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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, 2001 Commission File Number 1-566
---------------- -----
GREIF BROS. CORPORATION
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(Exact name of Registrant as specified in its charter)
State of Delaware 31-4388903
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Winter Road, Delaware, Ohio 43015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 740-549-6000
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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. [_]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of January 10, 2002 was $87,396,679.
The number of shares outstanding of each of the Registrant's classes of common
stock, as of January 10, 2002 was as follows:
Class A Common Stock - 10,519,576
Class B Common Stock - 11,812,859
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 25, 2002, 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, 2001.
PART I
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Item 1. Business
- ------- --------
(a) General Development of Business
Greif Bros. Corporation and its subsidiaries (the "Company")
principally manufacture industrial shipping containers and containerboard
and corrugated products that it sells to customers in many industries
throughout the world. In March 2001, the Company acquired all of the issued
share capital of Royal Packaging Industries Van Leer N.V., a Dutch limited
liability company, Huhtamaki Holdings do Brasil Ltda., a Brazilian limited
liability company, Van Leer France Holding S.A.S., a French limited
liability company, Van Leer Containers, Inc., a U.S. corporation, and
American Flange & Manufacturing Co., Inc., a U.S. corporation
(collectively, "Van Leer Industrial Packaging") (see Note 2 to the
Consolidated Financial Statements on pages 43-46 of this Form 10-K, which
Note is part of the financial statements contained in Item 8 of this Form
10-K), which significantly increased the operations of the Company. In
addition, the Company owns timber properties, which are principally
harvested and regenerated in the southeastern United States.
The Company has 185 operating locations in over 40 countries and, as
such, is subject to federal, state, local and foreign regulations in effect
at the various localities.
(b) Financial Information about Segments
The Company operates in three business segments: Industrial Shipping
Containers; Containerboard & Corrugated Products; and Timber. Information
related to each of these segments is included in Note 14 to the
Consolidated Financial Statements on pages 61-63 of this Form 10-K, which
Note is part of the financial statements contained in Item 8 of this Form
10-K, and which is incorporated herein by reference.
(c) Narrative Description of Business
Management's Discussion and Analysis of Financial Condition and
Results of Operations, which is included in Item 7 of this Form 10-K, is
incorporated herein by reference.
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.
1
Item 1. Business (continued)
- ------- --------
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.
The Company does not believe that compliance with federal, state,
local and foreign provisions which have been enacted or adopted regulating
the discharge of materials into the environment, or otherwise relating to
the protection of the environment, has had or will have a material effect
upon the capital expenditures, earnings, or competitive position of the
Company. The Company does not anticipate any material capital expenditures
for environmental control facilities for its 2002 fiscal year.
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.
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 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.
As of October 31, 2001, the Company had approximately 10,000
employees.
(d) Financial Information about Geographic Areas
The Company's operations are primarily located in North America,
Europe and various other regions. Information related to each of these
areas is included in Note 14 to the Consolidated Financial Statements, on
pages 61-63 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. Quantitative and Qualitative Disclosures
about Market Risk, included in Item 7A of this Form 10-K, is incorporated
herein by reference.
2
Item 2. Properties
- ------- ----------
The following are the Company's principal locations and the 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
-------- ---------------------
INDUSTRIAL SHIPPING CONTAINERS:
Argentina:
San Juan Plastic drums
San Fernando del Valle Steel drums
Tigre Steel drums, plastic drums and other
Australia:
Altona North Steel drums, plastic drums, intermediate bulk
containers and other
Brisbane Steel drums and other
Eagle Farm (1) Reconditioning
Marayong Plastic drums and other
Penrith (2) Closures
Perth Steel drums, plastic drums and other
Seven Hills Steel drums and other
Townsville Steel drums
Belgium:
Lier Steel drums, plastic drums and other
Brazil:
Aratu Steel drums
Araucaria Closures
Esteio Steel drums
Manaus (3) Plastic drums
Rio de Janeiro Steel drums
Sao Paulo Steel drums, plastic drums and other
Canada:
Alberta:
Lloydminster Fibre drums, steel drums and plastic drums
Ontario:
Belleville Plastic drums
Milton Fibre drums
Oakville Steel drums
Stoney Creek Fibre drums
Stoney Creek Steel drums
Stoney Creek Research center and fibre drums
Quebec:
La Salle Fibre drums
Chile:
Santiago Steel drums
3
Item 2. Properties (continued)
- ------- ----------
Location Products Manufactured
-------- ---------------------
China:
Ningbo Steel drums
Columbia:
Bogota (4) Steel drums, plastic drums and other
Cartagena Steel drums and plastic drums
Costa Rica:
San Jose (5) Steel drums
Czech Republic:
Usi nad Labem Steel drums
Denmark:
Roskilde Fibre drums
Egypt:
Sadat City Steel drums
France:
Autheuil Authouilet (38) Fibre drums, plastic drums and warehouse
Gare de Correze Plastic drums and warehouse
Le Grand-Quevilly Cedex (6) Steel drums, intermediate bulk containers,
closures, warehouse and other
Germany:
Attendorn Steel drums
Haan (7) Closures warehouse
Hamburg-Freihafen (8) Steel drums
Koln-Lovenich Fibre drums, steel drums and other
Monzingen Plastic drums
Greece:
Mandra-Attikis Steel drums
Guatemala:
Amatitlan Steel drums
Hungary:
Almasfusito Steel drums
Italy:
Melzo Fibre drums, steel drums and plastic drums
Salzano Steel drums
Jamaica:
Kingston Steel drums
Kenya:
Mombasa (9) Steel drums, plastic drums and other
4
Item 2. Properties (continued)
- ------- ----------
Location Products Manufactured
-------- ---------------------
Malaysia:
Petaling Jaya Steel drums, plastic drums and other
Mexico:
Cuernavaca Steel drums
Naucalpan de Juarez Fibre drums
Morocco:
Casablanca Steel drums and plastic drums
Mozambique:
Maputo Steel drums, plastic drums and other
Netherlands:
Amstelveen General office
Amsterdam Closures
Europoort (10) Steel drums and research center
Vreeland Fibre drums, steel drums and other
New Zealand:
Auckland Intermediate bulk containers
Dunedin Intermediate bulk containers
Nigeria:
Kaduna Steel drums
Koko Steel drums
Lagos (11) Steel drums, plastic drums and other
Philippines:
Rizal (12) Steel drums
Poland:
Rybnik (13) Steel drums and other
Portugal:
Povoa de Santa Iria Steel drums
Russia:
Beloyarsk (14) Steel drums
Vologda Steel drums and other
Singapore:
Tuas Steel drums
Gul (15) Closures
South Africa:
Eppingdust Steel drums
Ladysmith Plastic drums
Mobeni Steel drums and other
Port Elizabeth Warehouse
Vanderbijlpark Steel drums and other
5
Item 2. Properties (continued)
- ------- ----------
Location Products Manufactured
-------- ---------------------
Spain:
Reus (Tarragona) Steel drums, warehouse and other
Sweden:
Perstorp Fibre drums and warehouse
Vasterhaninge (16) Steel drums
Turkey:
Kocaeli Steel drums and other
United Kingdom:
Burton-on-Trent Steel drums and other
Deeside (17) Closures and other
Ellesmere Port Steel drums
Ellesmere Port Fibre drums, plastic drums and other
Hull Steel drums
Kingston-Upon-Hull (38) Plastic drums
Uruguay:
Las Piedras (18) Steel drums and plastic drums
Venezuela:
Punto Fijo Steel drums
Valencia Steel drums, plastic drums and other
Zimbabwe:
Harare Steel drums, plastic drums and other
United States:
Alabama:
Creola Fibre drums
Cullman Steel drums
Arkansas:
Batesville (38) Fibre drums
California:
Fontana Steel drums
La Palma Fibre drums
Merced Steel drums
Morgan Hill Fibre drums
Colorado:
Denver (19) Warehouse
Connecticut:
Windsor Locks (20) Fibre drums
Georgia:
Lawrenceville Intermediate bulk containers
Lavonia Intermediate bulk containers
Lithonia Fibre drums and laminator
6
Item 2. Properties (continued)
- ------- --------------------
Location Products Manufactured
-------- ---------------------
Illinois:
Alsip Steel drums
Bradley (21) Plastic drums
Bradley (22) Other
Carol Stream Closures
Chicago Steel drums
Lockport Plastic drums
Lombard (23) Research center
Naperville (24) Fibre drums
Kansas:
Kansas City (25) Fibre drums
Winfield Steel drums
Kentucky:
Florence Steel drums
Mount Sterling Plastic drums
Mount Sterling Warehouse
Louisiana:
St. Gabriel Steel drums and plastic drums
Massachusetts:
Mansfield Fibre drums
Michigan:
Midland (26) Warehouse
Taylor Fibre drums
Minnesota:
Minneapolis Fibre drums
Mississippi:
Canton (38) Steel drums
Missouri:
Wright City (27) Fibre drums
New Jersey:
Englishtown (28) Fibre drums
Spotswood Fibre drums
Teterboro Fibre drums
New York:
Tonawanda Fibre drums
North Carolina:
Bladenboro Steel drums
Charlotte (29) Fibre drums
7
Item 2. Properties (continued)
- ------- ----------
Location Products Manufactured
-------- ---------------------
Ohio:
Caldwell Steel drums
Delaware (30) Research center
Greenville Other
Van Wert Fibre drums
Pennsylvania:
Aston Fibre drums
Stroudsburg Steel parts
Warminster (31) Steel drums
West Hazleton (32) Plastic drums
Tennessee:
Kingsport Fibre drums
Texas:
Haltom City Fibre drums
Houston (33) Fibre drums
Houston (34) Plastic drums
La Porte Steel drums
La Porte Other
West Virginia:
Culloden (35) Fibre drums
CONTAINERBOARD & CORRUGATED PRODUCTS:
United States:
California:
Stockton Corrugated honeycomb
Georgia:
Macon Corrugated honeycomb
Illinois:
Centralia Corrugated containers
Oreana Corrugated containers
Posen Corrugated honeycomb
Quincy (38) Warehouse
Indiana:
Ferdinand (36) Corrugated containers
Kentucky:
Louisville Corrugated containers
Winchester Corrugated containers
Winchester (38) Warehouse
Michigan:
Canton Warehouse
Roseville Corrugated containers
Minnesota:
Rosemount Multiwall bags
8
Item 2. Properties (continued)
- ------- ----------
Location Products Manufactured
-------- ---------------------
Nebraska:
Omaha Multiwall bags
Ohio:
Fostoria Corrugated containers
Massillon Containerboard
Tiffin Corrugated containers
Toledo Corrugated containers
Zanesville Corrugated containers and sheets
Zanesville Warehouse
Pennsylvania:
Reno (37) Corrugated containers
Hazelton Corrugated honeycomb
Washington Corrugated containers and sheets
Washington (38) Warehouse
Texas:
Waco Corrugated honeycomb
Waco (38) Warehouse
Virginia:
Riverville Containerboard
Washington:
Woodland Corrugated honeycomb and warehouse
West Virginia:
Huntington Corrugated containers and sheets
Huntington (38) Warehouse
TIMBER:
United States:
Alabama:
Evergreen Warehouse
Mississippi:
Vicksburg Warehouse
CORPORATE:
United States:
Ohio:
Delaware Principal office
9
Item 2. Properties (continued)
- ------- ----------
Note: All properties are held in fee except as noted below:
Exceptions:
(1) Lease expires January 18, 2003
(2) Lease expires May 11, 2003
(3) Lease expires July 31, 2004
(4) Lease expires December 31, 2004
(5) Lease expires January 9, 2007
(6) Lease expires November 1, 2002
(7) Lease expires February 28, 2006
(8) Lease expires December 31, 2009
(9) Lease expires December 31, 2047
(10) Lease expires September 30, 2015
(11) Lease expires February 21, 2031
(12) Lease expires August 2003
(13) Lease expires July 1, 2002
(14) Lease expires September 1, 2003
(15) Lease expires July 31, 2002
(16) Lease expires December 31, 2005
(17) Lease expires March 31, 2014
(18) Lease expires December 30, 2002
(19) Lease expires December 15, 2004
(20) Lease expires December 31, 2005
(21) Lease expires March 31, 2006
(22) Lease expires June 30, 2002
(23) Lease expires July 31, 2007
(24) Lease expires June 30, 2003
(25) Lease expires March 31, 2004
(26) Lease expires October 16, 2002
(27) Lease expires August 31, 2005
(28) Lease expires February 28, 2003
(29) Lease expires September 30, 2003
(30) Lease expires June 30, 2002
(31) Lease expires April 30, 2006
(32) Lease expires January 1, 2016
(33) Lease expires December 31, 2006
(34) Lease expires September 30, 2006
(35) Lease expires January 31, 2006
(36) Lease expires July 31, 2002
(37) Lease expires December 31, 2004
(38) Lease operates month to month
The Company also owns in fee a substantial number of scattered timber
tracts comprising approximately 315,000 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, local
or foreign 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.
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 50 Chairman of the Board of 1988
Directors and Chief Executive
Officer, Chairman of the
Executive and Stock Repurchase
Committees and member of the
Nominating Committee
William B. Sparks, Jr. 60 Director, President and Chief 1995
Operating Officer, member of the
Executive Committee
Charles R. Chandler 66 Director, Vice Chairman, 1996
President of Soterra LLC
(subsidiary company), member of
the Executive Committee
Maureen A. Conley 43 Senior Vice President, New 2000
Business Development
11
Executive Officers of the Company (continued)
- ---------------------------------
Year first became
Name Age Positions and offices executive officer
- ---- ---- --------------------- -----------------
John S. Lilak 54 Executive Vice President, 1999
Containerboard & Corrugated
Products
Joseph W. Reed 64 Chief Financial Officer and 1997
Secretary
Michael L. Roane 46 Senior Vice President, Human 1998
Resources & Communications
Gary R. Martz 43 Senior Vice President and General 2002
Counsel
Michael J. Barilla 51 Vice President, Business 2002
Information Services
John K. Dieker 38 Vice President and Corporate 1996
Controller
Sharon R. Maxwell 52 Assistant Secretary 1997
Robert A. Young 47 Vice President and Director of 2002
Taxation
Robert S. Zimmerman 30 Assistant Treasurer 2001
The following information relates to certain significant employees of the
Company:
Year first became
Name Age Positions and offices significant employee
- ---- --- --------------------- --------------------
Francisco de Miguel 57 Special Counsel to 2001
the Chairman
Executive Officers and Certain Significant Employees of the Company
- -------------------------------------------------------------------
Except as indicated below, each person has served in his or her present
capacity for at least five years.
Ms. Maureen A. Conley was elected Senior 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.
12
Executive Officers and Certain Significant Employees of the Company
- -------------------------------------------------------------------
(concluded)
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 served as Chief Financial Officer and Secretary from
1997 to 2000, and Senior Vice President in 2001, and he was re-elected Chief
Financial Officer and Secretary in 2001. 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 Senior 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. Gary R. Martz was elected Senior Vice President and General Counsel in
2002. Prior to that time, and for more than five years, he served as a partner
in the law firm of Baker & Hostetler LLP.
Mr. Michael J. Barilla was appointed Vice President, Business Information
Services, during 1999. In 2002, Mr. Barilla was elected as an executive officer
of the Company. During 1997 to 1999, Mr. Barilla served as a Senior Consultant
for IBM Corporation. Prior to 1997, and for more than five years, he served as
Chief Financial Officer 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.
Mr. Robert A. Young was elected Vice President and Director of Taxation
during 2002. During 1999 to 2001, Mr. Young served as the Director of Taxes.
Prior to that time, and for more than five years, he was the Tax Manager of
Consolidated Papers, Inc.
Mr. Robert S. Zimmerman was elected Assistant Treasurer during 2001. From
1999 until joining the Company, he served as Treasury Manager at Mettler-Toledo
International, Inc. From 1997 to 1998, he was a Risk Advisor at Bank One. Prior
to 1997, and for more than five years, Mr. Zimmerman served as a Portfolio
Analyst at Chase Manhattan Mortgage Corporation.
Mr. Francisco de Miguel was appointed as Special Counsel to the Chairman in
2001. Prior to that time, and for more than five years, he served as President
of Van Leer Industrial Packaging.
13
PART II
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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.
Financial information regarding the Company's two classes of common stock,
as well as the number of holders of each class and the high, low and closing
sales prices for each class for each quarterly period for the two most recent
fiscal years, is included in Note 15 to the Consolidated Financial Statements on
pages 64-65 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 four dividends of varying amounts during its fiscal year
computed on the basis described in Note 8 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:
2001 fiscal year dividends per share - Class A $0.54; Class B $0.80
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
Section 8.13 of the Senior Secured Credit Agreement, a copy of which is
filed as Exhibit 10(j) to this Form 10-K, limits the ability of the Company to
make "restricted payments", which include dividends and purchases, redemptions
and acquisitions of equity interests of the Company.
The payments of dividends and other restricted payments are subject to the
condition that no default exists under the Senior Secured Credit Agreement and
are limited in amount by a formula based on the consolidated net income of the
Company. The dividends and other restricted payments may not exceed $18 million
during any fiscal year.
14
Item 6. Selected Financial Data
- ------- -----------------------
The five-year selected financial data is as follows (U.S. dollars in
thousands, except per share amounts):
Years Ended October 31,
----------------------------------------------------------------
2001 2000 1999 1998 1997
---------- -------- -------- -------- --------
Net sales $1,456,000 $963,956 $853,438 $845,753 $687,991
========== ======== ======== ======== ========
Net income $ 88,744 $ 75,794 $ 51,373 $ 37,441 $ 22,526
========== ======== ======== ======== ========
Total assets $1,776,396 $939,331 $910,986 $878,420 $594,217
========== ======== ======== ======== ========
Long-term debt, including
current portion of
long-term debt $ 697,514 $235,000 $258,000 $235,000 $ 52,152
========== ======== ======== ======== ========
Dividends per share:
Class A Common Stock $ 0.54 $ 0.52 $ 0.50 $ 0.48 $ 0.60
========== ======== ======== ======== ========
Class B Common Stock $ 0.80 $ 0.77 $ 0.74 $ 0.71 $ 0.89
========== ======== ======== ======== ========
Basic earnings per share:
Class A Common Stock $ 3.14 $ 2.68 $ 1.78 $ 1.30 $ 0.78
========== ======== ======== ======== ========
Class B Common Stock $ 4.70 $ 4.01 $ 2.67 $ 1.94 $ 1.17
========== ======== ======== ======== ========
Diluted earnings per share:
Class A Common Stock $ 3.14 $ 2.67 $ 1.78 $ 1.29 $ 0.78
========== ======== ======== ======== ========
Class B Common Stock $ 4.70 $ 4.01 $ 2.67 $ 1.94 $ 1.17
========== ======== ======== ======== ========
The 2001 amounts include the results of operations (from the date of
acquisition) and assets of the Van Leer Industrial Packaging business acquired
from Hutamaki Van Leer Oyj on March 2, 2001. The increase in long-term debt in
2001 is a result of this acquisition.
The 2001, 2000, 1999 and 1998 amounts include the results of operations
(from the date of acquisition) 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 $11.5 million, $27.5 million and $5.3 million for 2001, 1998 and
1997, respectively.
15
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 (U.S. dollars in thousands):
2001 2000 1999
---------- -------- --------
Net sales:
- ----------
Industrial Shipping Containers $1,038,948 $490,909 $477,370
Containerboard & Corrugated Products 379,302 428,369 351,936
Timber 37,750 44,678 24,132
---------- -------- --------
Total $1,456,000 $963,956 $853,438
========== ======== ========
EBITDA:
- -------
Industrial Shipping Containers $ 101,810 $ 59,583 $ 60,244
Containerboard & Corrugated Products 87,698 85,826 54,197
Timber 111,738 46,926 25,389
---------- -------- --------
Total segment 301,246 192,335 139,830
Restructuring charge (11,534) -- --
Corporate and other (34,822) (34,817) (17,129)
---------- -------- --------
Total EBITDA 254,890 157,518 122,701
Depreciation, depletion and
amortization (81,507) (45,222) (42,360)
Interest expense, net (45,149) (11,842) (12,983)
Foreign currency effects (228) -- --
---------- -------- --------
Income before income taxes,
minority interest in income of
consolidated subsidiaries and
equity in earnings of affiliates 128,006 100,454 67,358
Income taxes (48,514) (38,027) (26,740)
Minority interest in income of
consolidated subsidiaries (594) -- --
Equity in earnings of affiliates 9,876 13,367 10,755
---------- -------- --------
Net income $ 88,774 $ 75,794 $ 51,373
========== ======== ========
Current ratio 1.7:1 3.3:1 3.0:1
Cash flows from operations $ 98,865 $117,229 $ 71,766
Capital expenditures $ 132,217 $ 78,833 $ 49,253
Acquisitions of businesses $ 312,892 $ -- $ 74,233
16
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (continued)
-------------------------
RESULTS OF OPERATIONS
- ---------------------
Overview
- --------
The Company had record net sales and earnings in 2001. The previous
records were achieved in the prior year. On March 2, 2001, the Company acquired
Van Leer Industrial Packaging (see Note 2 to the Consolidated Financial
Statements on pages 43-46 of this Form 10-K, which Note is part of the financial
statements contained in Item 8 of this Form 10-K). As such, the Consolidated
Financial Statements include eight months of results for the year ended October
31, 2001 related to the Van Leer Industrial Packaging operations.
The Company operates in three business segments: Industrial Shipping
Containers; Containerboard & Corrugated Products; and Timber.
Net sales increased 51.0% to $1,456.0 million, including $446.2 million
from outside North America, in 2001 from $964.0 million in 2000. The increase in
net sales for the North American region was due to the Industrial Shipping
Containers segment ($101.8 million), which was partially offset by lower net
sales in the Containerboard & Corrugated Products segment ($49.1 million) and
the Timber segment ($6.9 million). The higher net sales in the North American
operations of the Industrial Shipping Containers segment was primarily due to
the inclusion of additional sales volume from the Van Leer Industrial Packaging
acquisition. The weaker economic conditions in the United States that prevailed
throughout 2001 compared to 2000 caused lower sales volumes and increased
competitive pricing in both the Industrial Shipping Containers and
Containerboard & Corrugated Products segments. Net sales and cost of products
sold have been restated, in accordance with EITF No. 00-10, "Accounting for
Shipping and Handling Fees and Costs," for the reclassification of certain
shipping and handling costs from a reduction in net sales to cost of products
sold for all years presented.
Earnings before interest, income taxes, depreciation, depletion and
amortization ("EBITDA") rose to $266.4 million, before the $11.5 million second
quarter restructuring charge, this year compared to $157.5 million last year.
The $108.9 million increase is attributable to higher gains on the sale of
timberland ($70.4 million) and the inclusion of Van Leer Industrial Packaging.
The factors that caused a reduction in EBITDA included weaker economic
conditions in the United States for both the Industrial Shipping Containers and
Containerboard & Corrugated Products segments. In addition, the lower timber
sales partially offset the improvement in EBITDA.
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
industries in which it operates.
17
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (continued)
-------------------------
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 industries and countries 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.
Segment Review
- --------------
Industrial Shipping Containers
2001 versus 2000:
The Industrial Shipping Containers segment had an increase in net sales of
$548.0 million, or 111.6%, primarily due to the inclusion of $446.2 million of
net sales outside of North America resulting from the acquisition of Van Leer
Industrial Packaging. Net sales in North America increased $101.8 million due to
additional sales volume from Van Leer Industrial Packaging during the eight
months ended October 31, 2001. A decrease in customer demand caused by weakness
in the U.S. economy, particularly in the chemical industry, partially offset
this increase in net sales. In addition, net sales to the agricultural sector
were lower in the first quarter of 2001 compared to 2000, which benefited from a
late harvest of certain crops during 1999 that extended into the first quarter
of 2000.
The EBITDA for Industrial Shipping Containers improved to $101.8 million,
before the $11.5 million second quarter restructuring charge, for 2001 from
$59.6 million for 2000. The primary reason for this increase relates to $48.8
million in EBITDA from outside North America.
2000 versus 1999:
The Industrial Shipping Containers segment had an increase in net sales of
$13.5 million, or 2.8%, in 2000 compared to 1999 due to an improvement in
general market conditions, especially in the chemical industry, improved pricing
to offset higher raw material prices and regaining some of the lost sales volume
resulting from the 1998 and 1999 plant closings and consolidation efforts. In
addition, there was an increase in activities related to container leasing and
reconditioning.
EBITDA for this segment remained at $60.0 million for both 2000 and 1999.
18
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (continued)
-------------------------
Containerboard & Corrugated Products
2001 versus 2000:
The Containerboard & Corrugated Products segment had a decrease in net
sales of $49.1 million, or 11.5%, as compared to the same period last year. This
reduction in net sales was caused by lower customer demand for corrugated
containers and containerboard due to continued weakness in the U.S. economy.
Lower average sales price for linerboard and medium also affected net sales
during 2001 as compared to 2000.
The EBITDA for this segment increased to $87.7 million for 2001 versus
$85.8 million in 2000. Lower raw material prices, especially for old corrugated
containers, a higher containerboard integration percentage and improved
operating efficiencies more than offset the decline caused by lower net sales
for this segment.
2000 versus 1999:
The Containerboard & Corrugated Products segment had an increase in net
sales of $76.4 million, or 21.7%, in 2000 compared to 1999 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.
In 2000, the EBITDA for Containerboard & Corrugated Products increased to
$85.8 million from $54.2 million in 1999. This improvement resulted from
improved gross margins resulting from the higher sales prices of this segment's
products without a corresponding increase in its costs.
Timber
2001 versus 2000:
Net sales of the Timber segment decreased $6.9 million from $44.7 million
during 2000 to $37.8 million during 2001. While timber sales are subject to
fluctuations, the Company seeks to maintain a consistent cutting schedule,
within the limits of market and weather conditions.
The sales of timber are recorded as net sales, while timberland sales are
included in gain on sale of timberland. The gain on sale of timberland was
$79.7 million for 2001 as compared to $9.3 million last year (see "Timberland
Transactions" below).
The EBITDA comparison for 2001 versus 2000 was primarily affected by the
significant gains on the sale of timberland partially offset by lower timber
sales.
19
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (continued)
-------------------------
2000 versus 1999:
The Timber segment had an increase in net sales of $20.5 million, or 85.1%,
in 2000 compared to 1999 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 timber
properties in the United States to achieve sustainable long-term yields on the
Company's timberland.
The increase in this segment's EBITDA for 2000 as compared to 1999 was due
to the significant improvement in net sales as well as $4.7 million of
additional gains on the sale of timberland.
Gain on Sale of Timberland
- --------------------------
Gain on sale of timberland increased $70.4 million in 2001 as compared to
2000 primarily due to the timber property sales described in the "Timberland
Transactions" section below.
The gain on sale of timberland increased $4.7 million in 2000 versus 1999.
Other Income, Net
- -----------------
Net other income increased to $6.4 million during 2001 from $4.9 million
last year. The change in other income is primarily due to gains on the sale of
facilities.
Net other income decreased $5.6 million in 2000 as compared to 1999
primarily due to $7.5 million less gain on the disposal of properties, plants
and equipment.
Cost of Products Sold
- ---------------------
The cost of products sold, as a percentage of net sales, increased from
76.5% in 2000 to 79.2% in 2001. The increase was primarily due to the inclusion
of Van Leer Industrial Packaging, which has contributed to a higher cost of
products sold, as a percentage of net sales, due to lower gross margins than the
Company's other products. In addition, Timber segment sales, which have a much
lower cost associated with them, were below those in 2000. This increase was
partially offset by lower raw material costs, which more than offset the lower
sales volume, in the Containerboard & Corrugated Products segment.
Cost of products sold was $737.5 million, or 76.5% of net sales, in 2000
compared with $675.1 million, or 79.1% 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
20
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (continued)
-------------------------
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.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses ("SG&A") increased to $204.7
million (14.1% of net sales) in 2001 as compared to $128.3 million (13.3% of net
sales) in 2000. The $76.4 million increase was primarily due to additional SG&A
related to Van Leer Industrial Packaging, which was acquired on March 2, 2001.
In addition, there was $5.3 million of amortization expense recorded on the
goodwill and other intangible assets from the acquisition of Van Leer Industrial
Packaging during the eight months ended October 31, 2001.
Despite increasing to $128.3 million in 2000 from $113.0 million in 1999,
SG&A had only increased slightly to 13.3% of net sales in 2000 from 13.2% of net
sales in 1999. The increased expenditures primarily represented higher costs to
support infrastructure improvements for current and future growth initiatives at
that time. In addition, $3.2 million of additional commission expense resulted
from the sale of timber and timberland in 2000. The increase was partially
offset by a $2.9 million reduction in Year 2000 remediation expenses.
Restructuring Costs
- -------------------
During the second quarter of 2001, the Company recognized a restructuring
charge of $11.5 million resulting from a plan to consolidate six of the
Company's existing Industrial Shipping Container operations and eliminate
redundant administrative functions in North America (see Note 5 to the
Consolidated Financial Statements on pages 48-49 of this Form 10-K, which Note
is part of the financial statements contained in Item 8 of this Form 10-K). In
connection with the acquisition and consolidation plan, an additional five
facilities in North America, South America, United Kingdom and Asia Pacific,
which were purchased as part of the Van Leer Industrial Packaging acquisition,
are being closed. Certain redundant administrative positions will also be
eliminated as part of this plan. Accordingly, the Company recorded a $19.7
million restructuring liability related to these locations. The Company has
incurred additional costs of $5.9 million in 2001 and will continue to incur
additional costs of approximately this same amount in 2002 related to the
relocation of machinery and equipment, employees and other reorganization costs,
which have been and will be charged to the results of operations. The Company's
management believes that, upon completion of the consolidation plan in 2002,
positive contributions to earnings on an annualized basis from these actions
will be approximately $27.5 million.
21
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (continued)
-------------------------
Interest Expense, Net
- ---------------------
Net interest expense during 2001 increased to $45.1 million from $11.8
million last year. The increase was primarily due to higher average debt
outstanding this year as a result of the Van Leer Industrial Packaging
acquisition, which was acquired on March 2, 2001, compared to last year.
The $1.1 million decrease in net interest expense for 2000 versus 1999 was
primarily due to $2.5 million of capitalized interest in 2000 compared to $0.4
million in 1999. The increase in capitalized interest related 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 1999.
Income Taxes
- ------------
The effective tax rate remained at 37.9% for 2001 and 2000.
During 2000, the effective tax rate dropped to 37.9% as compared to 39.7%
in 1999. The reduction, which was due to lower state and local taxes, had a
positive effect on net income in 2000.
Minority Interest in Income of Consolidated Subsidiaries
- --------------------------------------------------------
As part of the Van Leer Industrial Packaging acquisition, the Company
assumed minority holdings in 10 companies. These companies have been included in
the consolidated results, and the minority interest in their respective net
income has been eliminated.
Equity in Earnings of Affiliates
- --------------------------------
Equity in earnings of affiliates was $9.9 million for 2001 versus $13.4
million in 2000. This income represents the Company's equity interest in the
net income of CorrChoice, Inc. ("CorrChoice") and, to a lesser extent, the
Company's share of Abzac-Greif, Socer-Embalagens, Lda. and Balmer Lawrie-Van
Leer's net income (see Note 3 to the Consolidated Financial Statements on page
47 of this Form 10-K, which Note is part of the financial statements contained
in Item 8 of this Form 10-K).
Equity in earnings of affiliates increased $2.6 million, or 24.3%, in 2000
compared to 1999.
Net Income and Earnings Per Share
- ---------------------------------
Based on the foregoing, net income increased $13.0 million, or 17.1%, to
$88.8 million in 2001 from $75.8 million in 2000. Diluted earnings per share
were $3.14 and $4.70 for the Class A and Class B Common Stock, respectively, in
2001 compared with $2.67 and $4.01 for the Class A and Class B Common Stock,
respectively, in 2000.
22
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (continued)
-------------------------
Net income increased to $75.8 million in 2000 versus $51.4 million in 1999
due to the reasons previously stated. Diluted earnings per share of the Class A
and Class B Common Stock were $2.67 and $4.01, respectively, in 2000 and $1.78
and $2.67, respectively, in 1999.
Timberland Transactions
- -----------------------
In December 2000, the Company sold certain hardwood timberland for $44.4
million. As such, the Company recognized a gain of $43.0 million during the
first quarter of 2001 related to this transaction. In a related agreement, the
Company sold other hardwood timberland for $30.0 million in March 2001, and
recognized a gain of $27.7 million during the second quarter of 2001. A total
of approximately 65,000 acres of timber properties situated in Arkansas,
Mississippi and Louisiana were sold as a result of these transactions.
In a separate transaction during December 2000, the Company purchased
certain pine timberland for $42.8 million. In a related agreement, the Company
purchased other pine timberland for $43.1 million in March 2001. A total of
approximately 63,000 acres of timber properties situated in Louisiana were
purchased as a result of these transactions.
For tax purposes, these sale and purchase transactions are treated as like-
kind exchanges pursuant to Section 1031 of the Internal Revenue Code, and result
in a deferral of the tax gain on the sale 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.
23
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 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 2001, the Company invested $43 million in capital expenditures,
excluding the purchase of timber properties ($89 million). During the last three
years, the Company has invested $260 million in capital expenditures and
timberland purchases and $387 million in acquisitions of businesses, net of cash
acquired, described below. 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.
Van Leer Industrial Packaging Acquisition:
On March 2, 2001, pursuant to the terms of a Share Purchase Agreement,
dated October 27, 2000, as amended on January 5 and February 28, 2001, between
the Company and Huhtamaki, the Company acquired all of the issued share capital
of Van Leer Industrial Packaging for $555 million less the amount of Van Leer
Industrial Packaging's debt and certain other obligations ($206 million) as of
the closing date (see Note 2 to the Consolidated Financial Statements on pages
43-46 of this Form 10-K, which Note is part of the financial statements
contained in Item 8 of this Form 10-K). Van Leer Industrial Packaging is a
worldwide provider of industrial packaging and components, including steel,
fibre and plastic drums, polycarbonate water bottles, intermediate bulk
containers and closure systems, with operations in over 40 countries.
In June 1999, a wholly-owned Canadian subsidiary of the Company exchanged
its spiral core manufacturing assets for a 49% interest in Abzac S.A.'s fibre
drum business (which is known as "Abzac-Greif") (see Note 2 to the Consolidated
Financial Statements on pages 43-46 of this Form 10-K, which Note is part of the
financial statements contained in Item 8 of this Form 10-K). Abzac-Greif has
operations in Abzac, Lyon and Anvin, France, and markets and sells fibre drums
in Belgium as well as France.
24
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (continued)
-------------------------
On April 5, 1999, the Company acquired Great Lakes Corrugated Corp. ("Great
Lakes") and Trend Pak, Inc. ("Trend Pak") for approximately $21 million in cash
borrowed against the Company's then existing revolving credit facility (see Note
2 to the Consolidated Financial Statements on pages 43-46 of this Form 10-K,
which Note is part of the financial statements contained in Item 8 of this Form
10-K). Great Lakes manufactures corrugated containers in Toledo, Ohio. Trend
Pak adds foam and other packaging materials to corrugated containers
manufactured by Great Lakes.
On January 11, 1999, the Company acquired the intermediate bulk containers
business from Sonoco Products Company for approximately $38 million in cash
borrowed against the Company's then existing revolving credit facility (see Note
2 to the Consolidated Financial Statements on pages 43-46 of this Form 10-K,
which Note is part of the financial statements contained in Item 8 of this Form
10-K). The intermediate bulk containers business includes one location in
Lavonia, Georgia.
On November 1, 1998, the Company entered into a joint venture agreement to
form CorrChoice (see Note 2 to the Consolidated Financial Statements on pages
43-46 of this Form 10-K, which Note is part of the financial statements
contained in Item 8 of this Form 10-K). 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.
Balance Sheet Changes
- ---------------------
In general, the increases in assets and liabilities were primarily due to
the acquisition of Van Leer Industrial Packaging on March 2, 2001.
The increases in timber properties and land were primarily due to the
purchase of 63,000 acres of pine timber and land in Louisiana for $86 million.
In addition, the Van Leer Industrial Packaging acquisition contributed to the
increase in land.
The increase in restructuring reserves is due to the Company's 2001
consolidation plan. This amount has been reduced due to payments of severance
and other costs of closing the plants (see Note 5 to the Consolidated Financial
Statements on pages 48-49 of this Form 10-K, which Note is part of the financial
statements contained in Item 8 of this Form 10-K).
The increase in long-term debt was the result of borrowings under the
Company's Senior Secured Credit Agreement, which was used to fund the Van Leer
Industrial Packaging acquisition and to refinance amounts outstanding under the
Company's then existing credit facility. This increase was partially offset by
payments on long-term debt during the eight months ended October 31, 2001.
25
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (continued)
-------------------------
The increase in deferred tax liability was primarily due to the sale of
65,000 acres of hardwood timberland for $74 million, and the Van Leer Industrial
Packaging acquisition. During the year ended October 31, 2001, gains of $80
million, which included a $71 million gain from the sale of the 65,000 acres of
hardwood timberland (see "Timberland Transactions" section above), was
recognized on the sale of timberland. The tax gain is being deferred pursuant to
Section 1031 of the Internal Revenue Code.
Borrowing Arrangements
- ----------------------
On March 2, 2001, the Company and Greif Spain Holdings, S.L. entered into a
$900 million Senior Secured Credit Agreement with a syndicate of lenders. A
portion of the proceeds from the Senior Secured Credit Agreement was used to
fund the Van Leer Industrial Packaging acquisition and to refinance amounts
outstanding under the Company's then existing revolving credit facility. The
Senior Secured Credit Agreement provides for three term loans, a $150 million
U.S. Dollar Term Loan A, a $200 million Euro Term Loan A and a $400 million U.S.
Dollar Term Loan B, and a $150 million revolving multicurrency credit facility.
At October 31, 2001, there was $117 million available under the $150 million
revolving multicurrency credit facility. The revolving multicurrency credit
facility is available for working capital and general corporate purposes.
The Term Loan A (both U.S. Dollar and Euro) and Term Loan B periodically
reduce through the maturity date of February 28, 2006 and February 29, 2008,
respectively. The revolving multicurrency credit facility matures on February
28, 2006. The Company is required to pay a facility fee each quarter equal to
0.375% to 0.500% of the total commitment amount based upon the Company's
leverage ratio. Interest is based on either a LIBOR rate or an alternative base
rate plus a calculated margin amount and resets on a periodic basis.
The Senior Secured Credit Agreement contains certain covenants, including
financial covenants that require the Company to maintain a certain leverage
ratio, sufficient coverage of interest expense and fixed charges, and a minimum
net worth. In addition, the Company is limited with respect to the incurrence
of additional debt. The repayment of this facility is secured by a first lien
on substantially all of the personal property and certain of the real property
of the Company. Standard & Poor's and Moody's Investors Service have assigned a
"BB" rating and a "Ba3" rating, respectively, both with favorable outlook, to
the loan obligations of the Company under the Senior Secured Credit Agreement.
26
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (continued)
-------------------------
Share Repurchase Program
- ------------------------
In February 1999, the Board of Directors of the Company authorized a one
million-share stock repurchase program. During 2001, the Company repurchased
34,500 shares, including 10,000 Class A common shares and 24,500 Class B common
shares. As of October 31, 2001, the Company had repurchased 594,410 shares,
including 415,476 Class A common shares and 178,934 Class B common shares. The
total cost of the shares repurchased during 1999 through 2001 was $17 million.
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, 2001, the Company has spent
approximately $32 million towards this project. At this time, the finance module
is complete and the manufacturing and sales modules are being implemented. As
such, amortization has begun on approximately $20 million of this amount. The
capitalized costs of the project are being amortized on a straight-line basis
over seven years.
In addition to the new management information system, as described above,
the Company has approved future purchases of approximately $19 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.
EFFECTS OF INFLATION
- --------------------
The effects of inflation did not have a material impact on the Company's
operations during 2001, 2000 or 1999.
SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------
The significant accounting policies of the Company are revenue recognition,
income taxes, inventories, properties, plants and equipment, goodwill and other
intangible assets, derivative financial instruments, foreign currency
translation, and environmental cleanup costs. These policies are more fully
described in Note 1 to the Consolidated Financial Statements on pages 37-43 of
this Form 10-K, which Note is part of the financial statements contained in Item
8 of this Form 10-K.
27
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (continued)
-------------------------
Accounting principles generally accepted in the United States require
management to make certain estimates and assumptions that affect the financial
statements. The most significant of which are related to the allowance for
doubtful accounts, expected useful lives assigned to properties, plants and
equipment, goodwill and other intangible assets, restructuring reserves,
postretirement benefits, income taxes, and contingencies. Other items that
could have a significant impact on the financial statements include the risks
and uncertainties listed in the "Forward-Looking Statements; Certain Factors
Affecting Future Results" below. Actual results could differ materially using
different estimates and assumptions, or if conditions are significantly
different in the future.
RECENT ACCOUNTING STANDARDS
- ---------------------------
The recent accounting standards that could potentially affect the Company
are described in Note 1 to the Consolidated Financial Statements on pages 37-43
of this Form 10-K, which Note is part of the financial statements contained in
Item 8 of this Form 10-K.
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 countries in which it operates.
Accordingly, the Company's financial performance is substantially dependent upon
the general economic conditions existing in these countries.
The Relative Strength of the U.S. Dollar. The Company operates in over 40
----------------------------------------
countries throughout the world. As such, it is subject to fluctuations in
foreign currency exchange rates. However, given the geographic presence of the
Company's operations, this exposure is mitigated to some degree.
28
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations (concluded)
-------------------------
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.
Demand in Containerboard Market. Industry demand for containerboard has
-------------------------------
declined in recent years causing competitive pricing pressures in the
containerboard market which has 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.
Environmental and Health and Safety Matters; Product Liability Claims. The
---------------------------------------------------------------------
Company must comply with extensive rules and regulations regarding federal,
state, local and foreign 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 timberlands will have an effect on the Company's financial performance.
29
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 that include borrowings under its $900 million Senior Secured Credit
Agreement and interest rate swap agreements with an aggregate notional amount of
$320 million and EUR 65 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 borrowings.
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 Senior Secured Credit Agreement, the table
presents scheduled amortizations of principal and the current weighted average
interest rate by contractual maturity dates. For interest rate swaps, the table
presents annual amortizations of notional amounts and weighted average interest
rates by contractual maturity dates. Under the swap agreements, the Company
receives interest quarterly from the counterparties and pays interest quarterly
to the counterparties. The fair value of the Senior Secured Credit Agreement is
based on current rates available to the Company for debt of the same remaining
maturity. The fair value of the interest rate swap agreements have been
determined based upon the current market settlement prices of comparable
contracts.
Financial Instruments
---------------------
(U.S. dollars in millions)
Expected Maturity Date
--------------------------------------------------
Fair
2002 2003 2004 2005 2006 Thereafter Total Value
----- ----- ----- ----- ----- ---------- ----- -----
Senior Secured Credit
Agreement:
Scheduled amortizations $ 43 $ 59 $ 75 $ 90 $ 71 $ 358 $ 696 $ 696
Average interest rate (a) 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50%
Interest rate swaps:
Scheduled amortizations $ 40 $ 75 $ 28 $ 85 $ 100 $ 50 $ 378 $ (21)
Average fixed pay rate 5.43% 5.48% 5.54% 5.78% 5.99% 6.15% 5.56%
Average receive rate (b) 3.80% 3.80% 3.80% 3.80% 3.80% 3.80% 3.80%
(a) Variable rate specified is based on the LIBOR rate or an alternative base
rate plus a calculated margin at October 31, 2001.
(b) The average receive rate is based upon the LIBOR rates the Company was
scheduled to receive at October 31, 2001. The rates presented are not
intended to project the Company's expectations for the future.
Based on a sensitivity analysis performed by the counterparties at October
31, 2001, a 100 basis point increase in interest rates would improve the fair
value of the swap agreements to a liability of $11 million. Conversely, a 100
basis point decrease in interest rates would result in a fair value liability of
$32 million.
30
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
- -------- ----------------------------------------------------------
(concluded)
Foreign Currency Risk
- ---------------------
On March 2, 2001, the Company acquired Van Leer Industrial Packaging, an
industrial shipping containers manufacturer with operations in over 40
countries. Consequently, the Company's operating income is potentially affected
to a significant degree by fluctuations in foreign currency exchange rates.
However, given the geographic presence of the Company's operations, the Company
mitigates this exposure to some degree. Additionally, the Company's transaction
exposure is somewhat limited due to the Company both producing and selling a
majority of its products within each respective country.
The Company has entered into foreign currency forward contracts to hedge
certain short-term intercompany loan balances amongst the Company's foreign
businesses. Such contracts limit the Company's exposure to both favorable and
unfavorable currency fluctuations. At October 31, 2001, the Company had
contracts outstanding of $33 million. The fair value of these contracts at
October 31, 2001 was $0.3 million. Each of these contracts is hedging the
exposure of the euro against the fluctuation of various other currencies. A
sensitivity analysis to changes in the euro against these other currencies
indicates that if the euro uniformly weakened by 10% against all of the hedged
currency exposures, the fair value of these instruments would decrease by $6
million. Conversely, if the euro uniformly strengthened by 10% against all of
the hedged currency exposures, the fair value of these instruments would
increase by $3 million. Any resulting changes in fair value would be offset by
changes in the underlying hedged balance sheet position. The sensitivity
analysis assumes a parallel shift in foreign currency exchange rates. The
assumption that exchange rates change in parallel fashion may overstate the
impact of changing exchange rates on assets and liabilities denominated in a
foreign currency.
Commodity Price Risk
- --------------------
The Company's operating income is potentially affected to a significant
degree by fluctuations in the cost of its raw materials. Currently, the Company
has no derivative instruments used to hedge against such fluctuations in
commodity prices.
31
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars in thousands, except per share amounts)
For the years ended October 31, 2001 2000 1999
---- ---- ----
Net sales $1,456,000 $963,956 $853,438
Gain on sale of timberland 79,663 9,255 4,541
Other income, net 6,358 4,872 10,441
---------- -------- --------
1,542,021 978,083 868,420
---------- -------- --------
Cost of products sold 1,152,616 737,486 675,084
Selling, general and administrative
expenses 204,716 128,301 112,995
Restructuring costs 11,534 -- --
Interest expense, net 45,149 11,842 12,983
---------- -------- --------
1,414,015 877,629 801,062
---------- -------- --------
Income before income taxes, minority
interest in income of consolidated
subsidiaries and equity in earnings
of affiliates 128,006 100,454 67,358
Income taxes 48,514 38,027 26,740
---------- -------- --------
Income before minority interest in
income of consolidated subsidiaries
and equity in earnings of affiliates 79,492 62,427 40,618
Minority interest in income of
consolidated subsidiaries (594) -- --
Equity in earnings of affiliates 9,876 13,367 10,755
---------- -------- --------
Net income $ 88,774 $ 75,794 $ 51,373
========== ======== ========
Basic earnings per share:
Class A Common Stock $ 3.14 $ 2.68 $ 1.78
Class B Common Stock $ 4.70 $ 4.01 $ 2.67
Diluted earnings per share:
Class A Common Stock $ 3.14 $ 2.67 $ 1.78
Class B Common Stock $ 4.70 $ 4.01 $ 2.67
See accompanying Notes to Consolidated Financial Statements.
32
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
ASSETS
------
As of October 31, 2001 2000
---- ----
CURRENT ASSETS
Cash and cash equivalents $ 29,720 $ 13,388
Trade accounts receivable - less allowance of
$10,596 ($2,293 in 2000) 282,982 119,645
Income tax receivable -- 14,343
Inventories 123,363 42,741
Deferred tax asset 9,697 2,216
Net assets held for sale 12,530 8,495
Prepaid expenses and other 51,112 12,315
---------- ---------
509,404 213,143
---------- ---------
LONG-TERM ASSETS
Goodwill - less amortization 236,623 136,284
Other intangible assets 33,179 1,816
Investment in affiliates 144,071 136,374
Other long-term assets 44,282 16,052
---------- ---------
458,155 290,526
---------- ---------
PROPERTIES, PLANTS AND EQUIPMENT - at cost
Timber properties - less depletion 74,851 21,518
Land 81,048 12,330
Buildings 235,980 133,591
Machinery and equipment 689,637 521,685
Capital projects in progress 43,200 23,354
---------- ---------
1,124,716 712,478
Accumulated depreciation (315,879) (276,816)
---------- ---------
808,837 435,662
---------- ---------
$1,776,396 $ 939,331
========== =========
See accompanying Notes to Consolidated Financial Statements.
33
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
As of October 31, 2001 2000
---- ----
CURRENT LIABILITIES
Accounts payable $ 107,277 $ 42,855
Accrued payrolls and employee benefits 20,529 11,216
Income tax payable 5,778 --
Restructuring reserves 15,109 --
Short-term borrowings 16,533 --
Current portion of long-term debt 43,140 --
Other current liabilities 90,361 10,876
---------- --------
298,727 64,947
---------- --------
LONG-TERM LIABILITIES
Long-term debt 654,374 235,000
Deferred tax liability 124,346 58,895
Postretirement benefit liability 50,028 20,095
Other long-term liabilities 62,015 17,880
---------- --------
890,763 331,870
---------- --------
MINORITY INTEREST 560 --
---------- --------
SHAREHOLDERS' EQUITY
Common stock, without par value 10,446 10,383
Treasury stock, at cost (58,812) (57,894)
Retained earnings 671,917 598,301
Accumulated other comprehensive loss
- foreign currency translation (21,378) (8,276)
- interest rate swaps (13,071) --
- minimum pension liability (2,756) --
---------- --------
586,346 542,514
---------- --------
$1,776,396 $939,331
========== ========
See accompanying Notes to Consolidated Financial Statements.
34
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
For the years ended October 31, 2001 2000 1999
--------- -------- ---------
Cash flows from operating activities:
Net income $ 88,774 $ 75,794 $ 51,373
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 81,507 45,222 42,360
Equity in earnings of affiliates, net of
dividends received (7,007) (10,976) (10,755)
Minority interest in income of
consolidated subsidiaries 560 -- --
Deferred income taxes 29,127 13,548 15,815
Gain on disposals of properties, plants
and equipment, net (84,661) (502) (7,962)
Increase (decrease) in cash from changes in
certain assets and liabilities, net of
effects from acquisitions:
Trade accounts receivable (7,613) 5,109 (21,578)
Inventories 23,526 7,965 11,046
Prepaid expenses and other 24,243 1,955 2,846
Other long-term assets (4,052) 6,579 2,597
Accounts payable (15,734) (1,628) 3,534
Accrued payrolls and employee benefits (776) 1,062 307
Income tax payable (789) (14,343) (1,968)
Restructuring reserves (4,241) (5,157) (23,882)
Other current liabilities (27,756) (1,361) 110
Postretirement benefit liability 3,315 (1,059) 591
Other long-term liabilities 442 (4,979) 7,332
--------- -------- ---------
Net cash provided by operating activities 98,865 117,229 71,766
--------- -------- ---------
Cash flows from investing activities:
Acquisitions of companies, net of cash
acquired (312,892) -- (74,233)
Disposals of investments in government
securities -- 5,314 1,340
Purchases of properties, plants and equipment (132,217) (78,833) (49,253)
Proceeds on disposals of properties, plants
and equipment 92,403 4,672 18,874
--------- -------- ---------
Net cash used in investing activities (352,706) (68,847) (103,272)
--------- -------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 760,000 -- 54,500
Payments on long-term debt (464,542) (23,000) (31,500)
Payments on short-term borrowings (7,062) -- --
Acquisitions of treasury stock (924) (4,968) (11,102)
Exercise of stock options 69 190 291
Dividends paid (15,158) (14,619) (14,315)
--------- -------- ---------
Net cash provided by (used in) financing
activities 272,383 (42,397) (2,126)
--------- -------- ---------
Effects of exchange rates on cash (2,210) (1,532) 1,238
--------- -------- ---------
Net increase (decrease) in cash and cash
equivalents 16,332 4,453 (32,394)
Cash and cash equivalents at beginning of year 13,388 8,935 41,329
--------- -------- ---------
Cash and cash equivalents at end of year $ 29,720 $ 13,388 $ 8,935
========= ======== =========
See accompanying Notes to Consolidated Financial Statements.
35
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. dollars and shares in thousands, except per share amounts)
Capital Stock Treasury Stock Accumulated
------------- -------------- Other
Retained Comprehensive Shareholders'
Shares Amount Shares Amount Earnings Income (Loss) Equity
------ ------ ------ ------ -------- ------------- ------
As of November 1, 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 8):
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
------ ------- ------ -------- -------- -------- --------
As of 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 8):
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
------ ------- ------ -------- -------- -------- --------
As of October 31, 2000 22,371 $10,383 16,050 $(57,894) $598,301 $ (8,276) $542,514
Net income 88,774 88,774
Other comprehensive income:
- foreign currency
translation (13,102) (13,102)
- interest rate swaps (13,071) (13,071)
- minimum pension
liability adjustment (2,756) (2,756)
--------
Comprehensive income 59,845
--------
Dividends paid (Note 8):
Class A - $0.54 (5,683) (5,683)
Class B - $0.80 (9,475) (9,475)
Treasury shares acquired (35) 35 (924) (924)
Stock options exercised 3 63 (3) 6 69
------ ------- ------ -------- -------- -------- --------
As of October 31, 2001 22,339 $10,446 16,082 $(58,812) $671,917 $(37,205) $586,346
====== ======= ====== ======== ======== ======== ========
See accompanying Notes to Consolidated Financial Statements.
36
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 that it sells to customers in many industries throughout the world. In
March 2001, the Company acquired Van Leer Industrial Packaging (see Note 2),
which significantly increased the operations of the Company. The Company has 185
operating locations in over 40 countries. In addition, the Company owns timber
properties, primarily in the southeastern United States, which are harvested and
regenerated.
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 10,000 employees of the Company at October 31,
2001.
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.
37
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, goodwill and other intangible assets,
restructuring reserves, postretirement benefits, income taxes and contingencies.
Actual amounts could differ from those estimates.
Revenue Recognition
- -------------------
In December 1999, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 further defines the basic principles of revenue
recognition and was adopted by the Company during 2001. The Company recognizes
revenue when title passes to customers or services have been rendered, with
appropriate provision for returns and allowances. The adoption of SAB No. 101
did not have a material effect on the Company's financial statements.
Shipping and Handling Fees and Costs
- ------------------------------------
The Emerging Issues Task Force ("EITF") reached a consensus in September
2000 that all amounts billed to a customer in a sale transaction related to
shipping and handling, if any, represent revenues earned for the goods provided
and should be classified as revenue. The EITF also concluded that the
classification of shipping and handling costs is an accounting policy decision.
In accordance with EITF No. 00-10, "Accounting for Shipping and Handling Fees
and Costs," the Company includes shipping and handling costs in cost of products
sold. Prior to the issuance of EITF No. 00-10, the Company's shipping and
handling costs were netted in net sales. All prior period amounts have been
reclassified to conform to EITF No. 00-10. The adoption of EITF No. 00-10 had no
effect on reported net income.
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.
38
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
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 $1.9 million in 2001 ($3.6 million in
2000).
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 that are considered principal in the total operations of
the Company, doing business in a variety of industries throughout the world.
Inventories
- -----------
Inventories are stated at the lower of cost or market, principally on the
last-in, first-out basis in the United States (approximately 30% of consolidated
inventories) and on the first-in, first-out basis in other parts of the world
(approximately 70% of consolidated inventories). The inventories are comprised
as follows at October 31 (U.S. dollars in thousands):
2001 2000
-------- --------
Finished goods $ 40,881 $ 16,494
Raw materials and work-in-process 120,510 63,630
-------- --------
161,391 80,124
Reduction to state inventories on last-in,
first-out basis (38,028) (37,383)
-------- --------
$123,363 $ 42,741
======== ========
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 $63.8 million in 2001, $37.3 million in 2000 and
$35.2 million in 1999. Expenditures for repairs and maintenance are charged to
expense as incurred.
39
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
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.
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, primarily as
a result of the consolidated plans in the Industrial Shipping Containers
segment. As of October 31, 2001 and 2000, there were 14 and 12 locations held
for sale, respectively. The net sales and loss before income tax benefit of
these locations were $35.6 million and $0.8 million, respectively, during 2001.
The net sales and loss before income tax benefit of these locations were $16.0
million and $2.6 million, respectively, during 2000. 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
- ---------------------
Internal use software is accounted for under Statement of Position 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.
Goodwill and Other Intangible Assets
- ------------------------------------
Goodwill is amortized on a straight-line basis over 15 or 25 year periods.
The cost of acquired intangible assets is amortized on a straight-line basis
over their estimated economic lives of 2 to 25 years. The weighted average
period of goodwill and intangible assets amortization is 21 years. Amortization
expense was $13.1 million in 2001, $7.0 million in 2000 and $6.5 million in
1999. Accumulated amortization was $31.2 million at October 31, 2001 ($18.1
million at October 31, 2000).
The Company's policy is to periodically review its goodwill, other
intangible assets 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
40
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
the period such determination is made based on the fair value of the related
businesses.
Derivative Financial Instruments
- --------------------------------
On November 1, 2000, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities." These
statements require that all derivatives be recorded in the balance sheet as
either assets or liabilities and measured at fair value. The accounting for
changes in fair value of the derivative depends on the intended use of the
derivative and the resulting designation.
The Company enters into interest rate swap agreements for the purpose of
hedging its exposure to fluctuations in interest rates. Under SFAS No. 133, the
Company's interest rate swap contracts are considered cash flow hedges. The
interest rate swap contracts were entered into to assist the Company in its
management of exposure to variable rate debt. The differentials payable or
receivable under these agreements are recorded as an adjustment to interest
expense and are included in interest receivable or payable. An asset or
liability is recorded on the Company's balance sheet for the fair value of the
interest rate swap agreements. A corresponding charge or credit is reflected,
net of tax, in other comprehensive income (loss).
The Company enters into foreign currency forward contracts to hedge certain
short-term intercompany loan transactions with its foreign businesses. Such
contracts limit the Company's exposure to both favorable and unfavorable
currency fluctuations. These contracts are adjusted to reflect market value as
of each balance sheet date, with the resulting changes in fair value being
recognized in other income, net.
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 (Loss)." The transaction gains and
losses included in income are immaterial.
The functional currency for foreign operations in highly inflationary
economies is the U.S. dollar, and any gains or losses are credited or charged to
income.
41
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
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.
The following is a reconciliation of the shares used to calculate basic and
diluted earnings per share:
For the years ended October 31,
----------------------------------------
2001 2000 1999
---- ---- ----
Class A Common Stock:
- ---------------------
Basic earnings per share 10,523,476 10,557,935 10,882,081
Assumed conversion of stock
options 26,603 41,600 19,229
---------- ---------- ----------
Diluted earnings per share 10,550,079 10,599,535 10,901,310
========== ========== ==========
Class B Common Stock:
- ---------------------
Basic and diluted earnings per
share 11,842,656 11,852,602 11,989,605
========== ========== ==========
There are 1,172,248 options that are antidilutive for 2001 (370,090 for
2000 and 496,789 for 1999).
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 that 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 2001
presentation.
42
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
Recent Accounting Standards
- ---------------------------
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires use of the purchase method for business
combinations initiated after June 30, 2001. SFAS No. 142 requires that goodwill
no longer be amortized, but instead be periodically reviewed for impairment. The
provisions of SFAS No. 142 will be effective for fiscal years beginning after
December 15, 2001. However, earlier application is permitted for entities with
fiscal years beginning after March 15, 2001, provided that the first interim
financial statements have not been issued previously. In all cases, the
provisions of SFAS No. 142 shall be initially applied at the beginning of a
fiscal year.
The application of the non-amortization provisions of SFAS No. 142 will
increase net income of the Company upon adoption. The effect of the
non-amortization provisions of SFAS No. 142 on net income is subject to
finalization of the allocation of the purchase price for the Van Leer
Industrial Packaging acquisition (see Note 2) including further evaluation
of all intangible assets in relation to the provisions of SFAS No. 142.
At this time, the effect of the impairment provisions provided by SFAS No.
142 is not known. The Company is evaluating the possibility of early adoption
of SFAS No. 142 in fiscal 2002.
NOTE 2 - ACQUISITIONS AND OTHER INVESTMENTS
- --------------------------------------------
Van Leer Industrial Packaging Acquisition
- -----------------------------------------
On March 2, 2001, pursuant to the terms of a Share Purchase Agreement dated
October 27, 2000, as amended on January 5 and February 28, 2001, between the
Company and Huhtamaki Van Leer Oyj, a Finnish corporation ("Huhtamaki"), the
Company acquired all of the issued share capital of Royal Packaging Industries
Van Leer N.V., a Dutch limited liability company, Huhtamaki Holdings do Brasil
Ltda., a Brazilian limited liability company, Van Leer France Holding S.A.S., a
French limited liability company, Van Leer Containers, Inc., a U.S. corporation,
and American Flange & Manufacturing Co., Inc., a U.S. corporation (collectively,
"Van Leer Industrial Packaging"). Van Leer Industrial Packaging is a worldwide
provider of industrial packaging and components, including steel, fibre and
plastic drums, polycarbonate water bottles, intermediate bulk containers and
closure systems, with operations in over 40 countries.
As consideration for the shares of Van Leer Industrial Packaging, the
Company paid $555.0 million less the amount of Van Leer Industrial Packaging's
debt and certain other obligations ($206.4 million) as of the closing date. In
addition, the Company paid $15.0 million in legal and professional fees related
to the acquisition. The acquisition was funded by long-term debt borrowed
against a $900 million Senior Secured Credit Agreement (see Note 6).
43
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
The acquisition of Van Leer Industrial Packaging, 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 $642.7 million and $423.9 million, respectively. The final allocation of
the purchase price may differ due to additional refinements in the fair values
of the net assets acquired. Identifiable intangible assets, with a combined fair
value of $34.1 million, including the Van Leer trademark, Tri-Sure Closures
trademarks, patents and other proprietary information, and certain noncompete
agreements, have been recorded. The excess of the purchase price over the fair
values of the net tangible and intangible assets acquired of $110.7 million was
recorded as goodwill.
The goodwill is being amortized on a straight-line basis over 25 years
based on consideration regarding the age of the acquired companies, their
customers and the risk of obsolescence of their products. The intangible assets
are being amortized on a straight-line basis over their estimated economic lives
of 2 to 25 years.
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.
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 $20.8 million in cash. In addition, the Company paid $0.1
million in legal and professional fees related to the acquisition.
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 $14.8 million and $5.9 million, respectively. The excess of the purchase
price over the fair values of the net assets acquired of $12.0 million was
recorded as goodwill. The goodwill is being amortized on a straight-line basis
over 15 years based on consideration regarding the age of the acquired
businesses, their customers and the risk of obsolescence of their products.
44
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
Intermediate Bulk Containers ("IBC") Acquisition
- ------------------------------------------------
On January 11, 1999, the Company purchased the assets of the IBC business
from Sonoco Products Company ("Sonoco") for $38.0 million in cash. In addition,
the Company paid $0.2 million 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 $15.7 million
and $1.3 million, respectively. The excess of the purchase price over the fair
values of the net assets acquired of $23.8 million was recorded as goodwill. The
goodwill is being amortized on a straight-line basis over 25 years based on
consideration regarding the age of the acquired business, its customers and the
risk of obsolescence of its products.
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 EITF
No. 86-29, "Nonmonetary Transactions: Magnitude of Boot and the Exceptions to
the Use of Fair Value."
In connection with the closing of the CorrChoice joint venture, the Company
and RDJ entered into a voting agreement that 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 accounting
principles generally accepted in the United States, the Company has recorded its
investment in CorrChoice using the equity method of accounting.
45
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
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."
Pro Forma Information
- ---------------------
The following pro forma (unaudited) information assumes that the Van Leer
Industrial Packaging acquisition had occurred on November 1, 1999 (U.S. dollars
in thousands, except per share amounts):
For the years
ended October 31,
-----------------------------
2001 2000
---- ----
Net sales $1,745,921 $1,914,846
Net income $ 75,433 $ 73,058
Basic earnings per share:
- -------------------------
Class A Common Stock $ 2.67 $ 2.58
Class B Common Stock $ 4.00 $ 3.86
Diluted earnings per share:
- ---------------------------
Class A Common Stock $ 2.67 $ 2.57
Class B Common Stock $ 4.00 $ 3.86
The amounts reflect adjustments for interest expense related to the debt
issued for the purchase, amortization of goodwill and other intangible assets
and depreciation expense on the revalued properties, plants and equipment.
The pro forma information, as presented above, is not necessarily
indicative of the results which would have been obtained had the transaction
occurred on November 1, 1999, nor are they necessarily indicative of future
results.
46
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
NOTE 3 - INVESTMENT IN AFFILIATES
- ---------------------------------
The Company has investments in CorrChoice (63.24%), Abzac-Greif (49%),
Socer-Embalagens, Lda. (25%) and Balmer Lawrie-Van Leer (40.06%) that 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 $2.9 million in 2001 and $2.4 million in 2000.
The difference between the cost basis of the Company's investment in the
underlying equity of affiliates of $4.8 million at October 31, 2001 ($5.2
million at October 31,2000) is being amortized over 15 years.
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 (U.S. dollars in thousands):
As of and for the years
ended October 31,
---------------------------------
2001 2000 1999
---- ---- ----
Current assets $140,752 $127,106 $118,821
Long-term assets $108,639 $102,901 $ 97,225
Current liabilities $ 16,489 $ 14,653 $ 19,501
Long-term liabilities $ 11,266 $ 8,790 $ 8,238
Net sales $282,277 $299,086 $251,638
Gross profit $ 45,444 $ 54,399 $ 43,433
Operating income $ 28,338 $ 34,590 $ 31,090
Net income $ 18,606 $ 22,964 $ 17,570
NOTE 4 - TIMBERLAND TRANSACTIONS
- --------------------------------
Sale of Timber Properties
- -------------------------
In December 2000, the Company sold certain hardwood timberland for $44.4
million. As such, the Company recognized a gain of $43.0 million during the
first quarter of 2001 related to this transaction. In a related agreement, the
Company sold other hardwood timberland for $30.0 million in March 2001, and
recognized an additional gain of $27.7 million during the second quarter of
2001.
A total of approximately 65,000 acres of timber properties situated in
Arkansas, Mississippi and Louisiana were sold as a result of these transactions.
47
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
Purchase of Timber Properties
- -----------------------------
In December 2000, the Company purchased certain pine timberland for $42.8
million. In a related agreement, the Company purchased other pine timberland for
$43.1 million in March 2001.
A total of approximately 63,000 acres of timber properties situated in
Louisiana were purchased as a result of these transactions.
NOTE 5 - RESTRUCTURING RESERVES
- -------------------------------
During the second quarter of 2001, the Company approved a plan to
consolidate some of its locations in order to eliminate duplicate facilities
caused by the Van Leer Industrial Packaging acquisition and improve operating
efficiencies and capabilities. The plan was the result of an in-depth study to
determine whether certain locations should be closed and the sales and
manufacturing volume associated with such plants relocated to a different
facility. Six existing Company-owned plastic drum and steel drum plants were
identified to be closed. These plants are located in North America. In addition,
certain redundant administrative functions are being eliminated. As a result of
this plan, during the second quarter of 2001, the Company recognized a pretax
restructuring charge of $11.5 million, consisting of $8.0 million in employee
separation costs (approximately 400 employees) and a $3.5 million loss on
disposal of equipment and facilities. The Company is planning to sell its six
owned facilities. The Company expects to complete these restructuring activities
during the first half of 2002. Subsequent to the recognition of the
restructuring charge, the Company has and will continue to recognize expense
related to additional costs to relocate machinery and equipment and employees
upon the closure of these plants. The amounts charged against this restructuring
reserve during the period ended October 31, 2001 are as follows (U.S. dollars in
thousands):
Beginning Ending
Balance Activity Balance
------- -------- -------
Cash charges:
- -------------
Employee separation costs $ 8,000 $4,009 $3,991
Cash and non-cash charges:
- --------------------------
Other exit costs 3,534 3,222 312
------- ------ ------
$11,534 $7,231 $4,303
======= ====== ======
As of October 31, 2001, there were a total of 170 employees that had been
terminated and provided severance benefits under this restructuring plan.
48
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
In addition, in connection with the 2001 acquisition of Van Leer Industrial
Packaging from Huhtamaki and the consolidation plan, five facilities purchased
as part of the acquisition have been or will be closed. Four of these
facilities are Company-owned and one is leased. The facilities are located in
North America, South America, United Kingdom and Asia Pacific. In addition,
certain redundant administrative functions will be eliminated. Accordingly, the
Company recognized a $19.7 million restructuring liability in its purchase price
allocation related to these locations. This liability was accounted for under
EITF No. 95-3, "Recognition of Liabilities in Connection with a Purchase
Business Combination." The liability consisted of $16.5 million in employee
separation costs (approximately 375 employees), $0.9 million in lease
termination costs and $2.3 million in other exit costs. The Company is planning
to sell the four Company-owned facilities. The lease will be terminated on the
remaining facility. The amounts charged against this restructuring reserve
during the period ended October 31, 2001 are as follows (U.S. dollars in
thousands):
Balance at Ending
Acquisition Activity Balance
----------- -------- -------
Cash charges:
- -------------
Employee separation costs $16,480 $6,962 $ 9,518
Cash and non-cash charges:
- --------------------------
Other exit costs 3,203 1,915 1,288
------- ------ -------
$19,683 $8,877 $10,806
======= ====== =======
As of October 31, 2001, there were a total of 180 employees that had been
terminated and provided severance benefits under this restructuring plan.
NOTE 6 - LONG-TERM DEBT
- -----------------------
On March 2, 2001, the Company and Greif Spain Holdings, S.L. entered into a
$900 million Senior Secured Credit Agreement with a syndicate of lenders, and
Merrill Lynch & Co. and KeyBank National Association, as co-agents. A portion of
the proceeds from the Senior Secured Credit Agreement was used to fund the Van
Leer Industrial Packaging acquisition and to refinance amounts outstanding under
the Company's then existing revolving credit facility (as described below). The
Senior Secured Credit Agreement provides for three term loans, a $150 million
U.S. Dollar Term Loan A, a $200 million Euro Term Loan A and a $400 million U.S.
Dollar Term Loan B, and a $150 million revolving multicurrency credit facility.
The revolving multicurrency credit facility is available for working capital and
general corporate purposes.
49
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
The Term Loan A (both U.S. Dollar and Euro) and Term Loan B amortize
quarterly through the maturity dates of February 28, 2006 and February 29, 2008,
respectively. The revolving multicurrency credit facility matures on February
28, 2006. The Company is required to pay a commitment fee each quarter equal to
0.375% to 0.500% of the total unused revolver commitment amount, based upon the
Company's leverage ratio. Interest is based on either a LIBOR rate or an
alternative base rate that resets periodically plus a calculated margin amount.
The amounts outstanding, as well as the base rates and margins, at October 31,
2001, are as follows (U.S. dollars and euros in thousands):
Amount Base Rate Margin
------ --------- ------
Term Loan A (U.S. Dollar) $131,526 2.27% 2.50%
Term Loan A (Euro) EUR 187,660 3.59% 2.50%
Term Loan B $377,256 2.27% 3.25%
Multicurrency revolver $ 20,000 2.34% 2.50%
As of October 31, 2001, the Company had $696.3 million outstanding under
the Senior Secured Credit Agreement with a weighted average interest rate of
5.50%.
As part of the Senior Secured Credit Agreement, the Company incurred
financing fees of $16.3 million. The amount has been deferred and is being
amortized over the life of the agreement of six years. The charge is recorded
in interest expense.
The Senior Secured Credit Agreement contains certain covenants, including
financial covenants that require the Company to maintain a certain leverage
ratio, sufficient coverage of interest expense and fixed charges, and a minimum
net worth. In addition, the Company is limited with respect to the incurrence of
additional debt. The repayment of this facility is secured by a first lien on
substantially all of the personal property and certain of the real property of
the Company. Standard & Poor's and Moody's Investors Service have assigned a
"BB" rating and a "Ba3" rating, respectively, both with favorable outlook, to
the loan obligations of the Company under the Senior Secured Credit Agreement.
At October 31, 2001, the Company was in compliance with these covenants.
The $150 million revolving multicurrency credit facility may also be used
to issue letters of credit. At October 31, 2001, the Company had outstanding
$13.0 million in letters of credit under the credit agreement. The quarterly
fronting fee related to these letters of credit is 0.125% of the outstanding
amount plus a calculated margin (2.50% at October 31, 2001) for the use of this
facility.
In addition to the amounts borrowed against the Senior Secured Credit
Agreement, the Company had outstanding debt of $17.7 million, comprised of $1.2
million in long-term debt and $16.5 million in short-term borrowings at October
31, 2001.
50
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
On March 30, 1998, the Company had entered into a credit agreement with
various financial institutions, as banks, and KeyBank National Association, as
agent, which provided a revolving credit facility of up to $325 million. The
Company was required to pay a facility fee each quarter equal to 0.025% to
0.050% of the total commitment amount based upon the Company's leverage ratio.
The interest rate was either based on the prime rate or LIBOR rate plus a
calculated margin amount (0.275% at October 31, 2000). Interest was reset on a
quarterly basis. At October 31, 2000, the interest rate was 6.99%. The revolving
credit loans were due on March 31, 2003; however, the amounts remaining were
repaid from proceeds of the Senior Secured Credit Agreement.
Annual maturities of the Company's long-term debt are $43.1 million in
2002, $58.9 million in 2003, $74.6 million in 2004, $90.4 million in 2005, $71.0
million in 2006 and $359.5 million thereafter.
During 2001, the Company paid $44.8 million of interest ($16.6 million in
2000 and $15.4 million in 1999) related to its long-term obligations. Interest
of $2.5 million in 2001, $2.5 million in 2000 and $0.4 million in 1999 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 $8.8 million in 2002, $7.3 million in 2003, $5.9
million in 2004, $5.1 million in 2005, $3.8 million in 2006 and $17.8 million
thereafter. Rent expense was $19.8 million in 2001, $14.0 million in 2000 and
$12.5 million in 1999.
NOTE 7 - FINANCIAL INSTRUMENTS
- ------------------------------
The Company had interest rate swap agreements with an aggregate notional
amount of $320 million and EUR 65 million at October 31, 2001 with various
maturities through 2008. Under these agreements, the Company receives interest
quarterly from the counterparties equal to the LIBOR rate and pays interest at a
weighted average rate of 5.56% over the life of the contracts. At October 31,
2001, a liability for the interest rate swap contracts, which represented their
fair values at that time, in the amount of $21.0 million ($13.1 million net of
tax) was recorded with an offsetting amount in accumulated other comprehensive
income (loss). Assuming that interest rates in effect remain constant throughout
2002, the Company would reclassify $10.3 million of this amount to its results
of operations in 2002. At October 31, 2000, the Company had interest rate swap
agreements with an aggregate notional amount of $130 million. Under the
agreements, the Company received interest quarterly from the counterparty equal
to the LIBOR rate and paid interest quarterly to the counterparty at a weighted
average rate of 6.01%.
51
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
At October 31, 2001, the Company had outstanding foreign currency forward
contracts in the notional amount of $33.4 million. The fair value of these
contracts at October 31, 2001 resulted in a gain of $0.3 million. The purpose of
these contracts is to hedge short-term intercompany loan balances with its
foreign businesses.
While the Company may be exposed to credit losses in the event of
nonperformance by the counterparties to its derivative financial instrument
contracts, its counterparties are established banks and financial institutions
with high credit ratings. The Company has no reason to believe that such
counterparties will not be able to fully satisfy their obligations under these
contracts.
The fair values of all derivative financial instruments are estimated based
on current settlement prices of comparable contracts obtained from dealer
quotes. The values represent the estimated amounts the Company would pay or
receive to terminate the agreements at the reporting date.
NOTE 8 - 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.
The following table summarizes the Company's capital stock, without par
value (Class A and Class B common shares) and treasury shares at the specified
dates:
Authorized Issued Outstanding Treasury
Shares Shares Shares Shares
------ ------ ------ ------
October 31, 2001:
- -----------------
Class A Common Stock 32,000,000 21,140,960 10,516,196 10,624,764
Class B Common Stock 17,280,000 17,280,000 11,822,859 5,457,141
October 31, 2000:
- -----------------
Class A Common Stock 32,000,000 21,140,960 10,523,196 10,617,764
Class B Common Stock 17,280,000 17,280,000 11,847,359 5,432,641
52
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
NOTE 9 - STOCK OPTIONS
- ----------------------
In the current year, the Company adopted the 2001 Management Equity
Incentive and Compensation Plan (the "2001 Plan"). The provisions of the 2001
Plan allow the awarding of incentive and nonqualified stock options and
restricted and performance shares of Class A Common Stock to key employees. The
maximum number of shares that may be issued each year is determined by a formula
that takes into consideration the total number of shares outstanding and is also
subject to certain limits. In addition, the maximum number of incentive stock
options that will be issued under the 2001 Plan during its term is 2,500,000
shares.
Prior to 2001, the Company had adopted a Nonstatutory Stock Option Plan
(the "2000 Plan") that provides the discretionary granting of nonstatutory
options to key employees, and an Incentive Stock Option Plan (the "Option Plan")
that 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 that may be granted under the 2000
Plan and Option Plan may not exceed 200,000 shares and 1,000,000 shares,
respectively.
Under the terms of the 2001 Plan, the 2000 Plan and the Option Plan, stock
options are granted at exercise prices equal to the market value of the common
stock on the date options are granted and become exercisable two years after
date of grant. Options expire 10 years after date of grant.
The Directors' Stock Option Plan (the "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 that 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 of the common
stock on the date options are granted and become exercisable immediately.
Options expire 10 years after date of grant.
In 2001, 444,800 stock options were granted under the 2001 Plan with option
prices of $30.59 per share. Under the Directors' Plan, 10,000 options were
granted to outside directors with option prices of $27.38 per share.
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.
53
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
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 (U.S. dollars in thousands, except per share amounts):
For the years
ended October 31,
---------------------------------------------
2001 2000 1999
---- ---- ----
Net income $86,566 $73,990 $49,787
Basic earnings per share:
- ------------------------
Class A Common Stock $ 3.06 $ 2.62 $ 1.73
Class B Common Stock $ 4.59 $ 3.91 $ 2.58
Diluted earnings per share:
- ---------------------------
Class A Common Stock $ 3.06 $ 2.61 $ 1.73
Class B Common Stock $ 4.59 $ 3.91 $ 2.58
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:
2001 2000 1999
---- ---- ----
Dividend yield 1.70% 1.70% 1.90%
Volatility rate 27.20% 27.50% 25.10%
Risk-free interest rate 4.84% 6.05% 6.15%
Expected option life 6 years 6 years 6 years
The fair value of shares granted in 2001, 2000 and 1999 were $9.12, $9.49
and $7.33, respectively, as of grant date.
Stock option activity for the years ended October 31 was as follows (Shares
in thousands):
2001 2000 1999
---------------- ---------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
Beginning balance 1,154 $28.48 861 $28.23 659 $29.56
Granted 455 $30.52 316 $29.22 236 $24.36
Forfeited 100 $28.53 16 $29.76 22 $29.29
Exercised 3 $22.94 7 $27.12 12 $24.26
----- ----- ---
Ending balance 1,506 $29.11 1,154 $28.48 861 $28.23
===== ===== ===
54
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
As of October 31, 2001, the outstanding stock options had exercise prices
ranging from $22.94 to $36.53 and a remaining weighted average contractual life
of eight years.
There are 789,000 options that were exercisable at October 31, 2001
(628,000 options at October 31, 2000 and 432,000 options at October 31, 1999).
NOTE 10 - INCOME TAXES
- ----------------------
The provision for income taxes consists of the following (U.S. dollars in
thousands):
For the years ended October 31,
-----------------------------------------------------
2001 2000 1999
---- ---- ----
Current:
Federal $12,624 $21,420 $ 7,959
State and local 550 848 660
Foreign 6,213 2,211 2,306
------- ------- -------
19,387 24,479 10,925
Deferred 29,127 13,548 15,815
------- ------- -------
$48,514 $38,027 $26,740
======= ======= =======
Foreign income before income taxes amounted to $13.6 million in 2001 ($5.8
million in 2000 and $5.2 million in 1999).
The following is a reconciliation of the provision for income taxes based
on the federal statutory rate to the Company's effective income tax rate:
For the years ended October 31,
-----------------------------------------------------
2001 2000 1999
---- ---- ----
U.S. federal tax rate 35.0% 35.0% 35.0%
State and local taxes,
net of federal tax benefit 1.6% 1.7% 3.6%
Other non-deductible expenses and
foreign tax rates 1.3% 1.2% 1.1%
---- ---- ----
37.9% 37.9% 39.7%
==== ==== ====
55
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 (U.S. dollars in thousands):
2001 2000
---- ----
Vacation accrual $ 1,320 $ 1,171
Bad debt reserves 1,610 871
Restructuring reserves 5,439 --
Other 1,328 174
-------- -------
Current deferred tax asset $ 9,697 $ 2,216
======== =======
Net operating loss carryforwards $ 34,019 $ --
Interest rate swaps 7,977 --
Minimum pension liability 1,682 --
Deferred compensation 1,840 1,823
Accrued environmental reserve 2,556 532
Other 878 2,212
-------- -------
48,952 4,567
Valuation allowance for long-term
deferred tax assets (31,780) --
-------- -------
Long-term deferred tax asset $ 17,172 $ 4,567
======== =======
Properties, plants and equipment $ 77,932 $45,951
Equity investments 8,843 7,968
Goodwill 4,053 2,926
Timberland transactions 35,530 5,053
Pension 1,771 --
Other 13,389 1,564
-------- -------
Long-term deferred tax liability $141,518 $63,462
======== =======
At October 31, 2001, the Company has foreign net operating loss
carryforwards of approximately $95 million for foreign income tax purposes
expiring over various future periods.
At October 31, 2001, 2000 and 1999, the Company has provided deferred
income taxes on all of its undistributed foreign earnings.
During 2001, the Company paid $20.2 million in income taxes ($28.9 million
in 2000 and $14.7 million in 1999).
56
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
NOTE 11 - RETIREMENT PLANS
- --------------------------
In 2001, the Company assumed certain non-contributory defined benefit
pension plans in the United States, Australia, Germany, Netherlands, South
Africa and United Kingdom as a result of the Van Leer Industrial Packaging
acquisition (see Note 2). In addition, the Company already had non-contributory
defined benefit pension plans in the United States. The salaried plans' benefits
are based primarily on years of service and earnings. The hourly plans' benefits
are based primarily upon years of service. 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 large cap, small
cap and international equity securities, fixed income investments and the
allowable number of shares of the Company's common stock as follows:
2001 2000
---- ----
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 (U.S.
dollars in thousands):
For the years ended
October 31,
------------------------------------------------
2001 2000 1999
---- ---- ----
Service cost $ 7,432 $ 4,193 $ 4,760
Interest cost 13,982 5,561 5,279
Expected return on plan assets (17,886) (6,761) (6,238)
Amortization of prior service cost 1,004 700 662
Amortization of initial net asset (842) (562) (562)
Recognized net actuarial (gain) loss (270) (198) 66
-------- ------- -------
$ 3,420 $ 2,933 $ 3,967
======== ======= =======
The weighted average assumptions used in the actuarial valuations are as
follows:
2001 2000 1999
---- ---- ----
Discount rate 6.75% 7.50% 7.50%
Expected return on plan assets 8.00% 9.00% 8.25%
Rate of compensation increase 4.25% 4.25% 4.25%
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 (U.S. dollars in thousands):
2001 2000
---- ----
Change in benefit obligation:
- -----------------------------
Benefit obligation at beginning of year $ 82,140 $75,097
Benefit obligation of acquired businesses 202,122 --
Service cost 7,432 4,193
Interest cost 13,982 5,561
Plan participant contributions 626 --
Amendments -- 325
Actuarial (gain) loss (5,454) 919
Foreign currency effects (1,570) --
Benefits paid (9,861) (3,955)
Plan curtailment gain (45) --
-------- -------
Benefit obligation at end of year $289,372 $82,140
======== =======
Change in plan assets:
- ----------------------
Fair value of plan assets at beginning of year $ 84,802 $79,613
Fair value of plan assets of acquired businesses 204,049 --
Actual return on plan assets (17,660) 7,713
Plan participant contributions 626 --
Foreign currency effects (2,169) --
Employer contributions 8,082 1,431
Settlements (45) --
Benefits paid (9,528) (3,955)
-------- -------
Fair value of plan assets at end of year $268,157 $84,802
======== =======
Funded status $(21,215) $ 2,698
Unrecognized net actuarial loss (gain) 26,677 (3,745)
Unrecognized prior service cost 8,507 8,784
Unrecognized initial net asset (4,935) (5,777)
-------- -------
Net amount recognized $ 9,034 $ 1,960
======== =======
Amounts recognized in the statement of financial
- ------------------------------------------------
position consist of:
--------------------
Prepaid benefit cost $ 26,721 $ 3,662
Accrued benefit liability (30,605) (1,702)
Intangible asset 8,481 --
Accumulated other comprehensive income 4,437 --
-------- -------
Net amount recognized $ 9,034 $ 1,960
======== =======
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 $125.6 million, $112.1 million and $85.5 million,
respectively, as of October 31, 2001.
58
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the foreign pension plans were $136.3 million, $129.8
million and $138.0 million, respectively, as of October 31, 2001.
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 $0.3 million and $0.4 million was
recorded in 2001 and 2000, respectively.
The Company has several voluntary 401(k) savings plans that 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 $0.9 million in 2001, $0.9 million in
2000 and $0.5 million in 1999.
NOTE 12 - POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
- ----------------------------------------------------------------
In 2001, the Company assumed certain postretirement health and life
insurance benefit plans in the United States and South Africa as a result of the
Van Leer Industrial Packaging acquisition (see Note 2).
In conjunction with the acquisition of the industrial containers business
from Sonoco in 1998, 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 $1.4 million 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 its operations.
The components of net periodic cost for the postretirement benefits include
the following (U.S. dollars in thousands):
For the years ended
October 31,
----------------------------------------------
2001 2000 1999
---- ---- ----
Service cost $ 240 $ -- $ --
Interest cost 3,033 1,453 1,840
------ ------ ------
$3,273 $1,453 $1,840
====== ====== ======
59
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 (U.S. dollars in thousands):
2001 2000
---- ----
Change in benefit obligation:
- -----------------------------
Benefit obligation at beginning of year $19,573 $21,154
Benefit obligation of acquired businesses 31,648 --
Service cost 240 --
Interest cost 3,033 1,453
Plan participant contributions 40 --
Actuarial loss (gain) 754 (522)
Foreign currency effects (1,576) --
Benefits paid (1,393) (2,512)
------- -------
Benefit obligation at end of year $52,319 $19,573
======= =======
Change in plan assets:
- ----------------------
Fair value of plan assets at beginning of year $ -- $ --
Employer contributions 1,393 2,512
Benefits paid (1,393) (2,512)
-------- --------
Fair value of plan assets at end of year $ -- $ --
======== ========
Funded status $(52,319) $(19,573)
Unrecognized net actuarial loss (gain) 2,291 (522)
-------- --------
Net amount recognized $(50,028) $(20,095)
======== ========
The accumulated postretirement health and life insurance benefit and fair
value of plan assets for the foreign plans were $7.8 million and zero,
respectively, as of October 31, 2001.
The measurements assume a discount rate of 7.00% in the United States and
11.50% in South Africa. The health care cost trend rates on gross eligible
charges are as follows:
Medical
-------
Current trend rate 9.00%
Ultimate trend rate 5.00%
A one-percentage point change in assumed health care cost trend rates would
have the following effects (U.S. dollars in thousands):
1-Percentage- 1-Percentage-
Point Increase Point Decrease
-------------- --------------
Effect on total of
service and interest
cost components $ 189 $ (150)
Effect on postretirement
benefit obligation $2,747 $(2,232)
60
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
NOTE 13 - 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
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.
At October 31, 2001 and 2000, the Company had recorded liabilities of $7.1
million and $1.5 million, respectively, for estimated environmental remediation
costs based upon an evaluation of currently available facts with respect to each
individual site, including the results of environmental studies and testing, and
considering existing technology, presently enacted laws and regulations, and
prior experience in remediation of contaminated sites. The recorded liabilities
are included in other long-term liabilites. Actual costs to be incurred in
future periods at identified sites may vary from the estimates, given the
inherent uncertainties in evaluating environmental exposures. Future information
and developments will require the Company to continually reassess the expected
impact of these environmental matters.
Based upon the facts currently available, management believes that the
disposition of matters that are pending or asserted will not have a material
adverse affect on the consolidated financial position of the Company.
NOTE 14 - BUSINESS SEGMENT 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
sold in over 40 countries throughout the world.
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 North America.
Operations in the Timber segment involve the management and sale of timber
on approximately 275,000 acres of timberland in the states of Alabama, Arkansas,
Florida, Georgia, Louisiana, Mississippi and Virginia.
61
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
The Company's reportable segments are strategic business units that offer
different products. The Company evaluates performance and allocates resources
based on earnings before interest, income taxes, depreciation, depletion and
amortization ("EBITDA"). 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 in the United States.
Corporate and other includes the costs associated with the Company's
corporate headquarters, the Company's long-term debt (see Note 6) and other non-
segment items.
The following segment information is presented for the three years ended
October 31, 2001, except as to asset information that is as of October 31, 2001,
2000 and 1999 (U.S. dollars in thousands):
2001 2000 1999
---- ---- ----
Net sales:
- ----------
Industrial Shipping Containers $1,038,948 $490,909 $477,370
Containerboard & Corrugated Products 379,302 428,369 351,936
Timber 37,750 44,678 24,132
---------- -------- --------
Total $1,456,000 $963,956 $853,438
========== ======== ========
EBITDA:
- -------
Industrial Shipping Containers $ 101,810 $ 59,583 $ 60,244
Containerboard & Corrugated Products 87,698 85,826 54,197
Timber 111,738 46,926 25,389
---------- -------- --------
Total segment 301,246 192,335 139,830
Restructuring costs (11,534) -- --
Corporate and other (34,822) (34,817) (17,129)
---------- -------- --------
Total EBITDA 254,890 157,518 122,701
Depreciation, depletion and amortization (81,507) (45,222) (42,360)
Interest expense, net (45,149) (11,842) (12,983)
Foreign currency effects (228) -- --
---------- -------- --------
Income before income taxes,
minority interest in income of
consolidated subsidiaries and equity
in earnings of affiliates $ 128,006 $100,454 $ 67,358
========== ======== ========
Total assets:
- -------------
Industrial Shipping Containers $1,152,150 $397,741 $415,034
Containerboard & Corrugated Products 345,155 350,791 354,271
Timber 104,105 29,472 16,712
---------- -------- --------
Total segment 1,601,410 778,004 786,017
Corporate and other 174,986 161,327 124,969
---------- -------- --------
Total $1,776,396 $939,331 $910,986
========== ======== ========
62
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
2001 2000 1999
---- ---- ----
Depreciation, depletion and amortization
- ----------------------------------------
expense:
--------
Industrial Shipping Containers $ 48,849 $20,394 $20,660
Containerboard & Corrugated Products 21,766 20,457 19,335
Timber 4,897 771 277
-------- ------- -------
Total segment 75,512 41,622 40,272
Corporate and other 5,995 3,600 2,088
-------- ------- -------
Total $ 81,507 $45,222 $42,360
======== ======= =======
Additions to long-lived assets:
- -------------------------------
Industrial Shipping Containers $ 17,621 $21,442 $12,248
Containerboard & Corrugated Products 14,152 33,464 27,608
Timber 91,228 10,222 1,285
-------- ------- -------
Total segment 123,001 65,128 41,141
Corporate and other 9,216 13,705 8,112
-------- ------- -------
Total $132,217 $78,833 $49,253
======== ======= =======
The following table presents net sales to external customers by geographic
region (U.S. dollars in thousands):
For the years ended
October 31,
----------------------------------------------------
2001 2000 1999
---- ---- ----
North America $1,009,789 $963,956 $853,438
Europe 289,527 -- --
Other 156,684 -- --
---------- -------- --------
$1,456,000 $963,956 $853,438
========== ======== ========
The following table presents total assets by geographic region (U.S.
dollars in thousands):
As of October 31,
----------------------------------------------------
2001 2000 1999
---- ---- ----
North America $1,263,260 $939,331 $910,986
Europe 327,077 -- --
Other 186,059 -- --
---------- -------- --------
$1,776,396 $939,331 $910,986
========== ======== ========
63
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
NOTE 15 - QUARTERLY FINANCIAL DATA (UNAUDITED)
- ----------------------------------------------
The quarterly results of operations for 2001 and 2000 are shown below (U.S.
dollars in thousands, except per share amounts):
Quarter ended,
--------------------------------------------------------------
Jan. 31, Apr. 30, July 31, Oct. 31,
2001 2001 2001 2001
----------- ----------- ----------- -----------
Net sales $ 218,854 $ 356,628 $ 435,765 $ 444,753
Gross profit $ 50,372 $ 66,971 $ 91,241 $ 94,800
Net income $ 38,575 $ 22,958 $ 12,913 $ 14,328
Earnings per share:
Basic:
------
Class A Common Stock $ 1.37 $ 0.81 $ 0.46 $ 0.51
Class B Common Stock $ 2.04 $ 1.22 $ 0.68 $ 0.76
Diluted:
--------
Class A Common Stock $ 1.36 $ 0.81 $ 0.46 $ 0.51
Class B Common Stock $ 2.04 $ 1.22 $ 0.68 $ 0.76
Earnings per share were
calculated using the
following number of shares:
Basic:
------
Class A Common Stock 10,523,196 10,523,196 10,523,788 10,523,723
Class B Common Stock 11,846,778 11,842,859 11,842,859 11,838,128
Diluted:
--------
Class A Common Stock 10,552,723 10,547,231 10,563,081 10,545,847
Class B Common Stock 11,846,778 11,842,859 11,842,859 11,838,128
Market price (Class A Common Stock):
High $ 32.31 $ 31.75 $ 34.49 $ 33.00
Low $ 23.00 $ 25.56 $ 27.35 $ 21.80
Close $ 25.69 $ 28.92 $ 32.50 $ 24.80
Market price (Class B Common Stock):
High $ 30.00 $ 29.75 $ 30.74 $ 32.01
Low $ 23.63 $ 25.00 $ 26.50 $ 24.00
Close $ 25.50 $ 26.79 $ 30.74 $ 25.00
64
Item 8. Financial Statements and Supplementary Data (continued)
- ------- -------------------------------------------
Quarter ended,
--------------------------------------------------------------
Jan. 31, Apr. 30, July 31, Oct. 31,
2000 2000 2000 2000
----------- ----------- ----------- -----------
Net sales $ 238,613 $ 233,837 $ 243,856 $ 247,650
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
In 2001, the Company reclassified shipping and handling costs from net
sales to cost of products sold in accordance with EITF No. 00-10, "Accounting
for Shipping and Handling Fees and Costs." As a result, net sales, as reported
above, differ from the amounts previously disclosed in the Company's Quarterly
Reports on Form 10-Q.
The Class A and Class B Common Stock are traded on the NASDAQ Stock Market.
As of December 12, 2001, there were 565 shareholders of record of the Class
A Common Stock and 156 shareholders of record of the Class B Common Stock.
65
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. The internal
auditors of the Company continually review this system. 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
66
Item 8. Financial Statements and Supplementary Data (concluded)
- ------- -------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Shareholders and the
Board of Directors of
Greif Bros. Corporation
We have audited the accompanying consolidated balance sheets of Greif Bros.
Corporation and subsidiaries at October 31, 2001 and 2000, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended October 31, 2001. Our audits also
included the financial statement schedule listed in the Index at Item 14(a)(2).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Greif Bros.
Corporation and subsidiaries at October 31, 2001 and 2000, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended October 31, 2001 in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, 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 12, 2001
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.
67
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, 2001. 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, 2001.
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,
2001.
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, 2001.
68
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, 2001 32
Consolidated Balance Sheets at October 31, 2001 and 2000 33-34
Consolidated Statements of Cash Flows for each of the
three years in the period ended October 31, 2001 35
Consolidated Statements of Changes in Shareholders'
Equity for each of the three years in the period ended
October 31, 2001 36
Notes to Consolidated Financial Statements 37-65
Report of Management's Responsibilities 66
Report of Independent Accountants 67
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, 2001.
Page
----
(2) Financial Statement Schedule:
Consolidated Valuation and Qualifying Accounts and
Reserves (Schedule II) 75
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
69
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).
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
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).
70
Item 14. Exhibits, Financial Statement 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(g)* Employment Agreement, as amended, between Annual Report on Form 10-K for the
Joseph W. Reed and Greif Bros. Corporation. fiscal year ended October 31, 1998,
File No. 1-566 (see Exhibit 10(g)
therein).
10(h)* Supplemental Retirement Benefit Agreement. Annual Report on Form 10-K for the
fiscal year ended October 31, 1999,
File No. 1-566 (see Exhibit 10(i)
therein).
10(i) Share Purchase Agreement, dated October 27, Current report on Form 8-K dated
2000, as amended on January 5, 2001 and March 15, 2001, File No. 1-566 (see
February 28, 2001 between Hutamaki Van Leer Exhibit 2 therein).
Oyj, as the seller and Greif Bros.
Corporation as the buyer.
10(j) $900 million Senior Secured Credit Current report on Form 8-K dated
Agreement, dated as of March 2, 2001, among March 15, 2001, File No. 1-566 (see
Greif Bros. Corporation, as a U.S. Borrower, Exhibit 99.2 therein).
Greif Spain Holdings, S.L., as a Subsidiary
Borrower, Merrill Lynch & Co., as a Sole
Lead Arranger, Sole Book-Runner and
Administrative Agent, Keybank National
Association, as Syndication Agent, ABN AMRO
Bank N.V., as Co-Documentation Agent,
National City Bank, as Co-Documentation
Agent, The Bank of Nova Scotia, as Paying
Agent, and other financial institutions
party hereto from time to time.
71
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
- ------- ---------------------- ------------------------------------
10(k)* Greif Bros. Corporation 2001 Management Definitive Proxy Statement on Form
Equity Incentive and Compensation Plan. DEF 14A dated January 26, 2001,
File No. 001-00566 (see Exhibit A
therein).
10(l)* Greif Bros. Corporation 2000 Nonstatutory Registration Statement on Form S-8,
Stock Option Plan File No. 333-61058 (see Exhibit 4(c)
therein).
10(m) Audit Committee Charter Contained herein.
21 Subsidiaries of the Registrant. Contained herein.
23 Consent of Ernst & Young LLP-Columbus, Ohio. Contained herein.
24(a) Powers of Attorney for Michael J. Gasser, Annual Report on Form 10-K for the
Charles R. Chandler, Michael H. Dempsey, fiscal year ended October 31, 1997,
Naomi C. Dempsey, Daniel J. Gunsett, Robert File No. 1-566 (see Exhibit 24(a)
C. Macauley, David J. Olderman and William therein).
B. Sparks, Jr.
24(b) Power of Attorney for John C. Kane. Annual Report on Form 10-K for the
fiscal year ended October 31, 1999,
File No. 1-566 (see Exhibit 24(b)
therein).
* Executive compensation plans and arrangements required to be filed pursuant to
Item 601(b)(10) of Regulation S-K.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the fourth quarter of
2001.
72
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 25, 2002 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 and Chief Financial Officer and Secretary
Chief Executive Officer (principal financial officer)
(principal executive officer)
/s/ John K. Dieker /s/ Charles R. Chandler *
- --------------------------------------------- ---------------------------------------------
John K. Dieker Charles R. Chandler
Vice President and Member of the Board of Directors
Corporate Controller
(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 David 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]
73
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 and
Chief Executive Officer
Each of the above signatures is affixed as of January 25, 2002.
74
SCHEDULE II
- -----------
GREIF BROS. CORPORATION
-----------------------
AND SUBSIDIARY COMPANIES
------------------------
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
-----------------------------------------------------------
(U.S. dollars in thousands)
---------------------------
Balance at Charged to Accounts Balance at
Beginning Costs and Bad Debt Written- End of
Description Of Period Expenses Recoveries off Period
- ----------- --------- -------- ---------- -------- ------
Year ended October 31, 1999:
Reserves deducted from applicable assets:
For doubtful items -- trade accounts receivables $ 2,218 (A) $ 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
======== ======== ======== ======== ========
Year ended October 31, 2001:
Reserves deducted from applicable assets:
For doubtful items -- trade accounts receivables $ 9,860 (B) $ 3,500 $ 28 $ 2,792 $ 10,596
For doubtful items -- other notes and accounts
receivable 613 (B) 246 -0- -0- 859
-------- -------- -------- -------- --------
Total reserves deducted from applicable assets $ 10,473 $ 3,746 $ 28 $ 2,792 $ 11,455
======== ======== ======== ======== ========
(A) Excludes a $700,000 adjustment related to an amount guaranteed by Sonoco
Products Company.
(B) Includes adjustments of $7,567,000 for trade accounts receivable and
$613,000 for other notes and accounts receivable related to the Van Leer
Industrial Packaging business acquired from Hutamaki Van Leer Oyj on
March 2, 2001.
75
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 Certificate of Annual Report on Form 10-K for the
Incorporation of Greif Bros. Corporation. fiscal year ended October 31,
1997, File No. 1-566 (see Exhibit
3(a) therein).
3(b) Amended and Restated By-Laws of Greif Bros. Annual Report on Form 10-K for the
Corporation. fiscal year ended October 31,
1997, File No. 1-566 (see Exhibit
3(b) therein).
3(c) Amendment to Amended and Restated By-Laws of Annual Report on Form 10-K for the
Greif Bros. Corporation. fiscal year ended October 31,
1998 File No. 1-566 (see Exhibit
3(c) therein).
10(a)* Greif Bros. Corporation 1996 Directors Stock Registration Statement on Form S-8,
Option Plan. File No. 333-26977 (see Exhibit
4(b) therein).
10(b)* Greif Bros. Corporation Incentive Stock Annual Report on Form 10-K for the
Option Plan, as Amended and Restated. fiscal year ended October 31, 1997,
File No. 1-566 (see Exhibit 10(b)
therein).
10(c)* Greif Bros. Corporation Directors Deferred Annual Report on Form 10-K for the
Compensation Plan. fiscal year ended October 31, 1998
File No. 1-566 (see Exhibit 10(c)
therein).
10(d)* Employment Agreement between Michael J. Annual Report on Form 10-K for the
Gasser and Greif Bros. Corporation. fiscal year ended October 31, 1998,
File No. 1-566 (see Exhibit 10(d)
therein).
10(e)* Employment Agreement between William B. Annual Report on Form 10-K for the
Sparks and Greif Bros. Corporation. fiscal year ended October 31, 1998,
File No. 1-566 (see Exhibit 10(e)
therein).
10(f)* Employment Agreement, as amended, between Annual Report on Form 10-K for the
Charles R. Chandler and Greif Bros. fiscal year ended October 31, 1998,
Corporation. File No. 1-566 (see Exhibit 10(f)
therein).
Exhibit Index (continued)
- -------------
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
- ------- ---------------------- -----------------------------------
10(g)* Employment Agreement, as amended, between Annual Report on Form 10-K for the
Joseph W. Reed and Greif Bros. Corporation. fiscal year ended October 31, 1998,
File No. 1-566 (see Exhibit 10(g)
therein).
10(h)* Supplemental Retirement Benefit Agreement. Annual Report on Form 10-K for the
fiscal year ended October 31,
1999, File No. 1-566 (see Exhibit
10(i) therein).
10(i) Share Purchase Agreement, dated October 27, Current report of Form 8-K dated
2000, as amended on January 5, 2001 and March 15, 2001, File No. 1-566
February 28, 2001 between Hutamaki Van Leer (see Exhibit 2 therein).
Oyj, as the seller and Greif Bros.
Corporation as the buyer.
10(j) $900 million Senior Secured Credit Current report on Form 8-K dated
Agreement, dated as of March 2, 2001, among March 15, 2001, File No. 1-566
Greif Bros. Corporation, as a U.S. Borrower, (see Exhibit 99.2 therein).
Greif Spain Holdings, S.L., as a Subsidiary
Borrower, Merrill Lynch & Co., as a Sole
Lead Arranger, Sole Book-Runner and
Administrative Agent, Keybank National
Association, as Syndication Agent, ABN AMRO
Bank N.V., as Co-Documentation Agent,
National City Bank, as Co-Documentation
Agent, The Bank of Nova Scotia, as Paying
Agent, and other financial institutions
party hereto from time to time.
10(k)* Greif Bros. Corporation 2001 Management Definitive Proxy Statement on
Equity Incentive and Compensation Plan. Form DEF 14A dated January 26,
2001, File No. 001-00566 (see
Exhibit A therein).
Exhibit Index (continued)
- -------------
If Incorporated by Reference,
Exhibit Document with which Exhibit was
No. Description of Exhibit Previously Filed with SEC
- ------- ---------------------- -----------------------------------
10(l)* Greif Bros. Corporation 2000 Nonstatutory Registration Statement on Form S-8,
Stock Option Plan File No. 333-61058 (see Exhibit
4(c) therein).
10(m) Audit Committee Charter Contained herein.
21 Subsidiaries of the Registrant Contained herein.
23 Consent of Ernst & Young LLP-Columbus, Ohio. Contained herein.
24(a) Powers of Attorney for Michael J. Gasser, Annual Report on Form 10-K for the
Charles R. Chandler, Michael H. Dempsey, fiscal year ended October 31, 1997,
Naomi C. Dempsey, Daniel J. Gunsett, Robert File No. 1-566 (see Exhibit 24(a)
C. Macauley, David J. Olderman and William therein).
B. Sparks, Jr.
24(b) Power of Attorney for John C. Kane. Annual Report on Form 10-K for the
fiscal year ended October 31, 1999,
File No. 1-566 (see Exhibit 24(b)
therein).
* Executive compensation plans and arrangements required to be filed pursuant to
Item 601(b)(10) of Regulation S-K.