Greif, Inc. Reports First Quarter 2005 Results DELAWARE, Ohio,
March 2 /PRNewswire-FirstCall/ -- Greif, Inc. (NYSE: GEF; GEF.B), a
global leader in industrial packaging with niche businesses in
paper, corrugated packaging and timber, today announced results for
its first quarter ended January 31, 2005. Net income before
restructuring charges and timberland gains was $14.5 million for
the first quarter of 2005 compared with $4.5 million for the first
quarter of last year. Diluted earnings per share before
restructuring charges and timberland gains were $0.50 versus $0.16
per Class A share and $0.76 versus $0.23 per Class B share for the
first quarter of 2005 and 2004, respectively. The Company reported
GAAP net income of $15.1 million, or $0.52 per diluted Class A
share and $0.79 per diluted Class B share, for the first quarter of
2005 versus a net loss of $3.4 million, or a loss of $0.12 per
diluted Class A share and $0.18 per diluted Class B share, for the
same quarter last year. The Company's first quarter of 2005 results
were positively impacted by a lower level of restructuring charges
($8.1 million decrease) and higher timberland gains ($4.1 million
increase) compared to the first quarter of 2004. Michael J. Gasser,
Chairman and Chief Executive Officer, said, "We are pleased with
our operating results for the first quarter of 2005 despite
continued pressures in raw material costs. During fiscal 2005, we
will continue to focus on transitioning our transformation
initiatives into the Greif Business System -- that is, the way we
do business and create value for the long-term." 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 24
percent to $582.6 million for the first quarter of 2005 from $468.9
million for the same quarter of 2004. Net sales increased
approximately 21 percent excluding the impact of foreign currency
translation. Higher selling prices, primarily in response to
increased costs of steel and resin in the Industrial Packaging
& Services segment and old corrugated containers ("OCC") in the
Paper, Packaging & Services segment, contributed to this
improvement. Gross profit was $88.7 million, or 15.2 percent of net
sales, for the first quarter of 2005 versus $69.5 million, or 14.8
percent of net sales, for the first quarter of 2004. The principal
factors impacting the improvement in gross profit margin compared
to a year ago were improved selling prices and efficiencies in
labor and other manufacturing costs resulting from the ongoing
transformation initiatives. Higher raw material costs partially
offset these positive factors to the gross profit margin
improvement. Selling, general and administrative ("SG&A")
expenses were $59.7 million, or 10.3 percent of net sales, for the
first quarter of 2005 compared to $51.0 million, or 10.9 percent of
net sales, for the same period a year ago. The increase in SG&A
expenses was primarily attributable to an increase in salaries and
employee benefits (incentive compensation, medical and pension
expenses). Overall SG&A was influenced by a $1.6 million
negative foreign currency translation impact. Operating profit
before restructuring charges and timberland gains increased 68
percent to $31.3 million for the first quarter of 2005 compared
with $18.6 million for the first quarter of 2004. There were $7.2
million and $15.3 million of restructuring charges and $8.1 million
and $3.9 million of timberland gains during the first quarter of
2005 and 2004, respectively. GAAP operating profit was $32.2
million for the first quarter of 2005 compared with $7.3 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 first
quarter of 2005 compared to the first quarter of 2004 in the
Industrial Packaging & Services segment were: Higher selling
prices; - Generally higher volumes for steel and plastic drums; -
Benefits from transformation initiatives; - Higher raw material
costs, especially steel and resin; - Restructuring charges; and -
Foreign currency translation. In this segment, net sales rose 27
percent to $429.0 million for the first quarter of 2005 from $337.4
million for the same period last year. Net sales increased 23
percent excluding the impact of foreign currency translation.
Selling prices rose primarily in response to higher raw material
costs, especially steel and resin, and sales volumes were generally
higher for steel and plastic drums. Operating profit before
restructuring charges rose to $17.7 million for the first quarter
of 2005 from $8.9 million for the same period a year ago.
Restructuring charges were $6.8 million for the first quarter of
2005 compared with $12.0 million a year ago. The Industrial
Packaging & Services segment's gross profit margin benefited
from labor and other manufacturing efficiencies resulting from
transformation initiatives, partially offset by higher raw material
costs. GAAP operating profit was $10.9 million for the first
quarter of 2005 compared with an operating loss of $3.2 million for
the first 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 first quarter of 2005 compared to the first
quarter of 2004 in the Paper, Packaging & Services segment
were: - Higher selling prices; - Higher raw material costs,
especially OCC; and - Restructuring charges. In this segment, net
sales rose 18 percent to $148.2 million for the first quarter of
2005 from $125.3 million for the same period last year due to
improved selling prices for this segment's products. Operating
profit before restructuring charges was $9.6 million for the first
quarter of 2005 compared with $5.4 million the prior year.
Restructuring charges were $0.4 million for the first quarter of
2005 versus $3.2 million a year ago. The increase in operating
profit before restructuring charges was primarily due to improved
selling prices, partially offset by higher raw material costs,
particularly OCC, in the containerboard operations. GAAP operating
profit was $9.2 million for the first quarter of 2005 compared with
$2.2 million for the first quarter of 2004. Timber In the Timber
segment, the Company owns approximately 281,000 acres of timber
properties in southeastern United States, which are actively
harvested and regenerated, and approximately 35,000 acres in
Canada. The key factors influencing profitability in the first
quarter of 2005 compared to the first quarter of 2004 in the Timber
segment were: - Lower planned timber sales; and - Higher gain on
sale of timberland. Timber net sales were $5.3 million for the
first quarter of 2005 compared with $6.2 million for the same
period last year. As a result of the lower planned sales volume,
operating profit before restructuring charges and timberland gains
was $4.0 million for the first quarter of 2005 compared to $4.4
million a year ago. Restructuring charges were insignificant for
the first quarter in both years. Timberland gains were $8.1 million
for the first quarter of 2005 and $3.9 million for the same period
last year. GAAP operating profit was $12.1 million for the first
quarter of 2005 compared with $8.3 million for the first quarter of
2004. Transformation Initiatives The Company's transformation
initiatives continue to enhance long-term organic sales growth,
generate productivity improvements and achieve permanent cost
reductions. The transformation, which began in fiscal 2003, has
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.
As previously disclosed, only costs related to the transformation
activities already begun prior to October 31, 2004 are being
designated as restructuring charges during fiscal 2005.
Approximately $15 million to $20 million of restructuring charges
are anticipated in fiscal 2005. Financing Arrangements Total debt
outstanding was $486 million at January 31, 2005 compared to $469
million at October 31, 2004 and $661 million at January 31, 2004.
Total debt to total capitalization was 42.7 percent at January 31,
2005 and October 31, 2004, down from 53.8 percent at January 31,
2004. Interest expense declined to $10.1 million for the first
quarter of 2005 from $12.2 million for the same quarter last year.
This reduction was primarily due to lower average debt outstanding
during the first quarter of 2005 compared to the first quarter of
2004. Capital Expenditures Capital expenditures were $8.7 million
for the first quarter of 2005 compared with capital expenditures of
$7.1 million, excluding timberland purchases of $2.7 million,
during the same period last year. There were no timberland
purchases during the first quarter of 2005. 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. Share Repurchases The Company
repurchased 100,000 Class B Common Stock during the first quarter
of fiscal 2005 pursuant to the stock repurchase program authorized
by the Board of Directors in February 1999, which authorized the
Company to purchase up to one million shares of the Company's Class
A Common Stock or Class B Common Stock or any combination of the
foregoing (the "Common Stock"). As of January 31, 2005, the Company
had repurchased 864,680 shares, including 486,476 shares of Class A
Common Stock and 378,204 shares of Class B Common Stock pursuant to
this program. On February 28, 2005, the Board of Directors
authorized the Company to repurchase an additional one million
shares of its Common Stock. Company Outlook Ongoing benefits from
the transformation initiatives, which include incremental savings
of $35 million to be realized in fiscal 2005 and improvement in the
fundamentals for the Paper, Packaging & Services segment, are
expected to drive earnings improvement. These positive factors will
be partially offset by lower planned Timber segment results.
Although the Company exited the first quarter with positive
momentum, challenges remain, especially with respect to raw
material and other costs. Management reaffirms guidance, before
restructuring charges and timberland gains, 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 first quarter of
2005 results on Thursday, March 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, 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 OPERATIONS UNAUDITED (Dollars in
thousands, except per share amounts) Quarter ended January 31, 2005
2004 $582,564 $468,860 Net sales Cost of products sold 493,838
399,410 Gross profit 88,726 69,450 Selling, general and
administrative expenses 59,721 51,025 Restructuring charges 7,186
15,259 Gain on sale of assets 10,344 4,109 Operating profit 32,163
7,275 Interest expense, net 10,093 12,247 Other income (expense),
net (766) 222 Income (loss) before income tax expense (benefit) and
equity in earnings of affiliates and minority interests 21,304
(4,750) Income tax expense (benefit) 5,965 (1,463) Equity in
earnings of affiliates and minority interests (203) (79) Net income
(loss) $15,136 $(3,366) Basic earnings (loss) per share: Class A
Common Stock $0.53 $(0.12) Class B Common Stock $0.79 $(0.18)
Diluted earnings (loss) per share: Class A Common Stock $0.52
$(0.12) Class B Common Stock $0.79 $(0.18) GREIF, INC. AND
SUBSIDIARY COMPANIES SEGMENT DATA UNAUDITED (Dollars in thousands)
Quarter ended January 31, 2005 2004 Net sales Industrial Packaging
& Services $429,042 $337,391 Paper, Packaging & Services
148,205 125,294 Timber 5,317 6,175 Total $582,564 $468,860
Operating profit Operating profit before restructuring charges and
timberland gains: Industrial Packaging & Services $17,679
$8,851 Paper, Packaging & Services 9,591 5,353 Timber 4,007
4,396 Operating profit before restructuring charges and timberland
gains 31,277 18,600 Restructuring charges: Industrial Packaging
& Services 6,798 12,023 Paper, Packaging & Services 377
3,169 Timber 11 67 Restructuring charges 7,186 15,259 Timberland
gains: Timber 8,072 3,934 Total $32,163 $7,275 Depreciation,
depletion and amortization expense Industrial Packaging &
Services $16,136 $17,058 Paper, Packaging & Services 8,452
8,825 Timber 394 827 Total $24,982 $26,710 GREIF, INC. AND
SUBSIDIARY COMPANIES GEOGRAPHIC DATA UNAUDITED (Dollars in
thousands) Year ended January 31, 2005 2004 Net sales North America
$317,176 $268,024 Europe 176,170 132,946 Other 89,218 67,890 Total
$582,564 $468,860 Operating profit Operating profit before
restructuring charges and timberland gains: North America $17,637
$7,667 Europe 6,040 6,058 Other 7,600 4,875 Operating profit before
restructuring charges and timberland gains 31,277 18,600
Restructuring charges 7,186 15,259 Timberland gains 8,072 3,934
Total $32,163 $7,275 GREIF, INC. AND SUBSIDIARY COMPANIES CONDENSED
CONSOLIDATED BALANCE SHEETS UNAUDITED (Dollars in thousands)
January 31, October 31, 2005 2004 ASSETS CURRENT ASSETS Cash and
cash equivalents $56,138 $38,109 Trade accounts receivable 263,020
307,750 Inventories 212,503 191,457 Other current assets 74,629
75,366 606,290 612,682 LONG-TERM ASSETS Goodwill 237,211 237,803
Intangible assets 26,503 27,524 Other long-term assets 53,277
54,547 316,991 319,874 PROPERTIES, PLANTS AND EQUIPMENT 875,132
880,682 $1,798,413 $1,813,238 LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES Accounts payable $244,950 $281,265 Short-term
borrowings 9,036 11,621 Other current liabilities 130,023 144,332
384,009 437,218 LONG-TERM LIABILITIES Long-term debt 477,056
457,415 Other long-term liabilities 282,117 287,786 759,173 745,201
MINORITY INTEREST 1,988 1,725 SHAREHOLDERS' EQUITY 653,243 629,094
$1,798,413 $1,813,238 GREIF, INC. AND SUBSIDIARY COMPANIES GAAP TO
NON-GAAP RECONCILIATION UNAUDITED (Dollars in thousands, except per
share amounts) Quarter ended January 31, Quarter ended January 31,
2005 2004 Diluted per share Diluted per share amounts amounts Class
A Class B Class A Class B GAAP - operating profit $32,163 $ 7,275
Restructuring charges 7,186 15,259 Timberland gains (8,072) (3,934)
Non-GAAP - operating profit before restructuring charges and
timberland gains $31,277 $18,600 GAAP - net income $15,136 $0.52
$0.79 (3,366) $(0.12) $(0.18) Restructuring charges, net of tax
5,174 0.18 0.28 10,559 0.38 0.56 Timberland gains, net of tax
(5,812) (0.20) (0.31) (2,722) (0.10) (0.15) Non-GAAP - net income
before restructuring charges and timberland gains $14,498 $0.50
$0.76 $4,471 $ 0.16 $ 0.23 GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION UNAUDITED (Dollars in thousands)
Quarter ended January 31, 2005 2004 Industrial Packaging &
Services GAAP - operating profit $10,881 $(3,172) Restructuring
charges 6,798 12,023 Non-GAAP - operating profit before
restructuring charges $17,679 $8,851 Paper, Packaging &
Services GAAP - operating profit $9,214 $2,184 Restructuring
charges 377 3,169 Non-GAAP - operating profit before restructuring
charges $9,591 $5,353 Timber GAAP - operating profit $12,068 $8,263
Restructuring charges 11 67 Timberland gains (8,072) (3,934)
Non-GAAP - operating profit before restructuring charges and
timberland gains $4,007 $4,396 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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