<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1996 Commission File Number 1-566
GREIF BROS. CORPORATION
(Exact name of registrant as specified in its charter)
State of Delaware 31-4388903
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
621 Pennsylvania Avenue, Delaware, Ohio 43015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 614-363-1271
Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Class "A" Common Stock Chicago Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
Title of Each Class
Class "A" Common Stock
Class "B" Common Stock
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of December 16, 1996, was approximately $87,427,000.
The number of shares outstanding of each of the registrant's classes of common
stock, as of December 16, 1996, was as follows:
Class A Common Stock - 10,873,172 shares
Class B Common Stock - 12,001,793 shares
<PAGE> 2
PART I
Item 1. Business
The Company principally manufactures shipping containers and containerboard
and related products which it sells to customers in many industries primarily
in the United States and Canada, through direct sales contact with its
customers. There were no significant changes in the business since the
beginning of the fiscal year.
The Company operates 97 locations in 28 states of the United States and in
3 provinces of Canada and, as such, is subject to federal, state, local and
foreign regulations in effect at the various localities.
Due to the variety of products, the Company has many customers buying
different types of the Company's products and, due to the scope of the Company's
sales, no one customer is considered principal in the total operation of the
Company.
Because the Company supplies a cross section of industries, such as
chemicals, food products, petroleum products, pharmaceuticals, metal products
and others and because the Company must make spot deliveries on a day-to-day
basis as its product is required by its customers, the Company does not operate
on a backlog and maintains only limited levels of finished goods. Many
customers place their orders weekly for delivery during the week.
The Company's business is highly competitive in all respects (price,
quality and service) and the Company experiences substantial competition in
selling its products. Many of the Company's competitors are larger than the
Company.
While research and development projects are important to the Company's
continued growth, the amount expended in any year is not material in relation
to the results of operations of the Company.
The Company's raw materials are principally pulpwood, waste paper for
recycling, paper, steel and resins. In the current year, as in prior years,
certain of these materials have been in short supply, but to date these
shortages have not had a significant effect on the Company's operations.
The Company's business is not materially dependent upon patents,
trademarks, licenses or franchises.
The business of the Company is not seasonal to any significant extent.
The approximate number of persons employed during the year was 4,800.
Industry Segments
The Company operates in two industry segments, shipping containers and
materials (shipping containers) and containerboard and related products
(containerboard).
<PAGE> 3
Item 1. Business (continued)
Operations in the shipping containers segment involve the production and
sale of fibre, steel and plastic drums, multiwall bags, cooperage, dunnage,
pallets, laminated particle board, wood cut stock and miscellaneous items.
These products are manufactured and principally sold throughout the United
States and Canada.
Operations in the containerboard segment involve the production and sale of
containerboard, both virgin and recycled, and related corrugated products
including corrugated sheets and corrugated containers. These products are
manufactured and sold in the United States and Canada.
In computing operating profit for the two industry segments, interest
expense, other income and expense, timber property management costs and income
taxes have not been added or deducted. These latter amounts, excluding income
taxes, comprise general corporate other income and expense, net.
Each segment's operating assets are those assets used in the manufacture
and sale of shipping containers or containerboard. Corporate assets are
principally cash, marketable securities, timber properties and other
investments.
<PAGE> 4
Item 1. Business (concluded)
<TABLE>
The following segment information is presented for the three years ended
October 31, 1996, except as to asset information which is as of October 31,
1996, 1995 and 1994 (Dollars in thousands):
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net sales:
Shipping containers $391,315 $392,505 $353,992
Containerboard 246,053 326,840 229,534
Total $637,368 $719,345 $583,526
Operating profit:
Shipping containers $ 16,736 $ 9,059 $ 9,573
Containerboard 36,926 80,476 30,306
Total segment 53,662 89,535 39,879
General corporate other
income and expense, net 14,034 8,376 11,733
Income before income taxes 67,696 97,911 51,612
Income taxes 24,949 37,778 17,858
Net income $ 42,747 $ 60,133 $ 33,754
Identifiable assets:
Shipping containers $193,378 $190,982 $179,794
Containerboard 262,866 220,213 178,053
Total segment 456,244 411,195 357,847
Corporate assets 56,094 56,467 61,227
Total $512,338 $467,662 $419,074
Depreciation expense:
Shipping containers $ 13,282 $ 13,114 $ 13,271
Containerboard 12,977 9,765 8,388
Total segment 26,259 22,879 21,659
Corporate assets 89 65 58
Total $ 26,348 $ 22,944 $ 21,717
Property additions:
Shipping containers $ 16,588 $ 12,540 $ 16,226
Containerboard 56,160 47,593 24,065
Total segment 72,748 60,133 40,291
Corporate assets 1,647 933 391
Total $ 74,395 $ 61,066 $ 40,682
</TABLE>
<PAGE> 5
Item 2. Properties
<TABLE>
The following are the Company's principal locations and products
manufactured at such facilities or the use of such facilities. The Company
considers its operating properties to be in satisfactory condition and adequate
to meet its present needs. However, the Company expects to make further
additions, improvements and consolidations of its properties as the Company's
business continues to expand.
<CAPTION>
Location Products Manufactured/Use Industry Segment
<S> <C> <C>
Alabama
Cullman Steel drums and machine Shipping containers
shop
Good Hope Research center
Mobile Fibre drums Shipping containers
Arkansas
Batesville (1) Fibre drums Shipping containers
California
Commerce (2) Corrugated honeycomb Shipping containers
Fontana Steel drums Shipping containers
LaPalma Fibre drums Shipping containers
Morgan Hill Fibre drums Shipping containers
Sacramento General office
Stockton Corrugated honeycomb Shipping containers
Stockton Wood cut stock Shipping containers
Georgia
Macon Corrugated honeycomb Shipping containers
Tucker Fibre drums Shipping containers
Illinois
Blue Island Fibre drums Shipping containers
Chicago Steel drums Shipping containers
Joliet Steel drums Shipping containers
Lombard (3) General office
Northlake Fibre drums and plastic Shipping containers
drums
Oreana Corrugated containers Shipping containers
Posen Corrugated honeycomb Shipping containers
Kansas
Winfield Steel drums Shipping containers
Kansas City (4) Steel drums Shipping containers
Kansas City (5) Fibre drums Shipping containers
Kentucky
Louisville Wood cut stock Shipping containers
Winchester Corrugated containers Containerboard
Louisiana
St. Gabriel Steel drums and plastic drums Shipping containers
<PAGE> 6
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
Maryland
Sparrows Point Steel drums Shipping containers
Massachusetts
Mansfield Fibre drums Shipping containers
Westfield Fibre drums Shipping containers
Worcester Plywood reels Shipping containers
Michigan
Eaton Rapids Corrugated sheets Containerboard
Grand Rapids Corrugated sheets Containerboard
Mason Corrugated sheets Containerboard
Roseville Corrugated containers Containerboard
Taylor Fibre drums Shipping containers
Minnesota
Minneapolis Fibre drums Shipping containers
Rosemount Multiwall bags Shipping containers
St. Paul Tight cooperage Shipping containers
St. Paul (6) General office
Mississippi
Durant Plastic products Shipping containers
Jackson General office
Missouri
Kirkwood Fibre drums Shipping containers
Nebraska
Omaha (7) Multiwall bags Shipping containers
New Jersey
Rahway Fibre drums and plastic Shipping containers
drums
Spotswood Fibre drums Shipping containers
Springfield (8) National accounts sales
office
Teterboro Fibre drums Shipping containers
New York
Lindenhurst Research center
Syracuse Fibre drums and steel drums Shipping containers
North Carolina
Bladenboro Steel drums Shipping containers
Charlotte Fibre drums Shipping containers
Concord Corrugated sheets Containerboard
<PAGE> 7
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
Ohio
Caldwell Steel drums Shipping containers
Canton (9) Corrugated containers Containerboard
Cleveland Corrugated containers Containerboard
Delaware Principal office
Fostoria Corrugated containers Containerboard
Hebron Plastic products and Shipping containers
containers
Massillon Recycled containerboard Containerboard
Tiffin Corrugated containers Containerboard
Youngstown Steel drums Shipping containers
Zanesville Corrugated containers and Containerboard
sheets
Oregon
White City Laminated panels Shipping containers
Pennsylvania
Chester Fibre drums Shipping containers
Darlington Fibre drums and plastic Shipping containers
drums
Hazleton Corrugated honeycomb Shipping containers
Kelton (10) Corrugated honeycomb Shipping containers
Reno Corrugated containers Containerboard
Stroudsburg Rims and drum hardware Shipping containers
Washington Corrugated containers and Containerboard
sheets
Tennessee
Kingsport Fibre drums Shipping containers
Memphis Steel drums Shipping containers
Texas
Angleton Steel drums Shipping containers
Fort Worth Fibre drums Shipping containers
LaPorte Fibre drums, steel drums Shipping containers
and plastic drums
Waco Corrugated honeycomb Shipping containers
Virginia
Amherst Containerboard Containerboard
Washington
Woodland Corrugated honeycomb Shipping containers
and wood cut stock
West Virginia
Huntington Corrugated containers and Containerboard
sheets
New Martinsville Corrugated containers Containerboard
<PAGE> 8
Item 2. Properties (concluded)
Location Products Manufactured/Use Industry Segment
Wisconsin
Sheboygan Fibre drums Shipping containers
Canada
Belleville, Ontario Fibre drums and plastic Shipping containers
products
Bowmanville, Ontario Spiral tubes Shipping containers
Fort Frances, Ontario Spiral tubes Shipping containers
Fruitland, Ontario Drum hardware and machine Shipping containers
shop
LaSalle, Quebec Fibre drums and steel drums Shipping containers
Lloydminster, Alberta Steel drums, fibre drums Shipping containers
and plastic drums
Maple Grove, Quebec Pallets Shipping containers
Milton, Ontario Fibre drums Shipping containers
Niagara Falls,
Ontario General office
Pointe Aux Trembles,
Quebec Fibre drums and spiral Shipping containers
tubes
Stoney Creek, Ontario Steel drums Shipping containers
Winona, Ontario Machine shop
<FN>
Note: All properties are held in fee except as noted below.
</TABLE>
Exceptions:
( 1) Lease expires March 31, 1997
( 2) Lease expires March 31, 1997
( 3) Lease expires February 28, 1998
( 4) Lease expires June 30, 1999
( 5) Lease expires March 31, 1999
( 6) Lease expires December 31, 1999
( 7) Lease expires June 30, 1998
( 8) Lease expires September 7, 1997
( 9) Lease expires March 31, 1998
(10) Lease expires April 30, 2003
The Company also owns in fee a substantial number of scattered timber tracts
comprising approximately 307,000 acres in the states of Alabama, Arkansas,
Florida, Georgia, Louisiana, Mississippi and Virginia and the provinces of Nova
Scotia, Ontario and Quebec in Canada.
Item 3. Legal Proceedings
The Company has no pending material legal proceedings.
From time to time, various legal proceedings arise from either the Federal,
State or Local levels involving environmental sites to which the Company has
shipped, directly or indirectly, small amounts of toxic waste, such as paint
solvents, etc. The Company, to date, has been classified as a "de minimis"
participant and, as such, has not been subject, in any instance, to material
sanctions or sanctions greater than $100,000.
<PAGE> 9
Item 3. Legal Proceedings (concluded)
In addition, from time to time, but less frequently, the Company has been
cited for violations of environmental regulations. Except for the following
situation, none of these violations involve or are expected to involve sanctions
of $100,000 or more.
Currently, the only exposure known to the Company which may exceed $100,000
relates to a pollution situation at its Strother Field plant in Winfield,
Kansas. A record of decision issued by the U. S. Environmental Protection
Agency (EPA) has set forth estimated remedial costs which could expose the
Company to approximately $3,000,000 in expense under certain assumptions. If
the Company ultimately is required to incur this expense, a significant portion
would be paid over 10 years. The Kansas site involves groundwater pollution
and certain soil pollution that was found to exist on the Company's property.
The estimated costs of the remedy currently preferred by the EPA for the soil
pollution on the Company's land represents approximately $2,000,000 of the
estimated $3,000,000 in expense.
The final remedies have not been selected and may be delayed for four years.
In an effort to minimize its exposure for soil pollution, the Company has
undertaken further engineering borings and analysis to attempt to identify a
more definitive soil area which would require remediation. However, there can
be no assurance that the Company will be successful in minimizing such exposure,
and there can be no assurance that the total expense incurred by the Company in
remediating this site will not exceed $3,000,000.
A reserve for $2,000,000 was recorded by the Company during fiscal 1995.
To date, $175,000 has been charged against the reserve.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
<PAGE> 10
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
The Class A and Class B Common Stock are traded on the NASDAQ Stock Market.
In addition, the Class A Common Stock is still traded on the Chicago Stock
Exchange. Prior to March 1996, the Class A Common Stock was traded on the
Chicago Stock Exchange and there was no active market for the Class B Common
Stock.
<TABLE>
The high and low sales prices for each quarterly period during the last two
fiscal years are as follows:
<CAPTION>
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1996 1996 1996 1996
<S> <C> <C> <C> <C>
Market price
(Class A Common Stock):
High $28-7/8 $32 $33 $31-1/2
Low $24-1/4 $26-1/4 $26 $27-3/4
Market price
(Class B Common Stock):
High N/A $35-1/2 $36-1/2 $36
Low N/A $27-1/2 $26-3/4 $31-1/2
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1995 1995 1995 1995
Market price
(Class A Common Stock):
High $27-1/2 $28-7/8 $27-3/8 $25-1/2
Low $21-3/16 $25 $22-1/4 $21-1/4
</TABLE>
As of December 2, 1996, there were 828 shareholders of record of the Class A
Common Stock and 196 shareholders of the Class B Common Stock.
The Company paid five dividends of varying amounts during its fiscal year
computed on the basis described in Note 5 to The Consolidated Financial
Statements on page 26 of this Form 10-K, which is hereby incorporated by
reference. The annual dividends paid for the last three fiscal years are as
follows:
1996 fiscal year dividends per share - Class A $.48; Class B $.71
1995 fiscal year dividends per share - Class A $.40; Class B $.59
1994 fiscal year dividends per share - Class A $.30; Class B $.44
<PAGE> 11
Item 6. Selected Financial Data
<TABLE>
The 5-year selected financial data is as follows (Dollars in thousands, except
per share amounts):
<CAPTION>
YEARS ENDED OCTOBER 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net sales $637,368 $719,345 $583,526 $526,765 $510,995
Net income $ 42,747 $ 60,133 $ 33,754 $ 24,609 $ 29,719
Total assets $512,338 $467,662 $419,074 $381,183 $340,173
Long term obligations $ 25,203 $ 14,365 $ 28,215 $ 28,390 $ 960
Dividends per share of
common stock:
Class A Common Stock $ .48 $ .40 $ .30 $ .30 $ .28
Class B Common Stock $ .71 $ .59 $ .44 $ .44 $ .41
Net income per share:
Based on the assumption that earnings were allocated to Class A and
Class B Common Stock to the extent that dividends were actually paid for the
year and the remainder were allocated as they would be received by shareholders
in the event of liquidation, that is, equally to Class A and Class B shares,
share and share alike:
1996 1995 1994 1993 1992
Class A Common Stock $1.75 $2.39 $1.32 $ .94 $1.15
Class B Common Stock $1.98 $2.58 $1.46 $1.08 $1.28
Due to the special characteristics of the Company's two classes of stock
(see Note 5 to the Consolidated Financial Statements), earnings per share can be
calculated upon the basis of varying assumptions, none of which, in the opinion
of management, would be free from the claim that it fails fully and accurately
to represent the true interest of the shareholders of each class of stock and in
the retained earnings.
</TABLE>
<PAGE> 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
<TABLE>
FINANCIAL DATA
Presented below are certain comparative data illustrative of the following
discussion of the Company's results of operations, financial condition and
changes in financial condition (Dollars in thousands):
<CAPTION>
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Net sales:
Shipping containers $391,315 $392,505 $353,992 $340,326
Containerboard 246,053 326,840 229,534 186,439
Total $637,368 $719,345 $583,526 $526,765
Operating profit:
Shipping containers $ 16,736 $ 9,059 $ 9,573 $ 6,709
Containerboard 36,926 80,476 30,306 18,354
Total $ 53,662 $ 89,535 $ 39,879 $ 25,063
Net income $ 42,747 $ 60,133 $ 33,754 $ 24,609
Current ratio 3.7:1 4.0:1 4.4:1 5.4:1
Cash flow from
operations $ 81,906 $ 85,820 $ 48,049 $ 49,475
Increase (decrease)
in working capital $(13,973) $ 3,342 $ 7,202 $(15,105)
Capital expenditures $ 74,395 $ 61,066 $ 40,682 $ 74,521
</TABLE>
RESULTS OF OPERATIONS
Net sales and net income were the second highest amounts in the history of
the Company in 1996. The 1995 results had established a record for these items.
Net sales, compared to the previous year, decreased $82 million or 11.4% in
1996. Net income decreased $17 million or 28.9% compared to last year.
Historically, revenues or earnings may or may not be representative of
future operations because of various economic factors. As explained below, the
Company is subject to the general economic conditions of its customers and the
industry in which it is included.
The Company remains confident that, with the financial strength that it has
built over its 119 year existence, it will be able to adequately compete in
highly competitive markets.
<PAGE> 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Net Sales
The containerboard segment had a decrease in net sales of $81 million in
1996. The reductions in net sales are primarily caused by lower selling prices
due to the weaknesses in the containerboard market this year. These weaknesses
were caused by the industry's excessive containerboard capacity due to
additions in both 1995 and 1996. These decreases were partially offset by
sales volume increases in 1996.
The Company purchased two corrugated container companies with locations in
Illinois, West Virginia and Kentucky. In addition, a subsidiary of the Company
began operations at a new plant in Mason, Michigan. While these additions did
not have a significant impact on the current year results, these purchases
increased the net sales of the containerboard segment.
Net sales in the shipping containers segment remained about the same in 1996
as in the previous year. There was a decrease in net sales due to the closing
of two drum plants at the end of 1995. The closings resulted from management's
determination that they would not provide a reasonable return to the Company.
The reduction in sales was offset by a net increase in sales at the other
locations of this segment primarily due to more sales volume. The increase in
unit sales of the segment resulted from capital expenditures made in the current
and prior years.
The containerboard segment had an increase in net sales of $97 million in
1995 which was primarily due to higher sales prices. The increase in sales
prices resulted from shortages in the containerboard and related products
industry. In addition, there was a less significant increase in unit sales of
the segment because of the inclusion of an entire year of sales in 1995 for the
325 ton per day recycled paper machine at a subsidiary of the Company which was
completed in December 1993.
The shipping containers segment had an increase in net sales of $39 million
in 1995 resulting from more volume because of capital expenditures made in 1995
and 1994. In addition, there were some sales price increases that were made
because of the increase in the cost of the Company's raw materials.
The increase in sales in 1994 of 10.8% was primarily the result of the
addition of the recycled paper machine, discussed above, coupled with shortages
in containerboard and related products that resulted in increased selling
prices. Other capital expenditures made in 1994 and previous years also
contributed to this increase.
Operating Profit
The overall decrease in operating profit since the prior year is due to
lower net sales of the containerboard segment, as discussed above, and a lower
gross profit margin of 19.1% this year compared to 22.0% last year. The
reduction in gross profit is because the fixed costs included in cost of
products sold did not decrease to the same extent as net sales of the
containerboard segment.
<PAGE> 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The operating profit of the containerboard segment is $37 million or 15.0%
of net sales in 1996 compared to $80 million or 24.6% of net sales in 1995 and
$30 million or 13.2% of net sales in 1994. The decrease in 1996 is due to the
reduction in sales coupled with less favorable gross profit margins. The
increases in 1995 and 1994 are due to increases in net sales and more favorable
gross profit margins.
The operating profit of the shipping containers segment is $17 million or
4.3% of net sales in 1996 compared to $9 million or 2.3% of net sales in 1995
and $10 million or 2.7% of net sales in 1994. The operating profits of this
segment have been affected by severe price pressures on its products, especially
during 1993. However, due to the Company's ongoing efforts to reduce operating
costs by cost control measures, manufacturing innovations and capital
expenditures, the operating profits have increased from 1993 to 1996.
Other Income
The other income of the Company increased in 1996 due to the sale of timber
properties in the United States and in Canada.
In 1995, other income increased primarily due to the sale of timber
properties under threat of acquisition by eminent domain and more salvage timber
sales. The increase in volume of timber sales was accompanied by higher timber
prices.
The 1994 other income, compared with the previous year, decreased due to
less timber sales.
Income Before Income Taxes
Income before income taxes decreased in 1996 due to lower net sales and less
favorable gross profit margins than in the prior year. In addition, there was
an increase in the sale of timber properties as compared to 1995.
In 1995, income before income taxes increased because of higher sales and
more favorable gross profit margins. In addition, as discussed above, there
was an increase in the sale of timber and timber properties.
The 1994 increase in income before income taxes was the result of the sales
increase and increase in gross margin. This increase was slightly offset by a
reduction in timber sales and an increase in interest expense that resulted from
the Company's long term obligations.
LIQUIDITY AND CAPITAL RESOURCES
As indicated in the Consolidated Balance Sheets, elsewhere in this Report
and in the ratios set forth above, the Company is dedicated to maintaining a
strong financial position. It is our belief that this dedication is extremely
important during all economic times.
<PAGE> 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The Company's financial strength is important to continue to achieve the
following goals:
(a) To protect the assets of the Company and the intrinsic value of
shareholders' equity in periods of adverse economic conditions.
(b) To respond to any large and presently unanticipated cash demands that
might result from future drastic events.
(c) To be able to benefit from new developments, new products and new
opportunities in order to achieve the best results for our shareholders.
(d) To replace and improve plants and equipment. When plants and
production machinery must be replaced, either because of wear or to obtain the
cost-reducing potential of technological improvement required to remain a low
cost producer in the highly competitive environment in which the Company
operates, the cost of new plants and machinery are often much higher, sometimes
significantly higher, than the historical cost of the items being replaced.
The Company, during 1996, invested approximately $74 million in capital
additions. During the last three years, the Company has invested $176 million.
As discussed in the 1995 Annual Report, Virginia Fibre Corporation, a
subsidiary of the Company, has made significant improvements to their facilities
by adding a new woodyard and a manufacturing control system. Greif Board
Corporation, a subsidiary of the Company, has made significant improvements to
their machinery and equipment. In addition, Michigan Packaging Company, a
subsidiary of the Company, built a new manufacturing plant in Mason, Michigan
that was completed in November 1995. As discussed above, the Company purchased
two corrugated container companies, Decatur Container Corporation and Kyowva
Corrugated Container Company, Inc., in 1996. Furthermore, the Company undertook
a major addition at Virginia Vibre Corporation that was completed in December
1993. This project resulted in additional capacity for 1994, 1995 and 1996.
Subsequent to year-end, the Company purchased Aero Box Company, a corrugated
container company located in Roseville, Michigan. In addition, the Company has
approved future purchases, primarily for equipment, of approximately $30
million.
Self-financing and borrowing have been the primary source for such capital
expenditures and the Company will attempt to finance future capital expenditures
in a like manner. Long term obligations are higher at October 31, 1996
compared to October 31, 1995 due to additional long term debt related to its
acquisitions and capital improvements. The increase caused by this debt was
partially offset by pre-payment of long term debt during 1996.
While there is no commitment to continue such a practice, at least one new
manufacturing plant or a major addition to an existing plant has been undertaken
in each of the last three years.
<PAGE> 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (concluded)
These investments are an indication of the Company's commitment to be the
quality, low cost producer and the desirable long term supplier to all of our
customers.
(e) To continue to pay competitive and sound remuneration, including the
ever-increasing costs of employee benefits, to Company employees who produce the
results for the Company's shareholders.
During 1996 and 1995, the Company performed a complete study of the
compensation and retirement policies. As a result of this study, the Company is
implementing changes to our incentive plans so that compensation is more
directly linked to key corporate measures. In addition, an Incentive Stock
Option Plan was implemented and improvements were made to the pension plans and
a 401(k) Plan.
Management believes that the present financial strength of the Company will
be sufficient to achieve the foregoing goals.
In spite of such necessary financial strength, the Company's shipping
containers business, where packages manufactured by Greif Bros. Corporation are
purchased by other manufacturers and suppliers, is wholly subject to the general
economic conditions and business success of the Company's customers.
Similarly, the Company's containerboard and related products business is
also subject to the general economic conditions and the effect of the operating
rates of the containerboard industry, including pricing pressures from its
competition.
The historical financial strength generated by these segments has enabled
them to remain independently liquid during adverse economic conditions.
<PAGE> 17
Item 8. Financial Statements and Supplementary Data
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<CAPTION>
For the years ended October 31, 1996 1995 1994
<S> <C> <C> <C>
Net sales $637,368 $719,345 $583,526
Other income:
Interest and other 5,214 5,822 6,113
Gain on timber sales 9,626 8,067 4,604
652,208 733,234 594,243
Costs and expenses (including depreciation of
$26,348 in 1996, $22,944 in 1995 and
$21,717 in 1994):
Cost of products sold 515,775 561,118 480,666
Selling, general and administrative 68,220 73,733 60,518
Interest 517 472 1,447
584,512 635,323 542,631
Income before income taxes 67,696 97,911 51,612
Taxes on income 24,949 37,778 17,858
Net income $ 42,747 $ 60,133 $ 33,754
Net income per share (based on the average number of shares outstanding during
the year):
Based on the assumption that earnings were allocated to Class A and Class B
Common Stock to the extent that dividends were actually paid for the year and
the remainder were allocated as they would be received by shareholders in the
event of liquidation, that is, equally to Class A and Class B shares, share and
share alike:
1996 1995 1994
Class A Common Stock $1.75 $2.39 $1.32
Class B Common Stock $1.98 $2.58 $1.46
Due to the special characteristics of the Company's two classes of stock
(see Note 5), earnings per share can be calculated upon the basis of varying
assumptions, none of which, in the opinion of management, would be free from
the claim that it fails fully and accurately to represent the true interest of
the shareholders of each class of stock and in the retained earnings.
<FN>
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 18
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<CAPTI0N>
October 31, 1996 1995
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 26,560 $ 31,612
Canadian government securities 19,479 18,981
Trade accounts receivable -- less allowance
of $826 for doubtful items ($789 in 1995) 73,987 76,950
Inventories 49,290 53,876
Prepaid expenses and other 16,131 16,482
Total current assets 185,447 197,901
LONG TERM ASSETS
Cash surrender value of life insurance 2,982 2,838
Interest in partnership -- 1,091
Goodwill - less amortization 4,617 --
Other long term assets 7,116 6,977
14,715 10,906
PROPERTIES, PLANTS AND EQUIPMENT -- at cost
Timber properties -- less depletion 6,112 4,518
Land 10,771 11,014
Buildings 125,132 104,892
Machinery, equipment, etc. 385,834 316,419
Construction in progress 33,450 45,468
Less accumulated depreciation (249,123) (223,456)
312,176 258,855
$512,338 $467,662
<FN>
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 19
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
October 31, 1996 1995
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 31,609 $ 35,935
Current portion of long term obligations 2,455 264
Accrued payrolls and employee benefits 8,989 10,882
Accrued taxes -- general 1,949 1,954
Taxes on income 5,678 126
Total current liabilities 50,680 49,161
LONG TERM OBLIGATIONS 22,748 14,101
OTHER LONG TERM LIABILITIES 15,406 18,305
DEFERRED INCOME TAXES 22,872 13,562
Total long term liabilities 61,026 45,968
SHAREHOLDERS' EQUITY
Capital stock, without par value 9,034 9,034
Class A Common Stock:
Authorized 32,000,000 shares;
issued 21,140,960 shares;
outstanding 10,873,172 shares
Class B Common Stock:
Authorized and issued 17,280,000 shares;
outstanding 12,001,793 shares
(13,201,793 in 1995)
Treasury stock, at cost (41,867) (40,776)
Class A Common Stock: 10,267,788 shares
Class B Common Stock: 5,278,207 shares
(4,078,207 in 1995)
Retained earnings 436,672 407,665
Cumulative translation adjustment (3,207) (3,390)
400,632 372,533
$512,338 $467,662
<FN>
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 20
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
For the years ended October 31, 1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 42,747 $ 60,133 $ 33,754
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 26,420 23,002 21,758
Deferred income taxes 9,308 6,597 4,011
(Gain) loss on disposals of
properties, plants and equipment (412) (331) 4
Increase (decrease) in cash from
changes in certain assets and
liabilities, net of effects
from acquisitions:
Trade accounts receivable 4,831 (7,449) (12,900)
Inventories 6,356 (2,932) (8,244)
Prepaid expenses and other 420 (2,098) (1,591)
Other long term assets (75) (1,344) (848)
Accounts payable (5,481) 2,987 10,526
Accrued payrolls and employee
benefits (1,904) 3,800 1,289
Accrued taxes -- general (37) 2 332
Taxes on income 5,449 (587) (735)
Other long term liabilities (5,716) 4,040 693
Net cash provided by operating
activities 81,906 85,820 48,049
Cash flows from investing activities:
Acquisitions of companies, net of
cash acquired (284) -- --
Disposals of investments in
government securities 1,481 9,211 22,177
Purchases of investments in
government securities (1,979) (4,223) (19,214)
Purchases of properties, plants
and equipment (74,395) (61,066) (40,682)
Proceeds on disposals of properties,
plants and equipment 851 745 166
Net cash used by investing activities (74,326) (55,333) (37,553)
Cash flows from financing activities:
Proceeds from issuance of long
term debt 11,329 12,000 7,700
Payments on long term debt (3,692) (25,849) (7,876)
Payments on short term obligations (6,668) -- --
Acquisitions of treasury stock -- (2,647) (1,789)
Dividends paid (13,740) (12,180) (9,139)
Net cash used by financing activities (12,771) (28,676) (11,104)
Foreign currency translation adjustment 139 258 (676)
Net increase (decrease) in cash and
cash equivalents (5,052) 2,069 (1,284)
Cash and cash equivalents at beginning
of year 31,612 29,543 30,827
Cash and cash equivalents at end of year $ 26,560 $ 31,612 $ 29,543
<FN>
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 21
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars and shares in thousands, except per share amounts)
<CAPTION>
Capital Stock Treasury Stock Retained Translation Share-
Shares Amount Shares Amount Earnings Adjustment holders'
Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at November 1,
1993 24,273 $9,034 14,148 $(36,340) $335,097 $(2,824) $304,967
Net income 33,754 33,754
Dividends paid (Note):
Class A - $.30 (3,262) (3,262)
Class B - $.44 (5,877) (5,877)
Treasury shares
acquired (91) 91 (1,789) (1,789)
Translation loss (854) (854)
Balance at October 31,
1994 24,182 9,034 14,239 (38,129) 359,712 (3,678) 326,939
Net income 60,133 60,133
Dividends paid (Note):
Class A - $.40 (4,349) (4,349)
Class B - $.59 (7,831) (7,831)
Treasury shares
acquired (107) 107 (2,647) (2,647)
Translation gain 288 288
Balance at October 31,
1995 24,075 9,034 14,346 (40,776) 407,665 (3,390) 372,533
Net income 42,747 42,747
Dividends paid (Note):
Class A - $.48 (5,219) (5,219)
Class B - $.71 (8,521) (8,521)
Treasury shares
acquired (1,200) 1,200 (1,091) (1,091)
Translation gain 183 183
Balance at October 31,
1996 22,875 $9,034 15,546 $(41,867) $436,672 $(3,207) $400,632
<FN>
NOTE: Dividends paid during the calendar years 1996, 1995 and 1994,
relating to the results of operations for the fiscal years ended
October 31, 1996, 1995 and 1994, were as follows:
1996 calendar year dividends per share - Class A $.44; Class B $.65
1995 calendar year dividends per share - Class A $.40; Class B $.59
1994 calendar year dividends per share - Class A $.34; Class B $.50
<FN>
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 22
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The Consolidated Financial Statements include the accounts of the Company
and its subsidiaries. All intercompany transactions and balances have been
eliminated in consolidation.
Revenue Recognition
Revenue is recognized when goods are shipped.
Income Taxes
Income taxes are accounted for under Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". In accordance with
this statement, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, as measured by tax rates currently in effect.
Cash and Cash Equivalents
The Company considers highly liquid investments with an original maturity of
three months or less to be cash and cash equivalents. Included in these amounts
are repurchase agreements and certificates of deposit of $6,100,000 and
$13,400,000, respectively, in 1996 ($6,800,000 and $11,700,000, respectively,
in 1995).
Canadian Government Securities
The Canadian government securities are classified as available-for-sale and,
as such, are reported at their fair value which approximates amortized cost.
These securities have maturities to 2002.
During 1995, the Company received $3,600,000 in proceeds from the sale of
available-for-sale securities. The realized gains and losses included in
income are immaterial. No available-for-sale securities were sold prior to
maturity during 1996.
Inventories
Inventories are comprised principally of raw materials and are stated at the
lower of cost (principally on last-in, first-out basis) or market. If
inventories were stated on the first-in, first-out basis, they would be
<PAGE> 23
Item 8. Financial Statements and Supplementary Data (continued)
$48,400,000 greater in 1996, $57,600,000 greater in 1995 and $49,000,000 greater
in 1994. During 1996 and 1995 the Company experienced slight LIFO liquidations
which were deemed to be immaterial to the Consolidated Financial Statements.
Properties, Plants and Equipment
Depreciation on properties, plants and equipment is provided by the straight
line method over the estimated useful lives of the assets. Accelerated
depreciation methods are used for income tax purposes. Expenditures for repairs
and maintenance are charged to income as incurred.
Depletion on timber properties is computed on the basis of cost and the
estimated recoverable timber acquired.
When properties are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the asset and related reserve
accounts. Gains or losses are credited or charged to income as applicable.
Goodwill
Goodwill is amortized on a straight-line basis over fifteen years. The
Company periodically reviews its goodwill to determine if an impairment has
occurred. Accumulated amortization was $19,000 at October 31, 1996.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, Canadian government
securities and long term obligations approximate their fair value.
The fair value of long term obligations is estimated based on quoted market
prices on current rates offered to the Company for debt of the same remaining
maturities.
Foreign Currency Translation
In accordance with SFAS No. 52, "Foreign Currency Translation", the assets
and liabilities denominated in foreign currency are translated into U.S. dollars
at the current rate of exchange existing at year-end and revenues and expenses
are translated at the average monthly exchange rates.
The cumulative translation adjustments, which represent the effect of
translating assets and liabilities of the Company's foreign operation, are
presented in the Consolidated Statements of Changes in Shareholders' Equity.
The transaction gains and losses included in income are immaterial.
<PAGE> 24
Item 8. Financial Statements and Supplementary Data (continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual amounts could differ from those estimates.
Operations by Industry Segment
Information concerning the Company's industry segments, presented on
pages 2 - 4 of this Form 10-K, is an integral part of these financial
statements.
Recent Accounting Standards
The Company plans to adopt SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and SFAS No.
123, "Accounting for Stock-Based Compensation", in 1997.
SFAS No. 121 requires that impaired assets or assets to be disposed of be
accounted for at the lower of the carrying amount or the fair value of the
assets less costs of disposal. The adoption of the new standard is not expected
to have a material effect on the Company's financial position or results of
operations.
In accordance with SFAS No. 123, companies will have the option of
recognizing compensation expense for certain all stock-based compensation
arrangements based on the fair value of the option on the grant date or
continuing to recognize compensation expense in accordance with Accounting
Principles Board Opinion (APB) No. 25 "Accounting for Stock Issued to
Employees". Since the Company plans to continue to apply APB No. 25, the impact
of the adoption will not have a significant impact on the Company's financial
position or results of operations.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1996
presentation.
NOTE 2--ACQUISITIONS
During 1996, the Company purchased all of the outstanding common stock of
two corrugated container companies with locations in Illinois, West Virginia and
Kentucky. These acquisitions have been accounted for using the purchase
method of accounting and, accordingly, the purchase price has been allocated to
the assets purchased and liabilities assumed based upon the fair values at the
date of acquisition. The excess of the purchase price over the fair values of
the net assets acquired has been recorded as goodwill. The Consolidated
Financial Statements include the operating results of each business from the
date of acquisition. Pro forma results of operations have not been presented
<PAGE> 25
Item 8. Financial Statements and Supplementary Data (continued)
because the effects of these acquisitions were not significant.
Subsequent to year-end, the Company purchased the assets of Aero Box Company
located in Roseville, Michigan.
NOTE 3--INTEREST IN PARTNERSHIP
The 50% interest in Macauley & Company (the Partnership), in which the
Company was a limited partner, was liquidated on November 6, 1995. Prior to the
liquidation, the Partnership held Class B Common Stock (2,400,000 shares) of the
Company. Upon liquidation, the Company received 1,200,000 shares of the Class B
Common Stock. The Company recorded the liquidation by crediting interest in
partnership and charging an equal amount to treasury stock.
NOTE 4--LONG TERM OBLIGATIONS
<TABLE>
The Company's long term obligations include the following as of October 31
(Dollars in thousands):
<CAPTION>
1996 1995
<S> <C> <C>
Current portion of long term
obligations $ 2,455 $ 264
Long term obligations $20,972 $12,076
Capital lease 1,776 2,025
Total long term obligations $22,748 $14,101
</TABLE>
During 1996, the Company entered into long term obligations related to its
acquisitions and capital improvements. The most significant portion of this new
debt was a commercial installment loan in the amount of $7.5 million. This loan
is payable to 2001 and has an interest rate of 6.85%. As part of its loan
agreement, the Company has agreed to certain debt covenants related to the
financial results of the Company.
During 1996, a subsidiary of the Company entered into a $20 million
unsecured revolving loan agreement with a bank that expires in 2000. On
October 31, 1996, the amount outstanding was $437,000. The interest is an
adjustable rate tied to the London Interbank Offered Rates (5.84% at
October 31, 1996). There is no penalty for prepayment. As part of this
revolving loan agreement, the subsidiary agreed to certain provisions and
restrictions relating to investments and minimum tangible net worth
requirements.
On November 16, 1994, a different subsidiary of the Company signed a loan
commitment letter for an eight year unsecured revolving line of credit with a
bank for $17 million. On October 31, 1996, the amount outstanding was $9
million ($12 million at October 31, 1995). This revolving credit arrangement
<PAGE> 26
Item 8. Financial Statements and Supplementary Data (continued)
was used to finance the construction of a manufacturing plant in Michigan which
was completed in November 1995. At the Company's discretion, the interest rate
may be tied to either the London Interbank Offered Rates plus 50 basis points
or the bank's prime rate less 25 basis points. There is no penalty for
prepayment. As part of the revolving credit arrangement, the subsidiary agreed
to certain restrictions including a restriction on its additional indebtedness.
The Company has a capital lease agreement covering the land, building and
machinery and equipment at one of its plant locations. The amount that is
capitalized under this agreement is $2,708,000 and has accumulated depreciation
of $606,000 as of October 31, 1996 ($416,000 as of October 31, 1995). In
addition to the capital lease, the Company has entered into non-cancelable
operating leases for buildings and office space. The future minimum lease
payments for the non-cancelable operating leases are $701,000 in 1997, $420,000
in 1998, $187,000 in 1999, $67,000 in 2000, $67,000 in 2001 and $119,000
thereafter. Rent expense was $3,592,000 in 1996, $3,246,000 in 1995 and
$2,553,000 in 1994.
Annual maturities of the long term obligations and capital lease are
$2,569,000 in 1997, $4,034,000 in 1998, $3,848,000 in 1999, $5,658,000 in 2000,
$4,057,000 in 2001 and $5,396,000 thereafter. The amount that represents future
executory costs and interest payments for the capital lease is $359,000 as of
October 31, 1996 ($488,000 as of October 31, 1995).
During 1996, the Company paid $862,000 of interest ($1,359,000 in 1995 and
$1,599,000 in 1994) for the long term obligations and capital lease. Interest
of $569,000 in 1996, $780,000 in 1995 and $211,000 in 1994 was capitalized.
NOTE 5--CAPITAL STOCK
In March 1995, authorized Class A Common Stock was increased from 16,000,000
shares to 32,000,000 shares and Class B Common Stock from 8,640,000 shares to
17,280,000 shares. At the same time, all issued shares were split two-for-one.
Class A Common Stock is entitled to cumulative dividends of 1 cent a share
per year after which Class B Common Stock is entitled to non-cumulative
dividends up to 1/2 cent a share per year. Further distribution in any year
must be made in proportion of 1 cent a share for Class A Common Stock to 1-1/2
cents a share for Class B Common Stock. The Class A Common Stock shall have no
voting power nor shall it be entitled to notice of meetings of the shareholders,
all rights to vote and all voting power being vested exclusively in the Class B
Common Stock unless four quarterly cumulative dividends upon the Class A Common
Stock are in arrears. There is no cumulative voting.
<PAGE> 27
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 6--STOCK OPTIONS
In 1996, a Directors' Stock Option Plan (Directors' Plan) was adopted which
provides the granting of stock options to directors who are not employees of the
Company. The aggregate number of the Company's Class A Common Stock which
options may be granted shall not exceed 100,000 shares. Each outside director
will be granted an annual option to purchase 2,000 shares. Under the terms of
the Directors' Plan, options are granted at exercise prices equal to the market
value on the date the options are granted and become exercisable immediately.
As of October 31, 1996, no options have been exercised. Options expire ten
years after date of grant.
During 1995, the Company adopted an Incentive Stock Option Plan (Option
Plan) which provides the discretionary granting of incentive stock options to
key employees and non-statutory options for non-employees. The aggregate
number of the Company's Class A Common Stock which options may be granted shall
not exceed 1,000,000 shares. Under the terms of the Option Plan, options are
granted at exercise prices equal to the market value on the date the options
are granted and become exercisable after two years from the date of grant.
Options expire ten years after date of grant.
In 1996, 152,100 incentive stock options were granted with option prices of
$29.62 per share. Under the Directors' Plan, 12,000 options were granted to
outside directors with option prices of $29.62 per share.
In 1995, 155,000 and 44,500 incentive stock options were granted with option
prices of $26.19 per share and $22.94 per share, respectively. In addition,
10,000 non-statutory options were granted with option prices of $23.75 per
share.
During 1996, the Company purchased all rights to options granted under a
stock option plan at Virginia Fibre Corporation. There are no outstanding
options under this plan at October 31, 1996.
<PAGE> 28
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 7--INCOME TAXES
<TABLE>
Income tax expense is comprised as follows (Dollars in thousands):
<CAPTION>
State
U.S. and
Federal Foreign Local Total
<S> <C> <C> <C> <C>
1996:
Current $11,330 $ 3,075 $ 1,630 $16,035
Deferred 7,903 (59) 1,070 8,914
$19,233 $ 3,016 $ 2,700 $24,949
1995:
Current $27,053 $ 1,616 $ 3,567 $32,236
Deferred 3,655 258 1,629 5,542
$30,708 $ 1,874 $ 5,196 $37,778
1994:
Current $10,592 $ 1,882 $ 2,166 $14,640
Deferred 4,767 (196) (1,353) 3,218
$15,359 $ 1,686 $ 813 $17,858
</TABLE>
Foreign income before income taxes amounted to $7,729,000 in 1996
($4,452,000 in 1995 and $4,111,000 in 1994).
<TABLE>
The following is a reconciliation of the U.S. statutory Federal income tax
rate to the Company's effective tax rate:
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
U.S. Federal statutory tax rate 35.0% 35.0% 35.0%
State taxes, net of Federal tax
benefit 3.6% 3.9% 1.0%
Other (1.7%) (.3%) (1.4%)
Effective income tax rate 36.9% 38.6% 34.6%
</TABLE>
<PAGE> 29
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
Significant components of the Company's deferred tax assets and liabilities
are as follows (Dollars in thousands):
<CAPTION>
1996 1995
<S> <C> <C>
Current deferred tax assets $ 3,564 $ 4,244
Current deferred tax liabilities $ 29 $ 36
Book basis on acquired assets $11,432 $12,264
Other 551 3,791
Long term deferred tax assets $11,983 $16,055
Plants and equipment $27,974 $23,671
Timber condemnation 2,873 2,152
Undistributed Canadian net income 1,753 1,402
Pension costs 1,887 1,733
Other 368 659
Long term deferred tax liabilities $34,855 $29,617
</TABLE>
At October 31, 1996, the Company has provided deferred income taxes on all
undistributed Canadian earnings.
During 1996, the Company paid $10,318,000 in income taxes ($35,692,000 in
1995 and $15,429,000 in 1994).
<PAGE> 30
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 8--RETIREMENT PLANS
The Company has non-contributory defined benefit pension plans that cover
most of its employees. These plans include plans self-administered by the
Company along with Union administered multi-employer plans. The self-
administered hourly and Union plans' benefits are based primarily upon years of
service. The self-administered salaried plan's benefits are based primarily on
years of service and earnings. The Company contributes an amount that is not
less than the minimum funding nor more than the maximum tax-deductible amount
to these plans. The plans' assets consist of unallocated insurance contracts,
equity securities, government obligations and the allowable amount of the
Company's stock (127,752 shares of Class A Common Stock and 77,755 shares of
Class B Common Stock at October 31, 1996 and 1995).
<TABLE>
The pension expense for the plans included the following (Dollars in
thousands):
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost, benefits earned during the year $ 2,648 $ 2,365 $ 1,415
Interest cost on projected benefit obligation 4,277 3,839 2,444
Actual return on assets (6,404) (4,646) (1,844)
Net amortization 1,759 263 (1,699)
2,280 1,821 316
Multi-employer and non-U.S. pension expense 593 790 341
Total pension expense $ 2,873 $ 2,611 $ 657
</TABLE>
The range of weighted average discount rate and expected long term rate of
return on plan assets used in the actuarial valuation was 7.0% - 9.0% for
1996, 1995 and 1994. The rate of compensation increases for salaried employees
used in the actuarial valuation range from 4.0% - 6.5% for 1996, 1995 and 1994.
<PAGE> 31
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Consolidated Financial Statements (Dollars in thousands):
<CAPTION>
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $31,675 $30,816 $ 9,243 $ 8,389
Accumulated benefit
obligation $32,113 $31,122 $10,782 $10,152
Projected benefit
obligation $46,085 $45,027 $10,782 $10,152
Plan assets at fair
value $52,423 $48,399 $10,257 $ 9,290
Plan assets greater than
(less than) projected
benefit obligation $ 6,338 $ 3,372 $ (525) $ (862)
Unrecognized net (gain)
loss (9,274) (7,806) 769 897
Prior service cost not yet
recognized in net periodic
pension cost 6,587 7,077 2,368 1,880
Adjustment required to
recognize minimum
liability -- -- (804) (938)
Unrecognized net obligation
(asset) from transition 438 1,056 (2,333) (1,839)
Prepaid pension cost
(liability) $ 4,089 $ 3,699 $ (525) $ (862)
</TABLE>
During 1996 and 1995, the Company, in accordance with the provisions of
SFAS No. 87, "Employers' Accounting for Pensions", recorded the "adjustment
required to recognize minimum liability". The amount was offset by a long term
asset, of an equal amount, recognized in the Consolidated Financial Statements.
In addition to the pension plans, the Company has several voluntary 401(k)
savings plans which cover eligible employees at least 21 years of age with one
year of service. For certain plans, the Company matches 25% of each employee's
contribution, up to a maximum of 5% or 6% of base salary. Company contributions
to the 401(k) plans were $234,000 in 1996, $27,000 in 1995 and $3,000 in 1994.
<PAGE> 32
Item 8. Financial Statements and Supplementary Data (continued)
REPORT OF MANAGEMENT'S RESPONSIBILITIES
To the Shareholders of
Greif Bros. Corporation
The Company's management is responsible for the financial and operating
information included in this Annual Report to Shareholders, including the
Consolidated Financial Statements of Greif Bros. Corporation and its
subsidiaries. These statements were prepared in accordance with generally
accepted accounting principles and, as such, include certain estimates and
judgements made by management.
The system of internal accounting control, which is designed to provide
reasonable assurance as to the integrity and reliability of financial reporting,
is established and maintained by the Company's management. This system is
continuously reviewed by the internal auditor of the Company. In addition,
Price Waterhouse LLP, an independent accounting firm, audits the financial
statements of Greif Bros. Corporation and its subsidiaries and issues reports
to management concerning the internal controls of the Company. The Audit
Committee of the Board of Directors meets periodically with the internal
auditor and independent accountants to discuss the internal control structure
and the results of their audits.
Michael J. Gasser John K. Dieker
Chairman and Chief Executive Officer Controller
<PAGE> 33
Item 8. Financial Statements and Supplementary Data (continued)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the
Board of Directors of
Greif Bros. Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Greif Bros. Corporation and its subsidiaries at October 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three
years in the period ended October 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP Columbus, Ohio
November 27, 1996
<PAGE> 34
Item 8. Financial Statements and Supplementary Data (concluded)
<TABLE>
QUARTERLY FINANCIAL DATA (Unaudited)
The quarterly results of operations for fiscal 1996 and 1995 are shown below
(Dollars in thousands, except per share amounts).
<CAPTION>
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1996 1996 1996 1996
<S> <C> <C> <C> <C>
Net sales $159,743 $159,212 $155,994 $162,419
Gross profit 32,309 26,051 27,129 36,104
Net income 10,826 6,579 9,636 15,706
Net income per share:
Assuming distributions as actually
paid out in dividends and the
balance as in liquidation:
Class A Common Stock $.41 $.27 $.40 $.67
Class B Common Stock $.52 $.31 $.44 $.71
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1995 1995 1995 1995
Net sales $170,058 $184,869 $184,159 $180,259
Gross profit 37,400 37,969 46,148 36,710
Net income 15,378 14,881 17,588 12,286
Net income per share:
Assuming distributions as actually
paid out in dividends and the
balance as in liquidation:
Class A Common Stock $.58 $.60 $.71 $.50
Class B Common Stock $.68 $.63 $.74 $.53
Due to a mathematical error, the earnings per share amounts, as reported on
the Form 10-Q for the quarter ended July 31, 1996, were incorrect. The amounts
for the nine months ended July 31, 1996 for the Class A and Class B Common
Stock should have been reported as $1.08 and $1.27, respectively. The amounts
for the three months ended July 31, 1996 should have been reported as above.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
There has not been a change in the Company's principal independent
accountants and there were no matters of disagreement on accounting and
financial disclosure.
<PAGE> 35
PART III
Item 10. Directors and Executive Officers of the Registrant
</TABLE>
<TABLE>
The following information relates to Directors of the Company:
<CAPTION>
Year first
Date present Other positions became
Name term expires and offices held Director
<S> <C> <C> <C>
Michael J. Gasser (Note: All Directors See response below. 1991
are elected annually
Charles R. Chandler for the ensuing year See response below. 1987
and serve until their
Michael H. Dempsey(A) successors are elec- None. 1996
ted and qualify. The
Naomi C. Dempsey(B) annual meeting is None. 1995
held on the fourth
Daniel J. Gunsett(C) Monday of February.) None. 1996
Allan Hull(D) See response below. 1947
Robert C. Macauley See response below. 1979
David J. Olderman(E) None. 1996
William B. Sparks Jr. See response below. 1995
J Maurice Struchen(F) None. 1993
</TABLE>
(A) Michael H. Dempsey (age 40) has been, for more than the past five years,
President of Kuschall of America, a wheelchair manufacturing company.
He is a member of the Audit and Executive Committees. Mr. Dempsey is
the son of Naomi C. Dempsey.
(B) Naomi C. Dempsey (age 80) is an investor. She is a member of the
Compensation and Stock Option Committees. Mrs. Dempsey is the mother of
Michael H. Dempsey.
(C) Daniel J. Gunsett (age 48) has been, for more than the past five years, a
partner with the law firm of Baker and Hostetler. He is Chairman of the
Audit Committee and member of the Compensation Committee.
(D) Allan Hull (age 83) has been, for more than the past five years, a partner
with the law firm of Hull and Hull, Cleveland, Ohio. See below for
present positions with the Company.
<PAGE> 36
Item 10. Directors and Executive Officers of the Registrant (continued)
(E) David J. Olderman (age 61) has been, for more than the past five years,
Chairman and Chief Executive Officer of Carret and Company, Inc., an
investment counseling firm. He is a member of the Audit and Stock Option
Committees. He is also a director for Van Eck Global Funds, a group of
mutual funds, and Laidig, Inc., an engineering company and conveyor
manufacturer.
(F) J Maurice Struchen (age 76) is an investor. Prior to retiring, Mr.
Struchen was the Chairman and Chief Executive Officer of Society
Corporation. He is Chairman of the Stock Option Committee and member of
the Compensation Committee. He is also a director for Forest City
Enterprises, Inc., a land development company.
Mr. Gasser, for more than the past five years, has been a full-time officer
of the Company (see below).
Mr. Sparks was elected President and Chief Operating Officer in 1995. Prior
to that time, he served as Chief Executive Officer of Down River International,
Inc. (see below).
Mr. Chandler was elected Vice Chairman in 1996. Prior to that time, he
served as President and Chief Operating Officer of Virginia Fibre Corporation
(see below).
Mr. Macauley has been, for more than the past five years, the Chief
Executive Officer of Virginia Fibre Corporation (see below).
<TABLE>
The following information relates to Executive Officers of the Company
(elected annually):
<CAPTION>
Year first
became
Executive
Name Age Positions and Offices Officer
<S> <C> <C> <C>
Michael J. Gasser 45 Chairman of the Board of 1988
Directors and Chief Executive
Officer, Chairman of the Executive
Committee
William B. Sparks, Jr. 55 Director, President and Chief 1995
Operating Officer, member of the
Executive Committee
Charles R. Chandler 61 Director, Vice Chairman, member 1996
of the Executive Committee
Allan Hull 83 Director, Vice President, 1964
General Counsel, member
of the Executive Committee
<PAGE> 37
Item 10. Directors and Executive Officers of the Registrant (continued)
Year first
became
Executive
Name Age Positions and Offices Officer
Robert C. Macauley 73 Director, Chief Executive Officer of 1996
Virginia Fibre Corporation
(subsidiary company), Chairman
of Compensation Committee
John P. Berg 76 President Emeritus 1972
Michael M. Bixby 53 Vice President, General Manager 1980
of Western Division
Ronald L. Brown 49 President of Down River 1996
International, Inc. (subsidiary
company)
John P. Conroy 67 Vice President and Secretary 1991
John K. Dieker 33 Controller 1996
Elco Drost 51 Vice President of Greif Containers 1996
Inc. (subsidiary company)
Michael A. Giles 46 Executive Vice President of 1996
Virginia Fibre Corporation
(subsidiary company)
C. J. Guilbeau 49 Vice President, General Manager 1986
of Eastern Division
Philip R. Metzger 49 Treasurer 1995
Jerome B. Nolder, Jr. 38 General Manager of Corrugated 1996
Products Division
William R. Shew 66 President of Greif Board Corporation 1996
(subsidiary company)
Ralph V. Stoner, Sr. 68 Chief Executive Officer of 1996
Michigan Packaging Company
(subsidiary company)
Ralph V. Stoner, Jr. 43 President of Michigan Packaging 1996
Company (subsidiary company)
<PAGE> 38
Item 10. Directors and Executive Officers of the Registrant (concluded)
Year first
became
Executive
Name Age Positions and Offices Officer
Stan Timsans 71 President of Greif Containers Inc. 1996
(subsidiary company)
</TABLE>
Except as indicated below, each Executive Officer has served in his present
capacity for at least five years.
Mr. John P. Berg currently serves as President Emeritus. During the last
five years, he has served as President and General Manager of the Western
Division.
Mr. Michael M. Bixby became General Manager of Western Division during 1996.
During the past five years, he has been a Vice President and continues to serve
in this capacity.
Mr. John K. Dieker was elected Controller in 1995. From 1994 to 1995, he
served as Assistant Controller. Prior to that time, he served as Internal
Auditor.
Mr. Michael A. Giles became Executive Vice President of Virginia Fibre
Corporation in 1996. From 1995 to 1996, he served as Vice President of
Manufacturing and, prior to that time, Vice President of Finance and Treasurer
at Virginia Fibre Corporation.
Mr. Philip R. Metzger was elected Treasurer in 1995. Prior to that time, he
served as Assistant Treasurer and Assistant Controller.
Mr. Jerome B. Nolder, Jr. became General Manager of Corrugated Products
Division in 1994. Prior to that time, he served as Operations Manager for the
division.
Mr. William R. Shew, for more than the past five years, has served as
President of Greif Board Corporation.
Mr. Ralph V. Stoner, Sr. became Chief Executive Officer of Michigan
Packaging Company in 1994. Prior to that time, he served as President of
Michigan Packaging Company.
Mr. Ralph V. Stoner, Jr. became President of Michigan Packaging Company in
1994. Prior to that time, he served as Vice President of Michigan Packaging
Company.
Mr. Stan Timsans, for more than the last five years, has served as President
of Greif Containers Inc.
<PAGE> 39
Item 11. Executive Compensation
<TABLE>
The following table sets forth the compensation for the three years ended
October 31, 1996 for the Company's chief executive officer and the Company's
four other most highly compensated executive officers.
<CAPTION>
Number of
Deferred All Stock Options
Name and Position Year Salary Bonus Compensation Other Granted
<S> <C> <C> <C> <C> <C> <C>
Michael J. Gasser 1996 $314,658 $160,000 $2,951 25,000
Chairman
Chief Executive Officer 1995 $205,615 $166,841 $504 30,000
1994 $143,166 $99,999 $480
Charles R. Chandler 1996 $424,356 $70,164 $256,169 $251,745 23,000
Director
Vice Chairman 1995 $427,803 $164,077 $236,537 $225,807 10,000
1994 $408,421 $108,170 $218,411 $58,794
Robert C. Macauley 1996 $371,316 $69,932 $58,224 $729,000 2,000
Director
Chief Executive Officer 1995 $360,500 $136,165 $56,222 $1,879,470
of Virginia Fibre
Corporation 1994 $350,750 $102,347 $40,593 $451,410
William B. Sparks, Jr. 1996 $257,886 $120,000 $9,994 13,000
Director
President and Chief 1995 $173,048 $105,000 $17,921 20,000
Operating Officer
1994 $140,616 $53,000 $19,261
Ralph V. Stoner, Sr. 1996 $200,004 $90,562 $432 6,500
Chief Executive Officer
of Michigan Packaging 1995 $135,360 $135,000 $378 10,000
Company
1994 $118,260 $117,764 $360
</TABLE>
Mr. Michael J. Gasser, Chairman and Chief Executive Officer, on November 1,
1995, entered into an employment agreement with Greif Bros. Corporation
principally providing for (a) the employment of Mr. Gasser as Chairman and
Chief Executive Officer for a term of 15 years; (b) the right of Mr. Gasser to
extend his employment on a year-to-year basis until he reaches the age of 65;
<PAGE> 40
Item 11. Executive Compensation (continued)
(c) the agreement of Mr. Gasser to devote all of his time, attention, skill and
effort to the performance of his duties as an officer and employee of Greif
Bros. Corporation, and; (d) the fixing of the minimum basic salary during
such period of employment to the current year's salary plus any additional
raises authorized by the Board of Directors within two fiscal years following
October 31, 1995.
Mr. William B. Sparks, Jr., President and Chief Operating Officer, on
November 1, 1995, entered into an employment agreement with Greif Bros.
Corporation principally providing for (a) the employment of Mr. Sparks as
President and Chief Operating Officer for a term of 11 years; (b) the agreement
of Mr. Sparks to devote all of his time, attention, skill and effort to the
performance of his duties as an officer and employee of Greif Bros. Corporation,
and; (c) the fixing of the minimum basic salary during such period of
employment to the current year's salary plus any additional raises authorized
by the Board of Directors within two fiscal years following October 31, 1995.
Mr. Charles R. Chandler, Vice Chairman, on August 1, 1986, and amended in
1988, 1992 and 1996, entered into an employment agreement, principally
providing for (a) the employment of Mr. Chandler as Vice Chairman until 2001,
(b) the agreement of Mr. Chandler to devote all of his time, attention, skill
and effort to the performance of his duties as an officer and employee of Greif
Bros. Corporation, and (c) the fixing of minimum basic salary during such
period of employment at $424,356 per year. The employment contract with Mr.
Chandler gives him the right to extend his employment beyond the original
term for up to 5 additional years.
Mr. Robert C. Macauley, Chief Executive Officer of Virginia Fibre
Corporation, on August 1, 1986 and amended in 1992, entered into an employment
agreement with Virginia Fibre Corporation, principally providing for (a) the
employment of Mr. Macauley as Chief Executive Officer for a term of 18 years,
(b) the agreement of Mr. Macauley to devote his time, attention, skill and
effort to the performance of his duties as an officer and employee of Virginia
Fibre Corporation, and (c) the fixing of minimum basic salary during such
period of employment at $275,000 per year.
No Directors' fees are paid to Directors who are full-time employees of the
Company or its subsidiary companies. Directors who are not employees of the
Company receive $20,000 per year plus $1,000 for each Board, audit,
compensation and stock option meeting that they attend.
During 1996, a Directors' Stock Option Plan was adopted which provides for
the granting of stock options to directors who are not employees of the Company.
The aggregate number of shares of the Company's Class A Common Stock which
options may be granted shall not exceed 100,000 shares. Beginning in 1997,
each outside director will be granted an annual option to purchase 2,000 shares
immediately following each annual meeting of stockholders. Each eligible
director also received a one-time grant in 1996 to purchase 2,000 shares.
Under the terms of the Plan, options are granted at exercise prices equal to
the market value on the date the options are granted and become exercisable
immediately. In 1996, 12,000 options were granted to outside directors with
option prices of $29.62 per share. As of October 31, 1996, no options have
been exercised. Options expire ten years after date of grant.
<PAGE> 41
Item 11. Executive Compensation (continued)
For 1996, the Compensation Committee of the Board of Directors voted bonuses
to employees, based upon the progress of the Company, and upon the contributions
of the particular employees to that progress, and upon individual merit, which
determines, in the action of the Committee, the bonus a specific employee may
receive, if any. Prior to 1996, the Board of Directors of the Company, or the
appropriate subsidiary company, voted the bonuses for their employees.
Supplementing the pension benefits, Virginia Fibre Corporation has deferred
compensation contracts with Robert C. Macauley and Charles R. Chandler. These
contracts are designed to supplement the Company's defined benefit pension plan
only if the executive retires under such pension plan at or after age 65, or if
the executive becomes permanently disabled before attaining age 65. No benefit
is paid to the executive under this contract if death precedes retirement. The
deferred compensation is payable to the executive or his spouse for a total
period of 15 years.
Under the above Deferred Compensation Contracts, the annual amounts payable
to the executive or his surviving spouse are diminished by the amounts
receivable under the Virginia Fibre Corporation's defined benefit pension plan.
Mr. Macauley's estimated accrued benefit from the Deferred Compensation Contract
is $92,641 per year for 10 years and $61,761 per year for an additional 5 years.
Mr. Chandler's estimated accrued benefit from the Deferred Compensation Contract
is $216,481 per year for 10 years and $144,321 per year for an additional 5
years.
With respect to Mr. Gasser, the dollar amount in the all other category
relates to the Company match for the 401(k) plan and premiums paid for life
insurance.
With respect to Messrs. Chandler and Macauley, the dollar amount in the all
other category is the compensation attributable to the 1991 Virginia Fibre
Corporation stock option plan to certain key Virginia Fibre Corporation
employees.
This amount is the difference between the option price and the value
attributable to the stock based upon the performance of Virginia Fibre
Corporation for years prior to 1996. All outstanding options were redeemed by
Virginia Fibre Corporation during 1996 and the current year amount represents
the difference between the redemption price and the cumulative compensation
accrued as of October 31, 1995.
With respect to Mr. Sparks, the dollar amount in the all other category
relates to the Company match for the 401(k) plan and premiums paid for life
insurance. In addition, there are contributions made by Down River
International, Inc. to a Profit Sharing Trust.
With respect to Mr. Stoner, the dollar amount in the all other category
relates to premiums paid for life insurance.
During 1995, the Company adopted an Incentive Stock Option Plan which
provides the granting of incentive stock options to key employees and non-
statutory options for non-employees. The aggregate number of shares of the
Company's Class A Common Stock which options may be granted shall not exceed
1,000,000 shares. Under the terms of the Plan, options are granted at exercise
prices equal to the market value on the date the options are granted and become
exercisable after two years from the date of grant.
<PAGE> 42
Item 11. Executive Compensation (continued)
<TABLE>
The following table sets forth certain information with respect to options to
purchase Class A Common Stock granted during the year ended October 31, 1996 to each
of the named executive officers.
OPTION GRANTS TABLE
<CAPTION>
Potential Net Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term (2)
% of Total
Options
Granted to
Number of Employees Exercise
Options in Fiscal Price Per Expiration
Name Granted (1) Year Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Michael J. Gasser 25,000 16% $29.62 09/05/06 $465,775 $1,180,366
Charles R. Chandler 23,000 15% $29.62 09/05/06 $428,513 $1,085,936
Robert C. Macauley 2,000 1% $29.62 09/05/06 $37,262 $94,429
William B. Sparks,
Jr. 13,000 9% $29.62 09/05/06 $242,203 $613,790
Ralph V. Stoner,
Sr. 6,500 4% $29.62 09/05/06 $121,102 $306,895
<FN>
(1) The options granted are exercisable on September 5, 1998.
<FN>
(2) The values shown are based on the indicated assumed rates of appreciation
compounded annually. Actual gains realized, if any, are based on the
performance of the Class A Common Stock. There is no assurance that the values
shown will be achieved.
</TABLE>
<TABLE>
The following table sets forth certain information with respect to the
exercise of options to purchase Class A Common Stock during the year ended
October 31, 1996, and the unexercised options held and the value thereof at
that date, by each of the named executive officers:
AGGREGATE OPTION EXERCISES AND FISCAL
YEAR-END OPTION VALUES TABLE
<CAPTION>
Number of Value of
Value Unexercised In-The-Money
Shares Realized Options Held Options Held
Acquired upon at Year-End at Year-End
Name on Exercise Exercise Exer- Unexer- Exer- Unexer-
cisable cisable cisable cisable
<S> <C> <C> <C> <C> <C> <C>
Michael J. Gasser -0- $-0- -0- 55,000 $-0- $54,300
Charles R. Chandler -0- $-0- -0- 33,000 $-0- $18,100
Robert C. Macauley -0- $-0- -0- 2,000 $-0- $-0-
William B. Sparks, Jr. -0- $-0- -0- 33,000 $-0- $36,200
Ralph V. Stoner, Sr. -0- $-0- -0- 16,500 $-0- $18,100
</TABLE>
<PAGE> 43
Item 11. Executive Compensation (continued)
<TABLE>
The following table illustrates the amount of annual pension benefits for
eligible employees upon retirement in the specified remuneration and years of
service classifications under the registrant's defined benefit pension plan:
DEFINED BENEFIT PENSION TABLE
<CAPTION>
Annual Benefit for Years of Service
Remuneration 15 20 25 30
<S> <C> <C> <C> <C>
$450,000 $26,250 $35,000 $43,750 $52,500
$350,000 $26,250 $35,000 $43,750 $52,500
$250,000 $26,250 $35,000 $43,750 $52,500
$150,000 $24,500 $32,667 $40,833 $49,000
</TABLE>
<TABLE>
The following table sets forth certain information with respect to the
benefits under the defined benefit pension plans of the registrant and its
subsidiary, Virginia Fibre Corporation, for each of the named executive
officers.
<CAPTION>
Name of individual Remuneration used Estimated
or number of Credited Years for Calculation of annual benefits
persons in group of service Annual Benefit under retirement plan
<S> <C> <C> <C>
Michael J. Gasser 17 $363,426 $24,120
William B. Sparks, Jr. 2 $283,183 $3,504
Charles R. Chandler 24 $219,224 $52,614
Robert C. Macauley 24 $219,224 $52,614
Ralph V. Stoner, Sr. 29 $265,650 $50,748
</TABLE>
The registrant's pension plan is a defined benefit pension plan with
benefits based upon the average of the three consecutive highest-paying years
of total compensation and upon years of credited service up to 30 years.
The annual retirement benefits under the defined benefit pension plan of the
registrant's subsidiary, Virginia Fibre Corporation, are calculated at 1% per
year based upon the average of the five highest out of the last ten years of
salary compensation.
<PAGE> 44
Item 11. Executive Compensation (concluded)
None of the pension benefits described in this item are subject to offset
because of the receipt of Social Security benefits or otherwise.
The annual compensation for Michael J. Gasser, Chairman of the Board and
Chief Executive Officer of the Registrant, is reviewed annually by the
Compensation Committee of the Board of Directors. Mr. Gasser's salary is based
upon various measurements which are tied to the performance of Greif Bros.
Corporation.
The Compensation Committee, made up primarily of outside directors,
reviews the total compensation paid to Mr. Gasser and other executive officers.
Members of the Compensation Committee are:
Robert C. Macauley, Chairman
Naomi C. Dempsey
Daniel J. Gunsett
J Maurice Struchen
Mr. Macauley, Chairman of the Compensation Committee, is an executive
officer of the Company.
Item 12. Security Ownership of Certain Beneficial Owners and Management
<TABLE>
The following ownership is as of December 16, 1996:
<CAPTION>
Class of Type of Number of Percent
Name and Address stock ownership shares of class
<S> <C> <C> <C> <C>
Naomi C. Dempsey Class B Record and 6,043,236 50.35%
782 W. Orange Road Beneficially
Delaware, Ohio
Naomi C. Dempsey,
Trustee Class B See (1) below 1,663,040 13.86%
Robert C. Macauley Class B Record and 1,200,000 10.00%
161 Cherry Street Beneficially
New Canaan, Connecticut
<FN>
(1) Held by Naomi C. Dempsey as successor trustee in the Naomi A. Coyle Trust.
</TABLE>
<PAGE> 45
Item 12. Security Ownership of Certain Beneficial Owners and Management
(continued)
<TABLE>
The following information regarding directors and executive officers named
in the summary compensation table is as of December 16, 1996:
<CAPTION>
Title and Percent of Class
Name Class A %
<S> <C> <C>
Charles R. Chandler 400 *
Michael H. Dempsey 2,000 *
Naomi C. Dempsey 2,000 *
Michael J. Gasser -0- *
Daniel J. Gunsett 2,000 *
Allan Hull 2,000 *
Robert C. Macauley -0- *
David J. Olderman 3,000 *
William B. Sparks, Jr. 1,086 *
Ralph V. Stoner, Sr. -0- *
J Maurice Struchen 2,000 *
Title and Percent of Class
Name Class B %
Charles R. Chandler 4,000 *
Michael H. Dempsey 19,996 *
Naomi C. Dempsey 7,706,276 64.21%
Michael J. Gasser 11,798 *
Daniel J. Gunsett -0- *
Allan Hull 148,860 1.24%
Robert C. Macauley 1,200,000 10.00%
David J. Olderman 6,774 *
William B. Sparks, Jr. 6,248 *
Ralph V. Stoner, Sr. 15,400 *
J Maurice Struchen 7,400 *
<FN>
* Less than one percent.
</TABLE>
In addition to the above referenced shares, Messrs. Gasser, Hull and Lloyd
D. Baker, Vice President, serve as Trustees of the Greif Bros. Corporation
Employees' Retirement Income Plan, which holds 123,752 shares of Class A Common
Stock and 76,880 shares of Class B Common Stock. Messrs. Conroy, Hull and
Lawrence A. Ratcliffe, Vice President, serve as Trustees for the Greif Bros.
Corporation Retirement Plan for Certain Hourly Employees, which holds 3,475
shares of Class B Common Stock. The Trustees of these plans, accordingly,
share voting power in these shares.
Mr. Olderman is Chairman and Chief Executive Officer of Carret and Company,
Inc., which holds 510,474 shares of the Class A Common Stock and 51,460 shares
of the Class B Common Stock for their clients.
<PAGE> 46
Item 12. Security Ownership of Certain Beneficial Owners and Management
(concluded)
The Class A Common Stock has no voting power, except when four quarterly
cumulative dividends upon the Class A Common Stock are in arrears.
<TABLE>
The following sets forth the equity securities owned or controlled by all
directors and executive officers as a group (24 persons) as of December 16,
1996:
<CAPTION>
Title of Amount Percent
class of stock beneficially owned of class
<S> <C> <C>
Class A 18,848 *
Class B 9,311,740 77.59%
<FN>
*Less than one percent.
</TABLE>
Item 13. Certain Relationships and Related Transactions
The law firm of Hull & Hull received $393,856 in fees for legal services to
the Corporation plus reimbursement of out-of-pocket expenses of $21,207. Mr.
Allan Hull, attorney-at-law, is Vice President, General Counsel, member of the
Executive Committee and a Director of Greif Bros. Corporation and a partner in
the firm of Hull & Hull.
Virginia Fibre Corporation, a subsidiary of the Company, annually
contributes money to a world-wide relief organization. The founder and
chairman of this non-profit organization, Robert C. Macauley, is also the
founder and chief executive officer of Virginia Fibre Corporation and is a
director of the Company. During 1996, the subsidiary company contributed
approximately $350,600 to this organization.
See Note 3 to the Consolidated Financial Statements on page 25 of this
Form 10-K for information related to the liquidation of the Macauley & Company
Partnership, which is hereby incorporated by reference.
<TABLE>
There are loans that have been made by the Company to certain employees,
including certain directors and executive officers of the Company. The
following is a summary of these loans for the year ended October 31, 1996:
<CAPTION>
Balance at Balance at
Beginning Amount End of
Name of Debtor Period Proceeds Collected Period
<S> <C> <C> <C> <C>
Michael M. Bixby $ 215,000 $ -0- $ 6,000 $ 209,000
Michael J. Gasser 218,508 -0- 19,309 199,199
C. J. Guilbeau 181,655 -0- 6,014 175,641
Philip R. Metzger 89,098 -0- 6,062 83,036
Jerome B. Nolder, Jr. -0- 80,000 -0- 80,000
William B. Sparks, Jr. 101,929 21,000 -0- 122,929
R. V. Stoner, Jr. 225,000 -0- -0- 225,000
$1,031,190 $101,000 $37,385 $1,094,805
</TABLE>
<PAGE> 47
Item 13. Certain Relationships and Related Transactions (continued)
Michael M. Bixby is a Vice President of Greif Bros. Corporation. The loan
is secured by a house and lot in Minnesota and interest is payable at 3% per
annum.
Michael J. Gasser is Chairman and Chief Executive Office of Greif Bros.
Corporation. The loan is secured by 5,599 shares of the Company's Class B
Common Stock and a first mortgage on a house and lot in Ohio. Interest is
payable at 3% per annum.
C. J. Guilbeau is a Vice President of Greif Bros. Corporation. The loan is
secured by a house and lot in Illinois and interest is payable at 3% per annum.
Philip R. Metzger is Treasurer of Greif Bros. Corporation. The loan is
secured by a house and lot in Ohio and interest is payable at 3% per annum.
Jerome B. Nolder, Jr. is a General Manager of Greif Bros. Corporation. The
loan is secured by 200 shares of the Company's Class B Common Stock and the
assignment of his company-sponsored life insurance. Interest is payable at
7-1/4% per annum.
William B. Sparks, Jr. is President and Chief Operating Officer of Greif
Bros. Corporation. The loan is secured by 3,124 shares of the Company's Class
B Common Stock and 500 shares of the Company's Class A Common Stock. Interest
is payable at 3% per annum. An additional loan is secured by a house and lot
in Ohio with interest payable at 5% per annum.
Ralph V. Stoner, Jr. is President of Michigan Packaging Company. The loan
is secured by a house and lot in Michigan and interest is payable at 3% per
annum.
<PAGE> 48
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
<TABLE>
(a) The following documents are filed as part of this report:
<CAPTION>
Page
(1) Financial Statements:
<S> <C>
Consolidated Statements of Income for the
three years ended October 31, 1996 17
Consolidated Balance Sheets at October
31, 1996 and 1995 18-19
Consolidated Statements of Cash Flows
for the three years ended October 31, 1996 20
Consolidated Statements of Changes in
Shareholders' Equity for the three years
ended October 31, 1996 21
Notes to Consolidated Financial Statements 22-31
Report of Management's Responsibilities 32
Report of Independent Accountants 33
Selected Quarterly Financial Data (unaudited) 34
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial Statement
Schedules
Consolidated Valuation and Qualifying Accounts and
Reserves (Schedule II)
(3) Exhibits:
No.
(11.) Statements Re: Computation of Per Share Earnings
(21.) Subsidiaries of the Registrant
(27.) Financial Data Schedule
<PAGE> 49
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(concluded)
(b) Reports on Form 8-K
(1) No reports on Form 8-K have been filed during
the last quarter of fiscal 1996.
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
The individual financial statements of the Registrant have been omitted
since the Registrant is primarily an operating company and all subsidiaries
included in the consolidated financial statements, in the aggregate, do not
have minority equity interests and/or indebtedness to any person other than the
Registrant or its consolidated subsidiaries in amounts which exceed 5% of total
consolidated assets at October 31, 1996, except indebtedness incurred in the
ordinary course of business which is not in default.
<PAGE> 50
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GREIF BROS. CORPORATION
(Registrant)
Date January 15, 1997 By
John K. Dieker
Controller
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Michael J. Gasser John K. Dieker
Chairman of the Board of Directors and Controller (principal accounting officer)
Chief Executive Officer (principal
executive officer)
Charles R. Chandler Michael H. Dempsey
Member of the Board of Directors Member of the Board of Directors
Naomi C. Dempsey Daniel J. Gunsett
Member of the Board of Directors Member of the Board of Directors
Allan Hull Robert C. Macauley
Member of the Board of Directors Member of the Board of Directors
David J. Olderman William B. Sparks, Jr.
Member of the Board of Directors Member of the Board of Directors
J Maurice Struchen
Member of the Board of Directors
Each of the above signatures is affixed as of January 15, 1997.
<PAGE> 51
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Greif Bros. Corporation
Our audits of the consolidated financial statements referred to in our
report dated November 27, 1996 appearing on page 33 of this Form 10-K also
included an audit of the Financial Statement Schedules listed in Item 14 (a) (2)
of this Form 10-K. In our opinion, these Financial Statement Schedules present
fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements.
Price Waterhouse LLP
Columbus, Ohio
November 27, 1996
<PAGE> 52
SCHEDULE II
<TABLE>
GREIF BROS. CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN $000)
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other at End of
Description of Period Expenses Accounts Deductions Period
Year ended October 31, 1994:
<S> <C> <C> <C> <C> <C>
Reserves deducted from
applicable assets:
For doubtful items--
trade accounts
receivable $ 939 $398 $23 (A) $371 (B) $ 989
For doubtful items--
other notes and
accounts receivable 697 -0- -0- -0- 697
Total reserves deducted
from applicable assets $1,636 $398 $23 $371 $1,686
Year ended October 31, 1995:
Reserves deducted from
applicable assets:
For doubtful items--
trade accounts
receivable $ 989 $536 $37 (A) $773 (B) $ 789
For doubtful items--
other notes and
accounts receivable 697 -0- -0- -0- 697
Total reserves deducted
from applicable assets $1,686 $536 $37 $773 $1,486
Year ended October 31, 1996:
Reserves deducted from
applicable assets:
For doubtful items--
trade accounts
receivable $ 789 $201 $22 (A) $186 (B) $ 826
For doubtful items--
other notes and
accounts receivable 697 -0- -0- -0- 697
Total reserves deducted
from applicable assets $1,486 $201 $22 $186 $1,523
<FN>
(A) Collections of accounts previously written off.
(B) Accounts written off.
</TABLE>
<PAGE> 53
EXHIBIT 11
<TABLE>
STATEMENTS RE: COMPUTATION OF PER SHARE EARNINGS
Net income per share was calculated using the following number of shares for
the periods presented:
<CAPTION>
Year Ended October 31,
1996 1995 1994
<S> <C> <C> <C>
Class A Common Stock 10,873,172 10,873,172 10,873,172
Class B Common Stock 12,021,793 13,252,073 13,344,148
Three Months Ended October 31,
1996 1995 1994
Class A Common Stock 10,873,172 10,873,172 10,873,172
Class B Common Stock 12,001,793 13,201,793 13,311,326
</TABLE>
<PAGE> 54
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
The following companies are wholly-owned subsidiaries of the Company and
are included in the consolidated financial statements:
Name of Subsidiary Incorporated Under Laws of
Barzon Corporation Delaware
Down River International, Inc. Michigan
Greif Board Corporation Delaware
Greif Containers Inc. Canada
Kyowva Corrugated Container Company,
Inc. West Virginia
Michigan Packaging Company Delaware
Soterra, Incorporated Delaware
Virginia Fibre Corporation Virginia
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-K and is qualified in its entirety by reference to such Form 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 26,560
<SECURITIES> 19,479
<RECEIVABLES> 74,813
<ALLOWANCES> (826)
<INVENTORY> 49,290
<CURRENT-ASSETS> 185,447
<PP&E> 561,299
<DEPRECIATION> (249,123)
<TOTAL-ASSETS> 512,338
<CURRENT-LIABILITIES> 50,680
<BONDS> 0
0
0
<COMMON> 9,034
<OTHER-SE> 391,598
<TOTAL-LIABILITY-AND-EQUITY> 512,338
<SALES> 637,368
<TOTAL-REVENUES> 652,208
<CGS> 515,775
<TOTAL-COSTS> 515,775
<OTHER-EXPENSES> 68,220
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 517
<INCOME-PRETAX> 67,696
<INCOME-TAX> 24,949
<INCOME-CONTINUING> 42,747
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,747
<EPS-PRIMARY> 1.75<F1>
<EPS-DILUTED> 1.75<F1>
<FN>
<F1>Amount represents the earnings per share for the Class A Common Stock. The
earnings per share for the Class B Common Stock are $1.98.
</FN>
</TABLE>
