UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended January 31, 2007
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-00566
GREIF, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 31-4388903 | |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
| 425 Winter Road, Delaware, Ohio | 43015 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code (740) 549-6000
Not Applicable
Former name, former address and former fiscal year, if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares outstanding of each of the issuer’s classes of common stock at the close of business on January 31, 2007 was as follows:
|
Class A Common Stock |
11,825,550 shares | |
|
Class B Common Stock |
11,515,533 shares |
PART I. FINANCIAL INFORMATION
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in thousands,
except per share amounts)
Three months ended
January 31,
Net sales
Cost of products sold
Gross profit
Selling, general and administrative expenses
Restructuring charges
Gain on sale of timberland
Gain on disposal of properties, plants and equipment, net
Operating profit
Interest expense, net
Other income (loss), net
Income before income tax expense and equity in earnings of affiliates and minority interests
Income tax expense
Equity in earnings of affiliates and minority interests
Net income
Basic earnings per share:
Class A Common Stock
Class B Common Stock
Diluted earnings per share:
Class A Common Stock
Class B Common Stock
See accompanying Notes to Consolidated Financial Statements
-2-
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
January 31,
2007
October 31,
2006
Current assets
Cash and cash equivalents
Trade accounts receivable, less allowance of $10,102 in 2007 and $8,575 in 2006
Inventories
Net assets held for sale
Deferred tax assets
Prepaid expenses and other current assets
Long-term assets
Long-term notes receivable
Goodwill, net of amortization
Other intangible assets, net of amortization
Assets held by special purpose entities (Note 8)
Other long-term assets
Properties, plants and equipment
Timber properties, net of depletion
Land
Buildings
Machinery and equipment
Capital projects in progress
Accumulated depreciation
See accompanying Notes to Consolidated Financial Statements
-3-
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS’ EQUITY
January 31,
2007
Current liabilities
Accounts payable
Accrued payrolls and employee benefits
Restructuring reserves
Short-term borrowings
Other current liabilities
Long-term liabilities
Long-term debt
Deferred tax liability
Pension liability
Postretirement benefit liability
Liabilities held by special purpose entities (Note 8)
Other long-term liabilities
Minority interest
Shareholders’ equity
Common stock, without par value
Treasury stock, at cost
Retained earnings
Accumulated other comprehensive income (loss):
- foreign currency translation
- interest rate derivatives
- energy derivatives
- minimum pension liability
See accompanying Notes to Consolidated Financial Statements
-4-
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
For the three months ended January 31,
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization
Asset impairments
Deferred income taxes
Gain on disposals of properties, plants and equipment, net
Gain on the sale of timberland (Note 8)
Equity in earnings of affiliates and minority interests
Increase (decrease) in cash from changes in certain assets and liabilities:
Trade accounts receivable
Inventories
Prepaid expenses and other current assets
Other long-term assets
Long-term notes receivable
Accounts payable
Accrued payroll and employee benefits
Restructuring reserves
Other current liabilities
Pension and postretirement benefit liability
Other long-term liabilities
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Acquisitions of companies, net of cash acquired
Purchases of properties, plants and equipment
Purchases of timber properties
Increase in notes receivable
Proceeds from the sale of properties, plants and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of long-term debt
Payments on long-term debt
Proceeds from short-term borrowings
Dividends paid
Acquisitions of treasury stock
Exercise of stock options
Net cash provided by financing activities
Effects of exchange rates on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
See accompanying Notes to Consolidated Financial Statements
-5-
GREIF, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2007
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, 2007 and October 31, 2006 and the consolidated statements of income
and cash flows for the three-month periods ended January 31, 2007 and 2006 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, 2006 (the “2006 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 2007 or 2006, 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 2007 presentation.
Industrial Packaging Acquisitions
During the
first quarter of 2007, the Company completed four acquisitions of industrial packaging companies for an aggregate purchase price of $310.7 million. These four acquisitions were Blagden Packaging Group and two tuck-in North American companies in
November 2006 as well as one tuck-in North African company in January 2007. These industrial packaging acquisitions are expected to complement the Company’s existing product lines that together will provide growth opportunities and scale. These
acquisitions, included in operating results from the acquisition dates, were accounted for using the purchase method of accounting and, accordingly, the purchase prices were allocated to the assets purchased and liabilities assumed based upon their
estimated fair values at the dates of acquisition. The estimated fair values of the assets acquired were $204.2 million (including $39.2 million of inventory and $61.2 million of accounts receivable) and liabilities assumed were $52.2 million.
Identifiable intangible assets, with a combined fair value of $88.0 million, including trade-names, customer relationships, and certain non-compete agreements, have been recorded for these acquisitions. The excess of the purchase prices over the
estimated fair values of the net tangible and intangible assets acquired of $70.7 million was recorded as goodwill. The final allocation of the purchase prices may differ due to additional refinements in the fair values of the net assets acquired in
accordance with SFAS No. 141, “Business Combinations.”
In the fourth quarter of 2006, the Company completed two
acquisitions for an aggregate purchase price of $102.1 million. These two acquisitions were Delta Petroleum Company, Inc. and its subsidiaries (“Delta”), a blender and packager of lubricants, chemicals and glycol-based products in North
America, and an industrial packaging company located in Russia. These acquisitions, included in operating results from the acquisition dates, were accounted for using the purchase method of accounting and, accordingly, the purchase prices were
allocated to the assets purchased and liabilities assumed based upon their estimated fair values at the dates of acquisition. The estimated fair values of the assets acquired were $97.2 million (including $25.7 million of inventory and $28.0 million
of accounts receivable) and liabilities assumed were $46.9 million. Identifiable intangible assets, with a combined fair value of $29.4 million, including trade-names, customer relationships, and certain non-compete agreements, have been recorded
for these acquisitions. The excess of the purchase prices over the estimated fair values of the net tangible and intangible assets acquired of $22.4 million was recorded as goodwill. The final allocation of the purchase prices may differ due to
additional refinements in the fair values of the net assets acquired in accordance with SFAS No. 141, “Business Combinations.”
Had the transactions occurred on November 1, 2005
ITEM 1.
CONSOLIDATED FINANCIAL STATEMENTS
2007
2006
$
750,759
$
582,316
620,673
492,644
130,086
89,672
74,609
59,454
2,037
5,468
62
31,569
5,139
1,642
58,641
57,961
12,034
9,173
(736
)
(393
)
45,871
48,395
11,559
14,954
(333
)
(89
)
$
33,979
$
33,352
$
1.18
$
1.16
$
1.75
$
1.73
$
1.15
$
1.13
$
1.75
$
1.73
(Unaudited)
$
78,470
$
187,101
360,394
315,661
259,542
205,004
14,479
15,814
3,381
3,374
81,821
66,083
798,087
793,037
37,907
626
355,342
286,552
148,367
63,587
50,891
50,891
86,852
52,359
679,359
454,015
195,245
195,115
126,764
81,768
341,046
317,110
992,626
930,924
77,725
53,099
1,733,406
1,578,016
(686,480
)
(637,067
)
1,046,926
940,949
$
2,524,372
$
2,188,001
October 31,
2006
(Unaudited)
$
309,226
$
301,753
42,613
65,513
6,377
8,391
50,346
29,321
109,910
86,321
518,472
491,299
722,300
481,408
210,421
179,329
17,507
18,639
46,549
47,702
43,250
43,250
93,504
77,488
1,133,531
847,816
4,828
4,875
67,159
56,765
(80,991
)
(81,643
)
924,930
901,267
(10,428
)
1,525
(1,426
)
(1,861
)
(606
)
(945
)
(31,097
)
(31,097
)
867,541
844,011
$
2,524,372
$
2,188,001
2007
2006
$
33,979
$
33,352
26,172
24,673
851
1,173
27,084
13,731
(5,907
)
(1,643
)
(62
)
(31,569
)
333
89
14,316
(6,693
)
(17,251
)
(5,328
)
(14,203
)
(10,424
)
(30,200
)
2,134
(8,159
)
626
(32,909
)
(24,070
)
(24,791
)
(10,979
)
(1,990
)
(336
)
12,044
(2,700
)
(2,247
)
267
25,308
(458
)
2,368
(18,155
)
(310,798
)
—
(34,303
)
(12,559
)
(400
)
(35,459
)
(29,748
)
—
5,694
36,490
(369,555
)
(11,528
)
609,000
287,727
(389,685
)
(264,112
)
41,907
9,684
(10,315
)
(6,811
)
—
(3,202
)
8,920
1,483
259,827
24,769
(1,271
)
(2,076
)
(108,631
)
(6,990
)
187,101
122,411
$
78,470
$
115,421