1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 19961997 Commission File Number 1-566
GREIF BROS. CORPORATION
(Exact name of registrant as specified in its charter)
State of Delaware 31-4388903
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
621 Pennsylvania Avenue,425 Winter Road, Delaware, Ohio 43015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 614-363-1271740-549-6000
Securities registered pursuant to Section 12 (b)12(b) of the Act:
Name of Each Exchange on
Title of Each Class
Which Registered
Class "A" Common Stock Chicago Stock ExchangeNone
Securities registered pursuant to Section 12 (g)12(g) of the Act:
Title of Each Class
Class "A" Common Stock
Class "B" Common Stock
Indicate by check mark whether the registrant (1) has filed all reports required
to
be filed by Section 13 or 15 (d)15(d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X .__X__. No ._____.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant'sregistrants knowledge, in the definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ][X]
The aggregate market value of voting stock held by non-affiliates of
the Registrant as of December 16, 1996,January 5, 1998 was approximately $87,427,000.$101,942,807.
The number of shares outstanding of each of the registrant'sRegistrant's classes
of common stock, as of December 16, 1996,January 5, 1998 was as follows:
Class A Common Stock - 10,873,172 shares10,902,272
Class B Common Stock - 12,001,793
sharesListed hereunder are the documents, portions of which are incorporated
by reference, and the parts of this Form 10-K into which such portions
are incorporated:
1. The Registrant's Proxy Statement for use in connection with the Annual
Meeting of Shareholders to be held on February 23, 1998, portions of which
are incorporated by reference into Part III of this Form 10-K, which Proxy
Statement will be filed within 120 days of October 31, 1997.
2
PART I
Item 1. Business
The Company principally manufactures industrial shipping containers and
containerboard and related products which it sells to customers in many
industries primarily in the United States and Canada, through direct sales
contact with its customers. There were no significant changes in the
business since the beginning of the fiscal year.
The Company operates 9795 locations in 28 states of the United States and
in 3 provinces of Canada and, as such, is subject to federal, state, local
and foreign regulations in effect at the various localities.
Due to the variety of products, the Company has many customers buying
different types of the Company's products and, due to the scope of the
Company's sales, no one customer is considered principal in the total
operation of the Company.
Because the Company supplies a cross section of industries, such as
chemicals, food products, petroleum products, pharmaceuticals, metal
products and othersother and because the Company must make spot deliveries on a
day-to-day basis as its product is required by its customers, the Company
does not operate on a backlog and maintains only limited levels of finished
goods. Many customers place their orders weekly for delivery during the
week.
The Company's business is highly competitive in all respects (price,
quality and service) and the Company experiences substantial competition in
selling its products. Many of the Company's competitors are larger than the
Company.
While research and development projects are important to the Company's
continued growth, the amount expended in any year is not material in
relation to the results of operations of the Company.
The Company's raw materials are principally pulpwood, waste paper for
recycling, paper, steel and resins. In the current year, as in prior years,
certain of these materials have been in short supply, but to date these
shortages have not had a significant effect on the Company's operations.
The Company's business is not materially dependent upon patents,
trademarks, licenses or franchises.
The business of the Company is not seasonal to any significant extent.
The approximate number of persons employed during the year was 4,800.4,500.
3
Item 1. Business (continued)
Industry Segments
The Company operates in two industry segments, industrial shipping
containers and materials (shipping(industrial shipping containers) and containerboard
and related products (containerboard).
3
Item 1. Business (continued)
Operations in the industrial shipping containers segment involve the
production and sale of fibre, steel and plastic drums, multiwall bags,
cooperage, dunnage, pallets laminated particle board, wood cut stock and miscellaneous items. These products are
manufactured and principally sold throughout the United States and Canada.
Operations in the containerboard segment involve the production and
sale of containerboard, both virgin and recycled, and related corrugated
products including corrugated sheets and corrugated containers. TheseThe
products are manufactured and sold in the United States and Canada.
In computing operating profit for the two industry segments, gain on
timber sales, interest expense, other income and expense, timber property management costsa restructuring
charge (see Note 3 to the Consolidated Financial Statements), gains on
disposals of certain facilities and income taxes have not been added or deducted.allocated to
such segments. These latter amounts, excluding income taxes, comprise general
corporate other income and expense, net.
Each segment's operating assets are those assets used in the
manufacture and sale of industrial shipping containers or containerboard.
Corporate assets are principally cash marketable securities,and cash equivalents, timber
properties, corporate facilities and other
investments.
4
Item 1. Business (concluded)other.
The following segment information is presented for the three years
ended October 31, 1996,1997, except as to asset information which is as of
October 31, 1997, 1996 1995 and 19941995 (Dollars in thousands):
1997 1996 1995 1994
Net sales:
ShippingIndustrial shipping containers $396,456 $391,315 $392,505
$353,992
Containerboard 252,528 246,053 326,840
229,534
Total $648,984 $637,368 $719,345
$583,526 4
Item 1. Business (concluded)
1997 1996 1995
Operating profit:
ShippingIndustrial shipping containers $ 16,736$13,157 $16,736 $ 9,059
$ 9,573
Containerboard 10 36,926 80,476
30,306
Total segment 13,167 53,662 89,535 39,879
General corporate other income
and expense, net 16,338 14,034 8,376 11,733
Income before income taxes 29,505 67,696 97,911
51,612
Income taxes 11,419 24,949 37,778
17,858
Net income $ 42,747 $ 60,133 $ 33,754$18,086 $42,747 $60,133
Identifiable assets:
ShippingIndustrial shipping containers $193,213 $193,378 $190,982
$179,794
Containerboard 292,140 262,866 220,213
178,053
Total segment 485,353 456,244 411,195
357,847
Corporate assets 64,736 56,094 56,467
61,227
Total $550,089 $512,338 $467,662
$419,074
Depreciation expense:
ShippingIndustrial shipping containers $13,156 $13,282 $13,114
Containerboard 17,186 12,977 9,765
Total segment 30,342 26,259 22,879
Corporate assets 318 89 65
Total $30,660 $26,348 $22,944
Property additions:
Industrial shipping containers $ 13,282 $ 13,114 $ 13,2713,843 $16,588 $12,540
Containerboard 12,977 9,765 8,38822,923 56,160 47,593
Total segment 26,259 22,879 21,65926,766 72,748 60,133
Corporate assets 89 65 58
Total $ 26,348 $ 22,944 $ 21,717
Property additions:
Shipping containers $ 16,588 $ 12,540 $ 16,226
Containerboard 56,160 47,593 24,065
Total segment 72,748 60,133 40,291
Corporate assets9,427 1,647 933
391
Total $ 74,395 $ 61,066 $ 40,682$36,193 $74,395 $61,066
5
Item 2. Properties
The following are the Company's principal locations and products
manufactured at such facilities or the use of such facilities. The Company
considers its operating properties to be in satisfactory condition and
adequate to meet its present needs. However, the Company expects to make
further additions, improvements and consolidations of its properties as the
Company's business continues to expand.
Location Products Manufactured/Use Industry Segment
AlabamaAlabama:
Cullman Steel drums and machine ShippingIndustrial shipping
containers
shop
Good Hope Research center
Mobile Fibre drums ShippingIndustrial shipping
containers
ArkansasArkansas:
Batesville (1) Fibre drums ShippingIndustrial shipping
containers
California
Commerce (2) Corrugated honeycomb Shipping containersCalifornia:
Fontana Steel drums ShippingIndustrial shipping
containers
LaPalma Fibre drums ShippingIndustrial shipping
containers
Morgan Hill Fibre drums ShippingIndustrial shipping
containers
Sacramento General officeMerced Steel drums Industrial shipping
containers
Stockton Corrugated honeycomb ShippingIndustrial shipping
containers
Stockton Wood cut stock ShippingColorado:
Denver (2) Warehouse Industrial shipping
containers
GeorgiaGeorgia:
Macon Corrugated honeycomb ShippingIndustrial shipping
containers
Tucker Fibre drums Shippingdrum Industrial shipping
containers
IllinoisIllinois:
Blue Island Fibre drums ShippingIndustrial shipping
containers
Centralia Corrugated containers and sheets Containerboard
Chicago Steel drums Shipping containers
Joliet Steel drums ShippingIndustrial shipping
containers
Lombard (3) General office Northlake Fibre drums and plastic Shipping containers
drums
Oreana Corrugated containers Shipping containers
Posen Corrugated honeycomb Shipping containers
Kansas
Winfield Steel drums Shipping containers
Kansas City (4) Steel drums Shipping containers
Kansas City (5) Fibre drums Shipping containers
Kentucky
Louisville Wood cut stock Shipping containers
Winchester Corrugated containers Containerboard
Louisiana
St. Gabriel Steel drums and plastic drums ShippingIndustrial shipping
containers
6
Item 2. Properties (continued)
Location Products Manufactured/UseManufactured /Use Industry Segment
MarylandNorthlake Fibre drums and plastic drums Industrial shipping
containers
Oreana Corrugated containers Containerboard
Posen Corrugated honeycomb Industrial shipping
containers
Quincy (4) Warehouse Containerboard
Indiana:
Ferdinand (5) Corrugated containers Containerboard
Kansas:
Kansas City (6) Steel drums Industrial shipping
containers
Kansas City (7) Fibre drums Industrial shipping
containers
Winfield Steel drums Industrial shipping
containers
Kentucky:
Erlanger (8) Corrugated containers Containerboard
Louisville (9) Corrugated containers Containerboard
Winchester (10) Corrugated containers Containerboard
Louisiana:
St. Gabriel Steel drums and plastic drums Industrial shipping
containers
Maryland:
Sparrows Point Steel drums ShippingIndustrial shipping
containers
MassachusettsMassachusetts:
Mansfield Fibre drums ShippingIndustrial shipping
containers
Westfield Fibre drums ShippingIndustrial shipping
containers
West
Springfield (11) General office Industrial shipping
containers
Worcester Plywood reels ShippingIndustrial shipping
containers
Michigan
Eaton Rapids Corrugated sheets Containerboard 7
Item 2. Properties (continued)
Location Products Manufactured /Use Industry Segment
Michigan:
Grand Rapids Corrugated sheets Containerboard
Mason Corrugated sheets Containerboard
Roseville Corrugated containers Containerboard
Taylor Fibre drums ShippingIndustrial shipping
containers
MinnesotaMinnesota:
Minneapolis Fibre drums ShippingIndustrial shipping
containers
Rosemount Multiwall bags ShippingIndustrial shipping
containers
St. Paul Tight cooperage ShippingIndustrial shipping
containers
St. Paul (6)(12) General office MississippiIndustrial shipping
containers
Mississippi:
Durant Plastic products ShippingIndustrial shipping
containers
Jackson General office
MissouriMissouri:
Kirkwood Fibre drums ShippingIndustrial shipping
containers
NebraskaNebraska:
Omaha (7)(13) Multiwall bags ShippingIndustrial shipping
containers
Omaha Warehouse Industrial shipping
containers
New JerseyJersey:
Rahway Fibre drums and plastic Shippingdrums Industrial shipping
containers
drums
Spotswood Fibre drums ShippingIndustrial shipping
containers
Springfield (8) National accounts sales
office
Teterboro Fibre drums ShippingIndustrial shipping
containers
New York
Lindenhurst Research centerYork:
Syracuse Fibre drums and steel drums ShippingIndustrial shipping
containers
North Carolina
Bladenboro Steel drums Shipping containers
Charlotte Fibre drums Shipping containers
Concord Corrugated sheets Containerboard
78
Item 2. Properties (continued)
Location Products Manufactured/UseManufactured /Use Industry Segment
OhioNorth Carolina:
Bladenboro Steel drums Industrial shipping
containers
Charlotte Fibre drums Industrial shipping
containers
Concord Corrugated sheets Containerboard
Ohio:
Caldwell Steel drums ShippingIndustrial shipping
containers
Canton (9)(14) Corrugated containers Containerboard
Cleveland Corrugated containers Containerboard
Delaware Principal office
Delaware (15) Research center Industrial shipping
containers
Fostoria Corrugated containers Containerboard
Hebron Plastic products and Shipping containersdrums Industrial shipping
containers
Massillon Recycled containerboard Containerboard
Tiffin Corrugated containers Containerboard
Westerville (16) General office Industrial shipping
containers
Youngstown Steel drums ShippingIndustrial shipping
containers
Zanesville Corrugated containers and sheets Containerboard
sheets
Oregon
White City Laminated panels Shipping containers
Pennsylvania
Chester Fibre drums Shipping containersPennsylvania:
Darlington Fibre drums and plastic Shippingdrums Industrial shipping
containers
drums
HazletonHazelton Corrugated honeycomb ShippingIndustrial shipping
containers
Kelton (10)(17) Corrugated honeycomb ShippingIndustrial shipping
containers
Reno Corrugated containers Containerboard
Stroudsburg Rims and drum hardware ShippingIndustrial shipping
containers
Twin Oaks Fibre drums Industrial shipping
containers
Washington Corrugated containers and sheets Containerboard
sheets
Tennessee 9
Item 2. Properties (continued)
Location Products Manufactured /Use Industry Segment
Tennessee:
Kingsport Fibre drums ShippingIndustrial shipping
containers
Memphis Steel drums ShippingIndustrial shipping
containers
TexasTexas:
Angleton Steel drums ShippingIndustrial shipping
containers
Fort Worth Fibre drums ShippingIndustrial shipping
containers
LaPorte Fibre drums, steel drums Shipping containersIndustrial shipping
and plastic drums containers
Waco Corrugated honeycomb ShippingIndustrial shipping
containers
VirginiaVirginia:
Amherst Containerboard Containerboard
Washington
WoodlandWashington:
Vancouver (18) Corrugated honeycomb ShippingIndustrial shipping
containers
and wood cut stock
West VirginiaVirginia:
Huntington (19) Corrugated containers and sheets Containerboard
sheets
New Martinsville CorrugatedWisconsin:
Sheboygan Fibre drums Industrial shipping
containers
ContainerboardCanada
Alberta:
Lloydminster Steel drums, fibre drums Industrial shipping
and plastic drums containers
Ontario:
Belleville Fibre drums and plastic products Industrial shipping
containers
Bowmanville Spiral tubes Industrial shipping
containers
Fort Frances Spiral tubes Industrial shipping
containers
Fruitland Drum hardware and machine shop Industrial shipping
containers
810
Item 2. Properties (concluded)
Location Products Manufactured/UseManufactured /Use Industry Segment
Wisconsin
SheboyganMilton Fibre drums ShippingIndustrial shipping
containers
Canada
Belleville, Ontario FibreNiagara Falls General office Industrial shipping
containers
Oakville Steel drums and plastic ShippingIndustrial shipping
containers
products
Bowmanville, Ontario Spiral tubes ShippingStoney Creek Steel drums Industrial shipping
containers
Fort Frances, Ontario Spiral tubes ShippingWinona Machine shop Industrial shipping
containers
Fruitland, Ontario Drum hardware and machine Shipping containers
shop
LaSalle, QuebecQuebec:
La Salle Fibre drums and steel drums ShippingIndustrial shipping
containers
Lloydminster, Alberta Steel drums, fibre drums Shipping containers
and plastic drums
Maple Grove Quebec Pallets ShippingIndustrial shipping
containers
Milton, Ontario Fibre drums Shipping containers
Niagara Falls,
Ontario General office
Pointe Aux
Trembles
Quebec Fibre drums and spiral Shippingtubes Industrial shipping
containers
tubes
Stoney Creek, Ontario Steel drums Shipping containers
Winona, Ontario Machine shop
Note: All properties are held in fee except as noted below.below:
Exceptions:
( 1)(1) Lease expires MarchAugust 31, 1997
( 2)1999
(2) Lease expires March 31, 1997
( 3)December 15, 1998
(3) Lease expires February 28, 1998
( 4)(4) Lease operates month to month
(5) Lease expires October 26, 1999
(6) Lease expires June 30, 1999
( 5)(7) Lease expires March 31, 1999
( 6)(8) Lease expires October 6, 2003
(9) Lease expires December 31, 1998
(10) Lease expires October 7, 2001
(11) Lease expires September 1, 1998
(12) Lease expires December 31, 1999
( 7)(13) Lease expires June 30, 1998
( 8) Lease expires September 7, 1997
( 9)(14) Lease expires March 31, 1998
(10)(15) Lease expires June 30, 2001
(16) Lease operates month to month
(17) Lease expires April 30, 2003
(18) Lease expires January 31, 2002
(19) Lease expires March 31, 2000
The Company also owns in fee a substantial number of scattered timber
tracts comprising approximately 307,000316,000 acres in the states of Alabama,
Arkansas, Florida, Georgia, Louisiana, Mississippi and Virginia and the
provinces of Nova Scotia, Ontario and Quebec in Canada.
11
Item 3. Legal Proceedings
The Company has no pending material legal proceedings.
From time to time, various legal proceedings arise from either the Federal,
State or Local levels involving environmental sites to which the Company has
shipped, directly or indirectly, small amounts of toxic waste, such as paint
solvents, etc. The Company, to date, has been classified as a "de minimis"
participant and, as such, has not been subject, in any instance, to material
sanctions or sanctions greater than $100,000. 9
Item 3. Legal Proceedings (concluded)
In addition, from time to time, but less frequently, the Company has
been cited for violations of environmental regulations. Except for the
following situation, none of these violations involve or are expected to
involve sanctions of $100,000 or more.
Currently, the only exposure known to the Company which may exceed
$100,000 relates to a pollution situation at its Strother Field plant in
Winfield, Kansas. A record of decision issued by the U. S.U.S. Environmental
Protection Agency (EPA) has set forth estimated remedial costs which could
expose the Company to approximately $3,000,000 in expense under certain
assumptions. If the Company ultimately is required to incur this expense, a
significant portion would be paid over 10 years. The Kansas site involves
groundwater pollution and certain soil pollution that was found to exist on
the Company's property. The estimated costs of the remedy currently
preferred by the EPA for the soil pollution on the Company's land represents
approximately $2,000,000 of the estimated $3,000,000 in expense.
The final remedies have not been selected and may be delayed for four years.selected. In an effort to minimize
its exposure for soil pollution, the Company has undertaken further
engineering borings and analysis to attempt to identify a more definitive
soil area which would require remediation. However, there can be no
assurance that the Company will be successful in minimizing such exposure,
and there can be no assurance that the total expense incurred by the Company
in remediating this site will not exceed $3,000,000.
A reserve for $2,000,000 was recorded by the Company during fiscal
1995.1995 since it was considered the most likely amount of loss. To date,
$175,000$360,000 has been charged against the reserve. 12
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.
Executive Officers of the Company
The following information relates to Executive Officers of the Company
(elected annually):
Year first became
Name Age Positions and Offices Executive Officer
Michael J. Gasser 46 Chairman of the Board 1988
of Directors and
Chief Executive
Officer, Chairman of
the Executive and
Nominating Committees
William B. Sparks, Jr. 56 Director, President 1995
and Chief Operating
Officer, member of
the Executive
Committee
Charles R. Chandler 62 Director, Vice 1996
Chairman, member of
the Executive
Committee
Joseph W. Reed 60 Chief Financial 1997
Officer and Secretary
Allan Hull 84 Director, Vice 1964
President, General
Counsel, member of
the Executive
Committee
Robert C. Macauley 74 Director, Chief 1996
Executive Officer of
Virginia Fibre
Corporation
(subsidiary company),
Chairman of the
Compensation
Committee
John P. Berg 77 President Emeritus 1972
13
Executive Officers of the Company (continued)
Year first became
Name Age Positions and Offices Executive Officer
Lloyd D. Baker 64 President of Soterra, 1975
Incorporated
(subsidiary company)
Michael M. Bixby 54 Vice President, 1980
Regional Sales
Ronald L. Brown 50 Vice President, Sales 1996
and Marketing
Dwight L. Dexter 46 Vice President, 1990
Marketing
John K. Dieker 34 Corporate Controller 1996
Elco Drost 52 President of Greif 1996
Containers Inc.
(subsidiary company)
Michael A. Giles 47 Vice President, Mill 1996
Operations
C.J. Guilbeau 50 Vice President and 1986
Associate Director of
Manufacturing
Sharon R. Maxwell 48 Assistant Secretary 1997
Philip R. Metzger 50 Treasurer 1995
Mark J. Mooney 40 Vice President, 1997
National Sales
William R. Mordecai 45 Vice President, 1997
Containerboard Sales
and Logistics
Jerome B. Nolder, Jr. 39 Vice President, 1996
Container Operations
William R. Shew 67 Special Assistant to 1996
the Vice Chairman
Kent P. Snead 52 Corporate Director of 1997
Strategic Projects
1014
Executive Officers of the Company (continued)
Except as indicated below, each Executive Officer has served in his
present capacity for at least five years.
Mr. Michael J. Gasser was elected Chairman of the Board of Directors and
Chief Executive Officer during 1994. Prior to that time, and for more than
five years, he served as a Vice President of the Company.
Mr. William B. Sparks, Jr. was elected President and Chief Operating
Officer during 1995. Prior to that time, and for more than
five years, he served as Chief Executive Officer of Down River International,
Inc., a former subsidiary of the Company.
Mr. Charles R. Chandler was elected Vice Chairman during 1996. Prior to
that time, and for more than five years, he served as President and
Chief Operating Officer of Virginia Fibre Corporation, a subsidiary
of the Company.
Mr. Joseph W. Reed was elected Chief Financial Officer and Secretary in
1997. Prior to that time, and for more than five years, he served as Senior
Vice President, Finance and Administration - CFO of Pharmacia, Inc.
Mr. John P. Berg was elected President Emeritus in 1996. Prior to that
time, he served as President of the Company and General Manager of one of
its divisions for more than five years.
Mr. Lloyd D. Baker was elected President of Soterra, Incorporated
(subsidiary company) during 1997. Prior to that time, and for more than
five years, he served as a Vice President of the Company.
Mr. Michael M. Bixby became Vice President of Regional Sales during
1997. During the past five years, he has been a Vice President of the
Company.
Mr. Ronald L. Brown became Vice President of Sales and Marketing during
1997. Prior to that time, and for more than five years, he served as
President and Chief Operating Officer for Down River International (former
subsidiary company).
Mr. John K. Dieker was elected Corporate Controller in 1995. From 1994
to 1995 he served as Assistant Corporate Controller. Prior to that time, he
served as Internal Auditor for two years.
During 1996, Mr. Elco Drost was elected President of Greif Containers
Inc. (subsidiary company) and continues to serve in this capacity. Prior to
that time, and for more than five years, he served as Vice President for the
subsidiary company.
15
Executive Officers of the Company (concluded)
Mr. Michael A. Giles became Vice President, Mill Operations, in 1997.
He was Executive Vice President of Virginia Fibre Corporation (subsidiary
company) in 1996. From 1995 to 1996, he served as Vice President of
Manufacturing and, prior to that time, Vice President of Finance and
Treasurer at the subsidiary company for more than five years.
Mr. C.J. Guilbeau became Vice President and Associate Director of
Manufacturing during 1997. During the past five years, he has served as
Vice President of the Company.
Ms. Sharon R. Maxwell was elected Assistant Secretary during 1997.
Prior to that time, and for more than five years, she served as
administrative assistant to the Chairman.
Mr. Philip R. Metzger was elected Treasurer in 1995. Prior to that
time, and for more than the past five years, he served as Assistant
Treasurer and Assistant Controller.
Mr. Mark J. Mooney became Vice President of National Sales during 1997.
From 1993 to 1996, he served as the Operations Director, Multiwall Bags, and
prior to that time, General Sales and Marketing Manager of one of its
divisions.
Mr. William R. Mordecai became Vice President, Containerboard Sales and
Logistics, during 1997. During 1996 to 1997, Mr. Mordecai served as
Director, Containerboard Marketing for Virginia Fibre Corporation
(subsidiary company). During 1994 to 1996, he served as President of
Pimlico Paper Corporation. Prior to that time, and for more than the past
five years, he served as Director, Operations Planning, of MacMillan
Bloedel, Inc.
Mr. Jerome B. Nolder, Jr. became Vice President, Container Operations,
during 1997. Prior to that time, he served as General Manager of one of its
divisions since 1994, and prior to that time, he served as Operations
Manager for the division for more than five years.
Mr. William R. Shew became Special Assistant to the Vice Chairman
during 1997. Prior to that time, and for more than the past five years, he
served as President of Greif Board Corporation (subsidiary company).
Mr. Kent P. Snead became Corporate Director of Strategic Projects
during 1997. Prior to that time, and for more than the past five years, he
served as the Engineering Manager for Virginia Fibre Corporation (subsidiary
company).
16
PART II
Item 5. Market for the Registrant's Common Stock and
Related Security Holder Matters
The Class A and Class B Common Stock are traded on the NASDAQ Stock Market.
In addition, the Class A Common Stock is still traded on the Chicago Stock
Exchange.
Prior to March 1996, the Class A Common Stock was traded on the Chicago
Stock Exchange and there was no active market for the Class B Common Stock.
The high and low sales prices for each quarterly period during the last
two fiscal years are as follows:
Quarter ended,Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1997 1997 1997 1997
Market price
Class A Common Stock:
High $31 $31 1/4 $31 1/4 $36 1/2
Low $27 $25 $23 3/4 $30
Class B Common Stock:
High $35 $35 $33 $37 1/4
Low $30 $28 1/4 $26 3/4 $31 1/4
Quarter Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1996 1996 1996 1996
Market price
(ClassClass A Common Stock):Stock:
High $28-7/$28 7/8 $32 $33 $31-1/$31 1/2
Low $24-1/4 $26-1/$24 1/4 $26 $27-3/1/4 Market price
(Class$26 $27 3/4
Class B Common Stock):Stock:
High N/A $35-1/$35 1/2 $36-1/$36 1/2 $36
Low N/A $27-1/$27 1/2 $26-3/$26 3/4 $31-1/$31 1/2
Quarter ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1995 1995 1995 1995
Market price
(Class A Common Stock):
High $27-1/2 $28-7/8 $27-3/8 $25-1/2
Low $21-3/16 $25 $22-1/4 $21-1/4
As of December 2, 1996,1, 1997, there were 828790 shareholders of record of the
Class A Common Stock and 196179 shareholders of the Class B Common Stock. 17
Item 5. Market for the Registrant's Common Stock and
Related Security Holder Matters (concluded)
The Company paid five dividends of varying amounts during its fiscal
year computed on the basis described in Note 5 to Thethe Consolidated Financial
Statements on page 2636 of this Form 10-K, which is hereby incorporated by
reference. The annual dividends paid for the last three fiscal years are as
follows:
1997 fiscal year dividends per share - Class A $.60; Class B $.89
1996 fiscal year dividends per share - Class A $.48; Class B $.71
1995 fiscal year dividends per share - Class A $.40; Class B $.59
1994 fiscal year dividends per share - Class A $.30; Class B $.44
1118
Item 6. Selected Financial Data
The 5-year selected financial data is as follows (Dollars in thousands,
except per share amounts):
YEARS ENDED OCTOBER 31,
1997 1996 1995 1994 1993 1992
Net sales $648,984 $637,368 $719,345 $583,526 $526,765
$510,995
Net income $ 18,086 $ 42,747 $ 60,133 $ 33,754 $ 24,609
$ 29,719
Total assets $550,089 $512,338 $467,662 $419,074 $381,183
$340,173
Long term obligations $ 52,152 $ 25,203 $ 14,365 $ 28,215 $ 28,390
$ 960
Dividends per share of
common stock:share:
Class A Common Stock $ .48 $ .40 $ .30 $ .30 $ .28$.60 $.48 $.40 $.30 $.30
Class B Common Stock $ .71 $ .59 $ .44 $ .44 $ .41$.89 $.71 $.59 $.44 $.44
Net income per share:
Based on the assumption that earnings were allocated to Class A and
Class B Common Stock to the extent that dividends were actually paid for the
year and the remainder were allocated as they would be received by
shareholders in the event of liquidation, that is, equally to Class A and
Class B shares, share and share alike:
1997 1996 1995 1994 1993
1992
Class A Common Stock $.64 $1.75 $2.39 $1.32 $ .94 $1.15$.94
Class B Common Stock $.93 $1.98 $2.58 $1.46 $1.08 $1.28
Due to the special characteristics of the Company's two classes of
stock (see Note 5 to the Consolidated Financial Statements), earnings per
share can be calculated upon the basis of varying assumptions, none of
which, in the opinion of management, would be free from the claim that it
fails fully and accurately to represent the true interest of the
shareholders of each class of stock and in the retained earnings.
1219
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FINANCIAL DATA
Presented below are certain comparative data illustrative of the
following discussiondiscussions of the Company's results of operations, financial
condition and changes in financial condition (Dollars in thousands):
1997 1996 1995 1994 1993
Net sales:
ShippingIndustrial shipping containers $396,456 $391,315 $392,505 $353,992
$340,326
Containerboard 252,528 246,053 326,840 229,534
186,439
Total $648,984 $637,368 $719,345 $583,526
$526,765
Operating profit:
ShippingIndustrial shipping containers $ 16,736$13,157 $16,736 $ 9,059 $ 9,573
$ 6,709
Containerboard 10 36,926 80,476 30,306
18,354
Total $ 53,662 $ 89,535 $ 39,879 $ 25,063$13,167 $53,662 $89,535 $39,879
Net income $ 42,747 $ 60,133 $ 33,754 $ 24,609$18,086 $42,747 $60,133 $33,754
Current ratio 2.9:1 3.7:1 4.0:1 4.4:1 5.4:1
Cash flow from operations $ 81,906 $ 85,820 $ 48,049 $ 49,475
Increase (decrease)$40,115 $81,906 $85,820 $48,049
(Decrease) increase in working
capital $(22,257) $(13,973) $ 3,342 $ 7,202
$(15,105)
Capital expenditures $ 74,395 $ 61,066 $ 40,682 $ 74,521$36,193 $74,395 $61,066 $40,682
RESULTS OF OPERATIONS
Net income decreased $24,661,000 or 58% from the prior year. The
reduction is primarily due to the lower operating profit for the
containerboard segment caused by lower sales and net income were the second highest amountsprices without a corresponding
decrease in the historycost of products sold and selling, general and
administrative expenses for the segment. The lower sales prices were a
result of the Companycontinued weakness in 1996. Thepaper prices which related to excess
capacity in the containerboard market during 1997. These negative price
trends, which started at the end of 1995, results had establishedreached a record for these items.
Net19-year low in May 1997.
In the last several months of 1997, sales comparedprices in the containerboard
segment have begun to the previous year, decreased $82 million or 11.4% in
1996. Net income decreased $17 million or 28.9% compared to last year.increase.
Historically, revenues or earnings may or may not be representative of
future operations because of various economic factors. As explained below,
the Company is subject to the general economic conditions of its customers
and the industry in which it is included.operates.
20
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The Company remains confident that, with the financial strength that it
has built over its 119 year120-year existence, it will be able to adequately compete in its
highly competitive markets.
13
Item 7. Management's DiscussionNet Sales
The containerboard segment had an increase in net sales of $6.5 million
or 2.6% in 1997. As mentioned above, excess capacity in the containerboard
market caused sales prices for containerboard and Analysisrelated products to be
lower. This reduction in sales prices at our paper mills was partially
offset by an increase in sales volume this year as compared to last year.
In addition, the Company completed three acquisitions of Financial Conditioncorrugated
container companies: Aero Box Company located in Roseville, Michigan;
Independent Container, Inc. with locations in Louisville and ResultsErlanger,
Kentucky and Ferdinand, Indiana; and Centralia Container, Inc. located in
Centralia, Illinois. These acquisitions, along with the two acquisitions
from the prior year, contributed $48.7 million of Operations (continued)net sales during 1997, and
contributed to the further integration of the businesses. In the prior
year, there were $7.3 million of net sales relating to the 1996
acquisitions.
The industrial shipping containers segment had an increase in net sales
of $5.1 million or 1.3% in 1997. The increase is primarily due to the
purchase of two steel drum operations located in Merced, California and
Oakville, Ontario, Canada in the current year which contributed $19.1
million in sales during 1997. The increase that resulted from this
acquisition was partially offset by the disposal of the Company's wood
components plants in Kentucky, California, Washington and Oregon, at the
beginning of August 1997 and one of its injection molding facilities located
in Ohio during February 1997. Net Salessales for the locations which were sold
amounted to $38 million in 1997 and $46.2 million in 1996. These locations
were sold since it was determined that they no longer met the strategic
objectives of the Company.
The containerboard segment had a decrease in net sales of $81 million
in 1996. The reductionsreduction in net sales arewas primarily caused by lower selling
prices due to the weaknesses in the containerboard market this year. These weaknesses
were caused by the industry's excessive containerboard capacity due to
additions in both 1995 andduring 1996. These decreases wereThis
decrease was partially offset by a sales volume increasesincrease in 1996.
TheDuring 1996, the Company purchased two corrugated container companies
with locations in Illinois, West Virginia and Kentucky. In addition, a
subsidiary of the Company began operations at a new plant in Mason,
Michigan.
While these additions did
not have a significant impact on the current year results, these purchases
increased the net sales 21
Item 7. Management's Discussion and Analysis of the containerboard segment.Financial Condition
and Results of Operations (continued)
Net sales in the industrial shipping containers segment remained about
the same in 1996 as in the previous year. There was a decrease in net sales
due to the closing of two drum plants at the end of 1995. The closings
resulted from management's determination that they would not provide a
reasonable return to the Company. The reduction in net sales was offset by
a net increase in sales at the other locations of this segment primarily due
to more sales volume. The increase in
unit sales of the segment resulted from capital expenditures made in the current
and prior years.
The containerboard segment had an increase in net sales of $97 million
in 1995 which was primarily due to higher sales prices. The increase in
sales prices resulted from shortages in the containerboard and related
products industry. In addition, there was a less significant increase in
unit sales of the segment because of the inclusion of an entire year of
sales in 1995 for the 325 ton per day recycled paper machine at a subsidiary
of the Company which was completed in December 1993.
The industrial shipping containers segment had an increase in net sales
of $39 million in 1995 resulting from more volume because of capital expenditures made in 1995
and 1994.volume. In addition, there were
some sales price increases that were made because of the increase in the
cost of the Company's raw materials.
The increase in sales in 1994 of 10.8% was primarily the result of the
addition of the recycled paper machine, discussed above, coupled with shortages
in containerboard and related products that resulted in increased selling
prices. Other capital expenditures made in 1994 and previous years also
contributed to this increase.
Operating Profit
The overallDuring 1997, the decrease in operating profit since the prior yearof $40.5 million is
primarily due to
lower net sales of the containerboard segment, as discussed above, and a lower gross profit margin of 19.1%13.1% this year compared to
22.0%19.1% last year. TheThis reduction was caused by lower sales prices per unit
in the containerboard segment without a corresponding reduction in gross profit is because the fixed costs included in cost
of products sold did not decreasesold. In addition, selling, general and administrative expenses
included in both segments increased over the prior year partially due to
additional selling, general and administrative costs being included from the
same extent as net salesCompany's recent acquisitions.
The operating profit of the containerboard segment.segment is insignificant in
1997 compared to $37 million or 15.0% of net sales in 1996 and $80 million
or 24.6% of net sales in 1995. The decrease in 1996, and continued decrease
in 1997 is due to the reduction in sales prices resulting in less favorable
gross profit margins. The increase in 1995 is due to increases in net sales
and more favorable gross profit margins.
1422
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The operating profit of the containerboardindustrial shipping containers segment is
$37$13.2 million or 15.0%3.3% of net sales in 19961997 compared to $80 million or 24.6% of net sales in 1995 and
$30 million or 13.2% of net sales in 1994. The decrease in 1996 is due to the
reduction in sales coupled with less favorable gross profit margins. The
increases in 1995 and 1994 are due to increases in net sales and more favorable
gross profit margins.
The operating profit of the shipping containers segment is $17 million or 4.3%
of net sales in 1996 compared toand $9 million or 2.3% of net sales in 1995
and $10 million or 2.7% of net sales in 1994.1995. The
operating profits of this segment have been affected by severe price
pressures on its products, especially
during 1993.products. However, due to the Company's ongoing efforts to
reduce operating costs bythrough cost control measures, manufacturing
innovations and capital expenditures, the operating profits have increased from
19931994 to 1996. During 1997, the Company experienced lower profitability due
to higher cost of materials without a corresponding increase in sales
prices.
Restructuring Charge
During 1997, the Company adopted a plan to consolidate its operations
which included the relocation of certain key operating employees, the
realignment of some of its administrative functions and the reduction of
certain support functions. As a result, there was a charge to income of
$6.2 million during the fourth quarter.
Other Income
The otherOther income increased in 1997 due to $3 million of additional sales of
timber properties. Also, the Company sold its wood components plants and
one of its injection molding facilities during the year which resulted in
$3.7 million of gains on the sale of capital assets.
Other income of the Company increased in 1996 due to the sale of timber
properties in the United States and in Canada.
In 1995, other income increased primarily due to the sale of timber
properties under threat of acquisition by eminent domain and more salvage
timber sales. The increase in volume of timber sales was accompanied by
higher timber prices.
The 1994 other income, compared withInterest Expense
Interest expense increased $2.2 million as a result of additional debt
issued in 1997 and 1996 relating to the previous year, decreased due to
less timber sales.acquisitions of the Company and
certain capital improvements.
23
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Income Before Income Taxes
Income before income taxes decreased $38.2 million in 19961997 primarily
due to lower net sales and less favorable gross profit margins than in the prior year. In
addition, there was ana $6.2 million charge related to the restructuring and a
$2.2 million increase in interest expense. These reductions were offset by
the $3 million of higher timber sales and $3.7 million of gains on the sale
of certain facilities which no longer fit the business strategy of the
Company.
Income before income taxes decreased by $30.2 million in 1996 due to
lower sales and less favorable gross profit margins than in the prior year.
These reductions were offset by a $1.6 million increase in gains from timber
propertiessales as compared to 1995.
In 1995, income before income taxes increased because of higher sales
and more favorable gross profit margins. In addition, as discussed above,
there was an increase in the sale of timber and timber properties.
The 1994 increase in income before income taxes was the result of the sales
increase and increase in gross margin. This increase was slightly offset by a
reduction in timber sales and an increase in interest expense that resulted from
the Company's long term obligations.
LIQUIDITY AND CAPITAL RESOURCES
As indicated in the Consolidated Balance Sheets, elsewhere in this
Report and in the ratiosfinancial data set forth above, the Company is dedicated
to maintaining a strong financial position. It is our belief that this
dedication is extremely important during all economic times.
15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
The Company's financial strength is important to continue to achieve
the following goals:
(a)a. To protect the assets of the Company and the intrinsic value of
shareholders' equity in periods of adverse economic conditions.
(b)b. To respond to any large and presently unanticipated cash demands that
might result from future drasticadverse events.
(c)c. To be able to benefit from new developments, new products and new
opportunities in order to achieve the best results for our shareholders.
(d)d. To continue to pay competitive remuneration, including the ever-increasing
costs of employee benefits, to Company employees who produce the results
for the Company's shareholders.
24
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
e. To replace and improve plants and equipment. When plants and production
machinery must be replaced, either because of wear or to obtain the cost-reducingcost-
reducing potential of technological improvement required to remain a lowlow-
cost producer in the highly competitive environment in which the Company
operates, the cost of new plants and machinery are often much higher, sometimes
significantly
higher than the historical cost of the items being replaced.
The Company, during 1996,1997, invested approximately $74$36 million in capital
additions.additions and $42 million for its acquisitions. During the last three
years, the Company has invested $176 million.$223 million in capital additions and
acquisitions.
During 1997, the Company purchased three corrugated container
companies, Aero Box Company, Independent Container, Inc. and Centralia
Container, Inc. In addition, the Company purchased two steel drum
operations. Furthermore, one of the paper mills added a power plant to
its operations and a corrugated carton plant had a major addition to its
facility which included more machinery and equipment.
As discussed in the 19951996 Annual Report, Virginia Fibre Corporation, a
subsidiary of the Company, has made significant improvements to theirits facilities
by adding a new woodyard and a manufacturing control system. Greif Board
Corporation, a subsidiary of the Company, has made significant improvements to
theirits machinery and equipment. In addition, Michigan Packaging Company, a
subsidiary of the Company, built a new manufacturing plant in Mason,
Michigan that was completed in November 1995. As discussed above, theThe Company purchased two
corrugated container companies, Decatur Container Corporation and Kyowva
Corrugated Container Company, Inc., in 1996. Furthermore, the Company undertook
a major addition at Virginia Vibre Corporation that was completed in December
1993. This project resulted in additional capacity for 1994, 1995 and 1996.
Subsequent to year-end, the Company purchased Aero Box Company, a corrugated
container company located in Roseville, Michigan. In addition, the Company has
approved future purchases, primarily for equipment, of approximately $30
million.
Self-financing and borrowing have been the primary source for such capital
expenditures and the Company will attempt to finance future capital expenditures
in a like manner. Long term obligations are higher at October 31, 1996
compared to October 31, 1995 due to additional long term debt related to its
acquisitions and capital improvements. The increase caused by this debt was
partially offset by pre-payment of long term debt during 1996.
While there is no commitment to continue such a practice, at least one
new manufacturing plant or a major addition to an existing plant has been
undertaken in each of the last three years.
On December 10, 1997, the Company signed a non-binding letter of intent
to acquire all of the outstanding shares of KMI Continental Fibre Drum,
Inc., Fibro Tambor, S.A. de C.V., Sonoco Plastic Drum, Inc. from Sonoco
Products and their interest in Total Packaging Systems of Georgia, LLC for
approximately $225 million in cash. The acquisition is subject to
satisfactory completion of due diligence by the Company and receipt of all
required governmental approvals. In addition, the Company has approved
future purchases, primarily for equipment, of approximately $7 million.
1625
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (concluded)
Self-financing and borrowing have been the primary sources for past
capital expenditures and acquisitions. The Company will attempt to finance
future capital expenditures and acquisitions in a like manner. Long term
obligations are higher at October 31, 1997 compared to October 31, 1996 due
to additional long term debt related to its acquisitions and capital
improvements. The increase caused by this debt was partially offset by the
payment of long term debt during 1997.
These investments are an indication of the Company's commitment to be
the quality, low costlow-cost producer and the desirable long term supplier to all
of our customers.
(e) To continue to pay competitive and sound remuneration, including the
ever-increasing costs of employee benefits, to Company employees who produce the
results for the Company's shareholders.
During 1996 and 1995, the Company performed a complete study of the
compensation and retirement policies. As a result of this study, the Company is
implementing changes to our incentive plans so that compensation is more
directly linked to key corporate measures. In addition, an Incentive Stock
Option Plan was implemented and improvements were made to the pension plans and
a 401(k) Plan.
Management believes that the present financial strength of the Company
will be sufficient to achieve the foregoing goals.
In spite of such necessary financial strength, the Company's industrial
shipping containers business, where packages manufactured by Greif Bros.
Corporation are purchased by other manufacturers and suppliers, is wholly
subject to the general economic conditions and business success of the
Company's customers.
Similarly, the Company's containerboard and related products business
is also subject to the general economic conditions and the effect of the
operating rates of the containerboard industry, including pricing pressures
from its competition.competitors.
The historical financial strength generated by these segments has
enabled them to remain independently liquid during adverse economic
conditions.
SAFE HARBOR STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained herein, the matters
discussed in this Annual Report contain certain forward-looking statements
which involve risks and uncertainties, including, but not limited to,
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, services and related products, prices and
other factors discussed in the Company's filings with the Securities and
Exchange Commission. The Company's actual results could differ materially
from those projected in such forward-looking statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Not applicable at this time
1726
Item 8. Financial Statements and Supplementary Data
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
For the years ended October 31, 1997 1996 1995 1994
Net sales $648,984 $637,368 $719,345 $583,526
Other income:
Interest and other 12,918 5,214 5,822 6,113
Gain on timber sales 12,681 9,626 8,067
4,604674,583 652,208 733,234 594,243
Costs and expenses (including
depreciation of $30,660 in 1997,
$26,348 in 1996 and $22,944 in
1995 and
$21,717 in 1994)1995):
Cost of products sold 563,665 515,775 561,118 480,666
Selling, general and administrative 78,743 68,220 73,733
60,518
Interest 2,670 517 472
1,447645,078 584,512 635,323 542,631
Income before income taxes 29,505 67,696 97,911 51,612
Taxes on income 11,419 24,949 37,778 17,858
Net income $ 18,086 $ 42,747 $ 60,133 $ 33,754
Net income per share (based on the average number of shares outstanding during
the year):
Based on the assumption that earnings were allocated to Class A and Class
B Common Stock to the extent that dividends were actually paid for the year and
the remainder were allocated as they would be received by shareholders in the
event of liquidation, that is, equally to Class A and Class B shares, share and
share alike:
1997 1996 1995 1994
Class A Common Stock $ .64 $1.75 $2.39 $1.32
Class B Common Stock $1.98 $2.58 $1.46$ .93 $1.98 $2.58
Due to the special characteristics of the Company's two classes of stock
(see Note 5), earnings per share can be calculated upon the basis of varying
assumptions, none of which, in the opinion of management, would be free from
the claim that it fails fully and accurately to represent the true interest of
the shareholders of each class of stock and in the retained earnings.
See accompanying Notes to Consolidated Financial Statements
1827
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
October 31, 1997 1996 1995
CURRENT ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 26,56017,719 $ 31,61226,560
Canadian government securities 7,533 19,479 18,981
Trade accounts receivable --- less allowance of
$826$847 for doubtful items ($789826 in 1995)1996) 81,582 73,987
76,950
Inventories 44,892 49,290 53,876
Prepaid expenses and other 21,192 16,131 16,482
Total current assets 172,918 185,447 197,901
LONG TERM ASSETS
Cash surrender value of life insurance 1,070 2,982 2,838
Interest in partnership -- 1,091
Goodwill - less amortization 17,352 4,617 --
Other long term assets 20,952 7,116
6,97739,374 14,715 10,906
PROPERTIES, PLANTS AND EQUIPMENT --- at cost
Timber properties --- less depletion 6,884 6,112
4,518
Land 11,139 10,771
11,014
Buildings 139,713 125,132 104,892
Machinery, equipment, etc. 424,177 385,834 316,419
Construction in progress 17,546 33,450 45,468
Less accumulated depreciation (261,662) (249,123)
(223,456)337,797 312,176
258,855$550,089 $512,338 $467,662
See accompanying Notes to Consolidated Financial Statements
1928
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
October 31, 1997 1996 1995
CURRENT LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 31,60937,390 $ 35,93531,609
Current portion of long term obligations 8,504 2,455 264
Accrued payrolls and employee benefits 13,821 8,989 10,882
Accrued taxes --- general 97 1,949 1,954
Taxes on income 596 5,678 126
Total current liabilities 60,408 50,680 49,161
LONG TERM OBLIGATIONS 43,648 22,748 14,101
OTHER LONG TERM LIABILITIES 16,155 15,406 18,305
DEFERRED INCOME TAXES 29,740 22,872 13,562
Total long term liabilities 89,543 61,026 45,968
SHAREHOLDERS' EQUITY
Capital stock, without par value 9,0349,739 9,034
Class A Common Stock:
Authorized 32,000,000 shares;
issued 21,140,960 shares;
outstanding 10,873,17210,900,672 shares
(10,873,172 in 1996)
Class B Common Stock:
Authorized and issued 17,280,000 shares;
outstanding 12,001,793 shares
(13,201,793 in 1995)
Treasury stock, at cost (41,868) (41,867) (40,776)
Class A Common Stock: 10,267,78810,240,288 shares
(10,267,788 in 1996)
Class B Common Stock: 5,278,207 shares
(4,078,207 in 1995)
Retained earnings 437,550 436,672 407,665
Cumulative translation adjustment (5,283) (3,207)
(3,390)400,138 400,632
372,533$550,089 $512,338 $467,662
See accompanying Notes to Consolidated Financial Statements
2029
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the years ended October 31, 1997 1996 1995 1994
Cash flows from operating activities:
Net income $ 18,086 $ 42,747 $ 60,133 $ 33,754
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and
amortization 31,926 26,420 23,002 21,758
Deferred income taxes 4,703 9,308 6,597
4,011
(Gain) lossGain on disposals of properties, plants
and equipment (7,023) (412) (331) 4
Increase (decrease) in cash from changes
in certain assets and liabilities, net of
effects from acquisitions:
Trade accounts receivable (769) 4,831 (7,449)
(12,900)
Inventories 9,660 6,356 (2,932) (8,244)
Prepaid expenses and other (2,563) 420 (2,098) (1,591)
Other long term assets (11,719) (75) (1,344)
(848)
Accounts payable 1,809 (5,481) 2,987 10,526
Accrued payrolls and employee benefits 4,449 (1,904) 3,800
1,289
Accrued taxes --- general (1,871) (37) 2 332
Taxes on income (5,118) 5,449 (587) (735)
Other long term liabilities (1,455) (5,716) 4,040 693
Net cash provided by operating activities 40,115 81,906 85,820 48,049
Cash flows from investing activities:
Acquisitions of companies, net of cash
acquired (41,121) (284) -- --
Disposals of investments in government
securities 12,585 1,481 9,211 22,177
Purchases of investments in government
securities (639) (1,979) (4,223) (19,214)
Purchases of properties, plants and
equipment (36,193) (74,395) (61,066) (40,682)
Proceeds on disposals of properties,
plants and equipment 7,634 851 745 166
Net cash used byin investing activities (57,734) (74,326) (55,333) (37,553)
Cash flows from financing activities:
Proceeds from issuance of long term
debtobligations 52,753 11,329 12,000 7,700
Payments on long term debtobligations (25,804) (3,692) (25,849) (7,876)
Payments on short term obligations -- (6,668) -- --
Acquisitions of treasury stock (31) -- (2,647)
(1,789)Exercise of stock options 735 -- --
Dividends paid (17,208) (13,740) (12,180)
(9,139)
Net cash usedprovided by (used in) financing
activities 10,445 (12,771) (28,676) (11,104)
Foreign currency translation adjustment (1,667) 139 258
(676)
Net (decrease) increase (decrease) in cash and cash
equivalents (8,841) (5,052) 2,069 (1,284)
Cash and cash equivalents at beginning of year 26,560 31,612 29,543 30,827
Cash and cash equivalents at end of year $ 17,719 $ 26,560 $ 31,612 $ 29,543
See accompanying Notes to Consolidated Financial Statements
2130
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars and shares in thousands, except per share amounts)
Capital Stock Treasury Stock Retained Translation Share-
Shares Amount Shares Amount Earnings Adjustment holders'
Equity
Balance at November
1, 1993 24,273 $9,034 14,148 $(36,340) $335,097 $(2,824) $304,967
Net income 33,754 33,754
Dividends paid (Note):
Class A - $.30 (3,262) (3,262)
Class B - $.44 (5,877) (5,877)
Treasury shares
acquired (91) 91 (1,789) (1,789)
Translation loss (854) (854)
Balance at October 31,
1994 24,182 9,034$9,034 14,239 (38,129) 359,712 (3,678) 326,939$(38,129) $359,712 $(3,678) $326,939
Net income 60,133 60,133
Dividends paid
(Note)(Note 5):
Class A - $.40 (4,349) (4,349)
Class B - $.59 (7,831) (7,831)
Treasury shares
acquired (107) 107 (2,647) (2,647)
Translation gain 288 288
Balance at October
31, 1995 24,075 9,034 14,346 (40,776) 407,665 (3,390) 372,533
Net income 42,747 42,747
Dividends paid
(Note)(Note 5):
Class A - $.48 (5,219) (5,219)
Class B - $.71 (8,521) (8,521)
Treasury shares
acquired (1,200) 1,200 (1,091) (1,091)
Translation gain 183 183
Balance at October
31, 1996 22,875 $9,0349,034 15,546 $(41,867) $436,672 $(3,207) $400,632
NOTE:(41,867) 436,672 (3,207) 400,632
Net income 18,086 18,086
Dividends paid
during the calendar years 1996, 1995 and 1994,
relating to the results of operations for the fiscal years ended(Note 5):
Class A - $.60 (6,526) (6,526)
Class B - $.89 (10,682) (10,682)
Treasury shares
acquired (1) 1 (31) (31)
Stock options
exercised 28 705 (28) 30 735
Translation loss (2,076) (2,076)
Balance at October
31, 1996, 1995 and 1994, were as follows:
1996 calendar year dividends per share - Class A $.44; Class B $.65
1995 calendar year dividends per share - Class A $.40; Class B $.59
1994 calendar year dividends per share - Class A $.34; Class B $.501997 22,902 $9,739 15,519 $(41,868) $437,550 $(5,283) $400,138
See accompanying Notes to Consolidated Financial Statements
2231
Item 8. Financial Statements and Supplementary Data (continued)
GREIF BROS. CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The Consolidated Financial Statements include the accounts of the CompanyGreif
Bros. Corporation and its subsidiaries.subsidiaries (the Company). All intercompany
transactions and balances have been eliminated in consolidation.
Revenue Recognition
Revenue is recognized when goods are shipped.
Income Taxes
Income taxes are accounted for under Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". In accordance with
this statement, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases, as measured by tax rates currently in effect.
Cash and Cash Equivalents
The Company considers highly liquid investments with an original
maturity of three months or less to be cash and cash equivalents. Included
in these amounts are repurchase agreements and certificates of deposit of
$6,100,000$4,800,000 and $4,700,000, respectively, in 1997 ($6,100,000 and
$13,400,000, respectively, in 1996 ($6,800,000 and $11,700,000, respectively,
in 1995)1996).
Canadian Government Securities
The Canadian government securities are classified as available-for-sale
and, as such, are reported at their fair value which approximates amortized
cost. These securities have maturities to 2002.
During 1995,1997, the Company received $3,600,000$10,600,000 in proceeds from the sale
of available-for-sale securities.securities ($3,600,000 in 1995). The realized gains
and losses included in income are immaterial.
No available-for-sale securities were sold prior to
maturity during 1996. 32
Item 8. Financial Statements and Supplementary Data (continued)
Inventories
Inventories are comprised principally of raw materials and are stated
at the lower of cost (principally on last-in, first-out basis) or market.
If inventories were stated on the first-in, first-out basis, theythe balance
would be 23
Item 8. Financial Statements and Supplementary Data (continued)$47,000,000 greater in 1997, $48,400,000 greater in 1996 and
$57,600,000 greater in 1995 and $49,000,000 greater
in 1994.1995. During 1997, 1996 and 1995, the Company
experienced slight LIFO liquidations which were deemed to be immaterial to
the Consolidated Financial Statements.
Properties, Plants and Equipment
Depreciation on properties, plants and equipment is provided by the
straight
linestraight-line method over the estimated useful lives of the assets.
Accelerated depreciation methods are used for income tax purposes.
Expenditures for repairs and maintenance are charged to income as incurred.
Depletion on timber properties is computed on the basis of cost and the
estimated recoverable timber acquired.
When properties are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the asset and related reserveallowance
accounts. Gains or losses are credited or charged to income as applicable.
Goodwill
Goodwill is amortized on a straight-line basis over fifteen years. The
Company periodically reviews its goodwill to determine if an impairment has
occurred. Accumulated amortization was $19,000$1,052,000 at October 31, 1996.1997
($19,000 at October 31, 1996).
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, Canadian government
securities and long term obligations approximate their fair value.values.
The fair value of long term obligations is estimated based on quoted
market prices on current rates offered to the Company for debt of the same
remaining maturities. The carrying values of the interest rate swap
agreements (see Note 4) approximate their fair values, as determined by the
counterparties.
33
Item 8. Financial Statements and Supplementary Data (continued)
Foreign Currency Translation
In accordance with SFAS No. 52, "Foreign Currency Translation", the
assets and liabilities denominated in foreign currency are translated into
U.S. dollars at the current rate of exchange existing at year-end and
revenues and expenses are translated at the average monthly exchange rates.
The cumulative translation adjustments, which represent the effecteffects of
translating assets and liabilities of the Company's foreign operation,operations, are
presented in the Consolidated Statements of Changes in Shareholders' Equity.
The transaction gains and losses included in income are immaterial.
24
Item 8. Financial Statements and Supplementary Data (continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual amounts could differ from those estimates.
Operations by Industry Segment
Information concerning the Company's industry segments, presented on
pages 2 - 43-4 of this Form 10-K, is an integral part of these financial
statements.
Recent Accounting Standards
The Company plans to adoptDuring 1997, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"128, "Earnings Per Share", SFAS No. 130, "Reporting Comprehensive Income"
and SFAS No. 123, "Accounting for Stock-Based Compensation", in 1997.131, "Disclosures about Segments of an Enterprise and Related
Information".
SFAS No. 121128 (effective in 1998 for the Company) requires that impaired assets or assetscompanies to
be disposed of be
accounted for at the lower of the carrying amount or the fair value of the
assets less costs of disposal.present basic earnings per share and diluted earnings per share. The
adoption of the new standard is not expected to have a material effect on
the Company's financial position or resultspresentation of operations.
In accordance withearnings per share.
SFAS No. 123,130, which will not be effective until 1999 for the Company,
requires companies to present comprehensive income, which is comprised of
net income and other charges and credits to equity that are not the result
of transactions with the owners, in its financial statements. Currently, the
only item in addition to net income that would be included in comprehensive
income is the cumulative translation adjustment.
34
Item 8. Financial Statements and Supplementary Data (continued)
SFAS No. 131, which will havenot be effective until 1999 for the optionCompany,
requires that reporting segments be redefined in terms of recognizing compensation expense for certain all stock-based compensation
arrangements based on the fair valuea company's
operating segments. Adoption of the option on the grant date or
continuingnew standard is not expected to recognize compensation expense in accordance with Accounting
Principles Board Opinion (APB) No. 25 "Accounting for Stock Issued to
Employees". Since the Company plans to continue to apply APB No. 25, the impact
of the adoption will not have a
significant impact on the presentation of the Company's financial
position or resultssegments.
NOTE 2 - ACQUISITIONS AND DISPOSITIONS
In November 1996, the Company purchased the assets of operations.
Reclassifications
Certain prior year amounts have been reclassified to conform toAero Box Company,
a corrugated container company, located in Michigan. In March 1997, the
1996
presentation.
NOTE 2--ACQUISITIONS
During 1996,Company acquired the assets of two steel drum manufacturing plants located
in California and Ontario, Canada. In May 1997, the Company purchased all
of the outstanding common stock of twoIndependent Container, Inc., a corrugated
container companiescompany with two locations in Illinois, West VirginiaKentucky and Kentucky. Thesea location in Indiana.
In June 1997, the Company purchased all of the outstanding common stock of
Centralia Container, Inc., located in Illinois.
The acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the
assets purchased and liabilities assumed based upon the fair values at the
date of acquisition. The excess of the purchase price over the fair values
of the net assets acquired has been recorded as goodwill. The Consolidated
Financial Statements include the operating results of each business from the
date of acquisition. Pro forma results of operations have not been
presented because the results of these acquisitions were not significant to
the Company.
In February 1997, the Company sold its injection molding plant in Ohio.
In addition, the Company sold its wood component facilities, which
manufactured door panels, wood moldings and window and door parts, with
locations in Kentucky, California, Washington and Oregon in August 1997.
The transactions resulted in a gain of $3.7 million which is included in
other income.
NOTE 3 - RESTRUCTURING COSTS
During the fourth quarter of 1997, the Company adopted a plan to
consolidate its operations. This plan included the relocation of certain
key operating people to the corporate office. In addition, there was a
realignment of some of the administrative functions that were being
performed at the subsidiary and division offices which resulted in some
staff reductions. Finally, costs associated with the reduction of certain
support functions were incurred. As a result, a restructuring charge of
$6.2 million, consisting primarily of severance benefits, was recorded in
the results of operations during the fourth quarter of 1997.
2535
Item 8. Financial Statements and Supplementary Data (continued)
because the effects of these acquisitions were not significant.
Subsequent to year-end, the Company purchased the assets of Aero Box Company
located in Roseville, Michigan.
NOTE 3--INTEREST IN PARTNERSHIP
The 50% interest in Macauley & Company (the Partnership), in which the
Company was a limited partner, was liquidated on November 6, 1995. Prior to the
liquidation, the Partnership held Class B Common Stock (2,400,000 shares) of the
Company. Upon liquidation, the Company received 1,200,000 shares of the Class B
Common Stock. The Company recorded the liquidation by crediting interest in
partnership and charging an equal amount to treasury stock.
NOTE 4--LONG4 - LONG TERM OBLIGATIONS
The Company's long term obligations, which are primarily with banks,
include the following as of October 31 (Dollars in thousands):
1997 1996 1995
CurrentNotes Payable:
Fixed rate notes - 5.91% to 9.69%, due 1998 -
2015, secured by certain equipment, real
estate, inventory and receivables $ 1,558 $ 1,988
Variable rate notes - LIBOR plus .25% to .49%
or Prime Rate plus 1%, due 1999 - 2004,
certain notes secured by equipment 35,544 8,609
Revolving credit agreement and lines of
credit:
Variable rate - tied to LIBOR or Prime Rate,
expiring in 2000 15,050 12,830
Total 52,152 23,427
Capital lease obligation -- 1,776
Less: current portion of long term
obligations $8,504 2,455 $ 264
Long term obligations $20,972 $12,076
Capital lease 1,776 2,025
Total long term obligations$43,648 $22,748 $14,101
During 1996, the Company entered into longLong term obligations related to itshave generally resulted from acquisitions and
capital improvements. The most significant portion of this new
debt was a commercial installmentCertain loan in the amount of $7.5 million. This loan
is payable to 2001 and has an interest rate of 6.85%. As part of its loan
agreement, the Company has agreed to certainagreements contain debt covenants related
to the financial position or results of operations of the Company.
The Company has a revolving credit agreement and lines of credit
totaling $62 million. At October 31, 1997, the Company has $47 million
available under its revolving credit agreement and lines of credit.
During 1996, a subsidiary of1997, the Company entered into a $20 million
unsecured revolving loan agreementinterest rate swap agreements
with a bank that expires in 2000. On
October 31, 1996,aggregate notional amounts of $32,685,000 without the amount outstanding was $437,000.exchange of
underlying principal. The interest is an
adjustable rate tiedswaps were entered into to manage
the Company's exposure to variable rate debt. Under such agreements, the
Company receives interest from the counterparties equal to amounts incurred
under its existing variable rate debt, and pays interest to the
London Interbank Offered Rates (5.84%counterparties at October 31, 1996)fixed rates ranging from 6.43% to 7.39%. ThereThe differential
to be paid and received under such agreements is no penalty for prepayment. As partrecorded as an adjustment
to interest expense and is included in interest receivable or payable. The
agreements expire within seven years.
Annual maturities of this
revolving loan agreement, the subsidiary agreed to certain provisionslong term obligations are $8,504,000 in 1998,
$7,895,000 in 1999, $22,737,000 in 2000, $7,503,000 in 2001, $3,049,000 in
2002 and restrictions relating to investments and minimum tangible net worth
requirements.
On November 16, 1994, a different subsidiary of the Company signed a loan
commitment letter for an eight year unsecured revolving line of credit with a
bank for $17 million. On October 31, 1996, the amount outstanding was $9
million ($12 million at October 31, 1995). This revolving credit arrangement$2,464,000 thereafter.
2636
Item 8. Financial Statements and Supplementary Data (continued)
During 1997, the Company paid $3,726,000 of interest ($862,000 in 1996
and $1,359,000 in 1995) related to the long term obligations. Interest of
$1,163,000 in 1997, $569,000 in 1996 and $780,000 in 1995 was used to financecapitalized.
During 1997, the construction of a manufacturing plant in Michigan which
was completed in November 1995. At the Company's discretion, the interest rate
may be tied to either the London Interbank Offered Rates plus 50 basis points
or the bank's prime rate less 25 basis points. There is no penalty for
prepayment. As part of the revolving credit arrangement, the subsidiary agreed
to certain restrictions including a restriction on its additional indebtedness.
The Company has a capital lease agreement covering theobligation relating to land, building
and machinery and equipment at one of itsthe Company's plant locations.locations was
assumed by another party through the disposal of a plant. The amount that
iswas capitalized under this agreement iswas $2,708,000 and hashad accumulated
depreciation of $606,000 as of October 31, 1996 ($416,000 as of October 31, 1995). In
addition to the capital lease, the1996.
The Company has entered into non-cancelable operating leases for
buildings and office space. The future minimum lease payments for the non-cancelablenon-
cancelable operating leases are $701,000 in 1997, $420,000$1,473,000 in 1998, $187,000$992,000 in 1999,
$67,000$630,000 in 2000, $67,000$578,000 in 2001, $298,000 in 2002 and $119,000$250,000
thereafter. Rent expense was $5,684,000 in 1997, $3,592,000 in 1996 and
$3,246,000 in 1995 and
$2,553,000 in 1994.
Annual maturities of the long term obligations and capital lease are
$2,569,000 in 1997, $4,034,000 in 1998, $3,848,000 in 1999, $5,658,000 in 2000,
$4,057,000 in 2001 and $5,396,000 thereafter. The amount that represents future
executory costs and interest payments for the capital lease is $359,000 as of
October 31, 1996 ($488,000 as of October 31, 1995).
During 1996, the Company paid $862,000 of interest ($1,359,000 in 1995 and
$1,599,000 in 1994) for the long term obligations and capital lease. Interest
of $569,000 in 1996, $780,000 in 1995 and $211,000 in 1994 was capitalized.1995.
NOTE 5--CAPITAL5 - CAPITAL STOCK
In March 1995, authorized Class A Common Stock was increased from 16,000,000
shares to 32,000,000 shares and Class B Common Stock from 8,640,000 shares to
17,280,000 shares. At the same time, all issued shares were split two-for-one.
Class A Common Stock is entitled to cumulative dividends of 1 cent a
share per year after which Class B Common Stock is entitled to non-cumulativenon-
cumulative dividends up to 1/2 cent a share per year. Further distribution
in any year must be made in proportion of 1 cent a share for Class A Common
Stock to 1-1/1 1/2 cents a share for Class B Common Stock. The Class A Common
Stock shall have no voting power nor shall it be entitled to notice of
meetings of the shareholders, all rights to vote and all voting power being
vested exclusively in the Class B Common Stock unless four quarterly
cumulative dividends upon the Class A Common Stock are in arrears. There is
no cumulative voting.
27
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 6--STOCK6 - STOCK OPTIONS
In 1996, a Directors' Stock Option Plan (Directors' Plan) was adopted
which provides the granting of stock options to directorsDirectors who are not
employees of the Company. The aggregate number of the Company's Class A
Common Stock which options may be granted shallmay not exceed 100,000 shares. Each outside director
will be granted an annual option to purchase 2,000 shares.
Under the terms of the Directors' Plan, options are granted at exercise
prices equal to the market value on the date the options are granted and become
exercisable immediately. As of October 31, 1996,1997, no options have been
exercised. Options expire ten years after date of grant. 37
Item 8. Financial Statements and Supplementary Data (continued)
During 1995, the Company adopted an Incentive Stock Option Plan (Option
Plan) which provides the discretionary granting of incentive stock options
to key employees and non-statutory options for non-employees. The aggregate
number of the Company's Class A Common Stock which options may be granted
shall not exceed 1,000,000 shares. Under the terms of the Option Plan,
options are granted at exercise prices equal to the market value on the date
the options are granted and become exercisable after two years from the date
of grant. Options expire ten years after date of grant.
In 1997, 136,500 incentive stock options were granted with option
prices of $30.00 per share. Under the Directors' Plan, 12,000 options were
granted to outside directors with option prices of $30.50 per share.
In 1996, 152,100 incentive stock options were granted with option
prices of $29.62 per share. Under the Directors' Plan, 12,000 options were
granted to outside directors with option prices of $29.62$30.00 per share.
In 1995, 155,000 and 44,500 incentive stock options were granted with
option prices of $26.19 per share and $22.94 per share, respectively. In
addition, 10,000 non-statutory options were granted with option prices of
$23.75 per share.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock option plans. If compensation cost would have been
determined based on the fair values at the date of grant under SFAS No. 123,
"Accounting for Stock-Based Compensation", pro forma net income and earnings
per share would have been as follows (Dollars in thousands, except per share
amounts):
1997 1996
Net income $17,133 $42,486
Net income per share:
Class A Common Stock $.60 $1.74
Class B Common Stock $.89 $1.97
The fair value for each option is estimated on the date of grant using
the Black-Scholes option pricing model, as allowed under SFAS No. 123, with
the following assumptions:
1997 1996
Dividend yield 1.31% 1.16%
Volatility rate 20.60% 29.20%
Risk-free interest rate 6.29% 6.52%
Expected option life 6 years 6 years
38
Item 8. Financial Statements and Supplementary Data (continued)
The weighted fair value of shares granted were $9.03 and $10.95 at
October 31, 1997 and 1996, respectively. Stock option activity was as
follows (Shares in thousands):
1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Beginning Balance 374 $27.25 210 $25.38 -- $ --
Granted 148 30.04 164 29.62 210 25.38
Forfeited 38 27.11 -- -- -- --
Exercised 28 25.79 -- -- -- --
Expired -- -- -- -- -- --
Ending Balance 456 $28.26 374 $27.25 210 $25.38
There are 181,000 options which were exercisable at October 31, 1997
(12,000 options at October 31, 1996).
During 1996, the Company purchased all rights to options granted under
a stock option plan at Virginia Fibre Corporation. There are no outstanding
options under this plan at October 31, 1996.one of its subsidiaries and subsequently eliminated
the plan.
2839
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 7--INCOME7 - INCOME TAXES
Income tax expense is comprised as follows (Dollars in thousands):
State
U.S. and
Federal Foreign Local Total
1997:
Current $ 3,617 $ 2,097 $ 1,607 $ 7,321
Deferred 4,087 (96) 107 4,098
$ 7,704 $ 2,001 $ 1,714 $11,419
1996:
Current $11,330 $ 3,075 $ 1,630 $16,035
Deferred 7,903 (59) 1,070 8,914
$19,233 $ 3,016 $ 2,700 $24,949
1995:
Current $27,053 $ 1,616 $ 3,567 $32,236
Deferred 3,655 258 1,629 5,542
$30,708 $ 1,874 $ 5,196 $37,778
1994:
Current $10,592 $ 1,882 $ 2,166 $14,640
Deferred 4,767 (196) (1,353) 3,218
$15,359 $ 1,686 $ 813 $17,858
Foreign income before income taxes amounted to $7,729,000 in 1996
($4,452,000 in 1995 and $4,111,000 in 1994)Foreign income before income taxes amounted to $5,241,000 in 1997
($7,729,000 in 1996 and $4,452,000 in 1995).
The following is a reconciliation of the U.S. statutory Federal income
tax rate to the Company's effective tax rate:
1997 1996 1995 1994
U.S. Federal statutory tax rate 35.0% 35.0% 35.0%
State and local taxes, net of
Federal tax benefit 3.8% 3.6% 3.9%
1.0%
Other (.1%) (1.7%) (.3%) (1.4%)
Effective income tax rate 38.7% 36.9% 38.6% 34.6%
2940
Item 8. Financial Statements and Supplementary Data (continued)
Significant components of the Company's deferred tax assets and
liabilities are as follows at October 31 (Dollars in thousands):
1997 1996 1995
Current deferred tax assets $ 3,5645,729 $ 4,2443,564
Current deferred tax liabilities $ 2910 $ 3629
Book basis on acquired assets $10,159 $11,432
$12,264
Other 2,249 551 3,791
Long term deferred tax assets $12,408 $11,983
$16,055
Plants and equipmentDepreciation $35,448 $27,974 $23,671
Timber condemnation 3,557 2,873 2,152
Undistributed Canadian net income 1,627 1,753 1,402
Pension costs 1,111 1,887
1,733
Other 405 368 659
Long term deferred tax liabilities $42,148 $34,855
$29,617At October 31, 1997, the Company has provided deferred income taxes on
all of its undistributed Canadian earnings.
During 1997, the Company paid $13,334,000 in income taxes ($10,318,000
in 1996 and $35,692,000 in 1995).
At October 31, 1996, the Company has provided deferred income taxes on all
undistributed Canadian earnings.
During 1996, the Company paid $10,318,000 in income taxes ($35,692,000 in
1995 and $15,429,000 in 1994).
30
Item 8. Financial Statements and Supplementary Data (continued)
NOTE 8--RETIREMENT8 - RETIREMENT PLANS
The Company has non-contributory defined benefit pension plans that
cover most of its employees. These plans include plans self-administered by
the Company along with Union administered multi-employer plans. The self-
administered hourly and Union plans' benefits are based primarily upon years
of service. The self-administered salaried plan'splans' benefits are based
primarily on years of service and earnings. The Company contributes an
amount that is not less than the minimum funding nor more than the maximum
tax-deductible amount to these plans. The plans' assets consist of
unallocated insurance contracts, equity securities, government obligations
and the allowable amount of the Company's stock (127,752 shares of Class A
Common Stock and 77,755 shares of Class B Common Stock at October 31, 19961997
and 1995)1996). 41
Item 8. Financial Statements and Supplementary Data (continued)
The pension expense for the plans included the following (Dollars in
thousands):
1997 1996 1995 1994
Service cost, benefits earned during
the year $ 2,714 $ 2,648 $ 2,365 $ 1,415$2,365
Interest cost on projected benefit
obligation 4,548 4,277 3,839 2,444
Actual return on assets (8,986) (6,404) (4,646)
(1,844)
Net amortization 3,974 1,759 263
(1,699)2,250 2,280 1,821 316
Multi-employer and non-U.S. pension
expense 370 593 790 341
Total pension expense $ 2,620 $ 2,873 $ 2,611 $ 657$2,611
The range of weighted average discount rate and expected long term rate
of return on plan assets used in the actuarial valuation was 7.0% - 9.0% for
1997, 1996 and 1995. The rate of compensation increases for salaried
employees used in the actuarial valuation range from 4.0% - 6.5% for 1997,
1996 and 1995.
The range of weighted average discount rate and expected long term rate of
return on plan assets used in the actuarial valuation was 7.0% - 9.0% for
1996, 1995 and 1994. The rate of compensation increases for salaried employees
used in the actuarial valuation range from 4.0% - 6.5% for 1996, 1995 and 1994.
3142
Item 8. Financial Statements and Supplementary Data (continued)
The following table sets forth the plans' funded status and amounts
recognized in the Consolidated Financial Statements (Dollars in thousands):
Assets Exceed Accumulated
Accumulated Benefits
Accumulated
Benefits Exceed Assets
1997 1996 19951997 1996 1995
Actuarial present value of
benefit obligations:
Vested benefit obligation $34,190 $31,675 $30,816$10,636 $ 9,243 $ 8,389
Accumulated benefit
obligation $34,569 $32,113 $31,122$12,279 $10,782 $10,152
Projected benefit obligation $46,246 $46,085 $45,027$12,279 $10,782 $10,152
Plan assets at fair value $59,836 $52,423 $48,399$10,718 $10,257 $ 9,290
Plan assets greater than
(less than) projected
benefit obligation $$13,590 6,338 $ 3,372 $ (525) $ (862)$(1,561) $(525)
Unrecognized net (gain) loss (8,942) (9,274) (7,806)641 769 897
Prior service cost not yet
recognized in net periodic
pension cost 6,096 6,587 7,0772,788 2,368 1,880
Adjustment required to
recognize minimum liability -- -- (1,048) (804) (938)
Unrecognized net (asset)
obligation
(asset) from transition (7,345) 438 1,056(2,381) (2,333) (1,839)
Prepaid pension cost
(liability) $ 3,399 $ 4,089 $ 3,699$(1,561) $ (525)
$ (862)
During 1997 and 1996, and 1995, the Company, in accordance with the provisions of
SFAS No. 87, "Employers' Accounting for Pensions", recorded the "adjustment
required to recognize minimum liability". The amount was offset by a long
term asset, of an equal amount, recognized in the Consolidated Financial
Statements.
43
Item 8. Financial Statements and Supplementary Data (continued)
In addition to the pension plans, the Company has several voluntary
401(k) savings plans which cover eligible employees at least 21 years of age
with one year of service. For certain plans, the Company matches 25% of
each employee'semployees contribution, up to a maximum of 5% or 6% of base salary.
Company contributions to the 401(k) plans were $350,000 in 1997, $234,000 in
1996 and $27,000 in 19951995.
NOTE 9 - SUBSEQUENT EVENT
On December 10, 1997, the Company signed a non-binding letter of intent
to acquire all of the outstanding shares of KMI Continental Fibre Drum,
Inc., Fibro Tambor, S.A. de C.V. and $3,000Sonoco Plastic Drum, Inc., which are
wholly-owned subsidiaries of Sonoco Products Co. (Sonoco). In addition, the
Company would purchase Sonoco's interest in 1994.Total Packaging Systems of
Georgia, LLC. These companies comprise the entire industrial container
group of Sonoco and last year had combined annual net sales of approximately
$210 million. The acquisition of these operations includes twelve fibre
drum plants and five plastic drum plants along with facilities for research
and development, packaging services and distribution.
The purchase price will be approximately $225 million in cash and is
subject to regulatory approval and due diligence review.
3244
Item 8. Financial Statements and Supplementary Data (continued)
REPORT OF MANAGEMENT'S RESPONSIBILITIES
To the Shareholders of
Greif Bros. Corporation
The Company's management is responsible for the financial and operating
information included in this Annual Report to Shareholders, including the
Consolidated Financial Statements of Greif Bros. Corporation and its
subsidiaries. These statements were prepared in accordance with generally
accepted accounting principles and, as such, include certain estimates and
judgementsjudgments made by management.
The system of internal accounting control, which is designed to provide
reasonable assurance as to the integrity and reliability of financial
reporting, is established and maintained by the Company's management. This
system is continuouslycontinually reviewed by the internal auditor of the Company. In
addition, Price Waterhouse LLP, an independent accounting firm, audits the
financial statements of Greif Bros. Corporation and its subsidiaries and
issues reports
to management concerningconsiders the internal controlscontrol structure of the Company.Company in planning and
performing its audit. The Audit Committee of the Board of Directors meets
periodically with the internal auditor and independent accountants to
discuss the internal control structure and the results of their audits.
/s/ Michael J. Gasser John K. Dieker/s/ Joseph W. Reed
Michael J. Gasser Joseph W. Reed
Chairman and Chief Executive Officer ControllerChief Financial Officer and
Secretary
3345
Item 8. Financial Statements and Supplementary Data (continued)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and the
Board of Directors of
Greif Bros. Corporation
In our opinion, the accompanying consolidated balance sheets andfinancial statements listed in the
related
consolidated statements of income, of changes in shareholders' equity and of
cash flowsindex appearing under Item 14(a)(1) on page 48 present fairly, in all
material respects, the financial position of Greif Bros. Corporation and its
subsidiaries at October 31, 19961997 and 1995,1996, and the results of their
operations and their cash flows for each of the three years in the period ended October
31, 1996,1997, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements
in accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP Columbus, Ohio
November 27, 199626, 1997, except as to Note 9,
which is as of December 10, 1997
3446
Item 8. Financial Statements and Supplementary Data (concluded)
QUARTERLY FINANCIAL DATA (Unaudited)
The quarterly results of operations for fiscal 19961997 and 19951996 are shown
below (Dollars in thousands, except per share amounts).:
Quarter ended,Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1996 1996 1996 19961997 1997 1997 1997
Net sales $159,743 $159,212 $155,994 $162,419$152,370 $152,529 $167,062 $177,023
Gross profit 32,309 26,051 27,129 36,104$ 21,041 $ 17,608 $ 22,193 $ 24,477
Net income 10,826 6,579 9,636 15,706$ 4,485 $ 3,580 $ 4,682 $ 5,339
Net income per share:
Assuming distributions as actually paid out in dividends and the
balance as in liquidation:
Class A Common Stock $.41 $.27 $.40 $.67$.14 $.12 $.18 $.20
Class B Common Stock $.52 $.31 $.44 $.71$.25 $.18 $.24 $.26
Quarter ended,Ended,
Jan. 31, Apr. 30, July 31, Oct. 31,
1995 1995 1995 19951996 1996 1996 1996
Net sales $170,058 $184,869 $184,159 $180,259$159,743 $159,212 $155,994 $162,419
Gross profit 37,400 37,969 46,148 36,710$ 32,309 $ 26,051 $ 27,129 $ 36,104
Net income 15,378 14,881 17,588 12,286$ 10,826 $ 6,579 $ 9,636 $ 15,706
Net income per share:
Assuming distributions as actually paid out in dividends and the
balance as in liquidation:
Class A Common Stock $.58 $.60 $.71 $.50$.41 $.27 $.40 $.67
Class B Common Stock $.68 $.63 $.74 $.53
Due to a mathematical error, the earnings per share amounts, as reported on
the Form 10-Q for the quarter ended July 31, 1996, were incorrect. The amounts
for the nine months ended July 31, 1996 for the Class A and Class B Common
Stock should have been reported as $1.08 and $1.27, respectively. The amounts
for the three months ended July 31, 1996 should have been reported as above.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
There has not been a change in the Company's principal independent
accountants and there were no matters of disagreement on accounting and
financial disclosure.
35$.52 $.31 $.44 $.71
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There has not been a change in the Company's principal independent
accountants and there were no matters of disagreement on accounting and
financial disclosure.
47
PART III
Item 10. Directors and Executive Officers of the Registrant
The following information relatesInformation with respect to Directors of the Company:
Year first
Date present Other positions became
Name term expires and offices held Director
Michael J. Gasser (Note: All Directors See response below. 1991
are elected annually
Charles R. Chandler for the ensuing year See response below. 1987
and serve until their
Michael H. Dempsey(A) successors are elec- None. 1996
ted and qualify. The
Naomi C. Dempsey(B) annual meeting is None. 1995
held on the fourth
Daniel J. Gunsett(C) Monday of February.) None. 1996
Allan Hull(D) See response below. 1947
Robert C. Macauley See response below. 1979
David J. Olderman(E) None. 1996
William B. Sparks Jr. See response below. 1995
J Maurice Struchen(F) None. 1993
(A) Michael H. Dempsey (age 40) has been, for more than the past five years,
President of Kuschall of America, a wheelchair manufacturing company.
He is a member of the AuditCompany and Executive Committees. Mr. Dempseydisclosures
pursuant to Item 405 of Regulation S-K is incorporated by reference to the
sonRegistrant's Proxy Statement, which Proxy Statement will be filed within 120
days of Naomi C. Dempsey.
(B) Naomi C. Dempsey (age 80) is an investor. She is a memberOctober 31, 1997. Information regarding the executive officers of
the Compensation and Stock Option Committees. Mrs. Dempsey isRegistrant may be found under the mother of
Michael H. Dempsey.
(C) Daniel J. Gunsett (age 48) has been, for more than the past five years, a
partner with the law firm of Baker and Hostetler. He is Chairman of the
Audit Committee and member of the Compensation Committee.
(D) Allan Hull (age 83) has been, for more than the past five years, a partner
with the law firm of Hull and Hull, Cleveland, Ohio. See below for
present positions with the Company.
36
Item 10. Directors and Executivecaption "Executive Officers of the
Registrant (continued)
(E) David J. Olderman (age 61) has been, for more than the past five years,
ChairmanCompany" in Part I, and Chief Executive Officer of Carret and Company, Inc., an
investment counseling firm. He is a member of the Audit and Stock Option
Committees. He is also a director for Van Eck Global Funds, a group of
mutual funds, and Laidig, Inc., an engineering company and conveyor
manufacturer.
(F) J Maurice Struchen (age 76) is an investor. Prior to retiring, Mr.
Struchen was the Chairman and Chief Executive Officer of Society
Corporation. He is Chairman of the Stock Option Committee and member of
the Compensation Committee. He is also a director for Forest City
Enterprises, Inc., a land development company.
Mr. Gasser, for more than the past five years, has been a full-time officer
of the Company (see below).
Mr. Sparks was elected President and Chief Operating Officer in 1995. Prior
to that time, he served as Chief Executive Officer of Down River International,
Inc. (see below).
Mr. Chandler was elected Vice Chairman in 1996. Prior to that time, he
served as President and Chief Operating Officer of Virginia Fibre Corporation
(see below).
Mr. Macauley has been, for more than the past five years, the Chief
Executive Officer of Virginia Fibre Corporation (see below).
The following information relates to Executive Officers of the Company
(elected annually):
Year first
became
Executive
Name Age Positions and Offices Officer
Michael J. Gasser 45 Chairman of the Board of 1988
Directors and Chief Executive
Officer, Chairman of the Executive
Committee
William B. Sparks, Jr. 55 Director, President and Chief 1995
Operating Officer, member of the
Executive Committee
Charles R. Chandler 61 Director, Vice Chairman, member 1996
of the Executive Committee
Allan Hull 83 Director, Vice President, 1964
General Counsel, member
of the Executive Committee
37incorporated by reference into this Item 10. Directors and Executive Officers of the Registrant (continued)
Year first
became
Executive
Name Age Positions and Offices Officer
Robert C. Macauley 73 Director, Chief Executive Officer of 1996
Virginia Fibre Corporation
(subsidiary company), Chairman
of Compensation Committee
John P. Berg 76 President Emeritus 1972
Michael M. Bixby 53 Vice President, General Manager 1980
of Western Division
Ronald L. Brown 49 President of Down River 1996
International, Inc. (subsidiary
company)
John P. Conroy 67 Vice President and Secretary 1991
John K. Dieker 33 Controller 1996
Elco Drost 51 Vice President of Greif Containers 1996
Inc. (subsidiary company)
Michael A. Giles 46 Executive Vice President of 1996
Virginia Fibre Corporation
(subsidiary company)
C. J. Guilbeau 49 Vice President, General Manager 1986
of Eastern Division
Philip R. Metzger 49 Treasurer 1995
Jerome B. Nolder, Jr. 38 General Manager of Corrugated 1996
Products Division
William R. Shew 66 President of Greif Board Corporation 1996
(subsidiary company)
Ralph V. Stoner, Sr. 68 Chief Executive Officer of 1996
Michigan Packaging Company
(subsidiary company)
Ralph V. Stoner, Jr. 43 President of Michigan Packaging 1996
Company (subsidiary company)
38
Item 10. Directors and Executive Officers of the Registrant (concluded)
Year first
became
Executive
Name Age Positions and Offices Officer
Stan Timsans 71 President of Greif Containers Inc. 1996
(subsidiary company)
Except as indicated below, each Executive Officer has served in his present
capacity for at least five years.
Mr. John P. Berg currently serves as President Emeritus. During the last
five years, he has served as President and General Manager of the Western
Division.
Mr. Michael M. Bixby became General Manager of Western Division during 1996.
During the past five years, he has been a Vice President and continues to serve
in this capacity.
Mr. John K. Dieker was elected Controller in 1995. From 1994 to 1995, he
served as Assistant Controller. Prior to that time, he served as Internal
Auditor.
Mr. Michael A. Giles became Executive Vice President of Virginia Fibre
Corporation in 1996. From 1995 to 1996, he served as Vice President of
Manufacturing and, prior to that time, Vice President of Finance and Treasurer
at Virginia Fibre Corporation.
Mr. Philip R. Metzger was elected Treasurer in 1995. Prior to that time, he
served as Assistant Treasurer and Assistant Controller.
Mr. Jerome B. Nolder, Jr. became General Manager of Corrugated Products
Division in 1994. Prior to that time, he served as Operations Manager for the
division.
Mr. William R. Shew, for more than the past five years, has served as
President of Greif Board Corporation.
Mr. Ralph V. Stoner, Sr. became Chief Executive Officer of Michigan
Packaging Company in 1994. Prior to that time, he served as President of
Michigan Packaging Company.
Mr. Ralph V. Stoner, Jr. became President of Michigan Packaging Company in
1994. Prior to that time, he served as Vice President of Michigan Packaging
Company.
Mr. Stan Timsans, for more than the last five years, has served as President
of Greif Containers Inc.
39
Item 11. Executive Compensation
The following table sets forth the compensation for the three years ended
October 31, 1996 for the Company's chief executive officer and the Company's
four other most highly compensated executive officers.
Number of
Deferred All Stock Options
Name and Position Year Salary Bonus Compensation Other Granted
Michael J. Gasser 1996 $314,658 $160,000 $2,951 25,000
Chairman
Chief Executive Officer 1995 $205,615 $166,841 $504 30,000
1994 $143,166 $99,999 $480
Charles R. Chandler 1996 $424,356 $70,164 $256,169 $251,745 23,000
Director
Vice Chairman 1995 $427,803 $164,077 $236,537 $225,807 10,000
1994 $408,421 $108,170 $218,411 $58,794
Robert C. Macauley 1996 $371,316 $69,932 $58,224 $729,000 2,000
Director
Chief Executive Officer 1995 $360,500 $136,165 $56,222 $1,879,470
of Virginia Fibre
Corporation 1994 $350,750 $102,347 $40,593 $451,410
William B. Sparks, Jr. 1996 $257,886 $120,000 $9,994 13,000
Director
President and Chief 1995 $173,048 $105,000 $17,921 20,000
Operating Officer
1994 $140,616 $53,000 $19,261
Ralph V. Stoner, Sr. 1996 $200,004 $90,562 $432 6,500
Chief Executive Officer
of Michigan Packaging 1995 $135,360 $135,000 $378 10,000
Company
1994 $118,260 $117,764 $360
Mr. Michael J. Gasser, Chairman and Chief Executive Officer, on November 1,
1995, entered into an employment agreementInformation with Greif Bros. Corporation
principally providing for (a) the employment of Mr. Gasser as Chairman and
Chief Executive Officer for a term of 15 years; (b) the right of Mr. Gasserrespect to
extend his employment on a year-to-year basis until he reaches the age of 65;
40
Item 11. Executive Compensation (continued)
(c) the agreement of Mr. Gasser to devote all of his time, attention, skill and
effortis incorporated
herein by reference to the performance of his duties as an officer and employee of Greif
Bros. Corporation, and; (d) the fixing of the minimum basic salary during
such period of employment to the current year's salary plus any additional
raises authorized by the Board of Directors within two fiscal years following
October 31, 1995.
Mr. William B. Sparks, Jr., President and Chief Operating Officer, on
November 1, 1995, entered into an employment agreement with Greif Bros.
Corporation principally providing for (a) the employment of Mr. Sparks as
President and Chief Operating Officer for a term of 11 years; (b) the agreement
of Mr. Sparks to devote all of his time, attention, skill and effort to the
performance of his duties as an officer and employee of Greif Bros. Corporation,
and; (c) the fixing of the minimum basic salary during such period of
employment to the current year's salary plus any additional raises authorized
by the Board of Directors within two fiscal years following October 31, 1995.
Mr. Charles R. Chandler, Vice Chairman, on August 1, 1986, and amended in
1988, 1992 and 1996, entered into an employment agreement, principally
providing for (a) the employment of Mr. Chandler as Vice Chairman until 2001,
(b) the agreement of Mr. Chandler to devote all of his time, attention, skill
and effort to the performance of his duties as an officer and employee of Greif
Bros. Corporation, and (c) the fixing of minimum basic salary during such
period of employment at $424,356 per year. The employment contract with Mr.
Chandler gives him the right to extend his employment beyond the original
term for up to 5 additional years.
Mr. Robert C. Macauley, Chief Executive Officer of Virginia Fibre
Corporation, on August 1, 1986 and amended in 1992, entered into an employment
agreement with Virginia Fibre Corporation, principally providing for (a) the
employment of Mr. Macauley as Chief Executive Officer for a term of 18 years,
(b) the agreement of Mr. Macauley to devote his time, attention, skill and
effort to the performance of his duties as an officer and employee of Virginia
Fibre Corporation, and (c) the fixing of minimum basic salary during such
period of employment at $275,000 per year.
No Directors' fees are paid to Directors who are full-time employees of the
Company or its subsidiary companies. Directors who are not employees of the
Company receive $20,000 per year plus $1,000 for each Board, audit,
compensation and stock option meeting that they attend.
During 1996, a Directors' Stock Option Plan was adoptedRegistrant's Proxy Statement, which provides for
the granting of stock options to directors who are not employees of the Company.
The aggregate number of shares of the Company's Class A Common Stock which
options may be granted shall not exceed 100,000 shares. Beginning in 1997,
each outside directorProxy
Statement will be granted an annual option to purchase 2,000 shares
immediately following each annual meeting of stockholders. Each eligible
director also received a one-time grant in 1996 to purchase 2,000 shares.
Under the terms of the Plan, options are granted at exercise prices equal to
the market value on the date the options are granted and become exercisable
immediately. In 1996, 12,000 options were granted to outside directors with
option prices of $29.62 per share. Asfiled within 120 days of October 31, 1996, no options have
been exercised. Options expire ten years after date of grant.
41
Item 11. Executive Compensation (continued)
For 1996, the Compensation Committee of the Board of Directors voted bonuses
to employees, based upon the progress of the Company, and upon the contributions
of the particular employees to that progress, and upon individual merit, which
determines, in the action of the Committee, the bonus a specific employee may
receive, if any. Prior to 1996, the Board of Directors of the Company, or the
appropriate subsidiary company, voted the bonuses for their employees.
Supplementing the pension benefits, Virginia Fibre Corporation has deferred
compensation contracts with Robert C. Macauley and Charles R. Chandler. These
contracts are designed to supplement the Company's defined benefit pension plan
only if the executive retires under such pension plan at or after age 65, or if
the executive becomes permanently disabled before attaining age 65. No benefit
is paid to the executive under this contract if death precedes retirement. The
deferred compensation is payable to the executive or his spouse for a total
period of 15 years.
Under the above Deferred Compensation Contracts, the annual amounts payable
to the executive or his surviving spouse are diminished by the amounts
receivable under the Virginia Fibre Corporation's defined benefit pension plan.
Mr. Macauley's estimated accrued benefit from the Deferred Compensation Contract
is $92,641 per year for 10 years and $61,761 per year for an additional 5 years.
Mr. Chandler's estimated accrued benefit from the Deferred Compensation Contract
is $216,481 per year for 10 years and $144,321 per year for an additional 5
years.
With respect to Mr. Gasser, the dollar amount in the all other category
relates to the Company match for the 401(k) plan and premiums paid for life
insurance.
With respect to Messrs. Chandler and Macauley, the dollar amount in the all
other category is the compensation attributable to the 1991 Virginia Fibre
Corporation stock option plan to certain key Virginia Fibre Corporation
employees.
This amount is the difference between the option price and the value
attributable to the stock based upon the performance of Virginia Fibre
Corporation for years prior to 1996. All outstanding options were redeemed by
Virginia Fibre Corporation during 1996 and the current year amount represents
the difference between the redemption price and the cumulative compensation
accrued as of October 31, 1995.
With respect to Mr. Sparks, the dollar amount in the all other category
relates to the Company match for the 401(k) plan and premiums paid for life
insurance. In addition, there are contributions made by Down River
International, Inc. to a Profit Sharing Trust.
With respect to Mr. Stoner, the dollar amount in the all other category
relates to premiums paid for life insurance.
During 1995, the Company adopted an Incentive Stock Option Plan which
provides the granting of incentive stock options to key employees and non-
statutory options for non-employees. The aggregate number of shares of the
Company's Class A Common Stock which options may be granted shall not exceed
1,000,000 shares. Under the terms of the Plan, options are granted at exercise
prices equal to the market value on the date the options are granted and become
exercisable after two years from the date of grant.
42
Item 11. Executive Compensation (continued)
The following table sets forth certain information with respect to options to
purchase Class A Common Stock granted during the year ended October 31, 1996 to each
of the named executive officers.
OPTION GRANTS TABLE
Potential Net Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term (2)
% of Total
Options
Granted to
Number of Employees Exercise
Options in Fiscal Price Per Expiration
Name Granted (1) Year Share Date 5% 10%
Michael J. Gasser 25,000 16% $29.62 09/05/06 $465,775 $1,180,366
Charles R. Chandler 23,000 15% $29.62 09/05/06 $428,513 $1,085,936
Robert C. Macauley 2,000 1% $29.62 09/05/06 $37,262 $94,429
William B. Sparks,
Jr. 13,000 9% $29.62 09/05/06 $242,203 $613,790
Ralph V. Stoner,
Sr. 6,500 4% $29.62 09/05/06 $121,102 $306,895
(1) The options granted are exercisable on September 5, 1998.
(2) The values shown are based on the indicated assumed rates of appreciation
compounded annually. Actual gains realized, if any, are based on the
performance of the Class A Common Stock. There is no assurance that the values
shown will be achieved.
The following table sets forth certain information with respect to the
exercise of options to purchase Class A Common Stock during the year ended
October 31, 1996, and the unexercised options held and the value thereof at
that date, by each of the named executive officers:
AGGREGATE OPTION EXERCISES AND FISCAL
YEAR-END OPTION VALUES TABLE
Number of Value of
Value Unexercised In-The-Money
Shares Realized Options Held Options Held
Acquired upon at Year-End at Year-End
Name on Exercise Exercise Exer- Unexer- Exer- Unexer-
cisable cisable cisable cisable
Michael J. Gasser -0- $-0- -0- 55,000 $-0- $54,300
Charles R. Chandler -0- $-0- -0- 33,000 $-0- $18,100
Robert C. Macauley -0- $-0- -0- 2,000 $-0- $-0-
William B. Sparks, Jr. -0- $-0- -0- 33,000 $-0- $36,200
Ralph V. Stoner, Sr. -0- $-0- -0- 16,500 $-0- $18,100
43
Item 11. Executive Compensation (continued)
The following table illustrates the amount of annual pension benefits for
eligible employees upon retirement in the specified remuneration and years of
service classifications under the registrant's defined benefit pension plan:
DEFINED BENEFIT PENSION TABLE
Annual Benefit for Years of Service
Remuneration 15 20 25 30
$450,000 $26,250 $35,000 $43,750 $52,500
$350,000 $26,250 $35,000 $43,750 $52,500
$250,000 $26,250 $35,000 $43,750 $52,500
$150,000 $24,500 $32,667 $40,833 $49,000
The following table sets forth certain information with respect to the
benefits under the defined benefit pension plans of the registrant and its
subsidiary, Virginia Fibre Corporation, for each of the named executive
officers.
Name of individual Remuneration used Estimated
or number of Credited Years for Calculation of annual benefits
persons in group of service Annual Benefit under retirement plan
Michael J. Gasser 17 $363,426 $24,120
William B. Sparks, Jr. 2 $283,183 $3,504
Charles R. Chandler 24 $219,224 $52,614
Robert C. Macauley 24 $219,224 $52,614
Ralph V. Stoner, Sr. 29 $265,650 $50,748
The registrant's pension plan is a defined benefit pension plan with
benefits based upon the average of the three consecutive highest-paying years
of total compensation and upon years of credited service up to 30 years.
The annual retirement benefits under the defined benefit pension plan of the
registrant's subsidiary, Virginia Fibre Corporation, are calculated at 1% per
year based upon the average of the five highest out of the last ten years of
salary compensation.
44
Item 11. Executive Compensation (concluded)
None of the pension benefits described in this item are subject to offset
because of the receipt of Social Security benefits or otherwise.
The annual compensation for Michael J. Gasser, Chairman of the Board and
Chief Executive Officer of the Registrant, is reviewed annually by the
Compensation Committee of the Board of Directors. Mr. Gasser's salary is based
upon various measurements which are tied to the performance of Greif Bros.
Corporation.
The Compensation Committee, made up primarily of outside directors,
reviews the total compensation paid to Mr. Gasser and other executive officers.
Members of the Compensation Committee are:
Robert C. Macauley, Chairman
Naomi C. Dempsey
Daniel J. Gunsett
J Maurice Struchen
Mr. Macauley, Chairman of the Compensation Committee, is an executive
officer of the Company.1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following ownership is as of December 16, 1996:
Class of Type of Number of Percent
Name and Address stock ownership shares of class
Naomi C. Dempsey Class B Record and 6,043,236 50.35%
782 W. Orange Road Beneficially
Delaware, Ohio
Naomi C. Dempsey,
Trustee Class B See (1) below 1,663,040 13.86%
Robert C. Macauley Class B Record and 1,200,000 10.00%
161 Cherry Street Beneficially
New Canaan, Connecticut
(1) Held by Naomi C. Dempsey as successor trustee in the Naomi A. Coyle Trust.
45
Item 12.Information with respect to Security Ownership of Certain Beneficial
Owners and Management (continued)
The following information regarding directors and executive officers named
in the summary compensation table is as of December 16, 1996:
Title and Percent of Class
Name Class A %
Charles R. Chandler 400 *
Michael H. Dempsey 2,000 *
Naomi C. Dempsey 2,000 *
Michael J. Gasser -0- *
Daniel J. Gunsett 2,000 *
Allan Hull 2,000 *
Robert C. Macauley -0- *
David J. Olderman 3,000 *
William B. Sparks, Jr. 1,086 *
Ralph V. Stoner, Sr. -0- *
J Maurice Struchen 2,000 *
Title and Percent of Class
Name Class B %
Charles R. Chandler 4,000 *
Michael H. Dempsey 19,996 *
Naomi C. Dempsey 7,706,276 64.21%
Michael J. Gasser 11,798 *
Daniel J. Gunsett -0- *
Allan Hull 148,860 1.24%
Robert C. Macauley 1,200,000 10.00%
David J. Olderman 6,774 *
William B. Sparks, Jr. 6,248 *
Ralph V. Stoner, Sr. 15,400 *
J Maurice Struchen 7,400 *
* Less than one percent.
In additionis incorporated herein by reference to the
above referenced shares, Messrs. Gasser, Hull and Lloyd
D. Baker, Vice President, serve as TrusteesRegistrant's Proxy Statement, which Proxy Statement will be filed within 120
days of the Greif Bros. Corporation
Employees' Retirement Income Plan, which holds 123,752 shares of Class A Common
Stock and 76,880 shares of Class B Common Stock. Messrs. Conroy, Hull and
Lawrence A. Ratcliffe, Vice President, serve as Trustees for the Greif Bros.
Corporation Retirement Plan for Certain Hourly Employees, which holds 3,475
shares of Class B Common Stock. The Trustees of these plans, accordingly,
share voting power in these shares.
Mr. Olderman is Chairman and Chief Executive Officer of Carret and Company,
Inc., which holds 510,474 shares of the Class A Common Stock and 51,460 shares
of the Class B Common Stock for their clients.
46
Item 12. Security Ownership of Certain Beneficial Owners and Management
(concluded)
The Class A Common Stock has no voting power, except when four quarterly
cumulative dividends upon the Class A Common Stock are in arrears.
The following sets forth the equity securities owned or controlled by all
directors and executive officers as a group (24 persons) as of December 16,
1996:
Title of Amount Percent
class of stock beneficially owned of class
Class A 18,848 *
Class B 9,311,740 77.59%
*Less than one percent.
October 31, 1997.
Item 13. Certain Relationships and Related Transactions
The law firm of Hull & Hull received $393,856 in fees for legal servicesInformation with respect to
the Corporation plus reimbursement of out-of-pocket expenses of $21,207. Mr.
Allan Hull, attorney-at-law, is Vice President, General Counsel, member of the
Executive Committee and a Director of Greif Bros. Corporation and a partner in
the firm of Hull & Hull.
Virginia Fibre Corporation, a subsidiary of the Company, annually
contributes money to a world-wide relief organization. The founder and
chairman of this non-profit organization, Robert C. Macauley, is also the
founder and chief executive officer of Virginia Fibre Corporation and is a
director of the Company. During 1996, the subsidiary company contributed
approximately $350,600 to this organization.
See Note 3 to the Consolidated Financial Statements on page 25 of this
Form 10-K for information related to the liquidation of the Macauley & Company
Partnership, which is hereby incorporated by reference.
There are loans that have been made by the Company to certain employees,
including certain directors and executive officers of the Company. The
following is a summary of these loans for the year ended October 31, 1996:
Balance at Balance at
Beginning Amount End of
Name of Debtor Period Proceeds Collected Period
Michael M. Bixby $ 215,000 $ -0- $ 6,000 $ 209,000
Michael J. Gasser 218,508 -0- 19,309 199,199
C. J. Guilbeau 181,655 -0- 6,014 175,641
Philip R. Metzger 89,098 -0- 6,062 83,036
Jerome B. Nolder, Jr. -0- 80,000 -0- 80,000
William B. Sparks, Jr. 101,929 21,000 -0- 122,929
R. V. Stoner, Jr. 225,000 -0- -0- 225,000
$1,031,190 $101,000 $37,385 $1,094,805
47
Item 13. Certain Relationships and Related
Transactions (continued)
Michael M. Bixby is a Vice Presidentincorporated herein by reference to the Registrant's Proxy
Statement, which Proxy Statement will be filed within 120 days of Greif Bros. Corporation. The loan
is secured by a house and lot in Minnesota and interest is payable at 3% per
annum.
Michael J. Gasser is Chairman and Chief Executive Office of Greif Bros.
Corporation. The loan is secured by 5,599 shares of the Company's Class B
Common Stock and a first mortgage on a house and lot in Ohio. Interest is
payable at 3% per annum.
C. J. Guilbeau is a Vice President of Greif Bros. Corporation. The loan is
secured by a house and lot in Illinois and interest is payable at 3% per annum.
Philip R. Metzger is Treasurer of Greif Bros. Corporation. The loan is
secured by a house and lot in Ohio and interest is payable at 3% per annum.
Jerome B. Nolder, Jr. is a General Manager of Greif Bros. Corporation. The
loan is secured by 200 shares of the Company's Class B Common Stock and the
assignment of his company-sponsored life insurance. Interest is payable at
7-1/4% per annum.
William B. Sparks, Jr. is President and Chief Operating Officer of Greif
Bros. Corporation. The loan is secured by 3,124 shares of the Company's Class
B Common Stock and 500 shares of the Company's Class A Common Stock. Interest
is payable at 3% per annum. An additional loan is secured by a house and lot
in Ohio with interest payable at 5% per annum.
Ralph V. Stoner, Jr. is President of Michigan Packaging Company. The loan
is secured by a house and lot in Michigan and interest is payable at 3% per
annum.October
31, 1997.
48
PART IV
Item 14. Exhibits, Financial Statement
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:Report:
Page
(1) Financial Statements:
Consolidated Statements of Income for the three
years ended October 31, 1996 171997 26
Consolidated Balance Sheets at October 31,
1997 and 1996 and 1995 18-1927-28
Consolidated Statements of Cash Flows
for the three years ended October 31, 1996 201997 29
Consolidated Statements of Changes in
Shareholders' Equity for the three years
ended October 31, 1996 211997 30
Notes to Consolidated Financial Statements 22-3131-43
Report of Management's Responsibilities 3244
Report of Independent Accountants 33
Selected45
Quarterly Financial Data (unaudited) 34(Unaudited) 46
(2) Financial StatementStatements Schedules:
Report of Independent Accountants on
Financial Statement Schedules 53
Consolidated Valuation and Qualifying Accounts
and Reserves (Schedule II) 54
49
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(continued)
(3) Exhibits:
If Incorporated by Reference
Exhibit with which Exhibit was
No. (11.) StatementsDescription of Exhibit Previously Filed with SEC
3(a) Amended and Restated Contained herein.
Certificate of Incorporation of
Greif Bros. Corporation.
3(b) Amended and Restated By-Laws of Contained herein.
Greif Bros. Corporation.
10(a) Greif Bros. Corporation 1996 Registration Statement on Form
Directors' Stock Option Plan S-8, File No. 333-26977 (see
Exhibit 4(b) therein).
10(b) Greif Bros. Corporation Contained Herein.
Incentive Stock Option Plan, as
Amended and Restated.
11 Statement Re: Computation of Contained herein.
Per Share Earnings
(21.)Earnings.
21 Subsidiaries of the Registrant
(27.)Registrant. Contained herein.
23 Consent of Price Waterhouse LLP. Contained herein.
24(a) Powers of Attorney for Michael J. Contained herein.
Gasser, Charles R. Chandler,
Michael H. Dempsey, Naomi C.
Dempsey, Daniel J. Gunsett,
Allan Hull, Robert C. Macauley,
David J. Olderman, William B.
Sparks, Jr., and J Maurice
Struchen.
27 Financial Data Schedule
49
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(concluded)
(b) Reports on Form 8-K
(1) No reports on Form 8-K have been filed during
the last quarter of fiscal 1996.Schedule. Contained herein.
50
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(concluded)
(b) Reports on Form 8-K
(1) No reports on Form 8-K have been filed during
the last quarter of fiscal 1997.
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
The individual financial statements of the Registrant have been omitted
since the Registrant is primarily an operating company and all subsidiaries
included in the consolidated financial statements, in the aggregate, do not
have minority equity interests and/or indebtedness to any person other than
the Registrant or its consolidated subsidiaries in amounts which exceed 5%
of total consolidated assets at October 31, 1996,1997, except indebtedness
incurred in the ordinary course of business which is not in default.
5051
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d)15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
GREIF BROS. CORPORATIONGreif Bros. Corporation
(Registrant)
Date January 15, 199726, 1998 By John K. Dieker
Controller/s/ Michael J. Gasser
Michael J. Gasser
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Michael J. Gasser John K. Dieker/s/ Joseph W. Reed
Michael J. Gasser Joseph W. Reed
Chairman of the Board of Directors Chief Financial Officer and
Chief Executive Officer Secretary
(principal executive officer) (principal financial officer)
/s/ John K. Dieker Charles R. Chandler *
John K. Dieker Charles R. Chandler
Corporate Controller Member of the Board of Directors
(principal accounting officer)
Chief Executive Officer (principal
executive officer)
Charles R. Chandler Michael H. Dempsey * Naomi C. Dempsey *
Michael H. Dempsey Naomi C. Dempsey
Member of the Board of Directors Member of the Board of Directors
Naomi C. Dempsey Daniel J. Gunsett * Allan Hull *
Daniel J. Gunsett Allan Hull
Member of the Board of Directors Member of the Board of Directors
Allan Hull Robert C. Macauley * David J. Olderman *
Robert C. Macauley David J. Olderman
Member of the Board of Directors Member of the Board of Directors
David J. Olderman William B. Sparks, Jr. * J Maurice Struchen *
William B. Sparks, Jr. J Maurice Struchen
Member of the Board of Directors Member of the Board of Directors
J Maurice Struchen
Member[Signatures continued on the next page]
52
* The undersigned, Michael J. Gasser, by signing his name hereto, does
hereby execute this Annual Report on Form 10-K on behalf of each of the
above-named persons pursuant to powers of attorney duly executed by such
persons and filed as an exhibit to this Annual Report on Form 10-K.
By /s/ Michael J. Gasser
Michael J. Gasser
Chairman of the Board of Directors
Chief Executive Officer
Each of the above signatures is affixed as of January 15, 1997.26, 1998.
5153
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Greif Bros. Corporation
Our audits of the consolidated financial statements referred to in our
report dated November 27, 199626, 1997, except as to Note 9, which is as of December
10, 1997, appearing on page 3345 of this Form 10-K also included an audit of
the Financial Statement Schedules listed in Item 14 (a) 14(a)(2) of this Form 10-K.
In our opinion, these Financial Statement Schedules present fairly, in all
material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP
Columbus, Ohio
November 27, 199626, 1997,
except as to Note 9,
which is as of December 10, 1997
5254
SCHEDULE II
GREIF BROS. CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN $000)
Additions
Balance at
Balance at Charged to Charged to Balance
Beginning Costs and Other at End of
Description of Period Expenses Accounts Deductions Period
Year ended October 31, 1994:
Reserves deducted from
applicable assets:
For doubtful items--
trade accounts
receivable $ 939 $398 $23 (A) $371 (B) $ 989
For doubtful items--
other notes and
accounts receivable 697 -0- -0- -0- 697
Total reserves deducted
from applicable assets $1,636 $398 $23 $371 $1,686
Year ended
October 31,
1995:
Reserves deducted
from applicable
assets:
For doubtful
items--items-
trade accounts
receivablereceivables $ 989 $536$ 536 $37 (A) $773 (B) $ 789
For doubtful
items--items-
other notes
and accounts
receivable 697 -0- -0- -0- 697
Total reserves
deducted from
applicable
assets $1,686 $536$ 536 $37 $773 $1,486
Year ended
October 31, 1996:
Reserves deducted
from applicable
assets:
For doubtful
items--items-
trade accounts
receivablereceivables $ 789 $201$ 201 $22 (A) $186 (B) $ 826
For doubtful
items--items-
other notes
and accounts
receivable 697 -0- -0- -0- 697
Total reserves
deducted from
applicable
assets $1,486 $201$ 201 $22 $186 $1,523
Year ended
October 31,
1997:
Reserves deducted
from applicable
assets:
For doubtful
items-
trade accounts
receivables $ 826 $ 431 $11 (A) $421 (B) $ 847
For doubtful
items-
other notes
and accounts
receivable 697 -0- -0- -0- 697
Total reserves
deducted from
applicable
assets $1,523 $431 $11 $421 $1,544
(A) Collections of accounts previously written off.written-off.
(B) Accounts written off.written-off.
55
EXHIBIT INDEX
If Incorporated by Reference
Exhibit with which Exhibit was
No. Description of Exhibit Previously filed with SEC
3(a) Amended and Restated Contained herein.
Certificate of Incorporation of
Greif Bros. Corporation.
3(b) Amended and Restated By-Laws of Contained herein.
Greif Bros. Corporation.
10(a) Greif Bros. Corporation 1996 Registration Statement on Form
Directors' Stock Option Plan. S-8, File No. 333-26977 (see
Exhibit 4(b) therein).
10(b) Greif Bros. Corporation Contained herein.
Incentive Stock Option Plan, as
Amended and Restated.
11 Statement Re: Computation of Contained herein.
Per Share Earnings.
21 Subsidiaries of the Registrant. Contained herein.
23 Consent of Price Waterhouse LLP. Contained herein.
24(a) Powers of Attorney for Michael Contained herein.
J. Gasser, Charles R. Chandler,
Michael H. Dempsey, Naomi C.
Dempsey, Daniel J. Gunsett,
Allan Hull, Robert C. Macauley,
David J. Olderman, William B.
Sparks, Jr., and J Maurice
Struchen.
27 Financial Data Schedule. Contained herein.