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Greif Reports Fourth Quarter and Fiscal 2020 Results
DELAWARE, Ohio, Dec. 9, 2020 /PRNewswire via COMTEX/ -- Copyright (C) 2020 PR Newswire. All rights reserved

Greif, Inc. (NYSE: GEF, GEF.B), a world leader in industrial packaging products and services, today announced fourth quarter and fiscal 2020 results.

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Fourth Quarter Highlights Include (all results compared to the fourth quarter 2019 unless otherwise noted):

-- Net income of $44.4 million or $0.74 per diluted Class A share decreased compared to net income of $65.0 million or $1.09 per diluted Class A share. Net income, excluding the impact of adjustments(1), of $46.4 million or $0.78 per diluted Class A share decreased compared to net income, excluding the impact of adjustments, of $73.4 million or $1.24 per diluted Class A share. Adjusted EBITDA(2) decreased by $32.3 million to $154.5 million.

-- Net cash provided by operating activities increased by $5.0 million to $200.4 million. Adjusted free cash flow(3) increased by $23.7 million to $173.9 million.

-- Awarded a Gold Rating in sustainability performance for the third consecutive year by EcoVadis.

Fiscal Year Highlights Include (all results compared to the fiscal year 2019 unless otherwise noted):

-- Net income of $108.8 million or $1.83 per diluted Class A share decreased compared to net income of $171.0 million or $2.89 per diluted Class A share. Net income, excluding the impact of adjustments, of $190.9 million or $3.22 per diluted Class A share decreased compared to net income, excluding the impact of adjustments, of $234.0 million or $3.96 per diluted Class A share. Adjusted EBITDA decreased by $16.3 million to $642.6 million.

-- Net cash provided by operating activities increased by $65.2 million to $454.7 million. Adjusted free cash flow increased by $78.4 million to $346.2 million.

-- Reduced net debt(4) by $293.5 million since October 31, 2019 and paid $104.3 million in dividends to stockholders.

Pete Watson, Greif's President and Chief Executive Officer, commented:

"I am very proud of the commitment displayed by the Greif team to adapt and manage the challenges presented by the COVID-19 pandemic this past year," said Pete Watson, Greif's President and Chief Executive Officer. "Through our focus on customer service excellence and disciplined operational execution, the team delivered solid financial results, strong cash flow and significant debt reduction in a challenging operating environment. I am particularly pleased with our team's results in reducing working capital, which created a strong source of cash in the fiscal fourth quarter that helped drive our fiscal 2020 adjusted free cash flow well higher than our previously announced forecast.

Looking ahead, while downstream industries are gradually ramping back up, there remains lingering uncertainty in the global economy. We are committed to managing those areas within our control to navigate successfully through these uncertainties. Greif is well positioned to benefit as the economy further recovers."

Customer Service

The Company's consolidated CSI(5) score was 92.9 during the fiscal fourth quarter 2020 and reached a record high of 93.0 on a trailing four quarter basis. Our long term objective is for each business segment to achieve a CSI score of 95.0 or greater.

CSI for the Rigid Industrial Packaging & Services segment was 93.7, which was approximately 4 percent higher compared to the prior year quarter. CSI for the Flexible Products & Services segment was 86.4, which was approximately 9 percent lower compared to the prior year quarter as a result of COVID-19 related delays to product shipments due to staffing constraints. CSI for the Paper Packaging & Services segment was 91.0, which was approximately flat to the prior year quarter.

Additionally, we completed our tenth NPS(6) survey and achieved our best ever score of 67.0. Our latest NPS result was approximately 10% better than our wave nine survey conducted in late 2019 and a 72% improvement from the initial wave one conducted in late 2015. We continue to leverage the increased customer interactions that accompany each survey into enhanced service offerings for our customers and better strategic insight into their business needs.

Liquidity and Balance Sheet

As of October 31, 2020, the Company had $538.1 million of available borrowing capacity(7) within its $800.0 million revolving credit facility. Subsequent to October 31, 2020, the Company entered into a delayed draw term loan with the intent to utilize the proceeds to pay down the Company's Euro 200 million 7.375% senior notes at maturity in July of 2021. Based on the provisions of the applicable loan documents and a series of forward interest rate swaps entered into by the Company, if this term loan was drawn down today, the interest rate would initially be approximately 2.5% per annum. Other than the Euro 200 million senior notes, the Company has no other sizable debt maturities due until 2024.

For the year ended October 31, 2020, the Company's adjusted free cash flow was $346.2 million compared to $267.8 million for the year ended October 31, 2019. The increase in adjusted free cash flow was primarily attributable to $56.1 million of cash provided by operating working capital as a result of management initiatives and tight market conditions, particularly in the Paper Packaging & Services segment.

Segment Results (all results compared to the fourth quarter of 2019 unless otherwise noted)

Net sales are impacted mainly by the volume of primary products(8) 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 2020 as compared to the prior year quarter for the business segments with manufacturing operations.

Rigid Industrial Packaging & Services

Net sales decreased by $39.9 million to $579.1 million. Net sales excluding foreign currency translation decreased by $38.9 million due primarily to lower volumes and lower average sale prices driven by contractual price adjustment mechanisms related to raw material price decreases.

Gross profit decreased by $0.2 million to $113.8 million. The change in gross profit was primarily due to the same factors that impacted net sales, partially offset by lower priced raw materials.

Operating profit decreased by $0.9 million to $54.1 million. Adjusted EBITDA decreased by $4.2 million to $65.3 million primarily due to the same factors that impacted gross profit and higher segment SG&A expense, partially offset by the segment receiving a smaller portion of allocated corporate costs. The segment's SG&A expense in the prior year quarter included a one-time Brazilian tax recovery of approximately $7.0 million, which was previously disclosed.

Paper Packaging & Services

Net sales decreased by $32.8 million to $502.3 million primarily due to approximately $58.0 million of prior year net sales attributable to the divested Consumer Packaging Group business, as well as lower published containerboard and boxboard prices, partially offset by higher volumes.

Gross profit decreased by $29.7 million to $98.8 million. The change in gross profit was primarily due to the same factors that impacted net sales and higher old corrugated container input costs, partially offset by lower manufacturing costs.

Operating profit decreased by $25.0 million to $30.7 million. Adjusted EBITDA decreased by $31.3 million to $77.4 million primarily due to the same factors that impacted gross profit and the segment receiving a greater portion of allocated corporate costs, partially offset by a reduction in the segment's SG&A expense that was, in part, attributable to synergy realizations.

Flexible Products & Services

Net sales increased by $2.3 million to $73.2 million. Net sales excluding foreign currency translation increased by $0.4 million due primarily to due to higher average sale prices, partially offset by lower volumes.

Gross profit increased by $2.8 million to $17.0 million. The change in gross profit was primarily due to the same factors that impacted net sales and lower priced raw materials.

Operating profit increased by $1.7 million to $4.8 million. Adjusted EBITDA increased by $3.0 million to $8.8 million primarily due to the same factors that impacted gross profit.

Land Management

Net sales decreased by $0.4 million to $6.7 million.

Operating profit increased by $0.3 million to $2.2 million. Adjusted EBITDA increased by $0.2 million to $3.0 million.

Tax Summary

During the fourth quarter, the Company recorded an income tax rate of 27.9 percent and a tax rate excluding the impact of adjustments of 26.1 percent. As previously disclosed, the application of FIN 18 often causes fluctuations in our quarterly effective tax rates. For the full year, the Company recorded an income tax rate of 34.0 percent and a tax rate excluding the impact of adjustments of 27.0 percent.

Dividend Summary

On December 8, 2020, the Board of Directors declared quarterly cash dividends of $0.44 per share of Class A Common Stock and $0.65 per share of Class B Common Stock. Dividends are payable on January 1, 2021, to stockholders of record at the close of business on December 18, 2020.

Company Outlook

The Company is introducing a quarterly outlook given the continued market unpredictability caused by the COVID-19 pandemic. The Company will revert to annual guidance once the duration and economic impact of the pandemic is better understood.

Conference Call

The Company will host a conference call to discuss the fourth quarter of 2020 results on December 10, 2020, at 8:30 a.m. Eastern Time (ET). Participants may access the call using the following online registration link: http://www.directeventreg.com/registration/event/8795459. Registrants will receive a confirmation email containing dial in details and a unique conference call code for entry. Phone lines will open at 8:00 a.m. ET. The conference call will also be available through a live webcast, including slides, which can be accessed at http://investor.greif.com by clicking on the Events and Presentations tab and searching under the events calendar. A replay of the conference call will be available on the Company's website approximately two hours following the call.

About Greif

Greif is a global leader in industrial packaging products and services and is pursuing its vision: in industrial packaging, be the best performing customer service company in the world. The Company produces steel, plastic and fibre drums, intermediate bulk containers, reconditioned containers, flexible products, containerboard, uncoated recycled paperboard, coated recycled paperboard, tubes and cores and a diverse mix of specialty products. The Company also manufactures packaging accessories and provides filling, packaging and other services for a wide range of industries. In addition, Greif manages timber properties in the southeastern United States. The Company is strategically positioned in over 40 countries to serve global as well as regional customers. Additional information is on the Company's website at www.greif.com.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words "may," "will," "expect," "intend," "estimate," "anticipate," "aspiration," "objective," "project," "believe," "continue," "on track" or "target" or the negative thereof and similar expressions, among others, identify forward-looking statements. All forward-looking statements are based on assumptions, expectations and other information currently available to management. Such forward-looking statements are subject to certain risks and uncertainties that could cause the Company's actual results to differ materially from those forecasted, projected or anticipated, whether expressed or implied. The most significant of these risks and uncertainties are described in Part I of the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2020. The Company undertakes no obligation to update or revise any forward-looking statements.

Although the Company believes that the expectations reflected in forward-looking statements have a reasonable basis, the Company can give no assurance that these expectations will prove to be correct. Forward-looking statements are subject to risks and uncertainties that could cause the Company's actual results to differ materially from those forecasted, projected or anticipated, whether expressed in or implied by the statements. Such risks and uncertainties that might cause a difference include, but are not limited to, the following: (i) historically, our business has been sensitive to changes in general economic or business conditions, (ii) our global operations subject us to currency exchange and political risks that could adversely affect our results of operations, (iii) the COVID-19 pandemic could have a material adverse effect on our business, financial condition, results of operations and cash flows, (iv) the current and future challenging global economy and disruption and volatility of the financial and credit markets may adversely affect our business, (v) the continuing consolidation of our customer base and suppliers may intensify pricing pressure, (vi) we operate in highly competitive industries, (vii) our business is sensitive to changes in industry demands, (viii) raw material and energy price fluctuations and shortages may adversely impact our manufacturing operations and costs, (ix) the frequency and volume of our timber and timberland sales will impact our financial performance, (x) we may not successfully implement our business strategies, including achieving our growth objectives, (xi) we may encounter difficulties or liabilities arising from acquisitions or divestitures, (xii) the acquisition of Caraustar Industries, Inc. and its subsidiaries subjects us to various risks and uncertainties, (xiii) we may incur additional restructuring costs and there is no guarantee that our efforts to reduce costs will be successful, (xiv) several operations are conducted by joint ventures that we cannot operate solely for our benefit, (xv) certain of the agreements that govern our joint ventures provide our partners with put or call options, (xvi) our ability to attract, develop and retain talented and qualified employees, managers and executives is critical to our success, (xvii) our business may be adversely impacted by work stoppages and other labor relations matters, (xviii) 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 and deductible increases, (xix) our business depends on the uninterrupted operations of our facilities, systems and business functions, including our information technology and other business systems, (xx) a security breach of customer, employee, supplier or Company information may have a material adverse effect on our business, financial condition, results of operations and cash flows, (xxi) changes in U.S. generally accepted accounting principles (GAAP) and SEC rules and regulations concerning the maintenance of effective internal controls could materially impact our reported financial results, (xxii) we could be subject to changes to our tax rates, the adoption of new U.S. or foreign tax legislation or exposure to additional tax liabilities, (xxiii) full realization of our deferred tax assets may be affected by a number of factors, (xxiv) 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, (xxv) we have a significant amount of goodwill and long-lived assets which, if impaired in the future, would adversely impact our results of operations, (xxvi) our pension and postretirement 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, (xxvii) legislation/regulation related to environmental and health and safety matters and corporate social responsibility could negatively impact our operations and financial performance, (xxviii) product liability claims and other legal proceedings could adversely affect our operations and financial performance, (xxix) 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, (xxx) changing climate, climate change regulations and greenhouse gas effects may adversely affect our operations and financial performance. The risks described above 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. For a detailed discussion of the most significant risks and uncertainties that could cause our actual results to differ materially from those forecasted, projected or anticipated, see "Risk Factors" in Part I, Item 1A of our most recently filed Form 10-K and our other filings with the Securities and Exchange Commission. All forward-looking statements made in this news release 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.

The impact of income tax expense and noncontrolling interest on each adjustment is calculated based on tax rates and ownership percentages specific to each applicable entity.

Contact: Matt Eichmann 740-549-6067 matt.eichmann@greif.com

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