Greif reports third quarter 2015 results
Delaware, ohio--(business wire)--greif, inc. (nyse: gef, gef.b), a world leader in industrial packaging products and services, today reported third quarter 2015 net income attributable to the corporation totaling $8.6 million or $0.15 per diluted class a share on sales of $930.0 million compared with net income of $13.7 million or $0.23 per diluted class a share on sales of $1,124.0 million in the third quarter of 2014. after adjusting for the effect of divestitures for both quarters and currency translation for the third quarter 20151, sales were 2.7 percent lower for the quarter when compared to the third quarter of 2014 primarily due to lower raw material costs. excluding the impact of special items2, earnings were $0.60 per diluted class a share for the third quarter of 2015 compared to $0.58 per diluted class a share for the third quarter of 2014. david fischer, president and chief executive officer, stated, “we are pleased with the progress of our transformation initiative. while much work remains, during the third quarter we continued to reduce complexity in our businesses, achieved a 16% decrease in sg&a expenses excluding the impact of currency translation compared to a year ago, and improved capacity utilization in our rigid industrial packaging segment. the benefits from these concentrated efforts are becoming more evident and positive momentum is increasing with each passing month. i am especially pleased with the hard work and efforts of so many greif colleagues all over the world to achieve our stated goals.” mr. fischer added, “concerning the growth elements of our transformation activities, we are equally encouraged with the progress made on several key initiatives including our ibc global expansion efforts and by the exceptional performance of recently completed investments at the riverville, virginia mill and the additional corrugator in our paper packaging segment. these transformation improvements bode well for 2016.” rigid industrial packaging & services net sales decreased 19.2 percent to $669.0 million for the third quarter of 2015 compared with $827.7 million for the third quarter of 2014. excluding the impact of divestitures3, net sales decreased 14.4 percent to $667.9 million for the third quarter of 2015 compared with $780.7 million for the third quarter of 2014. the decrease in net sales was primarily due to the negative impact of foreign currency translation of 10.8 percent and price decreases of 3.7 percent, due mainly to the impact of decreases in raw material costs, compared to the third quarter of 2014, respectively. operating profit was $29.5 million for the third quarter of 2015 compared to $43.0 million for the third quarter of 2014. the decrease was primarily attributable to the negative impact of foreign currency translation, higher restructuring and non-cash asset impairment charges, and a write-down of the value of the company’s inventory in venezuela of $9.3 million as part of the overall remeasurement of the venezuelan balance sheet discussed further below. operating profit before special items and excluding the impact of divestitures was $60.2 million for the third quarter of 2015 versus $63.0 million for the third quarter of 2014. 1 2 3 paper packaging net sales decreased 2.2 percent to $176.7 million for the third quarter of 2015 compared with $180.6 million for the third quarter of 2014. excluding the impact of divestitures, net sales were $176.7 million for the third quarter of 2015 compared with $175.6 million for the third quarter of 2014. the increase was attributable to slightly higher volumes in the company’s sheet business. operating profit was $21.5 million for the third quarter of 2015 compared with $27.9 million for the third quarter of 2014. the decrease was primarily due to the planned shut-down of the riverville facility for a longer period of time in the third quarter of 2015 compared to the third quarter of 2014, lower margins in containerboard and sheet feeder operations due to pricing pressure from new market entrants and an increase in restructuring charges and non-cash asset impairment charges of $0.8 million. the company also made immaterial adjustments to certain reserves and inventories to more appropriately reflect those balances. the adjustments primarily impacted cost of products sold for paper packaging. flexible products & services net sales decreased 26.2 percent to $79.2 million for the third quarter of 2015 compared with $107.3 million for the third quarter of 2014. excluding the impact of divestitures, net sales decreased 13.5 percent to $79.2 million for the third quarter of 2015 compared with $91.6 million for the third quarter of 2014. the decrease was primarily attributable to the impact of decreased volumes of 8.9 percent, which were more than offset by an 11.1 percent increase in prices, and the negative impact of foreign currency translation of 15.7 percent. operating loss was $9.7 million for the third quarter of 2015 versus an operating loss of $12.9 million for the third quarter of 2014. operating loss before special items and excluding the impact of divestitures was $4.3 million for the third quarter of 2015 versus $5.6 million for the third quarter of 2014. this decrease in operating loss was primarily due to lower personnel, security and alternative supply costs compared to the prior period, (because the prior period included costs associated with the occupation of the hadimkoy facility) as well as reductions in sg&a and production costs as a result of transformation efforts in the segment, partially offset by higher costs of the move to an in-house labor force, which was prompted primarily by changes in the local regulatory environment. land management net sales decreased 39.3 percent to $5.1 million for the third quarter of 2015 compared with $8.4 million for the third quarter of 2014. the decrease was due to lower timber sales as planned for the third quarter of 2015. operating profit was $2.9 million for the third quarter of 2015 compared with $3.3 million for the third quarter of 2014. the decrease was due to the same factors impacting the segment’s net sales. venezuela hyperinflation adjustments 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. as a result of recent government action and significant continued devaluation of the bolivar, the company has reconsidered which of the available exchange rates best reflects the economics of greif’s business activities and has concluded that the company should utilize the simadi rate to remeasure its venezuelan operations effective july 31, 2015. 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. as a result of the utilization of the simadi rate and associated local currency denominated balance sheet remeasurement on july 31, 2015, the company recorded after-tax other income of $4.9 million related to the remeasurement of its venezuelan monetary assets and liabilities during the third quarter. in addition, the company recorded an adjustment of $9.3 million to write down the value of its inventory to net realizable value on a us dollar basis. finally, upon review of long-lived assets for impairment, the company determined that the carrying amount of those assets in venezuela was not recoverable in us dollar functional currency and recorded an impairment charge of $15.0 million. the company’s overall gross margin percentage for the quarter is 1% lower due to the impact of the inventory adjustment. results of the company’s venezuelan operations will be translated to us dollars using the simadi exchange rate as of august 1, 2015. dividends on september 1, 2015, 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 october 1, 2015, to stockholders of record at close of business on september 18, 2015. company outlook we anticipate that the remainder of our fiscal year will be marked by continued currency volatility, a soft global manufacturing environment and continuing deflationary raw material costs. these factors, combined with the continued strength of the us dollar, will result in lower year over year revenue. from an earnings perspective, we will continue to benefit from the execution of our transformation initiatives, including our sg&a cost reduction actions. however, those cost reduction benefits will be offset somewhat in the fourth quarter due to the expected accrual of professional fees related to the sg&a reduction efforts and increased medical expense costs related to experience trends throughout the year. excluding the impact of special items, fiscal 2015 class a earnings per share are expected to be in the range of $1.85-$1.95 compared to previous guidance of $1.65-$1.75 per class a share. selected financial highlights special items restructuring charges impact ofdivestitures excluding theimpact ofdivestitures2015 impact ofdivestitures excluding theimpact ofdivestitures2014 excluding theimpact ofdivestitures impact ofcurrencytranslation excluding theimpact ofdivestitures andcurrencytranslation 4 5 conference call the company will host a conference call to discuss the third quarter of 2015 results on september 4, 2015, at 10 a.m. eastern time (et). to participate, domestic callers should call 877-485-3107 and ask for the greif conference call. the number for international callers is +1 201-689-8427. phone lines will open at 9:50 a.m. et. the conference call will also be available through a live webcast, including slides, which can be accessed at www.greif.com in the investor center/conference calls. a replay of the conference call will be available on the company’s website approximately one hour 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 thursday, september 3 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 more than 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, 2014. 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) we may be subject to losses that might not be covered in whole or in part by existing insurance reserves or insurance coverage, (xvi) our business depends on the uninterrupted operations of our facilities, systems and business functions, including our information technology and other business systems, (xvii) 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, (xviii) legislation/regulation related to environmental and health and safety matters and corporate social responsibility could negatively impact our operations and financial performance, (xix) product liability claims and other legal proceedings could adversely affect our operations and financial performance, (xx) 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, (xxi) changing climate, climate change regulations and greenhouse gas effects may adversely affect our operations and financial performance, (xxii) the frequency and volume of our timber and timberland sales will impact our financial performance, (xxiii) changes in u.s. generally accepted accounting principles and sec rules and regulations could materially impact our reported results, (xxiv) 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 (xxv) the company has a significant amount of goodwill, and 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. increase (decrease) in cash from changes in certain assets and liabilities and other 6 7 8 9 10 total impact of venezuela devaluation on cost of products sold less: gain on disposal of properties, plants, equipment and businesses, net less: gain (loss) on disposal of properties, plants, equipment and businesses, net less: gain on disposal of properties, plants, equipment and businesses, net less: gain (loss) on disposal of properties, plants, equipment and businesses, net 2015 13 13 decrease innet sales ($) decrease innet sales (%)
