GREIF INC, 10-Q filed on 9/4/2015
Quarterly Report
Document and Entity Information
9 Months Ended
Jul. 31, 2015
Sep. 1, 2015
Class A Common Stock [Member]
Sep. 1, 2015
Class B Common Stock [Member]
Document Information [Line Items]
Document Type
10-Q
Amendment Flag
false
Document Period End Date
Jul. 31, 2015
Document Fiscal Year Focus
2015
Document Fiscal Period Focus
Q3
Trading Symbol
GEF
Entity Registrant Name
GREIF INC
Entity Central Index Key
0000043920
Current Fiscal Year End Date
--10-31
Entity Filer Category
Large Accelerated Filer
Entity Common Stock, Shares Outstanding
25,703,564
22,119,966
Condensed Consolidated Statements of Income (Unaudited)(USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Jul. 31, 2015
Jul. 31, 2014
Jul. 31, 2015
Jul. 31, 2014
Net sales
$930.0
$1,124.0
$2,748.2
$3,191.0
Cost of products sold
763.2
906.3
2,246.4
2,582.9
Gross profit
166.8
217.7
501.8
608.1
Selling, general and administrative expenses
96.9
129.1
317.2
383.1
Restructuring charges
16.2
4.2
26.7
10.5
Timberland gains
(24.3)
(17.1)
Non-cash asset impairment charges
17.6
15.4
22.3
15.6
Gain on disposal of properties, plants and equipment, net
(7.0)
(1.4)
(9.3)
(5.5)
(Gain) loss on disposal of businesses, net
(1.1)
9.1
8.5
9.7
Operating profit
44.2
61.3
160.7
211.8
Interest expense, net
18.4
20.7
56.2
61.5
Other (income) expense, net
(1.6)
1.6
1.0
6.6
Income before income tax expense and equity earnings of unconsolidated affiliates, net
27.4
39.0
103.5
143.7
Income tax expense
18.7
28.2
45.8
64.2
Equity earnings of unconsolidated affiliates, net of tax
0.6
0.7
0.3
0.9
Net income
9.3
11.5
58.0
80.4
Net (income) loss attributable to noncontrolling interests
(0.7)
2.2
1.5
2.4
Net income attributable to Greif, Inc.
$8.6
$13.7
$59.5
$82.8
Class A Common Stock [Member]
Basic earnings per share attributable to Greif, Inc. common shareholders:
EPS Basic
$0.15
$0.23
$1.02
$1.41
Diluted earnings per share attributable to Greif, Inc. common shareholders:
EPS Diluted
$0.15
$0.23
$1.02
$1.41
Weighted-average number of common shares outstanding:
Basic
25,692,973
25,576,452
25,659,750
25,529,049
Diluted
25,698,547
25,581,952
25,665,324
25,539,636
Cash dividends declared per common share:
Cash dividends per share
$0.42
$0.42
$1.26
$1.26
Class B Common Stock [Member]
Basic earnings per share attributable to Greif, Inc. common shareholders:
EPS Basic
$0.22
$0.35
$1.51
$2.11
Diluted earnings per share attributable to Greif, Inc. common shareholders:
EPS Diluted
$0.22
$0.35
$1.51
$2.11
Weighted-average number of common shares outstanding:
Basic
22,100,000
22,100,000
22,100,000
22,100,000
Diluted
22,100,000
22,100,000
22,100,000
22,100,000
Cash dividends declared per common share:
Cash dividends per share
$0.63
$0.63
$1.88
$1.88
Condensed Consolidated Statements of Comprehensive Income(USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Jul. 31, 2015
Jul. 31, 2014
Jul. 31, 2015
Jul. 31, 2014
Statement of Comprehensive Income [Abstract]
Net income
$9.3
$11.5
$58.0
$80.4
Other comprehensive income (loss), net of tax:
Foreign currency translation
5.6
(12.9)
(109.5)
(36.0)
Net reclassification of cash flow hedges to earnings
0.2
0.1
0.4
Minimum pension liabilities, net
(0.9)
0.4
5.5
(0.5)
Other comprehensive income (loss), net of tax
4.7
(12.3)
(103.9)
(36.1)
Comprehensive income (loss)
14.0
(0.8)
(45.9)
44.3
Comprehensive income (loss) attributable to noncontrolling interests
2.8
(4.4)
(23.3)
(2.1)
Comprehensive income (loss) attributable to Greif, Inc.
$11.2
$3.6
$(22.6)
$46.4
Condensed Consolidated Balance Sheets (Unaudited)(USD $)
In Millions, unless otherwise specified
Jul. 31, 2015
Oct. 31, 2014
Current assets
Cash and cash equivalents
$101.7
$85.1
Trade accounts receivable, less allowance of $11.8 in 2015 and $16.8 in 2014
461.9
501.3
Inventories
334.7
381.1
Deferred tax assets
27.0
29.0
Assets held for sale
24.9
28.3
Prepaid expenses and other current assets
129.8
129.9
Total current assets
1,080.0
1,154.7
Long-term assets
Goodwill
810.3
880.2
Other intangible assets, net of amortization
137.8
166.5
Deferred tax assets
26.2
20.9
Assets held by special purpose entities
50.9
50.9
Other long-term assets
76.8
101.2
Total long-term assets
1,102.0
1,219.7
Properties, plants and equipment
Timber properties, net of depletion
277.1
244.8
Land
116.7
129.3
Buildings
409.5
444.9
Machinery and equipment
1,438.7
1,500.8
Capital projects in progress
126.9
97.3
Properties, plants and equipment, gross
2,368.9
2,417.1
Accumulated depreciation
(1,135.6)
(1,124.1)
Properties, plants and equipment, net
1,233.3
1,293.0
Total assets
3,415.3
3,667.4
Current liabilities
Accounts payable
357.4
471.1
Accrued payroll and employee benefits
85.5
102.4
Restructuring reserves
16.1
4.1
Current portion of long-term debt
24.1
17.6
Short-term borrowings
50.7
48.1
Deferred tax liabilities
13.1
17.8
Liabilities held for sale
1.5
1.5
Other current liabilities
148.0
189.1
Total current liabilities
696.4
851.7
Long-term liabilities
Long-term debt
1,154.9
1,087.4
Deferred tax liabilities
210.3
219.0
Pension liabilities
136.9
136.0
Postretirement benefit obligations
15.4
17.3
Liabilities held by special purpose entities
43.3
43.3
Contingent liabilities and environmental reserves
8.6
24.7
Other long-term liabilities
57.0
64.8
Total long-term liabilities
1,626.4
1,592.5
Equity
Common stock, without par value
139.1
135.5
Treasury stock, at cost
(130.6)
(130.7)
Retained earnings
1,396.8
1,411.7
Accumulated other comprehensive loss:
- foreign currency translation
(232.2)
(144.5)
- interest rate and other cash flow hedges
(0.1)
- minimum pension liabilities
(124.3)
(129.8)
Total Greif, Inc. equity
1,048.8
1,142.1
Noncontrolling interests
43.7
81.1
Total equity
1,092.5
1,223.2
Total liabilities and equity
$3,415.3
$3,667.4
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical)(USD $)
In Millions, unless otherwise specified
Jul. 31, 2015
Oct. 31, 2014
Statement of Financial Position [Abstract]
Allowance of Trade accounts receivable
$11.8
$16.8
Condensed Consolidated Statements of Cash Flows (Unaudited)(USD $)
In Millions, unless otherwise specified
9 Months Ended
Jul. 31, 2015
Jul. 31, 2014
Cash flows from operating activities:
Net income
$58.0
$80.4
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization
100.9
117.4
Timberland gains
(24.3)
(17.1)
Non-cash asset impairment charges
22.3
15.6
Gain on disposals of properties, plants and equipment, net
(9.3)
(5.5)
Loss on disposals of businesses, net
8.5
9.7
Unrealized foreign exchange (gain) loss
(2.8)
(1.3)
Deferred income tax expense
(3.3)
(3.6)
Gain from Venezuela monetary assets and liabilities remeasurement
(4.9)
Loss for Venezuela non-monetary assets to net realizable value
9.3
Other, net
(1.4)
(1.9)
Increase (decrease) in cash from changes in certain assets and liabilities:
Trade accounts receivable
3.3
(60.4)
Inventories
11.7
(50.3)
Deferred purchase price on sold receivables
(10.8)
6.3
Accounts payable
(74.8)
29.1
Restructuring reserves
13.5
1.8
Pension and postretirement benefit liabilities
(1.5)
2.7
Other, net
(21.0)
(6.1)
Net cash provided by (used in) operating activities
73.4
116.8
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired
(1.5)
(53.5)
Purchases of properties, plants and equipment
(108.2)
(94.0)
Purchases of timber properties
(38.2)
(55.7)
Proceeds from the sale of properties, plants, equipment and other assets
46.8
40.1
Proceeds from the sale of businesses
18.9
30.1
Proceeds on insurance recoveries
3.4
Payments on notes receivable with related party, net
1.3
Net cash used in investing activities
(78.8)
(131.7)
Cash flows from financing activities:
Proceeds from issuance of long-term debt
643.4
807.0
Payments on long-term debt
(576.0)
(804.9)
Proceeds from short-term borrowings, net
18.0
37.3
Proceeds from trade accounts receivable credit facility
115.7
49.0
Payments on trade accounts receivable credit facility
(79.9)
(19.0)
Dividends paid to Greif, Inc. shareholders
(74.0)
(73.8)
Dividends paid to noncontrolling interests
(4.0)
Proceeds from the sale of membership units of a consolidated subsidiary
6.0
Exercise of stock options
0.2
1.6
Net cash provided by financing activities
43.4
3.2
Effects of exchange rates on cash
(21.4)
(1.4)
Net increase (decrease) in cash and cash equivalents
16.6
(13.1)
Cash and cash equivalents at beginning of period
85.1
78.1
Cash and cash equivalents at end of period
$101.7
$65.0
Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation and Summary of Significant Accounting Policies

NOTE 1 — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (“SEC”) instructions to Quarterly Reports on Form 10-Q and include all of the information and disclosures required by accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual amounts could differ from those estimates.

The Company’s fiscal year begins on November 1 and ends on October 31 of the following year. Any references to the year 2015 or 2014, or to any quarter of those years, relates to the fiscal year or quarter, as the case may be, ended in that year. The 2014 amounts have been restated. See Note 20 – Quarterly Financial Data in the Company’s 2014 Form 10-K.

The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the condensed consolidated balance sheets as of July 31, 2015 and October 31, 2014, the condensed consolidated statements of income and comprehensive income for the three and nine months ended July 31, 2015 and 2014 and the condensed consolidated statements of cash flows for the nine month periods ended July 31, 2015 and 2014 of Greif, Inc. and its subsidiaries (the “Company”). The condensed consolidated financial statements include the accounts of Greif, Inc., all wholly-owned and consolidated subsidiaries and investments in limited liability companies, partnerships and joint ventures in which it has controlling influence. Non-majority owned entities include investments in limited liability companies, partnerships and joint ventures in which the Company does not have controlling influence and are accounted for using either the equity or cost method, as appropriate.

The unaudited condensed consolidated financial statements included in the Quarterly Report on Form 10-Q (this “Form 10-Q”) should be read in conjunction with the condensed consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for its fiscal year ended October 31, 2014 (the “2014 Form 10-K”).

Venezuela Currency

The Company’s results of its Venezuelan businesses have been reported under highly inflationary accounting since 2010 and the functional currency was converted to US Dollars at that time. Currently, there are multiple legal mechanisms and respective exchange rates available in Venezuela to exchange currency: the CENCOEX rate (official rate or “CENCOEX”); the SICAD rate (“SICAD”) and; as of February of 2015, the SIMADI rate (“SIMADI”). The SIMADI exchange mechanism was created by the Venezuelan government to establish a more market driven exchange rate and is intended to be available to individuals and both public and private companies.

The government also announced in February 2015 that the official rate and SICAD exchange mechanisms would be available only to companies importing essential goods (i.e. medicine, food, and raw materials) although it has not officially published rules or regulations that clarify exactly which activities, industries or transactions will be eligible to use these rates. The purpose of these rates was intended to make necessities affordable to Venezuelan citizens. The exchange mechanisms have not been able to meet the demand from the private sector due to the lack of US Dollars in the country resulting in the continued devaluation of the SIMADI rate.

Greif has historically utilized the official rate which is 6.4 Bolivars/US Dollars to measure Bolivar-denominated monetary assets and liabilities and the respective historical rate to measure Bolivar-denominated nonmonetary assets each reporting period. Due to the continued significant devaluation of the Bolivar and the change in the exchange mechanisms announced earlier this year, the Company has reconsidered which rate best reflects the economics of Grief’s business activities and concluded that the Company should utilize the SIMADI rate to remeasure the Venezuelan operations as of July 31, 2015.

As a result of the change to the SIMADI rate, which reflects the recognition of a devaluation of approximately 97 percent as compared to the official exchange rate previously used, the Company recorded other income of $4.9 million related to the remeasurement of our Venezuelan monetary assets and liabilities during the quarter. In addition, the Company determined that an adjustment of $9.3 million to increase cost of goods sold was needed to reflect the non-monetary inventory assets at net realizable value and, upon review of long-lived assets for impairment, the Company determined that the carrying amount of the long-lived asset was not recoverable in US dollar functional currency and recorded an impairment charge of $15.0 million.

 

Recently Issued Accounting Standards

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30)”. The objective of this update is to simplify the presentation of debt issuance costs in the financial statements. Under the ASU, the Company would present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset; amortization of the costs is reported as interest expense. The effective date will be the first quarter of fiscal year 2016. The Company would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period would be adjusted). The ASU requires the Company to “disclose in the first fiscal year after the entity’s adoption date, and in the interim periods within the first fiscal year, the following: (1) The nature and reason for the change in accounting principle; (2) The transition method; (3) A description of the prior-period information that has been retrospectively adjusted; and (4) The effect of the change on the financial statement line item (that is, the debt issuance costs asset and the debt liability). The Company is expected to adopt this guidance beginning November 1, 2015, and the adoption of the new guidance is not expected to materially impact the Company’s financial position, results of operations, comprehensive income or cash flows, other than the related disclosures.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” which makes changes to both the variable interest model and voting interest model and eliminates the indefinite deferral of FASB Statement No. 167, included in ASU 2010-10, for certain investment funds. All reporting entities that hold a variable interest in other legal entities will need to re-evaluate their consolidation conclusions as well as disclosure requirements. This ASU is effective for annual periods beginning after December 15, 2015, and early adoption is permitted, including any interim period. The Company is in the process of determining the potential impact of adopting this guidance on its financial position, results of operations, comprehensive income, cash flow, and disclosures.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The update is effective in fiscal year 2019 using one of two retrospective application methods. The Company is in the process of determining the potential impact of adopting this guidance on its financial position, results of operations, comprehensive income, cash flow and disclosures.

In August 2014, the FASB issued ASU 2014-15 “Presentation of Financial Statements-Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as Going Concern”. The objective of this update is to reduce the diversity in the timing and content of footnote disclosures related to going concern. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. This update applies to all entities that would be required to disclose information about their potential inability to continue as a going concern when “substantial doubt” about their ability to continue as a going concern exists. The Company will be required to evaluate “relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued.” The Company will have to document its consideration of the ASU, but not because the Company believes there is substantial doubt about its ability to continue as a going concern. The Company is expected to adopt this guidance beginning November 1, 2017, and the adoption of the new guidance is not expected to impact the Company’s financial position, results of operations, comprehensive income or cash flows, other than the related disclosures.

Acquisitions and Divestitures
Acquisitions and Divestitures

NOTE 2 — ACQUISITIONS AND DIVESTITURES

The following table summarizes the Company’s acquisition activity in 2015 and 2014 (Dollars in millions):

 

     # of
Acquisitions
     Purchase Price,
net of Cash
     Tangible
Assets, net
     Intangible
Assets
     Goodwill  

Total 2014 Acquisitions

     2       $ 53.5         2.1         14.0         34.4   

Note: Purchase price, net of cash acquired, represents cash paid in the period of each acquisition and does not include assumed debt, subsequent payments for deferred purchase adjustments or earn-out provisions.

The Company completed eight divestitures and no material acquisitions for the nine months ended July 31, 2015. The divestitures were of nonstrategic businesses, six in the Rigid Industrial Packaging & Services segment and two in the Flexible Products & Services segment. The loss on disposal of businesses was $8.5 million for the nine months ended July 31, 2015. Proceeds from divestitures were $18.9 million. Additionally, the Company has recorded notes receivable of $3.6 million for the sale of these businesses, ranging from 3 months to five years.

The Company completed two acquisitions and one material divestiture during the nine months ended July 31, 2014. One acquisition was in the Rigid Industrial Packaging & Services segment and the other acquisition was in the Paper Packaging segment. The rigid industrial packaging acquisition complemented the Company’s existing product lines and provided growth opportunities and economies of scale. The paper packaging acquisition was made in part to obtain technologies, equipment, and customer lists. The divestiture included a nonstrategic business in the Rigid Industrial Packaging & Services segment and resulted in a non-cash loss on sale of $9.7 million, which includes the write-off of allocated goodwill. Proceeds from the divestiture were $30.1 million.

Sale of Non-United States Accounts Receivable
Sale of Non-United States Accounts Receivable

NOTE 3 — SALE OF NON-UNITED STATES ACCOUNTS RECEIVABLE

On April 27, 2012, Cooperage Receivables Finance B.V. and Greif Coordination Center BVBA, an indirect wholly owned subsidiary of Greif, Inc., entered into the Nieuw Amsterdam Receivables Purchase Agreement (the “European RPA”) with affiliates of a major international bank. On April 20, 2015, Cooperage Receivables Finance B.V. and Greif Coordination Center BVBA amended and extended the term of the existing European RPA. Under the European RPA, as amended, the number of entities participating in the agreement have decreased to now include only the following entities: Greif Belgium BVBA, EarthMinded Benelux N.V. (formerly Pack2pack Rumbeke N.V.), Greif Nederland B.V., Greif Italia S.p.A., Greif Plastics Italy Srl (formerly Fustiplast S.p.A.), Greif France S.A.S., Greif Packaging Spain S.A., Greif Germany GmbH, Greif Plastics Germany GmbH (formerly Fustiplast GmbH), and Greif Portugal S.A. Additionally, the terms have been amended to decrease the maximum amount of receivables that may be sold and outstanding under the European RPA at any time to €100 million ($110.6 million as of July 31, 2015).

In October 2007, Greif Singapore Pte. Ltd., an indirect wholly-owned subsidiary of Greif, Inc., entered into the Singapore Receivable Purchase Agreement (the “Singapore RPA”) with a major international bank. The maximum amount of aggregate receivables that may be financed under the Singapore RPA is 15.0 million Singapore Dollars ($11.0 million as of July 31, 2015).

In May 2009, Greif Malaysia Sdn Bhd., an indirect wholly-owned subsidiary of Greif, Inc., entered into the Malaysian Receivables Purchase Agreement (the “Malaysian Agreement”) with certain Malaysian banks. In March 2014, the Malaysian Agreement was discontinued and therefore there were no receivables held by third party financial institutions under this agreement as of July 31, 2015.

The table below contains certain information related to the Company’s accounts receivables programs (Dollars in millions):

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

European RPA

           

Gross accounts receivable sold to third party financial institution

   $ 165.9       $ 266.7       $ 552.6       $ 784.0   

Cash received for accounts receivable sold under the programs

     147.1         235.2         489.5         692.0   

Deferred purchase price related to accounts receivable sold

     18.8         31.5         63.1         92.0   

Loss associated with the programs

     0.3         0.7         1.2         2.0   

Expenses associated with the programs

     —           —           —           —     

Other

           

Gross accounts receivable sold to third party financial institution

   $ 12.0       $ 13.0       $ 36.4       $ 44.1   

Cash received for accounts receivable sold under the program

     12.0         13.0         36.4         44.1   

Deferred purchase price related to accounts receivable sold

     —           —           —           —     

Loss associated with the program

     —           —           —           —     

Expenses associated with the program

     —           —           0.1         0.1   

Total RPAs

           

Gross accounts receivable sold to third party financial institution

   $ 177.9       $ 279.7       $ 589.0       $ 828.1   

Cash received for accounts receivable sold under the program

     159.1         248.2         525.9         736.1   

Deferred purchase price related to accounts receivable sold

     18.8         31.5         63.1         92.0   

Loss associated with the program

     0.3         0.7         1.2         2.0   

Expenses associated with the program

     —           —           0.1         0.1   

 

The table below contains certain information related to the Company’s accounts receivables programs and the impact it has on the Condensed Consolidated Balance Sheets (Dollars in millions):

 

     July 31,
2015
     October 31,
2014
 

European RPA

     

Accounts receivable sold to and held by third party financial institution

   $ 121.6       $ 164.7   

Uncollected deferred purchase price related to accounts receivable sold

     10.9         —     

Deferred purchase price liability related to accounts receivable sold

     —           (23.7

Other

     

Accounts receivable sold to and held by third party financial institution

   $ 4.5       $ 5.0   

Uncollected deferred purchase price related to accounts receivable sold

     —           —     

Total RPAs

     

Accounts receivable sold to and held by third party financial institution

   $ 126.1       $ 169.7   

Uncollected deferred purchase price related to accounts receivable sold

     10.9         —     

Deferred purchase price liability related to accounts receivable sold

     —           (23.7

The deferred purchase price related to the accounts receivable sold is reflected as prepaid expenses and other current assets or other current liabilities on the Company’s condensed consolidated balance sheets and is recorded at an amount which approximates its fair value due to the short-term nature of these items. The cash received and the deferred purchase price relate to the sale or ultimate collection of the underlying receivables and are not subject to significant other risks given their short-term nature; therefore, the Company reflects all cash flows under the accounts receivable sales programs as operating cash flows on the Company’s condensed consolidated statements of cash flows.

Additionally, the Company performs collections and administrative functions on the receivables sold, similar to the procedures it uses for collecting all of its receivables, including receivables that are not sold under the RPAs.

Inventories
Inventories

NOTE 4 — INVENTORIES

Inventories are stated at the lower of cost or market and are summarized as follows (Dollars in millions):

 

     July 31,
2015
     October 31,
2014
 

Finished Goods

   $ 95.3       $ 100.9   

Raw materials

     211.1         235.9   

Work-in-process

     28.3         44.3   
  

 

 

    

 

 

 
   $ 334.7       $ 381.1   
  

 

 

    

 

 

 
Assets and Liabilities of Businesses Held for Sale and Disposals of Properties, Plants and Equipment, Net
Assets and Liabilities of Businesses Held for Sale and Disposals of Properties, Plants and Equipment, Net

NOTE 5 — ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE AND DISPOSALS OF PROPERTIES, PLANTS AND EQUIPMENT, NET

As of July 31, 2015, there were asset groups within the Rigid Industrial Packaging & Services and the Flexible Products & Services segments classified as assets and liabilities held for sale. The assets and liabilities held for sale are being marketed for sale, and it is the Company’s intention to complete the sales of these assets within the twelve months following the end of the quarter.

As of October 31, 2014, there were asset groups in the Rigid Industrial Packaging & Services, Flexible Products & Services, and the Land Management segments classified as assets and liabilities held for sale. During the nine months ended July 31, 2015, five asset groups previously classified as held for sale within the Rigid Industrial Packaging & Services and Paper Packaging & Services segments were sold and another asset group consisting of higher and better use (“HBU”) and surplus properties previously classified as held for sale within the Land Management segment were sold.

For the three months ended July 31, 2015, the Company recorded a gain on disposal of properties, plants and equipment, net of $7.0 million. This includes sales of HBU and surplus properties that resulted in gains of $1.5 million in the Land Management segment, a disposal of an asset group previously classified as held for sale in the Rigid Industrial Packaging & Services segment that resulted in a gain of $4.4 million, and other net gains and insurance recoveries totaling an additional $1.1 million.

For the nine months ended July 31, 2015, the Company recorded a gain on disposal of properties, plants and equipment, net of $9.3 million. This includes sales of HBU and surplus properties that resulted in gains of $2.7 million in the Land Management segment, and other net gains and insurance recoveries within the Rigid Industrial Packaging & Services segment that resulted in gains of $6.6 million.

For the three months ended July 31, 2014, the Company recorded a gain on disposal of properties, plants and equipment, net of $1.4 million. This includes sales of HBU and surplus properties that resulted in gains of $0.1 million in the Land Management segment, a sale of equipment that was previously classified as held for sale in the Flexible Products & Services segment that resulted in a gain of $1.1 million, and sales of other miscellaneous equipment which resulted in aggregate gains of $0.2 million.

For the nine months ended July 31, 2014, the Company recorded a gain on disposal of properties, plants and equipment, net of $5.5 million. This includes sales of HBU and surplus properties that resulted in gains of $2.8 million in the Land Management segment, a disposal of property in the Paper Packing segment that resulted in a gain of $0.8 million, a sale of equipment that was previously classified as held for sale in the Flexible Products & Services segment that resulted in a gain of $1.1 million, and sales of other miscellaneous equipment that resulted in aggregate gains of $0.8 million.

For the nine months ended July 31, 2015, the Company recorded gains of $24.3 million related to the sale of timberland. For the nine months ended July 31, 2014, the Company recorded $17.1 million relating to the sale of timberland. The Company recorded immaterial gains for the three months ended July 31, 2015 and 2014.

Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets

NOTE 6 — GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in the carrying amount of goodwill by segment for the nine month period ended July 31, 2015 (Dollars in millions):

 

     Rigid Industrial
Packaging &
Services (1)
    Paper Packaging      Flexible Products &
Services (2)
     Land Management      Total  

Balance at October 31, 2014

   $ 820.7      $ 59.5       $ —         $ —         $ 880.2   

Goodwill acquired

     —          —           —           —           —     

Goodwill allocated to divestitures and businesses held for sale

     (12.1     —           —           —           (12.1

Goodwill adjustments

     —          —           —           —           —     

Goodwill Impairment charge

     (0.5              (0.5

Currency translation

     (57.3     —           —           —           (57.3
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Balance at July 31, 2015

   $ 750.8      $ 59.5       $ —         $ —         $ 810.3   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) At July 31, 2015 and October 31, 2014, the accumulated goodwill impairment loss was $0.5 million and $0.0 million, respectively.
(2) At July 31, 2015 and October 31, 2014, the accumulated goodwill impairment loss was $50.3 million.

The following table summarizes the carrying amount of net other intangible assets by class as of July 31, 2015 and October 31, 2014 (Dollars in millions):

 

     Gross Intangible Assets      Accumulated
Amortization
     Net Intangible
Assets
 

July 31, 2015:

        

Indefinite lived:

        

Trademarks and patents

   $ 13.1       $ —         $ 13.1   

Definite lived:

        

Customer relationships

     182.0         78.8         103.2   

Trademarks and patents

     24.2         11.6         12.6   

Non-compete agreements

     12.4         4.0         8.4   

Other

     4.9         4.4         0.5   
  

 

 

    

 

 

    

 

 

 

Total

   $ 236.6       $ 98.8       $ 137.8   
  

 

 

    

 

 

    

 

 

 

October 31, 2014:

        

Indefinite lived:

        

Trademarks and patents

   $ 13.8       $ —         $ 13.8   

Definite lived:

        

Customer relationships

     203.3         78.8         124.5   

Trademarks and patents

     15.3         4.7         10.6   

Non-compete agreements

     6.0         5.1         0.9   

Other

     27.8         11.1         16.7   
  

 

 

    

 

 

    

 

 

 

Total

   $ 266.2       $ 99.7       $ 166.5   
  

 

 

    

 

 

    

 

 

 

Amortization expense for the three months ended July 31, 2015 and 2014 was $4.5 million and $5.4 million, respectively. Amortization expense for the nine months ended July 31, 2015 and 2014 was $13.9 million and $18.7 million, respectively. Amortization expense for the next five years is expected to be $18.2 million in 2015, $17.4 million in 2016, $16.7 million in 2017, $16.3 million in 2018 and $16.3 million in 2019.

Definite lived intangible assets for the periods presented are subject to amortization and are being amortized using the straight-line method over periods that are contractually, legally determined, or over the period a market participant would benefit from the asset.

Restructuring Charges
Restructuring Charges

NOTE 7 — RESTRUCTURING CHARGES

The following is a reconciliation of the beginning and ending restructuring reserve balances for the nine month period ended July 31, 2015 (Dollars in millions):

 

     Employee
Separation
Costs
     Other Costs      Total  

Balance at October 31, 2014

   $ 2.9       $ 1.2       $ 4.1   

Costs incurred and charged to expense

     18.6         8.1         26.7   

Costs paid or otherwise settled

     (10.8      (3.9      (14.7
  

 

 

    

 

 

    

 

 

 

Balance at July 31, 2015

   $ 10.7       $ 5.4       $ 16.1   
  

 

 

    

 

 

    

 

 

 

The focus for restructuring activities in 2015 is to continue to rationalize operations and close underperforming assets throughout all segments. During the three months ended July 31, 2015, the Company recorded restructuring charges of $16.2 million, which compares to $4.2 million of restructuring charges recorded during the three months ended July 31, 2014. The restructuring activity for the three months ended July 31, 2015 consisted of $10.9 million in employee separation costs and $5.3 million in other restructuring costs, primarily consisting of professional fees incurred for services specifically associated with employee separation and relocation. During the nine months ended July 31, 2015, the Company recorded restructuring charges of $26.7 million, which compares to $10.5 million of restructuring charges during the nine months ended July 31, 2014. The restructuring activity for the nine months ended July 31, 2015 consisted of $18.6 million in employee separation and relocation costs and $8.1 million in other restructuring costs, primarily consisting of professional fees incurred for services specifically associated with employee separation and relocation. The Company anticipates completion of the current restructuring programs by early 2018.

The following is a reconciliation of the total amounts expected to be incurred from open restructuring plans or plans that are being formulated and have not been announced as of the date of this Form 10-Q. Remaining amounts expected to be incurred are $17.4 million and $9.2 million as of July 31, 2015 and October 31, 2014, respectively. The change was due to the formulation of new plans during the period offset by the realization of expenses from plans formulated in prior periods. (Dollars in millions):

 

     Total Amounts Expected to
be Incurred
    Amounts expensed during
the nine month period
ended
July 31, 2015
    Amounts Remaining to be
Incurred
 

Rigid Industrial Packaging & Services

      

Employee separation costs

   $ 20.9      $ 15.3      $ 5.6   

Other restructuring costs

     10.6        5.1        5.5   
  

 

 

   

 

 

   

 

 

 
     31.5        20.4        11.1   

Flexible Products & Services

      

Employee separation costs

     9.0        3.1        5.9   

Other restructuring costs

     2.6        2.2        0.4   
  

 

 

   

 

 

   

 

 

 
     11.6        5.3        6.3   

Paper Packaging

      

Employee separation costs

     0.2        0.2        —     

Other restructuring costs

     0.8        0.8        —     
  

 

 

   

 

 

   

 

 

 
     1.0        1.0        —     
   $ 44.1      $ 26.7      $ 17.4   
  

 

 

   

 

 

   

 

 

Consolidation of Variable Interest Entities
Consolidation of Variable Interest Entities

NOTE 8 — CONSOLIDATION OF VARIABLE INTEREST ENTITIES

The Company evaluates whether an entity is a variable interest entity (“VIE”) upon acquisition and whenever reconsideration events occur. The Company consolidates VIEs for which it is the primary beneficiary. If the Company is not the primary beneficiary and an ownership interest is held, the VIE is accounted for under the equity or cost methods of accounting, as appropriate. When assessing the determination of the primary beneficiary, the Company considers all relevant facts and circumstances, including: the power to direct the activities of the VIE that most significantly impact the VIEs economic performance; and the obligation to absorb the expected losses and/or the right to receive the expected returns of the VIE.

Significant Nonstrategic Timberland Transactions

In 2005, the Company sold certain timber properties to Plum Creek Timberlands, L.P. (“Plum Creek”) in a series of transactions that included the creation of two separate legal entities that are now consolidated as separate VIEs. One is an indirect subsidiary of Plum Creek (the “Buyer SPE”), and the other is STA Timber LLC, an indirect wholly owned subsidiary of the Company (“STA Timber”). As of July 31, 2015 and October 31, 2014, consolidated assets of Buyer SPE consisted of $50.9 million of restricted bank financial instruments which are expected to be held to maturity. For both of the three month periods ended July 31, 2015 and 2014, Buyer SPE recorded interest income of $0.6 million. For both of the nine month periods ended July 31, 2015 and 2014, Buyer SPE recorded interest income of $1.8 million.

As of July 31, 2015 and October 31, 2014, STA Timber had consolidated long-term debt of $43.3 million. For both of the three month periods ended July 31, 2015 and 2014, STA Timber recorded interest expense of $0.5 million. For both of the nine month periods ended July 31, 2015 and 2014, STA Timber recorded interest expense of $1.7 million. The intercompany borrowing arrangement between the two VIEs is eliminated in consolidation. STA Timber is exposed to credit-related losses in the event of nonperformance by an issuer of a deed of guarantee in the transaction.

Flexible Packaging Joint Venture

On September 29, 2010, Greif, Inc. and its indirect subsidiary Greif International Holding Supra C.V. (“Greif Supra”) formed a joint venture (referred to herein as the “Flexible Packaging JV”) with Dabbagh Group Holding Company Limited and its subsidiary National Scientific Company Limited (“NSC”). The Flexible Packaging JV owns the operations in the Flexible Products & Services segment. The Flexible Packaging JV has been consolidated into the operations of the Company as of its formation date of September 29, 2010.

All entities contributed to the Flexible Packaging JV were existing businesses acquired by Greif Supra that were reorganized under Greif Flexibles Asset Holding B.V. and Greif Flexibles Trading Holding B.V. (“Asset Co.” and “Trading Co.”), respectively. The Flexible Packaging J.V. also includes Global Textile Company LLC (“Global Textile”), which owned and operated a fabric hub in the Kingdom of Saudi Arabia that commenced operations in the fourth quarter of 2012 and ceased operations in the fourth quarter of 2014.

The following table presents the Flexible Packaging JV total net assets (Dollars in millions):

 

July 31, 2015

   Asset Co.      Global Textile      Trading Co.      Flexible Packaging JV  

Total assets

   $ 99.9       $ 16.5       $ 105.9       $ 222.3   

Total liabilities

     92.2         17.4         56.3         165.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net assets

   $ 7.7       $ (0.9    $ 49.6       $ 56.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

October 31, 2014

   Asset Co.      Global Textile      Trading Co.      Flexible Packaging JV  

Total assets

   $ 113.6       $ 21.6       $ 126.4       $ 261.6   

Total liabilities

     102.7         42.8         51.8         197.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net assets

   $ 10.9       $ (21.2    $ 74.6       $ 64.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Net losses attributable to the noncontrolling interest in the Flexible Packaging JV for the three months ended July 31, 2015 and 2014 were $2.6 million and $3.7 million, respectively; and for the nine months ended July 31, 2015 and 2014, net losses attributable to the noncontrolling interest were $8.9 million and $9.2 million, respectively.

Non-United States Accounts Receivable VIE

As further described in Note 3, Cooperage Receivables Finance B.V. is a party to the European RPA. Cooperage Receivables Finance B.V. is deemed to be a VIE since this entity is not able to satisfy its liabilities without the financial support from the Company. While this entity is a separate and distinct legal entity from the Company and no ownership interest in this entity is held by the Company, the Company is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE. As a result, Cooperage Receivables Finance B.V. has been consolidated into the operations of the Company.

Long-Term Debt
Long-Term Debt

NOTE 9 — LONG-TERM DEBT

Long-term debt is summarized as follows (Dollars in millions):

 

     July 31, 2015      October 31, 2014  

Amended Credit Agreement

   $ 248.5       $ 169.2   

Senior Notes due 2017

     300.8         301.2   

Senior Notes due 2019

     245.8         245.2   

Senior Notes due 2021

     219.5         252.5   

Amended Receivables Facility

     145.8         110.0   

Other debt

     18.6         26.9   
  

 

 

    

 

 

 
     1,179.0         1,105.0   

Less current portion

     (24.1      (17.6
  

 

 

    

 

 

 

Long-term debt

   $ 1,154.9       $ 1,087.4   
  

 

 

    

 

 

 

Amended Credit Agreement

On December 19, 2012, the Company and two of its international subsidiaries amended and restated the Company’s existing $1.0 billion senior secured credit agreement with a syndicate of financial institutions (the “Amended Credit Agreement”). The total available borrowing under this facility was $679.5 million as of July 31, 2015, which has been reduced by $14.4 million for outstanding letters of credit, all of which is available without violating covenants.

The Amended Credit Agreement contains financial covenants that require the Company to maintain a certain leverage ratio and an interest coverage ratio. The leverage ratio generally requires that at the end of any fiscal quarter the Company will not permit the ratio of (a) the Company’s total consolidated indebtedness, to (b) the Company’s consolidated net income plus depreciation, depletion and amortization, interest expense (including capitalized interest), and income taxes, and minus certain extraordinary gains and non-recurring gains (or plus certain extraordinary losses and non-recurring losses) and plus or minus certain other items for the preceding twelve months (“adjusted EBITDA”) to be greater than 4.00 to 1. The interest coverage ratio generally requires that at the end of any fiscal quarter the Company will not permit the ratio of (a) the Company’s consolidated adjusted EBITDA to (b) the Company’s consolidated interest expense to the extent paid or payable, to be less than 3.00 to 1, during the preceding twelve month period (the “Interest Coverage Ratio Covenant”). As of July 31, 2015, the Company was in compliance with these covenants.

As of July 31, 2015, $248.5 million was outstanding under the Amended Credit Agreement. The current portion of the Amended Credit Agreement was $17.3 million and the long-term portion was $231.2 million. The weighted average interest rate on the Amended Credit Agreement was 1.61% for the nine months ended July 31, 2015. The actual interest rate on the Amended Credit Agreement was 1.73% as of July 31, 2015.

Senior Notes due 2017

On February 9, 2007, the Company issued $300.0 million of 6.75% Senior Notes due February 1, 2017. Interest on these Senior Notes is payable semi-annually.

Senior Notes due 2019

On July 28, 2009, the Company issued $250.0 million of 7.75% Senior Notes due August 1, 2019. Interest on these Senior Notes is payable semi-annually.

Senior Notes due 2021

On July 15, 2011, Greif, Inc.’s wholly-owned subsidiary, Greif Nevada Holdings, Inc., S.C.S. (formerly Greif Luxembourg Finance S.C.A.) issued € 200.0 million of 7.375% Senior Notes due July 15, 2021. These Senior Notes are fully and unconditionally guaranteed on a senior basis by Greif, Inc. Interest on these Senior Notes is payable semi-annually.

United States Trade Accounts Receivable Credit Facility

Prior to September 30, 2013, the Company had a $130 million U.S. trade accounts receivable credit facility with a financial institution (the “Prior Receivables Facility”). On September 30, 2013, the Company amended and restated the Prior Receivables Facility to establish a $170.0 million United States Trade Accounts Receivable Credit Facility (the “Amended Receivables Facility”) with a financial institution. The Amended Receivables Facility matures in September 2016.

Financial Instruments and Fair Value Measurements
Financial Instruments and Fair Value Measurements

NOTE 10 — FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial Instruments

The Company uses derivatives to mitigate partially the effect of exposure to interest rate movements, exposure to currency translation. Under ASC 815, “Derivatives and Hedging”, all derivatives are to be recognized as assets or liabilities on the balance sheet and measured at fair value. Changes in the fair value of derivatives are recognized in either net income or in other comprehensive income, depending on the designated purpose of the derivative.

While the Company may be exposed to credit losses in the event of nonperformance by the counterparties to its derivative financial instrument contracts, its counterparties are established banks and financial institutions with high credit ratings. The Company has no reason to believe that such counterparties will not be able to fully satisfy their obligations under these contracts.

ASC 820, “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements for financial and non-financial assets and liabilities. Additionally, this guidance established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.

The three levels of inputs used to measure fair values are as follows:

 

    Level 1 – Observable inputs such as unadjusted quoted prices in active markets for identical assets and liabilities.

 

    Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities.

 

    Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

Recurring Fair Value Measurements

The following table presents the fair value for those assets and (liabilities) measured on a recurring basis as of July 31, 2015 and October 31, 2014 (Dollars in millions):

 

     July 31, 2015    

Balance sheet

     Fair Value Measurement    
     Level 1      Level 2     Level 3      Total    

Location

Foreign exchange hedges

     —           0.8        —           0.8      Prepaid expenses and other current assets

Foreign exchange hedges

     —           (0.5     —           (0.5   Other current liabilities

Insurance annuity

     —           —          19.6         19.6      Other long-term assets
  

 

 

    

 

 

   

 

 

    

 

 

   

Total*

   $ —         $ 0.3      $ 19.6       $ 19.9     
  

 

 

    

 

 

   

 

 

    

 

 

   
     October 31, 2014    

Balance sheet

Location

     Fair Value Measurement    
     Level 1      Level 2     Level 3      Total    

Interest rate derivatives

   $ —         $ (0.2   $ —         $ (0.2   Other long-term liabilities

Foreign exchange hedges

     —           0.6        —           0.6      Prepaid expenses and other current assets

Foreign exchange hedges

     —           (0.2     —           (0.2   Other current liabilities

Insurance annuity

     —           —          22.6         22.6      Other long-term assets
  

 

 

    

 

 

   

 

 

    

 

 

   

Total*

   $ —         $ 0.2      $ 22.6       $ 22.8     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

* The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable, current liabilities and short-term borrowings as of July 31, 2015 and October 31, 2014 approximate their fair values because of the short-term nature of these items and are not included in this table.

Interest Rate Derivatives

As of July 31, 2015, the Company has no interest rate derivatives.

 

Through December 2014, the Company had two interest rate derivatives (floating to fixed swap agreements designated as cash flow hedges) with a total notional amount of $150 million. Under these swap agreements, the Company received interest based upon a variable interest rate from the counterparties and paid interest based upon a fixed interest rate. The assumptions that were used in measuring fair value of the interest rate derivatives were considered level 2 inputs, which were based on interest from the counterparties based upon LIBOR and interest paid based upon a designated fixed rate over the life of the swap agreements. These derivative instruments were designated and qualified as cash flow hedges. Accordingly, the effective portion of the gain or loss on these derivative instruments was reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affected earnings. The ineffective portion of the gain or loss on the derivative instrument was recognized in earnings immediately.

Losses reclassified to earnings under these contracts were $0.2 million for the three months ended July 31, 2014 and were $0.2 million and $0.7 million for the nine months ended July 31, 2015 and 2014, respectively. These losses were recorded within the condensed consolidated statements of income as interest expense, net. The fair value of these contracts was $0.2 million recorded in accumulated other comprehensive income as of October 31, 2014.

Foreign Exchange Hedges

The Company conducts business in various international currencies and is subject to risks associated with changing foreign exchange rates. The Company’s objective is to reduce volatility associated with foreign exchange rate changes. Accordingly, the Company enters into various contracts that change in value as foreign exchange rates change to protect the value of certain existing foreign currency assets and liabilities, commitments and anticipated foreign currency cash flows.

As of July 31, 2015, the Company had outstanding foreign currency forward contracts in the notional amount of $81.6 million ($122.4 million as of October 31, 2014). Adjustments to fair value are recognized in earnings, offsetting the impact of the hedged item. The assumptions used in measuring fair value of foreign exchange hedges are considered level 2 inputs, which were based on observable market pricing for similar instruments, principally foreign exchange futures contracts. Gains (losses) recorded under fair value contracts were $0.6 million and ($2.5) million for the three months ended July 31, 2015 and 2014, respectively; and were ($6.2) million and ($2.6) million for the nine months ended July 31, 2015 and 2014, respectively.

Other financial instruments

The fair values of the Company’s Amended Credit Agreement and the Amended Receivables Facility do not materially differ from carrying value as the Company’s cost of borrowing is variable and approximates current borrowing rates. The fair values of the Company’s long-term obligations are estimated based on either the quoted market prices for the same or similar issues or the current interest rates offered for the debt of the same remaining maturities, which are considered level 2 inputs in accordance with ASC Topic 820, Fair Value Measurements and Disclosures.

The following table presents the estimated fair values of the Company’s Senior Notes and the Assets held by special purpose entities (Dollars in millions):

 

     July 31, 2015      October 31, 2014  

Senior Notes due 2017

     

Estimated fair value

   $ 317.3       $ 325.5   

Senior Notes due 2019

     

Estimated fair value

     278.1         287.5   

Senior Notes due 2021

     

Estimated fair value

     260.7         297.7   

Assets held by special purpose entities

     

Estimated fair value

     54.4         54.5   

 

Non-Recurring Fair Value Measurements

Long-Lived Assets

The Company recognized asset impairment charges of $17.6 million during the three months ended July 31, 2015 and $15.4 million for the three months ended July 31, 2014. As a result of the Company measuring long-lived assets at fair value on a non-recurring basis, during the three months ended July 31, 2015 these impairment charges included $15.0 million related to Venezuelan property, plants and equipment, net, $1.5 million of IT software assets that were identified as obsolete during the quarter and $0.5 million other-than-temporary impairment of an equity method investment within the Flexible Products & Services segment. During the three months ended July 31, 2014 the impairment charges included $5.0 million of IT software assets that were identified as obsolete during the quarter, impairment of $5.9 million related to an equity method investment within the Rigid Industrial Packaging & Services segment and $4.3 million of impairment charges related to plant closures and restructuring plans. The Company recognized asset impairment charges of $22.3 million and $15.6 million during the nine months ended July 31, 2015 and 2014, respectively. These charges during the nine months ended July 31, 2015 included $15.0 million of impairment charges related to Venezuelan properties, plants and equipment, net, $1.5 million of IT software assets that were identified as obsolete, $0.5 million other-than-temporary impairment of equity method investment within the Flexible Products & Services segment, and $4.2 million of impairment charges related to plant closures within the Rigid Industrial Packaging & Services segment.

The assumptions used in measuring fair value of long-lived assets are considered level 3 inputs, which include bids received from third parties, recent purchase offers, market comparable information and discounted cash flows based on assumptions that market participants would use. The following table presents quantitative information about the significant unobservable inputs used to determine the fair value of the impairment of long-lived assets held and used for the nine months ended July 31, 2015.

 

     Fair Value of
Impairment
     Valuation
Technique
   Unobservable
Input
   Range
of Input Values
     (in millions)                 

July 31, 2015

           

Impairment of Long-lived assets - Land & Building

   $ 17.7       Broker Quote/
Indicative Bids
   Indicative Bids    N/A

Impairment of Long-lived assets - Machinery & Equipment

   $ 3.0       Sales Value    Sales Value    N/A

Assets and Liabilities Held for Sale

The assumptions used in measuring fair value of assets and liabilities held for sale are considered level 3 inputs, which include recent purchase offers, market comparables and/or data obtained from commercial real estate brokers. During the nine month period ended July 31, 2015, the Company recorded no additional impairment related to assets which were previously classified as assets and liabilities held for sale. During the nine month period ended July 31, 2014, the Company recorded no impairment related to assets which were previously classified as assets and liabilities held for sale.

Goodwill and Other Intangible Assets

On an annual basis or whenever events or circumstances indicate impairment may have occurred, the Company performs impairment tests for goodwill and long lived intangible assets as defined under ASC 350, “Intangibles-Goodwill and Other.” The Company concluded that no such impairment existed as of July 31, 2015.

Income Taxes
Income Taxes

NOTE 11 — INCOME TAXES

Income tax expense was $18.7 million and $28.2 million for the three months ended July 31, 2015 and 2014, respectively. The effective tax rate was 68.2 percent and 72.3 percent for the three months ended July 31, 2015 and 2014, respectively. The effective tax rate in both periods is higher than normally expected due to significant non-deductible GAAP losses recorded during each period.

 

The third quarter 2015 effective rate reflects the impact of the following: a shift in global earnings mix to countries with higher tax rates; the impact of the Venezuela hyperinflationary pretax adjustment on net income; and the impact of a $1.3 million discrete tax benefit consisting of a benefit of $2.0 million related to return-to-provision adjustments and statutory rate decreases for international subsidiaries and $0.8 million of tax expense related to a net increase in uncertain tax positions for the international subsidiaries.

The third quarter 2014 effective tax rate reflects the impact of the following: a shift in global earnings mix to countries with higher tax rates; the tax effect of GAAP losses from the sale of a business; the forecasted tax effect of a planned sale of an asset group within the Flexible Products & Services segment classified as assets held for sale; and the impact of a $3.5 million discrete tax expense. The discrete tax expense is a net amount mainly consisting of a $7.0 million expense related to the increase in valuation allowances for international subsidiaries and a benefit of $3.0 million related to the return to provision adjustments for international subsidiaries.

Income tax expense was $45.8 million and $64.2 million for the nine months ended July 31, 2015 and 2014 respectively. The effective rate was 44.3 percent and 44.7 percent for the nine months ended July 31, 2015 and 2014, respectively.

As of July 31, 2015, the Company had not recognized U.S. deferred income taxes on the undistributed earnings of non-U.S. subsidiaries. It is the Company’s belief that as of July 31, 2015 such earnings are indefinitely reinvested outside of the U.S. and determining the unrecognized deferred tax liability related to investments in these non-U.S. subsidiaries that are indefinitely reinvested is not practicable.

Post Retirement Benefit Plans
Post Retirement Benefit Plans

NOTE 12 — POST RETIREMENT BENEFIT PLANS

The components of net periodic pension cost include the following (Dollars in millions):

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

Service cost

   $ 4.1       $ 3.9       $ 12.4       $ 11.7   

Interest cost

     7.1         7.4         21.3       $ 22.2   

Expected return on plan assets

     (8.4      (8.5      (25.3    $ (25.5

Amortization of prior service cost, initial net asset and net actuarial gain

     3.7         2.7         11.0       $ 8.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net periodic pension costs

   $ 6.5       $ 5.5       $ 19.4       $ 16.5   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company made $8.1 million in pension contributions in the nine months ended July 31, 2015. The Company estimates $9.2 million of pension contributions for the twelve months ended October 31, 2015.

The components of net periodic cost for postretirement benefits include the following (Dollars in millions):

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

Service cost

   $ —         $ —         $ —         $ —     

Interest cost

     0.1         0.2         0.5         0.6   

Amortization of prior service cost and recognized actuarial gain

     (0.4      (0.4      (1.2      (1.2
  

 

 

    

 

 

    

 

 

    

 

 

 

Net periodic benefit for postretirement benefits

   $ (0.3    $ (0.2    $ (0.7    $ (0.6
  

 

 

    

 

 

    

 

 

    

 

 

 
Contingent Liabilities and Environmental Reserves
Contingent Liabilities and Environmental Reserves

NOTE 13 — CONTINGENT LIABILITIES AND ENVIRONMENTAL RESERVES

Litigation-related Liabilities

The Company may become involved in litigation and regulatory matters incidental to its business, including governmental investigations, enforcement actions, personal injury claims, product liability, employment health and safety matters, commercial disputes, intellectual property matters, disputes regarding environmental clean-up costs, litigation in connection with acquisitions and divestitures, and other matters arising out of the normal conduct of its business. The Company intends to vigorously defend itself in such litigation. The Company does not believe that the outcome of any pending litigation will have a material adverse effect on its condensed consolidated financial statements.

The Company may accrue for contingencies related to litigation and regulatory matters if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions can occur, assessing contingencies is highly subjective and requires judgments about future events. The Company reviews contingencies at least quarterly to determine whether its accruals are adequate. The amount of ultimate loss may differ from these estimates.

Environmental Reserves

As of July 31, 2015 and October 31, 2014, environmental reserves of $8.6 million and $24.7 million, respectively, were recorded on an undiscounted basis. These reserves are principally based on environmental studies and cost estimates provided by third parties, but also take into account management estimates. The estimated liabilities are reduced to reflect the anticipated participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of relevant costs. For sites that involve formal actions subject to joint and several liabilities, these actions have formal agreements in place to apportion the liability. As of July 31, 2015 and October 31, 2014, environmental reserves of the Company included $0.8 million and $13.7 million, respectively, for a blending facility in Chicago, Illinois; $4.4 million and $6.8 million, respectively, for various European drum facilities acquired from Blagden and Van Leer; $2.1 million and $2.6 million, respectively, for its various container life cycle management and recycling facilities acquired in 2011 and 2010; and $1.3 million and $1.6 million for various other facilities around the world. The $12.9 million decrease in environmental reserve for the blending facility located in Chicago is a result of the divestment during the second quarter of 2015 of the subsidiary that owns this facility.

The Company’s exposure to adverse developments with respect to any individual site is not expected to be material. Although environmental remediation could have a material effect on results of operations if a series of adverse developments occur in a particular quarter or year, the Company believes that the chance of a series of adverse developments occurring in the same quarter or year is remote. Future information and developments will require the Company to continually reassess the expected impact of these environmental matters.

Earnings Per Share
Earnings Per Share

NOTE 14 —EARNINGS PER SHARE

The Company has two classes of common stock and, as such, applies the “two-class method” of computing earnings per share (“EPS”) as prescribed in ASC 260, “Earnings Per Share.” In accordance with this guidance, earnings are allocated in the same fashion as dividends would be distributed. Under the Company’s articles of incorporation, any distribution of dividends in any year must be made in proportion of one cent a share for Class A Common Stock to one and one-half cents a share for Class B Common Stock, which results in a 40% to 60% split to Class A and B shareholders, respectively. In accordance with this, earnings are allocated first to Class A and Class B Common Stock to the extent that dividends are actually paid and the remainder is allocated assuming all of the earnings for the period have been distributed in the form of dividends.

The Company calculates EPS as follows:

 

Basic Class A EPS   =  

40% * Average Class A Shares Outstanding

  *  

Undistributed Net Income

  +   Class A Dividends Per Share
    40% * Average Class A Shares Outstanding + 60% * Average Class B Shares Outstanding     Average Class A Shares Outstanding    
Diluted Class A EPS   =  

40% * Average Class A Shares Outstanding

  *  

Undistributed Net Income

  +   Class A Dividends Per Share
    40% * Average Class A Shares Outstanding + 60% * Average Class B Shares Outstanding     Average Diluted Class A Shares Outstanding    
Basic Class B EPS   =  

60% * Average Class B Shares Outstanding

  *  

Undistributed Net Income

  +   Class B Dividends Per Share
    40% * Average Class A Shares Outstanding + 60% * Average Class B Shares Outstanding     Average Class B Share Outstanding    

 

* Diluted Class B EPS calculation is identical to Basic Class B calculation

The following table provides EPS information for each period, respectively:

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

Numerator for basic and diluted EPS

           

Net income attributable to Greif, Inc.

   $ 8.6       $ 13.7       $ 59.5       $ 82.8   

Cash dividends

     (24.8      (24.7      (74.0      (73.8
  

 

 

    

 

 

    

 

 

    

 

 

 

Undistributed net income (loss) attributable to Greif, Inc.

   $ (16.2    $ (11.0    $ (14.5    $ 9.0   

The Class A Common Stock has no voting rights unless four quarterly cumulative dividends upon the Class A Common Stock are in arrears. The Class B Common Stock has full voting rights. There is no cumulative voting for the election of directors.

Common stock repurchases

The Company’s Board of Directors has authorized the purchase of up to four million shares of Class A Common Stock or Class B Common Stock or any combination of the foregoing. During the nine months ended July 31, 2015 and 2014, the Company repurchased no shares of Class A or Class B Common Stock, respectively. As of July 31, 2015, the Company had repurchased 3,184,272 shares, including 1,425,452 shares of Class A Common Stock and 1,758,820 shares of Class B Common Stock, under this program, all of which were repurchased in prior years. There have been no shares repurchased from November 1, 2013 through July 31, 2015.

 

The following table summarizes the Company’s Class A and Class B common and treasury shares as of the specified dates:

 

     Authorized Shares      Issued Shares      Outstanding
Shares
     Treasury Shares  

July 31, 2015:

           

Class A Common Stock

     128,000,000         42,281,920         25,693,564         16,588,356   

Class B Common Stock

     69,120,000         34,560,000         22,119,966         12,440,034   

October 31, 2014:

           

Class A Common Stock

     128,000,000         42,281,920         25,603,452         16,678,468   

Class B Common Stock

     69,120,000         34,560,000         22,119,966         12,440,034   

The following is a reconciliation of the shares used to calculate basic and diluted earnings per share:

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

Class A Common Stock:

           

Basic shares

     25,692,973         25,576,452         25,659,750         25,529,049   

Assumed conversion of stock options

     5,574         5,500         5,574         10,587   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted shares

     25,698,547         25,581,952         25,665,324         25,539,636   
  

 

 

    

 

 

    

 

 

    

 

 

 

Class B Common Stock:

           

Basic and diluted shares

     22,119,966         22,119,966         22,119,966         22,119,966   
  

 

 

    

 

 

    

 

 

    

 

 

 

No stock options were antidilutive for the nine month period ended July 31, 2015 and 2014, respectively.

Equity Earnings of Unconsolidated Affiliates, Net of Tax and Net (Income) Loss Attributable to Noncontrolling Interests
Equity Earnings of Unconsolidated Affiliates, Net of Tax and Net (Income) Loss Attributable to Noncontrolling Interests

NOTE 15 – EQUITY EARNINGS OF UNCONSOLIDATED AFFILIATES, NET OF TAX AND NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

Equity earnings of unconsolidated affiliates, net of tax

Equity earnings of unconsolidated affiliates, net of tax represent the Company’s share of earnings of affiliates in which the Company does not exercise control and has a 20 percent or more voting interest. Investments in such affiliates are accounted for using the equity method of accounting. If the fair value of an investment in an affiliate is below its carrying value and the difference is deemed to be other than temporary, the difference between the fair value and the carrying value is charged to earnings. The Company has an equity interest in two such affiliates as of July 31, 2015. The Company had an equity interest in four such affiliates as of July 31, 2014. Equity earnings of unconsolidated affiliates, net of tax for the three months ended July 31, 2015 and 2014 were $0.6 million and $0.7 million, respectively. There were no dividends received from the Company’s equity method affiliates for the three months ended July 31, 2015 and 2014. Equity earnings of unconsolidated affiliates, net of tax for the nine months ended July 31, 2015 and 2014 were $0.3 million and $0.9 million, respectively. There were no dividends received from the Company’s equity method affiliates for the nine months ended July 31, 2015, compared to $0.2 million for the nine months ended July 31, 2014.

Net (income) loss attributable to noncontrolling interests

Net (income) loss attributable to noncontrolling interests represent the portion of earnings or losses from the operations of the Company’s consolidated subsidiaries attributable to unrelated third party equity owners that were added to net income to arrive at net income attributable to the Company. Net (income) loss attributable to noncontrolling interests for the three months ended July 31, 2015 and 2014 was ($0.7) million and $2.2 million, respectively. Net loss attributable to noncontrolling interests for the nine months ended July 31, 2015 and 2014 was $1.5 million and $2.4 million, respectively.

Equity and Comprehensive Income (Loss)
Equity and Comprehensive Income (Loss)

NOTE 16 —EQUITY AND COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes of equity from October 31, 2014 to July 31, 2015 (Dollars in millions, shares in thousands):

 

    Capital Stock     Treasury Stock                                
    Common
Shares
    Amount     Treasury
Shares
    Amount     Retained
Earnings
    Accumulated Other
Comprehensive
Income (Loss)
    Greif, Inc.
Equity
    Non
controlling
interests
    Total
Equity
 

As of October 31, 2014

    47,724      $ 135.5        29,118      $ (130.7   $ 1,411.7      $ (274.4   $ 1,142.1      $ 81.1      $ 1,223.2   

Net income

            59.5          59.5        (1.5     58.0   

Other comprehensive loss:

                 

- foreign currency translation

              (87.7     (87.7     (21.8     (109.5

- Net reclassification of cash flow hedges to earnings, net of immaterial income tax expense

              0.1        0.1          0.1   

- minimum pension liability adjustment, net of income tax expense of $2.0 million

              5.5        5.5          5.5   
             

 

 

     

 

 

 

Comprehensive loss

                (22.6       (45.9
             

 

 

     

 

 

 

Acquisition of noncontrolling interests and other

            (0.4       (0.4     (10.1     (10.5

Dividends paid to Greif, Inc. shareholders

            (74.0       (74.0       (74.0

Dividends paid to noncontrolling interests

                —          (4.0     (4.0

Stock options exercised

    10        0.2        (10     —              0.2          0.2   

Restricted stock executives and directors

    31        1.4        (31     —              1.4          1.4   

Long-term incentive shares issued

    49        2.0        (49     0.1            2.1          2.1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of July 31, 2015

    47,814      $ 139.1        29,028      $ (130.6   $ 1,396.8      $ (356.5   $ 1,048.8      $ 43.7      $ 1,092.5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table summarizes the changes of equity from October 31, 2013 to July 31, 2014 (Dollars in millions, shares in thousands):

 

    Capital Stock     Treasury Stock                                
    Common
Shares
    Amount     Treasury
Shares
    Amount     Retained
Earnings
    Accumulated Other
Comprehensive
Income (Loss)
    Greif, Inc.
Equity
    Non
controlling
interests
    Total
Equity
 

As of October 31, 2013

    47,577      $ 129.4        29,265      $ (131.0   $ 1,418.8      $ (152.6   $ 1,264.6      $ 115.3      $ 1,379.9   

Net income

            82.8          82.8        (2.4     80.4   

Other comprehensive income:

                 

- foreign currency translation

              (36.3     (36.3     0.3        (36.0

- Net reclassification of cash flow hedges to earnings, net of income tax expense of $0.2 million

              0.4        0.4          0.4   

- minimum pension liability adjustment, net of income tax benefit of $0.2 million

              (0.5     (0.5       (0.5
             

 

 

     

 

 

 

Comprehensive Income

                46.4          44.3   
             

 

 

     

 

 

 

Noncontrolling interests, loan conversion and other

            (1.2       (1.2     15.2        14.0   

Dividends paid to Greif, Inc. shareholders

            (73.8       (73.8       (73.8

Stock options exercised

    68        1.6        (68     0.1            1.7          1.7   

Restricted stock executives and directors

    22        1.1        (22     0.1            1.2          1.2   

Long-term incentive shares issued

    56        2.9        (56     0.1            3.0          3.0   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of July 31, 2014

    47,723      $ 135.0        29,119      $ (130.7   $ 1,426.6      $ (189.0   $ 1,241.9      $ 128.4      $ 1,370.3   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following table provides the rollforward of accumulated other comprehensive income for the nine months ended July 31, 2015 (Dollars in millions):

 

     Foreign
Currency
Translation
     Cash Flow
Hedges
     Minimum Pension
Liability
Adjustment
     Accumulated
Other
Comprehensive
Income (Loss)
 

Balance as of October 31, 2014

   $ (144.5    $ (0.1    $ (129.8    $ (274.4

Other Comprehensive Income (Loss) Before Reclassifications

     (87.7      —           5.5         (82.2

Amounts reclassified from Accumulated Other Comprehensive Loss

     —           0.1         —           0.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current-period Other Comprehensive Income (Loss)

     (87.7      0.1         5.5         (82.1
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of July 31, 2015

   $ (232.2    $ —         $ (124.3    $ (356.5
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table provides the rollforward of accumulated other comprehensive income for the nine months ended July 31, 2014 (Dollars in millions):

 

     Foreign
Currency
Translation
     Cash Flow
Hedges
     Minimum Pension
Liability
Adjustment
     Accumulated
Other
Comprehensive
Income (Loss)
 

Balance as of October 31, 2013

   $ (56.9    $ (0.6    $ (95.1    $ (152.6

Other Comprehensive Income (Loss) Before Reclassifications

     (36.3      (0.1      (0.5      (36.9

Amounts reclassified from Accumulated Other Comprehensive Loss

     —           0.5         —           0.5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current-period Other Comprehensive Income (Loss)

     (36.3      0.4         (0.5      (36.4
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of July 31, 2014

   $ (93.2    $ (0.2    $ (95.6    $ (189.0
  

 

 

    

 

 

    

 

 

    

 

 

 

The components of accumulated other comprehensive income above are presented net of tax, as applicable.

The following table provides amounts reclassified out of accumulated other comprehensive income for the nine months ended July 31 (Dollars in millions):

 

Details about Accumulated Other
Comprehensive Income Components

   Ammount Reclassified from Accumulated 
Other Comprehensive Income (Loss)
     Location on Consolidated
Consolidated Statements of Income
     2015      2014       

Cash Flow Hedges

   $ 0.1       $ 0.5       Other expense, net

Business Segment Information
Business Segment Information

NOTE 17 — BUSINESS SEGMENT INFORMATION

The Company has five operating segments, which are aggregated into four reportable business segments: Rigid Industrial Packaging & Services; Paper Packaging; Flexible Products & Services; and Land Management.

The Company’s reportable business segments offer different products and services. The accounting policies of the reportable business segments are substantially the same as those described in the “Basis of Presentation and Summary of Significant Accounting Policies” note in the 2014 Form 10-K. The measure of segment profitability that is used by the Company is operating profit.

The following segment information is presented for the periods indicated (Dollars in millions):

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

Net sales

           

Rigid Industrial Packaging & Services

   $ 669.0       $ 827.7       $ 1,985.3       $ 2,324.3   

Paper Packaging

     176.7         180.6         496.3         520.2   

Flexible Products & Services

     79.2         107.3         249.3         325.8   

Land Management

     5.1         8.4         17.3         20.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 930.0       $ 1,124.0       $ 2,748.2       $ 3,191.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit (loss):

           

Rigid Industrial Packaging & Services

   $ 29.5       $ 43.0       $ 75.5       $ 123.4   

Paper Packaging

     21.5         27.9         76.7         84.4   

Flexible Products & Services

     (9.7      (12.9      (23.8      (22.4

Land Management

     2.9         3.3         32.3         26.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating profit

   $ 44.2       $ 61.3       $ 160.7       $ 211.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation, depletion and amortization expense:

           

Rigid Industrial Packaging & Services

   $ 21.8       $ 26.8       $ 70.2       $ 81.1   

Paper Packaging

     6.8         7.3         21.5         22.6   

Flexible Products & Services

     2.2         3.3         6.6         10.7   

Land Management

     0.8         1.4         2.6         3.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total depreciation, depletion and amortization expense

   $ 31.6       $ 38.8       $ 100.9       $ 117.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents net sales to external customers by geographic area (Dollars in millions):

 

     Three months ended July 31,      Nine months ended July 31,  
     2015      2014      2015      2014  

Net sales:

           

United States

   $ 431.5       $ 502.4       $ 1,269.7       $ 1,417.3   

Europe, Middle East and Africa

     337.3         428.2         979.5         1,216.7   

Asia Pacific and other Americas

     161.2         193.4         499.0         557.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 930.0       $ 1,124.0       $ 2,748.2       $ 3,191.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

The following table presents total assets by segment and total properties, plants, and equipment, net by geographic area (Dollars in millions):

 

     July 31, 2015      October 31, 2014  

Assets:

     

Rigid Industrial Packaging & Services

   $ 2,200.5       $ 2,416.6   

Paper Packaging

     442.5         418.2   

Flexible Products & Services

     211.4         251.0   

Land Management

     342.3         319.0   
  

 

 

    

 

 

 

Total segments

     3,196.7         3,404.8   

Corporate and other

     218.6         262.6   
  

 

 

    

 

 

 

Total assets

   $ 3,415.3       $ 3,667.4   
  

 

 

    

 

 

 

Properties, plants and equipment, net:

     

United States

   $ 735.7       $ 716.5   

Europe, Middle East and Africa

     339.8         387.5   

Asia Pacific and other Americas

     157.8         189.0   
  

 

 

    

 

 

 

Total properties, plants and equipment, net

   $ 1,233.3       $ 1,293.0   
  

 

 

    

 

 

 
Basis of Presentation and Summary of Significant Accounting Policies (Policies)

Basis of Presentation

The condensed consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (“SEC”) instructions to Quarterly Reports on Form 10-Q and include all of the information and disclosures required by accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual amounts could differ from those estimates.

The Company’s fiscal year begins on November 1 and ends on October 31 of the following year. Any references to the year 2015 or 2014, or to any quarter of those years, relates to the fiscal year or quarter, as the case may be, ended in that year. The 2014 amounts have been restated. See Note 20 – Quarterly Financial Data in the Company’s 2014 Form 10-K.

The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the condensed consolidated balance sheets as of July 31, 2015 and October 31, 2014, the condensed consolidated statements of income and comprehensive income for the three and nine months ended July 31, 2015 and 2014 and the condensed consolidated statements of cash flows for the nine month periods ended July 31, 2015 and 2014 of Greif, Inc. and its subsidiaries (the “Company”). The condensed consolidated financial statements include the accounts of Greif, Inc., all wholly-owned and consolidated subsidiaries and investments in limited liability companies, partnerships and joint ventures in which it has controlling influence. Non-majority owned entities include investments in limited liability companies, partnerships and joint ventures in which the Company does not have controlling influence and are accounted for using either the equity or cost method, as appropriate.

The unaudited condensed consolidated financial statements included in the Quarterly Report on Form 10-Q (this “Form 10-Q”) should be read in conjunction with the condensed consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for its fiscal year ended October 31, 2014 (the “2014 Form 10-K”).

Venezuela Currency

The Company’s results of its Venezuelan businesses have been reported under highly inflationary accounting since 2010 and the functional currency was converted to US Dollars at that time. Currently, there are multiple legal mechanisms and respective exchange rates available in Venezuela to exchange currency: the CENCOEX rate (official rate or “CENCOEX”); the SICAD rate (“SICAD”) and; as of February of 2015, the SIMADI rate (“SIMADI”). The SIMADI exchange mechanism was created by the Venezuelan government to establish a more market driven exchange rate and is intended to be available to individuals and both public and private companies.

The government also announced in February 2015 that the official rate and SICAD exchange mechanisms would be available only to companies importing essential goods (i.e. medicine, food, and raw materials) although it has not officially published rules or regulations that clarify exactly which activities, industries or transactions will be eligible to use these rates. The purpose of these rates was intended to make necessities affordable to Venezuelan citizens. The exchange mechanisms have not been able to meet the demand from the private sector due to the lack of US Dollars in the country resulting in the continued devaluation of the SIMADI rate.

Greif has historically utilized the official rate which is 6.4 Bolivars/US Dollars to measure Bolivar-denominated monetary assets and liabilities and the respective historical rate to measure Bolivar-denominated nonmonetary assets each reporting period. Due to the continued significant devaluation of the Bolivar and the change in the exchange mechanisms announced earlier this year, the Company has reconsidered which rate best reflects the economics of Grief’s business activities and concluded that the Company should utilize the SIMADI rate to remeasure the Venezuelan operations as of July 31, 2015.

As a result of the change to the SIMADI rate, which reflects the recognition of a devaluation of approximately 97 percent as compared to the official exchange rate previously used, the Company recorded other income of $4.9 million related to the remeasurement of our Venezuelan monetary assets and liabilities during the quarter. In addition, the Company determined that an adjustment of $9.3 million to increase cost of goods sold was needed to reflect the non-monetary inventory assets at net realizable value and, upon review of long-lived assets for impairment, the Company determined that the carrying amount of the long-lived asset was not recoverable in US dollar functional currency and recorded an impairment charge of $15.0 million.

Recently Issued Accounting Standards

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30)”. The objective of this update is to simplify the presentation of debt issuance costs in the financial statements. Under the ASU, the Company would present such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset; amortization of the costs is reported as interest expense. The effective date will be the first quarter of fiscal year 2016. The Company would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period would be adjusted). The ASU requires the Company to “disclose in the first fiscal year after the entity’s adoption date, and in the interim periods within the first fiscal year, the following: (1) The nature and reason for the change in accounting principle; (2) The transition method; (3) A description of the prior-period information that has been retrospectively adjusted; and (4) The effect of the change on the financial statement line item (that is, the debt issuance costs asset and the debt liability). The Company is expected to adopt this guidance beginning November 1, 2015, and the adoption of the new guidance is not expected to materially impact the Company’s financial position, results of operations, comprehensive income or cash flows, other than the related disclosures.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” which makes changes to both the variable interest model and voting interest model and eliminates the indefinite deferral of FASB Statement No. 167, included in ASU 2010-10, for certain investment funds. All reporting entities that hold a variable interest in other legal entities will need to re-evaluate their consolidation conclusions as well as disclosure requirements. This ASU is effective for annual periods beginning after December 15, 2015, and early adoption is permitted, including any interim period. The Company is in the process of determining the potential impact of adopting this guidance on its financial position, results of operations, comprehensive income, cash flow, and disclosures.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The update is effective in fiscal year 2019 using one of two retrospective application methods. The Company is in the process of determining the potential impact of adopting this guidance on its financial position, results of operations, comprehensive income, cash flow and disclosures.

In August 2014, the FASB issued ASU 2014-15 “Presentation of Financial Statements-Going Concern: Disclosure of Uncertainties about an Entity’s Ability to Continue as Going Concern”. The objective of this update is to reduce the diversity in the timing and content of footnote disclosures related to going concern. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. This update applies to all entities that would be required to disclose information about their potential inability to continue as a going concern when “substantial doubt” about their ability to continue as a going concern exists. The Company will be required to evaluate “relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued.” The Company will have to document its consideration of the ASU, but not because the Company believes there is substantial doubt about its ability to continue as a going concern. The Company is expected to adopt this guidance beginning November 1, 2017, and the adoption of the new guidance is not expected to impact the Company’s financial position, results of operations, comprehensive income or cash flows, other than the related disclosures.

Acquisitions and Divestitures (Tables)
Acquisitions

The following table summarizes the Company’s acquisition activity in 2015 and 2014 (Dollars in millions):

 

     # of
Acquisitions
     Purchase Price,
net of Cash
     Tangible
Assets, net
     Intangible
Assets
     Goodwill  

Total 2014 Acquisitions

     2       $ 53.5         2.1         14.0         34.4   
Sale of Non-United States Accounts Receivable (Tables)
Company's Accounts Receivables Programs

The table below contains certain information related to the Company’s accounts receivables programs (Dollars in millions):

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

European RPA

           

Gross accounts receivable sold to third party financial institution

   $ 165.9       $ 266.7       $ 552.6       $ 784.0   

Cash received for accounts receivable sold under the programs

     147.1         235.2         489.5         692.0   

Deferred purchase price related to accounts receivable sold

     18.8         31.5         63.1         92.0   

Loss associated with the programs

     0.3         0.7         1.2         2.0   

Expenses associated with the programs

     —           —           —           —     

Other

           

Gross accounts receivable sold to third party financial institution

   $ 12.0       $ 13.0       $ 36.4       $ 44.1   

Cash received for accounts receivable sold under the program

     12.0         13.0         36.4         44.1   

Deferred purchase price related to accounts receivable sold

     —           —           —           —     

Loss associated with the program

     —           —           —           —     

Expenses associated with the program

     —           —           0.1         0.1   

Total RPAs

           

Gross accounts receivable sold to third party financial institution

   $ 177.9       $ 279.7       $ 589.0       $ 828.1   

Cash received for accounts receivable sold under the program

     159.1         248.2         525.9         736.1   

Deferred purchase price related to accounts receivable sold

     18.8         31.5         63.1         92.0   

Loss associated with the program

     0.3         0.7         1.2         2.0   

Expenses associated with the program

     —           —           0.1         0.1   

 

The table below contains certain information related to the Company’s accounts receivables programs and the impact it has on the Condensed Consolidated Balance Sheets (Dollars in millions):

 

     July 31,
2015
     October 31,
2014
 

European RPA

     

Accounts receivable sold to and held by third party financial institution

   $ 121.6       $ 164.7   

Uncollected deferred purchase price related to accounts receivable sold

     10.9         —     

Deferred purchase price liability related to accounts receivable sold

     —           (23.7

Other

     

Accounts receivable sold to and held by third party financial institution

   $ 4.5       $ 5.0   

Uncollected deferred purchase price related to accounts receivable sold

     —           —     

Total RPAs

     

Accounts receivable sold to and held by third party financial institution

   $ 126.1       $ 169.7   

Uncollected deferred purchase price related to accounts receivable sold

     10.9         —     

Deferred purchase price liability related to accounts receivable sold

     —           (23.7
Inventories (Tables)
Summarization of Inventories

Inventories are stated at the lower of cost or market and are summarized as follows (Dollars in millions):

 

     July 31,
2015
     October 31,
2014
 

Finished Goods

   $ 95.3       $ 100.9   

Raw materials

     211.1         235.9   

Work-in-process

     28.3         44.3   
  

 

 

    

 

 

 
   $ 334.7       $ 381.1   
  

 

 

    

 

 

 
Goodwill and Other Intangible Assets (Tables)

The following table summarizes the changes in the carrying amount of goodwill by segment for the nine month period ended July 31, 2015 (Dollars in millions):

 

     Rigid Industrial
Packaging &
Services (1)
    Paper Packaging      Flexible Products &
Services (2)
     Land Management      Total  

Balance at October 31, 2014

   $ 820.7      $ 59.5       $ —         $ —         $ 880.2   

Goodwill acquired

     —          —           —           —           —     

Goodwill allocated to divestitures and businesses held for sale

     (12.1     —           —           —           (12.1

Goodwill adjustments

     —          —           —           —           —     

Goodwill Impairment charge

     (0.5              (0.5

Currency translation

     (57.3     —           —           —           (57.3
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Balance at July 31, 2015

   $ 750.8      $ 59.5       $ —         $ —         $ 810.3   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) At July 31, 2015 and October 31, 2014, the accumulated goodwill impairment loss was $0.5 million and $0.0 million, respectively.
(2) At July 31, 2015 and October 31, 2014, the accumulated goodwill impairment loss was $50.3 million.

The following table summarizes the carrying amount of net other intangible assets by class as of July 31, 2015 and October 31, 2014 (Dollars in millions):

 

     Gross Intangible Assets      Accumulated
Amortization
     Net Intangible
Assets
 

July 31, 2015:

        

Indefinite lived:

        

Trademarks and patents

   $ 13.1       $ —         $ 13.1   

Definite lived:

        

Customer relationships

     182.0         78.8         103.2   

Trademarks and patents

     24.2         11.6         12.6   

Non-compete agreements

     12.4         4.0         8.4   

Other

     4.9         4.4         0.5   
  

 

 

    

 

 

    

 

 

 

Total

   $ 236.6       $ 98.8       $ 137.8   
  

 

 

    

 

 

    

 

 

 

October 31, 2014:

        

Indefinite lived:

        

Trademarks and patents

   $ 13.8       $ —         $ 13.8   

Definite lived:

        

Customer relationships

     203.3         78.8         124.5   

Trademarks and patents

     15.3         4.7         10.6   

Non-compete agreements

     6.0         5.1         0.9   

Other

     27.8         11.1         16.7   
  

 

 

    

 

 

    

 

 

 

Total

   $ 266.2       $ 99.7       $ 166.5   
  

 

 

    

 

 

    

 

 

 
Restructuring Charges (Tables)

The following is a reconciliation of the beginning and ending restructuring reserve balances for the nine month period ended July 31, 2015 (Dollars in millions):

 

     Employee
Separation
Costs
     Other Costs      Total  

Balance at October 31, 2014

   $ 2.9       $ 1.2       $ 4.1   

Costs incurred and charged to expense

     18.6         8.1         26.7   

Costs paid or otherwise settled

     (10.8      (3.9      (14.7
  

 

 

    

 

 

    

 

 

 

Balance at July 31, 2015

   $ 10.7       $ 5.4       $ 16.1   
  

 

 

    

 

 

    

 

 

 

The change was due to the formulation of new plans during the period offset by the realization of expenses from plans formulated in prior periods. (Dollars in millions):

 

     Total Amounts Expected to
be Incurred
    Amounts expensed during
the nine month period
ended
July 31, 2015
    Amounts Remaining to be
Incurred
 

Rigid Industrial Packaging & Services

      

Employee separation costs

   $ 20.9      $ 15.3      $ 5.6   

Other restructuring costs

     10.6        5.1        5.5   
  

 

 

   

 

 

   

 

 

 
     31.5        20.4        11.1   

Flexible Products & Services

      

Employee separation costs

     9.0        3.1        5.9   

Other restructuring costs

     2.6        2.2        0.4   
  

 

 

   

 

 

   

 

 

 
     11.6        5.3        6.3   

Paper Packaging

      

Employee separation costs

     0.2        0.2        —     

Other restructuring costs

     0.8        0.8        —     
  

 

 

   

 

 

   

 

 

 
     1.0        1.0        —     
   $ 44.1      $ 26.7      $ 17.4   
  

 

 

   

 

 

   

 

 

 
Consolidation of Variable Interest Entities (Tables)
Total Net Assets of Flexible Packaging JV

The following table presents the Flexible Packaging JV total net assets (Dollars in millions):

 

July 31, 2015

   Asset Co.      Global Textile      Trading Co.      Flexible Packaging JV  

Total assets

   $ 99.9       $ 16.5       $ 105.9       $ 222.3   

Total liabilities

     92.2         17.4         56.3         165.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net assets

   $ 7.7       $ (0.9    $ 49.6       $ 56.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

October 31, 2014

   Asset Co.      Global Textile      Trading Co.      Flexible Packaging JV  

Total assets

   $ 113.6       $ 21.6       $ 126.4       $ 261.6   

Total liabilities

     102.7         42.8         51.8         197.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net assets

   $ 10.9       $ (21.2    $ 74.6       $ 64.3   
  

 

 

    

 

 

    

 

 

    

 

 

 
Long-Term Debt (Tables)
Summary of Long-Term Debt

Long-term debt is summarized as follows (Dollars in millions):

 

     July 31, 2015      October 31, 2014  

Amended Credit Agreement

   $ 248.5       $ 169.2   

Senior Notes due 2017

     300.8         301.2   

Senior Notes due 2019

     245.8         245.2   

Senior Notes due 2021

     219.5         252.5   

Amended Receivables Facility

     145.8         110.0   

Other debt

     18.6         26.9   
  

 

 

    

 

 

 
     1,179.0         1,105.0   

Less current portion

     (24.1      (17.6
  

 

 

    

 

 

 

Long-term debt

   $ 1,154.9       $ 1,087.4   
  

 

 

    

 

 

 
Financial Instruments and Fair Value Measurements (Tables)

The following table presents the fair value for those assets and (liabilities) measured on a recurring basis as of July 31, 2015 and October 31, 2014 (Dollars in millions):

 

     July 31, 2015    

Balance sheet

     Fair Value Measurement    
     Level 1      Level 2     Level 3      Total    

Location

Foreign exchange hedges

     —           0.8        —           0.8      Prepaid expenses and other current assets

Foreign exchange hedges

     —           (0.5     —           (0.5   Other current liabilities

Insurance annuity

     —           —          19.6         19.6      Other long-term assets
  

 

 

    

 

 

   

 

 

    

 

 

   

Total*

   $ —         $ 0.3      $ 19.6       $ 19.9     
  

 

 

    

 

 

   

 

 

    

 

 

   
     October 31, 2014    

Balance sheet

Location

     Fair Value Measurement    
     Level 1      Level 2     Level 3      Total    

Interest rate derivatives

   $ —         $ (0.2   $ —         $ (0.2   Other long-term liabilities

Foreign exchange hedges

     —           0.6        —           0.6      Prepaid expenses and other current assets

Foreign exchange hedges

     —           (0.2     —           (0.2   Other current liabilities

Insurance annuity

     —           —          22.6         22.6      Other long-term assets
  

 

 

    

 

 

   

 

 

    

 

 

   

Total*

   $ —         $ 0.2      $ 22.6       $ 22.8     
  

 

 

    

 

 

   

 

 

    

 

 

   

 

* The carrying amounts of cash and cash equivalents, trade accounts receivable, accounts payable, current liabilities and short-term borrowings as of July 31, 2015 and October 31, 2014 approximate their fair values because of the short-term nature of these items and are not included in this table.

The following table presents the estimated fair values of the Company’s Senior Notes and the Assets held by special purpose entities (Dollars in millions):

 

     July 31, 2015      October 31, 2014  

Senior Notes due 2017

     

Estimated fair value

   $ 317.3       $ 325.5   

Senior Notes due 2019

     

Estimated fair value

     278.1         287.5   

Senior Notes due 2021

     

Estimated fair value

     260.7         297.7   

Assets held by special purpose entities

     

Estimated fair value

     54.4         54.5   

The following table presents quantitative information about the significant unobservable inputs used to determine the fair value of the impairment of long-lived assets held and used for the nine months ended July 31, 2015.

 

     Fair Value of
Impairment
     Valuation
Technique
   Unobservable
Input
   Range
of Input Values
     (in millions)                 

July 31, 2015

           

Impairment of Long-lived assets - Land & Building

   $ 17.7       Broker Quote/
Indicative Bids
   Indicative Bids    N/A

Impairment of Long-lived assets - Machinery & Equipment

   $ 3.0       Sales Value    Sales Value    N/A
Post Retirement Benefit Plans (Tables)

The components of net periodic pension cost include the following (Dollars in millions):

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

Service cost

   $ 4.1       $ 3.9       $ 12.4       $ 11.7   

Interest cost

     7.1         7.4         21.3       $ 22.2   

Expected return on plan assets

     (8.4      (8.5      (25.3    $ (25.5

Amortization of prior service cost, initial net asset and net actuarial gain

     3.7         2.7         11.0       $ 8.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net periodic pension costs

   $ 6.5       $ 5.5       $ 19.4       $ 16.5   
  

 

 

    

 

 

    

 

 

    

 

 

 

The components of net periodic cost for postretirement benefits include the following (Dollars in millions):

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

Service cost

   $ —         $ —         $ —         $ —     

Interest cost

     0.1         0.2         0.5         0.6   

Amortization of prior service cost and recognized actuarial gain

     (0.4      (0.4      (1.2      (1.2
  

 

 

    

 

 

    

 

 

    

 

 

 

Net periodic benefit for postretirement benefits

   $ (0.3    $ (0.2    $ (0.7    $ (0.6
  

 

 

    

 

 

    

 

 

    

 

 

 
Earnings Per Share (Tables)

The Company calculates EPS as follows:

 

Basic Class A EPS   =  

40% * Average Class A Shares Outstanding

  *  

Undistributed Net Income

  +   Class A Dividends Per Share
    40% * Average Class A Shares Outstanding + 60% * Average Class B Shares Outstanding     Average Class A Shares Outstanding    
Diluted Class A EPS   =  

40% * Average Class A Shares Outstanding

  *  

Undistributed Net Income

  +   Class A Dividends Per Share
    40% * Average Class A Shares Outstanding + 60% * Average Class B Shares Outstanding     Average Diluted Class A Shares Outstanding    
Basic Class B EPS   =  

60% * Average Class B Shares Outstanding

  *  

Undistributed Net Income

  +   Class B Dividends Per Share
    40% * Average Class A Shares Outstanding + 60% * Average Class B Shares Outstanding     Average Class B Share Outstanding    

 

* Diluted Class B EPS calculation is identical to Basic Class B calculation

The following table provides EPS information for each period, respectively:

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

Numerator for basic and diluted EPS

           

Net income attributable to Greif, Inc.

   $ 8.6       $ 13.7       $ 59.5       $ 82.8   

Cash dividends

     (24.8      (24.7      (74.0      (73.8
  

 

 

    

 

 

    

 

 

    

 

 

 

Undistributed net income (loss) attributable to Greif, Inc.

   $ (16.2    $ (11.0    $ (14.5    $ 9.0   

The following table summarizes the Company’s Class A and Class B common and treasury shares as of the specified dates:

 

     Authorized Shares      Issued Shares      Outstanding
Shares
     Treasury Shares  

July 31, 2015:

           

Class A Common Stock

     128,000,000         42,281,920         25,693,564         16,588,356   

Class B Common Stock

     69,120,000         34,560,000         22,119,966         12,440,034   

October 31, 2014:

           

Class A Common Stock

     128,000,000         42,281,920         25,603,452         16,678,468   

Class B Common Stock

     69,120,000         34,560,000         22,119,966         12,440,034   

The following is a reconciliation of the shares used to calculate basic and diluted earnings per share:

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

Class A Common Stock:

           

Basic shares

     25,692,973         25,576,452         25,659,750         25,529,049   

Assumed conversion of stock options

     5,574         5,500         5,574         10,587   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted shares

     25,698,547         25,581,952         25,665,324         25,539,636   
  

 

 

    

 

 

    

 

 

    

 

 

 

Class B Common Stock:

           

Basic and diluted shares

     22,119,966         22,119,966         22,119,966         22,119,966   
  

 

 

    

 

 

    

 

 

    

 

 

 
Equity and Comprehensive Income (Loss) (Tables)

The following table summarizes the changes of equity from October 31, 2014 to July 31, 2015 (Dollars in millions, shares in thousands):

 

    Capital Stock     Treasury Stock                                
    Common
Shares
    Amount     Treasury
Shares
    Amount     Retained
Earnings
    Accumulated Other
Comprehensive
Income (Loss)
    Greif, Inc.
Equity
    Non
controlling
interests
    Total
Equity
 

As of October 31, 2014

    47,724      $ 135.5        29,118      $ (130.7   $ 1,411.7      $ (274.4   $ 1,142.1      $ 81.1      $ 1,223.2   

Net income

            59.5          59.5        (1.5     58.0   

Other comprehensive loss:

                 

- foreign currency translation

              (87.7     (87.7     (21.8     (109.5

- Net reclassification of cash flow hedges to earnings, net of immaterial income tax expense

              0.1        0.1          0.1   

- minimum pension liability adjustment, net of income tax expense of $2.0 million

              5.5        5.5          5.5   
             

 

 

     

 

 

 

Comprehensive loss

                (22.6       (45.9
             

 

 

     

 

 

 

Acquisition of noncontrolling interests and other

            (0.4       (0.4     (10.1     (10.5

Dividends paid to Greif, Inc. shareholders

            (74.0       (74.0       (74.0

Dividends paid to noncontrolling interests

                —          (4.0     (4.0

Stock options exercised

    10        0.2        (10     —              0.2          0.2   

Restricted stock executives and directors

    31        1.4        (31     —              1.4          1.4   

Long-term incentive shares issued

    49        2.0        (49     0.1            2.1          2.1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of July 31, 2015

    47,814      $ 139.1        29,028      $ (130.6   $ 1,396.8      $ (356.5   $ 1,048.8      $ 43.7      $ 1,092.5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table summarizes the changes of equity from October 31, 2013 to July 31, 2014 (Dollars in millions, shares in thousands):

 

    Capital Stock     Treasury Stock                                
    Common
Shares
    Amount     Treasury
Shares
    Amount     Retained
Earnings
    Accumulated Other
Comprehensive
Income (Loss)
    Greif, Inc.
Equity
    Non
controlling
interests
    Total
Equity
 

As of October 31, 2013

    47,577      $ 129.4        29,265      $ (131.0   $ 1,418.8      $ (152.6   $ 1,264.6      $ 115.3      $ 1,379.9   

Net income

            82.8          82.8        (2.4     80.4   

Other comprehensive income:

                 

- foreign currency translation

              (36.3     (36.3     0.3        (36.0

- Net reclassification of cash flow hedges to earnings, net of income tax expense of $0.2 million

              0.4        0.4          0.4   

- minimum pension liability adjustment, net of income tax benefit of $0.2 million

              (0.5     (0.5       (0.5
             

 

 

     

 

 

 

Comprehensive Income

                46.4          44.3   
             

 

 

     

 

 

 

Noncontrolling interests, loan conversion and other

            (1.2       (1.2     15.2        14.0   

Dividends paid to Greif, Inc. shareholders

            (73.8       (73.8       (73.8

Stock options exercised

    68        1.6        (68     0.1            1.7          1.7   

Restricted stock executives and directors

    22        1.1        (22     0.1            1.2          1.2   

Long-term incentive shares issued

    56        2.9        (56     0.1            3.0          3.0   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of July 31, 2014

    47,723      $ 135.0        29,119      $ (130.7   $ 1,426.6      $ (189.0   $ 1,241.9      $ 128.4      $ 1,370.3   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table provides the rollforward of accumulated other comprehensive income for the nine months ended July 31, 2015 (Dollars in millions):

 

     Foreign
Currency
Translation
     Cash Flow
Hedges
     Minimum Pension
Liability
Adjustment
     Accumulated
Other
Comprehensive
Income (Loss)
 

Balance as of October 31, 2014

   $ (144.5    $ (0.1    $ (129.8    $ (274.4

Other Comprehensive Income (Loss) Before Reclassifications

     (87.7      —           5.5         (82.2

Amounts reclassified from Accumulated Other Comprehensive Loss

     —           0.1         —           0.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current-period Other Comprehensive Income (Loss)

     (87.7      0.1         5.5         (82.1
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of July 31, 2015

   $ (232.2    $ —         $ (124.3    $ (356.5
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table provides the rollforward of accumulated other comprehensive income for the nine months ended July 31, 2014 (Dollars in millions):

 

     Foreign
Currency
Translation
     Cash Flow
Hedges
     Minimum Pension
Liability
Adjustment
     Accumulated
Other
Comprehensive
Income (Loss)
 

Balance as of October 31, 2013

   $ (56.9    $ (0.6    $ (95.1    $ (152.6

Other Comprehensive Income (Loss) Before Reclassifications

     (36.3      (0.1      (0.5      (36.9

Amounts reclassified from Accumulated Other Comprehensive Loss

     —           0.5         —           0.5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current-period Other Comprehensive Income (Loss)

     (36.3      0.4         (0.5      (36.4
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of July 31, 2014

   $ (93.2    $ (0.2    $ (95.6    $ (189.0
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table provides amounts reclassified out of accumulated other comprehensive income for the nine months ended July 31 (Dollars in millions):

 

Details about Accumulated Other
Comprehensive Income Components

   Ammount Reclassified from Accumulated
Other Comprehensive Income (Loss)
     Location on Consolidated
Consolidated Statements of Income
     2015      2014       

Cash Flow Hedges

   $ 0.1       $ 0.5       Other expense, net
Business Segment Information (Tables)

The following segment information is presented for the periods indicated (Dollars in millions):

 

     Three months ended
July 31,
     Nine months ended
July 31,
 
     2015      2014      2015      2014  

Net sales

           

Rigid Industrial Packaging & Services

   $ 669.0       $ 827.7       $ 1,985.3       $ 2,324.3   

Paper Packaging

     176.7         180.6         496.3         520.2   

Flexible Products & Services

     79.2         107.3         249.3         325.8   

Land Management

     5.1         8.4         17.3         20.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 930.0       $ 1,124.0       $ 2,748.2       $ 3,191.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit (loss):

           

Rigid Industrial Packaging & Services

   $ 29.5       $ 43.0       $ 75.5       $ 123.4   

Paper Packaging

     21.5         27.9         76.7         84.4   

Flexible Products & Services

     (9.7      (12.9      (23.8      (22.4

Land Management

     2.9         3.3         32.3         26.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating profit

   $ 44.2       $ 61.3       $ 160.7       $ 211.8   
  

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation, depletion and amortization expense:

           

Rigid Industrial Packaging & Services

   $ 21.8       $ 26.8       $ 70.2       $ 81.1   

Paper Packaging

     6.8         7.3         21.5         22.6   

Flexible Products & Services

     2.2         3.3         6.6         10.7   

Land Management

     0.8         1.4         2.6         3.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total depreciation, depletion and amortization expense

   $ 31.6       $ 38.8       $ 100.9       $ 117.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents net sales to external customers by geographic area (Dollars in millions):

 

     Three months ended July 31,      Nine months ended July 31,  
     2015      2014      2015      2014  

Net sales:

           

United States

   $ 431.5       $ 502.4       $ 1,269.7       $ 1,417.3   

Europe, Middle East and Africa

     337.3         428.2         979.5         1,216.7   

Asia Pacific and other Americas

     161.2         193.4         499.0         557.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 930.0       $ 1,124.0       $ 2,748.2       $ 3,191.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents total assets by segment and total properties, plants, and equipment, net by geographic area (Dollars in millions):

 

     July 31, 2015      October 31, 2014  

Assets:

     

Rigid Industrial Packaging & Services

   $ 2,200.5       $ 2,416.6   

Paper Packaging

     442.5         418.2   

Flexible Products & Services

     211.4         251.0   

Land Management

     342.3         319.0   
  

 

 

    

 

 

 

Total segments

     3,196.7         3,404.8   

Corporate and other

     218.6         262.6   
  

 

 

    

 

 

 

Total assets

   $ 3,415.3       $ 3,667.4   
  

 

 

    

 

 

 

Properties, plants and equipment, net:

     

United States

   $ 735.7       $ 716.5   

Europe, Middle East and Africa

     339.8         387.5   

Asia Pacific and other Americas

     157.8         189.0   
  

 

 

    

 

 

 

Total properties, plants and equipment, net

   $ 1,233.3       $ 1,293.0   
  

 

 

    

 

 

 
Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Detail)(USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Jul. 31, 2015
Jul. 31, 2014
Jul. 31, 2015
Jul. 31, 2014
Basis Of Presentation And Significant Accounting Policies [Line Items]
Gain from Venezuela monetary assets and liabilities remeasurement
$4.9
Loss for Venezuela non-monetary assets to net realizable value
9.3
Impairment charge for long-lived assets
17.6
15.4
22.3
15.6
Foreign currency devaluation percentage
97.00%
Venezuelan Property, Plants and Equipment, Net [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Impairment charge for long-lived assets
$15.0
$15.0
Official Exchange [Member]
Basis Of Presentation And Significant Accounting Policies [Line Items]
Foreign currency exchange rate, remeasurement
6.4
6.4
Acquisitions and Divestitures - Acquisitions (Detail)(USD $)
In Millions, unless otherwise specified
9 Months Ended
Jul. 31, 2015
Acquisition
Jul. 31, 2014
Acquisition
Oct. 31, 2014
Business Acquisition [Line Items]
Number of acquisitions
0
2
Purchase Price, net of Cash
$1.5
$53.5
Goodwill
810.3
880.2
Total 2014 Acquisitions [Member]
Business Acquisition [Line Items]
Number of acquisitions
2
Purchase Price, net of Cash
53.5
Tangible Assets, net
2.1
Intangible Assets
14.0
Goodwill
$34.4
Acquisitions and Divestitures - Additional Information (Detail)(USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Jul. 31, 2015
Jul. 31, 2014
Jul. 31, 2015
Divestiture
Acquisition
Jul. 31, 2014
Acquisition
Divestiture
Business Acquisition [Line Items]
Number of acquisitions
0
2
Number of divestitures
8
1
(Gain) loss on divestitures
$(1.1)
$9.1
$8.5
$9.7
Cash related to sale of business
18.9
18.9
Notes receivables related to sale of business
3.6
3.6
Terms related to sale of business
3 months to five years
Proceeds from divestitures
$18.9
$30.1
Rigid Industrial Packaging & Services [Member]
Business Acquisition [Line Items]
Number of divestitures
6
1
Flexible Products & Services [Member]
Business Acquisition [Line Items]
Number of divestitures
2
Sale of Non-United States Accounts Receivable - Additional Information (Detail)
Jul. 31, 2015
USD ($)
Jul. 31, 2015
Singapore RPA [Member]
USD ($)
Jul. 31, 2015
Singapore RPA [Member]
SGD ($)
Jul. 31, 2015
European RPA [Member]
USD ($)
Jul. 31, 2015
European RPA [Member]
EUR ()
Finance Receivable Transferred To Held For Sale [Line Items]
Financing receivable maximum amount under receivable purchase agreement
$11,000,000
$15,000,000
$110,600,000
100,000,000
Receivables held by third party
$0
Sale of Non-United States Accounts Receivable - Company's Accounts Receivables Programs (Detail)(USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Jul. 31, 2015
Jul. 31, 2014
Jul. 31, 2015
Jul. 31, 2014
Oct. 31, 2014
European RPA [Member]
Finance Receivable Transferred To Held For Sale [Line Items]
Gross accounts receivable sold to third party financial institution
$165.9
$266.7
$552.6
$784.0
Cash received for accounts receivable sold under the program
147.1
235.2
489.5
692.0
Deferred purchase price related to accounts receivable sold
18.8
31.5
63.1
92.0
Loss associated with the program
0.3
0.7
1.2
2.0
Accounts receivable sold to and held by third party financial institution
121.6
121.6
164.7
Uncollected deferred purchase price related to accounts receivable sold
10.9
10.9
Deferred purchase price liability related to accounts receivable sold
(23.7)
Other Receivables Purchase Agreement [Member]
Finance Receivable Transferred To Held For Sale [Line Items]
Gross accounts receivable sold to third party financial institution
12.0
13.0
36.4
44.1
Cash received for accounts receivable sold under the program
12.0
13.0
36.4
44.1
Expenses associated with the program
0.1
0.1
Accounts receivable sold to and held by third party financial institution
4.5
4.5
5.0
Total RPAs [Member]
Finance Receivable Transferred To Held For Sale [Line Items]
Gross accounts receivable sold to third party financial institution
177.9
279.7
589.0
828.1
Cash received for accounts receivable sold under the program
159.1
248.2
525.9
736.1
Deferred purchase price related to accounts receivable sold
18.8
31.5
63.1
92.0
Loss associated with the program
0.3
0.7
1.2
2.0
Expenses associated with the program
0.1
0.1
Accounts receivable sold to and held by third party financial institution
126.1
126.1
169.7