10-K 1 form10k.htm BERRY GLOBAL GROUP, INC. 10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended October 1, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-35672
graphic
BERRY GLOBAL GROUP, INC.

 A Delaware corporation
 101 Oakley Street, Evansville, Indiana, 47710
(812) 424-2904
 IRS employer identification number
20-5234618

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value per share
BERY
New York Stock Exchange LLC

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes    No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes    No 

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act

Large Accelerated Filer 
Accelerated filer
Non-accelerated filer
Small reporting company
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).  Yes    No

The aggregate market value of the common stock of the registrant held by non-affiliates was approximately $8.0 billion as of April 2, 2022, the last business day of the registrant’s most recently completed second fiscal quarter. The aggregate market value was computed using the closing sale price as reported on the New York Stock Exchange. As of November 18, 2022, there were 124.1 million shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Berry Global Group, Inc.’s Proxy Statement for its 2023 Annual Meeting of Stockholders are incorporated by reference into Part III of this report.



CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Information included in or incorporated by reference in this Form 10-K and other filings with the U.S. Securities and Exchange Commission (the “SEC”) and the Company’s press releases or other public statements, contains or may contain forward-looking statements.  This report includes “forward-looking” statements with respect to our financial condition, results of operations and business and our expectations or beliefs concerning future events.  These statements contain words such as “believes,” “expects,” “may,” “will,” “should,” “would,” “could,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “project,” “outlook,” “anticipates,” or “looking forward” or similar expressions that relate to our strategy, plans, intentions, or expectations.  All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates, and financial results or to our expectations regarding future industry trends are forward-looking statements.  In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments.  These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected.  All forward-looking statements are made only as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Additionally, we caution readers that the list of important factors discussed in the section titled “Risk Factors” may not contain all of the material factors that are important to you.  In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report may not in fact occur.  Accordingly, readers should not place undue reliance on those statements.

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TABLE OF CONTENTS
FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER 1, 2022

 
Page
 
PART I
 
3
5
8
8
8
8
     
 
PART II
 
     
9
9
10
15
16
17
17
17
17
     
 
PART III
 
     
18
18
18
18
18
     
 
PART IV
 
     
19
19
2


Item 1.  BUSINESS
(In millions of dollars, except as otherwise noted)

General

Berry Global Group, Inc. (“Berry,” “we,” or the “Company”) is a leading global supplier of a broad range of innovative rigid, flexible and non-woven products.  We sell our products predominantly into stable, consumer-oriented end markets, such as healthcare, personal care, and food and beverage.  Our customers consist of a diverse mix of leading global, national, mid-sized regional and local specialty businesses. The size and scope of our customer network allows us to introduce new products we develop or acquire to a vast audience that is familiar with our business.  For the fiscal year ended October 1, 2022 (“fiscal 2022”), no single customer represented more than 5% of net sales and our top ten customers represented 15% of net sales.  We believe our manufacturing processes, manufacturing footprint and our ability to leverage our scale to reduce costs, positions us as a low-cost manufacturer relative to our competitors.

Additional financial information about our segments is provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Notes to Consolidated Financial Statements,” which are included elsewhere in this Form 10-K.

Segment Overview

The Company’s operations are organized into four reporting segments: Consumer Packaging International, Consumer Packaging North America, Engineered Materials, and Health, Hygiene & Specialties.  The structure is designed to align us with our customers, provide improved service, drive future growth, and to optimize costs.

Consumer Packaging International
The Consumer Packaging International segment is a manufacturer of rigid products that primarily services non-North American markets.  Product groups within the segment include Closures and Dispensing Systems, Pharmaceutical Devices and Packaging, Bottles and Canisters, Containers, and Technical Components.  In fiscal 2022, Consumer Packaging International accounted for 30% of our consolidated net sales.

Consumer Packaging North America
The Consumer Packaging North America segment is a manufacturer of rigid products that primarily services North American markets.  Product groups within the segment include Containers and Pails, Foodservice, Closures, Bottles and Prescription Vials, and Tubes.  In fiscal 2022, Consumer Packaging North America accounted for 24% of our consolidated net sales.

Engineered Materials
The Engineered Materials segment is a manufacturer of flexible products that services primarily North American and European markets.  Product groups within the segment include Stretch and Shrink Films, Converter Films, Institutional Can Liners, Food and Consumer Films, Retail Bags, and Agriculture Films.  In fiscal 2022, Engineered Materials accounted for 24% of our consolidated net sales.

Health, Hygiene & Specialties
The Health, Hygiene & Specialties segment is a manufacturer of non-woven and related products that services global markets.  Product groups within the segment include Healthcare, Hygiene, Specialties, and Tapes. In fiscal 2022, Health, Hygiene & Specialties accounted for 22% of our consolidated net sales.

Marketing, Sales, and Competition

We reach our large and diversified customer base through a direct sales force of dedicated professionals and the strategic use of distributors.  Our scale enables us to dedicate certain sales and marketing efforts to particular products or customers, when applicable, which enables us to develop expertise that we believe is valued by our customers.

The major markets in which the Company sells its products are highly competitive.  Areas of competition include service, innovation, quality, and price.  This competition is significant as to both the size and the number of competing firms.  Competitors include but are not limited to Amcor, Silgan, Aptar, Pactiv Evergreen, 3M, and Fitesa.
3


Raw Materials

Our primary raw material is polymer resin.  In addition, we use other materials such as butyl rubber, adhesives, paper and packaging materials, linerboard, rayon, polyester fiber, and foil, in various manufacturing processes.  While temporary industry-wide shortages of raw materials have occurred, we have historically been able to manage the supply chain disruption by working closely with our suppliers and customers. Changes in the price of raw materials are generally passed on to customers through contractual price mechanisms over time, during contract renewals and other means.

Patents, Trademarks and Other Intellectual Property

We customarily seek patent and trademark protection for our products and brands while seeking to protect our proprietary know-how.  While important to our business in the aggregate, sales of any one individually patented product is not considered material to any specific segment or the consolidated results.

Environmental and Sustainability

We believe there will always be a leading role for Berry’s product offerings due to our ability to promote customer brands by providing superior clarity, protection, design versatility, consumer safety, convenience, cost efficiency, barrier properties, and environmental performance.  We collaborate with customers, suppliers, and innovators to create industry-leading solutions which offer lighter weight products, enable longer shelf-life, and protect products throughout supply chains.

Sustainability is comprehensively embedded across our business, from how we run our manufacturing operations more efficiently to the investments we are making in sustainable packaging.  We believe responsible packaging is the answer to achieving less waste and that responsible packaging requires four things - innovative design, continued development of renewable and advanced raw materials, waste management infrastructure, and consumer participation. Berry is committed to responsible packaging and has (1) targeted 100% reusable, recyclable, or compostable packaging by 2025, (2) significantly increased our use of circular materials by entering into offtake agreements for both mechanically recycled and advanced recycled materials as well as expanded our own recycling operations in North America and Europe in order to meet our targeted 10% recycled  content by 2025, and (3) worked to drive greater recycling rates around the world.  With our global scale, deep industry experience, and strong capabilities, we are uniquely positioned to assist our customer in the design and development of more sustainable packaging.

We also work globally on continuous improvement of employee safety, energy usage, water efficiency, waste reduction, recycling and reducing our Green house Gas (GHG) emissions.  Our teams focus on improving the circularity and reducing the carbon footprint of our products.  We anticipate higher demand for products with lower emissions intensity where polymer resin based products are inherently well positioned since they typically have lower GHG emissions per functional unit compared to heavier alternatives such as paper, metal and glass.  Additionally, there is also significant work being done on the use of recycled and bio-based content, which typically has lower associated GHG emissions compared to other virgin materials.

Human Capital and Employees

Overview
Berry’s mission of ‘Always Advancing to Protect What’s Important’ has never been more critical as we are proud to work alongside our customers to supply products that are essential to everyday life.  We continue to prioritize the health and well-being of the communities we serve as well as our employees and their families, as our global teams remain dedicated to continuingly working with our business partners to ensure critical key supply chains remain uninterrupted and operational.

Health and Safety
Employee safety is our number one core value.  We believe when it comes to employee safety, our best should always be our standard.   It is through the adherence to our global Environment, Health, and Safety principles we have been able to identify and mitigate operational risks and drive continuous improvement, resulting in an OSHA incident rate below 1.0 which is significantly lower than the industry average.

Talent and Development
We seek to attract, develop and retain talent throughout the company.  Our succession management strategy focuses on a structured succession framework and multiple years of performance. Our holistic approach to developing key managers and identifying future leaders includes challenging assignments, formal development plans and professional coaching.  Resources to support employee development include operational programs, university partnerships, internal e-learning requirements, tuition reimbursement programs, and apprenticeships.
4


Employee Engagement
We seek to ensure that everyone is motivated to perform every day. To further that objective, our engagement approach focuses on clear communication and recognition. We communicate through regular employee meetings, at both the corporate and operating division levels, with business and market updates and information on production, safety, quality and other operating metrics. We have many recognition-oriented awards throughout our company and conduct company-wide engagement surveys which have generally indicated high levels of engagement and trust in Berry’s leadership.

Inclusion and Diversity
We strive to build a safe and inclusive culture where employees feel valued and treated with respect.  We believe inclusion helps drive engagement, innovation and organizational growth.  Our focus to date has been on providing training for our global workforce and increasing awareness about the importance of having a culture of inclusion.

Ethics
Our employees are expected to act with integrity and we maintain a Global Code of Business Ethics which is attested by every Berry employee and provides the Company's framework for ethical business. We provide targeted annual training across the globe to reinforce our commitment to ethics and drive adherence to the laws in each jurisdiction in which we operate.

Available Information

We make available, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments, if any, to those reports through our internet website as soon as reasonably practicable after they have been electronically filed with the SEC.  Our internet address is www.berryglobal.com.  The information contained on our website is not being incorporated herein.

Item 1A.  RISK FACTORS

Operational Risks

Global Economic Conditions, including inflation and supply chain disruptions, may negatively impact our business operations and financial results.

Challenging current and future global economic conditions, including inflation and supply chain disruptions may negatively impact our business operations and financial results.  The Russia-Ukraine conflict has increased volatility in world economies.  Current global economic challenges, including relatively high inflation and supply chain constraints may continue to put pressure on our business.

When challenging economic conditions exist, our customers may delay, decrease or cancel purchases from us, and may also delay payment or fail to pay us altogether. Suppliers may have difficulty filling our orders and distributors may have difficulty getting our products to customers, which may affect our ability to meet customer demands, and result in a loss of business. Weakened global economic conditions may also result in unfavorable changes in our product prices, product mix and profit margins. Although we take measures to mitigate the impact of inflation, including through pricing actions and productivity programs, if these actions are not effective our cash flow, financial condition, and results of operations could be adversely impacted. In addition, there could be a time lag between recognizing the benefit of our mitigating actions and when the inflation occurs and there is no assurance that our mitigating measures will be able to fully mitigate the impact of inflation.

Political volatility  may also contribute to the general economic conditions and regulatory uncertainty in regions in which we operate.  Future unrest and changing policies could result in an adverse impact to our financial condition. Political developments can also disrupt the markets we serve and the tax jurisdictions in which we operate and may affect our business, financial condition and results of operations.

Raw material inflation or shortage of available materials could harm our financial condition and results of operations.

Raw materials are subject to price fluctuations and availability, due to external factors, such as the Russia-Ukraine conflict, weather-related events, or other supply chain challenges, which are beyond our control.  Temporary industry-wide shortages of raw materials have occurred in the past, which can lead to increased raw material price volatility.  Additionally, our suppliers could experience cost increases to produce raw material due to increases in carbon pricing.  Historically we have been able to manage the impact of higher costs by increasing our selling prices.  We have generally been well positioned to capture additional market share as our primarily raw material, polymer resin, is typically a lower cost and more versatile substrate compared to alternatives.  However, raw material shortages or our inability to timely pass-through increased costs to our customers may adversely affect our business, financial condition and results of operations.
5


Weather related events could negatively impact our results of operations.

Weather related events could adversely impact on our business and those of our customers, suppliers, and partners.  Such events may have a physical impact on our facilities, inventory, suppliers, and equipment and any unplanned downtime at any of our facilities could result in unabsorbed costs that could negatively impact our results of operations for the period in which it experienced the downtime.  Longer-term changes in climate patterns could alter future customer demand, impact supply chains and increase operating costs.  However, any such changes are uncertain and we cannot predict the net impact from such events.

We may not be able to compete successfully and our customers may not continue to purchase our products.

We compete with multiple companies in each of our product lines on the basis of a number of considerations, including price, service, quality, product characteristics and the ability to supply products to customers in a timely manner.  Our products also compete with various other substrates.  Some of these competitive products are not subject to the impact of changes in resin prices, which may have a significant and negative impact on our competitive position versus substitute products.  Additionally, consumer views on environmental considerations could potentially impact demand for our products that utilize fossil fuel based materials in their manufacturing.  Our competitors may have financial and other resources that are substantially greater than ours and may be better able than us to withstand higher costs.  Competition and product preference changes could result in our products losing market share or our having to reduce our prices, either of which could have a material adverse effect on our business, financial condition and results of operations.  In addition, since we do not have long-term arrangements with many of our customers, these competitive factors could cause our customers to shift suppliers and/or packaging material quickly.

We may pursue and execute acquisitions or divestitures, which could adversely affect our business.

As part of our growth strategy, we consider transactions that either complement or expand our existing business and create economic value.  Transactions involve special risks, including the potential assumption of unanticipated liabilities and contingencies as well as difficulties in integrating acquired businesses or carving-out divested businesses, which may result in substantial costs, delays or other problems that could adversely affect our business, financial condition and results of operations.  Furthermore, we may not realize all of the synergies we expect to achieve from our current strategic initiatives due to a variety of risks.  If we are unable to achieve the benefits that we expect to achieve from our strategic initiatives, it could adversely affect our business, financial condition and results of operations.

In the event of a catastrophic loss of one of our key manufacturing facilities, our business would be adversely affected.

While we manufacture our products in a large number of diversified facilities and maintain insurance covering our facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of one of our key manufacturing facilities due to accident, labor issues, weather conditions, natural disaster, pandemic or otherwise, whether short or long-term, could result in future losses.

Employee retention, labor cost inflation or the failure to renew collective bargaining agreements could disrupt our business.

Our relations with employees under collective bargaining agreements remain satisfactory and there have been no significant work stoppages or other labor disputes during the past three years.  However, we may not be able to maintain constructive relationships with labor unions or trade councils and may not be able to successfully negotiate new collective bargaining agreements on satisfactory terms in the future.

Labor is subject to cost inflation, availability and workforce participation rates, all of which could be impacted by factors beyond our control.  As a result, there can be no assurance we will be able to recruit, train, assimilate, motivate and retain employees in the future.  The loss of a substantial number of these employees or a prolonged labor dispute could disrupt our business and result in future losses.

We depend on information technology systems and infrastructure to operate our business, and increased cybersecurity threats, system inadequacies, and failures could disrupt our operations, compromise customer, employee, vendor and other data which could negatively affect our business.

We rely on the efficient and uninterrupted operation of information technology systems and networks.  These systems and networks are vulnerable to increased threats and more sophisticated computer crime, energy interruptions, telecommunications failures, breakdowns, natural disasters, terrorism, war, computer malware or other malicious intrusions.

We also maintain and have access to data and information that is subject to privacy and security laws, regulations, and customer controls.  Despite our efforts to protect such information, breaches, misplaced or lost data and programming damages could result in a negative impact on the business.  While we have not had material system interruptions historically associated with these risks, there can be no assurance from future interruptions that could result in future losses.
6


Financial and Legal Risks

Our substantial indebtedness could affect our ability to meet our obligations and may otherwise restrict our activities.

We have a significant amount of indebtedness, which requires significant interest payments.  Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms, would have a material adverse effect on our business, financial condition and results of operations.  Additionally, servicing the interest obligations of our existing indebtedness could limit our ability to respond to business opportunities, including growing our business through acquisitions or increased levels of capital expenditures.

Goodwill and other intangibles represent a significant amount of our net worth, and a future write-off could result in lower reported net income and a reduction of our net worth.

We have a substantial amount of goodwill.  Future changes in market multiples, cost of capital, expected cash flows, or other external factors, may adversely affect our business and cause our goodwill to be impaired, resulting in a non-cash charge against results of operations to write off goodwill or indefinite lived intangible assets for the amount of impairment.  If a future write-off is required, the charge could result in significant losses.

Our international operations pose risks to our business that may not be present with our domestic operations.

We are subject to foreign exchange rate risk, both transactional and translational, which may negatively affect our financial performance. Exchange rates between transactional currencies may change rapidly due to a variety of factors.  Translational foreign exchange exposures result from exchange rate fluctuations in the conversion of entity functional currencies to U.S. dollars, our reporting currency, and may affect the reported value of our assets and liabilities and our income and expenses. In particular, our translational exposure may be impacted by movements in the exchange rate of the euro or the British pound sterling against the U.S. dollar.

Foreign operations are also subject to certain risks that are unique to doing business in foreign countries including shipping delays and supply chain challenges, disruption of energy, changes in applicable laws, including assessments of income and non-income related taxes, reduced protection of intellectual property, inability to readily repatriate cash to the U.S. effectively, and regulatory policies and various trade restrictions including potential changes to export taxes or countervailing and anti-dumping duties for exported products from these countries. Any of these risks could disrupt our business and result in significant losses. We are also subject to the Foreign Corrupt Practices Act and other anti-bribery and anti-corruption laws that generally bar bribes or unreasonable gifts to foreign governments or officials. We have implemented safeguards, training and policies to discourage these practices by our employees and agents. However, our existing safeguards, training and policies to assure compliance and any future improvements may prove to be less than effective and our employees or agents may engage in conduct for which we might be held responsible. If employees violate our policies, we may be subject to regulatory sanctions. Violations of these laws or regulations could result in sanctions including fines, debarment from export privileges and penalties and could adversely affect our business, financial condition and results of operations.

Current and future environmental and other governmental requirements could adversely affect our financial condition and our ability to conduct our business.

While we have not been required historically to make significant capital expenditures in order to comply with applicable environmental laws and regulations, we cannot predict our future capital expenditure requirements because of continually changing compliance standards and environmental technology.  Furthermore, violations or contaminated sites that we do not know about (including contamination caused by prior owners and operators of such sites or newly discovered information) could result in additional compliance or remediation costs or other liabilities.

In addition, federal, state, local, and foreign governments could enact laws or regulations concerning environmental matters, such as greenhouse gas (carbon) emissions, that increase the cost of producing, or otherwise adversely affect the demand for, packaging products.  Additionally, several governmental bodies in jurisdictions where we operate have introduced, or are contemplating introducing, regulatory change to address the potential impacts of changes in climate and global warming, which may have adverse impacts on our operations or financial results.  We believe that any such laws promulgated to date have not had a material adverse effect on us, as we have historically been able to manage the impact of higher costs by increasing our selling prices.  However, there can be no assurance that future legislation or regulation would not have a material adverse effect on us.
7


Changes in tax laws or changes in our geographic mix of earnings could have a material impact on our financial condition and results of operation.

We are subject to income and other taxes in the many jurisdictions in which we operate. Tax laws and regulations are complex and the determination of our global provision for income taxes and current and deferred tax assets and liabilities requires judgment and estimation. We are subject to routine examinations of our income tax returns, and tax authorities may disagree with our tax positions and assess additional tax. Our future income taxes could also be negatively impacted by our mix of earnings in the jurisdictions in which we operate being different than anticipated given differences in statutory tax rates in the countries in which we operate. In addition, tax policy efforts to raise global corporate tax rates could adversely impact our tax rate and subsequent tax expense.

We may not be successful in protecting our intellectual property rights, including our unpatented proprietary know-how and trade secrets, or in avoiding claims that we infringed on the intellectual property rights of others.

In addition to relying on patent and trademark rights, we rely on unpatented proprietary know-how and trade secrets, and employ various methods, including confidentiality agreements with employees and consultants, customers and suppliers to protect our know-how and trade secrets. However, these methods and our patents and trademarks may not afford complete protection and there can be no assurance that others will not independently develop the know-how and trade secrets or develop better production methods than us. Further, we may not be able to deter current and former employees, contractors and other parties from breaching agreements and misappropriating proprietary information and it is possible that third parties may copy or otherwise obtain and use our information and proprietary technology without authorization or otherwise infringe on our intellectual property rights. Furthermore, no assurance can be given that we will not be subject to claims asserting the infringement of the intellectual property rights of third parties seeking damages, the payment of royalties or licensing fees and/or injunctions against the sale of our products. Any such litigation could be protracted and costly and could result in significant losses.


Item 1B.  UNRESOLVED STAFF COMMENTS

None.

Item 2.  PROPERTIES

Our primary manufacturing facilities by geographic area were as follows:

Geographic Region
 
Total Facilities
 
Leased Facilities
US and Canada
 
107
 
19
Europe
 
119
 
23
Rest of world
 
41
 
24

Item 3.  LEGAL PROCEEDINGS

Berry is party to various legal proceedings involving routine claims which are incidental to our business. Although our legal and financial liability with respect to such proceedings cannot be estimated with certainty, we believe that any ultimate liability would not be material to the business, financial condition, results of operations or cash flows.

Item 4.  MINE SAFETY DISCLOSURES

Not applicable.

8


PART II
 
Item 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock “BERY” is listed on the New York Stock Exchange. As of the date of this filing there were fewer than 500 active record holders of the common stock, but we estimate the number of beneficial stockholders to be much higher as a number of our shares are held by brokers or dealers for their customers in street name. During fiscal 2021 and 2022, we did not declare or pay any cash dividends on our common stock.

Issuer Purchases of Equity Securities

The following table summarizes the Company's repurchases of its common stock during the Quarterly Period ended October 1, 2022.

Fiscal Period
 
Total Number of
Shares Purchased
   
Average Price
Paid Per Share
   
Total Number of Shares
Purchased as Part of Publicly
Announced Programs
   
Dollar Value of Shares that
May Yet be Purchased Under
the Program (in millions) (a)
 
July
   
132,000
   
$
55.00
     
132,000
   
$
407
 
August
   
716,963
     
57.13
     
716,963
     
366
 
September
   
440,850
     
54.54
     
440,850
     
342
 
  Total
   
1,289,813
   
$
56.02
     
1,289,813
   
$
342
 

(a)
All open market purchases during the quarter were made under the fiscal 2022 authorization from our board of directors to purchase up to $1 billion of shares of common stock.  (See Note 9. Stockholders' Equity and Note 12. Subsequent Events)

Item 6.  RESERVED

9

Item 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Outlook

The Company is affected by general economic and industrial growth, raw material availability, cost inflation, supply chain disruptions, and general industrial production.  Our business has both geographic and end market diversity, which reduces the effect of any one of these factors on our overall performance.  Our results are affected by our ability to pass through raw material and other cost changes to our customers, improve manufacturing productivity and adapt to volume changes of our customers.  Despite global macro-economic challenges in the short-term attributed to continued rising inflation, supply chain disruptions, currency devaluation and general market softness, in part because of the Russia-Ukraine conflict, we continue to believe our underlying long-term demand fundamental in all divisions will remain strong as we focus on delivering protective solutions that enhance consumer safety and by providing advantaged products in targeted markets.  For fiscal 2023, we project cash flow from operations between $1.4 to $1.5 billion and free cash flow between $800 million to $900 million.  Projected fiscal 2023 free cash flow assumes $600 million of capital spending.  For the definition of free cash flow and further information related to free cash flow as a non-GAAP financial measure, see “Liquidity and Capital Resources.”

Recent Dispositions

During fiscal 2022, the Company completed the sale of its rotational molding business, which was operated in the Consumer Packaging International segment for net proceeds of $111 million.  A pretax gain of $8 million was recorded in fiscal 2022 within Restructuring and transaction activities on the Consolidated Statements of Income.  In fiscal 2021, the rotational molding business recorded net sales of $146 million.

Discussion of Results of Operations for Fiscal 2022 Compared to Fiscal 2021

The Company's U.S. based results for fiscal 2022 and fiscal 2021 are based on a fifty-two and fifty-three week period, respectively.  Business integration expenses consist of restructuring and impairment charges, divestiture related costs, and other business optimization costs.  Tables present dollars in millions. A discussion and analysis regarding our results of operations for fiscal year 2021 compared to fiscal year 2020 can be found on Form 10-K, filed with the SEC on November 18, 2021.

Consolidated Overview
 
Fiscal Year
             
   
2022
   
2021
   
$ Change
   
% Change
 
Net sales
 
$
14,495
   
$
13,850
   
$
645
     
5
%
Cost of goods sold
   
12,123
     
11,352
     
771
     
7
%
Other operating expenses
   
1,130
     
1,206
     
(76
)
   
(6
)%
Operating income
 
$
1,242
   
$
1,292
   
$
(50
)
   
(4
)%

Net sales:  The net sales growth is primarily attributed to increased selling prices of $1,650 million due to the pass through of inflation, partially offset by a $420 million unfavorable impact from foreign currency, a 2% organic volume decline, a $131 million decrease from extra shipping days in fiscal 2021, and fiscal 2021 divestiture sales of $118 million.  The volume decline is primarily attributed to supply chain disruptions, general market softness and the moderation of advantaged products related to the COVID-19 pandemic.

Cost of goods sold:  The cost of goods sold increase is primarily attributed to product mix and inflation of $1,618 million, partially offset by a $352 million favorable impact from foreign currency, the 2% volume decline, extra shipping days in fiscal 2021, and fiscal 2021 divestiture cost of goods sold of $93 million.

Other operating expenses:  The other operating expense decrease is primarily attributed to a $36 million impact from foreign currency, a $22 million decrease in amortization expense and fiscal 2021 divestiture other operating expenses.

Operating Income:  The operating income decrease is primarily attributed to a $32 million unfavorable impact from foreign currency, a $49 million decrease from the organic volume decline, a $22 million decrease from extra shipping days in fiscal 2021, and fiscal 2021 divestiture operating income of $16 million.  These decreases are partially offset by a $36 million decrease in business integration expense and a $30 million favorable impact from price cost spread and product mix.
10


 Consumer Packaging International
 
Fiscal Year
             
   
2022
   
2021
   
$ Change
   
% Change
 
Net sales
 
$
4,293
   
$
4,242
   
$
51
     
1
%
Operating income
 
$
346
   
$
317
   
$
29
     
9
%

Net sales:  The net sales growth is primarily attributed to increased selling prices of $498 million due to the pass through of inflation, partially offset by a $299 million unfavorable impact from foreign currency and fiscal 2021 divestiture sales of $84 million.

Operating Income: The operating income increase is primarily attributed to a $46 million decrease in business integration activities, a $26 million favorable impact from price cost spread.  These increases were partially offset by a $24 million impact from foreign currency, and fiscal 2021 divestiture operating income of $10 million.

Consumer Packaging North America
 
Fiscal Year
             
   
2022
   
2021
   
$ Change
   
% Change
 
Net sales
 
$
3,548
   
$
3,141
   
$
407
     
13
%
Operating income
 
$
338
   
$
276
   
$
62
     
22
%

Net sales:  The net sales growth is primarily attributed to increased selling prices of $470 million due to the pass through of inflation, partially offset by a $40 million decrease from extra shipping days in fiscal 2021.

Operating Income:  The operating income increase is primarily attributed to a $72 million favorable impact from price cost spread, and a $10 million decrease in depreciation and amortization, partially offset by extra shipping days in fiscal 2021 and higher business integration expense.

 Engineered Materials
 
Fiscal Year
             
   
2022
   
2021
   
$ Change
   
% Change
 
Net sales
 
$
3,488
   
$
3,309
   
$
179
     
5
%
Operating income
 
$
328
   
$
301
   
$
27
     
9
%

Net sales:  The net sales growth is primarily attributed to increased selling prices of $500 million due to the pass through of inflation, partially offset by a 5% organic volume decline, a $72 million impact from foreign currency, a $44 million decrease from extra shipping days in fiscal 2021, and fiscal 2021 divestiture sales of $34 million.  The volume decline is primarily attributed to general market softness, product mix and supply chain disruptions.

Operating Income:  The operating income increase is primarily attributed to a $76 million favorable impact from price cost spread, partially offset by a $22 million decrease from the volume decline, fiscal 2021 divestiture operating income of $13 million and extra shipping days in fiscal 2021.

11

Health, Hygiene & Specialties
 
Fiscal Year
             
   
2022
   
2021
   
$ Change
   
% Change
 
Net sales
 
$
3,166
   
$
3,158
   
$
8
     
0
%
Operating income
 
$
230
   
$
398
   
$
(168
)
   
(42
)%

Net sales:  The net sales growth is primarily attributed to increased selling prices of $180 million due to the pass through of inflation, partially offset by a 3% organic volume decline, a $49 million impact from foreign currency, and a $42 million decrease from extra shipping days in fiscal 2021.  The volume decline is primarily attributed to the moderation of advantaged products related to the COVID-19 pandemic.

Operating Income:  The operating income decrease is primarily attributed to a $138 million unfavorable impact from price cost spread and negative product mix, a $14 million decline from the volume decline, and extra shipping days in fiscal 2021.

Other expense, net
 
Fiscal Year
             
   
2022
   
2021
   
$ Change
   
% Change
 
Other expense, net
 
$
22
   
$
51
   
$
(29
)
   
(57
)%

The Other expense decrease is primarily attributed to foreign currency changes related to the remeasurement of non-operating intercompany balances and debt extinguishment expense in fiscal 2021.
12


Interest expense, net
 
Fiscal Year
             
   
2022
   
2021
   
$ Change
   
% Change
 
Interest expense, net
 
$
286
   
$
336
   
$
(50
)
   
(15
)%

The interest expense decrease is primarily the result of foreign currency changes and repayments on long-term borrowings and refinancing activities in fiscal 2021.

Income tax expense
 
Fiscal Year
             
   
2022
   
2021
   
$ Change
   
% Change
 
Income tax expense
 
$
168
   
$
172
   
$
(4
)
   
(2
)%

Our effective tax rate for fiscal 2022 was 18% and was positively impacted by 2% from a deferred rate revalue, 2% from federal and state tax credits, and 2% from lapse in uncertain tax positions.  These favorable items were partially offset by other discrete items.  See Note 6. Income Taxes.

Comprehensive Income
 
Fiscal Year
             
   
2022
   
2021
   
$ Change
   
% Change
 
Comprehensive Income
 
$
659
   
$
988
   
$
(329
)
   
(33
)%

The decrease in comprehensive income is primarily attributed to a $425 million unfavorable change in currency translation, partially offset by a $77 million favorable change in the fair value of interest rate hedges and a $33 million increase in net income.  Currency translation losses are primarily related to non-U.S. subsidiaries with a functional currency other than the U.S. dollar whereby assets and liabilities are translated from the respective functional currency into U.S. dollars using period-end exchange rates.  The change in currency translation was primarily attributed to locations utilizing the euro, British pound sterling, and Chinese renminbi as their functional currency.  As part of the overall risk management, the Company uses derivative instruments to reduce exposure to changes in interest rates attributed to the Company’s floating-rate borrowings and records changes to the fair value of these instruments in Accumulated other comprehensive income (loss).  The change in fair value of these instruments in fiscal 2022 versus fiscal 2021 is primarily attributed to a change in the forward interest curve between measurement dates.

Liquidity and Capital Resources

Senior Secured Credit Facility

We manage our global cash requirements considering (i) available funds among the many subsidiaries through which we conduct our business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances.  We have a $1,050 million asset-based revolving line of credit that matures in May 2024.  At the end of fiscal 2022, the Company had no outstanding balance on the revolving credit facility.  The Company was in compliance with all covenants at the end of fiscal 2022.  See Note 3. Long-Term Debt.

Cash Flows from Operating Activities

Net cash provided by operating activities decreased $17 million from fiscal 2021 primarily attributed to working capital inflation, partially offset by derivatives settlements.

Cash Flows from Investing Activities

Net cash used in investing activities decreased $28 million from fiscal 2021 primarily attributed to the settlement of net investment hedges, partially offset by fewer proceeds for the divestiture of business compared to fiscal 2021.

Cash Flows from Financing Activities

Net cash used in financing activities decreased $37 million from fiscal 2021 primarily attributed to lower net repayments on long-term borrowings, partially offset by fiscal 2022 repurchases of common stock.

Dividends

In November 2022, the Company’s Board of Directors authorized a quarterly cash dividend of $0.25 per share (See Note 12. Subsequent Events).
13


Share Repurchases

During fiscal 2022, the Company repurchased approximately 12.2 million shares for $709 million.  The Company did not have any share repurchases in fiscal 2021 or 2020.  As of October 1, 2022, authorized share repurchases of $342 million remained available to the Company under the prior Board authorization.  In November 2022, the Board approved an additional $700 million in authorized share repurchases (See Note 12. Subsequent Events).

Free Cash Flow

We define "free cash flow" as cash flow from operating activities less net additions to property, plant and equipment.  Based on our definition, our consolidated free cash flow is summarized as follows:

 
Fiscal years ended
 
   
October 1,
2022
   
October 2,
2021
 
Cash flow from operating activities
 
$
1,563
   
$
1,580
 
Additions to property, plant and equipment, net
   
(687
)
   
(676
)
Free cash flow
 
$
876
   
$
904
 

We use free cash flow as a supplemental measure of liquidity as it assists us in assessing our ability to fund growth through generation of cash.  Free cash flow may be calculated differently by other companies, including other companies in our industry or peer group, limiting its usefulness.  Free cash flow is not a generally accepted accounting principles (“GAAP’) financial measure and should not be considered as an alternative to any other measure determined in accordance with GAAP.

Liquidity Outlook

At the end of fiscal 2022, our cash balance was $1,410 million, of which approximately 50% was located outside the U.S.  We believe our existing and future U.S. based cash and cash flow from U.S. operations, together with available borrowings under our senior secured credit facilities, will be adequate to meet our short-term and long-term liquidity needs with the exception of funds needed to cover all long-term debt obligations which we intend to refinance prior to maturity.  The Company has the ability to repatriate the cash located outside the U.S. to the extent not needed to meet operational and capital needs without significant restrictions.  Our unremitted foreign earnings were $1.7 billion at the end of fiscal 2022.  The computation of the deferred tax liability associated with unremitted earnings is not practicable.

Summarized Guarantor Financial Information

Berry Global, Inc. (“Issuer”) has notes outstanding which are fully, jointly, severally, and unconditionally guaranteed by its parent, Berry Global Group, Inc. (for purposes of this section, “Parent”) and substantially all of Issuer’s domestic subsidiaries. Separate narrative information or financial statements of the guarantor subsidiaries have not been included because they are 100% owned by Parent and the guarantor subsidiaries unconditionally guarantee such debt on a joint and several basis.  A guarantee of a guarantor subsidiary of the securities will terminate upon the following customary circumstances: the sale of the capital stock of such guarantor if such sale complies with the indentures, the designation of such guarantor as an unrestricted subsidiary, the defeasance or discharge of the indenture or in the case of a restricted subsidiary that is required to guarantee after the relevant issuance date, if such guarantor no longer guarantees certain other indebtedness of the issuer.  The guarantees of the guarantor subsidiaries are also limited as necessary to prevent them from constituting a fraudulent conveyance under applicable law and any guarantees guaranteeing subordinated debt are subordinated to certain other of the Company’s debts. Parent also guarantees the Issuer’s term loans and revolving credit facilities.  The guarantor subsidiaries guarantee our term loans and are co-borrowers under our revolving credit facility.

Presented below is summarized financial information for the Parent, Issuer and guarantor subsidiaries on a combined basis, after intercompany transactions have been eliminated.

 
Year Ended
 
   
October 1, 2022
 
Net sales
 
$
7,654
 
Gross profit
   
1,581
 
Earnings from continuing operations
   
506
 
Net income (a)
 
$
506
 

(a) Includes $39 million of income associated with intercompany activity with non-guarantor subsidiaries.
14


 
October 1, 2022
   
October 2, 2021
 
Assets
           
Current assets
 
$
2,432
   
$
2,293
 
Noncurrent assets
   
6,137
     
5,979
 
                 
Liabilities
               
Current liabilities
 
$
1,536
   
$
1,533
 
Intercompany payable
   
634
     
629
 
Noncurrent liabilities
   
10,630
     
11,083
 

Critical Accounting Policies and Estimates

We disclose those accounting policies that we consider to be significant in determining the amounts to be utilized for communicating our consolidated financial position, results of operations and cash flows in the first note to our consolidated financial statements included elsewhere herein.  Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP.  The preparation of financial statements in conformity with these principles requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes.  Actual results may differ from these estimates under different assumptions or conditions.

Pensions.  The accounting for our pension plans requires us to recognize the overfunded or underfunded status of the pension plans on our balance sheet.  We believe that the accounting estimates related to our pension plans are critical accounting estimates because they are highly susceptible to change from period to period based on the performance of plan assets, actuarial valuations, market conditions and contracted benefit changes.  See Note 1. Basis of Presentation and Summary of Significant Accounting Policies and Note 7. Retirement Plans.

Deferred Taxes and Effective Tax Rates.  We estimate the effective tax rate (“ETR”) and associated liabilities or assets for each of our legal entities in accordance with authoritative guidance.  We utilize tax planning to minimize or defer tax liabilities to future periods.  In recording ETRs and related liabilities and assets, we rely upon estimates, which are based upon our interpretation of U.S. and local tax laws as they apply to our legal entities and our overall tax structure.  Audits by local tax jurisdictions, including the U.S. Government, could yield different interpretations from our own and cause the Company to owe more taxes than originally recorded.  See Note 1. Basis of Presentation and Summary of Significant Accounting Policies and Note 6. Income Taxes.

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to market risk from changes in interest rates primarily through our senior secured credit facilities. As of October 1, 2022, our senior secured credit facilities are comprised of (i) $3.4 billion term loans and (ii) a $1,050 million revolving credit facility with no borrowings outstanding. Borrowings under our senior secured credit facilities bear interest at a rate equal to an applicable margin plus LIBOR. The applicable margin for LIBOR rate borrowings under the revolving credit facility ranges from 1.25% to 1.50%, and the margin for the term loans is 1.75% per annum. As of October 1, 2022, the LIBOR rate of approximately 3.14% was applicable to the term loans. A 0.25% change in LIBOR would increase our annual interest expense by $3 million on variable rate term loans.

We seek to manage interest rate fluctuations through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. These financial instruments are not used for trading or other speculative purposes. (See Note 4. Financial Instruments and Fair Value Measurements)

Foreign Currency Risk

As a global company, we face foreign currency risk exposure from fluctuating currency exchange rates, primarily the U.S. dollar against the euro, British pound sterling, and Chinese renminbi.  Significant fluctuations in currency rates can have a substantial impact, either positive or negative, on our revenue, cost of sales, and operating expenses.  Currency translation gains and losses are primarily related to non-U.S. subsidiaries with a functional currency other than U.S. dollars whereby assets and liabilities are translated from the respective functional currency into U.S. dollars using period-end exchange rates and impact our Comprehensive income.  A 10% decline in foreign currency exchange rates would have had an $18 million unfavorable impact on fiscal 2022 Net income.  (See Note 4. Financial Instruments and Fair Value Measurements)

15


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

Page
20
22
Consolidated Balance Sheets as of fiscal 2022 and 2021
23
Consolidated Statements of Cash Flows for fiscal 2022, 2021 and 2020
24
25
26

Index to Financial Statement Schedules

All schedules have been omitted because they are not applicable or not required or because the required information is included in the consolidated financial statements or notes thereto.


16

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with the preparation of this Form 10-K, management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of October 1, 2022.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of October 1, 2022.

Management’s Report on Internal Controls over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s internal controls over financial reporting were effective as of October 1, 2022.

The effectiveness of our internal control over financial reporting as of October 1, 2022, has been audited by the Company’s independent registered public accounting firm, as stated in their report, which is included herein.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended October 1, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.  OTHER INFORMATION

None.

Item 9C.  DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

None.

17


PART III

Item 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Except as set forth below, the information required by this Item is incorporated herein by reference to our definitive Proxy Statement to be filed in connection with the 2023 Annual Meeting of Stockholders.

We have a Global Code of Business Ethics that applies to all directors and employees, including our Chief Executive Officer and senior financial officers.  We also have adopted a Supplemental Code of Ethics, which is in addition to the standards set by our Global Code of Business Ethics, in order to establish a higher level of expectation for the most senior leaders of the Company.  Our Global Code of Business Ethics and Supplemental Code of Ethics can be obtained, free of charge, by contacting our corporate headquarters or can be obtained from the Corporate Governance section of the Investors page on the Company’s internet site.  In the event that we make changes in, or provide waivers from, the provision of the Code of Business Ethics that the SEC requires us to disclose, we will disclose these events in the corporate governance section of our website within four business days following the date of such amendment or waiver.

Item 11.  EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to our definitive Proxy Statement to be filed in connection with the 2023 Annual Meeting of Stockholders.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item, is incorporated herein by reference to our definitive Proxy Statement to be filed in connection with the 2023 Annual Meeting of Stockholders.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated herein by reference to our definitive Proxy Statement to be filed in connection with the 2023 Annual Meeting of Stockholders.

Item 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated herein by reference to our definitive Proxy Statement to be filed in connection with the 2023 Annual Meeting of Stockholders.



18

PART IV

Item 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

1.
Financial Statements

The financial statements listed under Item 8 are filed as part of this report.

2.
Financial Statement Schedules

Schedules have been omitted because they are either not applicable or the required information has been disclosed in the financial statements or notes thereto.

3.
Exhibits

The exhibits listed on the Exhibit Index immediately following the signature page of this annual report are filed as part of this report.

Item 16.  FORM 10-K SUMMARY

None.

19

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Berry Global Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Berry Global Group, Inc. (the Company) as of October 1, 2022 and October 2, 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended October 1, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at October 1, 2022 and October 2, 2021, and the results of its operations and its cash flows for each of the three years in the period ended October 1, 2022, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of October 1, 2022, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 18, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosure to which it relates.

   
United Kingdom Defined Benefit Pension Obligation
     
Description of the Matter
 
At October 1, 2022 the aggregate United Kingdom (UK) defined benefit pension obligation was $480 million and exceeded the fair value of pension plan assets, resulting in an underfunded defined benefit pension obligation. As disclosed in Notes 1 and 7 to the consolidated financial statements, the Company recognizes the overfunded or underfunded status of its pension plans in the consolidated balance sheet. The obligations for these plans are actuarially determined and affected by assumptions, including discount rates and mortality rates.
 
Auditing the UK defined benefit pension obligation is complex and required the involvement of our actuarial specialists due to the highly judgmental nature of actuarial assumptions (e.g., discount rates and mortality rates) used in the measurement process. These assumptions have a significant effect on the projected benefit obligation.
     
How We Addressed the Matter in Our Audit
 
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls that address the measurement and valuation of the UK defined benefit pension obligation. This included management’s review of the UK defined benefit pension obligation calculations and the significant actuarial assumptions used by management.
 
To test the UK defined benefit pension obligation, we performed audit procedures that included, among others, evaluating the methodology used and the significant actuarial assumptions described above. We involved our actuarial specialists to assist with our audit procedures. We compared the actuarial assumptions used by management to historical trends and evaluated the change in the defined benefit pension obligation from prior year due to the change in service cost, interest cost, actuarial gains and losses, benefit payments, contributions and other activities. In addition, we evaluated management’s methodology for determining the discount rate that reflects the maturity and duration of the benefit payments and is used to measure the defined benefit pension obligation. As part of this assessment, we compared management’s selected discount rate to an independently developed range of reasonable discount rates. To evaluate the mortality rate assumption, we assessed whether the information is consistent with publicly available information, and whether any market data adjusted for entity-specific factors were applied.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1991.

Indianapolis, Indiana
November 18, 2022
20

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Berry Global Group, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Berry Global Group, Inc.’s internal control over financial reporting as of October 1, 2022, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Berry Global Group, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of October 1, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of October 1, 2022 and October 2, 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended October 1, 2022, and the related notes and our report dated November 18, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Indianapolis, Indiana
November 18, 2022
21


Berry Global Group, Inc.
Consolidated Statements of Income
(in millions of dollars)

 
Fiscal years ended
 
   
October 1,
2022
   
October 2,
2021
   
September 26,
2020
 
Net sales
 
$
14,495
   
$
13,850
   
$
11,709
 
Costs and expenses:
                       
Cost of goods sold
   
12,123
     
11,352
     
9,301
 
Selling, general and administrative
   
850
     
867
     
850
 
Amortization of intangibles
   
257
     
288
     
300
 
Restructuring and transaction activities
   
23
     
51
     
79
 
Operating income
   
1,242
     
1,292
     
1,179
 
                         
Other expense
   
22
     
51
     
31
 
Interest expense
   
286
     
336
     
435
 
Income before income taxes
   
934
     
905
     
713
 
Income tax expense
   
168
     
172
     
154
 
Net income
 
$
766
   
$
733
   
$
559
 
Net income per share (see Note 11):
                       
Basic
 
$
5.87
   
$
5.45
   
$
4.22
 
Diluted
 
$
5.77
   
$
5.30
   
$
4.14
 




Berry Global Group, Inc.
Consolidated Statements of Comprehensive Income
(in millions of dollars)

 
Fiscal years ended
 
   
October 1,
2022
   
October 2,
2021
   
September 26,
2020
 
Net income
 
$
766
   
$
733
   
$
559
 
Currency translation
   
(301
)
   
124
     
1
 
Pension and postretirement benefits
   
35
     
49
     
(60
)
Derivative instruments
   
159
     
82
     
(106
)
Other comprehensive (loss) income
   
(107
)
   
255
     
(165
)
Comprehensive income
 
$
659
   
$
988
   
$
394
 

See notes to consolidated financial statements.

22


Berry Global Group, Inc.
Consolidated Balance Sheets
(in millions of dollars)

 
October 1,
2022
   
October 2,
2021
 
Assets
           
Current assets:
           
Cash and cash equivalents
 
$
1,410
   
$
1,091
 
Accounts receivable
   
1,777
     
1,879
 
Inventories
   
1,802
     
1,907
 
Prepaid expenses and other current assets
   
175
     
217
 
Total current assets
   
5,164
     
5,094
 
Property, plant and equipment
   
4,342
     
4,677
 
Goodwill and intangible assets
   
6,685
     
7,434
 
Right-of-use assets
   
521
     
562
 
Other assets
   
244
     
115
 
Total assets
 
$
16,956
   
$
17,882
 
                 
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Accounts payable
 
$
1,795
   
$
2,041
 
Accrued employee costs
   
253
     
336
 
Other current liabilities
   
783
     
788
 
Current portion of long-term debt
   
13
     
21
 
Total current liabilities
   
2,844
     
3,186
 
Long-term debt
   
9,242
     
9,439
 
Deferred income taxes
   
707
     
568
 
Employee benefit obligations
   
160
     
276
 
Operating lease liabilities
   
429
     
466
 
Other long-term liabilities
   
378
     
767
 
Total liabilities
   
13,760
     
14,702
 
                 
Stockholders’ equity:
               
Common stock (124.2 and 135.5 shares issued, respectively)
   
1
     
1
 
Additional paid-in capital
   
1,177
     
1,134
 
Retained earnings
   
2,421
     
2,341
 
Accumulated other comprehensive loss
   
(403
)
   
(296
)
Total stockholders’ equity
   
3,196
     
3,180
 
Total liabilities and stockholders’ equity
 
$
16,956
   
$
17,882
 

See notes to consolidated financial statements.

23


Berry Global Group, Inc.
Consolidated Statements of Cash Flows
(in millions of dollars)

 
Fiscal years ended
 
   
October 1,
2022
   
October 2,
2021
   
September 26,
2020
 
                   
Cash Flows from Operating Activities:
                 
Net income
 
$
766
   
$
733
   
$
559
 
                         
Adjustments to reconcile net cash from operating activities:
                       
Depreciation
   
562
     
566
     
545
 
Amortization of intangibles
   
257
     
288
     
300
 
Non-cash interest expense
   
6
     
32
     
27
 
Share-based compensation expense
   
39
     
40
     
33
 
Deferred income tax
   
(48
)
   
(73
)
   
(96
)
Other non-cash operating activities, net
   
(22
)
   
49
     
42
 
Settlement of derivatives
   
201
     
     
11
 
Changes in operating assets and liabilities:
                       
Accounts receivable
   
(86
)
   
(331
)
   
49
 
Inventories
   
(3
)
   
(639
)
   
48
 
Prepaid expenses and other assets
   
11
     
(30
)
   
(12
)
Accounts payable and other liabilities
   
(120
)
   
945
     
24
 
Net cash from operating activities
   
1,563
     
1,580
     
1,530
 
                         
Cash Flows from Investing Activities:
                       
Additions to property, plant and equipment, net
   
(687
)
   
(676
)
   
(583
)
Divestiture of businesses
   
128
     
165
     
 
Acquisition of business and purchase price derivatives
   
     
     
(14
)
Settlement of net investment hedges
   
76
     
     
281
 
Net cash from investing activities
   
(483
)
   
(511
)
   
(316
)
                         
Cash Flows from Financing Activities:
                       
Proceeds from long-term borrowings
   
     
2,716
     
1,202
 
Repayment of long-term borrowings
   
(22
)
   
(3,496
)
   
(2,436
)
Proceeds from issuance of common stock
   
27
     
60
     
30
 
Repurchase of common stock
   
(709
)
   
     
 
Debt financing costs
   
     
(21
)
   
(16
)
Net cash from financing activities
   
(704
)
   
(741
)
   
(1,220
)
Effect of currency translation on cash
   
(57
)
   
13
     
6
 
Net change in cash and cash equivalents
   
319
     
341
     
 
Cash and cash equivalents at beginning of period
   
1,091
     
750
     
750
 
Cash and cash equivalents at end of period
 
$
1,410
   
$
1,091
   
$
750
 

See notes to consolidated financial statements.

24


Berry Global Group, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
(in millions of dollars)

 
Common Stock
   
Additional
Paid-in Capital
   
Accumulated Other
Comprehensive Loss
   
Retained
Earnings
   
Total
 
Balance at September 28, 2019
 
$
1
   
$
949
   
$
(386
)
 
$
1,054
   
$
1,618
 
Net income
   
     
     
     
559
     
559
 
Other comprehensive loss
   
     
     
(165
)
   
     
(165
)
Share-based compensation
   
     
33
     
     
     
33
 
Proceeds from issuance of common stock
   
     
30
     
     
     
30
 
Acquisition(a)
   
     
22
     
     
     
22
 
Adoption of ASC 842
   
     
     
     
(5
)
   
(5
)
Balance at September 26, 2020
 
$
1
   
$
1,034
   
$
(551
)
 
$
1,608
   
$
2,092
 
Net income
   
     
     
     
733
     
733
 
Other comprehensive income
   
     
     
255
     
     
255
 
Share-based compensation
   
     
40
     
     
     
40
 
Proceeds from issuance of common stock
   
     
60
     
     
     
60
 
Balance at October 2, 2021
 
$
1
   
$
1,134
   
$
(296
)
 
$
2,341
   
$
3,180
 
Net income
   
     
     
     
766
     
766
 
Other comprehensive loss
   
     
     
(107
)
   
     
(107
)
Share-based compensation
   
     
39
     
     
     
39
 
Proceeds from issuance of common stock
   
     
27
     
     
     
27
 
Common stock repurchased and retired
   
     
(23
)
   
     
(686
)
   
(709
)
Balance at October 1, 2022
 
$
1
   
$
1,177
   
$
(403
)
 
$
2,421
   
$
3,196
 

(a)
Represents noncontrolling interest

See notes to consolidated financial statements.

25


Berry Global Group, Inc.
Notes to Consolidated Financial Statements
(in millions of dollars, except as otherwise noted)

1.  Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

Berry Global Group, Inc.’s (“Berry,” “we,” or the “Company”) consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commissions.  Periods presented in these financial statements include fiscal periods ending October 1, 2022 (“fiscal 2022”), October 2, 2021 (“fiscal 2021”), and September 26, 2020 (“fiscal 2020”).  The Company’s U.S. based results for fiscal 2022 and fiscal 2020 are based on a fifty-two week period.  Fiscal 2021 was based on a fifty-three week period. The Company has evaluated subsequent events through the date the financial statements were issued.

The consolidated financial statements include the accounts of Berry and its subsidiaries, all of which includes our wholly owned and majority owned subsidiaries. The Company has certain foreign subsidiaries that report on a calendar period basis which we consolidate into our respective fiscal period.  Intercompany accounts and transactions have been eliminated in consolidation.

Revenue Recognition and Accounts Receivable

Our revenues are primarily derived from the sale of non-woven, flexible and rigid products to customers.  Revenue is recognized when performance obligations are satisfied, in an amount reflecting the consideration to which the Company expects to be entitled.  We consider the promise to transfer products to be our sole performance obligation.  If the consideration agreed to in a contract includes a variable amount, we estimate the amount of consideration we expect to be entitled to in exchange for transferring the promised goods to the customer using the most likely amount method.  Our main sources of variable consideration are customer rebates.  There are no material instances where variable consideration is constrained and not recorded at the initial time of sale.  Generally, our revenue is recognized at a point in time for standard promised goods at the time of shipment, when title and risk of loss pass to the customer.  The accrual for customer rebates was $103 million and $104 million at October 1, 2022 and October 2, 2021, respectively, and is included in Other current liabilities on the Consolidated Balance Sheets.  The Company disaggregates revenue based on reportable business segment, geography, and significant product line.  See Note 10. Segment and Geographic Data.

Accounts receivable are presented net of allowance for credit losses of $18 million and $21 million at October 1, 2022 and October 2, 2021, respectively. The Company records its current expected credit losses based on a variety of factors including historical loss experience and current customer financial condition. The changes to our current expected credit losses, write-off activity, and  recoveries were not material for any of the periods presented.

The Company has entered into various factoring agreements, including customer-based supply chain financing programs, to sell certain receivables to third-party financial institutions.  Agreements which result in true sales of the transferred receivables, which occur when receivables are transferred without recourse to the Company, are reflected as a reduction of trade receivables, net on the consolidated balance sheets and the proceeds are included in the cash flows from operating activities in the consolidated statements of cash flows.  The fees associated with transfer of receivables for all programs were not material for any of the periods presented.

Research and Development

Research and development costs are expensed when incurred.  The Company incurred research and development expenditures of $81 million, $90 million, and $79 million in fiscal 2022, 2021, and 2020, respectively.

Share-Based Compensation

The Company recognized total share-based compensation expense of $39 million, $40 million, and $33 million for fiscal 2022, 2021, and 2020, respectively.  The share-based compensation plan is more fully described in Note 9. Stockholders’ Equity.
26


Foreign Currency

For the non-U.S. subsidiaries that account in a functional currency other than U.S. dollars, assets and liabilities are translated into U.S. dollars using period-end exchange rates.  Sales and expenses are translated at the average exchange rates in effect during the period.  Foreign currency translation gains and losses are included as a component of Accumulated other comprehensive loss within Stockholders’ equity.  Gains and losses resulting from foreign currency transactions are included in the Consolidated Statements of Income.

Cash and Cash Equivalents

All highly liquid investments purchased with a maturity of three months or less from the time of purchase are considered to be cash equivalents.

Inventories

Inventories are stated at the lower of cost or net realizable value and are valued using the first-in, first-out method.  Management periodically reviews inventory balances, using recent and future expected sales to identify slow-moving and/or obsolete items. The cost of spare parts is charged to cost of goods sold when purchased.  We evaluate our reserve for inventory obsolescence on a quarterly basis and review inventory on-hand to determine future salability.  We base our determinations on the age of the inventory and the experience of our personnel.  We reserve inventory that we deem to be not salable in the quarter in which we make the determination.  We believe, based on past history and our policies and procedures, that our net inventory is salable.  Inventory as of fiscal 2022 and 2021 was:

Inventories:
 
2022
   
2021
 
Finished goods
 
$
1,010
   
$
960
 
Raw materials
   
792
     
947
 
   
$
1,802
   
$
1,907
 

Property, Plant and Equipment

Property, plant and equipment are stated at cost.  Depreciation is computed primarily by the straight-line method over the estimated useful lives of the assets ranging from 15 to 40 years for buildings and improvements, 2 to 20 years for machinery, equipment, and tooling, and over the term of the agreement for capital leases.  Leasehold improvements are depreciated over the shorter of the useful life of the improvement or the lease term.  Repairs and maintenance costs are charged to expense as incurred.  Property, plant and equipment as of fiscal 2022 and 2021 was:

Property, plant and equipment:
 
2022
   
2021
 
Land, buildings and improvements
 
$
1,602
   
$
1,699
 
Equipment and construction in progress
   
6,916
     
6,800
 
     
8,518
     
8,499
 
Less accumulated depreciation
   
(4,176
)
   
(3,822
)
   
$
4,342
   
$
4,677
 

Long-lived Assets

Long-lived assets, including property, plant and equipment and definite lived intangible assets are reviewed for impairment in accordance with ASC 360, “Property, Plant and Equipment,” whenever facts and circumstances indicate that the carrying amount may not be recoverable.  Specifically, this process involves comparing an asset’s carrying value to the estimated undiscounted future cash flows the asset is expected to generate over its remaining life.  If this process were to result in the conclusion that the carrying value of a long-lived asset would not be recoverable, a write-down of the asset to fair value would be recorded through a charge to operations.
27


Goodwill

The changes in the carrying amount of goodwill by reportable segment are as follows:

 
Consumer Packaging
International
   
Consumer Packaging
North America
   
Engineered
Materials
   
Health, Hygiene
& Specialties
   
Total
 
Balance as of fiscal 2020
 
$
1,999
   
$
1,540
   
$
700
   
$
934
   
$
5,173
 
Foreign currency translation adjustment
   
36
     
1
     
(1
)
   
2
     
38
 
Dispositions
   
(19
)
   
     
     
     
(19
)
Balance as of fiscal 2021
 
$
2,016
   
$
1,541
   
$
699
   
$
936
   
$
5,192
 
Foreign currency translation adjustment
   
(250
)
   
(1
)
   
(37
)
   
(18
)
   
(306
)
Dispositions
   
(54
)
   
     
     
     
(54
)
Balance as of fiscal 2022
 
$
1,712
   
$
1,540
   
$
662
   
$
918
   
$
4,832
 

In fiscal year 2022, the Company completed a qualitative analysis to evaluate impairment of goodwill and concluded that it was more likely than not that the fair value for each reporting unit exceeded the carrying amount.  We reached this conclusion based on the strong valuations within the packaging industry and operating results of our reporting units, in addition to leveraging the quantitative test performed in fiscal 2020.  As a result of our annual impairment evaluations the Company concluded that no impairment existed in fiscal 2022.

Deferred Financing Fees

Deferred financing fees are amortized to interest expense using the effective interest method over the lives of the respective debt agreements.  Pursuant to ASC 835-30, the Company presents $60 million and $77 million as of fiscal 2022 and fiscal 2021, respectively, of debt issuance and deferred financing costs on the balance sheet as a deduction from the carrying amount of the related debt liability, instead of a deferred charge.

Intangible Assets

The changes in the carrying amount of intangible assets are as follows:

   
Customer
Relationships
   
Trademarks
   
Other
Intangibles
   
Accumulated
Amortization
   
Total
 
Balance as of fiscal 2020
 
$
3,323
   
$
522
   
$
129
   
$
(1,477
)
 
$
2,497
 
Foreign currency translation adjustment
   
32
     
4
     
(1
)
   
(2
)
   
33
 
Amortization expense
   
     
     
     
(288
)
   
(288
)
Netting of fully amortized intangibles
   
(26
)
   
(1
)
   
(6
)
   
33
     
 
Balance as of fiscal 2021
 
$
3,329
   
$
525
   
$
122
   
$
(1,734
)
 
$
2,242
 
Foreign currency translation adjustment
   
(172
)
   
(31
)
   
(1
)
   
66
     
(138
)
Amortization expense
   
     
     
     
(257
)
   
(257
)
Additions
   
     
     
6