Greif(GEF) - 2022 Q1 - Quarterly Report

Part I. Financial Information This section presents the company's condensed consolidated financial statements and related management discussion and analysis Item 1. Financial Statements The company reported increased net sales and improved operating cash flow, despite a decline in net income due to a significant asset impairment charge Condensed Consolidated Statements of Income Net sales increased significantly, but net income declined due to a substantial non-cash asset impairment charge Condensed Consolidated Statements of Income (Unaudited) | (in millions, except per share amounts) | Three Months Ended January 31, 2022 | Three Months Ended January 31, 2021 | | :--- | :--- | :--- | | Net sales | $1,564.3 | $1,146.5 | | Gross profit | $289.7 | $212.2 | | Non-cash asset impairment charges | $62.4 | $1.3 | | Operating profit | $72.0 | $70.0 | | Income before income tax expense | $52.9 | $36.3 | | Net income attributable to Greif, Inc. | $10.3 | $23.4 | | Diluted EPS (Class A) | $0.18 | $0.40 | Condensed Consolidated Statements of Comprehensive Income (Loss) The company reported a comprehensive loss primarily due to a significant foreign currency translation loss Comprehensive (Loss) Income (Unaudited) | (in millions) | Three Months Ended January 31, 2022 | Three Months Ended January 31, 2021 | | :--- | :--- | :--- | | Net income | $18.6 | $30.9 | | Other comprehensive (loss) income, net of tax | $(16.6) | $52.2 | | Comprehensive (loss) income attributable to Greif, Inc. | $(2.0) | $73.0 | Condensed Consolidated Balance Sheets Total assets slightly decreased, with a notable increase in assets held for sale and long-term debt Condensed Consolidated Balance Sheet Highlights (Unaudited) | (in millions) | January 31, 2022 | October 31, 2021 | | :--- | :--- | :--- | | Total current assets | $1,704.0 | $1,664.1 | | Assets held for sale | $139.8 | $6.9 | | Total assets | $5,766.6 | $5,815.8 | | Long-term debt | $2,139.1 | $2,054.8 | | Total liabilities | $4,190.2 | $4,216.1 | | Total shareholders' equity | $1,557.3 | $1,575.6 | Condensed Consolidated Statements of Cash Flows Operating cash flow improved due to non-cash adjustments, while financing activities provided significant cash from debt proceeds Condensed Consolidated Statements of Cash Flows (Unaudited) | (in millions) | Three Months Ended January 31, 2022 | Three Months Ended January 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22.4 | $11.5 | | Net cash provided by (used in) investing activities | $(45.8) | $4.2 | | Net cash provided by (used in) financing activities | $54.0 | $(30.0) | | Net increase (decrease) in cash and cash equivalents | $12.0 | $(4.5) | Notes to Condensed Consolidated Financial Statements Key notes include restructuring charges, a significant asset impairment, and the subsequent refinancing of the company's credit agreement - Restructuring charges of $3.5 million were recorded in Q1 2022, with a focus on optimizing operations and closing under-performing assets[25][26] - The remaining expected cost for open restructuring plans is $14.6 million[27] - A non-cash asset impairment charge of $62.4 million was recognized in Q1 2022, triggered by the reclassification of the Flexible Products & Services (FPS) business to assets held for sale following a definitive agreement to divest the company's equity interest[54][55] - Subsequent to the quarter end, on March 1, 2022, the company entered into a new 2022 Credit Agreement, which replaced the 2019 agreement[92] - The new agreement includes an $800 million revolving credit facility and term loans totaling $1.615 billion, with proceeds used to redeem Senior Notes due 2027 and refinance existing debt[93] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased net sales and Adjusted EBITDA, while acknowledging risks from inflation, supply chain, and geopolitical events Consolidated Financial Performance (Unaudited) | (in millions) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net sales | $1,564.3 | $1,146.5 | | Gross profit | $289.7 | $212.2 | | Operating profit | $72.0 | $70.0 | | Net income | $18.6 | $30.9 | | Adjusted EBITDA | $196.8 | $138.5 | - Management anticipates continued solid customer demand through 2022 but acknowledges risks from inflation, supply chain disruptions, and labor shortages[120] - Prices for steel are expected to decline slightly, while resin and old corrugated container prices are expected to remain stable, with other raw material, transportation, labor, and energy costs expected to increase[120] - The company's operations in Russia and Ukraine combined account for approximately 3% of total sales and 1.3% of total assets, with the company actively monitoring the situation following the invasion of Ukraine by Russia[121] Item 3. Quantitative and Qualitative Disclosures About Market Risk No significant changes in market risk disclosures were reported since the prior fiscal year's annual report - There have been no significant changes in market risk disclosures since the 2021 Form 10-K[168] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting - No changes occurred during the most recent fiscal quarter that materially affected, or are likely to materially affect, the company's internal control over financial reporting[169] - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[170][171] Part II. Other Information This section provides additional information including risk factors, equity sales, exhibits, and official signatures Item 1A. Risk Factors No material changes to risk factors were reported since the prior fiscal year's annual report - There have been no material changes in risk factors from those disclosed in the 2021 Form 10-K[172] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported during the period - None reported[173] Item 6. Exhibits This section lists key exhibits filed, including certifications and the new credit agreement - Key exhibits filed include CEO/CFO certifications and the new Second Amended and Restated Credit Agreement dated March 1, 2022[175] Signatures The report was officially signed by the Executive Vice President and Chief Financial Officer on March 4, 2022 - The Form 10-Q was signed on March 4, 2022, by Lawrence A. Hilsheimer, Executive Vice President and Chief Financial Officer[177]