1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act Date of Report (Date of earliest event reported): June 12, 1998 (March 30, 1998) GREIF BROS. CORPORATION (Exact name of registrant as specified in its charter) Delaware 1-566 31-4388903 (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File No.) Identification No.) 425 Winter Road, Delaware, Ohio 43015 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code 740-549-6000 Not Applicable (Former name or former address, if changed since last report) Index to Exhibits on Page 2
2 GREIF BROS. CORPORATION FORM 8-K/A Dated June 12, 1998 CURRENT REPORT ON FORM 8-K Dated April 14, 1998 Greif Bros. Corporation (the "Company") hereby amends its Current Report on Form 8-K dated April 14, 1998 to include the financial statements and pro forma financial information set forth below which was omitted from the original filing pursuant to Items 7(a)(4) and 7(b)(2). ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired. (1) Audited combined financial statements of the Industrial Containers Business of Sonoco Products Company for the years ended December 31, 1997 and 1996. CONTENTS Report of Independent Accountants Combined Balance Sheets at December 31, 1997 and 1996 Combined Statements of Income and Retained Earnings for the years ended December 31, 1997 and 1996 Combined Statements of Cash Flows for the years ended December 31, 1997 and 1996 Notes to Combined Financial Statements (2) Unaudited combined financial statements of the Industrial Containers Business of Sonoco Products Company for the quarters ended March 31, 1998 and 1997. CONTENTS Unaudited Combined Balance Sheets at March 31, 1998 and 1997 Unaudited Combined Statements of Income and Retained Earnings for the quarters ended March 31, 1998 and 1997 Unaudited Combined Statements of Cash Flows for the quarters ended March 31, 1998 and 1997 Notes to Unaudited Combined Financial Statements
3 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of the Sonoco Products Company: We have audited the accompanying combined balance sheets of the Industrial Containers Business, a division of Sonoco Products Company (see Note 1), as of December 31, 1997 and 1996, and the related combined statements of income and retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 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 combined financial position of the Industrial Containers Business, a division of Sonoco Products Company, at December 31, 1997 and 1996 and the combined results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. As discussed in Note 1 to the financial statements, in December 1997, Greif Bros. Corporation signed a letter of intent (subject to certain conditions) to purchase the stock of the Industrial Containers Business. These financial statements do not reflect any adjustments arising from this proposed transaction. /s/ Coopers & Lybrand LLP Charlotte, North Carolina February 12, 1998, except for the information in Note 11 for which the date is March 30, 1998
4 THE INDUSTRIAL CONTAINERS BUSINESS A DIVISION OF SONOCO PRODUCTS COMPANY COMBINED BALANCE SHEETS December 31 (In Thousands) 1997 1996 ASSETS Current Assets: Cash and cash equivalents $ 599 $ 308 Accounts receivable, less $1,468 and $919 allowance for doubtful accounts 22,930 21,903 Notes and other receivables 640 628 Inventories 16,634 17,486 Deferred income taxes 1,350 1,851 Prepaid expenses and other current assets 164 390 Total current assets 42,317 42,566 Property, plant and equipment, net 42,804 39,317 Deferred income taxes 3,104 1,422 Other assets, net 15,547 16,224 $103,772 $ 99,529 LIABILITIES AND SHAREHOLDER'S EQUITY Current Liabilities: Accounts payable $ 7,831 $ 6,753 Accrued compensation 4,277 4,045 Accrued expenses 1,655 2,371 Total current liabilities 13,763 13,169 Other long-term liabilities 132 119 Accrued postretirement benefits 20,258 19,912 Total liabilities 34,153 33,200 Shareholders' equity: Common stock 902 902 Additional paid-in capital 23,171 23,171 Retained earnings 76,840 88,937 Translation adjustment (656) (610) Advances to parent company (30,638) (46,071) Total shareholders' equity 69,619 66,329 $103,772 $ 99,529 The accompanying notes are an integral part of the combined financial statements.
5 THE INDUSTRIAL CONTAINERS BUSINESS A DIVISION OF SONOCO PRODUCTS COMPANY COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS For the years ended December 31 (In Thousands) 1997 1996 Net sales $181,928 $188,940 Cost of goods sold 155,007 156,561 Gross margin 26,921 32,379 Selling, general and administrative expenses 15,126 16,563 Corporate allocation expense 2,658 3,203 Royalties 3,813 2,767 Other income, net (698) (715) Income before income taxes 6,022 10,561 Provision for income taxes 2,619 3,947 Net income 3,403 6,614 Retained earnings, beginning of year 88,937 82,931 Dividends (15,500) (608) Retained earnings, end of year $ 76,840 $ 88,937 The accompanying notes are an integral part of the combined financial statements.
6 THE INDUSTRIAL CONTAINERS BUSINESS A DIVISION OF SONOCO PRODUCTS COMPANY COMBINED STATEMENTS OF CASH FLOWS for the years ended December 31 (In Thousands) 1997 1996 Cash flows from operating activities: Net income $ 3,403 $ 6,614 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,050 6,240 (Gain)loss on sale of property, plant and equipment (106) 186 Deferred income taxes (1,187) (535) Changes in operating assets and liabilities: Accounts receivable (934) 789 Notes and other receivables (12) 110 Inventories 835 476 Prepaid expenses and other current assets 225 (185) Accounts payable and accrued expenses 932 378 Other, net 124 (58) Net cash provided by operating activities 9,330 14,015 Cash flows from investing activities: Purchases of property, plant and equipment (9,009) (6,967) Proceeds from sales of property, plant and equipment 133 633 Other net - (27) Net cash used in investing activities (8,876) (6,361) Cash flows from financing activities: Advances from (to) parent company, net 15,433 (6,783) Advances to affiliate (604) (381) Advances from affiliate 519 - Cash dividends (15,500) (608) Net cash used in financing activities (152) (7,772) Effects of exchange rate changes on cash (11) (2) Net increase (decrease) in cash and cash equivalents 291 (120) Cash and cash equivalents, beginning of year 308 428 Cash and cash equivalents, end of year $ 599 $ 308 The accompanying notes are an integral part of the combined financial statements.
7 NOTES TO COMBINED FINANCIAL STATEMENTS (Dollars In Thousands Except Per Share) 1. Significant Accounting Policies: DESCRIPTION OF THE DIVISION - The Industrial Containers Business (the "Division") manufactures fibre drums and plastic drums at various locations for industrial customers in North America. On December 10, 1997, Sonoco signed a letter of intent, subject to a definitive agreement, with Greif Bros. Corporation ("Greif") to sell the stock of the Division. This sale is subject to certain conditions. These financial statements do not include any adjustments to the carrying values of the Division's net assets that might arise from this proposed transaction. PRINCIPLES OF COMBINATION - The combined financial statements of the Division include the operations of Sonoco Fibre Drum, Inc. (excluding the operations of the Intermediate Bulk Container Business), Sonoco Plastic Drum, Inc., Sonoco Packaging Services, Inc. and Fibro Tambor, S.A. de C.V.. All of these companies are 100% owned subsidiaries controlled by Sonoco Products Company ("Sonoco"). All significant intercompany accounts have been eliminated. All entities are under common control and accordingly are presented in the combined financial statements. CONCENTRATION OF CREDIT RISK - Substantially all of the Division's accounts receivable are due from customers located principally in North America. The Division performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. CASH AND CASH EQUIVALENTS - The Division considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Division maintains its cash in bank deposit accounts which at times may exceed federally insured limits. The Division has not experienced any losses in such accounts. The Division believes it is not exposed to any significant credit risk on cash and cash equivalents.
8 NOTES TO COMBINED FINANCIAL STATEMENTS, Continued (Dollars In Thousands Except Per Share) 1. Significant Accounting Policies, continued: The Division participated in Sonoco's centralized cash management system during the periods presented. Cash receipts attributable to the Division's operations are collected by Sonoco and cash disbursements, including amounts attributable to capital additions, are provided by Sonoco. No interest cost on funds provided has been recorded. The net effect of these transactions is included in "Advances to Parent Company" on the accompanying balance sheets. INVENTORIES - Inventories are stated at the lower of cost or market. The last-in, first-out (LIFO) method was used to determine costs of approximately 77% of total inventories in 1997 and 1996. The remaining inventories are determined on the first-in, first-out (FIFO) method. OTHER ASSETS - Other assets principally consist of goodwill (see Note 4). Goodwill represents the excess of cash paid over the fair value of assets acquired. Amortization is computed over the estimated lives of the assets. At each balance sheet date, the Company evaluates the realizability of goodwill based on expectations of non-discounted cash flows and operating income. REVENUE RECOGNITION - The Company recognizes revenue upon legal transfer of title of products. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
9 NOTES TO COMBINED FINANCIAL STATEMENTS, Continued (Dollars In Thousands Except Per Share) 1. Significant Accounting Policies, continued: INCOME TAXES - The Division records income tax expense as if the Division filed a separate return. Deferred tax liabilities and assets are recorded for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Federal income taxes currently payable or receivable are due to or from Sonoco and are included in "Advances to Parent Company". 2. Inventories: The components of inventories, at December 31 are as follows: 1997 1996 Raw materials $ 6,404 $ 6,661 Work in process and finished goods 11,011 11,800 Excess of FIFO cost over LIFO Cost (781) (975) $ 16,634 $ 17,486 3. Property, Plant and Equipment: Property, plant and equipment is recorded at cost. Depreciation is computed on the straight-line method, based upon the estimated useful lives of the related assets ranging from three to forty years. Expenditures for maintenance and repairs are charged to expense as incurred, whereas major betterments are capitalized. Gains and losses on sales or retirements are included in other income and other expense, respectively.
10 NOTES TO COMBINED FINANCIAL STATEMENTS, Continued (Dollars In Thousands Except Per Share) 3. Property, Plant and Equipment, continued: Property, plant and equipment as of December 31 is as follows: 1997 1996 Land $ 2,050 $ 2,050 Buildings 16,384 16,231 Equipment 71,366 68,099 Leasehold improvements 2,190 2,046 Construction in progress 6,126 1,630 98,116 90,056 Less accumulated depreciation (55,312) (50,739) $ 42,804 $ 39,317 Depreciation expense totaled approximately $5,482 and $5,672 in 1997 and 1996, respectively. 4. Other Assets: Other assets consist of the following at December 31: 1997 1996 Goodwill $ 22,567 $ 22,567 Other 94 203 22,661 22,770 Less accumulated amortization of goodwill (7,114) (6,546) $ 15,547 $ 16,224 Amortization of goodwill totaled $568 in 1997 and 1996.
11 NOTES TO COMBINED FINANCIAL STATEMENTS, Continued (Dollars In Thousands Except Per Share) 5. Related Party Transactions: The Division had sales of product of approximately $540 and $919 to Sonoco Products Company during 1997 and 1996, respectively. The Division also uses certain administrative functions of Sonoco including senior executive management services, finance and treasury services, accounting, legal and human resources. The cost of these functions has been primarily allocated to the Division by a formula based on the level of sales, assets and head count of the Division. Total costs allocated to the Division were $2,658 and $3,203 in 1997 and 1996, respectively. The Division also uses trademarks and other intellectual property of Sonoco. The cost of this usage has been allocated to the Division based upon 2 1/2% of revenues for the period from May 1, 1997 to December 31, 1997 and 1 1/2% of revenues for all periods presented prior to May 1, 1997. Total costs in 1997 and 1996 were $3,813 and $2,767, respectively. Management believes these allocations adequately reflect the estimated cost of capital employed, but may not necessarily be indicative of actual costs incurred or costs to be incurred in the future. 6. Leases and Commitments: The Company is obligated to unaffiliated parties under long- term non-cancelable operating leases. Future minimum payments, by year and in the aggregate, under the leases consist of the following at December 31, 1997. 1998 $2,482 1999 2,482 2000 2,267 2001 2,267 2002 and thereafter 2,267 Rent expense totaled approximately $2,000 and $1,948 in 1997 and 1996, respectively.
NOTES TO COMBINED FINANCIAL STATEMENTS, Continued (Dollars In Thousands Except Per Share) 7. Retirement Benefit Plans: The Division participates in the Sonoco non-contributory defined benefit pension plans which cover substantially all United States employees. Under the plans, retirement benefits are based either on both years of service and compensation or on service only. It is Sonoco's policy to fund these plans, at a minimum, in amounts required under ERISA. The expense allocated by Sonoco to the Division for the years ended December 31, 1997 and 1996 was $324 and $404, respectively. 8. Postretirement Benefits Other Than Pensions: The Division provides health care and life insurance to the majority of its United States retirees and their eligible dependents. Benefit costs are funded principally on a pay- as-you-go basis, with the retiree paying a portion of the costs. In situations where full-time employees retire from the Division between age 55 and 65, most are eligible to receive, at a cost to the retiree equal to the cost for an active employee, certain health care benefits identical to those available to active employees. After attaining age 65, an eligible retiree's health care benefit coverage becomes coordinated with Medicare. For purposes of projecting future benefit payments, early retiree contributions were assumed to increase at the health care cost trend. Non-pension retirement benefit expense includes the following: 1997 1996 Service cost during year $ 565 $ 671 Interest cost on accumulated postretirement benefit obligation 1,955 1,960 Net amortization and deferral 225 440 Net periodic postretirement benefit Cost $ 2,745 $ 3,071 13 NOTES TO COMBINED FINANCIAL STATEMENTS, Continued (Dollars In Thousands Except Per Share) 8. Postretirement Benefits Other Than Pensions, continued: The following sets forth the accrued obligation included in the accompanying December 31 balance sheets applicable to each employee group for non-pension postretirement benefits: 1997 1996 Accumulated postretirement benefit obligation (APBO): Retired employees $ 22,839 $ 19,030 Active employees-fully eligible 3,294 3,617 Active employees-not yet eligible 3,013 3,609 Accumulated benefit obligation 29,146 26,256 Deferred loss (8,888) (6,344) Accrued postretirement benefit cost $ 20,258 $ 19,912 The discount rate used in determining the APBO was 7.25% in 1997 and 7.75% in 1996. The assumed health care cost trend rate used in measuring the APBO was 9.25% in 1997 declining to a rate of 4.75% in the year 2006. Increasing the assumed trend rate for health care costs by one percentage point would result in an increase in the APBO of approximately $845 at December 31, 1997 and an increase of approximately $370 in the related 1997 expense.
14 NOTES TO COMBINED FINANCIAL STATEMENTS, Continued (Dollars In Thousands Except Per Share) 9. Income Taxes: The provision for federal, state and foreign income taxes on income for the years ending December 31 consists of the following: 1997 1996 Current Federal $ 3,129 $ 3,762 State 552 664 Foreign 125 56 3,806 4,482 Deferred Federal (1,092) (331) State (193) (58) Foreign 98 (146) (1,187) (535) $ 2,619 $ 3,947 Deferred income tax benefits result from temporary differences in the recognition of revenue and expense for tax and financial statement purposes. The sources of these differences and the tax effect of each are as follows at December 31: 1997 1996 Deferred tax liabilities: Property, plant and equipment $(4,667) $(6,102) Other (319) (536) (4,986) (6,638) Deferred tax assets: Allowance for doubtful accounts 579 290 Inventories 201 678 Accrued postretirement benefits 7,880 7,746 Accrued expenses 570 883 Foreign 210 314 9,440 9,911 Net deferred tax asset $ 4,454 $ 3,273
15 NOTES TO COMBINED FINANCIAL STATEMENTS, Continued (Dollars In Thousands Except Per Share) 9. Income Taxes, continued: A reconciliation of the United States federal statutory tax rate of 35% to the actual tax expense for the years ending December 31 is as follows: 1997 1996 Federal income tax expense at statutory rate $2,108 3,697 State taxes, net of federal benefit 240 423 Goodwill amortization 193 193 Foreign taxes - (417) Other 78 51 $2,619 $3,947 10 . Shareholder's Equity: As discussed in Note 1, the Division is a group of affiliated companies with common ownership. The table below summarizes the authorized and outstanding common stock at December 31, 1997 and 1996. Additional Shares Shares Paid-In Authorized Outstanding Amount Capital Sonoco Fibre Drum, Inc. ($1 par) 1,000 1,000 $ 1 $16,776 Sonoco Plastic Drum, Inc. ($1 par) 100,000 10,000 10 6,395 Sonoco Packaging Services, Inc. ($1 par) 1,000 1,000 1 - Fibro Tambor, S.A. de C.V. ($.018 par) 50,318,000 50,318,000 890 - 50,420,000 50,330,000 $902 $23,171 There are no other classes of common stock. Dividends were paid by Sonoco Fibre Drum, Inc. to its parent of $15,500 per share in 1997. Dividends of $608 were paid by Fibro Tambor to its parent in 1996.
NOTES TO COMBINED FINANCIAL STATEMENTS, Continued (Dollars In Thousands Except Per Share) 11. Subsequent Event: On March 30, 1998, Sonoco completed the sale of the Division (see Note 1) to Greif for approximately $185 million. 17 THE INDUSTRIAL CONTAINERS BUSINESS A DIVISION OF SONOCO PRODUCTS COMPANY COMBINED BALANCE SHEETS (UNAUDITED) March 31 (In Thousands) 1998 1997 ASSETS Current Assets: Cash and cash equivalents $ 887 $ 88 Accounts receivable, less $718 and $123 allowance for doubtful accounts 21,589 23,674 Notes and other receivables 2,131 714 Inventories 16,433 16,403 Deferred income taxes 1,350 1,851 Prepaid expenses and other current assets 235 412 Total current assets 42,625 43,142 Property, plant and equipment, net 43,936 38,109 Deferred income taxes 3,087 1,300 Other assets, net 15,347 17,106 $104,995 $ 99,657 LIABILITIES AND SHAREHOLDER'S EQUITY Current Liabilities: Accounts payable $ 10,791 $ 9,372 Accrued compensation 3,080 2,983 Accrued expenses 1,940 2,553 Total current liabilities 15,811 14,908 Other long-term liabilities 1,427 21 Accrued postretirement benefits 20,345 19,999 Total liabilities 37,583 34,928 Shareholder's equity: Common stock 902 902 Additional paid-in capital 23,171 23,171 Retained earnings 77,046 89,524 Translation adjustment (656) (610) Advances to parent company (33,051) (48,258) Total shareholder's equity 67,412 64,729 $104,995 $ 99,657 The accompanying notes are an integral part of the unaudited combined financial statements.
18 THE INDUSTRIAL CONTAINERS BUSINESS A DIVISION OF SONOCO PRODUCTS COMPANY COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED) for the quarters ended March 31 (In Thousands) 1998 1997 Net sales $ 43,999 $ 43,561 Cost of good sold 37,712 37,797 Gross margin 6,287 5,764 Selling, general and administrative expenses 4,102 3,424 Corporate allocation expense 779 718 Royalties 953 692 Other expense (income), net 110 (48) Income before income taxes 343 978 Provision for income taxes 137 391 Net income 206 587 Retained earnings, beginning of period 76,840 88,937 Retained earnings, end of period $ 77,046 $ 89,524 The accompanying notes are an integral part of the unaudited combined financial statements.
19 THE INDUSTRIAL CONTAINERS BUSINESS A DIVISION OF SONOCO PRODUCTS COMPANY COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED) for the quarters ended March 31 (In Thousands) 1998 1997 Cash flows from operating activities: Net income $ 206 $ 587 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 887 2,622 Deferred income taxes 17 122 Changes in operating assets and liabilities: Accounts receivable 1,341 (1,771) Notes and other receivables (1,491) (86) Inventories 201 1,083 Prepaid expenses and other current assets (71) (22) Accounts payable and accrued expenses 2,048 1,739 Other, net (413) (893) Net cash provided by operating activities 2,725 3,381 Cash flows from investing activities: Purchases of property, plant and equipment (2,019) (1,415) Net cash used in investing activities (2,019) (1,415) Cash flows from financing activities: Advances from (to) affiliates (418) (2,186) Net cash used in financing activities (418) (2,186) Net increase (decrease) in cash and cash equivalents 288 (220) Cash and cash equivalents, beginning of period 599 308 Cash and cash equivalents, end of period $ 887 $ 88 The accompanying notes are an integral part of the unaudited combined financial statements.
20 NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS 1. General: The accompanying unaudited combined financial statements have been prepared without audit. Certain information and footnote disclosures, including significant accounting policies, normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. However, these statements have been prepared on a basis consistent with the audited combined financial statements for the years ended December 31, 1997 and 1996. The management of the company believes that the financial statements reflect all adjustments which are necessary for a fair statement of the results of the interim periods. Results of operations for the periods shown are not necessarily indicative of results for the year. (b) Pro Forma Financial Information. On March 30, 1998, pursuant to the terms of a Stock Purchase Agreement between Greif Bros. Corporation (the "Company") and Sonoco Products Company ("Sonoco"), the Company acquired the Industrial Containers Business excluding the operations of the Intermediate Bulk Containers Business of Sonoco by purchasing all of the outstanding shares of KMI Continental Fibre Drum, Inc., Sonoco Plastic Drum, Inc., GBC Holding Co., and Fibro Tambor, S.A. de C.V., and the membership interest of Sonoco in Total Packaging Systems of Georgia, LLC. The following unaudited pro forma combined balance sheet at January 31, 1998 and combined statements of income for the quarter ended January 31, 1998 and for the year ended October 31, 1997 give effect to the purchase of the Industrial Containers Business of Sonoco. The unaudited pro forma financial statements are not necessarily indicative of the results which would have been obtained had the transactions occurred at November 1, 1996, nor are they necessarily indicative of future results. The pro forma information should be read in conjunction with: the accompanying notes to unaudited pro forma condensed combined financial statements; the audited annual and unaudited interim financial statements of the Industrial Containers Business of Sonoco included elsewhere in this Form 8-K/A; the Company's Annual Report on Form 10-K for the year ended October 31, 1997 and the Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 1998. The Company has a fiscal year which ends October 31, 1997 whereas the Industrial Containers Business has a fiscal year which ends December 31, 1997. The unaudited pro forma condensed combined balance sheet at January 31, 1998 and unaudited pro forma condensed combined statements of income for the quarter ended January 31, 1998 and for the year ended October 31, 1997 include the unaudited combined balance sheet of the Industrial Containers Business at March 31, 1998 and the unaudited statement of income for the quarter ended March 31, 1998 and the audited combined statement of income for the year ended December 31, 1997.
21 GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED) January 31, 1998 (Dollars In Thousands) Industrial Greif Bros. Containers Pro Forma Pro Forma Corporation Business Adjustments Results Assets Current Assets Cash & cash equivalents $ 16,834 $ 887 $ - $ 17,721 Canadian government securities 7,305 - - 7,305 Trade accounts receivable 80,559 21,589 - 102,148 Inventories 46,040 16,433 - 62,473 Prepaid expenses and other 20,054 3,716 971 a 24,741 Total current assets 170,792 42,625 971 214,388 Long Term Assets Property, plant and equipment, net 340,128 43,936 36,129 b,e 420,193 Other long term assets 21,541 3,087 308 c 24,936 Goodwill 17,017 15,347 83,780 d 116,144 Total long term assets 378,686 62,370 120,217 561,273 Total assets $ 549,478 $ 104,995 $ 121,188 $ 775,661 Liabilities and Shareholders' Equity Current Liabilities Accounts payable $ 29,998 $ 10,791 $ - $ 40,789 Current portion of long term debt 8,309 - - 8,309 Accrued payrolls and employee benefits 10,705 3,080 - 13,785 Taxes on income 4,409 - (4,409)a - Other current liabilities 1,703 1,940 23,068 e,f 26,711 Total current liabilities 55,124 15,811 18,659 89,594 Long term obligations 43,314 - 185,395 f 228,709 Deferred income taxes 30,619 - - 30,619 Other long term liabilities 15,329 21,772 (2,290)g 34,811 Total long term liabilities 89,262 21,772 183,105 294,139 Shareholders' equity Capital stock 9,774 24,073 (24,073)h 9,774 Retained earnings 401,959 77,046 (89,554)h 389,451 Translation adjustment (6,641) (656) - (7,297) Advances to Parent - (33,051) 33,051 i - Total shareholders' equity 405,092 67,412 (80,576) 391,928 Total liabilities and shareholders' equity $ 549,478 $ 104,995 $ 121,188 $ 775,661 See accompanying notes to pro forma condensed financial statements.
23 GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNDAUDITED) for the quarter ended January 31, 1998 (Dollars in Thousands) Industrial Greif Bros. Containers Pro Forma Pro Forma Corporation Business Adjustments Results Net sales $ 169,697 $ 43,999 $ - $ 213,696 Other income: Gain on sales of timber and timber properties 2,787 - - 2,787 Interest and other 2,510 (1,063) 953 i 2,400 174,994 42,936 953 218,883 Costs and expenses: Cost of products sold 138,177 37,712 313 b,g 176,202 Selling, general and administrative 20,324 4,881 264 c,d,i 25,469 Interest 1,230 - 2,859 f 4,089 159,731 42,593 3,436 205,760 Income before income taxes 15,263 343 (2,483) 13,123 Taxes on income 5,647 137 (1,038)a 4,746 Net income $ 9,616 $ 206 $ (1,445) $ 8,377 Net income per share (based on the average number of shares outstanding during the year): Based on the assumption that earnings were allocated to Class A and Class B Common Stock to the extent that dividends were actually paid for the year and the remainder were allocated as they would be received by shareholders in the event of liquidation, that is, equally to Class A and Class B shares, share and share alike: Basic and Diluted: Class A Common Stock $0.34 Class B Common Stock $0.39 Average Number of Shares Outstanding Basic Diluted Class A Common Stock 10,901,962 10,950,796 Class B Common Stock 12,001,793 12,001,793 Due to the special characteristics of the Company's two classes of stock, earnings per share can be calculated upon the basis of varying assumptions, none of which, in the opinion of management, would be free from the claim that it fails fully and accurately to represent the true interest of the shareholders of each class of stock and in the retained earnings. See accompanying notes to pro forma condensed combined financial statements.
24 GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED) for the year ended October 31, 1997 (Dollars in Thousands) Industrial Greif Bros. Containers Pro Forma Pro Forma Corporation Business Adjustments Results Net sales $ 648,984 $ 181,928 $ - $ 830,912 Other income: Gain on sales of timber and timber properties 12,918 - - 12,918 Interest and other 12,681 (3,115) 3,813 i 13,379 674,583 178,813 3,813 857,209 Costs and expenses: Cost of products sold 563,665 155,007 1,254 b,g 719,926 Selling, general and administrative 78,743 17,784 1,529 c,d,i 98,056 Interest 2,670 - 11,436 f 14,106 645,078 172,791 14,219 832,088 Income before income taxes 29,505 6,022 (10,406) 25,121 Taxes on income 11,419 2,619 (4,342)a 9,696 Net income $ 18,086 $ 3,403 $ (6,064) $ 15,425 Net income per share (based on the average number of shares outstanding during the year): Based on the assumption that earnings were allocated to Class A and Class B Common Stock to the extent that dividends were actually paid for the year and the remainder were allocated as they would be received by shareholders in the event of liquidation, that is, equally to Class A and Class B shares, share and share alike: Basic and Diluted: Class A Common Stock $0.52 Class B Common Stock $0.81 Average Number of Shares Outstanding Basic Diluted Class A Common Stock 10,878,233 10,892,248 Class B Common Stock 12,001,793 12,001,793 Due to the special characteristics of the Company's two classes of stock, earnings per share can be calculated upon the basis of varying assumptions, none of which, in the opinion of management, would be free from the claim that it fails fully and accurately to represent the true interest of the shareholders of each class of stock and in the retained earnings. See accompanying notes to pro forma combined financial statements.
25 NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS a. To reflect the income tax effects of the following pro forma adjustments. b. To record the write-up of property, plant and equipment to its estimated fair values. The amount has been partially offset by a write-down to net realizable value of certain locations which the Company intends to close (see note e below). In addition, depreciation expense resulting from the different values of the property, plant and equipment has been reflected in the statements. c. To record deferred loan costs related to the long term obligations incurred as a result of the acquisition of the Industrial Containers Business. The amortization expense related to these amounts has been recorded. d. To record additional goodwill and its related amortization expense. The goodwill is being amortized on a straight- line basis over twenty-five years. e. To record a restructuring reserve which is comprised of $11,507,000 to reduce the estimated fair values of property, plant and equipment and $8,773,000 for other costs associated with certain plant closings. The restructuring reserve relates to the closing of duplicate facilities. f. To record long term obligations incurred to purchase the Industrial Containers Business. The interest expense related to these long term obligations has been included in the pro forma statements. g. To adjust for postretirement benefits that were provided to the employees of the Industrial Containers Business of Sonoco. h. To eliminate the equity amounts of the Industrial Containers Business at November 1, 1996. i. To eliminate the "Advances to Parent" balances from Sonoco Products Company recorded on the Industrial Containers Business' financial statements. Certain charges, including royalties and other non-recurring charges from Sonoco, have been eliminated.
26 (c) Exhibits. Exhibit Number Description 2 Stock Purchase Agreement dated March 30, 1998 between Greif Bros. Corporation and Sonoco Products Company. 23.1 Consent of Coopers & Lybrand LLP, Charlotte, North Carolina (contained herein). 99(a) Press Release issued by Greif Bros. Corporation on March 31, 1998. 99(b) Credit Agreement, dated as of March 30, 1998, among Greif Bros. Corporation, as Borrower, Various Financial Institutions, as Banks, and KeyBank National Association, as Agent. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GREIF BROS. CORPORATION DATE: June 12, 1998 BY /s/ Michael J. Gasser Michael J. Gasser, Chairman and Chief Executive Officer
27 INDEX TO EXHIBITS If Incorporated by Reference which Exhibit was Previously Exhibit Number Description Filed with SEC 2 Stock Purchase Agreement dated Current Report on March 30, 1998 between Greif Form 8-K dated Bros. Corporation and Sonoco April 14, 1998. Products Company. 23.1 Consent of Coopers & Lybrand LLP, Charlotte, North Carolina. Contained Herein. 99(a) Press Release issued by Greif Current Report on Bros. Corporation on March 31, Form 8-K dated 1998. April 14, 1998. 99(b) Credit Agreement, dated as of Current Report on March 30, 1998, among Greif Bros. Form 8-K dated Corporation, as Borrower, Various April 14, 1998. Financial Institutions, as Banks, and KeyBank National Association, as Agent.
28 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the inclusion in this Current Report on Form 8-K/A, of Greif Bros. Corporation (File No. 1-566) of our report dated February 12, 1998, except for the information presented in Note 11 for which the date is March 30, 1998, on our audits of the financial statements of the Industrial Containers Business of Sonoco Products Company as of December 31, 1997 and 1996 and for the years then ended. /s/ Coopers & Lybrand LLP Charlotte, North Carolina June 12, 1998