SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1998 Commission File Number 1-566
GREIF BROS. CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 31-4388903
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Winter Road, Delaware, Ohio 43015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (740) 549-6000
Not Applicable
Former name, former address and former fiscal year, if changed since
last report.
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes _X_. No ___.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report:
Class A Common Stock -- 10,908,672 shares
Class B Common Stock -- 12,001,793 shares
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended, Nine Months Ended
July 31, July 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $218,631 $167,062 $579,597 $471,961
Other income:
Gain on timber sales 10,934 3,781 17,103 7,378
Interest and other 974 1,698 5,800 8,814
230,539 172,541 602,500 488,153
Costs and expenses
(including depreciation
of $28,361 in 1998 and
$22,749 in 1997):
Cost of products sold 180,249 144,869 472,058 411,119
Selling, general and
administrative 24,248 19,275 65,844 54,299
Restructuring charge 27,461 -- 27,461 --
Interest 4,478 1,063 7,909 2,736
236,436 165,207 573,272 468,154
Income (loss) before
income taxes (5,897) 7,334 29,228 19,999
Income taxes (1,430) 2,652 11,487 7,252
Net income (loss) $ (4,467) $ 4,682 $ 17,741 $ 12,747
Net income (loss) 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.
Basic and Diluted:
Class A Common Stock $(0.23) $0.18 $0.68 $0.44
Class B Common Stock $(0.17) $0.24 $0.85 $0.67
Due to the special characteristics of the Company's two classes of stock
(see Note 2), 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.
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<CAPTION>
July 31, October 31,
1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 63,442 $ 17,719
Canadian government securities 6,957 7,533
Trade accounts receivable - less allowance
of $1,032 for doubtful items ($847 in 1997) 107,650 81,582
Inventories 68,934 44,892
Prepaid expenses and other 22,843 21,192
Total current assets 269,826 172,918
LONG-TERM ASSETS
Goodwill - less amortization 124,008 17,352
Other long-term assets 30,102 22,022
154,110 39,374
PROPERTIES, PLANTS AND EQUIPMENT - at cost
Timber properties - less depletion 7,799 6,884
Land 16,409 11,139
Buildings 155,634 139,713
Machinery, equipment, etc. 504,603 424,177
Construction in progress 19,335 17,546
Less accumulated depreciation (285,716) (261,662)
418,064 337,797
$ 842,000 $ 550,089
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
July 31, October 31,
1998 1997
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 39,050 $ 35,711
Current portion of long-term obligations 13 8,504
Accrued payrolls and employee benefits 16,263 13,821
Restructuring reserve 37,655 --
Income taxes 213 596
Other current liabilities 6,258 1,776
Total current liabilities 99,452 60,408
LONG-TERM OBLIGATIONS 260,324 43,648
DEFERRED INCOME TAXES 37,190 29,740
OTHER LONG-TERM LIABILITIES 42,399 16,155
Total long-term liabilities 339,913 89,543
SHAREHOLDERS' EQUITY (Note 2)
Capital stock, without par value 9,914 9,739
Class A Common Stock:
Authorized 32,000,000 shares;
Issued 21,140,960 shares;
Outstanding 10,908,672 shares
(10,900,672 in 1997)
Class B Common Stock:
Authorized and issued 17,280,000 shares;
Outstanding 12,001,793 shares
Treasury Stock, at cost (41,860) (41,868)
Class A Common Stock : 10,232,288 shares
(10,240,288 in 1997)
Class B Common Stock : 5,278,207 shares
Retained earnings 445,004 437,550
Cumulative translation adjustment (10,423) (5,283)
402,635 400,138
$ 842,000 $ 550,089
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
For the nine months ended July 31, 1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 17,741 $ 12,747
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 31,283 23,771
Deferred income taxes 7,478 3,907
Other - net (8,517) (6,715)
Changes in current assets and liabilities,
net of effects from acquisitions 17,700 (8,661)
Net cash provided by operating activities 65,685 25,049
Cash flows from investing activities:
Acquisitions of companies, net of cash acquired (188,174) (7,514)
Disposals of investments in Canadian
government securities 576 11,224
Purchases of properties, plants and equipment (25,911) (34,464)
Net cash used in investing activities (213,509) (30,754)
Cash flows from financing activities:
Proceeds from long-term debt 271,000 17,895
Payments on long-term debt (62,815) (8,804)
Dividends paid (10,287) (13,740)
Other - net 183 134
Net cash provided by (used in) financing
activities 198,081 (4,515)
Foreign currency translation adjustment (4,534) (962)
Net increase (decrease) in cash and
cash equivalents 45,723 (11,182)
Cash and cash equivalents at beginning of period 17,719 26,560
Cash and cash equivalents at end of period $ 63,442 $ 15,378
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
NOTE 1 - BASIS OF PRESENTATION
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the consolidated
balance sheets as of July 31, 1998 and October 31, 1997, the consolidated
statements of operations for the three and nine month periods ended July 31,
1998 and 1997, and the consolidated statements of cash flows for the nine month
periods then ended. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual amounts could differ from those
estimates.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in Greif Bros. Corporation's (the
"Company's") most recent Annual Report on Form 10-K.
Certain prior period amounts have been reclassified to conform to the 1998
presentation.
NOTE 2 - CAPITAL STOCK
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 per 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 stockholders,
all rights to vote and all voting power being vested exclusively in the Class B
Common Stock unless four cumulative dividends upon the Class A Common
Stock are in arrears. There is no cumulative voting.
NOTE 3 - DIVIDENDS PER SHARE
The following dividends per share were paid during the period indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Class A Common Stock $0.12 $0.12 $0.36 $0.48
Class B Common Stock $0.18 $0.18 $0.53 $0.71
NOTE 4 - CALCULATION OF NET INCOME (LOSS) PER SHARE
During 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share." The provisions of SFAS No.
128 have been retroactively applied to 1997.
Net income (loss) per share was calculated using the following number of
shares for the period presented:
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, 1998: July 31, 1998:
Basic Diluted Basic Diluted
<S> <C> <C> <C> <C>
Class A Common Stock 10,906,582 10,906,582 10,904,433 10,968,112
Class B Common Stock 12,001,793 12,001,793 12,001,793 12,001,793
Three Months Ended Nine Months Ended
July 31, 1997: July 31, 1997:
Basic Diluted Basic Diluted
Class A Common Stock 10,874,038 10,883,518 10,873,461 10,885,922
Class B Common Stock 12,001,793 12,001,793 12,001,793 12,001,793
</TABLE>
The diluted shares assume conversion of stock options. As the Company
experienced a net loss for the three months ended July 31, 1998, the assumed
conversion of stock options has not been reflected in diluted shares
outstanding as the effect would have been antidilutive. There are 164,100
options that are antidilutive for the three months and nine months ended July
31, 1997.
NOTE 5 - 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.
NOTE 6 - ACQUISITIONS
On March 30, 1998, pursuant to the terms of a Stock Purchase Agreement
between the Company and Sonoco Products Company ("Sonoco"), the Company
acquired the industrial containers business of Sonoco by purchasing all of the
outstanding shares of KMI Continental Fibre Drum, Inc., a Delaware corporation
("KMI"), Sonoco Plastic Drum, Inc., an Illinois corporation ("SPD"), GBC
Holding Co., a Delaware corporation ("GBC Holding"), and Fibro Tambor, S.A.
de C.V., a Mexican corporation ("Fibro Tambor") and the membership interest
of Sonoco in Total Packaging Systems of Georgia, LLC, a Delaware limited
liability company ("TPS"). KMI, SPD, GBC Holding, Fibro Tambor, TPS and
their respective subsidiaries are in the business of manufacturing and selling
plastic drums and fibre drums principally in the United States and Mexico and
refurbishing and reconditioning plastic drums principally in the United States
and Mexico.
On March 30, 1998, the Company entered into an agreement with Sonoco to
acquire its intermediate bulk containers business, which the parties intend to
finalize as soon as receipt of necessary approvals are obtained. Pending
receipt of such approvals, the Company will market and sell intermediate bulk
containers for Sonoco under a distributorship agreement.
As consideration for the shares of KMI, SPD, GBC Holding and Fibro
Tambor and the membership interest of Sonoco in TPS, the Company paid
$185,395,000 in cash.
The acquisition of the industrial containers business of Sonoco has 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 of
$109,090,000 has been recorded as goodwill. The goodwill is being amortized on
a straight-line basis over twenty-five years based on careful consideration
regarding the age of the acquired companies, their customers and the risk of
obsolescence of their products. For tax purposes, goodwill is being amortized
over fifteen years.
The Consolidated Financial Statements include the operating results of the
acquired businesses from the date of acquisition. In addition, the income
resulting from the distributorship agreement relating to the intermediate bulk
containers business have been included in the Consolidated Financial
Statements since March 30, 1998. However, these amounts have not been
reflected in the pro forma figures prior to that time. The following summarized
pro forma (unaudited) information assumes the acquisition had occurred on
November 1, 1996 (Dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended July 31, Ended July 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $218,631 $213,801 $650,435 $606,337
Net income (loss) $ (4,467) $ 4,650 $ 15,513 $ 11,202
Basic and Diluted Earnings Per Share:
Class A Common Stock $ (0.23) $ 0.17 $ 0.58 $ 0.37
Class B Common Stock $ (0.17) $ 0.23 $ 0.75 $ 0.60
</TABLE>
The above amounts reflect adjustments for interest expense related to the
incremental debt issued for the purchase, amortization of goodwill and
depreciation expense on the revalued property, plant and equipment.
The pro forma information, as presented above, is not necessarily
indicative of the results which would have been obtained had the transactions
occurred at November 1, 1996, nor are they necessarily indicative of future
results.
NOTE 7 - LONG-TERM OBLIGATIONS
On March 30, 1998, the Company entered into a Credit Agreement with
various financial institutions, as banks, and KeyBank National Association, as
agent, which provides a revolving credit facility of up to $325 million. As of
July 31, 1998, the Company has borrowed $265 million primarily to purchase the
industrial containers business of Sonoco and to consolidate all of the
Company's other long-term borrowings. In addition, the Company has borrowed
funds in anticipation of closing on the purchase of the intermediate bulk
containers business of Sonoco. The interest rate is either based on the prime
rate or LIBOR rate plus a calculated margin amount. At July 31, 1998, the
interest rate is 6.04%. The revolving credit loans are due on March 31, 2003.
These obligations contain covenants related to the financial position and
results of operations of the Company.
During 1998, the Company entered into an interest rate swap agreement
with a notional amount of $140 million which will be reduced each year based on
an amortization schedule. The interest rate swap was entered into to help
manage the Company's exposure to variable rate debt. Under the agreement, the
Company receives interest from the counterparty equal to the LIBOR rate and
pays interest to the counterparty at a fixed rate of 6.15%. The differential to
be paid and received under this agreement is recorded as an adjustment to
interest expense and is included in interest receivable or payable. The
interest rate swap agreement expires on March 30, 2008.
NOTE 8 - RESTRUCTURING CHARGE
During the third quarter of 1998, the Company approved a plan to
consolidate the operations of a number of its locations. The consolidation
will be made to combine certain duplicate facilities, due to the Company's
recent acquisitions, and other locations together to optimize operating
efficiencies and capabilities. In addition, a number of other fibre, steel,
plastic and corrugated plants will be closed. As a result, there was a pretax
restructuring charge of approximately $27.5 million, primarily consisting of
employee separation costs and other anticipated closing costs.
NOTE 9 - RECENT ACCOUNTING STANDARDS
During 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information."
SFAS No. 130, which will not be effective until 1999 for the Company,
requires companies to present comprehensive income, which is comprised of net
income and other charges and credits to equity that are not the result of
transactions with the owners, in its financial statements. Currently, the only
item in addition to net income that would be included in comprehensive income is
the cumulative translation adjustment.
SFAS No. 131, which will not be effective until 1999 for the Company,
requires that reporting segments be redefined in terms of a company's operating
segments. Adoption of the new standard is not expected to have a significant
impact on the presentation of the Company's segments.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," which is effective in 2000
for the Company. Internal use software is software that is acquired,
internally developed or modified solely to meet the entity's needs and for
which, during the software's development or modification, a plan does not exist
to market the Software externally. Cost incurred to develop the software
during the application development stage and upgrades and enhancements that
provide additional functionality should be capitalized. The Company has not
yet determined what, if any, impact SOP 98-1 will have on the Company's
financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which is
effective in 2000 for the Company. The statement requires that all derivatives
be recorded in the balance sheet as either assets or liabilities and be measured
at fair value. The accounting for changes in fair value of a derivative depends
on the intended use of the derivative and the resulting designation. The Company
has not yet determined what, if any, impact SFAS No. 133 will have on the
Company's financial position or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Greif Bros. Corporation (the "Company") had net income, excluding the
effect of a $27.5 million restructuring charge, of $12.2 million, or $0.50 and
$0.56 per share for the Class A and Class B Common Stock, respectively, for the
third quarter of 1998 compared with $4.7 million, or $0.18 and $0.24 per share
for the Class A and Class B Common Stock, respectively, for the same period last
year. Including the effect of the restructuring charge, the Company reported a
net loss of $4.5 million, or $(0.23) and $(0.17) per share for the Class A
and Class B Common Stock, respectively, for the third quarter of 1998.
For the nine months ended July 31, 1998, the Company had net income,
excluding the effect of a $27.5 million restructuring charge, of $34.4 million,
or $1.41 and $1.58 per share for the Class A and Class B Common Stock,
respectively, compared to $12.7 million, or $0.44 and $0.67 per share for the
Class A and Class B Common Stock, respectively, last year. Including the
effect of the restructuring charge, the Company reported net income of $17.7
million, or $0.68 and $0.85 per share for the Class A and Class B Common Stock,
respectively, for the 1998 year-to-date period.
Historically, revenues or earnings may or may not be representative of
future operations because of various economic factors. The following
comparative information is presented for the nine-month periods ended July 31,
1998 and July 31, 1997.
Quarter Results
Net sales increased $51.6 million or 30.9% during the third quarter this
year compared to the third quarter last year.
The net sales of the industrial shipping containers segment increased by
$46.3 million due to the acquisition of the industrial containers
business of Sonoco Products Company ("Sonoco") on March 30, 1998.
The net sales of the containerboard segment increased by $5.3 million in
comparison to the prior quarterly period. This increase was the result of
$11.0 million higher net sales in the paper mills which was significantly
affected by the improved sales prices of its products. The higher sales prices
were caused by the overall improvement of the containerboard market. The
remaining increase was primarily due to higher sales volume in the corrugated
container and sheet operations during the current year's quarter compared to the
prior year's quarter. These increases were partially offset by the disposal of
the Company's wood components plants, with prior quarter net sales of $14.4
million, in Kentucky, California, Washington and Oregon during August 1997.
Other income increased $6.4 million primarily due to three sales of
timberland properties totaling $6.0 million during the third quarter.
The cost of products sold as a percentage of sales decreased from 86.7%
for the three months ended July 31, 1997 to 82.4% for the three months ended
July 31, 1998. This decrease is primarily the result of higher sales prices of
products in the containerboard segment without a corresponding increase in the
cost of products sold.
The increase in selling, general and administrative expense of $5.0 million
is primarily due to the additional expenses and amortization of goodwill
related to the Company's recent acquisitions.
During the third quarter of 1998, the Company approved a plan to
consolidate some of its locations in order to optimize operating efficiencies
and capabilities. The plan was a result of a study to determine whether
certain locations, either existing or newly acquired, should be closed or
relocated to a different facility. Eighteen facilities have been identified in
the consolidation plan. As a result of this plan, the Company recognized a
restructuring charge of $27.5 million for the Company's plants, not part of
the industrial containers business of Sonoco acquisition, which will be
closed during the next year. The charge relates primarily to
severance costs and other anticipated costs of closing the facilities.
Management believes that, upon completion of the consolidation, positive
contributions to earnings from these actions could approximate an amount equal
to the restructuring charge on an annualized basis. These contributions are
expected to begin in the latter part of 1998; however, the most significant
impact will be realized in 1999 when the plan is fully implemented.
The increase in interest expense of $3.4 million is due to the higher
average debt during the current quarter resulting from the acquisition of the
industrial containers business of Sonoco.
Year-To-Date Results
Net sales increased $107.6 million or 22.8% during the current period
compared to the previous period.
The net sales of the industrial shipping containers segment increased by
$70.6 million in comparison to the prior period. This increase was primarily
the result of the acquisition of the industrial containers business of Sonoco
which contributed $69.8 million of net sales during 1998.
The net sales of the containerboard segment increased by $37.0 million in
comparison to the prior period. This increase was primarily the result of
$34.5 million higher net sales in the paper mills which was significantly
affected by the improved sales prices of its products. The higher sales prices
were caused by the overall improvement of the containerboard market. In
addition, the purchase of Independent Container, Inc. and Centralia Container,
Inc. in May 1997 and June 1997, respectively, contributed $23.0 million in net
sales as a result of additional sales volume. The remaining increase was
primarily due to higher sales volume in the other corrugated container and
sheet operations. These increases were partially offset by the disposal of
the Company's wood components plants subsequent to the end of the third quarter
of 1997 with prior period net sales of $37.0 million.
Other income increased $6.7 million in the current period primarily due to
$9.7 million of additional sales of timber and timber properties offset by a
gain on the sale of an injection molding facility in the prior period.
The cost of products sold as a percentage of sales decreased from 87.1%
last period to 81.4% this period. This decrease is primarily the result of
higher sales prices of products in the containerboard segment without a
corresponding increase in the cost of products sold.
The increase of $11.5 million in selling, general and administrative
expense is due primarily to additional expenses related to the acquisitions in
March of the current period and March, May and June of the prior period. In
addition, the amortization of goodwill for these acquisitions contributed to the
higher expense in the current period.
As discussed above, the Company recorded a restructuring charge of
$27.5 million during the third quarter of 1998.
The increase in interest expense is due to the higher average debt during
1998 resulting from the acquisition of the industrial containers business of
Sonoco.
LIQUIDITY AND CAPITAL RESOURCES
As reflected by the Consolidated Balance Sheet, elsewhere in this report
and discussed in greater detail in the 1997 Annual Report, the Company is
dedicated to maintaining a strong financial position. It is the Company's
belief that this dedication is extremely important during all economic times.
As discussed in the 1997 Annual Report, the Company is subject to the
economic conditions of the market in which it operates. During this period,
the Company has been able to utilize its financial strength to meet its
continued business needs.
The current ratio of 2.7:1 as of July 31, 1998 is an indication of the
Company's continued dedication to strong liquidity.
Capital expenditures were $26 million during the nine months ended July
31, 1998. These capital expenditures were principally needed to replace and
improve equipment.
On March 30, 1998, the Company acquired all of the outstanding shares of
the industrial containers business of Sonoco for approximately $185 million in
cash. The industrial containers business includes twelve fibre drum plants and
five plastic drum plants along with facilities for research and development,
packaging services and distribution. In addition, the Company entered into an
agreement with Sonoco to acquire its intermediate bulk containers business,
which the parties intend to finalize as soon as necessary approvals are
obtained. Pending receipt of such approvals, the Company will market and sell
intermediate bulk containers for Sonoco under a distributorship agreement.
During 1998, the Company entered into a credit agreement which provides
for a revolving credit facility of up to $325 million. The Company has
borrowed money under the credit facility to purchase the industrial containers
business of Sonoco and repay the other long-term obligations of the Company.
In addition, the Company has borrowed funds in anticipation of closing on the
purchase of the intermediate bulk containers business of Sonoco. Since the
acquisition of the intermediate bulk containers business has not been
finalized, cash and cash equivalents are higher at July 31, 1998 due to the
funds being held.
The purchase of the industrial containers business of Sonoco has been the
primary reason for the increase in accounts receivable, inventories, goodwill,
property, plant and equipment and accounts payable since October 31, 1997.
The increase in the restructuring reserve is primarily due to the recording
of a restructuring charge of $27.5 million, as discussed above, during the
third quarter of 1998. The remaining increase is due to a restructuring reserve
that was set up for certain Sonoco locations, purchased on March 30, 1998, that
will be closed. This amount primarily relates to severance arrangements and
other costs of closing the plants.
The increase in other long-term liabilities is primarily the result of the
post-retirement health care benefits related to certain employees of the
acquired businesses of Sonoco.
During May 1998, the Company entered into a letter of intent to form a
joint venture named CorrChoice, Inc. to operate the sheet feeder plants of
Michigan Packaging Company, a subsidiary of the Company, and Ohio Packaging
Corporation. Completion of the joint venture is anticipated to occur during
November 1998. The joint venture will be formed by the stockholders of
Michigan Packaging Company and Ohio Packaging Corporation contributing their
stock in these companies to CorrChoice, Inc. in exchange for stock of
CorrChoice, Inc. The Company will not be required to commit any additional
capital resources to fund the joint venture. Because the joint venture is to
be self-supporting, the Company does not anticipate that the joint venture will
have a significant impact in the future on liquidity or capital resources of
the Company.
During 1997, the Company embarked on a program to implement a new
management information system. The purpose of the new management information
system is to focus on using information technology to link operations in
order to become a low cost producer and more effectively service the Company's
customers. The ultimate cost of this project is dependent upon management's
final determination of the locations, timing and extent of integration of
the new management information system. As of July 31, 1998, the Company has
spent approximately $10 million towards this project.
In addition to the intermediate bulk containers business of Sonoco and the
new management information system, as described above, the Company has
approved future purchases of approximately $17 million. These purchases are
primarily to replace and improve equipment.
Borrowing and self-financing have been the primary sources for past
capital expenditures and acquisitions. The Company anticipates financing
future capital expenditures in a like manner and believes that it will have
adequate funds available for planned expenditures.
Year 2000 Matters
The Company is actively assessing the Year 2000 readiness of its
information technology ("IT") and non-IT systems, and has begun to remediate
certain IT systems. In addition, the Company is in the process of determining
the extent to which the systems of third parties with whom the Company has
significant relationships may be vulnerable to Year 2000 issues and what
impact, if any, these Year 2000 issues will have on the Company. As part
of these assessments, a compliance plan, which includes the formation of
a steering committee and a timetable for identifying, evaluating and solving
its Year 2000 problems, has been developed. The timetable provides for the
Company's completion of its remediation of any Year 2000 issues by the end
of 1999. The Company is also developing estimates of the costs to be incurred
in its Year 2000 remediation efforts.
SAFE HARBOR STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters
discussed in this Form 10-Q contain certain forward-looking statements which
involve risks and uncertainties, including, but not limited to economic,
competitive, governmental and technological factors, including achievement
of Year 2000 compliance, affecting the Company's operations, markets,
services and related products, prices and other factors discussed in the
Company's filings with the Securities and Exchange Commission. The
Company's actual results could differ materially from those projected in
such forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Not applicable at this time.
ITEM 5. OTHER INFORMATION
As discussed in the Company's Proxy Statement for the 1998 Annual
Meeting of Stockholders, any qualified stockholder of the Company who intends
to submit a proposal to the Company at the 1999 Annual Meeting of the
Stockholders (the "1999 Annual Meeting") must submit such proposal to the
Company not later than September 30, 1998 (approximately 120 days prior to the
mailing date of the 1999 Proxy Statement) to be considered for inclusion in the
Company's Proxy Statement and form of Proxy (the "Proxy Materials") relating to
that meeting. If a stockholder intends to present a proposal at the 1999
Annual Meeting, but has not sought the inclusion of such proposal in the
Company's Proxy Materials, such material must be received by the Company prior
to December 15,1998 (approximately 45 days prior to the mailing date of the
1999 Proxy Statement) or the Company's management proxies for the 1999 Annual
Meeting will be entitled to use their discretionary voting authority should
such proposal then be raised, without any discussion of the matter in the
Company's Proxy Materials. Furthermore, stockholders must follow the
procedures set forth in Article I, Section 8, of the Company's Amended and
Restated By-Laws in order to present proposals at the 1999 Annual Meeting.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits.
Exhibit Number Description
27 Financial Data Schedule (contained herein).
(b.) Reports on Form 8-K.
No events occurred requiring Form 8-K to be filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Greif Bros. Corporation
__________________________
(Registrant)
September 14, 1998 /s/ Joseph W. Reed
__________________________
Joseph W. Reed
Chief Financial Officer and Secretary
(Duly Authorized Signatory)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10-Q and is qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JUL-31-1998
<CASH> 63,442
<SECURITIES> 6,957
<RECEIVABLES> 108,682
<ALLOWANCES> (1,032)
<INVENTORY> 68,934
<CURRENT-ASSETS> 269,826
<PP&E> 703,780
<DEPRECIATION> (285,716)
<TOTAL-ASSETS> 842,000
<CURRENT-LIABILITIES> 99,452
<BONDS> 260,324
0
0
<COMMON> 9,914
<OTHER-SE> 392,721
<TOTAL-LIABILITY-AND-EQUITY> 842,000
<SALES> 579,597
<TOTAL-REVENUES> 602,500
<CGS> 472,058
<TOTAL-COSTS> 472,058
<OTHER-EXPENSES> 93,305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,909
<INCOME-PRETAX> 29,228
<INCOME-TAX> 11,487
<INCOME-CONTINUING> 17,741
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,741
<EPS-PRIMARY> 0.68<F1>
<EPS-DILUTED> 0.68<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 $0.85.
</FN>
</TABLE>
