Greif, Inc. Reports Fiscal Second Quarter 2005 Results DELAWARE,
Ohio, June 2 /PRNewswire-FirstCall/ -- Greif, Inc.
(NYSE:GEFNYSE:GEF.B), a global leader in industrial packaging with
niche businesses in paper, corrugated packaging and timber, today
announced results for its second quarter ended April 30, 2005. Net
income before restructuring charges, debt extinguishment charge and
timberland gains (special items) was $23.9 million for the second
quarter of 2005 compared with $16.0 million for the second quarter
of last year. Diluted earnings per share before special items were
$0.81 versus $0.56 per Class A share and $1.25 versus $0.85 per
Class B share for the second quarter of 2005 and 2004,
respectively. The Company reported GAAP net income of $16.8
million, or $0.57 per diluted Class A share and $0.88 per diluted
Class B share, for the second quarter of 2005 versus $8.4 million,
or $0.30 per diluted Class A share and $0.45 per diluted Class B
share, for the same quarter last year. The Company's second quarter
2005 results were positively impacted by a higher gross profit
($8.7 million increase), a lower level of restructuring charges
($1.7 million decrease) and higher timberland gains ($2.0 million
increase) compared to the second quarter of 2004. These positive
impacts were partially offset by a debt extinguishment charge ($2.8
million) in the second quarter of 2005. Michael J. Gasser, chairman
and chief executive officer, said, "Operating results for the
second quarter of 2005 are in line with our expectations, despite
continued competitive pressures and higher input costs. During
fiscal 2005, the Greif Business System, which is the way we do
business, will continue to benefit our operations as we strive to
sustain the positive results already achieved and look for new
opportunities to further enhance shareholder value." A
reconciliation of the differences between all non-GAAP financial
measures disclosed in this release with the most directly
comparable GAAP financial measures is included in the financial
schedules that are a part of this release. Consolidated Results Net
sales rose 13 percent (10 percent excluding the impact of foreign
currency translation) to $613.0 million for the second quarter of
2005 from $542.2 million for the same quarter of 2004. The net
sales improvement was attributable to the Industrial Packaging
& Services segment ($58.7 million increase) and the Paper,
Packaging & Services segment ($12.0 million increase). Higher
selling prices, primarily in response to increased costs of steel
and resin, drove this improvement. Gross profit was $97.9 million,
or 16.0 percent of net sales, for the second quarter of 2005 versus
$89.3 million, or 16.5 percent of net sales, for the second quarter
of 2004. The deterioration in gross profit margin compared to a
year ago was principally due to generally lower sales volumes and
higher raw material costs, partially offset by improved selling
prices and labor and other manufacturing efficiencies related to
the ongoing transformation initiatives. See "Transformation to the
Greif Business System" below. Selling, general and administrative
(SG&A) expenses were $56.1 million, or 9.1 percent of net
sales, for the second quarter of 2005 compared to $55.7 million, or
10.3 percent of net sales, for the same period a year ago. While
certain SG&A expenses, such as employee benefits and
professional fees, primarily related to compliance matters
regarding Section 404 of the Sarbanes- Oxley Act of 2002, were
higher on a quarter-over-quarter comparison, certain other SG&A
expenses were reduced compared to the second quarter of 2004.
Operating profit before restructuring charges and timberland gains
increased 28 percent to $42.7 million for the second quarter of
2005 compared with $33.3 million for the second quarter of 2004.
This increase was primarily attributable to the Paper, Packaging
& Services segment ($7.9 million increase) and the Industrial
Packaging & Services segment ($1.7 million increase), partially
offset by the Timber segment ($0.2 million decrease). There were
$10.6 million and $12.3 million of restructuring charges and $3.4
million and $1.4 million of timberland gains during the second
quarter of 2005 and 2004, respectively. GAAP operating profit was
$35.4 million for the second quarter of 2005 compared with $22.4
million for the same period last year. Business Group Results
Industrial Packaging & Services In the Industrial Packaging
& Services segment, the Company offers a comprehensive line of
industrial packaging products, such as steel, fibre and plastic
drums, intermediate bulk containers, closure systems for industrial
packaging products and polycarbonate water bottles throughout the
world. The key factors influencing profitability in the second
quarter of 2005 compared to the second quarter of 2004 in the
Industrial Packaging & Services segment were: - Higher selling
prices; - Generally lower sales volumes for steel and fibre drums;
- Benefits from transformation initiatives; - Higher raw material
costs, especially steel and resin; - Lower restructuring charges;
and - Impact of foreign currency translation. In this segment, net
sales rose 15 percent (11 percent excluding the impact of foreign
currency translation) to $458.4 million for the second quarter of
2005 from $399.7 million for the same period last year. Selling
prices rose primarily in response to higher raw material costs,
especially steel and resin, compared to the same quarter last year.
However, sales volumes were generally lower for steel and fibre
drums. Operating profit before restructuring charges rose to $29.4
million for the second quarter of 2005 from $27.8 million for the
same period a year ago. Restructuring charges were $8.8 million for
the second quarter of 2005 compared with $9.5 million a year ago.
The Industrial Packaging & Services segment's gross profit
margin declined to 15.6 percent in the second quarter of 2005
versus 17.8 percent in the second quarter of 2004 due to generally
lower sales volumes and higher raw material costs, partially offset
by improved selling prices and labor and other manufacturing
efficiencies related to the transformation initiatives. GAAP
operating profit was $20.6 million for the second quarter of 2005
compared with $18.2 million for the second quarter of 2004. Paper,
Packaging & Services In the Paper, Packaging & Services
segment, the Company sells containerboard, corrugated sheets and
other corrugated products and multiwall bags in North America. The
key factors influencing profitability in the second quarter of 2005
compared to the second quarter of 2004 in the Paper, Packaging
& Services segment were: - Higher selling prices; - Generally
lower sales volumes for containerboard, corrugated sheets and
corrugated containers; and - Lower restructuring charges. In this
segment, net sales rose 9 percent to $150.0 million for the second
quarter of 2005 from $138.0 million for the same period last year
due to improved selling prices for this segment's products. Sales
volumes for containerboard, corrugated sheets and corrugated
containers were down on a quarter-over-quarter comparison.
Operating profit before restructuring charges was $10.4 million for
the second quarter of 2005 compared with $2.4 million the prior
year. Restructuring charges were $1.8 million for the second
quarter of 2005 versus $2.7 million a year ago. The increase in
operating profit before restructuring charges was primarily due to
improved selling prices, partially offset by generally lower sales
volumes and higher transportation and energy costs in the
containerboard operations. GAAP operating profit was $8.6 million
for the second quarter of 2005 compared with a loss of $0.2 million
for the second quarter of 2004. Timber As of April 30, 2005, the
Company owned approximately 281,000 acres of timber properties in
southeastern United States, which were actively harvested and
regenerated, and approximately 35,000 acres in Canada. The key
factors influencing profitability in the second quarter of 2005
compared to the second quarter of 2004 in the Timber segment were:
- Consistent level of timber sales; and - Higher gain on sale of
timberland. Timber net sales were $4.5 million for the second
quarter of 2005 and 2004. Operating profit before restructuring
charges and timberland gains was $2.9 million for the second
quarter of 2005 compared to $3.1 million a year ago. Restructuring
charges were insignificant for the second quarter in both years.
Timberland gains were $3.4 million for the second quarter of 2005
and $1.4 million for the same quarter last year. GAAP operating
profit was $6.2 million for the second quarter of 2005 compared
with $4.4 million for the second quarter of 2004. As previously
reported, in May 2005, the Company completed the first phase of the
sale of 56,000 acres of timberland, timber and associated assets
for $90 million. In this first phase, 35,000 acres of the Company's
timberland holdings in Florida, Georgia and Alabama were sold for
approximately $51 million in the third quarter of 2005. The second
phase of this transaction is expected to occur in several
installments during the Company's 2006 fiscal year. The Company
will recognize significant timberland gains in its consolidated
statements of income in the periods that these transactions occur.
Transformation to the Greif Business System The Company's
transformation to the Greif Business System continues to enhance
long-term organic sales growth, generate productivity improvements
and achieve permanent cost reductions. The transformation, which
began in fiscal 2003, delivered annualized benefits of
approximately $80 million through the end of fiscal 2004.
Additional annualized benefits of approximately $35 million are
expected during fiscal 2005. The opportunities continue to include,
but are not limited to, improved labor productivity, material yield
and other manufacturing efficiencies, coupled with further
footprint consolidation. In addition, the Company has launched a
strategic sourcing initiative to more effectively leverage its
global spend and lay the foundation for a world-class sourcing and
supply chain capability. In the second quarter of 2005, the Company
recorded restructuring charges of $6.8 million related to
transformation activities begun prior to October 31, 2004. These
restructuring charges totaled $14.0 million for the first half of
2005. Management is pleased with the progress of the transformation
initiatives to-date and is continuing to evaluate future
rationalization options based on that progress. In the second
quarter of 2005, the Company also recorded $3.8 million of
restructuring charges related to the impairment of two facilities,
currently held for sale, that were closed during previous
restructuring programs. Financing Arrangements Total debt
outstanding was $490 million at April 30, 2005 compared to $469
million at October 31, 2004 and $644 million at April 30, 2004.
Total debt to total capitalization was 42.1 percent at April 30,
2005 compared to 42.7 percent at October 31, 2004 and 52.5 percent
at April 30, 2004. Interest expense was $10.7 million for the
second quarter of 2005 and 2004. Lower average debt outstanding was
offset by higher interest rates during the second quarter of 2005
compared to the second quarter of 2004. During the second quarter
of 2005, the Company entered into a new revolving credit facility
to improve pricing and financial flexibility. As a result, the
Company recorded a $2.8 million debt extinguishment charge. Capital
Expenditures Capital expenditures were $16.2 million, excluding
timberland purchases of $1.3 million, for the second quarter of
2005 compared with capital expenditures of $16.3 million, excluding
timberland purchases of $1.9 million, during the same period last
year. For fiscal 2005, capital expenditures are expected to be
approximately $75 million, excluding timberland purchases, which
would be approximately $25 million below the Company's anticipated
depreciation expense of approximately $100 million. Company Outlook
Ongoing benefits from the transformation initiatives, which include
incremental savings of $35 million to be realized in fiscal 2005,
favorable comparisons for the Paper, Packaging & Services
segment and generally better results in the international
operations of the Industrial Packaging & Services segment are
expected to drive earnings improvement. These positive factors will
be partially offset by lower planned timber sales coupled with
downward pricing pressure and lower than planned sales volumes
during the second half of fiscal 2005. The second quarter results
were in line with expectations and management reaffirms previous
earnings guidance, before special items, in the range of $3.50 to
$3.60 per Class A share for fiscal 2005. Conference Call The
Company will host a conference call to discuss its second quarter
of 2005 results on Friday, June 3, 2005 at 10:00 a.m. ET at (800)
218-9073. For international callers, the number is +1 (303)
262-2130. The conference call will also be available through a live
webcast, including slides, which can be accessed at
http://www.greif.com/. A replay of the conference call will be
available on the Company's Web site approximately one hour
following the call. About Greif Greif is a world leader in
industrial packaging products and services. The Company provides
extensive expertise in steel, plastic, fibre, corrugated and
multiwall containers for a wide range of industries. Greif also
produces containerboard and manages timber properties in the United
States. Greif is strategically positioned in more than 40 countries
to serve multinational as well as regional customers. Additional
information is on the Company's Web site at http://www.greif.com/.
Forward-Looking Statements All statements other than statements of
historical facts included in this news release, including, without
limitation, statements regarding the Company's future financial
position, business strategy, budgets, projected costs, goals and
plans and objectives of management for future operations, are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect,"
"intend," "estimate," "anticipate," "project," "believe,"
"continue" or "target" or the negative thereof or variations
thereon or similar terminology. All forward-looking statements made
in this news release are based on information currently available
to management. Although the Company believes that the expectations
reflected in forward-looking statements have a reasonable basis,
the Company can give no assurance that these expectations will
prove to be correct. Forward-looking statements are subject to
risks and uncertainties that could cause actual events or results
to differ materially from those expressed in or implied by the
statements. Such risks and uncertainties that might cause a
difference include, but are not limited to: general economic or
business conditions, including a prolonged or substantial economic
downturn; changing trends and demands in the industries in which
the Company competes, including industry over-capacity; industry
competition; the continuing consolidation of the Company's customer
base for its industrial packaging, containerboard and corrugated
products; political instability in those foreign countries where
the Company manufactures and sells its products; foreign currency
fluctuations and devaluations; availability and costs of raw
materials for the manufacture of the Company's products,
particularly steel, resin and old corrugated containers, and price
fluctuations in energy costs; costs associated with litigation or
claims against the Company pertaining to environmental, safety and
health, product liability and other matters; work stoppages and
other labor relations matters; property loss resulting from wars,
acts of terrorism or natural disasters; the Company's ability to
integrate its newly acquired operations effectively with its
existing business; the Company's ability to achieve improved
operating efficiencies and capabilities; the frequency and volume
of sales of the Company's timber and timberland; and the deviation
of actual results from the estimates and/or assumptions used by the
Company in the application of its significant accounting policies.
These and other risks and uncertainties that could materially
affect the Company's consolidated financial results are further
discussed in its filings with the Securities and Exchange
Commission, including its Form 10-K for the year ended October 31,
2004. The Company assumes no obligation to update any
forward-looking statements. GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME UNAUDITED (Dollars in thousands,
except per share amounts) Three months ended Six months ended April
30, April 30, 2005 2004 2005 2004 Net sales $612,960 $542,189
$1,195,524 $1,011,049 Cost of products sold 515,042 452,928
1,008,880 852,338 Gross profit 97,918 89,261 186,644 158,711
Selling, general and administrative expenses 56,068 55,745 115,789
106,770 Restructuring charges 10,621 12,278 17,807 27,537 Gain on
sale of assets 4,194 1,122 14,538 5,231 Operating profit 35,423
22,360 67,586 29,635 Interest expense, net 10,693 10,716 20,786
22,963 Debt extinguishment charge 2,828 -- 2,828 -- Other income,
net 1,973 694 1,207 916 Income before income tax expense and equity
in earnings of affiliates and minority interests 23,875 12,338
45,179 7,588 Income tax expense 7,001 3,800 12,966 2,337 Equity in
earnings of affiliates and minority interests (107) (89) (310)
(168) Net income $16,767 $8,449 $31,903 $5,083 Basic earnings per
share: Class A Common Stock $0.58 $0.30 $1.12 $0.18 Class B Common
Stock $0.88 $0.45 $1.67 $0.27 Diluted earnings per share: Class A
Common Stock $0.57 $0.30 $1.09 $0.18 Class B Common Stock $0.88
$0.45 $1.67 $0.27 GREIF, INC. AND SUBSIDIARY COMPANIES SEGMENT DATA
UNAUDITED (Dollars in thousands) Three months ended Six months
ended April 30, April 30, 2005 2004 2005 2004 Net sales Industrial
Packaging & Services $458,404 $399,689 $887,446 $737,080 Paper,
Packaging & Services 150,034 138,043 298,239 263,337 Timber
4,522 4,457 9,839 10,632 Total $612,960 $542,189 $1,195,524
$1,011,049 Operating profit Operating profit before restructuring
charges and timberland gains: Industrial Packaging & Services
$29,411 $27,760 $47,090 $36,611 Paper, Packaging & Services
10,372 2,435 19,963 7,788 Timber 2,868 3,079 6,875 7,475 Total
operating profit before restructuring charges and timberland gains
42,651 33,274 73,928 51,874 Restructuring charges: Industrial
Packaging & Services 8,809 9,540 15,607 21,563 Paper, Packaging
& Services 1,764 2,665 2,141 5,834 Timber 48 73 59 140
Restructuring charges 10,621 12,278 17,807 27,537 Timberland gains:
Timber 3,393 1,364 11,465 5,298 Total $35,423 $22,360 $67,586
$29,635 Depreciation, depletion and amortization expense Industrial
Packaging & Services $16,176 $17,019 $32,312 $34,078 Paper,
Packaging & Services 8,322 8,486 16,774 17,311 Timber 694 592
1,088 1,418 Total $25,192 $26,097 $50,174 $52,807 GREIF, INC. AND
SUBSIDIARY COMPANIES GEOGRAPHIC DATA UNAUDITED (Dollars in
thousands) Three months ended Six months ended April 30, April 30,
2005 2004 2005 2004 Net sales North America $332,515 $305,470
$649,691 $573,494 Europe 191,316 159,001 367,486 291,947 Other
89,129 77,718 178,347 145,608 Total $612,960 $542,189 $1,195,524
$1,011,049 Operating profit Operating profit before restructuring
charges and timberland gains: North America $19,303 $13,672 $36,940
$22,156 Europe 13,883 12,993 19,923 17,304 Other 9,465 6,609 17,065
12,414 Operating profit before restructuring charges and timberland
gains 42,651 33,274 73,928 51,874 Restructuring charges 10,621
12,278 17,807 27,537 Timberland gains 3,393 1,364 11,465 5,298
Total $35,423 $22,360 $67,586 $29,635 GREIF, INC. AND SUBSIDIARY
COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in
thousands) April 30, 2005 October 31, 2004 (Unaudited) ASSETS
CURRENT ASSETS Cash and cash equivalents $52,029 $38,109 Trade
accounts receivable 282,564 307,750 Inventories 222,149 191,457
Other current assets 86,935 75,366 643,677 612,682 LONG-TERM ASSETS
Goodwill 228,571 237,803 Intangible assets 25,454 27,524 Other
long-term assets 56,363 54,547 310,388 319,874 PROPERTIES, PLANTS
AND EQUIPMENT 857,014 880,682 $1,811,079 $1,813,238 LIABILITIES AND
SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $241,930
$281,265 Short-term borrowings 23,506 11,621 Other current
liabilities 133,534 144,332 398,970 437,218 LONG-TERM LIABILITIES
Long-term debt 466,215 457,415 Other long-term liabilities 272,299
287,786 738,514 745,201 MINORITY INTEREST 1,290 1,725 SHAREHOLDERS'
EQUITY 672,305 629,094 $1,811,079 $1,813,238 GREIF, INC. AND
SUBSIDIARY COMPANIES GAAP TO NON-GAAP RECONCILIATION UNAUDITED
(Dollars in thousands, except per share amounts) Three months ended
Three months ended April 30, 2005 April 30, 2004 Diluted per
Diluted per share amounts share amounts Class A Class B Class A
Class B GAAP - operating profit $35,423 $22,360 Restructuring
charges 10,621 12,278 Timberland gains (3,393) (1,364) Non-GAAP -
operating profit before restructuring charges and timberland gains
$42,651 $33,274 GAAP - net income $16,767 $0.57 $0.88 $8,449 $0.30
$0.45 Restructuring charges, net of tax 7,506 0.25 0.40 8,496 0.29
0.45 Timberland gains, net of tax (2,398) (0.08) (0.13) (944)
(0.03) (0.05) Debt extinguishment charge, net of tax 1,999 0.07
0.10 -- -- -- Non-GAAP - net income before restructuring charges,
debt extinguishment charge and timberland gains $23,874 $0.81 $1.25
$16,001 $0.56 $0.85 Six months ended Six months ended April 30,
2005 April 30, 2004 Diluted per Diluted per share amounts share
amounts Class A Class B Class A Class B GAAP - operating profit
$67,586 $29,635 Restructuring charges 17,807 27,537 Timberland
gains (11,465) (5,298) Non-GAAP - operating profit before
restructuring charges and timberland gains $73,928 $51,874 GAAP -
net income $31,903 $1.09 $1.67 $5,083 $0.18 $0.27 Restructuring
charges, net of tax 12,696 0.43 0.66 19,056 0.67 1.02 Timberland
gains, net of tax (8,175) (0.28) (0.43) (3,666) (0.13) (0.20) Debt
extinguishment charge, net of tax 2,016 0.07 0.11 -- -- -- Non-GAAP
- net income before restructuring charges, debt extinguishment
charge and timberland gains $38,441 $1.31 $2.01 $20,473 $0.72 $1.09
GREIF, INC. AND SUBSIDIARY COMPANIES GAAP TO NON-GAAP
RECONCILIATION (CONTINUED) UNAUDITED (Dollars in thousands) Three
months ended Six months ended April 30, April 30, 2005 2004 2005
2004 Industrial Packaging & Services GAAP - operating profit
$20,602 $18,220 $31,483 $15,048 Restructuring charges 8,809 9,540
15,607 21,563 Non-GAAP - operating profit before restructuring
charges $29,411 $27,760 $47,090 $36,611 Paper, Packaging &
Services GAAP - operating profit (loss) $8,608 $(230) $17,822
$1,954 Restructuring charges 1,764 2,665 2,141 5,834 Non-GAAP -
operating profit before restructuring charges $10,372 $2,435
$19,963 $7,788 Timber GAAP - operating profit $6,213 $4,370 $18,281
$12,633 Restructuring charges 48 73 59 140 Timberland gains (3,393)
(1,364) (11,465) (5,298) Non-GAAP - operating profit before
restructuring charges and timberland gains $2,868 $3,079 $6,875
$7,475 DATASOURCE: Greif, Inc. CONTACT: Analysts, Robert Lentz,
+1-614-876-2000, for Greif, Inc.; or Media, Deb Strohmaier of
Greif, Inc., +1-740-549-6074 Web site: http://www.greif.com/
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