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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2000 Commission File Number 1-566
GREIF BROS. CORPORATION
(Exact name of Registrant as specified in its charter)
State of Delaware 31-4388903
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
425 Winter Road, Delaware, Ohio 43015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 740-549-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
Class "A" Common Stock
Class "B" Common Stock
Indicate by check mark whether the Registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__. No _____.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrants knowledge, in the definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of January 3, 2001 was $70,047,545.
The number of shares outstanding of each of the Registrant's classes of
common stock, as of January 3, 2001 was as follows:
Class A Common Stock - 10,523,196
Class B Common Stock - 11,847,359
Listed hereunder are the documents, portions of which are incorporated by
reference, and the parts of this Form 10-K into which such portions are
incorporated:
1. The Registrant's Proxy Statement for use in connection with the
Annual Meeting of Shareholders to be held on February 26, 2001, portions
of which are incorporated by reference into Part III of this Form 10-K,
which Proxy Statement will be filed within 120 days of October 31, 2000
1
PART I
Item 1. Business
Greif Bros. Corporation and its subsidiaries (the "Company")
principally manufacture industrial shipping containers and containerboard
and corrugated products which it sells to customers in many industries,
primarily in the United States, Canada and Mexico, through direct sales
contact with its customers. In addition, the Company owns timber properties
which are harvested and regenerated in the United States and Canada.
The Company operates over 70 locations in the United States, Canada
and Mexico and, as such, is subject to federal, state, local and foreign
regulations in effect at the various localities.
Due to the variety of its products, the Company has many customers
buying different types of its 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 and metal
products, and must make spot deliveries on a day-to-day basis as its
products are required by its customers, the Company does not operate on a
backlog to any significant extent 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, some 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
and has not recently been significantly affected by inflation.
The approximate number of persons employed during the year was 4,800.
2
Item 1. Business (concluded)
Acquisitions and Dispositions
A description of significant acquisitions and dispositions is included
in Note 2 to the Consolidated Financial Statements on pages 44-47 of this
Form 10-K, which Note is part of the financial statements contained in Item
8 of this Form 10-K, and which Note is incorporated herein by reference.
Industry Segments
Financial information concerning the Company's industry segments as
required by Item 101(b) is included in Note 12 to the Consolidated
Financial Statements on pages 59-62 of this Form 10-K, which Note is part
of the financial statements contained in Item 8 of this Form 10-K, and
which Note is incorporated herein by reference.
3
Item 2. Properties
The following are the Company's principal locations and products
manufactured at such facilities or the use of such facilities. The Company
considers its operating properties to be in satisfactory condition and
adequate to meet its present needs. However, the Company expects to make
further additions, improvements and consolidations of its properties as the
Company's business continues to expand.
Location Products Manufactured/Use Industry Segment
Alabama:
Creola Fibre drums Industrial shipping
container
Cullman Steel drums Industrial shipping
containers
Arkansas:
Batesville (30) Fibre drums Industrial shipping
containers
California:
Fontana Steel drums Industrial shipping
containers
LaPalma Fibre drums Industrial shipping
container
Merced Steel drums Industrial shipping
containers
Morgan Hill Fibre drums Industrial shipping
container
Ontario (28) Warehouse Industrial shipping
containers
Stockton Corrugated honeycomb Containerboard &
corrugated products
Colorado:
Denver (1) Warehouse Industrial shipping
containers
Connecticut:
Windsor Locks (2)Fibre drums Industrial shipping
containers
Georgia:
Dalton (3) Container leasing/Reconditioning Industrial shipping
containers
Lavonia Intermediate bulk containers Industrial shipping
containers
Lithonia Fibre drums and laminator Industrial shipping
containers
4
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
Macon Corrugated honeycomb Containerboard &
corrugated products
Macon (4) Warehouse Containerboard &
corrugated products
Marietta (29) Sales office Industrial shipping
containers
Illinois:
Blue Island (5) Warehouse Containerboard &
corrugated products
Centralia Corrugated containers Containerboard &
corrugated products
Chicago Steel drums Industrial shipping
containers
Lockport Plastic drums Industrial shipping
containers
Lombard (6) Research center Industrial shipping
containers
Naperville (7) Fibre drums Industrial shipping
containers
Oreana Corrugated containers Containerboard &
corrugated products
Posen Corrugated honeycomb Containerboard &
corrugated products
Quincy (30) Warehouse Industrial shipping
containers
Indiana:
Ferdinand (8) Corrugated containers Containerboard &
corrugated products
Kansas:
Kansas City (9) Fibre drums Industrial shipping
containers
Winfield Steel drums Industrial shipping
containers
Kentucky:
Louisville Corrugated containers Containerboard &
corrugated products
Mt. Sterling Plastic drums Industrial shipping
containers
Winchester Corrugated containers Containerboard &
corrugated products
Winchester (10) Warehouse Containerboard &
corrugated products
5
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
Louisiana:
St. Gabriel Steel drums and plastic drums Industrial shipping
containers
Massachusetts:
Mansfield Fibre drums Industrial shipping
containers
Michigan:
Roseville Corrugated containers Containerboard &
corrugated products
Taylor Fibre drums Industrial shipping
containers
Minnesota:
Minneapolis Fibre drums Industrial shipping
containers
Rosemount Multiwall bags Containerboard &
corrugated products
Mississippi:
Jackson (11) General office Timber
Missouri:
Wright City (12)Fibre drums Industrial shipping
containers
Nebraska:
Omaha Multiwall bags Containerboard &
corrugated products
New Jersey:
Englishtown (13)Fibre drums Industrial shipping
containers
Spotswood Fibre drums Industrial shipping
containers
Teterboro Fibre drums Industrial shipping
containers
New York:
Tonawanda Fibre drums Industrial shipping
containers
6
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
North Carolina:
Bladenboro Steel drums Industrial shipping
containers
Charlotte (14) Fibre drums Industrial shipping
containers
Ohio:
Caldwell Steel drums Industrial shipping
containers
Cleveland Corrugated containers Containerboard &
corrugated products
Columbus (15) General office Industrial shipping
containers
Columbus (16) General office
Delaware Principal office
Delaware (17) Research center Industrial shipping
containers
Fostoria Corrugated containers Containerboard &
corrugated products
Massillon Containerboard Containerboard &
corrugated products
Tiffin Corrugated containers Containerboard &
corrugated products
Toledo Corrugated containers Containerboard &
corrugated products
Van Wert Fibre drums Industrial shipping
containers
Zanesville Corrugated containers and sheets Containerboard &
corrugated products
Zanesville Warehouse Containerboard &
corrugated products
Pennsylvania:
Aston Fibre drums Industrial shipping
containers
Hazelton Corrugated honeycomb Containerboard &
corrugated products
Hazelton (30) Warehouse Containerboard &
corrugated products
Reno (18) Corrugated containers Containerboard &
corrugated products
Stroudsburg Steel parts Industrial shipping
containers
Washington Corrugated containers and sheets Containerboard &
corrugated products
7
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
Washington (30) Warehouse Containerboard &
corrugated products
Wayne (19) Sales office Industrial shipping
containers
West Hazelton(20)Plastic drums Industrial shipping
containers
Tennessee:
Kingsport Fibre drums Industrial shipping
containers
Texas:
Haltom City Fibre drums Industrial shipping
containers
Houston (21) Fibre drums Industrial shipping
containers
Houston (22) Plastic drums Industrial shipping
containers
Houston (23) Sales office Industrial shipping
containers
LaPorte Steel drums Industrial shipping
containers
Waco Corrugated honeycomb Containerboard &
corrugated products
Waco (30) Warehouse Containerboard &
corrugated products
Virginia:
Riverville Containerboard Containerboard &
corrugated products
Washington:
Vancouver (24) Corrugated honeycomb Containerboard &
corrugated products
Vancouver (25) Warehouse Containerboard &
corrugated products
West Virginia:
Culloden (26) Fibre drums Industrial shipping
containers
Huntington (27) Corrugated containers and sheets Containerboard &
corrugated products
Huntington (30) Warehouse Containerboard &
corrugated products
8
Item 2. Properties (continued)
Location Products Manufactured/Use Industry Segment
Canada
Alberta:
Lloydminster Steel drums, fibre drums Industrial shipping
and plastic drums containers
Ontario:
Belleville Plastic drums Industrial shipping
containers
Milton Fibre drums Industrial shipping
containers
Niagara Falls General office Industrial shipping
containers
Oakville Steel drums Industrial shipping
containers
Stoney Creek Fibre drums Industrial shipping
containers
Stoney Creek Steel drums Industrial shipping
containers
Stoney Creek Research center and fibre drums Industrial shipping
containers
Quebec:
La Salle Fibre drums Industrial shipping
containers
Maple Grove Pallets Industrial shipping
containers
Mexico
Estado de Mexico:
Naucalpan
de Juarez Fibre drums Industrial shipping
containers
9
Item 2. Properties (concluded)
Note: All properties are held in fee except as noted below:
Exceptions:
(1) Lease expires December 15, 2001
(2) Lease expires December 31, 2005
(3) Lease expires September 30, 2002
(4) Lease expires February 14, 2001
(5) Lease expires April 30, 2001
(6) Lease expires July 31, 2007
(7) Lease expires June 30, 2003
(8) Lease expires June 30, 2001
(9) Lease expires March 31, 2004
(10) Lease expires January 31, 2001
(11) Lease expires December 31, 2004
(12) Lease expires August 31, 2005
(13) Lease expires February 28, 2003
(14) Lease expires September 30, 2003
(15) Lease expires November 30, 2001
(16) Lease expires August 31, 2002
(17) Lease expires June 30, 2001
(18) Lease expires December 31, 2004
(19) Lease expires July 31, 2003
(20) Lease expires April 30, 2006
(21) Lease expires December 31, 2001
(22) Lease expires September 30, 2006
(23) Lease expires June 30, 2001
(24) Lease expires January 31, 2002
(25) Lease expires February 28, 2002
(26) Lease expires January 31, 2002
(27) Lease expires October 7, 2001
(28) Lease expires August 31, 2002
(29) Lease expires April 14, 2001
(30) Lease operates month to month
The Company also owns in fee a substantial number of scattered timber
tracts comprising approximately 322,000 acres in the states of Alabama,
Arkansas, Florida, Georgia, Louisiana, Mississippi and Virginia and the
provinces of Ontario and Quebec in Canada.
10
Item 3. Legal Proceedings
The Company has no pending material legal proceedings.
From time to time, various legal proceedings arise at Federal, State
or Local levels involving environmental sites to which the Company has
shipped, directly or indirectly, small amounts of toxic waste, such as
paint solvents, etc. The Company, to date, has been classified as a "de
minimis" participant and, as such, has not been subject, in any instance,
to sanctions of $100,000 or more.
In addition, from time to time, but less frequently, the Company has
been cited for violations of environmental regulations. None of these
violations involve or are expected to involve sanctions of $100,000 or more.
11
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.
Executive Officers and Certain Significant Employees of the Company
The following information relates to executive officers of the Company
(elected annually):
Year first became
Name Age Positions and offices executive officer
Michael J. Gasser 49 Chairman of the Board 1988
of Directors and Chief
Executive Officer,
Chairman of the
Executive and Stock
Repurchase Committees
and member of the
Nominating Committee
William B. Sparks, Jr. 59 Director, President 1995
and Chief Operating
Officer, member of the
Executive Committee
Charles R. Chandler 65 Director, Vice 1996
Chairman, President of
Soterra LLC
(subsidiary company),
member of the
Executive Committee
Maureen A. Conley 42 Vice President, New 2000
Business Development
Kenneth E. Kutcher 48 Chief Financial 2001
Officer and Secretary
John S. Lilak 53 Executive Vice 1999
President,
Containerboard &
Corrugated Products
Joseph W. Reed 63 Vice President 1997
Michael L. Roane 45 Vice President, Human 1998
Resources
12
Executive Officers and Certain Significant Employees of the Company
(continued)
Name Age Positions and offices Year first became
executive officer
Michael J. Barilla 50 Vice President, 1999
Business Information
Services
John K. Dieker 37 Corporate Controller 1996
Sharon R. Maxwell 51 Assistant Secretary 1997
Philip R. Metzger 53 Treasurer 1995
The following information relates to certain significant employees of the
Company:
Name Age Positions and offices Year first became
significant employee
Michael M. Bixby 57 Vice President, 1980
Strategic Accounts,
Industrial Shipping
Containers
Ronald L. Brown 53 Vice President, Sales 1996
and Marketing,
Industrial Shipping
Containers
Wayne R. Carlberg 57 Vice President, 1998
Marketing, Industrial
Shipping Containers
Elco Drost 55 President of Greif 1996
Bros. Canada Inc.
(subsidiary company)
Russell A Fazio 57 Vice President, Field 1998
Sales, Industrial
Shipping Containers
Michael A. Giles 50 Vice President, 1996
Manufacturing,
Containerboard Mill
Operations,
Containerboard &
Corrugated Products
13
Executive Officers and Certain Significant Employees of the Company
(continued)
Name Age Positions and offices Year first became
significant employee
C.J. Guilbeau 53 Vice President and 1986
Associate Director of
Manufacturing,
Industrial Shipping
Containers
Bruce J. Miller 45 Vice President, Sales 1998
and Marketing, and
General Manager,
Specialty Operations,
Containerboard &
Corrugated Products
Mark J. Mooney 43 Vice President, 1997
Packaging Solutions
William R. Mordecai 48 Vice President, Sales 1997
and Marketing,
Containerboard and
Paper, Containerboard
& Corrugated Products
Michael C. Patton 39 Vice President/General 2000
Manager,
Multiwall/Consumer Bag
Packaging,
Containerboard &
Corrugated Products
Kent P. Snead 55 Corporate Director of 1997
Strategic Projects
Karl Svendsen 59 Vice President, 1998
Manufacturing,
Industrial Shipping
Containers
Peter G. Watson 43 Vice President, 1999
Service Solutions, and
General Manager, Sheet
Plant Operations,
Containerboard &
Corrugated Products
14
Executive Officers and Certain Significant Employees of the Company
(continued)
Name Age Positions and offices Year first became
significant employee
Carl G. Wright 41 Vice President, 1999
Manufacturing, and
General Manager,
Corrugator Operations,
Containerboard &
Corrugated Products
15
Executive Officers and Certain Significant Employees of the Company
(continued)
Except as indicated below, each person has served in his or her
present capacity for at least five years.
Mr. Charles R. Chandler was elected Vice Chairman during 1996. In
addition, he was elected President of Soterra LLC during 1999. Prior to
that time, and for more than five years, he served as President and Chief
Operating Officer of Virginia Fibre Corporation, a former subsidiary of the
Company.
Ms. Maureen A. Conley was elected Vice President, New Business
Development, in 2000. Prior to that time, she served as a senior
management consultant for IBM Global Services for almost three years.
During 1998, she was Director of Corporate Development for BioCrystal
Limited. Prior to that time, and for more than five years, she served as
Director of Administrative Services for the City of Columbus, Ohio.
Mr. Kenneth E. Kutcher was elected Chief Financial Officer and
Secretary in 2001. During 1999 to 2001, Mr. Kutcher served as Chief
Financial Officer of Celanese Chemicals in New Jersey. From 1997 to 1999,
he served as Chief Financial Officer of Trevira, the polyester fiber unit
of Hoechst AG. Prior to that time, and for more than five years, he served
as Business Director, Filter Products, of Hoechst AG.
Mr. John S. Lilak was elected Executive Vice President, Containerboard
& Corrugated Products, during 1999. During 1997 to 1999, Mr. Lilak served
as General Sales and Marketing Manager, Kraft Paper and Board Division, for
Union Camp Corporation. Prior to that time, and for more than five years,
he served as Group General Manager, Container Division, of Union Camp.
Mr. Joseph W. Reed was elected Vice President in 2001. During 1997
to 2000, he served as Chief Financial Officer and Secretary. Prior to that
time, and for more than five years, he served as Senior Vice President,
Finance and Administration - Chief Financial Officer of Pharmacia, Inc.
Mr. Michael L. Roane was elected Vice President, Human Resources, in
1998. Prior to that time, and for more than five years, Mr. Roane served
as Vice President, Human Resources, for Owens and Minor, Inc.
Mr. Michael J. Barilla was elected Vice President, Business
Information Services, during 1999. During 1997 to 1999, Mr. Barilla served
as a Senior Consultant for IBM Corporation. During 1995 to 1997, he served
as Chief Financial Officer and prior to that time, and for more than five
years, he served as Senior Vice President of Operations and Administration
of Medex, Inc.
Ms. Sharon R. Maxwell was elected Assistant Secretary during 1997.
Prior to that time, and for more than five years, she served as
administrative assistant to the Chairman.
Executive Officers and Certain Significant Employees of the Company
(continued)
Mr. Michael M. Bixby became Vice President, Strategic Accounts,
Industrial Shipping Containers, during 1998. During the past five years,
he has been a Vice President of the Company.
Mr. Ronald L. Brown became Vice President, Sales and Marketing,
Industrial Shipping Containers, during 1997. Prior to that time, and for
more than five years, he served as President and Chief Operating Officer
for Down River International (former subsidiary company).
Mr. Wayne R. Carlberg became Vice President, Marketing,
Industrial Shipping Containers, during 1998. Prior to that time, and for
more than five years, he held the position of Sales Manager for the
Industrial Container Division of Sonoco Products Company, which was
acquired on March 31, 1998.
During 1996, Mr. Elco Drost became President of Greif Bros.
Canada Inc. (subsidiary company) and continues to serve in this capacity.
Prior to that time, and for more than five years, he served as Vice
President for the subsidiary company.
Mr. Russell A. Fazio became Vice President, Field Sales,
Industrial Shipping Containers, during 1998. Prior to that time, and for
more than five years, he held the position of Manager, Strategic Account
Programs, for the Industrial Container Division of Sonoco Products Company,
which was acquired on March 31, 1998.
Mr. Michael A. Giles became Vice President, Manufacturing,
Containerboard Mill Operations, Containerboard & Corrugated Products, in
1997. He was Executive Vice President of Virginia Fibre Corporation (now
Greif Bros. Corporation of Virginia, subsidiary company) in 1996. Prior to
that time, and for more than five years he served as Vice President of
Manufacturing at the subsidiary company.
Mr. C.J. Guilbeau became Vice President and Associate Director of
Manufacturing, Industrial Shipping Containers, during 1997. During the
past five years, he has served as Vice President of the Company.
Mr. Bruce J. Miller became Vice President, Sales and Marketing,
Specialty Operations, Containerboard & Corrugated Products, during 1998.
In 1997 and early 1998, Mr. Miller served as Director, Vendor Management
Programs, for the Industrial Shipping Containers segment. Prior to that
time, and for more than five years, he served as a Vice President of Down
River International, Inc. (former subsidiary company).
17
Executive Officers and Certain Significant Employees of the Company
(concluded)
Mr. Mark J. Mooney became Vice President, Packaging Services,
Industrial Shipping Containers, during 1998. Prior to that time, Mr.
Mooney served as Vice President, National Sales, and prior to 1996, and for
more than the past five years, he served as the Operations Director,
Multiwall Bags, at one of its divisions.
Mr. William R. Mordecai became Vice President, Sales and Marketing,
Containerboard and Paper, Containerboard & Corrugated Products, during
1997. During 1996 to 1997, Mr. Mordecai served as Director, Containerboard
Marketing, for Virginia Fibre Corporation (former subsidiary company).
Prior to that time, and for more than five years, he served as President of
Pimlico Paper Corporation.
Mr. Michael C. Patton became Vice President/General Manager,
Multiwall/Consumer Bag Packaging, Containerboard & Corrugated Products
during 2000. During 1997 to 2000, Mr. Patton served as Director of Sales &
Marketing, Flexible Packaging Division, of International Paper. Prior to
that time, he served as Sales Manager, Consumer Packaging Group, Flexible
Packaging Division of Union Camp Corporation, from 1995 to 1997.
Mr. Kent P. Snead became Corporate Director of Strategic Projects
during 1997. Prior to that time, and for more than the past five years, he
served as the Engineering Manager for Virginia Fibre Corporation (former
subsidiary company).
Mr. Karl Svendsen became Vice President, Manufacturing,
Industrial Shipping Containers, during 1998. Prior to that time, he served
as Vice President, Operating Resources, for the Industrial Container
Division of Sonoco Products Company, acquired on March 30, 1998, for more
than five years.
Mr. Peter G. Watson became Vice President, Service Solutions, and
General Manager, Sheet Plant Operations, Containerboard & Corrugated
Products, during 1999. During 1996 to 1999, Mr. Watson served as Vice
President and General Manager of Concept Packaging Group. Prior to that
time, and for more than five years, he served as General Manager for Union
Camp Corporation.
Mr. Carl G. Wright became Vice President, Manufacturing, and
General Manager, Corrugator Operations, Containerboard & Corrugated
Products, during 1999. During 1996 to 1999, Mr. Wright served as a Regional
Manager within the Containerboard & Corrugated Products segment. Prior to
that time, and for more than five years, he served as a General Manager
within the business segment.
18
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
The Class A and Class B Common Stock are traded on the NASDAQ Stock
Market under the symbols GBCOA and GBCOB, respectively.
The financial information regarding the Company's two classes of
common stock is included in Note 13 to the Consolidated Financial
Statements on pages 63-64 of this Form 10-K, which Note is part of the
financial statements contained in Item 8 of this Form 10-K, and which Note
is incorporated herein by reference.
The Company paid five dividends of varying amounts during its fiscal
year computed on the basis described in Note 6 to the Consolidated
Financial Statements on page 52 of this Form 10-K, which Note is part of
the financial statements contained in Item 8 of this Form 10-K, and which
Note is incorporated herein by reference. The annual dividends paid for
the last three fiscal years are as follows:
2000 fiscal year dividends per share - Class A $0.52; Class B $0.77
1999 fiscal year dividends per share - Class A $0.50; Class B $0.74
1998 fiscal year dividends per share - Class A $0.48; Class B $0.71
19
Item 6. Selected Financial Data
The 5-year selected financial data is as follows (Dollars in
thousands, except per share amounts):
Years Ended October 31,
2000 1999 1998 1997 1996
Net sales $929,861 $818,827 $814,432 $660,782 $644,744
Net income $ 75,794 $ 51,373 $ 37,441 $ 22,526 $ 48,524
Total assets $939,331 $910,986 $878,420 $594,217 $551,420
Long-term
obligations $235,000 $258,000 $235,000 $ 52,152 $ 25,203
Dividends per share:
Class A Common
Stock $ 0.52 $ 0.50 $ 0.48 $ 0.60 $ 0.48
Class B Common
Stock $ 0.77 $ 0.74 $ 0.71 $ 0.89 $ 0.71
Basic earnings per share:
Class A Common
Stock $ 2.68 $ 1.78 $ 1.30 $ 0.78 $ 1.68
Class B Common
Stock $ 4.01 $ 2.67 $ 1.94 $ 1.17 $ 2.52
Diluted earnings per share:
Class A Common
Stock $ 2.67 $ 1.78 $ 1.29 $ 0.78 $ 1.68
Class B Common
Stock $ 4.01 $ 2.67 $ 1.94 $ 1.17 $ 2.52
The 2000, 1999 and 1998 amounts include the results of operations and
assets of the industrial containers business acquired from Sonoco Products
Company on March 30, 1998. The increase in long-term obligations in 1998 is
a result of this acquisition.
The results of operations include the effects of pretax restructuring
charges of $27.5 million and $5.3 million for 1998 and 1997, respectively.
20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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):
2000 1999 1998
Net sales:
Industrial Shipping Containers $476,327 $461,014 $409,424
Containerboard & Corrugated Products 408,856 333,681 391,707
Timber 44,678 24,132 13,301
Total $929,861 $818,827 $814,432
Income before income taxes and equity
in earnings of affiliates:
Industrial Shipping Containers $ 40,323 $ 40,631 $ 31,593
Containerboard & Corrugated Products 65,942 34,742 53,498
Timber 46,503 25,240 18,432
Total segment 152,768 100,613 103,523
Corporate and other (52,314) (33,255) (20,475)
Restructuring costs -- -- (27,461)
Income before income taxes
and equity in earnings of
affiliates 100,454 67,358 55,587
Income taxes (38,027) (26,740) (22,483)
Equity in earnings of affiliates 13,367 10,755 4,337
Net income $ 75,794 $ 51,373 $ 37,441
Current ratio 3.3:1 3.0:1 2.6:1
Cash flows from operations $117,229 $ 71,766 $ 76,862
Capital expenditures $ 78,833 $ 49,253 $ 38,093
Acquisitions $ -- $ 58,826 $182,895
RESULTS OF OPERATIONS
The Company had record net sales and net income for the year ended
October 31, 2000. Net sales were $929.9 million compared to the previous
record of $818.8 million in 1999. Net income was $75.8 million compared to
the previous record of $65.3 million in 1995. The 1995 results were largely
the result of high containerboard prices.
21
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Net sales for 2000 increased 13.6% to $929.9 million from $818.8
million last year. The record results were due to higher net sales in all
of the Company's segments: Containerboard & Corrugated Products segment
($75.2 million), Industrial Shipping Containers segment ($15.3 million) and
Timber segment ($20.5 million). The improvement in the Containerboard &
Corrugated Products segment was primarily due to a 32.5% increase in the
average sales price of containerboard in 2000 versus 1999.
The record net income of $75.8 million compared to $51.4 million the
prior year was attributable to stronger net sales and a reduction in the
cost of products sold as a percentage of net sales. The other factors, net
of tax effect, that contributed to the increase in net income, including
gain on sale of timber properties ($2.9 million), equity in earnings of
affiliates ($2.6 million), a lower effective tax rate ($1.8 million) and an
increase in capitalized interest ($1.3 million), were partially offset by a
decrease in the gain on disposals of properties, plants and equipment ($4.6
million).
Historically, revenues or earnings may or may not be indicative 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 operates.
The Company's Industrial Shipping Containers segment, where products
manufactured by the Company are purchased by other manufacturers and
suppliers, is substantially subject to the general economic conditions of
its customers and the industry in which it operates.
Similarly, the Company's Containerboard & Corrugated Products segment
is subject to general economic conditions and the effect of the operating
rates of the containerboard industry, including pricing pressures from its
competitors.
Net Sales
Net sales increased $111.0 million or 13.6% in 2000 as compared to
1999.
The Industrial Shipping Containers segment had an increase in net
sales of $15.3 million or 3.3% due to an improvement in general market
conditions, especially in the chemical industry, improved pricing to offset
substantial raw material increases and regaining some of the lost sales
volume resulting from plant closings and consolidation efforts. In
addition, there has been an increase in activities related to container
leasing and reconditioning.
22
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The Containerboard & Corrugated Products segment had an increase in
net sales of $75.2 million or 22.5% primarily due to a 32.5% increase in
the average sales price of containerboard. In addition, there were $16.0
million of additional net sales from Great Lakes and Trend Pak which were
acquired in 1999.
The Timber segment had an increase in net sales of $20.5 million or
85.1% primarily due to a full year of net sales resulting from the timber
marketing agreement with Bennett & Peters, Inc., forestry consultants and
appraisers, initiated in May 1999. The timber marketing strategy is focused
on active harvesting and regeneration of the Company's 281,000 acres of
timber properties in the United States to achieve sustainable long-term
yields on the Company's timberlands. Sales of timber are recorded as net
sales, while sales of timber properties are included in other income.
Net sales increased $4.4 million or 0.5% in 1999 as compared to 1998.
The net sales of the Industrial Shipping Containers segment increased
by $51.6 million or 12.6% in 1999 as compared to 1998. The increase was due
primarily to the inclusion of a full year of net sales versus seven months
of net sales related to the industrial containers business acquired from
Sonoco on March 30, 1998. The increase was partially offset by a decline
in general market conditions and lost sales volume due to plant closings
and consolidation efforts.
The net sales of the Containerboard & Corrugated Products segment
decreased by $58.0 million or 14.8% in 1999 as compared to 1998. The
decrease was due primarily to a change in the method of reporting net sales
related to Michigan Packaging in 1999. The stock of Michigan Packaging was
contributed to the CorrChoice joint venture on November 1, 1998.
CorrChoice is accounted for using the equity method of accounting (see Note
2 to the Consolidated Financial Statements). Accordingly, beginning in
1999, the net sales related to Michigan Packaging are not included in
consolidated net sales. In 1998, Michigan Packaging had net sales of
$109.2 million. This reduction was partially offset by the inclusion of
$17.5 million in net sales related to the Great Lakes and Trend Pak
acquisitions as well as the Company's net sales to CorrChoice.
The net sales of the Timber segment increased by $10.8 million or
81.4% in 1999 as compared to 1998. The increase was primarily due to
fourth quarter sales resulting from a timber marketing agreement initiated
in May 1999.
Other Income
Other income decreased $1.1 million in 2000 as compared to the prior
year primarily due to $7.5 million less gains on the disposal of
properties, plants and equipment. The decrease was partially offset by $4.6
million of additional gains on the sale of timber properties in the current
year.
23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Other income increased $2.1 million in 1999 as compared to 1998
primarily due to $6.2 million of additional gains on the disposal of
properties, plants and equipment. The increase was partially offset by
$3.9 million less gains on the sale of timber properties in 1999 versus
1998.
Cost of Products Sold
Cost of products sold was $703.4 million, or 75.6% of net sales, in
2000 compared with $640.5 million, or 78.2% of net sales, in 1999. The
improvement was primarily due to the higher Timber segment net sales in the
current year. The timber sales of the Company have a very low cost
associated with them. In addition, the cost of products sold, as a
percentage of net sales, for the Containerboard & Corrugated Products
segment decreased as a result of the higher sales prices of its products
without a corresponding increase in the cost of products sold. The cost of
products sold, as a percentage of net sales, decreased slightly for the
Industrial Shipping Containers segment.
Cost of products sold, as a percentage of net sales, decreased in 1999
compared to 1998 primarily due to the increase in timber sales. In
addition, the cost of products sold, as a percentage of net sales,
decreased slightly for the Industrial Shipping Containers and
Containerboard & Corrugated Products segments.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") remained
constant at 13.8% of net sales for 2000 and 1999, despite increasing to
$128.3 million in 2000 from $113.0 million in 1999. The increased
expenditures primarily represent higher costs to support infrastructure
improvements for current and future growth initiatives. In addition, $3.2
million of additional commission expense resulted from the sale of timber
and timberlands in 2000. The increase was partially offset by a $2.9
million reduction in Year 2000 remediation expenses.
The $22.7 million increase in SG&A in 1999 versus 1998 was primarily
due to additional SG&A related to the industrial containers business
acquired from Sonoco on March 30, 1998 as well as certain increased
expenses in support of Company initiatives. In addition, contributing to
the higher costs were $3.0 million of additional amortization expense
related to recent acquisitions, $1.1 million in commitment fees related to
the Company's revolving credit facility and $2.9 million of Year 2000
remediation expenses.
24
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Restructuring Costs
During the third quarter of 1998, the Company recognized a
restructuring charge of $27.5 million resulting from a plan to consolidate
eighteen of the Company's existing industrial shipping and corrugated
container plants (see Note 4 to the Consolidated Financial Statements).
During 2000 the remaining locations were closed and the restructuring
reserves have been fully utilized.
Interest Expense
The $1.4 million decrease in interest expense for 2000 versus 1999,
which is included in Corporate and Other, was primarily due to $2.5 million
of capitalized interest in 2000 compared to $0.4 million in 1999. The
increase in capitalized interest relates to several large capital projects,
including the management information system, a new steel drum line in
LaPorte, Texas and a new corrugated container plant in Louisville,
Kentucky. The decrease was partially offset by higher interest rates that
prevailed throughout 2000 compared to the prior year.
The $3.9 million increase in interest expense for 1999 versus 1998 was
due to a higher average debt balance of $255.6 million during 1999 as
compared to $182.1 million during 1998. The higher level of debt was the
result of funds borrowed for the acquisition of the industrial containers
business and the intermediate bulk containers business from Sonoco on March
30, 1998 and January 11, 1999, respectively. In addition, the purchase of
Great Lakes and Trend Pak on April 5, 1999 increased the Company's
outstanding debt.
Income Before Income Taxes and Equity in Earnings of Affiliates
Income before income taxes and equity in earnings of affiliates
increased $33.1 million or 49.1% in 2000 as compared to 1999. The increase
was primarily due to the significant improvement in net sales for the
Containerboard & Corrugated Products and Timber segments. In addition,
there were $4.6 million of additional gains on the sale of timber
properties in 2000, and $1.4 million less in interest expense. The
increases were partially offset by lower gains on the disposal of
properties, plants and equipment.
Income before income taxes and equity in earnings of affiliates
increased $11.8 million or 21.2% in 1999 as compared to 1998 due to an
increase in net sales in the Industrial Shipping Containers and Timber
segments. In addition, there was a $27.5 million restructuring charge in
1998. Finally, there were $6.2 million of additional net gains on the sale
of properties, plants and equipment. These increases were offset by the
inclusion of Michigan Packaging's income before income taxes, which
amounted to $10.2 million in 1998, in CorrChoice during 1999. The amounts
were further offset by a reduction in gains on the sale of timber
properties of $3.9 million and $3.9 million of additional interest expense.
25
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Income Taxes
During 2000, the effective tax rate was 37.9% as compared to 39.7%
last year. The reduction, due to lower state and local taxes, had a
positive effect on net income for the current year.
The Company anticipates that it will be able to fully realize its
recognized deferred tax assets based upon its projected taxable income.
Equity in Earnings of Affiliates
Equity in earnings of affiliates, which includes the Company's share
of CorrChoice's net income and Abzac-Greif's net income, increased $2.6
million or 24.3% over the prior year.
The equity in earnings of affiliates during 1998 represents the
Company's share of Ohio Packaging's net income. Ohio Packaging and
Michigan Packaging were combined into the CorrChoice joint venture on
November 1, 1998. Therefore, the amounts reflected in the periods
presented are not comparable due to the different entities and ownership
interests of the Company (see Note 2 to the Consolidated Financial
Statements).
Net Income and Earnings Per Share
Based on the foregoing, net income increased $24.4 million or 47.5% to
$75.8 million in 2000 from $51.4 million in 1999. Diluted earnings per
share of the Class A and Class B Common Stock were $2.67 and $4.01,
respectively, in 2000. Diluted earnings per share of the Class A and Class
B Common Stock were $1.78 and $2.67, respectively, in 1999.
Net income increased to $51.4 million for 1999 versus $37.4 million in
1998 due to the reasons previously stated. Diluted earnings per share were
$1.78 and $2.67 for the Class A and Class B Common Stock, respectively, in
1999 compared with $1.29 and $1.94 for the Class A and Class B Common
Stock, respectively, in 1998.
Timber Properties Transactions
On December 21, 2000, Soterra LLC, a wholly-owned subsidiary of the Company,
sold certain hardwood timberlands to a third party situated in Arkansas,
Mississippi and Louisiana for approximately $44 million. As such, the Company
recognized a gain of approximately $43 million during the first quarter of 2001
related to this transaction. In addition, an agreement to sell other hardwood
timberlands for approximately $30 million in March 2001 was signed in December
2000. A total of approximately 65,000 acres of timber properties were sold or
will be sold as a result of these transactions.
26
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
In a separate transaction on December 21, 2000, Soterra LLC purchased
certain softwood timberlands from a third party situated in Louisiana for
approximately $43 million. In a related agreement signed in December 2000,
the Company agreed to purchase other softwood timberlands for approximately
$43 million in March 2001. A total of approximately 63,000 acres of timber
properties were purchased or will be purchased as a result of these
transactions.
LIQUIDITY AND CAPITAL RESOURCES
As indicated in the Consolidated Financial Statements and in the
financial data set forth above, the Company is dedicated to maintaining a
strong financial position. It is management's 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 adverse events.
c. To be able to benefit from new developments, new products and new
opportunities in order to achieve the best results for the Company's
shareholders.
d. To continue to pay competitive compensation, including the ever-
increasing costs of employee benefits, to Company employees who produce
the results for the Company's shareholders.
e. To replace and improve plants and equipment. When plants and production
machinery must be replaced, either because of condition or to obtain the
cost-reducing potential of technological improvements required to remain
a low-cost producer in the highly competitive environment in which the
Company operates, the cost of new plants and machinery are often
significantly higher than the historical cost of the items being
replaced.
Management believes that the present financial strength of the Company
will be sufficient to achieve these goals.
Investments in Business Expansion
During 2000, the Company invested $79 million in capital additions.
During the last three years, the Company has invested $408 million in
capital additions and acquisitions.
These investments are an indication of the Company's commitment to
being the high-quality, low-cost producer and desirable long-term supplier
to all of its customers.
27
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
On November 1, 1998, the Company entered into a joint venture
agreement to form CorrChoice (see Note 2 to the Consolidated Financial
Statements). The Company was not required to commit any additional capital
resources to fund this joint venture. The joint venture has been, and is
expected to continue to be, self-supporting.
On January 11, 1999, the Company acquired the intermediate bulk
containers business from Sonoco for approximately $38 million in cash
borrowed against the Company's revolving credit facility (see Note 2 to the
Consolidated Financial Statements). The intermediate bulk containers
business includes one location in Lavonia, Georgia.
On April 5, 1999, the Company acquired Great Lakes and Trend Pak for
approximately $21 million in cash borrowed against the Company's revolving
credit facility (see Note 2 to the Consolidated Financial Statements).
Great Lakes manufactures corrugated containers in Toledo, Ohio. Trend Pak
adds foam and other packaging materials to corrugated containers
manufactured by Great Lakes.
In June 1999, a wholly-owned Canadian subsidiary of the Company
exchanged its spiral core manufacturing assets for a 49% interest in
Abzac's fibre drum business (which is known as "Abzac-Greif") (see Note 2
to the Consolidated Financial Statements). Abzac-Greif has operations in
Abzac, Lyon and Anvin, France, and markets and sells fibre drums in Belgium
as well as France.
On March 30, 1998, the Company acquired all of the outstanding shares
of the industrial containers business from Sonoco for approximately $183
million in cash borrowed against the Company's revolving credit facility
(see Note 2 to the Consolidated Financial Statements). The industrial
containers business included twelve fibre drum plants and five plastic drum
plants along with facilities for research and development, packaging
services and distribution.
28
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Planned Business Expansion
On October 27, 2000, as amended on January 5, 2001, the Company signed a
definitive agreement to purchase Van Leer Industrial from Huhtamaki for $555
million less the amount of Van Leer Industrial's debt and certain other
obligations as of the closing date (see Note 14 to the Consolidated Financial
Statements). Van Leer Industrial is a leading worldwide provider of industrial
packaging and components, including steel, fibre and plastic drums,
polycarbonate water bottles, as well as intermediate bulk containers and
closure systems with operations in over 40 countries. The transaction is
expected to be completed during the first quarter of calendar 2001 subject to
regulatory and other approvals. The Company expects to finance the acquisition
through additional long-term borrowings and is currently negotiating the terms
and conditions of such financing, but no definitive agreement has been reached.
Balance Sheet Changes
The decrease of $5.1 million in trade accounts receivable in 2000 was
due to the delay in agricultural sales in the Industrial Shipping
Containers segment during 1999 from the third quarter to the fourth
quarter.
The decrease of $8.0 million in inventory in 2000 was due to the
closing of plants as a result of the 1998 restructuring plan.
Goodwill has been reduced primarily as a result of ongoing
amortization expense.
The investment in affiliates balance represents the Company's
investment in the CorrChoice joint venture and the Abzac-Greif venture. The
increase in 2000 as compared to 1999 was due to the Company's share of
CorrChoice's and Abzac-Greif's net income, net of dividends received. The
Company received a $2.4 million dividend from CorrChoice in 2000.
The decrease of $7.4 million in other long-term assets was primarily
due to the cash receipts and additional reserve on certain notes receivable
during 2000.
The reduction in the restructuring reserves was primarily due to the
payments of severance and other costs of closing the plants included in the
1998 restructuring reserves.
29
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Borrowing Arrangements
During 1998, the Company entered into a credit agreement which
provides for a revolving credit facility of up to $325 million. The
Company has borrowed money under the credit facility to fund various
acquisitions and repay the other long-term obligations of the Company. The
credit agreement contains certain covenants including maintaining a certain
leverage ratio, sufficient coverage of interest expense and a minimum net
worth. In addition, the Company is limited with respect to additional
debt. Finally, there are certain non-financial covenants including sales
of assets, financial reporting, mergers and acquisitions, investments,
change in control and Employee Retirement Income Security Act compliance.
The Company believes it is in compliance with these covenants.
The decrease in long-term obligations was due to prepayments on the
Company's long-term obligations.
Other Liquidity Matters
During 1997, the Company embarked on a program to implement a new
management information system. The purpose of the new management
information system is to focus on using information technology to link
operations in order to become a low-cost producer and more effectively
service the Company's customers. The ultimate cost of this project is
dependent upon management's final determination of the locations, timing
and extent of integration of the new management information system. As of
October 31, 2000, the Company has spent approximately $27 million towards
this project. While this program is not complete, especially with regard to
the manufacturing and sales modules, the centralized finance module is in
place. As such, amortization has begun on approximately $10 million of this
amount. The capitalized costs of the project are being amortized on a
straight-line basis over a seven-year period.
In addition to the new management information system, as described
above, the Company has approved future purchases of approximately $17
million. These purchases are primarily to replace and improve equipment.
Borrowing and self-financing have been the primary sources for past
capital expenditures and acquisitions. The Company anticipates financing
future capital expenditures in a like manner and believes that it will have
adequate funds available for planned expenditures.
In February 1999, the Board of Directors of the Company authorized a
one million share stock repurchase program. During 2000, the Company
repurchased 163,737 shares, including 137,200 Class A common shares and
26,537 Class B common shares. As of October 31, 2000, the Company had
repurchased 559,910 shares, including 405,476 Class A common shares and
154,434 Class B common shares. The total cost of the shares repurchased
during 1999 and 2000 was $16 million.
30
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
EFFECTS OF INFLATION
The effects of inflation did not have a material impact on the
Company's operations during 2000, 1999 or 1998.
RECENT ACCOUNTING STANDARDS
The recent accounting standards are described in Note 1 to the
Consolidated Financial Statements.
FORWARD-LOOKING STATEMENTS; CERTAIN FACTORS AFFECTING FUTURE RESULTS
Statements contained in this Form 10-K or any other reports or
documents prepared by the Company or made by management of the Company may
be "forward-looking" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject
to certain risks and uncertainties that could cause the Company's operating
results to differ materially from those projected. The following factors,
among others, in some cases have affected and in the future could affect
the Company's actual financial performance.
Changes in General Economic Conditions. The Company's customers
generally consist of other manufacturers and suppliers who purchase the
Company's industrial shipping containers and containerboard for their own
containment and shipping purposes. Because the Company supplies a cross
section of industries, such as chemicals, food products, petroleum
products, pharmaceuticals and metal products, demand for the Company's
industrial shipping containers and containerboard and related corrugated
products has historically corresponded to changes in general economic
conditions of the United States, Canada and Mexico. Accordingly, the
Company's financial performance is substantially dependent upon the general
economic conditions existing in the United States, Canada and Mexico.
Competition. The Company's business of manufacturing and selling
industrial shipping containers and containerboard is highly competitive.
The most important competitive factors are price, quality and service.
Many of the Company's competitors are substantially larger and have
significantly greater financial resources.
Excess Capacity in Containerboard Segment. Industry demand for
containerboard products has declined in recent years causing excess
capacity in this segment of the Company's business. These excess capacity
levels and competitive pricing pressures in the containerboard market have
negatively impacted the Company's financial performance in recent years.
Raw Material Shortages. The Company's raw materials are principally
pulpwood, waste paper for recycling, paper, steel and resins. Some of
these materials have been, and in the future may be, in short supply.
Shortages in raw materials could adversely affect the Company's operations.
31
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (concluded)
Environmental and Health and Safety Matters; Product Liability Claims.
The Company must comply with extensive rules and regulations regarding
federal, state and local environmental matters, such as air and water
quality and waste disposal. The Company must also comply with extensive
rules and regulations regarding safety and health matters. The failure to
materially comply with such rules and regulations could adversely affect
the Company's operations. Furthermore, litigation or claims against the
Company with respect to such matters could adversely affect the Company's
financial performance. The Company may also become subject to product
liability claims which could adversely affect the Company.
Risks Associated with Acquisitions. During the past several years the
Company has invested, and for the foreseeable future the Company
anticipates investing, a substantial amount of capital in acquisitions.
Acquisitions involve numerous risks, including the failure to retain key
employees and contracts and the inability to integrate businesses without
material disruption. In addition, other companies in the Company's
industries have similar acquisition strategies. There can be no assurance
that any future acquisitions will be successfully integrated into the
Company's operations, that competition for acquisitions will not intensify
or that the Company will be able to complete such acquisitions on
acceptable terms and conditions. In addition, the costs of unsuccessful
acquisition efforts may adversely affect the Company's financial
performance.
Timber and Timberland Sales. The Company has a significant inventory
of standing timber and timberlands. The frequency and volume of sales of
timber and timberland will have an effect on the Company's financial
performance.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
The Company is subject to interest rate risk related to its financial
instruments which include borrowings under its $325 million revolving
credit facility and interest rate swap agreements with an aggregate
notional amount of $130 million. The Company does not enter into financial
instruments for trading or speculative purposes. The interest rate swap
agreements have been entered into to manage the Company's exposure to its
variable rate borrowing.
32
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
(concluded)
The table below provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates. For the revolving credit facility, the table
presents principal cash flows and related weighted average interest rates
by contractual maturity dates. For interest rate swaps, the table presents
annual amortization of notional amounts and weighted average interest rates
by contractual maturity dates. Under the swap agreements, the Company
receives interest quarterly from the counterparty and pays interest
quarterly to the counterparty. The fair value of the revolving credit
facility is based on current rates available to the Company for debt of the
same remaining maturity. The fair values of the interest rate swap
agreements have been determined by the counterparty.
Financial Instruments
(Dollars in millions)
Expected Maturity Date
There- Fair
2001 2002 2003 2004 2005 after Total Value
Revolving credit facility:
Variable rate $ -- $ -- $235(a) $ -- $ -- $ -- $ 235 $ 235
Average interest rate 6.99%(b)
Interest rate swaps:
Variable to fixed rates $ 30 $ 10 $ 20 $ 10 $ 10 $ 50 $ 130 $ 3
Average pay rate 5.53% 6.15% 6.15% 6.15% 6.15% 6.15% 6.01%
Average receive rate (c)6.72% 6.72% 6.72% 6.72% 6.72% 6.72% 6.72%
(a) Includes $235 million of borrowings under the $325 million unsecured
revolving credit facility which expires in 2003. The Company has the option
under the credit facility to repay borrowings prior to 2003 or to request an
extension.
(b) Variable rate specified is based on the prime rate or LIBOR rate plus a
calculated margin at October 31, 2000. Interest is paid and reset
quarterly.
(c) The average receive rate is based upon the LIBOR rate at October 31, 2000.
The rates presented are not intended to project the Company's expectations
for the future.
Foreign Currency Risk
The Company's exposure to foreign currency fluctuations on its
financial instruments is not material because most of these instruments are
denominated in U.S. dollars. The net sales and total assets of the Company
which are denominated in foreign currencies (i.e., Canadian dollars and
Mexican pesos) represent less than 10% of the consolidated net sales and
total assets.
Commodity Price Risk
The Company has no financial instruments subject to commodity price
risks.
33
Item 8. Financial Statements and Supplementary Data
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
For the years ended October 31, 2000 1999 1998
Net sales $929,861 $818,827 $814,432
Other income, net 16,766 17,834 15,718
946,627 836,661 830,150
Cost of products sold 703,391 640,473 644,892
Selling, general and administrative
expenses 128,301 112,995 90,282
Restructuring costs -- -- 27,461
Interest expense 14,481 15,835 11,928
846,173 769,303 774,563
Income before income taxes and
equity in earnings of affiliates 100,454 67,358 55,587
Income taxes 38,027 26,740 22,483
Income before equity in earnings of
affiliates 62,427 40,618 33,104
Equity in earnings of affiliates 13,367 10,755 4,337
Net income $ 75,794 $ 51,373 $ 37,441
Basic earnings per share:
Class A Common Stock $ 2.68 $ 1.78 $ 1.30
Class B Common Stock $ 4.01 $ 2.67 $ 1.94
Diluted earnings per share:
Class A Common Stock $ 2.67 $ 1.78 $ 1.29
Class B Common Stock $ 4.01 $ 2.67 $ 1.94
See accompanying Notes to Consolidated Financial Statements.
34
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
October 31, 2000 1999
CURRENT ASSETS
Cash and cash equivalents $ 13,388 $ 8,935
Canadian government securities -- 5,314
Trade accounts receivable - less allowance of
$2,293 ($2,456 in 1999) 119,645 124,754
Income tax receivable 14,343 --
Inventories 42,741 50,706
Deferred tax asset 2,216 6,857
Net assets held for sale 8,495 6,462
Prepaid expenses and other 12,315 14,270
Total current assets 213,143 217,298
LONG-TERM ASSETS
Goodwill - less amortization 136,284 142,977
Investment in affiliates 136,374 124,360
Other long-term assets 17,868 25,218
290,526 292,555
PROPERTIES, PLANTS AND EQUIPMENT - at cost
Timber properties - less depletion 21,518 9,925
Land 12,330 12,280
Buildings 133,591 124,594
Machinery and equipment 521,685 491,533
Capital projects in progress 23,354 40,651
712,478 678,983
Accumulated depreciation (276,816) (277,850)
435,662 401,133
$939,331 $910,986
See accompanying Notes to Consolidated Financial Statements.
35
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
October 31, 2000 1999
CURRENT LIABILITIES
Accounts payable $ 45,075 $ 46,703
Accrued payrolls and employee benefits 11,216 10,154
Restructuring reserves -- 5,157
Other current liabilities 8,656 10,017
Total current liabilities 64,947 72,031
LONG-TERM LIABILITIES
Long-term obligations 235,000 258,000
Deferred tax liability 58,895 48,960
Postretirement benefit liability 20,095 21,154
Other long-term liabilities 17,880 22,859
Total long-term liabilities 331,870 350,973
SHAREHOLDERS' EQUITY
Capital stock, without par value 10,383 10,207
Class A Common Stock:
Authorized 32,000,000 shares;
issued 21,140,960 shares;
outstanding 10,523,196 shares
(10,653,396 shares in 1999)
Class B Common Stock:
Authorized and issued 17,280,000 shares;
outstanding 11,847,359 shares
(11,873,896 shares in 1999)
Treasury stock, at cost (57,894) (52,940)
Class A Common Stock: 10,617,764 shares
(10,487,564 shares in 1999)
Class B Common Stock: 5,432,641 shares
(5,406,104 shares in 1999)
Retained earnings 598,301 537,126
Accumulated other comprehensive income
- foreign currency translation (8,276) (6,411)
542,514 487,982
$939,331 $910,986
See accompanying Notes to Consolidated Financial Statements.
36
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the years ended October 31, 2000 1999 1998
Cash flows from operating activities:
Net income $ 75,794 $ 51,373 $ 37,441
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 45,222 42,360 39,686
Equity in earnings of affiliates, net of
dividends received (10,976) (10,755) (4,337)
Deferred income taxes 13,548 15,815 (964)
Gain on disposals of properties, plants
and equipment, net (502) (7,962) (1,747)
Increase (decrease) in cash from changes in
certain assets and liabilities, net of
effects from acquisitions:
Trade accounts receivable 5,109 (21,578) (4,271)
Income tax receivable (14,343) -- --
Inventories 7,965 11,046 (2,794)
Prepaid expenses and other 1,955 2,846 (1,367)
Other long-term assets 6,579 2,597 (5,447)
Accounts payable (1,628) 3,534 1,362
Accrued payrolls and employee benefits 1,062 307 (2,729)
Restructuring reserves (5,157) (23,882) 17,858
Other current liabilities (1,361) (1,858) 6,288
Postretirement benefit liability (1,059) 591 (1,765)
Other long-term liabilities (4,979) 7,332 (352)
Net cash provided by operating activities 117,229 71,766 76,862
Cash flows from investing activities:
Acquisitions of companies, net of cash
acquired -- (74,233) (186,472)
Disposals of investments in government
securities 5,314 1,340 --
Purchases of properties, plants and equipment (78,833) (49,253) (38,093)
Proceeds on disposals of properties, plants
and equipment 4,672 18,874 3,041
Net cash used in investing activities (68,847) (103,272) (221,524)
Cash flows from financing activities:
Proceeds from issuance of long-term
obligations -- 54,500 271,000
Payments on long-term obligations (23,000) (31,500) (88,152)
Debt issuance costs -- -- (410)
Acquisitions of treasury stock (4,968) (11,102) --
Exercise of stock options 190 291 207
Dividends paid (14,619) (14,315) (13,756)
Net cash (used in) provided by financing
activities (42,397) (2,126) 168,889
Effects of exchange rates on cash (1,532) 1,238 (617)
Net increase (decrease) in cash and cash
equivalents 4,453 (32,394) 23,610
Cash and cash equivalents at beginning of year 8,935 41,329 17,719
Cash and cash equivalents at end of year $ 13,388 $ 8,935 $ 41,329
See accompanying Notes to Consolidated Financial Statements.
37
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars and shares in thousands, except per share amounts)
Accumulated
Other
Capital Stock Treasury Stock Retained Comprehensive Shareholders'
Shares Amount Shares Amount Earnings Income Equity
Balance at
November 1,
1997 22,902 $ 9,739 15,519 $(41,868) $476,383 $(5,283) $438,971
Net income 37,441 37,441
Other
comprehensive
income -
foreign
currency
translation (2,761) (2,761)
Comprehensive
income 34,680
Dividends paid
(Note 6):
Class A - $0.48 (5,235) (5,235)
Class B - $0.71 (8,521) (8,521)
Stock options
exercised 9 197 (9) 10 207
Balance at
October 31,
1998 22,911 $ 9,936 15,510 $(41,858) $500,068 $(8,044) $460,102
Net income 51,373 51,373
Other
comprehensive
income -
foreign
currency
translation 1,633 1,633
Comprehensive
income 53,006
Dividends paid
(Note 6):
Class A - $0.50 (5,435) (5,435)
Class B - $0.74 (8,880) (8,880)
Treasury shares
acquired (396) 396 (11,102) (11,102)
Stock options
exercised 12 271 (12) 20 291
Balance at
October 31,
1999 22,527 $10,207 15,894 $(52,940) $537,126 $(6,411) $487,982
Net income 75,794 75,794
Other
comprehensive
income -
foreign
currency
translation (1,865) (1,865)
Comprehensive
income 73,929
Dividends paid
(Note 6):
Class A - $0.52 (5,492) (5,492)
Class B - $0.77 (9,127) (9,127)
Treasury shares
acquired (163) 163 (4,968) (4,968)
Stock options
exercised 7 176 (7) 14 190
Balance at
October 31,
2000 22,371 $10,383 16,050 $(57,894) $598,301 $(8,276) $542,514
See accompanying Notes to Consolidated Financial Statements.
38
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The Business
Greif Bros. Corporation and its subsidiaries (the "Company")
principally manufacture industrial shipping containers and containerboard
and corrugated products which it sells to customers in many industries
primarily in the United States, Canada and Mexico. The Company has over 70
operating locations in the United States, Canada and Mexico. In addition,
the Company owns timber properties which are harvested and regenerated in
the United States and Canada.
Due to the variety of its products, the Company has many customers
buying different types of its 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 and metal
products, and must make spot deliveries on a day-to-day basis as its
products are required by its customers, the Company does not operate on a
backlog to any significant extent and maintains only limited levels of
finished goods. Many customers place their orders weekly for delivery
during the week.
The Company's raw materials are principally pulpwood, waste paper for
recycling, paper, steel and resins.
There are approximately 4,800 employees of the Company at October 31,
2000.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of Greif
Bros. Corporation and its subsidiaries. All intercompany transactions and
balances have been eliminated in consolidation.
39
Item 8. Financial Statements and Supplementary Data (continued)
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make certain estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. The most significant
estimates are related to the allowance for doubtful accounts, expected
useful lives assigned to properties, plants and equipment and goodwill,
restructuring reserves, postretirement benefits, income taxes and
contingencies. Actual amounts could differ from those estimated.
Revenue Recognition
Revenue is recognized when title passes to customers or services have
been rendered, with appropriate provision for returns and allowances.
Income Taxes
Income taxes are accounted for under Statement of Financial Accounting
Standards ("SFAS") 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 enacted tax rates that are
expected to be in effect in the periods which the deferred tax liabilities
and assets are expected to be settled or realized.
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 of $3,607,000 in 2000
($1,391,000 in 1999).
Canadian Government Securities
The Canadian government securities are classified as available-for-
sale and, as such, are reported at their fair value which approximates
amortized cost.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily of trade
accounts receivable. Such credit risk is considered by management to be
limited due to the Company's many customers, none of whom are considered
principal in the total operations of the Company, doing business in a
variety of industries throughout the United States, Canada and Mexico.
40
Item 8. Financial Statements and Supplementary Data (continued)
Inventories
Inventories are stated at the lower of cost (principally on last-in,
first-out basis) or market. The inventories are comprised as follows at
October 31 (Dollars in thousands):
2000 1999
Finished goods $16,494 $16,306
Raw materials and work-
in-process 63,630 72,270
80,124 88,576
Reduction to state inventories
on last-in, first-out basis (37,383) (37,870)
$42,741 $50,706
Properties, Plants and Equipment
Depreciation on properties, plants and equipment is provided on the
straight-line method over the estimated useful lives of the assets as
follows:
Years
Buildings 30-45
Machinery and equipment 3-19
Depreciation expense was $37,299,000 in 2000, $35,237,000 in 1999 and
$35,585,000 in 1998. Expenditures for repairs and maintenance are charged
to expense 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
allowance accounts. Gains or losses are credited or charged to income as
incurred.
41
Item 8. Financial Statements and Supplementary Data (continued)
Net Assets Held for Sale
Net assets held for sale represent land, buildings and land
improvements less accumulated depreciation for locations that have been
closed. As of October 31, 2000 and October 31, 1999, there were twelve and
nine locations held for sale, respectively, the majority of which were the
result of the 1998 restructuring plans (see Note 4). The net sales and loss
before income tax benefit of these locations were $16,006,000 and
$2,557,000, respectively, during 2000. The net sales and loss before income
tax benefit of these locations were $22,132,000 and $1,762,000,
respectively, during 1999. The effect of suspending depreciation on the
facilities held for sale is immaterial to the results of operations. The
net assets held for sale have been listed for sale and it is the Company's
intention to complete the sales within the upcoming year.
Internal Use Software
In 1998, the Company adopted Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Internal use software is software that is acquired,
internally developed or modified solely to meet the entity's needs and for
which, during the software's development or modification, a plan does not
exist to market the software externally. Costs incurred to develop the
software during the application development stage, upgrades and
enhancements that provide additional functionality are capitalized.
Adoption of SOP 98-1 did not have a significant impact on the Company's
financial position or results of operations.
Goodwill
Goodwill is amortized on a straight-line basis over fifteen or twenty-
five year periods. The weighted average period of goodwill amortization is
twenty-three years. Amortization expense was $7,021,000 in 2000, $6,482,000
in 1999 and $3,547,000 in 1998. Accumulated amortization was $18,102,000
at October 31, 2000 ($11,081,000 at October 31, 1999).
The Company's policy is to periodically review its goodwill and other
long-lived assets based upon the evaluation of such factors as the
occurrence of a significant adverse event or change in the environment in
which the business operates or if the expected future net cash flows
(undiscounted and without interest) would become less than the carrying
amount of the asset. An impairment loss would be recorded in the period
such determination is made based on the fair value of the related
businesses.
42
Item 8. Financial Statements and Supplementary Data (continued)
Financial Instruments
The carrying amounts of cash and cash equivalents, Canadian government
securities and long-term obligations approximate their fair values. The
carrying amounts of interest rate swap agreements are zero at October 31,
2000 and $2,000 at October 31, 1999. The fair values of interest rate swap
agreements are $2,606,000 at October 31, 2000 and $2,738,000 at October 31,
1999.
The fair values of the long-term obligations are estimated based on
current rates available to the Company for debt of the same remaining
maturities. The fair values of interest rate swap agreements have been
determined by the counterparties.
The Company uses interest rate swaps for the purpose of hedging its
exposure to fluctuations in interest rates. The swaps meet the requirements
of designation and correlation for use of the accrual method of accounting.
Differentials in the swapped amounts are recorded as adjustments of the
underlying periodic cash flows that are being hedged.
Foreign Currency Translation
In accordance with SFAS 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 effects of
translating assets and liabilities of the Company's foreign operations, are
presented in the Consolidated Statements of Changes in Shareholders' Equity
in "Accumulated Other Comprehensive Income." The transaction gains and
losses included in income are immaterial.
Earnings Per Share
The Company has two classes of common stock and, as such, applies the
"two-class method" of computing earnings per share as prescribed in SFAS
No. 128, "Earnings Per Share." In accordance with the statement, earnings
are allocated first to Class A and Class B Common Stock to the extent that
dividends are actually paid and the remainder allocated assuming all of the
earnings for the period have been distributed in the form of dividends.
43
Item 8. Financial Statements and Supplementary Data (continued)
The following is a reconciliation of the shares used to calculate
basic and diluted earnings per share:
For the years ended October 31,
2000 1999 1998
Class A Common Stock:
Basic earnings per share 10,557,935 10,882,081 10,905,692
Assumed conversion of stock
options 41,600 19,229 69,014
Diluted earnings per share 10,599,535 10,901,310 10,974,706
Class B Common Stock:
Basic and diluted earnings per
share 11,852,602 11,989,605 12,001,793
There are 370,090 options that are antidilutive for 2000 (496,789 for
1999 and 12,000 for 1998).
Environmental Cleanup Costs
The Company expenses environmental expenditures related to existing
conditions resulting from past or current operations and from which no
current or future benefit is discernable. Expenditures which extend the
life of the related property or mitigate or prevent future environmental
contamination are capitalized. The Company determines its liability on a
site by site basis and records a liability at the time when it is probable
and can be reasonably estimated. The Company's estimated liability is
reduced to reflect the anticipated participation of other potentially
responsible parties in those instances where it is probable that such
parties are legally responsible and financially capable of paying their
respective shares of the relevant costs.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
2000 presentation.
44
Item 8. Financial Statements and Supplementary Data (continued)
Recent Accounting Standards
The Financial Accounting Standards Board ("FASB") issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," in June
1998, SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB Statement No. 133," in
June 1999 and SFAS No. 138, "Accounting for Certain Derivative Instruments
and Certain Hedging Activities," in June 2000, which are effective for all
quarters of 2001 for the Company. The statements require that all
derivatives be recorded in the balance sheet as either assets or
liabilities and be measured at fair value. The accounting for changes in
fair value of a derivative depends on the intended use of the derivative
and the resulting designation. The Company's interest rate swap agreements
are considered cash flow hedges under SFAS No. 133. Therefore, on November
1, 2000, the Company recorded an asset for an interest rate swap contract
in the amount of $2,606,000. A credit, in the same amount, was recorded as
accumulated other comprehensive income.
In December 1999, the Securities and Exchange Commission staff
released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements," which is effective in the fourth quarter of 2001 for
the Company. SAB No. 101 provides guidance on the recognition, presentation
and disclosure of revenue in financial statements. The Company does not
believe that SAB No. 101 will have a material impact on the results of
operations.
NOTE 2 - ACQUISITIONS AND OTHER INVESTMENTS
CorrChoice Joint Venture
On November 1, 1998, the Company entered into a Joint Venture
Agreement with RDJ Holdings Inc. ("RDJ") and a minority shareholder of a
subsidiary of Ohio Packaging Corporation (the "Minority Shareholder") to
form CorrChoice, Inc. ("CorrChoice"). Pursuant to the terms of the Joint
Venture Agreement, the Company contributed all of its stock of Michigan
Packaging Company ("Michigan Packaging") and Ohio Packaging Corporation
("Ohio Packaging") in exchange for a 63.24% ownership interest in
CorrChoice. RDJ and the Minority Shareholder contributed all of their stock
of Ohio Packaging and its subsidiaries in exchange for a 36.76% ownership
interest in CorrChoice. The contribution of the Michigan Packaging stock
and the Ohio Packaging stock was recorded by the Company at book value with
no gain or loss recognized in accordance with Emerging Issues Task Force
("EITF") No. 86-29, "Nonmonetary Transactions: Magnitude of Boot and the
Exceptions to the Use of Fair Value."
45
Item 8. Financial Statements and Supplementary Data (continued)
In connection with the closing of the CorrChoice joint venture, the
Company and RDJ entered into a voting agreement which enables the Company
and RDJ to be equally represented on CorrChoice's Board of Directors. As
such, the Company does not control CorrChoice. Therefore, in accordance
with generally accepted accounting principles, the Company has recorded its
investment in CorrChoice using the equity method of accounting.
Prior to the formation of the CorrChoice joint venture, the Company
accounted for its investment in Ohio Packaging's non-voting stock under the
cost method of accounting because the Company did not have significant
influence over the operations of Ohio Packaging. Because the Company's
investment in the common stock of Ohio Packaging that previously was
accounted for by the cost method became qualified for use of the equity
method (through the Company's ownership interest in CorrChoice), effective
November 1, 1998 the Company's investment in Ohio Packaging, results of
operations and retained earnings were retroactively restated in the
Company's 1999 Annual Report in accordance with Accounting Principles Board
Opinion ("APBO") No. 18, "The Equity Method of Accounting for Investments
in Common Stock," to account for the Company's ownership interest in Ohio
Packaging under the equity method.
Intermediate Bulk Containers ("IBC") Acquisition
On January 11, 1999, the Company purchased the assets of the IBC
business from Sonoco Products Company ("Sonoco") for $38,013,000 in cash.
In addition, the Company paid $234,000 in legal and professional fees
related to the acquisition. Prior to the acquisition date, and subsequent
to March 30, 1998, the Company marketed and sold IBCs under a
distributorship agreement with Sonoco.
The acquisition of the IBC business, included in operating results
from the acquisition date, was accounted for using the purchase method of
accounting and, accordingly, the purchase price was allocated to the assets
purchased and liabilities assumed based upon their fair values at the date
of acquisition. The fair values of the assets acquired and liabilities
assumed were $15,677,000 and $1,234,000, respectively. The excess of the
purchase price over the fair values of the net assets acquired of
$23,804,000 was recorded as goodwill. The goodwill is being amortized on a
straight-line basis over twenty-five years based on careful consideration
regarding the age of the acquired business, its customers and the risk of
obsolescence of its products.
Great Lakes and Trend Pak Acquisitions
On April 5, 1999, the Company purchased the common stock of Great
Lakes Corrugated Corp. ("Great Lakes") and Trend Pak, Inc. ("Trend Pak")
from their shareholders for $20,813,000 in cash. In addition, the Company
paid $107,000 in legal and professional fees related to the acquisition.
46
Item 8. Financial Statements and Supplementary Data (continued)
The acquisitions of Great Lakes and Trend Pak, included in operating
results from the acquisition date, were accounted for using the purchase
method of accounting and, accordingly, the purchase price was allocated to
the assets purchased and liabilities assumed based upon their fair values
at the date of acquisition. The fair values of the assets acquired and
liabilities assumed were $14,770,000 and $5,895,000, respectively. The
excess of the purchase price over the fair values of the net assets
acquired of $12,045,000 was recorded as goodwill. The goodwill is being
amortized on a straight-line basis over fifteen years based on careful
consideration regarding the age of the acquired businesses, their customers
and the risk of obsolescence of their products.
Abzac-Greif Investment
During June 1999, Greif Bros. Canada Inc., a wholly-owned Canadian
subsidiary of the Company, exchanged its spiral core manufacturing assets
with Abzac S.A., a privately held company in France ("Abzac"), for a 49%
equity interest in Abzac's fibre drum business (known as "Abzac-Greif").
The effective date of the transaction was January 1, 1999. The investment
in Abzac-Greif of $2.0 million has been recorded using the equity method of
accounting.
Industrial Containers Business of Sonoco Acquisition
On March 30, 1998, pursuant to the terms of a Stock Purchase Agreement
between the Company and Sonoco, the Company acquired the industrial
containers business of Sonoco by purchasing all of the outstanding shares
of KMI Continental Fibre Drum, Inc., a Delaware corporation ("KMI"), Sonoco
Plastic Drum, Inc., an Illinois corporation ("SPD"), GBC Holding Co., a
Delaware corporation ("GBC Holding"), and Fibro Tambor, S.A. de C.V., a
Mexican corporation ("Fibro Tambor") and the membership interest of Sonoco
in Total Packaging Systems of Georgia, LLC, a Delaware limited liability
company ("TPS"). KMI, SPD, GBC Holding, Fibro Tambor, TPS and their
respective subsidiaries are in the business of manufacturing and selling
plastic and fibre drums principally in the United States and Mexico and
refurbishing and reconditioning plastic drums principally in the United
States and Mexico.
As consideration for the shares of KMI, SPD, GBC Holding and Fibro
Tambor and the membership interest of Sonoco in TPS, the Company paid
$182,895,000 in cash. In addition, the Company paid $1,218,000 in legal and
professional fees related to the acquisition. The acquisition was funded
through new long-term obligations (see Note 5).
47
Item 8. Financial Statements and Supplementary Data (continued)
The acquisition of the industrial containers business from Sonoco,
included in operating results from the acquisition date, was accounted for
using the purchase method of accounting and, accordingly, the purchase
price was allocated to the assets purchased and liabilities assumed based
upon their fair values at the date of acquisition. The fair values of the
assets acquired and the liabilities assumed were $127,004,000 and
$42,561,000, respectively. The excess of the purchase price over the fair
values of the net assets acquired of $99,670,000 was recorded as goodwill.
During 1999, the Company adjusted its purchase price allocation which
resulted in a $10,065,000 reduction in goodwill and acquisition
liabilities. The decrease was due to the termination of certain
postretirement benefits of $6,694,000 and an adjustment to the
restructuring liability of $3,371,000. The goodwill is being amortized on
a straight-line basis over twenty-five years based on careful consideration
regarding the age of the acquired companies, their customers and the risk
of obsolescence of their products.
Pro Forma Information
The following pro forma (unaudited) information assumes the CorrChoice
joint venture, the acquisition of the IBC business, the acquisitions of
Great Lakes and Trend Pak, the investment in Abzac-Greif and the
acquisition of the industrial containers business from Sonoco had occurred
on November 1, 1997 (Dollars in thousands, except per share amounts):
For the years ended
October 31,
1999 1998
Net sales $827,412 $846,936
Net income $ 50,239 $ 37,558
Basic and diluted earnings per share:
Class A Common Stock $ 1.74 $ 1.30
Class B Common Stock $ 2.61 $ 1.95
The above amounts reflect adjustments for the contribution of Michigan
Packaging to the CorrChoice joint venture and recognition of the Company's
equity interest in CorrChoice. In addition, the amounts reflect the
contribution of the spiral core assets and the recognition of the equity
interest in Abzac-Greif by the Company's Canadian operation. Further, the
amounts reflect adjustments for interest expense related to the debt issued
for the purchases, amortization of goodwill and depreciation expense on the
revalued properties, plants and equipment resulting from the acquisitions.
The pro forma information, as presented above, is not necessarily
indicative of the results which would have been obtained had the
transactions occurred on November 1, 1997, nor are they necessarily
indicative of future results.
48
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 3 - INVESTMENT IN AFFILIATES
The Company has investments in CorrChoice (63.24%) and Abzac-Greif
(49%) which are accounted for on the equity method. The Company's share of
earnings of these affiliates is included in income as earned. The Company
received dividends from affiliates of $2,391,000 in 2000.
The difference between the cost basis of the Company's investment in
the underlying equity of affiliates of $5,177,000 at October 31, 2000 is
being amortized over a fifteen-year period.
The summarized unaudited financial information below represents the
combined financial position and results of the Company's unconsolidated
affiliates accounted for by the equity method (Dollars in thousands):
As of and for the
years ended
October 31,
2000 1999
Current assets $127,106 $118,821
Long-term assets $102,901 $ 97,225
Current liabilities $ 14,653 $ 19,501
Long-term liabilities $ 8,790 $ 8,238
Net sales $299,086 $251,638
Gross profit $ 54,399 $ 43,433
Operating income $ 34,590 $ 31,090
Net income $ 22,964 $ 17,570
49
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 4 - 1998 RESTRUCTURING PLANS
During the third quarter of 1998, the Company approved a plan to
consolidate some of its locations in order to improve operating
efficiencies and capabilities. The plan was the result of an in-depth
study to determine whether certain locations, either existing or newly
acquired, should be closed and the sales and manufacturing volume
associated with such plants relocated to a different facility. Eighteen
existing fibre drum, steel drum and corrugated container plants were
identified to be closed. The plants were located in Alabama, Georgia,
Illinois, Kansas, Maryland, Massachusetts, Missouri, New Jersey, North
Carolina, Ohio, Pennsylvania, Tennessee and Texas. As a result, the
Company recognized a pretax restructuring charge of approximately $27.5
million, consisting of $20.9 million in employee separation costs
(approximately 500 employees) and $6.6 million in other costs. The $6.6
million in other costs included $2.5 million for the impairment of long-
lived assets due to the significant reduction in the remaining useful lives
of the assets resulting from the decision to exit or close the facilities
and other exit costs expected to be incurred after operations had ceased to
maintain the facilities ($1.9 million) and remove the equipment ($2.2
million). The Company has sold or is planning to sell its seventeen owned
facilities. The lease has been terminated on the remaining plant.
Subsequent to the recognition of the restructuring charge, the Company did
incur additional costs to relocate machinery and equipment and employees
upon the closure of these plants.
The amounts charged against this restructuring reserve during the
years ended October 31, 1999 and 2000 are as follows (Dollars in
thousands):
Balance Balance Balance
at at at
10/31/98 Activity 10/31/91 Activity 10/31/00
Cash charges:
Employee separation costs $17,735 $(15,627) $2,108 $(2,108) $ --
Cash and non-cash charges:
Impairment of long-lived
assets and other exit
costs 7,012 (5,571) 1,441 (1,441) --
$24,747 $(21,198) $3,549 $(3,549) $ --
The restructuring reserve activity in the preceding table includes the
following non-cash charges for 1999: $1.0 million of accrued employee
separation costs related to employees that were terminated as of October
31, 1999 were reclassified to accrued compensation costs; and a $1.4
million charge for the impairment of long-lived assets was reclassified as
a valuation account recorded net against the related fixed asset accounts.
For 2000, $0.1 million of accrued employee separation costs related to
employees that have been terminated during October 31, 2000 have been
reclassified to accrued compensation costs.
50
Item 8. Financial Statements and Supplementary Data (continued)
During the years ended October 31, 1999 and 2000, 299 and 68
employees, respectively, were terminated in accordance with this
restructuring plan. As of October 31, 2000, there were a total of 471
employees that had been terminated and provided severance benefits under
this restructuring plan.
In addition, in connection with the 1998 acquisition of the industrial
containers business from Sonoco and the consolidation plan, five locations
purchased as part of the acquisition were identified to be closed. The
locations were located in California, Georgia, Missouri and New Jersey.
The plan to close or consolidate these locations was being formulated at
the date of acquisition. Accordingly, the Company recognized a $9.5
million restructuring liability in its purchase price allocation related to
these locations during the second quarter of 1998. This liability was
accounted for under EITF No. 95-3, "Recognition of Liabilities in
Connection with a Purchase Business Combination." The liability consisted
of $6.1 million in employee separation costs (approximately 150 employees),
$1.2 million in lease termination costs and $2.2 million in other exit
costs. The $2.2 million in other exit costs included amounts expected to
be incurred after operations had ceased to maintain the facilities ($1.0
million), remove the equipment ($0.5 million) and other closing costs ($0.7
million). The Company has sold or is planning to sell three of these
locations. The leases have been terminated on the remaining two locations.
The amounts charged against this restructuring reserve during the
years ended October 31, 1999 and 2000 are as follows (Dollars in
thousands):
Balance Balance Balance
at at at
10/31/98 Activity 10/31/99 Activity 10/31/00
Cash charges:
Employee separation costs $5,722 $(4,114) $1,608 $(1,608) $ --
Lease termination costs 1,183 (1,183) -- -- --
Cash and non-cash charges:
Other exit costs 759 (759) -- -- --
$7,664 $(6,056) $1,608 $(1,608) $ --
The restructuring reserve activity in the preceding table includes the
following non-cash charges for 1999: $0.3 million of accrued employee
separation costs related to employees that were terminated as of October
31, 1999 were reclassified to accrued compensation costs; and an adjustment
of $3.4 million was recorded as a reduction to goodwill in accordance with
EITF No. 95-3 because the ultimate cost was less than the amount initially
recorded in the purchase price allocation. For 2000, $0.2 million of
accrued employee separation costs related to employees that have been
terminated during October 31, 2000 have been reclassified to accrued
compensation costs.
51
Item 8. Financial Statements and Supplementary Data (continued)
During the years ended October 31, 1999 and 2000, 89 and 44 employees,
respectively, were terminated in accordance with this restructuring plan.
As of October 31, 2000, there were a total of 140 employees that had been
terminated and provided severance benefits under this restructuring plan.
NOTE 5 - LONG-TERM OBLIGATIONS
On March 30, 1998, the Company entered into a credit agreement with
various financial institutions, as banks, and KeyBank National Association,
as agent, which provides a revolving credit facility of up to $325 million.
The Company is required to pay a facility fee each quarter equal to .025%
to .050% of the total commitment amount based upon the Company's leverage
ratio. As of October 31, 2000, the Company had borrowed $235 million
primarily to fund acquisitions and to consolidate all of the Company's
other long-term borrowings. The interest rate is either based on the prime
rate or LIBOR rate plus a calculated margin amount (.275% at October 31,
2000). Interest resets on a quarterly basis. At October 31, 2000, the
interest rate is 6.99%. The revolving credit loans are due on March 31,
2003, however, management intends to extend a portion of the debt beyond
that date.
At October 31, 2000, the Company had outstanding $7.9 million in
letters of credit under the credit agreement. The quarterly fee related to
these letters of credit is .03% of the outstanding amount plus a calculated
margin (.275% at October 31, 2000).
The revolving credit facility contains certain covenants. Under the
most restrictive of these covenants, the Company is required to maintain a
certain leverage ratio, sufficient coverage of interest expense and a
minimum net worth. In addition, the Company is limited with respect to
additional debt. At October 31, 2000, the Company was in compliance with
these covenants.
During 1998, the Company entered into an interest rate swap agreement
with an original notional amount of $140 million which periodically reduces
through the expiration date of March 30, 2008 ($110 million at October 31,
2000). The Company entered into another swap agreement during 1998 with a
notional amount of $20 million expiring on October 31, 2001. The interest
rate swaps were entered into to manage the Company's exposure to its
variable rate debt. Under the agreements, the Company receives interest
quarterly from the counterparty equal to the LIBOR rate and pays interest
quarterly to the counterparty at a fixed rate of 6.15% and 5.22% for the
$110 million and $20 million swap agreements, respectively. The
differentials to be currently paid or received under these agreements are
recorded as an adjustment to interest expense and are included in interest
receivable or payable. The adjustment to interest expense resulting from
the differentials was a decrease of $438,000 during 2000, and increases of
$1,414,000 and $348,000 during 1999 and 1998, respectively.
Annual maturities of long-term obligations are $235 million in 2003.
52
Item 8. Financial Statements and Supplementary Data (continued)
During 2000, the Company paid $16,605,000 of interest ($15,472,000 in
1999 and $11,500,000 in 1998) related to its long-term obligations.
Interest of $2,501,000 in 2000, $377,000 in 1999 and $344,000 in 1998 was
capitalized.
The Company has entered into non-cancelable operating leases for
buildings, trucks and computer equipment. The future minimum lease payments
for the non-cancelable operating leases are $8,296,000 in 2001, $6,023,000
in 2002, $4,345,000 in 2003, $3,023,000 in 2004, $2,906,000 in 2005 and
$4,019,000 thereafter. Rent expense was $13,986,000 in 2000, $12,456,000
in 1999 and $8,615,000 in 1998.
NOTE 6 - CAPITAL STOCK
Class A Common Stock is entitled to cumulative dividends of one cent a
share per year after which Class B Common Stock is entitled to non-
cumulative dividends up to a half cent a share per year. Further
distribution in any year must be made in proportion of one cent a share for
Class A Common Stock to one and a half 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 7 - STOCK OPTIONS
In 2000, the Company adopted a Nonstatutory Stock Option Plan ("2000
Plan") which provides the discretionary granting of nonstatutory options to
key employees. In addition, the Company has an Incentive Stock Option Plan
("Option Plan") which provides the discretionary granting of incentive
stock options to key employees and nonstatutory options for non-employees.
The aggregate number of the Company's Class A Common Stock options which
may be granted under the Option Plan and 2000 Plan may not exceed 1,000,000
shares and 200,000 shares, respectively. Under the terms of the plans,
options are granted at exercise prices equal to the market value on the
date options are granted and become exercisable two years after date of
grant. Options expire ten years after date of grant.
The Directors' Stock Option Plan ("Directors' Plan") provides the
granting of stock options to directors who are not employees of the
Company. The aggregate number of the Company's Class A Common Stock
options which may be granted may not exceed 100,000 shares. Under the
terms of the Directors' Plan, options are granted at exercise prices equal
to the market value on the date options are granted and become exercisable
immediately. Options expire ten years after date of grant.
53
Item 8. Financial Statements and Supplementary Data (continued)
In 2000, 142,000 stock options and 163,730 stock options were granted
under the Option Plan and 2000 Plan, respectively, at option prices ranging
from $29.00 to $29.88 per share. Under the Directors' Plan, 10,000 options
were granted to outside directors with option prices of $29.88 per share.
In 1999, 225,452 stock options were granted under the Option Plan with
option prices of $24.25 per share. Under the Directors' Plan, 10,000
options were granted to outside directors with option prices of $26.81 per
share.
In 1998, 206,275 stock options were granted under the Option Plan with
option prices of $31.75 per share. Under the Directors' Plan, 12,000
options were granted to outside directors with option prices of $36.53 per
share.
The Company applies APBO No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its stock option
plans. If compensation cost would have been determined based on the fair
values at the date of grant under SFAS No. 123, "Accounting for Stock-Based
Compensation," pro forma net income and earnings per share would have been
as follows (Dollars in thousands, except per share amounts):
For the years ended
October 31,
2000 1999 1998
Net income $73,990 $49,787 $36,055
Basic earnings per share:
Class A Common Stock $ 2.62 $ 1.73 $ 1.25
Class B Common Stock $ 3.91 $ 2.58 $ 1.87
Diluted earnings per share:
Class A Common Stock $ 2.61 $ 1.73 $ 1.25
Class B Common Stock $ 3.91 $ 2.58 $ 1.87
The fair value for each option is estimated on the date of grant using
the Black-Scholes option pricing model, as allowed under SFAS No. 123, with
the following assumptions:
2000 1999 1998
Dividend yield 1.70% 1.90% 1.36%
Volatility rate 27.50% 25.10% 22.00%
Risk-free interest rate 6.05% 6.15% 5.36%
Expected option life 6 years 6 years 6 years
54
Item 8. Financial Statements and Supplementary Data (continued)
The fair value of shares granted in 2000, 1999 and 1998 were $9.49,
$7.33 and $9.08, respectively, as of grant date. Stock option activity was
as follows (Shares in thousands):
2000 1999 1998
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Beginning balance 861 $28.23 659 $29.56 456 $28.26
Granted 316 $29.22 236 $24.36 218 $32.01
Forfeited 16 $29.76 22 $29.29 6 $29.63
Exercised 7 $27.12 12 $24.26 9 $22.94
Ending balance 1,154 $28.49 861 $28.23 659 $29.56
As of October 31, 2000, the outstanding stock options had exercise
prices ranging from $22.94 to $36.53 and a remaining weighted average
contractual life of 7.85 years.
There are 628,000 options which were exercisable at October 31, 2000
(432,000 options at October 31, 1999 and 317,000 options at October 31,
1998).
NOTE 8 - INCOME TAXES
Income tax expense is comprised as follows (Dollars in thousands):
State
U.S. and
Federal Foreign Local Total
2000:
Current $21,420 $2,211 $ 848 $24,479
Deferred 12,567 117 864 13,548
$33,987 $2,328 $1,712 $38,027
1999:
Current $ 7,959 $2,306 $ 660 $10,925
Deferred 13,702 360 1,753 15,815
$21,661 $2,666 $2,413 $26,740
1998:
Current $15,755 $2,768 $3,039 $21,562
Deferred 1,763 -- (842) 921
$17,518 $2,768 $2,197 $22,483
55
Item 8. Financial Statements and Supplementary Data (continued)
Foreign income before income taxes amounted to $5,799,000 in 2000
($5,201,000 in 1999 and $6,212,000 in 1998).
The following is a reconciliation of the U.S. Federal statutory income
tax rate to the Company's effective tax rate:
2000 1999 1998
U.S. Federal statutory tax rate 35.0% 35.0% 35.0%
State and local taxes, net of
Federal tax benefit 1.7% 3.6% 2.6%
Other 1.2% 1.1% 2.9%
Effective income tax rate 37.9% 39.7% 40.5%
Significant components of the Company's deferred tax assets and
liabilities are as follows at October 31 (Dollars in thousands):
2000 1999
Vacation accrual $ 1,171 $ 1,251
Workers compensation reserve 15 1,713
Restructuring reserves -- 2,047
Other 1,030 1,846
Current deferred tax asset $ 2,216 $ 6,857
Deferred compensation $ 1,823 $ 1,713
Accrued environmental reserve 532 699
Other 2,212 1,599
Long-term deferred tax asset $ 4,567 $ 4,011
Properties, plants and equipment $45,951 $39,381
Equity investments 7,968 6,813
Timber condemnation 5,053 5,115
Other 4,490 1,662
Long-term deferred tax liability $63,462 $52,971
At October 31, 2000 and 1999, the Company has provided deferred income
taxes on all of its undistributed Canadian earnings.
During 2000, the Company paid $28,932,000 in income taxes ($14,737,000
in 1999 and $22,697,000 in 1998).
56
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 9 - 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 plans' 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 number of shares of the Company's common stock as
follows:
2000 1999
Class A Common Stock 123,752 123,752
Class B Common Stock 80,355 80,355
The components of net periodic pension cost include the following
(Dollars in thousands):
2000 1999 1998
Service cost $4,193 $4,760 $2,956
Interest cost 5,561 5,279 4,584
Expected return on plan assets (6,761) (6,238) (5,716)
Amortization of prior service cost 700 662 508
Amortization of initial net asset (562) (562) (562)
Recognized net actuarial (gain) loss (198) 66 (231)
Cost of special termination benefits -- -- 852
2,933 3,967 2,391
Multi-employer and non-U.S. pension
expense 534 572 386
Total pension expense $3,467 $4,539 $2,777
The weighted average assumptions used in the actuarial valuations are
as follows:
2000 1999 1998
Discount rate 7.50% 7.50% 7.00%
Expected return on plan assets 9.00% 8.25% 8.25%
Rate of compensation increase 4.25% 4.25% 4.75%
57
Item 8. Financial Statements and Supplementary Data (continued)
The following table sets forth the plans' change in benefit
obligation, change in plan assets and amounts recognized in the
Consolidated Financial Statements (Dollars in thousands):
2000 1999
Change in benefit obligation:
Benefit obligation at beginning of year $75,097 $76,223
Service cost 4,193 4,760
Interest cost 5,561 5,279
Amendments 325 450
Actuarial loss (gain) 919 (7,822)
Benefits paid (3,955) (3,793)
Benefit obligation at end of year $82,140 $75,097
Change in plan assets:
Fair value of plan assets at beginning of year $79,613 $74,986
Actual return on plan assets 7,713 6,498
Employer contributions 1,431 1,922
Benefits paid (3,955) (3,793)
Fair value of plan assets at end of year $84,802 $79,613
Funded status $ 2,698 $ 4,546
Unrecognized net actuarial (gain) loss (3,745) (3,904)
Unrecognized prior service cost 8,784 9,439
Unrecognized initial net asset (5,777) (6,619)
Net amount recognized $ 1,960 $ 3,462
Amounts recognized in the statement of financial
position consist of:
Prepaid benefit cost $ 3,662 $ 3,655
Accrued benefit liability (1,702) (346)
Intangible asset -- 153
Net amount recognized $ 1,960 $ 3,462
The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for the pension plans with accumulated benefit
obligations in excess of plan assets were $18,029,000, $18,029,000 and
$17,682,000, respectively, as of October 31, 1999.
In addition to the benefits provided under the defined benefit pension
plans, the Company has adopted a supplemental retirement plan for certain
executive employees. Pension expense of $357,000 was recorded in 2000.
The Company has several voluntary 401(k) savings plans which cover
eligible employees. For certain plans, the Company matches a percentage of
each employee's contribution up to a maximum percentage of base salary.
Company contributions to the 401(k) plans were $934,000 in 2000, $546,000
in 1999 and $566,000 in 1998.
58
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 10 - POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
In conjunction with the acquisition of the industrial containers
business from Sonoco, the Company assumed an obligation to reimburse Sonoco
for its actual costs incurred in providing postretirement health care
benefits to certain employees. Contributions by the Company are limited to
an aggregate annual payment of $1,350,000 for eligible employees at the
date of purchase. Further, the Company is responsible for the cost of
certain union hourly employees who were not eligible at the date of
closing. The Company intends to fund these benefits from operations.
The components of net periodic cost for the postretirement benefits
include the following (Dollars in thousands):
2000 1999 1998
Service cost $ -- $ -- $ 380
Interest cost 1,453 1,840 1,133
Cost of special termination benefits -- -- 306
$ 1,453 $ 1,840 $ 1,819
The following table sets forth the plan's change in benefit
obligation, change in plan assets and amounts recognized in the
Consolidated Financial Statements (Dollars in thousands):
2000 1999
Change in benefit obligation:
Benefit obligation at beginning of year $ 21,154 $ 27,257
Interest cost 1,453 1,840
Actuarial (gain) loss (522) 468
Benefits paid (2,512) --
Plan curtailment gain -- (8,411)
Benefit obligation at end of year $ 19,573 $ 21,154
Change in plan assets:
Fair value of plan assets at beginning of year $ -- $ --
Employer contributions 2,512 --
Benefits paid (2,512) --
Fair value of plan assets at end of year $ -- $ --
Funded status $(19,573) $(21,154)
Unrecognized net actuarial (gain) loss (522) --
Net amount recognized $(20,095) $(21,154)
59
Item 8. Financial Statements and Supplementary Data (continued)
The 1999 plan curtailment gain relates to the resolution of certain
benefit matters which resulted in the termination of certain benefit
obligations. The 1999 curtailment gain includes a reduction in accrued
benefit obligations of $6,694,000 existing as of the acquisition date. As a
result, upon final resolution of the benefit matters in 1999, the Company
adjusted its purchase price allocation and reduced goodwill by $6,694,000.
The measurement assumes a discount rate of 7.50%. The health care cost
trend rates on gross eligible charges are as follows:
Medical Dental
Current trend rate 7.25% 5.25%
Ultimate trend rate 4.75% 4.75%
A one percentage point increase/decrease in the assumed health care
cost trend rates would increase/decrease the postretirement benefit
obligation as of October 31, 2000 by approximately $290,000 and the total
of the service and interest cost components of postretirement benefits for
the year then ended by approximately $22,000.
NOTE 11 - CONTINGENT LIABILITIES
Various lawsuits, claims and proceedings have been or may be
instituted or asserted against the Company, including those pertaining to
environmental, product liability, safety and health matters. While the
amounts claimed may be substantial, the ultimate liability cannot now be
determined because of the considerable uncertainties that exist.
Therefore, it is possible that results of operations or liquidity in a
particular period could be materially affected by certain contingencies.
However, based upon the facts currently available, management believes that
the disposition of matters that are pending or asserted will not have a
materially adverse affect on the results of operations or financial
position of the Company.
NOTE 12 - BUSINESS SEGEMENT INFORMATION
The Company operates in three business segments: Industrial Shipping
Containers; Containerboard & Corrugated Products; and Timber.
Operations in the Industrial Shipping Containers segment involve the
production and sale of shipping containers. These products are manufactured
and principally sold throughout the United States, Canada and Mexico.
Operations in the Containerboard & Corrugated Products segment involve
the production and sale of containerboard, both virgin and recycled, and
related corrugated sheets, corrugated containers and multiwall bags. The
products are manufactured and sold in the United States and Canada.
60
Item 8. Financial Statements and Supplementary Data (continued)
Operations in the Timber segment involve the management and sale of
timber on approximately 281,000 acres of timberlands in the states of
Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi and Virginia.
The Company's reportable segments are strategic business units that
offer different products. The Company evaluates performance and allocates
resources based on income before income taxes and equity in earnings of
affiliates. The accounting policies of the reportable segments are the same
as those described in the "Description of Business and Summary of
Significant Accounting Policies" note except that the Company accounts for
inventory on a first-in, first-out basis at the segment level compared to a
last-in, first-out basis at the consolidated level.
Corporate and other includes the costs associated with the Company's
corporate headquarters, the Company's long-term obligations (see Note 5)
and other non-segment items.
During 1998, restructuring costs related to the Industrial Shipping
Containers segment and Containerboard & Corrugated Products segment were
$25,950,000 and $1,511,000, respectively.
61
Item 8. Financial Statements and Supplementary Data (continued)
The following segment information is presented for the three years
ended October 31, 2000, except as to asset information which is as of
October 31, 2000, 1999 and 1998 (Dollars in thousands):
2000 1999 1998
Net sales:
Industrial Shipping Containers $476,327 $461,014 $409,424
Containerboard & Corrugated Products 408,856 333,681 391,707
Timber 44,678 24,132 13,301
Total $929,861 $818,827 $814,432
Income before income taxes and equity
in earnings of affiliates:
Industrial Shipping Containers $ 40,323 $ 40,631 $ 31,593
Containerboard & Corrugated Products 65,942 34,742 53,498
Timber 46,503 25,240 18,432
Total segment 152,768 100,613 103,523
Corporate and other (52,314) (33,255) (20,475)
Restructuring costs -- -- (27,461)
Total $100,454 $ 67,358 $ 55,587
Total assets:
Industrial Shipping Containers $397,741 $415,034 $418,483
Containerboard & Corrugated Products 350,791 354,271 370,229
Timber 29,472 16,712 15,633
Total segment 778,004 786,017 804,345
Corporate and other 161,327 124,969 74,075
Total $939,331 $910,986 $878,420
Depreciation, depletion and amortization
expense:
Industrial Shipping Containers $ 20,394 $ 20,660 $ 14,445
Containerboard & Corrugated Products 20,457 19,335 20,952
Timber 771 277 188
Total segment 41,622 40,272 35,585
Corporate and other 3,600 2,088 4,101
Total $ 45,222 $ 42,360 $ 39,686
Additions to long-lived assets:
Industrial Shipping Containers $ 21,442 $ 12,248 $ 22,046
Containerboard & Corrugated Products 33,464 27,608 8,708
Timber 10,222 1,285 3,769
Total segment 65,128 41,141 34,523
Corporate and other 13,705 8,112 3,570
Total $ 78,833 $ 49,253 $ 38,093
62
Item 8. Financial Statements and Supplementary Data (continued)
The following table presents net sales to external customers by
country:
2000 1999 1998
United States $890,689 $783,120 $778,012
Canada 35,023 32,603 33,426
Mexico 4,149 3,104 2,994
$929,861 $818,827 $814,432
The following table presents total assets by country:
2000 1999 1998
United States $908,972 $875,914 $842,701
Canada 24,930 30,374 31,673
Mexico 5,429 4,698 4,046
$939,331 $910,986 $878,420
63
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 13 - QUARTERLY FINANCIAL DATA (UNAUDITED)
The quarterly results of operations for 2000 and 1999 are shown below
(Dollars in thousands, except per share amounts):
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
2000 2000 2000 2000
Net sales $229,309 $224,902 $236,249 $239,401
Gross profit $ 59,756 $ 48,255 $ 57,130 $ 61,329
Net income $ 23,017 $ 13,961 $ 18,829 $ 19,987
Earnings per share:
Basic:
Class A Common Stock $ 0.81 $ 0.49 $ 0.67 $ 0.71
Class B Common Stock $ 1.21 $ 0.74 $ 1.00 $ 1.06
Diluted:
Class A Common Stock $ 0.81 $ 0.49 $ 0.66 $ 0.70
Class B Common Stock $ 1.21 $ 0.74 $ 1.00 $ 1.06
Earnings per share were
calculated using the
following number of shares:
Basic:
Class A Common Stock 10,624,749 10,560,600 10,523,196 10,523,196
Class B Common Stock 11,868,046 11,847,644 11,847,359 11,847,359
Diluted:
Class A Common Stock 10,655,985 10,609,258 10,558,690 10,569,713
Class B Common Stock 11,868,046 11,847,644 11,847,359 11,847,359
Market price (Class A Common Stock):
High $ 30.56 $ 33.00 $ 33.00 $ 33.50
Low $ 25.75 $ 27.50 $ 25.00 $ 25.00
Close $ 27.94 $ 33.00 $ 25.38 $ 32.00
Market price (Class B Common Stock):
High $ 33.00 $ 32.25 $ 32.75 $ 31.75
Low $ 28.13 $ 27.88 $ 26.13 $ 27.13
Close $ 28.38 $ 31.38 $ 26.13 $ 30.00
64
Item 8. Financial Statements and Supplementary Data (continued)
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1999 1999 1999 1999
Net sales $180,004 $199,358 $205,032 $234,433
Gross profit $ 31,415 $ 39,867 $ 41,206 $ 65,866
Net income $ 3,681 $ 10,861 $ 10,906 $ 25,925
Earnings per share:
Basic:
Class A Common Stock $ 0.13 $ 0.38 $ 0.38 $ 0.90
Class B Common Stock $ 0.19 $ 0.56 $ 0.57 $ 1.35
Diluted:
Class A Common Stock $ 0.13 $ 0.38 $ 0.38 $ 0.90
Class B Common Stock $ 0.19 $ 0.56 $ 0.57 $ 1.35
Earnings per share were
calculated using the
following number of shares:
Basic:
Class A Common Stock 10,909,672 10,894,548 10,852,101 10,872,002
Class B Common Stock 12,001,793 12,000,535 11,998,793 11,957,299
Diluted:
Class A Common Stock 10,967,108 10,898,216 10,854,636 10,886,245
Class B Common Stock 12,001,793 12,000,535 11,998,793 11,957,299
Market price (Class A Common Stock):
High $ 33.13 $ 29.50 $ 29.00 $ 29.50
Low $ 27.38 $ 20.63 $ 24.50 $ 23.75
Close $ 28.19 $ 25.38 $ 24.75 $ 28.50
Market price (Class B Common Stock):
High $ 36.00 $ 33.00 $ 31.25 $ 33.25
Low $ 31.50 $ 29.63 $ 28.88 $ 26.50
Close $ 32.44 $ 30.25 $ 29.88 $ 30.00
The Class A and Class B Common Stock are traded on the NASDAQ Stock
Market.
As of December 5, 2000, there were 599 shareholders of record of the
Class A Common Stock and 160 shareholders of record of the Class B Common
Stock.
65
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 14 - SUBSEQUENT EVENT
Industrial Shipping Containers Acquisition
On October 27, 2000, as amended on January 5, 2001, the Company signed a
definitive agreement to purchase the Industrial Packaging Division of Royal
Packaging Industries Van Leer N.V., a Netherlands limited liability company,
("Van Leer Industrial") from Huhtamaki Van Leer Oyj, a Finish corporation,
("Huhtamaki") for $555 million less the amount of Van Leer Industrial's
debt and certain other obligations as of the closing date. Van Leer
Industrial is a leading worldwide provider of industrial packaging and
components, including steel, fibre and plastic drums, polycarbonate water
bottles, as well as intermediate bulk containers and closure systems with
operations in over 40 countries. Van Leer Industrial reported EUR 921
million in net sales for its fiscal year ended December 31, 1999.
The transaction will be accounted for as a purchase and is expected to
be completed during the first quarter of calendar 2001 subject to
regulatory and other approvals. The Company expects to finance the purchase
through additional long-term borrowings.
Sale of Timber Properties
On December 21, 2000, Soterra LLC, a wholly-owned subsidiary of the
Company, sold certain hardwood timberlands to a third party situated in
Arkansas, Mississippi and Louisiana for approximately $44 million.
As such, the Company recognized a gain of approximately $43 million related
to this transaction. In addition, an agreement to sell other hardwood
timberlands for approximately $30 million in March 2001 was signed in December
2000.
A total of approximately 65,000 acres of timber properties were sold or
will be sold as a result of these transactions.
Purchase of Timber Properties
On December 21, 2000, Soterra LLC, a wholly-owned subsidiary of the
Company, purchased certain softwood timberlands from a third party situated
in Louisiana for approximately $43 million. In a related agreement signed
in December 2000, the Company agreed to purchase other softwood timberlands
for approximately $43 million in March 2001.
A total of approximately 63,000 acres of timber properties were purchased
or will be purchased as a result of these transacions.
66
Item 8. Financial Statements and Supplementary Data (continued)
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
accounting principles generally accepted in the United States and, as such,
include certain estimates and judgments 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 continually reviewed by the internal auditors
of the Company. In addition, Ernst & Young LLP, an independent accounting
firm, audits the financial statements of Greif Bros. Corporation and its
subsidiaries and considers the internal control structure of the Company in
planning and performing its audit. The Audit Committee of the Board of
Directors meets periodically with the internal auditors and independent
accountants to discuss the internal control structure and the results of
their audits.
/s/ Michael J. Gasser /s/ Joseph W. Reed
Michael J. Gasser Joseph W. Reed
Chairman and Chief Executive Chief Financial Officer
Officer and Secretary
67
Item 8. Financial Statements and Supplementary Data (continued)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the
Board of Directors of
Greif Bros. Corporation
We have audited the consolidated balance sheets of Greif Bros.
Corporation and subsidiaries as of October 31, 2000 and 1999, and the
related consolidated statements of income, shareholders' equity, and cash
flows for the years then ended. 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. The
financial statements of Greif Bros. Corporation and subsidiaries for the
year ended October 31, 1998, were audited by other auditors whose report
dated December 4, 1998, expressed an unqualified opinion on those
statements prior to restatement.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards 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. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 2000 and 1999 financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Greif Bros. Corporation and subsidiaries at October 31, 2000
and 1999, and the consolidated results of their operations and their cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States.
We also audited the adjustments that were applied during 1999 to
restate the 1998 financial statements for the Company's change in method of
accounting for an investment from the cost method to the equity method as
described in Note 2. In our opinion, such adjustments were appropriate and
properly applied.
/s/ Ernst & Young LLP
Columbus, Ohio
December 5, 2000
68
Item 8. Financial Statements and Supplementary Data (concluded)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Greif Bros. Corporation
In our opinion, based on our audits and the report of other auditors,
the accompanying consolidated balance sheets and the related consolidated
statements of income, shareholders' equity and cash flows present fairly,
in all material respects, the financial position of Greif Bros. Corporation
at October 31, 1998, and the results of its operations and its cash flows
for the year ended October 31, 1998 in conformity with accounting
principles generally accepted in the United States. 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 did not audit the adjustments described
in Note 2 that were applied to restate the 1998 and 1997 financial
statements. Those adjustments were audited by other auditors whose report
thereon has been furnished to us, and our opinion expressed herein, insofar
as it relates to the amounts included in Note 2, is based solely on the
report of the other auditors. We conducted our audits of these statements
in accordance with auditing standards generally accepted in the United
States, 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 and the report of other
auditors provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
December 4, 1998
69
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
There has not been a change in the Company's principal independent
accountants and there were no matters of disagreement on accounting and
financial disclosures.
70
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to Directors of the Company and disclosures
pursuant to Item 405 of Regulation S-K is incorporated by reference to the
Registrant's Proxy Statement, which Proxy Statement will be filed within
120 days of October 31, 2000. Information regarding the executive officers
and certain significant employees of the Registrant may be found under the
caption "Executive Officers and Certain Significant Employees of the
Company" in Part I, and is also incorporated by reference into this Item
10.
Item 11. Executive Compensation
Information with respect to Executive Compensation is incorporated
herein by reference to the Registrant's Proxy Statement, which Proxy
Statement will be filed within 120 days of October 31, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information with respect to Security Ownership of Certain Beneficial
Owners and Management is incorporated herein by reference to the
Registrant's Proxy Statement, which Proxy Statement will be filed within
120 days of October 31, 2000.
Item 13. Certain Relationships and Related Transactions
Information with respect to Certain Relationships and Related
Transactions is incorporated herein by reference to the Registrant's Proxy
Statement, which Proxy Statement will be filed within 120 days of October
31, 2000.
71
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K
(a) The following documents are filed as part of this Report:
Page
(1) Financial Statements of Greif Bros. Corporation:
Consolidated Statements of Income for each of the three
years in the period ended October 31, 2000 33
Consolidated Balance Sheets at October 31, 2000 and 1999 34-35
Consolidated Statements of Cash Flows for each of the
three years in the period ended October 31, 2000 36
Consolidated Statements of Changes in Shareholders'
Equity for each of the three years in the period ended
October 31, 2000 37
Notes to Consolidated Financial Statements 38-65
Report of Management's Responsibilities 66
Reports of Independent Accountants 67-68
The individual financial statements of the Registrant have been
omitted since the Registrant is primarily an operating company and all
subsidiaries included in the consolidated financial statements, in the
aggregate, do not have minority equity interests and/or indebtedness to any
person other than the Registrant or its consolidated subsidiaries in
amounts which exceed 5% of total consolidated assets at October 31, 2000.
(2) Financial Statement Schedules:
Reports of Independent Accountants on Financial
Statement Schedules 77-78
Consolidated Valuation and Qualifying Accounts and
Reserves (Schedule II) 79
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
72
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K (continued)
(3) Exhibits:
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
3(a) Amended and Restated Annual Report on Form 10-K for
Certificate of Incorporation the fiscal year ended October
of Greif Bros. Corporation. 31, 1997, File No. 1-566 (see
Exhibit 3(a) therein).
3(b) Amended and Restated By-Laws Annual Report on Form 10-K for
of Greif Bros. Corporation. the fiscal year ended October
31, 1997, File No. 1-566 (see
Exhibit 3(b) therein).
3(c) Amendment to Amended and Annual Report on Form 10-K for
Restated By-Laws of Greif the fiscal year ended October
Bros. Corporation. 31, 1998, File No. 1-566 (see
Exhibit 3(c) therein).
10(a) Greif Bros. Corporation 1996 Registration Statement on Form
Directors Stock Option Plan. S-8, File No. 333-26977 (see
Exhibit 4 (b) therein).
10(b) Greif Bros. Corporation Annual Report on Form 10-K for
Incentive Stock Option Plan, the fiscal year ended October
as Amended and Restated. 31, 1997, File No. 1-566 (see
Exhibit 10(b) therein).
10(c) Greif Bros. Corporation Annual Report on form 10-K for
Directors Deferred the fiscal year ended October
Compensation Plan. 31, 1998, File No. 1-566 (see
Exhibit 10(c) therein).
73
Item 14. Exhibits, Financial Statment Schedules and Reports on Form 8-K
(continued)
If incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
10(d) Employment Agreement between Annual Report on Form 10-K for
Michael J. Gasser and Greif the fiscal year ended October
Bros. Corporation. 31, 1998, File No. 1-566 (see
Exhibit 10(d) therein).
10(e) Employment Agreement between Annual Report on Form 10-K for
William B. Sparks and Greif the fiscal year ended October 31,
Bros. Corporation. 1998, File No. 1-566 (see
Exhibit 10(e) therein).
10(f) Employment Agreement, as Annual report on form 10-K for
amended, between Charles R. the fiscal year ended October
Chandler and Greif Bros. 31, 1998, File No. 1-566 (see
Corporation. Exhibit 10(f) therein).
10(g) Employment Agreement, as Annual Report on form 10-K for
amended, between Joseph W. the fiscal year ended October
Reed and Greif Bros. 31, 1998, File No. 1-566 (see
Corporation. Exhibit 10(g) therein).
10(h) Credit Agreement dated as of Current Report on Form 8-K
March 30, 1998, among Greif dated April 14, 1998, File No.
Bros. Corporation, as 1-566 (see Exhibit 99(b)
Borrower, Various Financial therein).
Institutions, as Banks, and
KeyBank National Association,
as Agent.
10(i) Supplemental Retirement Annual Report on form 10-K for
Benefit Agreement. the fiscal year ended October
31, 1999, File No. 1-566 (see
Exhibit 10(i) therein).
21 Subsidiaries of the Contained herein.
Registrant.
23(a) Consent of Ernst & Young LLP- Contained herein.
Columbus, Ohio.
23(b) Consent of Contained herein.
PricewaterhouseCoopers LLP-
Columbus, Ohio.
74
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(concluded)
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
24(a) Powers of Attorney for Annual Report on Form 10-K for
Michael J. Gasser, Charles R. the fiscal year ended October
Chandler, Michael H. Dempsey, 31, 1997, File No. 1-566 (see
Naomi C. Dempsey, Daniel J. Exhibit 24(a) therein).
Gunsett, Robert C. Macauley,
David J. Olderman and William
B. Sparks, Jr.
24(b) Power of Attorney for John C. Annual Report on Form 10-K for
Kane. the fiscal year ended October
31, 1999, File No. 1-566 (see
Exhibit 24(b) therein).
(b) Reports on Form 8-K
On October 30, 2000, the Company filed a Current Report on Form
8-K that described an October 27, 2000 definitive agreement to
purchase the Industrial Packaging Division of Royal Packaging
Industries Van Leer N.V., a Netherlands limited liability company,
from Huhtamaki Van Leer Oyj, a Finish Corporation.
75
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 January 26, 2001 By /s/ Michael J. Gasser
Michael J. Gasser
Chairman of the Board of Director
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Michael J. Gasser /s/Kenneth E. Kutcher
Michael J. Gasser Kenneth E. Kutcher
Chairman of the Board of Directors Chief Financial Officer and
Chief Executive Officer Secretary
(principal executive officer) (principal financial officer)
/s/ John K. Dieker Charles R. Chandler *
John K. Dieker Charles R. Chandler
Corporate Controller Member of the Board of Directors
(principal accounting officer)
Michael H. Dempsey * Naomi C. Dempsey *
Michael H. Dempsey Naomi C. Dempsey
Member of the Board of Directors Member of the Board of Directors
Daniel J. Gunsett * John C. Kane *
Daniel J. Gunsett John C. Kane
Member of the Board of Directors Member of the Board of Directors
Robert C. Macauley * David J. Olderman *
Robert C. Macauley Davis J. Olderman
Member of the Board of Directors Member of the Board of Directors
William B. Sparks, Jr. *
William B. Sparks, Jr.
Member of the Board of Directors
[Signatures continued on the next page]
76
SIGNATURES (concluded)
* The undersigned, Michael J. Gasser, by signing his name hereto, does
hereby execute this Annual Report on Form 10-K on behalf of each of the
above-named persons pursuant to powers of attorney duly executed by such
persons and filed as an exhibit to this Annual Report on Form 10-K.
By /s/ Michael J. Gasser
Michael J. Gasser
Chairman of the Board of Directors
Chief Executive Officer
Each of the above signatures is affixed as of January 26, 2001.
77
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Shareholders and the
Board of Directors of
Greif Bros. Corporation
We have audited the consolidated financial statements of Greif Bros.
Corporation and subsidiaries as of October 31, 2000 and 1999 and for the
years then ended, and have issued our report thereon dated December 5, 2000
appearing on page 67 of this Annual Report on Form 10-K. Our audits also
included the financial information as of October 31, 2000 and 1999 and for
the years then ended included in the financial statement schedule listed
in Item 14(a)(2) of this Annual Report on Form 10-K. This schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits.
In our opinion, the financial information as of October 31, 2000 and
1999 and for the years then ended included in the financial statement
schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
/s/ Ernst & Young LLP
Columbus, Ohio
December 5, 2000
78
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Greif Bros. Corporation
Our audit of the consolidated financial statement referred to in our report
dated December 4, 1998 appearing in this Annual Report on Form 10-K also
included an audit of the financial statement schedule for the year ended
October 31, 1998 listed in Item 14(a)(2) of this Form 10-K. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with
the related consolidated financial statement.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
December 4, 1998
79
SCHEDULE II
GREIF BROS. CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN $000)
Balance at Charged to Amounts Balance at
Beginning Costs and Bad Debt Written End of
Description Of Period Expenses Recoveries off Period
Year ended
October 31, 1998:
Reserves deducted from
applicable assets:
For doubtful items-
trade accounts
receivables $1,652(A) $1,489 $142 $ 365 $2,918
For doubtful items-
other notes and
accounts receivable 697 0 0 0 697
Total reserves deducted
from applicable assets $2,349 $1,489 $142 $ 365 $3,615
Year ended
October 31, 1999:
Reserves deducted from
applicable assets:
For doubtful items-
trade accounts
receivables $2,218(B) $ 898 $173 $ 833 $2,456
For doubtful items-
other notes and
accounts receivable 697 0 0 0 697
Total reserves deducted
from applicable assets $2,915 $ 898 $173 $ 833 $3,153
Year ended
October 31, 2000:
Reserves deducted from
applicable assets:
For doubtful items-
trade accounts
receivables $2,456 $2,223 0 $2,386 $2,293
For doubtful items-
other notes and
accounts receivable 697 0 0 697 0
Total reserves deducted
from applicable assets $3,153 $2,223 $ 0 $3,083 $2,293
(A) Includes an $805,000 adjustment related to the industrial containers
business acquired from Sonoco Products Company on March 30, 1998.
(B) Excludes a $700,000 adjustment related to an amount guaranteed by Sonoco
Products Company.
80
EXHIBIT INDEX
If Incorporated by Reference
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
3(a) Amended and Restated Annual Report on Form 10-K for
Certificate of Incorporation the fiscal year ended October
of Greif Bros. Corporation. 31, 1997, File No. 1-566 (see
Exhibit 3(a) therein).
3(b) Amended and Restated By-Laws Annual Report on Form 10-K for
of Greif Bros. Corporation. the fiscal year ended October
31, 1997, File No. 1-566 (see
Exhibit 3(b) therein).
3(c) Amendment to Amended and Annual Report on Form 10-K for
Restated By-Laws of Greif the fiscal year ended October
Bros. Corporation. 31, 1998 File No. 1-566 (see
Exhibit 4(b) therein).
10(a) Greif Bros. Corporation 1996 Registration Statement on Form
Directors Stock Option Plan. S-8, File No. 333-26977 (see
Exhibit 4(b) therein).
10(b) Greif Bros. Corporation Annual Report on Form 10-K for
Incentive Stock Option Plan, the fiscal year ended October
as Amended and Restated. 31, 1997, File No. 1-566 (see
Annual Report on Form 10-K for Exhibit 10(b) therein).
10(c) Greif Bros. Corporation Annual Report on Form 10-K for
Directors Deferred the fiscal year ended October
Compensation Plan. 31, 1997, File No. 1-566 (see
Exhibit 10(b) therein).
10(d) Employment Agreement between Annual Report on Form 10-K for
Michael J. Gasser and Greif the fiscal year ended October
Bros. Corporation. 31, 1998, File No. 1-566 (see
Exhibit 10(c) therein).
10(e) Employment Agreement between Annual report on Form 10-K for
William B. Sparks and Greif the fiscal year ended October
Bros. Corporation. 31, 1998, File No. 1-566 (see
Exhibit 10(e) therein).
10(f) Employment Agreement, as Annual Report on Form 10-K for
amended, between Charles R. the fiscal year ended October
Chandler and Greif Bros. 31, 1998, File No. 1-566 (see
Corporation. Exhibit 10(f) therein).
81
EXHIBIT INDEX
If Incorporated by Reference
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
10(g) Employment Agreement, as Annual Report on Form 10-K for
amended, between Joseph W. the fiscal year ended October
Reed and Greif Bros. 31, 1998, File No. 1-566 (see
Corporation. 10(f) therein).
10(h) Credit Agreement dated as of Current Report on Form 8-K
March 30, 1998, among Greif dated April 14, 1998, File No.
Bros. Corporation, as 1-566 (see Exhibit 99(b)
Borrower, Various Financial therein).
Institutions, as Banks, and
KeyBank National Association,
As Agent.
10(i) Supplemental Retirement Annual Report on Form 10-K for
Benefit Agreement. the fiscal year ended October
31, 1999, File No. 1-566 (see
Exhibit 10(i) therein).
21 Subsidiaries of the Contained herein.
Registrant
23(a) Consent of Ernst & Young LLP- Contained herein.
Columbus, Ohio.
23(b) Consent of Contained herein.
PricewaterhouseCoopers LLP-
Columbus, Ohio.
24(a) Powers of Attorney for Annual Report on form 10-K for
Michael J. Gasser, Charles R. the fiscal year ended October
Chandler, Michael H. Dempsey, 31, 1997, File No. 1-566 (see
Naomi C. Dempsey, Daniel J. Exhibit 24(a) therein).
Gunsett, Robert C. Macauley,
David J. Olderman and William
B. Sparks, Jr.
24(b) Power of Attorney for John C. Annual Report on Form 10-K for
Kane. the fiscal year ended October
31, 1999, File No. 1-566 (see
Exhibit 24(b) therein).
82
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Name of Subsidiary Incorporated or Organized Under
Laws of
Barzon Corporation Delaware
Fibro Tambor, S.A. de C.V. Mexico
Great Lakes Corrugated Corp. Ohio
Greif Bros. Canada Inc. Canada
Greif Bros. Corp. of Ohio, Inc. Delaware
Greif Bros. Corporation Delaware
Greif Bros. Service Corp. Delaware
Soterra LLC Delaware
Tainer Transport, Inc. Delaware
Trend Pak, Inc. Ohio
83
EXHIBIT 23(a)
Consent of Ernst & Young LLP
We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 333-26767) pertaining to the Greif Bros.
Corporation 1996 Directors Stock Option Plan, (Form S-8 No. 333-26977)
pertaining to the Greif Bros. Corporation Incentive Stock Option Plan,
(Form S-8 No. 333-35048) pertaining to the Greif Bros. 401(k) Retirement
Plan and Trust, (Form S-8 No. 333-46134) pertaining to the Greif Bros.
Corporation Production Associates 401(k) Retirement Plan and Trust, and
(Form S-8 No. 333-46136) pertaining to the Greif Bros. Riverville Mill
Employee Retirement Savings Plan and Trust of our reports dated December 5,
2000 with respect to the consolidated financial statements and the financial
statement schedule of Greif Bros. Corporation included in the Annual Report
(Form 10-K) for the year ended October 31, 2000.
/s/ Ernst & Young LLP
Columbus, Ohio
January 22, 2001
84
EXHIBIT 23(b)
Consent of PricewaterhouseCoopers LLP
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-26767, No. 333-26977, No. 333-35048, No.
333-46134, and No. 333-46136) of Greif Bros. Corporation of our report
dated December 4, 1998 relating to the financial statements, which appears
in this Annual Report on Form 10-K. We also consent to the incorporation
by reference of our report dated December 4, 1998, relating to the
financial statement schedule for the year ended October 31, 1998, which
appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
January 25, 2001