Greif reports second quarter 2016 results
Delaware, ohio--(business wire)--greif, inc. (nyse: gef, gef.b), a world leader in industrial packaging products and services, announced second quarter 2016 results. pete watson, president and chief executive officer, stated “we are pleased to report another improved quarter at greif. our margins expanded compared to the previous year as we continue to implement fundamental operating improvements across the portfolio. performance was particularly strong in our rigid industrial packaging & services business, which helped to offset challenging market conditions impacting our paper packaging & services business. i am confident that greif is headed in the right direction and we remain focused on creating value for both our customers and shareholders.” highlights include: revised fiscal year 2016 class a earnings per share guidance of $2.20 - $2.46 per share, excluding gains and losses on the sales of businesses, timberland and property, plant and equipment, acquisition costs and restructuring and impairment charges. net income for the second quarter of 2016 attributable to the corporation that totaled $31.4 million or $0.53 per diluted class a share compared with net income of $20.8 million or $0.35 per diluted class a share for the second quarter of 2015. earnings, excluding the impact of special items1, of $0.47 per diluted class a share for the second quarter of 2016 compared to $0.53 per diluted class a share for the second quarter of 2015. gross profit of $173.7 million for the second quarter of 2016 compared to $181.1 million for the second quarter of 2015. gross profit margin improved to 20.7 percent for the second quarter of 2016 from 19.8 percent for the same period in 2015. cash provided by operating activities increased $51.1 million for the second quarter of 2016 compared to the same period in 2015. free cash flow2 improved $66.7 million for the second quarter of 2016 compared to the second quarter of 2015 and long-term debt decreased $52.2 million since year-end. net sales of $839.6 million for the second quarter of 2016 compared to second quarter 2015 net sales of $915.9 million. after adjusting for the effect of divestitures for both quarters and currency translation for the second quarter 20163, sales were flat compared to the second quarter of 2015. __________________________ segment results net sales are impacted primarily by the volume of products sold, selling prices, product mix and the impact of changes in foreign currencies against the u.s. dollar. the tables below show the percentage impact of each of these items on net sales for the second quarter of 2016 as compared to the second quarter of 2015 for the business segments with manufacturing operations. the first table excludes the impact of divestitures while the second is not adjusted for divestitures. rigid industrialpackaging & services paper packaging &services flexible products& services rigid industrialpackaging & services paper packaging &services flexible products& services rigid industrial packaging & services net sales decreased to $589.6 million for the second quarter of 2016 compared with $666.6 million for the second quarter of 2015. excluding the impact of divestitures4, net sales decreased $57.9 million to $568.0 million for the second quarter 2016 compared to $625.9 million for the second quarter 2015, due primarily to the negative impact of foreign currency. operating profit was $59.2 million for the second quarter of 2016 compared to operating profit of $25.8 million for the second quarter of 2015. the increase was primarily attributable to a $20.3 million increase in gain/loss on disposal of properties, plants, equipment and businesses, net, a reduction in restructuring costs of $3.5 million and a reduction in non-cash asset impairment charges of $3.1 million, as well as an improvement in gross profit margin of 2.1 percent and reductions in sg&a of $8.8 million. operating profit before special items and excluding the impact of divestitures was $54.3 million for the second quarter of 2016 versus $49.4 million for the second quarter of 2015, due primarily to improvements in gross profit margin and reductions in sg&a costs related to transformation efforts across the segment, partially offset by the negative impact of foreign currency. paper packaging & services net sales increased 4.2 percent to $167.2 million for the second quarter of 2016 compared with $160.4 million for the second quarter of 2015. the increase was primarily due to volume increases related to increased containerboard output from the riverville modernization project in the third quarter of 2015 and the addition of two lines in the corrugator business, offset by a reduction in prices as a result of a change in index prices impacting the first and second quarters of 2016. operating profit was $24.2 million for the second quarter of 2016 compared with $27.1 million for the second quarter of 2015. higher production costs for the second quarter of 2016, as compared to the second quarter of 2015, more than offset the increase in net sales. flexible products & services net sales decreased $5.8 million to $76.2 million for the second quarter of 2016 compared with $82.0 million for the second quarter of 2015, due primarily to reduced volumes and the negative impact of foreign currency. operating loss was $2.9 million for the second quarter of 2016 versus an operating loss of $5.3 million for the second quarter of 2015. operating loss before special items and excluding the impact of divestitures was $1.1 million for the second quarter of 2016 versus $5.7 million for the second quarter of 2015. the decrease in operating loss before special items and excluding the impact of divestitures was primarily related to improved margins as a result of transformation efforts in commercial excellence and reductions in sg&a expense and transportation and other production costs, partially offset by the impact of reduced sales volumes and the impact of additional labor expenses incurred as a result of moving to an in-house labor model in turkey. land management net sales decreased to $6.6 million for the second quarter of 2016 compared with $6.9 million for the second quarter of 2015. operating profit before special items was $2.0 million for the second quarter of 2016 compared with $2.6 million for the second quarter of 2015, due primarily to the decrease in sales compared to the second quarter of 2015. income taxes income tax expense for the quarter totaled $28.7 million on pre-tax income of $61.2 million or 46.9%. income tax expense for the quarter reflected the application of the company’s annual projected effective tax rate, which is impacted by net discrete losses for which there is not a proportionate tax benefit recognized, adjustments to uncertain tax position estimates and the impact of losses in jurisdictions with a valuation allowance, for which the company receives no tax benefit. the annual effective tax rate projection for the 2016 fiscal year remains in the range of 39% to 41%. dividends on june 7, 2016, the board of directors declared quarterly cash dividends of $0.42 per share of class a common stock and $0.63 per share of class b common stock. dividends are payable on july 1, 2016, to stockholders of record at the close of business on june 20, 2016. senior notes due 2017 the company reclassified $300 million of senior notes to current portion of long-term debt during the quarter because the stated maturity date for those senior notes is february 2017. the company intends to refinance those senior notes prior to the maturity date. ______________________________________ 4 a summary of all adjustments by business segment related to the impact of divestitures and special items that are excluded from net sales, gross profit and operating profit is set forth in the gaap to non-gaap reconciliation selected financial information excluding the impact of divestitures in the financial schedules that are part of this release company outlook the company has revised its 2016 class a earnings per share to $2.20 - $2.46 per share, which excludes gains and losses on the sales of businesses, timberland and property, plant and equipment, acquisition costs and restructuring and impairment charges. the company’s transformation activities will more than offset the impact of a sluggish global industrial economy and weaker containerboard environment. ______________________________________ selected financial highlights special items impact of total special items, net of tax, on diluted class a earnings per share attributable to greif, inc. april 30, 2016 october 31,2015 october 31,2014 ______________________________________ 5 conference call the company will host a conference call to discuss the second quarter 2016 results on june 9, 2016, at 8:30 a.m. eastern time (et). to participate, domestic callers should call 877-201-0168. the conference id is 16173742. the number for international callers is 647-788-4901. phone lines will open at 8:00 a.m. et. the conference call will also be available through a live webcast, including slides, which can be accessed at www.greif.com by clicking on the investors tab and searching under the events calendar. a replay of the conference call will be available on the company’s website approximately two hours following the call. the company encourages interested investors, analysts and portfolio managers to submit questions in advance of the conference call regarding greif’s quarterly performance to investors@greif.com. questions will be accepted until wednesday, june 8 at 5:00 p.m. et. the company will address both previously submitted questions and questions asked during the call. about greif greif is a world leader in industrial packaging products and services. the company produces steel, plastic, fibre, flexible and corrugated containers and containerboard, and provides reconditioning, blending, filling and packaging services for a wide range of industries. greif also manages timber properties in north america. the company is strategically positioned in 50 countries to serve global as well as regional customers. additional information is on the company's website at www.greif.com. forward-looking statements this release contains forward-looking statements within the meaning of the private securities litigation reform act of 1995. the words “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “aspiration,” “objective,” “project,” “believe,” “continue,” “on track” or “target” or the negative thereof and similar expressions, among others, identify forward-looking statements. all forward-looking statements are based on assumptions, expectations and other information currently available to management. such forward-looking statements are subject to certain risks and uncertainties that could cause the company’s actual results to differ materially from those forecasted, projected or anticipated, whether expressed or implied. the most significant of these risks and uncertainties are described in part i of the company’s annual report on form 10-k for the fiscal year ended oct. 31, 2015. the company undertakes no obligation to update or revise any forward-looking statements. although the company believes that the expectations reflected in forward-looking statements have a reasonable basis, the company can give no assurance that these expectations will prove to be correct. forward-looking statements are subject to risks and uncertainties that could cause the company’s actual results to differ materially from those forecasted, projected or anticipated, whether expressed in or implied by the statements. such risks and uncertainties that might cause a difference include, but are not limited to, the following: (i) historically, our business has been sensitive to changes in general economic or business conditions, (ii) our operations subject us to currency exchange and political risks that could adversely affect our results of operations, (iii) the current and future challenging global economy and disruption and volatility of the financial and credit markets may adversely affect our business, (iv) the continuing consolidation of our customer base and suppliers may intensify pricing pressure, (v) we operate in highly competitive industries, (vi) our business is sensitive to changes in industry demands, (vii) raw material and energy price fluctuations and shortages may adversely impact our manufacturing operations and costs, (viii) we may encounter difficulties arising from acquisitions, (ix) we may incur additional restructuring costs and there is no guarantee that our efforts to reduce costs will be successful, (x) tax legislation initiatives or challenges to our tax positions may adversely impact our results or condition, (xi) full realization of our deferred tax assets may be affected by a number of factors, (xii) several operations are conducted by joint ventures that we cannot operate solely for our benefit, (xiii) our ability to attract, develop and retain talented and qualified employees, managers and executives is critical to our success, (xiv) our business may be adversely impacted by work stoppages and other labor relations matters, (xv) our pension plans are underfunded and will require future cash contributions, and our required future cash contributions could be higher than we expect, each of which could have a material adverse effect on our financial condition and liquidity, (xvi) we may be subject to losses that might not be covered in whole or in part by existing insurance reserves or insurance coverage, (xvii) our business depends on the uninterrupted operations of our facilities, systems and business functions, including our information technology and other business systems, (xviii) a security breach of customer, employee, supplier or company information may have a material adverse effect on our business, financial condition and results of operations, (xix) legislation/regulation related to environmental and health and safety matters and corporate social responsibility could negatively impact our operations and financial performance, (xx) product liability claims and other legal proceedings could adversely affect our operations and financial performance, (xxi) we may incur fines or penalties, damage to our reputation or other adverse consequences if our employees, agents or business partners violate, or are alleged to have violated, anti-bribery, competition or other laws, (xxii) changing climate, climate change regulations and greenhouse gas effects may adversely affect our operations and financial performance, (xxiii) the frequency and volume of our timber and timberland sales will impact our financial performance, (xxiv) changes in u.s. generally accepted accounting principles and sec rules and regulations could materially impact our reported results, (xxv) if the company fails to maintain an effective system of internal control, the company may not be able to accurately report financial results or prevent fraud, and (xxvi) the company has a significant amount of goodwill and long-lived assets which, if impaired in the future, would adversely impact our results of operations. changes in business results may impact our book tax rates. the risks described above are not all-inclusive, and given these and other possible risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. for a detailed discussion of the most significant risks and uncertainties that could cause our actual results to differ materially from those forecasted, projected or anticipated, see “risk factors” in part i, item 1a of our most recently filed form 10-k and our other filings with the securities and exchange commission. all forward-looking statements made in this news release are expressly qualified in their entirety by reference to such risk factors. except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. income before income tax expense and equity earnings of unconsolidated affiliates, net $ $ net income increase (decrease) in cash from changes in certain assets and liabilities and other net cash provided by (used in) operating activities three months ended six months ended 7 net cash provided by operating activities for venezuela free cash flow excluding the impact of venezuela operations 11 net cash provided by (used in) operating activities, excluding the impact of venezuela operations less: cash paid for capital expenditures, excluding the impact of venezuela operations free cash flow, excluding the impact of venezuela operations free cash flow excluding the impact of venezuela operations is defined as net cash provided by operating activities, excluding venezuela’s net cash provided by operating activities, less capital expenditures, excluding venezuela’s capital expenditures. the information is relevant and presented due to the impact of the devaluation of the venezuelan currency at the end of the third quarter 2015 from 6.3 bolivars per usd to 199.4 bolivars per usd. the translated value of both the cash provided by operating activities of venezuela and the cash paid for capital expenditures does not reflect the true economic impact to the company because actual conversion of bolivars to u.s. dollars at the official exchange rate used for the first three quarters of 2015 would not have been possible. ______________________________________ less: (gain) loss on disposal of properties, plants, equipment and businesses, net less: (gain) loss on disposal of properties, plants, equipment and businesses, net less: (gain) loss on disposal of properties, plants, equipment and businesses, net less: (gain) loss on disposal of properties, plants, equipment and businesses, net 2016 13 2016 13 2015 13 see table contained herein entitled gaap to non-gaap reconciliation segment operating profit (loss) before special items for a reconciliation of each segment’s operating profit (loss) before special items.
