SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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For the quarterly period ended January 31, 2004
OR
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¨
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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For the transition period from to
Commission File Number 1-566
GREIF, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 31-4388903 | |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 425 Winter Road, Delaware, Ohio | 43015 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (740) 549-6000
Not Applicable
Former name, former address and former fiscal year, if changed since last report.
Indicated by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No ¨
The number of shares outstanding of each of the issuer’s classes of common stock at the close of business on January 31, 2004 was as follows:
| Class A Common Stock | 10,748,105 shares | |
| Class B Common Stock | 11,661,939 shares |
PART I. FINANCIAL INFORMATION
| ITEM 1. | CONSOLIDATED FINANCIAL STATEMENTS |
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Dollars in thousands, except per share amounts)
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Three months ended
January 31, |
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2004
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2003
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Net sales |
$ | 468,860 | $ | 434,678 | ||||
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Costs of products sold |
399,410 | 358,949 | ||||||
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Gross profit |
69,450 | 75,729 | ||||||
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Selling, general and administrative expenses |
51,025 | 59,501 | ||||||
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Restructuring charges |
15,259 | 1,539 | ||||||
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Gain on sale of assets |
4,109 | 411 | ||||||
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Operating profit |
7,275 | 15,100 | ||||||
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Interest expense, net |
12,247 | 13,554 | ||||||
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Other income, net |
222 | 224 | ||||||
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Income (loss) before income tax expense (benefit) and equity in earnings of affiliates and minority interests |
(4,750 | ) | 1,770 | |||||
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Income tax expense (benefit) |
(1,463 | ) | 566 | |||||
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Equity in earnings of affiliates and minority interests |
(79 | ) | (1,095 | ) | ||||
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Income (loss) before cumulative effect of change in accounting principle |
(3,366 | ) | 109 | |||||
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Cumulative effect of change in accounting principle |
— | 4,822 | ||||||
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Net income (loss) |
$ | (3,366 | ) | $ | 4,931 | |||
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Basic and diluted earnings (loss) per share: |
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Class A Common Stock (before cumulative effect) |
$ | (0.12 | ) | $ | 0.01 | |||
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Class A Common Stock (after cumulative effect) |
$ | (0.12 | ) | $ | 0.18 | |||
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Class B Common Stock (before cumulative effect) |
$ | (0.18 | ) | $ | — | |||
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Class B Common Stock (after cumulative effect) |
$ | (0.18 | ) | $ | 0.26 | |||
See accompanying Notes to Consolidated Financial Statements
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
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January 31,
2004 |
October 31,
2003 |
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Current assets |
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Cash and cash equivalents |
$ | 38,121 | $ | 49,767 | ||||
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Trade accounts receivable – less allowance of $11,817 in 2004 and $11,225 in 2003 |
270,613 | 294,957 | ||||||
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Inventories |
170,295 | 167,157 | ||||||
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Net assets held for sale |
6,812 | 6,311 | ||||||
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Deferred tax assets |
4,802 | 10,875 | ||||||
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Prepaid expenses and other |
60,427 | 54,390 | ||||||
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| 551,070 | 583,457 | |||||||
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Long-term assets |
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Goodwill – less accumulated amortization |
251,437 | 252,309 | ||||||
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Other intangible assets – less accumulated amortization |
29,808 | 30,654 | ||||||
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Investment in affiliates |
5,581 | 4,421 | ||||||
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Other long-term assets |
52,009 | 47,995 | ||||||
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| 338,835 | 335,379 | |||||||
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Properties, plants and equipment |
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Timber properties – less depletion |
87,748 | 86,437 | ||||||
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Land |
101,838 | 100,615 | ||||||
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Buildings |
323,380 | 320,229 | ||||||
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Machinery and equipment |
830,190 | 831,815 | ||||||
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Capital projects in progress |
42,143 | 36,522 | ||||||
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| 1,385,299 | 1,375,618 | |||||||
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Accumulated depreciation |
(483,476 | ) | (463,243 | ) | ||||
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| 901,823 | 912,375 | |||||||
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| $ | 1,791,728 | $ | 1,831,211 | |||||
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See accompanying Notes to Consolidated Financial Statements
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS’ EQUITY
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January 31, 2004 |
October 31, 2003 |
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Current liabilities |
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Accounts payable |
$ | 131,760 | $ | 158,333 | ||||
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Accrued payrolls and employee benefits |
30,760 | 43,126 | ||||||
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Restructuring reserves |
19,384 | 15,972 | ||||||
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Short-term borrowings |
19,734 | 15,605 | ||||||
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Current portion of long-term debt |
3,000 | 3,000 | ||||||
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Other current liabilities |
82,698 | 76,282 | ||||||
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| 287,336 | 312,318 | |||||||
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Long-term liabilities |
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Long-term debt |
637,972 | 643,067 | ||||||
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Deferred tax liability |
161,073 | 159,825 | ||||||
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Postretirement benefit liability |
49,187 | 48,504 | ||||||
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Other long-term liabilities |
86,269 | 93,047 | ||||||
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| 934,501 | 944,443 | |||||||
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Minority interest |
1,633 | 1,886 | ||||||
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Shareholders’ equity |
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Common stock, without par value |
16,595 | 12,207 | ||||||
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Treasury stock, at cost |
(63,852 | ) | (64,228 | ) | ||||
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Retained earnings |
673,861 | 681,043 | ||||||
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Accumulated other comprehensive loss: |
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- foreign currency translation |
(17,090 | ) | (15,314 | ) | ||||
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- interest rate derivatives |
(12,553 | ) | (12,938 | ) | ||||
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- minimum pension liability |
(28,703 | ) | (28,206 | ) | ||||
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| 568,258 | 572,564 | |||||||
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| $ | 1,791,728 | $ | 1,831,211 | |||||
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See accompanying Notes to Consolidated Financial Statements
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
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2004
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2003
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For the three months ended January 31, |
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Cash flows from operating activities: |
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Net income (loss) |
$ | (3,366 | ) | $ | 4,931 | |||
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Adjustments to reconcile net income to net cash used in operating activities: |
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Depreciation, depletion and amortization |
26,710 | 21,240 | ||||||
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Asset impairments |
2,177 | — | ||||||
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Equity in earnings of affiliates and minority interests, net of dividends received |
(1,413 | ) | 2,036 | |||||
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Deferred income taxes |
8,250 | 3,201 | ||||||
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Gain on disposals of properties, plants and equipment |
(4,109 | ) | (411 | ) | ||||
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Cumulative effect of change in accounting principle |
— | (4,822 | ) | |||||
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Other, net |
(7,957 | ) | (11,388 | ) | ||||
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Changes in current assets and liabilities |
(22,571 | ) | (18,697 | ) | ||||
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Net cash used in operating activities |
(2,279 | ) | (3,910 | ) | ||||
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Cash flows from investing activities: |
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Purchases of properties, plants and equipment |
(9,771 | ) | (12,454 | ) | ||||
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Proceeds on disposals of properties, plants and equipment |
4,200 | 1,390 | ||||||
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Net cash used in investing activities |
(5,571 | ) | (11,064 | ) | ||||
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Cash flows from financing activities: |
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(Payments) proceeds from long-term debt |
(8,451 | ) | 11,588 | |||||
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Proceeds from short-term borrowings |
2,854 | 2,913 | ||||||
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Dividends paid |
(3,816 | ) | (3,831 | ) | ||||
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Acquisitions of treasury stock |
(2 | ) | (1,031 | ) | ||||
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Exercise of stock options |
4,679 | — | ||||||
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Net cash (used in) provided by financing activities |
(4,736 | ) | 9,639 | |||||
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Effects of exchange rates on cash |
940 | (759 | ) | |||||
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Net decrease in cash and cash equivalents |
(11,646 | ) | (6,094 | ) | ||||
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Cash and cash equivalents at beginning of period |
49,767 | 25,396 | ||||||
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Cash and cash equivalents at end of period |
$ | 38,121 | $ | 19,302 | ||||
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See accompanying Notes to Consolidated Financial Statements
GREIF, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2004
NOTE 1 — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated balance sheets as of January 31, 2004 and October 31, 2003 and the consolidated statements of operations and cash flows for the three-month periods ended January 31, 2004 and 2003 of Greif, Inc. and subsidiaries (the “Company”). These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for its fiscal year ended October 31, 2003 (the “2003 Form 10-K”).
The Company’s fiscal year begins on November 1 and ends on October 31 of the following year. Any references to the year 2004 or 2003, or to any quarter of those years, relates to the fiscal year or quarter, as the case may be, ending in that year.
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual amounts could differ from those estimates.
Certain prior year amounts have been reclassified to conform to the 2004 presentation.
Stock-Based Compensation
At January 31, 2004, the Company had various stock-based compensation plans as described in Note 10 to the Notes to Consolidated Financial Statements in the 2003 Form 10-K. The Company applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock option plans. If compensation cost would have been determined based on fair values at the date of grant under Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” pro forma net income (loss) and earnings (loss) per share would have been as follows (Dollars in thousands, except per share amounts):
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Three months
ended January 31, |
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2004
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2003
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Net income (loss) as reported |
$ | (3,366 | ) | $ | 4,931 | ||
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Deduct total stock option expense determined under fair value method, net of tax |
612 | 952 | |||||
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Pro forma net income (loss) |
$ | (3,978 | ) | $ | 3,979 | ||
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Basic and diluted earnings per share: |
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Class A Common Stock: |
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As reported |
$ | (0.12 | ) | $ | 0.18 | ||
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Pro forma |
$ | (0.14 | ) | $ | 0.15 | ||
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Class B Common Stock: |
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