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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

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

 

For the quarterly period ended January 31, 2005

 

OR

 

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

 

For the transition period from              to             

 

Commission File Number 1-566

 

 

GREIF, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware   31-4388903

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

425 Winter Road, Delaware, Ohio   43015
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code (740) 549-6000

 

Not Applicable

Former name, former address and former fiscal year, if changed since last report.

 

 

Indicated 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  x    No  ¨

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

 

The number of shares outstanding of each of the issuer’s classes of common stock at the close of business on January 31, 2005 was as follows:

 

Class A Common Stock

   11,248,336 shares

Class B Common Stock

   11,561,189 shares

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(Dollars in thousands, except per share amounts)

 

    

Three months ended

January 31,

  
     2005
     2004
  

Net sales

    $ 582,564     $ 468,860  

Cost of products sold

      493,838       399,410  
    
 

Gross profit

      88,726       69,450  

Selling, general and administrative expenses

      59,721       51,025  

Restructuring charges

      7,186       15,259  

Gain on sale of assets

      10,344       4,109  
    
 

Operating profit

      32,163       7,275  

Interest expense, net

      10,093       12,247  

Other income (expense), net

      (766 )     222  
    
 

Income (loss) before income tax expense (benefit) and equity in earnings of affiliates and minority interests

      21,304       (4,750 )

Income tax expense (benefit)

      5,965       (1,463 )

Equity in earnings of affiliates and minority interests

      (203 )     (79 )
    
 

Net income (loss)

    $ 15,136     $ (3,366 )
    
 

Basic earnings (loss) per share:

                 

Class A Common Stock

    $ 0.53     $ (0.12 )

Class B Common Stock

    $ 0.79     $ (0.18 )

Diluted earnings (loss) per share:

                 

Class A Common Stock

    $ 0.52     $ (0.12 )

Class B Common Stock

    $ 0.79     $ (0.18 )

 

See accompanying Notes to Consolidated Financial Statements

 

2

GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

ASSETS

 

     January 31,
2005
     October 31,
2004
  
     (Unaudited)        

Current assets

                 

Cash and cash equivalents

    $ 56,138     $ 38,109  

Trade accounts receivable – less allowance of $10,039 in 2005 and $11,454 in 2004

      263,020       307,750  

Inventories

      212,503       191,457  

Net assets held for sale

      12,511       14,753  

Deferred tax assets

      5,489       6,636  

Prepaid expenses and other

      56,629       53,977  
    
 
       606,290       612,682  
    
 

Long-term assets

                 

Goodwill – less accumulated amortization

      237,211       237,803  

Other intangible assets – less accumulated amortization

      26,503       27,524  

Other long-term assets

      53,277       54,547  
    
 
       316,991       319,874  
    
 

Properties, plants and equipment

                 

Timber properties – less depletion

      128,968       129,141  

Land

      69,855       68,349  

Buildings

      325,224       321,183  

Machinery and equipment

      864,556       851,800  

Capital projects in progress

      40,653       37,192  
    
 
       1,429,256       1,407,665  

Accumulated depreciation

      (554,124 )     (526,983 )
    
 
       875,132       880,682  
    
 
     $ 1,798,413     $ 1,813,238  
    
 

 

See accompanying Notes to Consolidated Financial Statements

 

3

GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

    

January 31,

2005

    

October 31,

2004

  
     (Unaudited)        

Current liabilities

                 

Accounts payable

    $ 244,950     $ 281,265  

Accrued payrolls and employee benefits

      35,704       49,633  

Restructuring reserves

      17,112       17,283  

Short-term borrowings

      9,036       11,621  

Other current liabilities

      77,207       77,416  
    
 
       384,009       437,218  
    
 

Long-term liabilities

                 

Long-term debt

      477,056       457,415  

Deferred tax liability

      149,897       148,639  

Pension liability

      50,288       44,036  

Postretirement benefit liability

      49,734       48,667  

Other long-term liabilities

      32,198       46,444  
    
 
       759,173       745,201  
    
 

Minority interest

      1,988       1,725  
    
 

Shareholders’ equity

                 

Common stock, without par value

      33,245       27,382  

Treasury stock, at cost

      (70,121 )     (65,360 )

Retained earnings

      722,597       711,919  

Accumulated other comprehensive loss:

                 

-     foreign currency translation

      16,343       5,655  

-     interest rate derivatives

      (5,416 )     (7,097 )

-     minimum pension liability

      (43,405 )     (43,405 )
    
 
       653,243       629,094  
    
 
     $ 1,798,413     $ 1,813,238  
    
 

 

See accompanying Notes to Consolidated Financial Statements

 

4

GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Dollars in thousands)

 

For the three months ended January 31,

    2005
     2004
  

Cash flows from operating activities:

                 

Net income (loss)

    $ 15,136     $ (3,366 )

Adjustments to reconcile net income to net cash used in operating activities:

                 

Depreciation, depletion and amortization

      24,982       26,710  

Asset impairments

      57       2,177  

Deferred income taxes

      3,282       8,250  

Gain on disposals of properties, plants and equipment

      (10,344 )     (4,109 )

Equity in earnings of affiliates, net of dividends received, and minority interests

      203       (1,413 )

Increase (decrease) in cash from changes in certain assets and liabilities:

                 

Trade accounts receivable

      48,713       28,456  

Inventories

      (17,081 )     (831 )

Prepaid expenses and other

      (1,235 )     (4,851 )

Other long-term assets

      1,836       (3,316 )

Accounts payable

      (41,402 )     (34,851 )

Accrued payroll and employee benefits

      (13,929 )     (12,366 )

Restructuring reserves

      (171 )     3,412  

Other current liabilities

      (2,340 )     (1,541 )

Pension liability

      6,252       5,565  

Postretirement benefit liability

      1,067       683  

Other long-term liabilities

      (17,272 )     (10,888 )
    
 

Net cash used in operating activities

      (2,246 )     (2,279 )
    
 

Cash flows from investing activities:

                 

Purchases of properties, plants and equipment

      (8,685 )     (9,771 )

Proceeds on disposals of properties, plants and equipment

      12,934       4,200  
    
 

Net cash provided by (used in) investing activities

      4,249       (5,571 )
    
 

Cash flows from financing activities:

                 

Proceeds (payments) for long-term debt

      21,535       (8,451 )

(Payments) proceeds for short-term borrowings

      (3,731 )     2,854  

Dividends paid

      (4,458 )     (3,816 )

Acquisitions of treasury stock

      (5,291 )     (2 )

Exercise of stock options

      6,182       4,679  
    
 

Net cash provided by (used in) financing activities

      14,237       (4,736 )
    
 

Effects of exchange rates on cash

      1,789       940  
    
 

Net increase (decrease) in cash and cash equivalents

      18,029       (11,646 )

Cash and cash equivalents at beginning of period

      38,109       49,767  
    
 

Cash and cash equivalents at end of period

    $ 56,138     $ 38,121  
    
 

 

See accompanying Notes to Consolidated Financial Statements

 

5

GREIF, INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2005

 

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated balance sheets as of January 31, 2005 and October 31, 2004 and the consolidated statements of operations and cash flows for the three-month periods ended January 31, 2005 and 2004 of Greif, Inc. and subsidiaries (the “Company”). These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for its fiscal year ended October 31, 2004 (the “2004 Form 10-K”).

 

The Company’s fiscal year begins on November 1 and ends on October 31 of the following year. Any references to the year 2005 or 2004, or to any quarter of those years, relates to the fiscal year or quarter, as the case may be, ending in that year.

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual amounts could differ from those estimates.

 

Certain prior year amounts have been reclassified to conform to the 2005 presentation.

 

Stock-Based Compensation

 

At January 31, 2005, the Company had various stock-based compensation plans as described in Note 10 to the Notes to Consolidated Financial Statements in the 2004 Form 10-K. The Company applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock option plans. If compensation cost would have been determined based on fair values at the date of grant under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” pro forma net income (loss) and earnings (loss) per share would have been as follows (Dollars in thousands, except per share amounts):

 

6

    

Three months

ended January 31,

  
     2005
    2004
  

Net income (loss) as reported

    $ 15,136    $ (3,366 )

Deduct total stock option expense determined under fair value method, net of tax

      273      477  
    
  

Pro forma net income (loss)

    $ 14,863    $ (3,843 )
    
  

Earnings per share:

                

Class A Common Stock:

                

Basic - as reported

    $ 0.53    $ (0.12 )

Basic - pro forma