Greif(US:GEF)2021-12-15 16:00Part I Item 1. Business Greif, Inc. is a global producer of industrial packaging products and services, structured into three reportable segments, including the newly combined Global Industrial Packaging - Greif is a global leader in industrial packaging, serving diverse industries such as chemicals, food and beverage, and pharmaceuticals with a comprehensive product line including steel, fibre, and plastic drums, as well as containerboard and corrugated products13 - In 2021, the company restructured its segments, combining the Rigid Industrial Packaging & Services and Flexible Products & Services into a single reportable segment named Global Industrial Packaging to enhance cross-selling and operational effectiveness15 Human Capital Overview (as of Oct 31, 2021) | Metric | Value | | :--- | :--- | | Total Full-Time Employees | ~16,000 | | Geographic Distribution | | | North America | 44% | | Europe, Middle East & Africa | 40% | | Asia Pacific | 9% | | Latin America | 7% | | Gender Distribution | | | Female | 14% | | Male | 86% | | Union Representation | ~38% | - The company's principal raw materials, including steel, resin, and containerboard, experienced significant price increases in 2021, and Greif was able to pass the majority of these cost increases on to its customers24 Item 1A. Risk Factors The company faces multiple material risks across market, industry, operational, financial, and regulatory domains - Market & Economic Risks: Business performance is highly sensitive to general economic conditions, recessions, and the ongoing COVID-19 pandemic, with global operations subject to political instability and currency exchange fluctuations474950 - Industry Risks: The company operates in highly competitive industries facing pricing pressure from customer and supplier consolidation, and is sensitive to raw material price fluctuations (steel, resin, oil, old corrugated containers) and supply chain disruptions626367 - Operational Risks: Challenges include successfully implementing business strategies, integrating acquisitions, managing joint ventures, attracting/retaining qualified employees, and potential security breach of IT systems or data privacy issues737694 - Financial Reporting Risks: The company has a significant amount of goodwill ($1.5 billion as of Oct 31, 2021) which could be impaired in the future, and faces risks from changes in tax legislation and underfunded pension plans102103105 - Regulatory & Legal Risks: The business must comply with extensive environmental, health, and safety regulations, with increasing focus on climate change and ESG initiatives potentially leading to higher costs and capital expenditures, and the company may be unable to achieve its 2030 GHG emission reduction targets110120122 Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None Item 2. Properties Greif operates 184 principal global locations, 113 owned and 71 leased, and owns approximately 175,000 acres of timber properties Principal Operating Locations by Segment | Segment | Owned | Leased | Total | | :--- | :--- | :--- | :--- | | Global Industrial Packaging | 65 | 36 | 101 | | Paper Packaging & Services | 48 | 35 | 83 | | Total | 113 | 71 | 184 | - As of October 31, 2021, the company owned approximately 175,000 acres of timber properties in the southeastern United States126 Item 3. Legal Proceedings The company is not a party to material legal proceedings, but anticipates over $300,000 in sanctions for environmental violations - The company is involved in proceedings with the Wisconsin Department of Natural Resources (WDNR) and the U.S. Environmental Protection Agency (U.S. EPA) regarding violations of environmental laws at reconditioning facilities in Milwaukee, Wisconsin129 - While no fines have been assessed, the company anticipates that monetary sanctions from the U.S. EPA and WDNR will exceed $300,000129 Item 4. Mine Safety Disclosures The company reports no mine safety disclosures - None Part II Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Greif's Class A and B Common Stock are NYSE-listed, paying quarterly dividends, with no share repurchases in 2021 or 2020 Annual Dividends Paid Per Share | Year | Class A | Class B | | :--- | :--- | :--- | | 2021 | $1.78 | $2.66 | | 2020 | $1.76 | $2.63 | - The company did not repurchase any shares of its Class A or Class B Common Stock during fiscal years 2021 or 2020133 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Greif's FY2021 saw net sales increase by 23.1% to $5.56 billion and operating profit surge to $585.2 million, supported by strong liquidity and debt reduction Consolidated Financial Performance (in millions) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $5,556.1 | $4,515.0 | +23.1% | | Operating Profit | $585.2 | $304.9 | +91.9% | | Net Income | $413.2 | $124.3 | +232.4% | | Adjusted EBITDA | $764.2 | $642.6 | +18.9% | - A significant contributor to 2021 profitability was a $95.7 million gain from the sale of approximately 69,200 acres of timberland properties in Alabama150 Segment Adjusted EBITDA (in millions) | Segment | 2021 | 2020 | | :--- | :--- | :--- | | Global Industrial Packaging | $453.3 | $324.3 | | Paper Packaging & Services | $302.0 | $306.4 | | Land Management | $8.9 | $11.9 | - Net cash from operating activities was $396.0 million in 2021, a decrease from $454.7 million in 2020, primarily due to increased working capital requirements (higher accounts receivable and inventory) driven by higher sales and raw material prices201202203 - The company reduced its total long-term debt from $2.34 billion in 2020 to $2.05 billion in 2021, aided by proceeds from the timberland sale and strong operating cash flow207 Item 7A. Quantitative and Qualitative Disclosures about Market Risk The company manages market risks from interest rates, foreign currency, and commodity prices using derivative instruments for hedging - Interest Rate Risk: As of October 31, 2021, the company had interest rate swaps with a total notional amount of $1.0 billion to manage exposure to interest rate variability on its debt217237 - Currency Risk: The company uses cross-currency swaps to synthetically convert $334.4 million of its USD-denominated debt to Euro-denominated debt, and had $81.8 million in notional value of foreign currency forward contracts outstanding at year-end to hedge foreign currency transactions221246 - Commodity Price Risk: While the company purchases significant amounts of commodities like steel, resin, and pulpwood, it does not currently engage in material hedging activities for these raw materials248 Item 8. Financial Statements and Supplementary Data The consolidated financial statements for FY2021 show strong growth, with net sales of $5.56 billion, net income of $390.7 million, and reduced long-term debt Consolidated Statement of Income Highlights (in millions) | Line Item | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net sales | $5,556.1 | $4,515.0 | $4,595.0 | | Gross profit | $1,093.0 | $914.7 | $959.9 | | Operating profit | $585.2 | $304.9 | $399.1 | | Net income attributable to Greif, Inc. | $390.7 | $108.8 | $171.0 | Consolidated Balance Sheet Highlights (in millions) | Line Item | Oct 31, 2021 | Oct 31, 2020 | | :--- | :--- | :--- | | Total current assets | $1,664.1 | $1,302.8 | | Goodwill | $1,515.4 | $1,518.4 | | Total assets | $5,815.8 | $5,510.9 | | Long-term debt | $2,054.8 | $2,335.5 | | Total shareholders' equity | $1,575.6 | $1,200.7 | Consolidated Statement of Cash Flows Highlights (in millions) | Line Item | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $396.0 | $454.7 | $389.5 | | Net cash provided by (used in) investing activities | $46.8 | $(25.2) | $(1,989.3) | | Net cash used in financing activities | $(422.9) | $(405.3) | $1,583.5 | Notes to Consolidated Financial Statements - Note 2 - Goodwill: The goodwill balance was $1.515 billion as of Oct 31, 2021, with the annual impairment test performed on August 1, 2021, resulting in no impairment333334 - Note 3 - Restructuring: The company recorded $23.1 million in restructuring charges in 2021, primarily to optimize operations in the Paper Packaging segment and rationalize assets in the Global Industrial Packaging segment338339 - Note 5 - Long-Term Debt: Total long-term debt, net of current portion and financing costs, decreased to $2.05 billion in 2021 from $2.34 billion in 2020353 - Note 9 - Post-Retirement Benefit Plans: Defined benefit pension plans had a net underfunded status of $38.4 million (U.S.) and $11.0 million (non-U.S.) as of October 31, 2021105 - Note 13 - Business Segment Information: In 2021, the Rigid Industrial Packaging & Services and Flexible Products & Services segments were combined into a single reportable segment, Global Industrial Packaging468 - Note 16 - Disposals of Timberland: In the second quarter of 2021, the company sold approximately 69,200 acres of timberland for $145.1 million in cash, resulting in a pre-tax gain of $95.7 million484 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures The company reports no changes in or disagreements with its accountants on accounting and financial disclosures - None Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective, with an unqualified auditor opinion - Management concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal year500 - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of October 31, 2021503 - The independent auditor, Deloitte & Touche LLP, provided an unqualified opinion on the effectiveness of the company's internal control over financial reporting504505 Item 9B. Other Information The company reports no other information - None Part III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Required information is incorporated by reference from the 2022 Proxy Statement513 Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the 2022 Proxy Statement - Required information is incorporated by reference from the 2022 Proxy Statement518 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and equity compensation plans is incorporated by reference from the 2022 Proxy Statement - Required information is incorporated by reference from the 2022 Proxy Statement519520 Item 13. Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2022 Proxy Statement - Required information is incorporated by reference from the 2022 Proxy Statement522523 Item 14. Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2022 Proxy Statement - Required information is incorporated by reference from the 2022 Proxy Statement524 Part IV Item 15. Exhibits and Financial Statement Schedules This section lists all exhibits and financial statement schedules filed with the Form 10-K, including governance documents and material contracts - This section contains a list of all exhibits filed with the Form 10-K, including governance documents, debt agreements, and executive compensation plans526527 - Schedule II, detailing consolidated valuation and qualifying accounts and reserves, is included in the report530537 Item 16. Form 10-K Summary The company reports no Form 10-K summary - None