NYSE GEF.B

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Price: 56.80

NYSE GEF

Change: +0.1% +0.05
Volume: 149,059 July 17, 2018
Price: 52.19

Greif Reports Second Quarter 2018 Results

06/06/2018

DELAWARE, Ohio--(BUSINESS WIRE)-- Greif, Inc. (NYSE: GEF, GEF.B), a world leader in industrial packaging products and services, today announced second quarter 2018 results.

Second Quarter Highlights include (all results compared to the second quarter of 2017 unless otherwise noted):

  • Net sales increased by $80.9 million to $968.3 million.
  • Gross profit increased by $13.4 million to $195.3 million, despite being adversely impacted by an increase in transportation costs of $7.0 million.
  • Operating profit increased by $6.2 million to $87.7 million and operating profit before special items1 increased by $7.7 million to $92.6 million.
  • Net income of $45.1 million or $0.77 per diluted Class A share increased compared to net income of $36.0 million or $0.61 per diluted Class A share. Net income, excluding the impact of special items, of $44.7 million or $0.76 per diluted Class A share increased compared to net income, excluding the impact of special items, of $39.3 million or $0.67 per diluted Class A share.
  • Cash provided by operating activities decreased by $1.4 million to $58.2 million. Free cash flow2 decreased by $11.3 million to $29.9 million.

“Greif delivered solid second quarter results,” said Greif’s President and Chief Executive Officer, Pete Watson. “Sales, operating profit before special items and earnings each increased versus the prior year quarter, with particularly strong performance seen in our Paper Packaging and Flexible Products segments relative to the prior year quarter. Our Rigid Packaging segment was impacted by customer operational interruptions, weather issues and rising raw material costs. We continue to pass raw material costs along via price adjustment mechanisms and expect an improved second half performance from this segment. Looking ahead, the performance and outlook for our diversified product portfolio leads us to increase our Fiscal 2018 Class A EPS before special items guidance range to $3.45 - $3.70 per share from $3.25 - $3.55 previously.”

______________________________________________

(1)   A summary of all special items that are excluded from operating profit before special items, from net income before special items, and from earnings per diluted Class A share before special items is set forth in the Selected Financial Highlights table following the Company Outlook in this release.
 
(2) Free cash flow is defined as net cash provided by operating activities less cash paid for purchases of properties, plants and equipment.
 

Note: A reconciliation of the differences between all non-GAAP financial measures used in this release with the most directly comparable GAAP financial measures is included in the financial schedules that are a part of this release. These non-GAAP financial measures are intended to supplement and should be read together with our financial results. They should not be considered an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of this financial information should not place undue reliance on these non-GAAP financial measures.

Customer Service

The Company's consolidated CSI3 score for the second quarter of 2018 improved to 87.2, with the largest improvement recorded in FPS, which generated a 27 percent improvement versus the prior year quarter. Our expectation is that each business segment delivers a CSI score at 95 or better.

We finalized our sixth NPS4 survey during the second quarter of 2018 and received a consolidated Greif score of 46, which was down slightly compared to the previous survey result. Our aspiration is to achieve a score of 55 over time. We continue to leverage the increased customer interactions that accompany each survey as they lead to additional actions with our customers and ultimately better strategic insight into their businesses.

Segment Results (all results compared to the second quarter of 2017 unless otherwise noted)

Net sales are impacted mainly by the volume of primary products5 sold, selling prices, product mix and the impact of changes in foreign currencies against the U.S. Dollar. The table below shows the percentage impact of each of these items on net sales for our primary products for the second quarter of 2018 as compared to the prior year quarter for the business segments with manufacturing operations:

     
Rigid Industrial
Packaging & Paper Packaging & Flexible Products

Net Sales Impact - Primary Products

Services   Services   & Services
%   %   %
Currency Translation 5.2 % 13.1 %
Volume (2.8 )% 6.4 % 8.4 %
Selling Prices and Product Mix 4.5 %   6.7 %   5.9 %
Total Impact of Primary Products 6.9 %   13.1 %   27.4 %
 

Rigid Industrial Packaging & Services

Net sales increased by $38.4 million to $662.7 million. Net sales excluding foreign currency translation increased by $5.8 million due primarily to a 4.5 percent increase in selling prices on our primary products as a result of strategic pricing decisions and increases in index prices, partially offset by customer operational interruptions, weather and our value over volume decisions.

Gross profit decreased by $9.0 million to $124.9 million. The decrease in gross profit was primarily due to the continuation of rising raw material costs, the timing of contractual pass through arrangements and an increase in manufacturing and transportation costs.

Operating profit decreased by $8.9 million to $47.2 million. Operating profit before special items decreased by $7.8 million to $52.5 million, due primarily to the same factors that impacted gross profit, partially offset by a decrease in the segment's selling, general & administrative ("SG&A") expense.

Paper Packaging & Services

Net sales increased by $25.2 million to $213.9 million. The increase was due to higher selling prices due to increases in published containerboard pricing and higher volumes.

Gross profit increased by $17.0 million to $49.9 million. The increase in gross profit was primarily due to higher containerboard prices and lower old corrugated container input costs, partially offset by an increase in transportation costs.

Operating profit increased by $12.7 million to $33.0 million. Operating profit before special items increased by $12.4 million to $33.0 million due to the same factors that impacted gross profit, partially offset by an increase in the segment's SG&A expense.

Flexible Products & Services

Net sales increased by $17.5 million to $84.1 million. Net sales excluding foreign currency translation increased by $9.2 million due to strategic pricing decisions, product mix and higher volumes.

Gross profit increased by $5.3 million to $17.6 million due primarily due to the same factors that impacted net sales in addition to improved transportation and manufacturing efficiencies.

Operating profit increased by $3.2 million to $5.0 million. Operating profit before special items increased by $2.9 million to $5.0 million. The improvement in operating profit before special items was due primarily to the same factors that impacted gross profit, partially offset by an increase in the segment's SG&A expense.

Land Management

Net sales decreased by $0.2 million to $7.6 million.

Operating profit decreased by $0.8 million to $2.5 million. Operating profit before special items increased by $0.2 million to $2.1 million.

Dividend Summary

On June 5, 2018, the Board of Directors declared quarterly cash dividends of $0.42 per share of Class A Common Stock and $0.63 per share of Class B Common Stock. Dividends are payable on July 1, 2018, to stockholders of record at the close of business on June 18, 2018.

Tax Summary

Our second quarter tax rate was 29.2 percent. Our second quarter tax rate excluding the impact of special items was 34.2 percent, which was above our previously reported fiscal 2018 guidance range of 28 - 32 percent, due to additional reserves for uncertain tax positions and out of period adjustments that added approximately $3.0 million to our second quarter tax expense.

We expect our full year tax rate excluding the impact of special items to range between 28 - 32 percent, as we expect the discrete expenses that impacted our second quarter results to be offset by tax benefits booked ratably later in this fiscal year. We also continue to assess our provisional estimate for the Tax Cuts and Jobs Act. During the second quarter, we booked a $4.3 million increase to the provisional net tax benefit that was recorded during our first quarter and that was also treated as a special item. Looking ahead, there will likely be refinements to our provisional estimate which would be booked later this fiscal year.

Company Outlook

     

 

Fiscal 2018 Outlook Fiscal 2018 Outlook

(in millions, except per share amounts)

  Reported at Q1   Reported at Q2   Comments
SG&A expense $395 - $415 No change N/A
Interest expense $50 - $55 No change N/A
Other expense, net $15 - $20 No change N/A
Tax rate excluding the impact of special items 28 - 32% No change N/A

Class A earnings per share before special items

$3.25 - $3.55 $3.45 - $3.70 Improved price/cost in containerboard; accelerated FPS performance
Capital expenditures $100 - $120 $120 - $140 New growth projects
Free cash flow $200 - $220 No change N/A
 

Note: 2018 Class A earnings per share and tax rate guidance are not provided in this release due to the potential for one or more of the following, the timing and magnitude of which we are unable to reliably forecast: gains or losses on the disposal of businesses, timberland or properties, plants and equipment, net, non-cash asset impairment charges due to unanticipated changes in the business, restructuring-related activities, non-cash pension settlement charges or acquisition costs, and the income tax effects of these items and other income tax-related events. No reconciliation of the fiscal year 2018 Class A earnings per share before special items guidance or tax rate excluding the impact of special items guidance, both non-GAAP financial measures which exclude gains and losses on the disposal of businesses, timberland and properties, plants and equipment, non-cash pension settlement charges, acquisition costs, restructuring and impairment charges and provisional tax net benefits resulting from the Tax Reform Act is included in this release because, due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible, we are unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts. A reconciliation of 2018 free cash flow guidance to forecasted net cash provided by operating activities, the most directly comparable GAAP financial measure, is included in this release.

(3)

  Customer satisfaction index (CSI) tracks a variety of internal metrics designed to enhance the customer experience in dealing with Greif.
 

(4)

Net Promoter Score (NPS) is a survey conducted by a third party that measures how likely a customer is to recommend Greif as a business partner. NPS scores are developed by subtracting the percentage of detractors a business has from the percentage of its promoters.
 

(5)

Primary products are manufactured steel, plastic and fibre drums; intermediate bulk containers; linerboard, medium, corrugated sheets and corrugated containers; and 1&2 loop and 4 loop flexible intermediate bulk containers.
   
GREIF, INC. AND SUBSIDIARY COMPANIES
SELECTED FINANCIAL HIGHLIGHTS
UNAUDITED
 
Three months ended April 30,   Six months ended April 30,
(in millions, except for per share amounts)   2018   2017   2018   2017

Selected Financial Highlights

   
Net sales $ 968.3 $ 887.4 $ 1,874.0 $ 1,708.3
Gross profit 195.3 181.9 367.0 345.2
Gross profit margin 20.2 % 20.5 % 19.6 % 20.2 %
Operating profit 87.7 81.5 153.2 147.1
Operating profit before special items 92.6 84.9 160.7 151.6
EBITDA(6) 118.4 108.2 207.9 177.4
EBITDA before special items 123.3 112.7 215.4 206.5
Cash provided by operating activities 58.2 59.6 4.5 15.5
Free cash flow 29.9 41.2 (51.8 ) (24.2 )
Net income attributable to Greif, Inc. 45.1 36.0 101.6 41.4
Diluted Class A earnings per share attributable to Greif, Inc. $ 0.77 $ 0.61 $ 1.73 $ 0.71
Diluted Class A earnings per share attributable to Greif, Inc. before special items $ 0.76 $ 0.67 $ 1.25 $ 1.12

Special items

Restructuring charges $ 6.0 $ 5.1 $ 10.1 $ 4.8
Acquisition-related costs 0.2
Non-cash asset impairment charges 0.4 2.0 3.3 3.9
Non-cash pension settlement charge 1.1 24.6
Gain on disposal of properties, plants and equipment and businesses, net (1.5 ) (3.7 ) (6.1 ) (4.2 )
Provisional tax net benefit resulting from the Tax Reform Act (4.3 )   (33.4 )  
Total special items $ 0.6   $ 4.5   $ (25.9 ) $ 29.1  
 
April 30, 2018 October 31, 2017 April 30, 2017 October 31, 2016
Operating working capital(7) $ 420.6 $ 327.3 $ 390.1 $ 304.6
(6)   EBITDA is defined as net income, plus interest expense, net, plus income tax expense, plus depreciation, depletion and amortization.
 
(7) Operating working capital is defined as trade accounts receivable plus inventories less accounts payable.
 

Conference Call

The Company will host a conference call to discuss the second quarter of 2018 results on June 7, 2018, at 8:30 a.m. Eastern Time (ET). To participate, domestic callers should call 833-231-8265. The Greif ID is 9545489. The number for international callers is +1-647-689-4110. Phone lines will open at 8:00 a.m. ET. The conference call will also be available through a live webcast, including slides, which can be accessed at http://investor.greif.com by clicking on the Events and Presentations tab and searching under the events calendar. A replay of the conference call will be available on the Company’s website approximately two hours following the call.

About Greif

Greif is a global leader in industrial packaging products and services and is pursuing its vision to become the world’s best performing customer service company in industrial packaging. The Company produces steel, plastic, fibre, flexible, corrugated, and reconditioned containers, intermediate bulk containers, containerboard and packaging accessories, and provides filling, packaging and industrial packaging reconditioning services for a wide range of industries. Greif also manages timber properties in the southeastern United States. The Company is strategically positioned with production facilities in over 40 countries to serve global as well as regional customers. Additional information is on the Company’s website at www.greif.com.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “aspiration,” “objective,” “project,” “believe,” “continue,” “on track” or “target” or the negative thereof and similar expressions, among others, identify forward-looking statements. All forward-looking statements are based on assumptions, expectations and other information currently available to management. Such forward-looking statements are subject to certain risks and uncertainties that could cause the Company’s actual results to differ materially from those forecasted, projected or anticipated, whether expressed or implied. The most significant of these risks and uncertainties are described in Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2017. The Company undertakes no obligation to update or revise any forward-looking statements.

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 the Company’s actual results to differ materially from those forecasted, projected or anticipated, whether expressed in or implied by the statements. Such risks and uncertainties that might cause a difference include, but are not limited to, the following: (i) historically, our business has been sensitive to changes in general economic or business conditions, (ii) we may not successfully implement our business strategies, including achieving our growth objectives, (iii) our operations subject us to currency exchange and political risks that could adversely affect our results of operations, (iv) the current and future challenging global economy and disruption and volatility of the financial and credit markets may adversely affect our business, (v) the continuing consolidation of our customer base and suppliers may intensify pricing pressure, (vi) we operate in highly competitive industries, (vii) our business is sensitive to changes in industry demands, (viii) raw material and energy price fluctuations and shortages may adversely impact our manufacturing operations and costs, (ix) geopolitical conditions, including direct or indirect acts of war or terrorism, could have a material adverse effect on our operations and financial results, (x) we may encounter difficulties arising from acquisitions, (xi) in connection with acquisitions or divestitures, we may become subject to liabilities, (xii) we may incur additional restructuring costs and there is no guarantee that our efforts to reduce costs will be successful, (xiii) we could be subject to changes in our tax rates, the adoption of new U.S. of foreign tax legislation or exposure to additional tax liabilities, (xiv) full realization of our deferred tax assets may be affected by a number of factors, (xv) several operations are conducted by joint ventures that we cannot operate solely for our benefit, (xvi) certain of the agreements that govern our joint ventures provide our partners with put or call options, (xvii) our ability to attract, develop and retain talented and qualified employees, managers and executives is critical to our success, (xviii) our business may be adversely impacted by work stoppages and other labor relations matters, (xix) we may not successfully identify illegal immigrants in our workforce, (xx) our pension and postretirement plans are underfunded and will require future cash contributions and our required future cash contributions could be higher than we expect, each of which could have a material adverse effect on our financial condition and liquidity, (xxi) we may be subject to losses that might not be covered in whole or in part by existing insurance reserves or insurance coverage, (xxii) our business depends on the uninterrupted operations of our facilities, systems and business functions, including our information technology (IT) and other business systems, (xxiii) a security breach of customer, employee, supplier or Company information may have a material adverse effect on our business, financial condition and results of operations, (xxiv) legislation/regulation related to environmental and health and safety matters and corporate social responsibility could negatively impact our operations and financial performance, (xxv) product liability claims and other legal proceedings could adversely affect our operations and financial performance, (xxvi) we may incur fines or penalties, damage to our reputation or other adverse consequences if our employees, agents or business partners violate, or are alleged to have violated, anti-bribery, competition or other laws, (xxvii) changing climate, climate change regulations and greenhouse gas effects may adversely affect our operations and financial performance, (xxviii) the frequency and volume of our timber and timberland sales will impact our financial performance, (xxix) changes in U.S. generally accepted accounting principles (U.S. GAAP) and SEC rules and regulations could materially impact our reported results, (xxx) if the Company fails to maintain an effective system of internal control, the Company may not be able to accurately report financial results or prevent fraud, and (xxxi) the Company has a significant amount of goodwill and long-lived assets which, if impaired in the future, would adversely impact our results of operations. The risks described above are not all-inclusive, and given these and other possible risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. For a detailed discussion of the most significant risks and uncertainties that could cause our actual results to differ materially from those forecasted, projected or anticipated, see “Risk Factors” in Part I, Item 1A of our most recently filed Form 10-K and our other filings with the Securities and Exchange Commission. All forward-looking statements made in this news release are expressly qualified in their entirety by reference to such risk factors. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

     
GREIF, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

UNAUDITED

 
Three months ended April 30,   Six months ended April 30,
(in millions, except per share amounts)   2018   2017   2018   2017
Net sales $ 968.3 $ 887.4 $ 1,874.0   $ 1,708.3
Cost of products sold 773.0   705.5   1,507.0   1,363.1  
Gross profit 195.3 181.9 367.0 345.2
Selling, general and administrative expenses 102.7 97.0 206.5 193.6
Restructuring charges 6.0 5.1 10.1 4.8
Non-cash asset impairment charges 0.4 2.0 3.3 3.9
Gain on disposal of properties, plants and equipment, net (1.5 ) (1.8 ) (6.1 ) (2.8 )
Gain on disposal of businesses, net   (1.9 )   (1.4 )
Operating profit 87.7 81.5 153.2 147.1
Interest expense, net 13.0 14.3 26.3 33.0
Non-cash pension settlement charge 1.1 24.6
Other expense, net 2.5   3.2   10.2   6.8  
Income before income tax expense and equity earnings of unconsolidated affiliates, net 72.2 62.9 116.7 82.7
Income tax expense 21.1 23.0 5.5 34.8
Equity earnings of unconsolidated affiliates, net of tax (0.8 )   (0.8 )  
Net income 51.9 39.9 112.0 47.9
Net income attributable to noncontrolling interests (6.8 ) (3.9 ) (10.4 ) (6.5 )
Net income attributable to Greif, Inc. $ 45.1   $ 36.0   $ 101.6   $ 41.4  
Basic earnings per share attributable to Greif, Inc. common shareholders:
Class A Common Stock $ 0.77 $ 0.61 $ 1.73 $ 0.71
Class B Common Stock $ 1.14 $ 0.92 $ 2.58 $ 1.05
Diluted earnings per share attributable to Greif, Inc. common shareholders:
Class A Common Stock $ 0.77 $ 0.61 $ 1.73 $ 0.71
Class B Common Stock $ 1.14 $ 0.92 $ 2.58 $ 1.05
Shares used to calculate basic earnings per share attributable to Greif, Inc. common shareholders:
Class A Common Stock 25.9 25.8 25.9 25.8
Class B Common Stock 22.0 22.0 22.0 22.0
Shares used to calculate diluted earnings per share attributable to Greif, Inc. common shareholders:
Class A Common Stock 25.9 25.8 25.9 25.8
Class B Common Stock 22.0     22.0     22.0     22.0  
 
   
GREIF, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

 
(in millions)   April 30, 2018   October 31, 2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 108.2 $ 142.3
Trade accounts receivable 463.4 447.0
Inventories 352.9 279.5
Other current assets 164.1     125.7
1,088.6 994.5
LONG-TERM ASSETS
Goodwill 798.3 785.4
Intangible assets 90.7 98.0
Assets held by special purpose entities 50.9 50.9
Other long-term assets 128.4   115.1
1,068.3   1,049.4
PROPERTIES, PLANTS AND EQUIPMENT 1,189.9   1,188.4
$ 3,346.8   $ 3,232.3
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable $ 395.7 $ 399.2
Short-term borrowings 8.8 14.5
Current portion of long-term debt 15.0 15.0
Other current liabilities 247.6   259.2
667.1   687.9
LONG-TERM LIABILITIES
Long-term debt 1,020.5 937.8
Liabilities held by special purpose entities 43.3 43.3
Other long-term liabilities 452.8   484.3
1,516.6   1,465.4
REDEEMABLE NONCONTROLLING INTERESTS 33.8   31.5
EQUITY    
Total Greif, Inc. equity 1,086.5   1,010.9
Noncontrolling interests 42.8   36.6
1,129.3   1,047.5
$ 3,346.8   $ 3,232.3
 
   
GREIF, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 
Three months ended April 30,   Six months ended April 30,
(in millions)   2018   2017   2018   2017
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income $ 51.9 $ 39.9 $ 112.0 $ 47.9
Depreciation, depletion and amortization 32.4 31.0 64.1 61.7
Asset impairments 0.4 2.0 3.3 3.9
Pension settlement loss 1.1 24.6
Other non-cash adjustments to net income (5.5 ) 1.5 (73.1 ) (8.8 )
Operating working capital changes (19.9 ) (27.2 ) (85.2 ) (92.3 )
Deferred purchase price on sold receivables (1.9 ) 1.4 (24.8 ) (21.7 )
Increase in cash from changes in other assets and liabilities 0.8   9.9   8.2   0.2  
Net cash provided by operating activities 58.2   59.6   4.5   15.5  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of properties, plants and equipment (28.3 ) (18.4 ) (56.3 ) (39.7 )
Purchases of and investments in timber properties (2.3 ) (3.3 ) (4.9 ) (5.4 )
Proceeds from the sale of properties, plants and equipment, businesses, timberland and other assets 2.5 5.6 9.9 8.1
Proceeds on insurance recoveries   0.4     0.4  
Net cash used in investing activities (28.1 ) (15.7 ) (51.3 ) (36.6 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) debt, net 15.5 (32.2 ) 64.9 65.5
Dividends paid to Greif, Inc. shareholders (24.8 ) (24.7 ) (49.3 ) (49.2 )
Other (3.0 ) (3.0 ) (3.4 ) (3.5 )
Net cash provided by (used in) financing activities (12.3 ) (59.9 ) 12.2   12.8  
Reclassification of cash to assets held for sale (5.9 ) (5.9 )
Effects of exchange rates on cash (3.9 ) 2.1   0.5   (2.5 )
Net increase (decrease) in cash and cash equivalents 13.9 (19.8 ) (34.1 ) (16.7 )
Cash and cash equivalents, beginning of period 94.3   106.8   142.3   103.7  
Cash and cash equivalents, end of period $ 108.2   $ 87.0   $ 108.2   $ 87.0  
 
   
GREIF, INC. AND SUBSIDIARY COMPANIES
FINANCIAL HIGHLIGHTS BY SEGMENT

UNAUDITED

 
Three months ended April 30,   Six months ended April 30,
(in millions)   2018   2017   2018   2017
Net sales:    
Rigid Industrial Packaging & Services $ 662.7 $ 624.3 $ 1,278.1 $ 1,185.8
Paper Packaging & Services 213.9 188.7 417.7 371.6
Flexible Products & Services 84.1 66.6 164.1 136.3
Land Management 7.6   7.8   14.1   14.6
Total net sales $ 968.3   $ 887.4   $ 1,874.0   $ 1,708.3
Gross profit:
Rigid Industrial Packaging & Services $ 124.9 $ 133.9 $ 235.3 $ 246.3
Paper Packaging & Services 49.9 32.9 93.2 68.2
Flexible Products & Services 17.6 12.3 32.8 25.4
Land Management 2.9   2.8   5.7   5.3
Total gross profit $ 195.3   $ 181.9   $ 367.0   $ 345.2
Operating profit:
Rigid Industrial Packaging & Services $ 47.2 $ 56.1 $ 78.4 $ 98.9
Paper Packaging & Services 33.0 20.3 60.9 40.3
Flexible Products & Services 5.0 1.8 8.2 2.4
Land Management 2.5   3.3   5.7   5.5
Total operating profit $ 87.7   $ 81.5   $ 153.2   $ 147.1
EBITDA (8) :
Rigid Industrial Packaging & Services $ 66.3 $ 72.5 $ 110.8 $ 118.2
Paper Packaging & Services 41.1 27.4 77.1 46.5
Flexible Products & Services 7.4 3.6 12.2 4.8
Land Management 3.6   4.7   7.8   7.9
Total EBITDA $ 118.4   $ 108.2   $ 207.9   $ 177.4
EBITDA before special items:
Rigid Industrial Packaging & Services $ 71.6 $ 77.3 $ 119.6 $ 137.7
Paper Packaging & Services 41.1 28.2 77.1 56.4
Flexible Products & Services 7.4 3.9 12.5 6.2
Land Management 3.2   3.3   6.2   6.2
Total EBITDA before special items $ 123.3   $ 112.7   $ 215.4   $ 206.5
 
(8)   EBITDA is defined as net income, plus interest expense, net, plus income tax expense, plus depreciation, depletion and amortization. However, because the Company does not calculate net income by segment, this table calculates EBITDA by segment with reference to operating profit by segment, which, as demonstrated in the table of Consolidated EBITDA, is another method to achieve the same result. See the reconciliations in the table of Segment EBITDA.
 
   

GREIF, INC. AND SUBSIDIARY COMPANIES

FINANCIAL HIGHLIGHTS BY GEOGRAPHIC REGION

UNAUDITED

 
Three months ended April 30,   Six months ended April 30,
(in millions)   2018   2017   2018   2017
Net sales:    
United States $ 463.5 $ 434.5 $ 896.2 $ 842.5
Europe, Middle East and Africa 370.7 325.5 702.0 611.4
Asia Pacific and other Americas 134.1   127.4   275.8   254.4
Total net sales $ 968.3   $ 887.4   $ 1,874.0   $ 1,708.3
Gross profit:
United States $ 106.8 $ 94.5 $ 198.3 $ 179.7
Europe, Middle East and Africa 70.8 67.8 128.8 123.6
Asia Pacific and other Americas 17.7   19.6   39.9   41.9
Total gross profit $ 195.3   $ 181.9   $ 367.0   $ 345.2
 
   
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION
OPERATING WORKING CAPITAL

UNAUDITED

 
(in millions)   April 30, 2018   October 31, 2017
Trade accounts receivable $ 463.4 $ 447.0
Plus: inventories 352.9 279.5
Less: accounts payable 395.7   399.2
Operating working capital $ 420.6   $ 327.3
 
   
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION

CONSOLIDATED EBITDA (9)

UNAUDITED

 
Three months ended April 30,   Six months ended April 30,
(in millions)   2018   2017   2018   2017
Net income $ 51.9   $ 39.9 $ 112.0   $ 47.9
Plus: Interest expense, net 13.0 14.3 26.3 33.0
Plus: Income tax expense 21.1 23.0 5.5 34.8
Plus: Depreciation, depletion and amortization expense 32.4   31.0   64.1   61.7
EBITDA $ 118.4   $ 108.2   $ 207.9   $ 177.4
Net income $ 51.9 $ 39.9 $ 112.0 $ 47.9
Plus: Interest expense, net 13.0 14.3 26.3 33.0
Plus: Income tax expense 21.1 23.0 5.5 34.8
Plus: Non-cash pension settlement charge 1.1 24.6
Plus: Other expense, net 2.5 3.2 10.2 6.8
Plus: Equity earnings of unconsolidated affiliates, net of tax (0.8 )   (0.8 )
Operating profit 87.7 81.5 153.2 147.1
Less: Non-cash pension settlement charge 1.1 24.6
Less: Other expense, net 2.5 3.2 10.2 6.8
Less: Equity earnings of unconsolidated affiliates, net of tax (0.8 ) (0.8 )
Plus: Depreciation, depletion and amortization expense 32.4   31.0   64.1   61.7
EBITDA $ 118.4   $ 108.2   $ 207.9   $ 177.4
 
(9)   EBITDA is defined as net income, plus interest expense, net, plus income tax expense, plus depreciation, depletion and amortization. As demonstrated in this table, EBITDA can also be calculated with reference to operating profit.
 
   
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION

SEGMENT EBITDA (10)

UNAUDITED

 
Three months ended April 30,   Six months ended April 30,
(in millions)   2018   2017   2018   2017
Rigid Industrial Packaging & Services    
Operating profit $ 47.2 $ 56.1 $ 78.4 $ 98.9
Less: Non-cash pension settlement charge 0.6 14.7
Less: Other expense, net 2.8 3.5 10.1 5.9
Less: Equity earnings of unconsolidated affiliates, net of tax (0.8 ) (0.8 )
Plus: Depreciation and amortization expense 21.1     20.5     41.7     39.9  
EBITDA $ 66.3 $ 72.5 $ 110.8 $ 118.2
Restructuring charges 6.0 4.4 9.8 3.9
Acquisition-related costs 0.2
Non-cash asset impairment charges 0.4 2.0 3.3 3.6
Non-cash pension settlement charge 0.6 14.7
Gain on disposal of properties, plants, equipment, and businesses, net (1.1 )   (2.2 )   (4.5 )   (2.7 )
EBITDA before special items $ 71.6     $ 77.3     $ 119.6     $ 137.7  
Paper Packaging & Services
Operating profit $ 33.0 $ 20.3 $ 60.9 $ 40.3
Less: Non-cash pension settlement charge 0.5 9.7
Less: Other expense, net 0.3 0.5
Plus: Depreciation and amortization expense 8.4     7.6     16.7     15.9  
EBITDA $ 41.1 $ 27.4 $ 77.1 $ 46.5
Restructuring charges 0.3 0.3
Non-cash pension settlement charge 0.5   9.7
Gain on disposal of properties, plants, equipment, net             (0.1 )
EBITDA before special items $ 41.1     $ 28.2     $ 77.1     $ 56.4  
Flexible Products & Services
Operating profit $ 5.0 $ 1.8 $ 8.2 $ 2.4
Less: Non-cash pension settlement charge 0.1
Less: Other (income) expense, net (0.6 ) (0.3 ) (0.4 ) 0.9
Plus: Depreciation and amortization expense 1.8     1.5     3.6     3.4  
EBITDA $ 7.4 $ 3.6 $ 12.2 $ 4.8
Restructuring charges 0.4 0.3 0.6
Non-cash asset impairment charges 0.3
Non-cash pension settlement charge 0.1
(Gain) loss on disposal of properties, plants, equipment and businesses, net     (0.1 )       0.4  
EBITDA before special items $ 7.4     $ 3.9     $ 12.5     $ 6.2  
Land Management
Operating profit $ 2.5 $ 3.3 $ 5.7 $ 5.5
Less: Non-cash pension settlement charge 0.1
Plus: Depreciation, depletion and amortization expense 1.1     1.4     2.1     2.5  
EBITDA $ 3.6 $ 4.7 $ 7.8 $ 7.9
Non-cash pension settlement charge 0.1
Gain on disposal of properties, plants, equipment, net (0.4 )   (1.4 )   (1.6 )   (1.8 )
EBITDA before special items $ 3.2     $ 3.3     $ 6.2     $ 6.2  
Consolidated EBITDA $ 118.4     $ 108.2     $ 207.9     $ 177.4  
Consolidated EBITDA before special items $ 123.3     $ 112.7     $ 215.4     $ 206.5  
 
(10)   EBITDA is defined as net income, plus interest expense, net, plus income tax expense, plus depreciation, depletion and amortization. However, because the Company does not calculate net income by segment, this table calculates EBITDA by segment with reference to operating profit by segment, which, as demonstrated in the table of Consolidated EBITDA, is another method to achieve the same result.
 
   
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION

FREE CASH FLOW (11)

UNAUDITED

 
Three months ended April 30,   Six months ended April 30,
(in millions)   2018   2017   2018   2017
Net cash provided by operating activities $ 58.2   $ 59.6 $ 4.5   $ 15.5
Cash paid for purchases of properties, plants and equipment (28.3 )   (18.4 )   (56.3 )   (39.7 )
Free Cash Flow   $ 29.9     $ 41.2     $ (51.8 )   $ (24.2 )
 
(11)   Free Cash Flow is defined as net cash provided by operating activities less cash paid for purchases of properties, plants and equipment.
 
 
GREIF, INC. AND SUBSIDIARY COMPANIES
PROJECTED 2018 GUIDANCE RECONCILIATION
FREE CASH FLOW
UNAUDITED
 
Fiscal 2018 Guidance Range
(in millions)   Scenario 1   Scenario 2
Net cash provided by operating activities $ 320.0   $ 360.0
Cash paid for purchases of properties, plants and equipment (120.0 )   (140.0 )
Free Cash Flow   $ 200.0     $ 220.0  
 
   
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION

SEGMENT OPERATING PROFIT BEFORE SPECIAL ITEMS (12)

UNAUDITED

 
Three months ended April 30,   Six months ended April 30,
(in millions)   2018   2017   2018   2017
Operating profit:    
Rigid Industrial Packaging & Services $ 47.2 $ 56.1 $ 78.4 $ 98.9
Paper Packaging & Services 33.0 20.3 60.9 40.3
Flexible Products & Services 5.0 1.8 8.2 2.4
Land Management 2.5   3.3   5.7   5.5  
Total operating profit $ 87.7   $ 81.5   $ 153.2   $ 147.1  
Restructuring charges:
Rigid Industrial Packaging & Services $ 6.0 $ 4.4 $ 9.8 $ 3.9
Paper Packaging & Services 0.3 0.3
Flexible Products & Services   0.4   0.3   0.6  
Total restructuring charges $ 6.0   $ 5.1   $ 10.1   $ 4.8  
Acquisition-related costs:
Rigid Industrial Packaging & Services $   $   $ 0.2   $  
Total acquisition-related costs $   $   $ 0.2   $  
Non-cash asset impairment charges:
Rigid Industrial Packaging & Services $ 0.4 $ 2.0 $ 3.3 $ 3.6
Flexible Products & Services       0.3  
Total non-cash asset impairment charges $ 0.4   $ 2.0   $ 3.3   $ 3.9  
(Gain) loss on disposal of properties, plants, equipment and businesses, net:
Rigid Industrial Packaging & Services $ (1.1 ) $ (2.2 ) $ (4.5 ) $ (2.7 )
Paper Packaging & Services (0.1 )
Flexible Products & Services (0.1 ) 0.4
Land Management (0.4 ) (1.4 ) (1.6 ) (1.8 )
Total gain on disposal of properties, plants, equipment and businesses, net $ (1.5 ) $ (3.7 ) $ (6.1 ) $ (4.2 )
Operating profit before special items:
Rigid Industrial Packaging & Services $ 52.5 $ 60.3 $ 87.2 $ 103.7
Paper Packaging & Services 33.0 20.6 60.9 40.5
Flexible Products & Services 5.0 2.1 8.5 3.7
Land Management 2.1   1.9     4.1     3.7  
Total operating profit before special items $ 92.6   $ 84.9     $ 160.7     $ 151.6  
 
(12)   Operating profit before special items is defined as operating profit, plus restructuring charges, plus acquisition-related costs, plus non-cash impairment charges, less gain on disposal of properties, plants, equipment and businesses, net.
 
             
GREIF, INC. AND SUBSIDIARY COMPANIES
GAAP TO NON-GAAP RECONCILIATION
NET INCOME, CLASS A EARNINGS PER SHARE AND TAX RATE BEFORE SPECIAL ITEMS

UNAUDITED

 

Income

before

Equity
Income Tax Income Tax earnings of Non- Net Income Diluted Class

 

(Benefit) (Benefit) unconsolidated Controlling Attributable A Earnings

(in millions, except for per share amounts)

  Expense, net   Expense   affiliates   Interest   to Greif, Inc.   Per Share   Tax Rate
Three months ended April 30, 2018 $ 72.2 $ 21.1 $ (0.8 ) $ 6.8 $ 45.1 $ 0.77 29.2 %
Gain on disposal of properties, plants, equipment and businesses, net (1.5 ) (0.4 ) (1.1 ) (0.02 )
Restructuring charges 6.0 1.4 4.6 0.08
Non-cash asset impairment charges 0.4 0.4 0.01
Provisional tax net benefit resulting from the Tax Reform Act     4.3             (4.3 )   (0.08 )    
Excluding Special Items $ 77.1     $ 26.4     $ (0.8 )   $ 6.8     $ 44.7     $ 0.76     34.2 %
 
Three months ended April 30, 2017 $ 62.9 $ 23.0 $ $ 3.9 $ 36.0 $ 0.61 36.6 %
Gain on disposal of properties, plants, equipment and businesses, net (3.7 ) (0.7 ) (3.0 ) (0.05 )
Restructuring charges 5.1 1.4 0.2 3.5 0.06
Non-cash asset impairment charges 2.0 (0.2 ) 2.2 0.04
Non-cash pension settlement charge 1.1     0.5             0.6     0.01      
Excluding Special Items $ 67.4     $ 24.2     $     $ 3.9     $ 39.3     $ 0.67     35.9 %
 
Six months ended April 30, 2018 $ 116.7 $ 5.5 $ (0.8 ) $ 10.4 $ 101.6 $ 1.73 4.7 %
Gain on disposal of properties, plants, equipment and businesses, net (6.1 ) (0.7 ) (5.4 ) (0.09 )
Restructuring charges 10.1 1.9 0.2 8.0 0.14
Acquisition-related costs 0.2 0.1 0.1
Non-cash asset impairment charges 3.3 0.7 2.6 0.04
Provisional tax net benefit resulting from the Tax Reform Act     33.4             (33.4 )   (0.57 )    
Excluding Special Items $ 124.2     $ 40.9     $ (0.8 )   $ 10.6     $ 73.5     $ 1.25     32.9 %
 
Six months ended April 30, 2017 $ 82.7 $ 34.8 $ $ 6.5 $ 41.4 $ 0.71 42.1 %
Gain on disposal of properties, plants, equipment and businesses, net (4.2 ) (0.9 ) 0.2 (3.5 ) (0.06 )
Restructuring charges 4.8 (2.9 ) 0.4 7.3 0.13
Non-cash asset impairment charges 3.9 0.1 3.8 0.06
Non-cash pension settlement charge 24.6     7.9             16.7     0.28      
Excluding Special Items $ 111.8     $ 38.9     $     $ 7.2     $ 65.7     $ 1.12     34.8 %
 
The impact of income tax expense and non-controlling interest on each special item is calculated based on tax rates and ownership percentages specific to each applicable entity. Included in the six months ended April 30, 2017 restructuring charges special item is a $4.4 million income tax charge due to a change in assertions related to unremitted foreign earnings as a result of the restructuring of our intercompany debt portfolio.
     

GREIF, INC. AND SUBSIDIARY COMPANIES

GAAP TO NON-GAAP RECONCILIATION

NET SALES TO NET SALES EXCLUDING THE IMPACT OF

CURRENCY TRANSLATION

UNAUDITED
 
Three months ended April 30,
  Increase in Increase in
(in millions)   2018   2017   Net Sales ($)   Net Sales (%)
Consolidated
Net Sales $ 968.3 $ 887.4 $ 80.9 9.1 %
Currency Translation (40.9 ) N/A
Net Sales Excluding the Impact of Currency Translation $ 927.4 $ 887.4 $ 40.0 4.5 %
Rigid Industrial Packaging & Services
Net Sales $ 662.7 $ 624.3 $ 38.4 6.2 %
Currency Translation (32.6 ) N/A
Net Sales Excluding the Impact of Currency Translation $ 630.1 $ 624.3 $ 5.8 0.9 %
Flexible Products & Services
Net Sales $ 84.1 $ 66.6 $ 17.5 26.3 %
Currency Translation (8.3 ) N/A
Net Sales Excluding the Impact of Currency Translation $ 75.8 $ 66.6 $ 9.2 13.8 %
Six months ended April 30,
Increase in Increase in
(in millions)   2018   2017   Net Sales ($)   Net Sales (%)
Consolidated
Net Sales $ 1,874.0 $ 1,708.3 $ 165.7 9.7 %
Currency Translation (71.6 ) N/A
Net Sales Excluding the Impact of Currency Translation $ 1,802.4 $ 1,708.3 $ 94.1 5.5 %
Rigid Industrial Packaging & Services
Net Sales $ 1,278.1 $ 1,185.8 $ 92.3 7.8 %
Currency Translation (57.4 ) N/A
Net Sales Excluding the Impact of Currency Translation $ 1,220.7 $ 1,185.8 $ 34.9 2.9 %
Flexible Products & Services
Net Sales $ 164.1 $ 136.3 $ 27.8 20.4 %
Currency Translation (14.2 ) N/A
Net Sales Excluding the Impact of Currency Translation $ 149.9 $ 136.3 $ 13.6 10.0 %

Greif, Inc.
Matt Eichmann, 740-549-6067
matt.eichmann@greif.com

Source: Greif, Inc.

Contact

Matt Eichmann Vice President,
Investor Relations and Corporate Communications
Greif, Inc.
Office: (740) 549-6067

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