Greif(GEF_B) - 2023 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements The unaudited financial statements for April 30, 2023, reflect decreased sales, mixed net income, asset growth from acquisitions, and increased operating cash flow with significant investing outflows Condensed Consolidated Statements of Income Net sales decreased for both three and six-month periods ended April 30, 2023, while net income varied, decreasing for three months but increasing for six months due to disposals Condensed Consolidated Statements of Income (in millions, except per share amounts) | Financial Metric | Three Months Ended April 30, 2023 | Three Months Ended April 30, 2022 | Six Months Ended April 30, 2023 | Six Months Ended April 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $1,308.9 | $1,667.3 | $2,579.9 | $3,231.6 | | Gross profit | $311.8 | $338.7 | $563.4 | $628.4 | | Operating profit | $181.1 | $190.1 | $337.5 | $262.1 | | Net income attributable to Greif, Inc. | $111.2 | $125.1 | $201.1 | $135.4 | | Diluted EPS (Class A) | $1.90 | $2.09 | $3.44 | $2.27 | Condensed Consolidated Balance Sheets As of April 30, 2023, total assets increased due to acquisitions boosting goodwill, while total liabilities and long-term debt also rose, and shareholders' equity grew Condensed Consolidated Balance Sheet Highlights (in millions) | Account | April 30, 2023 (Unaudited) | October 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $1,481.7 | $1,499.4 | | Goodwill | $1,649.8 | $1,464.5 | | Total Assets | $5,911.5 | $5,469.9 | | Total Current Liabilities | $937.4 | $1,047.9 | | Long-Term Debt | $2,206.1 | $1,839.3 | | Total Liabilities | $3,943.9 | $3,659.8 | | Total Shareholders' Equity | $1,914.9 | $1,794.3 | Condensed Consolidated Statements of Cash Flows For the six months ended April 30, 2023, operating cash flow increased, while investing activities saw significant outflows for acquisitions, and financing activities were driven by debt issuance Six Months Ended April 30, Cash Flow Summary (in millions) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $243.7 | $161.6 | | Net cash (used in) provided by investing activities | $(451.0) | $62.7 | | Net cash provided by (used in) financing activities | $215.6 | $(197.1) | | Net increase (decrease) in cash | $11.4 | $(15.9) | Notes to Condensed Consolidated Financial Statements The notes detail significant accounting events, including major acquisitions and a key divestiture, ongoing restructuring, use of credit facilities and derivatives, and varied segment performance - Completed the acquisition of Centurion Container LLC on March 31, 2023, for a net purchase price of $144.5 million, increasing ownership from ~10% to 80%, resulting in goodwill of $104.8 million and a gain of $9.8 million on the previously held interest[23][24][25] - Completed the acquisition of Lee Container Corporation, Inc. on December 15, 2022, for a net purchase price of $302.8 million, resulting in goodwill of $71.7 million[30][31] - Completed the divestiture of Tama Paperboard, LLC during the first quarter of 2023 for net cash proceeds of $100.2 million, resulting in a $54.6 million gain on sale[40] - As of April 30, 2023, the company had various interest rate swaps with a total notional amount of $1,300.0 million to convert variable-rate debt to a fixed rate[58] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses declining net sales due to lower volumes and prices, increased operating profit from divestitures, key acquisitions and one divestiture, strong liquidity, and anticipated continued lower customer demand Results of Operations Net sales declined for both Q2 and H1 2023 due to lower volumes and prices, while operating profit decreased in Q2 but increased year-to-date due to divestiture gains Consolidated Results Summary (in millions) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,308.9 | $1,667.3 | $2,579.9 | $3,231.6 | | Gross Profit | $311.8 | $338.7 | $563.4 | $628.4 | | Operating Profit | $181.1 | $190.1 | $337.5 | $262.1 | | Adjusted EBITDA | $228.6 | $251.0 | $393.1 | $447.8 | - Management anticipates that the lower customer demand patterns experienced in the first half of the year will continue through the second half, with some raw material prices expected to increase slightly[143] Liquidity and Capital Resources The company's liquidity is supported by increased operating cash flow and credit facilities, with significant cash used for acquisitions, funded by debt, and a completed stock repurchase program - Net cash from operating activities increased to $243.7 million for the six months ended April 30, 2023, up from $161.6 million in the prior year period[186] - Investing activities included $447.5 million for business purchases (Lee Container and Centurion) and $91.1 million in capital expenditures during the first six months of 2023[189] - The company completed its $150.0 million stock repurchase program in May 2023, which included a $75.0 million accelerated share repurchase (ASR) and a $75.0 million open market repurchase (OSR) program[191][194] - Subsequent to the quarter end, on May 17, 2023, the company entered into a new $300.0 million senior secured credit agreement (the "2023 Credit Agreement") to refinance a portion of borrowings under the 2022 Credit Agreement[203] Quantitative and Qualitative Disclosures About Market Risk No significant changes have occurred in the company's quantitative and qualitative market risk disclosures since the October 31, 2022, Annual Report on Form 10-K - There have been no significant changes in market risk disclosures since the 2022 Form 10-K[218] Controls and Procedures The company's internal control assessment for fiscal year 2023 will exclude recent acquisitions, with management confirming no material changes and effective disclosure controls and procedures - The recent acquisitions of Lee Container and Centurion 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[219] - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[221][222] Part II. Other Information Risk Factors No material changes have occurred in the company's risk factors since the October 31, 2022, Annual Report on Form 10-K - No material changes in risk factors have occurred since the filing of the 2022 Form 10-K[223] Unregistered Sales of Equity Securities and Use of Proceeds The company completed its $150.0 million share repurchase program, comprising ASR and OSR components, with details provided on shares purchased and average prices paid - The company's $150.0 million share repurchase program, initiated in June 2022, was completed in May 2023[224] Share Repurchases for Three Months Ended April 30, 2023 | Stock Class | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Class A Common Stock | 500,602 | $62.60 | | Class B Common Stock | 216,878 | $77.19 | Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications, amendments to financing agreements, and financial statements in Inline XBRL format - Filed exhibits include required CEO/CFO certifications, amendments to financing agreements, and financial statements in Inline XBRL format[229]