GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1997
NOTE 1 - CAPITAL STOCK AND RETAINED EARNINGS
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
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.
NOTE 2 - DIVIDENDS PER SHARE
The following dividends per share were paid during the period indicated:
Three Months Ended Nine Months Ended
July 31, July 31,
1997 1996 1997 1996
Class A Common Stock $.12 $.08 $.48 $.40
Class B Common Stock $.18 $.12 $.71 $.59
NOTE 3 - CALCULATION OF NET INCOME PER SHARE
Net income per share was calculated using the following number of shares
for the periods presented:
Three Months Ended Nine Months Ended
July 31, July 31,
Class A Common Stock 10,874,038 shares 10,873,461 shares
Class B Common Stock 12,001,793 shares 12,001,793 shares
NOTE 4 - INVENTORIES
Inventories are comprised principally of raw materials and are stated at
the lower of cost (principally on last-in, first-out basis) or market.
NOTE 5 - ACQUISITIONS
On May 9, 1997, the Company purchased all of the outstanding common stock
of Independent Container, Inc., a corrugated container company, located in
Louisville, Kentucky, Ferdinand, Indiana and Erlanger, Kentucky. On June 30,
1997, the Company acquired all of the outstanding common stock of Centralia
Container, Inc., a corrugated container company, located in Centralia,
Illinois. These acquisitions have been accounted for using the purchase
method of accounting, and accordingly, the purchase price has been allocated
to the assets purchased and liabilities assumed based upon the fair values at
the date of acquisition. The excess of the purchase price over the fair
values of the net assets acquired has been recorded as goodwill. The
Consolidated Financial Statements include the operating results of each
business from the date of acquisition. Pro forma results of operations have
not been presented because the effect of these acquisitions were not
significant.
NOTE 6 - SUBSEQUENT EVENTS
On August 4, 1997, the Company sold its wood component operations, which
manufacture door panels, wood moldings and window and door parts, with
locations in Kentucky, California, Washington and Oregon. At the present time,
it is not expected that the transaction will have a material impact on the
results of operations.
NOTE 7 - RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Historically, revenues or earnings may or may not be representative of
future operations because of various economic factors. The following
comparative information is presented for the 9-month periods ended July 31,
1997 and July 31, 1996.
Net sales decreased during the current period compared to the previous
period primarily due to lower sales in the containerboard segment, which was
significantly affected by lower sales prices of its products. The lower
prices were caused by the continued weakness in the containerboard market
resulting from excess capacity of containerboard. The sales price decreases
were partially offset by the seven corrugated container plants which were
acquired subsequent to the third quarter of 1996. The net sales of the
shipping containers segment increased since the prior year due to the addition
of two steel drum manufacturing plants during the second quarter of 1997.
The increase in other income was primarily due to a gain on the sale of
an office building and an injection molding facility during 1997.
The cost of products sold as a percentage of sales increased from 82.0%
in 1996 to 87.1% in 1997. This increase is primarily the result of lower net
sales of the containerboard segment without a corresponding reduction in the
cost of products sold.
The increase in interest expense is due to more long-term obligations
than the prior year.
Liquidity and Capital Resources
As indicated in the Consolidated Balance Sheet, elsewhere in this report
and discussed in greater detail in the 1996 Annual Report to Shareholders, the
Company is dedicated to maintaining a strong financial position. It is our
belief that this dedication is extremely important during all economic times.
As discussed in the 1996 Annual Report, the Company is subject to the
economic conditions of the market in which it operates. During this period,
the Company has been able to utilize its developed financial position to meet
its continued business needs.
The current ratio as of July 31, 1997 is an indication of the
continuation of the Company's strong liquidity.
Capital expenditures were $34,464,000, after eliminating the effect of
the acquisitions, during the nine months ended July 31, 1997. These capital
expenditures were principally needed to replace and improve equipment.
In May 1997, the Company acquired the stock of Independent Container,
Inc, a manufacturer of corrugated containers, located in Louisville, Kentucky,
Ferdinand, Indiana and Erlanger, Kentucky. In June 1997, the Company
purchased the stock of Centralia Container, Inc., a corrugated container
company, located in Centralia, Illinois.
The Company has approved future purchases, primarily for equipment, of
approximately $11 million. Self-financing and borrowing has been the primary
source for financing such capital expenditures.
The increase in long-term obligations since year-end is primarily due to
the purchase of three corrugated container companies, two steel drum
operations, improvement related to Greif Board Corporation's machinery and
equipment and other capital expenditures.
Subsequent to July 1997, the Company sold its wood component operations,
located in Kentucky, California, Washington and Oregon. These locations
manufacture door panels, wood moldings and window and door parts.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material developments with respect to pending legal
proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits.
None.
(b.) Reports on Form 8-K.
No events occurred requiring Form 8-K to be filed.
OTHER COMMENTS
The information furnished herein reflects all adjustments which are, in
the opinion of management, necessary for a fair presentation of the
consolidated balance sheet as of July 31, 1997, the consolidated statements of
income for the 9-month periods ended July 31, 1997 and 1996, and the
consolidated statements of cash flows for the 9-month periods then ended.
These financial statements are unaudited; however, at year-end an audit will
be made for the fiscal year by our independent accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Greif Bros. Corporation
(Registrant)
Date September 10, 1997 Joseph W. Reed
Chief Financial Officer