26
EXHIBIT 13
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
For the years ended October 31, 1995 1994 1993
Net sales $719,345 $583,526 $526,765
Other income:
Interest and other 5,822 6,113 6,077
Gain on timber sales 8,067 4,604 5,618
733,234 594,243 538,460
Costs and expenses (including depreciation of
$22,944 in 1995, $21,717 in 1994 and
$18,845 in 1993):
Cost of products sold 561,118 480,666 440,578
Selling, general and administrative 73,733 60,518 58,078
Interest 472 1,447 203
635,323 542,631 498,859
Income before income taxes 97,911 51,612 39,601
Taxes on income 37,778 17,858 14,992
Net income $ 60,133 $ 33,754 $ 24,609
Net income per share (based on the average number of shares outstanding
during the year, adjusted for two-for-one stock split):
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:
1995 1994 1993
Class A Common Stock $2.39 $1.32 $ .94
Class B Common Stock $2.58 $1.46 $1.08
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 retained earnings.
[FN]
See accompanying Notes to Consolidated Financial Statements
27
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
October 31, 1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 31,612 $ 29,543
U.S. and Canadian government securities 18,981 23,970
Trade accounts receivable -- less allowance
of $789 for doubtful items ($989 in 1994) 76,950 69,501
Inventories, at the lower of cost (prin-
cipally last-in, first-out) or market 53,876 50,944
Prepaid expenses and other 16,482 14,384
Total current assets 197,901 188,342
LONG TERM ASSETS
Cash surrender value of life insurance 2,838 2,618
Interest in partnership 1,091 1,091
Other long term assets 6,977 5,853
10,906 9,562
PROPERTIES, PLANTS AND EQUIPMENT -- at cost
Timber properties -- less depletion 4,518 3,639
Land 11,014 10,521
Buildings 104,892 99,936
Machinery, equipment, etc. 319,785 291,426
Construction in progress 42,102 18,136
Less accumulated depreciation (223,456) (202,488)
258,855 221,170
$467,662 $419,074
<FN>
See accompanying Notes to Consolidated Financial Statements
28
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
October 31, 1995 1994
CURRENT LIABILITIES
Accounts payable $ 35,935 $ 32,948
Current portion of long term obligations 264 249
Accrued payrolls and employee benefits 10,882 7,082
Accrued taxes -- general 1,954 1,952
Taxes on income 0 126 713
Total current liabilities 49,161 42,944
LONG TERM OBLIGATIONS (interest rates from
4.81% - 8.00%; payable to 2002) 14,101 27,966
OTHER LONG TERM LIABILITIES 18,305 14,265
DEFERRED INCOME TAXES 13,562 6,960
Total long term liabilities 45,968 49,191
SHAREHOLDERS' EQUITY
Capital stock, without par value 9,034 9,034
Class A Common Stock:
Authorized 32,000,000 shares;
issued 21,140,960 shares;
outstanding 10,873,172 shares
Class B Common Stock:
Authorized and issued 17,280,000 shares;
outstanding 13,201,793 shares
(13,308,348 in 1994)
Treasury stock, at cost (40,776) (38,129)
Class A Common Stock: 10,267,788 shares
Class B Common Stock: 4,078,207 shares
(3,971,652 in 1994)
Retained earnings 407,665 359,712
Cumulative translation adjustment (3,390) (3,678)
372,533 326,939
$467,662 $419,074
<FN>
See accompanying Notes to Consolidated Financial Statements
29
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the years ended October 31, 1995 1994 1993
Cash flows from operating activities:
Net income $60,133 $33,754 $24,609
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 23,002 21,758 18,881
Deferred income taxes 6,597 4,011 1,133
(Gain) loss on disposals of properties,
plants and equipment (331) 4 175
(Increase) decrease:
Trade accounts receivable (7,449) (12,900) (543)
Inventories (2,932) (8,244)
5,190
Prepaid expenses and other (2,098) (1,591) (1,009)
Other long term assets (1,344) (848) 554
Increase (decrease):
Accounts payable 2,987 10,526 2,325
Accrued payrolls and employee
benefits 3,800 1,289 708
Accrued taxes -- general 2 332 (55)
Taxes on income (587) (735) (1,318)
Other long term liabilities 4,040 693 (1,175)
Net cash provided by operating
activities 85,820 48,049 49,475
Cash flows from investing activities:
Sales of investments in government
securities 9,211 22,177 26,512
Purchases of investments in government
securities (4,223) (19,214) (21,553)
Purchase of properties, plants and
equipment (61,066) (40,682) (74,521)
Proceeds on disposals of properties, plants
and equipment 745 166 103
Net cash used by investing activities (55,333) (37,553) (69,459)
Cash flows from financing activities:
Proceeds from issuance of long term
debt 12,000 7,700 28,108
Payments on long term debt (25,849) (7,876) (677)
Acquisition of treasury stock (2,647) (1,789) (952)
Dividends paid (12,180) (9,139) (9,176)
Net cash (used) provided by financing
activities (28,676) (11,104) 17,303
Foreign currency translation adjustment 258 (676) (1,931)
Net increase (decrease) in cash and
cash equivalents 2,069 (1,284) (4,612)
Cash and cash equivalents at beginning
of year 29,543 30,827 35,439
Cash and cash equivalents at end of year $31,612 $29,543 $30,827
<FN>
See accompanying Notes to Consolidated Financial Statements
30
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars and shares in thousands, except per share amounts)
Trans-
lation Share-
Capital Stock Treasury Stock Retained Adjust- holders'
Shares Amount Shares Amount Earnings ment Equity
Balance at
November 1, 1992 24,322 $9,034 14,099 $(35,388) $319,664 $ (425) $292,885
Net income 24,609 24,609
Dividends paid (Note):
Class A - $.30 (3,262) (3,262)
Class B - $.44 (5,914) (5,914)
Treasury shares
acquired (49) 49 (952) (952)
Translation loss (2,399) (2,399)
Balance at
October 31, 1993 24,273 9,034 14,148 (36,340) 335,097 (2,824) 304,967
Net income 33,754 33,754
Dividends paid (Note):
Class A - $.30 (3,262) (3,262)
Class B - $.44 (5,877) (5,877)
Treasury shares
acquired (91) 91 (1,789) (1,789)
Translation loss (854) (854)
Balance at
October 31, 1994 24,182 9,034 14,239 (38,129) 359,712 (3,678) 326,939
Net income 60,133 60,133
Dividends paid (Note):
Class A - $.40 (4,349) (4,349)
Class B - $.59 (7,831) (7,831)
Treasury shares
acquired (107) 107 (2,647) (2,647)
Translation gain 288 288
Balance at
October 31, 1995 24,075 $9,034 14,346 $(40,776) $407,665$(3,390) $372,533
NOTE:Dividends paid during the calendar years 1995, 1994 and 1993, relating to the
results of operations
for the fiscal years ended October 31, 1995, 1994 and 1993, were as
follows:
1995 calendar year dividends per share - Class A $.40;Class B $.59
1994 calendar year dividends per share - Class A $.34;Class B $.50
1993 calendar year dividends per share - Class A $.30;Class B $.44
<FN>
See accompanying Notes to Consolidated Financial Statements
31
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
Income taxes are accounted for under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". In
accordance with this statement, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases, as measured by tax rates currently in
effect.
Cash and Cash Equivalents
The Company considers highly liquid investments with an
original maturity of three months or less to be cash and cash
equivalents. Included in these amounts are repurchase agreements
and certificates of deposit of $6,800,000 and $11,700,000,
respectively, in 1995 ($7,500,000 and $9,400,000, respectively,
in 1994).
U.S. and Canadian Government Securities
There are no U.S. marketable securities at October 31,
1995.
The Canadian government securities are classified as
available-for-sale and, as such, are reported at their fair value
which approximates amortized cost. These securities have
maturities to 2001.
During 1995, the Company received $3,600,000 in proceeds
from the sale of available-for-sale securities. The realized
gains and losses included in income are immaterial.
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 $57,600,000 greater in
32
1995, $49,000,000 greater in 1994 and $42,800,000 greater in 1993. During
1995 and 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, 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.
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 cumulative translation adjustments which represent the
effect of translating assets and liabilities of the Company's
foreign operation are presented in the Consolidated Statements of
Changes in Shareholders' Equity. The transaction gains and
losses included in income are immaterial.
Operations by Industry Segment
Information concerning the Company's industry segments,
presented on pages 43-45, is an integral part of these financial
statements.
Reclassifications
Certain prior year amounts have been reclassified to
conform to the 1995 presentation.
33
NOTE 2--INTEREST IN PARTNERSHIP
Effective November 6, 1995, Macauley & Company (the
Partnership) was liquidated. Prior to the liquidation, the
Partnership held Class B Common Stock (2,400,000 shares) of the
Company. Upon liquidation, the Company received 1,200,000 shares
of the Class B Common Stock. The Company will record the
liquidation by crediting interest in partnership and charging an
equal amount to treasury stock.
NOTE 3--LONG TERM OBLIGATIONS
The Company's long term obligations include the following
as of October 31 (Dollars in thousands):
1995 1994
Current portion of long term obligations $ 264 $ 249
Long term obligations $12,076 $25,702
Capital lease 2,025 2,264
Total long term obligations $14,101 $27,966
During 1992, a subsidiary of the Company entered into an
unsecured revolving loan agreement, as amended in 1995, with a
bank for $25 million of financing through 1996. On October 31,
1995, there were no outstanding long term obligations. The
interest is an adjustable rate tied to the London Interbank
Offered Rates. 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. On October
31, 1995, the amount in long term obligations was $12 million.
This revolving credit arrangement was used to finance the
construction of a manufacturing plant in Michigan which was
completed in November 1995. At the Company's discretion, the
interest rate may be tied to either the London Interbank Offered
Rates plus 50 basis points or the bank's prime rate less 25 basis
points. There is no penalty for prepayment. As part of the
revolving credit arrangement, the subsidiary agreed to certain
restrictions including a restriction on its additional
indebtedness.
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 $416,000 as of October 31, 1995 ($227,000 as of
October 31, 1994). 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 $556,000 in 1996, $418,000 in
1997, $318,000 in 1998, $178,000 in 1999, $64,000 in 2000 and
$116,000 thereafter. Rent expense was $3,246,000 in 1995,
$2,553,000 in 1994 and $2,555,000 in 1993.
34
Annual maturities of the long term obligations and capital
lease are $392,000 in 1996, $391,000 in 1997, $388,000 in 1998,
$2,675,000 in 1999, $3,731,000 in 2000 and $7,276,000 thereafter.
The amount that represents future executory costs and interest
payments for the capital lease is $488,000 as of October 31, 1995
($630,000 as of October 31, 1994).
During 1995, the Company paid $1,359,000 of interest
($1,599,000 in 1994 and $363,000 in 1993) for the long term
obligations and capital lease. Interest of $780,000 in 1995,
$211,000 in 1994 and $272,000 in 1993 was capitalized.
NOTE 4--CAPITAL STOCK
In March 1995, authorized Class A Common Stock was increased
from 16,000,000 shares to 32,000,000 shares and Class B Common
Stock from 8,640,000 shares to 17,280,000 shares. At the same
time, all issued shares were split two-for-one.
Class A Common Stock is entitled to cumulative dividends of
1 cent a share per year after which Class B Common Stock is
entitled to non-cumulative dividends up to 1/2 cent a share per
year. Further distribution in any year must be made in
proportion of 1 cent a share for Class A Common Stock to 1-1/2
cents a share for Class B Common Stock. The Class A Common Stock
shall have no voting power nor shall it be entitled to notice of
meetings of the shareholders, all rights to vote and all voting
power being vested exclusively in the Class B Common Stock unless
four quarterly cumulative dividends upon the Class A Common Stock
are in arrears. There is no cumulative voting.
NOTE 5--STOCK OPTIONS
During 1995, the Company adopted an Incentive Stock Option
Plan (the Plan) which provides the granting of incentive stock
options to key employees and non-statutory options for non-employees.
The aggregate number of the Company's Class A Common
Stock which options may be granted shall not exceed 1,000,000
shares. Under the terms of the Plan, options are granted at
exercise prices equal to the market value on the date the options
are granted and become exercisable after two years from the date
of grant. Options expire ten years after date of grant.
In 1995, 155,000 and 44,500 incentive stock options have
been granted with option prices of $26.19 per share and $22.94
per share, respectively. In addition, 10,000 non-statutory
options have been granted with option prices of $23.75 per share.
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.
35
NOTE 6--INCOME TAXES
Income tax expense is comprised as follows (Dollars in
thousands):
U.S. State and
Federal Foreign Local Total
1995:
Current $27,053 $ 1,616 $ 3,567 $32,236
Deferred 3,655 258 1,629 5,542
$30,708 $ 1,874 $ 5,196 $37,778
1994:
Current $10,592 $ 1,882 $ 2,166 $14,640
Deferred 4,767 (196) (1,353) 3,218
$15,359 $ 1,686 $ 813 $17,858
1993:
Current $10,290 $ 1,483 $ 2,117 $13,890
Deferred 1,221 (119) -- 1,102
$11,511 $ 1,364 $ 2,117 $14,992
Foreign income before income taxes amounted to $4,452,000
in 1995 ($4,111,000 in 1994 and $3,208,000 in 1993).
During 1994, the Company was awarded 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 was 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:
1995 1994 1993
U.S. federal statutory tax rate 35.0% 35.0% 34.8%
State taxes, net of federal tax
benefit 3.9% 1.0% 3.5%
Other (.3%) (1.4%) (.4%)
Effective income tax rate 38.6% 34.6% 37.9%
36
Significant components of the Company's deferred tax assets
and liabilities are as follows (Dollars in thousands):
1995 1994
Current deferred tax assets $ 4,244 $ 2,804
Current deferred tax liabilities $ 36 $ 32
Book basis on acquired assets $12,264 $13,257
Other 3,791 1,656
Long term deferred tax assets $16,055 $14,913
Plants and equipment $25,823 $17,625
Undistributed Canadian net income 1,402 1,402
Pension costs 1,733 1,737
Other 659 1,109
Long term deferred tax liabilities $29,617 $21,873
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, 1995, permanently
reinvested earnings are $17,150,000. If deferred taxes were
provided on permanently reinvested earnings, the amount would
approximate $1 million.
During 1995, the Company paid $27,680,000 in U. S. Federal
income taxes
($10,898,000 in 1994 and $10,639,000 in 1993).
NOTE 7--RETIREMENT PLANS
The Company has non-contributory defined benefit pension
plans that cover most of its employees. These plans include
plans self-administered by the Company along with Union
administered multi-employer plans. The self-administered hourly
and Union plans' benefits are based primarily upon years of
service. The self-administered salaried plan's benefits are
based primarily on years of service and earnings. The Company
contributes an amount that is not less than the minimum funding
nor more than the maximum tax-deductible amount to these plans.
The plans' assets consist of unallocated insurance contracts,
equity securities, government obligations and the allowable
amount of the Company's stock (123,752 shares of Class A Common
Stock and 77,755 shares of Class B Common Stock at October 31,
1995 and 1994).
37
The pension expense for the plans included the following
(Dollars in thousands):
1995 1994 1993
Service cost, benefits
earned during the year $ 2,365 $ 1,415 $ 1,427
Interest cost on projected
benefit obligation 3,839 2,444 2,167
Actual return on assets (2,464) (1,844) (4,244)
Net amortization (1,919) (1,699) 813
1,821 316 163
Multi-employer and non-U.S.
pension expense 790 341 384
Total pension expense $ 2,611 $ 657 $ 547
The range of weighted average discount rate and expected
long term rate of return on plan assets used in the actuarial
valuation was 7.0% - 9.0% for 1995, 1994 and 1993. The rate of
compensation increases for salaried employees used in the
actuarial valuation range from 4.0% - 6.5% for 1995, 1994 and
1993.
38
The following table sets forth the plans' funded status and
amounts recognized in the Consolidated Financial Statements (Dollars
in thousands):
ASSETS EXCEED ACCUMULATED BENEFITS
ACCUMULATED BENEFITS EXCEED ASSETS
1995 1994 1995 1994
Actuarial present value of
benefit obligations:
Vested benefit obligation $30,816 $22,568 $ 8,389 $ 8,209
Accumulated benefit
obligation $31,122 $22,828 $10,152 $ 9,440
Projected benefit
obligation $45,027 $32,290 $10,152 $ 9,440
Plan assets at fair value $48,399 $45,591 $ 9,290 $ 8,552
Plan assets greater than
(less than) projected bene-
fit obligation $ 3,372 $13,301 $ (862) $ (888)
Unrecognized net (gain)
loss (7,806) 1,889 897 (1,952)
Prior service cost not yet re-
cognized in net periodic
pension cost 7,077 513 1,880 1,940
Adjustment required to recognize
minimum liability -- -- (938) (1,013)
Unrecognized net obligation (asset)
from transition 1,056 (11,851) (1,839) 1,025
Prepaid pension cost
(liability) $ 3,699 $ 3,852 $ (862) $ (888)
<FN>
During 1995 and 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 an equal amount, recognized in the Consolidated Financial
Statements.
39
REPORT OF MANAGEMENT'S RESPONSIBILITIES
To the Shareholders of
Greif Bros. Corporation
The Company's management is responsible for the financial
and operating information included in this Annual Report to
Shareholders, including the Consolidated Financial Statements of
Greif Bros. Corporation and its subsidiaries. These statements
were prepared in accordance with generally accepted accounting
principles and, as such, include certain estimates and judgements
made by management.
The system of internal accounting control, which is designed
to provide reasonable assurance as to the integrity and
reliability of financial reporting, is established and maintained
by the Company's management. This system is continuously
reviewed by the internal auditor of the Company. In addition,
Price Waterhouse LLP, an independent accounting firm, audits the
financial statements of Greif Bros. Corporation and its
subsidiaries and issues reports to management concerning the
internal controls of the Company. The Audit Committee of the
Board of Directors meets periodically with the internal auditor
and the independent accountants to discuss the internal control
structure and the results of their audits.
Michael J. Gasser John K. Dieker
Chairman and Chief Executive Officer Controller
40
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the
Board of Directors of
Greif Bros. Corporation
In our opinion, the accompanying consolidated balance sheets
and the related consolidated statements of income, of changes in
shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Greif Bros.
Corporation and its subsidiaries at October 31, 1995 and 1994,
and the results of their operations and their cash flows for each
of the three years in the period ended October 31, 1995, in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP Columbus, Ohio
December 1, 1995
41
QUARTERLY FINANCIAL DATA (Unaudited)
The quarterly results of operations for fiscal 1995 and 1994 are
shown below (Dollars in thousands, except per share amounts).
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1995 1995 1995 1995
Net sales $170,058 $184,869 $184,159 $180,259
Gross profit 37,400 37,969 46,148 36,710
Net income 15,378 14,881 17,588 12,286
Net income per share:
Assuming distributions as actually
paid out in dividends and the
balance as in liquidation:
Class A Common Stock $.58 $.60 $.71 $.50
Class B Common Stock $.68 $.63 $.74 $.53
Market price (Class A Common Stock):
High $27-1/2 $28-7/8 $27-3/8 $25-1/2
Low $21-3/16 $25 $22-1/4 $21-1/4
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 Common Stock $.15 $.25 $.35 $.57
Class B Common Stock $.23 $.27 $.37 $.59
Market price (Class A Common Stock):
High $21-3/4 $21-1/2 $19-15/16 $23-1/4
Low $18-7/8 $19 $18-5/8 $19-1/2
<FN>
The prior year per share amounts have been adjusted to reflect the
two-for-one stock split (see Note 4 to the Consolidated Financial
Statements).
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, 1995, there were 812 shareholders of record of
Class A Common Stock and 199 shareholders of Class B Common Stock.
42
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
YEAR ENDED OCTOBER 31
1995 1994 1993 1992 1991
Net sales $719,345 $583,526 $526,765 $510,995 $437,379
Net income $ 60,133 $ 33,754 $ 24,609 $ 29,719 $ 23,923
Total assets $467,662 $419,074 $381,183 $340,173 $327,693
Long term obligations $ 14,101 $ 27,966 $ 28,015 $ 768 $ 916
Dividends per share of
common stock:
Class A Common Stock $ .40 $ .30 $ .30 $ .28 $ .28
Class B Common Stock $ .59 $ .44 $ .44 $ .41 $ .41
Net income per share:
Based on the assumption that earnings were allocated to Class A
and Class B Common Stock to the extent that dividends were actually paid
for the year and the remainder were allocated as they would be received
by shareholders in the event of liquidation, that is, equally to Class A
and Class B shares, share and share alike:
1995 1994 1993 1992 1991
Class A Common Stock $2.39 $1.32 $ .94 $1.15 $ .91
Class B Common Stock $2.58 $1.46 $1.08 $1.28 $1.04
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 retained earnings.
The prior year per share amounts have been adjusted to
reflect the two-for-one stock split (see Note 4 to the Consolidated
Financial Statements).
43
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 95 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).
44
Operations in the shipping containers segment involve the
production and sale of fibre, steel and plastic drums, multiwall
bags, cooperage, dunnage, pallets, laminated particle board, wood
cut stock and miscellaneous items. These products are
manufactured and principally sold throughout the United States
and Canada.
Operations in the containerboard segment involve the
production and sale of containerboard, both virgin and recycled,
and related corrugated products including corrugated sheets and
corrugated containers. These products are manufactured and sold
in the United States and Canada.
In computing operating profit for the two industry segments,
interest expense, other income and expense, timber property
management costs and income taxes have not been added or
deducted. These latter amounts, excluding income taxes, comprise
general corporate other income and expense, net.
Each segment's operating assets are those assets used in the
manufacture and sale of shipping containers or containerboard.
Corporate assets are principally cash, marketable securities,
timber properties and other investments.
45
The following segment information is presented for the three
years ended October 31, 1995, except as to asset information
which is as of October 31 (Dollars in thousands):
1995 1994 1993
Net sales:
Shipping containers $392,505 $353,992 $340,326
Containerboard 326,840 229,534 186,439
Total $719,345 $583,526 $526,765
Operating profit:
Shipping containers $ 9,059 $ 9,573 $ 6,709
Containerboard 80,476 30,306 18,354
Total segment 89,535 39,879 25,063
General corporate other
income and expense, net 8,376 11,733 14,538
Income before income taxes 97,911 51,612 39,601
Income taxes 37,778 17,858 14,992
Net income $ 60,133 $ 33,754 $ 24,609
Identifiable assets:
Shipping containers $190,982 $179,794 $170,783
Containerboard 220,213 178,053 146,550
Total segment 411,195 357,847 317,333
Corporate assets 56,467 61,227 63,850
Total $467,662 $419,074 $381,183
Depreciation expense:
Shipping containers $ 13,114 $ 13,271 $ 13,697
Containerboard 9,765 8,388 5,097
Total segment 22,879 21,659 18,794
Corporate assets 65 58 51
Total $ 22,944 $ 21,717 $ 18,845
Property additions:
Shipping containers $ 12,540 $ 16,226 $ 15,503
Containerboard 47,593 24,065 58,453
Total segment 60,133 40,291 73,956
Corporate assets 933 391 565
Total $ 61,066 $ 40,682 $ 74,521
46
MANAGEMENT'S DISCUSSION AND ANALYSIS
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):
1995 1994 1993 1992
Net sales:
Shipping containers $392,505 $353,992 $340,326 $335,012
Containerboard 326,840 229,534 186,439 175,983
Total $719,345 $583,526 $526,765 $510,995
Operating profit:
Shipping containers $ 9,059 $ 9,573 $ 6,709 $ 16,292
Containerboard 80,476 30,306 18,354 18,194
Total $ 89,535 $ 39,879 $ 25,063 $ 34,486
Net Income $ 60,133 $ 33,754 $ 24,609 $ 29,719
Current ratio 4.0:1 4.4:1 5.4:1 6.1:1
Cash flow from
operations $ 85,820 $ 48,049 $ 49,475 $ 42,567
Increase (decrease)
in working capital $ 3,342 $ 7,202 $(15,105) $ (2,991)
Capital expenditures $ 61,066 $ 40,682 $ 74,521 $ 43,406
RESULTS OF OPERATIONS
The 1995 results of operations established a record for net
sales and net income of the Company. Net sales to customers,
compared with the previous year, increased $136 million or 23% in
1995. Net income increased $26 million or 78% over last year.
Historically, revenues or earnings may or may not be
representative of future operations because of various economic
factors. As explained below, the Company is subject to the
general economic conditions of its customers and the industry in
which it is included.
The Company remains confident that, with the financial
strength that it has built over its 118 year existence, it will
be able to adequately compete in highly competitive markets.
Net Sales
The containerboard segment had an increase in net sales of
$97 million in 1995, which is the due primarily to higher sales
prices. The increase in sales prices resulted from shortages in
the containerboard and related products industry. In addition,
there was a less significant increase in unit sales of the
segment because of the inclusion of an entire year of sales in
1995 for the 325 ton per day
47
recycled paper machine at a subsidiary of the Company which was completed
in December 1993.
The shipping containers segment had an increase in sales of
$38 million in 1995, resulting from more volume because of
capital expenditures made in the current and prior years. In
addition, there were some sales price increases that were made
because of the increase in the cost of the Company's raw
materials.
The increase in sales in 1994 of 10.8% was primarily the
result of the addition of the recycled paper machine, discussed
above, coupled with shortages in containerboard and related
products that resulted in increased selling prices. Other
capital expenditures made in 1994 and previous years also
contributed to this increase.
The increase in sales in 1993 of 3.1% was the result of
capital additions expended in 1993 and previous years offset by
reduced selling prices on some of the Company's products. The
price decreases resulted from competitive price pressures.
Operating Profit
The overall increase in operating profit since the prior
year is due to higher net sales, as discussed above, and a better
gross profit margin of 22.0% of net sales in 1995 compared to
17.6% of net sales in 1994. This improvement in the gross profit
margin is due to a higher percent of the net sales being
comprised of the containerboard segment, which has a higher gross
profit margin than the Company's other segment.
The operating profit of the containerboard segment is $80
million or 24.6% of net sales in 1995 compared to $30 million or
13.2% of net sales in 1994. This increase is due to the increase
in sales coupled with more favorable gross profit margins. The
increase in 1994 as compared to the two prior years is also due
to these reasons.
The operating profit of the shipping containers segment is
$9 million or 2.3% of net sales in 1995 compared to $10 million
or 2.7% of net sales in 1994. The operating profits of this
segment have decreased since fiscal 1992 due to severe price
pressures on its products, especially during 1993. In addition,
the Company's cost of certain raw materials have continued to
increase over the past couple years. However, due to the
Company's ongoing efforts to reduce operating costs by cost
control measures, manufacturing innovations and capital
expenditures, the operating profits have increased from 1993 to
1995.
Other Income
The other income of the Company increased in 1995 primarily
due to the sale of timber properties and more salvage timber
sales. The increase in volume of timber sales was accompanied by
higher timber prices.
48
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.
Income Before Income Taxes
In 1995, income before income taxes increased because of
higher sales and more favorable gross profit margins. In
addition, as discussed above, there was an increase in the sale
of timber and timber properties in the current year.
The 1994 increase in income before income taxes was the
result of the sales increase and increase in gross margin. This
increase was slightly offset by a reduction in timber sales and
an increase in interest expense that resulted from the Company's
long term obligations.
The 1993 decrease in income before income taxes was the
result of competitive price pressures of the Company's products,
coupled with increases in the cost of certain raw materials.
LIQUIDITY AND CAPITAL RESOURCES
As indicated in the Consolidated Balance Sheets, elsewhere
in this Report and in the ratios set forth immediately above, the
Company is dedicated to maintaining a strong financial position.
It is our belief that this dedication is extremely important
during all economic times.
The Company's financial strength is important to continue to
achieve the following goals:
(a) To protect the assets of the Company and the intrinsic
value of shareholders' equity in periods of adverse economic
conditions.
(b) To respond to any large and presently unanticipated
cash demands that might result from future drastic events.
(c) To be able to benefit from new developments, new
products and new opportunities in order to achieve the best
results for our shareholders.
(d) To replace and improve plants and equipment. When
plants and production machinery must be replaced, either because
of wear or to obtain the cost-reducing potential of technological
improvement required to remain a low cost producer in the
49
highly competitive environment in which the Company operates, the
cost of new plants and machinery are often much higher, sometimes
significantly higher, than the historical cost of the items being
replaced.
The Company, during 1995, invested approximately $61 million
in capital additions. During the last three years, the Company
has invested $176 million. The Company began operations in its
new injection molding facility in Durant, Mississippi during the
year. This location replaced an existing operation at a nearby
location. In addition, a subsidiary of the Company built a new
manufacturing plant in Mason, Michigan in 1995. The new plant,
which caused a significant increase in construction in progress
as compared to the prior year, was completed in November 1995.
As noted in our 1993 Report to Shareholders, the Company during
1993 undertook a major addition at Virginia Fibre Corporation.
This project was completed in December 1993 and resulted in
additional capacity for 1994 and 1995.
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 a major addition to an
existing plant has been undertaken in each of the last three
years.
These investments are an indication of the Company's
commitment to be the quality, low cost producer and the desirable
long term supplier to all of our customers.
(e) To continue to pay competitive and sound remuneration,
including the ever-increasing costs of employee benefits, to
Company employees who produce the results for the Company's
shareholders.
During 1995, the Company performed a complete study of the
compensation and retirement policies. As a result of this study,
an Incentive Stock Option Plan was implemented. In addition,
improvements were made to the pension plans and a 401(k) Plan was
begun to supplement the benefits of our office and salaried
employees.
Management believes that the present financial strength of
the Company will be sufficient to achieve the foregoing goals.
In spite of such necessary financial strength, the Company's
shipping containers business, where packages manufactured by
Greif Bros. Corporation are purchased by other manufacturers and
suppliers, is wholly subject to the general economic conditions
and business success of the Company's customers.
Similarly, the Company's containerboard and related products
business is also subject to the general economic conditions and
the effect of the operating rates of the containerboard industry,
including pricing pressures from its competition.
The historical financial strength generated by these
segments has enabled them to remain independently liquid during
adverse economic conditions.
50
Long term obligations are lower at October 31, 1995 compared
to October 31, 1994 due to the pre-payment of long term debt.
The decrease caused by this pre-payment was partially offset by
additional long term debt which was incurred to build the plant
in Mason, Michigan.
During 1995, a subsidiary company approved a $35 million
mill modernization program in Virginia. In addition, the Company
has approved future purchases, primarily for equipment, of
approximately $11 million. As explained above, self-financing
and low interest rate borrowing have been the primary source for
financing such capital expenditures.
***************************************************************
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.