EXHIBIT 13
GREIF BROS. CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
OCTOBER 31, 1994 1993
(Note 5)
CURRENT ASSETS
Cash and short term investments $ 29,543 $ 30,827
U.S. and Canadian government securities
--at amortized cost which approximates market 23,970 26,933
Trade accounts receivable -- less allowance
of $989 for doubtful items ($965 in 1993) 69,501 56,601
Inventories, at the lower of cost (prin-
cipally last-in, first-out) or market 50,944 42,700
Prepaid expenses and other 14,384 12,793
Total current assets 188,342 169,854
LONG TERM ASSETS
Cash surrender value of life insurance 2,618 2,452
Interest in partnership 1,091 1,091
Other long term assets 5,853 5,171
9,562 8,714
PROPERTIES, PLANTS AND EQUIPMENT - at cost
Timber properties -- less depletion 3,639 3,290
Land 10,521 9,608
Buildings 99,936 86,148
Machinery, equipment, etc. 291,426 218,475
Construction in progress 18,136 68,652
Less accumulated depreciation (202,488) (183,558)
221,170 202,615
$419,074 $381,183
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 32,948 $ 22,422
Current portion of long term obligations 249 375
Accrued payrolls and employee benefits 7,082 5,793
Accrued taxes -- general 1,952 1,620
Taxes on income 713 1,448
Total current liabilities 42,944 31,658
LONG TERM OBLIGATIONS (interest rates from
3.85% - 6.00%; payable to 2000) 27,966 28,015
OTHER LONG TERM LIABILITIES 14,265 13,572
DEFERRED INCOME TAXES 6,960 2,971
Total long term liabilities 49,191 44,558
SHAREHOLDERS' EQUITY
Capital stock, without par value 9,034 9,034
Class A Common Stock:
Authorized 16,000,000 shares;
issued 10,570,480 shares;
in treasury 5,133,894 shares;
outstanding 5,436,586 shares
Class B Common Stock:
Authorized and issued 8,640,000 shares;
in treasury 1,985,826 shares;
(1,940,267 in 1993)
outstanding 6,654,174 shares
(6,699,733 in 1993)
Earnings retained for use in the business 321,583 298,757
Cumulative translation adjustment (3,678) (2,824)
326,939 304,967
$419,074 $381,183
<FN>
See accompanying Notes to Consolidated Financial Statements
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
For the years ended October 31, 1994 1993 1992
(Note 5) (Note 5)
Sales and other income
Net sales $583,526 $526,765 $510,995
Other income:
Interest and other 6,113 6,077 7,609
Gain on timber sales 4,604 5,618 4,114
594,243 538,460 522,718
Costs and expenses (including depreciation of
$21,717 in 1994, $18,845 in 1993
and $18,292 in 1992)
Cost of products sold 480,666 440,578 415,074
Selling, general and administrative 60,518 58,078 58,331
Interest 1,447 203 197
542,631 498,859 473,602
Income before income taxes 51,612 39,601 49,116
Taxes on income 17,858 14,992 18,902
Income before minority interest 33,754 24,609 30,214
Minority interest -0- -0- 495
Net income $ 33,754 $ 24,609 $ 29,719
Net income per share (based on the average number of shares outstanding during
the year):
Based on the assumption that earnings were allocated to Class A and Class B
Common Stock to the extent that dividends were actually paid for the year and
the remainder were allocated as they would be received by shareholders in the
event of liquidation, that is, equally to Class A and Class B shares, share and
share alike:
1994 1993 1992
Class A $2.63 $1.87 $2.30
Class B $2.91 $2.15 $2.56
Due to the special characteristics of the Company's two classes of stock
(see Note 4), earnings per share can be calculated upon the basis of varying
assumptions, none of which, in the opinion of management, would be free from
the claim that it fails fully and accurately to represent the true interest of
the shareholders of each class of stock and in the earnings retained for use in
the business.
<FN>
See accompanying Notes to Consolidated Financial Statements
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EARNINGS RETAINED FOR USE IN THE BUSINESS
(Dollars in thousands, except per share amounts)
For the years ended October 31, 1994 1993 1992
Balance at beginning of year,
as previously reported $298,356 $283,251 $261,615
Effect of restatement as required by
SFAS No. 109 (see Note 5) 401 1,025 1,679
Balance at beginning of year,
as restated 298,757 284,276 263,294
Net Income 33,754 24,609 29,719
332,511 308,885 293,013
Dividends paid in the fiscal years (Note):
On Class A Common Stock
-- $.60 per share 3,262 3,262 3,045
($.60 per share in 1993
and $.56 per share in 1992)
On Class B Common Stock
-- $.88 per share 5,877 5,914 5,516
($.88 per share in 1993
and $.82 per share in 1992)
9,139 9,176 8,561
Cost of shares of treasury stock 1,789 952 176
Balance at end of year $321,583 $298,757 $284,276
Note: Dividends paid during the calendar years 1994, 1993 and 1992, relating
to the results of operations for the fiscal years ended October 31, 1994, 1993
and 1992, were as follows:
1994 calendar year dividends per share -- Class A $.68; Class B $1.00
1993 calendar year dividends per share -- Class A $.60; Class B $ .88
1992 calendar year dividends per share -- Class A $.60; Class B $ .88
<FN>
See accompanying Notes to Consolidated Financial Statements
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the years ended October 31, 1994 1993 1992
(Note 5) (Note 5)
Cash flows from operating activities:
Net income $ 33,754 $ 24,609 $ 29,719
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 21,758 18,881 18,315
Minority interest in income -0- -0- 495
Deferred income taxes 4,011 1,133 2,511
Loss (gain) on disposals of properties, plants
and equipment 4 175 (429)
(Increase) decrease:
Trade accounts receivable (12,900) (543) (1,774)
Inventories (8,244) 5,190 (1,426)
Prepaid expenses and other (1,591) (1,009) (1,248)
Other long term assets (848) 554 (189)
Increase (decrease):
Accounts payable and accrued liabilities 10,526 2,325 (873)
Accrued payrolls and employee benefits 1,289 708 (214)
Accrued taxes - general 332 (55) (80)
Taxes on income (735) (1,318) (1,469)
Other long term liabilities 693 (1,175) (771)
Net cash provided by operating activities 48,049 49,475 42,567
Cash flows from investing activities:
Sales (purchases) of investments in
government securities, net 2,963 4,959 4,914
Reduction in loan to partnership -0- -0- 6,000
Purchase of minority interest -0- -0- (4,124)
Purchase of properties, plants and equipment (40,682) (74,521) (43,406)
Proceeds on disposals of properties, plants
and equipment 166 103 659
Net cash used by investing activities (37,553) (69,459) (35,957)
Cash flows from financing activities:
Proceeds from issuance of long term debt 7,700 28,108 -0-
Payments on long term debt (7,876) (677) (146)
Acquisition of treasury stock (1,789) (952) (176)
Dividends paid (9,139) (9,176) (8,561)
Net cash provided (used) by financing
activities (11,104) 17,303 (8,883)
Foreign currency translation adjustment (676) (1,931) (3,046)
Net decrease in cash and short term
investments (1,284) (4,612) (5,319)
Cash and short term investments at
beginning of year 30,827 35,439 40,758
Cash and short term investments at
end of year $ 29,543 $ 30,827 $ 35,439
<FN>
See accompanying Notes to Consolidated Financial Statements
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The Consolidated Financial Statements include the accounts of the
Company and its subsidiaries.
Revenue Recognition
Revenue is recognized when goods are shipped.
Income Taxes
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes",
which changed the method for calculating deferred income taxes. The Company
adopted SFAS No. 109, retroactive to November 1, 1990. Certain prior year
amounts in the Company's financial statements have been restated.
Inventories
Inventories are comprised principally of raw materials and are stated
at the lower of cost (principally on last-in, first-out basis) or market. If
inventories were stated on the first-in, first-out basis, they would be
$49,000,000 greater in 1994 and $42,800,000 greater in 1993. During 1993 the
Company experienced slight LIFO liquidations which were deemed to be
immaterial to the Consolidated Financial Statements.
Interest in Partnership
The 50% interest in Macauley & Company (the partnership), in which the
Company is a limited partner, is accounted for on the cost basis since, as a
limited partner, the Company cannot participate in the management of the
limited partnership.
Properties, Plants and Equipment
Depreciation on properties, plants and equipment is provided by the
straight line method over the estimated useful lives of the assets.
Accelerated depreciation methods are used for federal income tax purposes.
Expenditures for repairs and maintenance are charged to income as incurred.
Depletion on timber properties is computed on the basis of cost and the
estimated recoverable timber acquired.
When properties are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the asset and related reserve
accounts. Gains or losses are credited or charged to income as applicable.
Earnings Retained for Use in the Business of Canadian Subsidiary Company
Deferred income taxes have been provided on accumulated earnings that
could be considered as not permanently reinvested in the Canadian subsidiary.
As of October 31, 1994, permanently reinvested earnings are
$28,591,000.
Foreign Currency Translation
In accordance with Statement of Financial Accounting Standards 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 following were the cumulative translation adjustments which
represent the effect of translating assets and liabilities of the Company's
foreign operation (Dollars in thousands):
1994 1993
Balance at beginning of year $(2,824) $ (425)
Effect of balance sheet translation (854) (2,399)
Balance at end of year $(3,678) $(2,824)
The transaction gains and losses included in income are immaterial.
Statement of Cash Flows
The Company considers highly liquid investments with an original
maturity of three months or less to be cash and short term investments.
Operations by Industry Segment
Information concerning the Company's industry segments is an integral
part of these financial statements.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
1994 presentation.
NOTE 2--INTEREST IN PARTNERSHIP
The investment in partnership consists of an investment in Macauley &
Company (the partnership). As of October 31, 1994 and 1993, the partnership
holds Class B Common Stock (1,200,000 shares) of the Company. During 1992,
the Company purchased 100% of Virginia Fibre Corporation through an option
agreement with the partnership. This purchase was accounted for under the
purchase method.
Virginia Fibre Corporation has existing stock option plans under which
additional shares may be issued but with restrictions which ensure that
ultimately these shares will be purchased by the Company. If all of these
options were fully exercised, and no shares were purchased by the Company,
Greif Bros. Corporation would then be the record holder of approximately 90%
of the outstanding stock of Virginia Fibre Corporation.
NOTE 3--LONG TERM OBLIGATIONS
The Company's long term obligations include the following as of October
31 (Dollars in thousands):
1994 1993
Current portion of long term obligations $ 249 $ 375
Long term obligations $25,702 $25,526
Capital lease 2,264 2,489
Total long term obligations $27,966 $28,015
During 1992, a subsidiary of the Company entered into a seven year
unsecured revolving loan agreement with a bank for $40 million. The revolving
loan agreement was used to finance the purchase of a 325 ton per day recycled
paper machine. The interest is an adjustable rate tied, at the Company's
discretion, to the lower of the bank's prime rate or the London Interbank
Offered Rates (4.81% as of October 31, 1994). There is no penalty for
prepayment. As part of this revolving loan agreement, the subsidiary agreed
to certain provisions and restrictions including a restriction on its
additional indebtedness.
On November 16, 1994, a different subsidiary of the Company signed a
loan commitment letter for an eight year unsecured revolving line of credit
with a bank for $17 million. This revolving credit arrangement will be used
to finance the construction of a manufacturing plant in Michigan. At the
Company's discretion, the interest rate may be tied to either the London
Interbank Offered Rates plus 50 basis points or the bank's prime rate less 25
basis points. There is no penalty for prepayment. In exchange, the
subsidiary agreed to certain restrictions including a restriction on its
additional indebtedness.
During 1993, the Company entered into a capital lease agreement covering
the land, building, and machinery and equipment at one of its plant locations.
The amount that is capitalized under this agreement is $2,708,000 and has
accumulated depreciation of $227,000 as of October 31, 1994 ($33,000 as of
October 31, 1993). In addition to the capital lease, the Company has entered
into non-cancelable operating leases for buildings and office space. The
future minimum lease payments for the non-cancelable operating leases are
$709,000 in 1995, $557,000 in 1996, $429,000 in 1997, $252,000 in 1998,
$72,000 in 1999 and $31,000 thereafter. Rent expense was $2,553,000 in 1994,
$2,555,000 in 1993 and $2,369,000 in 1992.
Annual maturities of the long term obligation and capital lease are
$392,000 in 1995, $1,992,000 in 1996, $8,391,000 in 1997, $8,388,000 in 1998,
$8,382,000 in 1999 and $1,300,000 thereafter. The amount that represents
future executory costs and interest payments for the capital lease is $630,000
as of October 31, 1994 ($785,000 as of October 31, 1993).
During 1994, the Company paid $1,599,000 of interest ($363,000 in 1993
and $171,000 in 1992) for the long term obligations and capital lease.
NOTE 4--CAPITAL STOCK AND RETAINED EARNINGS
Class A Common Stock is entitled to cumulative dividends of 2 cents a
share per year after which Class B Common Stock is entitled to non-cumulative
dividends up to 1 cent a share per year. Further distribution in any year
must be made in proportion of 1 cent a share for Class A Common Stock to 1-1/2
cents a share for Class B Common Stock. The Class A Common Stock shall have
no voting power nor shall it be entitled to notice of meetings of the
stockholders, 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. The
Company has acquired 7,119,720 shares of Class A and Class B Common Stock for
treasury at a cost of $38,129,296 which was appropriately charged against
earnings retained for use in the business. The Company acquired 45,559 of
these shares in 1994 for $1,789,009 (24,550 shares in 1993 for $951,812, and
4,500 shares in 1992 for $176,437).
NOTE 5--INCOME TAXES
Income tax expense is comprised as follows (Dollars in thousands):
U.S. State and
Federal Foreign Local Total
1994:
Current $10,592 $ 1,882 $ 2,166 $14,640
Deferred 4,767 (196) (1,353) 3,218
$15,359 $ 1,686 $ 813 $17,858
1993:
Current $10,290 $ 1,483 $ 2,117 $13,890
Deferred 1,221 (119) -- 1,102
$11,511 $ 1,364 $ 2,117 $14,992
1992:
Current $12,460 $ 1,984 $ 1,999 $16,443
Deferred 2,512 (53) -- 2,459
$14,972 $ 1,931 $ 1,999 $18,902
Foreign income before income taxes amounted to $4,111,000 in 1994
($3,208,000 in 1993 and $4,625,000 in 1992).
During 1994, the Company applied for and expects to receive a Virginia
state tax credit. The state of Virginia allows a tax credit equal to 10% of
the qualified purchase for the recycled paper machine in the year the
equipment is placed in service and for five additional years, subject to
certain income and percentage limitations.
The following is a reconciliation of the U.S. statutory federal income
tax rate to the Company's effective tax rate:
1994 1993 1992
U.S. federal statutory tax rate 35.0% 34.8% 34.0%
State taxes, net of federal tax
benefit 1.0 3.5 2.7
Limited partnership distribution -0- -0- 2.0
Other (1.4) (.4) (.2)
Effective income tax rate 34.6% 37.9% 38.5%
The Company adopted SFAS No. 109, retroactive to November 1, 1990, as
discussed in Note 1 to the Consolidated Financial Statements. In connection
with the adoption of SFAS No. 109, the Company recorded a one time adjustment
that resulted in a reduction of the deferred income tax liability and the
recording of a deferred tax asset. Certain prior year amounts in the
Company's financial statements have been restated. The effect on net income
was a reduction of net income of $624,000 or $.05 per share for 1993, a
reduction of net income of $654,000 or $.05 per share for 1992 and an addition
to net income of $1,679,000 or $.14 per share for 1991.
Significant components of the Company's deferred tax liabilities and
assets are as follows (Dollars in thousands):
1994 1993
Current deferred tax assets $ 2,804 $ 2,232
Current deferred tax liabilities $ 32 $ 35
Book basis on acquired assets $13,257 $14,920
Other 1,656 1,691
Long term deferred tax assets $14,913 $16,611
Plant and equipment $17,625 $14,864
Undistributed Canadian net income 1,402 1,402
Pension costs 1,737 1,174
Other 1,109 2,142
Long term deferred tax liabilities $21,873 $19,582
During 1994, the Company paid $10,898,000 in U. S. Federal income taxes
($10,639,000 in 1993 and $13,994,000 in 1992).
NOTE 6--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 Union
plans' benefits are based primarily upon years of service. The self-
administered salaried plan benefits are based primarily on years of service
and earnings. The Company contributes an amount that is not less than the
minimum funding nor more than the maximum tax-deductible amount to these
plans. The plans' assets consist of unallocated insurance contracts, equity
securities, government obligations, and the allowable amount of the Company's
stock (61,876 shares of Class A Common Stock and 38,440 shares of Class B
Common Stock at October 31, 1994 and 1993).
The pension expense for the plans included the following (Dollars in
thousands):
1994 1993 1992
Service cost, benefits earned during the year $ 1,415 $ 1,427 $ 1,445
Interest cost on projected benefit obligation 2,444 2,167 2,075
Actual return on assets (1,844) (4,244) (3,019)
Net amortization (1,699) 813 (293)
Pension expense 316 163 208
Multi-employer and non-U.S. pension expense 341 384 318
Total pension expense $ 657 $ 547 $ 526
The range of weighted average discount rate and expected long term rate
of return on plan assets used in the actuarial valuation were 7.0% - 9.0% for
1994, 1993 and 1992. The rate of compensation increases for salaried
employees used in the actuarial valuation range from 4.5% to 6.5% for 1994,
1993 and 1992.
The following table sets forth the plans' funded status and amounts
recognized in the Company's statements (Dollars in thousands):
ASSETS EXCEED ACCUMULATED BENEFITS
ACCUMULATED BENEFITS EXCEED ASSETS
1994 1993 1994
Actuarial present value of
benefit obligations:
Vested benefit obligation $22,568 $28,264 $ 8,209
Accumulated benefit obligation $22,828 $30,289 $ 9,440
Projected benefit obligation $32,290 $40,740 $ 9,440
Plan assets at fair value $45,591 $54,163 $ 8,552
Plan assets greater than
(less than) projected bene-
fit obligation $13,301 $13,423 $ (888)
Unrecognized net (gain) loss 1,889 (309) (1,952)
Prior service cost not yet re-
cognized in net periodic
pension cost 513 1,891 1,940
Adjustment required to recognize
minimum liability -- -- (1,013)
Unrecognized net (asset) obligation
from transition (11,851) (11,668) 1,025
Prepaid pension cost (liability) $ 3,852 $ 3,337 $ (888)
During 1994, the Company, in accordance with the provisions of
Statement of Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions", recorded the "adjustment
required to recognize minimum liability". The amount was offset by a long
term asset, of equal amount, recognized in the Consolidated Financial
Statements.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the
Board of Directors of
Greif Bros. Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of earnings retained for use in the
business and of cash flows present fairly, in all material respects, the
financial position of Greif Bros. Corporation and its subsidiaries at October
31, 1994 and 1993, and the results of their operations and their cash flows
for each of the three years in the period ended October 31, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 5 to the Consolidated Financial Statements, the
Company changed its method of accounting for income taxes.
Price Waterhouse LLP Columbus, Ohio
November 30, 1994
QUARTERLY FINANCIAL DATA (Unaudited)
The quarterly results of operations for fiscal 1994 and 1993 are
shown below (Dollars in thousands, except per share amounts).
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1994 1994 1994 1994
Net sales $128,772 $139,916 $147,629 $167,209
Gross profit 19,593 22,732 26,025 34,510
Net income 4,564 6,352 8,701 14,137
Net income per share:
Assuming distributions as actually
paid out in dividends and the
balance as in liquidation:
Class A $.29 $.50 $.70 $1.14
Class B $.45 $.54 $.74 $1.18
Market price (Class A Common Stock):
High $43-1/2 $43 $39-7/8 $46-1/2
Low $37-3/4 $38 $37-1/4 $39
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1993 1993 1993 1993
Net sales $125,062 $133,881 $130,762 $137,060
Gross profit 20,516 21,837 18,988 24,846
Net income 5,158 5,800 3,979 9,672
Net income per share:
Assuming distributions as actually
paid out in dividends and the
balance as in liquidation:
Class A $.34 $.46 $.30 $.77
Class B $.50 $.50 $.34 $.81
Market price (Class A Common Stock):
High $39 $39-3/4 $41 $40-7/8
Low $34-1/2 $37-7/8 $38-1/8 $38
The 1993 amounts have been restated to reflect the adoption of SFAS
No. 109 (see Note 5 to the Consolidated Financial Statements). The effect
on net income was a reduction of $157 for the quarter ended January 31, 1993,
$154 for the quarter ended April 30, 1993, $157 for the quarter ended July 31,
1993 and $156 for the quarter ended October 31, 1993.
The Class A Common Stock is traded on the Chicago Stock Exchange.
There is no active market for the Class B Common Stock.
As of November 30, 1994, there were 837 shareholders of record of
Class A Common Stock and 179 shareholders of Class B Common Stock.
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
YEAR ENDED OCTOBER 31
1994 1993 1992 1991 1990
Net sales $583,526 $526,765 $510,995 $437,379 $438,143
Net income $ 33,754 $ 24,609 $ 29,719 $ 23,923 $ 22,127
Total assets $419,074 $381,183 $340,173 $327,693 $296,603
Long term
obligations $ 27,966 $ 28,015 $ 768 $ 916 $ 904
Dividends per share of
common stock:
Class A $ .60 $ .60 $ .56 $ .56 $ .56
Class B $ .88 $ .88 $ .82 $ .82 $ .82
Net income per share:
Based on the assumption that earnings were allocated to Class A and
Class B Common Stock to the extent that dividends were actually paid for the
year and the remainder were allocated as they would be received by shareholders
in the event of liquidation, that is, equally to Class A and Class B shares,
share and share alike:
1994 1993 1992 1991 1990
Class A $2.63 $1.87 $2.30 $1.82 $1.66
Class B $2.91 $2.15 $2.56 $2.08 $1.92
Due to the special characteristics of the Company's two classes of stock
(see Note 4 to the Consolidated Financial Statements), earnings per share can
be calculated upon the basis of varying assumptions, none of which, in the
opinion of management, would be free from the claim that it fails fully and
accurately to represent the true interest of the shareholders of each class of
stock and in the earnings retained for use in the business.
Certain prior year amounts have been restated to reflect the adoption
of SFAS No. 109 (see Note 5 to the Consolidated Financial Statements).
THE BUSINESS
The Company principally manufactures shipping containers and
containerboard and related products which it sells to customers in many
industries primarily in the United States and Canada, through direct sales
contact with its customers. There were no significant changes in the business
since the beginning of the fiscal year.
The Company operates 97 locations in 29 states of the United States and
in 3 provinces of Canada and as such is subject to federal, state, local and
foreign regulations in effect at the various localities.
Due to the variety of products, the Company has many customers buying
different types of the Company's products and due to the scope of the
Company's sales, no one customer is considered principal in the total
operation of the Company.
Because the Company supplies a cross section of industries, such as
chemicals, food products, petroleum products, pharmaceuticals, metal products
and others and because the Company must make spot deliveries on a day-to-day
basis as its product is required by its customers, the Company does not
operate on a backlog and maintains only limited levels of finished goods.
Many customers place their orders weekly for delivery during the week.
The Company's business is highly competitive in all respects (price,
quality and service), and the Company experiences substantial competition in
selling its products. Many of the Company's competitors are larger than the
Company.
While research and development projects are important to the Company's
continued growth, the amount expended in any year is not material in relation
to the results of operations of the Company.
The Company's raw materials are principally pulpwood, waste paper for
recycling, paper, steel and resins. In the current year, as in prior years,
certain of these materials have been in short supply, but to date these
shortages have not had a significant effect on the Company's operations.
The Company's business is not materially dependent upon patents,
trademarks, licenses or franchises.
The business of the Company is not seasonal to any significant extent.
The approximate number of persons employed during the year was 4,500.
Industry Segments
The Company operates in two industry segments, shipping containers and
materials ("shipping containers") and containerboard and related products
("containerboard").
Operations in the shipping containers and materials industry segment
involve the production and sale of fibre, steel and plastic drums, multiwall
bags, cooperage, dunnage, pallets, laminated particle board, wood cut stock
and miscellaneous items. These products are manufactured and principally sold
throughout the United States and Canada.
Operations in the containerboard and related products segment involve
the production and sale of containerboard, both virgin and recycled, and
related corrugated products including corrugated paper and corrugated
containers. These products are manufactured and sold in the United States and
Canada.
In computing operating profit for the two industry segments, interest
expense, other income and expense, timber property management costs and income
taxes have not been added or deducted. These latter amounts, excluding income
taxes, comprise general corporate other income and expense, net.
Each segment's operating assets are those assets used in the
manufacture and sale of shipping containers and materials or containerboard
and related products. Corporate assets are principally cash, marketable
securities, timber properties and other investments.
The following segment information is presented for the three years
ended October 31, 1994, except as to asset information which is as of October
31 (Dollars in thousands):
1994 1993 1992
Net sales:
Shipping containers $353,992 $340,326 $335,012
Containerboard 229,534 186,439 175,983
Total $583,526 $526,765 $510,995
Operating profit:
Shipping containers $ 9,573 $ 6,709 $ 16,292
Containerboard 30,306 18,354 18,194
Total segment 39,879 25,063 34,486
General corporate other
income and expenses, net 11,733 14,538 14,135
Income before income taxes 51,612 39,601 48,621
Income taxes 17,858 14,992 18,902
Net income $ 33,754 $ 24,609 $ 29,719
Identifiable assets:
Shipping containers $179,794 $170,783 $174,007
Containerboard 178,053 146,550 93,225
Total segment 357,847 317,333 267,232
Corporate assets 61,227 63,850 72,941
Total $419,074 $381,183 $340,173
Depreciation expense:
Shipping containers $ 13,271 $ 13,697 $ 13,862
Containerboard 8,388 5,097 4,385
Total segment 21,659 18,794 18,247
Corporate assets 58 51 45
Total $ 21,717 $ 18,845 $ 18,292
Property additions:
Shipping containers $ 16,226 $ 15,503 $ 15,481
Containerboard 19,313 53,251 22,722
Total segment 35,539 68,754 38,203
Corporate assets 5,143 5,767 5,203
Total $ 40,682 $ 74,521 $ 43,406
<FN>
Certain prior year amounts have been restated to reflect the
adoption of SFAS No. 109 (see Note 5 to the Consolidated Financial
Statements).
MANAGEMENT'S DISCUSSION AND ANALYSIS
Ratio Analysis
Presented below are certain comparative data illustrative of the
following discussion of the Company's financial condition, etc. (Dollars in
thousands):
1994 1993 1992 1991
Capital
expenditures $40,682 $74,521 $43,406 $25,025
Net sales $583,526 $526,765 $510,995 $437,379
Net income $33,754 $24,609 $29,719 $23,923
Cash flow from
operations $48,049 $49,475 $42,567 $32,588
Increase (decrease)
in working capital $7,202 $(15,105) $(2,991) $23,077
Current ratio 4.4:1 5.4:1 6.1:1 5.8:1
Other income $10,717 $11,695 $11,723 $14,801
<FN>
Certain prior year amounts have been restated to reflect the adoption
of SFAS No. 109 (see Note 5 to the Consolidated Financial Statements).
Liquidity & Capital Resources
As indicated in the Consolidated Balance Sheet, elsewhere in this
Report and in the ratios set forth immediately above, the Company is dedicated
to maintaining a strong financial position. 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
share- holders' equity in periods of adverse economic conditions; and to
respond to any large and presently unanticipated cash demands that might
result from future drastic events.
(b) To replace and improve plant and equipment. When plant and
production machinery must be replaced either because of wear or to obtain the
cost-reducing potential of technological improvement required to remain a low
cost producer in the highly competitive environment in which the Company
operates, the costs of new plant and machinery are often much higher,
sometimes significantly higher, than the historical costs of the items being
replaced.
Self-financing and low interest rate borrowing have been the primary
source for such capital expenditures. The Company will attempt to finance
future capital expenditures in a like manner. While there is no commitment to
continue such a practice, at least one new manufacturing plant or major
additions to existing plants have been undertaken in each of the last three
years.
(c) To continue to pay competitive and sound remuneration,
including the ever-increasing costs of employee benefits, to Company employees
who produce the results for the Company's shareholders.
(d) To be able to benefit from new developments, new products and
new opportunities in order to achieve the best results for our shareholders.
Management believes that the present financial strength of the
Company will be sufficient to achieve the foregoing goals.
In spite of such necessary financial strength, the Company's
shipping containers business, where packages manufactured by Greif Bros.
Corporation are purchased by other manufacturers and suppliers, is wholly
subject to the general economic conditions and the business success of the
Company's customers.
Similarly, the Company's containerboard and related products
business is also subject to the general economic conditions and the effect of
the operating rates of the containerboard industry, including pricing
pressures from its competition.
The historical financial strength generated by these segments
has enabled them to remain independently liquid during adverse economic
conditions.
Results of Operations
As explained above, the Company is subject to the general economic
conditions of its customers.
In our 1993 Report to Shareholders, it was noted that the Company's
results were adversely affected by the following:
(a) The Company has experienced severe price pressures on its
products.
(b) The cost of the Company's raw materials continue to increase.
While these items still exist, the Company's continued efforts to
reduce operating costs by cost control measures, manufacturing innovations and
capital expenditures resulted in an improvement in the profit margin for 1994.
The Company, during 1994, invested approximately $40,682,000 in
capital additions. During the last three years, the Company has invested
$158,609,000. As noted in our 1993 Report to Shareholders, the Company during
1993 undertook a major addition at one of its subsidiaries. This project was
completed in December, 1993 and resulted in additional capacity for 1994. In
addition, another subsidiary of the Company is planning to build a new
manufacturing plant during 1995. These investments are an indication of the
Company's commitment to be the quality, low cost producer and the desirable
long term supplier to all of our customers.
The Company remains confident that with the financial strength that
it has built over its 117 year existence, it will be able to adequately
compete in highly competitive markets.
Net Sales
Net sales to customers, compared with the previous year, increased
10.8% in 1994. The 1994 sales established a record for net sales. The
increase in sales in 1994 was primarily the result of the addition of a 325
ton per day recycled paper machine at a subsidiary of the Company coupled with
shortages in containerboard and related products which resulted in increased
selling prices. Other capital expenditures from previous years also
attributed to this increase.
The increase in sales in 1993 of 3.1% was the result of capital
additions expended in previous years offset by reduced selling prices on some
of the Company's products.
The increase in sales in 1992 of 16.8% was primarily the result of
an increase in sales in the containerboard and related products segment. This
was the result of a full year of consolidation of Virginia Fibre Corporation
along with an increase in sales in the entities that make up that segment.
Other Income
The 1994 other income, compared with the previous year, decreased
due to less timber sales.
The 1993 other income was adversely affected by the reduced rates
available on the Company's investable funds. The Company's investable funds
were also reduced due to the significant capital additions during the year.
This reduction in other income was offset to a degree by the large amount of
timber sales in 1993. These sales were the result of the harvest of mature
timber in certain areas.
Also, the Company received a $5,104,640 dividend from an investment
in 1991. No such dividend was received in 1994, 1993 or 1992.
Income Before Income Taxes
The 1994 increase in income before taxes was the result of the sales
increase and increase in gross margin. This increase was slightly offset by a
reduction in timber sales and an increase in interest expense that resulted
from the Company's long term obligations.
The 1993 decrease in income before taxes was the result of
competitive price pressures of the Company's products, coupled with increases
in certain of its raw materials.
The 1992 increase in income before income taxes was the result of
the sales increase and increase in gross margin.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Greif Bros. Corporation will furnish to any shareholder of record,
upon written request, without charge, a copy of its most recently filed Form
10-Q and/or Form 10-K, as filed with the Securities and Exchange Commission.
Written requests should be directed to Secretary, Greif Bros. Corporation, 621
Pennsylvania Avenue, Delaware, Ohio 43015.