PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
For the three months ended January 31, 1998 1997
Net sales $169,697 $152,370
Other income:
Gain on timber sales 2,787 1,539
Interest and other 2,510 2,467
174,994 156,376
Costs and expenses (including depreciation of
$8,374 in 1998 and $7,594 in 1997):
Cost of products sold 138,177 131,329
Selling, general and administrative 20,324 17,212
Interest 1,230 750
159,731 149,291
Income before income taxes 15,263 7,085
Taxes on income 5,647 2,600
Net income $ 9,616 $ 4,485
Net income per share (based on the average number of shares outstanding
during the period):
Based on the assumption that earnings were allocated to Class A
and Class B Common Stock to the extent that dividends were actually paid
for the year and the remainder were allocated as they would be received by
shareholders in the event of liquidation, that is, equally to Class A and
Class B shares, share and share alike.
Basic and Diluted:
Class A Common Stock $0.39 $0.14
Class B Common Stock $0.44 $0.25
Due to the special characteristics of the Company's two classes of
stock (see Note 1), 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 in the retained earnings.
<FN>
See accompanying Notes to Consolidated Financial Statements
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
January 31, October 31,
1998 1997
CURRENT ASSETS
Cash and cash equivalents $ 16,834 $ 17,719
Canadian government securities 7,305 7,533
Trade accounts receivable
- less allowance of $965 for
doubtful items ($847 in 1997) 80,559 81,582
Inventories 46,040 44,892
Prepaid expenses and other 20,054 21,192
Total current assets 170,792 172,918
LONG TERM ASSETS
Cash surrender value of life insurance 1,040 1,070
Goodwill - less amortization 17,017 17,352
Other long term assets 20,501 20,952
38,558 39,374
PROPERTIES, PLANTS AND EQUIPMENT - at cost
Timber properties - less depletion 6,898 6,884
Land 11,473 11,139
Buildings 139,626 139,713
Machinery, equipment, etc. 431,525 424,177
Construction in progress 20,269 17,546
Less accumulated depreciation (269,663) (261,662)
340,128 337,797
$549,478 $550,089
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 31,701 $ 37,487
Current portion of long term obligations 8,309 8,504
Accrued payrolls and employee benefits 10,705 13,821
Taxes on income 4,409 596
Total current liabilities 55,124 60,408
LONG TERM OBLIGATIONS 43,314 43,648
OTHER LONG TERM OBLIGATIONS 15,329 16,155
DEFERRED INCOME TAXES 30,619 29,740
Total long term liabilities 89,262 89,543
SHAREHOLDERS' EQUITY (Note 1)
Capital stock, without par value 9,774 9,739
Class A Common Stock:
Authorized 32,000,000 shares;
Issued 21,140,960 shares;
outstanding 10,902,272 shares
(10,900,672 in 1997)
Class B Common Stock:
Authorized and issued 17,280,000 shares;
outstanding 12,001,793 shares
Treasury Stock, at cost (41,866) (41,868)
Class A Common Stock :10,238,688 shares
(10,240,288 in 1997)
Class B Common Stock : 5,278,207 shares
Retained earnings 443,825 437,550
Cumulative translation adjustment (6,641) (5,283)
405,092 400,138
$549,478 $550,089
<FN>
See accompanying Notes to Consolidated Financial Statements
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the three months ended January 31, 1998 1997
Cash flows from operating activities:
Net income $ 9,616 $ 4,485
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and amortization 8,709 7,986
Deferred income taxes 892 1,325
Increase (decrease) in cash from changes
in certain assets and liabilities,
net of effects from acquisitions:
Trade accounts receivable 1,023 5,233
Inventories (1,148) (576)
Prepaid expenses and other 1,138 253
Other long term assets 481 (255)
Accounts payable (5,786) (7,232)
Accrued payrolls and employee benefits (3,116) (2,659)
Taxes on income 3,813 (451)
Other long term liabilities (826) (901)
Net cash provided by operating activities 14,796 7,208
Cash flows from investing activities:
Acquisitions of companies, net of cash
acquired -- 134
Disposals of investments in government
securities 228 206
Purchases of properties, plants and
equipment (11,005) (15,354)
Net cash used by investing activities (10,777) (15,014)
Cash flows from financing activities:
(Payments) proceeds on long term debt (529) 10,307
Exercise of stock options 37 --
Dividends paid (3,341) (6,810)
Net cash (used in) provided by financing
activities (3,833) 3,497
Foreign currency translation adjustment (1,071) (203)
Net decrease in cash and cash equivalents (885) (4,512)
Cash and cash equivalents at beginning of
period 17,719 26,560
Cash and cash equivalents at end of period $ 16,834 $ 22,048
<FN>
See accompanying Notes to Consolidated Financial Statements
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1998
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 per share per year. Further distribution
in any year must be made in proportion of 1 cent a share for Class A
Common Stock to 1 1/2 cents a share for Class B Common Stock. The Class
A Common Stock shall have no voting power nor shall it be entitled to
notice of meetings of the stockholders, all rights to vote and all voting
power being vested exclusively in the Class B Common Stock unless four
cumulative dividends upon the Class A Common Stock are in arrears.
There is no cumulative voting.
NOTE 2 - DIVIDENDS PER SHARE
The following dividends per share were paid during the period
indicated:
Three Months Ended January 31, 1998 1997
Class A Common Stock $0.12 $0.24
Class B Common Stock $0.17 $0.35
NOTE 3 - CALCULATION OF NET INCOME PER SHARE
Net income per share was calculated using the following number of
shares for the period presented:
Three months ended January 31, 1998:
Basic Diluted
Class A Common Stock 10,901,962 shares 10,950,796 shares
Class B Common Stock 12,001,793 shares 12,001,793 shares
Three months ended January 31, 1997:
Basic Diluted
Class A Common Stock 10,873,172 shares 10,889,792 shares
Class B Common Stock 12,001,793 shares 12,001,793 shares
The diluted shares assume conversion of stock options. There are 164,100
options that are antidilutive for the three months ended January 31, 1997.
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 - RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to
the 1998 presentation.
ITEM 2. 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 three-month periods ended
January 31, 1998 and January 31, 1997.
Net sales increased $17.3 million or 11.4% during the current quarter
compared to the previous period. The net sales of the containerboard
segment increased by $15.2 million in comparison to the prior year's
quarter. This increase was primarily the result of $12.3 million higher net
sales in the paper mills, which was significantly affected by the improved
sales prices of its products. The higher sales prices were caused by the
overall improvement of the containerboard market. In addition, the
purchase of Independent Container, Inc. and Centralia Container, Inc. in
May 1997 and June 1997, respectively, contributed $9.8 million in net sales
as a result of the additional sales volume. These increases were partially
offset by the disposal of the Company's wood components plants, with
prior year first quarter net sales of $10.7 million, in Kentucky, California,
Washington and Oregon in August 1997. The net sales of the industrial
shipping containers segment increased by $ 2.1 million in comparison to
the prior year's quarter. Net sales increased due to the purchase of two
steel drum operations located in Merced, California and Oakville, Ontario,
Canada during March 1997 which contributed $4.6 million of net sales. The
increase that resulted from this acquisition was partially offset by the sale
of an injection molding facility, with prior year first quarter net sales
of $2.9 million, located in Ohio during February 1997.
Other income increased in 1998 due to $1.2 million of additional
sales of timber properties.
The cost of products sold as a percentage of sales decreased from
86.2% last year to 81.4% this year. This decrease is primarily the result of
higher net sales of the containerboard segment without a corresponding
increase in the cost of products sold.
The increase of $3.1 million in selling, general and administrative
expense is due primarily to additional expenses related to the acquisitions
in March, May and June of last year. In addition, the amortization of
goodwill for these acquisitions contributed to the higher costs.
The increase in interest expense is due to the higher average debt
during the first quarter of fiscal 1998 as compared to 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 1997 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 1997 Annual Report, the Company is subject to
the economic conditions of the market in which it operates. During this
period, the Company has been able to utilize its developed financial
position to meet its continued business needs.
The current ratio of 3.0:1 as of January 31, 1998 is an indication of
the Company's continued dedication to strong liquidity.
Capital expenditures were $11 million during the three months ended
January 31, 1998. These capital expenditures were principally needed to
replace and improve equipment.
On December 10, 1997, the Company signed a non-binding letter of
intent to acquire all of the outstanding shares of KMI Continental Fibre
Drum, Inc., Fibro Tambor, S.A. de C.V., and Sonoco Plastic Drum, Inc. from
Sonoco Products Co. and their interest in Total Packaging Systems of
Georgia, LLC for approximately $225 million in cash. The acquisition is
subject to satisfactory completion of due diligence by the Company and
receipt of all governmental approvals. In addition, the Company has
approved future purchases, primarily for equipment, of approximately $10
million.
The Company has embarked on a program to implement a new
management information system. The estimated cost of the project is
approximately $20 million and is expected to be completed during 1999.
The purpose of the program focuses on using information technology to
link together our operations to become a low cost producer and more
effectively service our customers. As a result of this undertaking, the
Company believes that its year 2000 compliance matters will be addressed
since most of its current software will be discarded.
Self-financing and borrowing have been the primary sources for past
capital expenditures and acquisitions. The Company anticipates financing
future capital expenditures and acquisitions in a like manner.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters
discussed in this Form 10-Q contain certain forward-looking statements
which involve risks and uncertainties, including, but not limited to
economic, competitive, governmental and technological factors affecting
the Company's operations, markets, services and related products, prices
and other factors discussed in the Company's filings with the Securities
and Exchange Commission. The Company's actual results could differ
materially from those projected in such forward-looking statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Not applicable at this time.