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, 2008
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, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer x |
Accelerated filer ¨ | |||
|
Non-accelerated filer ¨ (Do not check if a smaller reporting company) |
Smaller reporting company ¨ | |||
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, 2008 was as follows:
|
Class A Common Stock |
23,865,726 shares | |
|
Class B Common Stock |
22,941,166 shares |
PART I. FINANCIAL INFORMATION
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in thousands,
except per share amounts)
Net sales
Cost of products sold
Gross profit
Selling, general and administrative expenses
Restructuring charges
Timberland disposals, net
Gain on disposal of properties, plants and equipment, net
Operating profit
Interest expense, net
Other expense, net
Income before income tax expense and equity earnings and minority interests
Income tax expense
Equity earnings 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
1
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents
Trade accounts receivable, less allowance of $11,758 in 2008 and $12,539 in 2007
Inventories
Deferred tax assets
Net assets held for sale
Prepaid expenses and other current assets
Long-term assets
Goodwill
Other intangible assets, net of amortization
Assets held by special purpose entities (Note 8)
Long-term notes receivable
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
2
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable
Accrued payroll and employee benefits
Restructuring reserves
Short-term borrowings
Other current liabilities
Long-term liabilities
Long-term debt
Deferred tax liabilities
Pension liability
Postretirement benefit liabilities
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 and other derivatives
- minimum pension liability
See accompanying Notes to Consolidated Financial Statements
3
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
Timberland disposals, net
Equity earnings 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
Accounts payable
Accrued payroll and employee benefits
Restructuring reserves
Other current liabilities
Pension and postretirement benefit liability
Other, including 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
Issuance of notes receivable
Proceeds from the disposal of properties, plants, equipment and other assets
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 and other
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
4
GREIF, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2008
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, 2008 and October 31, 2007 and the consolidated statements of income
and cash flows for the three-month periods ended January 31, 2008 and 2007 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, 2007 (the “2007 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 2008 or 2007, 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 2008 presentation.
Industrial Packaging Acquisitions and Divestitures
During the first three months of 2008, the Company completed three acquisitions of industrial packaging companies for an aggregate purchase price of $69.4
million. These three acquisitions were a joint venture in the Middle East in November 2007, a South American company in November 2007, and a North American company in December 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 $65.7 million (including $16.0
million of accounts receivable and $8.1 million of inventory) and liabilities assumed were $35.7 million. Identifiable intangible assets, with a combined fair value that is insignificant and are yet to be allocated, 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 $39.4 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 as well as the execution of consolidation plans to eliminate duplicate operations, in accordance with SFAS
No. 141, “Business Combinations.” This is due to the valuation of certain other assets and liabilities that are subject to refinement and therefore the actual fair value may vary from the preliminary estimates. Adjustments to the
acquired net assets resulting from final valuations are not expected to be significant. The Company is finalizing certain closing date adjustments with the sellers, as well as the allocation of income tax adjustments.
During 2007, the Company completed seven acquisitions of industrial packaging companies for an aggregate purchase price of $346.4 million. These seven
acquisitions were Blagden Packaging Group, two small North American companies in November 2006, one small North African company in January 2007, the acquisition of the remaining ownership of two of our minority owned plants in Russia in July 2007, a
North American joint venture in October 2007, and one small South American company in October 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 $158.0 million (including $61.2 million of accounts receivable and $43.5 million of inventory) and
liabilities assumed were $75.1 million. Identifiable intangible assets, with a combined fair value of $56.4 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 $207.1 million was recorded as goodwill. The final allocation of the purchase prices for three of the 2007 acquisitions may differ due
to additional refinements in the fair values of the net assets acquired as well as the execution of consolidation plans to eliminate duplicate operations, in accordance with SFAS No. 141, “Business Combinations.” This is due to the
valuation of certain other assets and liabilities that are subject to refinement and therefore the actual fair value may vary from the preliminary estimates. Adjustments to the acquired net assets resulting from final valuations are not expected to
be significant. The Company is finalizing certain closing date adjustments with the sellers, as well as the allocation of income tax adjustments.
5
As of the completion date of the acquisitions made during the first three months of 2008, the Company had
only begun to formulate various restructuring plans at certain of the acquired businesses discussed abo
ITEM 1.
CONSOLIDATED FINANCIAL STATEMENTS
Three months ended
January 31,
2008
2007
$
846,292
$
750,759
697,968
620,673
148,324
130,086
80,512
74,609
10,475
2,037
(90
)
(62
)
(36,774
)
(5,139
)
94,201
58,641
11,756
12,034
3,330
736
79,115
45,871
18,690
11,559
262
(333
)
$
60,687
$
33,979
$
1.05
$
0.59
$
1.56
$
0.88
$
1.03
$
0.58
$
1.56
$
0.88
January 31,
2008
October 31,
2007
(Unaudited)
$
107,438
$
123,699
374,941
339,328
264,856
242,994
20,991
27,917
11,179
11,564
125,287
96,283
904,692
841,785
538,236
493,252
95,172
96,256
50,891
50,891
3,316
36,434
58,292
59,547
745,907
736,380
195,265
197,235
127,398
126,018
359,422
356,878
1,064,451
1,032,677
103,102
90,659
1,849,638
1,803,467
(775,495
)
(728,921
)
1,074,143
1,074,546
$
2,724,742
$
2,652,711
January 31,
2008
October 31,
2007
(Unaudited)
$
346,283
$
411,095
57,603
84,977
13,264
15,776
74,525
15,848
132,867
121,214
624,542
648,910
708,239
622,685
75,550
159,494
19,757
19,892
31,442
32,983
43,250
43,250
210,741
119,180
1,088,979
997,484
6,682
6,405
78,999
75,156
(92,110
)
(92,028
)
1,041,908
1,004,300
8,257
43,260
(3,459
)
(997
)
186
226
(29,242
)
(30,005
)
1,004,539
999,912
$
2,724,742
$
2,652,711
2008
2007
$
60,687
$
33,979
25,863
26,172
5,573
851
(77,018
)
27,084
(36,774
)
(5,907
)
(90
)
(62
)
(262
)
333
(20,372
)
14,316
(12,416
)
(17,251
)
(26,657
)
(14,203
)
19,417
(38,359
)
(7,889
)
(32,909
)
(26,912
)
(24,791
)
(1,301
)
(1,990
)
(9,351
)
12,044
3,217
(2,247
)
18,657
25,308
(85,628
)
2,368
(69,400
)
(310,798
)
(29,507
)
(34,303
)
(500
)
(400
)
—
(29,748
)
36,745
5,694
(62,662
)
(369,555
)
376,632
609,000
(288,653
)
(389,685
)
57,808
41,907
(16,064
)
(10,315
)
(148
)
—
1,731
8,920
131,306
259,827
723
(1,271
)
(16,261
)
(108,631
)
123,699
187,101
$
107,438
$
78,470