Greif(GEF) - 2023 Q1 - Quarterly Report

Part I. Financial Information This section presents the company's unaudited financial statements, management's analysis, and market risk disclosures Financial Statements Quarterly net sales decreased to $1,271 million, while net income rose significantly due to a business sale Condensed Consolidated Statements of Income Quarterly operating profit and net income surged due to a significant gain on the disposal of a business Consolidated Income Statement Highlights (Unaudited) | Metric | Three Months Ended Jan 31, 2023 (in millions) | Three Months Ended Jan 31, 2022 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net sales | $1,271.0 | $1,564.3 | -18.8% | | Gross profit | $251.6 | $289.7 | -13.1% | | Operating profit | $156.4 | $72.0 | +117.2% | | Net income attributable to Greif, Inc. | $89.9 | $10.3 | +772.8% | | Diluted EPS (Class A) | $1.54 | $0.18 | +755.6% | - The significant increase in operating profit and net income was primarily driven by a $54.6 million gain on the disposal of businesses in Q1 2023, compared to a $62.4 million non-cash asset impairment charge in Q1 2022[8] Condensed Consolidated Balance Sheets Total assets and long-term debt increased, primarily driven by the Lee Container acquisition Balance Sheet Summary (Unaudited) | Metric | Jan 31, 2023 (in millions) | Oct 31, 2022 (in millions) | Change | | :--- | :--- | :--- | :--- | | Total Assets | $5,690.6 | $5,469.9 | +$220.7M | | Goodwill | $1,540.8 | $1,464.5 | +$76.3M | | Other intangible assets, net | $695.9 | $576.2 | +$119.7M | | Long-term debt | $2,143.9 | $1,839.3 | +$304.6M | | Total Greif, Inc. shareholders' equity | $1,845.4 | $1,761.3 | +$84.1M | - The increase in Goodwill and Other intangible assets is primarily due to the Lee Container acquisition, and the rise in long-term debt was used to fund this acquisition[10][11][21] Condensed Consolidated Statements of Cash Flows Cash flow reflects significant investing and financing activities related to acquisitions and divestitures Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended Jan 31, 2023 (in millions) | Three Months Ended Jan 31, 2022 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $32.9 | $22.4 | | Net cash used in investing activities | ($269.1) | ($45.8) | | Net cash provided by financing activities | $239.5 | $54.0 | - Investing activities were dominated by the $301.9 million purchase of businesses (Lee Container), partially offset by $105.6 million in proceeds from the sale of businesses (Tama Divestiture)[12] - Financing activities included net proceeds from long-term debt of $298.0 million, which was used to fund acquisitions and operations[12] Notes to Condensed Consolidated Financial Statements Key notes detail the financial impact of recent acquisitions, divestitures, debt, and subsequent events - The company completed the acquisition of Lee Container for $302.8 million, which is now part of the Global Industrial Packaging segment, resulting in $71.2 million of goodwill and $133.5 million of intangible assets[20][21] - The company completed the divestiture of Tama Paperboard, LLC for net cash proceeds of $100.2 million, resulting in a $54.6 million gain on sale[29] - As of January 31, 2023, total long-term debt, net, stood at $2,143.9 million, an increase from $1,839.3 million at October 31, 2022, primarily to finance acquisitions[33] - Subsequent to the quarter end, the company entered into an agreement to increase its ownership stake in Centurion Container LLC to 80% for $145.0 million[91][92] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses decreased net sales due to lower volumes but higher operating profit from a divestiture gain Results of Operations Consolidated results show lower net sales and Adjusted EBITDA, but a significant increase in operating profit Consolidated Financial Performance (Q1 2023 vs Q1 2022) | Metric (in millions) | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,271.0 | $1,564.3 | -$293.3 | | Gross Profit | $251.6 | $289.7 | -$38.1 | | Operating Profit | $156.4 | $72.0 | +$84.4 | | Adjusted EBITDA | $164.5 | $196.8 | -$32.3 | - The decrease in net sales was primarily due to lower average sale prices and volumes in the Global Industrial Packaging segment, lower volumes in Paper Packaging & Services, and the impact of the FPS Divestiture[123] - Management anticipates that the lower customer demand patterns experienced in Q1 will continue through Q2, subject to normal seasonal increases[127] Segment Review Performance varied by segment, with Paper Packaging showing strong profit growth while Industrial Packaging declined Segment Performance (Q1 2023 vs Q1 2022) | Segment | Metric (in millions) | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | :--- | | Global Industrial Packaging | Net Sales | $705.8 | $949.1 | | | Operating Profit | $45.9 | $31.0 | | | Adjusted EBITDA | $71.8 | $114.2 | | Paper Packaging & Services | Net Sales | $560.2 | $610.0 | | | Operating Profit | $109.1 | $38.3 | | | Adjusted EBITDA | $90.7 | $80.5 | | Land Management | Net Sales | $5.0 | $5.2 | | | Operating Profit | $1.4 | $2.7 | | | Adjusted EBITDA | $2.0 | $2.1 | - Global Industrial Packaging sales fell $243.3 million due to the FPS divestiture, negative currency effects, and lower volumes/prices, causing Adjusted EBITDA to decrease by $42.4 million[129][131] - Paper Packaging & Services operating profit surged by $70.8 million, driven by a $54.6 million gain from the Tama Divestiture and higher containerboard prices[135] Liquidity and Capital Resources The company maintains sufficient liquidity through cash flow and credit facilities while executing a share repurchase program - Primary liquidity sources are operating cash flow and credit facilities, which are expected to be sufficient for needs over the next 12 months[149] - The company has a $150.0 million share repurchase program, split between a $75.0 million accelerated share repurchase (ASR) agreement and a $75.0 million open market repurchase (OSR) program[155][159] - As of January 31, 2023, the company had $448.0 million of available borrowing capacity under its $800.0 million secured revolving credit facility[165] Quantitative and Qualitative Disclosures About Market Risk No significant changes in market risk disclosures were reported since the last annual filing - There have been no significant changes in the quantitative and qualitative disclosures about market risk from the disclosures contained in the 2022 Form 10-K[180] Controls and Procedures The recent Lee Container acquisition is excluded from the internal controls assessment, with no other material changes reported - The recently completed Lee Container Acquisition will be excluded from the scope of the Company's assessment of internal controls over financial reporting for the fiscal year ending October 31, 2023[181] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[182] - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the reporting period[183][185] Part II. Other Information This section covers risk factors, share repurchase activities, and a list of filed exhibits Risk Factors No material changes to risk factors were reported from the previous annual filing - There have been no material changes in risk factors from those disclosed in the 2022 Form 10-K[186] Unregistered Sales of Equity Securities and Use of Proceeds The company details its ongoing $150 million share repurchase program and quarterly repurchase activity - In June 2022, the Board authorized a $150.0 million share repurchase program, consisting of a $75.0 million ASR for Class A stock and a $75.0 million OSR program for Class A or B stock[187] Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Class B Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | Nov 2022 | 75,149 | $74.90 | $58,258,591 | | Dec 2022 | 73,626 | $75.89 | $52,670,848 | | Jan 2023 | 83,171 | $79.72 | $46,040,699 | | Total | 231,946 | $76.94 | | Exhibits This section lists all exhibits filed with the report, including certifications and financial data - Filed exhibits include CEO/CFO certifications under Sarbanes-Oxley rules, an amended director equity plan, and financial statements formatted in Inline XBRL[193]