GREIF INC (Form: 10-Q)

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 July 31, 2006

¨	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

LOGO

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 July 31, 2006 was as follows:

Class A Common Stock 11,589,883 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 July 31,					Nine months ended July 31,
	2006			2005		2006			2005
Net sales	$	690,475		$	609,046	$	1,892,898		$	1,804,570
Cost of products sold		553,732			515,575		1,557,040			1,524,455

Gross profit		136,743			93,471		335,858			280,115

Selling, general and administrative expenses		70,348			52,224		192,180			168,013
Restructuring charges		7,087			5,296		22,842			23,103
Gain on sale of timberland		364			43,704		41,171			55,169
Gain on disposals of properties, plants and equipment, net		8,809			2,875		15,999			5,948

Operating profit		68,481			82,530		178,006			150,116

Interest expense, net		8,071			9,361		27,038			29,315
Debt extinguishment charge		—			—		—			2,828
Other income (expense), net		(4,254	)		1,887		(4,448	)		1,952

Income before income tax expense		56,156			75,056		146,520			119,925

Income tax expense		17,820			24,344		46,139			37,310

Net income	$	38,336		$	50,712	$	100,381		$	82,615

Basic earnings per share:
Class A Common Stock	$	1.33		$	1.76	$	3.48		$	2.88
Class B Common Stock	$	1.99		$	2.63	$	5.22		$	4.31

Diluted earnings per share:
Class A Common Stock	$	1.30		$	1.71	$	3.42		$	2.81
Class B Common Stock	$	1.99		$	2.63	$	5.22		$	4.31

See accompanying Notes to Consolidated Financial Statements

GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

ASSETS


	July 31, 2006			October 31, 2005
	(Unaudited)
Current assets
Cash and cash equivalents	$	167,651		$	122,411
Trade accounts receivable, less allowance of $8,951 in 2006 and $8,475 in 2005		301,635			258,636
Inventories		180,252			170,533
Net assets held for sale		5,961			8,410
Deferred tax assets		9,241			10,088
Other receivables, less allowance of $1,112 in 2006 and $977 in 2005		36,572			26,619
Prepaid expenses and other current assets		43,843			29,255

		745,155			625,952

Long-term assets
Goodwill, net of amortization		256,828			263,703
Other intangible assets, net of amortization		34,701			25,015
Assets held by special purpose entities (Note 8)		50,891			50,891
Other long-term assets		52,791			55,706

		395,211			395,315

Properties, plants and equipment
Timber properties, net of depletion		175,078			139,372
Land		86,011			75,464
Buildings		315,438			317,791
Machinery and equipment		897,255			852,926
Capital projects in progress		50,937			38,208

		1,524,719			1,423,761
Accumulated depreciation		(639,012	)		(561,705	)

		885,707			862,056

	$	2,026,073		$	1,883,323

See accompanying Notes to Consolidated Financial Statements

GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

LIABILITIES AND SHAREHOLDERS’ EQUITY


	July 31, 2006			October 31, 2005
	(Unaudited)
Current liabilities
Accounts payable	$	271,724		$	234,672
Accrued payrolls and employee benefits		51,048			45,252
Restructuring reserves		7,761			10,402
Short-term borrowings		21,992			17,173
Other current liabilities		95,050			75,485

		447,575			382,984

Long-term liabilities
Long-term debt		419,984			430,400
Deferred tax liability		151,984			133,837
Pension liability		43,896			45,544
Postretirement benefit liability		49,723			47,827
Liabilities held by special purpose entities (Note 8)		43,250			43,250
Other long-term liabilities		73,050			66,897

		781,887			767,755

Minority interest		4,670			1,696

Shareholders’ equity
Common stock, without par value		53,155			49,251
Treasury stock, at cost		(81,373	)		(75,956	)
Retained earnings		869,936			793,669
Accumulated other comprehensive income (loss):
- foreign currency translation		(5,858	)		9,117
- interest rate derivatives		(1,535	)		(2,738	)
- energy derivatives		73			—
- minimum pension liability		(42,457	)		(42,455	)

		791,941			730,888

	$	2,026,073		$	1,883,323

See accompanying Notes to Consolidated Financial Statements

GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Dollars in thousands)


For the nine months ended July 31,	2006			2005
Cash flows from operating activities:
Net income	$	100,381		$	82,615
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		68,621			74,576
Asset impairments		6,245			4,110
Deferred income taxes		19,315			8,673
Gain on disposals of properties, plants and equipment, net		(15,999	)		(5,948	)
Gain on sales of timberland (Note 8)		(41,171	)		(55,169	)
Gain on insurance settlement		(1,526	)		—
Increase (decrease) in cash from changes in certain assets and liabilities:
Trade accounts receivable		(45,989	)		29,489
Inventories		(10,777	)		(16,893	)
Prepaid expenses and other current assets		(26,363	)		(13,839	)
Other long-term assets		(1,499	)		13,834
Accounts payable		49,014			(43,136	)
Accrued payroll and employee benefits		6,431			(8,653	)
Restructuring reserves		(2,372	)		(6,369	)
Other current liabilities		429			2,931
Postretirement benefit liability		(327	)		1,555
Other, including long-term liabilities		37,954			1,301

Net cash provided by operating activities		142,367			69,074

Cash flows from investing activities:
Acquisitions of companies, net of cash acquired		(3,109	)		(4,889	)
Purchases of properties, plants, equipment and other assets		(107,884	)		(59,184	)
Proceeds from the sale of properties, plants, equipment and other assets		60,218			23,789
Proceeds from insurance settlement for properties, plants, and equipment		2,562			—

Net cash used in investing activities		(48,213	)		(40,284	)

Cash flows from financing activities:
Payments on long-term debt		(607,359	)		(1,188,107	)
Proceeds from issuance of long-term debt		586,804			1,135,393
Proceeds (payments) on short-term borrowings, net		4,736			14,628
Dividends paid		(24,114	)		(15,977	)
Acquisitions of treasury stock		(5,833	)		(8,105	)
Exercise of stock options		3,476			21,573
Proceed from timber notes securitized (Note 8)		—			43,250

Net cash provided by (used in) financing activities		(42,290	)		2,655

Effects of exchange rates on cash		(6,624	)		1,256