U.S. 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 31, 2002
Commission File Number 1-566
GREIF BROS. CORPORATION
(Exact name of Registrant as specified in its charter)
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State of Delaware
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31-4388903
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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425 Winter Road, Delaware, Ohio
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43015
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(Address of principal executive offices)
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(Zip Code)
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740-549-6000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Class A Common Stock
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New York Stock Exchange
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Class B Common Stock
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
8 7/8% Senior Subordinated Notes due 2012
Indicate by check mark whether the Registrant (1) has filed all reports to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes
x
No
¨
.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the
Registrants knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
¨
.
The aggregate market value of voting stock held by
non-affiliates of the Registrant as of January 9, 2003 was $76,194,222.
The number of shares outstanding of each
of the Registrant’s classes of common stock, as of January 9, 2003 was as follows:
Class A Common Stock - 10,562,366
Class B Common Stock - 11,757,859
Listed hereunder are the documents, portions of which are incorporated by reference, and the parts of this Form 10-K into which such portions are incorporated:
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1.
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The Registrant’s Proxy Statement for use in connection with the Annual Meeting of Shareholders to be held on February 24, 2003, portions of which are
incorporated by reference into Part III of this Form 10-K, which Proxy Statement will be filed within 120 days of October 31, 2002.
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IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical facts included in this Form 10-K of Greif Bros. Corporation and subsidiaries (the “Company”) or incorporated
herein, including, without limitation, statements regarding the Company’s future financial position, business strategy, budgets, projected costs, goals and plans and objectives of management for future operations, are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,”
“intend,” “estimate,” “anticipate,” “project,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. Forward-looking statements speak only as the
date the statements were made. Although the Company believes that the expectations reflected in forward-looking statements have a reasonable basis, it can give no assurance that these expectations will prove to be correct. Forward-looking statements
are subject to risks and uncertainties that could cause actual events or results to differ materially from those expressed in or implied by the statements. For a discussion of the most significant risks and uncertainties that could cause the
Company’s actual results to differ materially from those projected, see Item 7—Forward-Looking Statements; Certain Factors Affecting Future Results. Except to the limited extent required by applicable law, the Company undertakes no
obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
PART I
Item 1.
Business
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(a)
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General Development of Business
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General
The Company is a leading global
producer of industrial shipping containers with manufacturing facilities located in over 40 countries. The Company offers a comprehensive line of industrial shipping container products, such as steel, fibre and plastic drums, intermediate bulk
containers, closure systems for industrial shipping containers, and polycarbonate water bottles, which are complemented with a variety of value-added services. The Company’s global presence and full range of products uniquely position it to
offer its customers a single source for their packaging needs and to be responsive to global market changes. The Company also produces containerboard and value-added corrugated products for niche markets in the United States and Canada. The Company
owns timberland in the southeastern United States and Canada which it cuts and sells to third parties, as well as manages to maximize long-term value. The Company’s customers range from Fortune 500 companies to medium and small-sized companies
in a cross section of industries.
2
Item 1.
Business
(continued)
The Company’s history goes back to 1877 when its predecessor manufactured wooden barrels, casks and kegs to transport post-Civil War U.S. goods
nationally and internationally. The Company was incorporated as a Delaware corporation in 1926.
Recent
Acquisitions and Joint Ventures
Van Leer Industrial
Packaging
. In March 2001, the Company acquired Royal Packaging Industries Van Leer N.V., a Dutch company, Huhtamaki Holdings do Brasil Ltda., a Brazilian company, Van Leer France Holding S.A.S., a French company, Van Leer
Containers, Inc., a U.S. company, and American Flange & Manufacturing Co., Inc., a U.S. company, which are collectively referred to as “Van Leer Industrial Packaging.” The Company acquired Van Leer Industrial Packaging for $555.0
million less the amount of certain of its debt and other obligations ($206.4 million) that were assumed by the Company as of the closing date. Van Leer Industrial Packaging was a worldwide provider of industrial packaging and components, including
steel, fibre and plastic drums, polycarbonate water bottles, IBCs and closure systems for industrial shipping containers.
In connection with the Van Leer Industrial Packaging acquisition, the Company acquired a 25% interest in Socer-Embalagens, Lda. and a 40.06% interest in Balmer Lawrie-Van Leer. Socer-Embalagens reconditions used drums at its
facility in Portugal and resells them to customers. Balmer Lawrie-Van Leer manufactures closure systems for industrial shipping containers at its two facilities in India.
Great Lakes and Trend Pak
. In April 1999, the Company purchased Great Lakes Corrugated Corp. (“Great Lakes”) and
Trend Pak, Inc. (“Trend Pak”) for $20.8 million. Great Lakes manufactures corrugated containers in Toledo, Ohio. Trend Pak adds foam and other packaging materials to corrugated containers manufactured by Great Lakes.
Intermediate Bulk Container Business
. In January 1999, the Company purchased the
assets constituting the IBC business of Sonoco Products Company (“Sonoco”) for $38.0 million. This business included one location in Lavonia, Georgia.
CorrChoice Joint Venture
. In November 1998, the Company entered into a joint venture agreement to form CorrChoice, Inc.
(“CorrChoice”) with the then two shareholders of RDJ Holdings Inc. (“RDJ”), which owned one-half of the outstanding stock of Ohio Packaging Corporation (“OPC”), and the then minority shareholder (the “Minority
Shareholder”) of a subsidiary of OPC. CorrChoice manufactures corrugated sheets at seven locations in Georgia, Kentucky, Michigan, North Carolina and Ohio. The Company sells containerboard to CorrChoice, which it uses to produce corrugated
sheets, and the Company purchases corrugated sheets from CorrChoice, with all transactions effected at prevailing market prices. Under the terms of the joint venture agreement, the Company contributed to CorrChoice all of its
3
Item 1.
Business
(continued)
stock of Michigan Packaging Company and OPC in exchange for 63.24% of the outstanding stock of CorrChoice. In addition, under the terms of that joint venture agreement, the
two shareholders of RDJ contributed all of their stock of RDJ and the Minority Shareholder contributed his stock in the subsidiary of OPC in exchange for an aggregate 36.76% of the outstanding stock of CorrChoice. In connection with the joint
venture agreement, the Company entered into a voting agreement under which it can elect one-half of CorrChoice’s board of directors, and therefore, the Company does not control CorrChoice. CorrChoice has been, and is expected to continue to be,
self-supporting. Under certain circumstances, the Company may purchase, or be required to purchase, the other parties’ interest in CorrChoice, or the Company may be required to sell its interest to the other parties, at a price determined in
the manner described in the relevant agreement.
The joint venture agreement and related
agreements contain certain covenants and restrictions on certain business activities. These restrictions have not affected the Company’s business or operations in any material respect and have not prevented the Company from pursuing any
business opportunities that it desired to pursue.
Industrial Containers
Business.
In March 1998, the Company acquired the industrial containers business of Sonoco by purchasing all of the outstanding shares of KMI Continental Fibre Drum, Inc., a Delaware corporation (“KMI”), Sonoco
Plastic Drum, Inc., an Illinois corporation (“SPD”), GBC Holding Co., a Delaware corporation (“GBC Holding”) and Fibro Tambor, S.A. de C.V., a Mexican corporation (“Fibro Tambor”), and the membership interest of Sonoco
in Total Packaging Systems of Georgia, LLC, a Delaware limited liability company (“TPS”), for $182.9 million. KMI, SPD, GBC Holding, Fibro Tambor, TPS and their respective subsidiaries were in the business of manufacturing and selling
plastic and fibre drums principally in the United States and Mexico and refurbishing and reconditioning plastic drums principally in the United States and Mexico.
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(b)
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Financial Information about Segments
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The Company operates in three business segments: Industrial Packaging & Services (formerly Industrial Shipping Containers); Paper, Packaging &
Services (formerly Containerboard & Corrugated Products); and Timber. Information related to each of these segments is included in Note 14 to the Consolidated Financial Statements on pages 77-80 of this Form 10-K, which Note is part of the
consolidated financial statements contained in Item 8 of this Form 10-K, and which is incorporated herein by reference.
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(c)
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Narrative Description of Business
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Products and Services
In the Industrial
Packaging & Services segment, the Company offers a comprehensive line of industrial shipping container products,
4
Item 1.
Business
(continued)
such as steel, fibre and plastic drums, intermediate bulk containers (“IBCs”), closure systems for industrial shipping containers, and polycarbonate water
bottles. The Company sells its industrial shipping container products to customers in industries such as chemicals, paints and pigments, food and beverage, petroleum, industrial coatings, agricultural, pharmaceutical and mineral, among others.
In the Paper, Packaging & Services segment, the Company sells containerboard, corrugated
sheets and other corrugated products and multiwall bags to customers in North America in industries such as packaging, automotive, food and building products. The Company’s corrugated container products are used to ship such diverse products as
home appliances, small machinery, grocery products, building products, automotive components, books and furniture, as well as numerous other applications. The Company’s full line of industrial and consumer multiwall bag products is used to ship
a wide range of industrial and consumer products, such as fertilizers, chemicals, concrete, flour, sugar, feed, seed, pet foods, popcorn, charcoal and salt, primarily for the agricultural, chemical, building products and food industries.
The Company also provides its customers with a variety of value-added packaging services to
complement its industrial containers and corrugated products, such as total supply chain management services (including warehousing, outgoing logistics, inventory management, vendor management, on-site labor management and contract filling), as well
as research and development, engineering and design and testing services.
In the Timber segment,
the Company is focused on the active harvesting and regeneration of its timber properties to achieve sustainable long-term yields on its timberland. While timber sales are subject to fluctuations, the Company seeks to maintain a consistent cutting
schedule, within the limits of market and weather conditions. As of October 31, 2002, the Company owned approximately 276,000 acres of timberland in the southeastern United States and approximately 40,000 acres of timberland in Canada.
Customers
Due to the variety of its products, the Company has many customers buying different types of its products and, due to the scope of the Company’s sales, no one customer is considered principal in
the total operation of the Company.
Backlog
The business of the Company is not seasonal to any significant extent. Because the Company supplies a cross section of industries, such as chemicals,
food products, petroleum products, pharmaceuticals and metal products, and must make spot deliveries on a day-to-day basis as its products are required by its customers, the Company does not operate on a backlog to any significant extent and
maintains only
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Item 1.
Business
(continued)
limited levels of finished goods. Many customers place their orders weekly for delivery during the week.
Competition
The markets in which the Company sells its products are highly competitive and comprised of many participants. Although no single company dominates, the Company faces significant competitors in each of its businesses. The
Company’s competitors include large vertically integrated companies as well as numerous smaller companies. The industries in which the Company competes are particularly sensitive to price fluctuations caused by shifts in industry capacity and
other cyclical industry conditions. Other competitive factors include design, quality and service, with varying emphasis depending on product line.
In the industrial shipping containers industry, the Company competes by offering a comprehensive line of products on a global basis. In the paper, packaging
and services industry, the Company competes by concentrating on providing value-added, higher-margin corrugated products to niche markets. In addition, over the past several years the Company has closed higher cost facilities and otherwise
restructured its operations, which it believes has significantly improved its cost competitiveness.
Environmental Matters; Governmental Regulations
The Company’s
operations are subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, the protection of the environment, the generation, storage, handling, transportation, treatment, disposal and
remediation of hazardous substances and waste materials and numerous other environmental laws and regulations. In the ordinary course of business, the Company is subject to periodic environmental inspections and monitoring by governmental
enforcement authorities. In addition, the Company’s production facilities require environmental permits that are subject to revocation, modification and renewal.
Based on current information, the Company believes that the probable costs of the remediation of company-owned property and response costs under the
Comprehensive Environmental Response, Compensation and Liability Acts of 1980 and similar state laws will not have a material adverse effect on its financial condition or results of operations. The Company believes that its liability for these
matters was adequately reserved as of October 31, 2002.
The Company does not believe that
compliance with federal, state, local and foreign provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has had or will have a material
effect upon the capital expenditures, earnings, or competitive position of the Company. The Company does not anticipate any material capital expenditures for environmental control facilities for its 2002 fiscal year.
6
Item 1.
Business
(concluded)
Raw Materials
Steel, resin and paper are the principal raw materials for the Industrial Packaging & Services segment, and pulpwood, waste paper for recycling, and paper are the principal raw materials for the
Paper, Packaging & Services segment. The Company satisfies virtually all of its needs for these raw materials through purchases on the open market or under short-term supply agreements. All of these raw materials are purchased in highly
competitive, price-sensitive markets, which have historically exhibited price and demand cyclicality. From time to time, some of these raw materials have been in short supply, but to date these shortages have not had a significant effect on the
Company’s operations.
Research and Development
While research and development projects are important to the Company’s continued growth, the amount expended in any year is not material in
relation to the results of operations of the Company.
The Company’s business is not
materially dependent upon patents, trademarks, licenses or franchises.
Employees
As of October 31, 2002, the Company had approximately 9,800 employees. A majority of the Company’s North American
employees are represented by collective bargaining units. The Company believes that its employee relations are generally good.
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(d)
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Financial Information about Geographic Areas
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The Company’s operations are primarily located in North America, Europe and various other regions. Information related to each of these areas is
included in Note 14 to the Consolidated Financial Statements, on pages 78-80 of this Form 10-K, which Note is part of the consolidated financial statements contained in Item 8 of this Form 10-K, and which Note is incorporated herein by reference.
Quantitative and Qualitative Disclosures about Market Risk, included in Item 7A of this Form 10-K, is incorporated herein by reference.
7
Item 2.
Properties
The following are the Company’s principal locations and the products manufactured at such facilities or the use of such facilities.
The Company considers its operating properties to be in satisfactory condition and adequate to meet its present needs. However, the Company expects to make further additions, improvements and consolidations of its properties as the Company’s
business continues to expand.
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Location
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Products Manufactured
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INDUSTRIAL PACKAGING & SERVICES:
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Argentina:
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San Juan
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Plastic drums
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San Fernando del Valle
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Steel drums
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Tigre
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Steel drums, plastic drums and other
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Australia:
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Altona North
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Steel drums, plastic drums, intermediate
bulk containers and other
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Brisbane
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Steel drums and other
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Eagle Farm (1)
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Life cycle services
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Marayong
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Plastic drums and other
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Penrith (2)
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Closures
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Perth
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Steel drums, plastic drums and other
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Seven Hills
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Steel drums and other
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Belgium:
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Lier (22)
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Steel drums, plastic drums and other
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Brazil:
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Aratu
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Steel drums
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Araucaria
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Closures
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Esteio
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Steel drums
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Manaus (3)
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Plastic drums
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Rio de Janeiro
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Steel drums
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São Paulo
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Steel drums, plastic drums and other
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Canada:
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Alberta:
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Lloydminster
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Fibre drums, steel drums and plastic drums
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Ontario:
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Belleville
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Plastic drums
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Milton
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Fibre drums
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Oakville
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Steel drums
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Stoney Creek
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Fibre drum parts
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Stoney Creek
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Steel drums
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Stoney Creek
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Fibre drum parts
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Quebec:
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La Salle
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Fibre drums
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Maple Grove
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Wooden pallets
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8
Item 2.
Properties
(continued)
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Location
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Products Manufactured
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Chile:
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Santiago
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Steel drums
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China:
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Ningbo
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Steel drums
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Liu Jia Gang Town
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Steel drums
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Columbia:
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Bogotá (4)
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Steel drums, plastic drums and other
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Cartagena
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Steel drums and plastic drums
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Costa Rica:
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San José (5)
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Steel drums
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Czech Republic:
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Usi nad Labem
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Steel drums
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Denmark:
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Roskilde
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Fibre drums
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Egypt:
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Sadat City
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Steel drums
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France:
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Autheuil Authouilet (38)
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Fibre drums, plastic drums and distribution center
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Gare de Corréze
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Distribution Center
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Le Grand-Quevilly Cedex (6)
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Other
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Le Grand-Quevilly Cedex (12)
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Steel drums, intermediate bulk containers,
closures and distribution center
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Germany:
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Attendorn
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Steel drums
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Haan (7)
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Closures distribution center
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Hamburg-Freihafen (8)
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Steel drums
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Köln-Lövenich
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Fibre drums, steel drums and other
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Monzingen
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Plastic drums
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Greece:
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Mandra-Attikis
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Steel drums
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Guatemala:
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Amatitlán
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Steel drums
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Hungary:
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Almásfüsitö
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Steel drums
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Italy:
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Melzo
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Fibre drums, steel drums and plastic drums
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Salzano
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Steel drums
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9
Item 2.
Properties
(continued)
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Location
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Products Manufactured
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Jamaica:
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Kingston
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Distribution center
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Kenya:
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Mombasa (9)
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Steel drums, plastic drums and other
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Malaysia:
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Petaling Jaya
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Steel drums, plastic drums and other
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Mexico:
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Cuernavaca
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Steel drums, fibre drums
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Naucalpan de Juarez
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Plastic drums
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Morocco:
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Casablanca
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Steel drums and plastic bottles
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Mozambique:
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Maputo (38)
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Steel drums, plastic bottles and other
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Netherlands:
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Amstelveen
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General office
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Amsterdam
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Closures
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Europoort (10)
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Steel drums and research center
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Vreeland
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Fibre drums, steel drums and other
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New Zealand:
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Auckland (38)
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Intermediate bulk containers
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Nigeria:
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Kaduna
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Steel drums
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Koko
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Steel drums
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Lagos (11)
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Steel drums, plastic drums and other
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Philippines:
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Rizal (14)
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Steel drums, plastic drums
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Poland:
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Rybnik
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Steel drums and other
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Portugal:
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Póvoa de Santa Iria
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Steel drums
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Russia:
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Beloyarsk (14)
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Steel drums
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Moscow
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Other
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Volgograd
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Steel drums
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Singapore:
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Singapore
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Steel drums
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Singapore (15)
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Distribution center
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10
Item 2.
Properties
(continued)
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Location
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Products Manufactured
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South Africa:
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Eppingdust
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Steel drums
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Ladysmith
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Plastic drums
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Mobeni
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Steel drums, closures and other
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Port Elizabeth (38)
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Distribution center
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Vanderbijlpark
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Steel drums and other
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Spain:
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Reus (Tarragona)
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Steel drums, distribution center and other
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Sweden:
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Perstorp
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Fibre drums and warehouse
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Västerhäninge (16)
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Steel drums
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Turkey:
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Kocaeli
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Steel drums and other
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United Kingdom:
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Burton-on-Trent
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Steel drums and other
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Deeside (17)
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Closures and other
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Ellesmere Port
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Steel drums
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Ellesmere Port
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Fibre drums, plastic drums and other
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Hull
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Steel drums
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Kingston-Upon-Hull (38)
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Plastic drums
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Uruguay:
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Las Piedras (18)
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Steel drums and plastic drums
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Venezuela:
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Punto Fijo
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Steel drums
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Valencia
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Steel drums, plastic drums and other
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Zimbabwe:
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Harare
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Steel drums, plastic drums and other
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United States:
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Alabama:
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Creola (39)
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Fibre drums
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Arkansas:
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Batesville (38)
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Fibre drums
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California:
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Fontana (39)
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Steel drums
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La Palma (39)
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Fibre drums
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Merced (39)
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Steel drums
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Morgan Hill (39)
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Fibre drums
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Ontario (13)
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Distribution center
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11
Item 2.
Properties
(continued)
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Location
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Products Manufactured
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Colorado:
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Denver (19)
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Distribution center
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Connecticut:
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Windsor Locks (20)
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Fibre drums
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Georgia:
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Lawrenceville (39)
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Intermediate bulk containers
|
|
Lavonia (39)
|
|
Intermediate bulk containers
|
|
Lithonia (39)
|
|
Fibre drums and laminator
|
|
|
|
Illinois:
|
|
|
|
Alsip (39)
|
|
Steel drums
|
|
Bradley (21)
|
|
Plastic drums
|
|
Bradley (38)
|
|
Other
|
|
Carol Stream (39)
|
|
Closures
|
|
Lockport (39)
|
|
Plastic drums
|
|
Lombard (23)
|
|
Research center
|
|
Naperville (24)
|
|
Fibre drums
|
|
|
|
Kansas:
|
|
|
|
Kansas City (25)
|
|
Fibre drums
|
|
Winfield
|
|
Steel drums
|
|
|
|
Kentucky:
|
|
|
|
Florence (39)
|
|
Steel drums
|
|
Mount Sterling (39)
|
|
Plastic drums
|
|
|
|
Massachusetts:
|
|
|
|
Mansfield
|
|
Fibre drums and plastic drums
|
|
|
|
Michigan:
|
|
|
|
Midland (26)
|
|
Distribution center
|
|
Taylor
|
|
Fibre drums
|
|
|
|
Minnesota:
|
|
|
|
Minneapolis
|
|
Fibre drums
|
|
|
|
Mississippi:
|
|
|
|
Canton (38)
|
|
Steel drums
|
|
|
|
Missouri:
|
|
|
|
Wright City (27)
|
|
Fibre drums
|
|
|
|
New Jersey:
|
|
|
|
Englishtown (28)
|
|
Fibre drums
|
|
Spotswood
|
|
Fibre drums
|
|
Teterboro
|
|
Fibre drums
|
12
Item 2.
Properties
(continued)
|
Location
|
|
Products Manufactured
|
|
New York:
|
|
|
|
Tonawanda (39)
|
|
Fibre drums
|
|
|
|
North Carolina:
|
|
|
|
Bladenboro
|
|
Steel drums
|
|
Charlotte (29)
|
|
Fibre drums
|
|
|
|
Ohio:
|
|
|
|
Greenville (39)
|
|
Steel drums
|
|
Van Wert (39)
|
|
Fibre drums
|
|
|
|
Pennsylvania:
|
|
|
|
Aston (39)
|
|
Fibre drums
|
|
Stroudsburg
|
|
Steel parts
|
|
Warminster (32)
|
|
Steel drums
|
|
West Hazleton (31)
|
|
Plastic drums
|
|
|
|
Tennessee:
|
|
|
|
Kingsport
|
|
Fibre drums
|
|
|
|
Texas:
|
|
|
|
Haltom City (39)
|
|
Fibre drums
|
|
Houston (33)(39)
|
|
Fibre drums
|
|
Houston (34)(39)
|
|
Plastic drums
|
|
La Porte (39)
|
|
Steel drums
|
|
La Porte (39)
|
|
Steel drums
|
|
|
|
West Virginia:
|
|
|
|
Culloden (35)
|
|
Fibre drums
|
|
|
|
PAPER, PACKAGING & SERVICES:
|
|
|
|
United States:
|
|
|
|
California:
|
|
|
|
Stockton (39)
|
|
Corrugated honeycomb
|
|
|
|
Georgia:
|
|
|
|
Macon
|
|
Corrugated honeycomb
|
|
|
|
Illinois:
|
|
|
|
Centralia (39)
|
|
Corrugated containers and sheets
|
|
Oreana
|
|
Corrugated containers
|
|
Posen
|
|
Corrugated honeycomb
|
|
Quincy (38)
|
|
Distribution center
|
|
|
|
Indiana:
|
|
|
|
Ferdinand (38)
|
|
Corrugated containers
|
13
Item 2.
Properties
(continued)
|
Location
|
|
Products Manufactured
|
|
Kentucky:
|
|
|
|
Louisville (39)
|
|
Corrugated containers
|
|
Winchester
|
|
Corrugated containers
|
|
Winchester (38)
|
|
Distribution center
|
|
|
|
Michigan:
|
|
|
|
Canton
|
|
Distribution center
|
|
Roseville (39)
|
|
Corrugated containers
|
|
|
|
Minnesota:
|
|
|
|
Rosemount (39)
|
|
Multiwall bags
|
|
|
|
Nebraska:
|
|
|
|
Omaha (39)
|
|
Multiwall bags
|
|
|
|
Ohio:
|
|
|
|
Fostoria (39)
|
|
Corrugated containers
|
|
Massillon (39)
|
|
Containerboard
|
|
Tiffin
|
|
Corrugated containers
|
|
Toledo (30)
|
|
Corrugated containers
|
|
Toledo (39)
|
|
Corrugated containers
|
|
Zanesville (39)
|
|
Corrugated containers and sheets
|
|
Zanesville (39)
|
|
Distribution center
|
|
|
|
Pennsylvania:
|
|
|
|
Reno (37)
|
|
Corrugated containers
|
|
Hazelton
|
|
Corrugated honeycomb
|
|
Washington (39)
|
|
Corrugated containers and sheets
|
|
Washington (38)
|
|
Distribution center
|
|
|
|
Texas:
|
|
|
|
Waco
|
|
Corrugated honeycomb
|
|
Waco (38)
|
|
Distribution center
|
|
|
|
Virginia:
|
|
|
|
Riverville (39)
|
|
Containerboard
|
|
|
|
Washington:
|
|
|
|
Woodland
|
|
Corrugated honeycomb and distribution center
|
|
|
|
West Virginia:
|
|
|
|
Huntington
|
|
Corrugated containers and sheets
|
|
Huntington (38)
|
|
Distribution center
|
|
|
|
TIMBER:
|
|
|
|
United States:
|
|
|
|
Alabama:
|
|
|
|
Evergreen
|
|
Distribution center
|
14
Item 2.
Properties
(continued)
|
Location
|
|
Products Manufactured
|
|
Mississippi:
|
|
|
|
Flowood
|
|
Other
|
|
Vicksburg
|
|
Distribution center
|
|
|
|
CORPORATE:
|
|
|
|
United States:
|
|
|
|
Ohio:
|
|
|
|
Delaware (39)
|
|
Principal office
|
|
Delaware (36)
|
|
North America office
|
Note: All properties are held in fee except as
noted below:
Exceptions:
|
(1)
|
|
Lease expires January 18, 2004
|
|
(2)
|
|
Lease expires May 11, 2003
|
|
(3)
|
|
Lease expires July 31, 2004
|
|
(4)
|
|
Lease expires December 31, 2004
|
|
(5)
|
|
Lease expires January 9, 2007
|
|
(6)
|
|
Lease expires November 1, 2003
|
|
(7)
|
|
Lease expires February 28, 2006
|
|
(8)
|
|
Lease expires December 31, 2009
|
|
(9)
|
|
Lease expires December 31, 2047
|
|
(10)
|
|
Lease expires September 30, 2015
|
|
(11)
|
|
Lease expires February 21, 2031
|
|
(12)
|
|
Lease expires October 14, 2003
|
|
(13)
|
|
Lease expires August 31, 2003
|
|
(14)
|
|
Lease expires September 1, 2003
|
|
(15)
|
|
Lease expires July 31, 2005
|
|
(16)
|
|
Lease expires December 31, 2005
|
|
(17)
|
|
Lease expires March 31, 2014
|
|
(18)
|
|
Lease expires May 31, 2005
|
|
(19)
|
|
Lease expires December 15, 2004
|
|
(20)
|
|
Lease expires December 31, 2005
|
|
(21)
|
|
Lease expires March 31, 2006
|
|
(22)
|
|
Lease expires October 31, 2003
|
|
(23)
|
|
Lease expires July 31, 2007
|
|
(24)
|
|
Lease expires June 30, 2003
|
|
(25)
|
|
Lease expires March 31, 2004
|
|
(26)
|
|
Lease expires June 30, 2003
|
|
(27)
|
|
Lease expires August 31, 2005
|
|
(28)
|
|
Lease expires February 28, 2003
|
|
(29)
|
|
Lease expires September 30, 2003
|
|
(30)
|
|
Lease expires August 31, 2003
|
|
(31)
|
|
Lease expires April 30, 2006
|
|
(32)
|
|
Lease expires January 1, 2016
|
|
(33)
|
|
Lease expires December 31, 2006
|
|
(34)
|
|
Lease expires September 30, 2006
|
|
(35)
|
|
Lease expires January 31, 2006
|
|
(36)
|
|
Lease expires October 31, 2012
|
|
(37)
|
|
Lease expires December 31, 2004
|
|
(38)
|
|
Lease operates month to month
|
|
(39)
|
|
A first lien on this property secures payment of the Company’s obligations under its $550 million Amended and Restated Senior Secured Credit Agreement (see
Item 7 – Borrowing Arrangements).
|
15
Item 2.
Properties
(concluded)
The Company also owns in fee a substantial number of scattered timber tracts comprising approximately 276,000 acres in the states of
Alabama, Arkansas, Florida, Louisiana and Mississippi and approximately 40,000 acres in the provinces of Ontario and Quebec in Canada.
Item 3.
Legal Proceedings
The Company has no pending
material legal proceedings.
From time to time, various legal proceedings arise at federal, state, local or
foreign levels involving environmental sites to which the Company has shipped, directly or indirectly, small amounts of toxic waste, such as paint solvents, etc. The Company, to date, has been classified as a “de minimis” participant and,
as such, has not been subject, in any instance, to sanctions of $100,000 or more.
In addition, from time to time,
but less frequently, the Company has been cited for violations of environmental regulations. None of these violations involve or are expected to involve sanctions of $100,000 or more.
Item 4.
Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.
Executive Officers of the Company
The following
information relates to executive officers of the Company (elected annually):
Name
|
|
Age
|
|
Positions and offices
|
|
Year first became executive officer
|
|
Michael J. Gasser
|
|
51
|
|
Chairman of the Board of Directors and Chief Executive Officer, Chairman of the Executive and Stock Repurchase Committees and member of the Nominating
Committee
|
|
1988
|
|
|
|
William B. Sparks, Jr.
|
|
61
|
|
Director, President and Chief Operating Officer, member of the Executive Committee
|
|
1995
|
|
|
|
Donald S. Huml
|
|
56
|
|
Chief Financial Officer
|
|
2002
|
16
Executive Officers of the Company (continued)
|
Name
|
|
Age
|
|
Positions and offices
|
|
Year first became executive officer
|
|
Maureen A. Conley
|
|
44
|
|
Senior Vice President, New Business Development
|
|
2000
|
|
|
|
John S. Lilak
|
|
55
|
|
Executive Vice President, Paper, Packaging & Services, and President of Soterra LLC (subsidiary company)
|
|
1999
|
|
|
|
Michael L. Roane
|
|
47
|
|
Senior Vice President, Human Resources & Communications
|
|
1998
|
|
|
|
Gary R. Martz
|
|
44
|
|
Senior Vice President, General Counsel and Secretary
|
|
2002
|
|
|
|
Michael J. Barilla
|
|
52
|
|
Vice President, Business Information Services
|
|
2002
|
|
|
|
John K. Dieker
|
|
39
|
|
Vice President and Corporate Controller
|
|
1996
|
|
|
|
Sharon R. Maxwell
|
|
53
|
|
Assistant Secretary
|
|
1997
|
|
|
|
Robert A. Young
|
|
48
|
|
Vice President, Taxes
|
|
2002
|
|
|
|
Robert S. Zimmerman
|
|
31
|
|
Assistant Treasurer
|
|
2001
|
Executive Officers and Certain Significant Employees of the Company
Except as indicated below, each person has served in his or her present capacity for at least five years.
Mr. Donald S. Huml was elected Chief Financial Officer in 2002. Prior to that time, and for more than five years,
he served as Senior Vice President, Finance, and Chief Financial Officer of Snap-On Incorporated, a global developer, manufacturer and marketer of tools and equipment.
Ms. Maureen A. Conley was elected Senior Vice President, New Business Development, in 2000. Prior to that time, she served as a senior management consultant for IBM Global
Services for almost three years. During 1998, she was Director of Corporate Development for BioCrystal Limited. Prior to that time, and for more than five years, she served as Director of Administrative Services for the City of Columbus, Ohio.
17
Executive Officers and Certain Significant Employees of the Company (concluded)
Mr. John S. Lilak was elected President of Soterra LLC (subsidiary company)in 2002 and Executive Vice
President, Paper, Packaging & Services, during 1999. During 1997 to 1999, Mr. Lilak served as General Sales and Marketing Manager, Kraft Paper and Board Division, for Union Camp Corporation. Prior to that time, and for more than five years, he
served as Group General Manager, Container Division, of Union Camp.
Mr. Michael L. Roane was elected Senior Vice
President, Human Resources, in 1998. Prior to that time, and for more than five years, Mr. Roane served as Vice President, Human Resources, for Owens and Minor, Inc.
Mr. Gary R. Martz was elected Senior Vice President, General Counsel and Secretary in 2002. Prior to that time, and for more than five years, he served as a partner in the
law firm of Baker & Hostetler LLP.
Mr. Michael J. Barilla was elected Vice President, Business Information
Services, during 1999. In 2002, Mr. Barilla was elected as an executive officer of the Company. During 1997 to 1999, Mr. Barilla served as a Senior Consultant for IBM Corporation. Prior to 1997, and for more than five years, he served as Chief
Financial Officer of Medex, Inc.
Mr. Robert A. Young was elected Vice President, Taxes during 2002. During 1999
to 2001, Mr. Young served as the Director of Taxes. Prior to that time, and for more than five years, he was the Tax Manager of Consolidated Papers, Inc.
Mr. Robert S. Zimmerman was elected Assistant Treasurer during 2001. From 1999 until joining the Company, he served as Treasury Manager at Mettler-Toledo International, Inc. From 1997 to 1998, he was a
Risk Advisor at Bank One. Prior to 1997, and for more than five years, Mr. Zimmerman served as a Portfolio Analyst at Chase Manhattan Mortgage Corporation.
18
PART II
Item 5.
Market for the Registrant’s Common Stock and Related Security Holder Matters
The Class A and Class B Common Stock are traded on the New York Stock Exchange under the symbols GEF and GEF.B, respectively.
Financial information regarding the Company’s two classes of common stock, as well as the number of holders of each class and the
high, low and closing sales prices for each class for each quarterly period for the two most recent fiscal years, is included in Note 15 to the Consolidated Financial Statements on pages 81-82 of this Form 10-K, which Note is part of the
consolidated financial statements contained in Item 8 of this Form 10-K, and which Note is incorporated herein by reference.
The Company paid four dividends of varying amounts during its fiscal year computed on the basis described in Note 8 to the Consolidated Financial Statements on page 68 of this Form 10-K, which Note is part of the financial statements
contained in Item 8 of this Form 10-K, and which Note is incorporated herein by reference. The annual dividends paid for the last three fiscal years are as follows:
|
2002 fiscal year dividends per share – Class A
|
|
$0.56
|
|
Class B $0.83
|
|
|
|
2001 fiscal year dividends per share – Class A
|
|
$0.54
|
|
Class B $0.80
|
|
|
|
2000 fiscal year dividends per share – Class A
|
|
$0.52
|
|
Class B $0.77
|
|
|
The terms of both the Company’s $550 million Amended and
Restated Senior Secured Credit Agreement and the indenture for the Company’s 8 7/8% Senior Subordinated Notes limit the ability of the Company to make “restricted payments,” which include dividends and purchases, redemptions and
acquisitions of equity interests of the Company. The payments of dividends and other restricted payments are subject to the condition that no default exists under the terms of those agreements and are limited in amount by a formula based on the
consolidated net income of the Company. Under the Amended and Restated Senior Secured Credit Agreement, the dividends and other restricted payments may not exceed $25 million during any fiscal year.
19
Item 6
.
Selected Financial Data
The five-year selected financial data is as follows (Dollars in thousands, except per share amounts):
|
|
|
Years Ended October 31,
|
|
|
|
2002
|
|
2001
|
|
2000
|
|
1999
|
|
1998
|
|
Net sales
|
|
$
|
1,632,767
|
|
$
|
1,456,000
|
|
$
|
963,956
|
|
$
|
853,438
|
|
$
|
845,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
30,979
|
|
$
|
88,774
|
|
$
|
75,794
|
|
$
|
51,373
|
|
$
|
37,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,758,795
|
|
$
|
1,771,188
|
|
$
|
939,331
|
|
$
|
910,986
|
|
$
|
878,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including current portion of long-term debt
|
|
$
|
632,982
|
|
$
|
697,514
|
|
$
|
235,000
|
|
$
|
258,000
|
|
$
|
235,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock
|
|
$
|
0.56
|
|
$
|
0.54
|
|
$
|
0.52
|
|
$
|
0.50
|
|
$
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Common Stock
|
|
$
|
0.83
|
|
$
|
0.80
|
|
$
|
0.77
|
|
$
|
0.74
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock
|
|
$
|
1.10
|
|
$
|
3.14
|
|
$
|
2.68
|
|
$
|
1.78
|
|
$
|
1.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Common Stock
|
|
$
|
1.64
|
|
$
|
4.70
|
|
$
|
4.01
|
|
$
|
2.67
|
|
$
|
1.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock
|
|
$
|
1.10
|
|
$
|
3.14
|
|
$
|
2.67
|
|
$
|
1.78
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B Common Stock
|
|
$
|
1.64
|
|
$
|
4.70
|
|
$
|
4.01
|
|
$
|
2.67
|
|
$
|
1.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Van Leer Industrial Packaging was acquired on March 2, 2001.
Accordingly, the Van Leer Industrial Packaging operating results and assets have been included since that date. The increase in long-term debt in 2001 is a result of this acquisition.
The amounts include the results of operations (from the date of acquisition) and assets of the industrial containers business acquired from Sonoco on March 30, 1998.
The results of operations include the effects of a $10.3 million pretax debt extinguishment charge in 2002 and
pretax restructuring charges of $2.8 million, $11.5 million and $27.5 million for 2002, 2001 and 1998, respectively.
20
Item 7
.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The purpose of this section is to discuss and analyze our
consolidated financial condition, liquidity and capital resources and results of operations. This analysis should be read in conjunction with the consolidated financial statements and notes which appear elsewhere in this Annual Report. The terms
“Greif,” “our company,” “we,” “us,” and “our” as used in this discussion refer to Greif Bros. Corporation and subsidiaries. Our fiscal year begins on November 1 and ends on October 31 of the
following year. Any references in this Annual Report on Form 10-K to the years 2002, 2001 or 2000, or to any quarter of those years, relate to the fiscal year ending in that year.
General
Business Segments
We operate in three business segments: Industrial Packaging & Services (formerly Industrial Shipping Containers); Paper, Packaging
& Services (formerly Containerboard & Corrugated Products); and Timber.
We are a leading global provider
of industrial shipping container products such as steel, fibre and plastic drums, intermediate bulk containers (“IBCs”), closure systems for industrial shipping containers, and polycarbonate water bottles. We seek to provide complete
packaging solutions to our customers by offering a comprehensive range of products and services on a global basis. We sell our products to customers in industries such as chemicals, paints and pigments, food and beverage, petroleum, industrial
coatings, agricultural, pharmaceutical and mineral, among others.
We sell our containerboard, corrugated sheets
and other corrugated products and multiwall bags to customers in North America in industries such as packaging, automotive, food and building products. Our corrugated container products are used to ship such diverse products as home appliances,
small machinery, grocery products, building products, automotive components, books and furniture, as well as numerous other applications. Our full line of industrial and consumer multiwall bag products is used to ship a wide range of industrial and
consumer products, such as fertilizers, chemicals, concrete, flour, sugar, feed, seed, pet foods, popcorn, charcoal and salt, primarily for the agricultural, chemical, building products and food industries.
21
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
We also provide our customers with a variety of
value-added packaging services to complement our industrial containers and corrugated products, such as total supply chain management services (including warehousing, outgoing logistics, inventory management, vendor management, on-site labor
management and contract filling), as well as research and development, engineering and design and testing services.
As of October 31, 2002, we owned approximately 276,000 acres of timberland in the southeastern United States and approximately 40,000 acres of timberland in Canada. Our timber management is focused on the active harvesting and
regeneration of our timber properties to achieve sustainable long-term yields on our timberland. While timber sales are subject to fluctuations, we seek to maintain a consistent cutting schedule, within the limits of market and weather conditions.
Van Leer Industrial Packaging Acquisition
In March 2001, we acquired Royal Packaging Industries Van Leer N.V., a Dutch company, Huhtamaki Holdings do Brasil Ltda., a Brazilian company, Van Leer France Holding S.A.S., a French company, Van Leer
Containers, Inc., a U.S. company, and American Flange & Manufacturing Co., Inc., a U.S. company, which are collectively referred to as “Van Leer Industrial Packaging.” We acquired Van Leer Industrial Packaging for $555.0 million less
the amount of certain of its debt and other obligations ($206.4 million) that were assumed by us as of the closing date. Van Leer Industrial Packaging was a worldwide provider of industrial packaging and components, including steel, fibre and
plastic drums, polycarbonate water bottles, IBCs and closure systems for industrial shipping containers.
In
connection with the Van Leer Industrial Packaging acquisition, we acquired a 25.00% interest in Socer-Embalagens, Lda. and a 40.06% interest in Balmer Lawrie-Van Leer. Socer-Embalagens reconditions used drums at its facility in Portugal and resells
them to customers. Balmer Lawrie-Van Leer manufactures closure systems for industrial shipping containers at its two facilities in India.
The results of the operations of Van Leer Industrial Packaging are included in the consolidated financial statements for eight months of 2001 and for the entire year in 2002, but are not included in the consolidated
financial statements for 2000 or for the first four months of 2001.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements, in accordance with these principles, require us to make estimates and assumptions
that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our consolidated financial statements.
22
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
A summary of our significant accounting policies is
included in the Notes to Consolidated Financial Statements included in this Annual Report. We believe that the consistent application of these policies enables us to provide readers of the consolidated financial statements with useful and reliable
information about our operating results and financial condition. The following are the accounting policies that we believe are most important to the portrayal of our financial condition and results and require our most difficult, subjective or
complex judgments.
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•
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Allowance for Accounts Receivable — We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we
are aware of a specific customer’s inability to meet its financial obligations to us, we record a specific allowance for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be
collected. For all other customers, we recognize allowances for bad debts based on the length of time receivables are past due with allowance percentages, based on our historical experiences, applied on a graduated scale relative to the age of the
receivable amounts. If circumstances change (i.e., higher than expected bad debt experience or an unexpected material adverse change in a major customer’s ability to meet its financial obligations to us), our estimates of the recoverability of
amounts due to us could be reduced by a material amount.
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•
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Inventory Reserves — Reserves for slow moving and obsolete inventories are provided based on historical experience and product demand. We continuously
evaluate the adequacy of these reserves and make adjustments to these reserves as required.
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•
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Net Assets Held for Sale — Net assets held for sale represent land, buildings and land improvements less accumulated depreciation for locations that have
been closed, primarily as a result of the consolidation plans in the Industrial Packaging & Services segment. We record net assets held for sale in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 121 at the
lower of carrying value or fair value less cost to sell. Fair value is based on the estimated proceeds from the sale of the facility utilizing recent buy offers, market comparables and/or data obtained from our commercial real estate broker. Our
estimate as to fair value is regularly reviewed and subject to changes in the commercial real estate markets and our continuing evaluation as to the facility’s acceptable sale price.
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•
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Properties, Plants and Equipment — Depreciation on properties, plants and equipment is provided on the straight-line method over the estimated useful lives
of our assets. Depletion on timber properties is computed on the basis of cost and the estimated recoverable timber acquired. We believe that the lives and methods of determining depreciation and depletion are reasonable; however, using other lives
and methods could provide materially different results.
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23
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
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•
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Restructuring Liabilities — Restructuring liabilities are determined in accordance with appropriate accounting guidance, including Emerging Issues Task
Force (“EITF”) No. 94-3, EITF No. 95-3 and Staff Accounting Bulletin No. 100, depending upon the facts and circumstances surrounding the situation. Restructuring liabilities recorded in connection with existing and acquired companies are
further discussed in the Notes to Consolidated Financial Statements included in this Annual Report.
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•
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Pension and Postretirement Benefits — Pension and postretirement benefit expenses are determined by our actuaries using assumptions about the discount
rate, expected return on plan assets, rate of compensation increase and health care cost trend rates. Further discussion of our pension and postretirement benefit plans and related assumptions is included in Notes 11 and 12 to the consolidated
financial statements included in this Annual Report. The actual results would be different using other assumptions.
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•
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Income Taxes — Our effective tax rate, taxes payable and the tax bases of our assets and liabilities reflect current tax rates in our domestic and foreign
tax jurisdictions and our best estimate of the ultimate outcome of ongoing and potential future tax audits. Valuation allowances are established where expected future taxable income does not support the realization of the deferred tax assets.
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•
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Environmental Cleanup Costs — We expense environmental expenditures related to existing conditions caused by past or current operations and from which no
current or future benefit is discernable. Our estimates of environmental remediation costs are based upon an evaluation of currently available facts with respect to each individual site, including the results of environmental studies and testing,
and considering existing technology, presently enacted laws and regulations, and prior experience in remediation of contaminated sites. Expenditures that extend the life of the related property, or mitigate or prevent future environmental
contamination are capitalized. We determine our liability on a site-by-site basis and record a liability at the time when it is probable and can be reasonably estimated. Our estimated liability is reduced to reflect the anticipated participation of
other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of the relevant costs. Our potential future obligations for
environmental contingencies related to facilities acquired in the Van Leer Industrial Packaging acquisition may, under certain circumstances, be reduced by insurance coverage and seller cost sharing provisions. The insurance policy, which has a
10-year term, insures for environmental contingencies unidentified at the acquisition date subject to a $50 million aggregate self-insured retention. Unidentified environmental contingencies at the
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24
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
acquisition date up to $50 million are shared 70% by the seller and 30% by us if they are
identified within 10 years following the acquisition date. Identified environmental contingencies at the acquisition date are first provided for by us up to an aggregate $10 million and shared on a 70/30% basis by us and the seller, respectively,
thereafter.
Actual costs to be incurred in future periods at the identified sites may vary from the estimates,
given the inherent uncertainties in evaluating environmental exposures. Future information and developments will require us to continually reassess the expected impact of these environmental matters.
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•
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Contingencies — Various lawsuits, claims and proceedings have been or may be instituted or asserted against us, including those
pertaining to environmental, product liability, safety and health matters. We are continually consulting legal counsel and evaluating requirements to reserve for contingencies in accordance with SFAS No. 5. While the amounts claimed may be
substantial, the ultimate liability cannot currently be determined because of the considerable uncertainties that exist. Based on the facts currently available, we believe the disposition of matters that are pending will not have a material effect
on the consolidated financial statements.
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•
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Goodwill, Other Intangible Assets and Other Long-Lived Assets — Goodwill is amortized on a straight-line basis over 15 or 25 years based on consideration
regarding the age of the acquired companies, their customers and the risk of obsolescence of their products. The costs of acquired intangible assets are amortized on a straight-line basis over their estimated economic lives of 2 to 25 years. Our
policy is to periodically review goodwill, other intangible assets and other long-lived assets based upon the evaluation of such factors as the occurrence of a significant adverse event or change in the environment in which the business operates, or
if the expected future net cash flows (undiscounted and without interest) would become less than the carrying amount of the asset. An impairment loss would be recorded in the period such determination is made based on the fair value of the related
assets.
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In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 142, “Goodwill and Other Intangible Assets,” which requires that goodwill no longer be amortized, but instead be periodically reviewed for impairment. The provisions of SFAS No. 142 will be effective for fiscal years beginning after
December 15, 2001. As such, we will adopt SFAS No. 142 at the beginning of our 2003 fiscal year.
We anticipate
that the application of the non-amortization provisions of SFAS No. 142 will increase our net income upon adoption. Amortization expense related to our goodwill and indefinite-lived
25
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
assets was $11.2 million and $9.2 million for the fiscal
years ended October 31, 2002 and 2001, respectively.
At this time, the effect of the impairment provisions
provided by SFAS No. 142 is not known.
Other items that could have a significant impact on the financial statements
include the risks and uncertainties listed in this Annual Report under the
“Safe Harbor Statement Under the Private Securities Litigation Reform
Act of 1995” below. Actual results could differ materially using different
estimates and assumptions, or if conditions are significantly different in
the future.
RESULTS OF OPERATIONS
Historically, revenues and earnings may or may not be representative of future operating results due to various economic and
other factors. Our year-to-year comparisons have been significantly affected by our acquisition of Van Leer Industrial Packaging in March 2001.
We define EBITDA as earnings from continuing operations before interest, income taxes, depreciation, depletion, amortization, minority interest in income of consolidated subsidiaries, equity in
earnings of affiliates, debt extinguishment charge and foreign currency effects. EBITDA is included in this section because it is a basis on which we assess our financial performance and debt service capabilities. However, EBITDA should not be
considered in isolation or viewed as a substitute for cash flow from operations, net income or other measures of performance as defined by accounting principles generally accepted in the United States, or as a measure of our company’s
profitability or liquidity. While EBITDA is frequently used by securities analysts, lenders and others in their evaluation of companies, EBITDA as used herein is not necessarily comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation.
26
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
The following table sets forth the net sales and EBITDA
for each of our business segments for 2002, 2001 and 2000 (Dollars in millions):
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For the years ended October 31,
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2002
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2001
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2000
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Net sales
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Industrial Packaging & Services
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$
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1,268.0
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$
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1,038.9
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$
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490.9
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Paper, Packaging & Services
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324.0
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379.3
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428.4
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Timber
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40.8
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37.8
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44.7
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Total net sales
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$
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1,632.8
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$
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1,456.0
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$
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964.0
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EBITDA
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Industrial Packaging & Services
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$
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131.6
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$
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87.9
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$
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45.8
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Paper, Packaging & Services
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49.2
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82.4
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80.5
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Timber
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47.2
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112.1
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47.1
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Total segment
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228.0
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282.4
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173.4
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Restructuring charge
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(2.8
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)
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(11.5
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)
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—
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Corporate and other
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(24.0
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)
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(16.0
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)
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(15.9
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)
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Total EBITDA
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201.2
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|
|
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254.9
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|
|
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157.5
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Depreciation, depletion and amortization expense
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|
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(97.5
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)
|
|
|
(81.5
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)
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|
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(45.2
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)
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Debt extinguishment charge
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(10.3
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)
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|
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—
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|
|
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—
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Interest expense, net
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|
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(56.0
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)
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(45.2
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)
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|
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(11.8
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)
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Foreign currency effects
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(1.5
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)
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(0.2
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)
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—
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Income before income taxes, minority interest in income of consolidated subsidiaries and equity in earnings of
affiliates
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$
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35.9
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$
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128.0
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|
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$
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100.5
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|
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|
|
|
|
|
|
|
|
|
|
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Fiscal Year 2002 Compared to Fiscal Year 2001
Overview
Net sales
increased to $1,632.8 million, an increase of 12.1%, in 2002 from $1,456.0 million in 2001. This increase resulted from a $190.3 million increase in net sales from outside North America, partially offset by a $13.5 million decrease in net sales from
the North American operations. The decrease in the North American operations was due to lower net sales in the Paper, Packaging & Services segment ($55.3 million decrease), which were partially offset by the Industrial Packaging & Services
segment ($38.8 million increase) and the Timber segment ($3.0 million increase). The higher net sales in the North American operations of the Industrial Packaging & Services segment, as well as the higher net sales outside North America, were
primarily due to the inclusion of Van Leer Industrial Packaging sales volume for all of 2002 compared to eight months in 2001.
27
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
EBITDA was $204.0 million, before the $2.8 million fourth quarter restructuring charge, for 2002
as compared to $266.4 million, before the $11.5 million second quarter restructuring charge, for 2001. The $62.4 million decrease in EBITDA was attributable to lower gains on the sale of timberland ($67.5 million decrease) and the Paper, Packaging
& Services segment ($33.2 million decrease), which were partially offset by the inclusion of the Van Leer Industrial Packaging operations and higher timber sales.
Segment Review
Industrial Packaging & Services
The Industrial Packaging & Services segment had an increase in net sales of $229.1 million, or 22.1%. This increase was
primarily due to an increase of $190.3 million in net sales outside North America and an increase of $38.8 million in net sales in North America due to additional sales volume from the inclusion of an entire year of the Van Leer Industrial Packaging
operating results in 2002 compared to eight months in 2001. In addition, increased pricing for this segment’s products in response to higher raw material costs, especially for steel and resin during 2002, contributed to the increase in net
sales. Net sales outside of North America also benefited from an improvement in currency exchange rates in Europe, which were offset by lower net sales in South America, in particular Argentina and Venezuela, and Africa caused by unstable economic
conditions and currency devaluations. Finally, sales volumes in North America were lower due to the weak economic conditions that prevailed throughout 2002.
EBITDA for Industrial Packaging & Services increased to $131.6 million, before the $0.6 million fourth quarter restructuring charge, for 2002 as compared to $87.9 million, before the $11.5 million
second quarter restructuring charge, for 2001. The primary reasons for this increase relate to improved sales volumes as a result of the Van Leer Industrial Packaging acquisition, lower raw material costs as a percentage of net sales, positive
contributions from the prior year consolidation plan and other cost savings initiatives.
Paper, Packaging & Services
The Paper, Packaging & Services segment had a decrease in net sales of $55.3 million, or 14.6%, in 2002
as compared to 2001. This decrease in net sales was primarily due to lower average sales prices for linerboard and medium of approximately 15%, partially offset by an improvement in sales volumes on most of the segment’s products. However, our
multiwall bag operations had reduced sales volumes resulting primarily from weaknesses in the agricultural industry, particularly in the midwestern United States.
EBITDA for the Paper, Packaging & Services segment decreased to $49.2 million for 2002 as compared to $82.4 million for 2001. The decline was
28
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
caused by lower net sales and higher raw material costs, especially for old corrugated containers (“OCC”), on
a quarter-over-quarter comparison.
Timber
The Timber segment had an increase in net sales of $3.0 million, or 7.9%, for 2002 as compared to 2001. While timber sales are subject to fluctuations, we seek to maintain a consistent cutting
schedule, within the limits of market and weather conditions.
The sales of timber are recorded as net sales,
while timberland sales are included in gain on sale of timberland. The gain on sale of timberland was $12.1 million for 2002 as compared to $79.7 million for 2001. See “Timberland Transactions” below.
EBITDA for the Timber segment decreased to $47.2 million for 2002 as compared to $112.1 million for 2001. The decrease in EBITDA was
primarily the result of the significant gain on sale of timberland in the prior period slightly offset by higher timber sales.
Other
Income Statement Changes
Gain on Sale of Timberland
Gain on sale of timberland decreased $67.6 million in 2002 as compared to 2001 primarily due to the timberland sales described in the “Timberland Transactions”
section below.
Other Income, Net
Other income, net increased $1.5 million in 2002 as compared to 2001. The change in other income was primarily due to an increase from gains on the sale of closed facilities and equipment in comparison
to 2001.
Cost of Products Sold
The cost of products sold, as a percentage of net sales, increased to 79.4% in 2002 from 79.2% in 2001. This increase was primarily caused by weakening in the Paper, Packaging & Services segment,
which was affected by increased raw material costs, especially OCC, without a corresponding increase in sales prices. The increase was partially offset by an overall improvement in the Industrial Packaging & Services segment, which resulted from
lower raw material costs, as a percentage of net sales, and improved operating efficiencies. Higher timber segment sales, which have a very low cost associated with them, also benefited our gross margin.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses increased to $250.8 million (15.4% of net sales) in 2002 as compared to $204.7 million (14.1% of net sales) in 2001. The $46.1
million increase was primarily due
29
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
to additional SG&A expenses related to Van Leer Industrial Packaging, including $3.1 million of additional
amortization expense related to the acquisition’s goodwill and other intangible assets. SG&A expenses, as a percentage of net sales, primarily increased as a result of lower sales volumes, on a comparable structure basis, for Industrial
Packaging & Services and lower net sales in the Paper, Packaging & Services segment. In addition, the 2002 results were impacted by higher employee benefit costs and certain non-recurring costs related to our organizational improvement
initiatives and ongoing reorganization activities.
Restructuring Charge
During the fourth quarter of 2002, we recorded a $2.8 million pretax restructuring charge due to the reorganization activities described in the “Restructuring
Plans” section below.
Debt Extinguishment Charge
During 2002, we recorded a debt extinguishment charge of $10.3 million ($4.4 million in the third quarter and $5.9 million in the fourth quarter) related to the
extinguishment of the indebtedness outstanding under the $900 million Senior Secured Credit Agreement.
Interest Expense, Net
Interest expense, net increased to $56.0 million during 2002 as compared to $45.1 million in 2001. The
increase was primarily due to higher average debt outstanding of $683.5 million during 2002 as compared to $555.4 million during 2001. The increase in average debt outstanding was primarily the result of borrowings made in connection with the Van
Leer Industrial Packaging acquisition. Because the acquisition occurred on March 2, 2001, the acquisition-related debt was outstanding for only eight months in 2001 as compared to all of 2002.
Income Taxes
The effective tax rate decreased
to 36.0% for 2002 as compared to 37.9% in 2001, primarily as a result of a change in the mix of income from outside North America.
Minority Interest in Income of Consolidated Subsidiaries
As part of the Van Leer
Industrial Packaging acquisition, we acquired majority holdings in various companies. The operating results of these companies have been included in the consolidated results following the acquisition on March 2, 2001, and the minority interest of
other persons in the respective net income of these companies has been reflected as an expense.
30
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Equity in Earnings of Affiliates
Equity in earnings of affiliates decreased to $8.8 million for 2002 as compared to $9.9 million in 2001. This income represents our equity
interest in the net income of CorrChoice, Inc. (“CorrChoice”) and, to a lesser extent, Abzac-Greif (we sold our equity interest in Abzac-Greif during the second quarter of 2002), Socer-Embalagens, Lda. and Balmer Lawrie-Van Leer.
Net Income
Based on the foregoing, net income decreased $57.8 million, or 65.1%, to $31.0 million for 2002 from $88.8 million in 2001.
Fiscal Year 2001 Compared to Fiscal Year 2000
Overview
Net sales increased to $1,456.0 million, an increase of 51.0%, in 2001 from $964.0 million in 2000. This increase resulted from a $446.2
million increase in net sales from outside North America and a $45.8 million increase in net sales from the North American operations. The increase in net sales from the North American operations was due to the Industrial Packaging & Services
segment ($101.8 million increase), which was partially offset by lower net sales in the Paper, Packaging & Services segment ($49.1 million decrease) and the Timber segment ($6.9 million decrease). The higher net sales in the North American
operations of the Industrial Packaging & Services segment were primarily due to the inclusion of additional sales volume from the operations of Van Leer Industrial Packaging. The weaker economic conditions in the United States that prevailed
throughout 2001 compared to 2000 caused lower sales volumes and increased competitive pricing in both the Industrial Packaging & Services and Paper, Packaging & Services segments.
EBITDA was $266.4 million, before the $11.5 million second quarter restructuring charge, for 2001 as compared to $157.5 million for 2000. The $108.9 million increase in
EBITDA was attributable to higher gains on the sale of timberland ($70.4 million increase) and the inclusion of the operations of Van Leer Industrial Packaging. Factors that reduced EBITDA included weaker economic conditions in the United States for
both the Industrial Packaging & Services and Paper, Packaging & Services segments. In addition, lower timber sales partially offset the improvement in EBITDA.
31
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Segment Review
Industrial Packaging & Services
The
Industrial Packaging & Services segment had an increase in net sales of $548.0 million, or 111.6%, for 2001 as compared to 2000. This increase was primarily due to the inclusion of $446.2 million of net sales outside North America resulting from
the operations of Van Leer Industrial Packaging. Net sales for the North American operations increased $101.8 million for 2001 as compared to 2000 due to additional sales volume from the operations of Van Leer Industrial Packaging during the eight
months included in that year. A decrease in customer demand caused by weaknesses in the United States economy, particularly in the chemical industry, partially offset this increase in net sales. In addition, net sales to the agricultural sector were
lower in the first quarter of 2001 compared to 2000, which benefited from a late harvest of certain crops during 1999 that extended into the first quarter of 2000.
EBITDA for the Industrial Packaging & Services segment increased to $87.9 million, before the $11.5 million second quarter restructuring charge, for 2001 as compared to
$45.8 million for 2000. The primary reason for this increase relates to $48.8 million in EBITDA from outside North America related to the inclusion of the operations of Van Leer Industrial Packaging.
Paper, Packaging & Services
The Paper, Packaging & Services segment had a decrease in net sales of $49.1 million, or 11.5%, for 2001 as compared to 2000. This reduction in net sales was caused by lower customer demand for corrugated containers and
containerboard due to continued weaknesses in the United States economy. Lower average sales prices for linerboard and medium also affected net sales during 2001 as compared to 2000.
EBITDA for the Paper, Packaging & Services segment increased to $82.4 million for 2001 as compared to $80.5 million in 2000. Lower raw material prices, especially for
OCC, a higher containerboard integration percentage and improved operating efficiencies more than offset the decline caused by lower net sales for this segment.
Timber
The Timber segment had a decrease in net sales of $6.9 million, or 15.4%,
for 2001 as compared to 2000. While timber sales are subject to fluctuations, we seek to maintain a consistent cutting schedule within the limits of market and weather conditions.
The sales of timber are recorded as net sales, while timberland sales are included in gain on sale of timberland. The gain on sale of timberland was $79.7 million for 2001
as compared to $9.2 million for 2000. See “Timberland Transactions” below.
32
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
EBITDA for the Timber segment increased to $112.1 million
for 2001 as compared to $47.1 million for 2000. The increase was primarily the result of significant gains on the sale of timberland which were partially offset by lower timber sales.
Other Income Statement Changes
Gain on Sale of Timberland
Gain on sale of timberland increased $70.5 million in 2001 as compared to 2000 primarily due to the timber property sales
described in the “Timberland Transactions” section below.
Other Income, Net
Other income, net increased $1.4 million in 2001 as compared to 2000. The increase in other income was primarily due to an increase from
gains on the sale of closed facilities in comparison to 2000.
Cost of Products Sold
The cost of products sold, as a percentage of net sales, increased to 79.2% in 2001 from 76.5% in 2000. The increase was primarily due to
the inclusion of the operations of Van Leer Industrial Packaging, which contributed to a higher cost of products sold as a percentage of net sales because products from those operations have lower gross margins than our other products. In addition,
Timber segment sales, which have a much lower cost associated with them, were below those in 2000. This increase was partially offset by lower raw material costs, which more than offset the lower sales volume, in the Paper, Packaging & Services
segment.
Selling, General and Administrative Expenses
SG&A expenses increased to $204.7 million (14.1% of net sales) for 2001 as compared to $128.3 million (13.3% of net sales) for 2000. The $76.4 million increase was
primarily due to additional SG&A expenses related to the operations of Van Leer Industrial Packaging. In addition, there was $5.3 million of amortization expense related to the goodwill and other intangible assets acquired in the Van Leer
Industrial Packaging transaction included in the 2001 results.
Restructuring Charge
During the second quarter of 2001, we recorded an $11.5 million restructuring charge due to the reorganization activities described in the
“Restructuring Plans” section below.
33
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Interest Expense, Net
Interest expense, net increased to $45.2 million in 2001 as compared to $11.8 million in 2000. This increase was primarily due to higher
average debt outstanding in 2001 as compared to 2000 as a result of the Van Leer Industrial Packaging acquisition.
Income Taxes
The effective tax rate remained at 37.9% in 2001 and 2000.
Minority Interest in Income of Consolidated Subsidiaries
As part of the Van Leer Industrial Packaging acquisition, we acquired majority holdings in various companies. The operating results of these companies have been included in the consolidated results
following the acquisition on March 2, 2001, and the minority interest of other persons in the respective net income of these companies has been reflected as an expense.
Equity in Earnings of Affiliates
Equity in earnings of
affiliates decreased to $9.9 million for 2001 as compared to $13.3 million in 2000. This income represents our equity interest in the net income of CorrChoice and, to a lesser extent, Abzac-Greif, Socer-Embalagens, Lda. and Balmer Lawrie-Van Leer.
Net Income
Based on the foregoing, net income increased $13.0 million, or 17.1%, to $88.8 million in 2001 from $75.8 million in 2000.
Timberland Transactions
In December 2000, we sold certain hardwood timberland for $44.4
million. As a result of this transaction, we recognized a gain of $43.0 million during the first quarter of 2001. In a related agreement, we sold other hardwood timberland for $30.0 million in March 2001, and we recognized a gain of $27.7 million
during the second quarter of 2001. A total of approximately 65,000 acres of timber properties situated in Arkansas, Mississippi and Louisiana were sold as a result of these transactions.
In a separate transaction in December 2000, we purchased certain pine timberland for $42.8 million. In a related agreement, we purchased other pine timberland for $43.1
million in March 2001. A total of approximately 63,000 acres of timber properties situated in Louisiana were purchased as a result of these transactions.
For tax purposes, these sale and purchase transactions were treated as like-kind exchanges pursuant to Section 1031 of the Internal Revenue Code, which resulted in a deferral of the tax gain on the
sale transactions.
34
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Restructuring Plans
During the second quarter of 2001, we approved a plan to consolidate some of our locations in order to eliminate duplicate facilities caused by the Van Leer Industrial
Packaging acquisition and improve operating efficiencies and capabilities. The plan was the result of an in-depth study to determine whether certain locations, either existing or newly acquired, should be closed and the sales and manufacturing
volume associated with such plants relocated to a different facility. Six existing company-owned plastic drum and steel drum plants were identified to be closed. These plants are located in North America. In addition, certain redundant
administrative functions were identified to be eliminated. As a result of this plan, during the second quarter of 2001, we recognized a pretax restructuring charge of $11.5 million, consisting of $8.0 million in employee separation costs and a $3.5
million loss on disposal of equipment and facilities. We also recognized an additional $2.8 million pretax restructuring charge during the fourth quarter of 2002, primarily as a result of an extension of this plan. The fourth quarter 2002 charge
consisted of $1.4 million in employee separation costs, mostly related to early retirement expenses, and a $1.4 million loss on facilities that are currently in the process of being sold. We intend to sell the remainder of our facilities held for
sale during 2003.
In addition, in connection with the March 2001 acquisition of Van Leer Industrial Packaging and
the consolidation plan described in the preceding paragraph, five facilities purchased as part of that acquisition have been or will be closed. Four of these facilities are owned by our subsidiaries and one was leased. The facilities are located in
North America, South America, United Kingdom and Asia Pacific. In addition, certain redundant administrative functions have been eliminated. Accordingly, we recognized a $19.7 million restructuring liability in our purchase price allocation related
to these locations. This liability was accounted for under EITF No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.” The liability consisted of $16.5 million in employee separation costs and $3.2
million in other exit costs. We intend to sell the four company-owned facilities during 2003, and the lease on the remaining facility was terminated.
During 2002, our restructuring reserves were significantly reduced as related costs were incurred and charged to the reserves. Our restructuring activities were substantially completed at October 31,
2002, and positive contributions to earnings have exceeded $27.5 million on an annualized basis. Remaining reserves are approximately $2.3 million at October 31, 2002, with future cash outlays anticipated to occur in the first half of 2003 (see Note
5 to the consolidated financial statements for additional disclosures and description of restructuring activities). We incurred additional costs of $5.5 million and $5.9 million in 2002 and 2001, respectively, related to the relocation of machinery,
employees and other reorganization activities, all of which have been charged to the results of operations.
35
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Liquidity and Capital Resources
Our primary sources of liquidity are operating cash flows, the proceeds from our Senior Subordinated Notes and borrowings under our
Amended and Restated Senior Secured Credit Agreement, discussed below. We have used these sources to fund our working capital needs, capital expenditures, cash dividends, common stock repurchases and acquisitions. We anticipate continuing to fund
these items in a like manner. We currently expect that operating cash flows, the proceeds from our Senior Subordinated Notes and borrowings under our Amended and Restated Senior Secured Credit Agreement will be sufficient to fund our working
capital, capital expenditures, debt repayment and other liquidity needs for the foreseeable future.
Capital Expenditures and Business
Acquisitions
During 2002, we invested $45.7 million in capital expenditures, excluding the purchase of
timberland properties ($11.8 million), and we invested $42.7 million in capital expenditures, excluding the purchase of timberland properties ($89.5 million), during 2001. During the last three years, we have invested $167.2 million in capital
expenditures, $101.3 million in timberland purchases and $312.9 million for the Van Leer Industrial Packaging acquisition, net of cash acquired.
We have approved future capital expenditures of approximately $79 million through October 31, 2003. These expenditures are primarily to replace and improve equipment and to continue implementation of a
new management information system.
Balance Sheet Changes
The reduction in trade accounts receivable was due mostly to lower net sales in the fourth quarter of 2002 compared to the fourth quarter of 2001.
Inventories were higher primarily due to the increases in our raw material costs.
The increase in accounts payable was due to higher raw material costs and the timing of payments made to our suppliers.
Accrued payroll and employee benefits were higher as a result of the increase in these costs as well as timing of our payments.
The restructuring reserves decreased as a result of plant closings and other reorganization costs (see
“Restructuring Plans” section above).
The reduction in total debt was due to the repayment of amounts
borrowed and the extinguishment of our $900 million Senior Secured Credit Agreement, partially offset by the issuance of $250 million of Senior
36
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Subordinated Notes and the $550 million Amended and Restated Senior Secured
Credit Agreement (see “Borrowing Arrangements” section below).
The increase in other long-term
liabilities was primarily due to a higher minimum pension liability.
Borrowing Arrangements
$550 Million Amended and Restated Senior Secured Credit Agreement
On August 23, 2002, we, as U.S. borrower, and Greif Spain Holdings, S.L., Greif Canada Inc., Van Leer (UK) Ltd., Koninklijke Emballage Industrie Van Leer B.V. (dba Royal Packaging Industries Van Leer
B.V.), and Van Leer Australia Pty. Limited, as non-U.S. borrowers, entered into a $550 million Amended and Restated Senior Secured Credit Agreement with a syndicate of lenders. A portion of the proceeds from the Amended and Restated Senior Secured
Credit Agreement was used to refinance amounts outstanding under our then existing $900 million Senior Secured Credit Agreement. The Amended and Restated Senior Secured Credit Agreement provides for a $300 million term loan and a $250 million
revolving multicurrency credit facility. The revolving multicurrency credit facility is available for working capital and general corporate purposes. As of October 31, 2002, there was a total of $384.3 million outstanding under the Amended and
Restated Senior Secured Credit Agreement.
The Amended and Restated Senior Secured Credit Agreement contains
certain covenants, which include financial covenants that require us to maintain a certain leverage ratio, a minimum coverage of interest expense and fixed charges and a minimum net worth. At October 31, 2002, we were in compliance with these
covenants. The repayment of this facility is secured by a first lien on substantially all of the personal property and certain of the real property of Greif Bros. Corporation and its U.S. subsidiaries and, in part, by the capital stock of the
non-U.S. borrowers and any intercompany notes payable to them.
8 7/8% Senior Subordinated Notes
On July 31, 2002, we issued Senior Subordinated Notes in the aggregate principal amount of $250 million, receiving net proceeds of
approximately $248 million before expenses. Interest on the Senior Subordinated Notes is payable semi-annually at the annual rate of 8 7/8%. The Senior Subordinated Notes do not have required principal payments prior to maturity on August 1, 2012.
As of October 31, 2002, there was a total of $248.0 million outstanding under the Senior Subordinated Notes. The trust indenture pursuant to which the Senior Subordinated Notes were issued contain certain covenants. At October 31, 2002, we were in
compliance with these covenants.
$900 Million Senior Secured Credit Agreement
On March 2, 2001, the Company and Greif Spain Holdings, S.L. had entered into a $900 million Senior Secured Credit Agreement with a
syndicate of lenders. A portion of the proceeds from the Senior Secured
37
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Credit Agreement was used to fund the Van Leer Industrial Packaging acquisition
and to refinance amounts outstanding under the Company’s then existing revolving credit facility. The Senior Secured Credit Agreement provided for three term loans, a $150 million U.S. Dollar Term Loan A, a $200 million Euro Term Loan A and a
$400 million U.S. Dollar Term Loan B, and a $150 million revolving multicurrency credit facility. The revolving multicurrency credit facility was available for working capital and general corporate purposes.
During 2002, the Senior Secured Credit Agreement was refinanced using proceeds from the Amended and Restated Senior Secured Credit
Agreement and the Senior Subordinated Notes.
Contractual Obligations
As of October 31, 2002, we had the following contractual obligations (Dollars in millions):
|
|
|
Total
|
|
Payments Due By Period
|
|
|
|
|
Less than
1
Year
|
|
1-3
Years
|
|
3-5
Years
|
|
After 5 Years
|
|
Long-term debt
|
|
$
|
633
|
|
$
|
3
|
|
$
|
6
|
|
$
|
91
|
|
$
|
533
|
|
Short-term borrowings
|
|
|
20
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-cancelable operating leases
|
|
|
75
|
|
|
15
|
|
|
24
|
|
|
16
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
728
|
|
$
|
38
|
|
$
|
30
|
|
$
|
107
|
|
$
|
553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CorrChoice Joint Venture
We own 63.24% of the outstanding stock of CorrChoice, Inc. (“CorrChoice”). In connection with the investment in CorrChoice, we entered into a joint venture
agreement, a voting agreement and other related agreements with the other stockholders of CorrChoice. Under the voting agreement, we can elect one-half of CorrChoice’s board of directors and the other stockholders can elect the other half of
the board of directors, with no mechanism to break a board deadlock. Because of this situation, we do not control CorrChoice.
CorrChoice manufactures corrugated sheets at seven locations in the United States. We sell paper to CorrChoice, which it uses to produce corrugated sheets, and we purchase corrugated sheets from CorrChoice, with all transactions
effected at prevailing market prices. Sales and purchases with CorrChoice were $59.8 million and $21.0 million in 2002, $71.7 million and $23.1 million in 2001 and $81.4 million and $26.0 million in 2000, respectively.
The joint venture agreement and related agreements contain certain covenants and restrictions on certain business activities. These
restrictions have not affected our business or operations in any material respect and have not prevented us from pursuing any business opportunities that we desire to pursue. Under certain circumstances, we may purchase, or
38
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
we may be required to purchase, the other parties’ interest in CorrChoice,
or we may be required to sell our interest to the other parties, at a price determined in a manner described in the relevant agreement.
During 2002, we sold a building to a subsidiary of CorrChoice for $7.5 million. Concurrently with the sale, we entered into a lease-back arrangement for the building. The $0.2 million gain on the sale transaction has been
deferred over the term of the lease. The resulting 10-year lease is accounted for as an operating lease. Management believes that the sale price of the building to the subsidiary of CorrChoice was at fair market value. Furthermore, management
believes that the lease for this building is on terms at least as favorable as those that we could have obtained from unaffiliated third parties.
Share Repurchase Program
In February 1999, our Board of Directors authorized a one million
share stock repurchase program. During 2002, we repurchased 80,000 shares, including 20,000 shares of Class A Common Stock and 60,000 shares of Class B Common Stock. During 2001, we repurchased 34,500 shares, including 10,000 shares of Class A
Common Stock and 24,500 shares of Class B Common Stock. As of October 31, 2002, we had repurchased 674,410 shares, including 435,476 shares of Class A Common Stock and 238,934 shares of Class B Common Stock. The total cost of the shares repurchased
during 1999 through October 31, 2002 was $19.5 million. Future share repurchases will be limited under our Amended and Restated Senior Secured Credit Agreement and the indenture governing the Senior Subordinated Notes.
Effects of Inflation
The effects of inflation did not have a material impact on our operations during 2002, 2001 or 2000.
Recent
Accounting Standards
Goodwill and Other Intangible Assets
In June 2001, the FASB issued SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires use
of the purchase method for business combinations initiated after June 30, 2001. SFAS No. 142 requires that goodwill no longer be amortized, but instead be periodically reviewed for impairment. The provisions of SFAS No. 142 are effective for fiscal
years beginning after December 15, 2001, or November 1, 2002 for us.
The application of the non-amortization
provisions of SFAS No. 142 will decrease our amortization expense by approximately $11 million and increase our net income by approximately $9 million upon adoption in 2003. At this time, the effect of the impairment provisions provided by SFAS No.
142 is not known.
39
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Additionally, SFAS No. 141 requires that in a business
combination in which the fair value of the net assets acquired exceeds cost, any residual negative goodwill is recognized as an extraordinary gain in the period in which the business combination is initially recognized. The transition provisions of
SFAS No. 141 require that upon adoption of SFAS No. 142, any existing negative goodwill be adjusted as a cumulative effect of a change in accounting principal in the Consolidated Statements of Income. In the first quarter of 2003, we will record a
cumulative effect of a change in accounting principle for our remaining unamortized negative goodwill. Our recorded balance of negative goodwill at October 31, 2002 was $4.8 million.
Impairment or Disposal of Long-Lived Assets
In August
2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 addresses the accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121,
“Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of” and Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment
of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” SFAS No. 144 establishes a single accounting model for long-lived assets to be disposed of by sale and resolves implementation issues related to SFAS
No. 121.
SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15,
2001, or November 1, 2002 for us. We do not expect the adoption of this Statement to have a material effect on our consolidated financial statements.
Costs Associated with Exit or Disposal Activities
In June 2002, the FASB issued SFAS No.
146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 addresses the accounting and reporting for costs associated with exit or disposal activities and nullifies EITF No. 94-3, “Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 requires entities to recognize a liability for a cost associated with an exit or disposal activity
when the liability is incurred. Previously, under EITF No. 94-3, a liability for an exit cost was recognized at the date of an entity’s commitment to an exit plan.
SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with earlier application encouraged. We will adopt this Statement at
the beginning of our 2003 fiscal year (November 1, 2002). We do not expect the adoption of this Statement to have a material effect on our consolidated financial statements.
40
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
Forward-Looking Statements; Certain Factors Affecting Future Results
Statements contained in this Form 10-K or any other reports or documents prepared by us may be
“forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause our operating results to differ materially from
those projected. The following factors, among others, in some cases have affected and in the future could affect our actual financial performance.
Changes in General Economic or Business Conditions
. Our customers generally consist of other manufacturers and suppliers who purchase our industrial shipping containers
and containerboard for their own containment and shipping purposes. Because we supply a cross section of industries, such as chemicals, food products, petroleum products, pharmaceuticals and metal products, demand for our industrial shipping
containers and containerboard and related corrugated products has historically corresponded to changes in general economic and business conditions of the industries and countries in which we operate. Accordingly, our financial performance is
substantially dependent upon the general economic conditions existing in these industries and countries, and any prolonged or substantial economic downturn could have a material adverse affect on our business, results of operations and financial
condition.
Currency Exchange and Political Risk.
We have operations in over 40
countries. As a result of our non-U.S. operations, we are subject to certain risks which could disrupt our operations or force us to incur unanticipated costs. Our operating performance is affected by devaluations and fluctuations in currency
exchange rates by:
|
|
•
|
|
translations into U.S. dollars for financial reporting purposes of the assets and liabilities of our non-U.S. operations conducted in local currencies; and
|
|
|
•
|
|
gains or losses from non-U.S. operations conducted in currencies other than their functional currency.
|
We are subject to various other risks associated with operating in non-U.S. countries, such as the following:
|
|
•
|
|
political, social and economic instability;
|
|
|
•
|
|
war, civil disturbance or acts of terrorism;
|
|
|
•
|
|
taking of property by nationalization or expropriation without fair compensation;
|
|
|
•
|
|
changes in government policies and regulations;
|
|
|
•
|
|
imposition of limitations on conversions of non-U.S. currencies into dollars or remittance of dividends and other payments by non-U.S. subsidiaries;
|
41
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
|
|
•
|
|
imposition or increase of withholding and other taxes on remittances and other payments by non-U.S. subsidiaries;
|
|
|
•
|
|
hyperinflation in certain non-U.S. countries; and
|
|
|
•
|
|
impositions or increase of investment and other restrictions or requirements by non-U.S. governments.
|
Competition.
Our business of manufacturing and selling industrial shipping containers, containerboard and
corrugated products is highly competitive. The most important competitive factors are price, quality and service. Many of our competitors are substantially larger and have significantly greater financial resources.
Changes in Industry Demands
. Industry demand for containerboard has declined in recent years causing
competitive pricing pressures in the containerboard market which has negatively impacted our financial performance in recent years. We compete in industries which are capital intensive, which generally leads to continued production as long as prices
are sufficient to cover marginal costs. As a result, changes in industry demands, including industry over-capacity, may cause substantial price competition and, in turn, negatively impact our financial performance.
Continuing Consolidation of Customer Base for Containerboard and Corrugated Products
. Over the last few
years, many of our large containerboard and corrugated products customers have acquired companies with similar or complementary product lines. This consolidation has increased the concentration of this segment of our business with our largest
customers and resulted in increased pricing pressures from our customers. The continuing consolidation of the customer base in this segment may negatively impact our financial performance.
Raw Material and Energy Price Fluctuations and Shortages
. The principal raw materials used in the manufacture of our products are steel,
resins, pulpwood, waste paper for recycling and paper, which we purchase in highly competitive, price sensitive markets. These raw materials have historically exhibited price and demand cyclicality. Some of these materials have been, and in the
future may be, in short supply. However, we have not recently experienced any significant difficulty in obtaining our principal raw materials. We do not have long-term supply contracts or hedging arrangements in place for obtaining our principal raw
materials.
The cost of producing our products is sensitive to the price of energy. Energy prices, in particular
oil and natural gas, have increased significantly over the past year, with a corresponding effect on our production costs.
Environmental and Health and Safety Matters; Product Liability Claims.
We must comply with extensive rules and regulations regarding federal, state, local and non-U.S. environmental matters, such as air
and water quality and waste disposal. We must also comply with extensive rules and regulations regarding safety and health matters. The failure to materially
42
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
(concluded)
comply with such rules and regulations could adversely affect our operations.
Furthermore, litigation or claims against us with respect to such matters could adversely affect our financial performance. We may also become subject to product liability claims which could adversely affect us.
Work Stoppages
. We are subject to risk of work stoppages and other labor relations matters because a
significant number of our North American employees are represented by collective bargaining units. We have experienced work stoppages and strikes in the past, and there may be work stoppages and strikes in the future. Any prolonged work stoppage or
strike at any one of our principal manufacturing facilities could have a negative impact on our business, financial condition or results of operations.
Risks Associated with Acquisitions
. During the past several years we have invested, and for the foreseeable future we anticipate investing, a substantial amount of capital
in acquisitions. Acquisitions involve numerous risks, including the failure to retain key employees and contracts and the inability to integrate businesses without material disruption. In addition, other companies in our industries have similar
acquisition strategies. There can be no assurance that any future acquisitions will be successfully integrated into our operations, that competition for acquisitions will not intensify or that we will be able to complete such acquisitions on
acceptable terms and conditions. In addition, the costs of unsuccessful acquisition efforts may adversely affect our financial performance.
Risks of Property Loss.
We carry comprehensive liability, fire and extended coverage insurance on most of our facilities, with policy specifications and insured limits
customarily carried for similar properties. However, there are certain types of losses, such as losses resulting from wars, acts of terrorism, or natural disasters, that generally are not insured because they are either uninsurable or not
economically insurable. Should an uninsured loss or a loss in excess of insured limits occur, we could lose capital invested in that property, as well as the anticipated future revenues derived from the manufacturing activities conducted at that
property, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property. Any such loss would adversely impact our business, financial condition and results of operations.
Timber and Timberland Sales.
We have a significant inventory of standing timber and timberlands. The
frequency and volume of sales of timber and timberlands will have an effect on our financial performance.
Item
7A.
Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We are subject to interest rate risk related to our financial instruments that include borrowings under our
Amended and Restated Senior Secured Credit Agreement and interest rate swap agreements with an aggregate notional amount of $330.0 million as of October 31, 2002. We do
43
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
(continued)
not enter into financial instruments for trading or speculative purposes. The interest rate swap agreements have been entered into to manage our
exposure to variability in interest rates and changes in the fair value of fixed rate debt.
The table below
provides information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. For the existing Amended and Restated Senior Secured Credit Agreement, the table presents scheduled
amortizations of principal and the current weighted average interest rate by contractual maturity dates. For interest rate swaps, the table presents annual amortizations of notional amounts and weighted average interest rates by contractual maturity
dates. Under the swap agreements, we receive interest quarterly from the counterparties and pay interest quarterly to the counterparties. The fair value of the existing Amended and Restated Senior Secured Credit Agreement is based on current rates
available to us for debt of the same remaining maturity. The fair value of the interest rate swap agreements has been determined based upon the current market settlement prices of comparable contracts.
FINANCIAL INSTRUMENTS
(Dollars in millions)
|
|
|
Expected Maturity Date
|
|
|
Total
|
|
|
Fair
Value
|
|
|
|
|
2003
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
After
2007
|
|
|
|
|
Amended and Restated Senior Secured Credit Agreement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scheduled amortizations
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
88
|
|
|
$
|
3
|
|
|
$
|
284
|
|
|
$
|
384
|
|
|
$
|
384
|
|
|
Average interest rate (1)
|
|
|
4.04
|
%
|
|
|
4.04
|
%
|
|
|
4.04
|
%
|
|
|
4.04
|
%
|
|
|
4.04
|
%
|
|
|
4.04
|
%
|
|
|
4.04
|
%
|
|
|
|
|
|
Interest rate swaps:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scheduled amortizations
|
|
$
|
70
|
|
|
$
|
15
|
|
|
$
|
45
|
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
100
|
|
|
$
|
330
|
|
|
$
|
(21
|
)
|
|
Average pay rate (2)
|
|
|
5.72
|
%
|
|
|
5.72
|
%
|
|
|
5.80
|
%
|
|
|
5.90
|
%
|
|
|
5.90
|
%
|
|
|
5.65
|
%
|
|
|
5.77
|
%
|
|
|
|
|
|
Average receive rate (3)
|
|
|
3.17
|
%
|
|
|
3.25
|
%
|
|
|
3.58
|
%
|
|
|
5.34
|
%
|
|
|
5.34
|
%
|
|
|
8.88
|
%
|
|
|
4.03
|
%
|
|
|
|
|
|
(1)
|
|
Variable rate specified is based on the LIBOR rate or an alternative base rate plus a calculated margin at October 31, 2002.
|
|
(2)
|
|
The average pay rate is based upon the fixed rates we were scheduled to pay at October 31, 2002, along with one additional agreement where we pay the LIBOR rate
plus 3.83%.
|
|
(3)
|
|
The average receive rate is based upon the LIBOR rates we were scheduled to receive at October 31, 2002, along with one additional agreement where we receive a
fixed rate of 8.875%. The rates presented are not intended to project our expectations for the future.
|
Based on a sensitivity analysis performed by the counterparties at October 31, 2002, a 100 basis point increase in interest rates would improve the fair value of the swap agreements to a liability of $17.6
44
Item 7A.
Quantitative and Qualitative Disclosures about Market
Risk
(concluded)
million. Conversely, a 100 basis point decrease in interest rates would result in a fair value liability of
$24.6 million.
Foreign Currency Risk
As a result of our acquisition of Van Leer Industrial Packaging, our operating income is subject to fluctuations in foreign currency exchange rates. The geographic presence of our operations mitigates
this exposure to some degree. Additionally, our transaction exposure is somewhat limited because we produce and sell a majority of our products within each country in which we operate.
We have entered into foreign currency forward contracts to hedge certain short-term intercompany loan balances among our foreign businesses. At October 31, 2002, we had
contracts outstanding of $25.6 million. The fair value of these contracts at October 31, 2002 resulted in a loss of $0.1 million. Each of these contracts hedges the exposure of the euro against the fluctuation of various other currencies. A
sensitivity analysis to changes in the euro against these other currencies indicates that if the euro uniformly weakened by 10% against all of the hedged currency exposures, the fair value of these instruments would decrease by $2.5 million.
Conversely, if the euro uniformly strengthened by 10% against all of the hedged currency exposures, the fair value of these instruments would increase by $2.3 million. Any resulting changes in fair value would be offset by changes in the underlying
hedged balance sheet position. The sensitivity analysis assumes a parallel shift in foreign currency exchange rates. The assumption that exchange rates change in parallel fashion may overstate the impact of changing exchange rates on assets and
liabilities denominated in a foreign currency.
Commodity Price Risk
Our operating income is potentially affected to a significant degree by fluctuations in the cost of our raw materials and energy (see “Safe Harbor Statement Under the
Private Securities Litigation Reform Act of 1995”). We do not have long-term supply contracts or hedging arrangements in place for obtaining our principal raw materials. In general, we do not use derivative instruments to hedge against
fluctuations in commodity prices.
45
Item 8.
Financial Statements and Supplementary Data
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
|
|
|
For the years ended October 31,
|
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
Net sales
|
|
$
|
1,632,767
|
|
|
$
|
1,456,000
|
|
|
$
|
963,956
|
|
Gain on sale of timberland
|
|
|
12,122
|
|
|
|
79,663
|
|
|
|
9,255
|
|
Other income, net
|
|
|
7,837
|
|
|
|
6,358
|
|
|
|
4,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,652,726
|
|
|
|
1,542,021
|
|
|
|
978,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold
|
|
|
1,296,952
|
|
|
|
1,152,616
|
|
|
|
737,486
|
|
Selling, general and administrative expenses
|
|
|
250,756
|
|
|
|
204,716
|
|
|
|
128,301
|
|
Restructuring charge
|
|
|
2,824
|
|
|
|
11,534
|
|
|
|
—
|
|
Debt extinguishment charge
|
|
|
10,300
|
|
|
|
—
|
|
|
|
—
|
|
Interest expense, net
|
|
|
55,965
|
|
|
|
45,149
|
|
|
|
11,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,616,797
|
|
|
|
1,414,015
|
|
|
|
877,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes, minority interest in income of consolidated subsidiaries and equity in earnings of
affiliates
|
|
|
35,929
|
|
|
|
128,006
|
|
|
|
100,454
|
|
Income taxes
|
|
|
12,934
|
|
|
|
48,514
|
|
|
|
38,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in income of consolidated subsidiaries and equity in earnings of affiliates
|
|
|
22,995
|
|
|
|
79,492
|
|
|
|
62,427
|
|
Minority interest in income of consolidated subsidiaries
|
|
|
(840
|
)
|
|
|
(594
|
)
|
|
|
—
|
|
Equity in earnings of affiliates, net of tax
|
|
|
8,824
|
|
|
|
9,876
|
|
|
|
13,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
30,979
|
|
|
$
|
88,774
|
|
|
$
|
75,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock
|
|
$
|
1.10
|
|
|
$
|
3.14
|
|
|
$
|
2.68
|
|
Class B Common Stock
|
|
$
|
1.64
|
|
|
$
|
4.70
|
|
|
$
|
4.01
|
|
Diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common Stock
|
|
$
|
1.10
|
|
|
$
|
3.14
|
|
|
$
|
2.67
|
|
Class B Common Stock
|
|
$
|
1.64
|
|
|
$
|
4.70
|
|
|
$
|
4.01
|
See accompanying Notes to Consolidated Financial Statements.
46
Item 8.
Financial Statements and Supplementary Data
(continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
|
|
|
As of October 31,
|
|
|
|
|
2002
|
|
|
2001
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
25,396
|
|
|
$
|
29,720
|
|
|
Trade accounts receivable-less allowance of
$9,857 in 2002 and $10,596 in 2001
|
|
|
274,222
|
|
|
|
282,982
|
|
|
Inventories
|
|
|
144,320
|
|
|
|
123,363
|
|
|
Deferred tax asset
|
|
|
3,652
|
|
|
|
9,697
|
|
|
Net assets held for sale
|
|
|
13,945
|
|
|
|
12,530
|
|
|
Prepaid expenses and other
|
|
|
48,286
|
|
|
|
45,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
509,821
|
|
|
|
504,196
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM ASSETS
|
|
|
|
|
|
|
|
|
|
Goodwill—less accumulated amortization
|
|
|
232,577
|
|
|
|
236,623
|
|
|
Other intangible assets—less accumulated amortization
|
|
|
28,999
|
|
|
|
33,179
|
|
|
Investment in affiliates
|
|
|
149,820
|
|
|
|
144,071
|
|
|
Other long-term assets
|
|
|
45,060
|
|
|
|
44,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
456,456
|
|
|
|
458,155
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTIES, PLANTS AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
Timber properties—less depletion
|
|
|
81,380
|
|
|
|
74,851
|
|
|
Land
|
|
|
84,271
|
|
|
|
81,048
|
|
|
Buildings
|
|
|
244,967
|
|
|
|
235,980
|
|
|
Machinery and equipment
|
|
|
748,184
|
|
|
|
689,637
|
|
|
Capital projects in progress
|
|
|
26,042
|
|
|
|
43,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,184,844
|
|
|
|
1,124,716
|
|
|
Accumulated depreciation
|
|
|
(392,826
|
)
|
|
|
(315,879
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
792,018
|
|
|
|
808,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,758,295
|
|
|
$
|
1,771,188
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to Consolidated Financial Statements.
47
Item 8.
Financial Statements and Supplementary Data
(continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
|
|
|
As of October 31,
|
|
|
|
|
2002
|
|
|
2001
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
135,192
|
|
|
$
|
117,117
|
|
|
Accrued payroll and employee benefits
|
|
|
48,974
|
|
|
|
27,604
|
|
|
Restructuring reserves
|
|
|
2,300
|
|
|
|
15,109
|
|
|
Short-term borrowings
|
|
|
20,005
|
|
|
|
16,533
|
|
|
Current portion of long-term debt
|
|
|
3,000
|
|
|
|
43,140
|
|
|
Other current liabilities
|
|
|
72,101
|
|
|
|
74,016
|
|
|
|
|
|
|
|
|
|
|