- Net income rose to $17.4 million, before $20.2 million of
timberland gains and $4.3 million of restructuring charges (special
items) on a net of tax basis, in the first quarter of 2006 versus
$14.5 million before special items in the same quarter last year.
Net income based on accounting principles generally accepted in the
United States (GAAP) was $33.4 million in the current quarter
compared to $15.1 million in the first quarter of 2005. DELAWARE,
Ohio, March 1 /PRNewswire-FirstCall/ -- Greif, Inc. (NYSE: GEF;
GEF.B), a global leader in industrial packaging with niche
businesses in containerboard, corrugated packaging and timber,
today announced results for its first quarter of 2006, which ended
on Jan. 31, 2006. Michael J. Gasser, Chairman and Chief Executive
Officer, commented, "We are pleased with our first quarter
performance, especially given the challenging market conditions.
Solid improvement in operating profit for Industrial Packaging
& Services was partially offset by lower anticipated results in
Paper, Packaging & Services. Benefits from the Greif Business
System mitigated the adverse impact of higher energy and
transportation costs during the quarter. We believe fundamentals in
our markets are improving. As these positive developments are fully
realized, Greif will be positioned for a successful 2006 fiscal
year." GAAP to Non-GAAP Reconciliation A reconciliation of the
differences between all non-GAAP financial measures discussed in
this release with the most directly comparable GAAP financial
measures is included in the financial schedules that are a part of
this release. Consolidated Results Net Sales Reported net sales
were $582.3 million in the first quarter of 2006 compared to $582.6
million in the first quarter of 2005. Positive comparisons in the
Industrial Packaging & Services ($0.7 million) and Timber
segments ($0.2 million) were offset by a decline in the Paper,
Packaging & Services segment ($1.2 million). Net sales changes
for each of the Company's business segments are discussed in more
detail below. Net sales increased 5 percent, excluding the impact
of foreign currency translation, from the same quarter last year.
This increase is evenly split between overall improvement in
selling prices and volumes. Gross Profit Gross profit was $89.7
million, or 15.4 percent of net sales, in the first quarter of 2006
versus $88.7 million, or 15.2 percent of net sales, in the first
quarter of 2005. Raw material costs were generally lower for steel,
containerboard and old corrugated containers (OCC) and higher for
resin. The overall benefits to the gross profit margin related to
raw material costs and the Greif Business System were significantly
offset by higher energy and transportation costs compared to the
same quarter of 2005. Selling, General & Administrative
(SG&A) Expenses SG&A expenses were $59.5 million, or 10.2
percent of net sales, in the first quarter of 2006 compared to
$59.7 million, or 10.3 percent of net sales, in the first quarter
of 2005. Management continues to focus on the Company's
controllable costs. Operating Profit Operating profit before
special items was $31.9 million in the first quarter of 2006
compared with $31.3 million in the first quarter of 2005. The
increase in the Industrial Packaging & Services segment ($6.6
million) was partially offset by a decline in the Paper, Packaging
& Services ($5.3 million) and Timber segments ($0.6 million).
There were $5.5 million and $7.2 million of restructuring charges
and $31.6 million and $8.1 million of timberland gains during the
first quarter of 2006 and 2005, respectively. GAAP operating profit
was $58.0 million in the first quarter of 2006 compared with GAAP
operating profit of $32.2 million in the first quarter of 2005. Net
Income and Diluted Earnings Per Share Net income before special
items was $17.4 million in the first quarter of 2006 compared to
$14.5 million in the first quarter of 2005. Diluted earnings per
share before special items were $0.60 versus $0.50 per Class A
share and $0.90 versus $0.76 per Class B share in the first quarter
of 2006 and 2005, respectively. The Company had GAAP net income of
$33.4 million, or $1.13 per diluted Class A share and $1.73 per
diluted Class B share, in the first quarter of 2006 versus net
income of $15.1 million, or $0.52 per diluted Class A share and
$0.79 per diluted Class B share, in the first quarter of 2005.
Business Group Results Industrial Packaging & Services The
Industrial Packaging & Services segment offers a comprehensive
line of industrial packaging products, such as steel, fibre and
plastic drums, intermediate bulk containers, closure systems for
industrial packaging products and polycarbonate water bottles
throughout the world. The key factors influencing profitability in
the Industrial Packaging & Services segment are: - Selling
prices and sales volumes; - Raw material costs, especially steel,
resin and containerboard; - Benefits from the Greif Business
System; - Restructuring charges; and - Impact of foreign currency
translation. In this segment, net sales were $429.7 million in the
first quarter of 2006 compared to $429.0 million in the first
quarter of 2005. Net sales rose 6 percent excluding the impact of
foreign currency translation. The improvement in net sales was
primarily due to the increased volume of plastic and fibre drum
sales, which benefited from two tuck-in acquisitions in the fourth
quarter of 2005, as well as organic growth in plastic drums. In
addition, plastic drum selling prices increased in response to
higher resin costs. The improvement in sales resulting from plastic
and fibre drum volumes and plastic drum selling prices was
partially offset by lower steel drum selling prices and volumes.
Operating profit before restructuring charges rose to $24.2 million
in the first quarter of 2006 from $17.7 million in the first
quarter of 2005. Restructuring charges were $4.2 million in the
first quarter of 2006 compared with $6.8 million a year ago. The
Industrial Packaging & Services segment's gross profit margin
improved to 16.7 percent in the first quarter of 2006 from 14.7
percent in the first quarter of 2005. This improvement was due to
lower raw material costs, especially steel, and the Greif Business
System. GAAP operating profit was $20.0 million in the first
quarter of 2006 compared with $10.9 million in the first quarter of
2005. Paper, Packaging & Services The Paper, Packaging &
Services segment sells containerboard, corrugated sheets and other
corrugated products and multiwall bags in North America. The key
factors influencing profitability in the Paper, Packaging &
Services segment are: - Selling prices and sales volumes; - Raw
material costs, especially OCC; - Energy and transportation costs;
- Benefits from the Greif Business System; and - Restructuring
charges. In this segment, net sales were $147.0 million in the
first quarter of 2006 compared to $148.2 million last year due to
lower selling prices of containerboard, substantially offset by
improved sales volumes of containerboard and corrugated sheets.
Operating profit before restructuring charges was $4.3 million in
the first quarter of 2006 compared to $9.6 million in the first
quarter of 2005. Restructuring charges were $1.2 million in the
first quarter of 2006 versus $0.4 million a year ago. The decrease
in operating profit was primarily due to significantly higher
energy and transportation costs ($4.7 million) and lower selling
prices for containerboard as compared to the first quarter of 2005.
GAAP operating profit was $3.0 million in the first quarter of 2006
compared to $9.2 million in the first quarter of 2005. Timber The
Timber segment consists of approximately 255,700 acres of timber
properties in southeastern United States, which are actively
harvested and regenerated, and approximately 37,000 acres in
Canada. The key factors influencing profitability in the Timber
segment are: - Planned level of timber sales; and - Gains on sale
of timberland. Net sales were $5.6 million in the first quarter of
2006 compared to $5.3 million in the first quarter of 2005.
Operating profit before special items was $3.4 million (including
$0.7 million resulting from the sale of development property in
Canada) in the first quarter of 2006 compared to $4.0 million in
the first quarter of 2005. Special items included insignificant
restructuring charges in both periods and timberland gains of $31.6
million in the first quarter of 2006 and $8.1 million in the first
quarter of 2005. GAAP operating profit was $34.9 million in the
first quarter of 2006 compared to $12.1 million in the first
quarter of 2005. The Company completed the second phase of its
previously reported $90 million sale of timberland, timber and
associated assets in the first quarter of 2006. In this phase, the
Company sold 15,300 acres of timberland holdings in Florida for
$29.3 million, resulting in a gain of $27.4 million. The final
phase of this transaction, approximately $10 million, is expected
to occur later in fiscal 2006. Greif Business System Update The
Greif Business System generates productivity improvements and
achieves permanent cost reductions. The opportunities continue to
include, but are not limited to, improved labor productivity,
material yield and other manufacturing efficiencies, coupled with
further footprint rationalization. Annualized benefits of
approximately $125 million were achieved through the end of fiscal
2005. In addition, the Company has launched a strategic sourcing
initiative to more effectively leverage its global spend and lay
the foundation for a world-class sourcing and supply chain
capability. The Company expects incremental benefits of
approximately $30 million, primarily from the strategic sourcing
initiative, during fiscal 2006. Restructuring Charges The Company
had $5.5 million of restructuring charges during the first quarter
of 2006. These charges were primarily the result of closing two
industrial packaging operating locations in the United Kingdom and
a corrugated container location in the United States. In addition,
severance costs were incurred due to the elimination of certain
administrative positions. Financing Arrangements Net debt
outstanding was $370.2 million at Jan. 31, 2006 compared to $325.2
million at Oct. 31, 2005 and $430.0 million at Jan. 31, 2005. Net
debt is long-term debt plus short-term borrowings less cash and
cash equivalents. Net debt is higher than at fiscal year-end
primarily due to the seasonality of the Company's business, coupled
with changes in working capital and the net impact of property,
plant and equipment transactions. GAAP long-term debt was $457.4
million at Jan. 31, 2006 compared to $430.4 million at Oct. 31,
2005 and $477.1 million at Jan. 31, 2005. Interest expense was $9.7
million and $10.1 million in the first quarter of 2006 and 2005,
respectively. Lower average debt outstanding was partially offset
by higher interest rates during the first quarter of 2006 compared
to the first quarter of 2005. Capital Expenditures Capital
expenditures were $12.6 million, excluding timberland purchases of
$35.5 million, in the first quarter of 2006 compared with capital
expenditures of $8.7 million during the first quarter of 2005.
There were no timberland purchases in the first quarter of 2005.
For fiscal 2006, capital expenditures are expected to be
approximately $75 million, excluding timberland purchases, which
would be approximately $25 million below the Company's anticipated
depreciation expense of approximately $100 million. Stock
Repurchases and Dividends During the first quarter of 2006, the
Company repurchased 50,000 shares of Class A Common Stock pursuant
to its stock repurchase program. The Board of Directors authorized
the Company to purchase up to two million shares of the Company's
Class A or Class B Common Stock or any combination thereof. As of
Jan. 31, 2006, the Company had repurchased 1,027,224 shares,
including 626,476 shares of Class A Common Stock and 400,748 shares
of Class B Common Stock, under this program. The total cost of the
shares repurchased since 1999, when this program commenced, through
Jan. 31, 2006 was $37.9 million. The Company paid $6.8 million of
dividends to its Class A and Class B stockholders in the first
quarter of 2006 compared to $4.5 million for the same period last
year. This represents an increase of approximately 50 percent per
share for both classes of the Company's common stock compared to
the first quarter of 2005. Company Outlook Industry fundamentals
are expected to continue to improve throughout fiscal 2006. There
have been encouraging signs recently in the containerboard market
following a period of declining prices most of the past year. It is
anticipated that pressures related to higher energy and
transportation costs in our businesses will be more than offset by
additional savings from the Greif Business System. Earnings
guidance before special items is being increased by $0.10 to $3.55
to $3.65 per Class A share for fiscal 2006, which is 9 percent to
12 percent above the Company's fiscal 2005 earnings per Class A
share. Conference Call The Company will host a conference call to
discuss its first quarter of 2006 results on March 2, 2006, at 10
a.m. EST. To participate, domestic callers should call (800)
257-3401 and ask for the Greif conference call. The number for
international callers is +1 303 205 0033. Phone lines will open at
9:50 a.m. EST. The conference call will also be available through a
live webcast, including slides, which can be accessed at
http://www.greif.com/. A replay of the conference call will be
available on the Company's Web site approximately one hour
following the call. About Greif Greif is a world leader in
industrial packaging products and services. The Company provides
extensive expertise in steel, plastic, fibre, corrugated and
multiwall containers for a wide range of industries. Greif also
produces containerboard and manages timber properties in the United
States. Greif is strategically positioned in more than 40 countries
to serve multinational as well as regional customers. Additional
information is on the Company's Web site at http://www.greif.com/.
Forward-Looking Statements All statements other than statements of
historical facts included in this news release, including, without
limitation, statements regarding the Company's future financial
position, business strategy, budgets, projected costs, goals and
plans and objectives of management for future operations, are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect,"
"intend," "estimate," "anticipate," "project," "believe,"
"continue" or "target" or the negative thereof or variations
thereon or similar terminology. All forward-looking statements made
in this news release are based on information currently available
to management. Although the Company believes that the expectations
reflected in forward-looking statements have a reasonable basis,
the Company can give no assurance that these expectations will
prove to be correct. Forward-looking statements are subject to
risks and uncertainties that could cause actual events or results
to differ materially from those expressed in or implied by the
statements. Such risks and uncertainties that might cause a
difference include, but are not limited to: general economic or
business conditions, including a prolonged or substantial economic
downturn; changing trends and demands in the industries in which
the Company competes, including industry over-capacity; industry
competition; the continuing consolidation of the Company's customer
base for its industrial packaging, containerboard and corrugated
products; political instability in those foreign countries where
the Company manufactures and sells its products; foreign currency
fluctuations and devaluations; availability and costs of raw
materials for the manufacture of the Company's products,
particularly steel, resin and old corrugated containers; price
fluctuations in energy costs; costs associated with litigation or
claims against the Company pertaining to environmental, safety and
health, product liability and other matters; work stoppages and
other labor relations matters; property loss resulting from wars,
acts of terrorism or natural disasters; the Company's ability to
integrate its newly acquired operations effectively with its
existing business; the Company's ability to achieve improved
operating efficiencies and capabilities; the frequency and volume
of sales of the Company's timber and timberland; and the deviation
of actual results from the estimates and/or assumptions used by the
Company in the application of its significant accounting policies.
These and other risks and uncertainties that could materially
affect the Company's consolidated financial results are further
discussed in its filings with the Securities and Exchange
Commission, including its Form 10-K for the year ended Oct. 31,
2005. The Company assumes no obligation to update any
forward-looking statements. GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME UNAUDITED (Dollars in thousands,
except per share amounts) Quarter ended January 31, 2006 2005 Net
sales $582,316 $582,564 Cost of products sold 492,644 493,838 Gross
profit 89,672 88,726 Selling, general and administrative expenses
59,454 59,721 Restructuring charges 5,468 7,186 Gain on sale of
assets 33,211 10,344 Operating profit 57,961 32,163 Interest
expense, net 9,701 10,093 Other income (expense), net 46 (969)
Income before income tax expense 48,306 21,101 Income tax expense
14,954 5,965 Net income $33,352 $15,136 Basic earnings per share:
Class A Common Stock $1.16 $0.53 Class B Common Stock $1.73 $0.79
Diluted earnings per share: Class A Common Stock $1.13 $0.52 Class
B Common Stock $1.73 $0.79 Earnings per share were calculated using
the following number of shares: Basic earnings per share: Class A
Common Stock 11,542,159 11,119,292 Class B Common Stock 11,538,645
11,640,759 Diluted earnings per share: Class A Common Stock
11,868,331 11,527,874 Class B Common Stock 11,538,645 11,640,759
GREIF, INC. AND SUBSIDIARY COMPANIES SEGMENT DATA UNAUDITED
(Dollars in thousands) Quarter ended January 31, 2006 2005 Net
sales Industrial Packaging & Services $429,720 $429,042 Paper,
Packaging & Services 147,039 148,205 Timber 5,557 5,317 Total
$582,316 $582,564 Operating profit Operating profit before
restructuring charges and timberland gains: Industrial Packaging
& Services $24,240 $ 17,679 Paper, Packaging & Services
4,257 9,591 Timber 3,363 4,007 Operating profit before
restructuring charges and timberland gains 31,860 31,277
Restructuring charges: Industrial Packaging & Services 4,222
6,798 Paper, Packaging & Services 1,236 377 Timber 10 11
Restructuring charges 5,468 7,186 Timberland gains: Timber 31,569
8,072 Total $57,961 $ 32,163 Depreciation, depletion and
amortization expense Industrial Packaging & Services $15,082 $
16,136 Paper, Packaging & Services 8,008 8,452 Timber 1,584 394
Total $24,674 $ 24,982 GREIF, INC. AND SUBSIDIARY COMPANIES
GEOGRAPHIC DATA UNAUDITED (Dollars in thousands) Quarter ended
January 31, 2006 2005 Net sales North America $339,141 $317,176
Europe 156,029 176,170 Other 87,146 89,218 Total $582,316 $582,564
Operating profit Operating profit before restructuring charges and
timberland gains: North America $11,434 $17,637 Europe 12,667 6,040
Other 7,759 7,600 Operating profit before restructuring charges and
timberland gains 31,860 31,277 Restructuring charges 5,468 7,186
Timberland gains 31,569 8,072 Total $57,961 $32,163 GREIF, INC. AND
SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED (Dollars in thousands) January 31, 2006 October 31, 2005
ASSETS CURRENT ASSETS Cash and cash equivalents $115,421 $122,411
Trade accounts receivable 267,445 258,636 Inventories 177,499
170,533 Other current assets 75,069 74,372 635,434 625,952
LONG-TERM ASSETS Goodwill 248,910 263,703 Intangible assets 37,119
25,015 Assets held by special purpose entities 50,891 50,891 Other
long-term assets 53,523 55,706 390,443 395,315 PROPERTIES, PLANTS
AND EQUIPMENT 889,583 862,056 $1,915,460 $1,883,323 LIABILITIES AND
SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $212,198
$234,672 Short-term borrowings 28,191 17,173 Other current
liabilities 118,057 131,139 358,446 382,984 LONG-TERM LIABILITIES
Long-term debt 457,442 430,400 Liabilities held by special purpose
entities 43,250 43,250 Other long-term liabilities 293,413 294,105
794,105 767,755 MINORITY INTEREST 3,173 1,696 SHAREHOLDERS' EQUITY
759,736 730,888 $1,915,460 $1,883,323 GREIF, INC. AND SUBSIDIARY
COMPANIES GAAP TO NON-GAAP RECONCILIATION UNAUDITED (Dollars in
thousands, except per share amounts) Quarter ended Quarter ended
January 31, 2006 January 31, 2005 Diluted per share amounts Diluted
per share amounts Class A Class B Class A Class B GAAP - operating
profit $57,961 $32,163 Restructuring charges 5,468 7,186 Timberland
gains (31,569) (8,072) Non-GAAP - operating profit before
restructuring charges and timberland gains $31,860 $31,277 GAAP -
net income $33,352 $1.13 $1.73 $15,136 $0.52 $0.79 Restructuring
charges, net of tax 4,287 0.15 0.22 5,174 0.18 0.28 Timberland
gains, net of tax (20,229) (0.68) (1.05) (5,812) (0.20) (0.31)
Non-GAAP - net income before restructuring charges and timberland
gains $17,410 $0.60 $0.90 $14,498 $0.50 $0.76 NOTE: During the
first quarter of 2006, the Company sold 15,300 acres of timberland
holdings in Florida. The tax effect of the gain for this
transaction is calculated using a 38.1 percent tax rate. The other
adjustments to reconcile the GAAP to non-GAAP amounts are tax
effected using the consolidated effective tax rate excluding the
impact of this timberland sale. GREIF, INC. AND SUBSIDIARY
COMPANIES GAAP TO NON-GAAP RECONCILIATION (CONTINUED) UNAUDITED
(Dollars in thousands) Quarter ended January 31, 2006 2005
Industrial Packaging & Services GAAP - operating profit $20,018
$10,881 Restructuring charges 4,222 6,798 Non-GAAP - operating
profit before restructuring charges $24,240 $17,679 Paper,
Packaging & Services GAAP - operating profit $3,021 $9,214
Restructuring charges 1,236 377 Non-GAAP - operating profit before
restructuring charges $4,257 $9,591 Timber GAAP - operating profit
$34,922 $12,068 Restructuring charges 10 11 Timberland gains
(31,569) (8,072) Non-GAAP - operating profit before restructuring
charges and timberland gains $3,363 $4,007 GREIF, INC. AND
SUBSIDIARY COMPANIES GAAP TO NON-GAAP RECONCILIATION (CONTINUED)
UNAUDITED (Dollars in thousands) January 31, October 31, January
31, 2006 2005 2005 GAAP - long-term debt $457,442 $430,400 $477,056
Short-term borrowings 28,191 17,173 9,036 Cash and cash equivalents
(115,421) (122,411) (56,138) Non-GAAP net debt $370,212 $325,162
$429,954 DATASOURCE: Greif, Inc. CONTACT: Analysts, Robert Lentz,
+1-614-876-2000, for Greif, Inc.; or Media, Deb Strohmaier of
Greif, Inc., +1-740-549-6074, or cell, +1-614-208-3496 Web site:
http://www.greif.com/
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