Greif Inc.: Greif Reports Fourth Quarter and Fiscal 2016 Results, Provides Fiscal 2017 Guidance

Tickers: GEF
DELAWARE, Ohio--(BUSINESS WIRE)-- Greif, Inc. (NYSE: GEF, GEF.B), a world leader in industrial packaging products and services, announced fourth quarter and fiscal 2016 results. Pete Watson, President and Chief Executive Officer, stated 'I am pleased with Greif's solid fourth quarter results, which conclude an improved fiscal 2016 for our company. We increased Class A earnings before special items per share by 11.9 percent, more than doubled free cash flow to $200.9 million and returned $98.7 million in dividends to our shareholders, despite the effects of a tepid global industrial economy. Our performance benefited from improved customer service, stronger operating fundamentals and systematic fiscal discipline. Our plans for 2017 include furthering our commitment to customer service, continuing to improve our underlying business and achieving our 2017 run rate commitments. This will generate greater value for our customers and shareholders.'

Fourth Quarter Highlights include:

  • Net income of $8.5 million or $0.14 per diluted Class A share compared to net income of $12.4 million or $0.21 per diluted Class A share for the fourth quarter of 2015. Net income, excluding the impact of special items, of $38.5 million or $0.65 per diluted Class A share compared to net income, excluding the impact of special items,of $44.7 million or $0.76 per diluted Class A share for the fourth quarter of 2015. The net income for the fourth quarter of 2016 was significantly impacted by the changes in income tax expense as described below.
  • Net sales decreased $0.9 million to $867.6 million compared to $868.5 million for the fourth quarter of 2015. Net sales, after adjusting for the effect of divestitures for both quarters and currency translation for the fourth quarter of 2016, increased 5.3 percent compared to the fourth quarter 2015.
  • Gross profit improved to $183.4 million compared to $168.0 million for the fourth quarter of 2015. Gross profit margin improved to 21.1 percent from 19.3 percent for the fourth quarter of 2015.
  • Operating profit improved $21.5 million and operating profit before special items improved $15.0 million from the fourth quarter of 2015. Operating profit margin before special items improved to 10.0 percent compared to 8.3 percent for the fourth quarter of 2015.
  • Cash provided by operating activities increased $10.1 million compared to the fourth quarter of 2015. Free cash flow improved $9.0 million compared to the fourth quarter of 2015.
  • Income tax expense for the fourth quarter of 2016 increased to $28.3 million, or 81.3 percent, from $2.6 million, or 23.0 percent, for the fourth quarter 2015, due primarily to the impact of discrete losses in jurisdictions for which there is minimal tax benefit, adjustments to uncertain tax position estimates, withholding tax expense on fourth quarter transactions and corrections identified through enhanced control procedures executed during the quarter. In addition, the fourth quarter of 2015 tax expense was positively impacted by discrete transactions which resulted in one-time tax benefits.
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Fiscal Year Highlights Include:

  • Net income of $74.9 million or $1.28 per diluted Class A share compared to net income of $71.9 million or $1.23 per diluted Class A share for fiscal year 2015. Net income, excluding the impact of special items,of $143.5 million or $2.44 per diluted Class A share compared to net income, excluding the impact of special items, of $127.7 million or $2.18 per diluted Class A share for fiscal year 2015.
  • Net sales decreased $293.1 million to $3,323.6 million compared to $3,616.7 million for fiscal year 2015. Net sales, after adjusting for the effect of divestitures for both years and currency translation for fiscal year 2016, were flat compared to fiscal year 2015.
  • Gross profit improved to $684.9 million compared to $669.8 million for fiscal year 2015. Gross profit margin improved to 20.6 percent compared to 18.5 percent for fiscal year 2015.
  • Operating profit improved $32.8 million and operating profit before special items improved $42.1 million from fiscal year 2015. Operating profit margin before special items improved to 9.3 percent compared to 7.4 percent for fiscal year 2015.
  • Cash provided by operating activities increased $94.7 million compared to fiscal year 2015. Free cash flow improved $130.4 million compared to fiscal year 2015. Long-term debt has decreased $172.3 million since the previous year-end.
  • Income tax expense for the year was $66.5 million or 47.1 percent. The increase in the tax rate from the forecasted range of 35 - 38 percent was due primarily to the same factors impacting the quarterly rate.
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1 A summary of all special items that are excluded from net income before special items, earnings per diluted Class A share before special items and from operating profit before special items is set forth in the Selected Financial Highlights table following the Dividend Summary in this release.
2 Free cash flow is defined as net cash provided by operating activities less cash paid for capital expenditures.
3 A summary of the adjustments for the impact of divestitures and currency translation is set forth in the GAAP to Non-GAAP Reconciliation Net Sales to Net Sales Excluding the Impact of Divestitures and Currency Translation in the financial schedules that are part of this release.
Note: A reconciliation of the differences between all non-GAAP financial measures used in this release with the most directly comparable GAAP financial measures is included in the financial schedules that are a part of this release. These non-GAAP financial measures are intended to supplement and should be read together with our financial results. They 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 these non-GAAP financial measures.

Company Outlook

Our 2017 fiscal year guidance is set forth below.

Class A Earnings Per Share before Special Items $2.78 - $3.08
Note: 2017 GAAP Class A Earnings Per Share guidance is not provided in this release due to the potential for one or more of the following, the timing and magnitude of which we are unable to reliably forecast: gains or losses on the disposal of businesses, timberland or properties, plants and equipment, net, non-cash asset impairment charges due to unanticipated changes in the business, restructuring-related activities or acquisition costs, and the income tax effects of these items and other income tax-related events. No reconciliation of the fiscal year 2017 Class A earnings per share guidance, a non-GAAP financial measure which excludes gains and losses on the disposal of businesses, timberland and property, plant and equipment, acquisition costs and restructuring and impairment charges is included in this release because, due to the high variability and difficulty in making accurate forecasts and projections of some of the excluded information, together with some of the excluded information not being ascertainable or accessible, we are unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measure without unreasonable efforts.

Segment Results

Net sales are impacted primarily by the volume of primary products sold, selling prices, product mix and the impact of changes in foreign currencies against the U.S. Dollar. The table below shows the percentage impact of each of these items on net sales for our primary products for the fourth quarter of 2016 as compared to the fourth quarter of 2015 for the business segments with manufacturing operations:

Net Sales Impact - Primary Products:

Rigid Industrial
Packaging &
Services *

Paper Packaging &
Services*

Flexible Pro