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1
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, 1997 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 5, 1998 was approximately $101,942,807.
The number of shares outstanding of each of the Registrant's classes
of common stock, as of January 5, 1998 was as follows:
Class A Common Stock - 10,902,272
Class B Common Stock - 12,001,793
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 23, 1998, 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, 1997.
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PART I
Item 1. Business
The Company principally manufactures industrial shipping containers and
containerboard and related products which it sells to customers in many
industries primarily in the United States and Canada, through direct sales
contact with its customers. There were no significant changes in the
business since the beginning of the fiscal year.
The Company operates 95 locations in 28 states of the United States and
in 3 provinces of Canada and, as such, is subject to federal, state, local
and foreign regulations in effect at the various localities.
Due to the variety of products, the Company has many customers buying
different types of the Company's products and, due to the scope of the
Company's sales, no one customer is considered principal in the total
operation of the Company.
Because the Company supplies a cross section of industries, such as
chemicals, food products, petroleum products, pharmaceuticals, metal
products and other and because the Company must make spot deliveries on a
day-to-day basis as its product is required by its customers, the Company
does not operate on a backlog and maintains only limited levels of finished
goods. Many customers place their orders weekly for delivery during the
week.
The Company's business is highly competitive in all respects (price,
quality and service) and the Company experiences substantial competition in
selling its products. Many of the Company's competitors are larger than the
Company.
While research and development projects are important to the Company's
continued growth, the amount expended in any year is not material in
relation to the results of operations of the Company.
The Company's raw materials are principally pulpwood, waste paper for
recycling, paper, steel and resins. In the current year, as in prior years,
certain of these materials have been in short supply, but to date these
shortages have not had a significant effect on the Company's operations.
The Company's business is not materially dependent upon patents,
trademarks, licenses or franchises.
The business of the Company is not seasonal to any significant extent.
The approximate number of persons employed during the year was 4,500.
3
Item 1. Business (continued)
Industry Segments
The Company operates in two industry segments, industrial shipping
containers and materials (industrial shipping containers) and containerboard
and related products (containerboard).
Operations in the industrial shipping containers segment involve the
production and sale of fibre, steel and plastic drums, multiwall bags,
cooperage, dunnage, pallets and miscellaneous items. These products are
manufactured and principally sold throughout the United States and Canada.
Operations in the containerboard segment involve the production and
sale of containerboard, both virgin and recycled, and related corrugated
products including corrugated sheets and corrugated containers. The
products are manufactured and sold in the United States and Canada.
In computing operating profit for the two industry segments, gain on
timber sales, interest expense, other income and expense, a restructuring
charge (see Note 3 to the Consolidated Financial Statements), gains on
disposals of certain facilities and income taxes have not been allocated to
such segments. These amounts, excluding income taxes, comprise general
corporate other income and expense, net.
Each segment's operating assets are those assets used in the
manufacture and sale of industrial shipping containers or containerboard.
Corporate assets are principally cash and cash equivalents, timber
properties, corporate facilities and other.
The following segment information is presented for the three years
ended October 31, 1997, except as to asset information which is as of
October 31, 1997, 1996 and 1995 (Dollars in thousands):
1997 1996 1995
Net sales:
Industrial shipping containers $396,456 $391,315 $392,505
Containerboard 252,528 246,053 326,840
Total $648,984 $637,368 $719,345
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Item 1. Business (concluded)
1997 1996 1995
Operating profit:
Industrial shipping containers $13,157 $16,736 $ 9,059
Containerboard 10 36,926 80,476
Total segment 13,167 53,662 89,535
General corporate other income
and expense, net 16,338 14,034 8,376
Income before income taxes 29,505 67,696 97,911
Income taxes 11,419 24,949 37,778
Net income $18,086 $42,747 $60,133
Identifiable assets:
Industrial shipping containers $193,213 $193,378 $190,982
Containerboard 292,140 262,866 220,213
Total segment 485,353 456,244 411,195
Corporate assets 64,736 56,094 56,467
Total $550,089 $512,338 $467,662
Depreciation expense:
Industrial shipping containers $13,156 $13,282 $13,114
Containerboard 17,186 12,977 9,765
Total segment 30,342 26,259 22,879
Corporate assets 318 89 65
Total $30,660 $26,348 $22,944
Property additions:
Industrial shipping containers $ 3,843 $16,588 $12,540
Containerboard 22,923 56,160 47,593
Total segment 26,766 72,748 60,133
Corporate assets 9,427 1,647 933
Total $36,193 $74,395 $61,066
5
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:
Cullman Steel drums Industrial shipping
containers
Mobile Fibre drums Industrial shipping
containers
Arkansas:
Batesville (1) Fibre drums Industrial shipping
containers
California:
Fontana Steel drums Industrial shipping
containers
LaPalma Fibre drums Industrial shipping
containers
Morgan Hill Fibre drums Industrial shipping
containers
Merced Steel drums Industrial shipping
containers
Stockton Corrugated honeycomb Industrial shipping
containers
Colorado:
Denver (2) Warehouse Industrial shipping
containers
Georgia:
Macon Corrugated honeycomb Industrial shipping
containers
Tucker Fibre drum Industrial shipping
containers
Illinois:
Blue Island Fibre drums Industrial shipping
containers
Centralia Corrugated containers and sheets Containerboard
Chicago Steel drums Industrial shipping
containers
Lombard (3) General office Industrial shipping
containers
6
Item 2. Properties (continued)
Location Products Manufactured /Use Industry Segment
Northlake Fibre drums and plastic drums Industrial shipping
containers
Oreana Corrugated containers Containerboard
Posen Corrugated honeycomb Industrial shipping
containers
Quincy (4) Warehouse Containerboard
Indiana:
Ferdinand (5) Corrugated containers Containerboard
Kansas:
Kansas City (6) Steel drums Industrial shipping
containers
Kansas City (7) Fibre drums Industrial shipping
containers
Winfield Steel drums Industrial shipping
containers
Kentucky:
Erlanger (8) Corrugated containers Containerboard
Louisville (9) Corrugated containers Containerboard
Winchester (10) Corrugated containers Containerboard
Louisiana:
St. Gabriel Steel drums and plastic drums Industrial shipping
containers
Maryland:
Sparrows Point Steel drums Industrial shipping
containers
Massachusetts:
Mansfield Fibre drums Industrial shipping
containers
Westfield Fibre drums Industrial shipping
containers
West
Springfield (11) General office Industrial shipping
containers
Worcester Plywood reels Industrial shipping
containers
7
Item 2. Properties (continued)
Location Products Manufactured /Use Industry Segment
Michigan:
Grand Rapids Corrugated sheets Containerboard
Mason Corrugated sheets Containerboard
Roseville Corrugated containers Containerboard
Taylor Fibre drums Industrial shipping
containers
Minnesota:
Minneapolis Fibre drums Industrial shipping
containers
Rosemount Multiwall bags Industrial shipping
containers
St. Paul Tight cooperage Industrial shipping
containers
St. Paul (12) General office Industrial shipping
containers
Mississippi:
Durant Plastic products Industrial shipping
containers
Jackson General office
Missouri:
Kirkwood Fibre drums Industrial shipping
containers
Nebraska:
Omaha (13) Multiwall bags Industrial shipping
containers
Omaha Warehouse Industrial shipping
containers
New Jersey:
Rahway Fibre drums and plastic drums Industrial shipping
containers
Spotswood Fibre drums Industrial shipping
containers
Teterboro Fibre drums Industrial shipping
containers
New York:
Syracuse Fibre drums Industrial shipping
containers
8
Item 2. Properties (continued)
Location Products Manufactured /Use Industry Segment
North Carolina:
Bladenboro Steel drums Industrial shipping
containers
Charlotte Fibre drums Industrial shipping
containers
Concord Corrugated sheets Containerboard
Ohio:
Caldwell Steel drums Industrial shipping
containers
Canton (14) Corrugated containers Containerboard
Cleveland Corrugated containers Containerboard
Delaware Principal office
Delaware (15) Research center Industrial shipping
containers
Fostoria Corrugated containers Containerboard
Hebron Plastic drums Industrial shipping
containers
Massillon Recycled containerboard Containerboard
Tiffin Corrugated containers Containerboard
Westerville (16) General office Industrial shipping
containers
Youngstown Steel drums Industrial shipping
containers
Zanesville Corrugated containers and sheets Containerboard
Pennsylvania:
Darlington Fibre drums and plastic drums Industrial shipping
containers
Hazelton Corrugated honeycomb Industrial shipping
containers
Kelton (17) Corrugated honeycomb Industrial shipping
containers
Reno Corrugated containers Containerboard
Stroudsburg Rims and drum hardware Industrial shipping
containers
Twin Oaks Fibre drums Industrial shipping
containers
Washington Corrugated containers and sheets Containerboard
9
Item 2. Properties (continued)
Location Products Manufactured /Use Industry Segment
Tennessee:
Kingsport Fibre drums Industrial shipping
containers
Memphis Steel drums Industrial shipping
containers
Texas:
Angleton Steel drums Industrial shipping
containers
Fort Worth Fibre drums Industrial shipping
containers
LaPorte Fibre drums, steel drums Industrial shipping
and plastic drums containers
Waco Corrugated honeycomb Industrial shipping
containers
Virginia:
Amherst Containerboard Containerboard
Washington:
Vancouver (18) Corrugated honeycomb Industrial shipping
containers
West Virginia:
Huntington (19) Corrugated containers and sheets Containerboard
Wisconsin:
Sheboygan Fibre drums Industrial shipping
containers
Canada
Alberta:
Lloydminster Steel drums, fibre drums Industrial shipping
and plastic drums containers
Ontario:
Belleville Fibre drums and plastic products Industrial shipping
containers
Bowmanville Spiral tubes Industrial shipping
containers
Fort Frances Spiral tubes Industrial shipping
containers
Fruitland Drum hardware and machine shop Industrial shipping
containers
10
Item 2. Properties (concluded)
Location Products Manufactured /Use Industry Segment
Milton Fibre drums Industrial shipping
containers
Niagara Falls General office Industrial shipping
containers
Oakville Steel drums Industrial shipping
containers
Stoney Creek Steel drums Industrial shipping
containers
Winona Machine shop Industrial shipping
containers
Quebec:
La Salle Fibre drums and steel drums Industrial shipping
containers
Maple Grove Pallets Industrial shipping
containers
Pointe Aux
Trembles Fibre drums and spiral tubes Industrial shipping
containers
Note: All properties are held in fee except as noted below:
Exceptions:
(1) Lease expires August 31, 1999
(2) Lease expires December 15, 1998
(3) Lease expires February 28, 1998
(4) Lease operates month to month
(5) Lease expires October 26, 1999
(6) Lease expires June 30, 1999
(7) Lease expires March 31, 1999
(8) Lease expires October 6, 2003
(9) Lease expires December 31, 1998
(10) Lease expires October 7, 2001
(11) Lease expires September 1, 1998
(12) Lease expires December 31, 1999
(13) Lease expires June 30, 1998
(14) Lease expires March 31, 1998
(15) Lease expires June 30, 2001
(16) Lease operates month to month
(17) Lease expires April 30, 2003
(18) Lease expires January 31, 2002
(19) Lease expires March 31, 2000
The Company also owns in fee a substantial number of scattered timber
tracts comprising approximately 316,000 acres in the states of Alabama,
Arkansas, Florida, Georgia, Louisiana, Mississippi and Virginia and the
provinces of Nova Scotia, Ontario and Quebec in Canada.
11
Item 3. Legal Proceedings
The Company has no pending material legal proceedings.
From time to time, various legal proceedings arise from either 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 material
sanctions or sanctions greater than $100,000.
In addition, from time to time, but less frequently, the Company has
been cited for violations of environmental regulations. Except for the
following situation, none of these violations involve or are expected to
involve sanctions of $100,000 or more.
Currently, the only exposure known to the Company which may exceed
$100,000 relates to a pollution situation at its Strother Field plant in
Winfield, Kansas. A record of decision issued by the U.S. Environmental
Protection Agency (EPA) has set forth estimated remedial costs which could
expose the Company to approximately $3,000,000 in expense under certain
assumptions. If the Company ultimately is required to incur this expense, a
significant portion would be paid over 10 years. The Kansas site involves
groundwater pollution and certain soil pollution that was found to exist on
the Company's property. The estimated costs of the remedy currently
preferred by the EPA for the soil pollution on the Company's land represents
approximately $2,000,000 of the estimated $3,000,000 in expense.
The final remedies have not been selected. In an effort to minimize
its exposure for soil pollution, the Company has undertaken further
engineering borings and analysis to attempt to identify a more definitive
soil area which would require remediation. However, there can be no
assurance that the Company will be successful in minimizing such exposure,
and there can be no assurance that the total expense incurred by the Company
in remediating this site will not exceed $3,000,000.
A reserve for $2,000,000 was recorded by the Company during fiscal
1995 since it was considered the most likely amount of loss. To date,
$360,000 has been charged against the reserve.
12
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 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 46 Chairman of the Board 1988
of Directors and
Chief Executive
Officer, Chairman of
the Executive and
Nominating Committees
William B. Sparks, Jr. 56 Director, President 1995
and Chief Operating
Officer, member of
the Executive
Committee
Charles R. Chandler 62 Director, Vice 1996
Chairman, member of
the Executive
Committee
Joseph W. Reed 60 Chief Financial 1997
Officer and Secretary
Allan Hull 84 Director, Vice 1964
President, General
Counsel, member of
the Executive
Committee
Robert C. Macauley 74 Director, Chief 1996
Executive Officer of
Virginia Fibre
Corporation
(subsidiary company),
Chairman of the
Compensation
Committee
John P. Berg 77 President Emeritus 1972
13
Executive Officers of the Company (continued)
Year first became
Name Age Positions and Offices Executive Officer
Lloyd D. Baker 64 President of Soterra, 1975
Incorporated
(subsidiary company)
Michael M. Bixby 54 Vice President, 1980
Regional Sales
Ronald L. Brown 50 Vice President, Sales 1996
and Marketing
Dwight L. Dexter 46 Vice President, 1990
Marketing
John K. Dieker 34 Corporate Controller 1996
Elco Drost 52 President of Greif 1996
Containers Inc.
(subsidiary company)
Michael A. Giles 47 Vice President, Mill 1996
Operations
C.J. Guilbeau 50 Vice President and 1986
Associate Director of
Manufacturing
Sharon R. Maxwell 48 Assistant Secretary 1997
Philip R. Metzger 50 Treasurer 1995
Mark J. Mooney 40 Vice President, 1997
National Sales
William R. Mordecai 45 Vice President, 1997
Containerboard Sales
and Logistics
Jerome B. Nolder, Jr. 39 Vice President, 1996
Container Operations
William R. Shew 67 Special Assistant to 1996
the Vice Chairman
Kent P. Snead 52 Corporate Director of 1997
Strategic Projects
14
Executive Officers of the Company (continued)
Except as indicated below, each Executive Officer has served in his
present capacity for at least five years.
Mr. Michael J. Gasser was elected Chairman of the Board of Directors and
Chief Executive Officer during 1994. Prior to that time, and for more than
five years, he served as a Vice President of the Company.
Mr. William B. Sparks, Jr. was elected President and Chief Operating
Officer during 1995. Prior to that time, and for more than
five years, he served as Chief Executive Officer of Down River International,
Inc., a former subsidiary of the Company.
Mr. Charles R. Chandler was elected Vice Chairman during 1996. Prior to
that time, and for more than five years, he served as President and
Chief Operating Officer of Virginia Fibre Corporation, a subsidiary
of the Company.
Mr. Joseph W. Reed was elected Chief Financial Officer and Secretary in
1997. Prior to that time, and for more than five years, he served as Senior
Vice President, Finance and Administration - CFO of Pharmacia, Inc.
Mr. John P. Berg was elected President Emeritus in 1996. Prior to that
time, he served as President of the Company and General Manager of one of
its divisions for more than five years.
Mr. Lloyd D. Baker was elected President of Soterra, Incorporated
(subsidiary company) during 1997. Prior to that time, and for more than
five years, he served as a Vice President of the Company.
Mr. Michael M. Bixby became Vice President of Regional Sales during
1997. During the past five years, he has been a Vice President of the
Company.
Mr. Ronald L. Brown became Vice President of Sales and Marketing 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. John K. Dieker was elected Corporate Controller in 1995. From 1994
to 1995 he served as Assistant Corporate Controller. Prior to that time, he
served as Internal Auditor for two years.
During 1996, Mr. Elco Drost was elected President of Greif Containers
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.
15
Executive Officers of the Company (concluded)
Mr. Michael A. Giles became Vice President, Mill Operations, in 1997.
He was Executive Vice President of Virginia Fibre Corporation (subsidiary
company) in 1996. From 1995 to 1996, he served as Vice President of
Manufacturing and, prior to that time, Vice President of Finance and
Treasurer at the subsidiary company for more than five years.
Mr. C.J. Guilbeau became Vice President and Associate Director of
Manufacturing during 1997. During the past five years, he has served as
Vice President of the Company.
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.
Mr. Philip R. Metzger was elected Treasurer in 1995. Prior to that
time, and for more than the past five years, he served as Assistant
Treasurer and Assistant Controller.
Mr. Mark J. Mooney became Vice President of National Sales during 1997.
From 1993 to 1996, he served as the Operations Director, Multiwall Bags, and
prior to that time, General Sales and Marketing Manager of one of its
divisions.
Mr. William R. Mordecai became Vice President, Containerboard Sales and
Logistics, during 1997. During 1996 to 1997, Mr. Mordecai served as
Director, Containerboard Marketing for Virginia Fibre Corporation
(subsidiary company). During 1994 to 1996, he served as President of
Pimlico Paper Corporation. Prior to that time, and for more than the past
five years, he served as Director, Operations Planning, of MacMillan
Bloedel, Inc.
Mr. Jerome B. Nolder, Jr. became Vice President, Container Operations,
during 1997. Prior to that time, he served as General Manager of one of its
divisions since 1994, and prior to that time, he served as Operations
Manager for the division for more than five years.
Mr. William R. Shew became Special Assistant to the Vice Chairman
during 1997. Prior to that time, and for more than the past five years, he
served as President of Greif Board Corporation (subsidiary company).
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 (subsidiary
company).
16
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.
Prior to March 1996, the Class A Common Stock was traded on the Chicago
Stock Exchange and there was no active market for the Class B Common Stock.
The high and low sales prices for each quarterly period during the last
two fiscal years are as follows:
Quarter Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1997 1997 1997 1997
Market price
Class A Common Stock:
High $31 $31 1/4 $31 1/4 $36 1/2
Low $27 $25 $23 3/4 $30
Class B Common Stock:
High $35 $35 $33 $37 1/4
Low $30 $28 1/4 $26 3/4 $31 1/4
Quarter Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1996 1996 1996 1996
Market price
Class A Common Stock:
High $28 7/8 $32 $33 $31 1/2
Low $24 1/4 $26 1/4 $26 $27 3/4
Class B Common Stock:
High N/A $35 1/2 $36 1/2 $36
Low N/A $27 1/2 $26 3/4 $31 1/2
As of December 1, 1997, there were 790 shareholders of record of the
Class A Common Stock and 179 shareholders of the Class B Common Stock.
17
Item 5. Market for the Registrant's Common Stock and
Related Security Holder Matters (concluded)
The Company paid five dividends of varying amounts during its fiscal
year computed on the basis described in Note 5 to the Consolidated Financial
Statements on page 36 of this Form 10-K, which is hereby incorporated by
reference. The annual dividends paid for the last three fiscal years are as
follows:
1997 fiscal year dividends per share - Class A $.60; Class B $.89
1996 fiscal year dividends per share - Class A $.48; Class B $.71
1995 fiscal year dividends per share - Class A $.40; Class B $.59
18
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,
1997 1996 1995 1994 1993
Net sales $648,984 $637,368 $719,345 $583,526 $526,765
Net income $ 18,086 $ 42,747 $ 60,133 $ 33,754 $ 24,609
Total assets $550,089 $512,338 $467,662 $419,074 $381,183
Long term obligations $ 52,152 $ 25,203 $ 14,365 $ 28,215 $ 28,390
Dividends per share:
Class A Common Stock $.60 $.48 $.40 $.30 $.30
Class B Common Stock $.89 $.71 $.59 $.44 $.44
Net income per share:
Based on the assumption that earnings were allocated to Class A and
Class B Common Stock to the extent that dividends were actually paid for the
year and the remainder were allocated as they would be received by
shareholders in the event of liquidation, that is, equally to Class A and
Class B shares, share and share alike:
1997 1996 1995 1994 1993
Class A Common Stock $.64 $1.75 $2.39 $1.32 $.94
Class B Common Stock $.93 $1.98 $2.58 $1.46 $1.08
Due to the special characteristics of the Company's two classes of
stock (see Note 5 to the Consolidated Financial Statements), earnings per
share can be calculated upon the basis of varying assumptions, none of
which, in the opinion of management, would be free from the claim that it
fails fully and accurately to represent the true interest of the
shareholders of each class of stock and in the retained earnings.
19
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 discussions of the Company's results of operations, financial
condition and changes in financial condition (Dollars in thousands):
1997 1996 1995 1994
Net sales:
Industrial shipping containers $396,456 $391,315 $392,505 $353,992
Containerboard 252,528 246,053 326,840 229,534
Total $648,984 $637,368 $719,345 $583,526
Operating profit:
Industrial shipping containers $13,157 $16,736 $ 9,059 $ 9,573
Containerboard 10 36,926 80,476 30,306
Total $13,167 $53,662 $89,535 $39,879
Net income $18,086 $42,747 $60,133 $33,754
Current ratio 2.9:1 3.7:1 4.0:1 4.4:1
Cash flow from operations $40,115 $81,906 $85,820 $48,049
(Decrease) increase in working
capital $(22,257) $(13,973) $ 3,342 $ 7,202
Capital expenditures $36,193 $74,395 $61,066 $40,682
RESULTS OF OPERATIONS
Net income decreased $24,661,000 or 58% from the prior year. The
reduction is primarily due to the lower operating profit for the
containerboard segment caused by lower sales prices without a corresponding
decrease in the cost of products sold and selling, general and
administrative expenses for the segment. The lower sales prices were a
result of the continued weakness in paper prices which related to excess
capacity in the containerboard market during 1997. These negative price
trends, which started at the end of 1995, reached a 19-year low in May 1997.
In the last several months of 1997, sales prices in the containerboard
segment have begun to increase.
Historically, revenues or earnings may or may not be representative of
future operations because of various economic factors. As explained below,
the Company is subject to the general economic conditions of its customers
and the industry in which it operates.
20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The Company remains confident that, with the financial strength that it
has built over its 120-year existence, it will be able to compete in its
highly competitive markets.
Net Sales
The containerboard segment had an increase in net sales of $6.5 million
or 2.6% in 1997. As mentioned above, excess capacity in the containerboard
market caused sales prices for containerboard and related products to be
lower. This reduction in sales prices at our paper mills was partially
offset by an increase in sales volume this year as compared to last year.
In addition, the Company completed three acquisitions of corrugated
container companies: Aero Box Company located in Roseville, Michigan;
Independent Container, Inc. with locations in Louisville and Erlanger,
Kentucky and Ferdinand, Indiana; and Centralia Container, Inc. located in
Centralia, Illinois. These acquisitions, along with the two acquisitions
from the prior year, contributed $48.7 million of net sales during 1997, and
contributed to the further integration of the businesses. In the prior
year, there were $7.3 million of net sales relating to the 1996
acquisitions.
The industrial shipping containers segment had an increase in net sales
of $5.1 million or 1.3% in 1997. The increase is primarily due to the
purchase of two steel drum operations located in Merced, California and
Oakville, Ontario, Canada in the current year which contributed $19.1
million in sales during 1997. The increase that resulted from this
acquisition was partially offset by the disposal of the Company's wood
components plants in Kentucky, California, Washington and Oregon, at the
beginning of August 1997 and one of its injection molding facilities located
in Ohio during February 1997. Net sales for the locations which were sold
amounted to $38 million in 1997 and $46.2 million in 1996. These locations
were sold since it was determined that they no longer met the strategic
objectives of the Company.
The containerboard segment had a decrease in net sales of $81 million
in 1996. The reduction in net sales was primarily caused by lower selling
prices due to weaknesses in the containerboard market during 1996. This
decrease was partially offset by a sales volume increase in 1996.
During 1996, the Company purchased two corrugated container companies
with locations in Illinois, West Virginia and Kentucky. In addition, a
subsidiary of the Company began operations at a new plant in Mason,
Michigan.
21
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Net sales in the industrial shipping containers segment remained about
the same in 1996 as in the previous year. There was a decrease in net sales
due to the closing of two drum plants at the end of 1995. The closings
resulted from management's determination that they would not provide a
reasonable return to the Company. The reduction in net sales was offset by
a net increase in sales at the other locations of this segment primarily due
to more sales volume.
The containerboard segment had an increase in net sales of $97 million
in 1995 which was primarily due to higher sales prices. The increase in
sales prices resulted from shortages in the containerboard and related
products industry. In addition, there was a less significant increase in
unit sales of the segment because of the inclusion of an entire year of
sales in 1995 for the 325 ton per day recycled paper machine at a subsidiary
of the Company which was completed in December 1993.
The industrial shipping containers segment had an increase in net sales
of $39 million in 1995 resulting from more volume. In addition, there were
some sales price increases that were made because of the increase in the
cost of the Company's raw materials.
Operating Profit
During 1997, the decrease in operating profit of $40.5 million is
primarily due to a lower gross profit margin of 13.1% this year compared to
19.1% last year. This reduction was caused by lower sales prices per unit
in the containerboard segment without a corresponding reduction in the cost
of products sold. In addition, selling, general and administrative expenses
included in both segments increased over the prior year partially due to
additional selling, general and administrative costs being included from the
Company's recent acquisitions.
The operating profit of the containerboard segment is insignificant in
1997 compared to $37 million or 15.0% of net sales in 1996 and $80 million
or 24.6% of net sales in 1995. The decrease in 1996, and continued decrease
in 1997 is due to the reduction in sales prices resulting in less favorable
gross profit margins. The increase in 1995 is due to increases in net sales
and more favorable gross profit margins.
22
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The operating profit of the industrial shipping containers segment is
$13.2 million or 3.3% of net sales in 1997 compared to $17 million or 4.3%
of net sales in 1996 and $9 million or 2.3% of net sales in 1995. The
operating profits of this segment have been affected by severe price
pressures on its products. However, due to the Company's ongoing efforts to
reduce operating costs through cost control measures, manufacturing
innovations and capital expenditures, the operating profits increased from
1994 to 1996. During 1997, the Company experienced lower profitability due
to higher cost of materials without a corresponding increase in sales
prices.
Restructuring Charge
During 1997, the Company adopted a plan to consolidate its operations
which included the relocation of certain key operating employees, the
realignment of some of its administrative functions and the reduction of
certain support functions. As a result, there was a charge to income of
$6.2 million during the fourth quarter.
Other Income
Other income increased in 1997 due to $3 million of additional sales of
timber properties. Also, the Company sold its wood components plants and
one of its injection molding facilities during the year which resulted in
$3.7 million of gains on the sale of capital assets.
Other income of the Company increased in 1996 due to the sale of timber
properties in the United States and in Canada.
In 1995, other income increased primarily due to the sale of timber
properties under threat of acquisition by eminent domain and more salvage
timber sales. The increase in volume of timber sales was accompanied by
higher timber prices.
Interest Expense
Interest expense increased $2.2 million as a result of additional debt
issued in 1997 and 1996 relating to the acquisitions of the Company and
certain capital improvements.
23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Income Before Income Taxes
Income before income taxes decreased $38.2 million in 1997 primarily
due to less favorable gross profit margins than in the prior year. In
addition, there was a $6.2 million charge related to the restructuring and a
$2.2 million increase in interest expense. These reductions were offset by
the $3 million of higher timber sales and $3.7 million of gains on the sale
of certain facilities which no longer fit the business strategy of the
Company.
Income before income taxes decreased by $30.2 million in 1996 due to
lower sales and less favorable gross profit margins than in the prior year.
These reductions were offset by a $1.6 million increase in gains from timber
sales as compared to 1995.
In 1995, income before income taxes increased because of higher sales
and more favorable gross profit margins. In addition, as discussed above,
there was an increase in the sale of timber and timber properties.
LIQUIDITY AND CAPITAL RESOURCES
As indicated in the Consolidated Balance Sheets, elsewhere in this
Report and in the financial data set forth above, the Company is dedicated
to maintaining a strong financial position. It is our belief that this
dedication is extremely important during all economic times.
The Company's financial strength is important to continue to achieve
the following goals:
a. To protect the assets of the Company and the intrinsic value of
shareholders' equity in periods of adverse economic conditions.
b. To respond to any large and presently unanticipated cash demands that
might result from future adverse events.
c. To be able to benefit from new developments, new products and new
opportunities in order to achieve the best results for our shareholders.
d. To continue to pay competitive remuneration, including the ever-increasing
costs of employee benefits, to Company employees who produce the results
for the Company's shareholders.
24
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
e. To replace and improve plants and equipment. When plants and production
machinery must be replaced, either because of wear or to obtain the cost-
reducing potential of technological improvement required to remain a low-
cost producer in the 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.
The Company, during 1997, invested approximately $36 million in capital
additions and $42 million for its acquisitions. During the last three
years, the Company has invested $223 million in capital additions and
acquisitions.
During 1997, the Company purchased three corrugated container
companies, Aero Box Company, Independent Container, Inc. and Centralia
Container, Inc. In addition, the Company purchased two steel drum
operations. Furthermore, one of the paper mills added a power plant to
its operations and a corrugated carton plant had a major addition to its
facility which included more machinery and equipment.
As discussed in the 1996 Annual Report, Virginia Fibre Corporation, a
subsidiary of the Company, made significant improvements to its facilities
by adding a new woodyard and a manufacturing control system. Greif Board
Corporation, a subsidiary of the Company, made significant improvements to
its machinery and equipment. In addition, Michigan Packaging Company, a
subsidiary of the Company, built a new manufacturing plant in Mason,
Michigan that was completed in November 1995. The Company purchased two
corrugated container companies, Decatur Container Corporation and Kyowva
Corrugated Container Company, Inc. in 1996.
While there is no commitment to continue such a practice, at least one
new manufacturing plant or a major addition to an existing plant has been
undertaken in each of the last three years.
On December 10, 1997, the Company signed a non-binding letter of intent
to acquire all of the outstanding shares of KMI Continental Fibre Drum,
Inc., Fibro Tambor, S.A. de C.V., Sonoco Plastic Drum, Inc. from Sonoco
Products and their interest in Total Packaging Systems of Georgia, LLC for
approximately $225 million in cash. The acquisition is subject to
satisfactory completion of due diligence by the Company and receipt of all
required governmental approvals. In addition, the Company has approved
future purchases, primarily for equipment, of approximately $7 million.
25
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (concluded)
Self-financing and borrowing have been the primary sources for past
capital expenditures and acquisitions. The Company will attempt to finance
future capital expenditures and acquisitions in a like manner. Long term
obligations are higher at October 31, 1997 compared to October 31, 1996 due
to additional long term debt related to its acquisitions and capital
improvements. The increase caused by this debt was partially offset by the
payment of long term debt during 1997.
These investments are an indication of the Company's commitment to be
the quality, low-cost producer and the desirable long term supplier to all
of our customers.
Management believes that the present financial strength of the Company
will be sufficient to achieve the foregoing goals.
In spite of such necessary financial strength, the Company's industrial
shipping containers business, where packages manufactured by Greif Bros.
Corporation are purchased by other manufacturers and suppliers, is wholly
subject to the general economic conditions and business success of the
Company's customers.
Similarly, the Company's containerboard and related products business
is subject to the general economic conditions and the effect of the
operating rates of the containerboard industry, including pricing pressures
from its competitors.
The historical financial strength generated by these segments has
enabled them to remain independently liquid during adverse economic
conditions.
SAFE HARBOR STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters
discussed in this Annual Report contain certain forward-looking statements
which involve risks and uncertainties, including, but not limited to,
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, services and related products, prices and
other factors discussed in the Company's filings with the Securities and
Exchange Commission. The Company's actual results could differ materially
from those projected in such forward-looking statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable at this time
26
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, 1997 1996 1995
Net sales $648,984 $637,368 $719,345
Other income:
Interest and other 12,918 5,214 5,822
Gain on timber sales 12,681 9,626 8,067
674,583 652,208 733,234
Costs and expenses (including
depreciation of $30,660 in 1997,
$26,348 in 1996 and $22,944 in
1995):
Cost of products sold 563,665 515,775 561,118
Selling, general and administrative 78,743 68,220 73,733
Interest 2,670 517 472
645,078 584,512 635,323
Income before income taxes 29,505 67,696 97,911
Taxes on income 11,419 24,949 37,778
Net income $ 18,086 $ 42,747 $ 60,133
Net income per share (based on the average number of shares outstanding during
the year):
Based on the assumption that earnings were allocated to Class A and Class
B Common Stock to the extent that dividends were actually paid for the year and
the remainder were allocated as they would be received by shareholders in the
event of liquidation, that is, equally to Class A and Class B shares, share and
share alike:
1997 1996 1995
Class A Common Stock $ .64 $1.75 $2.39
Class B Common Stock $ .93 $1.98 $2.58
Due to the special characteristics of the Company's two classes of stock
(see Note 5), earnings per share can be calculated upon the basis of varying
assumptions, none of which, in the opinion of management, would be free from
the claim that it fails fully and accurately to represent the true interest of
the shareholders of each class of stock and in the retained earnings.
See accompanying Notes to Consolidated Financial Statements
27
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
October 31, 1997 1996
CURRENT ASSETS
Cash and cash equivalents $ 17,719 $ 26,560
Canadian government securities 7,533 19,479
Trade accounts receivable - less allowance of
$847 for doubtful items ($826 in 1996) 81,582 73,987
Inventories 44,892 49,290
Prepaid expenses and other 21,192 16,131
Total current assets 172,918 185,447
LONG TERM ASSETS
Cash surrender value of life insurance 1,070 2,982
Goodwill - less amortization 17,352 4,617
Other long term assets 20,952 7,116
39,374 14,715
PROPERTIES, PLANTS AND EQUIPMENT - at cost
Timber properties - less depletion 6,884 6,112
Land 11,139 10,771
Buildings 139,713 125,132
Machinery, equipment, etc. 424,177 385,834
Construction in progress 17,546 33,450
Less accumulated depreciation (261,662) (249,123)
337,797 312,176
$550,089 $512,338
See accompanying Notes to Consolidated Financial Statements
28
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, 1997 1996
CURRENT LIABILITIES
Accounts payable $ 37,390 $ 31,609
Current portion of long term obligations 8,504 2,455
Accrued payrolls and employee benefits 13,821 8,989
Accrued taxes - general 97 1,949
Taxes on income 596 5,678
Total current liabilities 60,408 50,680
LONG TERM OBLIGATIONS 43,648 22,748
OTHER LONG TERM LIABILITIES 16,155 15,406
DEFERRED INCOME TAXES 29,740 22,872
Total long term liabilities 89,543 61,026
SHAREHOLDERS' EQUITY
Capital stock, without par value 9,739 9,034
Class A Common Stock:
Authorized 32,000,000 shares;
issued 21,140,960 shares;
outstanding 10,900,672 shares
(10,873,172 in 1996)
Class B Common Stock:
Authorized and issued 17,280,000 shares;
outstanding 12,001,793 shares
Treasury stock, at cost (41,868) (41,867)
Class A Common Stock: 10,240,288 shares
(10,267,788 in 1996)
Class B Common Stock: 5,278,207 shares
Retained earnings 437,550 436,672
Cumulative translation adjustment (5,283) (3,207)
400,138 400,632
$550,089 $512,338
See accompanying Notes to Consolidated Financial Statements
29
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, 1997 1996 1995
Cash flows from operating activities:
Net income $ 18,086 $ 42,747 $ 60,133
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and
amortization 31,926 26,420 23,002
Deferred income taxes 4,703 9,308 6,597
Gain on disposals of properties, plants
and equipment (7,023) (412) (331)
Increase (decrease) in cash from changes
in certain assets and liabilities, net of
effects from acquisitions:
Trade accounts receivable (769) 4,831 (7,449)
Inventories 9,660 6,356 (2,932)
Prepaid expenses and other (2,563) 420 (2,098)
Other long term assets (11,719) (75) (1,344)
Accounts payable 1,809 (5,481) 2,987
Accrued payrolls and employee benefits 4,449 (1,904) 3,800
Accrued taxes - general (1,871) (37) 2
Taxes on income (5,118) 5,449 (587)
Other long term liabilities (1,455) (5,716) 4,040
Net cash provided by operating activities 40,115 81,906 85,820
Cash flows from investing activities:
Acquisitions of companies, net of cash
acquired (41,121) (284) --
Disposals of investments in government
securities 12,585 1,481 9,211
Purchases of investments in government
securities (639) (1,979) (4,223)
Purchases of properties, plants and
equipment (36,193) (74,395) (61,066)
Proceeds on disposals of properties,
plants and equipment 7,634 851 745
Net cash used in investing activities (57,734) (74,326) (55,333)
Cash flows from financing activities:
Proceeds from issuance of long term
obligations 52,753 11,329 12,000
Payments on long term obligations (25,804) (3,692) (25,849)
Payments on short term obligations -- (6,668) --
Acquisitions of treasury stock (31) -- (2,647)
Exercise of stock options 735 -- --
Dividends paid (17,208) (13,740) (12,180)
Net cash provided by (used in) financing
activities 10,445 (12,771) (28,676)
Foreign currency translation adjustment (1,667) 139 258
Net (decrease) increase in cash and cash
equivalents (8,841) (5,052) 2,069
Cash and cash equivalents at beginning of year 26,560 31,612 29,543
Cash and cash equivalents at end of year $ 17,719 $ 26,560 $ 31,612
See accompanying Notes to Consolidated Financial Statements
30
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)
Capital Stock Treasury Stock Retained Translation Share-
Shares Amount Shares Amount Earnings Adjustment holders'
Equity
Balance at November
1, 1994 24,182 $9,034 14,239 $(38,129) $359,712 $(3,678) $326,939
Net income 60,133 60,133
Dividends paid
(Note 5):
Class A - $.40 (4,349) (4,349)
Class B - $.59 (7,831) (7,831)
Treasury shares
acquired (107) 107 (2,647) (2,647)
Translation gain 288 288
Balance at October
31, 1995 24,075 9,034 14,346 (40,776) 407,665 (3,390) 372,533
Net income 42,747 42,747
Dividends paid
(Note 5):
Class A - $.48 (5,219) (5,219)
Class B - $.71 (8,521) (8,521)
Treasury shares
acquired (1,200) 1,200 (1,091) (1,091)
Translation gain 183 183
Balance at October
31, 1996 22,875 9,034 15,546 (41,867) 436,672 (3,207) 400,632
Net income 18,086 18,086
Dividends paid
(Note 5):
Class A - $.60 (6,526) (6,526)
Class B - $.89 (10,682) (10,682)
Treasury shares
acquired (1) 1 (31) (31)
Stock options
exercised 28 705 (28) 30 735
Translation loss (2,076) (2,076)
Balance at October
31, 1997 22,902 $9,739 15,519 $(41,868) $437,550 $(5,283) $400,138
See accompanying Notes to Consolidated Financial Statements
31
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The Consolidated Financial Statements include the accounts of Greif
Bros. Corporation and its subsidiaries (the Company). All intercompany
transactions and balances have been eliminated in consolidation.
Revenue Recognition
Revenue is recognized when goods are shipped.
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 tax rates currently in effect.
Cash and Cash Equivalents
The Company considers highly liquid investments with an original
maturity of three months or less to be cash and cash equivalents. Included
in these amounts are repurchase agreements and certificates of deposit of
$4,800,000 and $4,700,000, respectively, in 1997 ($6,100,000 and
$13,400,000, respectively, in 1996).
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. These securities have maturities to 2002.
During 1997, the Company received $10,600,000 in proceeds from the sale
of available-for-sale securities ($3,600,000 in 1995). The realized gains
and losses included in income are immaterial.
32
Item 8. Financial Statements and Supplementary Data (continued)
Inventories
Inventories are comprised principally of raw materials and are stated
at the lower of cost (principally on last-in, first-out basis) or market.
If inventories were stated on the first-in, first-out basis, the balance
would be $47,000,000 greater in 1997, $48,400,000 greater in 1996 and
$57,600,000 greater in 1995. During 1997, 1996 and 1995, the Company
experienced slight LIFO liquidations which were deemed to be immaterial to
the Consolidated Financial Statements.
Properties, Plants and Equipment
Depreciation on properties, plants and equipment is provided by the
straight-line method over the estimated useful lives of the assets.
Accelerated depreciation methods are used for income tax purposes.
Expenditures for repairs and maintenance are charged to income as incurred.
Depletion on timber properties is computed on the basis of cost and the
estimated recoverable timber acquired.
When properties are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the asset and related allowance
accounts. Gains or losses are credited or charged to income as applicable.
Goodwill
Goodwill is amortized on a straight-line basis over fifteen years. The
Company periodically reviews its goodwill to determine if an impairment has
occurred. Accumulated amortization was $1,052,000 at October 31, 1997
($19,000 at October 31, 1996).
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, Canadian government
securities and long term obligations approximate their fair values.
The fair value of long term obligations is estimated based on quoted
market prices on current rates offered to the Company for debt of the same
remaining maturities. The carrying values of the interest rate swap
agreements (see Note 4) approximate their fair values, as determined by the
counterparties.
33
Item 8. Financial Statements and Supplementary Data (continued)
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.
The transaction gains and losses included in income are immaterial.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual amounts could differ from those estimates.
Operations by Industry Segment
Information concerning the Company's industry segments, presented on
pages 3-4 of this Form 10-K, is an integral part of these financial
statements.
Recent Accounting Standards
During 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share", SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information".
SFAS No. 128 (effective in 1998 for the Company) requires companies to
present basic earnings per share and diluted earnings per share. The
adoption of the new standard is not expected to have a material effect on
the presentation of earnings per share.
SFAS No. 130, which will not be effective until 1999 for the Company,
requires companies to present comprehensive income, which is comprised of
net income and other charges and credits to equity that are not the result
of transactions with the owners, in its financial statements. Currently, the
only item in addition to net income that would be included in comprehensive
income is the cumulative translation adjustment.
34
Item 8. Financial Statements and Supplementary Data (continued)
SFAS No. 131, which will not be effective until 1999 for the Company,
requires that reporting segments be redefined in terms of a company's
operating segments. Adoption of the new standard is not expected to have a
significant impact on the presentation of the Company's segments.
NOTE 2 - ACQUISITIONS AND DISPOSITIONS
In November 1996, the Company purchased the assets of Aero Box Company,
a corrugated container company, located in Michigan. In March 1997, the
Company acquired the assets of two steel drum manufacturing plants located
in California and Ontario, Canada. In May 1997, the Company purchased all
of the outstanding common stock of Independent Container, Inc., a corrugated
container company with two locations in Kentucky and a location in Indiana.
In June 1997, the Company purchased all of the outstanding common stock of
Centralia Container, Inc., located in Illinois.
The acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the
assets purchased and liabilities assumed based upon the fair values at the
date of acquisition. The excess of the purchase price over the fair values
of the net assets acquired has been recorded as goodwill. The Consolidated
Financial Statements include the operating results of each business from the
date of acquisition. Pro forma results of operations have not been
presented because the results of these acquisitions were not significant to
the Company.
In February 1997, the Company sold its injection molding plant in Ohio.
In addition, the Company sold its wood component facilities, which
manufactured door panels, wood moldings and window and door parts, with
locations in Kentucky, California, Washington and Oregon in August 1997.
The transactions resulted in a gain of $3.7 million which is included in
other income.
NOTE 3 - RESTRUCTURING COSTS
During the fourth quarter of 1997, the Company adopted a plan to
consolidate its operations. This plan included the relocation of certain
key operating people to the corporate office. In addition, there was a
realignment of some of the administrative functions that were being
performed at the subsidiary and division offices which resulted in some
staff reductions. Finally, costs associated with the reduction of certain
support functions were incurred. As a result, a restructuring charge of
$6.2 million, consisting primarily of severance benefits, was recorded in
the results of operations during the fourth quarter of 1997.
35
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 4 - LONG TERM OBLIGATIONS
The Company's long term obligations, which are primarily with banks,
include the following as of October 31 (Dollars in thousands):
1997 1996
Notes Payable:
Fixed rate notes - 5.91% to 9.69%, due 1998 -
2015, secured by certain equipment, real
estate, inventory and receivables $ 1,558 $ 1,988
Variable rate notes - LIBOR plus .25% to .49%
or Prime Rate plus 1%, due 1999 - 2004,
certain notes secured by equipment 35,544 8,609
Revolving credit agreement and lines of
credit:
Variable rate - tied to LIBOR or Prime Rate,
expiring in 2000 15,050 12,830
Total 52,152 23,427
Capital lease obligation -- 1,776
Less: current portion 8,504 2,455
Long term obligations $43,648 $22,748
Long term obligations have generally resulted from acquisitions and
capital improvements. Certain loan agreements contain debt covenants related
to the financial position or results of operations of the Company.
The Company has a revolving credit agreement and lines of credit
totaling $62 million. At October 31, 1997, the Company has $47 million
available under its revolving credit agreement and lines of credit.
During 1997, the Company entered into interest rate swap agreements
with aggregate notional amounts of $32,685,000 without the exchange of
underlying principal. The interest rate swaps were entered into to manage
the Company's exposure to variable rate debt. Under such agreements, the
Company receives interest from the counterparties equal to amounts incurred
under its existing variable rate debt, and pays interest to the
counterparties at fixed rates ranging from 6.43% to 7.39%. The differential
to be paid and received under such agreements is recorded as an adjustment
to interest expense and is included in interest receivable or payable. The
agreements expire within seven years.
Annual maturities of long term obligations are $8,504,000 in 1998,
$7,895,000 in 1999, $22,737,000 in 2000, $7,503,000 in 2001, $3,049,000 in
2002 and $2,464,000 thereafter.
36
Item 8. Financial Statements and Supplementary Data (continued)
During 1997, the Company paid $3,726,000 of interest ($862,000 in 1996
and $1,359,000 in 1995) related to the long term obligations. Interest of
$1,163,000 in 1997, $569,000 in 1996 and $780,000 in 1995 was capitalized.
During 1997, the capital lease obligation relating to land, building
and machinery and equipment at one of the Company's plant locations was
assumed by another party through the disposal of a plant. The amount that
was capitalized under this agreement was $2,708,000 and had accumulated
depreciation of $606,000 as of October 31, 1996.
The Company has entered into non-cancelable operating leases for
buildings and office space. The future minimum lease payments for the non-
cancelable operating leases are $1,473,000 in 1998, $992,000 in 1999,
$630,000 in 2000, $578,000 in 2001, $298,000 in 2002 and $250,000
thereafter. Rent expense was $5,684,000 in 1997, $3,592,000 in 1996 and
$3,246,000 in 1995.
NOTE 5 - CAPITAL STOCK
Class A Common Stock is entitled to cumulative dividends of 1 cent a
share per year after which Class B Common Stock is entitled to non-
cumulative dividends up to 1/2 cent a share per year. Further distribution
in any year must be made in proportion of 1 cent a share for Class A Common
Stock to 1 1/2 cents a share for Class B Common Stock. The Class A Common
Stock shall have no voting power nor shall it be entitled to notice of
meetings of the shareholders, all rights to vote and all voting power being
vested exclusively in the Class B Common Stock unless four quarterly
cumulative dividends upon the Class A Common Stock are in arrears. There is
no cumulative voting.
NOTE 6 - STOCK OPTIONS
In 1996, a Directors' Stock Option Plan (Directors' Plan) was adopted
which 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 which options 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. As of October 31, 1997, no options have been
exercised. Options expire ten years after date of grant.
37
Item 8. Financial Statements and Supplementary Data (continued)
During 1995, the Company adopted an Incentive Stock Option Plan (Option
Plan) which provides the discretionary granting of incentive stock options
to key employees and non-statutory options for non-employees. The aggregate
number of the Company's Class A Common Stock which options may be granted
shall not exceed 1,000,000 shares. Under the terms of the Option Plan,
options are granted at exercise prices equal to the market value on the date
the options are granted and become exercisable after two years from the date
of grant. Options expire ten years after date of grant.
In 1997, 136,500 incentive stock options were granted with option
prices of $30.00 per share. Under the Directors' Plan, 12,000 options were
granted to outside directors with option prices of $30.50 per share.
In 1996, 152,100 incentive stock options were granted with option
prices of $29.62 per share. Under the Directors' Plan, 12,000 options were
granted to outside directors with option prices of $30.00 per share.
In 1995, 155,000 and 44,500 incentive stock options were granted with
option prices of $26.19 per share and $22.94 per share, respectively. In
addition, 10,000 non-statutory options were granted with option prices of
$23.75 per share.
The Company applies Accounting Principles Board Opinion 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):
1997 1996
Net income $17,133 $42,486
Net income per share:
Class A Common Stock $.60 $1.74
Class B Common Stock $.89 $1.97
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:
1997 1996
Dividend yield 1.31% 1.16%
Volatility rate 20.60% 29.20%
Risk-free interest rate 6.29% 6.52%
Expected option life 6 years 6 years
38
Item 8. Financial Statements and Supplementary Data (continued)
The weighted fair value of shares granted were $9.03 and $10.95 at
October 31, 1997 and 1996, respectively. Stock option activity was as
follows (Shares in thousands):
1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Beginning Balance 374 $27.25 210 $25.38 -- $ --
Granted 148 30.04 164 29.62 210 25.38
Forfeited 38 27.11 -- -- -- --
Exercised 28 25.79 -- -- -- --
Expired -- -- -- -- -- --
Ending Balance 456 $28.26 374 $27.25 210 $25.38
There are 181,000 options which were exercisable at October 31, 1997
(12,000 options at October 31, 1996).
During 1996, the Company purchased all rights to options granted under
a stock option plan at one of its subsidiaries and subsequently eliminated
the plan.
39
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 7 - INCOME TAXES
Income tax expense is comprised as follows (Dollars in thousands):
State
U.S. and
Federal Foreign Local Total
1997:
Current $ 3,617 $ 2,097 $ 1,607 $ 7,321
Deferred 4,087 (96) 107 4,098
$ 7,704 $ 2,001 $ 1,714 $11,419
1996:
Current $11,330 $ 3,075 $ 1,630 $16,035
Deferred 7,903 (59) 1,070 8,914
$19,233 $ 3,016 $ 2,700 $24,949
1995:
Current $27,053 $ 1,616 $ 3,567 $32,236
Deferred 3,655 258 1,629 5,542
$30,708 $ 1,874 $ 5,196 $37,778
Foreign income before income taxes amounted to $5,241,000 in 1997
($7,729,000 in 1996 and $4,452,000 in 1995).
The following is a reconciliation of the U.S. statutory Federal income
tax rate to the Company's effective tax rate:
1997 1996 1995
U.S. Federal statutory tax rate 35.0% 35.0% 35.0%
State and local taxes, net of
Federal tax benefit 3.8% 3.6% 3.9%
Other (.1%) (1.7%) (.3%)
Effective income tax rate 38.7% 36.9% 38.6%
40
Item 8. Financial Statements and Supplementary Data (continued)
Significant components of the Company's deferred tax assets and
liabilities are as follows at October 31 (Dollars in thousands):
1997 1996
Current deferred tax assets $ 5,729 $ 3,564
Current deferred tax liabilities $ 10 $ 29
Book basis on acquired assets $10,159 $11,432
Other 2,249 551
Long term deferred tax assets $12,408 $11,983
Depreciation $35,448 $27,974
Timber condemnation 3,557 2,873
Undistributed Canadian net income 1,627 1,753
Pension costs 1,111 1,887
Other 405 368
Long term deferred tax liabilities $42,148 $34,855
At October 31, 1997, the Company has provided deferred income taxes on
all of its undistributed Canadian earnings.
During 1997, the Company paid $13,334,000 in income taxes ($10,318,000
in 1996 and $35,692,000 in 1995).
NOTE 8 - 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 amount of the Company's stock (127,752 shares of Class A
Common Stock and 77,755 shares of Class B Common Stock at October 31, 1997
and 1996).
41
Item 8. Financial Statements and Supplementary Data (continued)
The pension expense for the plans included the following (Dollars in
thousands):
1997 1996 1995
Service cost, benefits earned during
the year $ 2,714 $ 2,648 $2,365
Interest cost on projected benefit
obligation 4,548 4,277 3,839
Actual return on assets (8,986) (6,404) (4,646)
Net amortization 3,974 1,759 263
2,250 2,280 1,821
Multi-employer and non-U.S. pension
expense 370 593 790
Total pension expense $ 2,620 $ 2,873 $2,611
The range of weighted average discount rate and expected long term rate
of return on plan assets used in the actuarial valuation was 7.0% - 9.0% for
1997, 1996 and 1995. The rate of compensation increases for salaried
employees used in the actuarial valuation range from 4.0% - 6.5% for 1997,
1996 and 1995.
42
Item 8. Financial Statements and Supplementary Data (continued)
The following table sets forth the plans' funded status and amounts
recognized in the Consolidated Financial Statements (Dollars in thousands):
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1997 1996 1997 1996
Actuarial present value of
benefit obligations:
Vested benefit obligation $34,190 $31,675 $10,636 $ 9,243
Accumulated benefit
obligation $34,569 $32,113 $12,279 $10,782
Projected benefit obligation $46,246 $46,085 $12,279 $10,782
Plan assets at fair value $59,836 $52,423 $10,718 $10,257
Plan assets greater than
(less than) projected
benefit obligation $13,590 6,338 $(1,561) $(525)
Unrecognized net (gain) loss (8,942) (9,274) 641 769
Prior service cost not yet
recognized in net periodic
pension cost 6,096 6,587 2,788 2,368
Adjustment required to
recognize minimum liability -- -- (1,048) (804)
Unrecognized net (asset)
obligation from transition (7,345) 438 (2,381) (2,333)
Prepaid pension cost
(liability) $ 3,399 $ 4,089 $(1,561) $ (525)
During 1997 and 1996, the Company, in accordance with the provisions of
SFAS No. 87, "Employers' Accounting for Pensions", recorded the "adjustment
required to recognize minimum liability". The amount was offset by a long
term asset, of an equal amount, recognized in the Consolidated Financial
Statements.
43
Item 8. Financial Statements and Supplementary Data (continued)
In addition to the pension plans, the Company has several voluntary
401(k) savings plans which cover eligible employees at least 21 years of age
with one year of service. For certain plans, the Company matches 25% of
each employees contribution, up to a maximum of 5% or 6% of base salary.
Company contributions to the 401(k) plans were $350,000 in 1997, $234,000 in
1996 and $27,000 in 1995.
NOTE 9 - SUBSEQUENT EVENT
On December 10, 1997, the Company signed a non-binding letter of intent
to acquire all of the outstanding shares of KMI Continental Fibre Drum,
Inc., Fibro Tambor, S.A. de C.V. and Sonoco Plastic Drum, Inc., which are
wholly-owned subsidiaries of Sonoco Products Co. (Sonoco). In addition, the
Company would purchase Sonoco's interest in Total Packaging Systems of
Georgia, LLC. These companies comprise the entire industrial container
group of Sonoco and last year had combined annual net sales of approximately
$210 million. The acquisition of these operations includes twelve fibre
drum plants and five plastic drum plants along with facilities for research
and development, packaging services and distribution.
The purchase price will be approximately $225 million in cash and is
subject to regulatory approval and due diligence review.
44
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 generally
accepted accounting principles 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 auditor of the Company. In
addition, Price Waterhouse LLP, an independent accounting firm, audits the
financial statements of Greif Bros. Corporation and its subsidiaries and
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 auditor 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 Officer Chief Financial Officer and
Secretary
45
Item 8. Financial Statements and Supplementary Data (continued)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the
Board of Directors of
Greif Bros. Corporation
In our opinion, the consolidated financial statements listed in the
index appearing under Item 14(a)(1) on page 48 present fairly, in all
material respects, the financial position of Greif Bros. Corporation and its
subsidiaries at October 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years ended October
31, 1997, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements
in accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP Columbus, Ohio
November 26, 1997, except as to Note 9,
which is as of December 10, 1997
46
Item 8. Financial Statements and Supplementary Data (concluded)
QUARTERLY FINANCIAL DATA (Unaudited)
The quarterly results of operations for fiscal 1997 and 1996 are shown
below (Dollars in thousands, except per share amounts):
Quarter Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1997 1997 1997 1997
Net sales $152,370 $152,529 $167,062 $177,023
Gross profit $ 21,041 $ 17,608 $ 22,193 $ 24,477
Net income $ 4,485 $ 3,580 $ 4,682 $ 5,339
Net income per share:
Assuming distributions as actually paid out in dividends and the
balance as in liquidation:
Class A Common Stock $.14 $.12 $.18 $.20
Class B Common Stock $.25 $.18 $.24 $.26
Quarter Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1996 1996 1996 1996
Net sales $159,743 $159,212 $155,994 $162,419
Gross profit $ 32,309 $ 26,051 $ 27,129 $ 36,104
Net income $ 10,826 $ 6,579 $ 9,636 $ 15,706
Net income per share:
Assuming distributions as actually paid out in dividends and the
balance as in liquidation:
Class A Common Stock $.41 $.27 $.40 $.67
Class B Common Stock $.52 $.31 $.44 $.71
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 disclosure.
47
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, 1997. Information regarding the executive officers of
the Registrant may be found under the caption "Executive Officers 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, 1997.
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, 1997.
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, 1997.
48
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this Report:
Page
(1) Financial Statements:
Consolidated Statements of Income for the three
years ended October 31, 1997 26
Consolidated Balance Sheets at October 31,
1997 and 1996 27-28
Consolidated Statements of Cash Flows
for the three years ended October 31, 1997 29
Consolidated Statements of Changes in
Shareholders' Equity for the three years
ended October 31, 1997 30
Notes to Consolidated Financial Statements 31-43
Report of Management's Responsibilities 44
Report of Independent Accountants 45
Quarterly Financial Data (Unaudited) 46
(2) Financial Statements Schedules:
Report of Independent Accountants on
Financial Statement Schedules 53
Consolidated Valuation and Qualifying Accounts
and Reserves (Schedule II) 54
49
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(continued)
(3) Exhibits:
If Incorporated by Reference
Exhibit with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
3(a) Amended and Restated Contained herein.
Certificate of Incorporation of
Greif Bros. Corporation.
3(b) Amended and Restated By-Laws of Contained herein.
Greif Bros. Corporation.
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 Contained Herein.
Incentive Stock Option Plan, as
Amended and Restated.
11 Statement Re: Computation of Contained herein.
Per Share Earnings.
21 Subsidiaries of the Registrant. Contained herein.
23 Consent of Price Waterhouse LLP. Contained herein.
24(a) Powers of Attorney for Michael J. Contained herein.
Gasser, Charles R. Chandler,
Michael H. Dempsey, Naomi C.
Dempsey, Daniel J. Gunsett,
Allan Hull, Robert C. Macauley,
David J. Olderman, William B.
Sparks, Jr., and J Maurice
Struchen.
27 Financial Data Schedule. Contained herein.
50
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(concluded)
(b) Reports on Form 8-K
(1) No reports on Form 8-K have been filed during
the last quarter of fiscal 1997.
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
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, 1997, except indebtedness
incurred in the ordinary course of business which is not in default.
51
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, 1998 By /s/ Michael J. Gasser
Michael J. Gasser
Chairman of the Board of Directors
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/ Joseph W. Reed
Michael J. Gasser Joseph W. Reed
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 * Allan Hull *
Daniel J. Gunsett Allan Hull
Member of the Board of Directors Member of the Board of Directors
Robert C. Macauley * David J. Olderman *
Robert C. Macauley David J. Olderman
Member of the Board of Directors Member of the Board of Directors
William B. Sparks, Jr. * J Maurice Struchen *
William B. Sparks, Jr. J Maurice Struchen
Member of the Board of Directors Member of the Board of Directors
[Signatures continued on the next page]
52
* 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, 1998.
53
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Greif Bros. Corporation
Our audits of the consolidated financial statements referred to in our
report dated November 26, 1997, except as to Note 9, which is as of December
10, 1997, appearing on page 45 of this Form 10-K also included an audit of
the Financial Statement Schedules listed in Item 14(a)(2) of this Form 10-K.
In our opinion, these Financial Statement Schedules present fairly, in all
material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
Columbus, Ohio
November 26, 1997,
except as to Note 9,
which is as of December 10, 1997
54
SCHEDULE II
GREIF BROS. CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN $000)
Balance at
Balance at Charged to Charged to End of
Description of Period Expenses Accounts Deductions Period
Year ended
October 31,
1995:
Reserves deducted
from applicable
assets:
For doubtful
items-
trade accounts
receivables $ 989 $ 536 $37 (A) $773 (B) $ 789
For doubtful
items-
other notes
and accounts
receivable 697 -0- -0- -0- 697
Total reserves
deducted from
applicable
assets $1,686 $ 536 $37 $773 $1,486
Year ended
October 31, 1996:
Reserves deducted
from applicable
assets:
For doubtful
items-
trade accounts
receivables $ 789 $ 201 $22 (A) $186 (B) $ 826
For doubtful
items-
other notes
and accounts
receivable 697 -0- -0- -0- 697
Total reserves
deducted from
applicable
assets $1,486 $ 201 $22 $186 $1,523
Year ended
October 31,
1997:
Reserves deducted
from applicable
assets:
For doubtful
items-
trade accounts
receivables $ 826 $ 431 $11 (A) $421 (B) $ 847
For doubtful
items-
other notes
and accounts
receivable 697 -0- -0- -0- 697
Total reserves
deducted from
applicable
assets $1,523 $431 $11 $421 $1,544
(A) Collections of accounts previously written-off.
(B) Accounts written-off.
55
EXHIBIT INDEX
If Incorporated by Reference
Exhibit with which Exhibit was
No. Description of Exhibit Previously filed with SEC
3(a) Amended and Restated Contained herein.
Certificate of Incorporation of
Greif Bros. Corporation.
3(b) Amended and Restated By-Laws of Contained herein.
Greif Bros. Corporation.
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 Contained herein.
Incentive Stock Option Plan, as
Amended and Restated.
11 Statement Re: Computation of Contained herein.
Per Share Earnings.
21 Subsidiaries of the Registrant. Contained herein.
23 Consent of Price Waterhouse LLP. Contained herein.
24(a) Powers of Attorney for Michael Contained herein.
J. Gasser, Charles R. Chandler,
Michael H. Dempsey, Naomi C.
Dempsey, Daniel J. Gunsett,
Allan Hull, Robert C. Macauley,
David J. Olderman, William B.
Sparks, Jr., and J Maurice
Struchen.
27 Financial Data Schedule. Contained herein.