GREIF, INC. 2019 ANNUAL REPORTANNUAL REPORT2019 GREIF, INC. 2019 ANNUAL REPORTANNUAL REPORT2019 D E A R F E L LO W S H A R E H O L D E R S,
It has been an exciting and eventful year at Greif. I am incredibly proud of all that our global team has accomplished as
we pursue our vision: In industrial packaging, be the best performing customer service company in the world.
At Greif, we are focused on developing solutions to safely package and protect our customers’ products. Our strategy
is based upon the service profit chain concept that draws a connection between engaged colleagues and enhanced
profitability. Our colleagues exemplify the values embodied by The Greif Way and their work is guided by the principles
outlined in the fact based, process driven Greif Business System. A more engaged global Greif team, focused on
differentiated customer service, provides the path to enhanced performance that rewards our colleagues, customers,
host communities and shareholders.
We delivered a step change in financial results in 2019 that was fueled by the acquisition and ongoing integration of
Caraustar Industries:
• Adjusted EBITDA increased by more than 30 percent to $659 million
• Adjusted Class A earnings per share grew by more than 12 percent to $3.96 per share
• Adjusted Free Cash Flow increased by 50 percent to $268 million
• And our shareholders were rewarded with $104 million of dividends paid
In addition to improved financial results, we also made notable progress in our three strategic priorities.
Engaged Teams – The health and safety of our colleagues is our highest priority at Greif. We believe that all accidents
are preventable, and 53 percent of our manufacturing sites recorded zero accidents in 2019. While we have more work
to do, our performance this year demonstrates that our aspiration of a zero accident workplace is achievable.
We also advanced colleague engagement activities and significantly increased our overall engagement scores com-
pared to 2018. Those activities were led and coordinated by local teams across our global organization that are working
together to further embed a culture of servant leadership into Greif.
Differentiated Customer Service – Our experience indicates there is a direct link between customer service excellence
and profitable growth. We measure our customers’ trust and loyalty using a qualitative tool called the Net Promoter
Score (NPS). We increased our NPS by more than 36 percent since the inception of this strategy and our 2019 score of
61 was an 18 percent improvement over our 2018 result.
Enhanced Performance – Beyond enhancing financial performance, we continue to accelerate our efforts to opera-
tionalize sustainability. Thirty-five of our manufacturing facilities achieved “zero waste to landfill” status in 2019 and
Greif was awarded with “Gold Recognition Status” for the second consecutive year from EcoVadis, a highly respected
third-party audit firm that specializes in evaluating sustainability programs. This ranking placed Greif among the top
five percent of all companies evaluated by this firm.
Greif’s business is well positioned to capture greater value through the principles of a circular economy. Our Paper
Packaging business is a net positive recycler, meaning that we recover and recycle more waste paper than we produce.
We are also growing the Earthminded reconditioning network in our Rigid Industrial Packaging business, with particular
emphasis on our Intermediate Bulk Container portfolio to meet customer needs and remove waste that would otherwise
end up in a landfill.
In 2020, the Greif team will be laser focused on controlling the execution levers within our control to counter diminishing
industrial growth and the prolonged negative effects of the global trade war. Looking ahead, Greif is well positioned to
serve a variety of attractive markets through our industry leading product portfolio and our commitment to customer
service excellence. We are advancing low risk growth opportunities close to our core business, and we believe that the
Caraustar acquisition will deliver exceptional value.
I am excited about Greif’s future and our commitment to creating greater value for our colleagues, the communities we
operate and live in, our customers and our shareholders remains steadfast. Thank you for your support and continued
investment in Greif.
Best regards,
Peter G. Watson
President and Chief Executive Officer
C O M PA NY I N F O R M AT I O N
BOARD OF DIRECTORS
VICKI L. AVRIL-GROVES
BRUCE A. EDWARDS
MARK A. EMKES
JOHN F. FINN
Former Chief Executive
Officer and President
TMK IPSCO
Former Global Chief
Executive Officer
DHL Supply Chain
Former Commissioner of
Chairman and Chief
Finance and Administration
Executive Officer
State of Tennessee
Gardner, Inc.
MICHAEL J. GASSER
DANIEL J. GUNSETT
JUDITH D. HOOK
JOHN W. MCNAMARA
Chairman of the Board,
Former Chief Executive
Partner
Baker Hostetler LLP
Investor
Former President and Owner
Corporate Visions
Limited, LLC
Officer
Greif, Inc.
PETER G. WATSON
President and Chief
Executive Officer
Greif, Inc.
EXECUTIVE OFFICERS
PETER G. WATSON
LAWRENCE A.
GARY R. MARTZ
President and Chief
Executive Officer
HILSHEIMER
Executive Vice President,
Chief Financial Officer
Executive Vice President,
General Counsel and
Secretary
TIMOTHY L. BERGWALL
Senior Vice President and
President, Paper Packaging
& Services and Soterra LLC
MICHAEL CRONIN
Senior Vice President,
OLE G. ROSGAARD
Senior Vice President and
Enterprise Strategy, Global
President Rigid Industrial
Sourcing and Supply
Packaging & Services and
Chain and Greif Packaging
Global Sustainability
Accessories
BALA V.
HARI K. KUMAR
SATHYANARAYANAN
Senior Vice President,
Chief Human Resources
Officer
Vice President and Division
President, Flexible Products
& Services
DOUG W. LINGREL
DAVID C. LLOYD
Vice President and Chief
Vice President, Corporate
Administrative Officer
Financial Controller and
Treasurer
SHAREHOLDER INFORMATION
CORPORATE
STOCK EXCHANGE
STOCK TRANSFER
HEADQUARTERS
LISTING
AGENT
INDEPENDENT
ACCOUNTANTS
Delaware, Ohio 43015
Class B Common Stock
Shareholder Services
The company’s Class A
Computershare Investor
Deloitte & Touche LLP
Common Stock and
Services, LLC
Columbus, Ohio
Greif, Inc.
425 Winter Road
(740) 549-6000
www.greif.com
are traded on the New York
PO Box 505000
Stock Exchange, where the
Louisville, KY 40233-5000
symbols are GEF and GEF.B,
respectively.
Forward-Looking Statements: This Annual Report contains certain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Please see “Important Information Regarding Forward-Looking Statements” preceding
Part I of the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019, which is included in this document.
(1) Diluted Class A earnings per share, excluding the impact of adjustments, is defined as earnings per diluted Class A share, less (gain) loss on
disposal of properties, plants, equipment and businesses, net, plus restructuring charges, plus non‐cash asset impairment charges, plus
acquisition‐related costs, plus debt extinguishment charges, less the net tax expense (benefit) resulting from the Tax Cuts and Jobs Act, each net
of tax, noncontrolling interest and equity earnings of unconsolidated affiliates.
$
$
$
GAAP TO NON‐GAAP RECONCILIATION
DILUTED CLASS A EARNINGS PER SHARE EXCLUDING ADJUSTMENTS(1)
UNAUDITED
Diluted Class A EPS
(Gain) Loss on disposal of properties, plants, equipment and businesses, net
Restructuring charges
Non‐cash asset impairment charges
Acquisition‐related costs
Debt extinguishment charges
Tax net benefit resulting from the Tax Reform Act
Diluted Class A EPS Excluding Adjustments
GAAP TO NON‐GAAP RECONCILIATION
CONSOLIDATED ADJUSTED EBITDA (2)
UNAUDITED
(in millions)
Net income
Plus: Interest expense, net
Plus: Debt extinguishment charges
Plus: Income tax expense
Plus: Depreciation, depletion and amortization expense
EBITDA
Plus: Restructuring charges
Plus: Acquisition‐related costs
Plus: Non‐cash asset impairment charges
Plus: Non‐cash pension settlement charges
Less: (Gain) loss on disposal of properties, plants, equipment, and businesses, net
Adjusted EBITDA
Twelve months ended October 31,
2018
$
2017
$
2019
$
2.89
(0.09)
0.36
0.10
0.43
0.28
(0.01)
3.96
194.2
112.5
22.0
70.7
206.1
605.5
26.1
29.7
7.8
‐
(10.2)
658.9
3.55
(0.09)
0.26
0.11
0.01
0.02
(0.33)
3.53
229.5
51.0
‐
73.3
126.9
480.7
18.6
0.7
8.3
1.3
(6.4)
503.2
Twelve months ended October 31,
2018
$
2017
$
2019
$
$
$
$
$
$
$
2.02
0.04
0.24
0.35
0.01
‐
0.29
2.95
135.1
60.1
‐
67.2
120.5
382.9
12.7
0.7
20.8
27.1
1.3
445.5
(2)Adjusted EBITDA is defined as net income, plus interest expense, net, including debt extinguishment charges, plus income tax expense, plus
depreciation, depletion and amortization expense, plus restructuring charges, plus acquisition‐related costs, plus non‐cash impairment charges,
plus non‐cash pension settlement charges, less (gain) loss on disposal of properties, plants, equipment and businesses, net.
GAAP TO NON‐GAAP RECONCILIATION
ADJUSTED FREE CASH FLOW (3)
UNAUDITED
(in millions)
Net cash provided by operating activities
Cash paid for purchases of properties, plants and equipment
Free Cash Flow
Cash paid for acquisition‐related costs
Cash paid for debt issuance costs(4)
Additional U.S. pension contribution
Cash paid for acquisition‐related ERP systems (5)
Adjusted Free Cash Flow
Twelve months ended October 31,
2018
$
2017
$
2019
$
$
$
$
389.5
(156.8)
232.7
29.7
5.1
253.0
(140.2)
112.8
0.7
‐
305.0
(96.8)
208.2
0.7
‐
‐
0.3
65.0
‐
‐
‐
$
267.8
$
178.5
$
208.9
(3)Adjusted free cash flow is defined as net cash provided by operating activities, less cash paid for purchases of properties, plants and equipment,
plus cash paid for acquisition‐related costs, plus cash paid for debt issuance costs, plus an additional one‐time $65.0 million contribution made by
the Company to its U.S. defined benefit plan during the third quarter of 2018, plus cash paid for acquisition‐related ERP systems.
(4)Cash paid for debt issuance costs is defined as cash payments for debt issuance related expenses included within net cash used in operating
activities.
(5)Cash paid for acquisition‐related ERP systems is defined as capital expenditures for the integration of Caraustar into Grief's global enterprise
resource planning system.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2019
□ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
or
Commission file number: 001-00566
GREIF, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
425 Winter Road, Delaware, Ohio
(Address of principal executive offices)
31-4388903
(I.R.S. Employer
Identification No.)
43015
(Zip Code)
Registrant’s telephone number, including area code 740-549-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Class A Common Stock
Class B Common Stock
Trading Symbol(s)
GEF
GEF-B
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No □
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes □ No ☑
Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No □
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post
such files). Yes ☑ No □
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
☑
□
□
Accelerated filer
Smaller reporting company
□
□
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange). Yes □ No ☑
The aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold
as of the last business day of the Registrant’s most recently completed second fiscal quarter was as follows:
The number of shares outstanding of each of the Registrant’s classes of common stock, as of December 13, 2019, was as follows:
Non-voting common equity (Class A Common Stock) $994,807,811
Voting common equity (Class B Common Stock) $280,425,022
Class A Common Stock − 26,260,943 shares
Class B Common Stock − 22,007,725 shares
Listed hereunder are the documents, portions of which are incorporated by reference, and the parts of this Form 10-K into which such portions are incorporated:
1. The Registrant’s Definitive Proxy Statement for use in connection with the Annual Meeting of Stockholders to be held on February 25, 2020 (the ‘‘2020 Proxy
Statement’’), portions of which are incorporated by reference into Parts II and III of this Form 10-K. The 2020 Proxy Statement will be filed within 120 days of October 31,
2019.
IMPORTANT INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
All statements, other than statements of historical facts, included in this Annual Report on Form 10-K of Greif, Inc. and its subsidiaries for
the fiscal year ended October 31, 2019 (this ‘‘Form 10-K’’) or incorporated herein, including, without limitation, statements regarding our
future financial position, business strategy, budgets, projected costs, goals and plans and objectives of management for future operations
and initiatives, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended
(the ‘‘Exchange Act’’). Forward-looking statements generally can be identified by the use of forward-looking terminology such as ‘‘may,’’
‘‘will,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘estimate,’’ ‘‘anticipate,’’ ‘‘aspiration,’’ ‘‘objective,’’ ‘‘project,’’ ‘‘believe,’’ ‘‘continue,’’ ‘‘on track’’ or ‘‘target’’ or the
negative thereof or variations thereon or similar terminology. All forward-looking statements made in this Form 10-K are based on
information currently available to our management. Forward-looking statements speak only as of the date the statements were made.
Although we believe that the expectations reflected in forward-looking statements have a reasonable basis, we can give no assurance that
these expectations will prove to be correct. Forward-looking statements are subject to risks and uncertainties that could cause actual events
or results to differ materially from those expressed in or implied by the statements. For a discussion of the most significant risks and
uncertainties that could cause our actual results to differ materially from those projected, see ‘‘Risk Factors’’ in Item 1A of this Form 10-K.
The risks described in this Form 10-K 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. All forward-looking statements made in this
Form 10-K 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.
1
Index to Form 10-K Annual Report for the Fiscal Year ended October 31, 2019
Form
10-K Item
Part I
Description
1
Business
(a) General Development of Business
(b) Financial Information about Segments
(c) Narrative Description of Business
(d) Financial Information about Geographic Areas
(e) Available Information
(f) Other Matters
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
1A.
1B.
2
3
4
5
6
7
Part II
7A. Quantitative and Qualitative Disclosures about Market Risk
8
Financial Statements and Supplementary Data
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Shareholders’ Equity
Note 1 – Basis of Presentation and Summary of Significant Accounting Policies
Note 2 – Acquisitions and Divestitures
Note 3 – Sale of Non-United States Accounts Receivable
Note 4 – Assets and Liabilities Held for Sale and Disposals of Property, Plant and Equipment, Net
Note 5 – Goodwill and Other Intangible Assets
Note 6 – Restructuring Charges
Note 7 – Consolidation of Variable Interest Entities
Note 8 – Long-Term Debt
Note 9 – Financial Instruments and Fair Value Measurements
Note 10 – Stock-Based Compensation
Note 11 – Income Taxes
Note 12 – Post-Retirement Benefit Plans
Note 13 – Contingent Liabilities and Environmental Reserves
Note 14 – Earnings Per Share
Note 15 – Leases
Note 16 – Business Segment Information
Note 17 – Comprehensive Income (Loss)
Note 18 – Quarterly Financial Data (Unaudited)
Note 19 – Redeemable Noncontrolling Interests
Report of Independent Registered Public Accounting Firm
9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
9A.
Controls and Procedures
Report of Independent Registered Public Accounting Firm
9B. Other Information
2
Page
4
4
4
4
6
6
7
8
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20
23
23
24
26
26
52
54
54
54
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58
59
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72
73
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76
77
79
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85
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102
102
104
105
108
108
110
111
Form
10-K Item
Part III
Part IV
Schedules
10
11
12
13
14
15
16
Description
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
Schedule II
Page
111
111
111
112
113
113
116
117
118
3
PART I
ITEM 1. BUSINESS
(a) General Development of Business
We are a leading global producer of industrial packaging products and services with operations in over 40 countries. We offer a
comprehensive line of rigid industrial packaging products, such as steel, fibre and plastic drums, rigid intermediate bulk containers, closure
systems for industrial packaging products, transit protection products, water bottles and remanufactured and reconditioned industrial
containers, and services, such as container life cycle management, filling, logistics, warehousing and other packaging services. We produce
and sell containerboard, corrugated sheets, and corrugated containers to customers in North America. We also produce and sell coated and
uncoated recycled paperboard, along with tubes and cores and a diverse mix of specialty products to customers in North America. We are
a leading global producer of flexible intermediate bulk containers and related services. We sell timber to third parties from our timberland
in the southeastern United States that we manage to maximize long-term value. In addition, we sell, from time to time, timberland and
special use land, which consists of surplus land, higher and better use (‘‘HBU’’) land, and development land. Our customers range from
Fortune 500 companies to medium and small-sized companies in a cross section of industries.
We were founded in 1877 in Cleveland, Ohio, as ‘‘Vanderwyst and Greif,’’ a cooperage shop co-founded by one of four Greif brothers. One
year after our founding, the other three Greif brothers were invited to join the business, renamed Greif Bros. Company, making wooden
barrels, casks and kegs to transport post-Civil War goods nationally and internationally. We later purchased nearly 300,000 acres of
timberland to provide raw materials for our cooperage plants. We still own significant timber properties located in the southeastern
United States. In 1926, we incorporated as a Delaware corporation and made a public offering as The Greif Bros. Cooperage Corporation.
In 1951, we moved our headquarters from Cleveland, Ohio to Delaware, Ohio, which is in the Columbus metro-area, where our corporate
headquarters are currently located. Since the latter half of the 1900s, we have transitioned from our keg and barrel heading mills, stave mills
and cooperage facilities to a global producer of industrial packaging products. Following our acquisition of Van Leer Packaging in 2001, a
global steel and plastic drum manufacturer, we changed our name to Greif, Inc.
We completed our acquisition of Caraustar Industries, Inc. and its subsidiaries (‘‘Caraustar’’) on February 11, 2019 (the ‘‘Caraustar
Acquisition’’), which was the largest acquisition in our history. Caraustar is a leader in the production of coated and uncoated recycled
paperboard, which is used in a variety of applications that include industrial products (tubes and cores, construction products, protective
packaging, and adhesives) and consumer packaging products (folding cartons, set-up boxes, and packaging services). The Caraustar
Acquisition significantly expanded our operations in the Paper Packaging & Services segment portfolio.
Our fiscal year begins on November 1 and ends on October 31 of the following year. Any references in this Form 10-K to the years 2024,
2023, 2022, 2021, 2020, 2019, 2018, 2017, 2016 or 2015, or to any quarter of those years, relate to the fiscal year ended in that year.
As used in this Form 10-K, the terms ‘‘Greif,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us,’’ and ‘‘our’’ refer to Greif, Inc. and its subsidiaries.
(b) Financial Information about Segments
We operate in eight business segments, which are aggregated into four reportable business segments: Rigid Industrial Packaging & Services;
Paper Packaging & Services; Flexible Products & Services; and Land Management. Information related to each of these segments is
included in Note 16 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.
(c) Narrative Description of Business
Products and Services
In the Rigid Industrial Packaging & Services segment, we are a leading global producer of rigid industrial packaging products, including steel,
fibre and plastic drums, rigid intermediate bulk containers, closure systems for industrial packaging products, transit protection products,
water bottles and remanufactured and reconditioned industrial containers, and services, such as container life cycle management, filling,
logistics, warehousing and other packaging services. We sell our rigid industrial packaging products to customers in industries such as
chemicals, paints and pigments, food and beverage, petroleum, industrial coatings, agricultural, pharmaceutical and mineral products, among
others.
In the Paper Packaging & Services segment, we produce and sell containerboard, corrugated sheets, corrugated containers and other
corrugated products to customers in North America in industries such as packaging, automotive, food and building products.Our
corrugated container products are used to ship such diverse products as home appliances, small machinery, grocery products, automotive
components, books and furniture, as well as numerous other applications. We also produce and sell coated and uncoated recycled
4
paperboard, some of which we use to produce and sell industrial products (tubes and cores, construction products, protective packaging,
and adhesives) and consumer packaging products (folding cartons, set-up boxes, and packaging services). In addition, we also purchase and
sell recycled fiber.
In the Flexible Products & Services segment, we are a leading global producer of flexible intermediate bulk containers and related services.
Our flexible intermediate bulk containers consist of a polypropylene-based woven fabric that is produced at our production sites, as well as
sourced from strategic regional suppliers. Our flexible products are sold globally and service customers and market segments similar to
those of our Rigid Industrial Packaging & Services segment. Additionally, our flexible products significantly expand our presence in the
agricultural and food industries, among others.
In the Land Management segment, we are focused on the active harvesting and regeneration of our United States timber properties to
achieve sustainable long-term yields. While timber sales are subject to fluctuations, we seek to maintain a consistent cutting schedule,
within the limits of market and weather conditions. We also sell, from time to time, timberland and special use land, which consists of
surplus land, HBU land and development land. As of October 31, 2019, we owned approximately 251,000 acres of timber property in the
southeastern United States.
Customers
Due to the variety of our products, we have many customers buying different types of our products and due to the scope of our sales, no
one customer is considered principal in our total operations.
Backlog
We supply a cross-section of industries, such as chemicals, paints and pigments, food and beverage, petroleum, industrial coatings,
agricultural, pharmaceutical, mineral, packaging, automotive and building products, and must make spot deliveries on a day-to-day basis as
our products are required by our customers. We do not operate on a backlog to any significant extent and maintain only limited levels of
finished goods. Many customers place their orders weekly for delivery during the week.
Competition
The markets in which we sell our products are highly competitive with many participants. Although no single company dominates, we face
significant competitors in each of our businesses. Our competitors include large vertically integrated companies as well as numerous
smaller companies. The industries in which we compete are particularly sensitive to price fluctuations caused by shifts in industry capacity
and other cyclical industry conditions. Other competitive factors include design, quality and service, with varying emphasis depending on
product line.
In both the rigid industrial packaging industry and the flexible products industry, we compete by offering a comprehensive line of products
on a global basis. In the containerboard industry, we compete by concentrating on providing value-added, higher-margin corrugated
products to niche markets. In our other paper packaging businesses, we compete by offering a comprehensive range of uncoated and coated
paperboard products and diverse tube, core and other specialty products. In addition, over the past several years we have closed higher cost
facilities and otherwise restructured our operations, which we believe has significantly improved our cost competitiveness.
Compliance with Governmental Regulations Concerning Environmental Matters
Our operations are subject to extensive federal, state, local and international laws, regulations, rules and ordinances relating to pollution,
the protection of the environment, the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous
substances and waste materials and numerous other environmental laws and regulations. In the ordinary course of business, we are subject
to periodic environmental inspections and monitoring by various governmental agencies. In addition, certain of our production facilities
require environmental permits that are subject to revocation, modification and renewal. As of the date of filing this Form 10-K, and based
on current information, we believe that the probable costs of the remediation of company-owned property will not have a material adverse
effect on our financial condition or results of operations. We believe that we have adequately reserved for our liability for these matters as
of October 31, 2019.
We do not believe that compliance with federal, state, local and international provisions, which have been enacted or adopted regulating
the discharge of materials into the environment, or otherwise relating to the protection of the environment, has had or will have a material
adverse effect upon our capital expenditures, earnings or competitive position. We do not anticipate any material capital expenditures
related to environmental control in 2020. However, since 2017, three reconditioning facilities in the Milwaukee, Wisconsin area that are
owned by Container Life Cycle Management LLC (‘‘CLCM’’), our U.S. reconditioning joint venture company, have been subject to
investigations and proceedings conducted by federal, state and local governmental agencies concerning, among other matters, potential
5
violations of environmental laws and regulations. We have cooperated with the governmental agencies in these investigations and
proceedings. As of the filing date of this Form 10-K, no citations have been issued or fines assessed with respect to any violations of
environmental laws and regulations. As a result of these investigations and proceedings, we will review all options for future actions at these
facilities, including changes to existing reconditioning operations, installation of control technology, other capital expenditures, and
facility relocation or closure. While there could be costs associated with future actions, we do not expect them to be material.
See also to Note 13 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information
concerning environmental expenses and cash expenditures for the periods ended October 31, 2019, 2018 and 2017, and our reserves for
environmental liabilities as of October 31, 2019 and 2018.
Raw Materials
Steel, resin and containerboard, as well as used industrial packaging for reconditioning, are the principal raw materials for the Rigid
Industrial Packaging & Services segment, resin is the primary raw material for the Flexible Products & Services segment, and pulpwood, old
corrugated containers, recycled coated and uncoated paperboard are the principal raw materials for the Paper Packaging & Services
segment. We satisfy most of our needs for these raw materials through purchases on the open market or under short-term and long-term
supply agreements. All of these raw materials are purchased in highly competitive, price-sensitive markets, which have historically exhibited
price, demand and supply cyclicality. From time to time, some of these raw materials have been in short supply at certain of our
manufacturing facilities. In those situations, we ship the raw materials in short supply from one or more of our other facilities with
sufficient supply to the facility or facilities experiencing the shortage. To date, raw material shortages have not had a material adverse effect
on our financial condition or results of operations.
Research and Development
While research and development projects are important to our continued growth, the amount expended in any year is not material in
relation to our results of operations.
Other
Our businesses are not materially dependent upon patents, trademarks, licenses or franchises.
No material portion of our businesses is subject to renegotiation of profits or termination of contracts or subcontracts at the election of a
governmental agency or authority.
The businesses of our segments are not seasonal to any material extent, although the businesses of some of our customers who are in the
agricultural industries and purchase our rigid industrial packaging products and flexible products may be seasonal in nature.
Employees
As of October 31, 2019, we had approximately 17,000 full time employees. A significant number of our full time employees are covered
under collective bargaining agreements. We believe that our employee relations are generally good.
(d) Financial Information about Geographic Areas
Our operations are located in North and South America, Europe, the Middle East, Africa and the Asia Pacific regions. Information related
to our geographic areas of operation is included in Note 16 of the Notes to Consolidated Financial Statements included in Item 8 of this
Form 10-K. See also to Quantitative and Qualitative Disclosures about Market Risk included in Item 7A of this Form 10-K.
(e) Available Information
We maintain a website at www.greif.com. We file reports with the United States Securities and Exchange Commission (‘‘SEC’’) and make
available, free of charge, on or through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, proxy and information statements and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after we have electronically filed such material with, or furnished it to, the SEC.
Any of the materials we file with the SEC may also be read and/or copied at the SEC’s Public Reference Room at 100 F Street, NE,
Washington, DC 20549. Information on the operation of the SEC’s Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC at www.sec.gov.
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(f) Other Matters
Our Class A Common Stock and Class B Common Stock are listed on the New York Stock Exchange (‘‘NYSE’’) under the symbols GEF
and GEF.B, respectively. Our Chief Executive Officer has timely certified to the NYSE that, at the date of the certification, he was unaware
of any violation by our Company of the NYSE’s corporate governance listing standards. However, we are currently in the process of
amending one of our equity plans to correct a non-compliance matter with respect to Section 303A.08 of the NYSE Listed Company
Manual. The proposed corrective amendment will be presented to stockholders for approval at the 2020 Annual Meeting. In addition, our
Chief Executive Officer and Chief Financial Officer have provided certain certifications in this Form 10-K regarding the quality of our
public disclosures. See Exhibits 31.1 and 31.2 to this Form 10-K.
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ITEM 1A. RISK FACTORS
Statements contained in this Form 10-K may be ‘‘forward-looking’’ within the meaning of Section 21E of the Exchange Act. Such forward-
looking statements are subject to certain risks and uncertainties that could cause our operating results to differ materially from those
projected. The following factors, among others, in some cases have affected, and in the future could affect, our actual financial or
operational performance, or both.
Historically, our Business has been Sensitive to Changes in General Economic or Business Conditions.
Our customers generally consist of other manufacturers and suppliers who purchase industrial packaging products and containerboard and
related corrugated products for their own containment and shipping purposes. Because we supply a cross section of industries, such as
chemicals, films, paints and pigments, food and beverage, petroleum, industrial coatings, carpeting, agricultural, pharmaceutical, mineral
products, packaging, automotive, construction and building products industries and have operations in many countries, demand for our
products and services has historically corresponded to changes in general economic and business conditions of the industries and countries
in which we operate. The overall demand and prices for our products and services could decline as a result of a large number of factors
outside our control, including economic recessions, changes in industrial production processes or consumer preference, changes in laws
and regulations, inflation, tariffs, changes in published pricing indices, fluctuations in interest and currency exchange rates and changes in
the fiscal or monetary policies of governments in the regions in which we operate. Accordingly, our financial performance is substantially
dependent upon the general economic and business conditions existing in these industries and countries, and any prolonged or substantial
economic downturn in the markets in which we operate could have a material adverse effect on our business, financial condition and
results of operations.
We may not Successfully Implement our Business Strategies, Including Achieving our Growth Objectives.
We may not be able to fully implement our business strategies or realize, in whole or in part within the expected time frames, the
anticipated benefits of our growth and other initiatives. Our various business strategies and initiatives are subject to significant business,
economic and competitive uncertainties and contingencies, many of which are beyond our control.
In addition, we may incur certain costs to achieve efficiency improvements and growth in our business and we may not meet anticipated
implementation timetables or stay within budgeted costs. As these growth initiatives are undertaken, we may not fully achieve our
expected cost savings and efficiency improvements or growth rates, or these initiatives could adversely impact our customer retention or
our operations. Also, our business strategies may change from time to time in light of our ability to implement our new business initiatives,
competitive pressures, economic uncertainties or developments, or other factors. A variety of risks could cause us not to realize some or all
of the expected benefits of these initiatives. These risks include, among others, delays in the anticipated timing of activities related to such
initiatives, strategies and operating plans; increased difficulty and costs in implementing these efforts; and the incurrence of other
unexpected costs associated with operating the business. As a result, there can be no assurance that we will realize these benefits. If, for any
reason, the benefits we realize are less than our estimates or the implementation of these growth initiatives and business strategies adversely
affect our operations or cost more or take longer to effectuate than we expect, or if our assumptions prove inaccurate, our business,
financial condition and results of operations may be materially adversely affected.
Our Level of Indebtedness Could Adversely Affect our Liquidity, Limit our Flexibility in Responding to Business Opportunities, and Increase our
Vulnerability to Adverse Changes in Economic and Industry Conditions.
We incurred substantial indebtedness to finance the Caraustar Acquisition. As a result of our level of indebtedness, a substantial portion of
our cash flows are dedicated to the payment of principal and interest on our indebtedness, which, among other things: reduces our
liquidity;
limits our flexibility in responding to new business opportunities; reduces funds available for working capital, capital
expenditures and other general corporate purposes; increases our vulnerability to adverse economic and industry conditions; exposes us to
the risk of increased interest rates and corresponding increased interest expense; limits our ability to obtain additional financing for
working capital, capital expenditures, acquisitions and general corporate or other purposes; and could place us at a competitive
disadvantage compared to our competitors who have less debt. In addition, the failure to comply with the financial and other restrictive
covenants in our debt instruments could, if not cured or waived, have a material adverse effect on our ability to fulfill our debt obligations
and on our business and prospects generally. In addition, our debt instruments impose operating and financial restrictions on us, which
may limit how we conduct our business and impact our ability to raise additional debt or equity financing to capitalize on available
business opportunities.
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Our Operations Subject us to Currency Exchange and Political Risks that Could Adversely Affect our Results of Operations.
We have operations in over 40 countries. Management of global operations is extremely complex, and operations outside the United States
are subject to additional risks that may not exist, or be as significant, in the United States. As a result of our global operations, we are
subject to certain risks that could disrupt our operations or force us to incur unanticipated costs.
We also have indebtedness, agreements to purchase raw materials and agreements to sell finished products that are denominated in Euros,
Turkish Lira, Russian Rubles and other currencies. Our operating performance is affected by fluctuations in currency exchange rates by:
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translations into United States dollars for financial reporting purposes of the assets and liabilities of our non-U.S. operations
conducted in local currencies; and
gains or losses from transactions conducted in currencies other than the operation’s functional currency.
We are subject to various other risks associated with operating in countries outside the U.S., such as the following:
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political, social, economic and labor instability;
war, invasion, civil disturbance or acts of terrorism;
taking of property by nationalization or expropriation without fair compensation;
changes in government policies and regulations and enforcement thereof, including selectivity or discrimination in the
enforcement thereof;
loss or non-renewal of treaties or similar agreements with foreign tax authorities;
difficulties in enforcement of contractual obligations;
imposition of limitations on conversions of currencies into United States dollars or remittance of dividends and other
payments by international subsidiaries;
imposition or increase of withholding and other taxes on income remittances and other payments by international
subsidiaries;
hyperinflation, currency devaluation or defaults in certain countries;
impositions or increase of investment and other restrictions or requirements by non-United States governments;
national and regional labor strikes, whether legal or illegal and other labor or social actions; and
restrictive governmental trade policies, customs, tariffs, import/export and other trade compliance regulations.
The Current and Future Challenging Global Economy and Disruption and Volatility of the Financial and Credit Markets may Adversely Affect our
Business.
Current global economic conditions are challenging to our global business operations. Such conditions have had, and may continue to
have, a negative impact on our financial results. Future economic downturns, either in the United States, Europe or in other regions in
which we do business could negatively affect our business and results of operations. The volatility of the current economic climate,
especially in relation to ongoing uncertainties related to geopolitical events around the world, including the imposition of trade tariffs,
makes it difficult for us to predict the complete impact of the forgoing matters on our business and results of operations. Due to these
current and future economic conditions, our customers may face financial difficulties, disruption in their supply chains, and the
unavailability of or reduction in commercial credit that may result in decreased sales by and revenues to our company. Certain of our
customers may cease operations or seek bankruptcy protection, which would reduce our cash flows and adversely impact our results of
operations. Our customers that are financially viable and not experiencing economic distress may nevertheless elect to reduce the volume
of orders for our products or close facilities in an effort to remain financially stable or as a result of the unavailability of commercial credit
which would negatively affect our results of operations. We may experience difficulties in servicing, renewing or repaying our outstanding
debt due to continued volatility in the global economy. We may also have difficulty accessing the global credit markets if there is a
tightening of commercial credit availability, which would result in decreased ability to fund capital-intensive strategic projects.
Further, we may experience challenges in forecasting revenues and operating results due to these global economic conditions. The difficulty
in forecasting revenues and operating results may result in volatility in the market price of our common stock.
In addition, the lenders under our senior secured credit agreement and other borrowing facilities described in Item 7 of this Form 10-K
under Liquidity and Capital Resources - Borrowing Arrangements and the counterparties with whom we maintain interest rate swap
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agreements, currency forward contracts and derivatives and other hedge agreements may be unable to perform their lending or payment
obligations in whole or in part, or may cease operations or seek bankruptcy protection, which would negatively affect our cash flows and
our results of operations.
A downgrade in our credit rating could also impact our ability to effectively finance our operations and could lead to increased borrowing
costs and limits on our access to capital.
The equipment that we use in our manufacturing operations is expensive and requires continued maintenance. We require significant
capital investment to maintain our equipment. If our existing sources of capital prove insufficient, there can be no assurance that we will be
able to obtain capital to finance these expenditures on favorable terms, or at all. Any inability by us to maintain our equipment as needed
or any inability to obtain capital for expenditures on equipment maintenance on favorable terms could have an adverse effect on our
business, financial position and results of operations.
The Continuing Consolidation of our Customer Base and Suppliers may Intensify Pricing Pressure.
Over the last few years, many of our large industrial packaging, containerboard and corrugated products customers have acquired, or been
acquired by, companies with similar or complementary product lines. In addition, many of our suppliers of raw materials such as steel, resin
and paper, have undergone a similar process of consolidation. This consolidation has increased the concentration of our largest customers,
resulting in increased pricing pressures from our customers. The consolidation of our largest suppliers has resulted in limited sources of
supply and increased cost pressures from our suppliers. Any future consolidation of our customer base or our suppliers could negatively
impact our business, financial condition, and results of operations. Furthermore, if one or more of our major customers reduces, delays or
cancels substantial orders, if one or more of our major suppliers is unable to timely produce and deliver our orders our business, financial
condition, results of operations, and cash flows may be materially and adversely affected, particularly for the period in which the reduction,
delay or cancellation occurs and also possibly for subsequent periods.
We Operate in Highly Competitive Industries.
Each of our business segments operates in highly competitive industries. The most important competitive factors we face are price, quality
and service. To the extent that one or more of our competitors become more successful with respect to any of these key competitive factors,
we could lose customers and our sales could decline. In addition, due to the tendency of certain customers to diversify their suppliers, we
could be unable to increase or maintain sales volumes with particular customers. Certain of our competitors are substantially larger and
have significantly greater financial resources.
In addition, some of our products are made from raw materials that are subject to pronounced price fluctuations, such as steel, which is
used in the manufacture of steel drums and containers, and oil, which in turn affects the price of resin for plastic drums and containers.
Particularly in well-developed markets in Europe and in the United States, any substantial increases in the supply of rigid industrial
packaging resulting from capacity increases, the stockpiling of raw materials or other types of opportunistic behavior by our competitors in
a period of high raw materials prices, or price wars, could adversely affect our margins and the profitability of our business. Although price
is a significant basis of competition in our industry, we also compete on the basis of product reliability, the ability to deliver products on a
global scale and our reputation for quality and customer service. If we fail to maintain our current standards for product quality, the scope
of our distribution capabilities or our customer relationships, our business, financial condition and results of operations could be adversely
affected. Additionally, customers that shift away from packaging products we produce to other types of packaging made from other
materials may adversely affect our business, financial condition and results of operations.
Negative media reports about us or our businesses, whether accurate or inaccurate, could damage our reputation and relationships with our
customers and suppliers, cause customers and suppliers to terminate their relationship with us, or impair our ability to effectively compete,
which could adversely affect our business, financial condition and results of operations.
Our Business is Sensitive to Changes in Industry Demands.
Industry demand for containerboard in the United States and certain of our industrial packaging products in our United States, European
and other international markets has varied in recent years causing competitive pricing pressures for those products. We compete in
industries that are capital intensive, which generally leads to continued production as long as prices are sufficient to cover marginal costs.
As a result, changes in industry demands (including any resulting industry over-capacity) and increased new capacity for production of
industrial packaging products by competitors, may cause substantial price competition and, in turn, negatively impact our business,
financial condition and results of operations.
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Raw Material, Energy and Transportation Price Fluctuations and Shortages may Adversely Impact our Manufacturing Operations and Costs.
The principal raw materials used in the manufacture of our products are steel, resin, pulpwood, old corrugated containers for recycling, and
recycled coated and uncoated paperboard, used industrial packaging for reconditioning, and containerboard, which we purchase or
otherwise acquire in highly competitive, price sensitive markets. These raw materials have historically exhibited price and demand
cyclicality. In addition, we manufacture certain component parts for our rigid industrial packaging products and those of some of our
competitors. Some of these materials and component parts have been, and in the future may be, in short supply. For example, the
availability of these raw materials and component parts and/or our ability to purchase and transport these raw materials and produce and
transport these component parts may be unexpectedly disrupted by adverse weather conditions, natural disasters, man-made disasters, a
substantial economic downturn in the industries that provide any of those raw materials, or competition for use of raw materials and
component parts in other regions or countries. However, we have not recently experienced any significant difficulty in obtaining our
principal raw materials or component parts. We have long-term supply contracts in place for obtaining a portion of our principal raw
materials. The cost of producing our products is also sensitive to the price of energy (including its impact on transport costs). Energy
prices, in particular oil and natural gas, have fluctuated in recent years, with a corresponding effect on our production costs. Potential
legislation, regulatory action and international treaties related to climate change, especially those related to the regulation of greenhouse
gases, may result in significant increases in raw material and energy costs. We are highly reliant on the trucking industry for the
transportation of our products. The overall profitability of our operations may be negatively impacted by higher transportation costs as
freight carriers raise prices to address the continued shortage of drivers. There can be no assurance that we will be able to recoup any past or
future increases in the cost of energy, transportation and raw materials.
Changes in U.S. Trade Policies Could Impact the Cost of Imported Goods into the U.S., Which may Materially Impact our Revenues or Increase our
Operating Costs.
In March 2018, the U.S. announced new tariffs on imported steel and aluminum products. Other international trade actions and
initiatives also have been announced, notably the imposition by the U.S. of additional tariffs on products of Chinese origin, and China’s
imposition of additional tariffs on U.S.-origin goods. If we are unable to mitigate the impact of these additional duties or if our customers
permanently change their supply chain patterns even after tariffs are removed or reduced, our business and profits may be materially and
adversely affected. Further changes in U.S. trade policy, or additional sanctions, could result in retaliatory actions by other countries that
could materially and negatively impact the volume of economic activity in the U.S., which, in turn, could reduce our revenues, and increase
our operating costs. In addition, many of our customers use our packaging to transport their products internationally. The impact of duties
and retaliatory actions on their businesses could result in a negative impact on our business, financial condition and results of operations.
The Results of the United Kingdom’s Referendum on Withdrawal from the European Union may have a Negative Effect on Global Economic
Conditions, Financial Markets and our Business.
In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union (the ‘‘EU’’) in a national
referendum. In March 2017, the United Kingdom formally notified the EU of its intention to withdraw pursuant to Article 50 of the
Lisbon Treaty. The referendum was advisory, and the terms of any withdrawal are subject to a negotiation period that could last, after
multiple extensions until January 31, 2020. The referendum has created significant uncertainty about the future relationship between the
United Kingdom and the EU, and has given rise to calls for the governments of other EU member states to consider withdrawal.
These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and
the stability of global financial markets, and could significantly reduce global market liquidity and restrict the ability of key market
participants to operate in certain financial markets. Asset valuations, currency exchange rates and credit ratings may be especially subject to
increased market volatility. Lack of clarity about future United Kingdom laws and regulations as the United Kingdom determines which
EU laws to replace or replicate in the event of a withdrawal, could depress economic activity, restrict our access to capital or adversely affect
our contracts or relationships with customers in the United Kingdom or elsewhere in the European economic area. If the United Kingdom
and the EU are unable to negotiate acceptable withdrawal terms or if other EU member states pursue withdrawal, barrier-free access
between the United Kingdom and other EU member states or among the European economic area overall could be diminished or
eliminated. Any of these factors could have a material adverse effect on our business, financial condition and results of operations.
Geopolitical Conditions, Including Direct or Indirect Acts of War or Terrorism, Could Have a Material Adverse Effect on our Operations and
Financial Results.
Our operations could be disrupted by geopolitical conditions such as international boycotts and sanctions, acts of war, terrorist activity or
other similar events. Such events could make it difficult or impossible to manufacture or deliver products to our customers, receive
production materials from our suppliers, or perform critical functions, which could adversely affect our business globally or in certain
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regions. While we maintain similar manufacturing capacities at different locations and coordinate multi-source supplier programs on many
of our materials which would better enable us to respond to these types of events, we cannot be sure that our plans will fully protect us
from all such disruptions.
We may Encounter Difficulties Arising from Acquisitions.
We have invested a substantial amount of capital in acquisitions, joint ventures and strategic investments and we expect that we will
continue to do so in the foreseeable future. We are continually evaluating acquisitions and strategic investments that are significant to our
business both in the United States and internationally. Acquisitions, joint ventures and strategic investments involve numerous risks,
including the failure to identify suitable acquisition candidates, complete acquisitions on acceptable terms and conditions, retain key
customers, employees and contracts, the inability to integrate businesses without material disruption, unanticipated costs incurred in
connection with integrating businesses, the incurrence of liabilities greater than anticipated or operating results that are less than
anticipated, the inability to realize the projected value, and the inability to realize projected synergies. In addition, acquisitions, joint
ventures and strategic investments and associated integration activities require time and attention of management and other key personnel,
and other companies in our industries have similar acquisition and investment strategies. There can be no assurance that any acquisitions,
joint ventures and strategic investments will be successfully integrated into our operations, that competition for acquisitions will not
intensify or that we will be able to complete such acquisitions, joint ventures and strategic investments on acceptable terms and conditions.
The costs of unsuccessful acquisition, joint venture and strategic investment efforts may adversely affect our business, financial condition,
and results of operations.
In Connection with Acquisitions or Divestitures, we may become Subject to Liabilities.
In connection with any acquisitions or divestitures, we may become subject to contingent liabilities or legal claims, including but not
limited to third party liability and other tort claims; claims for breach of contract; employment-related claims; environmental, health and
safety liabilities, conditions or damage; permitting, regulatory or other compliance with law issues; or tax liabilities. If we become subject to
any of these liabilities or claims, and they are not adequately covered by insurance or an enforceable indemnity or similar agreement from a
creditworthy counterparty, we may be responsible for significant out-of-pocket expenditures. These liabilities, if they materialize, could
have a material adverse effect on our business, financial condition and results of operations.
The Acquisition of Caraustar Subjects us to Various Risks and Uncertainties.
The Caraustar Acquisition was the largest acquisition in our history. As a result of this acquisition, we are subject to various risks and
uncertainties, including the failure to retain key customers, employees and contracts, the inability to integrate businesses without material
disruption, unanticipated costs incurred in connection with integrating businesses, the incurrence of liabilities greater than anticipated or
operating results that are less than anticipated, the inability to realize the projected value, and the inability to realize projected synergies,
cost savings, operating efficiencies and other benefits. We may encounter difficulties with integrating Caraustar’s operations into our
operations, including inconsistencies in standards, systems and controls, which may divert management’s focus and resources from
ordinary business activities and opportunities. We may encounter unforeseen internal control, regulatory or compliance issues. Any of the
foregoing could result in a material adverse effect on our business, financial condition and results of operations.
We may Incur Additional Restructuring Costs and there is no Guarantee that our Efforts to Reduce Costs will be Successful.
We have restructured portions of our operations from time to time in recent years, particularly following acquisitions of businesses, and
periods of economic downturn due to local, regional or global economic conditions. We will continue to implement continuous
improvement initiatives necessary or desirable to improve our business portfolio, address underperforming assets and generate additional
cash. These initiatives may include selling, general and administrative reductions throughout our Company and have and will likely
continue to result in the rationalization of manufacturing facilities.
The rationalization of our manufacturing facilities may result in temporary constraints upon our ability to produce the quantity of
products necessary to fill orders and thereby complete sales in a timely manner. In addition, system upgrades at our manufacturing facilities
that impact ordering, production scheduling and other related manufacturing processes are complex, and could impact or delay production
targets. A prolonged delay in our ability to fill orders on a timely basis could affect customer demand for our products and increase the size
of our product inventories, causing future reductions in our manufacturing schedules and adversely affecting our results of operations.
Moreover, our continuous development and production of new products will often involve the retooling of existing manufacturing
facilities. This retooling may limit our production capacity at certain times in the future, which could adversely affect our business,
financial condition and results of operations. In addition, the expansion and reconfiguration of existing manufacturing facilities could
increase the risk of production delays, as well as require significant investments of capital.
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While we expect these initiatives to result in significant profit opportunities and savings throughout our organization, our estimated
profits and savings are based on several assumptions that may prove to be inaccurate, and as a result, there can be no assurance that we will
realize these profits and cost savings or that, if realized, these profits and cost savings will be sustained. Failure to achieve or delays in
achieving projected levels of efficiencies and cost savings from such measures, or unanticipated inefficiencies resulting from manufacturing
and administrative reorganization actions in progress or contemplated, could adversely affect our business, financial condition and results
of operations and harm our reputation.
We Could be Subject to Changes in our Tax Rates, the Adoption of New U.S. or Foreign Tax Legislation or Exposure to Additional Tax Liabilities.
The multinational nature of our business subjects us to taxation in the United States and numerous foreign jurisdictions. Due to economic
and political conditions, tax rates in various jurisdictions may be subject to significant change. Our future effective tax rates could be
affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and
liabilities, or changes in tax laws or their interpretation.
The Tax Cuts and Jobs Act of 2017 (the ‘‘Tax Reform Act’’) was enacted into law in December 2017. The Tax Reform Act, among other
matters, reduced the U.S. federal corporate tax rate from 35 percent to 21 percent and required companies to pay a one-time tax to
repatriate, for U.S. purposes, earnings of certain foreign subsidiaries that were previously deferred for tax purposes. In addition, beginning
in 2019, the Tax Reform Act limits certain deductions and creates new taxes on certain foreign sourced earnings. While we generally
expect the impact of the Tax Reform Act to be positive, it is possible that the limitation of certain deductions and the creation of new taxes
could be more detrimental to us than anticipated.
Tax laws are complex and subject to varying interpretations. At this time, we believe we are properly reflecting the provision for taxes on
income using all current enacted global tax laws in every jurisdiction in which we operate. However, there can be no assurance that our tax
positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge.
Full Realization of our Deferred Tax Assets may be Affected by a Number of Factors.
We have deferred tax assets, including foreign net operating loss carryforwards and foreign capital loss carryforwards, employee and retiree
benefit items, and other accruals not yet deductible for tax purposes. We have established valuation allowances to reduce those deferred tax
assets to an amount that is more likely than not to be realized. Our ability to use these deferred tax assets depends in part upon our having
future taxable income during the periods in which these temporary differences reverse or our ability to carry back any losses created by the
deduction of these temporary differences. We expect to realize these assets over an extended period. However, if we were unable to
generate sufficient future taxable income in the U.S. and certain foreign jurisdictions, or if there were a significant change in the time
period within which the underlying temporary differences became taxable or deductible, we could be required to increase our valuation
allowances against our deferred tax assets, which could have a material adverse effect on our financial condition and results of operations.
Several Operations are Conducted by Joint Ventures that we Cannot Operate Solely for our Benefit.
Several operations, particularly in developing countries, are conducted through joint ventures, such as a significant joint venture in our
Flexible Products & Services segment. In countries that require us to conduct business through a joint venture with a local joint venture
partner, the loss of a joint venture partner or a joint venture partner’s loss of its ability to conduct business in such country may impact our
ability to conduct business in that country. Sanctions that apply to a partner of a joint venture partner or to a joint venture’s directors or
officers could also impact our ability to conduct business through that joint venture.
In joint ventures, we share ownership and, in some instances, management of a company with one or more parties who may or may not
have the same goals, strategies, priorities or resources as we do. In general, joint ventures are intended to be operated for the benefit of all
co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities
as well as time-consuming procedures for sharing information, accounting and making decisions. In certain cases, our joint venture
partners must agree in order for the applicable joint venture to take certain actions, including acquisitions, the sale of assets, budget
approvals, borrowing money and granting liens on joint venture property. Our inability to take unilateral action that we believe is in our
best interests may have an adverse effect on the financial performance of the joint venture and the return on our investment. In joint
ventures, we believe our relationship with our co-owners is an important factor to the success of the joint venture, and if a co-owner
changes, our relationship may be adversely affected. In addition, the benefits from a successful joint venture are shared among the co-
owners, so that we do not receive all the benefits from our successful joint ventures. Finally, we may be required on a legal or practical basis
or both, to accept liability for obligations of a joint venture beyond our economic interest, including in cases where our co-owner becomes
bankrupt or is otherwise unable to meet its commitments. For additional information with respect to the joint venture relating to our
Flexible Products & Services segment, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of
Operations - Variable Interest Entities.
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Certain of the Agreements that Govern our Joint Ventures Provide our Partners With Put or Call Options.
The agreements that govern certain of our current joint ventures under certain circumstances provide the joint venture partner with the
right to sell their participation in the joint venture to us or the right to acquire our participation in the joint venture. Some of the joint
venture agreements provide that the joint venture partner can sell its participation for a certain purchase price calculated on the basis of a
fixed multiple. Such put and call rights may result in financial risks for us. In addition, such rights could negatively impact our operations if
as a result of their exercise we lose access to members of our management teams that are familiar with local markets or distribution and
manufacturing channels.
Our Ability to Attract, Develop and Retain Talented and Qualified Employees, Managers and Executives is Critical to our Success.
Our ability to attract, develop and retain talented and qualified employees, including executives and other key managers, is important to
our business. This is becoming more difficult in the current highly competitive hiring and retention environment. The retirement of or
unforeseen loss of key officers and employees without appropriate succession planning or the ability to develop or hire replacements could
hinder our strategic planning and execution and make it difficult to manage our business and meet our objectives resulting in a material
adverse effect on our business, financial condition and results of operations.
Our Business may be Adversely Impacted by Work Stoppages and Other Labor Relations Matters.
We are subject to risk of work stoppages and other labor relations matters because a significant number of our employees are represented
by unions. We have experienced work stoppages and strikes in the past, and there may be work stoppages and strikes in the future. Any
prolonged work stoppage or strike at any one of our principal manufacturing facilities could have a negative impact on our business,
financial condition and results of operations. In addition, upon the expiration of existing collective bargaining agreements, we may not
reach new agreements without union action and any such new agreements may not be on terms satisfactory to us.
We may not Successfully Identify Illegal Immigrants in our Workforce.
Our business is subject to laws regarding employment of illegal immigrants. Although we have taken steps that we believe are sufficient and
appropriate to ensure compliance with immigration laws, we cannot provide assurance that we have identified, or will identify in the
future, all illegal immigrants who work for us. Our failure to identify illegal immigrants who work for us may result in fines or other
penalties being imposed upon us, or in the event we identify illegal immigrants in our workforce, it may be difficult for us to backfill those
open positions, any of which could have an adverse effect on our business, financial condition and results of operations.
Our Pension and Post-retirement Plans are Underfunded and will Require Future Cash Contributions, and our Required Future Cash Contributions
Could be Higher than we Expect, Each of Which Could Have a Material Adverse Effect on our Financial Condition and Liquidity.
We sponsor various pension and similar benefit plans worldwide. Our U.S. and non-U.S. pension and post-retirement plans were
underfunded by an aggregate of $142.2 million and $12.2 million, respectively, as of October 31, 2019. We are legally required to make
cash contributions to our pension plans in the future, and those cash contributions could be material.
In 2020, we expect, but are not obligated, to make cash contributions and direct benefit payments of approximately $27.7 million and
$1.3 million to our U.S. and non-U.S. pension and post-retirement plans, respectively, which we believe will be sufficient to meet the
minimum funding requirements under applicable laws. Our future funding obligations for our pension and post-retirement plans depend
upon the levels of benefits provided for by these plans, the future performance of assets set aside for these plans, the rates of interest used to
determine funding levels, the impact of potential business dispositions, actuarial data and experience, and any changes in government laws
and regulations. Accordingly, our future funding requirements for our pension and post-retirement plans could be higher than expected,
which could have a material adverse effect on our financial condition and liquidity.
In addition, our pension plans hold a significant amount of equity securities. If the market values of these securities decline, our pension
expense and funding requirements will increase, which could have a material adverse effect on our financial condition and liquidity.
Any decrease in interest rates and asset returns, if and to the extent not offset by contributions, could increase our obligations under our
pension plans. If the performance of assets held in these pension plans does not meet our expectations, our cash contributions for these
plans could be higher than we expect, which could have a material adverse effect on our financial condition and liquidity.
14
We may be Subject to Losses that Might not be Covered in Whole or in Part by Existing Insurance Reserves or Insurance Coverage and General
Insurance Premium Increases.
We are self-insured for certain of the claims made under our employee medical and dental insurance programs and for certain of our
workers’ compensation claims. We establish reserves for estimated costs related to pending claims, administrative fees and claims incurred
but not reported. Because establishing reserves is an inherently uncertain process involving estimates, currently established reserves may
not be adequate to cover the actual liability for claims made under our employee medical and dental insurance programs and for certain of
our workers’ compensation claims. If we conclude that our estimates are incorrect and our reserves are inadequate for these claims, we will
need to increase our reserves, which could adversely affect our financial condition and results of operations.
We have comprehensive liability, fire and extended coverage insurance on our facilities, with policy specifications and insured limits
customarily carried for similar properties. However, there are certain types of losses, such as losses resulting from wars, acts of terrorism,
wind storm, flood, earthquake or other natural disasters, or pollution, that may be uninsurable or subject to restrictive policy conditions. In
these instances, should a loss occur in excess of insured limits, we could lose capital invested in that property, as well as the anticipated
future revenues derived from the manufacturing activities conducted at that property, while remaining obligated for any financial
obligations related to the property. Any such loss would adversely impact our business, financial condition and results of operations.
We purchase insurance policies covering general liability and product liability with substantial policy limits. However, there can be no
assurance that any liability claim would be adequately covered by our applicable insurance policies or it would not be excluded from
coverage based on the terms and conditions of the policy. This could also apply to any applicable contractual indemnity.
We also purchase environmental liability policies where legally required and may elect to purchase coverage in other circumstances in order
to transfer all or a portion of environmental liability risk through insurance. However, there can be no assurance that any environmental
liability claim would be adequately covered by our applicable insurance policies or that it would not be excluded from coverage based on
the terms and conditions of the policy.
The costs of insurance coverage continue to increase, and the availability of some insurance coverages is decreasing due to extensive
property damage caused by natural disasters, increased cyber security breaches and other business and employment litigation and losses.
Any substantial increases in our insurance premiums or the availability of insurance policies could adversely affect our business, financial
condition and results of operations.
Our Business Depends on the Uninterrupted Operations of our Facilities, Systems and Business Functions, Including our Information Technology
(IT) and Other Business Systems.
Our business is dependent upon our ability to execute, in an efficient and uninterrupted fashion, necessary business functions, such as
accessing key business data, financial information, order processing, invoicing and the operation of IT dependent manufacturing
equipment. In addition, a significant portion of the communication between our employees, customers and suppliers around the world
depends on our IT systems. A shut-down of or inability to access one or more of our facilities, a power outage, a pandemic, or a failure of
one or more of our IT, telecommunications or other systems could significantly impair our ability to perform such functions on a timely
basis.
We are in the process of implementing a standard IT platform across our business and have successfully completed implementation in over
half of our locations. Though there are other locations globally, the locations acquired as part of the Caraustar Acquisition represent the
majority of locations in which implementation is still in progress. The transition from many former systems, many of which were acquired
in connection with business acquisitions, to a single system will reduce complexity and inefficiencies in monitoring business results and
consolidating financial data. The transition could result in adverse business effects. This project has been ongoing for several years
requiring significant human and financial resources and is expected to extend into 2022, with work at our Flexible Products & Services
operations and former Caraustar operations being completed later in 2021. There can be no assurance that this project will be successful,
and even if successful, there can be no assurance that other difficulties and inefficiencies will not exist in our systems.
We have established a business continuity plan in an effort to ensure the continuation of core business operations in the event that normal
operations could not be performed due to a catastrophic event. While we continue to test and assess our business continuity plan to ensure
it meets the needs of our core business operations and addresses multiple business interruption events, there is no assurance that core
business operations could be performed upon the occurrence of such an event which may have a material adverse effect on our business,
financial condition and results of operations.
15
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.
In the conduct of our business, we collect, use, transmit, store and report data on information systems and interact with customers, vendors
and employees. Increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of our
systems and networks and the confidentiality, availability and integrity of our data. Despite our security measures, our IT systems and
infrastructure may be vulnerable to computer viruses, cyber-attacks, security breaches caused by employee error or malfeasance or other
disruptions. Any such threat could compromise our networks and the information stored there could be accessed, publicly disclosed, lost
or stolen. A security breach of our computer systems could interrupt or damage our operations or harm our reputation, or both. In
addition, we could be subject to legal claims or proceedings, liability under laws that protect the privacy of personal information and
regulatory penalties if confidential information relating to customers, suppliers, employees or other parties is misappropriated from our
computer system.
In May 2018, the EU enacted the General Data Protection Regulation, which provides for significantly increased responsibilities for
companies that process EU personal data as well as significant penalties for noncompliance. As a result of these new regulations, we expect
to see increased regulatory and customer attention surrounding data privacy. Furthermore, outside of the EU, we continue to see increased
regulation of data privacy and security, including the adoption of more stringent subject matter specific state laws, including the California
Consumer Privacy Act of 2018, and national laws regulating the collection and use of data, as well as security and data breach obligations.
The uncertainty and changes in the requirements of multiple jurisdictions may increase the cost of compliance, reduce demand for our
services, restrict our ability to offer services in certain locations, impact our customers’ ability to deploy our solutions in certain
jurisdictions, or subject us to sanctions by state and national data protection regulators, all of which could harm our business, financial
condition and results of operations. Failure to provide adequate privacy protections and maintain compliance with the new data privacy
laws, like the General Data Protection Regulation and California Consumer Privacy Act of 2018, could jeopardize business transactions
across borders and result in significant penalties and claims from individuals and other businesses. These laws could create liability for us or
increase our cost of doing business.
Similar security threats exist with respect to the IT systems of our lenders, suppliers, consultants, advisors and other third parties with
whom we conduct business. A security breach of those computer systems could result in the loss, theft or disclosure of confidential
information and could also interrupt or damage our operations, harm our reputation and subject us to legal claims.
The regulatory framework for privacy issues is evolving worldwide, and various government and consumer agencies and public advocacy
groups have called for new regulation and changes in industry practices. It is possible that new laws and regulations will be adopted in the
United States and internationally, or existing laws and regulations may be interpreted in new ways that would affect our business.
Complying with any new regulatory requirements could force us to incur substantial costs or require us to change our business practices in
a manner that could reduce our revenue or compromise our ability to effectively pursue our growth strategy.
To date, we have seen no material impact on our business or operations from these threats. However, we cannot assure that our security
efforts will prevent unauthorized access or loss of functionality to our or our third-party providers’ systems.
Legislation/Regulation Related to Environmental and Health and Safety Matters and Corporate Social Responsibility Could Negatively Impact our
Operations and Financial Performance.
We must comply with extensive laws, rules and regulations in the United States and in each of the countries where we conduct business
regarding environmental matters, such as air, soil and water quality and waste disposal. We must also comply with extensive laws, rules and
regulations regarding safety, health and corporate responsibility matters. There can be no assurance that compliance with existing and new
laws, rules and regulations will not require significant expenditures.
In addition, laws, rules and regulations, as well as the interpretation and administration of such laws and regulations by governmental
agencies, can change and restrict or prohibit the manner in which we conduct our current operations, require additional permits to engage
in some or all of our current operations, or increase the cost of some or all our operations. For example, certain of the remedies being
sought by the U.S. EPA and the Wisconsin Department of Natural Resources in the proceedings relating to the Container Life Cycle
Management LLC (‘‘CLCM’’) facilities in the Milwaukee, Wisconsin area seek to implement changes in the way certain laws and
regulations are interpreted and administered with respect to our reconditioning business. Such changes could adversely affect our business,
financial condition and results of operations.
We are also subject to transportation safety regulations promulgated by the U.S. Department of Transportation (‘‘DOT’’) and agencies in
other jurisdictions. Both the DOT regulations and standards issued by the United Nations and adopted by various jurisdictions outside
the United States set forth requirements related to the transportation of both hazardous and nonhazardous materials in some of our
16
packaging products and subject our company to random inspections and testing to ensure compliance. Failure to comply could result in
fines to us and could affect our business, financial condition and results of operations.
We are subject to laws, rules and regulations relating to certain raw materials used in our business. For example, certain resins and epoxy-
based coatings used in our rigid container business may contain Bisphenol-A (BPA), a chemical monomer that can be toxic in sufficient
quantities, and is used in several food contact applications. Regulatory agencies in several jurisdictions worldwide have found these
materials to be safe for food contact at current levels, but a significant change in regulatory rulings concerning BPA could have an adverse
effect on our business. These laws, rules and regulations, as well as resulting claims by individuals and other businesses, could adversely
affect our business, financial condition and results of operations.
At the EU-level, many laws and regulations are designed to protect human health and the environment. For example, Directive
2004/35/EC concerns obligations to remedy damages to the environment, which could require us to remediate contamination identified
at sites we own or use. Other EU directives limit pollution from industrial activities, reduce emissions to air, water and soil, protect water
resources, reduce waste, protect employee health and safety and regulate the registration, evaluation, authorization and restriction of
chemicals. Failure to comply with these laws, or a change in the applicable legal framework, for example the increased enforcement of
environmental regulations in the U.S., China or other countries, could affect our business, financial condition and results of operations, in
addition to those of our customers.
Our customers in the food industry are subject to increasing laws, rules and regulations relating to food safety. As a result, customers may
demand that changes be made to our products or facilities, as well as other aspects of our production processes, that may require the
investment of capital. The failure to comply with these requests could adversely affect our relationships with some customers and result in
negative effects on our business, financial condition and results of operations.
We are subject to the annual disclosure and reporting requirements regarding the use of ‘‘conflict minerals’’ from the Democratic Republic
of the Congo and adjoining countries pursuant to Section 1502 of The Dodd-Frank Wall Street Reform and Consumer Protection Act.
These requirements could affect the sourcing, availability and cost of minerals used in the manufacture of certain of our products. We have
incurred and will continue to incur costs associated with complying with these supply chain due diligence procedures. In addition, because
our supply chain is complex, we may face reputation challenges with our customers and other stakeholders if we are unable to sufficiently
verify the origins of all minerals used in our products through the due diligence procedures that we implement.
Although there may be adverse financial impact (including compliance costs, potential permitting delays and increased cost of energy, raw
materials and transportation) associated with any legislation, regulation or other action, the extent and magnitude of that impact cannot
be reliably or accurately estimated due to the fact that some requirements have only recently been adopted and the present uncertainty
regarding other additional measures and how they will be implemented. In addition, environmental, health and safety laws and regulations
applicable to our business and the business of our customers, and the interpretation or enforcement of these laws and regulations, are
constantly evolving and it is impossible to predict accurately the effect that changes in these laws and regulations, or their interpretation or
enforcement, may have upon our business, financial condition and results of operations. Should environmental laws and regulations, or
their interpretation or enforcement, become more stringent, our costs could increase, which may have a material adverse effect on our
business, financial condition and results of operations.
Product Liability Claims and Other Legal Proceedings Could Adversely Affect our Operations and Financial Performance.
We produce products and provide services related to other parties’ products, including sensitive products such as food ingredients,
pharmaceutical ingredients and hazardous substances. Incidents involving these product types can involve risk of recall, contamination,
spillage, leakage, fires, and explosions, which can threaten individual health, impact the environment and cause the breakdown or failure of
equipment or processes and the performance of facilities below expected levels of capacity. If any of our customers have such accidents
involving our products, they may bring product liability claims against us. While we have built extensive operational processes to ensure
that the design and manufacture of our products meet rigorous quality standards, there can be no assurance that we or our customers will
not experience operational process failures that could result in potential product, safety, regulatory or environmental claims and associated
litigation. We are also subject to a variety of legal proceedings and legal compliance risks in our areas of operation around the globe. Any
such claims, whether with or without merit, could be time consuming and expensive to defend and could divert management’s attention
and resources. In accordance with customary practice, we maintain insurance against some, but not all, of these potential claims. In the
future, we may not be able to maintain insurance at commercially acceptable premium levels at all. In addition, the levels of insurance we
maintain may not be adequate to fully cover any and all losses or liabilities. If any significant judgment or claim is not fully insured or
indemnified against, it could have a material adverse impact on our business, financial condition and results of operations.
We and the industries in which we operate are at times being reviewed or investigated by regulators and other governmental agencies,
which could lead to enforcement actions, fines and penalties or the assertion of private litigation claims and damages. Simply responding to
17
actual or threatened litigation or government investigations of our compliance with regulatory standards may require significant
expenditures of time and other resources. While we believe that we have adopted appropriate risk management and compliance programs,
the global and diverse nature of our operations means that legal and compliance risks will continue to exist and legal proceedings and other
contingencies, the outcome of which cannot be predicted with certainty, will arise from time to time that could adversely affect our
business, financial condition and results of operations.
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.
We cannot provide assurance that our internal controls will always protect us from reckless or criminal acts committed by our employees,
agents or business partners that would violate U.S. and non-U.S. laws, including anti-bribery, competition, trade sanctions and regulation,
and other laws. Any such improper actions could subject us to civil or criminal investigations in the U.S. and in other jurisdictions, could
lead to substantial civil or criminal monetary and non-monetary penalties against us or our subsidiaries, and could damage our reputation.
Even the allegation or appearance of our employees, agents or business partners acting improperly or illegally could damage our reputation
and result in significant expenditures in investigating and responding to such actions.
Changing Climate, Climate Change Regulations and Greenhouse Gas Effects may Adversely Affect our Operations and Financial Performance.
There is continuing concern from members of the scientific community and the general public that emissions of greenhouse gases
(‘‘GHG’’) and other human activities have or will cause significant changes in weather patterns and increase the frequency or severity of
weather events, wildfires and flooding. Climate change creates physical and financial risk. Physical risks from climate change include an
increase in sea level and changes in weather conditions, such as an increase in precipitation, droughts and extreme weather events. These
types of events may adversely impact us, our suppliers, our customers and their ability to purchase our products and our ability to
manufacture and transport our products on a timely basis and could result in a material adverse effect on our business, financial condition
and results of operations.
We believe it is likely that the scientific and political attention to issues concerning the extent and causes of climate change will continue,
with the potential for further legislation and regulations that could affect our financial condition and results of operations. Foreign,
federal, state and local regulatory and legislative bodies have proposed various legislative and regulatory measures relating to climate change,
regulating GHG emissions and energy policies. If such legislation or regulations are enacted, we could incur increased energy,
environmental and other costs and capital expenditures to comply with the limitations. Failure to comply with these regulations could
result in fines to our company and could affect our business, financial condition and results of operations.
We, along with other companies in many business sectors, including our customers, are considering and implementing ways to reduce
GHG emissions. As a result, our customers may request that changes be made to our products or facilities, as well as other aspects of our
production processes, that increase costs and may require the investment of capital. The failure to comply with these requests could
adversely affect our relationships with some customers, which in turn could adversely affect our business, financial condition and results of
operations.
We could face increased costs related to defending and resolving legal claims and other litigation related to climate change and the alleged
impact of our operations on climate change.
The Frequency and Volume of our Timber and Timberland Sales Will Impact our Financial Performance.
We have a significant inventory of standing timber and timberland and approximately 18,800 acres of special use properties in the United
States as of October 31, 2019. The frequency, demand for and volume of sales of timber, timberland and special use properties will have an
effect on our financial condition and results of operations. In addition, volatility in the real estate market for special use properties could
negatively affect our results of operations.
Changes in U.S. Generally Accepted Accounting Principles (GAAP) and SEC Rules and Regulations Could Materially Impact our Reported Results.
GAAP and SEC accounting and reporting changes have become more frequent and significant in the past several years. These changes
could have significant effects on our reported results when compared to prior periods and other companies and may even require us to
retrospectively adjust prior periods from time to time. Additionally, material changes to the presentation of transactions in the
consolidated financial statements could impact key ratios that analysts and credit rating agencies use to rate our company, increase our cost
of borrowing and ultimately our ability to access the credit markets in an efficient manner.
The Financial Accounting Standard Board (‘‘FASB’’) has issued an Accounting Standards Update (‘‘ASU’’) that provides new
requirements for accounting for and the disclosure of lease assets and lease liabilities on the balance sheet and the disclosure of key
18
information about our lease arrangements. This ASU is effective for us on November 1, 2019, and we expect to adopt this ASU on that
date using a modified retrospective approach and will not adjust our comparative period financial information. We plan to adopt the
practical expedient package which permits us to not reassess previous conclusions whether a contract is or contains a lease, lease
classification, or treatment of indirect costs for existing contracts as of the adoption date. We also plan to adopt the short-term lease
recognition exemption and the practical expedient allowing for the combination of lease and non-lease components for equipment leases.
We have preliminarily completed the lease collection and evaluation process, implemented a technology tool to assist with the accounting
and reporting requirements of the new standard, and designed new processes and controls around leases. We expect to recognize a right-
of-use asset and lease liability between approximately $275-$325 million and do not expect the ASU to have a material impact on our
financial position, results of operations, comprehensive income, or cash flows, other than the impact mentioned above.
In June 2016, the FASB issued ASU 2016-13, ‘‘Financial Instruments – Credit Losses’’. The ASU sets forth a ‘‘current expected credit loss’’
(CECL) model which requires us to measure all expected credit losses for financial instruments held at the reporting date based on
historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is
applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit
exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years,
with early adoption permitted. We plan to adopt this ASU on November 1, 2020. We are in the process of determining the potential
impact of adopting this guidance on its financial position, results of operations, comprehensive income, cash flows and disclosures.
If we Fail to Maintain an Effective System of Internal Control, we may not be able to Accurately Report Financial Results or Prevent Fraud.
Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. We must
annually evaluate our internal control procedures to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which
requires management and auditors to assess the effectiveness of internal controls. As described in Item 9A of this Form 10-K, management
has concluded that our internal controls over financial reporting, except where excluded by the SEC’s guidance, were effective as of
October 31, 2019. In the past, we have reported material weaknesses in the adequacy of our internal controls, and there is no assurance
that, in the future, material weaknesses will not be identified that would cause management to change its current conclusion as to the
effectiveness of our internal controls. If we fail to maintain effective internal controls, we could report material weaknesses in the future,
indicating that there is a reasonable possibility that our financial statements do not accurately reflect our financial condition.
We have a Significant Amount of Goodwill and Long-lived Assets Which, if Impaired in the Future, Would Adversely Impact our Results of
Operations.
Our goodwill could be impaired if the fair value of any particular reporting unit is less than the carrying value of that reporting unit.
Impairment of our goodwill would reduce our net income in the period of any such write down. We are required to evaluate goodwill
reflected on our balance sheet at least annually, or when circumstances indicate a potential impairment. If we determine that the goodwill
is impaired, we would be required to write off a portion or all of the goodwill. At October 31, 2019, the carrying value of our goodwill was
$1,517.8 million.
We may be required to record future impairments of our long-lived assets as we continue to restructure our business. Decisions to sell or
close plants could reduce the estimated useful life of an asset group or indicate that the fair value of the asset group is less than the carrying
value. We may also experience declines in particular businesses due to competition or other outside forces indicating our long-lived assets
are not recoverable. Any resulting impairments will impact net income in the period in which the triggering event occurs and could be
significant, which could have a material adverse effect on our financial condition and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
19
ITEM 2. PROPERTIES
The following are our principal operating locations and the products manufactured at such facilities or the use of such facilities. We
consider our operating properties to be in satisfactory condition and adequate to meet our present needs. However, we expect to make
further additions, improvements and consolidations of our properties to support our business.
Location
Products or Use
RIGID INDUSTRIAL PACKAGING & SERVICES
Algeria
Steel drums
Argentina
Steel and plastic drums, pails, and water bottles
Austria
Belgium
Brazil
Canada
Chile
China
Colombia
Costa Rica
Czech Republic
Denmark
Egypt
France
Germany
Greece
Guatemala
Hungary
Israel
Italy
Kenya
Malaysia
Mexico
Morocco
Steel drums, intermediate bulk containers, and reconditioned containers and services
Steel and plastic drums
Steel and plastic drums and closures
Steel and plastic drums
Steel drums, water bottles, and warehouse
Steel and plastic drums, closures, and intermediate bulk containers
Steel and plastic drums and water bottles
Steel drums
Steel drums
Fibre drums
Steel drums
Steel and plastic drums, reconditioned containers, closures, and intermediate bulk
containers
Steel drums, water bottles, closures, and intermediate bulk containers
Steel drums
Steel drums
Steel drums
Steel, plastic and fibre drums and intermediate bulk containers
Steel and plastic drums, jerry cans, and intermediate bulk containers
Steel drums
Steel drums
Steel and fibre drums and warehouse
Steel and plastic drums
Netherlands
Steel drums, closures, paints and linings, and intermediate bulk containers
Nigeria
Poland
Portugal
Russia
Steel drums
Steel drums and water bottles
Steel drums
Steel drums, clovertainers, intermediate bulk containers, and general office
20
Owned
Leased
—
2
—
2
5
2
1
7
1
—
1
—
1
4
4
1
1
1
—
1
—
1
1
1
3
1
1
1
7
1
1
1
—
3
—
1
1
1
1
—
1
—
—
1
—
—
—
1
3
1
1
2
—
2
—
—
—
3
Location
Saudi Arabia
Singapore
South Africa
Spain
Sweden
Turkey
Ukraine
Products or Use
Steel drums
Steel and plastic drums
Steel and plastic drums
Steel drums and intermediate bulk containers
Steel and plastic drums and intermediate bulk containers
Steel drums
Distribution center and water bottles
United Kingdom
Steel drums, reconditioned containers, and intermediate bulk containers
United States
Vietnam
Fibre, steel and plastic drums, intermediate bulk containers, reconditioned
containers, closures, warehouse, and packaging services
Steel drums
FLEXIBLE PRODUCTS & SERVICES:
Belgium
Manufacturing plant
Brazil
Chile
China
France
Germany
India
Ireland
Mexico
General office
General office
Manufacturing plant
Manufacturing plant
General offices and warehouse
General office
Distribution center
Manufacturing plant
Netherlands
General offices and warehouse
Portugal
Romania
Turkey
Ukraine
Manufacturing plant
Manufacturing plants
Manufacturing plants
Manufacturing plant
United Kingdom
Manufacturing plant
United States
Vietnam
General offices
Manufacturing plant
PAPER PACKAGING & SERVICES:
Canada
Spiral-wound paper containers and warehouse
Owned
—
Leased
2
—
2
2
1
1
—
2
18
1
—
—
—
—
1
—
—
—
—
—
—
—
—
1
—
—
—
2
1
1
1
1
—
1
—
25
—
1
1
1
1
—
2
1
1
1
2
1
2
3
—
1
2
1
2
United States
Corrugated sheets and containers, containerboard, coated and uncoated recycled
paperboard, folding cartons, spiral-wound paper tubes and cores, headers, adhesives,
recycling plants, general offices and warehouses
63
57
21
Location
LAND MANAGEMENT:
United States
Products or Use
General offices
CORPORATE:
Belgium
Hungary
Netherlands
United States
General office
Shared service center
General office
Principal and general offices
Owned
Leased
3
—
—
—
3
2
1
1
1
—
We also own a substantial amount of timber properties. Our timber properties consisted of approximately 251,000 acres in the
southeastern United States as of October 31, 2019.
22
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings that are material to our business or financial condition.
From time to time, we have been a party to legal proceedings arising at the country, state or local level involving environmental sites to
which we have shipped, directly or indirectly, small amounts of toxic waste, such as paint solvents. As of the filing date of this Form 10-K,
we have been classified only as a ‘‘de minimis’’ participant in such proceedings. Except as described in the following paragraphs, we are not
a party to any legal proceedings involving a governmental authority and arising under any federal, state or local provisions that have been
enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment
and involving potential monetary sanctions in excess of $100,000.
On July 19, 2017, the Wisconsin Department of Natural Resources (‘‘WDNR’’) issued Notices of Violation to us and CLCM with respect
to CLCM’s three reconditioning facilities in the Milwaukee, Wisconsin area regarding violations of Wisconsin laws related to hazardous
waste, air management and industrial storm water. On November 27, 2017, the United States Environmental Protection Agency (‘‘U.S.
EPA’’) issued a Notice of Violation to us and CLCM with respect to CLCM’s reconditioning facilities in the Milwaukee, Wisconsin area
regarding violations of the federal Resource Conservation and Recovery Act (‘‘RCRA’’), primarily related to the unlawful storage and
treatment of hazardous wastes without RCRA licenses and violations of RCRA’s requirements related to hazardous waste determinations
and hazardous waste activity notifications, and Wisconsin laws related to hazardous waste. On November 27, 2017, the U.S. EPA issued
Notices and Findings of Violations to CLCM with respect to two of CLCM’s reconditioning facilities in the Milwaukee, Wisconsin area
regarding violations of the federal Clean Air Act, primarily related to air management, and Wisconsin laws related to air management. The
remedies being sought in these proceedings include compliance with the applicable environmental laws and regulations as being
interpreted by the U.S. EPA and WDNR and monetary sanctions. We have cooperated with the governmental agencies in these
investigations and proceedings. As of the filing date of this Form 10-K, no citations have been issued or fines assessed with respect to any of
these proceedings. With respect to one or more of these proceedings, monetary sanctions may be imposed by the U.S. EPA or the WNDR
and those monetary sanctions may exceed $100,000 individually or in the aggregate.
ITEM 4. MINE SAFETY DISCLOSURES
None.
23
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
Shares of our Class A and Class B Common Stock are listed on the New York Stock Exchange under the symbols GEF and GEF.B,
respectively.
Financial information regarding our two classes of common stock, as well as the number of holders of each class and the high, low and
closing sales prices for each class for each quarterly period for the two most recent years, is included in Note 18 of the Notes to
Consolidated Financial Statements in Item 8 of this Form 10-K.
We pay quarterly dividends of varying amounts computed on the basis described in Note 14 of the Notes to Consolidated Financial
Statements included in Item 8 of this Form 10-K. The annual dividends paid for the last two years are as follows:
2019 Dividends per Share – Class A $1.76; Class B $2.63
2018 Dividends per Share – Class A $1.70; Class B $2.54
The terms of our current secured credit facilities, United States accounts receivable credit facility and the indenture governing our Senior
Notes due 2027 limit our ability to make ‘‘restricted payments,’’ which include dividends and purchases, redemptions and acquisitions of
our equity interests. The payment of dividends and other restricted payments are subject to the condition that certain defaults not exist
under the terms of our current secured credit facilities, United States accounts receivable credit facility and the indenture governing our
Senior Notes due 2027 and, in the event that certain defaults exist, are limited in amount by a formula based, in part, on our consolidated
net income. See ‘‘Liquidity and Capital Resources – Borrowing Arrangements’’ in Item 7 of this Form 10-K.
In July 2017, the Board of Directors’ Stock Repurchase Committee authorized, and we executed, the repurchase of 2,000 shares of Class B
Common Stock as a part of the Board authorized common stock repurchase program. No stock has been repurchased during 2018 and
2019.
24
Performance Graph
The following graph compares the performance of shares of our Class A and B Common Stock to that of the Standard and Poor’s 500
Index and our industry group (Peer Index) assuming $100 invested on October 31, 2014 and reinvestment of dividends for each
subsequent year. The graph does not purport to represent our value.
$250
$200
s
e
c
i
r
P
d
e
x
e
d
n
I
$150
$100
$50
$0
10/31/14
10/31/15
10/31/16
10/31/17
10/31/18
10/31/19
S&P 500 Index
Peer Index
Greif Cl A
Greif Cl B
The Peer Index comprises the containers and packaging index as shown by Dow Jones.
Equity compensation plan information required by Items 201(d) of Regulation S-K will be found under the caption ‘‘Equity
Compensation Plan Information’’ in the 2020 Proxy Statement, which information is incorporated herein by reference.
25
ITEM 6. SELECTED FINANCIAL DATA
The five-year selected financial data is as follows:
(in millions, except per share amounts)
Net sales
Net income attributable to Greif, Inc.
Total assets
Long-term debt, including current portion of long-term debt
Basic earnings per share:
Class A common stock
Class B common stock
Diluted earnings per share:
Class A common stock
Class B common stock
Dividends per share:
Class A common stock
Class B common stock
2019(1)
$4,595.0
$ 171.0
$5,426.7
$2,756.3
$
$
$
$
$
$
2.89
4.33
2.89
4.33
1.76
2.63
Year Ended October 31,
2018
$3,873.8
$ 209.4
$3,194.8
$ 907.6
$
$
$
$
$
$
3.56
5.33
3.55
5.33
1.70
2.54
2017
$3,638.2
$ 118.6
$3,232.3
$ 952.8
$
$
$
$
$
$
2.02
3.02
2.02
3.02
1.68
2.51
2016
$3,323.6
$
74.9
$3,153.0
$ 974.6
$
$
$
$
$
$
1.28
1.90
1.28
1.90
1.68
2.51
2015
$3,616.7
$
71.9
$3,315.7
$1,146.9
$
$
$
$
$
$
1.23
1.83
1.23
1.83
1.68
2.51
(1)
Includes the results and components of the Caraustar Acquisition from February 11, 2019 through October 31, 2019.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The terms ‘‘Greif,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ as used in this discussion refer to Greif, Inc. and its subsidiaries.
RESULTS OF OPERATIONS
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States (‘‘GAAP’’). The preparation of
these consolidated financial statements, in accordance with these principles, require us to make estimates and assumptions that affect the
reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our
consolidated financial statements.
Historical revenues and earnings may or may not be representative of future operating results due to various economic and other factors.
The non-GAAP financial measures of EBITDA and Adjusted EBITDA are used throughout the following discussion of our results of
operations, both for our consolidated and segment results. For our consolidated results, EBITDA is defined as net income, plus interest
expense, net, including debt extinguishment charges, plus income tax expense, plus depreciation, depletion and amortization, and Adjusted
EBITDA is defined as EBITDA plus restructuring charges, plus acquisition-related costs, plus non-cash impairment charges, plus non-cash
pension settlement charges, less (gain) loss on disposal of properties, plants, equipment and businesses, net. Since we do not calculate net
income by business segment, EBITDA and Adjusted EBITDA by business segment are reconciled to operating profit by business segment.
In that case, EBITDA is defined as operating profit by business segment less other (income) expense, net, less equity earnings of
unconsolidated affiliates, net of tax, plus depreciation, depletion and amortization expense for that business segment, and Adjusted
EBITDA is defined as EBITDA plus restructuring charges, plus acquisition-related costs, plus non-cash asset impairment charges, plus
non-cash pension settlement charges, less (gain) loss on disposal of properties, plants, equipment and businesses, net, for that business
segment. We use EBITDA and Adjusted EBITDA as financial measures to evaluate our historical and ongoing operations and believe that
these non-GAAP financial measures are useful to enable investors to perform meaningful comparisons of our historical and current
performance. In addition, we present our U.S. and non-U.S. income before income taxes after eliminating the impact of non-cash asset
impairment charges, non-cash pension settlement charges, restructuring charges, debt extinguishment charges, acquisition-related costs
and (gains) losses on sales of businesses, net, which are non-GAAP financial measures. We believe that excluding the impact of these
adjustments enable investors to perform a meaningful comparison of our current and historical performance that investors find valuable.
The foregoing non-GAAP financial measures are intended to supplement and should be read together with our financial results. These
non-GAAP financial measures should not be considered an alternative or substitute for, and should not be considered superior to, our
reported financial results. Accordingly, users of this financial information should not place undue reliance on the non-GAAP financial
measures.
26
The following table sets forth the net sales, operating profit (loss), EBITDA and Adjusted EBITDA for each of our business segments for
2019, 2018 and 2017:
Year Ended October 31, (in millions)
Net sales
Rigid Industrial Packaging & Services
Paper Packaging & Services
Flexible Products & Services
Land Management
Total net sales
Operating profit (loss):
Rigid Industrial Packaging & Services
Paper Packaging & Services
Flexible Products & Services
Land Management
Total operating profit
EBITDA:
Rigid Industrial Packaging & Services
Paper Packaging & Services
Flexible Products & Services
Land Management
Total EBITDA
Adjusted EBITDA:
Rigid Industrial Packaging & Services
Paper Packaging & Services
Flexible Products & Services
Land Management
Total Adjusted EBITDA
2019
2018
2017
$2,490.6
1,780.0
297.5
26.9
$4,595.0
179.6
184.3
25.3
9.9
$ 399.1
251.6
307.0
32.7
14.2
$ 605.5
269.9
348.3
28.6
12.1
$ 658.9
$2,623.6
898.5
324.2
27.5
$3,873.8
183.2
158.3
19.4
9.6
$ 370.5
249.0
191.8
25.7
14.2
$ 480.7
273.4
192.3
25.6
11.9
$ 503.2
$2,522.7
800.9
286.4
28.2
$3,638.2
190.1
93.5
5.8
10.1
$ 299.5
241.9
115.3
11.1
14.6
$ 382.9
294.9
126.1
12.3
12.2
$ 445.5
The following table sets forth EBITDA and Adjusted EBITDA, reconciled to net income and operating profit, for our consolidated
results for 2019, 2018 and 2017:
Year Ended October 31, (in millions)
Net income
Plus: interest expense, net
Plus: debt extinguishment charges
Plus: income tax expense
Plus: depreciation, depletion and amortization expense
EBITDA
Net income
Plus: interest expense, net
Plus: debt extinguishment charges
Plus: income tax expense
Plus: non-cash pension settlement charges
Plus: other (income) expense, net
Plus: equity earnings of unconsolidated affiliates, net of tax
Operating profit
Less: non-cash pension settlement charges
Less: other (income) expense, net
Less: equity earnings of unconsolidated affiliates, net of tax
Plus: depreciation, depletion and amortization expense
EBITDA
Plus: restructuring charges
Plus: acquisition-related charges
Plus: non-cash asset impairment charges
Plus: non-cash pension settlement charges
Less: (Gain) loss on disposal of properties, plants, equipment, and businesses, net
Adjusted EBITDA
27
2019
194.2
112.5
22.0
70.7
206.1
$605.5
194.2
112.5
22.0
70.7
—
2.6
(2.9)
399.1
—
2.6
(2.9)
206.1
$605.5
26.1
29.7
7.8
—
(10.2)
$658.9
2018
229.5
51.0
—
73.3
126.9
$480.7
229.5
51.0
—
73.3
1.3
18.4
(3.0)
370.5
1.3
18.4
(3.0)
126.9
$480.7
18.6
0.7
8.3
1.3
(6.4)
$503.2
2017
135.1
60.1
—
67.2
120.5
$382.9
135.1
60.1
—
67.2
27.1
12.0
(2.0)
299.5
27.1
12.0
(2.0)
120.5
$382.9
12.7
0.7
20.8
27.1
1.3
$445.5
The following table sets forth EBITDA and Adjusted EBITDA for each of our business segments, reconciled to the operating profit for
each segment, for 2019 and 2018:
Year Ended October 31, (in millions)
Rigid Industrial Packaging & Services
Operating profit
Less: non-cash pension settlement charges
Less: other (income) expense, net
Less: equity earnings of unconsolidated affiliates, net of tax
Plus: depreciation and amortization expense
EBITDA
Plus: restructuring charges
Plus: acquisition-related charges
Plus: non-cash asset impairment charges
Plus: non-cash pension settlement charges
Less: (gain) loss on disposal of properties, plants, equipment, and businesses, net
Adjusted EBITDA
Paper Packaging & Services
Operating profit
Less: non-cash pension settlement charges
Less: other (income) expense, net
Plus: depreciation and amortization expense
EBITDA
Plus: restructuring charges
Plus: acquisition-related charges
Plus: non-cash asset impairment charges
Plus: non-cash pension settlement charges
Less: (gain) loss on disposal of properties, plants, equipment, and businesses, net
Adjusted EBITDA
Flexible Products & Services
Operating profit (loss)
Less: non-cash pension settlement charge
Less: other (income) expense, net
Plus: depreciation and amortization expense
EBITDA
Plus: restructuring charges
Plus: non-cash asset impairment charges
Plus: non-cash pension settlement charges
Less: (gain) loss on disposal of properties, plants, equipment, and businesses, net
Adjusted EBITDA
Land Management
Operating profit
Less: non-cash pension settlement charge
Plus: depreciation, depletion and amortization expense
EBITDA
Plus: restructuring charges
Plus: non-cash pension settlement charge
Less: (gain) loss on disposal of properties, plants, equipment, and businesses, net
Adjusted EBITDA
28
2019
2018
2017
$ 179.6
$ 183.2
$ 190.1
—
7.2
(2.9)
76.3
1.3
17.1
(3.0)
81.2
16.7
10.5
(2.0)
77.0
$ 251.6
$ 249.0
$ 241.9
18.8
0.6
2.7
—
(3.8)
17.3
0.7
8.3
1.3
(3.2)
11.2
0.5
20.5
16.7
4.1
$ 269.9
$ 273.4
$ 294.9
$ 184.3
$ 158.3
$
—
(3.4)
119.3
—
0.7
34.2
93.5
10.2
(0.1)
31.9
$ 307.0
$ 191.8
$ 115.3
6.2
29.1
5.1
—
0.9
0.4
—
—
—
0.1
0.3
0.2
—
10.2
0.1
$ 348.3
$ 192.3
$ 126.1
$
25.3
$
19.4
$
—
(1.2)
6.2
—
0.6
6.9
5.8
0.1
1.6
7.0
$
32.7
$
25.7
$
11.1
1.0
—
—
(5.1)
0.9
—
—
(1.0)
1.2
0.3
0.1
(0.4)
$
28.6
$
25.6
$
12.3
9.9
—
4.3
9.6
—
4.6
10.1
0.1
4.6
$
14.2
$
14.2
$
14.6
0.1
—
(2.2)
—
—
(2.3)
—
0.1
(2.5)
$
12.1
$
11.9
$
12.2
Year 2019 Compared to Year 2018
Net Sales
Net sales were $4,595.0 million for 2019 compared with $3,873.8 million for 2018. The $721.2 million increase was primarily due to the
sales contributed by the acquired Caraustar operations, partially offset by lower volumes in certain regions and the impact of foreign
currency translation.
Gross Profit
Gross profit was $959.9 million for 2019 compared with $788.9 million for 2018. The respective reasons for the improvement or decline
in gross profit, as the case may be, for each segment are described below in the ‘‘Segment Review.’’ Gross profit margin was 20.9 percent for
2019 compared to 20.4 percent for 2018.
Selling, General and Administrative Expenses
Selling, general and administrative (‘‘SG&A’’) expenses increased $110.2 million to $507.4 million for 2019 from $397.2 million for 2018.
This increase was primarily due to expenses attributable to the acquired Caraustar operations, partially offset by a reduction in salaries and
benefits costs. SG&A expenses were 11.0 percent of net sales for 2019 compared with 10.3 percent of net sales for 2018.
Restructuring Charges
Restructuring charges were $26.1 million for 2019 compared with $18.6 million for 2018. Restructuring activities and associated costs
during 2019 are anticipated to deliver annual run-rate savings of approximately $31.6 million with payback periods ranging from one to
three years among the plans. See Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for
additional information.
Acquisition-related Costs
Acquisition-related costs were $29.7 million for 2019 compared with $0.7 million for 2018. The increase was primarily due to expenses
incurred in connection with the Caraustar Acquisition and the Tholu Acquisition. See Note 2 of the Notes to Consolidated Financial
Statements included in Item 8 of this Form 10-K for additional information.
Impairment Charges
There were no goodwill impairment charges for 2019 and 2018.
Non-cash asset impairment charges were $7.8 million for 2019 compared with $8.3 million for 2018. In 2019, these charges were primarily
related to plant closures. See Note 9 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for
additional information.
Gain on Disposal of Properties, Plants and Equipment, net
The gain on disposal of properties, plants, and equipment, net was $13.9 million and $5.6 million for 2019 and 2018, respectively. See
Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information.
Gain on Disposal of Businesses, net
The gain on disposal of business, net was $3.7 million for 2019 and $0.8 million for 2018. See Note 2 of the Notes to Consolidated
Financial Statements included in Item 8 of this Form 10-K for additional information.
Financial Measures
Operating profit was $399.1 million for 2019 compared with $370.5 million for 2018. Net income was $194.2 million for 2019 compared
with $229.5 million for 2018. Adjusted EBITDA was $658.9 million for 2019 compared with $503.2 million for 2018. The
$155.7 million increase in Adjusted EBITDA was primarily due to the contribution from the acquired Caraustar operations, partially
offset by lower volumes in certain regions and a negative impact from foreign currency translation.
29
Trends
We anticipate demand softness in the industrial manufacturing businesses, particularly in North America and Western Europe, to
continue in 2020. Additionally, raw material prices for steel, resin, old corrugated containers, recycled coated and uncoated paperboard are
expected to remain relatively stable in 2020.
Segment Review
Rigid Industrial Packaging & Services
Key factors influencing profitability in the Rigid Industrial Packaging & Services segment are:
•
•
•
•
•
Selling prices, product mix, customer demand and sales volumes;
Raw material costs, primarily steel, resin, containerboard and used industrial packaging for reconditioning;
Energy and transportation costs;
Benefits from executing the Greif Business System;
Restructuring charges;
• Acquisition of businesses and facilities;
• Divestiture of businesses and facilities; and
•
Impact of foreign currency translation.
Net sales were $2,490.6 million for 2019 compared with $2,623.6 million for 2018. The $133.0 million decrease in net sales was due
primarily to decreased volumes in certain regions and the impact of foreign currency translation, partially offset by an increase in selling
prices due to strategic pricing decisions.
Gross profit was $460.1 million for 2019 compared with $490.8 million for 2018. The $30.7 million decrease in gross profit was primarily
due to the same factors that impacted net sales. Gross profit margin decreased to 18.5 percent in 2019 from 18.7 percent in 2018.
Operating profit was $179.6 million for 2019 compared with $183.2 million for 2018. The $3.6 million decrease was primarily
attributable to the same factors that impacted net sales, partially offset by a decrease in the segment’s SG&A expense. The decrease in
SG&A expense included a one-time Brazilian tax recovery of approximately $7.0 million. Adjusted EBITDA was $269.9 million for 2019
compared with $273.4 million for 2018. The $3.5 million decrease was primarily due to the same factors that impacted operating profit.
Depreciation, depletion and amortization expense was $76.3 million and $81.2 million for 2019 and 2018, respectively.
Paper Packaging & Services
Key factors influencing profitability in the Paper Packaging & Services segment are:
•
•
•
•
•
Selling prices, product mix, customer demand and sales volumes;
Raw material costs, primarily old corrugated containers;
Energy and transportation costs;
Benefits from executing the Greif Business System
Restructuring charges; and
• Acquisition of businesses and facilities.
Net sales were $1,780.0 million for 2019 compared with $898.5 million for 2018. The $881.5 million increase was primarily due to
$936.3 million of contribution from the acquired Caraustar operations, partially offset by lower published containerboard prices and
decreased volumes.
Gross profit was $425.4 million for 2019 compared with $222.5 million for 2018. The increase in gross profit was due primarily to
$211.6 million of contribution from the acquired Caraustar operations, partially offset by the same factors that impacted net sales. Gross
profit margin was 23.9 percent and 24.8 percent for 2019 and 2018, respectively.
30
Operating profit was $184.3 million for 2019 compared with $158.3 million for 2018. Adjusted EBITDA was $348.3 million for 2019
compared with $192.3 million for 2018. The increase was due primarily to $163.9 million of contribution from the acquired Caraustar
operations, partially offset by the same factors that impacted net sales. Depreciation, depletion and amortization expense was
$119.3 million and $34.2 million for 2019 and 2018, respectively.
Flexible Products & Services
Key factors influencing profitability in the Flexible Products & Services segment are:
•
•
•
•
•
Selling prices, product mix, customer demand and sales volumes;
Raw material costs, primarily resin;
Energy and transportation costs;
Benefits from executing the Greif Business System;
Restructuring charges;
• Divestiture of businesses and facilities; and
•
Impact of foreign currency translation.
Net sales were $297.5 million for 2019 compared with $324.2 million for 2018. The $26.7 million decrease was primarily due to the
impact of foreign currency translation and volume decreases, partially offset by improved product mix.
Gross profit was $64.2 million for 2019 compared with $65.2 million for 2018. The decrease was primarily attributable to the same factors
that impacted net sales, partially offset by lower manufacturing costs. The increase in gross profit margin to 21.6 percent for 2019 from
20.1 percent for 2018 was primarily due to lower manufacturing costs.
Operating profit was $25.3 million for 2019 compared with $19.4 million for 2018. The increase in operating profit was primarily due to
a $5.1 million gain on disposal of properties, plants and equipment. Adjusted EBITDA was $28.6 million for 2019 compared with
$25.6 million for 2018. The increase was due to a reduction in segment SG&A expense, partially offset by lower gross profit. Depreciation,
depletion and amortization expense was $6.2 million for 2019 compared with $6.9 million for 2018, respectively.
Land Management
As of October 31, 2019, our Land Management segment consisted of approximately 251,000 acres of timber properties in the southeastern
United States. Key factors influencing profitability in the Land Management segment are:
•
•
Planned level of timber sales;
Selling prices and customer demand;
• Gains on timberland sales; and
• Gains on the disposal of development, surplus and HBU properties (‘‘special use property’’).
In order to maximize the value of our timber properties, we continue to review our current portfolio and explore the development of
certain of these properties. This process has led us to characterize our property as follows:
•
Surplus property, meaning land that cannot be efficiently or effectively managed by us, whether due to parcel size, lack of
productivity, location, access limitations or for other reasons.
• HBU property, meaning land that in its current state has a higher market value for uses other than growing and selling
timber.
• Development property, meaning HBU land that, with additional investment, may have a significantly higher market value
than its HBU market value.
• Core timberland, meaning land that is best suited for growing and selling timber.
31
We report the sale of timberland property in ‘‘timberland gains,’’ the sale of HBU and surplus property in ‘‘gain on disposal of properties,
plants and equipment, net’’ and the sale of timber and development property under ‘‘net sales’’ and ‘‘cost of products sold’’ in our
consolidated statements of income. All HBU and development property, together with surplus property, is used to productively grow and
sell timber until the property is sold.
Whether timberland has a higher value for uses other than growing and selling timber is a determination based upon several variables, such
as proximity to population centers, anticipated population growth in the area, the topography of the land, aesthetic considerations,
including access to lakes or rivers, the condition of the surrounding land, availability of utilities, markets for timber and economic
considerations both nationally and locally. Given these considerations, the characterization of land is not a static process, but requires an
ongoing review and re-characterization as circumstances change.
As of October 31, 2019, we estimated that there were 18,800 acres in the United States of special use property, which we expect will be
available for sale in the next four to six years.
Net sales decreased to $26.9 million for 2019 compared with $27.5 million for 2018.
Operating profit increased to $9.9 million for 2019 from $9.6 million for 2018.
Adjusted EBITDA was $12.1 million and $11.9 million for 2019 and 2018, respectively. Depreciation, depletion and amortization
expense was $4.3 million and $4.6 million for 2019 and 2018, respectively.
Other Income Statement Changes
Interest Expense, net
Interest expense, net was $112.5 million and $51.0 million for 2019 and 2018, respectively. The increase was primarily due to the
incremental debt incurred in connection with the Caraustar Acquisition.
Debt Extinguishment Charges
Debt extinguishment charges were $22.0 million in 2019. There were no debt extinguishment charges in 2018. The increase in debt
extinguishment charges was due to the debt extinguishment related to the financing of the Caraustar Acquisition.
Other Expense, net
Other expense, net was $2.6 million and $18.4 million for 2019 and 2018, respectively. The decrease was primarily due to a reduction in
pension costs, largely driven by a one-time $65.0 million contribution we made to our U.S. defined benefit plan in 2018, as well as reduced
foreign currency transaction losses.
32
U.S. and Non-U.S. Income before Income Tax Expense
See the following tables for details of the U.S. and non-U.S. income before income taxes and U.S. and non-U.S. income before income
taxes after eliminating the impact of non-cash asset impairment charges, non-cash pension settlement charges, restructuring charges, and
(gains) losses on sales of businesses.
Summary
Non-U.S. % of Consolidated Net Sales
U.S. % of Consolidated Net Sales
Non-U.S. % of Consolidated I.B.I.T.
U.S. % of Consolidated I.B.I.T.
Non-U.S. % of Consolidated I.B.I.T. before Special Items
U.S. % of Consolidated I.B.I.T. before Special Items
Non-U.S. I.B.I.T.
Non-cash asset impairment charges
Non-cash pension settlement charge
Restructuring charges
Acquisition-related costs
(Gain) loss on sale of businesses
Total Non-U.S. Special Items
Non-U.S. I.B.I.T. before Special Items
U.S. I.B.I.T.
Non-cash asset impairment charges
Restructuring charges
Acquisition-related costs
Debt extinguishment charges
Loss on sale of businesses
Total U.S. Special Items
U.S. I.B.I.T. before Special Items
*
Income Before Income Tax expense = I.B.I.T.
Income Tax Expense
Non-U.S. I.B.I.T. Reconciliation
U.S. I.B.I.T. Reconciliation
Year ended
October 31,
2019
2018
40.6%
59.4%
51.4%
48.6%
100.0%
100.0%
50.4%
49.6%
34.1%
65.9%
100.0%
100.0%
44.0%
56.0%
36.9%
63.1%
100.0%
100.0%
Year ended
October 31,
2019
2018
$ 132.1
$ 102.3
2.7
—
16.3
0.5
2.9
22.4
4.6
1.3
13.5
0.6
(0.8)
19.2
$ 154.5
$ 121.5
Year ended
October 31,
2019
2018
$ 129.9
$ 197.5
5.1
9.8
29.2
22.0
0.8
66.9
3.7
5.1
0.1
—
—
8.9
$ 196.8
$ 206.4
We had operations in over 40 countries during 2019. Operations outside the United States are subject to additional risks that may not
exist, or be as significant, within the United States. Because of our global operations in numerous countries we are required to address
different and complex tax systems and issues which are constantly changing.
Preparation of our financial statements requires the use of estimates and assumptions that affect the reported amounts of our assets and
liabilities; and revenues and expenses as of the balance sheet date. The numerous tax jurisdictions in which we operate, along with the
variety and complexity of the various tax laws, creates a level of uncertainty, and requires judgment when addressing the impact of complex
tax issues. Our effective tax rate and the amount of tax expense are dependent upon various factors, including the following: the tax laws of
33
the jurisdictions in which income is earned; the ability to realize deferred tax assets at certain international subsidiaries; negotiation and
dispute resolution with taxing authorities in the U.S. and international jurisdictions; and changes in tax laws.
The provision for income taxes is computed using the asset and liability method. Under this method, deferred tax assets and liabilities are
recognized currently based on the anticipated future tax consequences of changes in the temporary differences between the book and tax
bases of assets and liabilities. This method includes an estimate of the future realization of tax benefits associated with tax losses. Deferred
tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those
assets are expected to be realized or settled.
Income tax expense for 2019 was $70.7 million on $262.0 million of pretax income and for 2018 was $73.3 million on $299.8 million of
pretax income. In 2019, the mix of income and losses among various jurisdictions resulted in $7.6 million less tax on $37.8 million less of
pretax income. Additionally, the year-over-year increase in our reserve for unrecognized tax benefits due to releases for audit settlements
and expirations in the statute of limitations, offset by increases of the reserve due to changes in the measurement of uncertain tax positions,
was $3.3 million lower than the 2018 increase in the reserve. Further, the 2019 tax related to unremitted foreign earnings was $0.7 million
lower than the amount recorded in 2018. These decreases between the 2019 and 2018 tax amounts were offset by year-over-year increases
of $0.8 million in withholding tax expense and $3.6 million for other miscellaneous tax expense items, along with, most significantly, a
$18.7 million increase in the 2019 tax expense related to the one-time net provisional tax benefit recognized in 2018 related to the Tax
Reform Act.
During 2019, there was a $17.8 million net increase in valuation allowances. This increase was a result of a $5.6 million increase to
valuation allowances related to net operating losses and other deferred tax assets, an increase of $0.7 million in new valuation allowances, as
well as an increase of $13.2 million recorded from the Caraustar Acquisition. These increases were partially offset by a $1.7 million
decrease in valuation allowances due to currency translation and pension adjustments.
The SEC staff issued Staff Accounting Bulletin No. 118 (‘‘SAB 118’’) to address the application of GAAP in situations when a registrant
does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the
accounting for certain income tax effects of the Tax Reform Act. SAB 118 also provides for a measurement period that should not extend
beyond one year from the Tax Reform Act enactment date. During the first quarter of 2019, we revised our calculation for the transition
tax liability by $2.3 million. The provisional calculations related to the Tax Reform Act are now complete.
We analyze potential income tax liabilities related to uncertain tax positions in the United States and international jurisdictions. The
analysis of potential income tax liabilities results in estimates of income tax liabilities recognized for uncertain tax positions following the
guidance of ASC 740, ‘‘Income Taxes.’’ The estimation of potential tax liabilities related to uncertain tax positions involves significant
judgment in evaluating the impact of uncertainties in the application of ASC 740 and complex tax laws. We periodically analyze both
potential income tax liabilities and existing liabilities for uncertain tax positions resulting in both new reserves and adjustments to existing
reserves in light of changing facts and circumstances. This includes the release of existing liabilities for uncertain tax positions based on the
expiration of statutes of limitation. During 2019 and 2018, recognition of uncertain tax positions increased primarily due to increases in
unrecognized tax benefits related to prior years and the current year, offset by decreases related to lapses in statute of limitations and audit
settlements.
The ultimate resolution of potential income tax liabilities may result in a payment that is materially different from our current estimates. If
our estimates recognized under Account Standards Codification (‘‘ASC’’) 740 prove to be different than what is ultimately resolved, such
resolution could have a material impact on our financial condition and results of operations. While predicting the final outcome or the
timing of the resolution of any particular tax matter is subject to various risks and uncertainties, we believe that our tax accounts related to
uncertain tax positions are appropriately stated.
See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for further information.
Equity Earnings of Unconsolidated Affiliates, net of Tax
We recorded $2.9 million and $3.0 million of equity earnings of unconsolidated affiliates, net of tax, for 2019 and 2018, respectively.
Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests represents the portion of earnings from the operations of our non-wholly owned,
consolidated subsidiaries that belongs to the noncontrolling interests in those subsidiaries. Net income attributable to noncontrolling
interests was $23.2 million and $20.1 million for 2019 and 2018, respectively. The increase in net income attributable to noncontrolling
34
interests was due primarily to increased earnings of the joint venture (‘‘Flexible Packaging JV’’) formed in 2010, with Dabbagh Group
Holdings Company Limited and one of its subsidiaries, originally National Scientific Company Limited and now Gulf Refined Packaging
for Industrial Packaging Company LTD.
Net Income Attributable to Greif, Inc.
Based on the factors noted above, net income attributable to Greif, Inc. decreased $38.4 million to $171.0 million in 2019 from
$209.4 million in 2018.
Year 2018 Compared to Year 2017
Net Sales
Net sales were $3,873.8 million for 2018 compared with $3,638.2 million for 2017. The 6.5 percent increase was due primarily to strategic
pricing decisions and contractual price changes in our Rigid Industrial Packaging & Services segment, increases in selling prices due to
increases in published containerboard pricing and an increase in sales volumes in our Paper Packaging & Services segment, and strategic
pricing decisions and product mix in our Flexible Products & Services segment, partially offset by volume declines due to customer
operational interruptions, weather and strategic pricing decisions in our Rigid Industrial Packaging & Services segment.
Gross Profit
Gross profit was $788.9 million for 2018 compared with $714.7 million for 2017. The respective reasons for the improvement or decline
in gross profit, as the case may be, for each segment are described below in the ‘‘Segment Review.’’ Gross profit margin was 20.4 percent for
2018 compared to 19.6 percent for 2017.
Selling, General and Administrative Expenses
SG&A expenses increased 4.6 percent to $397.2 million for 2018 from $379.7 million for 2017. This increase was primarily due to
increased health and medical expenses, increased non-income taxes and increased salary expenses. SG&A expenses were 10.3 percent of net
sales for 2018 compared with 10.4 percent of net sales for 2017.
Restructuring Charges
Restructuring charges were $18.6 million for 2018 compared with $12.7 million for 2017. See Note 6 of the Notes to Consolidated
Financial Statements included in Item 8 of this Form 10-K for additional information.
Impairment Charges
There were no goodwill impairment charges for 2018 compared with $13.0 million for 2017. The 2017 charges were related to the
impairment of goodwill within the Rigid Industrial Packaging & Services segment.
Non-cash asset impairment charges were $8.3 million for 2018 compared with $7.8 million for 2017. In 2018, these charges were primarily
related to plant closures and impairments of goodwill allocated to assets held for sale. See Note 9 of the Notes to Consolidated Financial
Statements included in Item 8 of this Form 10-K for additional information.
Gain on Disposal of Properties, Plants and Equipment, net
The gain on disposal of properties, plants, and equipment, net was $5.6 million and $0.4 million for 2018 and 2017, respectively. See
Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information.
(Gain) Loss on Disposal of Businesses, net
The gain on disposal of business, net was $0.8 million for 2018 and the loss on disposal of business, net was $1.7 million for 2017. See
Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information.
Financial Measures
Operating profit was $370.5 million for 2018 compared with $299.5 million for 2017. Net income was $229.5 million for 2018 compared
with $135.1 million for 2017. Adjusted EBITDA was $503.2 million for 2018 compared with $445.5 million for 2017. The $57.7 million
35
increase in Adjusted EBITDA was primarily due to increased volumes, higher containerboard sales prices and lower old corrugated
containerboard prices in our Paper Packaging & Services segment, product mix and volume increases in our Flexible Products & Services
segment, partially offset by increased raw materials costs in our Rigid Industrial Packaging & Services segment and increased SG&A
expenses.
Segment Review
Rigid Industrial Packaging & Services
Key factors influencing profitability in the Rigid Industrial Packaging & Services segment are:
•
•
•
•
•
Selling prices, product mix, customer demand and sales volumes;
Raw material costs, primarily steel, resin, containerboard and used industrial packaging for reconditioning;
Energy and transportation costs;
Benefits from executing the Greif Business System;
Restructuring charges;
• Divestiture of businesses and facilities; and
•
Impact of foreign currency translation.
Net sales increased 4.0 percent to $2,623.6 million in 2018 from $2,522.7 million in 2017. The $100.9 million increase in net sales was
primarily the result of an increase in selling prices due to strategic pricing decisions, contractual price changes and a $18.9 million impact of
foreign currency translation, partially offset by volume declines due to customer operational interruptions, weather and strategic pricing
decisions.
Gross profit was $490.8 million for 2018 compared with $502.2 million for 2017. The $11.4 million decrease in gross profit was primarily
due to increased raw material costs, increased manufacturing expenses and the timing of contractual price changes. Gross profit margin
decreased to 18.7 percent in 2018 from 19.9 percent in 2017.
Operating profit was $183.2 million for 2018 compared with $190.1 million for 2017. Adjusted EBITDA was $273.4 million for 2018
compared with $294.9 million for 2017. The decrease in Adjusted EBITDA was due to the same factors same factors impacting gross
profit.
Paper Packaging & Services
Key factors influencing profitability in the Paper Packaging & Services segment are:
•
•
•
•
Selling prices, product mix, customer demand and sales volumes;
Raw material costs, primarily old corrugated containers;
Energy and transportation costs; and
Benefits from executing the Greif Business System.
Net sales increased 12.2 percent to $898.5 million for 2018 compared with $800.9 million for 2017, primarily due to increased published
containerboard prices and increased sales volumes.
Gross profit was $222.5 million for 2018 compared with $150.9 million for 2017. Gross profit margin was 24.8 percent and 18.8 percent
for 2018 and 2017, respectively. The increase in gross profit and gross profit margin was due primarily to higher containerboard sales prices
and lower old corrugated container input costs, partially offset by increased transportation costs.
Operating profit was $158.3 million for 2018 compared with $93.5 million for 2017. Adjusted EBITDA was $192.3 million for 2018
compared with $126.1 million for 2017. The increase was primarily due to the same factors that impacted gross profit, partially offset by an
increase in SG&A expenses due to an increase in allocated corporate costs and an increase in salaries and benefits costs as a result of
business performance.
36
Flexible Products & Services
Key factors influencing profitability in the Flexible Products & Services segment are:
•
•
•
•
•
Selling prices, product mix, customer demand and sales volumes;
Raw material costs, primarily resin;
Energy and transportation costs;
Benefits from executing the Greif Business System;
Restructuring charges;
• Divestiture of businesses and facilities; and
•
Impact of foreign currency translation.
Net sales increased 13.2 percent to $324.2 million for 2018 compared with $286.4 million for 2017. The increase was due primarily to
product mix, strategic pricing decisions, volume increases, and a $12.3 million impact of foreign currency translation.
Gross profit was $65.2 million for 2018 compared with $51.1 million for 2017. The increase was primarily attributable to the same factors
that impacted net sales and improved transportation and manufacturing efficiencies, which also contributed to the increase in gross profit
margin to 20.1 percent for 2018 from 17.8 percent for 2017.
Operating profit was $19.4 million for 2018 compared with $5.8 million for 2017. Adjusted EBITDA was $25.6 million for 2018
compared with $12.3 million for 2017. The increase was primarily related to the same factors impacting gross profit, partially offset by an
increase in SG&A expenses due to an increase in allocated corporate costs and an increase in salaries and benefits expenses as a result of
business performance.
Land Management
As of October 31, 2018, our Land Management segment consisted of approximately 243,000 acres of timber properties in the southeastern
United States. Key factors influencing profitability in the Land Management segment are:
•
•
Planned level of timber sales;
Selling prices and customer demand;
• Gains on timberland sales; and
• Gains on the disposal of special use properties.
As of October 31, 2018, we estimated that there were 17,900 acres in the United States of special use property, which we expect will be
available for sale in the next five to seven years.
Net sales decreased to $27.5 million for 2018 compared with $28.2 million for 2017.
Operating profit decreased to $9.6 million for 2018 from $10.1 million for 2017.
Adjusted EBITDA was $11.9 million and $12.2 million for 2018 and 2017, respectively. Depreciation, depletion and amortization
expense was $4.6 million for 2018 and 2017.
Other Income Statement Changes
Interest Expense, net
Interest expense, net was $51.0 million and $60.1 million for 2018 and 2017, respectively. The decrease was primarily due to the
repayment of our Senior Notes due February 2017, lower long-term debt balances, and lower interest rates resulting from the impact of our
derivative financial instruments.
37
Other Expense, net
Other expense, net was $18.4 million and $12.0 million for 2018 and 2017, respectively. The increase was primarily due to other
components of net benefit cost, $5.9 million, which are required to be present outside of income from operations, as a result of our
adoption of ASU 2017-07. See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for
additional information.
U.S. and Non-U.S. Income before Income Tax Expense
Refer to the following tables for details of the U.S. and non-U.S. income before income taxes and U.S. and non-U.S. income before income
taxes after eliminating the impact of non-cash asset impairment charges, non-cash pension settlement charges, restructuring charges, and
(gains) losses on sales of businesses.
Summary
Non-U.S. % of Consolidated Net Sales
U.S. % of Consolidated Net Sales
Non-U.S. % of Consolidated I.B.I.T.
U.S. % of Consolidated I.B.I.T.
Non-U.S. % of Consolidated I.B.I.T. before Special Items
U.S. % of Consolidated I.B.I.T. before Special Items
Non-U.S. I.B.I.T.
Non-cash asset impairment charges
Goodwill impairment charges
Non-cash pension settlement charge
Restructuring charges
(Gain) loss on sale of businesses
Total Non-U.S. Special Items
Non-U.S. I.B.I.T. before Special Items
U.S. I.B.I.T.
Non-cash asset impairment charges
Non-cash pension settlement charge
Restructuring charges
Total U.S. Special Items
U.S. I.B.I.T. before Special Items
*
Income Before Income Tax expense = I.B.I.T.
Income Tax Expense
Non-U.S. I.B.I.T. Reconciliation
U.S. I.B.I.T. Reconciliation
Year ended
October 31,
2018
51.4%
48.6%
100.0%
34.1%
65.9%
100.0%
36.9%
63.1%
100.0%
2017
51.1%
48.9%
100.0%
42.6%
57.4%
100.0%
43.5%
56.5%
100.0%
Year ended
October 31,
2018
102.3
4.6
—
1.3
13.5
(0.8)
18.6
120.9
2017
$ 85.2
2.2
13.0
1.2
10.8
1.7
28.9
$114.1
Year ended
October 31,
2018
2017
197.5
3.7
—
5.1
8.8
206.3
$
$
115.1
5.6
25.9
1.9
33.4
148.5
$
$
$
$
We had operations in over 40 countries during 2018. Operations outside the United States are subject to additional risks that may not
exist, or be as significant, within the United States. Because of our global operations in numerous countries we are required to address
different and complex tax systems and issues which are constantly changing.
Preparation of our financial statements requires the use of estimates and assumptions that affect the reported amounts of our assets and
liabilities; and revenues and expenses as of the balance sheet date. The numerous tax jurisdictions in which we operate, along with the
variety and complexity of the various tax laws, creates a level of uncertainty, and requires judgment when addressing the impact of complex
38
tax issues. Our effective tax rate and the amount of tax expense are dependent upon various factors, including the following: the tax laws of
the jurisdictions in which income is earned; the ability to realize deferred tax assets at certain international subsidiaries; negotiation and
dispute resolution with taxing authorities in the U.S. and international jurisdictions; and changes in tax laws.
The provision for income taxes is computed using the asset and liability method. Under this method, deferred tax assets and liabilities are
recognized currently based on the anticipated future tax consequences of changes in the temporary differences between the book and tax
bases of assets and liabilities. This method includes an estimate of the future realization of tax benefits associated with tax losses. Deferred
tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those
assets are expected to be realized or settled.
Income tax expense for 2018 was $73.3 million on $299.8 million of pretax income and for 2017 was $67.2 million on $200.3 million of
pretax income. For 2018, the reduction of the statutory federal corporate income tax rate due to the enactment of the Tax Reform Act, as
well as the mix of income and losses among various jurisdictions, resulted in a net tax increase of $18.7 million on pre-tax income of
$99.5 million. Additionally, there was an $11.0 million year-over-year increase in tax expense related to changes in the measurement of
uncertain tax positions, offset by decreases related to audit settlements and the expiration of the statute of limitations. Further, there was a
year-over-year $1.9 million increase in withholding tax expense. These year-over-year tax increases were offset by year-over-year decreases
of $5.1 million related to unremitted foreign earnings and $1.2 million for other small tax expense items, along with, most significantly, a
$19.2 million decrease in the 2018 tax expense related to the net provisional tax benefit related to the Tax Reform Act. The net provisional
tax benefit included tax benefits of $72.0 million resulting from the revaluation of deferred tax assets and liabilities, which were partially
offset by $52.8 million of transition tax expense.
During 2018, there was a $24.8 million net increase in valuation allowances. This increase was a result of a $30.2 million increase to
valuation allowances related to net operating losses and other deferred tax assets, as well as an increase of $0.6 million in new valuation
allowances. These increases were partially offset by a $6.0 million decrease in valuation allowances due to currency translation.
The SEC staff issued SAB 118 to address the application of GAAP in situations when a registrant does not have the necessary information
available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of
the Tax Reform Act. SAB 118 also provides for a measurement period that should not extend beyond one year from the Tax Reform Act
enactment date. As of October 31, 2018, our accounting for the Tax Reform Act was provisional. However, in accordance with SAB 118,
we have recorded a reasonable estimate for the following items: a tax benefit related to the revaluation of deferred tax assets and liabilities
of $72.0 million; and a provisional tax expense as a result of the accrual for the transition tax liability of $52.8 million. As a result, the net
provisional tax benefit recorded in our consolidated financial statements for the year ended October 31, 2018 was $19.2 million.
Adjustments to the provisional estimates will be recorded and disclosed prospectively during the measurement period and may differ from
these provisional amounts, due to, among other matters, additional analyses, changes in interpretations and assumptions we have made,
additional regulatory guidance that may be issued, and actions we may take as a result of the Tax Reform Act.
We analyze potential income tax liabilities related to uncertain tax positions in the United States and international jurisdictions. The
analysis of potential income tax liabilities results in estimates of income tax liabilities recognized for uncertain tax positions following the
guidance of ASC 740, ‘‘Income Taxes.’’ The estimation of potential tax liabilities related to uncertain tax positions involves significant
judgment in evaluating the impact of uncertainties in the application of ASC 740 and complex tax laws. We periodically analyze both
potential income tax liabilities and existing liabilities for uncertain tax positions resulting in both new reserves and adjustments to existing
reserves in light of changing facts and circumstances. This includes the release of existing liabilities for uncertain tax positions based on the
expiration of statutes of limitation. During 2018, recognition of uncertain tax positions increased primarily due to increases in
unrecognized tax benefits related to prior years and the current year, offset by decreases related to lapse in statute of limitations; whereas in
2017, the uncertain tax positions decreased primarily due to audit and statute of limitations releases attributable to non-US jurisdictions.
The ultimate resolution of potential income tax liabilities may result in a payment that is materially different from our current estimates. If
our estimates recognized under ASC 740 prove to be different than what is ultimately resolved, such resolution could have a material
impact on our financial condition and results of operations. While predicting the final outcome or the timing of the resolution of any
particular tax matter is subject to various risks and uncertainties, we believe that our tax accounts related to uncertain tax positions are
appropriately stated.
See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for further information.
39
Equity Earnings of Unconsolidated Affiliates, net of Tax
We recorded $3.0 million and $2.0 million of equity earnings of unconsolidated affiliates, net of tax, for 2018 and 2017, respectively.
Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests represents the portion of earnings from the operations of our non-wholly owned,
consolidated subsidiaries that belongs to the noncontrolling interests in those subsidiaries. Net income attributable to noncontrolling
interests was $20.1 million and $16.5 million for 2018 and 2017, respectively. The increase in net income attributable to noncontrolling
interests was due primarily to increased earnings of the Flexible Packaging JV.
Net Income Attributable to Greif, Inc.
Based on the factors noted above, net income attributable to Greif, Inc. increased $90.8 million to $209.4 million in 2018 from
$118.6 million in 2017.
OTHER COMPREHENSIVE INCOME CHANGES
Other comprehensive income (loss), net of tax for 2019 and 2018 was $(55.9) million and $(21.5) million, respectively. The components
of those other comprehensive income changes were as follows:
Foreign currency translation
In accordance with ASC 830, ‘‘Foreign Currency Matters,’’ the assets and liabilities denominated in a foreign currency are translated into
United States Dollars at the rate of exchange existing at the end of the current period, and revenues and expenses are translated at average
exchange rates over the month in which they are incurred. The cumulative translation adjustments, which represent the effects of
translating assets, liabilities and operations of our international subsidiaries, are presented in the consolidated statements of changes in
equity in accumulated other comprehensive loss. Other comprehensive loss resulting from foreign currency translation for 2019 was
$4.5 million. Other comprehensive loss resulting from foreign currency translation for 2018 was $45.5 million.
Derivative financial instruments
The change in derivative financial instruments, net of tax for 2019 and 2018 was a loss of $26.1 million and income of $7.7 million,
respectively. The other comprehensive loss in 2019 resulting from the change in derivative financial instruments, net, was primarily due to
an increased portfolio of interest rate swaps and the impact of decreases in market interest rates on the swaps.
Minimum pension liability, net
The change in minimum pension liability, net of tax for 2019 and 2018 was a loss of $25.3 million and income of $16.3 million,
respectively. The other comprehensive loss in 2019 resulting from the change in minimum pension liability, net was primarily due to the
Caraustar Acquisition, lower discount rates globally, and lowered expected return on asset assumptions.
BALANCE SHEET CHANGES
Refer to Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for further information on
acquisition impacts to the 2019 Consolidated Balance Sheet.
Working capital changes
The $207.5 million increase in accounts receivable to $664.2 million as of October 31, 2019 from $456.7 million as of October 31, 2018
was primarily due to $135.7 million of contribution from the acquired Caraustar operations and changes in our international trade
accounts receivables credit facilities. For a discussion of these changes, see ‘‘Liquidity and Capital Resources - International Trade Accounts
Receivable Credit Facilities’’ and Note 3 to the Consolidated Financial Statements included in Item 8 of this Form 10-K.
The $68.7 million increase in inventories to $358.2 million as of October 31, 2019 from $289.5 million as of October 31, 2018 was
primarily due to $84.9 million of contribution from the acquired Caraustar operations, offset by decreased raw material purchases and
prices.
The $31.4 million increase in accounts payable to $435.2 million as of October 31, 2019 from $403.8 million as of October 31, 2018 was
primarily due to $85.1 million of contribution from the acquired Caraustar operations, offset by decreased raw material prices and the
timing of payments.
40
Other balance sheet changes
The $695.9 million increase in other intangible assets to $776.5 million as of October 31, 2019 from $80.6 million as of October 31, 2018
was primarily due to $725.5 million of contribution from the acquired Caraustar operations and $24.1 million of contribution from the
acquired Tholu operations, partially offset by amortization expense of $53.2 million recognized during 2019. For a discussion of these
changes, see Note 2 and Note 5 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K.
The $498.4 million increase in properties, plants and equipment, net to $1,690.3 million as of October 31, 2019 from $1,191.9 million as
of October 31, 2018 was primarily due to $493.4 million of contribution from the acquired Caraustar operations and capital expenditures,
partially offset by depreciation.
The $1,774.9 million increase in long-term debt to $2,659.0 million as of October 31, 2019 from $884.1 million as of October 31, 2018
was primarily due to the ‘‘2019 Credit Agreement’’ we entered into and the ‘‘Senior Notes due 2027’’ we issued on February 11, 2019 to
fund the purchase price of the Caraustar Acquisition, partially offset by repayments of the ‘‘2017 Credit Agreement’’ and the ‘‘Senior Note
due 2019’’. For a discussion of these changes, see ‘‘Liquidity and Capital Resources - Borrowing Arrangements’’ and Note 8 to the
Consolidated Financial Statements included in Item 8 of this Form 10-K.
The $11.6 million increase in noncontrolling interest to $58.0 million as of October 31, 2019 from $46.4 million as of October 31, 2018
was primarily due to increased earnings of consolidated joint ventures and foreign currency translation.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are operating cash flows and borrowings under our senior secured credit facilities, proceeds from the
senior notes we have issued, and proceeds from our trade accounts receivable credit facilities. We use these sources to fund our working
capital needs, capital expenditures, cash dividends, stock repurchases and acquisitions. We anticipate continuing to fund these items in a
like manner. We currently expect that operating cash flows, borrowings under our senior secured credit facilities, and proceeds from our
trade accounts receivable credit facilities will be sufficient to fund our anticipated working capital, capital expenditures, cash dividends,
stock purchases, debt repayment, potential acquisitions of businesses and other anticipated liquidity needs for at least 12 months.
Moreover, as a result of the Tax Reform Act, if distributions from operations outside the United States are needed to fund working capital
needs, capital expenditures, cash dividends, stock repurchases, or debt payment, there would be no U.S. taxes on such distributions.
Capital Expenditures
During 2019 and 2018, we invested $156.9 million (excluding $5.4 million for purchases of and investments in timber properties) and
$139.1 million (excluding $8.9 million for purchases of and investments in timber properties), respectively, in capital expenditures.
We anticipate future capital expenditures, excluding the potential purchases of and investments in timber properties, ranging from
$160.0 million to $180.0 million during the year ending October 31, 2020. We anticipate that these expenditures will replace and improve
existing equipment and fund new facilities.
United States Trade Accounts Receivable Credit Facility
On September 24, 2019, we amended and restated our existing receivables facility in the United States to establish a $275.0 million United
States Trade Accounts Receivable Credit Facility (the ‘‘U.S. Receivables Facility’’) with a financial institution. The U.S. Receivables Facility
matures on September 24, 2020. As of October 31, 2019, $254.7 million, net of deferred financing costs of $0.4 million, was outstanding
under the U.S. Receivable Facility, which was reported in long-term debt in the consolidated balance sheets because we intend to refinance
the obligation on a long-term basis and have the intent and ability to consummate a long-term refinancing by exercising the renewal option
in the agreement or entering into a new financing arrangement.
We may terminate the U.S. Receivables Facility at any time upon five days prior written notice. The U.S. Receivables Facility is secured by
certain of our United States trade accounts receivables and bears interest at a variable rate based on the London Interbank Offered Rate
(‘‘LIBOR’’) or an applicable base rate, plus a margin, or a commercial paper rate plus a margin. Interest is payable on a monthly basis and
the principal balance is payable upon termination of the U.S. Receivables Facility. The U.S. Receivables Facility also contains certain
covenants and events of default, which are substantially the same as the covenants under the 2019 Credit Agreement. As of October 31,
2019, we were in compliance with these covenants. Proceeds of the U.S. Receivables Facility are available for working capital and general
corporate purposes.
See Note 8 to the Consolidated Financial Statements included in Item 1 of Part I of this Form 10-Q for additional disclosures regarding
the U.S. Receivables Facility.
41
International Trade Accounts Receivable Credit Facilities
In 2012, Cooperage Receivables Finance B.V. (the ‘‘Main SPV’’) and Greif Coordination Center BVBA, an indirect wholly owned
subsidiary of Greif, Inc. (‘‘Seller’’), entered into the Nieuw Amsterdam Receivables Purchase Agreement (the ‘‘European RPA’’) with
affiliates of a major international bank (the ‘‘Purchasing Bank Affiliates’’). On April 17, 2019, the Main SPV and Seller amended and
extended the term of the European RPA through April 17, 2020. On June 17, 2019, the Main SPV and Seller entered into an agreement to
replace the European RPA with the Nieuw Amsterdam Receivables Financing Agreement (the ‘‘European RFA’’). The European RFA,
which matures on April 17, 2020, provides an accounts receivable financing facility of up to €100.0 million ($111.1 million as of
October 31, 2019) secured by certain European accounts receivable. As of October 31, 2019, $96.4 million was outstanding under the
European RFA, which was reported as long-term debt in the consolidated balance sheet because we intend to refinance these obligations
on a long-term basis and have the intent and ability to consummate a long-term refinancing by exercising the renewal option in the
respective agreement or entering into new financing arrangements.
During the first quarter of 2019, a parent-level guarantee was added to the European RPA and Singapore RPA (as such term is defined
below). During the third quarter of 2019, in conjunction with execution of the European RFA, the parent level guarantee was removed for
the European RFA. The $1.9 million outstanding on the Singapore RPA as of October 31, 2019 is reported as short-term debt in the
consolidated balance sheet because the agreement expires in 2020 and will not be renewed.
Under the previous European RPA, as amended, the maximum amount of receivables that could be sold and outstanding under the
European RPA at any time was €100 million ($111.1 million as of October 31, 2019). Under the terms of the European RPA, we had the
ability to loan excess cash to the Purchasing Bank Affiliates in the form of the subordinated loan receivable.
Under the terms of the previous European RPA, we had agreed to sell trade receivables meeting certain eligibility requirements that the
Seller had purchased from our other indirect wholly-owned subsidiaries under a factoring agreement. Prior to November 1, 2018, the
structure of the transactions provided for a legal true sale, on a revolving basis, of the receivables transferred from our various subsidiaries
to the respective Purchasing Bank Affiliates. The purchaser funded an initial purchase price of a certain percentage of eligible receivables
based on a formula, with the initial purchase price approximating 75 percent to 90 percent of eligible receivables. The remaining deferred
purchase price was settled upon collection of these receivables.
In October 2007, Greif Singapore Pte. Ltd., an indirect wholly-owned subsidiary of the Seller, entered into the Singapore Receivable
Purchase Agreement (the ‘‘Singapore RPA’’) with a major international bank. The maximum amount of aggregate receivables that may be
financed under the Singapore RPA is 15.0 million Singapore dollars ($11.0 million as of October 31, 2019).
Under the terms of the Singapore RPA, we have agreed to sell trade receivables in exchange for an initial purchase price of approximately
90 percent of the eligible receivables. The remaining deferred purchase price is settled upon collection of these receivables.
Prior to November 1, 2018, we removed from accounts receivable the amount of proceeds received from the initial purchase price since
they met the applicable criteria of ASC 860, ‘‘Transfers and Servicing,’’ and we continued to recognize the deferred purchase price in other
current assets or other current liabilities on our consolidated balance sheets, as appropriate. The receivables were sold on a non-recourse
basis with the total funds in the servicing collection accounts pledged to the banks between settlement dates. The cash initially received,
along with the deferred purchase price, related to the sale or ultimate collection of the underlying receivables and was not subject to
significant other risks given their short-term nature. Therefore, we reflected all cash flows under the accounts receivable sales programs as
operating cash flows on our consolidated statements of cash flows.
We perform collection and administrative functions on the receivables related to the European RPA, the European RFA and the Singapore
RPA (collectively, ‘‘Foreign Receivables Facilities’’), similar to the procedures we use for collecting all of our receivables. The servicing
liability for these receivables is not material to our consolidated financial statements.
See Note 3 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information regarding
Foreign Receivables Facilities.
Caraustar Acquisition
On February 11, 2019, we completed the Caraustar Acquisition. Caraustar is a leader in the production of coated and uncoated recycled
paperboard, which is used in a variety of applications that include industrial products (tubes and cores, construction products, protective
packaging, adhesives) and consumer packaging products (folding cartons, set-up boxes, and packaging services) and a diverse mix of
specialty products. The total purchase price for this acquisition, net of cash acquired, was $1,834.9 million. We incurred transaction costs
of $62.1 million to complete this acquisition. Of this amount, $34.0 million was recognized immediately in the consolidated statements of
42
income and the remaining $28.1 million in transaction costs was capitalized in accordance with ASC 470, ‘‘Debt’’, and is presented as part
of the consolidated balance sheet ($20.8 million within Long-Term Debt and $7.3 million within Other Long-Term Assets).
We recognized goodwill related to this acquisition of $726.6 million. The goodwill recognized in this acquisition is attributable to the
acquired assembled workforce, expected synergies, and economies of scale, none of which qualify for recognition as a separate intangible
asset. Caraustar is reported within the Paper Packaging & Services reportable segment to which the goodwill was assigned. The goodwill is
not expected to be deductible for tax purposes.
Acquired property, plant and equipment and intangibles will be depreciated and amortized over the estimated useful lives, primarily on a
straight-line basis.
We have not yet finalized the determination of the fair value of assets acquired and liabilities assumed, including income taxes and
contingencies. We expect to finalize these amounts within one year of the acquisition date. The current preliminary estimate of fair value
and purchase price allocation were based on information available at the time of closing the acquisition, and we continue to evaluate the
underlying inputs and assumptions that are being used in fair value estimates. Accordingly, these preliminary estimates are subject to
adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances
that existed as of the date of closing the acquisition.
Tholu Acquisition
We completed our acquisition of Tholu B.V and its wholly owned subsidiary A. Thomassen Transport B.V. (collectively ‘‘Tholu’’) on
June 11, 2019 (the ‘‘Tholu Acquisition’’). Tholu is a Netherlands-based leader in IBC rebottling, reconditioning and distribution.
The total purchase price for this acquisition was $52.2 million, net of cash acquired of $2.1 million, of which $25.1 million was paid upon
closing and the remaining $29.2 million was deferred according to a set payment schedule. The current portion of the deferred obligation
is $2.5 million, recorded in Other Current Liabilities, and the remaining $26.7 million has been recorded in Other Long-Term Liabilities
within the consolidated balance sheets. The legal form of the Tholu Acquisition is a joint venture with the former Tholu owner, but due to
the economic structure of the transaction, we are deemed to be the 100% economic owner, and under GAAP, we will record and report
100% of all future income or loss.
We recognized goodwill related to this acquisition of $22.3 million. The goodwill recognized in this acquisition is attributable to the
acquired assembled workforce, economies of scale, vertical integration and new market penetration. Tholu is reported within the Rigid
Industrial Packaging & Services reportable segment to which the goodwill was assigned. The goodwill is not expected to be deductible for
tax purposes.
Acquired property, plant and equipment and intangibles will be depreciated and amortized over the estimated useful lives, primarily on a
straight-line basis.
We have not yet finalized the determination of the fair value of assets acquired and liabilities assumed, including income taxes and
contingencies. We expect to finalize these amounts within one year of the acquisition date. The current preliminary estimate of fair value
and purchase price allocation were based on information available at the time of closing the acquisition, and we continue to evaluate the
underlying inputs and assumptions that are being used in fair value estimates. Accordingly, these preliminary estimates are subject to
adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances
that existed as of the date of closing the acquisition.
Divestitures
For the year ended October 31, 2019, we completed two divestitures of non-U.S. businesses in the Rigid Industrial Packaging & Services
segment, liquidated two non-strategic non-U.S. business in the Rigid Industrial Packaging & Services segment, and deconsolidated one
wholly-owned non-U.S. business in the Rigid Industrial Packaging & Services segment. The loss on disposal of businesses was $3.7 million
for the year ended October 31, 2019. Proceeds from divestitures were $1.5 million for the year ended October 31, 2019. Proceeds from
divestitures that were completed in 2015 and collected during the year ended October 31, 2019 were $0.8 million. Proceeds from
divestitures that were completed in 2016 and collected during the year ended October 31, 2019 were $1.6 million.
For the year ended October 31, 2018, we completed no divestitures. We liquidated two non-strategic non-U.S. business in the Flexible
Products & Services segment. The gain on disposal of businesses was $0.8 million for the year ended October 31, 2018. Proceeds from
divestitures that were completed in 2017 and collected during the year ended October 31, 2018 were $0.5 million. Proceeds from
divestitures that were completed in 2015 and collected during the year ended October 31, 2018 were $0.9 million. We had $2.9 million of
notes receivable recorded from the sale of businesses for the year ended October 31, 2018.
43
For the year ended October 31, 2017, we completed two divestitures in the Rigid Industrial Packaging & Services segment, deconsolidated
one nonstrategic business in the Flexible Products & Services segment and one nonstrategic business in the Rigid Industrial Packaging &
Services segment, and liquidated two non-U.S. nonstrategic businesses in the Rigid Industrial Packaging & Services segment. The loss on
disposal of businesses was $1.7 million for the year ended October 31, 2017. Proceeds from divestitures were $5.1 million for the year
ended October 31, 2017. Proceeds from divestitures that were completed in fiscal year 2015 and collected during the year ended
October 31, 2017 were $0.8 million. We had $4.3 million of notes receivable recorded from the sale of businesses for the year ended
October 31, 2017.
None of the above-referenced divestitures in 2019, 2018, or 2017 qualified as discontinued operations as they do not, individually or in the
aggregate, represent a strategic shift that has had a major impact on our operations or financial results.
See Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for disclosures regarding our
acquisitions and divestitures.
Borrowing Arrangements
Long-term debt is summarized as follows:
(in millions)
2019 Credit Agreement - Term Loans
2017 Credit Agreement - Term Loan
Senior Notes due 2027
Senior Notes due 2021
Senior Notes due 2019
Accounts receivable credit facilities
2019 Credit Agreement - Revolving Credit Facility
2017 Credit Agreement - Revolving Credit Facility
Other debt
Less current portion
Less deferred financing costs
Long-term debt, net
2019 Credit Agreement
October 31,
2019
October 31,
2018
$ 1,612.2
$
—
—
494.3
221.7
—
351.6
76.1
—
0.4
2,756.3
83.7
13.6
277.5
—
226.5
249.1
150.0
—
3.8
0.7
907.6
18.8
4.7
$ 2,659.0
$ 884.1
On February 11, 2019, we and certain of our subsidiaries entered into an amended and restated senior secured credit agreement (the ‘‘2019
Credit Agreement’’) with a syndicate of financial institutions. The 2019 Credit Agreement amended, restated and replaced in its entirety
the prior $800.0 million senior secured credit agreement (the ‘‘2017 Credit Agreement’’), which is described below. Our obligations under
the 2019 Credit Agreement are guaranteed by certain of our U.S. subsidiaries and certain of our non-U.S. subsidiaries.
The 2019 Credit Agreement provides for (a) an $800.0 million secured revolving credit facility, consisting of a $600.0 million
multicurrency facility and a $200.0 million U.S. dollar facility, maturing on February 11, 2024 (the ‘‘Revolving Credit Facility’’), (b) a
$1,275.0 million secured term loan A-1 facility with quarterly principal installments commencing on April 30, 2019 and continuing
through maturity on January 31, 2024, and (c) a $400.0 million secured term loan A-2 facility with quarterly principal installments
commencing on April 30, 2019 and continuing through maturity on January 31, 2026. In addition, we have an option to add an aggregate
of $700.0 million to the 2019 Credit Agreement with the agreement of the lenders.
We used borrowings under the 2019 Credit Agreement, together with the net proceeds from the issuance of the Senior Notes due
March 1, 2027 (described below), to fund the purchase price of the Caraustar Acquisition, to redeem our $250.0 million Senior Notes due
August 1, 2019 (the ‘‘Senior Notes due 2019’’), to repay outstanding borrowings under the 2017 Credit Agreement, and to pay related fees
and expenses. The Revolving Credit Facility is available to fund ongoing working capital and capital expenditures needs and for general
corporate purposes. Interest is based on either a Eurodollar rate or a base rate that resets periodically plus a calculated margin amount.
The 2019 Credit Agreement contains certain covenants, which include financial covenants that require us to maintain a certain leverage
ratio and an interest coverage ratio. The leverage ratio generally requires that, at the end of any quarter, we will not permit the ratio of
(a) our total consolidated indebtedness, to (b) our consolidated net income plus depreciation, depletion and amortization, interest expense
(including capitalized interest), income taxes, and minus certain extraordinary gains and non-recurring gains (or plus certain extraordinary
44
losses and non-recurring losses) and plus or minus certain other items for the preceding twelve months (as used in this paragraph only,
‘‘EBITDA’’) to be greater than 4.75 to 1.00 and stepping down annually by 0.25 increments beginning on July 31, 2020 to 4.00 on July 31,
2023. The interest coverage ratio generally requires that, at the end of any quarter, we will not permit the ratio of (a) our consolidated
EBITDA, to (b) our consolidated interest expense to the extent paid or payable, to be less than 3.00 to 1.00, during the applicable
preceding twelve month period.
The terms of the 2019 Credit Agreement contain restrictive covenants, which limit our ability, among other things, to incur additional
indebtedness or issue certain preferred stock, pay dividends, redeem stock or make other distributions, or make certain investments; create
restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to affiliates; create certain liens; transfer or
sell certain assets; merge or consolidate; enter into certain transactions with our affiliates; and designate subsidiaries as unrestricted
subsidiaries. These covenants are subject to a number of important exceptions and qualifications. As of October 31, 2019, we were in
compliance with the covenants and other agreements in the 2019 Credit Agreement.
The repayment of this facility is secured by a security interest in our personal property and the personal property of certain of our U.S.
subsidiaries, including equipment and inventory and certain intangible assets, as well as a pledge of the capital stock of substantially all of
our U.S. subsidiaries, and is secured, in part, by the capital stock of the non-U.S. borrowers. However, in the event that we receive and
maintain an investment grade rating from either Moody’s Investors Service, Inc. or Standard & Poor’s Financial Services LLC, we may
request the release of such collateral.
The 2019 Credit Agreement provides for events of default (subject in certain cases to customary grace and cure periods), which include,
among others, nonpayment of principal or interest when due, breach of covenants or other agreements in the 2019 Credit Agreement,
defaults in payment of certain other indebtedness and certain events of bankruptcy or insolvency.
2017 Credit Agreement
We and certain of our international subsidiaries were borrowers under the 2017 Credit Agreement. The 2017 Credit Agreement provided
for an $800.0 million revolving multicurrency credit facility and a $300.0 million term loan. On February 11, 2019, proceeds from
borrowings under the 2019 Credit Agreement were used to pay the obligations outstanding under the 2017 Credit Agreement.
See Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for disclosures regarding our Credit
Agreements over time.
Senior Notes
On February 11, 2019, we issued $500.0 million of 6.50% Senior Notes due March 1, 2027 (the ‘‘Senior Notes due 2027’’). Interest on the
Senior Notes due 2027 is payable semi-annually commencing on September 1, 2019. Our obligations under the Senior Notes due 2027 are
guaranteed by our U.S. subsidiaries that guarantee the 2019 Credit Agreement, as described above. We used the net proceeds from the
issuance of the Senior Notes due 2027, together with borrowings under the 2019 Credit Agreement, to fund the purchase price of the
Caraustar Acquisition, to redeem all of our Senior Notes due 2019, to repay outstanding borrowings under the 2017 Credit Agreement,
and to pay related fees and expenses. The terms of the Senior Notes due 2027 are governed by an Indenture that contains restrictive
covenants that limit our ability, among other things, to incur additional indebtedness or issue certain preferred stock, pay dividends,
redeem stock or make other distributions, or make certain investments; create certain liens; enter into certain transactions with affiliates;
and designate subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of important exceptions and qualifications
as set forth in the Indenture. Certain of these covenants will be suspended if the Senior Notes due 2027 achieve investment grade ratings
from both Moody’s Investors Service, Inc. and Standard & Poor’s Global Ratings and no default or event of default has occurred and is
continuing. As of October 31, 2019, we were in compliance with these covenants.
Our Luxembourg subsidiary has issued €200.0 million of 7.375% Senior Notes due July 15, 2021 (the ‘‘Senior Notes due 2021’’). Interest
on the Senior Notes due 2021 is payable semi-annually. The Senior Notes due 2021 are guaranteed on a senior basis by Greif, Inc. The
Senior Notes due 2021 are governed by an Indenture that contains various covenants. As of October 31, 2019, we were in compliance with
these covenants.
On April 1, 2019, we redeemed all of our outstanding Senior Notes due 2019, which were issued on July 28, 2009 for $250.0 million. The
total redemption price for the Senior Notes due 2019 was $253.9 million, which was equal to the aggregate principal amount outstanding
of $250.0 million plus a premium of $3.9 million. The payment of the redemption price was funded by our borrowings under the 2019
Credit Agreement.
See Note 8 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for disclosures regarding the Senior
Notes discussed above.
45
Financial Instruments
Interest Rate Derivatives
We have various borrowing facilities which charge interest based on the one-month U.S. dollar LIBOR rate plus an interest spread.
In 2019, we entered into six interest rate swaps related to the debt incurred in connection with the Caraustar Acquisition. See ‘‘Borrowing
Arrangements - 2019 Credit Agreement’’. These six interest rate swaps have a total notional amount of $1,300.0 million and amortize to
$200.0 million over a five year term. We receive variable rate interest payments based upon one month U.S. dollar LIBOR, and in return
we are obligated to pay interest at a weighted-average interest rate of 2.49% plus an interest spread.
In 2017, we entered into an interest rate swap with a notional amount of $300.0 million and received variable rate interest payments based
upon one month U.S. dollar LIBOR, and in return we are obligated to pay interest at a fixed rate of 1.19% plus an interest spread.
These derivatives are designated as cash flow hedges for accounting purposes. Accordingly, the gain or loss on these derivative instruments
are reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the
forecasted transactions and in the same period during which the hedged transaction affects earnings.
See Note 9 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for disclosures regarding our interest
rate derivatives.
Foreign Exchange Hedges
We conduct business in international currencies and are subject to risks associated with changing foreign exchange rates. Our objective is
to reduce volatility associated with foreign exchange rate changes to allow management to focus its attention on business operations.
Accordingly, we enter into various contracts that change in value as foreign exchange rates change to protect the value of certain existing
foreign currency assets and liabilities, commitments and anticipated foreign currency cash flows.
As of October 31, 2019, we had outstanding foreign currency forward contracts in the notional amount of $275.0 million ($194.4 million
as of October 31, 2018).
See Note 9 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for disclosures regarding our foreign
exchange hedges.
Cross Currency Swap
We have operations and investments in various international locations and are subject to risks associated with changing foreign exchange
rates. On March 6, 2018, we entered into a cross currency interest rate swap agreement that synthetically swaps $100.0 million of fixed rate
debt to Euro denominated fixed rate debt at a rate of 2.35%. The agreement is designated as a net investment hedge for accounting
purposes and will mature on March 6, 2023. Accordingly, the gain or loss on this derivative instrument is included in the foreign currency
translation component of other comprehensive income until the net investment is sold, diluted, or liquidated. Interest payments received
from the cross currency swap are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense, net
on the consolidated statements of income.
See Note 9 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for disclosures regarding our cross
currency swap.
46
Contractual Obligations
As of October 31, 2019, we had the following contractual obligations:
(in millions)
Payments Due by Period
Total
Less than 1
year
1-3 years
3-5 years
After
5 years
Long-term debt, net of deferred financing costs
$2,659.0
$ 348.9
$ 495.2 $ 1,033.4 $
781.5
Short-term borrowings
Operating and capital lease obligations
Liabilities held by special purpose entities
Contingent liabilities and environmental reserves
Current portion of long-term debt
Mandatorily redeemable noncontrolling interests
Deferred purchase price of Tholu
Total
9.2
366.3
43.3
18.7
83.7
8.4
29.2
9.2
66.6
—
2.0
83.7
—
2.5
108.6
43.3
2.5
8.4
6.8
73.3
117.8
2.2
12.0
19.9
$3,217.8
$ 512.9
$ 664.8 $ 1,128.8 $
911.3
Environmental reserves are estimates based on current remediation plans; actual liabilities could significantly differ from the reserve
estimates.
We have no near-term post-retirement benefit plan funding obligations. Because the amount of such obligations in future years is not
reasonably estimable, they have been excluded from the contractual obligations table. We intend to make post-retirement benefit plan
contributions of $29.0 million during 2020, which consists of $23.7 million of employer contributions and $5.3 million of benefits paid
directly by the employer. These contributions are not contractually obligated, and therefore are not included in the table above.
Our unrecognized tax benefits under ASC 740, ‘‘Income Taxes’’ have been excluded from the contractual obligations table because of the
inherent uncertainty and the inability to reasonably estimate the timing of cash outflows.
Stock Repurchase Program and Other Share Acquisitions
Our Board of Directors has authorized the purchase of Class A Common Stock or Class B Common Stock or any combination of the
foregoing up to 4,703,487 shares as of October 31, 2019. See Note 14 of the Notes to Consolidated Financial Statements included in
Item 8 of this Form 10-K for additional information regarding this program and the repurchase of shares of Class A and Class B Common
Stock.
Effects of Inflation
We generally identify hyper-inflationary markets as those markets whose cumulative inflation rate over a three-year period exceeds 100%.
During the third quarter of 2018, Argentina was deemed as a hyper-inflationary market and our Argentine operations changed functional
currency from Argentine Pesos to U.S. Dollars for GAAP reporting purposes. As a result, non-U.S. Dollar denominated monetary assets
and liabilities of our Argentine operations are subject to re-measurement and recorded in Other Expense, Net, within the Consolidated
Statements of Income. During 2019, foreign currency losses, net recorded in Other expense, net, related to our Argentine operations were
$4.2 million. Inflation did not have a material impact on our operations during 2018.
Critical Accounting Policies
A summary of our significant accounting policies is included in Note 1 of the Notes to Consolidated Financial Statements included in
Item 8 of this Form 10-K. We believe that the consistent application of these policies enables us to provide readers of the consolidated
financial statements with useful and reliable information about our results of operations and financial condition. The following are the
accounting policies that we believe are most important to the portrayal of our results of operations and financial condition and require our
most difficult, subjective or complex judgments.
Other items that could have a significant impact on the financial statements include the risks and uncertainties listed in Part I, Item 1A –
Risk Factors. Actual results could differ materially using different estimates and assumptions, or if conditions are significantly different in
the future.
Business Combinations. We completed the Caraustar Acquisition on February 11, 2019, and the Tholu Acquisition on June 11, 2019.
The Caraustar Acquisition significantly expanded the Paper Packaging & Services segment portfolio. Caraustar’s and Tholu’s results of
operations have been included in our financial results for the period subsequent to their respective acquisition date. Under the acquisition
47
method of accounting, we allocate the fair value of purchase consideration transferred to the tangible and intangible assets acquired and
liabilities assumed based on their estimated fair values on the date of the acquisition. The fair values assigned, defined as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants, are based on
estimates and assumptions determined by management. The excess purchase consideration over the aggregate fair value of tangible and
intangible assets, net of liabilities assumed, is recorded as goodwill. When determining the fair value of assets acquired and liabilities
assumed, we make significant estimates and assumptions, especially with respect to intangible assets. Our estimates of fair value are based
upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ
from estimates. During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the
assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and
circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the
consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred. See Note 2 of the
Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information regarding our acquisitions.
Goodwill and Indefinite-Lived Intangibles Impairment Testing. We account for goodwill in accordance with ASC 350, ‘‘Intangibles –
Goodwill and Other.’’ Under ASC 350, purchased goodwill is not amortized, but instead is tested for impairment either annually on
August 1 or when events and circumstances indicate an impairment may have occurred. Our goodwill impairment assessment is performed
by reporting unit. A reporting unit is the operating segment, or a business one level below that operating segment (the component level) if
discrete financial information is prepared and regularly reviewed by segment management. However, components are aggregated as a single
reporting unit if they have similar economic characteristics. In conducting the annual impairment tests, the estimated fair value of each of
our reporting units is compared to its carrying amount including goodwill. If the estimated fair value exceeds the carrying amount, then no
impairment exists. If the carrying amount exceeds the estimated fair value an impairment is indicated.
The Rigid Industrial Packaging & Services segment consists of five operating segments: Rigid Industrial Packaging & Services – North
America; Rigid Industrial Packaging & Services – Latin America; Rigid Industrial Packaging & Services – Europe, Middle East and Africa;
Rigid Industrial Packaging & Services – Asia Pacific; and Rigid Industrial Packaging & Services – Tri-Sure. Each of those operating
segments consists of multiple components that have discrete financial information available that is reviewed by segment management on a
regular basis. We have evaluated those components and concluded that they are economically similar and should be aggregated into five
separate reporting units. For the purpose of aggregating our components, we review the long-term performance of gross profit margin and
operating profit margin. Additionally, we review qualitative factors such as common customers, similar products, similar manufacturing
processes, sharing of resources, level of integration, and interdependency of processes across components. We place greater weight on the
qualitative factors outlined in ASC 280 ‘‘Segment Reporting’’ and consider the guidance in ASC 350 in determining whether two or more
components of an operating segment are economically similar and can be aggregated into a single reporting unit. However, our assessment
of the aggregation includes both qualitative and quantitative factors and is based on the facts and circumstances specific to the
components.
The estimated fair value of the reporting units utilized in the impairment test is based on a discounted cash flow analysis or income
approach and market multiple approach. Under this method, the principal valuation focus is on the reporting unit’s cash-generating
capabilities. The discount rates used for impairment testing are based on our weighted average cost of capital. The use of alternative
estimates, peer groups or changes in the industry, or adjusting the discount rate, earnings before interest, taxes, depreciation, depletion and
amortization multiples or price earnings ratios used could affect the estimated fair value of the assets and potentially result in impairment.
Any identified impairment would result in an adjustment to our results of operations.
In performing the test, we first evaluate qualitative factors, such as macroeconomic conditions and our overall financial performance to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. We
then evaluate how significant each of the identified factors could be to the fair value or carrying amount of a reporting unit and weigh
those factors in totality in forming a conclusion of whether or not it is more likely than not that the fair value of a reporting unit is less
than its carrying amount (the Step 0 Test). If necessary, the next step in the goodwill impairment test involves comparing the fair value of
each of the reporting units to the carrying value of those reporting units. If the carrying value of a reporting unit exceeds the fair value of
the reporting unit, an impairment loss would be recognized (not to exceed the carrying amount of goodwill). Our Rigid Industrial
Packaging & Services - Latin America, Flexible Products & Services and Land Management reporting units have no goodwill and therefore
no impairment test was required. For our Rigid Industrial Packaging & Services - North America; Rigid Industrial Packaging & Services -
Europe, Middle East and Africa; Rigid Industrial Packaging & Services - Tri-Sure; and Paper Packaging & Services reporting units, a Step 0
approach was used and we determined it was not more likely than not that the fair value of the reporting unit was less than its carrying
amount. As of August 1, 2019, the estimated fair value of each of those reporting units was deemed to substantially exceed the carrying
amount of assets and liabilities assigned to each reporting unit.
For the Rigid Industrial Packaging & Services - Asia Pacific reporting unit, we proceeded directly to the quantitative impairment testing.
48
The fair value of the reporting unit exceeded the carrying value by 32%, so no impairment was deemed to exist. Discount rates, growth
rates and cash flow projections are the assumptions that are most sensitive and susceptible to change as they require significant
management judgment. In addition, certain future events and circumstances, including deterioration of market conditions, higher cost of
capital, a decline in actual and expected consumption and demand, could result in changes to those assumptions and judgments. A revision
of those assumptions could cause the fair value of the reporting unit to fall below its respective carrying value. As for all of our reporting
units, if in future years, the reporting unit’s actual results are not consistent with our estimates and assumptions used to calculate fair value,
we may be required to recognize material impairments to goodwill.
During the fourth quarter of 2017, we performed an assessment of our operating segments and determined that as a result of changes in
the way the chief operating decision maker receives and reviews financial information, a realignment of our operating segment and
reporting unit structure was necessary. As of our annual goodwill impairment testing date of August 1, 2017, our reporting units of the
Rigid Industrial Packaging & Services segment were realigned to consist of Rigid Industrial Packaging & Services – North America; Rigid
Industrial Packaging & Services – Latin America; Rigid Industrial Packaging & Services – Europe, Middle East and Africa; Rigid Industrial
Packaging & Services – Asia Pacific; and Rigid Industrial Packaging & Services – Tri-Sure. As a result of the realignment, goodwill was
reassigned to each of the Rigid Industrial Packaging & Services reporting units using a relative fair value approach. There were no changes
to the reporting units of the Paper Packaging & Services; Flexible Products & Services; and Land Management segments. No reporting
units were aggregated for purposes of conducting the annual impairment test.
Due to the realignment of our reporting units in the fourth quarter of 2017, we recorded an impairment charge of $13.0 million, which
represented goodwill associated with the Rigid Industrial Packaging & Services segment as the carrying amount of the Rigid Industrial
Packaging & Services – Latin America reporting unit exceeded its fair value. See Note 5 of the Notes to Consolidated Financial Statements
included in Item 8 of this Form 10-K for further information.
The following table summarizes the carrying amount of goodwill by reporting unit for the year ended October 31, 2019 and 2018:
(in millions)
Rigid Industrial Packaging & Services
North America
Europe, Middle East and Africa
Asia Pacific
Tri-Sure
Paper Packaging & Services
Total
Goodwill Balance
October 31,
2019
October 31,
2018
$
252.9
313.0
88.6
77.2
786.1
$ 252.8
297.1
88.8
77.8
59.5
$
1,517.8
$ 776.0
*
The Rigid Industrial Packaging & Services: Latin America, Flexible Products & Services, and Land Management reporting units have no goodwill balance at either
reporting period.
We test for impairment of indefinite-lived intangible assets during the fourth quarter of each year as of August 1, or more frequently if
certain indicators are present or changes in circumstances suggest that impairment may exist.
Income Taxes. Preparation of our financial statements requires the use of estimates and assumptions that affect the reported amounts of
our assets and liabilities and revenues and expenses. The multitude of tax jurisdictions in which we operate requires significant judgment
when applying the complex tax regulations to estimate our global tax position. Our effective tax rate and the amount of taxes we pay are
dependent upon various factors, including the following: the laws and regulations, and varying tax rates of the country tax jurisdictions in
which income is earned; the recognition of permanent book/tax basis differences realized through acquisitions, divestitures and asset
impairments; the ability to realize long term deferred tax assets at certain international subsidiaries; negotiation and dispute resolution
with taxing authorities in the U.S. and non-U.S. jurisdictions arising from federal, state and local country tax audits; and changes in tax
laws, regulations, administrative rulings and common law.
See Note 11 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for further information.
Pension and Post-retirement Benefits. Pension and post-retirement assumptions are significant inputs to the actuarial models that
measure pension and post-retirement benefit obligations and related effects on operations. Two assumptions – discount rate and expected
return on assets – are important elements of plan expense and asset/liability measurement. We evaluate these critical assumptions at least
annually on a plan and country-specific basis. At least annually, we evaluate other assumptions involving demographic factors, such as
retirement age, mortality and turnover, and update them to reflect our experience and expectations for the future. Actual results in any
given year will often differ from actuarial assumptions because of economic and other factors.
49
Accumulated and projected benefit obligations are measured as the present value of future cash payments. We discount those cash
payments using the weighted average of market-observed yields for high quality fixed income securities with maturities that correspond to
the payment of benefits. Lower discount rates increase present values and subsequent-year pension expense; higher discount rates decrease
present values and subsequent-year pension expense.
Our weighted discount rates for consolidated pension plans at October 31, 2019, 2018 and 2017 were 2.74%, 3.48% and 3.01%,
respectively, reflecting market interest rates.
To develop the expected long-term rate of return on assets assumption, we use a generally consistent approach worldwide. The approach
considers various sources, primarily inputs from a range of advisers, inflation, bond yields, historical returns and future expectations for
returns for each asset class, as well as the target asset allocation of each pension portfolio. This rate is gross of any investment or
administrative expenses. Assets in our principal pension plans gained approximately 15.3% in 2019. Based on our analysis of future
expectations of asset performance, past return results, and our current and expected asset allocations, we have assumed a 4.64% long-term
expected return on those assets for cost recognition in 2020. This is a change from the 4.12%, 4.53% and 5.39% long-term expected return
we had assumed in 2019, 2018 and 2017, respectively.
Changes in key assumptions for our consolidated pension and post-retirement plans would have the following effects.
• Discount rate – A 25 basis point increase in discount rate would decrease pension and post-retirement cost in the following
year by $1.0 million and would decrease the pension and post-retirement benefit obligation at year-end by about
$39.2 million.
•
Expected return on assets – A 50 basis point decrease in the expected return on assets would increase pension and post-
retirement cost in the following year by $4.7 million.
Further discussion of our pension and post-retirement benefit plans and related assumptions is contained in Note 12 of the Notes to
Consolidated Financial Statements included in Item 8 of this Form 10-K.
Revenue Recognition. We generate substantially all of our revenue by providing our customers with industrial packaging products serving
a variety of end markets. We may enter into fixed term sale agreements, including multi-year master supply agreements which outline the
terms under which we do business. We also sell to certain customers solely based on purchase orders. As master supply agreements do not
typically include fixed volumes, customers generally purchase products pursuant to purchase orders or other communications that are
short-term in nature. We have concluded for the vast majority of our revenues that our contracts with customers are either a purchase
order or the combination of a purchase order with a master supply agreement.
A performance obligation is considered an individual unit sold. Contracts or purchase orders with customers could include a single type of
product or it could include multiple types or specifications of products. Regardless, the contracted price with the customer is agreed at the
individual product level outlined in the customer contracts or purchase orders. We do not bundle prices. Negotiations with customers are
based on a variety of factors including the level of anticipated contractual volume, geographic location, complexity of the product, key
input costs and a variety of other factors. We have concluded that prices negotiated with each individual customer are representative of the
stand-alone selling price of the product.
We typically satisfy the obligation to provide packaging to customers at a point in time when control is transferred to customers. The point
in time when control of goods is transferred is largely dependent on delivery terms. Revenue is recorded at the time of shipment for
delivery terms designated shipping point. For sales transactions designated destination, revenue is recorded when the product is delivered
to the customer’s delivery site. Purchases by our customers are generally manufactured and shipped with minimal lead time; therefore,
performance obligations are generally settled shortly after manufacturing and shipment.
We manufacture certain products that have no alternative use to us once they are printed or manufactured to customer specifications;
however, in the majority of cases, we do not have an enforceable right to payment that includes a reasonable profit for custom products at
all times in the manufacturing process, and therefore revenue is recognized at the point in time at which control transfers. As revenue
recognition is dependent upon individual contractual terms, we will continue our evaluation of any new or amended contracts entered
into.
Revenue is measured as the amount of consideration we expect to be entitled to in exchange for transferring goods or providing services.
Standalone selling prices for each performance obligation are generally stated in the contract. When we offer variable consideration in the
form of volume rebates to customers, we estimate the amount of revenue to which we expect to be entitled to based on contract terms and
historical experience of actual results, and include the estimate in the transaction price, limited to the amount which is probable will not
result in reversal of cumulative revenue recognized when the variable consideration is resolved. We provide prompt pay discounts to
50
certain customers if invoices are paid within a predetermined period. Prompt payment discounts are treated as a reduction of revenue and
are determinable within a short period of the sale.
Contract liabilities relate primarily to prepayments received from our customers before revenue is recognized and volume rebates to
customers. These amounts are included in other current liabilities in the consolidated balance sheets. We do not have any material contract
assets.
Our contracts generally include standard commercial payment terms generally acceptable in each region. Customer payment terms are
typically less than one year and as such, we have applied the practical expedient to exclude consideration of significant financing
components from the determination of transaction price.
Taxes collected from customers and remitted to governmental authorities are excluded from net sales.
Costs to obtain a contract are generally immaterial, but we have elected the practical expedient to expense these costs as incurred if the
amortization period of the capitalized cost would be one year or less.
We have applied the practical expedient to exclude disclosure of remaining performance obligations as our contracts typically have a term
of one year or less. Freight charged to customers is included in net sales in the income statement. For shipping and handling activities
performed after a customer obtains control of the goods, we have elected to account for these costs as activities to fulfill the promise to
transfer the goods; therefore, these activities are not assessed as separate performance obligations.
Our contracts with customers are broadly similar in nature throughout our reportable segments, but the amount, timing and uncertainty
of revenue and cash flows may vary in each reportable segment due to geographic factors. See Note 16 to the Consolidated Financial
Statements for additional disclosures of revenue disaggregated by geography for each reportable segment.
Recent Accounting Standards
See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for a detailed description of recently
issued and newly adopted accounting standards.
51
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We are subject to interest rate risk related to our financial instruments that include borrowings under the 2019 Credit Agreement, and
proceeds from our Senior Notes, U.S. Receivables Facility and Foreign Receivables Facilities (collectively,
‘‘Accounts Receivables
Facilities’’), and cross currency and interest rate swap agreements. We do not enter into financial instruments for trading or speculative
purposes. The interest rate swap agreements have been entered into to manage our exposure to variability in interest rates.
We have six interest rate swap agreements with an aggregate notional amount of $1,300.0 million as of October 31, 2019. Under these
agreements, we receive variable rate interest payments based upon one month U.S. dollar LIBOR, and in return we are obligated to pay
interest at a weighted-average interest rate of 2.49%, plus an interest spread.
We have another interest rate swap agreement with an aggregate notional amount of $300.0 million as of October 31, 2019. Under this
agreement, we receive interest monthly from the counterparties equal to LIBOR and pay interest at a fixed rate over the life of the
contracts.
Gains reclassified to earnings under these interest rate swaps were recorded in the amount of $3.0 million and $1.8 million for the years
ended October 31, 2019 and October 31, 2018, respectively.
We have a cross currency interest rate swap agreement that synthetically swaps $100.0 million of fixed rate debt to Euro denominated fixed
rate debt at a rate of 2.35%. The gain or loss on this derivative instrument is included in the foreign currency translation component of
other comprehensive income until the net investment is sold, diluted, or liquidated. Interest payments received for the cross currency swap
are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense, net on the consolidated
statements of income. A gain on the cross currency swap agreement was recorded in interest expense for the amount of $2.4 million and
$1.6 million for the year ended October 31, 2019 and October 31, 2018, respectively.
The tables below provide information about our derivative financial instruments and other financial instruments that are sensitive to
changes in interest rates. For our 2019 Credit Agreement, Senior Notes and Accounts Receivables Facilities, the tables present scheduled
amortizations of principal and the weighted average interest rate by contractual maturity dates as of October 31, 2019 and 2018.
The fair values of our 2019 Credit Agreement, Senior Notes and Accounts Receivables Facilities are based on rates available to us for debt
of the same remaining maturity as of October 31, 2019 and 2018.
Financial Instruments
As of October 31, 2019
(Dollars in millions)
2019 Credit Agreement:
Scheduled amortizations
Scheduled maturity
Average interest rate(1)
Senior Notes due 2021:
Scheduled maturity
Average interest rate
Senior Notes due 2027:
Scheduled maturity
Average interest rate
Receivables Facilities:
Scheduled maturity
Weighted average interest rate
Expected Maturity Date
2020
2021
2022
2023
2024
After
2024
Total
Fair
Value
$ 84
$ —
$ 131
$ 148
$ 148
—
—
—
$ 51
841
$ 25
$ 260
3.71%
3.71%
3.71%
3.71%
3.71%
—
—
—
—
$ 352
2.00%
$ 222
7.38%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 587
$1,101
3.71%
$ 587
$1,101
$ 222
$ 248
7.38%
—
—
—
500
$ 500
$ 538
6.50%
6.50%
—
—
$ 352
$ 352
2.00%
(1)
Variable rate specified is based on LIBOR or an alternative base rate plus a calculated margin as of October 31, 2019. The rates presented are not intended to project
our expectations for the future.
52
As of October 31, 2018
(Dollars in millions)
2017 Credit Agreement:
Scheduled amortizations
Scheduled maturity
Average interest rate(1)
Senior Notes due 2019:
Scheduled maturity
Average interest rate
Senior Notes due 2021:
Scheduled maturity
Average interest rate
Receivables Facility:
Scheduled maturity
Expected Maturity Date
2019
2020
2021
2022
2023
After
2023
Total
$ 19
$ 30
$ 23
—
—
—
$ —
$ 209
$ —
$—
—
3.37%
3.37%
3.37%
3.37%
3.37%
$ 249
7.75%
—
—
—
—
—
—
$ 227
7.38%
7.38%
7.38%
$ 150
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Fair
Value
$ 72
$209
$ 72
$ 209
3.37%
$ 249
$257
7.75%
$ 227
$263
7.38%
$ 150
$150
(1)
Variable rate specified is based on LIBOR or an alternative base rate plus a calculated margin as of October 31, 2018. The rates presented are not intended to project
our expectations for the future.
Currency Risk
As a result of our international operations, our operating results are subject to fluctuations in currency exchange rates. The geographic
presence of our operations mitigates this exposure to some degree. Additionally, our transaction exposure is somewhat limited because we
produce and sell a majority of our products in local currency within most countries in which we operate.
As of October 31, 2019, we had outstanding foreign currency forward contracts in the notional amount of $275.0 million ($194.4 million
as of October 31, 2018). The purpose of these contracts is to hedge our exposure to foreign currency transactions and short-term
intercompany loan balances in our international businesses. The fair value of these contracts resulted in realized gains (losses) recorded in
other expense, net of $4.6 million and $(9.2) million for the years ended October 31, 2019 and 2018, respectively.
A sensitivity analysis (with respect only to these instruments) to changes in the foreign currencies hedged indicates that if the U.S. dollar
strengthened by 10 percent, the fair value of these instruments would increase by $8.3 million to a net asset of $7.5 million. Conversely, if
the U.S. dollar weakened by 10 percent, the fair value of these instruments would decrease by $7.5 million to a net liability of $8.3 million.
Commodity Price Risk
We purchase commodities such as steel, resin, containerboard, pulpwood and energy. We do not currently engage in material hedging of
commodities, although in the past we have sometimes engaged in hedges in natural gas. There were no commodity hedging contracts
outstanding as of October 31, 2019 and 2018.
53
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended October 31, (in millions, except per share amounts)
Net sales
Costs of products sold
Gross profit
Selling, general and administrative expenses
Restructuring charges
Acquisition-related costs
Non-cash asset impairment charges
Goodwill impairment charges
Gain on disposal of properties, plants and equipment, net
(Gain) loss on disposal of businesses, net
Operating profit
Interest expense, net
Debt extinguishment charges
Non-cash pension settlement charges
Other expense, net
Income before income tax expense and equity earnings of unconsolidated affiliates, net
Income tax expense
Equity earnings of unconsolidated affiliates, net of tax
Net income
Net income attributable to noncontrolling interests
Net income attributable to Greif, Inc.
Basic earnings per share attributable to Greif, Inc. common shareholders:
Class A common stock
Class B common stock
Diluted earnings per share attributed to Greif, Inc. common shareholders:
Class A common stock
Class B common stock
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended October 31, (in millions)
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation
Derivative financial instruments
Minimum pension liabilities
Other comprehensive income (loss), net of tax
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Greif, Inc.
See accompanying Notes to Consolidated Financial Statements.
54
2019
2018
2017
$4,595.0
$3,873.8
$3,638.2
3,635.1
3,084.9
2,923.5
959.9
507.4
26.1
29.7
7.8
—
(13.9)
3.7
399.1
112.5
22.0
—
2.6
262.0
70.7
(2.9)
194.2
(23.2)
788.9
397.2
18.6
0.7
8.3
—
(5.6)
(0.8)
370.5
51.0
—
1.3
18.4
299.8
73.3
(3.0)
229.5
(20.1)
714.7
379.7
12.7
0.7
7.8
13.0
(0.4)
1.7
299.5
60.1
—
27.1
12.0
200.3
67.2
(2.0)
135.1
(16.5)
$ 171.0
$ 209.4
$ 118.6
$
$
$
$
2.89
4.33
2.89
4.33
$
$
$
$
3.56
5.33
3.55
5.33
$
$
$
$
2.02
3.02
2.02
3.02
2019
2018
2017
$194.2
$229.5
$135.1
(4.5)
(26.1)
(25.3)
(55.9)
138.3
23.9
(45.5)
7.7
16.3
(21.5)
208.0
18.1
37.6
5.1
14.2
56.9
192.0
33.2
$114.4
$189.9
$158.8
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(in millions)
ASSETS
Current assets
Cash and cash equivalents
Trade accounts receivable, less allowance of $6.8 in 2019 and $4.2 in 2018
Inventories:
Raw materials
Work-in-process
Finished goods
Assets held for sale
Prepaid expenses
Other current assets
Long-term assets
Goodwill
Other intangible assets, net of amortization
Deferred tax assets
Assets held by special purpose entities
Pension assets
Other long-term assets
Properties, plants and equipment
Timber properties, net of depletion
Land
Buildings
Machinery and equipment
Capital projects in progress
Accumulated depreciation
Total assets
October 31,
2019
October 31,
2018
$
77.3
$
94.2
664.2
456.7
238.4
11.3
108.5
4.1
44.0
101.2
203.9
10.0
75.6
4.4
39.8
92.1
1,249.0
976.7
1,517.8
776.5
15.9
50.9
35.4
90.9
2,487.4
272.4
178.0
531.0
1,866.2
170.4
3,018.0
776.0
80.6
7.9
50.9
10.4
100.4
1,026.2
274.2
96.4
431.4
1,554.9
117.2
2,474.1
(1,327.7)
(1,282.2)
1,690.3
1,191.9
$ 5,426.7
$ 3,194.8
See accompanying Notes to Consolidated Financial Statements.
55
October 31,
2019
October 31,
2018
$ 435.2
$ 403.8
142.4
11.3
83.7
9.2
143.6
825.4
2,659.0
313.0
177.6
12.2
43.3
18.7
8.4
27.8
128.9
3,388.9
114.4
4.4
18.8
7.3
121.5
670.2
884.1
179.8
78.0
10.7
43.3
6.8
8.6
46.1
77.5
1,334.9
21.3
35.5
162.6
(134.8)
150.5
(135.4)
1,539.0
1,469.8
(298.0)
(12.7)
(123.0)
(292.8)
13.4
(97.7)
1,133.1
1,107.8
58.0
46.4
1,191.1
1,154.2
$5,426.7
$3,194.8
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(in millions)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable
Accrued payroll and employee benefits
Restructuring reserves
Current portion of long-term debt
Short-term borrowings
Other current liabilities
Long-term liabilities
Long-term debt
Deferred tax liabilities
Pension liabilities
Post-retirement benefit obligations
Liabilities held by special purpose entities
Contingent liabilities and environmental reserves
Mandatorily redeemable noncontrolling interests
Long-term income tax payable
Other long-term liabilities
Commitments and Contingencies (Note 13)
Redeemable Noncontrolling Interests (Note 19)
Equity
Common stock, without par value
Treasury stock, at cost
Retained earnings
Accumulated other comprehensive income (loss), net of tax:
Foreign currency translation
Derivative financial instruments
Minimum pension liabilities
Total Greif, Inc. shareholders’ equity
Noncontrolling interests
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying Notes to Consolidated Financial Statements.
56
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended October 31, (in millions)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization
Non-cash asset impairment charges
Non-cash pension settlement charges
Gain on disposals of properties, plants and equipment, net
(Gain) loss on disposals of businesses, net
Unrealized foreign exchange (gain) loss
Deferred income tax (benefit) expense
Transition tax (benefit) expense
Debt extinguishment charges
Other, net
Increase (decrease) in cash from changes in certain assets and liabilities:
Trade accounts receivable
Inventories
Deferred purchase price on sold receivables
Accounts payable
Restructuring reserves
Pension and post-retirement benefit liabilities
Other, net
Net cash provided by operating activities
Cash flows from investing activities:
Acquisitions of companies, net of cash acquired
Purchases of properties, plants and equipment
Purchases of and investments in timber properties
Proceeds from the sale of properties, plants, equipment and other assets
Proceeds from the sale of businesses
Proceeds on insurance recoveries
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of long-term debt
Payments on long-term debt
Proceeds (payments) on short-term borrowings, net
Proceeds from trade accounts receivable credit facility
Payments on trade accounts receivable credit facility
Dividends paid to Greif, Inc. shareholders
Dividends paid to noncontrolling interests
Payments for debt extinguishment and issuance costs
Purchases of redeemable noncontrolling interest
Cash contribution from noncontrolling interest holder
Net cash provided (used in) by financing activities
Effects of exchange rates on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental information:
Non-cash transactions:
Capital expenditures included in accounts payable
Schedule of interest and income taxes paid:
Cash payments for interest expense
Cash payments for taxes
See accompanying Notes to Consolidated Financial Statements.
57
2019
2018
2017
$
194.2
$
229.5
$
135.1
206.1
7.8
—
(13.9)
3.7
3.0
2.1
(0.8)
14.0
4.2
55.1
33.9
(6.9)
(69.9)
6.7
(15.3)
(34.5)
389.5
(1,857.9)
(156.8)
(5.4)
28.7
1.5
0.6
(1,989.3)
3,732.3
(2,075.6)
2.2
181.4
(89.2)
(104.0)
(9.2)
(44.1)
(11.9)
1.6
1,583.5
(0.6)
(16.9)
94.2
77.3
$
126.9
8.3
1.3
(5.6)
(0.8)
(0.7)
(44.8)
52.8
—
(2.8)
(34.0)
(24.8)
2.1
24.3
(0.8)
(66.8)
(11.1)
253.0
—
(140.2)
(8.9)
12.5
1.4
—
(135.2)
120.5
20.8
27.1
(0.4)
1.7
4.6
2.3
—
—
1.2
(47.3)
(7.0)
5.1
20.5
(5.3)
(1.7)
27.8
305.0
—
(96.8)
(9.5)
9.6
5.9
0.4
(90.4)
1,020.7
(1,065.4)
(11.0)
2.8
(2.8)
(100.0)
(4.6)
—
—
2.0
(158.3)
(7.6)
(48.1)
142.3
94.2
$
1,446.0
(1,627.9)
(36.4)
203.6
(53.6)
(98.6)
(4.2)
(4.5)
—
—
(175.6)
(0.4)
38.6
103.7
142.3
$
$
$
$
18.6
161.8
71.4
$
$
$
11.4
58.3
65.2
$
$
$
12.5
76.2
53.4
GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Amounts in millions, except shares amounts in thousands and per share amounts)
As of October 31, 2016
47,792
$ 141.4
29,050
$ (135.6)
Capital Stock
Treasury Stock
Shares
Amount
Shares
Amount
Net income
Other comprehensive income (loss):
– Foreign currency translation
– Derivative financial instruments, net of
income tax expense of $3.1 million
– Minimum pension liability adjustment,
net of income tax expense of
$16.5 million
Comprehensive income
Current period mark to redemption value of
redeemable noncontrolling interest
Net income allocated to redeemable
noncontrolling interests
Deconsolidation of noncontrolling interest
Dividends paid to Greif, Inc., Shareholders
($1.68 per Class A share and $2.51 per
Class B share)
Dividends paid to noncontrolling interests
Treasury shares acquired
Restricted stock executives and directors
Long-term incentive shares issued
As of October 31, 2017
Net income
Other comprehensive income (loss):
– Foreign currency translation
– Derivative financial instruments, net of
income tax expense of $3.3 million
– Minimum pension liability adjustment,
net of income tax expense of
$4.1 million
Comprehensive income
Current period mark to redemption value of
redeemable noncontrolling interest
Net income allocated to redeemable
noncontrolling interests
Dividends paid to Greif, Inc., Shareholders
($1.70 per Class A share and $2.54 per
Class B share)
Dividends paid to noncontrolling interests
Restricted stock executives and directors
Long-term incentive shares issued
As of October 31, 2018
Net income
Other comprehensive income (loss):
– Foreign currency translation
– Derivative financial instruments, net of
income tax expense of $8.6 million
– Minimum pension liability adjustment,
net of income tax benefit of
$1.1 million
Comprehensive income
Adoption of ASU 2016-16
Current period mark to redemption value of
redeemable noncontrolling interest
Net income allocated to redeemable
noncontrolling interests
Dividends paid to Greif, Inc., Shareholders
($1.76 per Class A share and $2.63 per
Class B share)
Dividends paid to noncontrolling interests
Acquisition of noncontrolling interest and
other
(2)
24
29
47,843
1.3
1.5
$ 144.2
2
(24)
(29)
28,999
0.1
—
(0.1)
$ (135.6)
$1,360.5
209.4
$ (358.2)
(43.5)
(43.5)
(2.0)
(45.5)
(0.6)
8.3
7.7
21
85
47,949
1.2
5.1
$ 150.5
(21)
(85)
28,893
—
0.2
$ (135.4)
$1,469.8
171.0
$ (377.1)
Accumulated
Other
Comprehensive
Income (Loss)
$ (398.4)
Retained
Earnings
$1,340.0
118.6
20.9
5.1
14.2
0.5
(98.6)
Greif,
Inc.
Equity
Noncontrolling
Interests
Total
Equity
$ 947.4
118.6
$
10.5
16.5
16.7
(1.4)
(2.6)
(3.1)
$ 957.9
135.1
37.6
5.1
14.2
192.0
0.5
(1.4)
(2.6)
(98.6)
(3.1)
0.1
1.3
1.4
$1,047.5
229.5
$
36.6
20.1
7.7
16.3
208.0
0.5
(3.7)
(100.0)
(4.6)
1.2
5.3
$1,154.2
194.2
(4.5)
(26.1)
(25.3)
138.3
(2.1)
4.9
(2.3)
(104.0)
(7.9)
(2.7)
1.1
11.6
$1,191.1
(3.7)
(4.6)
$
46.4
23.2
0.7
(2.3)
(7.9)
(2.1)
$
58.0
20.9
5.1
14.2
158.8
0.5
(98.6)
0.1
1.3
1.4
$1,010.9
209.4
(100.0)
1.2
5.3
$1,107.8
171.0
(25.3)
114.4
(2.1)
4.9
(104.0)
(0.6)
1.1
11.6
$1,133.1
16.3
16.3
189.9
0.5
0.5
(100.0)
(5.2)
(5.2)
(26.1)
(26.1)
(25.3)
(2.1)
4.9
(104.0)
(0.6)
Restricted stock directors
Long-term incentive shares issued
As of October 31, 2019
25
292
48,266
1.1
11.0
$ 162.6
(25)
(292)
28,576
0.6
$ (134.8)
$1,539.0
$ (433.7)
See accompanying Notes to Consolidated Financial Statements.
58
GREIF, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Business
Greif, Inc. and its subsidiaries (collectively, ‘‘Greif,’’ ‘‘our,’’ or the ‘‘Company’’), principally manufacture rigid industrial packaging products,
such as steel, fibre and plastic drums, rigid intermediate bulk containers, closure systems for industrial packaging products, transit
protection products, water bottles and remanufactured and reconditioned industrial containers, and provides services, such as container
life cycle management, filling, logistics, warehousing and other packaging services. The Company produces containerboard, corrugated and
paperboard products for niche markets in North America. The Company also produces coated and uncoated recycled paperboard, which is
used in a variety of applications that include industrial products (tubes and cores, construction products, protective packaging, and
adhesives) and consumer packaging products (folding cartons, set-up boxes, and packaging services). The Company is a leading global
producer of flexible intermediate bulk containers. The Company has operations in over 40 countries. In addition, the Company owns
timber properties in the southeastern United States, which are actively harvested and regenerated.
Due to the variety of its products, the Company has many customers buying different products and due to the scope of the Company’s
sales, no one customer is considered principal in the total operations of the Company.
The Company supplies a cross section of industries, such as chemicals, paints and pigments, food and beverage, petroleum, industrial
coatings, agricultural, pharmaceutical, mineral, packaging, automotive and building products, and makes spot deliveries on a day-to-day
basis as its products are required by its customers. The Company does not operate on a backlog to any significant extent and maintains
only limited levels of finished goods. Many customers place their orders weekly for delivery during the same week.
The Company’s raw materials are principally steel, resin, containerboard, old corrugated containers, pulpwood, recycled coated and
uncoated paperboard and used industrial packaging for reconditioning.
There were approximately 17,000 employees of the Company as of October 31, 2019.
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Greif, Inc., all wholly-owned and majority-owned subsidiaries, joint ventures
controlled by the Company or for which the Company is the primary beneficiary, including the joint venture relating to the Flexible
Products & Services segment, and equity earnings of unconsolidated affiliates. All intercompany transactions and balances have been
eliminated in consolidation. Investments in unconsolidated affiliates are accounted for using the equity method based on the Company’s
ownership interest in the unconsolidated affiliate.
The Company’s consolidated financial statements are presented in accordance with accounting principles generally accepted in the United
States (‘‘GAAP’’). Certain prior year amounts have been reclassified to conform to the current year presentation.
The Company’s fiscal year begins on November 1 and ends on October 31 of the following year. Any references to the year 2024, 2023,
2022, 2021, 2020, 2019, 2018 2017, 2016, or 2015, or to any quarter of those years, relates to the fiscal year ended in that year.
Argentina Currency
The Company’s results with respect to the business of its Argentinian subsidiary have been reported under highly inflationary accounting
beginning August 1, 2018. As of October 31, 2019, the Company’s Argentina subsidiary represented approximately 1% of the Company’s
consolidated net revenues and less than 1% of its consolidated total assets.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates,
judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The most
significant estimates are related to the expected useful lives assigned to properties, plants and equipment, goodwill and other intangible
assets, estimates of fair value, environmental liabilities, pension and post-retirement benefits, including plan assets, income taxes, net assets
held for sale and contingencies. Actual amounts could differ from those estimates.
59
Cash and Cash Equivalents
The Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. The carrying
value of cash equivalents approximates fair value.
Allowance for Doubtful Accounts
Trade receivables represent amounts owed to the Company through its operating activities and are presented net of allowance for doubtful
accounts. The allowance for doubtful accounts totaled $6.8 million and $4.2 million as of October 31, 2019 and 2018, respectively. The
Company evaluates the collectability of its accounts receivable based on a combination of factors. In circumstances where the Company is
aware of a specific customer’s inability to meet its financial obligations to the Company, the Company records a specific allowance for bad
debts against amounts due to reduce the net recognized receivable to the amount the Company reasonably believes will be collected. In
addition, the Company recognizes allowances for bad debts based on the length of time receivables are past due with allowance
percentages, based on its historical experiences, applied on a graduated scale relative to the age of the receivable amounts. If circumstances
such as higher than expected bad debt experience or an unexpected material adverse change in a major customer’s ability to meet its
financial obligations to the Company were to occur, the recoverability of amounts due to the Company could change by a material
amount. Amounts deemed uncollectible are written-off against an established allowance for doubtful accounts.
Concentration of Credit Risk and Major Customers
The Company maintains cash depository accounts with banks throughout the world and invests in high quality short-term liquid
instruments. Such investments are made only in instruments issued by high quality institutions. These investments mature within three
months and the Company has not incurred any related losses for the years ended October 31, 2019, 2018, and 2017.
Trade receivables can be potentially exposed to a concentration of credit risk with customers or in particular industries. Such credit risk is
considered by management to be limited due to the Company’s many customers, none of which are considered principal in the total
operations of the Company, and its geographic scope of operations in a variety of industries throughout the world. The Company does not
have an individual customer that exceeds 10 percent of total revenue. In addition, the Company performs ongoing credit evaluations of its
customers’ financial conditions and maintains reserves for credit losses. Such losses historically have been within management’s
expectations.
Inventory
The Company primarily uses the FIFO method of inventory valuation. Reserves for slow moving and obsolete inventories are provided
based on historical experience, inventory aging and product demand. The Company continuously evaluates the adequacy of these reserves
and makes adjustments to these reserves as required.
The Paper Packaging & Services segment trades certain inventories with third parties. These inventory trades are accounted for as non-
monetary exchanges and any unfavorable imbalances, resulting from these trades, are recorded as a liability.
Net Assets Held for Sale
Net assets held for sale represent land, buildings and other assets and liabilities for locations that have met the criteria of ‘‘held for sale’’
accounting, as specified by Accounting Standards Codification (‘‘ASC’’) 360, ‘‘Property, Plant, and Equipment,’’ at the lower of carrying
value or fair value less cost to sell. Fair value is based on the estimated proceeds from the sale of the assets utilizing recent purchase offers,
market comparables and/or reliable third party data. The Company’s estimate as to fair value is regularly reviewed and assets are subject to
changes, such as in the commercial real estate markets and the Company’s continuing evaluation as to the asset’s acceptable sale price. As of
October 31, 2019, there were three asset groups within the Rigid Industrial Packaging & Services, three asset groups within Paper
Packaging & Services segment, one asset group within Land Management segment and one asset group within the Corporate and Other
segment classified as assets and liabilities held for sale. The effect of suspending depreciation on the facilities held for sale is immaterial to
the results of operations. The net assets held for sale are being marketed for sale and it is the Company’s intention to complete the sales of
these assets within the upcoming year. See Note 4 and Note 9 for additional information regarding assets and liabilities held for sale.
Goodwill and Indefinite-Lived Intangibles
Goodwill is the excess of the purchase price of an acquired entity over the amounts assigned to tangible and intangible assets and liabilities
assumed in the business combination. The Company accounts for purchased goodwill and indefinite-lived intangible assets in accordance
with ASC 350, ‘‘Intangibles – Goodwill and Other.’’ Under ASC 350, purchased goodwill and intangible assets with indefinite lives are
60
not amortized, but instead are tested for impairment at least annually. The Company tests for impairment of goodwill and indefinite-lived
intangible assets as of August 1, or more frequently if certain indicators are present or changes in circumstances suggest that impairment
may exist.
In accordance with ASC 350, the Company has the option to first assess qualitative factors to determine whether it is necessary to perform
the quantitative test for goodwill impairment. If the Company believes, as a result of its qualitative assessment, that it is more-likely-than-
not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. The quantitative test
for goodwill impairment is conducted at the reporting unit level by comparing the carrying value of each reporting unit to the estimated
fair value of the unit. If the carrying value of a reporting unit exceeds its estimated fair value, then the goodwill of the reporting unit is
impaired. Goodwill impairment is recognized as the amount that the carrying value exceeds the fair value; not to exceed the balance of
goodwill attributable to the reporting unit. When a portion of a reporting unit is disposed of, goodwill is allocated to the gain or loss on
that disposition based on the relative fair values of the portion of the reporting unit subject to disposition and the portion of the reporting
unit that will be retained.
The Company’s determinations of estimated fair value of the reporting units are based on both the market approach and a discounted cash
flow analysis utilizing the income approach. Under the market approach, the principal inputs are market prices and valuation multiples for
public companies engaged in businesses that are considered comparable to the reporting unit. Under the income approach, the principal
inputs are the reporting unit’s cash-generating capabilities and the discount rate. The discount rates used in the income approach are based
on a market participant’s weighted average cost of capital. The use of alternative estimates, including different peer groups or changes in the
industry, or adjusting the discount rate, earnings before interest, taxes, depreciation, depletion and amortization forecasts or cash flow
assumptions used could affect the estimated fair value of the reporting units and potentially result in goodwill impairment. Any identified
impairment would result in an expense to the Company’s results of operations. See Note 4 for additional information regarding goodwill
and other intangible assets.
Other Intangibles
The Company accounts for intangible assets in accordance with ASC 350. Definite lived intangible assets are amortized over their useful
lives on a straight-line basis. The useful lives for definite lived intangible assets vary depending on the type of asset and the terms of
contracts or the valuation performed. Amortization expense on intangible assets is recorded on the straight-line method over their useful
lives as follows:
Trade names
Non-competes
Customer relationships
Other intangibles
Acquisitions
Years
1-15
1-10
5-25
1-20
From time to time, the Company acquires businesses and/or assets that augment and complement its operations. In accordance with ASC
805, ‘‘Business Combinations,’’ these acquisitions are accounted for under the purchase method of accounting. Under this method, the
Company allocates the fair value of purchase consideration transferred to the tangible and intangible assets acquired and liabilities assumed
based on their estimated fair values on the date of the acquisition. The excess purchase consideration over the aggregate fair value of
tangible and intangible assets, net of liabilities assumed, is recorded as goodwill. The Company’s estimates of fair value are based upon
assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from
estimates.
During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets
acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances
that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the consolidated
statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred.
In order to assess performance, the Company classifies costs incurred in connection with acquisitions as acquisition-related costs. These
costs are expensed as incurred and consist primarily of transaction costs, legal and consulting fees, integration costs and changes in the fair
value of contingent payments (earn-outs) and are recorded within Acquisition-Related Costs line item presented on the consolidated
income statement. Acquisition transaction costs are incurred during the initial evaluation of a potential targeted acquisition and primarily
relate to costs to analyze, negotiate and consummate the transaction as well as financial and legal due diligence activities. Post-acquisition
integration activities are costs incurred to combine the operations of an acquired enterprise into the Company’s operations.
61
The consolidated financial statements include the results of operations from these business combinations from the date of acquisition.
Internal Use Software
Internal use software is accounted for under ASC 985, ‘‘Software.’’ Internal use software is software that is acquired, internally developed
or modified solely to meet the Company’s needs and for which, during the software’s development or modification, a plan does not exist to
market the software externally. Costs incurred to develop the software during the application development stage and for upgrades and
enhancements that provide additional functionality are capitalized and then amortized over a three to ten year period. Internal use
software is capitalized as a component of machinery and equipment on the Consolidated Balance Sheets.
Long-Lived Assets
Properties, plants and equipment are stated at cost. Depreciation on properties, plants and equipment is provided on the straight-line
method over the estimated useful lives of the assets as follows:
Buildings
Machinery and equipment
Years
30-40
5-15
Depreciation expense was $149.0 million, $107.5 million and $106.8 million in 2019, 2018 and 2017, respectively. Expenditures for
repairs and maintenance are charged to expense as incurred. When properties are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the asset and related allowance accounts. Gains or losses are credited or charged to income
as incurred.
The Company capitalizes interest on long-term fixed asset projects using a rate that approximates the weighted average cost of borrowing.
For the years ended October 31, 2019, 2018, and 2017, the Company capitalized interest costs of $5.6 million, $4.5 million, and
$3.5 million, respectively.
The Company tests for impairment of properties, plants and equipment if certain indicators are present to suggest that impairment may
exist. Long-lived assets are grouped together at the lowest level, generally at the plant level, for which identifiable cash flows are largely
independent of cash flows of other groups of long-lived assets. As events warrant, the Company evaluates the recoverability of long-lived
assets, other than goodwill and indefinite-lived intangible assets, by assessing whether the carrying value can be recovered over their
remaining useful lives through the expected future undiscounted operating cash flows of the underlying business. Impairment indicators
include, but are not limited to, a significant decrease in the market price of a long-lived asset; a significant adverse change in the manner in
which the asset is being used or in its physical condition; a significant adverse change in legal factors or the business climate that could
affect the value of a long-lived asset; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or
construction of a long-lived asset; current period operating or cash flow losses combined with a history of operating or cash flow losses
associated with the use of the asset; or a current expectation that it is more likely than not that a long-lived asset will be sold or otherwise
disposed of significantly before the end of its previously estimated useful life. Future decisions to change our manufacturing processes, exit
certain businesses, reduce excess capacity, temporarily idle facilities and close facilities could also result in material impairment losses. Any
impairment loss that may be required is determined by comparing the carrying value of the assets to their estimated fair value.
As of October 31, 2019, the Company’s timber properties consisted of approximately 251,000 acres, all of which were located in the
southeastern United States. The Company’s land costs are maintained by tract. Upon acquisition of a new timberland tract, the Company
records separate amounts for land, merchantable timber and pre-merchantable timber allocated as a percentage of the values being
purchased. The Company begins recording pre-merchantable timber costs at the time the site is prepared for planting. Costs capitalized
during the establishment period include site preparation by aerial spray, costs of seedlings, including refrigeration rental and trucking,
planting costs, herbaceous weed control, woody release, and labor and machinery use. The Company does not capitalize interest costs in
the process. Property taxes are expensed as incurred. New road construction costs are capitalized as land improvements and depreciated
over 20 years. Road repairs and maintenance costs are expensed as incurred. Costs after establishment of the seedlings, including
management costs, pre-commercial thinning costs and fertilization costs, are expensed as incurred. Once the timber becomes
merchantable, the cost is transferred from the pre-merchantable timber category to the merchantable timber category in the depletion
block.
Merchantable timber costs are maintained by five product classes: pine sawtimber, pine chip-n-saw, pine pulpwood, hardwood sawtimber
and hardwood pulpwood, within a depletion block, with each depletion block based upon a geographic district or subdistrict. Currently,
the Company has eight depletion blocks. These same depletion blocks are used for pre-merchantable timber costs. Each year, the Company
estimates the volume of the Company’s merchantable timber for the five product classes by each depletion block and depletion costs
62
recognized upon sales are calculated as volumes sold times the unit costs in the respective depletion block. Depletion expense was
$3.7 million, $4.0 million and $4.0 million in 2019, 2018 and 2017, respectively.
Contingencies
Various lawsuits, claims and proceedings have been or may be instituted or asserted against the Company, including those pertaining to
environmental, product liability and safety and health matters. While the amounts claimed may be substantial, the ultimate liability cannot
currently be determined because of the considerable uncertainties that exist.
All lawsuits, claims and proceedings are considered by the Company in establishing reserves for contingencies in accordance with
ASC 450, ‘‘Contingencies.’’ In accordance with the provisions of ASC 450, the Company accrues for a litigation-related liability when it is
probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Based on currently available information
known to the Company, the Company believes that its reserves for these litigation-related liabilities are reasonable and that the ultimate
outcome of any pending matters is not likely to have a material effect on the Company’s financial position or results of operations.
Environmental Cleanup Costs
The Company accounts for environmental cleanup costs in accordance with ASC 410,
‘‘Asset Retirement and Environmental
Obligations.’’ The Company expenses environmental expenditures related to existing conditions resulting from past or current operations
and from which no current or future benefit is discernible. Expenditures that extend the life of the related property or mitigate or prevent
future environmental contamination are capitalized. The Company determines its liability on a site-by-site basis and records a liability at
the time when it is probable and can be reasonably estimated. The Company’s estimated liability is reduced to reflect the anticipated
participation of other potentially responsible parties in those instances where it is probable that such parties are legally responsible and
financially capable of paying their respective shares of the relevant costs.
Self-insurance
The Company is self-insured for certain of the claims made under its employee medical and dental insurance programs. The Company had
recorded liabilities totaling $7.6 million and $3.8 million for estimated costs related to outstanding claims as of October 31, 2019 and
2018, respectively. These costs include an estimate for expected settlements on pending claims, administrative fees and an estimate for
claims incurred but not reported. These estimates are based on management’s assessment of outstanding claims, historical analyses and
current payment trends. The Company recorded an estimate for the claims incurred, but not reported using an estimated lag period based
upon historical information.
The Company has certain deductibles applied to various insurance policies including general liability, product, vehicle and workers’
compensation. The Company maintains liabilities totaling $27.5 million and $9.8 million for anticipated costs related to general liability,
product, vehicle and workers’ compensation claims as of October 31, 2019 and 2018, respectively. These costs include an estimate for
expected settlements on pending claims, defense costs and an estimate for claims incurred but not reported. These estimates are based on
the Company’s assessment of its deductibles, outstanding claims, historical analysis, actuarial information and current payment trends.
Income Taxes
Income taxes are accounted for under ASC 740, ‘‘Income Taxes.’’ In accordance with ASC 740, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, as measured by enacted tax rates that are expected to be in effect in the periods when the
deferred tax assets and liabilities are expected to be settled or realized. Valuation allowances are established when management believes it is
more likely than not that some portion of the deferred tax assets will not be realized.
The Company’s effective tax rate is impacted by the amount of income generated in each taxing jurisdiction, statutory tax rates and tax
planning opportunities available to the Company in the various jurisdictions in which the Company operates. Significant judgment is
required in determining the Company’s effective tax rate and in evaluating its tax positions.
Tax benefits from uncertain tax positions are recognized when it is more likely than not that the position will be sustained upon
examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The amount recognized is
measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement. The Company’s
effective tax rate includes the impact of reserve provisions and changes to reserves on uncertain tax positions that are not more likely than
not to be sustained upon examination as well as related interest and penalties.
63
A number of years may elapse before a particular matter, for which the Company has established a reserve, is audited and finally resolved.
The number of years with open tax audits varies depending on the tax jurisdiction. While it is often difficult to predict the final outcome
or the timing of resolution of any particular tax matter, the Company believes that its reserves reflect the probable outcome of known tax
contingencies. Unfavorable settlement of any particular issue would require use of the Company’s cash. Favorable resolution would be
recognized as a reduction to the Company’s effective tax rate in the period of resolution.
Equity earnings of unconsolidated affiliates, net of tax
Equity earnings of unconsolidated affiliates, net of tax represent the Company’s share of earnings of affiliates in which the Company does
not exercise control, but has significant influence. Investments in such affiliates are accounted for using the equity method of accounting.
The Company has an equity interest in two such affiliates as of October 31, 2019. If the fair value of an investment in an affiliate is below
its carrying value and the difference is deemed to be other than temporary, the difference between the fair value and the carrying value is
charged to earnings.
Other Comprehensive Income
The Company’s other comprehensive income is significantly impacted by foreign currency translation, effective cash flow hedges and
defined benefit pension and post-retirement benefit adjustments.
The impact of foreign currency translation is affected by the translation of assets, liabilities and operations of the Company’s foreign
subsidiaries which are denominated in functional currencies other than the U.S. dollar and the recognition of accumulated foreign
currency translation upon the disposal of foreign entities. The primary assets and liabilities affecting the adjustments are: cash and cash
equivalents; accounts receivable; inventory; properties, plants and equipment; accounts payable; pension and other post-retirement benefit
obligations; and certain intercompany loans payable and receivable. The primary currencies in which these assets and liabilities are
denominated are the Euro, Brazilian real, and Chinese yuan.
The impact of effective cash flow hedges is reclassified into earnings in the same period or periods during which the hedged transaction
affects earnings. Currently, interest rate swaps are held by the Company to effectively convert a portion of floating rate debt to a fixed rate
basis, thus reducing the impact of interest rate increases on future interest expense. The Company uses the regression method for assessing
the effectiveness of the swaps.
The impact of defined benefit pension and post-retirement benefit adjustments is primarily affected by unrecognized actuarial gains and
losses related to the Company’s defined benefit and other post-retirement benefit plans, as well as the subsequent amortization of gains and
losses from accumulated other comprehensive income in periods following the initial recording of such items. These actuarial gains and
losses are determined using various assumptions, the most significant of which are (i) the weighted average rate used for discounting the
liability, (ii) the weighted average expected long-term rate of return on pension plan assets, (iii) the method used to determine market-
related value of pension plan assets, (iv) the weighted average rate of future salary increases and (v) the anticipated mortality rate tables.
Restructuring Charges
The Company accounts for all exit or disposal activities in accordance with ASC 420, ‘‘Exit or Disposal Cost Obligations.’’ Under
ASC 420, a liability is measured at its fair value and recognized as incurred.
Employee-related costs primarily consist of one-time termination benefits provided to employees who have been involuntarily terminated.
A one-time benefit arrangement is an arrangement established by a plan of termination that applies for a specified termination event or for
a specified future period. A one-time benefit arrangement exists at the date the plan of termination meets all of the following criteria and
has been communicated to employees:
(1) Management, having the authority to approve the action, commits to a plan of termination.
(2) The plan identifies the number of employees to be terminated, their job classifications or functions and their locations, and
the expected completion date.
(3) The plan establishes the terms of the benefit arrangement, including the benefits that employees will receive upon
termination (including but not limited to cash payments), in sufficient detail to enable employees to determine the type and
amount of benefits they will receive if they are involuntarily terminated.
(4) Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the
plan will be withdrawn.
64
Facility exit and other costs consist of equipment relocation costs and project consulting fees. A liability for other costs associated with an
exit or disposal activity shall be recognized and measured at its fair value in the period in which the liability is incurred (generally, when
goods or services associated with the activity are received). The liability shall not be recognized before it is incurred, even if the costs are
incremental to other operating costs and will be incurred as a direct result of a plan.
Pension and Post-retirement Benefits
Under ASC 715, ‘‘Compensation – Retirement Benefits,’’ employers recognize the funded status of their defined benefit pension and
other post-retirement plans on the consolidated balance sheet and record as a component of other comprehensive income, net of tax, the
gains or losses and prior service costs or credits that have not been recognized as components of the net periodic benefit cost.
Stock-Based Compensation Expense
The Company recognizes stock-based compensation expense in accordance with ASC 718, ‘‘Compensation – Stock Compensation.’’
ASC 718 requires the measurement and recognition of compensation expense, based on estimated fair values, for all share-based awards
made to employees and directors, including stock options, restricted stock, restricted stock units and participation in the Company’s
employee stock purchase plan.
ASC 718 requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The value
of the portion of the award that is ultimately expected to vest is recognized as expense in the Company’s consolidated statements of income
over the requisite service periods. The Company granted 291,520 shares of restricted stock with a grant date fair value of $39.83 under the
Company’s Long-Term Incentive Plan for 2019. The total stock expense recorded under the Long-Term Incentive Plan was $11.6 million,
$5.3 million and $1.7 million for the periods ended October 31, 2019, 2018 and 2017, respectively. All restricted stock awards under the
Long-Term Incentive Plan are fully vested at the date of award. No stock options were granted in 2019, 2018 or 2017. For any options
granted in the future, compensation expense will be based on the grant date fair value estimated in accordance with the standard.
Revenue Recognition
Revenue is recognized in accordance with ASC 606, ‘‘Revenue from Contracts with Customers’’.
The Company generates substantially all of its revenue by providing its customers with industrial packaging products serving a variety of
end markets. The Company may enter into fixed term sale agreements, including multi-year master supply agreements which outline the
terms under which the Company does business. The Company also sells to certain customers solely based on purchase orders. As master
supply agreements do not typically include fixed volumes, customers generally purchase products pursuant to purchase orders or other
communications that are short-term in nature. The Company has concluded for the vast majority of its revenues, that its contracts with
customers are either a purchase order or the combination of a purchase order with a master supply agreement.
A performance obligation is considered an individual unit sold. Contracts or purchase orders with customers could include a single type of
product or it could include multiple types or specifications of products. Regardless, the contracted price with the customer is agreed at the
individual product level outlined in the customer contracts or purchase orders. The Company does not bundle products. Negotiations
with customers are based on a variety of factors including the level of anticipated contractual volume, geographic location, complexity of
the product, key input costs and a variety of other factors. The Company has concluded that prices negotiated with each individual
customer are representative of the stand-alone selling price of the product.
The Company typically satisfies the obligation to provide packaging to customers at a point in time when control is transferred to
customers. The point in time when control of goods is transferred is largely dependent on delivery terms. Revenue is recorded at the time
of shipment for delivery terms designated shipping point. For sales transactions designated destination, revenue is recorded when the
product is delivered to the customer’s delivery site. Purchases by the Company’s customers are generally manufactured and shipped with
minimal lead time; therefore, performance obligations are generally settled shortly after manufacturing and shipment.
The Company manufactures certain products that have no alternative use to the Company once they are printed or manufactured to
customer specifications; however, in the majority of cases, the Company does not have an enforceable right to payment that includes a
reasonable profit for custom products at all times in the manufacturing process, and therefore revenue is recognized at the point in time at
which control transfers. As revenue recognition is dependent upon individual contractual terms, the Company evaluates any new or
amended contracts entered into.
Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for transferring goods or providing
services. Standalone selling prices for each performance obligation are generally stated in the contract. When the Company offers variable
65
consideration in the form of volume rebates to customers, it estimates the amount of revenue to which it is expected to be entitled to based
on contract terms and historical experience of actual results, and includes the estimate in the transaction price, limited to the amount
which is probable will not result in reversal of cumulative revenue recognized when the variable consideration is resolved. The Company
provides prompt pay discounts to certain customers if invoices are paid within a predetermined period. Prompt payment discounts are
treated as a reduction of revenue and are determinable within a short period of the sale.
Contract Balances
Contract liabilities relate primarily to prepayments received from the Company’s customers before revenue is recognized and before
volume rebates to customers. These amounts are included in other current liabilities in the consolidated balance sheets. The Company
does not have any material contract assets.
Practical Expedients
The Company’s contracts generally include standard commercial payment terms generally acceptable in each region. Customer payment
terms are typically less than one year and as such, the Company has applied the practical expedient to exclude consideration of significant
financing components from the determination of transaction price.
Taxes collected from customers and remitted to governmental authorities are excluded from net sales.
Costs to obtain a contract are generally immaterial, but the Company has elected the practical expedient to expense these costs as incurred
if the amortization period of the capitalized cost would be one year or less.
The Company has applied the practical expedient to exclude disclosure of remaining performance obligations as the Company’s contracts
typically have a term of one year or less.
Freight charged to customers is included in net sales in the income statement. For shipping and handling activities performed after a
customer obtains control of the goods, the Company has elected to account for these costs as activities to fulfill the promise to transfer the
goods; therefore, these activities are not assessed as separate performance obligations.
Disaggregation of Revenues
The Company’s contracts with customers are broadly similar in nature throughout its reportable segments, but the amount, timing and
uncertainty of revenue and cash flows may vary in each reportable segment due to geographic factors. See Note 16 to the Consolidated
Financial Statements for additional disclosures of revenue disaggregated by geography for each reportable segment.
Shipping and Handling Fees and Costs
The Company includes shipping and handling fees and costs in cost of products sold.
Other Expense, net
Other expense, net primarily represents Foreign Receivables Facilities, as defined in Note 3 to the Consolidated Financial Statements,
program fees, foreign currency transaction gains and losses, non-service cost components of net periodic post-retirement benefit costs and
other infrequent non-operating items.
Currency Translation
In accordance with ASC 830, ‘‘Foreign Currency Matters,’’ the assets and liabilities denominated in a foreign currency are translated into
United States dollars at the rate of exchange existing at period-end, and revenues and expenses are translated at average exchange rates.
The cumulative translation adjustments, which represent the effects of translating assets and liabilities of the Company’s international
operations, are presented in the consolidated statements of changes in shareholders’ equity in accumulated other comprehensive income
(loss). Transaction gains and losses on foreign currency transactions denominated in a currency other than an entity’s functional currency
are credited or charged to income. The amounts included in other expense, net related to foreign currency transaction losses were
$2.1 million, $8.8 million and $6.4 million in 2019, 2018 and 2017, respectively.
66
Derivative Financial Instruments
In accordance with ASC 815, ‘‘Derivatives and Hedging,’’ the Company records all derivatives in the consolidated balance sheet as either
assets or liabilities measured at fair value. Dependent on the designation of the derivative instrument, changes in fair value are recorded to
earnings or shareholders’ equity through other comprehensive income (loss).
The Company may from time to time use interest rate swap agreements to hedge against changing interest rates. For interest rate swap
agreements designated as cash flow hedges, the net gain or loss on the derivative instrument is reported as a component of other
comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects
earnings. The Company’s interest rate swap agreements effectively convert a portion of floating rate debt to a fixed rate basis, thus reducing
the impact of interest rate increases on future interest expense.
The Company’s cross currency interest rate swap agreement synthetically swaps U.S. dollar denominated fixed rate debt for Euro
denominated fixed rate debt and is designated as a net investment hedge for accounting purposes. The gain or loss on this derivative
instrument is included in the foreign currency translation component of other comprehensive income until the net investment is sold,
diluted, or liquidated. Interest payments received for the cross currency swap are excluded from the net investment hedge effectiveness
assessment and are recorded in interest expense, net on the consolidated statements of income.
The Company enters into currency forward contracts to hedge certain currency transactions and short-term intercompany loan balances
with its international businesses. Such contracts limit the Company’s exposure to both favorable and unfavorable currency fluctuations.
These contracts are adjusted to reflect market value as of each balance sheet date, with the resulting changes in fair value being recognized
in other expense, net.
Any derivative contract that is either not designated as a hedge, or is so designated but is ineffective, has its changes to market value
recognized in earnings immediately. If a cash flow or fair value hedge ceases to qualify for hedge accounting, the contract would continue to
be carried on the balance sheet at fair value until settled and have the adjustments to the contract’s fair value recognized in earnings. If a
forecasted transaction were no longer probable to occur, amounts previously deferred in accumulated other comprehensive income (loss)
would be recognized immediately in earnings.
Variable Interest Entities
The Company evaluates whether an entity is a variable interest entity (‘‘VIE’’) and determines if the primary beneficiary status is
appropriate on a quarterly basis. The Company consolidates VIEs for which it is the primary beneficiary. If the Company is not the
primary beneficiary and an ownership interest is held, the VIE is accounted for under the equity method of accounting. When assessing the
determination of the primary beneficiary, the Company considers all relevant facts and circumstances, including: the power to direct the
activities of the VIE that most significantly impact the VIE’s economic performance; the obligation to absorb the expected losses; and/or
the right to receive the expected returns of the VIE.
Fair Value
The Company uses ASC 820, ‘‘Fair Value Measurements and Disclosures’’ to account for fair value. ASC 820 defines fair value, establishes
a framework for measuring fair value in GAAP and expands disclosures about assets and liabilities measured at fair value. Additionally, this
standard established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities
to maximize the use of observable inputs and minimize the use of unobservable inputs.
The three levels of inputs used to measure fair values are as follows:
•
•
•
Level 1 – Observable inputs such as unadjusted quoted prices in active markets for identical assets and liabilities.
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of
the assets and liabilities.
The Company presents various fair value disclosures in Notes 9 and 12 to these consolidated financial statements.
Newly Adopted Accounting Standards
In May 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) 2014-09, ‘‘Revenue
‘‘Revenue
from Contracts with Customers (Topic 606),’’ which supersedes the revenue recognition requirements in ASC 605,
67
Recognition.’’ This new revenue standard introduces a five-step revenue recognition model in which an entity should recognize revenue to
depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
to in exchange for those goods or services. The new revenue standard also requires additional disclosure about the nature, amount, timing
and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and
assets recognized from costs incurred to obtain or fulfill a contract. The Company adopted the ASU, and all of the related amendments,
using the modified retrospective method on November 1, 2018. The adoption of the ASU and related amendments did not impact the
Company’s financial position, results of operations, comprehensive income or cash flows. Additionally, no cumulative effect adjustment
was recorded to opening retained earnings as of November 1, 2018. Based on current operations, the Company does not expect a material
impact on an ongoing basis as a result of the adoption of the new standard.
In August 2016, the FASB issued ASU 2016-15, ‘‘Statement of Cash Flows (Topic 230),’’ which amends the classification of certain cash
receipts and cash payments on the statement of cash flows. This update clarifies guidance on eight specific cash flow items. The ASU
requires the beneficial interests obtained through securitization of financial assets be disclosed as a non-cash activity and cash receipts from
beneficial interests be classified as cash inflows from investing activities. Under previous guidance, the Company classified cash receipts
from beneficial interests in securitized receivables and cash payments resulting from debt prepayment or extinguishment as cash flows from
operating activities. The amendments in this update are required to be applied using a retrospective approach, excluding amendments for
which retrospective application is impractical. On November 1, 2018, the Company adopted the provisions of ASU 2016-15 on a
retrospective basis with the exception of the Company’s beneficial interests obtained through securitization of financial assets, for which
the Company adopted this update on a prospective basis due to the impracticality of the retrospective basis. The adoption of this update
did not have a material impact on the Company’s financial position, results of operations, comprehensive income, cash flows or disclosures
for the periods presented.
In October 2016, the FASB issued ASU 2016-16, ‘‘Intra-Entity Transfers of Assets Other Than Inventory (Topic 740),’’ which improves
the accounting for income tax consequences of intra-entity transfers of assets other than inventory. This update requires transferring
entities to recognize a current tax expense or benefit at the time of transfer and receiving entities to recognize a corresponding deferred tax
asset or liability. The Company adopted this standard on November 1, 2018 using a modified retrospective approach. The adoption of this
update resulted in a reclassification of approximately $15.1 million from ‘‘Prepaid Tax Assets’’ to ‘‘Retained Earnings’’, offset by the
establishment of a deferred tax asset of $13.0 million for a net impact on retained earnings of $2.1 million as of November 1, 2018. The
adoption did not have a material impact on the Company’s financial position, results of operations, comprehensive income, cash flows or
disclosures, other than the impact discussed above.
In January 2017, the FASB issued ASU 2017-01, ‘‘Clarifying the Definition of a Business,’’ which narrows the existing definition of a
business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or
a business. The ASU requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single
identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a
business. To be considered a business, the set would need to include an input and a substantive process that together significantly
contribute to the ability to create outputs. The standard also narrows the definition of outputs. The definition of a business affects areas of
accounting such as acquisitions, disposals and goodwill. Under the new guidance, fewer acquired sets are expected to be considered
businesses. The Company adopted this standard effective November 1, 2018 on a prospective basis. The Company applied this guidance
to its respective acquisitions of Caraustar Industries, Inc. and its subsidiaries (‘‘Caraustar’’) and Tholu B.V. and its wholly owned subsidiary
A. Thomassen Transport B.V. (collectively ‘‘Tholu’’), which qualified as business combinations. See Note 2 to the Consolidated Financial
Statements for additional disclosures related to these acquisitions. The adoption did not have a material impact on the Company’s
financial position, results of operations, comprehensive income, cash flows or disclosures, other than the impact discussed above.
Recently Issued Accounting Standards
In February 2016 and July 2018, the FASB issued ASU 2016-02 and ASU 2018-11, ‘‘Leases (Topic 842),’’ which amends the lease
accounting and disclosure requirements in ASC 840, ‘‘Leases.’’ The objective of this update is to increase transparency and comparability
among organizations recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about lease
arrangements. The Company adopted ASU 2018-11 on November 1, 2019, utilizing a modified retrospective approach and will not adjust
its comparative period financial information. The Company plans to adopt the practical expedient package which permits the Company to
not reassess previous conclusions whether a contract is or contains a lease, lease classification, or treatment of indirect costs for existing
contracts as of the adoption date. The Company also plans to adopt the short-term lease recognition exemption and the practical
expedient allowing for the combination of lease and non-lease components for equipment leases. The Company has preliminarily
completed the lease collection and evaluation process, implemented a technology tool to assist with the accounting and reporting
requirements of the new standard, and designed new processes and controls around leases. The Company expects to recognize a right-of-
68
use asset and lease liability between approximately $275-$325 million and does not expect the ASU will have a material impact on its
financial position, results of operations, comprehensive income, or cash flows, other than the impact discussed above.
In June 2016, the FASB issued ASU 2016-13, ‘‘Financial Instruments – Credit Losses’’. The ASU sets forth a ‘‘current expected credit loss’’
(CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based
on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is
applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit
exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years,
with early adoption permitted. The Company plans to adopt this ASU on November 1, 2020. The Company is in the process of
determining the potential impact of adopting this guidance on its financial position, results of operations, comprehensive income, cash
flows and disclosures.
NOTE 2 – ACQUISITIONS AND DIVESTITURES
Acquisitions
The Company accounts for acquisitions in accordance with ASC 805, ‘‘Business Combinations’’. The estimated fair values of all assets
acquired and liabilities assumed in the acquisitions are provisional and may be revised as a result of additional information obtained during
the measurement period of up to one year from the acquisition date.
Caraustar Acquisition
On February 11, 2019, the Company completed its acquisition of Caraustar (the ‘‘Caraustar Acquisition’’), a leader in the production of
coated and uncoated recycled paperboard, which is used in a variety of applications that include industrial products (tubes and cores,
construction products, protective packaging, and adhesives) and consumer packaging products (folding cartons, set-up boxes, and
packaging services). The total purchase price for this acquisition, net of cash acquired, was $1,834.9 million. The Company incurred
transaction costs of $62.1 million to complete this acquisition. Of this amount, $34.0 million was recognized immediately in the
consolidated statements of income and the remaining $28.1 million in transaction costs was capitalized in accordance with ASC 470,
‘‘Debt’’, and is presented as part of the consolidated balance sheet ($20.8 million within Long-Term Debt and $7.3 million within Other
Long-Term Assets).
The following table summarizes the consideration transferred to acquire Caraustar and the current preliminary valuation of identifiable
assets acquired and liabilities assumed at the acquisition date, as well as measurement period adjustments made during the year ended
October 31, 2019.
(in millions)
Fair value of consideration transferred
Cash consideration
Recognized amounts of identifiable assets acquired and liabilities assumed
Accounts receivable
Inventories
Prepaid and other current assets
Intangibles
Other long-term assets
Properties, plants and equipment
Total assets acquired
Accounts payable
Accrued payroll and employee benefits
Other current liabilities
Long-term deferred tax liability
Pension and post-retirement obligations
Other long-term liabilities
Total liabilities assumed
Total identifiable net assets
Goodwill
Amounts
Recognized as of
the Acquisition
Date
Measurement
Period
Adjustments(1)
Amount
Recognized as of
Acquisition Date
(as Adjusted)
$1,834.9
$ —
$1,834.9
147.0
103.9
21.5
717.1
1.3
521.3
1,512.1
(99.5)
(42.9)
(21.8)
(185.7)
(67.1)
(12.7)
(429.7)
$1,082.4
$ 752.5
—
(1.1)
(0.8)
8.4
5.7
(12.4)
(0.2)
—
(6.4)
(6.7)
46.6
—
(7.4)
26.1
$ 25.9
$(25.9)
147.0
102.8
20.7
725.5
7.0
508.9
1,511.9
(99.5)
(49.3)
(28.5)
(139.1)
(67.1)
(20.1)
(403.6)
$1,108.3
$ 726.6
(1) The measurement adjustments were primarily due to refinement to third party appraisals and carrying amounts of certain assets and liabilities, as well as adjustments to
certain tax accounts based on, among other things, adjustments to deferred tax liabilities. The net impact of the measurement period adjustments resulted in a net
$25.9 million decrease to Goodwill. The measurement adjustments recorded in 2019 did not have a significant impact on the Company’s consolidated statements of
income for the year ended October 31, 2019.
69
The Company recognized goodwill related to this acquisition of $726.6 million. The goodwill recognized in this acquisition is attributable
to the acquired assembled workforce, expected synergies, and economies of scale, none of which qualify for recognition as a separate
intangible asset. Caraustar is reported within the Paper Packaging & Services segment to which the goodwill was assigned. The goodwill is
not expected to be deductible for tax purposes.
The cost approach was used to determine the fair value for buildings, improvements and equipment, and the market approach was used to
determine the fair value for land. The cost approach measures the value by estimating the cost to acquire, or construct, comparable assets
and adjusts for age and condition. The Company assigned buildings and improvements a useful life ranging from 1 year to 20 years and
equipment a useful life ranging from 1 year to 15 years. Acquired property, plant and equipment will be depreciated over its estimated
remaining useful lives on a straight-line basis.
The fair value for acquired customer relationship intangibles was determined as of the acquisition date based on estimates and judgments
regarding expectations for the future after-tax cash flows arising from the revenue from customer relationships that existed on the
acquisition date over their estimated lives, including the probability of expected future contract renewals and revenue, less a contributory
assets charge, all of which is discounted to present value. The fair value of the trade name intangible assets were determined utilizing the
relief from royalty method which is a form of the income approach. Under this method, a royalty rate based on observed market royalties is
applied to projected revenue supporting the trade names and discounted to present value using an appropriate discount rate.
Acquired intangible assets will be amortized over the estimated useful lives, primarily on a straight-line basis. The following table
summarizes the current preliminary purchase price allocation and weighted average remaining useful lives for identifiable intangible assets
acquired:
(in millions)
Customer relationships
Trademarks
Other
Total intangible assets
Current
Preliminary
Purchase Price
Allocation
Weighted
Average
Estimated
Useful Life
$708.0
15.0
2.5
$725.5
15.0
3.0
4.6
Caraustar’s results of operations have been included in the Company’s financial statements for the period subsequent to the acquisition
date of February 11, 2019. Caraustar contributed net sales of $936.3 million for the year ended October 31, 2019.
The following unaudited supplemental pro forma data presents consolidated information as if the acquisition had been completed on
November 1, 2017. These amounts were calculated after adjusting Caraustar’s results to reflect interest expense incurred on the debt to
finance the acquisition, additional depreciation and amortization that would have been charged assuming the fair value of property, plant
and equipment and intangible assets had been applied from November 1, 2017, the adjusted tax expense, and related transaction costs of
$34.0 million. These adjustments also include an additional one-time charge of $9.0 million for the fair value adjustment for inventory
acquired.
(in millions, except per share amounts)
Pro forma net sales
Pro forma net (loss) income attributable to Greif, Inc.
Basic earnings per share attributable to Greif, Inc. common shareholders:
Class A common stock
Class B common stock
Diluted earnings per share attributable to Greif, Inc. common shareholders:
Class A common stock
Class B common stock
Twelve Months Ended October 31,
2019
$4,958.8
$ 154.8
$
$
$
$
2.62
3.92
2.62
3.92
2018
$5,249.4
$ 152.7
$
$
$
$
2.60
3.88
2.59
3.88
The unaudited supplemental pro forma financial information is based on the Company’s preliminary assignment of purchase price and
therefore subject to adjustment upon finalizing the purchase price assignment. The pro forma data should not be considered indicative of
the results that would have occurred if the acquisition and related financing had been consummated on the assumed completion dates, nor
are they indicative of future results. The pro forma results do not include the Tholu Acquisition, as the impact of this acquisition is not
material to prior year results of operations.
70
The Company has not yet finalized the determination of the fair value of assets acquired and liabilities assumed, including income taxes
and contingencies. The Company expects to finalize these amounts within one year of the acquisition date. The current preliminary
estimate of fair value and purchase price allocation were based on information available at the time of closing the acquisition, and the
Company continues to evaluate the underlying inputs and assumptions that are being used in fair value estimates. Accordingly, these
preliminary estimates are subject to adjustments during the measurement period, not to exceed one year, based upon new information
obtained about facts and circumstances that existed as of the date of closing the acquisition.
Tholu Acquisition
On June 11, 2019, the Company completed its acquisition of Tholu (the ‘‘Tholu Acquisition’’). Tholu is a Netherlands-based market
leader in IBC rebottling, reconditioning and distribution.
The total purchase price for this acquisition was $52.2 million, net of cash acquired of $2.1 million, of which $25.1 million was paid upon
closing and the remaining $29.2 million was deferred according to a set payment schedule. The current portion of the deferred obligation
is $2.5 million, recorded in Other Current Liabilities, and the remaining $26.7 million has been recorded in Other Long-Term Liabilities
within the consolidated balance sheets. The legal form of the Tholu Acquisition is a joint venture with the former Tholu owner, but due to
the economic structure of the transaction the Company is deemed to be the 100% economic owner, and under GAAP, the Company will
record and report 100% of all future income or loss.
The following table summarizes the consideration transferred to acquire Tholu and the current preliminary valuation of identifiable assets
acquired and liabilities assumed at the acquisition date, as well as measurement period adjustments made during the year ended
October 31, 2019.
(in millions)
Fair value of consideration transferred
Cash consideration
Deferred payments
Cash received
Total consideration
Recognized amounts of identifiable assets acquired and liabilities assumed
Accounts receivable
Inventories
Intangibles
Properties, plants and equipment
Other assets
Total assets acquired
Accounts payable
Capital lease obligations
Long-term deferred tax liability
Other liabilities
Total liabilities assumed
Total identifiable net assets
Goodwill
Amounts
Recognized as of
the Acquisition
Date
Measurement
Period
Adjustments(2)
Amount
Recognized as of
Acquisition Date
(as Adjusted)
$ 25.1
$ 29.2
$ (2.1)
$ 52.2
7.3
3.0
24.1
6.4
1.2
42.0
(4.0)
(1.7)
(5.4)
(1.0)
(12.1)
$ 29.9
$ 22.3
$ —
—
$ —
$ —
—
0.4
—
—
—
0.4
—
—
(0.4)
—
(0.4)
$ —
$ —
$ 25.1
$ 29.2
$ (2.1)
$ 52.2
$ 7.3
$ 3.4
$ 24.1
$ 6.4
$ 1.2
42.4
(4.0)
(1.7)
(5.8)
(1.0)
(12.5)
$ 29.9
$ 22.3
(2) The measurement adjustments were primarily due to refinement to third party appraisals and carrying amounts of certain assets and liabilities, as well as adjustments to
certain tax accounts based on, among other things, adjustments to deferred tax liabilities. The net impact of the measurement period adjustments resulted in no net
impact to Goodwill. The measurement adjustments recorded in 2019 did not have a significant impact on our consolidated statements of income for the twelve
months ended October 31, 2019.
The Company recognized goodwill related to this acquisition of $22.3 million. The goodwill recognized in this acquisition is attributable
to the acquired assembled workforce, economies of scale, vertical integration and new market penetration. Tholu is reported within the
Rigid Industrial Packaging & Services segment to which the goodwill was assigned. The goodwill is not expected to be deductible for tax
purposes.
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Acquired property, plant and equipment will be depreciated over its estimated remaining useful lives on a straight-line basis.
Acquired intangible assets will be amortized over the estimated useful lives, primarily on a straight-line basis. The following table
summarizes the preliminary purchase price allocation and weighted average remaining useful lives for identifiable intangible assets
acquired:
(in millions)
Customer relationships
Trademarks
Other
Total intangible assets
Weighted
Average
Estimated
Useful Life
15.0
9.0
2.0
Preliminary
Fair Value
$21.9
1.2
1.0
$24.1
The Company has not yet finalized the determination of the fair value of assets acquired and liabilities assumed, including income taxes
and contingencies. The Company expects to finalize these amounts within one year of the acquisition date. The current preliminary
estimate of fair value and purchase price allocation were based on information available at the time of closing the acquisition, and the
Company continues to evaluate the underlying inputs and assumptions that are being used in fair value estimates. Accordingly, these
preliminary estimates are subject to adjustments during the measurement period, not to exceed one year, based upon new information
obtained about facts and circumstances that existed as of the date of closing the acquisition.
Divestitures
For the year ended October 31, 2019, the Company completed two divestitures of non-U.S. businesses in the Rigid Industrial Packaging &
Services segment, liquidated two non-strategic non-U.S. business in the Rigid Industrial Packaging & Services segment, and deconsolidated
one wholly-owned non-U.S. business in the Rigid Industrial Packaging & Services segment. The loss on disposal of businesses was
$3.7 million for the year ended October 31, 2019. Proceeds from divestitures were $1.5 million for the year ended October 31, 2019.
Proceeds from divestitures that were completed in 2015 and collected during the year ended October 31, 2019 were $0.8 million. Proceeds
from divestitures that were completed in 2016 and collected during the year ended October 31, 2019 were $1.6 million.
For the year ended October 31, 2018, the Company completed no divestitures. The Company liquidated two non-strategic non-U.S.
business in the Flexible Products & Services segment. The gain on disposal of businesses was $0.8 million for the year ended October 31,
2018. Proceeds from divestitures that were completed in 2017 and collected during the year ended October 31, 2018 were $0.5 million.
Proceeds from divestitures that were completed in 2015 and collected during the year ended October 31, 2018 were $0.9 million. The
Company had $2.9 million of notes receivable recorded from the sale of businesses for the year ended October 31, 2018.
For the year ended October 31, 2017, the Company completed two divestitures in the Rigid Industrial Packaging & Services segment,
deconsolidated one nonstrategic business in the Flexible Products & Services segment and one nonstrategic business in the Rigid Industrial
Packaging & Services segment, and liquidated two non-U.S. nonstrategic businesses in the Rigid Industrial Packaging & Services segment.
The loss on disposal of businesses was $1.7 million for the year ended October 31, 2017. Proceeds from divestitures were $5.1 million for
the year ended October 31, 2017. Proceeds from divestitures that were completed in fiscal year 2015 and collected during the year ended
October 31, 2017 were $0.8 million. The Company had $4.3 million of notes receivable recorded from the sale of businesses for the year
ended October 31, 2017.
None of the above-referenced divestitures in 2019, 2018, or 2017 qualified as discontinued operations as they do not, individually or in the
aggregate, represent a strategic shift that has had a major impact on the Company’s operations or financial results.
NOTE 3 – SALE OF NON-UNITED STATES ACCOUNTS RECEIVABLE
In 2012, Cooperage Receivables Finance B.V. (the ‘‘Main SPV’’) and Greif Coordination Center BVBA, an indirect wholly owned
subsidiary of Greif, Inc. (‘‘Seller’’), entered into the Nieuw Amsterdam Receivables Purchase Agreement (the ‘‘European RPA’’) with
affiliates of a major international bank (the ‘‘Purchasing Bank Affiliates’’). On April 17, 2019, the Main SPV and Seller amended and
extended the term of the existing European RPA through April 17, 2020. On June 17, 2019, the Main SPV and Seller entered into an
agreement to replace the European RPA with the Nieuw Amsterdam Receivables Financing Agreement (the ‘‘European RFA’’). The
European RFA provides an accounts receivable financing facility of up to €100.0 million ($111.1 million as of October 31, 2019) secured
by certain European accounts receivable. The $96.4 million outstanding on the European RFA as of October 31, 2019 is reported as
72
long-term debt in the consolidated balance sheet because the Company intends to refinance these obligations on a long-term basis and has
the intent and ability to consummate a long-term refinancing by exercising the renewal option in the respective agreement or entering into
new financing arrangements.
During the first quarter of 2019, a parent-level guarantee was added to the European RPA and Singapore RPA (as such term is defined
below). During the third quarter of 2019, in conjunction with execution of the European RFA, the parent level guarantee was removed for
the European RFA. The $1.9 million outstanding on the Singapore RPA as of October 31, 2019 is reported as short-term debt in the
consolidated balance sheet because the agreement expires in 2020 and will not be renewed.
Under the previous European RPA, as amended, the maximum amount of receivables that could be sold and outstanding under the
European RPA at any time was €100 million ($111.1 million as of October 31, 2019). Under the terms of the European RPA, the
Company had the ability to loan excess cash to the Purchasing Bank Affiliates in the form of the subordinated loan receivable.
Under the terms of the previous European RPA, we had agreed to sell trade receivables meeting certain eligibility requirements that the
Seller had purchased from other indirect wholly-owned subsidiaries under a factoring agreement. Prior to November 1, 2018, the structure
of the transactions provided for a legal true sale, on a revolving basis, of the receivables transferred to the respective Purchasing Bank
Affiliates. The purchaser funded an initial purchase price of a certain percentage of eligible receivables based on a formula, with the initial
purchase price approximating 75 percent to 90 percent of eligible receivables. The remaining deferred purchase price was settled upon
collection of these receivables.
In October 2007, Greif Singapore Pte. Ltd., an indirect wholly-owned subsidiary of Greif, Inc., entered into the Singapore Receivable
Purchase Agreement (the ‘‘Singapore RPA’’) with a major international bank. The maximum amount of aggregate receivables that may be
financed under the Singapore RPA is 15.0 million Singapore dollars ($11.0 million as of October 31, 2019).
Under the terms of the Singapore RPA, the Company has agreed to sell trade receivables in exchange for an initial purchase price of
approximately 90 percent of the eligible receivables. The remaining deferred purchase price is settled upon collection of those receivables.
Prior to November 1, 2018, the Company removed from accounts receivable the amount of proceeds received from the initial purchase
price since they met the applicable criteria of ASC 860, ‘‘Transfers and Servicing,’’ and the Company continued to recognize the deferred
purchase price in other current assets or other current liabilities on the Company’s consolidated balance sheets, as appropriate. The
receivables were sold on a non-recourse basis with the total funds in the servicing collection accounts pledged to the banks between
settlement dates. The cash initially received, along with the deferred purchase price, related to the sale or ultimate collection of the
underlying receivables and was not subject to significant other risks given their short-term nature. Therefore, the Company reflected all
cash flows under the accounts receivable sales programs as operating cash flows on the Company’s consolidated statements of cash flows.
The Company performs collection and administrative functions on the receivables related to the European RPA, the European RFA and
the Singapore RPA (collectively, ‘‘Foreign Receivables Facilities’’), similar to the procedures it uses for collecting all of its receivables. The
servicing liability for these receivables is not material to the consolidated financial statements.
NOTE 4 – ASSETS AND LIABILITIES HELD FOR SALE AND DISPOSALS OF PROPERTY, PLANT AND EQUIPMENT, NET
As of October 31, 2019, there was one asset group within the Rigid Industrial Packaging & Services segment, three asset groups within the
Paper Packaging & Services segment, one asset group in the Land Management segment, and one corporate asset group classified as assets
held for sale. The assets held for sale are being marketed for sale, and it is the Company’s intention to complete the sales of these assets
within twelve months following their initial classification into assets held for sale.
During 2019, the Company recorded a gain on disposal of properties, plants and equipment, net of $13.9 million. This included disposals
of assets in the Rigid Industrial Packaging & Services segment that resulted in gains of $7.5 million, disposals of assets in the Paper
Packaging & Services segment that resulted in losses of $0.9 million, disposals of assets in the Flexible Packaging & Services segment that
resulted in gains of $5.1 million, and special use property sales that resulted in gains of $2.2 million in the Land Management segment.
For the year ended October 31, 2018, the Company recorded a gain on disposal of properties, plants and equipment, net of $5.6 million.
This included disposals of assets in the Rigid Industrial Packaging & Services segment that resulted in gains of $3.3 million and special use
property sales that resulted in gains of $2.3 million in the Land Management segment.
73
NOTE 5 – GOODWILL AND OTHER INTANGIBLE ASSETS
The following table summarizes the changes in the carrying amount of goodwill by segment for the years ended October 31, 2019 and
2018:
(in millions)
Balance at October 31, 2017
Goodwill acquired
Goodwill allocated to divestitures and businesses held for sale
Goodwill adjustments
Goodwill impairment charge
Currency translation
Balance at October 31, 2018
Goodwill acquired
Goodwill allocated to divestitures and businesses held for sale
Goodwill adjustments
Goodwill impairment charge
Currency translation
Balance at October 31, 2019
Rigid
Industrial
Packaging &
Services(1)
Paper
Packaging &
Services
Flexible
Products &
Services(1)
Land
Management
Total
$725.9
$ 59.5
$—
$—
$ 785.4
—
(0.7)
—
—
(8.7)
—
—
—
—
—
$716.5
22.3
$ 59.5
726.6
—
—
—
(7.1)
—
—
—
—
—
—
—
—
—
$—
—
—
—
—
—
—
—
—
—
—
$—
—
—
—
—
—
—
(0.7)
—
—
(8.7)
$ 776.0
748.9
—
—
—
(7.1)
$731.7
$786.1
$—
$—
$1,517.8
(1) Accumulated goodwill impairment loss was $63.3 million as of October 31, 2019, 2018 and 2017. Included in the accumulated goodwill impairment loss was
$13.0 million related to the Rigid Industrial Packaging & Services segment and $50.3 million related to the Flexible Products & Services segment.
The Caraustar Acquisition added $726.6 million of goodwill to the Paper Packaging & Services segment and the Tholu Acquisition added
$22.3 million of goodwill to the Rigid Industrial Packaging & Services segment. See Note 2 to the Consolidated Financial Statements for
additional disclosure of goodwill added by these acquisitions.
The Company reviews goodwill by reporting unit and indefinite-lived intangible assets for impairment as required by ASC 350,
‘‘Intangibles – Goodwill and Other,’’ either annually August 1, or whenever events and circumstances indicate impairment may have
occurred. A reporting unit is the operating segment, or a business unit one level below that operating segment (the component level) if
discrete financial information is prepared and regularly reviewed by segment management. The components are aggregated into reporting
units for purposes of goodwill impairment testing to the extent they share similar qualitative and quantitative characteristics.
The Company performed its annual goodwill impairment test as of August 1, 2019 which resulted in no goodwill impairment. The
majority of the Company’s goodwill reporting units were tested utilizing a qualitative assessment. However, for the Rigid Industrial
Packaging & Services - Asia Pacific reporting unit, the Company proceeded directly to the quantitative impairment test. The fair value of
the reporting unit exceeded the carrying value by 32%, resulting in no impairment. Discount rates, growth rates and cash flow projections
are the assumptions that are most sensitive and susceptible to change as they require significant management judgment. In addition, certain
future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in actual and expected
consumption and demand, could result in changes to these assumptions and judgments. A revision of these assumptions could cause the
fair value of the reporting unit to fall below its respective carrying value. As for all of the Company’s reporting units, if in future years, the
reporting unit’s actual results are not consistent with the Company’s estimates and assumptions used to calculate fair value, the Company
may be required to recognize material impairments to goodwill.
The Company performed its annual goodwill review as of August 1, 2018, for each of the reporting units, which resulted in no goodwill
impairment. The majority of the Company’s goodwill reporting units were tested utilizing a qualitative assessment. However, for the Rigid
Industrial Packaging & Services - Asia Pacific reporting unit, the Company proceeded directly to the quantitative impairment test. The fair
value of the reporting unit exceeded the carrying value by 20%, resulting in no impairment. Discount rates, growth rates and cash flow
projections are the assumptions that are most sensitive and susceptible to change as they require significant management judgment. In
addition, certain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in actual
and expected consumption and demand, could result in changes to these assumptions and judgments. A revision of these assumptions
could cause the fair value of the reporting unit to fall below its respective carrying value. As for all of the Company’s reporting units, if in
future years, the reporting unit’s actual results are not consistent with the Company’s estimates and assumptions used to calculate fair
value, the Company may be required to recognize material impairments to goodwill.
74
During the fourth quarter of 2017, the Company performed an assessment of its operating segments and determined that as a result of
changes in the way the chief operating decision maker receives and reviews financial information, a realignment of its operating segment
structure was necessary. As a result of the operating segment realignment, the Company’s reporting unit structure was updated for
consistency. As of August 1, 2017, the Company realigned its operating segments to include eight operating segments: Rigid Industrial
Packaging & Services – North America; Rigid Industrial Packaging & Services – Latin America; Rigid Industrial Packaging & Services –
Europe, Middle East and Africa; Rigid Industrial Packaging & Services – Asia Pacific; Rigid Industrial Packaging & Services – Tri-Sure;
Paper Packaging & Services; Flexible Products & Services; and Land Management. The Company’s eight operating segments are aggregated
into four reportable business segments by combining the Rigid Industrial Packaging & Services – North America; Rigid Industrial
Packaging & Services – Latin America; Rigid Industrial Packaging & Services – Europe, Middle East and Africa; Rigid Industrial Packaging
& Services – Asia Pacific; and Rigid Industrial Packaging & Services – Tri-Sure operating segments. The Company’s reporting units are the
same as the operating segments. As a result of the realignment, goodwill was reassigned to each of the Rigid Industrial Packaging & Services
reporting units using a relative fair value approach.
The Company performed its annual goodwill review as of August 1, 2017, for each of the reporting units with a goodwill balance under
both the former and current reporting unit structure. The impairment test under the former reporting unit structure concluded that no
impairment existed as of August 1, 2017. The impairment test under the updated reporting unit structure concluded that the carrying
value of the Rigid Industrial Packaging & Services – Latin America reporting unit exceeded the fair value of the reporting unit and the
goodwill of the Rigid Industrial Packaging & Services – Latin America reporting unit of $13.0 million was fully impaired.
The fair value of the Rigid Industrial Packaging & Services – Latin America reporting unit was determined using a combination of the
income approach by discounting estimated future cash flows and the market multiple approach. The cash flow projections were prepared
based upon the evaluation of the historical performance and future growth expectations for the reporting unit. Revenue was based on the
2017 forecast as of August 1, 2017 with a long-term growth rate applied to future periods. The most critical assumptions within the cash
flow projections are revenue growth rates and forecasted gross margin percentages. The most critical assumption within the market
multiple calculation is the multiple selected.
See Note 2 to the Consolidated Financial Statements for further discussion regarding goodwill allocated to divestitures and businesses held
for sale.
The following table summarizes the carrying amount of net intangible assets by class as of October 31, 2019 and 2018:
(in millions)
October 31, 2019:
Indefinite lived:
Trademarks and patents
Definite lived:
Customer relationships
Trademarks and patents
Non-compete agreements
Other
Total
October 31, 2018:
Indefinite lived:
Trademarks and patents
Definite lived:
Customer relationships
Trademarks and patents
Other
Total
Gross
Intangible
Assets
Accumulated
Amortization
Net
Intangible
Assets
$ 13.1
$ —
$ 13.1
$890.6
$150.3
$740.3
27.0
2.3
21.9
9.3
0.7
18.1
17.7
1.6
3.8
$954.9
$178.4
$776.5
$ 13.3
$ —
$ 13.3
$162.2
$105.8
$ 56.4
10.9
21.2
5.1
16.1
5.8
5.1
$207.6
$127.0
$ 80.6
Gross intangible assets increased by $747.3 million for the year ended October 31, 2019. The increase was attributable to $725.5 million
from the Caraustar Acquisition, $24.1 million from the Tholu Acquisition and $0.3 million of asset adjustment, offset by $2.6 million of
currency fluctuations. See Note 2 to the Consolidated Financial Statements for additional disclosure of intangibles added by these
acquisitions.
75
Amortization expense was $53.2 million, $15.2 million and $13.5 million for the years ended October 31, 2019, 2018 and 2017,
respectively. Amortization expense for the next five years is expected to be $69.3 million in 2020, $67.1 million in 2021, $59.1 million in
2022, $56.3 million in 2023 and $52.9 million in 2024.
Definite lived intangible assets for the periods presented are subject to amortization and are being amortized using the straight-line method
over periods that are contractually or legally determined, or over the period a market participant would benefit from the asset. Indefinite
lived intangibles of approximately $13.1 million as of October 31, 2019, related primarily to the Tri-Sure trademark and trade names
related to Closures, Blagden Express, Closed-loop, Box Board and Pachmas, are not amortized.
NOTE 6 – RESTRUCTURING CHARGES
The following is a reconciliation of the beginning and ended restructuring reserve balances for the years ended October 31, 2019 and 2018:
(in millions)
Balance at October 31, 2017
Costs incurred and charged to expense
Costs paid or otherwise settled
Balance at October 31, 2018
Costs incurred and charged to expense
Costs paid or otherwise settled
Balance at October 31, 2019
Employee
Separation
Costs
$ 3.9
14.8
(14.5)
$ 4.2
22.5
(17.2)
$ 9.5
Other
Costs
$ 1.3
3.8
(4.9)
Total
$ 5.2
18.6
(19.4)
$ 0.2
$ 4.4
3.6
(2.0)
26.1
(19.2)
$ 1.8
$ 11.3
The focus for restructuring activities in 2019 was to optimize and integrate operations in the Paper Packaging & Services segment related
to the Caraustar Acquisition and continue to rationalize operations and close underperforming assets in the Rigid Industrial Packaging &
Services and the Flexible Products & Services segments. During the year ended October 31, 2019, the Company recorded restructuring
charges of $26.1 million, as compared to $18.6 million of restructuring charges recorded during the year ended October 31, 2018. The
restructuring activity for the year ended October 31, 2019 consisted of $22.5 million in employee separation costs and $3.6 million in
other restructuring costs, primarily consisting of professional fees and other fees associated with restructuring activities. There were twelve
plants closed in 2019, and a total of 430 employees severed throughout 2019 as part of the Company’s restructuring efforts.
The following is a reconciliation of the total amounts expected to be incurred from open restructuring plans or plans that are being
formulated and have not been announced as of the filing date of this Form 10-K. Remaining amounts expected to be incurred were
$24.7 million as of October 31, 2019:
(in millions)
Rigid Industrial Packaging & Services:
Employee separation costs
Other restructuring costs
Flexible Products & Services:
Employee separation costs
Other restructuring costs
Paper Packaging & Services:
Employee separation costs
Other restructuring costs
Land Management
Employee separation costs
Total
Total Amounts
Expected to be
Incurred
Amounts
Incurred During
the year ended
October 31, 2019
Amounts
Remaining to be
Incurred
$32.3
9.1
41.4
1.2
0.1
1.3
6.1
1.9
8.0
$15.4
3.4
18.8
0.9
0.1
1.0
6.1
0.1
6.2
16.9
5.7
22.6
0.3
—
0.3
—
1.8
1.8
0.1
$50.8
0.1
$26.1
—
$24.7
The focus for restructuring activities in 2018 was to continue to rationalize operations and close underperforming assets in the Rigid
Industrial Packaging & Services and Flexible Products & Services segments. During 2018, the Company recorded restructuring charges of
$18.6 million, consisting of $14.8 million in employee separation costs and $3.8 million in other restructuring costs, primarily consisting
76
of professional fees and other fees associated with restructuring activities. There were five plants closed and a total of 322 employees
severed throughout 2018 as part of the Company’s restructuring efforts.
The focus for restructuring activities in 2017 was to rationalize and close underperforming assets in the Rigid Industrial Packaging &
Services and Flexible Products & Services segments. During 2017, the Company recorded restructuring charges of $12.7 million,
consisting of $9.0 million in employee separation costs and $3.7 million in other restructuring costs, primarily consisting of professional
fees incurred for services specifically associated with employee separation and relocation. There were two plants closed and a total of 157
employees severed throughout 2017 as part of the Company’s restructuring efforts.
NOTE 7 – CONSOLIDATION OF VARIABLE INTEREST ENTITIES
The Company evaluates whether an entity is a variable interest entity (‘‘VIE’’) whenever reconsideration events occur and performs
reassessments of all VIE’s quarterly to determine if the primary beneficiary status is appropriate. The Company consolidates VIE’s for
which it is the primary beneficiary. If the Company is not the primary beneficiary and an ownership interest is held, the VIE is accounted
for under the equity or cost methods of accounting, as appropriate. When assessing the determination of the primary beneficiary, the
Company considers all relevant facts and circumstances, including: the power to direct the activities of the VIE that most significantly
impact the VIE’s economic performance; and the obligation to absorb the expected losses and/or the right to receive the expected returns
of the VIE.
Significant Nonstrategic Timberland Transactions
On March 28, 2005, Soterra LLC (a wholly owned subsidiary) entered into two real estate purchase and sale agreements with Plum Creek
Timberlands, L.P. (‘‘Plum Creek’’) to sell approximately 56,000 acres of timberland and related assets located primarily in Florida for an
aggregate sales price of approximately $90 million, subject to closing adjustments. In connection with the closing of one of these
agreements, Soterra LLC sold approximately 35,000 acres of timberland and associated assets in Florida, Georgia and Alabama for
$51.0 million, resulting in a pretax gain of $42.1 million, on May 23, 2005. The purchase price was paid in the form of cash and a
$50.9 million purchase note payable (the ‘‘Purchase Note’’) by an indirect subsidiary of Plum Creek (the ‘‘Buyer SPE’’). Soterra LLC
contributed the Purchase Note to STA Timber LLC (‘‘STA Timber’’), one of the Company’s indirect wholly owned subsidiaries. The
Purchase Note is secured by a Deed of Guarantee issued by Bank of America, N.A., London Branch, in an amount not to exceed
$52.3 million (the ‘‘Deed of Guarantee’’), as a guarantee of the due and punctual payment of principal and interest on the Purchase Note.
The Company completed the second and final phase of these transactions in the first and second quarters of 2006, respectively, with the
sale of 15,300 acres and another approximately 5,700 acres.
On May 31, 2005, STA Timber issued in a private placement its 5.20% Senior Secured Notes due August 5, 2020 (the ‘‘Monetization
Notes’’) in the principal amount of $43.3 million. In connection with the sale of the Monetization Notes, STA Timber entered into note
purchase agreements with the purchasers of the Monetization Notes (the ‘‘Note Purchase Agreements’’) and related documentation. The
Monetization Notes are secured by a pledge of the Purchase Note and the Deed of Guarantee. The Monetization Notes may be accelerated
in the event of a default in payment or a breach of the other obligations set forth therein or in the Note Purchase Agreements or related
documents, subject in certain cases to any applicable cure periods, or upon the occurrence of certain insolvency or bankruptcy related
events. Although the maturity date of the Monetization Notes is August 5, 2020, STA Timber has the discretion to extend to the maturity
date to November 5, 2020. STA Timber has the ability and intent to extend the maturity date to November 5, 2020. The proceeds from
the sale of the Monetization Notes were primarily used for the repayment of indebtedness. Greif, Inc. and its other subsidiaries have not
extended any form of guaranty of the principal or interest on the Monetization Notes. Accordingly, Greif, Inc. and its other subsidiaries
will not become directly or contingently liable for the payment of the Monetization Notes at any time.
The Buyer SPE is deemed to be a VIE since the assets of the Buyer SPE are not available to satisfy the liabilities of the Buyer SPE. The
Buyer SPE is a separate and distinct legal entity from the Company and no ownership interest in the Buyer SPE is held by the Company,
but the Company is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact
the VIE’s economic performance, and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the
right to receive benefits from the VIE that could potentially be significant to the VIE. As a result, Buyer SPE has been consolidated into the
operations of the Company.
As of October 31, 2019 and 2018, assets of the Buyer SPE consisted of $50.9 million of restricted bank financial instruments which are
expected to be held to maturity. For each of the years ended October 31, 2019, 2018 and 2017, the Buyer SPE recorded interest income of
$2.4 million.
77
As of October 31, 2019 and 2018, STA Timber had long-term debt of $43.3 million. For each of the years ended October 31, 2019, 2018
and 2017, STA Timber recorded interest expense of $2.2 million. STA Timber is exposed to credit-related losses in the event of
nonperformance by the issuer of the Deed of Guarantee.
Flexible Packaging Joint Venture
On September 29, 2010, Greif, Inc. and one of its indirect subsidiaries formed a joint venture (referred to herein as the ‘‘Flexible Packaging
JV’’ or ‘‘FPS VIE’’) with Dabbagh Group Holding Company Limited and one of its subsidiaries, originally National Scientific Company
Limited and now Gulf Refined Packaging for Industrial Packaging Company LTD (‘‘GRP’’). The Flexible Packaging JV owns the
operations in the Flexible Products & Services segment. The Flexible Packaging JV has been consolidated into the operations of the
Company since its formation date of September 29, 2010.
The Flexible Packaging JV is deemed to be a VIE since the total equity investment at risk is not sufficient to permit the legal entity to
finance its activities without additional subordinated financial support. The major factors that led to the conclusion that the Company
was the primary beneficiary of this VIE was that (1) the Company has the power to direct the most significant activities due to its ability to
direct the operating decisions of the FPS VIE, which power is derived from the significant CEO discretion over the operations of the FPS
VIE combined with the Company’s sole and exclusive right to appoint the CEO of the FPS VIE, and (2) the significant variable interest
through the Company’s equity interest in the FPS VIE.
The economic and business purpose underlying the Flexible Packaging JV is to establish a global industrial flexible products enterprise
through a series of targeted acquisitions and major investments in plant, machinery and equipment. All entities contributed to the Flexible
Packaging JV were existing businesses acquired by an indirect subsidiary of the Company and that were reorganized under Greif Flexibles
Asset Holding B.V. and Greif Flexibles Trading Holding B.V. (‘‘Asset Co.’’ and ‘‘Trading Co.’’), respectively. The Company has 51 percent
ownership in Trading Co. and 49 percent ownership in Asset Co. However, the Company and GRP have equal economic interests in the
Flexible Packaging JV, notwithstanding the actual ownership interests in the various legal entities.
All investments, loans and capital contributions are to be shared equally by the Company and GRP and each partner has committed to
contribute capital of up to $150.0 million and obtain third party financing for up to $150.0 million as required.
The following table presents the Flexible Packaging JV total net assets:
(in millions)
Cash and cash equivalents
Trade accounts receivable, less allowance of $0.7 in 2019 and $0.6 in 2018
Inventories
Properties, plants and equipment, net
Other assets
Total assets
Accounts payable
Other liabilities
Total liabilities
October 31,
2019
October 31,
2018
$ 16.9
$ 22.2
51.2
46.4
22.3
29.3
53.2
49.0
28.8
21.5
$166.1
$174.7
$ 28.9
23.6
$ 52.5
$ 29.0
24.8
$ 53.8
Net income attributable to the noncontrolling interest in the Flexible Packaging JV for the years ended October 31, 2019, 2018 and 2017
were $12.4 million, $9.9 million and $6.3 million, respectively.
Paper Packaging Joint Venture
On April 20, 2018, Greif, Inc. and one of its indirect subsidiaries formed a joint venture (referred to herein as the ‘‘Paper Packaging JV’’ or
‘‘PPS VIE’’) with a third party. The Paper Packaging JV has been consolidated into the operations of the Company since its formation date
of April 20, 2018.
The Paper Packaging JV is deemed to be a VIE as the equity investors at risk, as a group, lack the characteristics of a controlling financial
interest. The structure of the Paper Packaging JV has governing provisions that are the functional equivalent of a limited partnership
whereby the Company is the managing member that makes all the decisions related to the activities that most significantly affect the
economic performance of the PPS VIE. In addition, the third party does not have any substantive kick-out rights or substantive
78
participating rights in the Paper Packaging JV. The major factors that led to the conclusion that the Paper Packaging JV is a VIE was that
all limited partnerships are considered to be VIE’s unless the limited partners have substantive kick-out rights or substantive participating
rights.
As of October 31, 2019 and 2018, the Paper Packaging JV’s net assets consist mainly of properties, plants, and equipment, net of
$29.4 million and $7.2 million, respectively. There was $0.1 million net loss related to interest expense for the year ended October 31,
2019, and there was no net income or loss for the year ended October 31, 2018, as the PPS JV was in the startup phase and had not yet
commenced operations.
Non-United States Accounts Receivable VIE
As further described in Note 3 to the Consolidated Financial Statements, Cooperage Receivables Finance B.V. is a party to the European
RFA. Cooperage Receivables Finance B.V. is deemed to be a VIE since this entity is not able to satisfy its liabilities without the financial
support from the Company. While this entity is a separate and distinct legal entity from the Company and no ownership interest in this
entity is held by the Company, the Company is the primary beneficiary because it has (1) the power to direct the activities of the VIE that
most significantly impact the VIE’s economic performance, and (2) the obligation to absorb losses of the VIE that could potentially be
significant to the VIE. As a result, Cooperage Receivables Finance B.V. has been consolidated into the operations of the Company.
NOTE 8 – LONG-TERM DEBT
Long-term debt is summarized as follows:
(in millions)
2019 Credit Agreement - Term Loans
2017 Credit Agreement - Term Loan
Senior Notes due 2027
Senior Notes due 2021
Senior Notes due 2019
Accounts receivable credit facilities
2019 Credit Agreement - Revolving Credit Facility
2017 Credit Agreement - Revolving Credit Facility
Other debt
Less current portion
Less deferred financing costs
Long-term debt, net
2019 Credit Agreement
October 31,
2019
October 31,
2018
$1,612.2
—
494.3
221.7
—
351.6
76.1
—
0.4
2,756.3
83.7
13.6
$ —
277.5
—
226.5
249.1
150.0
—
3.8
0.7
907.6
18.8
4.7
$2,659.0
$884.1
On February 11, 2019, the Company and certain of its subsidiaries entered into an amended and restated senior secured credit agreement
(the ‘‘2019 Credit Agreement’’) with a syndicate of financial institutions. The 2019 Credit Agreement amended, restated, and replaced in
its entirety the prior $800.0 million senior secured credit agreement (the ‘‘2017 Credit Agreement’’). The Company’s obligations under
the 2019 Credit Agreement are guaranteed by certain of its U.S. subsidiaries and certain of its non-U.S. subsidiaries.
The 2019 Credit Agreement provides for (a) an $800.0 million secured revolving credit facility, consisting of a $600.0 million
multicurrency facility and a $200.0 million U.S. dollar facility, maturing on February 11, 2024, (b) a $1,275.0 million secured term loan
A-1 facility with quarterly principal installments commencing on April 30, 2019 and continuing through maturity on January 31, 2024,
and (c) a $400.0 million secured term loan A-2 facility with quarterly principal installments commencing on April 30, 2019 and
continuing through maturity on January 31, 2026. In addition, the Company has an option to add an aggregate of $700.0 million to the
secured revolving credit facility under the 2019 Credit Agreement with the agreement of the lenders.
The Company used borrowings under the 2019 Credit Agreement, together with the net proceeds from the issuance of the Senior Notes
due March 1, 2027 (described below), to fund the purchase price of the Caraustar Acquisition, to redeem its $250.0 million Senior Notes
due August 1, 2019 (the ‘‘Senior Notes due 2019’’), to repay outstanding borrowings under the 2017 Credit Agreement, to fund ongoing
working capital and capital expenditure needs and for general corporate purposes, and to pay related fees and expenses. Interest is based on
either a Eurodollar rate or a base rate that resets periodically plus a calculated margin amount. On February 11, 2019, proceeds from
borrowings under the 2019 Credit Agreement were used to pay the obligations outstanding under the 2017 Credit Agreement.
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The 2019 Credit Agreement contains certain covenants, which include financial covenants that require the Company to maintain a
certain leverage ratio and an interest coverage ratio. The leverage ratio generally requires that, at the end of any quarter, the Company will
not permit the ratio of (a) its total consolidated indebtedness, to (b) its consolidated net income plus depreciation, depletion and
amortization, interest expense (including capitalized interest), income taxes, and minus certain extraordinary gains and non-recurring
gains (or plus certain extraordinary losses and non-recurring losses) and plus or minus certain other items for the preceding twelve months
(as used in this paragraph only, ‘‘EBITDA’’) to be greater than 4.75 to 1.00 and stepping down annually by 0.25 increments beginning on
July 31, 2020 to 4.00 on July 31, 2023. The interest coverage ratio generally requires that, at the end of any quarter, the Company will not
permit the ratio of (a) its consolidated EBITDA, to (b) its consolidated interest expense to the extent paid or payable, to be less than 3.00
to 1.00, during the applicable preceding twelve month period.
The terms of the 2019 Credit Agreement contain restrictive covenants, which limit the ability of the Company and its restricted
subsidiaries, among other things, to incur additional indebtedness or issue certain preferred stock, pay dividends, redeem stock or make
other distributions, or make certain investments; create restrictions on the ability of its restricted subsidiaries to pay dividends or make
other payments to the Company; create certain liens; transfer or sell certain assets; merge or consolidate; enter into certain transactions
with the Company’s affiliates; and designate subsidiaries as unrestricted subsidiaries. These covenants are subject to a number of important
exceptions and qualifications.
The repayment of this facility is secured by a security interest in the personal property of the Company and certain of its U.S. subsidiaries,
including equipment and inventory and certain intangible assets, as well as a pledge of the capital stock of substantially all of the
Company’s U.S. subsidiaries, and is secured, in part, by the capital stock of the non-U.S. borrowers. However, in the event that the
Company receives and maintains an investment grade rating from either Moody’s Investors Service, Inc. or Standard & Poor’s Financial
Services LLC, the Company may request the release of such collateral.
The 2019 Credit Agreement provides for events of default (subject in certain cases to customary grace and cure periods), which include,
among others, nonpayment of principal or interest when due, breach of covenants or other agreements in the 2019 Credit Agreement,
defaults in payment of certain other indebtedness and certain events of bankruptcy or insolvency.
As of October 31, 2019, $1,688.3 million was outstanding under the 2019 Credit Agreement. The current portion of such outstanding
amount was $83.7 million, and the long-term portion was $1,604.6 million. The weighted average interest rate for borrowings under the
2019 Credit Agreement was 4.05% for the year ended October 31, 2019. The actual interest rate for borrowings under the 2019 Credit
Agreement was 3.71% as of October 31, 2019. The deferred financing costs associated with the term loan portion of the 2019 Credit
Agreement totaled $10.8 million as of October 31, 2019 and are recorded as a direct deduction from the balance sheet line Long-Term
Debt. The deferred financing costs associated with the revolver portion of the 2019 Credit Agreement totaled $8.0 million as of
October 31, 2019 and are recorded within Other Long-Term Assets.
As a result of the refinancing, $0.8 million of unamortized deferred financing costs related to the 2017 Credit Agreement and $5.5 million
of newly incurred financing costs related to the 2019 Credit Agreement were expensed as Debt Extinguishment Charges in the
consolidated statements of income.
Senior Notes due 2027
On February 11, 2019, the Company issued $500.0 million of 6.50% Senior Notes due March 1, 2027 (the ‘‘Senior Notes due 2027’’).
Interest on the Senior Notes due 2027 is payable semi-annually commencing on September 1, 2019. The Company’s obligations under the
Senior Notes due 2027 are guaranteed by its U.S. subsidiaries that guarantee the 2019 Credit Agreement, as described above. The
Company used the net proceeds from the issuance of the Senior Notes due 2027, together with borrowings under the 2019 Credit
Agreement, to fund the purchase price of the Caraustar Acquisition, to redeem all of the Senior Notes due 2019, to repay outstanding
borrowings under the 2017 Credit Agreement, and to pay related fees and expenses. The deferred financing cost associated with the Senior
Notes due 2027 totaled $2.6 million as of October 31, 2019 and are recorded as a direct deduction from the balance sheet line Long-Term
Debt.
Senior Notes due 2021
On July 15, 2011, Greif, Inc.’s wholly-owned subsidiary, Greif Nevada Holdings, Inc., S.C.S. issued €200.0 million of 7.375% Senior Notes
due July 15, 2021 (the ‘‘Senior Notes due 2021’’). The Senior Notes due 2021 are guaranteed on a senior basis by Greif, Inc. Interest on the
Senior Notes due 2021 is payable semiannually.
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Senior Notes due 2019
On April 1, 2019, the Company redeemed all of its outstanding 7.75% Senior Notes due 2019, which were issued by the Company on
July 28, 2009 for $250.0 million. The total redemption price for the Senior Notes due 2019 was $253.9 million, which was equal to the
aggregate principal amount outstanding of $250.0 million plus a premium of $3.9 million. The premium was recognized as a debt
extinguishment cost. The payment of the redemption price was funded by borrowings under the Company’s 2019 Credit Agreement.
As a result of redeeming the Senior Notes due 2019, $0.7 million of unamortized deferred financing costs were expensed to Debt
Extinguishment Charges in the consolidated statements of income.
United States Trade Accounts Receivable Credit Facility
On September 24, 2019, certain U.S. subsidiaries of Greif, Inc. (the ‘‘Company’’) amended and restated the existing receivables financing
facility (the ‘‘U.S. Receivables Facility’’). Greif Receivables Funding LLC (‘‘Greif Funding’’), Greif Packaging LLC (‘‘Greif Packaging’’), for
itself and as servicer, and certain other U.S. subsidiaries of the Company entered into a Third Amended and Restated Transfer and
Administration Agreement, dated as of September 24, 2019 (the ‘‘Third Amended TAA’’), with Bank of America, N.A. (‘‘BANA’’), as the
agent, managing agent, administrator and committed investor, and various investor groups, managing agents, and administrators, from
time to time parties thereto. The Third Amended TAA, as of September 24, 2019, replaced in its entirety the prior facility agreement,
which provided for a $150.0 million U.S. Receivables Facility. The Third Amended TAA provides a $275.0 million U.S. Receivables
Facility. The financing costs associated with the U.S. Receivables Facility are $0.4 million as of October 31, 2019, and are recorded as a
direct deduction from the balance sheet line Long-Term Debt.
Greif Funding is a direct subsidiary of Greif Packaging and is included in the Company’s consolidated financial statements. However,
because Greif Funding is a separate and distinct legal entity from the Company, the assets of Greif Funding are not available to satisfy the
liabilities and obligations of the Company, Greif Packaging or other subsidiaries of the Company, and the liabilities of Greif Funding are
not the liabilities or obligations of the Company or its other subsidiaries.
The Third Amended TAA provides for the ongoing purchase by BANA of receivables from Greif Funding, which Greif Funding will have
purchased from Greif Packaging and certain other U.S. subsidiaries of the Company as the originators under the Third Amended and
Restated Sale Agreement, dated as of September 24, 2019 (the ‘‘Third Amended Sale Agreement’’). Greif Packaging will service and collect
on behalf of Greif Funding those receivables sold to Greif Funding under the Third Amended Sale Agreement. The commitment
termination date of the U.S. Receivables Facility is September 24, 2020, subject to earlier termination as provided in the Third Amended
TAA (including acceleration upon an event of default as provided therein), or such later date to which the purchase commitment may be
extended by agreement of the parties. In addition, Greif Funding may terminate the U.S. Receivables Facility at any time upon five days’
prior written notice. The Company has guaranteed the performance by Greif Funding, Greif Packaging and its other participating
subsidiaries of their respective obligations under the Third Amended TAA, the Third Amended Sale Agreement and related agreements
thereto, but has not guaranteed the collectability of the receivables thereunder. A significant portion of the proceeds from the U.S.
Receivables Facility was used to pay the obligations under the Second Amended TAA. The remaining proceeds were used to pay certain
fees, costs and expenses incurred in connection with the U.S. Receivables Facility and to repay borrowings on our Revolving Credit
Facility.
The U.S. Receivables Facility is secured by certain trade accounts receivables related to the Rigid Industrial Packaging & Services and the
Paper Packaging & Services businesses of Greif Packaging and other subsidiaries of the Company in the United States and bears interest at
a variable rate based on the London InterBank Offered Rate or an applicable base rate, plus a margin, or a commercial paper rate, all as
provided in the Third Amended TAA. Interest is payable on a monthly basis and the principal balance is payable upon termination of the
U.S. Receivables Facility. The $255.1 million outstanding balance under the U.S. Receivables Facility as of October 31, 2019 is reported in
long-term debt in the condensed consolidated balance sheets because the Company intends to refinance this obligation on a long-term
basis and has the intent and ability to consummate a long-term refinancing.
International Trade Accounts Receivable Credit Facilities
For additional disclosures related to the Foreign Receivables Facilities, as defined see Note 3 to the Consolidated Financial Statements.
Other
In addition to the amounts borrowed under the 2019 Credit Agreement and proceeds from the Senior Notes and the Accounts
Receivables Facilities, as of October 31, 2019, the Company had outstanding other debt of $0.4 million in long-term debt and $9.2 million
81
in short-term borrowings, compared to outstanding other debt of $0.7 million in long-term debt and $7.3 million in short-term
borrowings, as of October 31, 2018. There are no financial covenants associated with this other debt.
As of October 31, 2019, annual maturities, including the current portion of long-term debt, were $511.5 million in 2020, $353.8 million
in 2021, $147.5 million in 2022, $147.5 million in 2023, $51.9 million in 2024 and $1,549.4 million thereafter.
NOTE 9 – FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The following table presents the fair value of those assets and (liabilities) measured on a recurring basis as of October 31, 2019 and 2018:
(in millions)
Interest rate derivatives
Interest rate derivatives
Foreign exchange hedges
Foreign exchange hedges
Insurance annuity
Cross currency swap
Total
(in millions)
Interest rate derivatives
Foreign exchange hedges
Foreign exchange hedges
Insurance annuity
Cross currency swap
Total
October 31, 2019
Fair Value Measurement
Level 1
Level 2
Level 3
Total
Balance Sheet Location
$—
—
—
—
—
—
$—
$ 1.3
(25.0)
0.9
(0.2)
—
10.6
$(12.4)
$ —
—
—
—
20.0
—
$20.0
October 31, 2018
Fair Value Measurement
Level 1
$—
Level 2
$16.5
—
—
—
—
2.6
(0.7)
—
5.2
Level 3
$ —
—
—
20.4
—
$ 1.3
(25.0)
0.9
(0.2)
20.0
10.6
$ 7.6
Total
$16.5
2.6
(0.7)
20.4
5.2
$—
$23.6
$20.4
$44.0
Other long-term assets and other current assets
Other long-term liabilities and other current liabilities
Other current assets
Other current liabilities
Other long-term assets
Other long-term assets and other current assets
Balance Sheet Location
Other long-term assets and other current assets
Other current assets
Other current liabilities
Other long-term assets
Other long-term assets and other current assets
The carrying amounts of cash and cash equivalents, trade accounts receivable, notes receivable, accounts payable, current liabilities and
short-term borrowings as of October 31, 2019 and 2018 approximate their fair values because of the short-term nature of these items and
are not included in this table.
Interest Rate Derivatives
The Company has various borrowing facilities which charge interest based on the one month U.S. dollar LIBOR plus an interest spread. In
2019, the Company entered into six amortizing interest rate swaps. These six interest rate swaps have a total initial notional amount of
$1,300.0 million and amortize to $200.0 million over a five year term. The outstanding notional as of October 31, 2019 is
$1,000.0 million. The Company will receive variable rate interest payments based upon one month U.S. dollar LIBOR, and in return the
Company is obligated to pay interest at a weighted-average interest rate of 2.49% plus an interest spread. This effectively converted the
borrowing rate on an amount of debt equal to the outstanding notional amount of the interest rate swap from a variable rate to a fixed rate.
In 2017, the Company entered into an interest swap with a notional amount of $300.0 million. As of February 1, 2017, the Company
began to receive variable rate interest payments based upon one month U.S. dollar LIBOR and in return was obligated to pay interest at a
fixed rate of 1.19% plus an interest spread. This effectively converted the borrowing rate on $300.0 million of debt from a variable rate to
a fixed rate.
These derivatives are designated as cash flow hedges for accounting purposes. Accordingly, the gain or loss on these derivative instruments
are reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the
forecasted transaction and in the same period during which the hedged transaction affects earnings. See Note 17 to the Consolidated
Financial Statements for additional disclosures of the gain or loss included within other comprehensive income. The assumptions used in
measuring fair value of these interest rate derivatives are considered level 2 inputs, which are based upon observable market rates, including
LIBOR and interest paid based upon a designated fixed rate over the life of the swap agreements.
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Gains reclassified to earnings under these contracts were $3.0 million for the year ended October 31, 2019. Gains reclassified to earnings
under these contracts were $1.8 million for the year ended October 31, 2018. A derivative loss of $8.1 million, based upon interest rates at
October 31, 2019, is expected to be reclassified from accumulated other comprehensive income (loss) to earnings in the next twelve
months.
Foreign Exchange Hedges
The Company conducts business in various international currencies and is subject to risks associated with changing foreign exchange rates.
The Company’s objective is to reduce volatility associated with foreign exchange rate changes. Accordingly, the Company enters into
various contracts that change in value as foreign exchange rates change to protect the value of certain existing foreign currency assets and
liabilities, commitments and anticipated foreign currency cash flows. As of October 31, 2019, the Company had outstanding foreign
currency forward contracts in the notional amount of $275.0 million ($194.4 million as of October 31, 2018). Adjustments to fair value
are recognized in earnings, offsetting the impact of the hedged profits. The assumptions used in measuring fair value of foreign exchange
hedges are considered level 2 inputs, which were based on observable market pricing for similar instruments, principally foreign exchange
futures contracts.
Realized gains (losses) recorded in other expense, net under fair value contracts were $4.6 million, $(9.2) million and $(1.8) million for the
years ended October 31, 2019, 2018 and 2017, respectively. The Company recognized in other expense, net an unrealized net gain (loss) of
$0.7 million, $1.9 million and $(0.5) million in the years ended October 31, 2019, 2018 and 2017, respectively.
Cross Currency Swap
The Company has operations and investments in various international locations and is subject to risks associated with changing foreign
exchange rates. On March 6, 2018, the Company entered into a cross currency interest rate swap agreement that synthetically swaps
$100.0 million of fixed rate debt to Euro denominated fixed rate debt at a rate of 2.35%. The agreement is designated as a net investment
hedge for accounting purposes and will mature on March 6, 2023. Accordingly, the gain or loss on this derivative instrument is included in
the foreign currency translation component of other comprehensive income until the net investment is sold, diluted, or liquidated. Interest
payments received for the cross currency swap are excluded from the net investment hedge effectiveness assessment and are recorded in
interest expense, net on the consolidated statements of income. For the year ended October 31, 2019 and 2018, gains recorded in interest
expense, net under the cross currency swap agreement were $2.4 million and $1.6 million, respectively. See Note 17 to the Consolidated
Financial Statements for additional disclosure of the gain or loss included within other comprehensive income. The assumptions used in
measuring fair value of the cross currency swap are considered level 2 inputs, which are based upon the Euro to United States dollar
exchange rate market.
Other Financial Instruments
The fair values of the Company’s 2019 Credit Agreement, 2017 Credit Agreement, and U.S. Receivables Facility and Foreign Receivables
Facilities (collectively, ‘‘Accounts Receivables Facilities’’) do not materially differ from carrying value as the Company’s cost of borrowing is
variable and approximates current borrowing rates. The fair values of the Company’s long-term obligations are estimated based on either
the quoted market prices for the same or similar issues or the current interest rates offered for the debt of the same remaining maturities,
which are considered level 2 inputs in accordance with ASC Topic 820, ‘‘Fair Value Measurements and Disclosures.’’
The following table presents the estimated fair values for the Company’s Senior Notes and Assets held by special purpose entities:
(in millions)
Senior Notes due 2019 estimated fair value
Senior Notes due 2021 estimated fair value
Senior Notes due 2027 estimated fair value
Assets held by special purpose entities estimated fair value
Pension Plan Assets
October 31,
2019
October 31,
2018
$ —
248.1
537.9
51.9
$257.4
263.4
—
51.6
On an annual basis the Company compares the asset holdings of its pension plan to targets it previously established. The pension plan
assets are categorized as equity securities, debt securities, fixed income securities, insurance annuities or other assets, which are considered
level 1, level 2 and level 3 fair value measurements. The typical asset holdings include:
• Common stock: Valued based on quoted prices and are primarily exchange-traded.
• Mutual funds: Valued at the Net Asset Value ‘‘NAV’’ available daily in an observable market.
83
• Common collective trusts: Unit value calculated based on the observable NAV of the underlying investment.
•
Pooled separate accounts: Unit value calculated based on the observable NAV of the underlying investment.
• Government and corporate debt securities: Valued based on readily available inputs such as yield or price of bonds of
comparable quality, coupon, maturity and type.
•
Insurance annuity: Value is derived based on the value of the corresponding liability.
Non-Recurring Fair Value Measurements
The Company recognized asset impairment charges of $7.8 million and $8.3 million for the years ended October 31, 2019 and 2018.
The following table presents quantitative information about the significant unobservable inputs used to determine the fair value of the
impairment of long-lived assets held and used and net assets held for sale for the twelve months ended October 31, 2019 and 2018:
(in millions)
October 31, 2019
Impairment of Net Assets Held for Sale
Impairment of Long Lived Assets
Total
October 31, 2018
Impairment of Net Assets Held for Sale
Impairment of Long Lived Assets
Total
Long-Lived Assets
Quantitative Information about Level 3 Fair Value Measurements
Fair Value of
Impairment
Valuation
Technique
Unobservable
Input
Range
of Input Values
$2.1
5.7
$7.8
$0.7
7.6
$8.3
Indicative Bids
Sales Value
Indicative Bids
SalesValue
N/A
N/A
Broker Quote / Indicative Bids
Sales Value
Indicative Bids
SalesValue
N/A
N/A
During the year ended October 31, 2019, the Company wrote down long-lived assets with a carrying value of $5.9 million to a fair value of
$0.2 million, resulting in recognized asset impairment charges of $5.7 million. These charges include $0.6 million related to properties,
plants and equipment, net, in the Rigid Industrial Packaging & Services segment, and $5.1 million related to properties, plants and
equipment, net, in the Paper Packaging & Services segment.
During the year ended October 31, 2018, the Company wrote down long-lived assets with a carrying value of $10.7 million to a fair value
of $3.1 million, resulting in recognized asset impairment charges of $7.6 million. The $7.6 million of impairment charges was all related to
properties, plants and equipment, net, in the Rigid Industrial Packaging & Services segment.
During the year ended October 31, 2017, the Company wrote down long-lived assets with a carrying value of $3.8 million to a fair value of
$1.6 million, resulting in recognized asset impairment charges of $2.2 million. These charges include $1.9 million related to properties,
plants and equipment, net, in the Rigid Industrial Packaging & Services segment and $0.3 million of properties, plants and equipment, net,
in the Flexible Products & Services segment.
The assumptions used in measuring fair value of long-lived assets are considered level 3 inputs, which include bids received from third
parties, recent purchase offers, market comparable information and discounted cash flows based on assumptions that market participants
would use.
Assets and Liabilities Held for Sale
During the year ended October 31, 2019, the Company wrote down the assets and liabilities of one asset group that was held for sale with
a carrying value of $2.1 million to a fair value of zero, resulting in recognized asset impairment charges of $2.1 million.
During the year ended October 31, 2018, the Company wrote down the assets and liabilities of one asset group that was held for sale with
a carrying value of $2.9 million to a fair value of $2.2 million, resulting in recognized asset impairment charges of $0.7 million for goodwill
allocated to the business classified as held for sale.
During the year ended October 31, 2017, the Company wrote down the assets and liabilities of one asset group that was held for sale with
a carrying value of $69.2 million to a fair value of $63.6 million, resulting in recognized asset impairment charges of $5.6 million for
84
goodwill allocated to the business classified as held for sale. Additionally, during the year ended October 31, 2017, one asset group that was
classified as held for sale at October 31, 2016 was reclassified to held and used at net realizable value, resulting in no impairment.
The assumptions used in measuring fair value of assets and liabilities held for sale are considered level 3 inputs, which include recent
purchase offers, market comparables and/or data obtained from commercial real estate brokers.
Goodwill and Indefinite-Lived Intangibles
On an annual basis or when events or circumstances indicate impairment may have occurred, the Company performs impairment tests for
goodwill and indefinite-lived intangibles as defined under ASC 350,
‘‘Intangibles-Goodwill and Other.’’ There was no goodwill
impairment for the years ended October 31, 2019 and 2018. On August 1, 2017, the Company concluded that the carrying amount of the
Rigid Industrial Packaging & Services - Latin America reporting unit exceeded at the fair value of the reporting unit, and the goodwill of
Rigid Industrial Packaging & Services - Latin America of $13.0 million was fully impaired.
NOTE 10 – STOCK-BASED COMPENSATION
Stock-based compensation is accounted for in accordance with ASC 718, ‘‘Compensation – Stock Compensation,’’ which requires
companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The Company maintains
two stock-based compensation plans, the 2001 Management Equity Incentive and Compensation Plan (the ‘‘2001 Plan’’) and the 2005
Outside Directors Equity Award Plan (the ‘‘2005 Directors Plan’’) however no stock options were granted in 2019, 2018 or 2017. No
shares were forfeited or exercised in 2019, 2018 or 2017.
The Company’s Amended and Restated Long-Term Incentive Plan (‘‘Long-Term Incentive Plan’’) is intended to focus management on
the key measures that drive superior performance over the longer term. The Long-Term Incentive Plan is based on three-year performance
periods that commence at the start of every fiscal year. For each three-year performance period, the performance goals are based on targeted
levels of earnings before interest, taxes, depreciation, depletion and amortization as determined by the Special Subcommittee of the
Company’s Compensation Committee of the Board of Directors (the ‘‘Special Subcommittee’’).
The Company granted 291,520 shares of restricted stock with a grant date fair value of $39.83 under the Company’s Long-Term Incentive
Plan for 2019. The total stock expense recorded under the Long-Term Incentive Plan was $11.6 million, $5.3 million and $1.7 million for
the periods ended October 31, 2019, 2018 and 2017, respectively. All restricted stock awards under the Long-Term Incentive Plan are fully
vested at the date of award.
Under the Company’s 2005 Directors Plan, the Company granted 25,144 shares of restricted stock with a grant date fair value of $42.95 in
2019. The Company granted 20,529 shares of restricted stock with a grant date fair value of $59.18 under the Company’s 2005 Directors
Plan in 2018. The total expense recorded under the plan was $1.1 million, $1.2 million and $1.1 million for the periods ended October 31,
2019, 2018, and 2017, respectively. All restricted stock awards under the 2005 Directors Plan are fully vested at the date of award.
During 2019, the Company awarded an officer, as part of the terms of the officer’s initial employment arrangement, 9,000 shares of
Class A Common Stock under the 2001 Plan. These shares were issued subject to vesting and post-vesting restrictions on the sale or
transfer until November 5, 2023. These shares will fully vest in equal installments of 3,000 on November 5, 2019, 2020 and 2021. Share-
based compensation expense was $0.1 million, for the period ended October 31, 2019.
During 2014, the Company awarded an officer, as part of the terms of the officer’s initial employment arrangement, 15,000 shares of
Class A Common Stock under the 2001 Plan. These shares were issued subject to vesting and post-vesting restrictions on the sale or
transfer until May 12, 2019. These shares fully vested in equal installments of 5,000 on May 12, 2015, 2016 and 2017. Share-based
compensation expense was $0.1 million, for the period ended October 31, 2017.
The total stock compensation expenses recorded under the plans were $12.7 million, $6.5 million and $2.9 million for periods ended
October 31, 2019, 2018 and 2017 respectively.
NOTE 11 – INCOME TAXES
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act of 2017 (the ‘‘Tax Reform Act’’).
The legislation significantly changed U.S. tax law by, among other items, (1) lowering the corporate income tax rate from 35% to 21%,
effective January 1, 2018; (2) allowing for the acceleration of expensing of qualified business assets; (3) requiring companies to pay a
one-time transition tax on certain unremitted earnings of foreign subsidiaries that may be payable over eight years; (4) a new limitation on
deductible interest expense; (5) limitations on the deductibility of certain executive compensation; and (6) eliminating U.S. federal income
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tax on dividends from foreign subsidiaries. The corporate income tax rate change was administratively effective beginning 2018. Therefore,
the Company used a blended statutory rate for 2018 of 23.33% on U.S. earnings.
The SEC staff issued Staff Accounting Bulletin No. 118 (‘‘SAB 118’’) to address the application of GAAP in situations when a registrant
does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the
accounting for certain income tax effects of the Tax Reform Act. The Bulletin also provides for a measurement period that should not
extend beyond one year from the U.S. Tax Reform enactment date. In accordance with the Bulletin, the Company recorded a tax benefit
of $72.0 million related to the revaluation of deferred tax assets and liabilities during the year ended October 31, 2018 as well as a
provisional tax expense of $52.8 million for the transition tax liability. During the first quarter of 2019, the Company revised its
calculation for the transition tax liability to $55.1 million. In addition, the Company re-evaluated its indefinite reinvestment assertion,
concluding that the unremitted earnings and profits of certain non-U.S. subsidiaries and affiliates will no longer be indefinitely reinvested.
These changes in assertion required the recognition of a tax benefit of $1.7 million due to Section 986(c) currency losses. The provisional
calculations related to the Tax Reform Act are now complete.
In addition, the Tax Reform Act established new tax provisions that affected the Company in 2019, including (1) eliminating the U.S.
manufacturing deduction; (2) establishing new limitations on deductible interest expense and certain executive compensation; (3) creating
the base erosion anti-abuse tax (‘‘BEAT’’); (4) creating a new provision designed to tax global intangible low-tax income (‘‘GILTI’’);
(5) establishing a deduction for foreign-derived intangible income (‘‘FDII’’); and (6) generally eliminating U.S. federal income taxes on
dividends from foreign subsidiaries. Regarding the new GILTI tax rules, the Company is allowed to make an accounting policy election to
either (1) treat taxes due on future GILTI inclusions in U.S. taxable income as a current period expense when incurred or (2) reflect such
portion of the future GILTI exclusions in U.S. taxable income that relate to existing basis differences in the Company’s measurement of
deferred taxes. The Company has elected to treat taxes due to future GILTI inclusions in U.S. taxable income as a current period expense.
With respect to pre-October 31, 2016 undistributed foreign earnings, the Company is indefinitely reinvested as defined under ASC
740-30-25-1. For post-October 31, 2016 foreign earnings, the Company is not indefinitely reinvested. Accordingly, during 2017, the
Company began recording a deferred tax liability with respect to post-October 31, 2016 foreign unremitted earnings, generally based on
foreign jurisdiction withholding taxes. As disclosed above, Company no longer asserts that the unremitted earnings and profits of certain
non-U.S. subsidiaries and affiliates is indefinitely reinvested and has recorded the appropriate U.S. federal and state impacts. Total deferred
taxes accrued by the Company relative to undistributed earnings were $6.6 million and $8.4 million at October 31, 2019 and 2018,
respectively. The decrease in the liability is primarily attributable to tax-deductible foreign currency losses that would be recognized on
distributions of previously taxed earnings to the U.S.
The provision for income taxes consists of the following:
(in millions)
Current
Federal
State and local
Non-U.S.
Deferred
Federal
State and local
Non-U.S.
Year Ended October 31,
2019
2018
2017
$26.6
$ 74.0
$33.0
6.1
35.9
68.6
2.1
0.9
(0.9)
2.1
8.0
36.1
118.1
(45.2)
0.8
(0.4)
(44.8)
6.0
25.9
64.9
4.5
(2.0)
(0.2)
2.3
$70.7
$ 73.3
$67.2
The non-U.S. income before income tax expense was $132.1 million, $102.3 million and $85.2 million in 2019, 2018, and 2017,
respectively. The U.S. income before income tax was $129.9 million, $197.5 million and $115.1 million in 2019, 2018, and 2017,
respectively.
86
The following is a reconciliation of the provision for income taxes based on the federal statutory rate to the Company’s effective income
tax rate:
Federal statutory rate
Impact of foreign tax rate differential
State and local taxes, net of federal tax benefit
Net impact of changes in valuation allowances
Non-deductible write-off and impairment of goodwill and other intangible assets
Unrecognized tax benefits
Permanent book-tax differences
Withholding taxes
Tax Reform Act(1)
Other items, net
Year Ended October 31,
2019
21.00%
0.10%
1.99%
2.41%
0.29%
(0.76)%
(0.87)%
2.43%
(0.19)%
0.58%
2018
2017
23.33%
(0.57)%
2.38%
5.65%
0.06%
3.41%
35.00%
(9.86)%
1.35%
20.74%
(0.02)%
(2.00)%
(4.03)%
(15.71)%
1.84%
(7.31)%
(0.33)%
1.88%
—%
2.20%
26.98%
24.43%
33.58%
(1)
Reflects the net impact of the change in deferred tax assets and liabilities and the estimated transition tax resulting from the Tax Reform Act.
The primary items which increased the Company’s effective income tax rate from the federal statutory rate in 2019 were state and local
taxes, increases in valuation allowances, and withholding tax liabilities.
The primary items which increased the Company’s effective income tax rate from the federal statutory rate in 2018 were increases in
valuation allowances and unrecognized tax benefits; offset primarily by the remeasurement of the domestic deferred tax liabilities, net of
the transition tax liability due to the Tax Reform Act, and permanent book-tax differences.
The primary items which decreased the Company’s effective income tax rate from the federal statutory rate in 2017 were permanent
book-tax differences, unrecognized tax benefits, the impact of foreign tax rates that differ from the federal statutory tax rate, and other
immaterial items; offset primarily by increases in valuation allowances. Also, in 2017, the Company included in the table above a
$38.6 million and 19.26% change in valuation allowance, with offsetting amounts in permanent book-tax differences, for certain
intercompany financing transactions.
87
The components of the Company’s deferred tax assets and liabilities as of October 31 for the years indicated were as follows:
(in millions)
Deferred Tax Assets
Net operating loss and other carryforwards
Foreign tax credits
Pension liabilities
Incentive liabilities
Workers compensation accruals
Inventories
State income taxes
Deferred compensation
Other
Total Deferred Tax Assets
Valuation allowance
Net Deferred Tax Assets
Deferred Tax Liabilities
Properties, plants and equipment
Timberland transactions
Goodwill and other intangible assets
Other
Total Deferred Tax Liabilities
Net Deferred Tax Liability
2019
2018
$ 206.9
$ 122.8
21.5
24.1
12.0
12.1
6.7
9.4
2.3
41.2
336.2
20.7
12.2
12.1
6.6
4.9
4.5
2.2
16.5
202.5
(175.0)
(157.2)
$ 161.2
$ 45.3
$ 152.7
$ 78.9
74.2
207.5
23.9
458.3
$ 297.1
73.5
49.2
15.6
217.2
$ 171.9
As of October 31, 2019 and 2018, the Company had deferred income tax benefits of $206.9 million and $122.8 million, respectively, from
net operating loss carryforwards and interest expense limitation carryforwards. These carryforwards are composed of $49.4 million,
$27.3 million, and $130.2 million in U.S. Federal, state, and non-U.S. jurisdictions, respectively. The Company has recorded valuation
allowances of $142.3 million and $137.1 million against non-U.S. deferred tax assets as of October 31, 2019 and 2018 respectively. The
Company has also recorded valuation allowances of $32.7 million and $20.1 million, as of October 31, 2019 and 2018, respectively, against
U.S. deferred tax assets. The Company had net changes in valuation allowances in 2019 of $17.8 million.
As discussed in Note 2 - Acquisitions and Divestitures, the table above reflects a net deferred tax liability of $139.1 million related to the
Caraustar Acquisition, as well as a net deferred tax liability of $5.8 million related to the Tholu Acquisition.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in millions)
Balance at November 1
Increases in tax positions for prior years
Decreases in tax positions for prior years
Increases in tax positions for current years
Settlements with taxing authorities
Lapse in statute of limitations
Currency translation
Balance at October 31
2019
$36.2
5.1
(0.7)
4.3
(3.6)
(2.0)
(0.5)
2018
$26.8
7.8
(1.4)
8.0
—
(3.6)
(1.4)
2017
$29.7
2.1
(1.8)
6.7
(7.4)
(4.6)
2.1
$38.8
$36.2
$26.8
The 2019 net increase in unrecognized tax benefits is primarily related to increases in unrecognized tax benefits related to prior years and
the current year, offset by decreases related to the settlement of prior years’ tax audits and lapse in statute of limitations. The Company files
income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various non-U.S. jurisdictions and is subject to audit
by various taxing authorities for 2012 through the current year. The Company has completed its U.S. federal tax audit for the tax years
through 2013.
The October 31, 2019, 2018, 2017 balances include $34.1 million, $36.2 million and $26.8 million, respectively, of unrecognized tax
benefits that, if recognized, would have an impact on the effective tax rate. The Company also recognizes accrued interest and penalties
related to unrecognized tax benefits in income tax expense net of tax, as applicable. As of October 31, 2019 and October 31, 2018, the
Company had $6.3 million and $4.9 million, respectively, accrued for the payment of interest and penalties.
88
The Company has estimated the reasonably possible expected net change in unrecognized tax benefits through October 31, 2019 under
ASC 740. The Company’s estimate is based on lapses of the applicable statutes of limitations, settlements and payments of uncertain tax
positions. The estimated net decrease in unrecognized tax benefits for the next 12 months ranges from zero to $5.9 million. Actual results
may differ materially from this estimate.
NOTE 12 – POST-RETIREMENT BENEFIT PLANS
Defined Benefit Pension Plans
The Company has certain non-contributory defined benefit pension plans for salaried and hourly employees in the United States, Canada,
Germany, the Netherlands, South Africa and the United Kingdom. The Company uses a measurement date of October 31 for fair value
purposes for its pension plans. The salaried employees plans’ benefits are based primarily on years of service and earnings. The hourly
employees plans’ benefits are based primarily upon years of service, and certain benefit provisions are subject to collective bargaining. The
Company contributes an amount that is not less than the minimum funding and not more than the maximum tax-deductible amount to
these plans. Salaried employees in the United States who commence service on or after November 1, 2007 are not eligible to participate in
the defined benefit pension plans, but are eligible to participate in a defined contribution retirement program. Salaried employees outside
the U.S. also have various dates in which they are not eligible to participate in the defined benefit pension plans, but are eligible to
participate in a defined contribution retirement program. The category ‘‘Other International’’ represents the noncontributory defined
benefit pension plans in Canada and South Africa.
Pension plan contributions by the Company totaled $26.5 million during 2019, which consisted of $22.6 million of employer
contributions and $3.9 million of benefits paid directly by the Company. Pension plan contributions, including benefits paid directly by
the Company, totaled $85.5 million and $14.4 million during 2018 and 2017, respectively. Contributions, including benefits paid directly
by the Company, during 2020 are expected to be approximately $27.7 million.
The following table presents the number of participants in the defined benefit plans:
October 31, 2019
Active participants
Vested former employees and deferred members
Retirees and beneficiaries
Consolidated
United States
Germany
United Kingdom
Netherlands
2,455
5,236
6,462
2,351
4,643
5,074
41
86
258
—
366
662
63
97
414
October 31, 2018
Active participants
Vested former employees and deferred members
Retirees and beneficiaries
Consolidated
United States
Germany
United Kingdom
Netherlands
1,332
1,433
2,389
1,214
790
942
47
85
253
—
419
699
71
95
441
Other
International
—
44
54
Other
International
—
44
54
The actuarial assumptions are used to measure the year-end benefit obligations as of October 31, 2019 and the pension costs for the year
were as follows:
For the year ended October 31, 2019
Consolidated(1)
United States
Germany
United Kingdom
Netherlands
Discount rate
Expected return on plan assets
Rate of compensation increase
2.74%
4.12%
2.85%
3.27%
5.10%
3.00%
0.73%
N/A
2.75%
1.76%
3.60%
N/A
0.74%
1.51%
2.25%
For the year ended October 31, 2018
Consolidated(1)
United States
Germany
United Kingdom
Netherlands
Discount rate
Expected return on plan assets
Rate of compensation increase
3.48%
4.53%
2.85%
4.59%
6.25%
3.00%
1.80%
N/A
2.75%
2.50%
3.60%
N/A
1.64%
1.45%
2.25%
For the year ended October 31, 2017
Consolidated(1)
United States
Germany
United Kingdom
Netherlands
Discount rate
Expected return on plan assets
Rate of compensation increase
3.01%
5.39%
2.87%
3.79%
6.25%
3.00%
1.72%
N/A
2.75%
2.37%
6.00%
N/A
1.55%
1.20%
2.25%
Other
International
3.98%
6.00%
N/A
Other
International
4.84%
5.69%
N/A
Other
International
4.46%
5.70%
N/A
(1) This column represents the weighted average of the regions.
89
The discount rate is determined by developing a hypothetical portfolio of individual high-quality corporate bonds available at the
measurement date, the coupon and principal payments of which would be sufficient to satisfy the plans’ expected future benefit payments
as defined for the projected benefit obligation. The discount rate by country is equivalent to the average yield on that hypothetical
portfolio of bonds and is a reflection of current market settlement rates on such high quality bonds, government treasuries, and annuity
purchase rates. To determine the expected long-term rate of return on pension plan assets, the Company considers current and expected
asset allocations, as well as historical and expected returns on various categories of plan assets. In developing future return expectations for
the defined benefit pension plans’ assets; the Company formulates views on the future economic environment, both in the U.S. and
globally. The Company evaluates general market trends and historical relationships among a number of key variables that impact asset class
returns, such as expected earnings growth, inflation, valuations, yields and spreads, using both internal and external sources. The Company
takes into account expected volatility by asset class and diversification across classes to determine expected overall portfolio results given
current and expected allocations. The Company uses published mortality tables for determining the expected lives of plan participants and
believe that the tables selected are most-closely associated with the expected lives of plan participants as the tables are based on the country
in which the participant is employed.
Based on the Company’s analysis of future expectations of asset performance, past return results, and its current and expected asset
allocations, the Company has assumed a 4.12% long-term expected return on those assets for cost recognition in 2019. For the defined
benefit pension plans, the Company applies its expected rate of return to a market-related value of assets, which stabilizes variability in the
amounts to which the Company applies that expected return.
The Company amortizes experience gains and losses as well as the effects of changes in actuarial assumptions and plan provisions over a
period no longer than the average future service of employees.
During the year ended October 31, 2018, in the United Kingdom, lump sum payments totaling $4.7 million were made from the defined
benefit plan assets to certain participants who agreed to such payments representing the current fair value of the participant’s respective
pension benefit. These lump sum payments resulted in a non-cash pension settlement charge of $1.3 million for the year ended
October 31, 2018.
During the year ended October 31, 2017, in the United States, an annuity contract for approximately $49.2 million was purchased with
defined benefit plan assets, and the pension obligation for certain retirees was irrevocably transferred from that plan to the annuity
contract. Additionally, lump sum payments totaling $45.2 million were made from the defined benefit plan assets to certain participants
who voluntarily agreed to such payments, representing the current fair value of the participant’s respective pension benefit. The settlement
items described above resulted in a decrease in the fair value of plan assets and the projected benefit obligation of $94.4 million and a
non-cash pension settlement charge of $25.9 million of unrecognized net actuarial loss that was included in accumulated other
comprehensive loss. Additionally, in the United Kingdom, lump sum payments totaling $7.3 million were made from the defined benefit
plan assets to certain participants who voluntarily agreed to such payments, representing the current fair value of the participant’s
respective pension benefit. These lump sum payments resulted in a non-cash pension settlement charge of $1.2 million of unrecognized net
actuarial loss that was included in accumulated other comprehensive loss. Finally, $1.8 million of projected benefit obligation for certain
retirees in Germany was irrevocably transferred to a third-party buyer through the sale of a business resulting in $0.7 million of
unrecognized net actuarial loss that was included in accumulated other comprehensive loss that was recognized as a loss on sale of business.
Benefit Obligations
The components of net periodic pension cost include the following:
For the year ended October 31, 2019
(in millions)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service (cost) benefit
Recognized net actuarial loss
Net periodic pension (benefit) cost
Consolidated
$ 14.1
31.0
(38.8)
(0.1)
7.1
United
States
$ 12.7
25.4
(30.5)
(0.1)
5.0
$ 13.3
$ 12.5
Germany
$0.3
0.5
—
—
0.9
$1.7
United
Kingdom
$ 0.5
3.9
(6.2)
0.1
1.2
Netherlands
Other
International
$ 0.5
0.9
(1.3)
(0.1)
—
$ 0.1
0.3
(0.8)
—
—
$(0.5)
$ —
$(0.4)
90
For the year ended October 31, 2018
(in millions)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized net actuarial loss
Other Adjustments
Special Events
Settlement
Net periodic pension (benefit) cost
For the year ended October 31, 2017
(in millions)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized net actuarial loss
Special Events
Settlement*
Net periodic pension (benefit) cost
Consolidated
$ 12.3
18.9
(25.5)
(0.2)
11.0
2.8
1.3
$ 20.6
Consolidated
$ 13.3
18.2
(27.7)
(0.1)
10.9
27.8
$ 42.4
United
States
$ 10.8
13.2
(16.8)
(0.1)
8.1
—
—
$ 15.2
United
States
$ 11.8
12.9
(15.6)
—
8.1
$ 25.9
$ 43.1
Germany
$0.4
0.5
—
—
1.1
—
—
$2.0
Germany
$0.5
0.5
—
—
1.3
$0.7
$3.0
United
Kingdom
$ 0.5
4.0
(6.5)
—
1.7
2.8
1.3
$ 3.8
United
Kingdom
$ 0.5
3.8
(10.2)
—
1.5
$ 1.2
$ (3.2)
Netherlands
Other
International
$ 0.5
0.9
(1.4)
(0.1)
—
—
—
$(0.1)
$ 0.1
0.3
(0.8)
—
0.1
—
—
$(0.3)
Netherlands
$ 0.4
0.7
(1.2)
(0.1)
—
Other
International
$ 0.1
0.3
(0.7)
—
—
$ —
$(0.2)
$ —
$(0.3)
*
Includes $0.7M that was recorded as a loss on sale of business
Benefit obligations are described in the following tables. Accumulated and projected benefit obligations (ABO and PBO) represent the
obligations of a pension plan for past service as of the measurement date. ABO is the present value of benefits earned to date with benefits
computed based on current compensation levels. PBO is ABO increased to reflect expected future compensation.
The following table sets forth the plans’ change in projected benefit obligation:
For the year ended October 31, 2019
(in millions)
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Plan participant contributions
Expenses paid from assets
Actuarial loss
Foreign currency effect
Benefits paid
Acquisitions
Benefit obligation at end of year
For the year ended October 31, 2018
(in millions)
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Plan participant contributions
Expenses paid from assets
Plan Amendments
Actuarial gain
Foreign currency effect
Benefits paid
Benefit obligation at end of year
United
States
$351.9
12.7
25.4
—
(5.1)
105.5
—
(48.7)
389.3
$831.0
United
States
$387.6
10.8
13.2
—
(1.0)
—
(33.5)
—
(25.2)
$351.9
Germany
United
Kingdom
Netherlands
Other
International
$38.1
0.3
0.5
—
—
7.4
(0.9)
(1.3)
—
$44.1
$176.3
0.5
3.9
—
(0.7)
6.0
1.1
(6.3)
—
$180.8
$85.4
0.5
0.9
0.2
—
11.0
(1.9)
(4.8)
—
$91.3
$10.7
0.1
0.3
—
(0.1)
1.1
(0.1)
(0.5)
—
$11.5
Germany
United
Kingdom
Netherlands
Other
International
$39.9
0.4
0.5
—
—
—
(0.5)
(0.8)
(1.4)
$38.1
$186.9
0.5
4.0
—
(0.6)
3.5
(3.9)
(4.3)
(9.8)
$176.3
$91.8
0.5
0.9
0.2
—
(0.2)
(0.9)
(1.7)
(5.2)
$85.4
$11.6
0.1
0.3
—
(0.1)
—
(0.3)
(0.3)
(0.6)
$10.7
Consolidated
$ 662.4
14.1
31.0
0.2
(5.9)
131.0
(1.8)
(61.6)
389.3
$1,158.7
Consolidated
$717.8
12.3
18.9
0.2
(1.7)
3.3
(39.1)
(7.1)
(42.2)
$662.4
91
The following tables set forth the PBO, ABO, plan assets and instances where the ABO exceeds the plan assets for the respective years:
Actuarial value of benefit obligations
(in millions)
October 31, 2019
Projected benefit obligation
Accumulated benefit obligation
Plan assets
October 31, 2018
Projected benefit obligation
Accumulated benefit obligation
Plan assets
Plans with ABO in excess of Plan assets
October 31, 2019
Accumulated benefit obligation
Plan assets
October 31, 2018
Accumulated benefit obligation
Plan assets
Consolidated
$1,158.7
1,131.3
1,017.0
$ 662.4
638.9
594.8
United
States
$831.0
806.8
698.7
$351.9
330.4
311.9
$ 860.9
709.7
$806.8
698.9
$ 171.1
$ 28.8
94.7
—
Germany
United
Kingdom
Netherlands
Other
International
$44.1
42.6
—
$38.1
37.2
—
$42.6
—
$37.2
—
$180.8
180.8
209.8
$176.3
176.3
178.7
$ —
—
$104.6
94.2
$91.3
89.6
94.5
$85.4
84.3
90.6
$ —
—
$ —
—
$11.5
11.5
14.0
$10.7
10.7
13.6
$11.5
10.8
$ 0.5
0.5
Future benefit payments for the Company’s global plans, which reflect expected future service, as appropriate, during the next five years,
and in the aggregate for the five years thereafter, are as follows:
(in millions)
Year(s)
2020
2021
2022
2023
2024
2025-2029
Plan assets
Expected Benefit
Payments
$ 59.7
60.2
62.0
65.6
67.2
323.6
The plans’ assets consist of U.S. and non-U.S. equity securities, government and corporate bonds, cash, insurance annuity mutual funds
and not more than the allowable number of shares of the Company’s common stock. The plans’ assets include shares of the Company’s
common stock in the amount of 175,320 Class A shares and 111,270 Class B shares at October 31, 2019 and 247,504 Class A shares and
160,710 Class B shares at October 31, 2018.
The investment policy reflects the long-term nature of the plans’ funding obligations. The assets are invested to provide the opportunity
for both income and growth of principal. This objective is pursued as a long-term goal designed to provide required benefits for
participants without undue risk. It is expected that this objective can be achieved through a well-diversified asset portfolio. All equity
investments are made within the guidelines of quality, marketability and diversification mandated by the Employee Retirement Income
Security Act and/or other relevant statutes. Investment managers are directed to maintain equity portfolios at a risk level approximately
equivalent to that of the specific benchmark established for that portfolio.
The Company’s weighted average asset allocations at the measurement date and the target asset allocations by category are as follows:
Asset Category
Equity securities
Debt securities
Other
Total
2020 Target
2019 Target
2019 Actual
29%
55%
16%
100%
15%
63%
22%
100%
31%
51%
18%
100%
92
The fair value of the pension plans’ investments is presented below. The inputs and valuation techniques used to measure the fair value of
the assets are consistently applied and described in Note 9.
For the year ended October 31, 2019
(in millions)
Change in plan assets:
Consolidated
United
States
Germany
United
Kingdom
Netherlands
Other
International
Fair value of plan assets at beginning of year
$ 594.8
$311.9
$—
$178.7
Actual return on plan assets
Expenses paid
Plan participant contributions
Foreign currency impact
Employer contributions
Benefits paid out of plan
Acquisitions
140.1
(5.9)
0.2
(0.7)
22.7
(57.8)
323.6
Fair value of plan assets at end of year
$1,017.0
For the year ended October 31, 2018
(in millions)
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Expenses paid
Plan participant contributions
Foreign currency impact
Employer contributions
Benefits paid out of plan
Fair value of plan assets at end of year
Consolidated
$568.6
(8.7)
(1.7)
0.2
(6.9)
81.7
(38.4)
$594.8
93.4
(5.1)
—
—
21.0
(46.1)
323.6
$698.7
United
States
$268.6
(12.9)
(1.0)
—
—
80.0
(22.8)
$311.9
The following table presents the fair value measurements for the pension assets:
As of October 31, 2019 (in millions)
Asset Category
Mutual funds
Common stock
Cash
Corporate bonds
Government bonds
Other assets
Total Assets in the Fair Value Hierarchy
Investments Measured at Net Asset Value
Mutual funds
Insurance contracts
Common stock funds
Corporate bond funds
Government bond funds
Investments at Fair Value
As of October 31, 2018 (in millions)
Asset Category
Mutual funds
Common stock
Cash
Corporate bonds
Government bonds
Other assets
—
—
—
—
—
—
—
35.2
(0.7)
—
1.3
1.6
(6.3)
—
$90.6
10.7
—
0.2
(2.1)
—
(4.9)
—
$13.6
0.8
(0.1)
—
0.1
0.1
(0.5)
—
$—
$209.8
$94.5
$14.0
Germany
$—
—
—
—
—
—
—
$—
United
Kingdom
$188.9
3.2
(0.6)
—
(4.6)
1.6
(9.8)
$178.7
Netherlands
Other
International
$97.5
(0.1)
—
0.2
(1.8)
—
(5.2)
$90.6
$13.6
1.1
(0.1)
—
(0.5)
0.1
(0.6)
$13.6
Fair Value Measurement
Level 1
Level 2
Level 3
Total
$25.6
$137.4
$—
$ 163.0
27.6
6.5
—
—
—
—
—
134.8
39.8
0.2
—
—
—
—
—
27.6
6.5
134.8
39.8
0.2
$59.7
$312.2
$—
$ 371.9
358.5
130.2
81.5
70.8
4.1
$59.7
$312.2
$—
$1,017.0
Fair Value Measurement
Level 1
Level 2
Level 3
Total
$ 63.0
$140.7
$—
$203.7
35.9
1.9
—
—
—
—
—
26.1
17.8
0.8
—
—
—
—
—
35.9
1.9
26.1
17.8
0.8
Total Assets in the Fair Value Hierarchy
$100.8
$185.4
$—
$286.2
93
As of October 31, 2018 (in millions)
Investments Measured at Net Asset Value
Mutual funds
Insurance contracts
Common stock funds
Corporate bond funds
Investments at Fair Value
Financial statement presentation including other comprehensive income:
As of October 31, 2019
(in millions)
Unrecognized net actuarial loss
Unrecognized prior service cost (credit)
Consolidated
United
States
$ 171.8
$ 120.5
0.8
(1.0)
Germany
$ 19.2
—
Accumulated other comprehensive loss (gain) - Pre-tax
$ 172.6
$ 119.5
$ 19.2
Amounts recognized in the Consolidated Balance
Sheets consist of:
Prepaid benefit cost
Accrued benefit liability
Accumulated other comprehensive loss
Net amount recognized
As of October 31, 2018
(in millions)
Unrecognized net actuarial loss
Unrecognized prior service cost (credit)
Accumulated other comprehensive loss (gain) - Pre-tax
Amounts recognized in the Consolidated Balance
Sheets consist of:
Prepaid benefit cost
Accrued benefit liability
Accumulated other comprehensive loss (gain)
Net amount recognized
$ 35.4
$ —
$ —
(177.0)
172.6
(132.2)
119.5
(44.1)
19.2
$ 31.0
$ (12.7)
$(24.9)
Consolidated
$149.7
0.7
$150.4
United
States
$ 82.9
(1.1)
Germany
$ 13.1
—
$ 81.8
$ 13.1
$ 10.4
(78.0)
150.4
$ 82.8
$ —
$ —
(39.9)
81.8
(38.1)
13.1
$ 41.9
$(25.0)
$ 2.3
—
53.0
$55.3
United
Kingdom
$25.3
3.3
$28.6
$29.0
—
28.6
$57.6
United
Kingdom
$49.5
3.5
$53.0
(in millions)
Accumulated other comprehensive loss at beginning of year
Increase or (decrease) in accumulated other comprehensive loss
Net prior service benefit amortized
Net loss amortized
Loss recognized due to settlement
Prior service credit
Liability loss (gain)
Asset (gain) loss
Other adjustments
Increase (decrease) in accumulated other comprehensive loss
Foreign currency impact
Accumulated other comprehensive loss at year end
Fair Value Measurement
Level 1
Level 2
Level 3
Total
$ 44.6
124.0
42.7
97.3
$100.8
$185.4
$—
$594.8
Netherlands
Other
International
$ 3.1
(1.5)
$ 1.6
$ 3.2
—
1.6
$ 4.8
$ 3.7
—
$ 3.7
$ 3.2
(0.7)
3.7
$ 6.2
Netherlands
Other
International
$ 1.5
(1.7)
$(0.2)
$ 5.0
—
(0.2)
$ 4.8
$2.7
—
$2.7
$3.1
—
2.7
$5.8
October 31,
2019
October 31,
2018
$ 150.4
$168.1
0.1
(7.1)
—
—
131.0
(101.3)
—
0.2
(11.0)
(1.4)
3.3
(39.2)
34.6
(2.7)
$ 22.7
$ (16.2)
(0.5)
(1.5)
$ 172.6
$150.4
In 2020, the Company expects to record an amortization gain of $0.2 million of prior service credits from shareholders’ equity into
pension costs.
94
Supplemental Employee Retirement Plan
The Company has a supplemental employee retirement plan which is an unfunded plan providing supplementary retirement benefits
primarily to certain executives and longer-service employees. The present benefit obligation of the supplemental employee retirement plan
is included in the United States defined benefit pension plans above.
Defined contribution plans
The Company has several voluntary 401(k) savings plans that cover eligible employees. For certain plans, the Company matches a
percentage of each employee’s contribution up to a maximum percentage of base salary. Company contributions to the 401(k) plans were
$21.8 million in 2019, $9.4 million in 2018 and $8.3 million in 2017.
Post-retirement Health Care and Life Insurance Benefits
The Company has certain post-retirement unfunded health and life insurance benefit plans in the United States and South Africa. The
Company uses a measurement date of October 31 for its post-retirement benefit plans.
Benefits paid directly by the Company totaled $0.9 million, $1.0 million and $0.8 million for the years ending 2019, 2018 and 2017
respectively. Benefits paid directly by the Company during 2020 are expected to be approximately $1.3 million.
The following table presents the number of participants in the post-retirement health and life insurance benefit plan:
October 31, 2019
Active participants
Retirees and beneficiaries
October 31, 2018
Active participants
Retirees and beneficiaries
Consolidated United States
South Africa
9
1,065
3
986
6
79
Consolidated United States
South Africa
12
625
5
542
7
83
The discount rate actuarial assumptions at October 31 used to measure the year-end benefit obligations and the pension costs for the
subsequent year were as follows:
For the year ended:
October 31, 2019
October 31, 2018
The components of net periodic income for the post-retirement benefits include the following:
(in millions)
Interest cost
Amortization of prior service benefit
Recognized net actuarial gain
Net periodic income
The following table sets forth the plans’ change in benefit obligation:
(in millions)
Benefit obligation at beginning of year
Interest cost
Actuarial loss (gain)
Benefits paid
Acquisition
Benefit obligation at end of year
95
Consolidated United States
South Africa
3.52%
5.02%
2.95%
4.39%
9.20%
10.10%
Year Ended October 31,
2019
$ 0.5
(1.3)
(0.3)
$(1.1)
2018
$ 0.5
(1.4)
(0.2)
$(1.1)
2017
$ 0.5
(1.4)
(0.2)
$(1.1)
October 31,
2019
October 31,
2018
$10.7
$12.6
0.5
0.5
(1.0)
1.5
0.5
(1.4)
(1.0)
—
$12.2
$10.7
Financial statement presentation included other comprehensive income:
(in millions)
Unrecognized net actuarial gain
Unrecognized prior service credit
Accumulated other comprehensive income
October 31,
2019
October 31,
2018
$(2.8)
(0.4)
$(3.2)
$(3.6)
(1.6)
$(5.2)
The accumulated post-retirement health and life insurance benefit obligation and fair value of plan assets for the consolidated plans were
$12.2 million and zero, respectively, as of October 31, 2019 compared to $10.7 million and zero, respectively, as of October 31, 2018.
The healthcare cost trend rates on gross eligible charges are as follows:
Current trend rate
Ultimate trend rate
Year ultimate trend rate reached (South Africa)
Year ultimate trend rate reached (US)
Medical
6.3%
4.7%
2020
2026
A one-percentage point change in assumed health care cost trend rates would have the following effects:
(in millions)
Effect on total of service and interest cost components
Effect on post-retirement benefit obligation
1-Percentage-Point
Increase
1-Percentage-Point
Decrease
$ —
0.2
$ —
(0.2)
Future benefit payments, which reflect expected future service, as appropriate, during the next five years, and in the aggregate for the five
years thereafter, are expected to be as follows:
(in millions)
Year(s)
2020
2021
2022
2023
2024
2025-2029
Expected Benefit
Payments
$1.3
1.3
1.2
1.1
1.0
4.2
NOTE 13 – CONTINGENT LIABILITIES AND ENVIRONMENTAL RESERVES
Litigation-related Liabilities
The Company may become involved from time-to-time in litigation and regulatory matters incidental to its business, including
governmental investigations, enforcement actions, personal injury claims, product liability, employment health and safety matters,
commercial disputes, intellectual property matters, disputes regarding environmental clean-up costs, litigation in connection with
acquisitions and divestitures, and other matters arising out of the normal conduct of its business. The Company intends to vigorously
defend itself in such litigation. The Company does not believe that the outcome of any pending litigation will have a material adverse effect
on its consolidated financial statements.
The Company may accrue for contingencies related to litigation and regulatory matters if it is probable that a liability has been incurred
and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions can
occur, assessing contingencies is highly subjective and requires judgments about future events. The Company regularly reviews
contingencies to determine whether its accruals are adequate. The amount of ultimate loss may differ from these estimates.
The Company is currently involved in legal proceedings outside of the United States related to various wrongful termination lawsuits filed
by former employees and benefit claims filed by some existing employees of the Company’s Flexible Products & Services segment. The
lawsuits include claims for severance for employment periods prior to the Company’s ownership in the business. As of October 31, 2019
and October 31, 2018, the estimated liability recorded related to these matters were $0.6 million and $2.0 million, respectively. The
estimated liability has been determined based on the number of active cases and the settlements and rulings on previous cases. It is
reasonably possible the estimated liability could increase if additional cases are filed or adverse rulings are made.
96
Since 2017, three reconditioning facilities in the Milwaukee, Wisconsin area that are owned by Container Life Cycle Management LLC
(‘‘CLCM’’), the Company’s U.S. reconditioning joint venture company, have been subject to investigations conducted by federal, state and
local governmental agencies concerning, among other matters, potential violations of environmental laws and regulations. As a result of
these investigations, the United States Environmental Protection Agency (‘‘U.S. EPA’’) and the Wisconsin Department of Natural
Resources (‘‘WDNR’’) have issued notices of violations to the Company and CLCM regarding violations of certain federal and state
environmental
laws and regulations. The remedies being sought in these proceedings include compliance with the applicable
environmental laws and regulations as being interpreted by the U.S. EPA and WDNR and monetary sanctions. The Company has
cooperated with the governmental agencies in these investigations and proceedings. As of December 17, 2019, no material citations have
been issued or material fines assessed with respect to any violation of environmental laws and regulations. Since these proceedings are in
their investigative stage, the Company is unable to predict the outcome of these proceedings or estimate a range of reasonable possible
monetary sanctions or costs associated with any remedial actions that may be required or requested by the U.S. EPA or WDNR.
In addition, on November 8, 2017, the Company, CLCM and other parties were named as defendants in a punitive class action lawsuit
filed in Wisconsin state court concerning one of CLCM’s Milwaukee reconditioning facilities. The plaintiffs are alleging that odors from
this facility have invaded their property and are interfering with the use and enjoyment of their property and causing damage to the value
of their property. Plaintiffs are seeking compensatory and punitive damages, along with their legal fees. The Company and CLCM are
vigorously defending themselves in this lawsuit. The Company is unable to predict the outcome of this lawsuit or estimate a range of
reasonably possible losses.
Environmental Reserves
As a result of the Caraustar Acquisition, the Company acquired The Newark Group, Inc., a subsidiary of Caraustar (‘‘Newark’’), and
became subject to Newark’s Lower Passaic River environmental and litigation liability. By letters dated February 14, 2006 and June 2,
2006, the United States Environment Protection Agency (‘‘EPA’’) notified Newark of its potential liability under Section 107(a) of the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (‘‘CERCLA’’) relating to the Diamond Alkali
Superfund Site, which includes a 17-mile stretch of the Lower Passaic River that EPA has denominated the Lower Passaic River Study
Area (‘‘LPRSA’’). Newark is one of at least 70 potentially responsible parties identified in this case. The EPA alleges that hazardous
substances were released from Newark’s now-closed Newark, New Jersey recycled paperboard mill into the Lower Passaic River. The EPA
informed the Company that it may be potentially liable for response costs that the government may incur relating to the study of the
LPRSA and for unspecified natural resource damages.
In April 2014, EPA issued a Focused Feasibility Study that proposed alternatives for the remediation of the lower 8 miles of the Lower
Passaic River. On March 3, 2016, EPA issued its Record of Decision for the lower 8 miles of the Lower Passaic River, which presented a
bank-to-bank dredging remedy selected by the agency for the lower 8 miles and which EPA estimates will cost approximately
$1,380.0 million to implement. Newark is participating in an allocation process to determine its allocable share.
On June 30, 2018, Occidental Chemical Corporation (‘‘OCC’’) filed litigation in the U.S. District Court for the District of New Jersey
styled Occidental Chemical Corp. v. 21st Century Fox America, Inc., et al., Civil Action No. 2:18-CV-11273 (D.N.J.), that names Newark
and approximately 119 other parties as defendants. OCC’s Complaint alleges claims under CERCLA against all defendants for cost
recovery, contribution, and declaratory judgment for costs OCC allegedly has incurred and will incur at the Diamond Alkali Superfund
Site. The litigation is in its early stages, and the Company intends to vigorously defend itself in this litigation.
The Company has completed its initial assessment of these matters as part of our purchase price allocation. As of October 31, 2019, the
Company has accrued $11.2 million for LPRSA and the Diamond Alkali Superfund Site. It is possible that, once the Company finalizes its
purchase price allocation, it could record a material adjustment to this environmental reserve related to the acquisition. Further, it is
possible that there could be resolution of uncertainties in the future that would require the Company to record charges, which could be
material to future earnings.
As of October 31, 2019 and October 31, 2018, the Company’s environmental reserves were $18.7 million and $6.8 million, respectively.
These reserves are principally based on environmental studies and cost estimates provided by third parties, but also take into account
management estimates. The estimated liabilities are reduced to reflect the anticipated participation of other potentially responsible parties
in those instances where it is probable that such parties are legally responsible and financially capable of paying their respective shares of
relevant costs. For sites that involve formal actions subject to joint and several liabilities, these actions have formal agreements in place to
apportion the liability.
Aside from the Diamond Alkali Superfund Site, other environmental reserves of the Company as of October 31, 2019 and October 31,
2018 included $3.3 million and $3.7 million, respectively, for various European drum facilities acquired from Blagden and Van Leer;
$0.1 million and $0.2 million, respectively, for its various container life cycle management and recycling facilities acquired in 2011 and
97
2010; $0.3 million and $0.9 million, respectively, for remediation of sites no longer owned by the Company; $2.0 million and $1.0 million,
respectively, for landfill closure obligations in the Company’s Paper Packaging & Services segment; and $1.8 million and $1.0 million,
respectively, for various other facilities around the world.
The Company’s exposure to adverse developments with respect to any individual site is not expected to be material. Although
environmental remediation could have a material effect on results of operations if a series of adverse developments occur in a particular
quarter or year, the Company believes that the chance of a series of adverse developments occurring in the same quarter or year is remote.
Future information and developments will require the Company to continually reassess the expected impact of these environmental
matters.
NOTE 14 – EARNINGS PER SHARE
The Company has two classes of common stock and, as such, applies the ‘‘two-class method’’ of computing earnings per share (‘‘EPS’’) as
prescribed in ASC 260, ‘‘Earnings Per Share.’’ In accordance with this guidance, earnings are allocated in the same fashion as dividends
would be distributed. Under the Company’s articles of incorporation, any distribution of dividends in any year must be made in
proportion of one cent a share for Class A Common Stock to one and one-half cents a share for Class B Common Stock, which results in
a 40% to 60% split to Class A and B shareholders, respectively. In accordance with this, earnings are allocated first to Class A and Class B
Common Stock to the extent that dividends are actually paid, and the remainder is allocated assuming all of the earnings for the period
have been distributed in the form of dividends.
The Company calculates EPS as follows:
Basic
Class A EPS
Diluted
Class A EPS
Basic
Class B EPS
=
=
=
40% * Average Class A Shares Outstanding
40% * Average Class A Shares Outstanding +
60% * Average Class B Shares Outstanding
40% * Average Class A Shares Outstanding
40% * Average Class A Shares Outstanding +
60% * Average Class B Shares Outstanding
60% * Average Class B Shares Outstanding
40% * Average Class A Shares Outstanding +
60% * Average Class B Shares Outstanding
*
*
*
Undistributed Net Income
Average Class A Shares Outstanding
+ Class A Dividends Per Share
Undistributed Net Income
Average Diluted Class A Shares Outstanding
+ Class A Dividends Per Share
Undistributed Net Income
Average Class B Shares Outstanding
+ Class B Dividends Per Share
*
Diluted Class B EPS calculation is identical to Basic Class B calculation
The following table provides EPS information for each period, respectively:
(in millions, except per share data)
Numerator
Numerator for basic and diluted EPS –
Net income attributable to Greif
Cash dividends
Undistributed net income (loss) attributable to Greif, Inc.
Denominator
Denominator for basic EPS –
Class A common stock
Class B common stock
Denominator for diluted EPS –
Class A common stock
Class B common stock
EPS Basic
Class A common stock
Class B common stock
EPS Diluted
Class A common stock
Class B common stock
Year Ended October 31,
2019
2018
2017
$171.0
104.0
$ 67.0
$209.4
100.0
$109.4
$118.6
98.6
$ 20.0
26.2
22.0
26.2
22.0
25.9
22.0
26.0
22.0
25.8
22.0
25.8
22.0
$ 2.89
$ 4.33
$ 3.56
$ 5.33
$ 2.02
$ 3.02
$ 2.89
$ 4.33
$ 3.55
$ 5.33
$ 2.02
$ 3.02
The Class A Common Stock has no voting rights unless four quarterly cumulative dividends upon the Class A Common Stock are in
arrears. The Class B Common Stock has full voting rights. There is no cumulative voting for the election of directors.
98
Common Stock Repurchases
The Board of Directors has authorized the Company to repurchase shares of the Company’s Class A Common Stock or Class B Common
Stock or any combination of the foregoing. As of October 31, 2019 and 2018, the remaining amount of shares that may be repurchased
under this authorization were 4,703,487 and 4,703,487, respectively. There were no shares repurchased under this program from
November 1, 2017 through October 31, 2019.
The following table summarizes the Company’s Class A and Class B common and treasury shares at the specified dates:
October 31, 2019:
Class A common stock
Class B common stock
October 31, 2018:
Class A common stock
Class B common stock
Authorized Shares
Issued Shares
Outstanding Shares
Treasury Shares
128,000,000
69,120,000
42,281,920
34,560,000
26,257,943
22,007,725
16,023,977
12,552,275
128,000,000
69,120,000
42,281,920
34,560,000
25,941,279
22,007,725
16,340,641
12,552,275
The following is a reconciliation of the shares used to calculate basic and diluted earnings per share:
Class A Common Stock:
Basic shares
Assumed conversion of stock options and unvested shares
Diluted shares
Class B Common Stock:
Basic and diluted shares
No stock options were antidilutive for the years ended October 31, 2019, 2018, or 2017.
NOTE 15 – LEASES
The table below contains information related to the Company’s rent expense:
(in millions)
Rent Expense
Year Ended October 31,
2019
2018
2017
26,189,445 25,915,887 25,820,470
25,666
49,969
2,470
26,215,111 25,965,856 25,822,940
22,007,725 22,007,725 22,009,193
Year Ended October 31,
2019
$86.2
2018
$47.1
2017
$41.0
The following table provides the Company’s minimum rent commitments under operating leases in the next five years and the remaining
years thereafter:
(in millions)
Year(s):
2020
2021
2022
2023
2024
Thereafter
Total
Operating Leases Capital Leases
$ 64.8
$1.8
57.0
48.7
40.1
31.6
117.5
$359.7
1.6
1.3
1.0
0.6
0.3
$6.6
Minimum rent commitments under capital leases in 2020 and thereafter are attributable to addition of capital leases through the
Caraustar Acquisition.
NOTE 16 – BUSINESS SEGMENT INFORMATION
The Company has eight operating segments, which are aggregated into four reportable business segments: Rigid Industrial Packaging &
Services; Paper Packaging & Services; Flexible Products & Services; and Land Management. The Rigid Industrial Packaging & Services
reportable business segment is the aggregation of five operating segments: Rigid Industrial Packaging & Services – North America; Rigid
99
Industrial Packaging & Services – Latin America; Rigid Industrial Packaging & Services – Europe, Middle East and Africa; Rigid Industrial
Packaging & Services – Asia Pacific; and Rigid Industrial Packaging & Services – Tri-Sure.
Operations in the Rigid Industrial Packaging & Services segment involve the production and sale of rigid industrial packaging products,
such as steel, fibre and plastic drums, rigid intermediate bulk containers, closure systems for industrial packaging products, transit
protection products, water bottles and remanufactured and reconditioned industrial containers, and services, such as container life cycle
management, filling, logistics, warehousing and other packaging services. The Company’s rigid industrial packaging products and services
are sold to customers in industries such as chemicals, paints and pigments, food and beverage, petroleum, industrial coatings, agricultural,
pharmaceutical and mineral products, among others.
On June 11, 2019, the Company completed the Tholu Acquisition. Tholu is a Netherlands-based leader in IBC rebottling, reconditioning
and distribution. The results of Tholu are recorded within the Rigid Industrial Packaging & Services segment, which incorporates IBC
packaging services.
Operations in the Paper Packaging & Services segment involve the production and sale of containerboard, corrugated sheets, corrugated
containers and other corrugated and specialty products to customers in North America in industries such as packaging, automotive, food
and building products. The Company’s corrugated container products are used to ship such diverse products as home appliances, small
machinery, grocery products, automotive components, books and furniture, as well as numerous other applications. The Company also
produces and sells coated and uncoated recycled paperboard, along with tubes and cores and a diverse mix of specialty products to
customers in North America. In addition, the segment is involved in purchase and sale of recycled fiber.
On February 11, 2019, the Company completed the Caraustar Acquisition. Caraustar produces coated and uncoated recycled paperboard,
which is used in a variety of applications that include industrial products (tubes and cores, construction products, protective packaging,
and adhesives) and consumer packaging products (folding cartons, set-up boxes, and packaging services that complement the Company’s
Paper Packaging & Services specialty portfolio. The results of Caraustar are recorded within the Paper Packaging & Services segment while
the Company evaluates the impact of the Caraustar Acquisition on its reportable business segments.
Operations in the Flexible Products & Services segment involve the production and sale of flexible intermediate bulk containers and
related services on a global basis. The Company’s flexible intermediate bulk containers are constructed from a polypropylene-based woven
fabric that is produced at its production sites, as well as sourced from strategic regional suppliers. Flexible products are sold to customers
and in market segments similar to those of the Company’s Rigid Industrial Packaging & Services segment. The Company’s flexible
products are sold to customers in industries such as agricultural, construction and food industries.
Operations in the Land Management segment involve the management and sale of timber and special use properties from approximately
251,000 acres of timber properties in the southeastern United States. Land Management’s operations focus on the active harvesting and
regeneration of its timber properties to achieve sustainable long-term yields. While timber sales are subject to fluctuations, the Company
seeks to maintain a consistent cutting schedule, within the limits of market and weather conditions. The Company also sells, from time to
time, timberland and special use properties, which consists of surplus properties, HBU properties, and development properties.
In order to maximize the value of timber property, the Company continues to review its current portfolio and explore the development of
certain of these properties. This process has led the Company to characterize property as follows:
•
Surplus property, meaning land that cannot be efficiently or effectively managed by the Company, whether due to parcel
size, lack of productivity, location, access limitations or for other reasons.
• HBU property, meaning land that in its current state has a higher market value for uses other than growing and selling
timber.
• Development property, meaning HBU land that, with additional investment, may have a significantly higher market value
than its HBU market value.
•
Timberland, meaning land that is best suited for growing and selling timber.
The disposal of surplus and HBU property is reported in the consolidated statements of income under ‘‘gain on disposals of properties,
plants and equipment, net’’ and the sale of development property is reported under ‘‘net sales’’ and ‘‘cost of products sold.’’ All HBU,
development and surplus property is used by the Company to productively grow and sell timber until sold.
Whether timberland has a higher value for uses other than growing and selling timber is a determination based upon several variables, such
as proximity to population centers, anticipated population growth in the area, the topography of the land, aesthetic considerations,
including access to water, the condition of the surrounding land, availability of utilities, markets for timber and economic considerations
both nationally and locally. Given these considerations, the characterization of land is not a static process, but requires an ongoing review
and re-characterization as circumstances change.
100
The following tables present net sales disaggregated by geographic area for each reportable segment for the year ended October 31, 2019:
(in millions)
Rigid Industrial Packaging & Services
Paper Packaging & Services
Flexible Products & Services
Land Management
Total net sales
Year Ended October 31, 2019
Europe, Middle
East and Africa
Asia Pacific and
Other Americas
$1,118.0
$466.3
—
232.4
—
21.2
29.4
—
Total
$2,490.6
1,780.0
297.5
26.9
United States
$ 906.3
1,758.8
35.7
26.9
$2,727.7
$1,350.4
$516.9
$4,595.0
The following tables present net sales disaggregated by geographic area for each reportable segment for the year ended October 31, 2018:
(in millions)
Rigid Industrial Packaging & Services
Paper Packaging & Services
Flexible Products & Services
Land Management
Total net sales
Year Ended October 31, 2018
United States
Europe, Middle
East and Africa
Asia Pacific and
Other Americas
Total
$ 960.5
$1,147.7
$515.4
$2,623.6
898.5
34.0
27.5
—
263.2
—
—
27.0
—
898.5
324.2
27.5
$1,920.5
$1,410.9
$542.4
$3,873.8
The following segment information is presented for each of the three years in the period ended October 31:
(in millions)
Operating profit (loss):
Rigid Industrial Packaging & Services
Paper Packaging & Services
Flexible Products & Services
Land Management
Total operating profit
Depreciation, depletion and amortization expense:
Rigid Industrial Packaging & Services
Paper Packaging & Services
Flexible Products & Services
Land Management
Total depreciation, depletion and amortization expense
Capital expenditures:
Rigid Industrial Packaging & Services
Paper Packaging & Services
Flexible Products & Services
Land Management
Total segment
Corporate and other
Total capital expenditures
Assets:
Rigid Industrial Packaging & Services
Paper Packaging & Services
Flexible Products & Services
Land Management
Total segment
Corporate and other
Total assets
101
2019
2018
2017
$ 179.6
$ 183.2
$ 190.1
184.3
25.3
9.9
158.3
19.4
9.6
93.5
5.8
10.1
$ 399.1
$ 370.5
$ 299.5
$
76.3
$
119.3
6.2
4.3
81.2
34.2
6.9
4.6
$
77.0
31.9
7.0
4.6
$ 206.1
$ 126.9
$ 120.5
$
53.6
81.2
4.8
0.2
139.8
17.1
$
76.8
39.2
3.7
0.4
120.1
19.0
$
57.6
23.2
2.6
0.5
83.9
16.2
$ 156.9
$ 139.1
$ 100.1
$2,006.3
$1,963.0
$1,976.7
2,686.3
148.2
348.7
5,189.5
237.2
474.3
153.9
347.2
2,938.4
256.4
459.8
163.2
345.4
2,945.1
287.2
$5,426.7
$3,194.8
$3,232.3
The following table presents properties, plants and equipment, net by geographic region:
(in millions)
Properties, plants and equipment, net:
United States
Europe, Middle East, and Africa
Asia Pacific and other Americas
Total properties, plants and equipment, net
NOTE 17 – COMPREHENSIVE INCOME (LOSS)
October 31,
2019
October 31,
2018
$1,295.8
$ 796.3
277.1
117.4
276.9
118.7
$1,690.3
$1,191.9
The following table provides the roll forward of accumulated other comprehensive loss for the year ended October 31, 2019:
(in millions)
Balance as of October 31, 2018
Other Comprehensive Loss
Balance as of October 31, 2019
Foreign
Currency
Translation
$(292.8)
(5.2)
$(298.0)
Derivative
Financial
Instruments
Minimum
Pension Liability
Adjustment
$ 13.4
(26.1)
$(12.7)
$ (97.7)
(25.3)
$(123.0)
The following table provides the roll forward of accumulated other comprehensive loss for the year ended October 31, 2018:
(in millions)
Balance as of October 31, 2017
Other Comprehensive Income (Loss)
Balance as of October 31, 2018
Foreign
Currency
Translation
Derivative
Financial
Instruments
Minimum
Pension Liability
Adjustment
$(249.3)
(43.5)
$(292.8)
$ 5.1
8.3
$13.4
$(114.0)
16.3
$ (97.7)
The components of accumulated other comprehensive income above are presented net of tax, as applicable.
NOTE 18 – QUARTERLY FINANCIAL DATA (UNAUDITED)
The quarterly results of operations for 2019 and 2018 are shown below:
Accumulated
Other
Comprehensive
Loss
$(377.1)
(56.6)
$(433.7)
Accumulated
Other
Comprehensive
Loss
$(358.2)
(18.9)
$(377.1)
(in millions, except per share amounts)
Net sales
Gross profit
Net income(1)
Net income attributable to Greif, Inc.(1)
Earnings per share
Basic:
Class A Common Stock
Class B Common Stock
Diluted:
Class A Common Stock
Class B Common Stock
Earnings per share were calculated using the following number of shares:
Basic:
Class A Common Stock
Class B Common Stock
Diluted:
Class A Common Stock
Class B Common Stock
January 31,
April 30,
July 31,
October 31,
2019
$
$
$
$
$
$
$
$
897.0
172.8
35.8
29.7
0.51
0.75
0.51
0.75
$
$
$
$
$
$
$
$
1,213.3
248.7
21.1
13.6
0.23
0.34
0.23
0.34
$
$
$
$
$
$
$
$
1,252.6
279.4
67.5
62.7
1.06
1.59
1.06
1.59
$
$
$
$
$
$
$
$
1,232.1
259.0
69.8
65.0
1.09
1.65
1.09
1.65
25,991,433
26,250,460
26,257,943
26,257,943
22,007,725
22,007,725
22,007,725
22,007,725
25,991,433
26,255,112
26,257,943
26,360,148
22,007,725
22,007,725
22,007,725
22,007,725
102
(in millions, except per share amounts)
Market price (Class A Common Stock):
High
Low
Close
Market price (Class B Common Stock):
High
Low
Close
January 31,
April 30,
July 31,
October 31,
2019
$49.28
$31.22
$37.67
$50.55
$36.87
$43.18
$41.49
$37.10
$38.59
$48.57
$42.48
$47.23
$39.15
$30.74
$34.57
$47.69
$41.10
$42.39
$40.59
$30.05
$39.17
$48.76
$37.96
$47.03
(1) The Company recorded the following significant transactions during the fourth quarter of 2019: (i) acquisition-related costs of $7.5 million; (ii) restructuring charges
of $5.8 million; (iii) non-cash asset impairment charges of $5.7 million; (v) gain on disposals of properties, plants, equipment, net of $(6.8) million; and (vi) loss on
disposals of businesses, net of $0.7 million. See the Company’s Form 10-Q filings with the SEC for prior quarter significant transactions or trends.
(in millions, except per share amounts)
Net sales
Gross profit
Net income(1)
Net income attributable to Greif, Inc.(1)
Earnings per share
Basic:
Class A Common Stock
Class B Common Stock
Diluted:
Class A Common Stock
Class B Common Stock
Earnings per share were calculated using the following number of shares:
Basic:
Class A Common Stock
Class B Common Stock
Diluted:
Class A Common Stock
Class B Common Stock
Market price (Class A Common Stock):
High
Low
Close
Market price (Class B Common Stock):
High
Low
Close
January 31
April 30
July 31
October 31
2018
$
$
$
$
$
$
$
$
905.7
171.7
60.1
56.5
0.96
1.44
0.96
1.44
$
$
$
$
$
$
$
$
968.3
195.3
51.9
45.1
0.77
1.14
0.77
1.14
$
$
$
$
$
$
$
$
1,012.1
217.1
72.0
67.7
1.15
1.72
1.15
1.72
$
$
$
$
$
$
$
$
987.7
204.8
45.5
40.1
0.68
1.03
0.67
1.03
25,845,758
25,934,680
25,941,279
25,941,279
22,007,725
22,007,725
22,007,725
22,007,725
25,845,758
25,934,680
25,941,279
26,139,524
22,007,725
22,007,725
22,007,725
22,007,725
$
$
$
$
$
$
62.94
49.68
57.76
68.71
55.90
61.60
$
$
$
$
$
$
59.09
48.80
57.63
63.52
52.07
61.56
$
$
$
$
$
$
60.89
51.71
54.03
64.02
56.01
57.20
$
$
$
$
$
$
58.82
44.72
47.30
63.50
48.35
51.36
(1) The Company recorded the following significant transactions during the fourth quarter of 2018: (i) restructuring charges of $4.8 million; (ii) non-cash asset
impairment charges of $4.2 million; (iii) pension settlement charges of $0.9 million; (iv) loss on disposals of properties, plants, equipment, net of $1.9 million; and
(v) gain on disposals of businesses, net of ($0.9) million. See the Company’s Form 10-Q filings with the SEC for prior quarter significant transactions or trends.
Shares of the Company’s Class A Common Stock and Class B Common Stock are listed on the New York Stock Exchange where the
symbols are GEF and GEF.B, respectively.
As of December 13, 2019, there were 386 stockholders of record of the Class A Common Stock and 75 stockholders of record of the
Class B Common Stock.
103
NOTE 19 – REDEEMABLE NONCONTROLLING INTERESTS
Mandatorily Redeemable Noncontrolling Interests
The terms of the joint venture agreement for one joint venture within the Rigid Industrial Packaging & Services segment include
mandatory redemption by the Company, in cash, of the noncontrolling interest holders’ equity at a formulaic price after the expiration of
a lockout period specific to each noncontrolling interest holder. The redemption features cause the interest to be classified as a mandatorily
redeemable instrument under the accounting guidance, and this interest is included at the current redemption value each period in long-
term or short-term liabilities of the Company, as applicable. The impact of marking to redemption value at each period end is recorded in
interest expense. The Company has a contractual obligation to redeem the outstanding equity interest of each remaining partner in 2021
and 2022, respectively.
The following table provides a rollforward of the mandatorily redeemable noncontrolling interest for the years ended October 31, 2018
and 2019:
(in millions)
Balance as of October 31, 2017
Current period mark to redemption value
Balance as of October 31, 2018
Current period mark to redemption value
Balance as of October 31, 2019
Redeemable Noncontrolling Interests
Mandatorily Redeemable
Noncontrolling Interest
$ 9.2
(0.6)
8.6
(0.2)
$ 8.4
Redeemable noncontrolling interests related to two joint ventures within the Paper Packaging & Services segment and one joint venture
within the Rigid Industrial Packaging & Services segment are held by the respective noncontrolling interest owners. The holders of these
interests share in the profits and losses of these entities on a pro-rata basis with the Company. However, the noncontrolling interest
owners have the right to put all or a portion of those noncontrolling interests to the Company at a formulaic price after a set period of
time, specific to each agreement.
On November 15, 2018, one of the noncontrolling interest owners related to one of the Paper Packaging & Services joint ventures
exercised their put option for all of their ownership interests. As of October 31, 2019, the Company made a payment for approximately
$10.1 million to the noncontrolling interest owner. The Company also entered into a Stock Purchase Agreement with another
noncontrolling interest owner related to the same Paper Packaging & Services joint venture, pursuant to which the owner received a
$1.8 million payment for certain of its equity.
Redeemable noncontrolling interests are reflected in the consolidated balance sheets at redemption value. The following table provides the
rollforward of the redeemable noncontrolling interest for the years ended October 31, 2018 and 2019:
(in millions)
Balance as of October 31, 2017
Current period mark to redemption value
Redeemable noncontrolling interest share of income and other
Dividends to redeemable noncontrolling interest and other
Balance as of October 31, 2018
Current period mark to redemption value
Repurchase of redeemable shareholder interest
Redeemable noncontrolling interest share of income and other
Dividends to redeemable noncontrolling interest and other
Balance as of October 31, 2019
Redeemable
Noncontrolling Interest
$ 31.5
(0.5)
3.7
0.8
35.5
(4.9)
(11.9)
2.3
0.3
$ 21.3
104
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Greif, Inc. and subsidiary companies
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Greif, Inc. and subsidiary companies (the ‘‘Company’’) as of
October 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income (loss), changes in shareholders’
equity, and cash flows for each of the three years in the period ended October 31, 2019, and the related notes and the financial statement
schedule listed in the Index at Item 15 (collectively, the ‘‘financial statements’’). In our opinion, the financial statements present fairly, in
all material respects, the consolidated financial position of the Company as of October 31, 2019 and 2018, and the results of its operations
and its cash flows for each of the three years in the period ended October 31, 2019, in conformity with accounting principles generally
accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the Company’s internal control over financial reporting as of October 31, 2019, based on criteria established in Internal Control-Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
December 18, 2019, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to
the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Acquisitions-Caraustar-Customer Relationship Intangibles and Properties, Plants, and Equipment - Refer to Note 2 to the Financial
Statements
Critical Audit Matter Description
The Company completed the acquisition of Caraustar Industries, Inc. and its subsidiaries (‘‘Caraustar’’) on February 11, 2019 for cash
consideration of approximately $1,834.9 million. The Company accounted for this transaction under the acquisition method of
accounting for business combinations. Under this approach, the Company allocated the fair value of purchase consideration transferred to
the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the date of the acquisition,
including customer relationship intangibles of approximately $708.0 million and properties, plants, and equipment of approximately
$508.9 million. The fair values assigned are based on estimates and assumptions determined by management with the assistance of third
party specialists.
Management estimated the fair value of the customer relationship intangibles based on estimates and judgments regarding expectations for
the future after-tax cash flows arising from the revenue of the customer relationships that existed on the acquisition date over their
estimated lives, including the probability of expected future contract renewals and revenue, less a contributory asset charge, all of which is
105
discounted to present value. The method for determining the fair value for the properties, plants, and equipment depended on the type of
asset and involved management making significant estimates related to assumptions.
We identified the valuation of the customer relationship intangibles and properties, plants, and equipment for Caraustar as a critical audit
matter because of the significant estimates and assumptions management made to estimate the fair values of these assets for purposes of the
preliminary purchase price allocation. This required a high degree of auditor judgment and an increased extent of effort, including the need
to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s valuation models
and assumptions.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to testing the valuation models and assumptions for the customer relationship intangibles and properties,
plants, and equipment included the following, among others:
Customer Relationship Intangibles
• We tested the effectiveness of controls over the valuation of the customer relationship intangibles, including management’s
controls over forecasts of future after-tax cash flows and selection of the discount rate.
• We evaluated the reasonableness of management’s forecasts of future after-tax cash flows by comparing the projections to
Caraustar’s historical results and peer company historical results.
• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and the
following significant valuation assumptions:
○
○
○
Long-term revenue growth rate through industry and macro-economic benchmarking
Probability of expected future revenues by evaluating historical customer attrition rates and the competitive
landscape in the industry
Contributory asset charge by analyzing the application of the asset charges, including the required rate of return
and estimated fair value of each contributory asset
○ Discount rate by developing a range of independent estimates and compared those to the amounts selected by
management.
Properties, Plants, and Equipment
• We tested the effectiveness of controls over the valuation of the properties, plants, and equipment, including management’s
controls over significant assumptions.
• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and the
following significant valuation assumptions:
○
○
Replacement costs by comparing cost estimates to industry data for individual assets
Cost indices by comparing these factors to published indices commonly used by appraisers of properties, plants,
and equipment
○ Depreciation factors through analyzing the age/life method applied in comparison to published physical
deterioration curves
○ Obsolescence factors applied based on generally accepted valuation practices.
Goodwill-Rigid Industrial Packaging & Services Asia Pacific Reporting Unit - Refer to Note 5 to the Financial Statements
Critical Audit Matter Description
The Company’s evaluation of goodwill for impairment involves comparing the carrying value of each reporting unit to the estimated fair
value of the reporting unit. The Company’s determinations of estimated fair value of the reporting units are based on both the market
approach and a discounted cash flow analysis utilizing the income approach. The determination of the estimated fair value using the
market approach and the discounted cash flow model requires management to make significant estimates and assumptions related to the
valuation of the reporting unit. Changes in these assumptions could have a significant impact on either the fair value of the reporting unit,
the amount of any goodwill impairment charge, or both. The Company’s consolidated goodwill balance was $1.5 billion as of October 31,
106
2019, of which $88.6 million was allocated to the Rigid Industrial Packaging & Services-Asia Pacific (‘‘RIPS APAC’’) reporting unit,
which is the reporting unit that exhibits significant sensitivity to changes in estimates and assumptions given the limited cushion between
the carrying value and estimated fair value. The estimated fair value of the RIPS APAC reporting unit exceeded its carrying value by 32%
as of the measurement date of August 1, 2019 and, therefore, no impairment was recognized.
We identified the valuation of goodwill for RIPS APAC as a critical audit matter because of the significant estimates and assumptions
management made to estimate its fair value and the highly sensitive nature of RIPS APAC’s operations to changes in demand. This
required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when
performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to testing the valuation of the RIPS APAC reporting unit focused on the following key assumptions:
valuation multiples, revenue growth rates, and the selection of the discount rate, and included the following, among others:
• We tested the effectiveness of internal controls over management’s goodwill impairment evaluation, including those over the
determination of the fair value of the RIPS APAC reporting unit, such as controls related to management’s selection of the
valuation multiple, revenue growth rates, and discount rate
• We performed a sensitivity analysis of the revenue growth rates, which included the impact of the revenue growth rates on
cash flows
• We evaluated the reasonableness of management’s revenue growth rates used in the discounted cash flow model by
comparing the revenues to historical amounts, historical macroeconomic benchmarking, and future forecasted macro-
economic benchmarking
• With the assistance of our fair value specialists, we evaluated the reasonableness of (1) the valuation methodology, (2) the
long-term revenue growth rate through macroeconomic benchmarking, and (3) the discount rate and valuation multiple by
developing a range of independent estimates and comparing those to the amounts selected by management.
/s/ Deloitte & Touche LLP
Columbus, Ohio
December 18, 2019
We have served as the Company’s auditor since 2014.
107
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
ITEM 9A. CONTROLS AND PROCEDURES
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Disclosure Controls and Procedures
We completed the following two acquisitions during 2019: the Caraustar Acquisition on February 11, 2019; and the Tholu Acquisition
on June 11, 2019. The scope of our management’s assessment of the effectiveness of our internal controls over financial reporting for the
year ended October 31, 2019, will not include the Caraustar Acquisition or the Tholu Acquisition. This exclusion is allowed in accordance
with the Securities and Exchange Commission’s general guidance that an assessment of a recently acquired business may be omitted from
the reporting company’s scope in the year of acquisition.
With the participation of our principal executive officer and principal financial officer, our management has evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the
‘‘Exchange Act’’)), as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and
principal financial officer have concluded that, as of the end of the period covered by this report:
•
•
Information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange
Commission;
Information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and
communicated to our management, including our principal executive officer and principal financial officer, as appropriate,
to allow timely decisions regarding required disclosure; and
• Our disclosure controls and procedures are effective.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Internal control
over financial reporting is the process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Our internal control over financial reporting includes those policies and procedures that:
•
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of our assets;
provide reasonable assurance that transactions are recorded as necessary to allow for the preparation of financial statements
in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of
our management and directors;
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on our consolidated financial statements; and
provide reasonable assurance as to the detection of fraud.
All internal control systems have inherent limitations, including the possibility of circumvention and overriding of controls, and therefore
can provide only reasonable assurance of achieving the designed control objectives. The Company’s internal control system is supported by
written policies and procedures, contains self-monitoring mechanisms, and is audited by the internal audit function. Appropriate actions
are taken by management to correct deficiencies as they are identified. As allowed by the Securities and Exchange Commission’s general
guidance, management excluded Caraustar and Tholu, which were acquired in 2019, from its assessment of internal control over financial
reporting. These acquisitions constituted approximately 29% of total assets and approximately 21% of revenue, included in our
consolidated financial statements as of and for the year ended October 31, 2019.
108
As of October 31, 2019, management has assessed the effectiveness of the Company’s internal control over financial reporting. In making
this assessment, we used the criteria described in ‘‘Internal Control - Integrated Framework (2013)’’ issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on our assessment, management concluded that the Company’s internal
control over financial reporting was effective as of October 31, 2019.
Our internal control over financial reporting as of October 31, 2019, has been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report, which appears herein.
109
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Greif, Inc. and subsidiary companies
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Greif, Inc. and subsidiaries (the ‘‘Company’’) as of October 31, 2019,
based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of October 31, 2019, based on the criteria established in Internal Control-Integrated Framework (2013) issued by
COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the consolidated financial statements as of and for the year ended October 31, 2019, of the Company and our report dated December 18,
2019, expressed an unqualified opinion on those financial statements.
As described in Management’s Annual Report on Internal Control over Financial Reporting, management excluded from its assessment
the internal control over financial reporting at Caraustar Industries, Inc. and Tholu B.V., and their subsidiaries, which were acquired on
February 11, 2019 and June 11, 2019, respectively. These acquisitions constituted approximately 29% of total assets and approximately
21% of total revenues of the consolidated financial statement amounts as of and for the fiscal year ended October 31, 2019. Accordingly,
our audit did not include the internal control over financial reporting at Caraustar Industries, Inc. and Tholu B.V., and their subsidiaries.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on
our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Columbus, Ohio
December 18, 2019
110
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding our directors required by Items 401(a) and (d)-(f) of Regulation S-K will be found under the caption ‘‘Proposal
Number 1 – Election of Directors’’ in the 2020 Proxy Statement, which information is incorporated herein by reference. Information
regarding our executive officers required by Items 401(b) and (d)-(f) of Regulation S-K will be contained under the caption ‘‘Executive
Officers of the Company’’ in the 2020 Proxy Statement, which information is incorporated herein by reference.
We have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. As of
the date of this filing, the members of the Audit Committee were Bruce A. Edwards, John F. Finn, John W. McNamara, and Michael J.
Gasser. Mr. Edwards is Chairperson of the Audit Committee. Our Board of Directors has determined that Mr. Edwards is an ‘‘audit
committee financial expert,’’ as that term is defined in Item 401(h)(2) of Regulation S-K, and ‘‘independent,’’ as that term is defined in
Rule 10A-3 of the Exchange Act.
Information regarding the filing of reports of ownership under Section 16(a) of the Exchange Act by our officers and directors and persons
owning more than 10 percent of a registered class of our equity securities required by Item 405 of Regulation S-K will be found under the
caption ‘‘Corporate Governance—Stock Holdings of Certain Owners and Management—Section 16(a) Beneficial Ownership Reporting
Compliance’’ in the 2020 Proxy Statement, which information is incorporated herein by reference.
Information concerning the procedures by which stockholders may recommend nominees to our Board of Directors will be found under
the caption ‘‘Corporate Governance—Board of Directors—Director Nominations’’ in the 2020 Proxy Statement. There has been no
material change to the nomination procedures we previously disclosed in the proxy statement for our 2019 annual meeting of
stockholders.
Our Board of Directors has adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal
accounting officer, controller and persons performing similar functions. This code of ethics is posted on our Internet Web site at
www.greif.com under ‘‘Investors—Corporate Governance—Governance Documents.’’ Copies of this code of ethics are also available to
any person, without charge, by making a written request to us. Requests should be directed to Greif, Inc., Attention: Corporate Secretary,
425 Winter Road, Delaware, Ohio 43015. Any amendment (other than any technical, administrative or other non-substantive
amendment) to, or waiver from, a provision of this code will be posted on our website described above within four business days following
its occurrence.
ITEM 11. EXECUTIVE COMPENSATION
The 2020 Proxy Statement will contain information regarding the following matters: information regarding executive compensation
required by Item 402 of Regulation S-K will be found under the caption ‘‘Compensation Discussion and Analysis’’; information required
by Item 407(e)(4) of Regulation S-K will be found under the caption ‘‘Compensation Committee Interlocks and Insider Participation,’’
and information required by Item 407(e)(5) of Regulation S-K will be found under the caption ‘‘Compensation Committee Report.’’ This
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information regarding security ownership of certain beneficial owners and management required by Item 403 of Regulation S-K will be
found under the caption ‘‘Stock Holdings of Certain Owners and Management’’ in the 2020 Proxy Statement, which information is
incorporated herein by reference.
Information regarding equity compensation plan information required by Item 201(d) of Regulation S-K will be found under the caption
‘‘Executive Compensation—Equity Compensation Plan Information’’ in the 2020 Proxy Statement, which information is incorporated
herein by reference.
111
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information regarding certain relationships and related transactions required by Item 404 of Regulation S-K will be found under the
caption ‘‘Certain Relationships and Related Transactions’’ in the 2020 Proxy Statement, which information is incorporated herein by
reference.
Information regarding the independence of our directors required by Item 407(a) of Regulation S-K will be found under the caption
‘‘Corporate Governance – Director Independence’’ in the 2020 Proxy Statement, which information is incorporated herein by reference.
112
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information regarding principal accounting fees and services required by Item 9(e) of Schedule 14A will be found under the caption
‘‘Independent Registered Public Accounting Firm’’ in the 2020 Proxy Statement, which information is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBITS
Exhibit No.
2.2
3.1
3.2
3.3
3.4
3.5
3.6
3.7
4.1
4.2
4.3
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
Description of Exhibit
Agreement and Plan of Merger, dated December 20, 2018,
by and among Paperboard Parent Inc., Greif Packaging
LLC, Greif USA II LLC and Peach Representative LLC.
Amended and Restated Certificate of Incorporation of
Greif, Inc.
Amendment to Amended and Restated Certificate of
Incorporation of Greif, Inc.
Amendment to Amended and Restated Certificate of
Incorporation of Greif, Inc.
Second Amended and Restated By-Laws of Greif, Inc.
Amendment of Second Amended and Restated By-Laws of
Greif, Inc. (effective November 1, 2011).
Amendment of Second Amended and Restated By-Laws of
Greif, Inc. (effective September 3, 2013).
Amendment to Second Amended and Restated By-Laws of
Greif, Inc. (effective January 9, 2019).
Indenture dated as of July 15, 2011, among Greif
Luxembourg Finance S.C.A., as Issuer, Greif, Inc. as
Guarantor, The Bank of New York Mellon, as Trustee and
Principal Paying Agent, and The Bank of New York
Mellon (Luxembourg) S.A., as Transfer Agent, Registrar
and Luxembourg Paying Agent, regarding 7.375% Senior
Notes due 2021.
Indenture, dated as of February 11, 2019, among Greif,
Inc., as issuer, each of the United States subsidiaries of
Greif, Inc. party thereto, as guarantors, and U.S. Bank
National Association, as trustee, regarding 6.50% Senior
Notes due 2027.
Description of the Registrant’s Securities Registered under
Section 12 of the Securities Exchange Act of 1934.
Greif, Inc. Amended and Restated Directors’ Deferred
Compensation Plan.
Supplemental Retirement Benefit Agreement.
Second Amended and Restated Supplemental Executive
Retirement Plan.
Greif, Inc. Amended and Restated Long-Term Incentive
Plan.
Amendment No. 1 to Greif, Inc. Amended and Restated
Long-Term Incentive Plan.
Amendment No. 2 to Greif, Inc. Amended and Restated
Long-Term Incentive Plan.
Greif, Inc. Performance-Based Incentive Compensation
Plan.
If Incorporated by Reference,
Document with which Exhibit was Previously Filed with SEC
Current Report on Form 8-K/A dated December 20, 2018,
File No. 001-00566 (see Exhibit 2.2 therein).
Annual Report on Form 10-K for the fiscal year ended
October 31, 1997, File No. 001-00566 (see Exhibit 3(a)
therein).
Definitive Proxy Statement on Form 14A dated January 27,
2003, File No. 001-00566 (see Exhibit A therein).
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 2007, File No. 001-00566 (see Exhibit 3.1 therein).
Current Report on Form 8-K dated August 29, 2008, File
No. 001-00566 (see Exhibit 99.2 therein).
Current Report on Form 8-K dated November 2, 2011, File
No. 001-00566 (see Exhibit 99.2 therein).
Current Report on Form 8-K dated September 6, 2013, File
No. 001-00566 (see Exhibit 99.3 therein).
Current Report on Form 8-K dated January 10, 2019, File
No. 001-00566 (see Exhibit 3.1 therein).
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 31, 2011, File No. 001-00566 (see Exhibit 99.3 therein).
Current Report on Form 8-K dated February 11, 2019, File
No. 001-00566 (see Exhibit 4.1 therein).
Contained herein.
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 2006, File No. 001-00566 (see Exhibit 10.2 therein).
Annual Report on Form 10-K for the fiscal year ended
October 31, 1999, File No. 001-00566 (see
Exhibit 10(i) therein).
Annual Report on Form 10-K for fiscal year ended
October 31, 2007, File No. 001-00566 (see Exhibit 10(f)
therein).
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 2006, File No. 001-00566 (see Exhibit 10.1 therein).
Annual Report on Form 10-K for the fiscal year ended
October 31, 2014, File No. 001-00566 (See Exhibit 10.8
therein).
Annual Report on Form 10-K for the fiscal year ended
October 31, 2018, File No. 001-00566 (See Exhibit 10.8
therein).
Definitive Proxy Statement on Form 14A dated January 25,
2002, File No. 001-00566 (see Exhibit B therein).
113
If Incorporated by Reference,
Document with which Exhibit was Previously Filed with SEC
Annual Report on Form 10-K for the fiscal year ended
October 31, 2011, File No. 001-00566 (See
Exhibit 10(i) therein).
Annual Report on Form 10-K for the fiscal year ended
October 31, 2013, File No. 001-00566 (See Exhibit 10.10
therein).
Annual Report on Form 10-K for the fiscal year ended
October 31, 2017, File No. 001-00566 (See Exhibit 10.11
therein).
Definitive Proxy Statement on Form DEF 14A dated
January 26, 2001, File No. 001-00566 (see Exhibit A therein).
Annual Report on Form 10-K for the fiscal year ended
October 31, 2011, File No. 001-00566 (See Exhibit 10(k)
therein).
Annual Report on Form 10-K for the fiscal year ended
October 31, 2015, File No. 001-00566 (See Exhibit 10.13.2
therein).
Definitive Proxy Statement on Form DEF 14A, File No. 001-
00566, filed with the Securities and Exchange Commission on
January 21, 2005 (see Exhibit A therein).
Registration Statement on Form S-8, File No. 333-123133
(see Exhibit 4(c) therein).
Registration Statement on Form S-8, File No. 333-123133
(see Exhibit 4(d) therein).
Quarterly Report on Form 10-Q for the fiscal quarter ended
January 31, 2016, File No. 001-00566 (see Exhibit 10.1
therein).
Quarterly Report on Form 10-Q for the fiscal quarter ended
January 31, 2008, File No. 001-00566 (see Exhibit 10(cc)
therein).
Current Report on Form 8-K dated February 11, 2019, File
No. 001-00566 (see Exhibit 10.1 therein).
Quarterly Report on Form 10-Q for the fiscal quarter ended
July 31, 2010, File No. 001-00566 (see Exhibit 10.2 therein).
Annual Report on Form 10-K for the fiscal year ended
October 31, 2010, File No. 001-00566 (see Exhibit 10(ee)
therein).
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 2013, File No. 001-00566 (see Exhibit 10.1 therein).
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 2017, File No. 001-00566 (see Exhibit 10.1 therein).
Exhibit No.
10.8*
Description of Exhibit
Amendment No. 1 to Greif, Inc. Performance-Based
Incentive Compensation Plan.
10.9*
10.10*
10.11*
10.12*
10.13*
Amendment No. 2 to Greif, Inc. Performance-Based
Incentive Compensation Plan.
Amendment No. 3 to Greif, Inc. Performance-Based
Incentive Compensation Plan.
Greif, Inc. 2001 Management Equity Incentive and
Compensation Plan.
Amendment No. 1 to Greif, Inc. 2001 Management
Equity Incentive and Compensation Plan.
Amendment No. 2 to Greif, Inc. 2001 Management
Equity Incentive and Compensation Plan.
10.14*
2005 Outside Directors Equity Award Plan.
10.15*
10.16*
10.17*
Form of Stock Option Award Agreement for the 2005
Outside Directors Equity Award Plan of Greif, Inc.
Form of Restricted Share Award Agreement for the 2005
Outside Directors Equity Award Plan of Greif, Inc.
Amendment No. 1 to Greif, Inc. 2005 Outside Directors
Equity Award Plan.
10.18*
Greif, Inc. Nonqualified Deferred Compensation Plan.
10.19
10.20
10.21
10.22*
10.23
Amended and Restated Credit Agreement, dated as of
February 11, 2019, among Greif, Inc., Greif Packaging
LLC, Greif International Holding Ltd., Greif International
Holding B.V., and Greif Luxembourg Holding S.à.r.l., as
borrowers, each financial institution party thereto, as
lenders, Wells Fargo Securities, LLC, JPMorgan Chase
Bank, National Association, Goldman Sachs Bank USA,
and Merrill Lynch, Pierce, Fenner & Smith Incorporated,
and their respective affiliates as joint lead arrangers and
joint book managers, and JPMorgan Chase Bank, as
administrative agent for the lenders.
Formation Agreement dated as of June 14, 2010, by and
among Greif, Inc. and Greif International Holding Supra
C.V. and National Scientific Company Limited and
Dabbagh Group Holding Company Limited.
Joint Venture Agreement dated as of September 29, 2010,
by and among Greif, Inc. and Greif International Holding
Supra C.V. and Dabbagh Group Holding Company
Limited and National Scientific Company Limited.
Defined Contribution Supplemental Executive Retirement
Plan.
Amendment Agreement dated April 18, 2017, by and
among Coöperatieve Centrale Raiffeisen-Boerenleenbank
B.A. Trading as Rabobank London, Coöperatieve Centrale
Raiffeisen-Boerenleenbank B.A., Nieuw Amsterdam
Receivables Corporation S. À.R.L., Cooperage Receivables
Finance B.V., Stichting Cooperage Receivables Finance
Holding, Greif Services Belgium BVBA, Greif, Inc., the
Originators as described therein and Trust International
Management (T.I.M.) B.V. (in connection with the Master
Definitions Agreement dated April 27, 2012 and as
amended and restated April 20, 2015).
114
If Incorporated by Reference,
Document with which Exhibit was Previously Filed with SEC
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 2017, File No. 001-00566 (see Exhibit 10.2 therein).
Current Report on Form 8-K dated September 26, 2019, File
No. 001-00566 (see Exhibit 99.1 therein).
Contained herein.
Current Report on Form 8-K/A dated April 25, 2019, File
No. 001-00566 (see Exhibit 99.1 therein).
Current Report on Form 8-K/A dated April 25, 2019, File
No. 001-00566 (see Exhibit 99.2 therein).
Contained herein.
Contained herein.
Annual Report on Form 10-K for the fiscal year ended
October 31, 2015, File No. 001-00566 (See Exhibit 24
therein).
Contained herein.
Contained herein.
Contained herein.
Contained herein.
Exhibit No.
10.24
10.25
10.26
10.27
10.28
21
23
24
31.1
31.2
32.1
32.2
Description of Exhibit
Amended and Restated Master Definition Agreement
dated April 18, 2017, by and among Coöperatieve
Centrale Raiffeisen-Boerenleenbank B.A. Trading as
Rabobank London, Coöperatieve Centrale Raiffeisen-
Boerenleenbank B.A., Nieuw Amsterdam Receivables
Corporation S. À.R.L., Cooperage Receivables Finance
B.V., Stichting Cooperage Receivables Finance Holding,
Greif Services Belgium BVBA, Greif, Inc., the Originators
as described therein and Trust International Management
(T.I.M.) B.V.
Third Amended and Restated Sale Agreement, dated
September 24, 2019, by and among Greif Packaging LLC,
Delta Petroleum Company, Inc., American Flange &
Manufacturing Co., Inc., Caraustar Mill Group, Inc.,
Caraustar Industrial and Consumer Products Group, Inc.,
Caraustar Recovered Fiber Group, Inc., The Newark
Group, Inc., Caraustar Consumer Products Group, LLC,
Caraustar Custom Packaging Group, Inc., Tama
Paperboard, LLC, Cascade Paper Converters Co. and each
other entity from time to time party hereto as an
Originator, as Originators and Greif Receivables Funding
LLC.
Third Amended and Restated Transfer and
Administration Agreement, date September 24, 2019, by
and among Greif Receivables Funding LLC, Greif
Packaging LLC, Greif Packaging LLC, Delta Petroleum
Company, Inc., American Flange & Manufacturing Co.
Inc., Caraustar Mill Group, Inc., Caraustar Industrial and
Consumer Products Group, Inc., Caraustar Recovered
Fiber Group, Inc., The Newark Group, Inc., Caraustar
Consumer Products Group, LLC, Caraustar Custom
Packaging Group, Inc., Tama Paperboard, LLC, Cascade
Paper Converters Co., and each other entity from time to
time party hereto as an Originator, as Originators, Bank of
America, N.A., and the various investor groups, managing
agents and administrators from time to time parties here
to.
The audited consolidated financial statements of
Paperboard Parent, Inc. and subsidiaries for the years
ended December 31, 2018 and 2017.
Unaudited pro forma condensed consolidated financial
statements of Greif Inc. and subsidiaries, giving effect to
the Caraustar acquisition and related financing
transactions as of and for the year ended October 31,
2018.
Subsidiaries of the Registrant.
Consent of Deloitte & Touche LLP.
Powers of Attorney for Michael J. Gasser, Vicki L. Avril,
John F. Finn, John W. McNamara, Bruce A. Edwards,
Daniel J. Gunsett, Judith D. Hook and Mark A. Emkes.
Certification of Chief Executive Officer Pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934.
Certification of Chief Financial Officer Pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934.
Certification of Chief Executive Officer required by Rule
13a-14(b) of the Securities Exchange Act of 1934 and
Section 1350 of Chapter 63 of Title 18 of the United
States Code.
Certification of Chief Financial Officer required by Rule
13a-14(b) of the Securities Exchange Act of 1934 and
Section 1350 of Chapter 63 of Title 18 of the United
States Code.
115
Exhibit No.
101
Description of Exhibit
The following financial statements from the Company’s
Annual Report on Form 10-K for the year ended
October 31, 2019, formatted in Inline XBRL (Extensive
Business Reporting Language): (i) Consolidated
Statements of Income, (ii) Consolidate Balance Sheets,
(iii) Consolidated Statements of Cash Flow,
(iv) Consolidated Statements of Changes in Shareholders’
Equity and (v) Notes to Consolidated Financial
Statements.
If Incorporated by Reference,
Document with which Exhibit was Previously Filed with SEC
Contained herein.
*
Executive compensation plans and arrangements required to be filed pursuant to Item 601(b)(10) of Regulation S-K.
Schedule
No.
II
Description of Schedule
If Incorporated by Reference,
Document with which Exhibit was Previously Filed with SEC
Consolidated Valuation and Qualifying Accounts and
Reserves.
Contained herein.
ITEM 16. FORM 10-K SUMMARY
None.
116
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date:
December 18, 2019
By:
/s/ PETER G. WATSON
Peter G. Watson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the dates indicated.
Greif, Inc.
(Registrant)
/s/ PETER G. WATSON
Peter G. Watson
President and Chief Executive Officer
Member of the Board of Directors
(principal executive officer)
/s/ DAVID C. LLOYD
David C. Lloyd
Vice President, Corporate Financial Controller
(principal accounting officer)
BRUCE A. EDWARDS*
Bruce A. Edwards
Member of the Board of Directors
JOHN F. FINN*
John F. Finn
Member of the Board of Directors
JUDITH D. HOOK*
Judith D. Hook
Member of the Board of Directors
VICKI L. AVRIL-GROVES*
Vicki L. Avril-Groves
Member of the Board of Directors
/s/ LAWRENCE A. HILSHEIMER
Lawrence A. Hilsheimer
Executive Vice President and Chief Financial Officer
(principal financial officer)
MICHAEL J. GASSER*
Michael J. Gasser
Chairman
Member of the Board of Directors
DANIEL J. GUNSETT*
Daniel J. Gunsett
Member of the Board of Directors
JOHN W. MCNAMARA*
John W. McNamara
Member of the Board of Directors
MARK A. EMKES*
Mark A. Emkes
Member of the Board of Directors
*
The undersigned, Peter G. Watson, by signing his name hereto, does hereby execute this Form 10-K on behalf of each of the above-named persons pursuant to powers
of attorney duly executed by such persons and filed as an exhibit to this Form 10-K.
By:
/s/ PETER G. WATSON
Peter G Watson
Each of the above signatures is affixed as of December 18, 2019.
117
SCHEDULE II
GREIF, INC. AND SUBSIDIARY COMPANIES
Consolidated Valuation and Qualifying Accounts and Reserves (Dollars in millions)
Description
Year ended October 31, 2017:
Allowance for doubtful accounts
Environmental reserves
Year ended October 31, 2018:
Allowance for doubtful accounts
Environmental reserves
Year ended October 31, 2019:
Allowance for doubtful accounts
Environmental reserves
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Charged to
Other Accounts
Deductions
Balance at End
of Period
$
$
$
$
$
$
8.8
6.8
8.9
7.1
4.2
6.8
$
$
$
$
0.5
1.1
0.4
1.3
$
0.6
$ 12.9
$
$
$
$
$
$
(0.2)
(1.1)
(4.6)
(1.6)
2.0
(0.9)
$
$
$
$
$
$
(0.2)
0.3
(0.5)
—
—
(0.1)
$
$
$
$
8.9
7.1
4.2
6.8
$
6.8
$ 18.7
118
Per item 601(b)(21)(ii) of Regulation S-K, names of particular subsidiaries may be omitted if the unnamed subsidiaries, considered in the
aggregate as a single subsidiary, would not constitute a significant subsidiary as of October 31, 2019. Significant subsidiaries are defined in
Rule 1-02(w) of Regulation S-X.
SUBSIDIARIES OF REGISTRANT
EXHIBIT 21
Name of Subsidiary
United States:
Caraustar Custom Packaging Group, Inc.
Caraustar Industrial and Consumer Products Group, Inc.
Caraustar Recovered Fiber Group, Inc.
Container Life Cycle Management LLC
CorrChoice (PA) LLC
Greif Packaging LLC
Soterra LLC
Tama Paperboard, LLC
Greif Flexibles USA Inc.
Delta Petroleum Company, Inc.
The Newark Group, Inc.
Box Board Products, Inc.
Caraustar Mill Group, Inc.
International:
Greif Algeria Spa
Greif Argentina S.A.
Greif Belgium BVBA
Greif Embalagens Industrialis Do Brasil Ltda
Caraustar Industrial Canada, Inc.
Greif Bros. Canada Inc.
Greif Embalajes Industriales S.A.
Greif Tianjin Packaging Co. Ltd
Greif (Shanghai) Packaging Co., Ltd.
Greif (Taicang) Packaging Co., Ltd.
Greif Flexibles Changzhou Co. Ltd
Greif Huizhou Packaging Co., Ltd.
Greif Czech Republic a.s.
Greif Flexibles France SARL
Greif France Holdings SAS
EarthMinded Germany GmbH
Greif Flexibles Germany GmbH & Co. KG
Pachmas Packaging Ltd
Greif Italy SpA
Greif Italy SRL
Greif Malaysia Sdn Bhd
Greif Mexico, S.A. de C.V.
Greif Flexibles Benelux B.V.
Greif International Holding B.V.
Greif Netherland B.V.
Greif Tholu B.V.
Greif Poland Sp zoo
Greif Portugal, S.A.
Greif Kazan LLC
Incorporated or Organized
Under Laws of
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Illinois
Louisiana
New Jersey
North Carolina
Ohio
Algeria
Argentina
Belgium
Brazil
Canada
Canada
Chile
China
China
China
China
China
Czech Republic
France
France
Germany
Germany
Israel
Italy
Italy
Malaysia
Mexico
Netherlands
Netherlands
Netherlands
Netherlands
Poland
Portugal
Russia
Name of Subsidiary
Greif Omsk LLC
Greif Perm LLC
Greif Vologda LLC
Greif Saudi Arabia Ltd.
Greif Eastern Packaging Pte. Ltd.
Greif South Africa Pty Ltd
Greif Packaging Spain S.L.
Greif Sweden AB
Greif Mimaysan Ambalaj Sanayi AS
Greif Flexibles UK Ltd.
Greif UK Ltd.
Incorporated or Organized
Under Laws of
Russia
Russia
Russia
Saudi Arabia
Singapore
South Africa
Spain
Sweden
Turkey
United Kingdom
United Kingdom
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in Registration Statement Nos. 333-26767, 333-26977, 333-35048, 333-61058, 333-61068,
333-123133, and 333-151475 on Form S-8 of our reports dated December 18, 2019, relating to the consolidated financial statements and
financial statement schedule of Greif, Inc. and subsidiary companies, and the effectiveness of Greif, Inc. and subsidiary companies’ internal
control over financial reporting, appearing in the Annual Report on Form 10-K of Greif, Inc. and subsidiary companies for the year ended
October 31, 2019.
EXHIBIT 23
/s/ Deloitte & Touche LLP
Columbus, Ohio
December 18, 2019
EXHIBIT 31.1
I, Peter G. Watson, certify that:
1. I have reviewed this Annual Report on Form 10-K of Greif, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: December 18, 2019
/s/ Peter G. Watson
Peter G. Watson
President and Chief Executive Officer
(principal executive officer)
EXHIBIT 31.2
I, Lawrence A. Hilsheimer, certify that:
1. I have reviewed this Annual Report on Form 10-K of Greif, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: December 18, 2019
/s/ Lawrence A. Hilsheimer
Lawrence A. Hilsheimer
Executive Vice President and Chief Financial Officer
(principal financial officer)
Certification Required by Rule 13a-14(b) of the Securities Exchange Act of
1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code
EXHIBIT 32.1
In connection with the Annual Report of Greif, Inc. (the ‘‘Company’’) on Form 10-K for the annual period ended October 31, 2019, as
filed with the Securities and Exchange Commission on the date hereof (the ‘‘Report’’), I, Peter G. Watson, the President and Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: December 18, 2019
/s/ Peter G. Watson
Peter G. Watson
President and Chief Executive Officer
A signed original of this written statement required by Section 906 has been provided to Greif, Inc. and will be retained by Greif, Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.
Certification Required by Rule 13a-14(b) of the Securities Exchange Act of
1934 and Section 1350 of Chapter 63 of Title 18 of the United States Code
EXHIBIT 32.2
In connection with the Annual Report of Greif, Inc. (the ‘‘Company’’) on Form 10-K for the annual period ended October 31, 2019, as
filed with the Securities and Exchange Commission on the date hereof (the ‘‘Report’’), I, Lawrence A. Hilsheimer, Executive Vice
President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: December 18, 2019
/s/ Lawrence A. Hilsheimer
Lawrence A. Hilsheimer
Executive Vice President and Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to Greif, Inc. and will be retained by Greif, Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.
D E A R F E L LO W S H A R E H O L D E R S,
It has been an exciting and eventful year at Greif. I am incredibly proud of all that our global team has accomplished as
we pursue our vision: In industrial packaging, be the best performing customer service company in the world.
At Greif, we are focused on developing solutions to safely package and protect our customers’ products. Our strategy
is based upon the service profit chain concept that draws a connection between engaged colleagues and enhanced
profitability. Our colleagues exemplify the values embodied by The Greif Way and their work is guided by the principles
outlined in the fact based, process driven Greif Business System. A more engaged global Greif team, focused on
differentiated customer service, provides the path to enhanced performance that rewards our colleagues, customers,
host communities and shareholders.
Caraustar Industries:
We delivered a step change in financial results in 2019 that was fueled by the acquisition and ongoing integration of
• Adjusted EBITDA increased by more than 30 percent to $659 million
• Adjusted Class A earnings per share grew by more than 12 percent to $3.96 per share
• Adjusted Free Cash Flow increased by 50 percent to $268 million
• And our shareholders were rewarded with $104 million of dividends paid
In addition to improved financial results, we also made notable progress in our three strategic priorities.
Engaged Teams – The health and safety of our colleagues is our highest priority at Greif. We believe that all accidents
are preventable, and 53 percent of our manufacturing sites recorded zero accidents in 2019. While we have more work
to do, our performance this year demonstrates that our aspiration of a zero accident workplace is achievable.
We also advanced colleague engagement activities and significantly increased our overall engagement scores com-
pared to 2018. Those activities were led and coordinated by local teams across our global organization that are working
together to further embed a culture of servant leadership into Greif.
Differentiated Customer Service – Our experience indicates there is a direct link between customer service excellence
and profitable growth. We measure our customers’ trust and loyalty using a qualitative tool called the Net Promoter
Score (NPS). We increased our NPS by more than 36 percent since the inception of this strategy and our 2019 score of
61 was an 18 percent improvement over our 2018 result.
Enhanced Performance – Beyond enhancing financial performance, we continue to accelerate our efforts to opera-
tionalize sustainability. Thirty-five of our manufacturing facilities achieved “zero waste to landfill” status in 2019 and
Greif was awarded with “Gold Recognition Status” for the second consecutive year from EcoVadis, a highly respected
third-party audit firm that specializes in evaluating sustainability programs. This ranking placed Greif among the top
five percent of all companies evaluated by this firm.
Greif’s business is well positioned to capture greater value through the principles of a circular economy. Our Paper
Packaging business is a net positive recycler, meaning that we recover and recycle more waste paper than we produce.
We are also growing the Earthminded reconditioning network in our Rigid Industrial Packaging business, with particular
emphasis on our Intermediate Bulk Container portfolio to meet customer needs and remove waste that would otherwise
end up in a landfill.
In 2020, the Greif team will be laser focused on controlling the execution levers within our control to counter diminishing
industrial growth and the prolonged negative effects of the global trade war. Looking ahead, Greif is well positioned to
serve a variety of attractive markets through our industry leading product portfolio and our commitment to customer
service excellence. We are advancing low risk growth opportunities close to our core business, and we believe that the
Caraustar acquisition will deliver exceptional value.
I am excited about Greif’s future and our commitment to creating greater value for our colleagues, the communities we
operate and live in, our customers and our shareholders remains steadfast. Thank you for your support and continued
investment in Greif.
Best regards,
Peter G. Watson
President and Chief Executive Officer
C O M PA NY I N F O R M AT I O N
BOARD OF DIRECTORS
VICKI L. AVRIL-GROVES
Former Chief Executive
Officer and President
TMK IPSCO
BRUCE A. EDWARDS
Former Global Chief
Executive Officer
DHL Supply Chain
MARK A. EMKES
Former Commissioner of
Finance and Administration
State of Tennessee
DANIEL J. GUNSETT
Partner
Baker Hostetler LLP
JUDITH D. HOOK
Investor
MICHAEL J. GASSER
Chairman of the Board,
Former Chief Executive
Officer
Greif, Inc.
PETER G. WATSON
President and Chief
Executive Officer
Greif, Inc.
JOHN F. FINN
Chairman and Chief
Executive Officer
Gardner, Inc.
JOHN W. MCNAMARA
Former President and Owner
Corporate Visions
Limited, LLC
EXECUTIVE OFFICERS
PETER G. WATSON
President and Chief
Executive Officer
LAWRENCE A.
HILSHEIMER
Executive Vice President,
Chief Financial Officer
GARY R. MARTZ
Executive Vice President,
General Counsel and
Secretary
TIMOTHY L. BERGWALL
Senior Vice President and
President, Paper Packaging
& Services and Soterra LLC
MICHAEL CRONIN
Senior Vice President,
Enterprise Strategy, Global
Sourcing and Supply
Chain and Greif Packaging
Accessories
DOUG W. LINGREL
Vice President and Chief
Administrative Officer
OLE G. ROSGAARD
Senior Vice President and
President Rigid Industrial
Packaging & Services and
Global Sustainability
BALA V.
SATHYANARAYANAN
Senior Vice President,
Chief Human Resources
Officer
HARI K. KUMAR
Vice President and Division
President, Flexible Products
& Services
DAVID C. LLOYD
Vice President, Corporate
Financial Controller and
Treasurer
SHAREHOLDER INFORMATION
CORPORATE
HEADQUARTERS
Greif, Inc.
425 Winter Road
Delaware, Ohio 43015
(740) 549-6000
www.greif.com
STOCK EXCHANGE
LISTING
The company’s Class A
Common Stock and
Class B Common Stock
are traded on the New York
Stock Exchange, where the
symbols are GEF and GEF.B,
respectively.
STOCK TRANSFER
AGENT
Computershare Investor
Services, LLC
Shareholder Services
PO Box 505000
Louisville, KY 40233-5000
INDEPENDENT
ACCOUNTANTS
Deloitte & Touche LLP
Columbus, Ohio
Forward-Looking Statements: This Annual Report contains certain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Please see “Important Information Regarding Forward-Looking Statements” preceding
Part I of the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019, which is included in this document.
GREIF, INC. 2019 ANNUAL REPORTANNUAL REPORT2019 GREIF, INC. 2019 ANNUAL REPORTANNUAL REPORT2019