- Net sales for the fourth quarter 2014 were flat compared to the fourth quarter 2013 after eliminating the effect of acquisitions, dispositions and currency fluctuations
- Quarterly results were positively impacted by gains on the sale of businesses of $21.2 million and a decrease in SG&A expenses of $2.3 million, offset by asset impairment charges of $70.2 million and restructuring costs of $5.6 million
- EBITDA1 before special items2 of $149.2 million in fourth quarter 2014 compared to $145.7 million in fourth quarter 2013
- Diluted Class A earnings per share attributable to Greif, Inc. of $0.15 and $1.56 for the fourth quarter and fiscal year 2014, respectively, compared to $0.65 and $2.47 for the fourth quarter and fiscal year 2013, respectively. Diluted Class A earnings per share attributable to Greif, Inc. were $2.01 for fiscal year 2014 after eliminating the tax-effected impact of fiscal year 2014 timberland gains and fourth quarter 2014 non-cash asset impairment charges
- Long-term debt, current portion of long-term debt, and short-term debt decreased $171 million during the fourth quarter 2014 primarily from the application of proceeds from the sale of businesses
- Tax rate for 2014 was negatively impacted by non-deductible goodwill, valuation allowances related to non-U.S. jurisdictions, uncertain tax positions, and discrete deferred tax adjustments
Greif, Inc. (NYSE: GEF, GEF.B), a global leader in industrial packaging products and services, today announced results for its fourth quarter, which ended October 31, 2014:
David B. Fischer, president and chief executive officer, stated, "During the fourth quarter we took actions to improve our business portfolio, address underperforming assets and generate additional cash. Specific initiatives are also being implemented in fiscal 2015 and beyond consistent with our strategy. As previously discussed, we are in the midst of a comprehensive effort to aggressively address our underperforming and loss-generating operations, as well as SG&A costs. The fourth quarter 2014 results were lower than expected, primarily due to asset impairment charges in the Flexible Products & Services segment, the negative impact of foreign currency translation and a decrease in selling prices. Our proceeds from divestitures and continued focus on cash resulted in a $171 million reduction in debt during the quarter."
Consolidated Results
Net sales decreased 4.2 percent to $1,048.1 million for the fourth quarter of 2014 compared with $1,094.2 million for the fourth quarter of 2013. This decrease was primarily due to the negative impact from foreign currency translation of 2.5 percent, a decrease in selling prices of 0.3 percent and a decrease in volumes of 1.4 percent. The lower selling prices were in the Paper Packaging and Flexible Products & Services segments. Although overall company volumes were lower, compared to volumes in the fourth quarter of 2013, volumes in the Rigid Industrial Packaging & Services segment increased 4.9 percent in Europe and 2.8 percent in North America, but decreased 22.5 percent in Latin America. Volumes decreased 9.3 percent within the Flexible Products & Services segment, primarily due to the previously reported sale of the multiwall packaging business in August.
Gross profit was $202.9 million for the fourth quarter of 2014 compared with $226.1 million for the fourth quarter of 2013. Declines in the Rigid Industrial Packaging & Services, Paper Packaging, and Flexible Products & Services segments were partially offset by an increase in the Land Management segment. The decrease was primarily due to competitive pressures in Western Europe, the continuing impact of the occupation of a manufacturing facility in Turkey during the second quarter of 2014, which has resulted in higher costs incurred to find alternative supply sources to satisfy customers, and the net effect of acquisitions and divestitures. Gross profit margin was 19.4 percent for the fourth quarter of 2014 compared to 20.7 percent for the fourth quarter of 2013.
SG&A expenses decreased 2.0 percent to $113.6 million for the fourth quarter of 2014 from $115.9 million for the fourth quarter of 2013. This decrease was primarily due to divestitures, lower employee costs as a result of settlement of Brazilian labor claims, a reduction in management compensation and lower amortization of intangible assets, partially offset by higher professional fees related to the sale of the multiwall packaging business. SG&A expenses were 10.8 percent of net sales for the fourth quarter of 2014 compared with 10.6 percent of net sales for the fourth quarter of 2013.
Restructuring charges were $5.6 million for the fourth quarter of 2014 compared with $2.2 million for the fourth quarter of 2013. Charges in the fourth quarter of 2014 were primarily related to employee separation costs in the Flexible Products & Services segment and within the European operations of the Rigid Industrial Packaging & Services segment.
Operating profit was $37.5 million for the fourth quarter of 2014 compared with $97.9 million for the fourth quarter of 2013. The $60.4 million decrease consisted of a $1.7 million increase in the Paper Packaging segment, a $43.6 million decrease in the Flexible Products & Services segment, a $14.4 million decrease in the Land Management segment, and a $4.1 million decrease in the Rigid Industrial Packaging & Services segment. Factors contributing to the $60.4 million decrease were lower gross profit as discussed above, the $3.4 million increase in restructuring charges and the $43.3 million increase in non-cash asset impairment charges along with no timberland sales (resulting in no gains) during the fourth quarter 2014. These factors were partially offset by $21.2 million of net gains on divestitures and the $2.3 million decrease in SG&A expenses discussed above. Operating profit before special items2 was $113.7 million for the fourth quarter of 2014 compared with $109.8 million for the fourth quarter of 2013.
EBITDA was $73.0 million for the fourth quarter of 2014 compared with $133.8 million for the fourth quarter of 2013. The $60.8 million decrease was primarily due to the same factors that impacted operating profit. EBITDA before special items2 was $149.2 million for the fourth quarter of 2014 versus $145.7 million for the fourth quarter of 2013. Depreciation, depletion and amortization expense was $38.4 million for the fourth quarter of 2014 compared with $39.2 million for the fourth quarter of 2013.
Cash provided by operating activities was $145.0 million for the fourth quarter of 2014 compared with $131.6 million for the fourth quarter of 2013. Free cash flow3 was $194.7 million for the fourth quarter of 2014 compared with free cash flow of $98.8 million for the fourth quarter of 2013. The increase in free cash flow was due to the sale of select non-core assets and the improvement of cash generated by operations.
Interest expense, net, was $20.3 million for the fourth quarter of 2014 compared with $21.6 million for the fourth quarter of 2013. The decrease was the result of lower average outstanding debt.
Income tax expense was $50.8 million and $39.2 million for the fourth quarters of 2014 and 2013, respectively. Income tax expense for the fiscal year 2014 was $115.0 million compared with $98.8 million for fiscal year 2013. The company's annual effective tax rate was 72.8 percent for 2014 compared with 40.6 percent for 2013. The company's 2014 annual effective tax rate was impacted by, among other factors, non-deductible goodwill (15.6%), valuation allowances related to non-U.S. jurisdictions (18.7%), uncertain tax positions (7.2%) and discrete deferred tax adjustments (1.6%).
Net income attributable to Greif, Inc. for the fourth quarter of 2014 was $8.7 million or $0.15 per diluted Class A share and $0.22 per diluted Class B share versus net income attributable to Greif, Inc. for the fourth quarter of 2013 of $38.0 million, or $0.65 per diluted Class A share and $0.97 per diluted Class B share.
Segment Results
Rigid Industrial Packaging & Services
Net sales decreased 3.8 percent to $752.7 million for the fourth quarter of 2014 compared with $782.1 million for the fourth quarter of 2013. The decrease in net sales was attributable to a negative 3.2 percent impact of foreign currency translation and volume decreases of 1.0 percent, partially offset by net price increases of 0.4 percent. The volumes in the Rigid Industrial Packaging & Services segment increased 4.9 percent in Europe and 2.8 percent in North America, and decreased 22.5 percent in Latin America.
Gross profit was $136.4 million for the fourth quarter of 2014 compared with $149.6 million for the fourth quarter of 2013. The $13.2 million decrease in gross profit was primarily due to competitive pressures in Western Europe and increased transportation and labor costs. Gross profit margin decreased to 18.1 percent for the fourth quarter of 2014 from 19.1 percent for the fourth quarter of 2013.
Operating profit was $46.7 million for the fourth quarter of 2014 compared with $50.8 million for the fourth quarter of 2013. The $4.1 million decrease was primarily due to the same factors that impacted the segment's gross profit partially offset by a decrease in amortization of intangible assets due to the sale of businesses and lower employee costs. Operating profit before special items was $54.8 million for the fourth quarter of 2014 versus $69.3 million for the fourth quarter of 2013.
EBITDA was $71.2 million for the fourth quarter of 2014 compared with $75.3 million for the fourth quarter of 2013. EBITDA before special items was $79.3 million for the fourth quarter of 2014 compared with $93.8 million for the fourth quarter of 2013. Depreciation, depletion and amortization expense was $27.3 million for the fourth quarter of 2014 compared with $26.7 million for the fourth quarter of 2013.
Paper Packaging
Net sales decreased 2.0 percent to $186.6 million for the fourth quarter of 2014 compared with $190.4 million for the fourth quarter of 2013. The decrease was attributable to lower selling prices of 1.4 percent and lower volumes of 0.6 percent.
Gross profit was $51.8 million for the fourth quarter of 2014 compared with $53.3 million for the fourth quarter of 2013. This decrease was due to the same factors that impacted the segment's net sales and increased transportation costs. Gross profit margin decreased to 27.8 percent for the fourth quarter of 2014 from 28.0 percent for the fourth quarter of 2013.
Operating profit and operating profit before special items were $41.4 million for the fourth quarter of 2014 compared with $39.7 million for the fourth quarter of 2013. The $1.7 million increase was due to the $4.2 million gain on the sale of a business, partially offset by increased transportation costs.
EBITDA and EBITDA before special items were $48.6 million for the fourth quarter of 2014 compared with $47.3 million for the fourth quarter of 2013. This increase was due to the same factors that impacted the segment's operating profit. Depreciation, depletion and amortization expense was $7.2 million for the fourth quarter of 2014 compared with $7.6 million for the fourth quarter of 2013.
Flexible Products & Services
Net sales decreased 12.6 percent to $100.0 million for the fourth quarter of 2014 compared with $114.4 million for the fourth quarter of 2013. The decrease was attributable to volume decreases of 9.3 percent primarily due to reduced sales of $13 million as a result of the sale of the multiwall packaging business and due to lost sales attributable to the impact of the occupation of a manufacturing facility in Turkey during the second quarter of 2014. The impact of foreign currency translation for the fourth quarter of 2014 was a negative 2.8 percent compared with the fourth quarter of 2013.
Gross profit was $10.8 million for the fourth quarter of 2014 compared with $20.2 million for the fourth quarter of 2013. The decrease in gross profit was primarily due to the continuing impact of the occupation of a manufacturing facility in Turkey during the second quarter of 2014, which has resulted in higher costs incurred to find alternative supply sources to satisfy customers, and the sale of the multiwall packaging business. Gross profit margin decreased to 10.8 percent for the fourth quarter of 2014 from 17.7 percent for the fourth quarter of 2013.
Operating loss was $56.2 million for the fourth quarter of 2014 compared with an operating loss of $12.6 million for the fourth quarter of 2013. This increase in operating loss was primarily related to non-cash asset impairment charges related to the closure of the fabric hub in Saudi Arabia and to goodwill related to the segment, partially offset by the gain on the sale of the multiwall packaging business. Operating profit before special items was $11.9 million for the fourth quarter of 2014 versus operating loss before special items of $1.9 million for the fourth quarter of 2013.
EBITDA was negative $53.7 million for the fourth quarter of 2014 compared with negative $9.7 million for the fourth quarter of 2013. This decrease was due to the same factors that impacted the segment's operating loss. EBITDA before special items was $14.4 million for the fourth quarter of 2014 compared with $1.0 million for the fourth quarter of 2013. Depreciation, depletion and amortization expense was $2.6 million for the fourth quarter of 2014 compared with $4.0 million for the fourth quarter of 2013.
Land Management
Net sales increased 20.5 percent to $8.8 million for the fourth quarter of 2014 compared with $7.3 million for the fourth quarter of 2013. The increase was due to higher timber sales as planned for the fourth quarter of 2014.
Operating profit decreased to $5.6 million for the fourth quarter of 2014 from $20.0 million for the fourth quarter of 2013. This decrease was primarily due to no timberland gains (due to no timberland sales) in the fourth quarter of 2014 compared to $17.3 million of timberland gains in the fourth quarter of 2013. The fourth quarter of 2013 timberland gains resulted from the sale of timberland in the first phase of an approximately $90 million multi-phase sales contract. The company closed the last phase of sales under this contract in the first quarter of 2015. Operating profit before special items was $5.6 million for the fourth quarter of 2014 compared with $2.7 million for the fourth quarter of 2013. Special use property disposals included in operating profit were $2.8 million for the fourth quarter of 2014 versus $0.7 million for the fourth quarter of 2013.
EBITDA was $6.9 million and $20.9 million for the fourth quarters of 2014 and 2013, respectively. This decrease was due to the timberland gain in 2013 previously mentioned. EBITDA before special items was $6.9 million for the fourth quarter of 2014 compared with $3.6 million for the fourth quarter of 2013. Depreciation, depletion and amortization expense was $1.3 million and $0.9 million for the fourth quarters of 2014 and 2013, respectively.
Other Financial Information
Long-term debt was $1,087.4 million at October 31, 2014 compared with $1,207.2 million at Oct. 31, 2013. The decrease in long-term debt was primarily due to the application of proceeds from the sale of three businesses in the Rigid Industrial Packaging & Services segment, one business in the Paper Packaging segment, and the multiwall packaging business in the Flexible Products & Services segment to debt reduction, partially offset by debt incurred for the funding of two acquisitions completed in the first quarter of 2014.
Capital expenditures were $43.9 million for the fourth quarter of 2014 compared with $53.8 million for fourth quarter of 2013. There were $1.1 million of timberland purchases for the fourth quarter of 2014 compared with $8.5 million of timberland purchases for the fourth quarter of 2013. Depreciation, depletion and amortization expense was $38.4 million for the fourth quarter of 2014 compared with $39.2 million for the fourth quarter of 2013.
On December 9, 2014, the Board of Directors declared quarterly cash dividends of $0.42 per share of Class A Common Stock and $0.62 per share of Class B Common Stock. These dividends were payable on January 1, 2015, to stockholders of record at close of business on December 19, 2014.
Company Outlook
The company anticipates the overall global economy to reflect a modest recovery in fiscal 2015, with positive aspects of the improving economy in the United States being offset by the negative trends in other regions, particularly in Europe and Latin America. We anticipate that foreign currency matters will continue to present challenges for the company, as the strengthening of the United States dollar against other currencies will continue to impact the company's revenues and net income. During the fourth quarter, the company sold several businesses and plans to continue to accelerate restructuring plans and facility closures and pursue the sale of select non-core assets as part of our overall strategic transformation. We also plan to implement SG&A cost savings actions throughout 2015 and beyond. We will provide more information about our strategic transformation and SG&A actions in our upcoming Investor Day, to be held on January 21st. Based on these factors, fiscal 2015 adjusted Class A earnings per share is expected to be in the range of $2.25 to $2.35, excluding gains and losses on the sales of businesses, timberland and property, plant and equipment, and acquisition related costs, as well as restructuring and impairment charges.
