Greif(GEF_B) - 2022 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements This section presents the unaudited interim condensed consolidated financial statements for Greif, Inc. for the three months ended January 31, 2022, and 2021, including statements of income, comprehensive income, balance sheets, cash flows, and changes in shareholders' equity, along with detailed notes explaining the basis of presentation and significant accounting policies Condensed Consolidated Statements of Income For the three months ended January 31, 2022, net sales increased by 36.4% year-over-year to $1,564.3 million, but operating profit remained flat at $72.0 million due to a significant non-cash asset impairment charge of $62.4 million, leading to a decrease in net income attributable to Greif, Inc. to $10.3 million from $23.4 million Condensed Consolidated Statements of Income (Unaudited) | (in millions, except per share amounts) | Three Months Ended January 31, 2022 | Three Months Ended January 31, 2021 | | :--- | :--- | :--- | | Net sales | $1,564.3 | $1,146.5 | | Gross profit | $289.7 | $212.2 | | Non-cash asset impairment charges | $62.4 | $1.3 | | Operating profit | $72.0 | $70.0 | | Income before income tax expense | $52.9 | $36.3 | | Income tax expense | $35.6 | $6.1 | | Net income attributable to Greif, Inc. | $10.3 | $23.4 | | Diluted EPS (Class A) | $0.18 | $0.40 | - A significant non-cash asset impairment charge of $62.4 million was recorded in the first quarter of 2022, compared to only $1.3 million in the same period of 2021, heavily impacting operating profit and net income[10] - Cash dividends declared per share for Class A common stock increased to $0.46 in Q1 2022 from $0.44 in Q1 2021[10] Condensed Consolidated Balance Sheets As of January 31, 2022, total assets were $5,766.6 million, a slight decrease from October 31, 2021, reflecting a significant increase in 'Assets held for sale' to $139.8 million, while total long-term debt increased to $2,139.1 million and total shareholders' equity slightly decreased Condensed Consolidated Balance Sheet Highlights (Unaudited) | (in millions) | January 31, 2022 | October 31, 2021 | | :--- | :--- | :--- | | Total current assets | $1,704.0 | $1,664.1 | | Assets held for sale | $139.8 | $6.9 | | Total assets | $5,766.6 | $5,815.8 | | Total current liabilities | $1,280.5 | $1,314.1 | | Long-term debt | $2,139.1 | $2,054.8 | | Total liabilities | $4,190.2 | $4,216.1 | | Total shareholders' equity | $1,557.3 | $1,575.6 | Condensed Consolidated Statements of Cash Flows For the three months ended January 31, 2022, net cash provided by operating activities increased to $22.4 million, while net cash used in investing activities was $45.8 million, and net cash provided by financing activities was $54.0 million, resulting in a period-end cash and cash equivalents balance of $136.6 million Condensed Consolidated Statements of Cash Flows (Unaudited) | (in millions) | Three Months Ended January 31, 2022 | Three Months Ended January 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22.4 | $11.5 | | Net cash provided by (used in) investing activities | $(45.8) | $4.2 | | Net cash provided by (used in) financing activities | $54.0 | $(30.0) | | Net increase (decrease) in cash | $12.0 | $(4.5) | | Cash and cash equivalents at end of period | $136.6 | $101.4 | Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and financial activities, including restructuring charges of $3.5 million, an increase in long-term debt to $2.14 billion, a significant $62.4 million impairment charge related to the divestiture of the Flexible Products & Services business, and a major subsequent event involving the refinancing of its credit agreement in March 2022 - Restructuring charges of $3.5 million were recorded for the three months ended January 31, 2022, with a focus on optimizing operations and closing under-performing assets[25][26] - Total long-term debt, net of current portion and deferred financing costs, increased to $2,139.1 million as of January 31, 2022, from $2,054.8 million as of October 31, 2021[28] - The company recognized asset impairment charges of $62.4 million during the quarter, primarily related to the reclassification of the Flexible Products & Services business to assets held for sale ahead of its divestiture[54][55] - Subsequent to the quarter end, on March 1, 2022, the company entered into a new Second Amended and Restated Senior Secured Credit Agreement (the "2022 Credit Agreement") to refinance its existing debt and redeem its Senior Notes due 2027[92][93] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for the first quarter of 2022, highlighting a 36.4% increase in net sales to $1,564.3 million and a significant growth in Adjusted EBITDA to $196.8 million, while also addressing segment performance, gross profit, SG&A expenses, future trends, liquidity, capital resources, and recent debt refinancing Results of Operations For Q1 2022, net sales rose to $1,564.3 million from $1,146.5 million in Q1 2021, an increase of $417.8 million, driven by higher volumes and prices, leading to an increase in gross profit to $289.7 million and a substantial increase in Adjusted EBITDA to $196.8 million, despite operating profit remaining stable at $72.0 million due to a large impairment charge First Quarter Financial Highlights | (in millions) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total net sales | $1,564.3 | $1,146.5 | | Global Industrial Packaging Sales | $949.1 | $659.3 | | Paper Packaging & Services Sales | $610.0 | $480.9 | | Operating profit | $72.0 | $70.0 | | Adjusted EBITDA | $196.8 | $138.5 | - Management anticipates continued solid customer demand through 2022 but acknowledges risks from inflation, supply chain disruptions, and labor shortages, while actively monitoring the Russia-Ukraine conflict, though combined operations in those countries account for only about 3% of total sales[120][121] Segment Review The Global Industrial Packaging segment's net sales grew by $289.8 million, increasing Adjusted EBITDA to $114.2 million, while the Paper Packaging & Services segment saw a $129.1 million sales increase, boosting its Adjusted EBITDA by $24.4 million to $80.5 million, and the Land Management segment's sales and Adjusted EBITDA slightly decreased due to reduced timber availability Segment Adjusted EBITDA Performance | (in millions) | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Global Industrial Packaging | $114.2 | $79.5 | | Paper Packaging & Services | $80.5 | $56.1 | | Land Management | $2.1 | $2.9 | - Global Industrial Packaging's operating profit decreased to $31.0 million from $54.0 million, primarily due to a $62.4 million non-cash impairment charge related to the planned divestiture of its Flexible Products and Services business[125] - Paper Packaging & Services' gross profit margin improved to 18.2% from 16.6% year-over-year, as higher prices and volumes offset increased raw material, transportation, and utility costs[128] Liquidity and Capital Resources The company's primary liquidity sources are cash from operations and credit facilities, with net cash from operations at $22.4 million and cash and cash equivalents at $136.6 million for Q1 2022, and total long-term debt at $2.14 billion, followed by a major refinancing on March 1, 2022, through a new $2.415 billion credit agreement Cash Flow Summary | (in millions) | Three Months Ended January 31, 2022 | | :--- | :--- | | Net cash provided by operating activities | $22.4 | | Net cash used in investing activities | $(45.8) | | Net cash provided by financing activities | $54.0 | | Cash and cash equivalents at end of period | $136.6 | - On March 1, 2022, the company entered into a new 2022 Credit Agreement, securing an $800 million revolving credit facility and $1.615 billion in term loans, maturing in 2027, with proceeds used to refinance existing debt and redeem the Senior Notes due 2027[151][155] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no significant changes in the quantitative and qualitative disclosures about its market risk from the information provided in its Annual Report on Form 10-K for the fiscal year ended October 31, 2021 - There have been no significant changes in market risk disclosures since the last Annual Report on Form 10-K[168] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of the end of the period covered by the report, with no material changes in internal control over financial reporting occurring during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of January 31, 2022[170][171] - No material changes to the company's internal control over financial reporting were identified during the most recent fiscal quarter[169] Part II. Other Information Item 1A. Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended October 31, 2021 - No material changes in risk factors were reported compared to those disclosed in the 2021 Form 10-K[172] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None reported[173] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and the Second Amended and Restated Credit Agreement dated March 1, 2022, along with the financial statements formatted in Inline XBRL - Key exhibits filed include CEO/CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and the new Second Amended and Restated Credit Agreement (Exhibit 10.1)[175]