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, 1999 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.)
425 Winter Road, Delaware, Ohio 43015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 740-549-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
None
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 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 Registrants knowledge, in the 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 January 10, 2000 was $81,951,776.
The number of shares outstanding of each of the Registrant's classes of common
stock, as of January 10, 2000 was as follows:
Class A Common Stock - 10,586,296
Class B Common Stock - 11,867,859
Listed hereunder are the documents, portions of which are incorporated by
reference, and the parts of this Form 10-K into which such portions are
incorporated:
1. The Registrant's Proxy Statement for use in connection with the Annual
Meeting of Shareholders to be held on February 28, 2000, portions of which are
incorporated by reference into Part III of this Form 10-K, which Proxy Statement
will be filed within 120 days of October 31, 1999.
<PAGE> 1
PART I
Item 1. Business
Greif Bros. Corporation and its subsidiaries (the "Company")
principally manufacture industrial shipping containers and containerboard
and corrugated products which it sells to customers in many industries,
primarily in the United States, Canada and Mexico, through direct sales
contact with its customers. In addition, the Company owns timber properties
which are harvested and regenerated in the United States and Canada.
The Company operates over 80 locations in the United States, Canada
and Mexico and, as such, is subject to federal, state, local and foreign
regulations in effect at the various localities.
Due to the variety of its products, the Company has many customers
buying different types of its 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 and metal
products, and must make spot deliveries on a day-to-day basis as its
products are required by its customers, the Company does not operate on a
backlog to any significant extent 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, some 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
and has not recently been significantly affected by inflation.
The approximate number of persons employed during the year was 5,100.
<PAGE> 2
Item 1. Business (concluded)
Acquisitions and Dispositions
A description of significant acquisitions and dispositions is included
in Note 2 to the Consolidated Financial Statements on pages 44-49 of this
Form 10-K, which Note is part of the financial statements contained in Item
8 of this Form 10-K, and which Note is incorporated herein by reference.
Industry Segments
Financial information concerning the Company's industry segments as
required by Item 101(b) is included in Note 11 to the Consolidated
Financial Statements on pages 60-63 of this Form 10-K, which Note is part
of the financial statements contained in Item 8 of this Form 10-K, and
which Note is incorporated herein by reference.
<PAGE> 3
<TABLE>
Item 2. Properties
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:
Creola Fibre drums Industrial shipping
containers
Cullman Steel drums Industrial shipping
containers
Arkansas:
Batesville (32) Fibre drums Industrial shipping
containers
California:
Fontana Steel drums Industrial shipping
containers
LaPalma Fibre drums Industrial shipping
containers
Merced Steel drums Industrial shipping
containers
Morgan Hill Fibre drums Industrial shipping
containers
Stockton Corrugated honeycomb Containerboard &
corrugated products
Colorado:
Denver (1) Warehouse Industrial shipping
containers
Connecticut:
Windsor Locks (2) Fibre drums Industrial shipping
containers
Georgia:
Dalton (3) Packaging services Industrial shipping
containers
Lavonia Intermediate bulk containers Industrial shipping
containers
Lithonia Fibre drums and laminator Industrial shipping
containers
Macon Corrugated honeycomb Containerboard &
corrugated products
<PAGE> 4
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
Marietta (4) General office Industrial shipping
containers
Illinois:
Blue Island (5) Warehouse Containerboard &
corrugated products
Centralia Corrugated containers and sheets Containerboard &
corrugated products
Chicago Steel drums Industrial shipping
containers
Lockport Plastic drums Industrial shipping
containers
Lombard (6) Research center Industrial shipping
containers
Naperville (7) Fibre drums Industrial shipping
containers
Oreana Corrugated containers Containerboard &
corrugated products
Posen Corrugated honeycomb Containerboard &
corrugated products
Quincy (32) Warehouse Containerboard &
corrugated products
Indiana:
Ferdinand (8) Corrugated containers Containerboard &
corrugated products
Kansas:
Kansas City (9) Fibre drums Industrial shipping
containers
Winfield Steel drums Industrial shipping
containers
Kenntucky:
Erlanger (10) Corrugated containers Containerboard &
corrugated products
Louisville (32) Corrugated containers Containerboard &
corrugated products
Louisville (32) Warehouse Containerboard &
corrugated products
Mt. Sterling Plastic drums Industrial shipping
containers
Mt. Sterling (11) Warehouse Industrial shipping
containers
<PAGE> 5
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
Winchester Corrugated containers Containerboard &
corrugated products
Winchester(12) Warehouse Containerboard &
corrugated products
Louisiana:
St. Gabriel Steel drums and plastic drums Industrial shipping
containers
Massachusetts:
Mansfield Fibre drums Industrial shipping
containers
Worcester Plywood reels Industrial shipping
containers
Michigan:
Canton Warehouse Containerboard &
corrugated products
Roseville Corrugated containers Containerboard &
corrugated products
Taylor Fibre drums Industrial shipping
containers
Minnesota:
Minneapolis Fibre drums Industrial shipping
containers
Rosemount Multiwall bags Industrial shipping
containers
St. Paul Tight cooperage Industrial shipping
containers
Mississippi:
Durant Plastic products Industrial shipping
containers
Jackson(13) General office Timber
Missouri:
Wright City(14) Fibre drums Industrial shipping
containers
Nebraska:
Omaha Multiwall bags Industrial shipping
containers
<PAGE> 6
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
New Jersey:
Englishtown(15) Fibre drums Industrial shipping
containers
Rahway Fibre drums and plastic drums Industrial shipping
containers
Spotswood Fibre drums Industrial shipping
containers
Teterboro Fibre drums Industrial shipping
containers
New York:
Syracuse Fibre drums Industrial shipping
containers
Tonawanda Fibre drums Industrial shipping
containers
North Carolina:
Bladenboro Steel drums Industrial shipping
containers
Charlotte(16) Fibre drums Industrial shipping
containers
Ohio:
Caldwell Steel drums Industrial shipping
containers
Cleveland Corrugated containers Containerboard &
corrugated products
Columbus(17) General office Industrial shipping
containers
Columbus(18) General office
Delaware Principal office
Delaware(19) Research center Industrial shipping
containers
Fostoria Corrugated containers Containerboard &
corrugated products
Massillon Containerboard Containerboard &
corrugated products
Tiffin Corrugated containers Containerboard &
corrugated products
Van Wert Fibre drum Industrial shipping
containers
Zanesville Corrugated containers and sheets Containerboard &
corrugated products
<PAGE> 7
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
Pennsylvania:
Aston Fibre drums Industrial shipping
containers
Hazelton Corrugated honeycomb Containerboard &
corrugated products
Hazelton(32) Warehouse Containerboard &
corrugated products
Kelton Sales office Containerboard &
corrugated products
Reno(21) Corrugated containers Containerboard &
corrugated products
Stroudsburg Drum hardware Industrial shipping
containers
Washington Corrugated containers and sheets Containerboard &
corrugated products
Wayne(22) Sales office Industrial shipping
containers
West Hazelton(23) Plastic drums Industrial shipping
containers
Tennessee:
Kingsport Fibre drums Industrial shipping
containers
Texas:
Angleton Steel drums Industrial shipping
containers
Haltom City Fibre drums Industrial shipping
containers
Houston(24) Fibre drums Industrial shipping
containers
Houston(25) Plastic drums Industrial shipping
containers
Houston(26) Sales office Industrial shipping
containers
LaPorte Steel drums Industrial shipping
containers
Waco Corrugated honeycomb Containerboard &
corrugated products
Virginia:
Riverville Containerboard Containerboard &
corrugated products
<PAGE> 8
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
Washington:
Vancouver(27) Corrugated honeycomb Containerboard &
corrugated products
Vancouver(28) Warehouse Containerboard &
corrugated products
West Virginia:
Culloden(29) Fibre drums Industrial shipping
containers
Huntington(30) Corrugated containers and sheets Containerboard &
corrugated products
Huntington(31) Warehouse Containerboard &
corrugated products
Wisconsin:
Sheboygan Fibre drums Industrial shipping
containers
Canada
Alberta:
Lloydminster Steel drums, fibre drums Industrial shipping
and plastic drums containers
Ontario:
Belleville Plastic products Industrial shipping
containers
Milton Fibre drums Industrial shipping
containers
Niagara Falls General office Industrial shipping
containers
Oakville Steel drums Industrial shipping
containers
Stoney Creek Drum hardware Industrial shipping
containers
Stoney Creek Steel drums Industrial shipping
containers
Stoney Creek Research center and drum hardware Industrial shipping
containers
Quebec:
La Salle Fibre drums Industrial shipping
containers
Maple Grove Pallets Industrial shipping
containers
<PAGE> 9
Item 2. Properties (concluded)
Location Products Manufactured/Use Industry Segment
Mexico
Estado de Mexico:
Naucalpan
de Juarez Fibre drums Industrial shipping
containers
<FN>
Note: All properties are held in fee except as noted below:
Exceptions:
(1) Lease expires December 15, 2001
(2) Lease expires December 31, 2005
(3) Lease expires September 30, 2002
(4) Lease expires April 14, 2001
(5) Lease expires April 30, 2001
(6) Lease expires July 31, 2007
(7) Lease expires June 30, 2003
(8) Lease expires April 30, 2000
(9) Lease expires March 31, 2004
(10) Lease expires October 6, 2003
(11) Lease expires June 30, 2000
(12) Lease expires January 31, 2001
(13) Lease expires August 31, 2001
(14) Lease expires August 31, 2005
(15) Lease expires February 28, 2003
(16) Lease expires September 30, 2003
(17) Lease expires November 30, 2000
(18) Lease expires August 31, 2001
(19) Lease expires June 30, 2001
(20) Lease expires July 31, 2000
(21) Lease expires December 31, 2001
(22) Lease expires July 31, 2003
(23) Lease expires April 30, 2006
(24) Lease expires September 30, 2006
(25) Lease expires September 30, 2002
(26) Lease expires June 30, 2001
(27) Lease expires January 31, 2002
(28) Lease expires February 28, 2002
(29) Lease expires January 31, 2002
(30) Lease expires October 7, 2001
(31) Lease expires March 31, 2000
(32) Lease operates month to month
</TABLE>
The Company also owns in fee a substantial number of scattered timber
tracts comprising approximately 319,000 acres in the states of Alabama,
Arkansas, Florida, Georgia, Louisiana, Mississippi and Virginia and the
provinces of Ontario and Quebec in Canada.
<PAGE> 10
Item 3. Legal Proceedings
The Company has no pending material legal proceedings.
From time to time, various legal proceedings arise at 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.
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. 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 1995
since it was considered the most likely amount of loss. To date,
approximately $500,000 has been charged against this reserve. The
remaining reserve is considered adequate.
<PAGE> 11
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.
Executive Officers of the Company
<TABLE>
The following information relates to Executive Officers of the Company
(elected annually):
<CAPTION>
Year first became
Name Age Positions and Offices Executive Officer
<S> <C> <C> <C>
Michael J. Gasser 48 Chairman of the Board 1988
of Directors and Chief
Executive Officer,
Chairman of the
Executive, Nominating
and Stock Repurchase
Committees
William B. Sparks, Jr. 58 Director, President 1995
and Chief Operating
Officer, member of the
Executive Committee
Charles R. Chandler 64 Director, Vice 1996
Chairman, President of
Soterra LLC
(subsidiary company),
member of the
Executive Committee
John S. Lilak 52 Executive Vice 1999
President,
Containerboard &
Corrugated Products
Joseph W. Reed 62 Chief Financial 1997
Officer and Secretary
Michael L. Roane 44 Vice President, Human 1998
Resources
John P. Berg 79 President Emeritus 1972
Michael J. Barilla 49 Vice President, 1999
Business Information
Services
<PAGE> 12
Executive Officers of the Company (continued)
Year first became
Name Age Positions and Offices Executive Officer
Michael M. Bixby 56 Vice President, 1980
Strategic Accounts,
Industrial Shipping
Containers
Ronald L. Brown 52 Vice President, Sales 1996
and Marketing,
Industrial Shipping
Containers
Wayne R. Carlberg 56 Vice President, 1998
Marketing, Industrial
Shipping Containers
John K. Dieker 36 Corporate Controller 1996
Elco Drost 54 President of Greif 1996
Containers Inc.
(subsidiary company)
Russell A Fazio 56 Vice President, Field 1998
Sales, Industrial
Shipping Containers
Michael A. Giles 49 Vice President, 1996
Manufacturing,
Containerboard Mill
Operations,
Containerboard &
Corrugated Products
C.J. Guilbeau 52 Vice President and 1986
Associate Director of
Manufacturing,
Industrial Shipping
Containers
Sharon R. Maxwell 50 Assistant Secretary 1997
Philip R. Metzger 52 Treasurer 1995
Bruce J. Miller 44 Vice President, Sales 1998
and Marketing,
Specialty Operations,
Containerboard &
Corrugated Products
<PAGE> 13
Executive Officers of the Company (continued)
Year first became
Name Age Positions and Offices Executive Officer
Mark J. Mooney 42 Vice President, 1997
Packaging Services,
Industrial Shipping
Containers
William R. Mordecai 47 Vice President, Sales 1997
and Marketing,
Containerboard and
Paper, Containerboard
& Corrugated Products
William R. Shew 69 Special Assistant to 1996
the Vice Chairman
Kent P. Snead 54 Corporate Director of 1997
Strategic Projects
Karl Svendsen 58 Vice President, 1998
Manufacturing,
Industrial Shipping
Containers
Peter G. Watson 42 Vice President, 1999
Service Solutions, and
General Manager, Sheet
Plant Operations,
Containerboard &
Corrugated Products
Carl G. Wright 40 Vice President, 1999
Manufacturing, and
General Manager,
Corrugator Operations,
Containerboard &
Corrugated Products
</TABLE>
<PAGE> 14
Executive Officers of the Company (continued)
Except as indicated below, each Executive Officer has served in his or
her present capacity for at least five years.
Mr. William B. Sparks, Jr. was elected President and Chief Operating
Officer during 1995. Prior to that time, and for more than five years, he
served as Chief Executive Officer of Down River International, Inc., a
former subsidiary of the Company.
Mr. Charles R. Chandler was elected Vice Chairman during 1996. In
addition, he was elected President of Soterra LLC during 1999. Prior to
that time, and for more than five years, he served as President and Chief
Operating Officer of Virginia Fibre Corporation, a former subsidiary of the
Company.
Mr. John S. Lilak was elected Executive Vice President, Containerboard
& Corrugated Products, during 1999. During 1997 to 1999, Mr. Lilak served
as General Sales and Marketing Manager, Kraft Paper and Board Division, for
Union Camp Corporation. Prior to that time, and for more than five years,
he served as Group General Manager, Container Division, of Union Camp.
Mr. Joseph W. Reed was elected Chief Financial Officer and Secretary
in 1997. Prior to that time, and for more than five years, he served as
Senior Vice President, Finance and Administration - CFO of Pharmacia, Inc.
Mr. Michael L. Roane was elected Vice President, Human Resources, in
1998. Prior to that time, and for more than five years, Mr. Roane served
as Vice President, Human Resources, for Owens and Minor, Inc.
Mr. John P. Berg was elected President Emeritus in 1996. Prior to
that time, he served as President of the Company and General Manager of one
of its divisions for more than five years.
Mr. Michael J. Barilla was elected Vice President, Business
Information Services, during 1999. During 1997 to 1999, Mr. Barilla served
as a Senior Consultant for IBM Corporation. During 1995 to 1997, he served
as Chief Financial Officer and prior to that time, and for more than five
years, he served as Senior Vice President of Operations and Administration
of Medex, Inc.
Mr. Michael M. Bixby became Vice President, Strategic Accounts,
Industrial Shipping Containers, during 1998. During the past five years,
he has been a Vice President of the Company.
Mr. Ronald L. Brown became Vice President, Sales and Marketing,
Industrial Shipping Containers, during 1997. Prior to that time, and for
more than five years, he served as President and Chief Operating Officer
for Down River International (former subsidiary company).
<PAGE> 15
Executive Officers of the Company (continued)
Mr. Wayne R. Carlberg was elected Vice President, Marketing,
Industrial Shipping Containers, during 1998. Prior to that time, and for
more than five years, he held the position of Sales Manager for the
Industrial Container Division of Sonoco Products Company, which was
acquired on March 31, 1998.
Mr. John K. Dieker was elected Corporate Controller in 1995. Prior to
that time, and for more than five years, he served as Assistant Corporate
Controller.
During 1996, Mr. Elco Drost was elected President of Greif Containers
Inc. (subsidiary company) and continues to serve in this capacity. Prior
to that time, and for more than five years, he served as Vice President for
the subsidiary company.
Mr. Russell A. Fazio was elected Vice President, Field Sales,
Industrial Shipping Containers, during 1998. Prior to that time, and for
more than five years, he held the position of Manager, Strategic Account
Programs, for the Industrial Container Division of Sonoco Products Company,
which was acquired on March 31, 1998.
Mr. Michael A. Giles became Vice President, Manufacturing,
Containerboard Mill Operations, Containerboard & Corrugated Products, in
1997. He was Executive Vice President of Virginia Fibre Corporation (now
Greif Bros. Corporation of Virginia, subsidiary company) 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 the subsidiary
company for more than five years.
Mr. C.J. Guilbeau became Vice President and Associate Director of
Manufacturing, Industrial Shipping Containers, during 1997. During the
past five years, he has served as Vice President of the Company.
Ms. Sharon R. Maxwell was elected Assistant Secretary during 1997.
Prior to that time, and for more than five years, she served as
administrative assistant to the Chairman.
Mr. Philip R. Metzger was elected Treasurer in 1995. Prior to that
time, and for more than the past five years, he served as Assistant
Treasurer and Assistant Controller.
Mr. Bruce J. Miller was elected Vice President, Sales and Marketing,
Specialty Operations, Containerboard & Corrugated Products, during 1998.
In 1997 and early 1998, Mr. Miller served as Director, Vendor Management
Programs, for the Industrial Shipping Containers segment. Prior to that
time, and for more than five years, he served as a Vice President of Down
River International, Inc. (former subsidiary company).
<PAGE> 16
Executive Officers of the Company (concluded)
Mr. Mark J. Mooney became Vice President, Packaging Services,
Industrial Shipping Containers, during 1998. Prior to that time, Mr.
Mooney served as Vice President, National Sales, and prior to 1996, and for
more than the past five years, he served as the Operations Director,
Multiwall Bags, at one of its divisions.
Mr. William R. Mordecai became Vice President, Sales and Marketing,
Containerboard and Paper, Containerboard & Corrugated Products, during
1997. During 1996 to 1997, Mr. Mordecai served as Director, Containerboard
Marketing, for Virginia Fibre Corporation (former subsidiary company).
Prior to that time, and for more than five years, he served as President of
Pimlico Paper Corporation.
Mr. William R. Shew became Special Assistant to the Vice Chairman
during 1997. Prior to that time, and for more than the past five years, he
served as President of Greif Board Corporation (former subsidiary company).
Mr. Kent P. Snead became Corporate Director of Strategic Projects
during 1997. Prior to that time, and for more than the past five years, he
served as the Engineering Manager for Virginia Fibre Corporation (former
subsidiary company).
Mr. Karl Svendsen was elected Vice President, Manufacturing,
Industrial Shipping Containers, during 1998. Prior to that time, he served
as Vice President, Operating Resources, for the Industrial Container
Division of Sonoco Products Company, acquired on March 30, 1998, for more
than five years.
Mr. Peter G. Watson was elected Vice President, Service Solutions, and
General Manager, Sheet Plant Operations, Containerboard & Corrugated
Products, during 1999. During 1996 to 1999, Mr. Watson served as Vice
President and General Manager of Concept Packaging Group. Prior to that
time, and for more than five years, he served as General Manager for Union
Camp Corporation.
Mr. Carl G. Wright was elected Vice President, Manufacturing, and
General Manager, Corrugator Operations, Containerboard & Corrugated
Products, during 1999. During 1996 to 1999, Mr. Wright served as a Regional
Manager within the Containerboard & Corrugated Products segment. Prior to
that time, and for more than five years, he served as a General Manager
within the business segment.
<PAGE> 17
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 under the symbols GBCOA and GBCOB, respectively.
The financial information regarding the Company's two classes of
common stock is included in Note 12 to the Consolidated Financial
Statements on pages 64-65 of this Form 10-K, which Note is part of the
financial statements contained in Item 8 of this Form 10-K, and which Note
is incorporated herein by reference.
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 52 of this Form 10-K, which Note is part of
the financial statements contained in Item 8 of this Form 10-K, and which
Note is incorporated herein by reference. The annual dividends paid for
the last three fiscal years are as follows:
1999 fiscal year dividends per share - Class A $0.50; Class B $0.74
1998 fiscal year dividends per share - Class A $0.48; Class B $0.71
1997 fiscal year dividends per share - Class A $0.60; Class B $0.89
<PAGE> 18
<TABLE>
Item 6. Selected Financial Data
The 5-year selected financial data is as follows (Dollars in
thousands, except per share amounts):
<CAPTION>
Years Ended October 31,
1999 1998 1997 1996 1995
(As Restated)(As Restated)(As Restated)(As Restated)
<S> <C> <C> <C> <C> <C>
Net sales $818,827 $814,432 $660,782 $644,744 $725,861
Net income $ 51,373 $ 37,441 $ 22,526 $ 48,524 $ 65,268
Total assets $910,986 $878,420 $594,217 $551,420 $500,179
Long-term
obligations $258,000 $235,000 $ 52,152 $ 25,203 $ 14,365
Dividends per share:
Class A Common
Stock $ 0.50 $ 0.48 $ 0.60 $ 0.48 $ 0.40
Class B Common
Stock $ 0.74 $ 0.71 $ 0.89 $ 0.71 $ 0.59
Basic earnings per share:
Class A Common
Stock $ 1.78 $ 1.30 $ 0.78 $ 1.68 $ 2.13
Class B Common
Stock $ 2.67 $ 1.94 $ 1.17 $ 2.52 $ 3.18
Diluted earnings per share:
Class A Common
Stock $ 1.78 $ 1.29 $ 0.78 $ 1.68 $ 2.13
Class B Common
Stock $ 2.67 $ 1.94 $ 1.17 $ 2.52 $ 3.18
</TABLE>
The 1999 and 1998 amounts include the results of operations and assets
of the industrial containers business acquired from Sonoco Products Company
on March 30, 1998. The increase in long-term obligations in 1998 is a
result of this acquisition.
The results of operations include the effects of pretax restructuring
charges of $27.5 million and $5.3 million for 1998 and 1997, respectively.
<PAGE> 19
Item 6. Selected Financial Data (concluded)
Prior year amounts have been restated to reflect the equity method of
accounting for the Company's investment in non-voting stock of Ohio
Packaging Corporation (see Note 2 to the Consolidated Financial Statements,
which Note is part of the financial statements contained in Item 8 of this
Form 10-K).
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>
1999 1998 1997
<S> <C> <C> <C>
Net sales:
Industrial shipping containers $492,925 $444,130 $333,005
Containerboard & corrugated products 301,770 357,001 315,979
Timber 24,132 13,301 11,798
Total $818,827 $814,432 $660,782
Income before income taxes and equity
in earnings of affiliates:
Industrial shipping containers $ 41,563 $ 34,273 $ 24,171
Containerboard & corrugated products 34,023 50,861 8,598
Timber 25,951 18,982 10,744
Total segment 101,537 104,116 43,513
Corporate and other (34,179) (21,068) (8,723)
Restructuring costs -- (27,461) (5,285)
Income before income taxes
and equity in earnings of
affiliates 67,358 55,587 29,505
Income taxes (26,740) (22,483) (11,419)
Equity in earnings of affiliates 10,755 4,337 4,440
Net income $ 51,373 $ 37,441 $ 22,526
Current ratio 3.0:1 2.6:1 2.9:1
Cash flows from operations $ 71,766 $ 76,862 $ 40,115
Capital expenditures $ 49,253 $ 38,093 $ 36,193
Acquisitions $ 58,826 $182,895 $ 41,724
</TABLE>
<PAGE> 20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
RESULTS OF OPERATIONS
Net income increased 37.2% to $51.4 million for 1999 versus $37.4
million, as restated, the prior year. Diluted earnings per share were
$1.78 and $2.67 for the Class A and Class B Common Stock, respectively,
compared with $1.29 and $1.94 for the Class A and Class B Common Stock,
respectively, as restated, last year. The prior year amounts have been
restated to reflect the equity method of accounting for the Company's
investment in non-voting stock of Ohio Packaging that was contributed to
the CorrChoice joint venture on November 1, 1998 (see Note 2 to the
Consolidated Financial Statements).
The increase in net income was due primarily to a $27.5 million
restructuring charge in 1998, resulting from a plan to consolidate eighteen
of the Company's existing industrial shipping and corrugated container
plants.
Net sales for 1999 rose to $818.8 million from $814.4 million in the
prior year. The increase was primarily due to a full year of net sales
resulting from the acquisition of the industrial containers business from
Sonoco in March 1998 compared with seven months from the prior year, as
well as the intermediate bulk container and Great Lakes and Trend Pak
acquisitions in 1999. During 1999, Timber was established as a core
business of the Company and timber sales, which were higher in 1999 than in
1998, were reclassified to net sales. The sale of timber properties
continues to be classified in other income. These increases were partially
offset because the 1999 results do not include net sales for Michigan
Packaging, a previously wholly-owned subsidiary of the Company, which
became part of the CorrChoice joint venture at the beginning of 1999.
Historically, revenues or earnings may or may not be indicative of
future operations because of various economic factors. As explained below,
the Company is subject to general economic conditions of its customers and
the industry in which it operates.
The Company's Industrial Shipping Containers segment, where packages
manufactured by the Company are purchased by other manufacturers and
suppliers, is substantially subject to general economic conditions of its
customers and the industry in which it operates.
Similarly, the Company's Containerboard & Corrugated Products segment
is subject to general economic conditions and the effect of the operating
rates of the containerboard industry, including pricing pressures from its
competitors.
<PAGE> 21
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Net Sales
Net sales increased $4.4 million or 0.5% in 1999 as compared to 1998.
The Industrial Shipping Containers segment had an increase in net
sales of $48.8 million or 11.0% due primarily to the inclusion of a full
year of net sales versus seven months of net sales related to the
industrial containers business acquired from Sonoco on March 30, 1998. The
increase was partially offset by a decline in general market conditions and
lost sales volume due to plant closings and consolidation efforts.
The Containerboard & Corrugated Products segment had a decrease in net
sales of $55.2 million or 15.5% due primarily to the change in the method
of reporting net sales related to Michigan Packaging in the current year.
The stock of Michigan Packaging was contributed to the CorrChoice joint
venture on November 1, 1998. CorrChoice is accounted for using the equity
method of accounting (see Note 2 to the Consolidated Financial Statements).
Accordingly, in 1999 the net sales related to Michigan Packaging are not
included in consolidated net sales. In the prior year, Michigan Packaging
had net sales of $109.2 million. This reduction was partially offset by
the inclusion of $17.5 million in net sales related to the Great Lakes and
Trend Pak acquisitions as well as the Company's net sales to CorrChoice.
The Timber segment had an increase in net sales of $10.8 million or
81.4% in 1999 as compared to 1998. The increase is primarily due to fourth
quarter sales resulting from a timber marketing agreement with Bennett &
Peters, Inc., forestry consultants and appraisers, in May 1999 to implement
a timber marketing strategy focused on active harvesting and regeneration
of the Company's 278,000 acres of timber properties in the United States.
Their responsibilities include implementation of plans to achieve
sustainable long-term yields on the Company's timberlands. Sales of timber
are recorded as net sales, while sales of timberlands are included in other
income.
Net sales increased $153.7 million or 23.3% in 1998 as compared to
1997.
The net sales of the Industrial Shipping Containers segment increased
by $111.1 million or 33.4% in 1998 as compared to 1997. This increase was
primarily the result of the acquisition of the industrial containers
business from Sonoco which contributed $123.5 million of net sales during
1998.
The net sales of the Containerboard & Corrugated Products segment
increased by $41.0 million or 13.0% in 1998 as compared to 1997. This
increase was primarily the result of the improved sales prices of the
segment's products. The higher sales prices were caused by the overall
improvement of the containerboard market. In addition, the purchase of
<PAGE> 22
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Independent Container, Inc. and Centralia Container, Inc. in May 1997 and
June 1997, respectively, contributed $24.0 million in additional net sales
as a result of higher sales volume. In August 1997, the Company disposed of
its wood components plants in Kentucky, California, Washington and Oregon
with prior year net sales of $37.0 million.
The net sales of the Timber segment increase by $1.5 million or 12.7%
in 1998 compared to 1997.
Other Income
Other income increased $2.1 million in 1999 as compared to 1998 due
primarily to $6.2 million of additional gains on the sale of properties,
plants and equipment. The increase was offset by $3.9 million less gains
on the sale of timber properties in the current year.
Other income increased $1.9 million in 1998 from 1997 due primarily to
$7.3 million of additional gains on the sale of timber properties. In 1997,
there were $3.7 million of gains on the sale of an injection molding
facility and wood components plants.
Cost of Products Sold
Cost of products sold, as a percentage of net sales, decreased in 1999
compared to 1998 primarily due to the inclusion of timber sales in net
sales. As discussed above, timber sales increased in 1999 as compared to
1998. The timber sales of the Company have very low costs associated with
them. In addition, the cost of products sold, as a percentage of net
sales, decreased slightly for the Industrial Shipping Containers and
Containerboard & Corrugated Products segments.
Cost of products sold, as a percentage of sales, decreased in 1998 as
compared to 1997. This decrease was caused by higher sales prices per unit
in the Containerboard & Corrugated Products segment without a corresponding
increase in the cost of products sold. In addition, the inclusion of the
industrial containers business acquired from Sonoco contributed to this
decrease.
Selling, General and Administrative Expenses
The $22.7 million increase in selling, general and administrative
expenses ("SG&A") in 1999 versus 1998 is primarily due to additional SG&A
related to the industrial containers business acquired from Sonoco on March
30, 1998 as well as certain increased expenses in support of Company
initiatives. In addition, contributing to higher costs were $3.0 million
of additional amortization expense related to recent acquisitions, $1.1
million in commitment fees related to the Company's revolving credit
facility and $2.9 million of Year 2000 remediation expenses.
<PAGE> 23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The $15.3 million increase in SG&A in 1998 versus 1997 was due
primarily to additional expenses related to the industrial containers
business acquired from Sonoco, prior year acquisitions and amortization of
goodwill.
Restructuring Costs
During the third quarter of 1998, the Company recognized a
restructuring charge of $27.5 million resulting from a plan to consolidate
eighteen of the Company's existing industrial shipping and corrugated
container plants (see Note 3 to the Consolidated Financial Statements).
Interest Expense
The $3.9 million increase in interest expense, which is included in
Corporate and Other, is due to a higher average debt balance of $255.6
million during 1999 as compared to $182.1 million during 1998. The higher
level of debt is the result of funds borrowed for the acquisition of the
industrial containers business and the intermediate bulk containers
business from Sonoco on March 30, 1998 and January 11, 1999, respectively.
In addition, the purchase of Great Lakes and Trend Pak on April 5, 1999
increased the Company's outstanding debt.
In 1998, interest expense increased $9.3 million from the prior year
due to increased debt relating to the acquisition of the industrial
containers business from Sonoco.
Income Before Income Taxes and Equity in Earnings of Affiliates
Income before income taxes and equity in earnings of affiliates
increased $11.8 million or 21.2% in 1999 as compared to 1998 due to an
increase in net sales in the Industrial Shipping Containers and Timber
segments without a corresponding increase in costs. In addition, there was
a $27.5 million restructuring charge in 1998. Finally, there were $6.2
million of additional net gains on the sale of properties, plants and
equipment. These increases were offset by the inclusion of Michigan
Packaging's income before income taxes, which amounted to $10.2 million in
1998, in CorrChoice during 1999. The amounts were further offset by a
reduction in gains on the sale of timber properties of $3.9 million and
$3.9 million of additional interest expense.
<PAGE> 24
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Income before income taxes and equity in earnings of affiliates
increased $26.1 million or 88.4% in 1998 as compared to 1997 primarily due
to more favorable gross profit margins experienced by the Containerboard &
Corrugated Products segment than in 1997. In addition, the industrial
containers business acquired from Sonoco contributed $12.9 million and
there were $7.3 million of additional gains on the sale of timber
properties. These increases were significantly offset by a $27.5 million
restructuring charge in 1998 as compared to a $5.3 million restructuring
charge in 1997 and $9.3 million of additional interest expense.
Income Taxes
The Company anticipates that it will be able to fully realize its
recognized deferred tax assets based upon its projected taxable income.
Equity in Earnings of Affiliates
In 1999, the equity in earnings of affiliates represents the Company's
share of CorrChoice's net income and Abzac-Greif's net income. Due to the
restatement of prior years, the amount during 1998 and 1997 represents the
Company's share of Ohio Packaging's net income. Ohio Packaging and
Michigan Packaging were combined into the CorrChoice joint venture on
November 1, 1998. Therefore, the amounts reflected in the periods
presented are not comparable due to the different entities and ownership
interests of the Company (see Note 2 to the Consolidated Financial
Statements).
LIQUIDITY AND CAPITAL RESOURCES
As indicated in the Consolidated Financial Statements and in the
financial data set forth above, the Company is dedicated to maintaining a
strong financial position. It is management's belief that this dedication
is extremely important during all economic times.
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 adverse 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.
<PAGE> 25
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
d. To continue to pay competitive compensation, including the ever-
increasing costs of employee benefits, to Company employees who produce
the results for the Company's shareholders.
e. To replace and improve plants and equipment. When plants and production
machinery must be replaced, either because of condition or to obtain the
cost-reducing potential of technological improvements 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
significantly higher than the historical cost of the items being
replaced.
Investments in Business Expansion
During 1999, the Company invested $49 million in capital additions and
$59 million for its acquisitions. During the last three years, the Company
has invested $407 million in capital additions and acquisitions.
These investments are an indication of the Company's commitment to
being the high-quality, low-cost producer and desirable long-term supplier
to all of its customers.
Management believes that the present financial strength of the Company
will be sufficient to achieve these goals.
On November 1, 1998, the Company entered into a joint venture
agreement to form CorrChoice (see Note 2 to the Consolidated Financial
Statements). The Company was not required to commit any additional capital
resources to fund this joint venture. The joint venture has been, and is
expected to continue to be, self-supporting.
On January 11, 1999, the Company acquired the intermediate bulk
containers business from Sonoco for approximately $38 million in cash
borrowed against the Company's revolving credit facility (see Note 2 to the
Consolidated Financial Statements). The intermediate bulk containers
business includes one location in Lavonia, Georgia.
On April 5, 1999, the Company acquired Great Lakes and Trend Pak for
approximately $21 million in cash borrowed against the Company's revolving
credit facility (see Note 2 to the Consolidated Financial Statements).
Great Lakes manufactures corrugated containers in Toledo, Ohio. Trend Pak
adds foam and other packaging materials to corrugated containers
manufactured by Great Lakes.
<PAGE> 26
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
In June 1999, a wholly-owned Canadian subsidiary of the Company
exchanged its spiral core manufacturing assets for a 49% interest in
Abzac's fibre drum business (which is known as "Abzac-Greif") (see Note 2
to the Consolidated Financial Statements). Abzac-Greif has operations in
Abzac, Lyon and Anvin, France, and markets and sells fibre drums in Belgium
as well as France.
On March 30, 1998, the Company acquired all of the outstanding shares
of the industrial containers business from Sonoco for approximately $183
million in cash borrowed against the Company's revolving credit facility
(see Note 2 to the Consolidated Financial Statements). The industrial
containers business included twelve fibre drum plants and five plastic drum
plants along with facilities for research and development, packaging
services and distribution.
During 1997, the Company purchased three corrugated container
companies: Aero Box Company, Independent Container, Inc. and Centralia
Container, Inc. In addition, the Company purchased two steel drum
operations.
Balance Sheet Changes
The increase of $10.8 million in accounts receivable is due to the
delay in agricultural sales in the Industrial Shipping Containers segment
this year from the third quarter to the fourth quarter. In addition,
accounts receivable from Michigan Packaging contributed to the increase.
The decrease of $14.1 million in inventory in 1999 reflects the
contribution of Michigan Packaging to the CorrChoice joint venture during
1999 as well as the closing of plants as a result of the 1998 restructuring
plan.
The increase in net assets held for sale is due primarily to locations
closed as a result of the 1998 restructuring plan.
The amounts of goodwill increased as a result of the intermediate bulk
containers acquisition on January 11, 1999 and the Great Lakes and Trend
Pak acquisitions on April 5, 1999. Goodwill has been reduced primarily
resulting from the termination of certain postretirement benefits that had
been assumed as part of the industrial containers business acquired from
Sonoco as well as ongoing amortization.
The investment in affiliates balance represents the Company's
investment in the CorrChoice joint venture and the Abzac-Greif venture. At
October 31, 1998, the balance represents the amount of the Company's
investment in non-voting stock of Ohio Packaging restated to reflect the
equity method of accounting.
<PAGE> 27
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The decrease in fixed assets is due primarily to the contribution of
Michigan Packaging to the CorrChoice joint venture during the first quarter
of 1999. These amounts were partially offset by additional amounts from
the intermediate bulk containers business, Great Lakes and Trend Pak
acquisitions during 1999.
The reduction in the restructuring reserves is due primarily to the
payments of severance and other costs of closing the plants included in the
1998 restructuring reserves.
Borrowing Arrangements
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 fund various
acquisitions and repay the other long-term obligations of the Company. The
credit agreement contains certain covenants including maintaining a certain
leverage ratio, sufficient coverage of interest expense and a minimum net
worth. In addition, the Company is limited with respect to additional
debt. Finally, there are certain non-financial covenants including sales
of assets, financial reporting, mergers and acquisitions, investments,
change in control and Employee Retirement Income Security Act compliance.
The Company believes it is in compliance with these covenants.
The increase in long-term obligations is due to the acquisition of the
intermediate bulk containers business from Sonoco on January 11, 1999 and
Great Lakes and Trend Pak on April 5, 1999. The increase is partially
offset by prepayments on the long-term obligations.
Other Liquidity Matters
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
October 31, 1999, the Company has spent approximately $20 million towards
this project.
In addition to the new management information system, as described
above, the Company has approved future purchases of approximately $50
million. These purchases are primarily to replace and improve equipment.
<PAGE> 28
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
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.
In February 1999, the Board of Directors of the Company authorized a
one million share stock repurchase program. During 1999, the Company had
repurchased 396,173 shares, including 268,276 Class A common shares and
127,897 Class B common shares. The total cost of the shares repurchased
was $11 million.
EFFECTS OF INFLATION
The effects of inflation did not have a material impact on the
Company's operations during 1999, 1998 or 1997.
YEAR 2000 MATTERS
Historically, certain information technology ("IT") systems of the
Company have used two digits rather than four digits to define that
applicable year, which could result in recognizing a date using "00" as the
year 1900 rather than the year 2000. IT systems include computer software
and hardware in the mainframe, midrange and desktop environments as well as
telecommunications. Additionally, the impact of the problem extends to
non-IT systems, such as automated plant systems and instrumentation. The
Year 2000 issues could potentially result in major failures or
misclassifications.
The Company has developed a compliance plan, which includes the
formation of a steering committee and a timetable for identifying,
evaluating, resolving and testing its Year 2000 issues. The steering
committee includes members of the Company's senior management and internal
audit department to ensure that the issues are being adequately addressed
and completed in a timely manner.
The Company maintains IT systems to handle a variety of administrative
and financial applications. The Company has completed its assessment,
remediation or replacement, and testing of its IT systems. For
non-IT systems, the machinery and equipment has been assessed, remediated
or replaced, tested and deemed Year 2000 compliant. As a necessary part of
the compliance plan, contingency plans have been developed.
The Company relies on third party suppliers for certain raw materials,
utilities and other key services. Under the compliance plan, the Company
has initiated efforts to reduce risks of disruption in its operations by
sending surveys to all of the Company's key suppliers. The Company has
received over 90% of the responses to these inquiries. Even though not all
of the responses to these inquiries have been received, the Company
<PAGE> 29
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
performed a risk assessment for all of the suppliers. Due to the nature of
the Company's operations and numerous suppliers, the Company does not
believe that any significant disruptions will occur in its operations.
However, contingency plans have been developed to address issues related to
the Company's third party suppliers not being Year 2000 compliant.
Year 2000 interruptions on customers' operations could potentially
result in reduced sales, increased inventory or receivable levels and
reduction in cash flows. However, the Company believes that its customer
base is broad enough to minimize the effect of such occurrences.
Nevertheless, surveys have been sent to all of the key customers of the
Company regarding their Year 2000 compliance and contingency plans have
been developed to address issues related to the Company's customers being
Year 2000 compliant.
The Company has spent approximately $8 million for its Year 2000
remediation efforts. This amount has been primarily expended during 1999.
Internal and external costs for system maintenance and modification have
been expensed as incurred (approximately $3 million) while spending for new
hardware, software or equipment have been capitalized and depreciated over
the assets' useful lives (approximately $5 million). The Company's Year
2000 expenditures are being funded out of its cash flows from operations.
The Company has completed its Year 2000 compliance plan and continues
to monitor the status of its Year 2000 program. To date, there have been no
major failures or misclassifications which resulted from Year 2000 issues.
Also, no significant disruptions in the Company's operations have occurred
as a result of its customers or suppliers not being Year 2000 compliant.
RECENT ACCOUNTING STANDARDS
The recent accounting standards are described in Note 1 to the
Consolidated Financial Statements.
FORWARD-LOOKING STATEMENTS; CERTAIN FACTORS AFFECTING FUTURE RESULTS
Statements contained in this Form 10-K or any other reports or
documents prepared by the Company or made by management of the Company may
be "forward-looking" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject
to certain risks and uncertainties that could cause the Company's operating
results to differ materially from those projected. The following factors,
among others, in some cases have affected and in the future could affect
the Company's actual financial performance.
<PAGE> 30
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Changes in General Economic Conditions. The Company's customers
generally consist of other manufacturers and suppliers who purchase the
Company's industrial shipping containers and containerboard for their own
containment and shipping purposes. Because the Company supplies a cross
section of industries, such as chemicals, food products, petroleum
products, pharmaceuticals and metal products, demand for the Company's
industrial shipping containers and containerboard and related corrugated
products has historically corresponded to changes in general economic
conditions of the United States, Canada and Mexico. Accordingly, the
Company's financial performance is substantially dependent upon the general
economic conditions existing in the United States, Canada and Mexico.
Competition. The Company's business of manufacturing and selling
industrial shipping containers and containerboard is highly competitive.
The most important competitive factors are price, quality and service.
Many of the Company's competitors are substantially larger and have
significantly greater financial resources.
Excess Capacity in Containerboard Segment. Industry demand for
containerboard products has declined in recent years causing excess
capacity in this segment of the Company's business. These excess capacity
levels and competitive pricing pressures in the containerboard market have
negatively impacted the Company's financial performance in recent years.
Raw Material Shortages. The Company's raw materials are principally
pulpwood, waste paper for recycling, paper, steel and resins. Some of
these materials have been, and in the future may be, in short supply.
Shortages in raw materials could adversely affect the Company's operations.
Environmental and Health and Safety Matters; Product Liability Claims.
The Company must comply with extensive rules and regulations regarding
federal, state and local environmental matters, such as air and water
quality and waste disposal. The Company must also comply with extensive
rules and regulations regarding safety and health matters. The failure to
materially comply with such rules and regulations could adversely affect
the Company's operations. Furthermore, litigation or claims against the
Company with respect to such matters could adversely affect the Company's
financial performance. The Company may also become subject to product
liability claims which could adversely affect the Company.
<PAGE> 31
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (concluded)
Risks Associated with Acquisitions. During the past several years the
Company has invested, and for the foreseeable future the Company
anticipates investing, a substantial amount of capital in acquisitions.
Acquisitions involve numerous risks, including the failure to retain key
employees and contracts and the inability to integrate businesses without
material disruption. In addition, other companies in the Company,s
industries have similar acquisition strategies. There can be no assurance
that any future acquisitions will be successfully integrated into the
Company's operations, that competition for acquisitions will not intensify
or that the Company will be able to complete such acquisitions on
acceptable terms and conditions. In addition, the costs of unsuccessful
acquisition efforts may adversely affect the Company's financial
performance.
Timber and Timberland Sales. The Company has a significant inventory
of standing timber and timberlands. The frequency and volume of sales of
timber and timberland will have an effect on the Company's financial
performance.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
The Company is subject to interest rate risk related to its financial
instruments which include borrowings under its $325 million revolving
credit facility and interest rate swap agreements with an aggregate
notional amount of $150 million. The Company does not enter into financial
instruments for trading or speculative purposes. The interest rate swap
agreements have been entered into to manage the Company's exposure to its
variable rate borrowing.
<PAGE> 32
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
(concluded)
The table below provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates. For the revolving credit facility, the table
presents principal cash flows and related weighted average interest rates
by contractual maturity dates. For interest rate swaps, the table presents
annual amortization of notional amounts and weighted average interest rates
by contractual maturity dates. Under the swap agreements, the Company
receives interest quarterly from the counterparty and pays interest
quarterly to the counterparty. The fair value of the revolving credit
facility is based on current rates available to the Company for debt of the
same remaining maturity. The fair values of the interest rate swap
agreements have been determined by the counterparty.
<TABLE>
Financial Instruments
(Dollars in millions)
<CAPTION>
Expected Maturity Date
There- Fair
2000 2001 2002 2003 2004 after Total Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revolving credit
facility:
Variable rate $ -- $ -- $ -- $258(a) $ -- $ -- $ 258 $ 258
Average interest
rate 6.20%(b)
Interest rate
swaps:
Variable to fixed
rates $ 20 $ 30 $ 10 $ 20 $ 10 $ 60 $ 150 $ 3
Average pay rate 6.15% 5.53% 6.15% 6.15% 6.15% 6.15% 6.03%
Average receive
rate (c) 5.87% 5.87% 5.87% 5.87% 5.87% 5.87% 5.87%
<FN>
(a) Includes $258 million of borrowings under the $325 million unsecured
revolving credit facility which expires in 2003. The Company has the option
under the credit facility to repay borrowings prior to 2003 or to request an
extension.
(b) Variable rate specified is based on the prime rate or LIBOR rate plus a
calculated margin at October 31, 1999. Interest is paid and reset
quarterly.
(c) The average receive rate is based upon the LIBOR rate at October 31,1999.
The rates presented are not intended to project the Company's expectations
for the future.
</TABLE>
Foreign Currency Risk
The Company's exposure to foreign currency fluctuations on its
financial instruments is not material because most of these instruments are
denominated in U.S. dollars. The net sales and total assets of the Company
which are denominated in foreign currencies (i.e., Canadian dollars and
Mexican pesos) represent less than 10% of the consolidated net sales and
total assets.
Commodity Price Risk
The Company has no financial instruments subject to commodity price
risks.
<PAGE> 33
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, 1999 1998 1997
(As Restated) (As Restated)
<S> <C> <C> <C>
Net sales $818,827 $814,432 $660,782
Other income, net 17,834 15,718 13,801
836,661 830,150 674,583
Cost of products sold 640,473 644,892 562,165
Selling, general and administrative
expenses 112,995 90,282 74,958
Restructuring costs -- 27,461 5,285
Interest expense 15,835 11,928 2,670
769,303 774,563 645,078
Income before income taxes and
equity in earnings of affiliates 67,358 55,587 29,505
Income taxes 26,740 22,483 11,419
Income before equity in earnings of
affiliates 40,618 33,104 18,086
Equity in earnings of affiliates 10,755 4,337 4,440
Net income $ 51,373 $ 37,441 $ 22,526
Basic earnings per share:
Class A Common Stock $ 1.78 $ 1.30 $ 0.78
Class B Common Stock $ 2.67 $ 1.94 $ 1.17
Diluted earnings per share:
Class A Common Stock $ 1.78 $ 1.29 $ 0.78
Class B Common Stock $ 2.67 $ 1.94 $ 1.17
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 34
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<CAPTION>
October 31, 1999 1998
(As Restated)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 8,935 $ 41,329
Canadian government securities 5,314 6,654
Trade accounts receivable - less allowance of
$2,456 for doubtful items ($2,918 in 1998) 124,754 113,931
Inventories 50,706 64,851
Deferred tax asset 6,857 13,355
Net assets held for sale 6,462 1,760
Prepaid expenses and other 14,270 16,626
Total current assets 217,298 258,506
LONG-TERM ASSETS
Goodwill - less amortization 142,977 123,677
Investment in affiliates 124,360 49,059
Other long-term assets 25,218 27,393
292,555 200,129
PROPERTIES, PLANTS AND EQUIPMENT - at cost
Timber properties - less depletion 9,925 9,067
Land 12,280 17,170
Buildings 124,594 157,501
Machinery and equipment 491,533 505,236
Capital projects in progress 40,651 17,045
678,983 706,019
Accumulated depreciation (277,850) (286,234)
401,133 419,785
$910,986 $878,420
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 35
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, 1999 1998
(As Restated)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 46,703 $ 45,361
Accrued payrolls and employee benefits 10,154 9,859
Restructuring reserves 5,157 32,411
Other current liabilities 10,017 10,604
Total current liabilities 72,031 98,235
LONG-TERM LIABILITIES
Long-term obligations 258,000 235,000
Deferred tax liability 48,960 42,299
Postretirement benefit liability 21,154 27,257
Other long-term liabilities 22,859 15,527
Total long-term liabilities 350,973 320,083
SHAREHOLDERS' EQUITY
Capital stock, without par value 10,207 9,936
Class A Common Stock:
Authorized 32,000,000 shares;
issued 21,140,960 shares;
outstanding 10,653,396 shares
(10,909,672 shares in 1998)
Class B Common Stock:
Authorized and issued 17,280,000 shares;
outstanding 11,873,896 shares
(12,001,793 shares in 1998)
Treasury stock, at cost (52,940) (41,858)
Class A Common Stock: 10,487,564 shares
(10,231,288 shares in 1998)
Class B Common Stock: 5,406,104 shares
(5,278,207 shares in 1998)
Retained earnings 537,126 500,068
Accumulated other comprehensive income
- foreign currency translation (6,411) (8,044)
487,982 460,102
$910,986 $878,420
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 36
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, 1999 1998 1997
(As Restated) (As Restated)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 51,373 $ 37,441 $ 22,526
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 42,360 39,686 31,926
Equity in earnings of affiliates (10,755) (4,337) (4,440)
Deferred income taxes 15,815 (964) 4,703
Gain on disposals of properties,
plants and equipment, net (7,962) (1,747) (7,023)
Increase (decrease) in cash from
changes in certain assets and
liabilities, net of effects from
acquisitions:
Trade accounts receivable (21,578) (4,271) (769)
Inventories 11,046 (2,794) 9,660
Prepaid expenses and other 2,846 (1,367) (2,563)
Other long-term assets 2,597 (5,447) (11,719)
Accounts payable 3,534 1,362 1,809
Accrued payrolls and employee benefits 307 (2,729) 130
Restructuring reserves (23,882) 17,858 4,319
Other current liabilities (1,858) 6,288 (6,989)
Postretirement benefit liability 591 (1,765) --
Other long-term liabilities 7,332 (352) (1,455)
Net cash provided by operating
activities 71,766 76,862 40,115
Cash flows from investing activities:
Acquisitions of companies, net of cash
acquired (74,233) (186,472) (41,121)
Disposals of investments in government
securities 1,340 -- 12,585
Purchases of investments in government
securities -- -- (639)
Purchases of properties, plants and
equipment (49,253) (38,093) (36,193)
Proceeds on disposals of properties,
plants and equipment 18,874 3,041 7,634
Net cash used in investing activities (103,272) (221,524) (57,734)
Cash flows from financing activities:
Proceeds from issuance of long-term
obligations 54,500 271,000 52,753
Payments on long-term obligations (31,500) (88,152) (25,804)
Debit issuance costs -- (410) --
Acquisitions of treasury stock (11,102) -- (31)
Exercise of stock options 291 207 735
Dividends paid (14,315) (13,756) (17,208)
Net cash (used in) provided by
financing activities (2,126) 168,889 10,445
Effects of exchange rates on cash 1,238 (617) (1,667)
Net (decrease) increase in cash and
cash equivalents (32,394) 23,610 (8,841)
Cash and cash equivalents at
beginning of year 41,329 17,719 26,560
Cash and cash equivalents at
end of year $ 8,935 $ 41,329 $ 17,719
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 37
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(As restated for 1997 and 1998)
(Dollars and shares in thousands, except per share amounts)
<CAPTION>
Accumulated
Other
Capital Stock Treasury Stock Retained Comprehensive Shareholders'
Shares Amount Shares Amount Earnings Income Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
November 1,
1996 22,875 $ 9,034 15,546 $(41,867) $471,065 $(3,207) $435,025
Net income 22,526 22,526
Other
comprehensive
income -
foreign
currency
translation (2,076) (2,076)
Comprehensive
income 20,450
Dividends paid
(Note 5):
Class A - $0.60 (6,526) (6,526)
Class B - $0.89 (10,682) (10,682)
Treasury shares
acquired (1) 1 (31) (31)
Stock options
exercised 28 705 (28) 30 735
Balance at
October 31,
1997 22,902 $ 9,739 15,519 $(41,868) $476,383 $(5,283) $438,971
Net income 37,441 37,441
Other
comprehensive
income -
foreign
currency
translation (2,761) (2,761)
Comprehensive
income 34,680
Dividends paid
(Note 5):
Class A - $0.48 (5,235) (5,235)
Class B - $0.71 (8,521) (8,521)
Stock options
exercised 9 197 (9) (10) 207
Balance at
October 31,
1998 22,911 $ 9,936 15,510 $(41,858) $500,068 $(8,044) $460,102
Net income 51,373 51,373
Other
comprehensive
income -
foreign
currency
translation 1,633 1,633
Comprehensive
income 53,006
Dividends paid
(Note 5):
Class A - $0.50 (5,435) (5,435)
Class B - $0.74 (8,880) (8,880)
Treasury shares
acquired (396) 396 (11,102) (11,102)
Stock options
exercised 12 271 (12) 20 291
Balance at
October 31,
1999 22,527 $10,207 15,894 $(52,940) $537,126 $(6,411) $487,982
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 38
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The Business
Greif Bros. Corporation and its subsidiaries (the "Company")
principally manufacture industrial shipping containers and containerboard
and corrugated products which it sells to customers in many industries
primarily in the United States, Canada and Mexico. The Company has over 80
operating locations in the United States, Canada and Mexico. In addition,
the Company owns timber properties which are harvested and regenerated in
the United States and Canada.
Due to the variety of its products, the Company has many customers
buying different types of its 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 and metal
products, and must make spot deliveries on a day-to-day basis as its
products are required by its customers, the Company does not operate on a
backlog to any significant extent and maintains only limited levels of
finished goods. Many customers place their orders weekly for delivery
during the week.
The Company's raw materials are principally pulpwood, waste paper for
recycling, paper, steel and resins.
The approximate number of persons employed during the year was 5,100.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of Greif
Bros. Corporation and its subsidiaries. All intercompany transactions and
balances have been eliminated in consolidation.
<PAGE> 39
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 certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. The most significant estimates are
related to the allowance for doubtful accounts, expected useful lives
assigned to properties, plants and equipment and goodwill, restructuring
reserves, postretirement benefits, income taxes and contingencies. Actual
amounts could differ from those estimated.
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 enacted tax rates that are
expected to be in effect in the periods which the deferred tax liabilities
and assets are expected to be settled or realized.
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 of $1,391,000 in 1999
($23,300,000 in 1998).
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily of trade
accounts receivable. Such credit risk is considered by management to be
limited due to the Company's many customers, none of whom are considered
principal in the total operations of the Company, doing business in a
variety of industries throughout the United States, Canada and Mexico.
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.
<PAGE> 40
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
Inventories
Inventories are stated at the lower of cost (principally on last-in,
first-out basis) or market. The inventories are comprised as follows at
October 31 (Dollars in thousands):
<CAPTION>
1999 1998
<S> <C> <C>
Finished goods $20,504 $ 20,557
Raw materials and work-in-process 68,072 87,694
88,576 108,251
Reduction to state inventories on
last-in, first-out basis (37,870) (43,400)
$50,706 $ 64,851
</TABLE>
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 as
follows:
<TABLE>
<CAPTION>
Years
<S> <C>
Buildings 30-45
Machinery and equipment 3-19
</TABLE>
Depreciation expense was $35,237,000 in 1999, $35,585,000 in 1998 and
$30,660,000 in 1997. Expenditures for repairs and maintenance are charged
to expense 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
allowance accounts. Gains or losses are credited or charged to income as
incurred.
<PAGE> 41
Item 8. Financial Statements and Supplementary Data (continued)
Net Assets Held for Sale
Net assets held for sale represent land, buildings and land
improvements less accumulated depreciation for locations that have been
closed. As of October 31, 1999 and October 31, 1998, there were nine and
three locations held for sale, respectively, the majority of which were the
result of the 1998 restructuring plan. The net sales and loss before income
tax benefit of these locations were $22,132,000 and $1,762,000,
respectively, during 1999. The net sales and income before income taxes of
these locations were $15,433,000 and $561,000, respectively, during 1998.
The effect of suspending depreciation on the facilities held for sale is
immaterial to the results of operations. The net assets held for sale have
been listed for sale, and it is the Company's intention to complete the
sales within the upcoming year.
Internal Use Software
In 1998, the Company adopted Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." 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. Costs incurred to develop the
software during the application development stage, upgrades and
enhancements that provide additional functionality are capitalized.
Adoption of SOP 98-1 did not have a significant impact on the Company's
financial position or results of operations.
Goodwill
Goodwill is amortized on a straight-line basis over fifteen or twenty-
five year periods. The weighted average period of goodwill amortization is
twenty-three years. Amortization expense was $6,482,000 in 1999,
$3,547,000 in 1998 and $1,032,000 in 1997. Accumulated amortization was
$11,081,000 at October 31, 1999 ($4,599,000 at October 31, 1998).
The Company's policy is to periodically review its goodwill and other
long-lived assets based upon the evaluation of such factors as the
occurrence of a significant adverse event or change in the environment in
which the business operates or if the expected future net cash flows
(undiscounted and without interest) would become less than the carrying
amount of the asset. An impairment loss would be recorded in the period
such determination is made based on the fair value of the related
businesses.
<PAGE> 42
Item 8. Financial Statements and Supplementary Data (continued)
Financial Instruments
The carrying amounts of cash and cash equivalents, Canadian government
securities and long-term obligations approximate their fair values. The
carrying amounts of interest rate swap agreements are $2,000 at October 31,
1999 and zero at October 31, 1998. The fair values of interest rate swap
agreements are $2,738,000 at October 31, 1999 and $(7,020,000) at October
31, 1998.
The fair values of the long-term obligations are estimated based on
current rates available to the Company for debt of the same remaining
maturities. The fair values of interest rate swap agreements have been
determined by the counterparties.
The Company uses interest rate swaps for the purpose of hedging its
exposure to fluctuations in interest rates. The swaps meet the requirements
of designation and correlation for use of the accrual method of accounting.
Differentials in the swapped amounts are recorded as adjustments of the
underlying periodic cash flows that are being hedged.
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 effects of
translating assets and liabilities of the Company's foreign operations, are
presented in the Consolidated Statements of Changes in Shareholders' Equity
in "Accumulated Other Comprehensive Income." The transaction gains and
losses included in income are immaterial.
Earnings Per Share
The Company has two classes of common stock and, as such, applies the
"two-class method" of computing earnings per share as prescribed in SFAS
No. 128, "Earnings Per Share." In accordance with the statement, earnings
are allocated first to Class A and Class B Common Stock to the extent that
dividends are actually paid and the remainder allocated assuming all of the
earnings for the period have been distributed in the form of dividends.
<PAGE> 43
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
The following is a reconciliation of the shares used to calculate
basic and diluted earnings per share:
<CAPTION>
For the years ended October 31,
1999 1998 1997
<S> <C> <C> <C>
Class A Common Stock:
Basic earnings per share 10,882,081 10,905,692 10,878,233
Assumed conversion of stock
options 19,229 69,014 16,670
Diluted earnings per share 10,901,310 10,974,706 10,894,903
Class B Common Stock:
Basic and diluted earnings per
share 11,989,605 12,001,793 12,001,793
</TABLE>
There are 496,789 options that are antidilutive for 1999 (12,000 for
1998 and 298,600 for 1997).
Environmental Cleanup Costs
The Company expenses environmental expenditures related to existing
conditions resulting from past or current operations and from which no
current or future benefit is discernable. Expenditures which extend the
life of the related property or mitigate or prevent future environmental
contamination are capitalized. The Company determines its liability on a
site by site basis and records a liability at the time when it is probable
and can be reasonably estimated. The Company's estimated liability is
reduced to reflect the anticipated participation of other potentially
responsible parties in those instances where it is probable that such
parties are legally responsible and financially capable of paying their
respective shares of the relevant costs.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
1999 presentation.
Recent Accounting Standards
The Financial Accounting Standards Board ("FASB") issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," in June
1998 and SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133," in
June 1999, which are effective for all quarters of 2001 for the Company.
The statements require 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 determined what impact these statements will have on the
<PAGE> 44
Item 8. Financial Statements and Supplementary Data (continued)
Consolidated Financial Statements.
NOTE 2 - ACQUISITIONS AND DISPOSITIONS
CorrChoice Joint Venture
On November 1, 1998, the Company entered into a Joint Venture
Agreement with RDJ Holdings Inc. ("RDJ") and a minority shareholder of a
subsidiary of Ohio Packaging Corporation (the "Minority Shareholder") to
form CorrChoice, Inc. ("CorrChoice"). Pursuant to the terms of the Joint
Venture Agreement, the Company contributed all of its stock of Michigan
Packaging Company ("Michigan Packaging") and Ohio Packaging Corporation
("Ohio Packaging") in exchange for a 63.24% ownership interest in
CorrChoice. RDJ and the Minority Shareholder contributed all of their stock
of Ohio Packaging and its subsidiaries in exchange for a 36.76% ownership
interest in CorrChoice. The contribution of the Michigan Packaging stock
and the Ohio Packaging stock was recorded by the Company at book value with
no gain or loss recognized in accordance with Emerging Issues Task Force
("EITF') No. 86-29, "Nonmonetary Transactions: Magnitude of Boot and the
Exceptions to the Use of Fair Value."
In connection with the closing of the CorrChoice joint venture, the
Company and RDJ entered into a voting agreement which enables the Company
and RDJ to be equally represented on CorrChoice's Board of Directors. As
such, the Company does not control CorrChoice. Therefore, in accordance
with generally accepted accounting principles, the Company has recorded its
investment in CorrChoice using the equity method of accounting.
Prior to the formation of the CorrChoice joint venture, the Company
accounted for its investment in Ohio Packaging's non-voting stock under the
cost method of accounting because the Company did not have significant
influence over the operations of Ohio Packaging. Because the Company's
investment in the common stock of Ohio Packaging that previously was
accounted for by the cost method now qualifies for use of the equity method
(through the Company's ownership interest in CorrChoice), the Company's
investment in Ohio Packaging, results of operations and retained earnings
were retroactively restated in accordance with Accounting Principles Board
Opinion ("APBO") No. 18, "The Equity Method of Accounting for Investments
in Common Stock," to account for the Company's ownership interest in Ohio
Packaging under the equity method. The previously reported amounts, Ohio
Packaging adjustments and the restated amounts follow (Dollars in
thousands, except per share amounts):
<PAGE> 45
<TABLE>
Item 8. Financial Statements and Supplementary Data (continued)
<CAPTION>
The Company
(As Previously Ohio Packaging The Company
Reported) Adjustments (As Restated)
<S> <C> <C> <C>
As of and for the year
ended October 31, 1998:
Investment in affiliates $ -- $ 49,059 $ 49,059
Other long-term assets $ 27,395 $ (2) $ 27,393
Deferred tax liability $ 36,412 $ 5,887 $ 42,299
Retained earnings $456,898 $ 43,170 $500,068
Net income $ 33,104 $ 4,337 $ 37,441
Basic earnings per share:
Class A Common Stock $ 1.15 $ 0.15 $ 1.30
Class B Common Stock $ 1.71 $ 0.23 $ 1.94
Diluted earnings per share:
Class A Common Stock $ 1.15 $ 0.14 $ 1.29
Class B Common Stock $ 1.71 $ 0.23 $ 1.94
As of and for the year
ended October 31, 1997:
Investment in affiliates $ -- $ 44,130 $ 44,130
Other long-term assets $ 22,022 $ (2) $ 22,020
Deferred tax liability $ 29,740 $ 5,295 $ 35,035
Retained earnings $437,550 $ 38,833 $476,383
Net income $ 18,086 $ 4,440 $ 22,526
Basic earnings per share:
Class A Common Stock $ 0.63 $ 0.15 $ 0.78
Class B Common Stock $ 0.94 $ 0.23 $ 1.17
Diluted earnings per share:
Class A Common Stock $ 0.63 $ 0.15 $ 0.78
Class B Common Stock $ 0.94 $ 0.23 $ 1.17
</TABLE>
The difference between the cost basis of the Company's investment in
the underlying equity of CorrChoice of $5,600,000 is being amortized over a
fifteen-year period.
At October 31, 1999, the financial position of CorrChoice included
current and non-current assets of $112 million and $95 million,
respectively, and current and non-current liabilities of $14 million and $8
million, respectively. For the year ended October 31, 1999, the results of
operations for CorrChoice included net sales of $262 million, gross profit
of $47 million, operating income of $29 million and net income of $19
million.
<PAGE> 46
Item 8. Financial Statements and Supplementary Data (continued)
Intermediate Bulk Containers ("IBC") Acquisition
On January 11, 1999, the Company purchased the assets of the IBC
business from Sonoco Products Company ("Sonoco") for $38,013,000 in cash.
In addition, the Company paid $234,000 in legal and professional fees
related to the acquisition. Prior to the acquisition date, and subsequent
to March 30, 1998, the Company marketed and sold IBCs under a
distributorship agreement with Sonoco.
The acquisition of the IBC business 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 their
fair values at the date of acquisition. The fair values of the assets
acquired and liabilities assumed were $15,677,000 and $1,234,000,
respectively. The excess of the purchase price over the fair values of the
net assets acquired of $23,804,000 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 business,
its customers and the risk of obsolescence of its products.
Great Lakes and Trend Pak Acquisitions
On April 5, 1999, the Company purchased the common stock of Great
Lakes Corrugated Corp. ("Great Lakes") and Trend Pak, Inc. ("Trend Pak")
from their shareholders for $20,813,000 in cash. In addition, the Company
paid $107,000 in legal and professional fees related to the acquisitions.
The acquisitions of Great Lakes and Trend Pak 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 their fair values at the date of acquisition. The fair values
of the assets acquired and liabilities assumed were $14,770,000 and
$5,895,000, respectively. The excess of the purchase price over the fair
values of the net assets acquired of $12,045,000 has been recorded as
goodwill. The goodwill is being amortized on a straight-line basis over
fifteen years based on careful consideration regarding the age of the
acquired businesses, their customers and the risk of obsolescence of their
products.
Abzac-Greif Investment
During June 1999, Greif Containers Inc., a wholly owned Canadian
subsidiary of the Company, exchanged its spiral core manufacturing assets
with Abzac S.A., a privately held company in France, for a 49% equity
interest in Abzac's fibre drum business (which will be known as "Abzac-
Greif"). The effective date of the transaction was January 1, 1999. The
investment in Abzac-Greif of $2.0 million has been recorded using the
equity method of accounting.
<PAGE> 47
Item 8. Financial Statements and Supplementary Data (continued)
Industrial Containers Business of Sonoco Acquisition
On March 30, 1998, pursuant to the terms of a Stock Purchase Agreement
between the Company and 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 and fibre drums principally in the United States and Mexico and
refurbishing and reconditioning plastic drums principally in the United
States and Mexico.
As consideration for the shares of KMI, SPD, GBC Holding and Fibro
Tambor and the membership interest of Sonoco in TPS, the Company paid
$182,895,000 in cash. In addition, the Company paid $1,218,000 in legal and
professional fees related to the acquisition. The acquisition was funded
through new long-term obligations (see Note 4).
The acquisition of the industrial containers business from 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 their fair values at the date of
acquisition. The fair values of the assets acquired and the liabilities
assumed were $127,004,000 and $42,233,000, respectively. The excess of the
purchase price over the fair values of the net assets acquired of
$99,342,000 has been recorded as goodwill. During 1999, the Company's
purchase price allocation was finalized resulting in a $10,065,000
reduction in goodwill and acquisition liabilities. The reasons for this
decrease are the termination of certain postretirement benefits of
$6,694,000 and an adjustment to the restructuring liability of $3,371,000.
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.
Other Acquisitions
In November 1996, the Company purchased the assets of Aero Box
Company, a corrugated container company, located in Michigan. In March
1997, the Company acquired the assets of two steel drum manufacturing
plants located in California and Ontario, Canada. In May 1997, the Company
purchased all of the outstanding common stock of Independent Container,
Inc., a corrugated container company with two locations in Kentucky and a
location in Indiana. In June 1997, the Company purchased all of the
outstanding common stock of Centralia Container, Inc., located in Illinois.
<PAGE> 48
Item 8. Financial Statements and Supplementary Data (continued)
These other 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 for these other acquisitions have not been presented because
the results of these acquisitions were not significant to the Company.
Dispositions
In February 1997, the Company sold its injection molding plant in
Ohio. In addition, the Company sold its wood component facilities, which
manufactured door panels, wood moldings and window and door parts, with
locations in Kentucky, California, Washington and Oregon in August 1997.
The transactions resulted in a gain of $3.7 million which is included in
other income.
Pro Forma Information
The following pro forma (unaudited) information assumes the CorrChoice
joint venture, the acquisition of the IBC business, the acquisitions of
Great Lakes and Trend Pak, the investment in Abzac-Greif and the
acquisition of the industrial containers business from Sonoco had occurred
on November 1, 1997 (Dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
For the years ended
October 31,
1999 1998
<S> <C> <C>
Net sales $827,412 $846,936
Net income $ 50,239 $ 37,558
Basic and diluted earnings per share:
Class A Common Stock $ 1.74 $ 1.30
Class B Common Stock $ 2.61 $ 1.95
</TABLE>
The above amounts reflect adjustments for the contribution of Michigan
Packaging to the CorrChoice joint venture and recognition of the Company's
equity interest in CorrChoice. In addition, the amounts reflect the
contribution of the spiral core assets and the recognition of the equity
interest in Abzac-Greif by the Company's Canadian operation. Further, the
amounts reflect adjustments for interest expense related to the debt issued
for the purchases, amortization of goodwill and depreciation expense on the
revalued properties, plants and equipment resulting from the acquisitions.
<PAGE> 49
Item 8. Financial Statements and Supplementary Data (continued)
The pro forma information, as presented above, is not necessarily
indicative of the results which would have been obtained had the
transactions occurred on November 1, 1997, nor are they necessarily
indicative of future results.
NOTE 3 - RESTRUCTURING CHARGES
During the third quarter of 1998, the Company approved a plan to
consolidate some of its locations in order to improve operating
efficiencies and capabilities. The plan was the result of an in-depth
study to determine whether certain locations, either existing or newly
acquired, should be closed and the sales and manufacturing volume
associated with such plants relocated to a different facility. Eighteen
existing fibre drum, steel drum and corrugated container plants were
identified to be closed. The plants are located in Alabama, Georgia,
Illinois, Kansas, Maryland, Massachusetts, Missouri, New Jersey, North
Carolina, Ohio, Pennsylvania, Tennessee and Texas. As a result, the
Company recognized a pretax restructuring charge of approximately $27.5
million, consisting of $20.9 million in employee separation costs
(approximately 500 employees) and $6.6 million in other costs. The $6.6
million in other costs included $2.5 million for the impairment of long-
lived assets due to the significant reduction in the remaining useful lives
of the assets resulting from the decision to exit or close the facilities
and other exit costs expected to be incurred after operations had ceased to
maintain the facilities ($1.9 million) and remove the equipment ($2.2
million). The plant closures were announced and have been completed except
for four plants expected to be announced and closed during 2000. The
Company has sold or is planning to sell its seventeen owned facilities. A
lease has been terminated on the remaining plant. Subsequent to the
recognition of the restructuring charge, the Company did incur or, for
plants not yet closed, expects to incur additional costs to relocate
machinery and equipment and employees upon the closure of these plants.
The amounts charged against this restructuring reserve during 1999 are
as follows (Dollars in thousands):
<TABLE>
<CAPTION>
Balance at Balance at
10/31/98 Activity 10/31/99
<S> <C> <C> <C>
Cash charges:
Employee separation costs $17,735 $(15,627) $2,108
Cash and non-cash charges:
Impairment of long-lived assets
and other exit costs 7,012 (5,571) 1,441
$24,747 $(21,198) $3,549
</TABLE>
<PAGE> 50
Item 8. Financial Statements and Supplementary Data (continued)
The restructuring reserve activity in the preceding table includes the
following non-cash charges: $1.0 million of accrued employee separation
costs related to employees that have been terminated as of October 31, 1999
have been reclassified to accrued compensation costs; and a $1.4 million
charge for the impairment of long-lived assets has been reclassified as a
valuation account recorded net against the related fixed asset accounts.
During the year ended October 31, 1999, 299 employees were terminated
in accordance with this restructuring plan. As of October 31, 1999, there
were a total of 403 employees that had been terminated and provided
severance benefits under this restructuring plan.
In addition, in connection with the acquisition of the industrial
containers business from Sonoco and the consolidation plan, five locations
purchased as part of the acquisition were identified to be closed. The
locations are located in California, Georgia, Missouri and New Jersey. The
plan to close or consolidate these locations was being formulated at the
date of acquisition. Accordingly, the Company recognized a $9.5 million
restructuring liability in its purchase price allocation related to these
locations during the second quarter of 1998. This liability was accounted
for under EITF No. 95-3, "Recognition of Liabilities in Connection with a
Purchase Business Combination." The liability consisted of $6.1 million in
employee separation costs (approximately 150 employees), $1.2 million in
lease termination costs and $2.2 million in other exit costs. The $2.2
million in other exit costs included amounts expected to be incurred after
operations had ceased to maintain the facilities ($1.0 million), remove the
equipment ($0.5 million) and other closing costs ($0.7 million). The
Company has sold or is planning to sell three of these locations. The
leases have been or will be terminated on the remaining two locations.
The amounts charged against this restructuring reserve during 1999 are
as follows (Dollars in thousands):
<TABLE>
<CAPTION>
Balance at Balance at
10/31/98 Activity 10/31/99
<S> <C> <C> <C>
Cash charges:
Employee separation costs $5,722 $(4,114) $1,608
Lease termination costs 1,183 (1,183) --
Cash and non-cash charges:
Other exit costs 759 (759) --
$7,664 $(6,056) $1,608
</TABLE>
<PAGE> 51
Item 8. Financial Statements and Supplementary Data (continued)
The restructuring reserve activity in the preceding table includes the
following non-cash charges: $0.3 million of accrued employee separation
costs related to employees that have been terminated as of October 31, 1999
have been reclassified to accrued compensation costs; and an adjustment of
$3.4 million was recorded as a reduction to goodwill in accordance with
EITF No. 95-3 because the ultimate cost is less than the amount initially
recorded in the purchase price allocation.
During the year ended October 31, 1999, 89 employees were terminated
in accordance with this restructuring plan. As of October 31, 1999, there
were a total of 96 employees that had been terminated and provided
severance benefits under this restructuring plan.
During the fourth quarter of 1997, the Company adopted a plan to
consolidate its operations. This plan included a realignment of some of the
administrative functions that were being performed at the subsidiary and
division offices which resulted in staff reductions. In addition, costs
associated with the reduction of certain support functions were incurred.
As a result, a restructuring charge of $5.3 million, consisting of $3.8
million of severance benefits and $1.5 million for the impairment of long-
lived assets, was recorded in the results of operations. During 1998, the
Company paid $4.1 million in severance benefits to 62 employees. The
additional $0.3 million was charged to the results of operations. As of
October 31, 1998, all expenditures related to the charge had been made and
the liability eliminated.
NOTE 4 - 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.
The Company is required to pay a facility fee each quarter equal to .025%
to .050% of the total commitment amount based upon the Company's leverage
ratio. As of October 31, 1999, the Company has borrowed $258 million
primarily to fund the Company's recent acquisitions and to consolidate all
of the Company's other long-term borrowings. The interest rate is either
based on the prime rate or LIBOR rate plus a calculated margin amount (.33%
at October 31, 1999). Interest resets on a quarterly basis. At October 31,
1999, the interest rate is 6.20%. The revolving credit loans are due on
March 31, 2003, however, management intends to extend a portion of the debt
beyond that date.
At October 31, 1999, the Company has outstanding $6.2 million in
letters of credit under the credit agreement. The quarterly fee related to
these letters of credit is .03% of the outstanding amount plus a calculated
margin (.33% at October 31, 1999).
<PAGE> 52
Item 8. Financial Statements and Supplementary Data (continued)
The revolving credit facility contains certain covenants. Under the
most restrictive of these covenants, the Company is required to maintain a
certain leverage ratio, sufficient coverage of interest expense and a
minimum net worth. In addition, the Company is limited with respect to
additional debt. At October 31, 1999, the Company was in compliance with
these covenants.
During 1998, the Company entered into an interest rate swap agreement
with an original notional amount of $140 million which periodically reduces
through the expiration date of March 30, 2008 ($130 million at October 31,
1999). The Company entered into another swap agreement during 1998 with a
notional amount of $20 million expiring on October 31, 2001. The interest
rate swaps were entered into to manage the Company's exposure to its
variable rate debt. Under the agreements, the Company receives interest
quarterly from the counterparty equal to the LIBOR rate and pays interest
quarterly to the counterparty at a fixed rate of 6.15% and 5.22% for the
$130 million and $20 million swap agreements, respectively. The
differentials to be currently paid or received under these agreements are
recorded as an adjustment to interest expense and are included in interest
receivable or payable. The adjustment to interest expense resulting from
the differentials was an increase of $1,414,000 during 1999 and $348,000
during 1998.
Annual maturities of long-term obligations are $258 million in 2003.
During 1999, the Company paid $15,472,000 of interest ($11,500,000 in
1998 and $3,726,000 in 1997) related to its long-term obligations.
Interest of $377,000 in 1999, $344,000 in 1998 and $1,163,000 in 1997 was
capitalized.
The Company has entered into non-cancelable operating leases for
buildings, trucks and computer equipment. The future minimum lease payments
for the non-cancelable operating leases are $6,618,000 in 2000, $6,105,000
in 2001, $4,067,000 in 2002, $3,024,000 in 2003, $2,160,000 in 2004 and
$2,722,000 thereafter. Rent expense was $12,456,000 in 1999, $8,615,000 in
1998 and $5,684,000 in 1997.
NOTE 5 - CAPITAL STOCK
Class A Common Stock is entitled to cumulative dividends of one cent a
share per year after which Class B Common Stock is entitled to non-
cumulative dividends up to a half cent a share per year. Further
distribution in any year must be made in proportion of one cent a share for
Class A Common Stock to one and a half 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> 53
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 6 - STOCK OPTIONS
The Company has 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 options which 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 options are granted and become exercisable two years after date of
grant. Options expire ten years after date of grant.
A Directors' Stock Option Plan ("Directors' Plan") which was adopted
in 1996, 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 options which may be granted may not exceed 100,000 shares.
Under the terms of the Directors' Plan, options are granted at exercise
prices equal to the market value on the date options are granted and become
exercisable immediately. Options expire ten years after date of grant.
In 1999, 225,452 incentive stock options were granted with option
prices of $24.25 per share. Under the Directors' Plan, 10,000 options were
granted to outside directors with option prices of $26.81 per share.
In 1998, 206,275 incentive stock options were granted with option
prices of $31.75 per share. Under the Directors' Plan, 12,000 options were
granted to outside directors with option prices of $36.53 per share.
In 1997, 136,500 incentive stock options were granted with option
prices of $30.00 per share. Under the Directors' Plan, 12,000 options were
granted to outside directors with option prices of $30.50 per share.
The Company applies APBO No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its stock option
plans. If compensation cost would have been determined based on the fair
values at the date of grant under SFAS No. 123, "Accounting for Stock-Based
Compensation," pro forma net income and earnings per share would have been
as follows (Dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
For the years ended
October 31,
1999 1998 1997
<S> <C> <C> <C>
Net income $49,787 $36,055 $21,672
Basic and diluted earnings per share:
Class A Common Stock $ 1.73 $ 1.25 $ 0.75
Class B Common Stock $ 2.58 $ 1.87 $ 1.12
</TABLE>
<PAGE> 54
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
The fair value for each option is estimated on the date of grant using
the Black-Scholes option pricing model, as allowed under SFAS No. 123, with
the following assumptions:
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Dividend yield 1.90% 1.36% 1.31%
Volatility rate 25.10% 22.00% 20.60%
Risk-free interest rate 6.15% 5.36% 6.29%
Expected option life 6 years 6 years 6 years
</TABLE>
The fair value of shares granted in 1999, 1998 and 1997 were $7.33,
$9.08 and $9.03, respectively, as of grant date. Stock option activity was
as follows (Shares in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Beginning balance 659 $29.56 456 $28.26 374 $27.25
Granted 236 $24.36 218 $32.01 148 $30.04
Forfeited 22 $29.29 6 $29.63 38 $27.11
Exercised 12 $24.26 9 $22.94 28 $25.79
Ending balance 861 $28.23 659 $29.56 456 $28.26
</TABLE>
As of October 31, 1999, the outstanding stock options had exercise
prices ranging from $22.94 to $36.53 and a remaining weighted average
contractual life of 8.11 years.
There are 432,000 options which were exercisable at October 31, 1999
(317,000 options at October 31, 1998 and 181,000 options at October 31,
1997).
<PAGE> 55
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
NOTE 7 - INCOME TAXES
Income tax expense is comprised as follows (Dollars in thousands):
<CAPTION>
State
U.S. and
Federal Foreign Local Total
<S> <C> <C> <C> <C>
1999:
Current $ 7,959 $2,306 $ 660 $10,925
Deferred 13,702 360 1,753 15,815
$21,661 $2,666 $2,413 $26,740
1998:
Current $15,755 $2,768 $3,039 $21,562
Deferred 1,763 -- (842) 921
$17,518 $2,768 $2,197 $22,483
1997:
Current $ 3,617 $2,097 $1,607 $ 7,321
Deferred 4,087 (96) 107 4,098
$ 7,704 $2,001 $1,714 $11,419
</TABLE>
Foreign income before income taxes amounted to $5,201,000 in 1999
($6,212,000 in 1998 and $5,241,000 in 1997).
The following is a reconciliation of the U.S. Federal statutory income
tax rate to the Company's effective tax rate:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
U.S. Federal statutory tax rate 35.0% 35.0% 35.0%
State and local taxes, net of
Federal tax benefit 3.6% 2.6% 3.8%
Other 1.1% 2.9% (0.1%)
Effective income tax rate 39.7% 40.5% 38.7%
</TABLE>
<PAGE> 56
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
Significant components of the Company's deferred tax assets and
liabilities are as follows at October 31 (Dollars in thousands):
<CAPTION>
1999 1998
<S> <C> <C>
Restructuring reserves $ 2,047 $ 8,964
Workers compensation reserve 1,713 1,663
Vacation accrual 1,251 1,335
Other 1,846 1,393
Current deferred tax asset $ 6,857 $13,355
Deferred compensation $ 1,713 $ 1,614
Accrued environmental reserve 699 644
Other 1,599 238
Long-term deferred tax asset $ 4,011 $ 2,496
Properties, plants and equipment $39,381 $31,788
Equity investments 6,813 5,887
Timber condemnation 5,115 3,868
Other 1,662 3,252
Long-term deferred tax liability $52,971 $44,795
</TABLE>
At October 31, 1999 and 1998, the Company has provided deferred income
taxes on all of its undistributed Canadian earnings.
During 1999, the Company paid $14,737,000 in income taxes ($22,697,000
in 1998 and $13,334,000 in 1997).
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 plans' 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 number of shares of the Company's common stock as
follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Class A Common Stock 123,752 127,752
Class B Common Stock 80,355 80,355
<PAGE> 57
Item 8. Financial Statements and Supplementary Data (continued)
</TABLE>
<TABLE>
The components of net periodic pension cost include the following
(Dollars in thousands):
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Service cost $4,760 $2,956 $2,714
Interest cost 5,279 4,584 4,548
Expected return on plan assets (6,238) (5,716) (7,569)
Amortization of prior service cost 662 508 3,294
Amortization of initial net asset (562) (562) (615)
Recognized net actuarial loss (gain) 66 (231) (122)
Cost of special termination benefits -- 852 --
3,967 2,391 2,250
Multi-employer and non-U.S. pension
expense 572 386 370
Total pension expense $4,539 $2,777 $2,620
</TABLE>
The weighted average assumptions used in the actuarial valuations are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Discount rate 7.50% 7.00% 8.00%
Expected return on plan assets 8.25% 8.25% 8.25%
Rate of compensation increase 4.25% 4.75% 4.75%
</TABLE>
<PAGE> 58
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
The following table sets forth the plans' change in benefit
obligation, change in plan assets and amounts recognized in the
Consolidated Financial Statements (Dollars in thousands):
<CAPTION>
1999 1998
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $76,223 $58,525
Service cost 4,760 2,956
Interest cost 5,279 4,584
Amendments 450 1,832
Actuarial (gain) loss (7,822) 11,246
Benefits paid (3,793) (3,772)
Cost of special termination benefits -- 852
Benefit obligation at end of year $75,097 $76,223
Change in plan assets:
Fair value of plan assets at beginning of year $74,986 $70,555
Actual return on plan assets 11,536 3,234
Employer contribution 1,922 4,969
Benefits paid (3,793) (3,772)
Fair value of plan assets at end of year $84,651 $74,986
Funded status $ 9,584 $(1,231)
Unrecognized net actuarial (gain) loss (8,942) 4,268
Unrecognized prior service cost 9,439 9,929
Unrecognized initial net asset (6,619) (7,459)
Net amount recognized $ 3,462 $ 5,507
Amounts recognized in the statement of financial
position consist of:
Prepaid benefit cost $ 3,655 $ 5,507
Accrued benefit liability (193) --
Intangible asset 153 3,422
Minimum liability (153) (3,422)
Net amount recognized $ 3,462 $ 5,507
</TABLE>
The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for the pension plans with accumulated benefit
obligations in excess of plan assets were $18,029,000, $18,029,000 and
$17,682,000, respectively, as of October 31, 1999 and $18,134,000,
$18,134,000 and $15,489,000, respectively, as of October 31, 1998.
<PAGE> 59
Item 8. Financial Statements and Supplementary Data (continued)
In addition to the defined benefit pension plans, the Company has
several voluntary 401(k) savings plans which cover eligible employees. For
certain plans, the Company matches a percentage of each employee's
contribution up to a maximum percentage of base salary. Company
contributions to the 401(k) plans were $546,000 in 1999, $566,000 in 1998
and $350,000 in 1997.
NOTE 9 - POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
In conjunction with the acquisition of the industrial containers
business from Sonoco, the Company assumed an obligation to reimburse Sonoco
for its actual costs incurred in providing postretirement health care
benefits to certain employees. Contributions by the Company are limited to
an aggregate annual payment of $1,350,000 ($1,012,500 in 1998) for eligible
employees at the date of purchase. Further, the Company is responsible for
the cost of certain union hourly employees who were not eligible at the
date of closing. The Company intends to fund these benefits from
operations.
The components of net periodic cost for the postretirement benefits
include the following (Dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Service cost $ -- $ 380
Interest cost 1,840 1,133
Cost of special termination
benefits -- 306
$1,840 $1,819
</TABLE>
The following table sets forth the change in benefit obligation
(Dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Benefit obligation at beginning of year $27,257 $27,320
Service cost -- 380
Interest cost 1,840 1,133
Actuarial loss 468 691
Plan curtailment gain (8,411) (2,573)
Cost of special termination benefits -- 306
$21,154 $27,257
</TABLE>
The plan curtailment gain relates to the resolution of certain benefit
matters which resulted in the termination of certain benefit obligations.
The 1999 curtailment gain includes a reduction in accrued benefit
obligations of $6,694,000 existing as of the acquisition date. As a result,
upon final resolution of the benefit matters in 1999, the Company adjusted
its purchase price allocation and reduced goodwill by $6,694,000.
<PAGE> 60
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
The measurement assumes a discount rate of 7.50%. The health care cost
trend rates on gross eligible charges are as follows:
<CAPTION>
Medical Dental
<S> <C> <C>
Current trend rate 8.25% 6.25%
Ultimate trend rate 4.75% 4.75%
</TABLE>
A one percentage point increase/decrease in the assumed health care
cost trend rates would increase/decrease the postretirement benefit
obligation as of October 31, 1999 by approximately $280,000 and the total
of the service and interest cost components of postretirement benefits for
the year then ended by approximately $21,000.
NOTE 10 - CONTINGENT LIABILITIES
Various lawsuits, claims and proceedings have been or may be
instituted or asserted against the Company, including those pertaining to
environmental, product liability, safety and health matters. While the
amounts claimed may be substantial, the ultimate liability cannot now be
determined because of the considerable uncertainties that exist.
Therefore, it is possible that results of operations or liquidity in a
particular period could be materially affected by certain contingencies.
However, based upon the facts currently available, management believes that
the disposition of matters that are pending or asserted will not have a
materially adverse affect on the results of operations or financial
position of the Company.
NOTE 11 - BUSINESS SEGEMENT INFORMATION
During 1999, the Company adopted SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which changes the way
companies report information about their operating segments. The
information for 1997 and 1998 has been restated from the prior years'
presentation in order to conform to the 1999 presentation.
The Company operates in three business segments: Industrial Shipping
Containers; Containerboard & Corrugated Products; and Timber.
Operations in the Industrial Shipping Containers segment involve the
production and sale of shipping containers and multiwall bags. These
products are manufactured and principally sold throughout the United
States, Canada and Mexico.
Operations in the Containerboard & Corrugated Products segment involve
the production and sale of containerboard, both virgin and recycled, and
related corrugated sheets and corrugated containers. The products are
manufactured and sold in the United States and Canada.
<PAGE> 61
Item 8. Financial Statements and Supplementary Data (continued)
Operations in the Timber segment involve the management and sale of
timber on approximately 278,000 acres of timberlands in the states of
Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi and Virginia.
The Company's reportable segments are strategic business units that
offer different products. The Company evaluates performance and allocates
resources based on income before income taxes and equity in earnings of
affiliates. The accounting policies of the reportable segments are the same
as those described in the "Description of Business and Summary of
Significant Accounting Policies" note except that the Company accounts for
inventory on a first-in, first-out basis at the segment level compared to a
last-in, first-out basis at the consolidated level.
Corporate and other includes the costs associated with the Company's
corporate headquarters, the Company's long-term obligations (see Note 4)
and other non-segment items.
During 1998 and 1997, restructuring costs related to the Industrial
Shipping Containers segment were $25,950,000 and $3,393,000, respectively.
During 1998 and 1997, restructuring costs related to the Containerboard &
Corrugated Products segment were $1,511,000 and $1,892,000, respectively.
<PAGE> 62
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
The following segment information is presented for the three years
ended October 31, 1999, except as to asset information which is as of
October 31, 1999, 1998 and 1997 (Dollars in thousands):
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net sales:
Industrial shipping containers $492,925 $444,130 $333,005
Containerboard & corrugated products 301,770 357,001 315,979
Timber 24,132 13,301 11,798
Total $818,827 $814,432 $660,782
Income before income taxes and equity
in earnings of affiliates:
Industrial shipping containers $ 41,563 $34,273 $ 24,171
Containerboard & corrugated products 34,023 50,861 8,598
Timber 25,951 18,982 10,744
Total segment 101,537 104,116 43,513
Corporate and other (34,179) (21,068) (8,723)
Restructuring costs -- (27,461) (5,285)
Total $ 67,358 $ 55,587 $ 29,505
Total assets:
Industrial shipping containers $438,255 $444,638 $193,304
Containerboard & corrugated products 331,050 344,074 355,346
Timber 16,712 15,633 10,834
Total segment 786,017 804,345 559,484
Corporate and other 124,969 74,075 34,733
Total $910,986 $878,420 $594,217
Depreciation, depletion and amortization
expense:
Industrial shipping containers $ 22,186 $ 16,092 $ 11,971
Containerboard & corrugated products 17,809 19,305 18,371
Timber 277 188 87
Total segment 40,272 35,585 30,429
Corporate and other 2,088 4,101 1,497
Total $ 42,360 $ 39,686 $ 31,926
Additions to long-lived assets:
Industrial shipping containers $ 12,248 $ 22,046 $ 3,843
Containerboard & corrugated products 27,608 8,708 22,923
Timber 1,285 3,769 2,195
Total segment 41,141 34,523 28,961
Corporate and other 8,112 3,570 7,232
Total $ 49,253 $ 38,093 $ 36,193
</TABLE>
<PAGE> 63
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
The following table presents net sales to external customers by
country:
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
United States $783,120 $778,012 $630,487
Canada 32,603 33,426 30,295
Mexico 3,104 2,994 --
$818,827 $814,432 $660,782
The following table presents total assets by country:
1999 1998 1997
United States $875,914 $842,701 $550,968
Canada 30,374 31,673 43,249
Mexico 4,698 4,046 --
$910,986 $878,420 $594,217
</TABLE>
<PAGE> 64
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
NOTE 12 - QUARTERLY FINANCIAL DATA (UNAUDITED)
The quarterly results of operations for 1999 and 1998 are shown below
(Dollars in thousands, except per share amounts):
<CAPTION>
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1999 1999 1999 1999
<S> <C> <C> <C> <C>
Net sales $180,004 $199,358 $205,032 $234,433
Gross profit $ 31,415 $ 39,867 $ 41,206 $ 65,866
Net income $ 3,681 $ 10,861 $ 10,906 $ 25,925
Earnings per share:
Basic:
Class A Common Stock $ 0.13 $ 0.38 $ 0.38 $ 0.90
Class B Common Stock $ 0.19 $ 0.56 $ 0.57 $ 1.35
Diluted:
Class A Common Stock $ 0.13 $ 0.38 $ 0.38 $ 0.90
Class B Common Stock $ 0.19 $ 0.56 $ 0.57 $ 1.35
Earnings per share were
calculated using the
following number of shares:
Basic:
Class A Common Stock 10,909,672 10,894,548 10,852,101 10,872,002
Class B Common Stock 12,001,793 12,000,535 11,998,793 11,957,299
Diluted:
Class A Common Stock 10,967,108 10,898,216 10,854,636 10,886,245
Class B Common Stock 12,001,793 12,000,535 11,998,793 11,957,299
Market price (Class A Common Stock):
High $ 33.13 $ 29.50 $ 29.00 $ 29.50
Low $ 27.38 $ 20.63 $ 24.50 $ 23.75
Close $ 28.19 $ 25.38 $ 24.75 $ 28.50
Market price (Class B Common Stock):
High $ 36.00 $ 33.00 $ 31.25 $ 33.25
Low $ 31.50 $ 29.63 $ 28.88 $ 26.50
Close $ 32.44 $ 30.25 $ 29.88 $ 30.00
</TABLE>
<PAGE> 65
Item 8. Financial Statements and Supplementary Data (continued)
<TABLE>
<CAPTION>
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1998 1998 1998 1998
<S> <C> <C> <C> <C>
Net sales $172,383 $194,447 $222,514 $225,088
Gross profit $ 34,206 $ 40,815 $ 42,265 $ 52,254
Net income (loss) $ 10,857 $ 13,937 $ (3,707) $ 16,354
Earnings (loss) per share:
Basic:
Class A Common Stock $ 0.38 $ 0.48 $ (0.13) $ 0.57
Class B Common Stock $ 0.56 $ 0.72 $ (0.19) $ 0.85
Diluted:
Class A Common Stock $ 0.38 $ 0.48 $ (0.13) $ 0.56
Class B Common Stock $ 0.56 $ 0.72 $ (0.19) $ 0.85
Earnings (loss) per share were
calculated using the following
number of shares:
Basic:
Class A Common Stock 10,901,962 10,904,755 10,906,582 10,909,468
Class B Common Stock 12,001,793 12,001,793 12,001,793 12,001,793
Diluted:
Class A Common Stock 10,950,796 10,977,776 10,977,466 10,957,728
Class B Common Stock 12,001,793 12,001,793 12,001,793 12,001,793
Market price (Class A Common Stock):
High $ 35.75 $ 41.25 $ 40.75 $ 40.63
Low $ 32.00 $ 35.00 $ 35.00 $ 27.50
Close $ 35.50 $ 38.50 $ 39.50 $ 32.00
Market price (Class B Common Stock):
High $ 39.50 $ 44.00 $ 43.75 $ 43.00
Low $ 33.50 $ 37.50 $ 40.75 $ 34.00
Close $ 39.50 $ 42.63 $ 42.75 $ 35.00
</TABLE>
Prior year amounts reported in the Company's quarterly reports on Form
10-Q in 1998 have been restated in the 1999 Form 10-Q's and herein to
reflect the equity method of accounting for the Company's investment in
non-voting stock of Ohio Packaging Corporation (see Note 2 to the
Consolidated Financial Statements).
The Class A and Class B Common Stock are traded on the NASDAQ Stock
Market.
As of December 6, 1999, there were 676 shareholders of record of the
Class A Common Stock and 176 shareholders of record of the Class B Common
Stock.
<PAGE> 66
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 on Form 10-K,
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 judgments 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 continually reviewed by the internal auditors
of the Company. In addition, Ernst & Young LLP, an independent accounting
firm, audits the financial statements of Greif Bros. Corporation and its
subsidiaries and considers the internal control structure of the Company in
planning and performing its audit. The Audit Committee of the Board of
Directors meets periodically with the internal auditors and independent
accountants to discuss the internal control structure and the results of
their audits.
/s/ Michael J. Gasser /s/ Joseph W. Reed
Michael J. Gasser Joseph W. Reed
Chairman and Chief Executive Chief Financial Officer
Officer and Secretary
<PAGE> 67
Item 8. Financial Statements and Supplementary Data (continued)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the
Board of Directors of
Greif Bros. Corporation
We have audited the consolidated balance sheet of Greif Bros.
Corporation and subsidiaries as of October 31, 1999, and the related
consolidated statements of income, shareholders' equity, and cash flows for
the year then ended. 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 audit. The financial statements of
Greif Bros. Corporation and subsidiaries as of October 31, 1998 and for the
years ended October 31, 1998 and 1997, were audited by other auditors whose
report dated December 4, 1998, expressed an unqualified opinion on those
statements prior to restatement.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the 1999 financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Greif Bros. Corporation and subsidiaries, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
As disclosed in Note 2 to the financial statements, during 1999 the
Company changed its method of accounting for an investment from the cost
method to the equity method. Prior year financial statements have been
restated to retroactively present this change.
We also audited the adjustments described in Note 2 that were applied
to restate the 1998 and 1997 financial statements. In our opinion, such
adjustments are appropriate and have been properly applied.
/s/ Ernst & Young LLP
Columbus, Ohio
December 6, 1999
<PAGE> 68
Item 8. Financial Statements and Supplementary Data (concluded)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Greif Bros. Corporation
In our opinion, based on our audits and the report of the other auditors,
the accompanying consolidated balance sheets and the related consolidated
statements of income, shareholders' equity and cash flows present fairly, in
all material respects, the financial position of Greif Bros. Corporation at
October 31, 1998, and the results of its oprtaitons and its cash flows for each
of the two years in the period ended October 31, 1998 in conformity with
accounting principles generally accepted in the United States. 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 did not audit the adjustments described in Note 2 that were
applied to restate the 1998 and 1997 financial statements. Those adjustments
were audited by other auditors whose report thereon has been funished to us,
and our opinion expressed herein, insofar as it relates to the amounts included
in Note 2, is based solely on the report of the other autitors. We conducted
our audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An 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 and the report
of other auditors provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhousCoopers LLP
Columbus, Ohio
December 4, 1998
<PAGE> 69
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
During 1999, the Company changed its independent public accountants
from PricewaterhouseCoopers LLP to Ernst & Young LLP.
(a) (1) PricewaterhouseCoopers LLP had been the independent public
accounting firm for the Company. On February 1, 1999, the Company
informed PricewaterhouseCoopers LLP that an audit proposal would
not be sought from that firm and that it was being dismissed as
the Company's independent public accountants.
(2) For the two fiscal years ended October 31, 1998, the report of
PricewaterhouseCoopers LLP on the Company's consolidated
financial statements did not contain an adverse opinion or a
disclaimer of opinion, nor was any such report qualified or
modified as to uncertainty, audit scope or accounting principles.
(3) The decision to change accountants was approved by the Audit
Committee of the Company's Board of Directors.
(4) During the Company's two fiscal years ended October 31, 1998 and
through February 1, 1999, there were no disagreements between
PricewaterhouseCoopers LLP and the Company regarding any matter
of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which, if not resolved
to the satisfaction of the former accountant, would have caused
it to make reference thereto in its report on the financial
statements for such years.
(5) The Company requested that PricewaterhouseCoopers LLP furnish it
with a letter addressed to the Securities and Exchange Commission
stating whether or not it agrees with the above statements. A
copy of such letter dated February 3, 1999, is filed as Exhibit
16 to this Form 10-K.
(b) On February 23, 1999, the Company engaged the services of Ernst &
Young LLP as its independent public accounting firm for its
fiscal year ending October 31, 1999. Ernst & Young LLP had not
been consulted by the Company concerning any accounting, auditing
or financial reporting issue during the Company's two fiscal
years ended October 31, 1998, and the subsequent interim period
prior to the Company's engagement of Ernst & Young LLP.
There have been no matters of disagreement on accounting and financial
disclosure.
<PAGE> 70
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to Directors of the Company and disclosures
pursuant to Item 405 of Regulation S-K is incorporated by reference to the
Registrant's Proxy Statement, which Proxy Statement will be filed within
120 days of October 31, 1999. Information regarding the executive officers
of the Registrant may be found under the caption "Executive Officers of the
Company" in Part I, and is also incorporated by reference into this Item
10.
Item 11. Executive Compensation
Information with respect to Executive Compensation is incorporated
herein by reference to the Registrant's Proxy Statement, which Proxy
Statement will be filed within 120 days of October 31, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information with respect to Security Ownership of Certain Beneficial
Owners and Management is incorporated herein by reference to the
Registrant's Proxy Statement, which Proxy Statement will be filed within
120 days of October 31, 1999.
Item 13. Certain Relationships and Related Transactions
Information with respect to Certain Relationships and Related
Transactions is incorporated herein by reference to the Registrant's Proxy
Statement, which Proxy Statement will be filed within 120 days of October
31, 1999.
<PAGE> 71
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
<S> <C>
(1) Financial Statements of Greif Bros. Corporation:
Consolidated Statements of Income for each of the
three years ended October 31, 1999 33
Consolidated Balance Sheets at October 31, 1999
and 1998 34-35
Consolidated Statements of Cash Flows
for each of the three years ended October 31, 1999 36
Consolidated Statements of Changes in
Shareholders' Equity for the three years ended
October 31, 1999 37
Notes to Consolidated Financial Statements 38-65
Report of Management's Responsibilities 66
Reports of Independent Accountants 67-68
Financial Statements of CorrChoice, Inc.:
Report of Independent Auditors 75
Consolidated Balance Sheet as October 31, 1999 76-77
Consolidated Statement of Income for the year
ended October 31, 1999 78
Consolidated Statement of Shareholders' Equity for
the year ended October 31, 1999 78
Consolidated Statement of Cash Flows for the year
ended October 31, 1999 79
Notes to Consolidated Financial Statements 80-87
</TABLE>
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, 1999.
<PAGE> 72
<TABLE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
<CAPTION>
Page
<S> <C>
(2) Financial Statement Schedules:
Reports of Independent Accountants on
Financial Statement Schedules 90-91
Consolidated Valuation and Qualifying Accounts
and Reserves (Schedule II) 92
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
<TABLE>
(3) Exhibits:
<CAPTION>
If Incorporated by Reference
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed was SEC
<S> <C> <C>
2(a) Stock Purchase Agreement Current Report on Form 8-K dated
dated March 30, 1998, April 14, 1998, File No. 1-566
between Greif Bros. (see Exhibit 2 therein).
Corporation and Sonoco
Products Company.
2(b) Joint Venture Agreement Current Report on Form 8-K dated
dated as of November 1, November 13, 1998, File No. 1-566
1998, among CorrChoice, (see Exhibit 2 therein).
Inc., Greif Bros.
Corporation, Geoffrey A.
Jollay and R. Dean Jollay,
and John J. McLaughlin.
3(a) Amended and Restated Annual Report on Form 10-K for
Certificate of Incorporation the fiscal year ended October 31,
of Greif Bros. Corporation. 1997, File No. 1-566 (see Exhibit
3(a) therein).
3(b) Amended and Restated By-Laws Annual Report on Form 10-K for
of Greif Bros. Corporation. the fiscal year ended October 31,
1997, File No. 1-566 (see Exhibit
3(b) therein).
3(c) Amendment to Amended and Annual Report on Form 10-K for
Restated By-Laws of Greif the fiscal year ended October 31,
Bros. Corporation. 1998, File No. 1-566 (see Exhibit
3(c) therein).
10(a) Greif Bros. Corporation 1996 Registration Statement on Form S-
Directors Stock Option Plan. 8, File No. 333-26977 (see
Exhibit 4(b) therein).
<PAGE> 73
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
10(b) Greif Bros. Corporation Annual Report on Form 10-K for
Incentive Stock Option Plan, the fiscal year ended October 31,
as Amended and Restated. 1997, File No. 1-566 (see Exhibit
10(b) therein).
10(c) Greif Bros. Corporation Annual Report on Form 10-K for
Directors Deferred the fiscal year ended October 31,
Compensation Plan. 1998, File No. 1-566 (see Exhibit
10(c) therein).
10(d) Employment Agreement between Annual Report on Form 10-K for
Michael J. Gasser and Greif the fiscal year ended October 31,
Bros. Corporation. 1998, File No. 1-566 (see Exhibit
10(d) therein).
10(e) Employment Agreement between Annual Report on Form 10-K for
William B. Sparks and Greif the fiscal year ended October 31,
Bros. Corporation. 1998, File No. 1-566 (see Exhibit
10(e) therein).
10(f) Employment Agreement, as Annual Report on Form 10-K for
amended, between Charles R. the fiscal year ended October 31,
Chandler and Greif Bros. 1998, File No. 1-566 (see Exhibit
Corporation. 10(f) therein).
10(g) Employment Agreement, as Annual Report on Form 10-K for
amended, between Joseph W. the fiscal year ended October 31,
Reed and Greif Bros. 1998, File No. 1-566 (see Exhibit
Corporation. 10(g) therein).
10(h) Credit Agreement dated as of Current Report on Form 8-K dated
March 30, 1998, among Greif April 14, 1998, File No. 1-566
Bros. Corporation, as (see Exhibit 99(b) therein).
Borrower, Various Financial
Institutions, as Banks, and
KeyBank National Association,
as Agent.
10(i) Supplemental Retirement Contained herein.
Benefit Agreement.
16 Letter Re: Change in Current Report on Form 8-K dated
Certifying Accountant. February 3, 1999, File No. 1-566
(see Exhibit 16 therein).
21 Subsidiaries of the Contained herein.
Registrant.
<PAGE> 74
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
23(a) Consent of Ernst & Young LLP- Contained herein.
Columbus, Ohio.
23(b) Consent of Contained herein.
PricewaterhouseCoopers LLP-
Columbus, Ohio.
23(c) Consent of Ernst & Young LLP- Contained herein.
Akron, Ohio.
24(a) Powers of Attorney for Annual Report on Form 10-K for
Michael J. Gasser, Charles R. the fiscal year ended October 31,
Chandler, Michael H. Dempsey, 1997, File No. 1-566 (see Exhibit
Naomi C. Dempsey, Daniel J. 24 (a) therein).
Gunsett, Robert C. Macauley,
David J. Olderman and William
B. Sparks, Jr.
24(b) Power of Attorney for John C. Contained herein.
Kane.
27.1 Financial Data Schedule. Contained herein.
27.2 Financial Data Schedule- Contained herein.
Restated 1998.
27.3 Financial Data Schedule- Contained herein.
Restated 1997.
</TABLE>
<PAGE> 75
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
(b) Reports on Form 8-K
(1) No reports on Form 8-K have been filed during the last quarter
of fiscal 1999.
(d) Financial Statements of Subsidiaries Not Consolidated:
Report of Independent Auditors
Board of Directors
CorrChoice, Inc.
We have audited the accompanying balance sheet of CorrChoice, Inc. and
Subsidiaries as of October 31, 1999, and the related statements of income,
shareholders' equity and cash flows for the year then ended. 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 audit in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of CorrChoice,
Inc. and Subsidiaries at October 31, 1999, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Akron, Ohio
November 24, 1999
<PAGE> 76
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
<TABLE>
CorrChoice, Inc. and Subsidiaries
Consolidated Balance Sheet
October 31, 1999
<CAPTION>
<S> <C>
Assets
Current Assets:
Cash and cash equivalents $ 31,801,318
Marketable securities 22,095,339
Accounts receivable, less allowance of $905,000 25,178,517
Accounts and notes receivable-related parties 2,392,867
Inventories 29,724,175
Deferred income taxes 1,226,600
Prepaid expenses and other assets 48,997
Total current assets 112,467,813
Property, plant and equipment:
Land and improvements 6,345,708
Buildings and improvements 39,990,677
Machinery and equipment 93,225,962
Office fixtures and computer equipment 3,184,386
Construction in process 3,724,799
146,471,532
Less accumulated depreciation 53,895,892
92,575,640
Other long-term assets:
Goodwill, net of accumulated amortization of $94,459 1,322,433
Prepaid pension expense 413,784
Property held for sale, less allowance of $432,000 330,888
2,067,105
Total assets $207,110,558
<FN>
See accompanying notes.
</TABLE>
<PAGE> 77
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
<TABLE>
CorrChoice, Inc. and Subsidiaries
Consolidated Balance Sheet
October 31, 1999
<CAPTION>
<S> <C>
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 5,950,807
Accounts payable-related party 3,011,564
Accrued compensation 1,976,548
Accrued taxes, other than income taxes 815,369
Income taxes payable 2,143,463
Other accrued expenses 301,599
Current portion of notes payable 205,903
Total current liabilities 14,405,253
Deferred income taxes 8,057,700
Notes payable, long-term portion 180,665
Shareholders' equity:
Common stock, no par value,
10,000 shares authorized and issued --
Additional paid-in-capital 165,619,160
Accumulated other comprehensive loss (56,373)
Retained earnings 18,904,153
Total shareholders' equity 184,466,940
Total liabilities and shareholders' equity $207,110,558
<FN>
See accompanying notes.
</TABLE>
<PAGE> 78
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
<TABLE>
CorrChoice, Inc. and Subsidiaries
Consolidated Statement of Income
Year ended October 31, 1999
<CAPTION>
<S> <C>
Net sales $262,128,240
Cost of goods sold 214,908,489
Gross profit 47,219,751
Selling, general and administrative expenses 18,394,590
Operating income 28,825,161
Investment and other income 2,016,912
Other expenses (61,920)
Income before income taxes 30,780,153
Income tax expense 11,876,000
Net income $ 18,904,153
<FN>
See accompanying notes.
</TABLE>
CorrChoice, Inc. and Subsidiaries
Consolidated Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In Accumulated Other Retained
Total Capital Comprehensive Loss Earnings
<S> <C> <C> <C> <C> <C>
Balance at
November 1, 1998 $ -- $ -- $ -- $ -- $ --
Contribution by
Joint Venture
partners at
formation 165,773,922 -- 165,619,160 154,762 --
Net income 18,904,153 18,904,153
Unrealized loss
on marketable
securities, net
of taxes of
$140,757 (211,135) (211,135)
Total compre-
hensive income 18,693,018
Balance at
October 31, 1999 $184,466,940 $ -- $165,619,160 $ (56,373) $18,904,153
<FN>
See accompanying notes.
</TABLE>
<PAGE> 79
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
<TABLE>
CorrChoice, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
Year ended October 31, 1999
<CAPTION>
<S> <C>
Operating activities:
Net income $18,904,153
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 9,863,880
Amortization 94,459
Gain on sale of fixed assets (148,668)
Deferred income taxes (92,900)
Changes in operating assets and liabilities:
Accounts receivable (4,653,576)
Accounts and notes receivable - related parties (2,004,164)
Inventories (8,273,005)
Prepaid expenses and other assets 159,845
Prepaid pension expense (68,798)
Accounts payable 1,900,224
Accrued liabilities 763,094
Income taxes payable 604,960
Net cash provided by operating activites 17,049,504
Investing activities:
Purchases of short-term investments, net (3,838,728)
Purchases of property, plant and equipment (19,388,077)
Proceeds from sale of fixed assets 1,312,091
Net cash used in investing activities (21,914,714)
Financing activities:
Principle payments on notes payable (113,432)
Net decrease in cash and cash equivalents (4,978,642)
Cash and cash equivalents at beginning of year 36,779,960
Cash and cash equivalents at end of year $31,801,318
Supplemental disclosure of cash flow information:
Cash paid during the period for income taxes $10,919,824
<FN>
See accompanying notes.
</TABLE>
<PAGE> 80
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
CorrChoice, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
October 31, 1999
1. Description of Business and Basis of Presentation
CorrChoice, Inc. (CorrChoice or the "Company") operates in one
business segment which manufactures corrugated cardboard sheets for sale to
producers of corrugated boxes.
CorrChoice was formed effective November 1, 1998 upon the signing of a
joint venture agreement between Greif Bros. Corporation ("Greif") and the
former owners of Ohio Packaging Corporation and subsidiaries. Under the
agreement, Greif contributed its stock holdings of both Michigan Packaging
Corporation and Ohio Packaging Corporation in exchange for a 63.24%
interest in CorrChoice, and the former owners of Ohio Packaging Corporation
and subsidiaries ("Ohio Packaging") received a 36.76% interest in
CorrChoice for their interest in Ohio Packaging. The ownership percentages
were determined by an appraisal performed by an independent third party.
Based on the terms of the shareholder voting agreement, Greif and the
former owners of Ohio Packaging are equally represented on the CorrChoice
Board of Directors. As such, joint venture accounting was applied, and the
combined net assets of Michigan Packaging and Ohio Packaging were recorded
at their historical carryover values.
2. Significant Accounting Principles
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of CorrChoice, Inc. and Subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Fiscal Year End
The Company's fiscal year ends on October 31st. References in the
notes to the financial statements to the year 1999 refer to the fiscal year
ended October 31, 1999.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
<PAGE> 81
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
CorrChoice, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(continued)
Revenue Recognition
The Company recognizes revenue from product sales upon shipment to
customers.
Marketable Securities and Investment Income
Marketable securities have been classified as available-for-sale in
accordance with the provisions of Financial Accounting Standards Board
Statement No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" (FAS No. 115). Available-for-sale securities are carried at
fair value, with the unrealized gains and losses, net of tax, reported as
accumulated other comprehensive income in shareholders' equity. At October
31, 1999, accumulated other comprehensive income consists entirely of
unrealized gains or losses on available-for-sale securities.
Fair value of marketable equity securities traded on a national
securities exchange are valued at the last reported sales price on the last
business day of the fiscal year. U.S. Treasury securities are valued based
on quoted market prices using yields currently available on comparable
securities of issuers with similar credit ratings. Interest and dividends
are included in investment income.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents,
trade receivables and notes receivable. The Company places its cash
equivalents with major financial institutions.
The Company's customers are primarily located in the mid-west and
southeast regions of the United States. The Company grants credit to
customers based on an evaluation of their financial condition and
collateral is generally not required. Losses from credit sales are provided
for in the financial statements and have historically been within
management's expectations.
Inventories
Inventories, which are principally composed of raw materials, are
<PAGE> 82
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
stated at the lower of cost or market. Cost is determined using the last-
in, first-out (LIFO) method for 88% of inventories. If all inventories had
been valued at current costs, inventories would have been $8,390,000 higher
at October 31, 1999.
Property, Plant and Equipment
Property, plant and equipment is valued at cost less accumulated
depreciation. Expenditures for repairs and maintenance are charged to
operations as incurred, while expenditures for additions and improvements
are capitalized. Depreciation is computed principally by the straight-line
method based upon the estimated useful lives of the assets. The useful
lives are approximately 30 years for buildings, 3 to 7 years for office
furniture and computer equipment and 5 to 10 years for operating machinery
and equipment.
Goodwill
Goodwill represents costs in excess of net assets of acquired
businesses which are amortized using the straight-line method over 15
years. The carrying value of goodwill is reviewed on a periodic basis for
recoverability based on the undiscounted cash flows of the businesses
acquired over the remaining amortization period. Should the review
indicate that goodwill is not recoverable, the Company's carrying value of
the goodwill would be reduced by the estimated shortfall of the cash flows.
In addition, the Company assesses long-lived assets for impairment under
Financial Accounting Standards Board's (FASB) Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets to Be Disposed Of." Under those rules, goodwill
associated with assets acquired in a purchase business combination is
included in impairment evaluations when events or circumstances exist that
indicate the carrying amount of those assets may not be recoverable. No
reduction of goodwill for impairment was necessary in 1999.
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 results could differ from those estimates.
Derivative Financial Instruments
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted by the
Company in fiscal 2001. Because of the Company's lack of derivative
financial instruments, management anticipates that the adoption of the new
Statement will not have a significant effect on earnings or the financial
position of the Company.
<PAGE> 83
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
3. Financing Arrangements
At October 31, 1999, the Company had $20,000,000 available under an
unsecured line-of-credit from a bank which expires February 28, 2000.
In connection with the 1998 acquisition of the assets of a corrugated
sheet feeding facility in Atlanta, Georgia, the Company delayed remittance
of $500,000 of the purchase price in order to compel the selling company to
comply with minimum purchase provisions included in the purchase agreement.
The Company signed a promissory note bearing interest at a rate of 8.5% for
the remaining amount due. The note provides for quarterly payments of
approximately $47,600 through October 2001. Assuming that minimum purchase
requirements are met, the note should be repaid as $205,903 in 2000 and
$180,665 in 2001.
4. Financial Instruments
The carrying values of cash, cash equivalents, accounts receivable and
accounts payable are a reasonable estimate of their fair value due to the
short-term nature of these instruments. The notes receivable - related
parties do not have a ready market and cost is assumed to approximate fair
value. The aggregate carrying value of these notes is $190,000 at October
31, 1999, with interest rates of 7.5% and maturity dates through October
18, 2000.
The following is a summary of the Company's available-for-sale
securities at October 31, 1999.
<TABLE>
<CAPTION>
Available-for-Sale Securities
Fair Market Historical Unrealized
Value Cost Losses
<S> <C> <C> <C>
U.S treasury securities $17,493,298 $17,537,688 $(44,390)
Greif Bros. Corporation common stock 1,918,800 1,968,366 (49,566)
Other 2,683,241 2,683,241 --
$22,095,339 $22,189,295 $(93,956)
</TABLE>
The contractual maturity of the U.S. Treasury securities are all less
than one year.
<PAGE> 84
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
5. Property Held for Sale
Prior to the formation of CorrChoice, Ohio Packaging had purchased
land in North Carolina in contemplation of the construction of a new
corrugated sheet manufacturing facility. Site preparation and certain
start up expenses were incurred before the decision was made to terminate
the North Carolina project on May 1, 1998. The Company is holding the land
for sale and recorded a reserve of $432,000 in 1998 to reduce the land to
its estimated net realizable value.
In October 1998, Ohio Packaging purchased the assets of a corrugated
sheet feeding facility near Atlanta, Georgia. Certain equipment at the
facility was outdated and was immediately replaced. The replaced equipment
was allocated value based on its estimated selling price. At October 31,
1999, equipment with an estimated fair value of $32,000 is still held for
sale.
6. Common Stock
Greif and the former owners of Ohio Packaging have entered into buy-sell
agreements, whereby sales of CorrChoice common stock are restricted to the
shareholder group and are valued at a formula price specified in the
agreement.
Dividends are computed in accordance with a formula specified in the joint-
venture agreement. Dividends are paid after completion of the year end
audit and upon approval by the Board of Directors. The dividend to be paid
in 2000 based on the 1999 formula calculation is approximately $3,800,000.
7. Retirement Benefit Plan
The Company sponsors a defined benefit pension plan which covers
substantially all of its employees. The CorrChoice plan is a continuation
of the former Ohio Packaging pension plan. Accordingly, the pension
benefits for Ohio Packaging employees are based upon their total years of
service with Ohio Packaging and compensation during employment. The
pension benefits for Michigan Packaging employees in the CorrChoice plan
began on January 1, 1999, with vesting credit received for their total
years of service with Michigan Packaging. Prior service for Michigan
Packaging employees will be paid upon retirement from a Greif plan. The
Company's policy is to fund amounts on an actuarial basis to accumulate
assets sufficient to meet the benefits to be paid in accordance with the
requirements of ERISA. No Company contributions were required in 1999.
<PAGE> 85
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
<TABLE>
<CAPTION>
The following tables set forth the change in benefit obligation,
change in plan assets, funded status and amounts recognized in the
consolidated balance sheets relating to the defined benefit pension plan as
of October 31, 1999:
<S> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $1,040,578
Service cost 59,058
Interest cost 76,688
Actuarial losses 138,773
Benefits paid (66,357)
Benefit obligation at end of year $1,248,740
Change in plan assets(1):
Fair value of plan assets at beginning of year $1,970,670
Actual return on plan assets 184,095
Benefits paid (66,357)
Fair value of plan assets at end of year $2,088,408
Funded Status:
Plan assets in excess of projected benefit obligations $ 839,668
Unrecognized net actuarial loss 186,319
Unrecognized net transition asset (612,203)
Prepaid pension expense $ 413,784
<FN>
(1)Plan assets are primarily invested in listed stocks and bonds and cash
equivalents.
</TABLE>
The following table summarizes the assumptions used by the consulting
actuary and the related benefit cost information:
<TABLE>
<CAPTION>
1999
<S> <C>
Assumptions:
Discount rate 7.5%
Future compensation assumption N/A
Expected long-term return on plan assets 8.0%
Components of net periodic benefit cost (credit):
Service cost $ 59,058
Interest cost 76,688
Expected return on plan assets (156,528)
Amortization of transition asset (48,016)
Net periodic benefit credit $ (68,798)
</TABLE>
<PAGE> 86
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(continued)
In addition to the defined benefit pension plan, the Company also
sponsors a defined contribution profit sharing plan covering substantially
all employees with at least six months credited service to the Company.
The Company's contributions under the plan are at the discretion of the
Board of Directors. At October 31, 1999, the plan had net assets of
$16,980,000 Company contributions under the plan for the 1999 Plan year,
including payments made directly to employees and amounts credited to the
individual participants' investment accounts, were approximately
$3,496,000.
8. Income Taxes
<TABLE>
<CAPTION>
The provision for income taxes consists of the following:
<S> <C>
Current:
Federal $10,347,800
State and local 1,621,100
11,968,900
Deferred (92,900)
$11,876,000
</TABLE>
The effective income tax rate differs from the statutory federal corporate
tax rate of 35% for 1999 as follows:
Statutory federal corporate tax rate 35.0%
State and local taxes, net of federal income tax benefit 3.4
Non-deductible expenses 0.2
Effective tax rate 38.6%
Significant components of the Company's deferred income taxes are as
follows:
<TABLE>
<S> <C>
Deferred tax assets:
Trade accounts receivable $ 354,300
Franchise taxes 596,300
Other 462,700
1,413,300
Deferred tax liabilities-Property, plant and equipment 8,244,400
Net deferred tax liability $ 6,831,100
<PAGE> 87
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(concluded)
9. Related Party Transactions
At October 31, 1999, the Company had accounts receivable of $2,202,867
and accounts payable of $3,011,564 with Greif. These amounts have been
identified as related party accounts in the balance sheet. During 1999,
the Company sold $22,232,829 of corrugated sheets to Greif and purchased
$67,327,851 of raw materials from Greif. These transactions are included
in net sales and cost of goods sold in the consolidated statement of
income.
Notes receivable-related parties includes $190,000 due from officers
at one of the Company's subsidiary locations. The notes receivable are due
in fiscal 2000 and bear interest at a rate of 7.5%.
10. Contingencies
Various legal proceedings arising from the normal conduct of business
are pending but, in the opinion of management, the ultimate disposition of
these matters will not have a material effect on the financial condition,
operations or cash flows of the Company.
<PAGE> 88
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 27, 2000 By /s/ Michael J. Gasser
Michael J. Gasser
Chairman of the Board of Directors
and Chief Executive Officer
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.
/s/ Michael J. Gasser /s/ Joseph W. Reed
Michael J. Gasser Joseph W. Reed
Chairman of the Board of Directors Chief Financial Officer and
Chief Executive Officer Secretary
(principal executive officer) (principal financial officer)
/s/ John K. Dieker Charles R. Chandler*
John K. Dieker Charles R. Chandler
Corporate Controller Member of the Board of Directors
(principal accounting officer)
Michael H. Dempsey * Naomi C. Dempsey *
Michael H. Dempsey Naomi C. Dempsey
Member of the Board of Directors Member of the Board of Directors
Daniel J. Gunsett * John C. Kane *
Daniel J. Gunsett John C. Kane
Member of the Board of Directors Member of the Board of Directors
Robert C. Macauley * David J. Olderman *
Robert C. Macauley David J. Olderman
Member of the Board of Directors Member of the Board of Directors
William B. Sparks, Jr. *
William B. Sparks, Jr.
Member of the Board of Directors
[Signatures continued on the next page]
<PAGE> 89
SIGNATURES (concluded)
* The undersigned, Michael J. Gasser, by signing his name hereto, does
hereby execute this Annual Report on Form 10-K on behalf of each of the
above-named persons pursuant to powers of attorney duly executed by such
persons and filed as an exhibit to this Annual Report on Form 10-K.
By /s/ Michael J. Gasser
Michael J. Gasser
Chairman of the Board of Directors
Chief Executive Officer
Each of the above signatures is affixed as of January 27, 2000.
<PAGE> 90
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Shareholders and the
Board of Directors of
Greif Bros. Corporation
We have audited the consolidated financial statements of Greif Bros.
Corporation and subsidiaries as of October 31, 1999 and for the year then
ended, and have issued our report thereon dated December 6, 1999 appearing
on page 67 of this Annual Report on Form 10-K. Our audit also included the
financial information as of October 31, 1999 and for the year then ended
included in the financial statement schedule listed in Item 14(a)2 of this
Annual Report on Form 10-K. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on
our audit.
In our opinion, the financial information as of October 31, 1999 and
for the year then ended included in the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
Columbus, Ohio
December 6, 1999
<PAGE> 91
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 December 4, 1998 appearing in this Annual Report on Form 10-K
also included an audit of the financial statement schedules for the years ended
October 31, 1998 and 1997 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.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
December 4, 1998
<PAGE> 92
</TABLE>
<TABLE>
SCHEDULE II
GREIF BROS. CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN $000)
<CAPTION>
Balance at Charged to Accounts Balance at
Beginning Costs and Bad Debt Written- End of
Description Of Period Expenses Recoveries off Period
<S> <C> <C> <C> <C> <C>
Year ended
October 31, 1997:
Reserves deducted from
applicable assets:
For doubtful items -
trade accounts
receivables $ 826 $ 431 $ 11 $421 $ 847
For doubtful items -
other notes and
accounts receivable 697 -0- -0- -0- 697
Total reserves deducted
from applicable assets $1,523 $ 431 $ 11 $421 $1,544
Year ended
October 31, 1998:
Reserves deducted from
applicable assets:
For doubtful items -
trade accounts
receivables $1,652 (A) $1,489 $142 $365 $2,918
For doubtful items -
other notes and
accounts receivable 697 -0- -0- -0- 697
Total reserves deducted
from applicable assets $2,349 $1,489 $142 $365 $3,615
Year ended
October 31, 1999:
Reserves deducted from
applicable assets:
For doubtful items -
trade accounts
receivables $2,218 (B) $ 898 $173 $833 $2,456
For doubtful items -
other notes and
accounts receivable 697 -0- -0- -0- 697
Total reserves deducted
from applicable assets $2,915 $ 898 $173 $833 $3,153
<FN>
(A) Includes an $805,000 adjustment related to the industrial containers
business acquired from Sonoco Products Company on March 30, 1998.
(B) Excludes a $700,000 adjustment related to an amount guaranteed by Sonoco
Products Company.
</TABLE>
<PAGE> 93
<TABLE>
<CAPTION>
EXHIBIT INDEX
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
<S> <C> <C>
2(a) Stock Purchase Agreement Current Report on Form 8-K dated
dated March 30, 1998, between April 14, 1998, File No. 1-566
Greif Bros. Corporation and (see Exhibit 2 therein).
Sonoco Products Company.
2(b) Joint Venture Agreement dated Current Report on Form 8-K dated
as of November 1, 1998, among November 13, 1998, File No. 1-566
CorrChoice, Inc., Greif Bros. (see Exhibit 2 therein).
Corporation, Geoffrey A.
Jollay and R. Dean Jollay,
and John J. McLaughlin.
3(a) Amended and Restated Annual Report on Form 10-K for
Certificate of Incorporation the fiscal year ended October 31,
of Greif Bros. Corporation. 1997, File No. 1-566 (see Exhibit
3(a) therein).
3(b) Amended and Restated By-Laws Annual Report on Form 10-K for
of Greif Bros. Corporation. the fiscal year ended October 31,
1997, File No. 1-566 (see Exhibit
3(b) therein).
3(c) Amendment to Amended and Annual Report on Form 10-K for
Restated By-Laws of Greif the fiscal year ended October 31,
Bros. Corporation. 1998 File No. 1-566 (see Exhibit
3(c) therein).
10(a) Greif Bros. Corporation 1996 Registration Statement on Form S-
Directors Stock Option Plan. 8, File No. 333-26977 (see
Exhibit 4(b) therein).
10(b) Greif Bros. Corporation Annual Report on Form 10-K for
Incentive Stock Option Plan, the fiscal year ended October 31,
as Amended and Restated. 1997, File No. 1-566 (see Exhibit
10(b) therein).
10(c) Greif Bros. Corporation Annual Report on Form 10-K for
Directors Deferred the fiscal year ended October 31,
Compensation Plan. 1998 File No. 1-566 (see Exhibit
10(c) therein).
<PAGE> 94
EXHIBIT INDEX
(continued)
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
10(d) Employment Agreement between Annual Report on Form 10-K for
Michael J. Gasser and Greif the fiscal year ended October 31,
Bros. Corporation. 1998, File No. 1-566 (see Exhibit
10(d) therein).
10(e) Employment Agreement between Annual Report on Form 10-K for
William B. Sparks and Greif the fiscal year ended October 31,
Bros. Corporation. 1998, File No. 1-566 (see Exhibit
10(e) therein).
10(f) Employment Agreement, as Annual Report on Form 10-K for
amended, between Charles R. the fiscal year ended October 31,
Chandler and Greif Bros. 1998, File No. 1-566 (see Exhibit
Corporation. 10(f) therein).
10(g) Employment Agreement, as Annual Report on Form 10-K for
amended, between Joseph W. the fiscal year ended October 31,
Reed and Greif Bros. 1998, File No. 1-566 (see Exhibit
Corporation. 10(g) therein).
10(h) Credit Agreement dated as of Current Report on Form 8-K dated
March 30, 1998, among Greif April 14, 1998, File No. 1-566
Bros. Corporation, as (see Exhibit 99(b) therein).
Borrower, Various Financial
Institutions, as Banks, and
KeyBank National Association,
As Agent.
10(i) Supplemental Retirement Contained herein.
Benefit Agreement.
16 Letter Re: Change in Current Report on Form 8-K dated
Certifying Accountant. February 3, 1999, File No. 1-566
(see Exhibit 16 therein).
21 Subsidiaries of the Contained herein.
Registrant.
23(a) Consent of Ernst & Young LLP- Contained herein.
Columbus, Ohio.
<PAGE> 95
EXHIBIT INDEX
(concluded)
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
23(b) Consent of Contained herein.
PricewaterhouseCoopers LLP-
Columbus, Ohio.
23(c) Consent of Ernst & Young LLP- Contained herein.
Akron, Ohio.
24(a) Powers of Attorney for Annual Report on Form 10-K for
Michael J. Gasser, Charles R. the fiscal year ended October 31,
Chandler, Michael H. Dempsey, 1997, File No. 1-566 (see Exhibit
Naomi C. Dempsey, Daniel J. 24(a) therein).
Gunsett, Robert C. Macauley,
David J. Olderman and William
B. Sparks, Jr.
24(b) Power of Attorney for John C. Contained herein.
Kane.
27.1 Financial Data Schedule. Contained herein.
27.2 Financial Data Schedule- Contained herein.
Restated 1998.
27.3 Financial Data Schedule- Contained herein.
Restated 1997.
</TABLE>
<PAGE> 96
EXHIBIT 10(i)
SUPPLEMENTAL RETIREMENT BENEFIT AGREEMENT
THIS AGREEMENT is made as of __________________, 1999, between Greif
Bros. Corporation, a Delaware corporation ("Greif Bros.") and
_________________________ ("Executive").
BACKGROUND INFORMATION
A. The Executive is a key employee of Greif Bros. and it is expected
that he will continue to contribute substantially to the growth and success
of Greif Bros. during his employment. In order to assure to Greif Bros.
the continued benefit of the experience, advice, ability and services of
the Executive, Greif Bros. is willing to provide to the Executive, on the
terms and conditions set forth herein, the supplemental retirement benefits
described in this Agreement, in consideration of the execution of a
confidentiality and non-competition agreement.
B. Greif Bros. maintains the Greif Bros. Corporation Employees'
Retirement Income Plan (the "Pension Plan"), a qualified defined benefit
pension plan under Sections 401(a) and 501(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), for certain employees of Greif Bros.
C. Sections 401(a)(17) and 415 of the Code place certain limitations
on the amount of benefits that would otherwise be made available under the
Pension Plan for certain participants, including the Executive.
D. This Agreement is intended to provide a supplemental retirement
benefit to the Executive in excess of the benefits provided under the
Pension Plan.
AGREEMENT
Greif Bros. and the Executive acknowledge the accuracy of the
foregoing Background Information and agree as follows:
<PAGE> 97
EXHIBIT 10(i)
(continued)
ARTICLE I - DEFINITIONS
Words and phrases used herein with initial capital letters which are
defined in the Pension Plan are used herein as so defined, unless otherwise
specifically defined herein or the context clearly indicates otherwise.
The following words and phrases when used in this Agreement with initial
capital letters shall have the following respective meanings, unless the
context clearly indicates otherwise.
Section 1.1. Actual Pension Plan Benefit. The amount of the annual
benefit under the Pension Plan that that is actually payable to the
Executive or his Beneficiary.
Section 1.2. Cause. Termination of the Executive's employment due to
any act which, in the sole discretion of Greif Bros., is deemed to be
detrimental to the best interests of Greif Bros., including, but not
limited to (a) serious, willful misconduct in respect of his duties for
Greif Bros., (b) conviction of a felony or perpetration of a common law
fraud, (c) willful failure to comply with applicable laws with respect to
the execution of the business operations of Greif Bros., (d) theft, fraud,
embezzlement, dishonesty or other willful conduct which has resulted in
economic damage to Greif Bros., or (e) failure to comply with the drug and
alcohol abuse policies, if any, of Greif Bros.
Section 1.3. Change in Control. A Change in Control shall occur
upon (a) the purchase or other acquisition by any person, entity or group
of persons (within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934 ("Act"), or any comparable successor provisions),
directly or indirectly, which results in the beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Act) of such person, entity
or group of persons equaling 30% or more of either the outstanding common
shares of Greif Bros. or the combined voting power of the then-outstanding
securities of Greif Bros. entitled to vote in the election of the Board of
Directors, or (b) the approval by the shareholders of Greif Bros. of a
reorganization, merger, or consolidation, with respect to which in each
case persons who were shareholders of Greif Bros. immediately prior to such
reorganization, merger or consolidation do not (solely because of their
common shares of Greif Bros. owned immediately prior to such
reorganization, merger, or consolidation) immediately thereafter, own more
than 50% of the combined voting power entitled to vote in the election of
directors of the then-outstanding securities of the reorganized, merged or
consolidated company, or (c) a liquidation or dissolution of Greif Bros.,
or (d) the sale of all or substantially all of the assets of Greif Bros.
<PAGE> 98
EXHIBIT 10(i)
(continued)
Section 1.4. Controlled Group. Greif Bros. and any corporation or
other trade or business which, together with Greif Bros., is "under common
control" within the meaning of Code Section 414(b) or (c), as modified by
Code Section 415(h), where applicable; any organization (whether or not
incorporated) which, together with Greif Bros., is a member of an
"affiliated service group" within the meaning of Code Section 414(m); and
any other entity required to be aggregated with Greif Bros. pursuant to
Code Section 414(o).
Section 1.5. Disability. The Executive's disability as determined
under a long-term disability plan maintained by Greif Bros. covering such
Executive.
Section 1.6. Good Reason. One or more of the following actions by
Greif Bros. leading to the Executive's voluntary termination: (a) material
breach of the terms of any employment agreement with the Executive that is
not "cured" by Greif Bros. within 30 days of notice thereof, (b) failure of
a successor or assign of Greif Bros. to assume liability under this
Agreement or an employment agreement with the Executive, or (c) material
reduction in the salary, duties or status of the Executive's position
within Greif Bros.
Section 1.7. Maximum Target Bonus. The amount of a bonus (not to
exceed 100% of the target amount) that may be paid to the Executive based
on a performance goal target for the Plan Year, as set by the Board of
Directors of Greif Bros.
ARTICLE II- SUPPLEMENTAL RETIREMENT BENEFITS
Section 2.1. Purpose of Agreement. The purpose of this Agreement is
to provide supplemental retirement benefits (the "Supplemental Benefits")
to the Executive. The Executive is a member of a select group of
management and highly compensated employees of Greif Bros. The
Supplemental Benefits are designed to replace any benefits reduced under
the Pension Plan that the Executive would otherwise receive if not for (a)
the limitations on benefits imposed by Section 415 of the Code and/or (b)
the limitations on compensation considered under the Pension Plan imposed
by Section 401(a)(17) of the Code.
<PAGE> 99
EXHIBIT 10(i)
(continued)
Section 2.2. Amount and Duration of Supplemental Benefits. The amount
of Supplemental Benefits payable to the Executive under this Agreement
shall equal the difference between (a) the amount of the benefit payable,
expressed as an annual benefit amount, to the Executive under the Pension
Plan, determined under the terms of the Pension Plan in effect on the date
of the Executive's termination of employment with the Controlled Group but
calculated as if the Pension Plan did not contain the limitations of Code
Sections 401(a)(17) and 415, and (b) the amount of the Actual Pension Plan
Benefit.
The annual amount of Supplemental Benefits shall be paid for a period
of years equal to the Executive's Years of Service, as determined under the
Pension Plan, not to exceed fifteen (15) years.
Except as otherwise provided herein, the Executive's Supplemental
Benefits under this Agreement shall be computed in accordance with the
benefit formula and actuarial assumptions, methods and procedures
applicable under the Pension Plan and shall be based on the normal benefit
form under the Pension Plan at the date of the Executive's actual
retirement.
Section 2.3. Compensation. For purposes of calculating the
Supplemental Benefits set forth in Section 2.2, Annual Compensation shall
be determined in accordance with the Pension Plan; provided, however, that
the amount of any bonus that is taken into account for purposes of
determining Annual Compensation shall be limited to an amount equal to 50%
of the Maximum Target Bonus. In addition, Average Annual Compensation for
the Executive shall be determined as the period of thirty-six consecutive
months during the five consecutive Plan Years immediately preceding the
Executive's termination of employment during which the average of the
Executive's Annual Compensation is highest. In the calculation of such
Average Annual Compensation, in no event shall the thirty-six month period
take into account more than three annual bonus payments. To the extent
that such thirty-six month period would otherwise include more than three
annual bonus payments, all bonus payments after the first three annual
bonus payments included in such thirty-six month period (calculated from
the beginning of such thirty-six month period) shall be excluded from the
definition of Average Annual Compensation.
Section 2.4. Form of Executive's Benefits. At the time the
Executive's Supplemental Benefits under this Agreement become payable, such
benefits shall be paid in the form of quarterly installments. Greif Bros.
expressly reserves the right to alter the payment frequency or method in
effect from time to time in its sole discretion as necessary or desirable.
Notwithstanding the foregoing, if a Change in Control occurs, Greif Bros.
may under no circumstances and for no reason extend the payment period
beyond, or delay the commencement of payments to a date later than, the
time otherwise specifically provided under this Agreement.
<PAGE> 100
EXHIBIT 10(i)
(continued)
Section 2.5. Commencement of Benefits. Payment of the Executive's
Supplemental Benefits shall commence on the same date as payments of the
benefits under the Pension Plan to the Executive commence. Any election
made by the Executive under the Pension Plan with respect to the
commencement of payment of benefits under the Pension Plan shall also be
applicable with respect to the commencement of payment of amounts payable
as Supplemental Benefits under this Agreement.
Section 2.6. Vesting and Forfeiture. The Executive shall be vested
in his Supplemental Benefits upon attainment of Early Retirement Age,
Normal Retirement Age, death or Disability. In addition, upon termination
of the Executive within the two year period following a Change in Control,
either by the Executive for Good Reason, or by Greif Bros. other than for
Cause, the Executive shall be vested in the Supplemental Benefits payable
under the Agreement.
If the Executive is terminated for Cause or for a violation of his
confidentiality and non-competition agreement, all Supplemental Benefits
under this Agreement shall be forfeited. To the extent that the Executive
has commenced payments under the Agreement, all remaining installment
payments under the Agreement shall cease and be forfeited upon a violation
of the Executive's confidentiality and non-competition agreement.
Section 2.7. Actuarial Equivalent. The amount of the Supplemental
Benefits payable under the Agreement in the form set forth in Section 2.2,
or the determination of the amount of Supplemental Benefits which are
payable if payment commences at any time prior to a Executive's Normal or
Early Retirement Age, as defined by the Pension Plan, shall be the
actuarial equivalent of the amount of Supplemental Benefits payable in the
normal benefit form at the applicable retirement date, determined using the
same actuarial assumptions as set forth in the Pension Plan.
Section 2.8. Death Benefits. In the event of the death of the
Executive while receiving benefit payments under any provision of this
Agreement, Greif Bros. shall pay the remaining payments due under this
Agreement in accordance with the method of distribution in effect on the
date of the Executive's death to the Executive's surviving spouse, if any.
In the event of the death of the Executive prior to the commencement of the
distribution of benefits under this Agreement, Greif Bros. shall pay a
death benefit under this Agreement to the Executive's surviving spouse, if
any, based on the benefit that would have been payable to the Executive
under this Agreement. Such death benefit shall be payable at the time when
the death benefit (if any) under the Pension Plan becomes payable to the
Executive's surviving spouse under the Pension Plan, and shall be payable
for the number of years such benefits would have been payable to the
Executive but not beyond the surviving spouse's death. If the Executive is
not survived by a spouse, no death benefit shall be payable under this
Agreement.
<PAGE> 101
EXHIBIT 10(i)
(continued)
ARTICLE III - MISCELLANEOUS
Section 3.1. Right to Assets. Nothing contained in this Agreement
and no action taken pursuant to the provisions of this Agreement shall
create or be construed to create a trust that is not subject to the claims
of any unsecured general creditors of Greif Bros., or a fiduciary
relationship between Greif Bros. and the Executive or any other person. If
Greif Bros. elects to purchase insurance policies or otherwise invest any
funds in connection with this Agreement, all such policies or other
investments shall continue for all purposes to be a part of the general
assets of Greif Bros., and no person other than Greif Bros. shall, by
virtue of the provisions of this Agreement, have any interest in such
funds. Greif Bros. shall be the sole named beneficiary of any insurance
policies purchased by Greif Bros. on the life of the Executive. To the
extent that the Executive, the surviving spouse or any other person
acquires a right to receive payments from Greif Bros. under this Agreement,
such right shall be no greater than the right of any unsecured general
creditor of Greif Bros.
Section 3.2. Assignment and Alienation Prohibited. Neither an
Executive nor his surviving spouse shall have the power or right to
transfer, assign, anticipate, hypothecate, mortgage, commute, modify, or
otherwise encumber, in advance, any of the benefits payable hereunder, nor
shall any of said benefits be subject to seizure for the payment of any
debts, judgments, alimony or separate maintenance owed by the Executive or
his surviving spouse, nor be transferable by operation of law in the event
of bankruptcy, insolvency, or otherwise. In the event the Executive or his
surviving spouse attempts assignment, commutation, hypothecation, transfer,
or disposal of the benefits hereunder, the liabilities of Greif Bros. shall
forthwith cease and terminate.
Section 3.3. Revocation. During the lifetime of the Executive, this
Agreement may be amended or revoked at any time or times, in whole or in
part, by Greif Bros. in its sole discretion. However, unless the parties
agree otherwise, in the event of a modification or revocation, the
Executive shall be entitled to the Supplemental Benefits, if any, that have
accrued through the date of such amendment or revocation. Such benefits
shall be payable at such times and in such amounts as provided in this
Agreement.
<PAGE> 102
EXHIBIT 10(i)
(continued)
Section 3.4. Effect On Other Greif Bros. Benefit Plans. Nothing
contained in this Agreement shall affect the right of the Executive to
participate in or be covered by any qualified or non-qualified pension,
profit-sharing, group, bonus, or other supplemental compensation or fringe
benefit plan constituting a part of the existing or future compensation
structure of Greif Bros. Except as otherwise expressly provided herein,
all terms and conditions applicable to an Executive's benefit under the
Pension Plan shall be applicable to the Executive's benefit under this
Agreement. Any benefit payable to the Executive under the Pension Plan
shall be paid solely in accordance with the terms and conditions of the
Pension Plan, and nothing in this Agreement shall operate or be construed
to modify, amend or affect the terms and conditions of the Pension Plan.
Section 3.5. Interpretation. Greif Bros. shall have full power and
authority to interpret, construe, and administer this Agreement, and the
interpretation and construction thereof and actions thereunder by Greif
Bros., including any valuation of the Executive's Supplemental Benefits and
the determination of the amount or recipient of the payments to be made
with respect thereto, shall be binding and conclusive on all persons for
all purposes. No trustee, employee or agent of Greif Bros. shall be liable
to any person for any action taken or omitted in connection with the
interpretation and administration of this Agreement. Whenever, under this
Agreement, benefits are to be payable quarterly, the calculation of such
quarterly benefit payments shall be made under any method deemed reasonable
by Greif Bros., in its sole discretion. Greif Bros. shall be entitled to
rely conclusively upon all tables, valuations, certificates, opinions and
reports furnished by any actuary, accountant, controller, counsel or other
person employed or engaged by Greif Bros. with respect to the Pension Plan
and/or to this Agreement.
Section 3.6. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of Greif Bros., its successors and assigns, and
the Executive and his heirs, executors, administrators, and legal
representatives.
Section 3.7. Entire Agreement. This Agreement represents and
embodies the entire agreement and understanding of the parties with respect
to the subject matter hereof and supersedes all prior and contemporaneous
documents and understandings relative to this subject matter.
Section 3.8. Agreement Not a Contract of Employment. The Executive's
right to benefits under this Agreement shall not be construed or
interpreted to constitute or create a contract of employment between Greif
Bros. (or any affiliate) and the Executive, and nothing contained herein
shall be deemed to confer on the Executive the right to be employed by
Greif Bros. (or any affiliate).
<PAGE> 103
EXHIBIT 10(i)
(concluded)
Section 3.9. Liability. No member of the Board of Directors and no
officer or employee of Greif Bros. shall be liable to any person for
actions taken or omitted in connection with this Agreement unless
attributable to fraud, nor shall Greif Bros. be liable to any person for
actions taken or omitted with respect to this Agreement unless attributable
to fraud on the part of any officer, trustee or employee of Greif Bros.
Section 3.10. Gender. Whenever in this Agreement words are used in
the masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender whenever they should so apply.
Section 3.11. Headings. Headings and subheadings in this Agreement
are inserted for reference and convenience only and shall not be deemed a
part of this Agreement.
Section 3.12. Applicable Law. The validity and interpretation of
this Agreement shall be governed by the laws of the State of Ohio, to the
extent not superseded by federal law.
EXECUTIVE GREIF BROS. CORPORATION
By:
Title: Chairman and Chief Executive
Officer
Date: Date:
Witness
Witness
<PAGE> 104
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Name of Subsidiary Incorporated Under Laws of
Barzon, Inc. Delaware
Fibro Tambor, S.A. de C.V. Mexico
Great Lakes Corrugated Corp. Ohio
Greif Bros. Corporation of Ohio, Inc. Delaware
Greif Bros. Service Corp. Delaware
Greif Containers Inc. Canada
Soterra LLC Delaware
Tainer Transport, Inc. Delaware
Trend Pak, Inc. Ohio
<PAGE> 105
EXHIBIT 23(a)
Consent of Ernst & Young LLP
We consent to the incorporation by reference in the Registration
Statements on Form S-8 (File No. 333-26767) and (File No. 333-26977) of
Greif Bros. Corporation of our report dated December 6, 1999 with respect
to the consolidated financial statements of Greif Bros. Corporation
included in the Annual Report (Form 10-K) for the year ended October 31,
1999.
We also consent to the incorporation by reference in the registration
statements referred to in the first paragraph of our report dated December
6, 1999 with respect to the financial statement schedule of Greif Bros.
Corporation for the year ended October 31, 1999 included in the Annual
Report (Form 10-K) for 1999 filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Columbus, Ohio
January 24, 2000
<PAGE> 106
EXHIBIT 23(b)
Consent of PricewaterhouseCoopers LLP
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-26767) of Greif Bros. Corporation of our
report dated December 4, 1998 relating to the financial statements, which
appears in this Annual Report on Form 10-K. We also consent to the incorporation
by reference of our report dated December 4, 1998, relating to the financial
statement schedules for the years ended October 31, 1998 and 1997, which appears
in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
January 24, 2000
<PAGE> 107
EXHIBIT 23(c)
Consent of Ernst & Young LLP
We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 333-26767) pertaining to the Greif Bros.
Corporation 1996 Directors Stock Option Plan and (Form S-8 No. 333-26977)
pertaining to the Greif Bros. Corporation Incentive Stock Option Plan of
our report dated November 24, 1999, with respect to the consolidated
financial statements of CorrChoice, Inc., included in the Greif Bros.
Corporation Annual Report (Form 10-K) for the year ended October 31, 1999.
/s/ Ernst & Young LLP
Akron, Ohio
January 24, 2000
<PAGE>108
EXHIBIT 24(b)
Powers of Attorney for Directors
For Form 10-K Annual Reports
Each undersigned director of Greif Bros. Corporation, a Delaware
corporation (the "Company"), hereby constitutes and appoints Michael J.
Gasser and William B. Sparks, Jr., and each of them (with full power to
each of them to act alone), and his or her true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place, and stead, in his or her capacity as a
Director of the Company, to execute the Company's Form 10-K Annual Report,
pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
for the Company's fiscal year ended October 31, 1999, for each fiscal year
thereafter, and any amendments thereto, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully
to all intent and purposes as the undersigned directors might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or any of them or their or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Each undersigned director of the Company has executed and delivered
this Power of Attorney on the date set forth opposite such director's
signature.
Signature of Director Execution Date
/s/ John C. Kane January 17, 2000
John C. Kane
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary 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-31-1999
<PERIOD-END> OCT-31-1999
<CASH> 8,935
<SECURITIES> 5,314
<RECEIVABLES> 127,210
<ALLOWANCES> (2,456)
<INVENTORY> 50,706
<CURRENT-ASSETS> 217,298
<PP&E> 678,983
<DEPRECIATION> (277,850)
<TOTAL-ASSETS> 910,986
<CURRENT-LIABILITIES> 72,031
<BONDS> 258,000
0
0
<COMMON> 10,207
<OTHER-SE> 477,775
<TOTAL-LIABILITY-AND-EQUITY> 910,986
<SALES> 818,827
<TOTAL-REVENUES> 836,661
<CGS> 640,473
<TOTAL-COSTS> 640,473
<OTHER-EXPENSES> 112,995
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,835
<INCOME-PRETAX> 67,358
<INCOME-TAX> 26,740
<INCOME-CONTINUING> 40,618
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,373<F1>
<EPS-BASIC> 1.78<F2>
<EPS-DILUTED> 1.78<F2>
<FN>
<F1>Net income includes "equity in earnings of affiliates" in the amount of
$10,755,000 for 1999.
<F2>Amount represents the basic and diluted earnings per share for the Class A
Common Stock. The basic and diluted earnings per share for the Class B Common
Stock is $2.67.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Form 10-K and is
qualified in its entirety by reference to such Form 10-K.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<CASH> 41,329
<SECURITIES> 6,654
<RECEIVABLES> 116,849
<ALLOWANCES> (2,918)
<INVENTORY> 64,851
<CURRENT-ASSETS> 258,506
<PP&E> 706,019
<DEPRECIATION> (286,234)
<TOTAL-ASSETS> 878,420
<CURRENT-LIABILITIES> 98,235
<BONDS> 235,000
0
0
<COMMON> 9,936
<OTHER-SE> 450,166
<TOTAL-LIABILITY-AND-EQUITY> 878,420
<SALES> 814,432
<TOTAL-REVENUES> 830,150
<CGS> 644,892
<TOTAL-COSTS> 644,892
<OTHER-EXPENSES> 117,743
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,928
<INCOME-PRETAX> 55,587
<INCOME-TAX> 22,483
<INCOME-CONTINUING> 33,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,441<F1>
<EPS-BASIC> 1.30<F2>
<EPS-DILUTED> 1.29<F2>
<FN>
<F1>Net Income includes "equity in earnings of affiliates" in the amount of
$4,337,000 for 1998.
<F2>Amount represents the basic and diluted earnings per share for the Class A
Common Stock. The basic and diluted earnings per share for the Class B Common
Stock is $1.94 for 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Form 10-K and is
qualified in its entirety by reference to such Form 10-K.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 17,719
<SECURITIES> 7,533
<RECEIVABLES> 82,429
<ALLOWANCES> (847)
<INVENTORY> 44,892
<CURRENT-ASSETS> 172,918
<PP&E> 599,459
<DEPRECIATION> (261,662)
<TOTAL-ASSETS> 594,217
<CURRENT-LIABILITIES> 60,408
<BONDS> 43,648
0
0
<COMMON> 9,739
<OTHER-SE> 429,232
<TOTAL-LIABILITY-AND-EQUITY> 594,217
<SALES> 660,782
<TOTAL-REVENUES> 674,583
<CGS> 562,165
<TOTAL-COSTS> 562,165
<OTHER-EXPENSES> 80,243
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,670
<INCOME-PRETAX> 29,505
<INCOME-TAX> 11,419
<INCOME-CONTINUING> 18,086
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,526<F1>
<EPS-BASIC> 0.78<F2>
<EPS-DILUTED> 0.78<F2>
<FN>
<F1>Net income includes "equity in earnings of affiliates" in the amount of
$4,440,000 for 1997.
<F2>Amount represents the basic and diluted earnings per share for the Class A
Common Stock. The basic and diluted earnings per share for the Class B Common
Stock is $1.17 for 1997.
</FN>
</TABLE>
