DELAWARE, Ohio, Aug. 31 /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 third quarter ended July 31, 2005. Net
income before restructuring charges and timberland gains (special
items) was $27.4 million for the third quarter of 2005 compared
with $23.1 million for the third quarter of last year. Diluted
earnings per share before special items were $0.93 versus $0.80 per
Class A share and $1.42 versus $1.22 per Class B share for the
third quarter of 2005 and 2004, respectively. The Company reported
GAAP net income of $50.7 million for the third quarter of 2005
compared with $14.9 million for the third quarter of last year.
Diluted earnings per share were $1.71 versus $0.51 per diluted
Class A share and $2.63 versus $0.79 per diluted Class B share for
the third quarter of 2005 and 2004, respectively. The Company's
third quarter of 2005 results were positively impacted by higher
timberland gains and lower restructuring charges compared to the
third quarter of 2004. Michael J. Gasser, chairman and chief
executive officer, said, "We are pleased with the strong cash flows
and substantial reduction in debt during the third quarter, which
benefited from the completion of the first phase of a significant
timberland transaction. We also took action to mitigate soft market
conditions, particularly in North America, by expanding commercial
excellence activities and adjusting costs consistent with operating
performance. We are encouraged by generally stronger order intake
levels during August across our North America product portfolio.
Additional contributions from the Greif Business System and
benefits from our strategic sourcing initiative position us to
deliver strong year-over-year improvement in 2006." 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 4 percent (2 percent excluding the impact of foreign
currency translation) to $609.0 million for the third quarter of
2005 from $584.8 million for the same quarter of 2004. The net
sales improvement was attributable to the Industrial Packaging
& Services segment ($20.5 million increase) and the Paper,
Packaging & Services segment ($7.9 million increase), partially
offset by $4.2 million of lower planned sales in the Timber
segment. Higher selling prices, primarily in response to higher
year-over-year raw material costs, were partially offset by lower
volumes for certain products, which reflected soft market
conditions experienced by many of the Company's customers. These
market conditions appear to be turning favorable since quarter-end.
Gross profit was $93.5 million, or 15.3 percent of net sales, for
the third quarter of 2005 versus $99.9 million, or 17.1 percent of
net sales, for the third quarter of 2004. Improved selling prices
and additional labor and other manufacturing efficiencies related
to the Greif Business System (see "Transformation to the Greif
Business System below) were more than offset by higher raw material
costs and lower absorption of fixed costs. Selling, general and
administrative (SG&A) expenses were $52.2 million, or 8.6
percent of net sales, for the third quarter of 2005 compared to
$57.1 million, or 9.8 percent of net sales, for the same period a
year ago. SG&A expenses continue to be adjusted consistent with
changes in operating performance. Operating profit before
restructuring charges and timberland gains increased 2 percent to
$44.1 million for the third quarter of 2005 compared to $43.2
million for the third quarter of 2004. This increase was primarily
attributable to the Industrial Packaging & Services segment
($2.1 million increase) and the Paper, Packaging & Services
segment ($2.1 million increase), partially offset by a $3.3 million
decline in the Timber segment due to lower planned sales for the
quarter. There were $5.3 million of restructuring charges for the
third quarter of 2005 compared to $12.3 million for the third
quarter of 2004 and $43.7 million of timberland gains for the third
quarter of 2005 compared to $0.9 million of timberland gains for
the third quarter of 2004. GAAP operating profit was $82.5 million
for the third quarter of 2005 compared to $31.8 million for the
same period last year. Business Group Results Industrial Packaging
& Services The Industrial Packaging & Services segment
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 third quarter of 2005 compared to the third
quarter of 2004 in the Industrial Packaging & Services segment
were: - Higher selling prices; - Lower sales volumes for steel and
fibre drums; - Benefits from the Greif Business System; - Higher
raw material costs, especially steel and resin; - Lower
restructuring charges; and - Impact of foreign currency
translation. In this segment, net sales rose 5 percent (3 percent
excluding the impact of foreign currency translation) to $456.6
million for the third quarter of 2005 from $436.1 million for the
same period last year. Selling prices rose primarily in response to
higher raw material costs during the quarter, especially steel and
resin, compared to the same quarter last year. Sales increased due
to higher prices, which were partially offset by lower sales
volumes for steel and fibre drums. Operating profit before
restructuring charges rose to $36.1 million for the third quarter
of 2005 from $34.0 million for the same period a year ago.
Restructuring charges were $4.8 million for the third quarter of
2005 compared to $10.4 million the prior year. The Industrial
Packaging & Services segment's gross profit margin declined to
16.0 percent for the third quarter of 2005 from 18.1 percent in the
third quarter of 2004. This decline was due to lower sales volumes
and higher raw material costs, which were partially offset by
improved selling prices and labor and other manufacturing
efficiencies resulting from the Greif Business System. GAAP
operating profit was $31.3 million for the third quarter of 2005
compared to $23.6 million for the third quarter of 2004. Paper,
Packaging & Services The Paper, Packaging & Services
segment sells containerboard, corrugated sheets and other
corrugated products and multiwall bags in North America. The key
factors influencing profitability in the third quarter of 2005
compared to the third quarter of 2004 in the Paper, Packaging &
Services segment were: - Higher selling prices; - Higher sales
volumes for containerboard; - Lower sales volumes for corrugated
sheets and containers; and - Lower restructuring charges. In this
segment, net sales rose 6 percent to $151.6 million for the third
quarter of 2005 from $143.6 million for the same period last year
due to improved selling prices for this segment's products and
improved sales volumes for containerboard. Sales volumes for
corrugated sheets and containers were down on a year-over-year
comparison. Operating profit before restructuring charges was $7.9
million for the third quarter of 2005 compared to $5.8 million in
the prior year. Restructuring charges were $0.5 million for the
third quarter of 2005 versus $1.9 million a year ago. The increase
in operating profit before restructuring charges was primarily due
to improved selling prices and volumes in the containerboard
operations, partially offset by lower sales volumes for corrugated
sheets and containers and higher transportation and energy costs.
GAAP operating profit was $7.4 million for the third quarter of
2005 compared to $3.9 million for the third quarter of 2004. Timber
The Timber segment owns approximately 246,000 acres of timber
properties in southeastern United States, which are actively
harvested and regenerated, and approximately 37,000 acres in
Canada. The key factors influencing profitability in the third
quarter of 2005 compared to the third quarter of 2004 in the Timber
segment were: - Lower planned level of timber sales; and - Higher
gain on sale of timberland. Timber net sales were $0.9 million for
the third quarter of 2005 compared with $5.1 million for the third
quarter of 2004. Operating profit before restructuring charges and
timberland gains was $0.1 million for the third quarter of 2005
compared to $3.5 million a year ago. Restructuring charges were
insignificant for the third quarter in both years. Timberland gains
were $43.7 million for the third quarter of 2005 versus $0.9
million for the same quarter last year. GAAP operating profit was
$43.8 million for the third quarter of 2005 compared to $4.3
million for the third 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
$51.0 million, resulting in a gain of $42.1 million, in the third
quarter of 2005. The second phase of this transaction is expected
to occur in several installments during 2006, and the Company will
recognize additional 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 generate
productivity improvements and achieve permanent cost reductions.
The transformation, which began in 2003, delivered annualized
benefits of approximately $80 million through the end of 2004.
Additional annualized benefits of approximately $35 million are
expected during 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. Incremental benefits of $25 million are expected to be
realized from this initiative in 2006. In the third quarter of
2005, the Company recorded restructuring charges of $5.2 million
related to the transformation to the Greif Business System, which
had begun prior to October 31, 2004. These restructuring charges
totaled $19.2 million for the first nine months of 2005. Management
is pleased with the progress of the transformation to the Greif
Business System to-date and is continuing to evaluate future
rationalization options based on that progress. In the first nine
months of 2005, the Company also recorded $3.9 million of
restructuring charges related to the impairment of two facilities,
currently held for sale, that were closed during previous
restructuring programs. Financing Arrangements Net debt outstanding
was $360 million at July 31, 2005 compared to $431 million at
October 31, 2004 and $592 million at July 31, 2004. Net debt to net
capitalization was 33.7 percent at July 31, 2005 compared to 40.7
percent at October 31, 2004 and 49.8 percent at July 31, 2004.
Interest expense was $9.8 million and $10.9 million for the third
quarter of 2005 and 2004, respectively. Lower average debt
outstanding was partially offset by higher interest rates during
the third quarter of 2005 compared to the third quarter of 2004.
Capital Expenditures Capital expenditures were $22.6 million,
excluding timberland purchases of $8.6 million, for the third
quarter of 2005 compared with capital expenditures of $14.4
million, excluding timberland purchases of $4.1 million, during the
same period last year. For 2005, capital expenditures are expected
to be approximately $75 million, excluding timberland purchases,
which would be approximately $25 million below the Company's
anticipated annual depreciation expense. Company Outlook Results
for the Paper, Packaging & Services business are anticipated to
be impacted in the fourth quarter of 2005 by the recently announced
containerboard price reductions. This significant factor, coupled
with higher energy and other input costs for the Company during
2005, results in management revising its earnings guidance, before
special items, to $3.25 to $3.35 from $3.50 to $3.60 per Class A
share for 2005. Management remains optimistic about 2006, based on
the expectation of improving market fundamentals from current
levels, recent announcements related to the paper and packaging
industry's rationalization of certain capacity, and stabilization
of commodity prices, particularly steel. In addition, the Greif
Business System will be further embedded, and approximately $25
million of incremental savings are anticipated to be realized from
strategic sourcing initiatives in 2006. Conference Call The Company
will host a conference call to discuss its third quarter of 2005
results on Thursday, September 1, 2005 at 10:00 a.m. ET at (800)
218-0204. For international callers, the number is +1 (303)
262-2131. 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; 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 Nine months ended July
31, July 31, 2005 2004 2005 2004 Net sales $609,046 $584,814
$1,804,570 $1,595,863 Cost of products sold 515,575 484,921
1,524,455 1,337,259 Gross profit 93,471 99,893 280,115 258,604
Selling, general and administrative expenses 52,224 57,105 168,013
163,875 Restructuring charges 5,296 12,324 23,103 39,861 Gain on
sale of assets 46,579 1,290 61,117 6,521 Operating profit 82,530
31,754 150,116 61,389 Interest expense, net 9,754 10,885 30,540
33,848 Debt extinguishment charge -- -- 2,828 -- Other income, net
2,401 292 3,608 1,208 Income before income tax expense and equity
in earnings of affiliates and minority interests 75,177 21,161
120,356 28,749 Income tax expense 24,344 6,000 37,310 8,337 Equity
in earnings of affiliates and minority interests (121) (292) (431)
(460) Net income $50,712 $14,869 $82,615 $19,952 Basic earnings per
share: Class A Common Stock $1.76 $0.52 $2.88 $0.71 Class B Common
Stock $2.63 $0.79 $4.31 $1.06 Diluted earnings per share: Class A
Common Stock $1.71 $0.51 $2.81 $0.70 Class B Common Stock $2.63
$0.79 $4.31 $1.06 GREIF, INC. AND SUBSIDIARY COMPANIES SEGMENT DATA
UNAUDITED (Dollars in thousands) Three months ended Nine months
ended July 31, July 31, 2005 2004 2005 2004 Net sales Industrial
Packaging & Services $456,593 $436,087 $1,344,039 $1,173,167
Paper, Packaging & Services 151,551 143,621 449,790 406,958
Timber 902 5,106 10,741 15,738 Total $609,046 $584,814 $1,804,570
$1,595,863 Operating profit Operating profit before restructuring
charges and timberland gains: Industrial Packaging & Services
$36,084 $33,972 $83,174 $70,583 Paper, Packaging & Services
7,929 5,789 27,892 13,577 Timber 109 3,453 6,984 10,928 Total
operating profit before restructuring charges and timberland gains
44,122 43,214 118,050 95,088 Restructuring charges: Industrial
Packaging & Services 4,773 10,356 20,380 31,919 Paper,
Packaging & Services 523 1,923 2,664 7,757 Timber -- 45 59 185
Restructuring charges 5,296 12,324 23,103 39,861 Timberland gains:
Timber 43,704 864 55,169 6,162 Total $82,530 $31,754 $150,116
$61,389 Depreciation, depletion and amortization expense Industrial
Packaging & Services $15,485 $14,474 $47,797 $48,552 Paper,
Packaging & Services 7,900 8,871 24,674 26,182 Timber 346 982
1,434 2,400 Total $23,731 $24,327 $73,905 $77,134 GREIF, INC. AND
SUBSIDIARY COMPANIES GEOGRAPHIC DATA UNAUDITED (Dollars in
thousands) Three months ended Nine months ended July 31, July 31,
2005 2004 2005 2004 Net sales North America $329,126 $327,351
$978,817 $900,845 Europe 191,202 179,335 558,688 471,282 Other
88,718 78,128 267,065 223,736 Total $609,046 $584,814 $1,804,570
$1,595,863 Operating profit Operating profit before restructuring
charges and timberland gains: North America $21,229 $20,873 $58,169
$43,029 Europe 15,825 14,560 35,748 31,864 Other 7,068 7,781 24,133
20,195 Operating profit before restructuring charges and timberland
gains 44,122 43,214 118,050 95,088 Restructuring charges 5,296
12,324 23,103 39,861 Timberland gains 43,704 864 55,169 6,162 Total
$82,530 $31,754 $150,116 $61,389 GREIF, INC. AND SUBSIDIARY
COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in
thousands) July 31, October 31, 2005 2004 (Unaudited) ASSETS
CURRENT ASSETS Cash and cash equivalents $70,810 $38,109 Trade
accounts receivable 276,352 307,750 Inventories 206,235 191,457
Other current assets 101,236 75,366 654,633 612,682 LONG-TERM
ASSETS Goodwill 232,091 237,803 Intangible assets 24,550 27,524
Timber note receivable 50,891 -- Other long-term assets 55,092
54,547 362,624 319,874 PROPERTIES, PLANTS AND EQUIPMENT 844,506
880,682 $1,861,763 $1,813,238 LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES Accounts payable $235,547 $281,265 Short-term
borrowings 26,050 11,621 Other current liabilities 139,914 144,332
401,511 437,218 LONG-TERM LIABILITIES Long-term debt 404,682
457,415 Timber note securitized 43,250 -- Other long-term
liabilities 301,657 287,786 749,589 745,201 MINORITY INTEREST 1,797
1,725 SHAREHOLDERS' EQUITY 708,866 629,094 $1,861,763 $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 July 31, 2005 July
31, 2004 Diluted per share amounts Diluted per share amounts Class
A Class B Class A Class B GAAP - operating profit $82,530 $31,754
Restructuring charges 5,296 12,324 Timberland gains (43,704) (864)
Non-GAAP - operating profit before restructuring charges and
timberland gains $44,122 $43,214 GAAP - net income $50,712 $1.71
$2.63 $14,869 $0.51 $0.79 Restructuring charges, net of tax 3,966
0.13 0.21 8,824 0.31 0.46 Timberland gains, net of tax (27,262)
(0.91) (1.42) (619) (0.02) (0.03) Non-GAAP - net income before
restructuring charges and timberland gains $27,416 $0.93 $1.42
$23,074 $0.80 $1.22 Nine months ended Nine months ended July 31,
2005 July 31, 2004 Diluted per share amounts Diluted per share
amounts Class A Class B Class A Class B GAAP - operating profit
$150,116 $61,389 Restructuring charges 23,103 39,861 Timberland
gains (55,169) (6,162) Non-GAAP - operating profit before
restructuring charges and timberland gains $118,050 $95,088 GAAP -
net income $82,615 $2.81 $4.31 $19,952 $0.70 $1.06 Restructuring
charges, net of tax 16,823 0.56 0.88 28,301 0.98 1.50 Timberland
gains, net of tax (35,578) (1.20) (1.86) (4,375) (0.15) (0.23) Debt
extinguishment charge, net of tax 2,059 0.07 0.11 -- -- -- Non-GAAP
- net income before restructuring charges, debt extinguishment
charge and timberland gains $65,919 $2.24 $3.44 $43,878 $1.53 $2.33
Note: During the third quarter of 2005, the Company sold 35,000
acres of timberland holdings in Florida, Georgia and Alabama. The
tax effect of the gain for this transaction is calculated using a
38.1 percent tax rate. The other adjustments to reconcile the GAAP
to non-GAAP amounts are tax effected using the consolidated
effective tax rate excluding the impact of this timberland sale.
GREIF, INC. AND SUBSIDIARY COMPANIES GAAP TO NON-GAAP
RECONCILIATION (CONTINUED) UNAUDITED (Dollars in thousands) Three
months ended Nine months ended July 31, July 31, 2005 2004 2005
2004 Industrial Packaging & Services GAAP - operating profit
$31,311 $23,616 $62,794 $38,664 Restructuring charges 4,773 10,356
20,380 31,919 Non-GAAP - operating profit before restructuring
charges $36,084 $33,972 $83,174 $70,583 Paper, Packaging &
Services GAAP - operating profit $7,406 $3,866 $25,228 $5,820
Restructuring charges 523 1,923 2,664 7,757 Non-GAAP - operating
profit before restructuring charges $7,929 $5,789 $27,892 $13,577
Timber GAAP - operating profit $43,813 $4,272 $62,094 $16,905
Restructuring charges -- 45 59 185 Timberland gains (43,704) (864)
(55,169) (6,162) Non-GAAP - operating profit before restructuring
charges and timberland gains $109 $3,453 $6,984 $10,928 DATASOURCE:
Greif, Inc. CONTACT: Analysts, Robert Lentz, for Greif, Inc.,
+1-614-876-2000; or Media, Deb Strohmaier of Greif, Inc.,
+1-740-549-6074 Web site: http://www.greif.com/
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