- Record net sales were $620.1 million for the second quarter of
2006. Net sales increased 1 percent (3 percent excluding the impact
of foreign currency translation) for the second quarter of 2006
from the second quarter of 2005. DELAWARE, Ohio, May 31
/PRNewswire-FirstCall/ -- Greif, Inc. (NYSE: GEF; GEF.B), a global
leader in industrial packaging with niche businesses in
containerboard, corrugated packaging and timber, today announced
results for its second quarter of 2006, which ended on April 30,
2006. Michael J. Gasser, Chairman and Chief Executive Officer,
commented, "Our second quarter results reflect improving volumes
and margin expansion on sequential quarter and year-over-year
comparisons. These solid results were driven by contributions from
the disciplined Greif Business System and improving industry
fundamentals in all of our business segments. At the midpoint of
fiscal 2006, we are ahead of our original plan and anticipate
building upon these achievements during the remainder of the year."
Special Items and GAAP to Non-GAAP Reconciliation Special items are
as follows: (i) for the second quarter of 2006, restructuring
charges of $10.3 million ($7.2 million net of tax) and timberland
gains of $9.2 million ($5.5 million net of tax); and (ii) for the
second quarter of 2005, restructuring charges of $10.6 million
($7.5 million net of tax), timberland gains of $3.4 million ($2.4
million net of tax) and debt extinguishment charge of $2.8 million
($2.0 million net of tax). A reconciliation of the differences
between all non-GAAP financial measures used in this release with
the most directly comparable GAAP financial measures is included in
the financial schedules that are a part of this release.
Consolidated Results Net Sales Net sales were $620.1 million in the
second quarter of 2006 compared to $613.0 million in the second
quarter of 2005. The $7.1 million increase was primarily due to the
Paper, Packaging & Services segment. As stated previously, net
sales increased 3 percent, after excluding the impact of foreign
currency translation, for the second quarter of 2006 from the same
quarter last year. This increase is primarily due to generally
higher sales volumes in all three of the Company's business
segments. Net sales changes for each of the Company's business
segments are discussed in more detail below. The Company has
previously announced and implemented price increases since the
first quarter of 2006 for certain of its products due to higher raw
material costs. Gross Profit Gross profit was $109.4 million, or
17.6 percent of net sales, in the second quarter of 2006 compared
to $97.9 million, or 16.0 percent of net sales, in the second
quarter of 2005. Gross profit margin benefited from positive
contributions due to the Greif Business System and generally lower
raw material costs compared to the second quarter of 2005. These
benefits were partially offset by higher energy and transportation
costs compared to the second quarter of 2005. Selling, General
& Administrative (SG&A) Expenses SG&A expenses were
$62.4 million, or 10.1 percent of net sales, in the second quarter
of 2006 compared to $56.1 million, or 9.1 percent of net sales, in
the second quarter of 2005. The increase was primarily due to
higher accruals for performance-based incentive plans resulting
from improvements in the Company's current and planned results. On
a full-year basis, management expects SG&A expenses to be less
than the 10 percent of net sales target for fiscal 2006. Operating
Profit Operating profit before special items was $52.6 million in
the second quarter of 2006 compared to $42.7 million in the second
quarter of 2005. The $9.9 million increase was due to the
Industrial Packaging & Services segment ($4.8 million), the
Paper, Packaging & Services segment ($4.1 million) and the
Timber segment ($1.1 million). There were $10.3 million and $10.6
million of restructuring charges and $9.2 million and $3.4 million
of timberland gains during the second quarter of 2006 and 2005,
respectively. GAAP operating profit was $51.6 million in the second
quarter of 2006 compared to $35.4 million in the second quarter of
2005. Net Income and Diluted Earnings Per Share Net income before
special items was $30.4 million for the second quarter of 2006
compared to $23.9 million in the second quarter of 2005. Diluted
earnings per share before special items were $1.03 per Class A
share compared to $0.81 per Class A share and $1.58 per Class B
share compared to $1.25 per Class B share for the second quarter of
2006 and 2005, respectively. The Company had GAAP net income of
$28.7 million, or $0.97 per diluted Class A share and $1.49 per
diluted Class B share, in the second quarter of 2006 compared to
GAAP net income of $16.8 million, or $0.57 per diluted Class A
share and $0.88 per diluted Class B share, in the second quarter of
2005. Business Group Results Industrial Packaging & Services
The Industrial Packaging & Services segment offers a
comprehensive line of industrial packaging products, such as steel,
fibre and plastic drums, intermediate bulk containers, closure
systems for industrial packaging products and polycarbonate water
bottles throughout the world. The key factors influencing
profitability in the Industrial Packaging & Services segment
are: - Selling prices and sales volumes; - Raw material costs,
primarily steel, resin and containerboard; - Benefits from the
Greif Business System; - Restructuring charges; and - Impact of
foreign currency translation. In this segment, net sales were
$459.0 million in the second quarter of 2006 compared to $458.4
million in the second quarter of 2005. Net sales rose 2 percent
excluding the impact of foreign currency translation. The
improvement in net sales was primarily due to organic growth in
steel drums and increased volume in fibre and plastic drums, which
benefited from two tuck-in acquisitions in the fourth quarter of
2005. This improvement was partially offset by lower steel drum
selling prices resulting from lower steel costs on a year-over-year
comparison. The Industrial Packaging & Services segment's gross
profit margin improved to 17.6 percent in the second quarter of
2006 from 15.6 percent in the second quarter of 2005. This
improvement was due to lower raw material costs, primarily steel,
and the Greif Business System compared to the same period last
year. Operating profit before restructuring charges rose to $34.2
million in the second quarter of 2006 from $29.4 million in the
second quarter of 2005. Restructuring charges were $8.3 million in
the second quarter of 2006 compared with $8.8 million a year ago.
GAAP operating profit was $25.9 million in the second quarter of
2006 compared to $20.6 million in the second quarter of 2005.
Paper, Packaging & Services The Paper, Packaging & Services
segment sells containerboard, corrugated sheets and other
corrugated products and multiwall bags in North America. The key
factors influencing profitability in the Paper, Packaging &
Services segment are: - Selling prices and sales volumes; - Raw
material costs, primarily OCC; - Energy and transportation costs; -
Benefits from the Greif Business System; and - Restructuring
charges. In this segment, net sales were $156.5 million in the
second quarter of 2006 compared to $150.0 million in the second
quarter of 2005. The increase in net sales was primarily due to
improved sales volumes of containerboard and corrugated sheets and
higher containerboard selling prices. Operating profit before
restructuring charges was $14.4 million in the second quarter of
2006 compared to $10.4 million in the second quarter of 2005.
Restructuring charges were $2.0 million in the second quarter of
2006 compared to $1.8 million in the second quarter of 2005. The
increase in operating profit was primarily due to the improvement
in net sales, lower OCC costs and gain on sale of a warehouse ($2.0
million), partially offset by higher energy and transportation
costs ($5.3 million) as compared to the second quarter of 2005.
GAAP operating profit was $12.4 million in the second quarter of
2006 compared to $8.6 million in the second quarter of 2005. Timber
The Timber segment consists of approximately 251,500 acres of
timber properties in southeastern United States, which are actively
harvested and regenerated, and approximately 37,000 acres in
Canada. The key factors influencing profitability in the Timber
segment are: - Planned level of timber sales; - Gains on sale of
timberland; and - Gains on sale of special use properties (surplus,
higher and better use, and development properties). Net sales were
$4.6 million in the second quarter of 2006 compared to $4.5 million
in the second quarter of 2005. Operating profit before special
items was $4.0 million (including $1.5 million resulting from the
sale of surplus as well as higher and better use properties) in the
second quarter of 2006 compared to $2.9 million in the second
quarter of 2005. Special items included insignificant restructuring
charges in both periods and timberland gains of $9.2 million in the
second quarter of 2006 and $3.4 million in the second quarter of
2005. GAAP operating profit was $13.2 million in the second quarter
of 2006 compared to $6.2 million in the second quarter of 2005. The
Company completed the final phase of its previously reported $90
million sale of timberland, timber and associated assets in the
second quarter of 2006. In this phase, the Company sold 5,700 acres
of timberland holdings in Florida for $9.7 million, resulting in a
gain of $9.0 million. Greif Business System Update The Greif
Business System generates productivity improvements and achieves
permanent cost reductions. The opportunities continue to include,
but are not limited to, improved labor productivity, material yield
and other manufacturing efficiencies, coupled with further
footprint rationalization. Annualized benefits of approximately
$125 million were achieved through the end of fiscal 2005. The
Company is implementing a strategic sourcing initiative as part of
the Greif Business System to more effectively leverage its global
spend and lay the foundation for a world-class sourcing and supply
chain capability. The Company expects incremental benefits of
approximately $30 million, primarily from the strategic sourcing
initiative, during fiscal 2006. Incremental benefits from the Greif
Business System totaled approximately $23 million for the six
months ended April 30, 2006. Restructuring Charges The Company had
$10.3 million of restructuring charges during the second quarter of
2006. These charges were primarily the result of closing two
industrial packaging facilities in the United Kingdom, an
impairment charge in connection with closing an industrial
packaging facility in France and the consolidation of corrugated
sheet operations in the United States. In addition, severance costs
were incurred due to the elimination of certain operating and
administrative positions throughout the world. For the second
quarter of 2005, restructuring charges were $10.6 million.
Financing Arrangements Net debt outstanding was $333.6 million at
April 30, 2006 versus $437.7 million on the same date last year and
$325.2 million at Oct. 31, 2005. Net debt is long-term debt plus
short-term borrowings less cash and cash equivalents. GAAP
long-term debt was $459.2 million at April 30, 2006 compared to
$466.2 million at April 30, 2005 and $430.4 million at Oct. 31,
2005. Interest expense was $9.8 million and $10.3 million in the
second quarter of 2006 and 2005, respectively. The decrease was due
to lower average debt outstanding as well as lower average interest
rates during the second quarter of 2006 compared to the second
quarter of 2005. Capital Expenditures Capital expenditures were
$35.6 million, excluding timberland purchases of $1.2 million, in
the second quarter of 2006 compared with capital expenditures of
$16.2 million, excluding timberland purchases of $1.3 million,
during the second quarter of 2005. For fiscal 2006, capital
expenditures are expected to be approximately $75 million,
excluding timberland purchases, which would be approximately $25
million below the Company's anticipated depreciation expense of
approximately $100 million. Stock Repurchases and Cash Dividends
During the second quarter of 2006, the Company repurchased 41,200
shares of Class A and Class B Common Stock pursuant to its stock
repurchase program. The Board of Directors has authorized the
Company to purchase up to two million shares of the Company's Class
A or Class B Common Stock or any combination thereof. As of April
30, 2006, the Company had repurchased 1,068,424 shares, including
650,276 shares of Class A Common Stock and 418,148 shares of Class
B Common Stock, under this program. The Company paid $6.9 million
of cash dividends to its Class A and Class B stockholders in the
second quarter of 2006 compared to $4.6 million for the second
quarter of 2005. This represents an increase of approximately 50
percent per share for both classes of the Company's common stock
compared to the second quarter of 2005. On May 30, 2006, the Board
of Directors declared quarterly cash dividends of $0.36 per share
of Class A Common Stock and $0.54 per share of Class B Common
Stock, which marks the second consecutive year the Company has
increased quarterly cash dividends by 50 percent. These dividends
are payable on July 1, 2006 to shareholders of record at close of
business on June 16, 2006. Company Outlook The Company enters the
second half of fiscal 2006 with positive momentum based on higher
sales volumes and improved margins during the first half of fiscal
2006. Profitability has benefited from ongoing initiatives to
further embed the Greif Business Systems throughout the Company,
including recent contributions from strategic sourcing, coupled
with improving industry fundamentals. The Company's guidance, which
excludes special items, is being raised $0.30 for its Class A
common stock for fiscal 2006 to a range of $3.85 to $3.95 per
share. This range is approximately 18 percent to 21 percent above
fiscal 2005 on a similar basis. Conference Call The Company will
host a conference call to discuss its second quarter of 2006
results on June 1, 2006, at 10 a.m. ET. To participate, domestic
callers should call 800-218-0713 and ask for the Greif conference
call. The number for international callers is +1 303 262 2140.
Phone lines will open at 9:50 a.m. ET. The conference call will
also be available through a live webcast, including slides, which
can be accessed at http://www.greif.com/. A replay of the
conference call will be available on the Company's website
approximately one hour following the call. About Greif Greif is a
world leader in industrial packaging products and services. The
Company provides extensive expertise in steel, plastic, fibre,
corrugated and multiwall containers for a wide range of industries.
Greif also produces containerboard and manages timber properties in
the United States. Greif is strategically positioned in more than
40 countries to serve multinational as well as regional customers.
Additional information is on the Company's website at
http://www.greif.com/. Forward-Looking Statements All statements
other than statements of historical facts included in this news
release, including, without limitation, statements regarding the
Company's future financial position, business strategy, budgets,
projected costs, goals and plans and objectives of management for
future operations, are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements generally can be identified by the use
of forward-looking terminology such as "may," "will," "expect,"
"intend," "estimate," "anticipate," "project," "believe,"
"continue" or "target" or the negative thereof or variations
thereon or similar terminology. All forward-looking statements made
in this news release are based on information currently available
to management. Although the Company believes that the expectations
reflected in forward-looking statements have a reasonable basis,
the Company can give no assurance that these expectations will
prove to be correct. Forward-looking statements are subject to
risks and uncertainties that could cause actual events or results
to differ materially from those expressed in or implied by the
statements. Such risks and uncertainties that might cause a
difference include, but are not limited to: general economic and
business conditions, including a prolonged or substantial economic
downturn; changing trends and demands in the industries in which
the Company competes, including industry over-capacity; industry
competition; the continuing consolidation of the Company's customer
base for its industrial packaging, containerboard and corrugated
products; political instability in those foreign countries where
the Company manufactures and sells its products; foreign currency
fluctuations and devaluations; availability and costs of raw
materials for the manufacture of the Company's products,
particularly steel, resin and old corrugated containers; price
fluctuations in energy costs; costs associated with litigation or
claims against the Company pertaining to environmental, safety and
health, product liability and other matters; work stoppages and
other labor relations matters; property loss resulting from wars,
acts of terrorism or natural disasters; the Company's ability to
integrate its newly acquired operations effectively with its
existing business; the Company's ability to achieve improved
operating efficiencies and capabilities; the Company's ability to
effectively embed and realize improvements from the Greif Business
System; the frequency and volume of sales of the Company's timber,
timberland and special use timberland; and the deviation of actual
results from the estimates and/or assumptions used by the Company
in the application of its significant accounting policies. These
and other risks and uncertainties that could materially affect the
Company's consolidated financial results are further discussed in
its filings with the Securities and Exchange Commission, including
its Form 10-K for the year ended Oct. 31, 2005. The Company assumes
no obligation to update any forward-looking statements. GREIF, INC.
AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED (Dollars in thousands, except per share amounts) Three
months ended Six months ended April 30, April 30, 2006 2005 2006
2005 Net sales $620,107 $612,960 $1,202,423 $1,195,524 Cost of
products sold 510,664 515,042 1,003,308 1,008,880 Gross profit
109,443 97,918 199,115 186,644 Selling, general and administrative
expenses 62,378 56,068 121,832 115,789 Restructuring charges 10,287
10,621 15,755 17,807 Gain on sale of assets 14,786 4,194 47,997
14,538 Operating profit 51,564 35,423 109,525 67,586 Interest
expense, net 9,794 10,296 18,967 19,954 Debt extinguishment charge
-- 2,828 -- 2,828 Other income (loss), net 288 1,469 (194) 65
Income before income tax expense 42,058 23,768 90,364 44,869 Income
tax expense 13,365 7,001 28,319 12,966 Net income $28,693 $16,767
$62,045 $31,903 Basic earnings per share: Class A Common Stock
$0.99 $0.58 $2.15 $1.12 Class B Common Stock $1.49 $0.88 $3.22
$1.67 Diluted earnings per share: Class A Common Stock $0.97 $0.57
$2.11 $1.09 Class B Common Stock $1.49 $0.88 $3.22 $1.67 Earnings
per share were calculated using the following number of shares:
Basic earnings per share: Class A Common Stock 11,543,093
11,377,891 11,542,626 11,248,592 Class B Common Stock 11,530,487
11,561,189 11,534,566 11,600,974 Diluted earnings per share: Class
A Common Stock 11,858,020 11,813,749 11,852,643 11,636,293 Class B
Common Stock 11,530,487 11,561,189 11,534,566 11,600,974 GREIF,
INC. AND SUBSIDIARY COMPANIES SEGMENT DATA UNAUDITED (Dollars in
thousands) Three months ended Six months ended April 30, April 30,
2006 2005 2006 2005 Net sales Industrial Packaging & Services
$459,008 $458,404 $888,728 $887,446 Paper, Packaging & Services
156,483 150,034 303,522 298,239 Timber 4,616 4,522 10,173 9,839
Total $620,107 $612,960 $1,202,423 $1,195,524 Operating profit
Operating profit before restructuring charges and timberland gains:
Industrial Packaging & Services $34,205 $29,411 $58,445 $47,090
Paper, Packaging & Services 14,425 10,372 18,682 19,963 Timber
3,983 2,868 7,346 6,875 Operating profit before restructuring
charges and timberland gains 52,613 42,651 84,473 73,928
Restructuring charges: Industrial Packaging & Services 8,265
8,809 12,487 15,607 Paper, Packaging & Services 2,022 1,764
3,258 2,141 Timber -- 48 10 59 Restructuring charges 10,287 10,621
15,755 17,807 Timberland gains: Timber 9,238 3,393 40,807 11,465
Total $51,564 $35,423 $109,525 $67,586 Depreciation, depletion and
amortization expense Industrial Packaging & Services $15,143
$16,176 $30,225 $32,312 Paper, Packaging & Services 7,201 8,322
15,210 16,774 Timber 981 694 2,564 1,088 Total $23,325 $25,192
$47,999 $50,174 GREIF, INC. AND SUBSIDIARY COMPANIES GEOGRAPHIC
DATA UNAUDITED (Dollars in thousands) Three months ended Six months
ended April 30, April 30, 2006 2005 2006 2005 Net sales North
America $366,338 $332,515 $705,479 $649,691 Europe 167,079 191,316
323,108 367,486 Other 86,690 89,129 173,836 178,347 Total $620,107
$612,960 $1,202,423 $1,195,524 Operating profit Operating profit
before restructuring charges and timberland gains: North America
$28,354 $19,303 $39,788 $36,940 Europe 14,288 13,883 26,955 19,923
Other 9,971 9,465 17,730 17,065 Operating profit before
restructuring charges and timberland gains 52,613 42,651 84,473
73,928 Restructuring charges 10,287 10,621 15,755 17,807 Timberland
gains 9,238 3,393 40,807 11,465 Total $51,564 $35,423 $109,525
$67,586 GREIF, INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED
BALANCE SHEETS UNAUDITED (Dollars in thousands) April 30, 2006
October 31, 2005 ASSETS CURRENT ASSETS Cash and cash equivalents
$152,030 $122,411 Trade accounts receivable 283,496 258,636
Inventories 170,958 170,533 Other current assets 98,699 74,372
705,183 625,952 LONG-TERM ASSETS Goodwill 249,505 263,703
Intangible assets 35,975 25,015 Assets held by special purpose
entities 50,891 50,891 Other long-term assets 53,483 55,706 389,854
395,315 PROPERTIES, PLANTS AND EQUIPMENT 882,647 862,056 $1,977,684
$1,883,323 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES
Accounts payable $225,423 $234,672 Short-term borrowings 26,459
17,173 Other current liabilities 130,501 131,139 382,383 382,984
LONG-TERM LIABILITIES Long-term debt 459,190 430,400 Liabilities
held by special purpose entities 43,250 43,250 Other long-term
liabilities 316,851 294,105 819,291 767,755 MINORITY INTEREST 4,027
1,696 SHAREHOLDERS' EQUITY 771,983 730,888 $1,977,684 $1,883,323
GREIF, INC. AND SUBSIDIARY COMPANIES GAAP TO NON-GAAP
RECONCILIATION UNAUDITED (Dollars in thousands, except per share
amounts) Three months ended Three months ended April 30, 2006 April
30, 2005 Diluted per share Diluted per share amounts amounts Class
A Class B Class A Class B GAAP - operating profit $51,564 $35,423
Restructuring charges 10,287 10,621 Timberland gains (9,238)
(3,393) Non-GAAP - operating profit before restructuring charges
and timberland gains $52,613 $42,651 GAAP - net income $28,693
$0.97 $1.49 $16,767 $0.57 $0.88 Restructuring charges, net of tax
7,249 0.25 0.38 7,506 0.25 0.40 Timberland gains, net of tax
(5,529) (0.19) (0.29) (2,398) (0.08) (0.13) Debt extinguishment
charge, net of tax -- -- -- 1,999 0.07 0.10 Non-GAAP - net income
before restructuring charges, debt extinguishment charge and
timberland gains $30,413 $1.03 $1.58 $23,874 $0.81 $1.25 Six months
ended Six months ended April 30, 2006 April 30, 2005 Diluted per
share amounts Diluted per share amounts Class A Class B Class A
Class B GAAP - operating profit $109,525 $67,586 Restructuring
charges 15,755 17,807 Timberland gains (40,807) (11,465) Non-GAAP -
operating profit before restructuring charges and timberland gains
$84,473 $73,928 GAAP - net income $62,045 $2.11 $3.22 $31,903 $1.09
$1.67 Restructuring charges, net of tax 11,536 0.39 0.60 12,696
0.43 0.66 Timberland gains, net of tax (25,758) (0.87) (1.34)
(8,175) (0.28) (0.43) Debt extinguishment charge, net of tax -- --
-- 2,016 0.07 0.11 Non-GAAP - net income before restructuring
charges, debt extinguishment charge and timberland gains $47,823
$1.63 $2.48 $38,440 $1.31 $2.01 NOTE: During the first half of
2006, the Company sold 21,000 acres of timberland holdings in
Florida. The tax effect of the gain for this transaction is
calculated using a 38.1 percent tax rate. The other adjustments to
reconcile the GAAP to non-GAAP amounts are tax effected using the
consolidated effective tax rate excluding the impact of this
timberland sale. GREIF, INC. AND SUBSIDIARY COMPANIES GAAP TO
NON-GAAP RECONCILIATION (CONTINUED) UNAUDITED (Dollars in
thousands) Three months ended Six months ended April 30, April 30,
2006 2005 2006 2005 Industrial Packaging & Services GAAP -
operating profit $25,940 $20,602 $45,958 $31,483 Restructuring
charges 8,265 8,809 12,487 15,607 Non-GAAP - operating profit
before restructuring charges $34,205 $29,411 $58,445 $47,090 Paper,
Packaging & Services GAAP - operating profit $12,403 $8,608
$15,424 $17,822 Restructuring charges 2,022 1,764 3,258 2,141
Non-GAAP - operating profit before restructuring charges $14,425
$10,372 $18,682 $19,963 Timber GAAP - operating profit $13,221
$6,213 $48,143 $18,281 Restructuring charges -- 48 10 59 Timberland
gains (9,238) (3,393) (40,807) (11,465) Non-GAAP - operating profit
before restructuring charges and timberland gains $3,983 $2,868
$7,346 $6,875 GREIF, INC. AND SUBSIDIARY COMPANIES GAAP TO NON-GAAP
RECONCILIATION (CONTINUED) UNAUDITED (Dollars in thousands) April
30, October 31, April 30, 2006 2005 2005 GAAP - long-term debt
$459,190 $430,400 $466,215 Short-term borrowings 26,459 17,173
23,506 Cash and cash equivalents (152,030) (122,411) (52,029)
Non-GAAP net debt $333,619 $325,162 $437,692 DATASOURCE: Greif,
Inc. CONTACT: Analysts, Robert Lentz, +1-614-876-2000, for Greif,
Inc.; or Media, Deb Strohmaier of Greif, Inc., +1-740-549-6074, or
cell, +1-614-208-3496 Web site: http://www.greif.com/
Copyright