GREIF, INC - Quarter Report: 2011 April (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-00566

 

GREIF, INC.

(Exact name of registrant as specified in its charter)

Delaware		31-4388903
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
425 Winter Road, Delaware, Ohio		43015
(Address of principal executive offices)		(Zip Code)

Indicate by check mark whether the registrant (1) has filed all reports required 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares outstanding of each of the issuer’s classes of common stock at the close of business on May 31, 2011:

Class A Common Stock		24,838,853 shares
Class B Common Stock		22,362,266 shares

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

GREIF, INC. AND SUBSIDIARY COMPANIES

		Three months ended								Six months ended
		April 30,								April 30,
		2011				2010				2011				2010
Net sales		$	1,050,766			$	836,580			$	1,994,558			$	1,546,262
Cost of products sold			843,412				668,064				1,611,119				1,240,034
Gross profit			207,354				168,516				383,439				306,228
Selling, general and administrative expenses			113,909				91,668				220,362				174,050
Restructuring charges			5,020				4,790				8,011				10,787
(Gain) on disposal of properties, plants and equipment, net			(2,857	)			(701	)			(4,936	)			(2,029	)
Operating profit			91,282				72,759				160,002				123,420
Interest expense, net			18,585				16,759				35,382				31,647
Other expense , net			7,306				896				5,416				3,659
Income before income tax expense and equity earnings (losses) of unconsolidated affilitates, net			65,391				55,104				119,204				88,114
Income tax expense			14,775				10,514				28,013				17,182
Equity earnings (losses) of unconsolidated affiliates, net of tax			(25	)			242				497				131
Net income			50,591				44,832				91,688				71,063
Net (income) loss attributable to noncontrolling interests			293				(2,198	)			637				(3,610	)
Net income attributable to Greif, Inc.		$	50,884			$	42,634			$	92,325			$	67,453
Basic earnings per share attributable to Greif, Inc. common shareholders:
Class A Common Stock		$	0.87			$	0.73			$	1.58			$	1.16
Class B Common Stock		$	1.31			$	1.10			$	2.37			$	1.73
Diluted earnings per share attributable to Greif, Inc. common shareholders:
Class A Common Stock		$	0.87			$	0.73			$	1.58			$	1.16
Class B Common Stock		$	1.31			$	1.10			$	2.37			$	1.73

See accompanying Notes to Consolidated Financial Statements

GREIF, INC. AND SUBSIDIARY COMPANIES

ASSETS

		April 30, 2011				October 31, 2010
Current assets
Cash and cash equivalents		$	95,548			$	106,957
Trade accounts receivable, less allowance of $12,259 in 2011 and $13,117 in 2010			521,396				480,158
Inventories			456,105				396,572
Deferred tax assets			19,135				19,526
Net assets held for sale			19,679				28,407
Prepaid expenses and other current assets			149,446				134,269
			1,261,309				1,165,889
Long-term assets
Goodwill			731,400				709,725
Other intangible assets, net of amortization			172,089				173,239
Deferred tax assets			33,981				29,982
Assets held by special purpose entities			50,891				50,891
Other long-term assets			118,237				93,603
			1,106,598				1,057,440
Properties, plants and equipment
Timber properties, net of depletion			215,517				215,537
Land			131,171				121,409
Buildings			447,390				411,437
Machinery and equipment			1,383,987				1,302,597
Capital projects in progress			129,712				112,300
			2,307,777				2,163,280
Accumulated depreciation			(962,165	)			(888,164	)
			1,345,612				1,275,116
Total assets		$	3,713,519			$	3,498,445

See accompanying Notes to Consolidated Financial Statements

GREIF, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

LIABILITIES AND SHAREHOLDERS’ EQUITY

		April 30, 2011				October 31, 2010
Current liabilities
Accounts payable		$	412,828			$	448,310
Accrued payroll and employee benefits			90,411				90,887
Restructuring reserves			18,626				20,238
Current portion of long-term debt			12,500				12,523
Short-term borrowings			105,698				60,908
Deferred tax liabilities			7,153				5,091
Other current liabilities			135,782				123,854
			782,998				761,811
Long-term liabilities
Long-term debt			1,088,215				953,066
Deferred tax liabilities			181,341				180,486
Pension liabilities			57,076				65,915
Postretirement benefit obligations			22,515				21,555
Liabilities held by special purpose entities			43,250				43,250
Other long-term liabilities			110,480				116,930
			1,502,877				1,381,202
Shareholders’ equity
Common stock, without par value			109,469				106,057
Treasury stock, at cost			(120,299	)			(117,394	)
Retained earnings			1,366,972				1,323,477
Accumulated other comprehensive loss:
- foreign currency translation			68,337				44,612
- interest rate and other derivatives			(755	)			(1,505	)
- minimum pension liabilities			(77,377	)			(76,526	)
Toal Greif, Inc. shareholders’ equity			1,346,347				1,278,721
Noncontrolling interests			81,297				76,711
Total shareholders’ equity			1,427,644				1,355,432
Total liabilities and shareholders’ equity		$	3,713,519			$	3,498,445

See accompanying Notes to Consolidated Financial Statements

GREIF, INC. AND SUBSIDIARY COMPANIES

For the six months ended April 30,		2011				2010
Cash flows from operating activities:
Net income		$	91,688			$	71,063
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation, depletion and amortization			67,702				57,179
Asset impairments			820				239
Deferred income taxes			(691	)			3,333
Gain on disposals of properties, plants and equipment, net			(4,936	)			(2,029	)
Equity earnings of affiliates			(497	)			(131	)
Increase (decrease) in cash from changes in certain assets and liabilities:
Trade accounts receivable			(24,419	)			(45,346	)
Inventories			(44,559	)			(46,452	)
Prepaid expenses and other current assets			(9,986	)			(8,107	)
Accounts payable			(47,953	)			(99,809	)
Accrued payroll and employee benefits			(2,745	)			(9,672	)
Restructuring reserves			(1,612	)			595
Other current liabilities			(8,460	)			29,464
Pension and postretirement benefit liabilities			(7,879	)			4,125
Other long-term assets, other long-term liabilities and other			(18,979	)			(10,674	)
Net cash used in operating activities			(12,506	)			(56,222	)
Cash flows from investing activities:
Acquisitions of companies, net of cash acquired			(28,468	)			(114,135	)
Purchases of properties, plants and equipment			(73,676	)			(64,558	)
Purchases of timber properties			(900	)			(16,615	)
Proceeds from the sale of properties, plants, equipment and other assets			5,498				3,927
Issuance of notes receivable			(21,817	)			—
Purchases of land rights			(650	)			—
Net cash used in investing activities			(120,013	)			(191,381	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			1,551,903				1,517,186
Payments on long-term debt			(1,404,655	)			(1,378,976	)
Proceeds from short-term borrowings, net			40,724				21,360
Proceeds from (payments of) trade accounts receivable credit facility, net			(18,900	)			108,600
Dividends paid			(48,830	)			(44,100	)
Exercise of stock options			338				364
Acquisitions of treasury stock and other			(3,060	)			—
Net cash provided by financing activities			117,520				224,434
Effects of exchange rates on cash			3,590				(3,694	)
Net decrease in cash and cash equivalents			(11,409	)			(26,863	)
Cash and cash equivalents at beginning of period			106,957				111,896
Cash and cash equivalents at end of period		$	95,548			$	85,033

See accompanying Notes to Consolidated Financial Statements

GREIF, INC. AND SUBSIDIARY COMPANIES

NOTE 1 — BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated balance sheets as of April 30, 2011 and October 31, 2010 and the consolidated statements of operations and cash flows for the three month and six month periods ended April 30, 2011 and 2010 of Greif, Inc. and its subsidiaries (the “Company”). The consolidated financial statements include the accounts of the Company, all wholly-owned and majority-owned subsidiaries and investments in limited liability companies, partnerships and joint ventures in which it has controlling influence. Non-majority owned entities include investments in limited liability companies, partnerships and joint ventures in which the Company does not have controlling influence.

The unaudited consolidated financial statements included in the Quarterly Report on Form 10-Q (this “Form 10-Q”) should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for its fiscal year ended October 31, 2010 (the “2010 Form 10-K”). Note 1 of the “Notes to Consolidated Financial Statements” from the 2010 Form 10-K is specifically incorporated in this Form 10-Q by reference. In the opinion of management, all adjustments necessary for fair presentation of the consolidated financial statements have been included are of a normal and recurring nature.

The consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (“SEC”) instructions to Quarterly Reports on Form 10-Q and include all of the information and disclosures required by accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual amounts could differ from those estimates.

The Company’s fiscal year begins on November 1 and ends on October 31 of the following year. Any references to the year 2011 or 2010, or to any quarter of those years, relates to the fiscal year or quarter, as the case may be, ending in that year.

Certain and appropriate prior year amounts have been reclassified to conform to the 2011 presentation.

Newly Adopted Accounting Standards

In June 2009, the Financial Accounting Standards Board (“FASB”) amended Accounting Standards Codification (“ASC”) 860, “Transfers and Servicing”. The amendment to ASC 860 requires an enterprise to evaluate whether the transaction is legally isolated from the Company and whether the results of the transaction are consolidated within the consolidated financial statements. The Company adopted the new guidance beginning November 1, 2010, and the adoption of the new guidance did not impact the Company’s financial position, results of operations or cash flows, other than the related disclosures.

In June 2009, the FASB amended ASC 810, “Consolidation”. The amendment to ASC 810 changed the methodology for determining the primary beneficiary of a variable interest entity (“VIE”) from a quantitative risk and rewards based model to a qualitative determination. It also requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a VIE. Accordingly, the Company reevaluated its previous ASC 810 conclusions, including (1) whether an entity is a VIE, (2) whether the enterprise is the VIE’s primary beneficiary, and (3) what type of financial statement disclosures are required. The Company adopted the new guidance beginning November 1, 2010, and the adoption of the new guidance did not impact the Company’s financial position, results of operations or cash flows, other than the related disclosures.

Recently Issued Accounting Standards

Effective July 1, 2009, changes to the ASC are communicated through an Accounting Standards Update (“ASU”). As of April 30, 2011, the FASB has issued ASU’s 2009-01 through 2011-03. The Company has reviewed each ASU and determined that they will not have a material impact on the Company’s financial position, results of operations or cash flows, other than the related disclosure.

NOTE 2 — ACQUISITIONS, DIVESTITURES AND OTHER SIGNIFICANT TRANSACTIONS

		# of				Purchase Price,								Operating				Tangible				Intangible
		Acquisitions				net of Cash				Revenue				Profit				Assets, net				Assets				Goodwill
Total 2010 Acquisitions			12			$	176,156			$	268,443			$	19,042			$	104,863			$	49,510			$	120,394

During the first half of 2011, the Company’s acquisition activity was not material.

During 2010, the Company completed twelve acquisitions consisting of seven rigid industrial packaging companies and five flexible products companies and made a contingent purchase price payment related to a 2008 acquisition. The seven rigid industrial packaging companies consisted of a European company purchased in November 2009, an Asian company purchased in June 2010, a North American drum reconditioning company purchased in July 2010, a North American drum reconditioning company purchased in August 2010, a European company purchased in August 2010, a 51 percent interest in a Middle Eastern company purchased in September 2010 and a South American company purchased in September 2010. The five flexible products companies acquired conduct business throughout Europe, Asia and North America and were acquired in February, June, August and September 2010. The rigid industrial packaging acquisitions are expected to complement the Company’s existing product lines that together will provide growth opportunities and economies of scale. The drum reconditioning acquisitions, within our Rigid Industrial Packaging & Services segment, and the flexible products acquisitions expand the Company’s product and service offerings. The estimated fair value of the net tangible assets acquired was $104.9 million. Identifiable intangible assets, with a combined fair value of $49.5 million, including trade-names, customer relationships, and certain non-compete agreements, have been recorded for these acquisitions. The excess of the purchase prices over the estimated fair values of the net tangible and intangible assets acquired of $120.4 million was recorded as goodwill.

The five flexible products companies were contributed to a joint venture on September 29, 2010. See “Flexible Products Joint Venture” included in Note 8 for additional information on this joint venture. The aggregate purchase price in the table above includes the reimbursement of $98.2 million received from the other joint venture partner relating to its investment and reimbursement of certain costs.

Had the transactions described above occurred on November 1, 2009, results of operations would not have differed materially from reported results.

NOTE 3 — SALE OF NON-UNITED STATES ACCOUNTS RECEIVABLE

Pursuant to the terms of a Receivable Purchase Agreement (the “RPA”) between Greif Coordination Center BVBA, an indirect wholly-owned subsidiary of Greif, Inc., and a major international bank, the seller agreed to sell trade receivables meeting certain eligibility requirements that seller had purchased from other indirect wholly-owned subsidiaries of Greif, Inc., including Greif Belgium BVBA, Greif Germany GmbH, Greif Nederland BV, Greif Packaging Belgium NV, Greif Spain SA, Greif Sweden AB, Greif Packaging Norway AS, Greif Packaging France, SAS, Greif Packaging Spain SA, Greif Portugal Lda and Greif UK Ltd, under discounted receivables purchase agreements and from Greif France SAS under a factoring agreement. This agreement is amended from time to time to add additional Greif entities. In addition, Greif Italia S.P.A. also an indirect wholly-owned subsidiary of Greif, Inc., entered into the Italian Receivables Purchase Agreement with the Italian branch of the major international bank (the “Italian RPA”) agreeing to sell trade receivables that meet certain eligibility criteria to such branch. The Italian RPA is similar in structure and terms as the RPA. The maximum amount of receivables that may be financed under the RPA and the Italian RPA is €115 million ($168.6 million) at April 30, 2011.

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 ($12.2 million) at April 30, 2011.

In October 2008, Greif Embalagens Industriais do Brasil Ltda., an indirect wholly-owned subsidiary of Greif, Inc., entered into agreements (the “Brazil Agreements”) with Brazilian banks. There is no maximum amount of aggregate receivables that may be financed under the Brazil Agreements; however, the sale of individual receivables is subject to approval by the banks.

In May 2009, Greif Malaysia Sdn Bhd., an indirect wholly-owned subsidiary of Greif, Inc., entered into the Malaysian Receivables Purchase Agreement (the “Malaysian Agreements”) with Malaysian banks. The maximum amount of the aggregate receivables that may be financed under the Malaysian Agreements is 15.0 million Malaysian Ringgits ($5.0 million) at April 30, 2011.

The structure of the transactions provide for a legal true sale, on a revolving basis, of the receivables transferred from the various Greif, Inc. subsidiaries to the respective banks. The bank funds 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 is settled upon collection of the receivables. At the balance sheet reporting dates, the Company removes from accounts receivable the amount of proceeds received from the initial purchase price since they meet the applicable criteria of ASC 860, “Transfers and Servicing”, and continues to recognize the deferred purchase price in its accounts receivable. At the time the receivables are initially sold, the difference between the carrying amount and the fair value of the assets sold are included as a loss on sale in the consolidated statements of operations. The receivables are sold on a non-recourse basis with the total funds in the servicing collection accounts pledged to the banks between settlement dates.

At April 30, 2011 and October 31, 2010, €109.7 million ($160.7 million) and €117.6 million ($162.9 million), respectively, of accounts receivable were sold under the RPA and Italian RPA. At April 30, 2011 and October 31, 2010, 7.7 million Singapore Dollars ($6.3 million) and 6.7 million Singapore Dollars ($5.4 million), respectively, of accounts receivable were sold under the Singapore RPA. At April 30, 2011 and October 31, 2010, 32.7 million Brazilian Reais ($20.9 million) and 11.7 million Brazilian Reais ($6.9 million), respectively, of accounts receivable were sold under the Brazil Agreements. At April 30, 2011 and October 31, 2010, 10.3 million Malaysian Ringgits ($3.4 million) and 6.3 million Malaysian Ringgits ($2.0 million), respectively, of accounts receivable were sold under the Malaysian Agreements.

Expenses associated with the RPA and Italian RPA totaled €0.7 million ($1.0 million) and €0.7 million ($0.9 million) for the three months ended April 30, 2011 and 2010, respectively; and €1.5 million ($2.0 million) and €1.4 million ($1.9 million) for the six months ended April 30, 2011 and 2010, respectively.

Expenses associated with the Singapore RPA totaled 0.1 million Singapore Dollars ($0.1 million) and 0.1 million Singapore Dollars ($0.1 million) for the three months ended April 30, 2011 and 2010, respectively; and 0.2 million Singapore Dollars ($0.2 million) and 0.2 million Singapore Dollars ($0.2 million) for the six months ended April 30, 2011 and 2010, respectively.

Expenses associated with the Brazil Agreements totaled 0.8 million Brazilian Reais ($0.5 million) and 1.0 million Brazilian Reais ($0.6 million) for the three months ended April 30, 2011 and 2010, respectively; and 1.8 million Brazilian Reais ($1.1 million) and 2.1 million Brazilian Reais ($1.2 million) for the six months ended April 30, 2011 and 2010, respectively.

Expenses associated with the Malaysian Agreements totaled 0.2 million Malaysian Ringgits ($0.1 million) and were insignificant for the three months ended April 30, 2011 and 2010, respectively; and 0.4 million Malaysian Ringgits ($0.1 million) and were insignificant for the six months ended April 30, 2011 and 2010, respectively.

Additionally, the Company performs collections and administrative functions on the receivables sold similar to the procedures it uses for collecting all of its receivables, including receivables that are not sold under the RPA, the Italian RPA, the Singapore RPA, the Brazil Agreements, and the Malaysian Agreements. The servicing liability for these receivables is not material to the consolidated financial statements.

NOTE 4 — INVENTORIES

Inventories are stated at the lower of cost or market, utilizing the first-in, first-out basis. Inventories are summarized as follows (Dollars in thousands):

		April 30,				October 31,
		2011				2010
Finished Goods		$	104,278			$	92,469
Raw materials and work-in-process			351,827				304,103
		$	456,105			$	396,572

NOTE 5 — NET ASSETS HELD FOR SALE

As of April 30, 2011 and October 31, 2010, there were twelve and sixteen locations with assets held for sale, respectively. During the first six months of 2011, we sold two locations, added two locations and four locations were placed back in service and depreciation was resumed. The net assets held for sale are being marketed for sale and it is the Company’s intention to complete the facility sales within the upcoming year. For the six months ended April 30, 2011, there was a sale of a location in the Rigid Industrial Packaging & Services segment which resulted in a $2.6 million gain, a sale of a location in the Paper Packaging segment which resulted in a $1.2 million gain and sales of other miscellaneous equipment which resulted in a $1.1 million gain.

NOTE 6 — GOODWILL AND OTHER INTANGIBLE ASSETS

The following table summarizes the changes in the carrying amount of goodwill by segment for the six month period ended April 30, 2011 (Dollars in thousands):

		Rigid Industrial
		Packaging &				Flexible Products &
		Services				Services				Paper Packaging				Land Management				Total
Balance at October 31, 2010		$	570,661			$	78,261			$	60,653			$	150			$	709,725
Goodwill acquired			11,383				—				—				—				11,383
Goodwill adjustments			102				(8,616	)			—				—				(8,514	)
Currency translation			14,294				4,512				—				—				18,806
Balance at April 30, 2011		$	596,440			$	74,157			$	60,653			$	150			$	731,400

The goodwill adjustments decreased goodwill by $8.5 million and consisted in part of $8.6 million of tangible asset valuation adjustments related to three of the 2010 acquisitions within the Flexible Products & Services segment. Certain business combinations that occurred at or near year end were recorded with provisional estimates for fair value based on management’s best estimate.

The Company reviews goodwill and indefinite-lived intangible assets for impairment by a reporting as required by ASC 350, “Intangibles — Goodwill and Other”, either annually or when events and circumstances indicate impairment may have occurred. A reporting unit is the operating segment, or a business one level below that operating segment if discrete financial information is prepared and regularly reviewed by segment management. The Company’s business segments have been identified as reporting units and the Company concluded that no impairment or impairment indicators exist at this time.

The following table summarizes the carrying amount of net intangible assets by class as of April 30, 2011 and October 31, 2010 (Dollars in thousands):

		Gross Intangible				Accumulated				Net Intangible
		Assets				Amortization				Assets
October 31, 2010:
Trademark and patents		$	42,878			$	17,184			$	25,694
Non-compete agreements			20,456				7,774				12,682
Customer relationships			153,131				27,091				126,040
Other			15,235				6,412				8,823
Total		$	231,700			$	58,461			$	173,239
April 30, 2011:
Trademark and patents		$	43,823			$	17,290			$	26,533
Non-compete agreements			21,545				9,441				12,104
Customer relationships			158,073				32,364				125,709
Other			15,292				7,549				7,743
Total		$	238,733			$	66,644			$	172,089

Gross intangible assets increased by $7.0 million for the six month period ended April 30, 2011. The increase in gross intangible assets was attributable to $1.2 million in preliminary purchase price allocations related to three of the 2010 acquisitions within the Flexible Products & Services segment and one 2011 acquisition in the Rigid Industrial Packaging & Services segment and $5.8 million was attributable to currency fluctuations. Amortization expense for the six months ended April 30, 2011 and 2010 was $8.2 million and $6.7 million, respectively. Amortization expense for the next five years is expected to be $18.6 million in 2011, $17.5 million in 2012, $15.4 million in 2013, $14.5 million in 2014 and $13.7 million in 2015.

All intangible assets for the periods presented are subject to amortization and are being amortized using the straight-line method over periods that range from three to 23 years, except for $12.9 million related to the Tri-Sure trademark and the trade names related to Blagden Express, Closed-loop, and Box Board, all of which have indefinite lives.

NOTE 7 — RESTRUCTURING CHARGES

The following is a reconciliation of the beginning and ending restructuring reserve balances for the six month period ended April 30, 2011 (Dollars in thousands):

										Non-cash
		Cash Charges								Charges
		Employee
		Separation								Asset
		Costs				Other Costs				Impairments				Total
Balance at October 31, 2010		$	12,668			$	7,570			$	—			$	20,238
Costs incurred and charged to expense			4,231				2,960				820				8,011
Costs paid or otherwise settled			(6,837	)			(2,711	)			(75	)			(9,623	)
Balance at April 30, 2011		$	10,062			$	7,819			$	745			$	18,626

The focus for restructuring activities in 2011 continues to be on the integration of recent acquisitions in the Rigid Industrial Packaging & Services and Flexible Products & Services segments. During the first six months of 2011, the Company recorded restructuring charges of $8.0 million, which compares to $10.8 million of restructuring charges during the first six months of 2010. The restructuring activity for the six month period ended April 30, 2011 consisted of $4.2 million in employee separation costs, $0.8 million in asset impairments and $3.0 million in other costs. The $4.2 million in employee separation costs relates to the realignment of the Company’s management structure, plant closings and prior year acquisitions. The $3.0 million in other costs relates to professional fees and other administrative costs. The restructuring activity for the six month period ended April 30, 2010 consisted of $6.7 million in employee separation costs, $0.2 million in asset impairments and $3.9 million in other costs.

The following is a reconciliation of the total amounts expected to be incurred from open restructuring plans which are anticipated to be realized in 2011 and 2012 or plans that are being formulated and have not been announced as of the date of this Form 10-Q (Dollars in thousands):

		Amounts Expected				Three months ended				Six months ended				Amounts Remaining
		to be Incurred				April 30, 2011				April 30, 2011				to be Incurred
Rigid Industrial Packaging & Services
Employee separation costs		$	3,564			$	961			$	2,041			$	1,523
Asset impairments			333				333				333				—
Other restructuring costs			8,270				1,010				2,175				6,095
			12,167				2,304				4,549				7,618
Flexible Products & Services
Employee separation costs			2,328				2,100				2,181				147
Other restructuring costs			1,082				1,075				1,050				32
			3,410				3,175				3,231				179
Paper Packaging
Employee separation costs			—				—				16				—
Asset impairments			—				—				486				—
Other restructuring costs			—				(453	)			(265	)			—
			—				(453	)			237				—
Land Management
Employee separation costs			—				(6	)			(6	)			—
		$	15,577			$	5,020			$	8,011			$	7,797

The gain recognized within the Paper Packaging segment reflects actual expenditures being less than originally estimated for completed restructuring activities.

NOTE 8 — VARIABLE INTEREST ENTITIES

The Company evaluates whether an entity is a VIE whenever reconsideration events occur. 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. 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. The Company performs ongoing reassessments of all VIE’s to determine if the primary beneficiary status is appropriate. As of April 30, 2011, the Company is the primary beneficiary of the two VIE’s, as discussed below.

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.

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. The Monetization Notes are subject to a mechanism that may cause them, subject to certain conditions, to be extended 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 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.

At April 30, 2011 and October 31, 2010, assets of the Buyer SPE consisted of $50.9 million of restricted bank financial instruments. For the six month periods ended April 30, 2011 and 2010, the Buyer SPE recorded interest income of $1.2 million, respectively. The Buyer SPE is a separate and distinct legal entity from the Company. However, it has been consolidated into the operations of the Company.

At April 30, 2011 and October 31, 2010, STA Timber had long-term debt of $43.3 million. For the six month periods ended April 30, 2011 and 2010, STA Timber recorded interest expense of $1.1 million, respectively. STA Timber is exposed to credit-related losses in the event of nonperformance by the issuer of the Deed of Guarantee.

Flexible Products Joint Venture

On September 29, 2010, Greif, Inc. and its indirect subsidiary Greif International Holding Supra C.V. (“Greif Supra,”) formed a joint venture (referred to herein as the “Flexible Products JV”) with Dabbagh Group Holding Company Limited and its subsidiary National Scientific Company Limited (“NSC”). The Flexible Products JV owns the operations in the Flexible Products & Services segment, with the exception of the North American multi-wall bag business. The Flexible Products JV has been consolidated into the operations of the Company as of its formation date of September 29, 2010.

The Flexible Products 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 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.

The economic and business purpose underlying the Flexible Products 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 Products JV were existing businesses acquired by Greif Supra and that were reorganized under Pinwheel Asset Holding B.V. and Pinwheel Trading Holding B.V. (“Asset Co.” and “Trading Co.”), respectively. The Company has 51% ownership in Trading Co. and 49% ownership in Asset Co. However, Greif Supra and NSC have equal economic interests in the Flexible Products JV, notwithstanding the actual ownership interests in the various legal entities.

All investments, loans and capital contributions are to be shared equally by Greif Supra and NSC and each partner has committed to contribute capital of up to $150 million and obtain third party financing for up to $150 million as required.

The following table presents the Flexible Products JV total net assets (Dollars in thousands):

April 30, 2011		Asset Co.				Trading Co.				Flexible Products JV
Total assets		$	197,056			$	162,136			$	359,192
Total liabilities			94,208				63,029				157,237
Net assets		$	102,848			$	99,107			$	201,955

October 31, 2010		Asset Co.				Trading Co.				Flexible Products JV
Total assets		$	187,727			$	166,956			$	354,683
Total liabilities			79,243				65,033				144,276
Net assets		$	108,484			$	101,923			$	210,407

Net income (loss) attributable to the non controlling interest in the Flexible Products JV for the three and six months ended April 30, 2011 was ($1.9) and ($3.6) million, respectively and was added to net income to arrive at net income attributable to the Company.

NOTE 9 — LONG-TERM DEBT

Long-term debt is summarized as follows (Dollars in thousands):

		April 30, 2011				October 31, 2010
Credit Agreement		$	429,152			$	273,700
Senior Notes due 2017			303,124				303,396
Senior Notes due 2019			242,613				242,306
Trade accounts receivable credit facility			116,100				135,000
Other long-term debt			9,726				11,187
			1,100,715				965,589
Less current portion			(12,500	)			(12,523	)
Long-term debt		$	1,088,215			$	953,066

Credit Agreement

On October 29, 2010, the Company obtained a $1.0 billion senior secured credit facility pursuant to an Amended and Restated Credit Agreement with a syndicate of financial institutions (the “Credit Agreement”). The Credit Agreement provides for a $750 million revolving multicurrency credit facility and a $250 million term loan, both expiring October 29, 2015, with an option to add $250 million to the facilities with the agreement of the lenders. The $250 million term loan is scheduled to amortize by $3.1 million each quarter-end for the first eight quarters, $6.3 million each quarter-end for the next eleven quarters and $156.3 million on the maturity date. The Credit Agreement replaced and refinanced the Company’s then existing credit agreement that provided the Company with a $500 million revolving multicurrency credit facility and a $200 million term loan.

The Credit Agreement is available to fund ongoing working capital and capital expenditure needs, for general corporate purposes and to finance acquisitions. Interest is based on a Eurodollar rate or a base rate that resets periodically plus a calculated margin amount. As of April 30, 2011, $429.2 million was outstanding under the Credit Agreement. The current portion of the Credit Agreement was $12.5 million and the long-term portion was $416.7 million. The weighted average interest rate on the Credit Agreement was 2.14% for the six months ended April 30, 2011.

The Credit Agreement contains financial covenants that require the Company to maintain a certain leverage ratio and a fixed charge coverage ratio. At April 30, 2011, the Company was in compliance with these covenants.

Senior Notes due 2017

On February 9, 2007, the Company issued $300.0 million of 6.75% Senior Notes due February 1, 2017. Interest on these Senior Notes is payable semi-annually. Proceeds from the issuance of these Senior Notes were principally used to fund the purchase of previously outstanding 8.875% Senior Subordinated Notes in a tender offer and for general corporate purposes.

The fair value of these Senior Notes due 2017 was $321.1 million at April 30, 2011 based upon quoted market prices. The indenture pursuant to which these Senior Notes were issued contains certain covenants. At April 30, 2011, the Company was in compliance with these covenants.

Senior Notes due 2019

On July 28, 2009, the Company issued $250.0 million of 7.75% Senior Notes due August 1, 2019. Interest on these Senior Notes is payable semi-annually. Proceeds from the issuance of these Senior Notes were principally used for general corporate purposes, including the repayment of amounts outstanding under the Company’s revolving multicurrency credit facility, without any permanent reduction of the commitments.

The fair value of these Senior Notes due 2019 was $274.4 million at April 30, 2011, based upon quoted market prices. The indenture pursuant to which these Senior Notes were issued contains certain covenants. At April 30, 2011, the Company was in compliance with these covenants.

United States Trade Accounts Receivable Credit Facility

On December 8, 2008, the Company entered into a $135.0 million trade accounts receivable credit facility with a financial institution and its affiliate, as purchasers, with a maturity date of December 8, 2013, subject to earlier termination of the purchasers’ commitment on September 29, 2011, or such later date to which the purchase commitment may be extended by agreement of the parties. The credit facility is secured by certain of the Company’s trade accounts receivable in the United States and bears interest at a variable rate based on the London Interbank Offered Rate (“LIBOR”) plus a margin or other agreed-upon rate (0.78% at April 30, 2011). In addition, the Company can terminate the credit facility at any time upon five days prior written notice. A significant portion of the initial proceeds from this credit facility was used to pay the obligations under the previous trade accounts receivable credit facility, which was terminated. The remaining proceeds were and will be used to pay certain fees, costs and expenses incurred in connection with the credit facility and for working capital and general corporate purposes. At April 30, 2011, there was $116.1 million outstanding under the credit facility. The agreement for this credit facility contains financial covenants that require the Company to maintain a certain leverage ratio and a fixed charge coverage ratio. At April 30, 2011, the Company was in compliance with these covenants.

Greif Receivables Funding LLC (“GRF”), an indirect subsidiary of the Company, has participated in the purchase and transfer of receivables in connection with these credit facilities and is included in the Company’s consolidated financial statements. However, because GRF is a separate and distinct legal entity from the Company and its other subsidiaries, the assets of GRF are not available to satisfy the liabilities and obligations of the Company and its other subsidiaries, and the liabilities of GRF are not the liabilities or obligations of the Company and its other subsidiaries. This entity purchases and services the Company’s trade accounts receivable that are subject to this credit facility.

Other

In addition to the amounts borrowed under the Credit Agreement and proceeds from the Senior Notes and the United States Trade Accounts Receivable Credit Facility, at April 30, 2011, the Company had outstanding other debt of $115.4 million, comprised of $9.7 million in long-term debt and $105.7 million in short-term borrowings, compared to other debt outstanding of $72.1 million, comprised of $11.2 million in long-term debt and $60.9 million in short-term borrowings, at October 31, 2010. The $43.3 million increase was primarily due to funding acquisitions, capital expenditures and increased working capital requirements.

At April 30, 2011, the current portion of the Company’s long-term debt was $12.5 million. Annual maturities, including the current portion, of long-term debt under the Company’s various financing arrangements were $22.2 million in 2012, $25.0 million in 2013, $141.1 million in 2014, $360.4 million in 2015 and $545.7 million thereafter.

At April 30, 2011 and October 31, 2010, the Company had deferred financing fees and debt issuance costs of $19.6 million and $21.4 million, respectively, which are included in other long-term assets.

NOTE 10 — FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Financial Instruments

The Company uses derivatives from time to time to partially mitigate the effect of exposure to interest rate movements, exposure to currency fluctuations, and energy cost fluctuations. Under ASC 815, “Derivatives and Hedging”, all derivatives are to be recognized as assets or liabilities on the balance sheet and measured at fair value. Changes in the fair value of derivatives are recognized in either net income or in other comprehensive income, depending on the designated purpose of the derivative.

While the Company may be exposed to credit losses in the event of nonperformance by the counterparties to its derivative financial instrument contracts, its counterparties are established banks and financial institutions with high credit ratings. The Company has no reason to believe that such counterparties will not be able to fully satisfy their obligations under these contracts.

During the next six months, the Company expects to reclassify into earnings a net loss from accumulated other comprehensive loss of approximately $0.7 million after tax at the time the underlying hedge transactions are realized.

ASC 820, “Fair Value Measurements and Disclosures” defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements for financial and non-financial assets and liabilities. Additionally, this guidance 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.

Recurring Fair Value Measurements

The following table presents the fair value adjustments for those assets and (liabilities) measured on a recurring basis as of April 30, 2011 (Dollars in thousands):

		Fair Value Measurement																Balance sheet
		Level 1				Level 2				Level 3				Total				Location
Interest rate derivatives		$	—			$	(1,166	)		$	—			$	(1,166	)		Other long-term liabilities
Foreign exchange hedges			—				(1,292	)			—				(1,292	)		Other current liabilities
Energy hedges			—				4				—				4			Other current liabilities
Total*		$	—			$	(2,454	)		$	—			$	(2,454	)

Interest Rate Derivatives

The Company has interest rate swap agreements with various maturities through 2012. These interest rate swap agreements are used to manage the Company’s fixed and floating rate debt mix. Under these agreements, the Company receives interest monthly from the counterparties based upon the LIBOR and pays interest based upon a designated fixed rate over the life of the swap agreements.

The Company has two interest rate derivatives (floating to fixed swap agreements recorded as cash flow hedges) with a total notional amount of $125 million. Under these swap agreements, the Company receives interest based upon a variable interest rate from the counterparties (weighted average of 0.21% at April 30, 2011 and 0.26% at October 31, 2010) and pays interest based upon a fixed interest rate (weighted average of 1.78% at April 30, 2011 and October 31, 2010).

In the first quarter of 2010, the Company entered into a $100.0 million fixed to floating swap agreement which was recorded as a fair value hedge. Under this swap agreement, the Company received interest from the counterparty based upon a fixed rate of 6.75% and paid interest based upon a variable rate on a semi-annual basis. In the third quarter of 2010, the Company terminated this swap agreement, including any future cash flows. The termination of this swap agreement resulted in a cash benefit of $3.6 million ($2.2 million, net of tax).

Foreign Exchange Hedges

At April 30, 2011, the Company had outstanding foreign currency forward contracts in the notional amount of $158.8 million ($252.9 million at October 31, 2010). The purpose of these contracts is to hedge the Company’s exposure to foreign currency transactions and short-term intercompany loan balances in its international businesses. The fair value of these contracts at April 30, 2011 resulted in a loss of $1.2 million recorded in the consolidated statements of operations and a loss of $0.1 million recorded in other comprehensive income. The fair value of similar contracts at October 31, 2010 resulted in a gain of $0.8 million in the consolidated statements of operations and a loss of $2.3 million recorded in other comprehensive income.

Energy Hedges

The Company has entered into certain cash flow agreements to mitigate its exposure to cost fluctuations in natural gas prices through October 31, 2011. Under these hedge agreements, the Company agrees to purchase natural gas at a fixed price. At April 30, 2011, the notional amount of these hedges was $0.9 million ($2.4 million at October 31, 2010). The other comprehensive gain on these agreements was immaterial at April 30, 2011 and $0.3 million at October 31, 2010. As a result of the high correlation between the hedged instruments and the underlying transactions, ineffectiveness did not have a material impact on the Company’s consolidated statements of operations for the quarter ended April 30, 2011.

Other financial instruments

The estimated fair value of the Company’s long-term debt was $1,150.5 million and $1,021.5 million at April 30, 2011 and October 31, 2010, respectively. The current portion of the long-term debt was $12.5 million at April 30, 2011 and October 31, 2010. 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 debt of the same remaining maturities.

Non Recurring Fair Value Measurements

The Company has reviewed the fair value adjustments for those assets and (liabilities) measured on a non-recurring basis as of April 30, 2011 discussed herein.

Net Assets Held for Sale

Net assets held for sale are considered level two inputs which include recent purchase offers, market comparables and/or data obtained from commercial real estate brokers. As of April 30, 2011, the Company had not recognized any impairment related to net assets held for sale.

Long-Lived Assets

As part of the Company’s restructuring plans following recent acquisitions, the Company may close manufacturing facilities during the next few years. The long-lived assets are considered level two inputs which were valued based on bids received from third parties and using discounted cash flow analysis based on assumptions that the Company believes market participants would use. Key inputs included anticipated revenues, associated manufacturing costs, capital expenditures and discount, growth and tax rates. The Company recorded restructuring-related expenses for the period ended April 30, 2011 of $0.8 million on long lived assets with net book values of $1.3 million.

Goodwill

On an annual basis, the Company performs an impairment test for goodwill. The Company concluded that no impairment existed at October 31, 2010. There have been no changes during the second quarter of 2011 that would warrant impairment considerations. The 2011 impairment test will be performed during the third quarter of 2011, or earlier if specific impairment indicators are present.

NOTE 11 — 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 value of the portion of the award that is ultimately expected to vest is recognized as an expense in the Company’s consolidated statements of operations over the requisite service periods. The Company uses the straight-line single option method of expensing stock options to recognize compensation expense in its consolidated statements of operations for all share-based awards. Because share-based compensation expense is based on awards that are ultimately expected to vest, share-based compensation expense will be reduced to account for estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. No stock options were granted in 2011 or 2010. For any options granted in the future, compensation expense will be based on the grant date fair value estimated in accordance with the provisions of ASC 718.

NOTE 12 — INCOME TAXES

The effective tax rate was 22.6% and 19.1% for the three months ended April 30, 2011 and 2010, respectively, and 23.5% and 19.5% for the six months ended April 30, 2011 and 2010 respectively. The change in the effective tax rate is primarily attributable to a change in the global business mix and the loss of the alternative fuel tax credit for the respective periods.

The Company has estimated the reasonably possible expected net change in unrecognized tax benefits through April 30, 2011 based on expected settlements or payments of uncertain tax positions, and lapses of the applicable statutes of limitations of unrecognized tax benefits under ASC 740, “Income Taxes.” ASC 740 clarifies the accounting for uncertainty in income tax positions. The Company does not anticipate any significant changes in unrecognized tax benefits within the next 12 months.

The Company settled audits during the second quarter of 2011 that reduced the Company’s uncertain tax positions by $2.4 million.

NOTE 13 — RETIREMENT PLANS AND POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS

The components of net periodic pension cost include the following (Dollars in thousands):

		Three months ended								Six months ended
		April 30								April 30
		2011				2010				2011				2010
Service cost		$	2,239			$	2,293			$	4,478			$	4,586
Interest cost			4,159				3,998				8,318				7,996
Expected return on plan assets			(4,928	)			(4,524	)			(9,856	)			(9,048	)
Amortization of prior service cost, initial net asset and net actuarial gain			2,160				1,700				4,320				3,400
Net periodic pension costs		$	3,630			$	3,467			$	7,260			$	6,934

The Company made $13.2 million in pension contributions in the six months ended April 30, 2011. The Company estimates $29.7 million of pension contributions for the entire 2011 fiscal year.

The components of net periodic cost for postretirement benefits include the following (Dollars in thousands):

		Three months ended								Six months ended
		April 30								April 30
		2011				2010				2011				2010
Service cost		$	2			$	1			$	4			$	2
Interest cost			219				283				438				566
Amortization of prior service cost and recognized actuarial gain			(334	)			(251	)			(668	)			(502	)
Net periodic cost for postretirement benefits		$	(113	)		$	33			$	(226	)		$	66

NOTE 14 — CONTINGENT LIABILITIES

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 now be determined because of considerable uncertainties that exist. Therefore, it is possible that results of operations or liquidity in a particular period could be materially affected by certain contingencies.

In accordance with ASC 450, “Contingencies”, 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 adverse effect on the Company’s financial position or results from operations.

Environmental Reserves

At April 30, 2011 and October 31, 2010, the Company had recorded liabilities of $26.5 million and $26.2 million, respectively, for estimated environmental remediation costs. The liabilities were recorded on an undiscounted basis and are included in other long-term liabilities. At April 30, 2011 and October 31, 2010, the Company had recorded environmental liability reserves of $14.3 million and $14.5 million, respectively, for its blending facility in Chicago, Illinois and $10.6 million and $10.3 million, respectively, for various European drum facilities acquired in November 2006 as well as the facility in Lier, Belgium. 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.

The Company anticipates that cash expenditures in future periods for remediation costs at identified sites will be made over an extended period of time. Given the inherent uncertainties in evaluating environmental exposures, actual costs may vary from those estimated at April 30, 2011. 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 15 —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 first to Class A and Class B Common Stock to the extent that dividends are actually paid and the remainder allocated assuming all of the earnings for the period have been distributed in the form of dividends.

The Company calculates Class A EPS as follows: (i) multiply 40% times the average Class A shares outstanding, then divide that amount by the product of 40% of the average Class A shares outstanding plus 60% of the average Class B shares outstanding to get a percentage, (ii) divide undistributed net income attributable to Greif, Inc. by the average Class A shares outstanding, then (iii) multiply item (i) by item (ii), and finally (iv) add item (iii) to the Class A cash dividend per share. Diluted shares are factored into the Class A calculation.

The Company calculates Class B EPS as follows: (i) multiply 60% times the average Class B shares outstanding, then divide that amount by the product of 40% of the average Class A shares outstanding plus 60% of the average Class B shares outstanding to get a percentage, (ii) divide undistributed net income attributable to Greif, Inc. by the average Class B shares outstanding, then (iii) multiply item (i) by item (ii), and finally (iv) add item (iii) to the Class B cash dividend per share. Class B diluted EPS is identical to Class B basic EPS.

The following table provides EPS information for each period, respectively:

		Three months ended								Six months ended
		April 30								April 30
(In thousands except per share data)		2011				2010				2011				2010
Numerator for basic and diluted EPS
Net income attributable to Greif, Inc.		$	50,884			$	42,634			$	92,325			$	67,453
Cash dividends			24,517				22,169				48,830				44,100
Undistributed net income attributable to Greif, Inc.		$	26,367			$	20,465			$	43,495			$	23,353
Denominator for basic EPS
Class A common stock			24,825,768				24,637,648				24,806,813				24,591,389
Class B common stock			22,385,922				22,462,266				22,399,094				22,462,266
Denominator for diluted EPS
Class A common stock			25,106,844				25,008,915				25,082,560				24,958,358
Class B common stock			22,385,922				22,462,266				22,399,094				22,462,266
EPS Basic
Class A common stock		$	0.87			$	0.73			$	1.58			$	1.16
Class B common stock		$	1.31			$	1.10			$	2.37			$	1.73
EPS Diluted
Class A common stock		$	0.87			$	0.73			$	1.58			$	1.16
Class B common stock		$	1.31			$	1.10			$	2.37			$	1.73
Dividends per share
Class A common stock		$	0.42			$	0.38			$	0.84			$	0.76
Class B common stock		$	0.63			$	0.57			$	1.25			$	1.13

Class A Common Stock is entitled to cumulative dividends of one cent a share per year after which Class B Common Stock is entitled to non-cumulative dividends up to a half-cent a share per year. Further distribution in any year must be made in proportion of one cent a share for Class A Common Stock to one and a half cents a share for Class B Common Stock. 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.

Common stock repurchases

The Company’s Board of Directors has authorized the purchase of up to four million shares of Class A Common Stock or Class B Common Stock or any combination of the foregoing. During the first six months of 2011, the Company repurchased no shares of Class A Common Stock and 50,000 shares of Class B Common Stock. As of April 30, 2011, the Company had repurchased 2,933,272 shares, including 1,416,752 shares of Class A Common Stock and 1,516,520 shares of Class B Common Stock, under this program. The total cost of the shares repurchased from November 1, 2009 through April 30, 2011 was approximately $5.8 million.

The following table summarizes the Company’s Class A and Class B common and treasury shares at the specified dates:

										Outstanding
		Authorized Shares				Issued Shares				Shares				Treasury Shares
April 30, 2011:
Class A Common Stock			128,000,000				42,281,920				24,832,353				17,449,567
Class B Common Stock			69,120,000				34,560,000				22,362,266				12,197,734
October 31, 2010:
Class A Common Stock			128,000,000				42,281,920				24,756,974				17,524,946
Class B Common Stock			69,120,000				34,560,000				22,412,266				12,147,734

The following is a reconciliation of the shares used to calculate basic and diluted earnings per share:

		Three months ended								Six months ended
		April 30								April 30
		2011				2010				2011				2010
Class A Common Stock:
Basic shares			24,825,768				24,637,648				24,806,813				24,591,389
Assumed conversion of stock options			281,076				371,267				275,747				366,969
Diluted shares			25,106,844				25,008,915				25,082,560				24,958,358
Class B Common Stock:
Basic and diluted shares			22,385,922				22,462,266				22,399,094				22,462,266

No stock options were antidilutive for the six month periods ended April 30, 2011 and April 30, 2010, respectively.

NOTE 16 — EQUITY EARNINGS (LOSSES) OF UNCONSOLIDATED AFFILIATES, NET OF TAX AND NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

Equity earnings (losses) of unconsolidated affiliates, net of tax

Equity earnings (losses) of unconsolidated affiliates, net of tax represent investments in affiliates in which the Company does not exercise control and has a 20 percent or more voting interest. Such investments in affiliates are accounted for using the equity method of accounting. 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. The Company has an equity interest in seven affiliates. Equity earnings (losses) of unconsolidated affiliates, net of tax for the six months ended April 30, 2011 and 2010 were $0.5 and $0.1 million, respectively. There were no dividends received from the Company’s equity method affiliates for the six months ended April 30, 2011 and 2010.

Net (income) loss attributable to noncontrolling interests

Net (income) loss attributable to noncontrolling interests represent the portion of earnings or losses from the operations of the Company’s majority owned subsidiaries that were (deducted)/added from net income to arrive at net income attributable to the Company. Net (income) loss attributable to noncontrolling interests for the three months ended April 30, 2011 and 2010 were $0.3 million and ($2.2) million, respectively. Net (income) loss attributable to noncontrolling interests for the six months ended April 30, 2011 and 2010 were $0.6 million and ($3.6) million.

NOTE 17 — COMPREHENSIVE INCOME AND SHAREHOLDERS EQUITY

Comprehensive income is comprised of net income and other charges and credits to equity that are not the result of transactions with the Company’s owners. The components of comprehensive income are as follows (Dollars in thousands):

		Three months ended								Six months ended
		April 30								April 30
		2011				2010				2011				2010
Net income		$	50,591			$	44,832			$	91,688			$	71,063
Other comprehensive income:
Foreign currency translation adjustment			54,175				(75,229	)			23,726				(92,128	)
Changes in fair value of interest rate derivatives, net of tax			232				784				560				1,467
Changes in fair value of energy and other derivatives, net of tax			35				(189	)			189				(11	)
Minimum pension liability adjustment, net of tax			(972	)			553				(851	)			943
Comprehensive income		$	104,061			$	(29,249	)		$	115,312			$	(18,666	)

The following is the income tax benefit (expense) for each other comprehensive income line items:

		Three months ended								Six months ended
		April 30								April 30
		2011				2010				2011				2010
Income tax benefit (expense):
Changes in fair value of interest rate derivatives, net of tax			(125	)			(422	)			(302	)			(790	)
Changes in fair value of energy and other derivatives, net of tax			(19	)			102				(102	)			6
Minimum pension liability adjustment, net of tax			284				(131	)			256				(228	)

The components of Shareholders’ Equity from October 31, 2010 to April 30, 2011 (Dollars in thousands):

																						Non-				Accumulated Other
		Capital Stock								Treasury Stock								Retained				controlling				Comprehensive				Shareholders’
		Shares				Amount				Shares				Amount				Earnings				interests				Income (Loss)				Equity
As of October 31, 2010			47,169			$	106,057				29,673			$	(117,394	)		$	1,323,477			$	76,711			$	(33,419	)		$	1,355,432
Net income																			92,325				(637	)							91,688
Other comprehensive income (loss):																											23,624				23,624
Comprehensive income, attributable to Greif, Inc.																															115,312
Noncontrolling interests and other																							1,994								1,994
Foreign currency translation on noncontrolling interests																							3,229								3,229
Dividends paid																			(48,830	)											(48,830	)
Stock options exercised			24				289				(24	)			49																338
Tax benefit of stock options							77																								77
Treasury shares acquired			(50	)							50				(3,060	)															(3,060	)
Restricted stock directors			11				697				(11	)			23																720
Long-term incentive shares issued			40				2,349				(40	)			83																2,432
As of April 30, 2011			47,194			$	109,469				29,648			$	(120,299	)		$	1,366,972			$	81,297			$	(9,795	)		$	1,427,644

NOTE 18 — BUSINESS SEGMENT INFORMATION

The Company operates in four business segments: Rigid Industrial Packaging & Services, Flexible Products & Services, Paper Packaging, and Land Management.

Operations in the Rigid Industrial Packaging & Services segment involve the production and sale of rigid industrial packaging products, such as steel, fiber and plastic drums, rigid intermediate bulk containers, closure systems for industrial packaging products, water bottles and reconditioned containers, and services, such as container lifecycle management, blending, filling and other packaging services, logistics and warehousing. The Company’s rigid industrial packaging products are sold to customers in industries such as chemicals, paints and pigments, food and beverage, petroleum, industrial coatings, agricultural, pharmaceutical and mineral, among others.

Operations in the Flexible Products & Services segment involve the production and sale of flexible intermediate bulk containers and related services on a global basis and industrial and consumer multiwall bag products in the North America market. Our flexible intermediate bulk containers consist of a polypropylene-based woven fabric that is partly produced at our fully integrated production sites, as well as sourced from strategic regional suppliers. Our flexible products are sold to customers and in 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. Our industrial and consumer multiwall bag products are used to ship a wide range of industrial and consumer products, such as seed, fertilizers, chemicals, concrete, flour, sugar, feed, pet foods, popcorn, charcoal and salt, primarily for the agricultural, chemical, building products and food industries.

Operations in the Paper Packaging segment involve the production and sale of containerboard, corrugated sheets and other corrugated products to customers in North America. The Company’s corrugated container products are used to ship such diverse products as home appliances, small machinery, grocery products, building products, automotive components, books and furniture, as well as numerous other applications. Operations related to the Company’s industrial and consumer multiwall bag products were reclassified from this segment to the Flexible Products & Services segment in the first quarter of 2010.

Operations in the Land Management segment involve the management and sale of timber and special use properties from approximately 266,900 acres of timber properties in the southeastern United States, which are actively managed, and 23,100 acres of timber properties in Canada, which are not actively managed. The Company’s Land Management team is 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, 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 land, which consists of surplus land, higher and better use (“HBU”) land, and development land.

The Company’s reportable segments are strategic business units that offer different products. The accounting policies of the reportable segments are substantially the same as those described in the “Basis of Presentation and Summary of Significant Accounting Policies” note in the 2010 Form 10-K.

The following segment information is presented for the periods indicated (Dollars in thousands):

		Three months ended								Six months ended
		April 30,								April 30,
		2011				2010				2011				2010
Net sales
Rigid Industrial Packaging & Services		$	743,946			$	636,544			$	1,397,837			$	1,201,308
Flexible Products & Services			134,816				50,455				262,824				61,741
Paper Packaging			166,540				147,527				323,304				275,790
Land Management			5,464				2,054				10,593				7,423
Total net sales		$	1,050,766			$	836,580			$	1,994,558			$	1,546,262
Operating profit:
Rigid Industrial Packaging & Services		$	66,141			$	64,264			$	112,203			$	112,905
Flexible Products & Services			1,974				368				3,426				(4,310	)
Paper Packaging			20,856				7,635				38,996				11,334
Land Management			2,311				492				5,377				3,491
Total operating profit			91,282				72,759				160,002				123,420
Restructuring charges:
Rigid Industrial Packaging & Services			2,304				4,718				4,549				10,674
Flexible Products & Services			3,175				—				3,231				—
Paper Packaging			(453	)			72				237				113
Land Management			(6	)			—				(6	)			—
Total restructuring charges			5,020				4,790				8,011				10,787
Restructuring-related inventory charges:
Rigid Industrial Packaging & Services			—				37				—				37
Total restructuring-related inventory charges			—				37				—				37
Acquisition-related costs:
Rigid Industrial Packaging & Services			2,699				941				4,208				3,803
Flexible Products & Services			5,322				3,646				12,357				10,840
Total acquisition-related costs			8,021				4,587				16,565				14,643
Operating profit before special items:
Rigid Industrial Packaging & Services			71,144				69,960				120,960				127,419
Flexible Products & Services			10,471				4,014				19,014				6,530
Paper Packaging			20,403				7,707				39,233				11,447
Land Management			2,305				492				5,371				3,491
Total operating profit before special items*		$	104,323			$	82,173			$	184,578			$	148,887
Depreciation, depletion and amortization expense:
Rigid Industrial Packaging & Services		$	21,806			$	19,938			$	42,197			$	41,191
Flexible Products & Services			4,107				795				8,320				980
Paper Packaging			7,875				6,676				15,577				13,810
Land Management			806				264				1,608				1,198
Total depreciation, depletion and amortization expense		$	34,594			$	27,673			$	67,702			$	57,179