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 April 30, 2006
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 April 30, 2006 was as follows:
| Class A Common Stock |
11,545,303 shares |
|
| Class B Common Stock |
11,521,245 shares |
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in thousands, except per share amounts)
|
Three months ended April 30, |
Six months ended April 30, |
||||||||||||
| 2006 | 2005 | 2006 | 2005 | ||||||||||
|
Net sales |
$ | 620,107 | $ | 612,960 | $ | 1,202,423 | $ | 1,195,524 | |||||
|
Cost of products sold |
510,664 | 515,042 | 1,003,308 | 1,008,880 | |||||||||
|
Gross profit |
109,443 | 97,918 | 199,115 | 186,644 | |||||||||
|
Selling, general and administrative expenses |
62,378 | 56,068 | 121,832 | 115,789 | |||||||||
|
Restructuring charges |
10,287 | 10,621 | 15,755 | 17,807 | |||||||||
|
Gain on sale of assets |
14,786 | 4,194 | 47,997 | 14,538 | |||||||||
|
Operating profit |
51,564 | 35,423 | 109,525 | 67,586 | |||||||||
|
Interest expense, net |
9,794 | 10,296 | 18,967 | 19,954 | |||||||||
|
Debt extinguishment charge |
— | 2,828 | — | 2,828 | |||||||||
|
Other income (expense), net |
288 | 1,469 | (194 | ) | 65 | ||||||||
|
Income before income tax expense |
42,058 | 23,768 | 90,364 | 44,869 | |||||||||
|
Income tax expense |
13,365 | 7,001 | 28,319 | 12,966 | |||||||||
|
Net income |
$ | 28,693 | $ | 16,767 | $ | 62,045 | $ | 31,903 | |||||
| Basic earnings per share: | |||||||||||||
|
Class A Common Stock |
$ | 0.99 | $ | 0.58 | $ | 2.15 | $ | 1.12 | |||||
|
Class B Common Stock |
$ | 1.49 | $ | 0.88 | $ | 3.22 | $ | 1.67 | |||||
| Diluted earnings per share: | |||||||||||||
|
Class A Common Stock |
$ | 0.97 | $ | 0.57 | $ | 2.11 | $ | 1.09 | |||||
|
Class B Common Stock |
$ | 1.49 | $ | 0.88 | $ | 3.22 | $ | 1.67 | |||||
See accompanying Notes to Consolidated Financial Statements
2
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
April 30,
2006
Cash and cash equivalents
Trade accounts receivable, less allowance of $8,032 in 2006 and $8,972 in 2005
Inventories
Net assets held for sale
Deferred tax assets
Prepaid expenses and other current assets
Goodwill, net of amortization
Other intangible assets, net of amortization
Assets held by special purpose entities (Note 8)
Other long-term assets
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
April 30,
2006
Accounts payable
Accrued payrolls and employee benefits
Restructuring reserves
Short-term borrowings
Other current liabilities
Long-term debt
Deferred tax liability
Pension liability
Postretirement benefit liability
Liabilities held by special purpose entities (Note 8)
Other long-term liabilities
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 six months ended April 30,
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 significant sales of nonstrategic timberland (Note 8)
Increase (decrease) in cash from changes in certain assets and liabilities:
Trade accounts receivable
Inventories
Other current assets
Other long-term assets
Accounts payable
Accrued payroll and employee benefits
Restructuring reserves
Other current liabilities
Postretirement benefit liability
Other long-term liabilities
Net cash provided by (used in) operating activities
Purchases of properties, plants, equipment and other assets
Proceeds from the sale of properties, plants, equipment and other assets
Net cash used in investing activities
Proceeds from issuance of long-term debt
Payments on long-term debt
Proceeds (payments) on short-term borrowings
Dividends paid
Acquisitions of treasury stock
Exercise of stock options
Net cash provided by financing activities
See accompanying Notes to Consolidated Financial Statements
5
GREIF, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2006
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 April 30, 2006 and October 31, 2005 and the consolidated
statements of income and cash flows for the three-month and six-month periods ended April 30, 2006 and 2005 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, 2005 (the “2005 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 2006 or 2005, 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 2006 presentation.
Stock-Based Compensation Expense
On November 1, 2005, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based
Payment,” which requires the measurement and recognition of compensation expense, based on estimated fair values, for all share-based awards made to employees and directors, including stock options, restricted stock, restricted stock units and
participation in the Company’s employee stock purchase plan. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 107 relating to SFAS No. 123(R). The Company has
applied th
October 31,
2005
(Unaudited)
Current assets
$
152,030
$
122,411
283,496
258,636
170,958
170,533
3,272
8,410
9,189
10,088
86,238
55,874
705,183
625,952
Long-term assets
249,505
263,703
35,975
25,015
50,891
50,891
53,483
55,706
389,854
395,315
Properties, plants and equipment
172,042
139,372
75,374
75,464
312,176
317,791
900,063
852,926
47,543
38,208
1,507,198
1,423,761
(624,551
)
(561,705
)
882,647
862,056
$
1,977,684
$
1,883,323
October 31,
2005
(Unaudited)
Current liabilities
$
225,423
$
234,672
44,474
45,252
6,958
10,402
26,459
17,173
79,069
75,485
382,383
382,984
Long-term liabilities
459,190
430,400
145,604
133,837
44,037
45,544
50,735
47,827
43,250
43,250
76,475
66,897
819,291
767,755
Minority interest
4,027
1,696
Shareholders’ equity
52,037
49,251
(81,429
)
(75,956
)
841,982
793,669
4,219
9,117
(1,861
)
(2,738
)
(508
)
—
(42,457
)
(42,455
)
771,983
730,888
$
1,977,684
$
1,883,323
2006
2005
Cash flows from operating activities:
$
62,045
$
31,903
47,999
50,174
5,525
3,896
12,436
2,832
(7,190
)
(14,538
)
(40,807
)
—
(28,970
)
25,041
(3,322
)
(30,829
)
(32,498
)
(12,609
)
1,353
(200
)
7,578
(39,254
)
(176
)
(7,720
)
(3,297
)
(3,031
)
(10,965
)
(7
)
2,138
3,118
36,645
(12,052
)
48,494
(3,276
)
Cash flows from investing activities:
(82,170
)
(26,200
)
52,282
17,687
(29,888
)
(8,513
)
Cash flows from financing activities:
480,544
965,480
(458,685
)
(954,263
)
11,141
12,880
(13,732
)
(9,049
)
(5,733
)
(5,291
)
1,916
14,767
15,451
24,524
Effects of exchange rates on cash
(4,438
)
1,185
Net increase in cash and cash equivalents
29,619
13,920
Cash and cash equivalents at beginning of period
122,411
38,109
Cash and cash equivalents at end of period
$
152,030
$
52,029