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GREIF INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
[August 29, 2014]

GREIF INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


(Edgar Glimpses Via Acquire Media NewsEdge) GENERAL The terms "Greif," "our company," "we," "us" and "our" as used in this discussion refer to Greif, Inc. and its subsidiaries. Our fiscal year begins on November 1 and ends on October 31 of the following year. Any references in this Form 10-Q to the years 2014 or 2013, or to any quarter of those years, relates to the fiscal year or quarter, as the case may be, ended in that year.



The discussion and analysis presented below relates to the material changes in financial condition and results of operations for our consolidated balance sheets as of July 31, 2014 and October 31, 2013, and for the consolidated statements of income for the three and nine months ended July 31, 2014 and 2013.

This discussion and analysis should be read in conjunction with the consolidated financial statements that appear elsewhere in this Form 10-Q and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2013 (the "2013 Form 10-K"). Readers are encouraged to review the entire 2013 Form 10-K, as it includes information regarding Greif not discussed in this Form 10-Q. This information will assist in your understanding of the discussion of our current period financial results.


All statements, other than statements of historical facts, included in this Form 10-Q, including without limitation, statements regarding our future financial position, business strategy, budgets, projected costs, goals, trends and plans and objectives of management for future operations, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Forward-looking statements generally can be identified by the use 28 -------------------------------------------------------------------------------- of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "project," "believe," "continue," "on track" or "target" or the negative thereof or variations thereon or similar terminology.

All forward-looking statements made in this Form 10-Q are based on information currently available to management. Although we believe that the expectations reflected in forward-looking statements have a reasonable basis, we can give no assurance that these expectations will prove to be correct. Forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from those 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) the current and future challenging global economy may adversely affect our business, (ii) historically, our business has been sensitive to changes in general economic or business conditions, (iii) our operations are subject to currency exchange and political risks that could adversely affect our results of operations, (iv) the continuing consolidation of our customer base and suppliers may intensify pricing pressure, (v) we operate in highly competitive industries, (vi) our business is sensitive to changes in industry demands, (vii) raw material and energy price fluctuations and shortages may adversely impact our manufacturing operations and costs, (viii) we may encounter difficulties arising from acquisitions, (ix) we may incur additional restructuring costs and there is no guarantee that our efforts to reduce costs will be successful, (x) tax legislation initiatives or challenges to our tax positions may adversely impact our financial results or condition, (xi) several operations are conducted by joint ventures that we cannot operate solely for our benefit, (xii) our ability to attract, develop and retain talented and qualified employees, managers and executives is critical to our success, (xiii) our business may be adversely impacted by work stoppages and other labor relations matters, (xiv) we may be subject to losses that might not be covered in whole or in part by existing insurance reserves or insurance coverage, (xv) our business depends on the uninterrupted operations of our facilities, systems and business functions, including our information technology and other business systems, (xvi) legislation/regulation related to climate change and environmental and health and safety matters and corporate social responsibility could negatively impact our operations and financial performance, (xvii) product liability claims and other legal proceedings could adversely affect our operations and financial performance, (xviii) 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, (xix) changing climate conditions may adversely affect our operations and financial performance, (xx) the frequency and volume of our timber and timberland sales will impact our financial performance, (xxi) changes in U.S. generally accepted accounting principles and SEC rules and regulations could materially impact our reported results, and (xxii) if the company fails to maintain an effective system of internal control, the company may not be able to accurately report financial results or prevent fraud. 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 more detailed discussion of the most significant risks and uncertainties that could cause our actual results to differ materially from those projected, see "Risk Factors" in Part I, Item 1A of our 2013 Form 10-K and our other filings with the Securities and Exchange Commission. All forward-looking statements made in this Form 10-Q 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.

OVERVIEW Business Segments We operate in four business segments: Rigid Industrial Packaging & Services; Paper Packaging; Flexible Products & Services; and Land Management.

We are a leading global producer of rigid industrial packaging products, such as steel, fibre and plastic drums, rigid intermediate bulk containers, closure systems for industrial packaging products, transit protection products, water bottles and remanufactured and reconditioned industrial containers, and services, such as container life cycle management, blending, filling, logistics, warehousing and other packaging services. We sell our industrial packaging products and services to customers in industries such as chemicals, paints and pigments, food and beverage, petroleum, industrial coatings, agricultural, pharmaceutical and mineral, among others.

We produce and sell containerboard, corrugated sheets and other corrugated products to customers in North America in industries such as packaging, automotive, food and building products. Our 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.

We are a leading global producer of flexible intermediate bulk containers and related services and a North American producer of industrial and consumer multiwall bag products. Our flexible intermediate bulk containers consist of a polypropylene-based woven fabric that is produced at our fully integrated production sites, as well as sourced from strategic regional suppliers. Our flexible products are sold globally and service customers and market segments similar to those in our Rigid Industrial Packaging & Services 29 -------------------------------------------------------------------------------- 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.

As of July 31, 2014, we owned approximately 251,350 acres of timber properties in the southeastern United States, which are actively managed, and approximately 10,295 acres of timber properties in Canada, which are not actively managed. Our 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, we seek to maintain a consistent cutting schedule, within the limits of market and weather conditions. We also sell, from time to time, timberland and special use properties, which consist of surplus properties, higher and better use ("HBU") properties, and development properties.

CRITICAL ACCOUNTING POLICIES The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of these consolidated financial statements, in accordance with these principles, require us to make estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities as of the date of our consolidated financial statements.

Our significant accounting policies are discussed in Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operation of the 2013 Form 10-K. We believe that the consistent application of these policies enables us to provide readers of the consolidated financial statements with useful and reliable information about our results of operations and financial condition.

Other items that could have a significant impact on the financial statements include the risks and uncertainties listed in Part I, Item 1A--Risk Factors, of the 2013 Form 10-K. Actual results could differ materially using different estimates and assumptions, or if conditions are significantly different in the future.

Trends The slow motion global economic recovery is anticipated to continue during the remainder of fiscal 2014, resulting in moderate sales volume improvement and slightly higher raw material costs in certain regions. The Rigid Industrial Packaging segment is anticipated to benefit from moderate volume growth, especially in Europe, and Greif Business System cost savings. In addition to the announced closure of our facility in the Kingdom of Saudi Arabia, additional specific actions will be implemented in the Flexible Products segment during the remainder of 2014 as this business is repositioned for sustainable growth and profitability. During the third quarter, we sold a business in the Rigid Industrial Packaging & Service segment and will continue to pursue the sale of select non-core assets and plans to accelerate restructuring actions.

RESULTS OF OPERATIONS The following comparative information is presented for the three and nine month periods ended July 31, 2014 and 2013. Historically, revenues and earnings may or may not be representative of future operating results attributable to various economic and other factors.

The non-GAAP financial measure of EBITDA is used throughout the following discussion of our results of operations. EBITDA is defined as net income, plus interest expense, net, plus income tax expense, less equity earnings of unconsolidated affiliates, net of tax, plus depreciation, depletion and amortization. Since we do not calculate net income by segment, EBITDA by segment is reconciled to operating profit by segment. We use EBITDA as one of the financial measures to evaluate our historical and ongoing operations.

Third Quarter Results The following table sets forth the net sales, operating profit (loss) and EBITDA* for each of our business segments for the three month periods ended July 31, 2014 and 2013 (Dollars in millions): 30 -------------------------------------------------------------------------------- Three months ended July 31, 2014 2013 Net sales: Rigid Industrial Packaging & Services $ 827.7 $ 802.2 Paper Packaging 217.7 208.4 Flexible Products & Services 107.3 110.5 Land Management 8.4 8.6 Total net sales $ 1,161.1 $ 1,129.7 Operating profit (loss): Rigid Industrial Packaging & Services $ 41.3 $ 61.7 Paper Packaging 27.9 30.7 Flexible Products & Services (12.9 ) - Land Management 3.3 4.3 Total operating profit $ 59.6 $ 96.7 EBITDA*: Rigid Industrial Packaging & Services $ 67.6 $ 86.3 Paper Packaging 35.2 38.0 Flexible Products & Services (10.5 ) 2.1 Land Management 4.7 5.8 Total EBITDA $ 97.0 $ 132.2 * EBITDA is defined as net income, plus interest expense, net, plus income tax expense, less equity earnings of unconsolidated affiliates, net of tax, plus depreciation, depletion and amortization.

The following table sets forth EBITDA*, reconciled to net income and operating profit, for our consolidated results for the three month periods ended July 31, 2014 and 2013 (Dollars in millions): For the three months ended July 31, 2014 2013 Net income $ 10.0 $ 48.8 Plus: interest expense, net 20.7 19.2 Plus: income tax expense 28.2 25.9 Plus: depreciation, depletion and amortization expense 38.8 39.5 Less: equity earnings of unconsolidated affiliates, net of tax 0.7 1.2 EBITDA* $ 97.0 $ 132.2 Net income $ 10.0 $ 48.8 Plus: interest expense, net 20.7 19.2 Plus: income tax expense 28.2 25.9 Plus: other expense, net 1.4 4.0 Less: equity earnings of unconsolidated affiliates, net of tax 0.7 1.2 Operating profit 59.6 96.7 Less: other expense, net 1.4 4.0 Plus: depreciation, depletion and amortization expense 38.8 39.5 EBITDA* $ 97.0 $ 132.2 * EBITDA is defined as net income, plus interest expense, net, plus income tax expense, less equity earnings of unconsolidated affiliates, net of tax, plus depreciation, depletion and amortization.

31 -------------------------------------------------------------------------------- The following table sets forth EBITDA* for our business segments, reconciled to the operating profit (loss) for each segment, for the three month periods ended July 31, 2014 and 2013 (Dollars in millions): For the three months ended July 31, 2014 2013 Rigid Industrial Packaging & Services Operating profit $ 41.3 $ 61.7 Less: other (income) expense, net 0.5 2.1 Plus: depreciation and amortization expense 26.8 26.7 EBITDA* 67.6 86.3 Paper Packaging Operating profit $ 27.9 $ 30.7 Plus: depreciation and amortization expense 7.3 7.3 EBITDA* 35.2 38.0 Flexible Products & Services Operating profit (loss) $ (12.9 ) $ - Less: other expense, net 0.9 1.9 Plus: depreciation and amortization expense 3.3 4.0 EBITDA* (10.5 ) 2.1 Land Management Operating profit $ 3.3 $ 4.3 Plus: depreciation, depletion and amortization expense 1.4 1.5 EBITDA* $ 4.7 $ 5.8 Consolidated EBITDA $ 97.0 $ 132.2 * EBITDA is defined as net income, plus interest expense, net, plus income tax expense, less equity earnings of unconsolidated affiliates, net of tax, plus depreciation, depletion and amortization. However, because we do not calculate net income by segment, this table calculates EBITDA as operating profit, less other expense, plus depreciation, depletion and amortization as shown in the tables preceding this one.

Net Sales Net sales were $1,161.1 million for the third quarter of 2014 compared with $1,129.7 million for the third quarter of 2013. The 2.8 percent increase in net sales was primarily due to the impact of a 3.0 percent increase in selling prices partially offset by a negative 0.2 percent impact from foreign currency translation. The higher selling prices were consistent across our Rigid Industrial Packaging & Services, Flexible Products & Services and Paper Packaging segments. Although consolidated volumes remained flat, volumes increased 3.3 percent in Europe and 4.3 percent in North America and decreased 6.2 percent in Latin America within the Rigid Industrial Packaging & Services segment and decreased 8.3 percent within the Flexible Products & Services segment compared to a year ago.

Operating Costs Gross profit was $216.3 million for the third quarter of 2014 compared with $217.3 million for the third quarter of 2013. Improvements in the Rigid Industrial Packaging & Services and Paper Packaging segments were offset by declines in the Flexible Products & Services and Land Management segments. Gross profit margin was 18.6 percent for the third quarter of 2014 compared to 19.2 percent for the third quarter of 2013.

Selling, general and administrative ("SG&A") expenses increased 9.5 percent to $129.4 million for the third quarter of 2014 from $118.2 million for the third quarter of 2013 primarily due to higher amortization expenses related to intangible assets, higher professional fees, increased bad debt expense in the Paper Packaging segment and further scalable business platform expenses. SG&A expenses were 11.1 percent of net sales for the third quarter of 2014 compared with 10.5 percent of net sales for the third quarter of 2013.

32 -------------------------------------------------------------------------------- Restructuring Charges Restructuring charges were $4.2 million for the third quarter of 2014 compared with $1.9 million for the third quarter of 2013. Current year charges were primarily related to employee separation costs in the Flexible Products & Services and Rigid Industrial Packaging & Services segments.

Asset Impairment Charges During the three months ended July 31, 2014 and 2013, the Company recognized asset impairment charges of $15.4 million and 2.3 million, respectively. These charges included $4.3 million and $2.3 million of impairment charges related to restructuring plans during the three months ended July 31, 2014 and 2013, respectively.

Timberland gains For the three months ended July 31, 2014 and 2013 there were no sales of timberland.

Acquisition-Related Costs Acquisition-related costs were $0.4 million for the third quarter of 2014 and $0.1 million for the third quarter of 2013.

Gain on Disposal of Properties, Plants, Equipment and Businesses, net The gain (loss) on disposal of properties, plants, equipment and businesses, net, was ($7.7) million for the third quarter 2014 mostly related to a $9.1 million non-cash loss on the sale of a business compared to $1.8 million for the same period in 2013.

Operating Profit Operating profit was $59.6 million for the third quarter of 2014 compared with $96.7 million for the third quarter of 2013. The $37.1 million decrease consisted of a $20.4 million decrease in the Rigid Industrial Packaging & Services segment, a $12.9 million decrease in the Flexible Products & Services segment, a $2.8 million decrease in the Paper Packaging segment, and a $1.0 million decrease in the Land Management segment. Factors contributing to the $37.1 million decrease were $15.4 million of asset impairment charges, a $9.1 million non-cash loss on the sale of a business resulting from the allocation of segment level goodwill to this business, a $2.3 million increase in restructuring charges and the $11.2 million increase in the SG&A expenses discussed above, partially offset by a slight gain from the increase in selling prices discussed above.

EBITDA EBITDA was $97.0 million for the third quarter of 2014 compared with $132.2 million for the third quarter of 2013. The $35.2 million decrease was primarily due to the factors previously described that impacted operating profit.

Depreciation, depletion and amortization expense was $38.8 million for the third quarter of 2014 compared with $39.5 million for the third quarter of 2013.

Segment Review Rigid Industrial Packaging & Services Our Rigid Industrial Packaging & Services segment offers a comprehensive line of rigid industrial packaging products, such as steel, fibre and plastic drums, rigid intermediate bulk containers, closure systems for industrial packaging products, water bottles and remanufactured and reconditioned industrial containers, and services, such as container life cycle management, blending, filing, logistics, warehousing and other packaging services. Key factors influencing profitability in the Rigid Industrial Packaging & Services segment are: • Selling prices, customer demand and sales volumes; • Raw material costs, primarily steel, resin and containerboard and used industrial packaging for reconditioning; • Energy and transportation costs; • Benefits from executing the Greif Business System; • Restructuring charges; 33 -------------------------------------------------------------------------------- • Contributions from acquisitions; • Divestiture of facilities; and • Impact of foreign currency translation.

Net sales increased 3.2 percent to $827.7 million for the third quarter of 2014 compared with $802.2 million for the third quarter of 2013. The increase in net sales was attributable to product mix, volume improvements in Europe and North America, which were partially offset by volume decreases in Latin America and Asia Pacific, and a 3.0 percent increase in selling prices, which was partially attributable to the contractual pass-through of higher resin costs. The impact of foreign currency translation was a negative 0.6 percent compared with the third quarter of 2013.

Gross profit was $152.4 million for the third quarter of 2014 compared with $149.5 million for the third quarter of 2013. The increase in gross profit was due to product mix and higher selling prices. Gross profit margin decreased slightly to 18.4 percent for the third quarter of 2014 from 18.6 percent for the third quarter of 2013 due to higher costs.

Operating profit was $41.3 million for the third quarter of 2014 compared with $61.7 million for the third quarter of 2013. The $20.4 million decrease from the third quarter of 2013 was due to a $9.1 million non-cash loss on the sale of a business, increases in SG&A expenses of $6.0 million primarily due to higher amortization expenses related to intangible assets, increases in asset impairment charges of $5.3 million, increases in restructuring costs of $1.1 million, and higher professional fees.

EBITDA was $67.6 million for the third quarter of 2014 compared with $86.3 million for the third quarter of 2013. This decrease was due to the same factors that impacted the decrease in operating profit. Depreciation, depletion and amortization expense was $26.8 million for the third quarter of 2014 compared with $26.7 million for the third quarter of 2013.

Paper Packaging Our Paper Packaging segment produces and sells containerboard, corrugated sheets and corrugated containers in North America. Key factors influencing profitability in the Paper Packaging segment are: • Selling prices, customer demand and sales volumes; • Raw material costs, primarily old corrugated containers; • Energy and transportation costs; and • Benefits from executing the Greif Business System.

Net sales increased 4.5 percent to $217.7 million for the third quarter of 2014 compared with $208.4 million for the third quarter of 2013. The increase was attributable to higher selling prices partially realized as a result of the pass-through of a previous containerboard price increase and increasing sales of specialty products, as well as increased volumes in certain products.

Gross profit was $44.7 million for the third quarter of 2014 compared with $44.1 million for the third quarter of 2013 as a result of the same factors that impacted the segment's net sales offset by higher transportation costs. Gross profit margin decreased to 20.5 percent for the third quarter of 2014 from 21.2 percent for the third quarter of 2013.

Operating profit was $27.9 million for the third quarter of 2014 compared with $30.7 million for the third quarter of 2013. The decrease was due to increased bad debt expense which was partially offset by the same factors that impacted gross profit described above.

EBITDA was $35.2 million for the third quarter of 2014 compared with $38.0 million for the third quarter of 2013. This decrease was due to the same factors that impacted the segment's operating profit. Depreciation, depletion and amortization expense was $7.3 million for the third quarter of 2014 and the third quarter of 2013.

34 -------------------------------------------------------------------------------- Flexible Products & Services Our Flexible Products & Services segment offers a comprehensive line of flexible products, such as flexible intermediate bulk containers and multiwall bags. Key factors influencing profitability in the Flexible Products & Services segment are: • Selling prices, customer demand and sales volumes; • Raw material costs, primarily resin and containerboard; • Energy and transportation costs; • Benefits from executing the Greif Business System; • Restructuring charges; and • Impact of foreign currency translation.

Net sales decreased 2.9 percent to $107.3 million for the third quarter of 2014 compared with $110.5 million for the third quarter of 2013. The decrease in net sales was attributable to volume decreases of 8.3 percent due to the lost sales related to the continuing impact of the occupation of our manufacturing facility in Turkey during the second quarter of 2014 and product mix offset by price increases of 3.4 percent. The impact of foreign currency translation for the third quarter of 2014 was a positive 1.9 percent compared with the third quarter of 2013.

Gross profit was $15.4 million for the third quarter of 2014 compared with $19.4 million for the third quarter of 2013. The decrease in gross profit was primarily due to the continuing impact of the occupation of our manufacturing facility in Turkey, during the second quarter of 2014, which has resulted in higher costs incurred to find alternative supply sources to satisfy customers.

Gross profit margin decreased to 14.4 percent for the third quarter of 2014 from 17.6 percent for the third quarter of 2013.

Operating loss was $12.9 million for the third quarter of 2014 compared with nominal operating profit for the third quarter of 2013 due to the factors that impacted the segment's gross margin discussed above as well as increases in restructuring costs of $1.2 million and in asset impairment charges of $7.8 million EBITDA was negative $10.5 million for the third quarter of 2014 compared with $2.1 million for the third quarter of 2013. This decrease was due to the same factors that impacted the segment's operating profit (loss). Depreciation, depletion and amortization expense was $3.3 million for the third quarter of 2014 compared with $4.0 million for the third quarter of 2013.

Land Management As of July 31, 2014, our Land Management segment consisted of approximately 251,350 acres of timber properties in the southeastern United States, which are actively harvested and regenerated, and approximately 10,295 acres in Canada.

Key factors influencing profitability in the Land Management segment are: • Planned level of timber sales; • Selling prices and customer demand; • Gains (losses) on sale of timberland; and • Gains on the disposal of special use properties (surplus, HBU and development properties).

Net sales decreased 2.3 percent to $8.4 million for the third quarter of 2014 compared with $8.6 million for the third quarter of 2013. The decrease was due to lower planned sales of timber in the third quarter of 2014.

Operating profit decreased to $3.3 million for the third quarter of 2014 from $4.3 million for the third quarter of 2013. Special use property disposals included in operating profit were $0.2 million for the third quarter of 2014 compared with $0.4 million for the third quarter of 2013.

35 -------------------------------------------------------------------------------- EBITDA was $4.7 million for the third quarter of 2014 compared with $5.8 million for the third quarter of 2013. This decrease was primarily due to the same factors that impacted the segment's operating profit. Depreciation, depletion and amortization expense was $1.4 million for the third quarter of 2014 compared with $1.5 million for the third quarter of 2013.

In order to maximize the value of our timber property, we continue to review our current portfolio and explore the development of certain of these properties in Canada and the United States. This process has led us to characterize our property as follows: • Surplus property, meaning land that cannot be efficiently or effectively managed by us, whether due to parcel size, lack of productivity, location, access limitations or for other reasons.

• HBU property, meaning land that in its current state has a higher market value for uses other than growing and selling timber.

• Development property, meaning HBU land that, with additional investment, may have a significantly higher market value than its HBU market value.

• Timberland, meaning land that is best suited for growing and selling timber.

We report the disposal of surplus and HBU property in our consolidated statements of income under "gain on disposals of properties, plants, equipment and businesses, net" and report the sale of development property under "net sales" and "cost of products sold." All HBU, development and surplus property is used by us to productively grow and sell timber until sold.

Whether timberland has a higher value for uses other than growing and selling timber is a determination based upon several variables, such as proximity to population centers, anticipated population growth in the area, the topography of the land, aesthetic considerations, including access to water, the condition of the surrounding land, availability of utilities, markets for timber and economic considerations both nationally and locally. Given these considerations, the characterization of land is not a static process, but requires an ongoing review and re-characterization as circumstances change.

As of July 31, 2014, we estimated that there were approximately 36,650 acres in Canada and the United States of special use property, which we expect will be available for sale in the next five to seven years.

Other Income Statement Changes Interest expense, net Interest expense, net, was $20.7 million for the third quarter of 2014 compared with $19.2 million for the third quarter of 2013. The slight increase was a result of higher average debt outstanding primarily resulting from two acquisitions completed in the first quarter of 2014 offset by lower average interest rates due to refinancing activities in certain countries.

Income tax expense Income tax expense was $28.2 million for the third quarter of 2014 compared with $25.9 million for the third quarter of 2013. Our effective tax rate was 75.2 percent for the third quarter of 2014 versus 35.2 percent for the third quarter of 2013. The higher third quarter 2014 effective tax rate reflects the impact of the following: a shift in global earnings mix to countries with higher tax rates; the tax effect of a non-cash loss from the sale of a business; the forecasted tax effect of a $21.5 million allocation of goodwill reducing the book gain on a planned sale of an asset group within the Flexible Products & Services segment classified as held for sale; and the impact of a $3.5 million discrete tax expense. The discrete tax expense is a net amount mainly consisting of a $7.0 million expense related to the increase in valuation allowances for international subsidiaries and a benefit of $3.0 million related to the return to provision adjustments for international subsidiaries.

Equity earnings of unconsolidated affiliates, net of tax We recorded $0.7 million of equity earnings of unconsolidated affiliates, net of tax, during the third quarter 2014 compared to $1.2 million for the same period 2013.

Net (income) loss attributable to noncontrolling interests Net (income) loss attributable to noncontrolling interests for the third quarters of 2014 and 2013 were $2.2 million and ($2.1) million, respectively.

36 -------------------------------------------------------------------------------- Net income attributable to Greif, Inc.

Based on the factors noted above, net income attributable to Greif, Inc. was $12.2 million for the third quarter of 2014 compared to $46.7 million for the third quarter of 2013.

Year-to-Date Results The following table sets forth the net sales, operating profit (loss) and EBITDA* for each of our business segments for the nine month periods ended July 31, 2014 and 2013 (Dollars in millions): Nine months ended July 31, 2014 2013 Net sales: Rigid Industrial Packaging & Services $ 2,324.3 $ 2,280.0 Paper Packaging 625.4 587.1 Flexible Products & Services 325.8 334.3 Land Management 20.7 25.8 Total net sales $ 3,296.2 $ 3,227.2 Operating profit (loss): Rigid Industrial Packaging & Services $ 119.2 $ 146.4 Paper Packaging 84.4 84.1 Flexible Products & Services (22.4 ) 1.4 Land Management 26.2 12.7 Total operating profit $ 207.4 $ 244.6 EBITDA*: Rigid Industrial Packaging & Services $ 197.8 $ 221.8 Paper Packaging 107.0 107.0 Flexible Products & Services (14.3 ) 9.3 Land Management 29.2 16.5 Total EBITDA $ 319.7 $ 354.6 * EBITDA is defined as net income, plus interest expense, net, plus income tax expense, less equity earnings of unconsolidated affiliates, net of tax, plus depreciation, depletion and amortization.

37 -------------------------------------------------------------------------------- The following table sets forth EBITDA*, reconciled to net income and operating profit, for our consolidated results for the nine month periods ended July 31, 2014 and 2013 (Dollars in millions): For the nine months ended July 31, 2014 2013 Net income $ 75.1 $ 116.0 Plus: interest expense, net 61.5 63.5 Plus: income tax expense 64.2 58.7 Plus: depreciation, depletion and amortization expense 119.8 117.9 Less: equity earnings of unconsolidated affiliates, net of tax 0.9 1.5 EBITDA* $ 319.7 $ 354.6 Net income $ 75.1 $ 116.0 Plus: interest expense, net 61.5 63.5 Plus: income tax expense 64.2 58.7 Plus: other expense, net 7.5 7.9 Less: equity earnings of unconsolidated affiliates, net of tax 0.9 1.5 Operating profit 207.4 244.6 Less: other expense, net 7.5 7.9 Plus: depreciation, depletion and amortization expense 119.8 117.9 EBITDA* $ 319.7 $ 354.6 * EBITDA is defined as net income, plus interest expense, net, plus income tax expense, less equity earnings of unconsolidated affiliates, net of tax, plus depreciation, depletion and amortization.

The following table sets forth EBITDA* for our business segments, reconciled to the operating profit (loss) for each segment, for the nine month periods ended July 31, 2014 and 2013 (Dollars in millions): For the nine months ended July 31, 2014 2013 Rigid Industrial Packaging & Services Operating profit $ 119.2 $ 146.4 Less: other (income) expense, net 4.9 4.8 Plus: depreciation and amortization expense 83.5 80.2 EBITDA* 197.8 221.8 Paper Packaging Operating profit $ 84.4 $ 84.1 Less: other (income) expense, net - (0.2 ) Plus: depreciation and amortization expense 22.6 22.7 EBITDA* 107.0 107.0 Flexible Products & Services Operating profit (loss) $ (22.4 ) $ 1.4 Less: other (income) expense, net 2.6 3.3 Plus: depreciation and amortization expense 10.7 11.2 EBITDA* (14.3 ) 9.3 Land Management Operating profit $ 26.2 $ 12.7 Plus: depreciation, depletion and amortization expense 3.0 3.8 EBITDA* $ 29.2 $ 16.5 Consolidated EBITDA $ 319.7 $ 354.6 * EBITDA is defined as net income, plus interest expense, net, plus income tax expense, less equity earnings of unconsolidated affiliates, net of tax, plus depreciation, depletion and amortization. However, because we do not calculate net income by segment, this table calculates EBITDA as operating profit, less other expense, plus depreciation, depletion and amortization as shown in the tables preceding this one.

38 -------------------------------------------------------------------------------- Net Sales Net sales were $3,296.2 million for the first nine months of 2014 compared with $3,227.2 million for the first nine months of 2013. The 2.1 percent increase in net sales was primarily due to the impact of a 3.3 percent increase in selling prices partially offset by a negative 0.8 percent impact from foreign currency translation. Selling prices for rigid industrial packaging products increased in North America and Latin America primarily as a result of the pass-through of higher raw material costs. Selling prices for paper packaging products were higher due to a containerboard price increase that was realized in the third quarter of 2013. Consolidated volumes were flat compared with the first nine months of 2013.

Operating Costs Gross profit increased to $607.1 million for the first nine months of 2014 from $606.6 million for the first nine months of 2013. Improvements in the Rigid Industrial Packaging & Services and Paper Packaging segments were offset by declines in Flexible Products & Services and Land Management segments. Gross profit was 18.4 percent of net sales for the first nine months of 2014 versus 18.8 percent of net sales for the first nine months of 2013.

SG&A expenses increased 7.0 percent to $386.3 million for the first nine months of 2014 from $360.9 million for the first nine months of 2013 primarily related to higher professional fees and higher amortization costs of intangible assets.

SG&A expenses were 11.7 percent of net sales for the first nine months of 2014 compared with 11.1 percent of net sales for the first nine months of 2013.

Restructuring Charges Restructuring charges were $10.5 million for the first nine months of 2014 and were primarily related to employee separation costs in the Flexible Products & Services segment and footprint rationalization efforts in our Rigid Industrial Packaging & Services segment. For the first nine months of 2013, restructuring charges of $2.7 million were primarily related to footprint rationalization efforts in our Asia Pacific operations in the Rigid Industrial Packaging & Services segment.

Asset Impairment Charges During the nine months ended July 31, 2014 and 2013, the Company recognized asset impairment charges of $15.6 million and 4.5 million, respectively. These charges included $4.5 million and $2.7 million of impairment charges related to restructuring plans during the nine months ended July 31, 2014 and 2013, respectively.

Timberland gains For the nine months ended July 31, 2014, we recorded a gain of $16.9 million relating to the sale of timberland. For the nine months ended July 31, 2013, there were no sales of timberland.

Acquisition-Related Costs Acquisition-related costs were $1.2 million and $0.7 million for the first nine months of 2014 and 2013, respectively. For the first nine months of 2014, these costs included $0.8 million of acquisition related costs and $0.4 million of acquisition integration costs attributable to acquisitions completed during 2014. First nine months of 2013 acquisition-related costs included $0.3 million of acquisition-related costs and $0.4 million of post-acquisition integration costs attributable to acquisitions completed during 2011.

(Gain) loss on Disposal of Properties, Plants, Equipment and Businesses, net The (gain) loss on disposal of properties, plants, equipment and businesses, net, decreased to $4.2 million for the first nine months 2014 compared to ($6.1) million for the same period in 2013 due to a loss on a divestiture in our Rigid Industrial Packaging segment during the third quarter of 2014.

39 -------------------------------------------------------------------------------- Operating Profit Operating profit was $207.4 million for the first nine months of 2014 compared with $244.6 million for the first nine months of 2013. The $37.2 million decrease consisted of $23.8 million decrease in Flexible Products & Services, a $27.2 million decrease in Rigid Industrial Packaging & Services, partially offset by $13.5 million increase in Land Management and a $0.3 million increase in Paper Packaging.

EBITDA EBITDA was $319.7 million for the first nine months of 2014 compared with $354.6 million for the first nine months of 2013. The $34.9 million decrease was primarily due to non-cash asset impairment charges in the Rigid Industrial Packaging & Services segment and the Flexible Products & Services segment as well as the adverse impact of the prolonged occupation of a flexible products manufacturing facility. Depreciation, depletion and amortization expense was $119.8 million for the first nine months of 2014 compared with $117.9 million for the same period in 2013.

Segment Review Rigid Industrial Packaging & Services Our Rigid Industrial Packaging & Services segment offers a comprehensive line of rigid industrial packaging products, such as steel, fibre and plastic drums, rigid intermediate bulk containers, closure systems for industrial packaging products, water bottles and remanufactured and reconditioned industrial containers, and services, such as container life cycle management, blending, filing, logistics, warehousing and other packaging services. Key factors influencing profitability in the Rigid Industrial Packaging & Services segment are: • Selling prices, customer demand and sales volumes; • Raw material costs, primarily steel, resin and containerboard and used industrial packaging for reconditioning; • Energy and transportation costs; • Benefits from executing the Greif Business System; • Restructuring charges; • Contributions from acquisitions; • Divestiture of facilities; and • Impact of foreign currency translation.

Net sales were $2,324.3 million for the first nine months of 2014 compared with $2,280.0 million for the first nine months of 2013. Selling prices increased 3.6 percent primarily from the pass-through of higher resin costs to customers and changes in product mix. The impact of foreign currency translation was a negative 1.2 percent compared with the first nine months of 2013.

Gross profit was $416.0 million for the first nine months of 2014 compared with $405.9 million for the first nine months of 2013. Gross profit margin increased to 17.9 percent for the first nine months of 2014 from 17.8 percent for the first nine months of 2013. The increase was primarily the result of lower steel input prices and product mix.

Operating profit was $119.2 million for the first nine months of 2014 compared with $146.4 million for the first nine months of 2013. The $27.2 million decrease was due to slightly lower volumes, higher than planned selling, general and administrative costs, and a non-cash loss on the sale of a business.

Restructuring charges for the first nine months of 2014 were $5.8 million primarily related to the consolidation of certain Europe, Asia Pacific and Latin America operations. Restructuring charges for the first nine months of 2013 were $2.1 million primarily related to the rationalization of operations and capacity and Life Cycle Services integration. Acquisition related costs were $1.2 million and $0.7 million for the first nine months of 2014 and 2013, respectively.

40 -------------------------------------------------------------------------------- Asset impairment charges were $7.7 million for the first nine months of 2014 compared with $2.8 million for the first nine months of 2013. These charges included $1.6 million and $2.6 million of impairment charges related to restructuring plans during the nine months ended July 31, 2014 and 2013, respectively.

EBITDA was $197.8 million for the first nine months of 2014 compared with $221.8 million for the first nine months of 2013 due to the same factors that impacted the segment's operating profit. Depreciation, depletion and amortization expense was $83.5 million for the first nine months of 2014 compared with $80.2 million for the same period in 2013.

Paper Packaging Our Paper Packaging segment sells containerboard, corrugated sheets and corrugated containers in North America. Key factors influencing profitability in the Paper Packaging segment are: • Selling prices, customer demand and sales volumes; • Raw material costs, primarily old corrugated containers; • Energy and transportation costs; and • Benefits from executing the Greif Business System.

Net sales were $625.4 million for the first nine months of 2014 compared with $587.1 million for the first nine months of 2013. Selling prices increased 5.2 percent due to a containerboard price increase realized in the third quarter of 2013. Volumes improved 1.3 percent in the first nine months of 2014 compared to the same period last year.

Gross profit increased 3.5 percent to $131.0 million for the first nine months of 2014 from $126.5 million for the first nine months of 2013. Gross profit margin decreased to 20.9 percent for the first nine months of 2014 from 21.6 percent for the first nine months of 2013. The decrease in gross profit margin was primarily due to higher energy, input and logistics costs associated with adverse weather related conditions partly offset by higher selling prices.

Operating profit increased to $84.4 million for the first nine months of 2014 compared with $84.1 million for the first nine months of 2013, due to higher selling prices and volumes partially offset by higher energy, input and logistics costs associated with adverse weather related conditions.

There were no asset impairment charges for the first nine months of 2014 compared with $1.6 million for the first nine months of 2013.

EBITDA was $107.0 million for the first nine months of 2014 and for the first nine months of 2013 due to the same factors that impacted the segment's operating profit. Depreciation, depletion and amortization expense was $22.6 million and $22.7 million for the first nine months of 2014 and 2013, respectively.

Flexible Products & Services Our Flexible Products & Services segment offers a comprehensive line of flexible products, such as flexible intermediate bulk containers and multiwall bags. Key factors influencing profitability in the Flexible Products & Services segment are: • Selling prices, customer demand and sales volumes; • Raw material costs, primarily resin and containerboard; • Energy and transportation costs; • Benefits from executing the Greif Business System; • Restructuring charges; and • Impact of foreign currency translation.

41 -------------------------------------------------------------------------------- Net sales were $325.8 million for the first nine months of 2014 compared with $334.3 million for the first nine months of 2013. The decrease in net sales was attributable to volume decreases of 3.2 percent and selling price decreases of 0.4 percent. The impact of foreign currency translation was a positive 1.1 percent compared with the first nine months of 2013.

Gross profit was $51.9 million for the first nine months of 2014 compared with $60.9 million for the first nine months of 2013. Gross profit margin decreased to 15.9 percent for the first nine months of 2014 from 18.2 percent for the first nine months of 2013 primarily due to the occupation of a manufacturing facility in Turkey which resulted in higher costs incurred to find alternative supply sources to satisfy customers and idle facility costs.

Operating loss was $22.4 million for the first nine months of 2014 compared with an operating profit of $1.4 million for the first nine months of 2013 due to incremental security costs for certain facilities, additional costs to service customers, and non-cash asset impairment charges.

Restructuring charges for the first nine months of 2014 were $4.7 million primarily related to the occupation of a manufacturing facility in Turkey. There were $0.6 million of restructuring charges for the first nine months of 2013.

Asset impairment charges were $7.9 million for the first nine months of 2014 compared with $0.1 million for the first nine months of 2013. These charges included $2.9 million and $0.1 million of impairment charges related to restructuring plans during the nine months ended July 31, 2014 and 2013, respectively.

EBITDA was ($14.3) million for the first nine months of 2014 compared with $9.3 million for the first nine months of 2013 due to the same factors that impacted the segment's operating loss. Depreciation, depletion and amortization expense was $10.7 and $11.2 million for the first nine months of 2014 and 2013, respectively.

Land Management As of July 31, 2014, our Land Management segment consisted of approximately 251,350 acres of timber properties in the southeastern United States, which are actively harvested and regenerated, and approximately 10,295 acres in Canada.

Key factors influencing profitability in the Land Management segment are: • Planned level of timber sales; • Selling prices and customer demand; • Gains (losses) on sale of timberland; and • Gains on the disposal of special use properties (surplus, HBU and development properties).

Net sales were $20.7 million for the first nine months of 2014 compared with $25.8 million for the first nine months of 2013. The $5.1 million decrease was due to lower planned sales of timber in the first nine months of 2014.

Operating profit increased to $26.2 million for the first nine months of 2014 from $12.7 million for the first nine months of 2013 primarily due to a $16.9 million gain on the disposal of timberland in the second, third and fourth phases of an approximately $90 million multi-phase sales contract. We anticipate closing the final phase of this contract by the first quarter of 2015 and estimate a gain of approximately $22 to $24 million on that sale. Special use property disposals included in operating profit were $3.2 million for the first nine months of 2014 compared with $1.2 million for the first nine months of 2013.

EBITDA was $29.2 million for the first nine months of 2014 compared with $16.5 million for the first nine months of 2013 due to the same factors that impacted the segment's operating profit. Depreciation, depletion and amortization expense was $3.0 million and $3.8 million for the first nine months of 2014 and 2013, respectively.

As of July 31, 2014, we estimated that there were approximately 36,650 acres in Canada and the United States of special use property, which we expect will be available for sale in the next five to seven years.

42 -------------------------------------------------------------------------------- Other Income Statement Changes Interest expense, net Interest expense, net, was $61.5 million for the first nine months of 2014 compared with $62.2 million for the first nine months of 2013. The decrease was a result of lower average interest rates due to refinancing activities in certain countries offset by higher average debt outstanding primarily resulting from two acquisitions completed in the first nine months of 2014.

Debt extinguishment charges There were no debt extinguishment charges for the first nine months of 2014 compared with $1.3 million for the first nine months of 2013. The 2013 debt extinguishment charges related to amending and restating our previous senior secured credit facility in the first quarter of 2013.

Income tax expense Income tax expense was $64.2 million for the first nine months of 2014 compared with $58.7 million for the first nine months of 2013. Our effective tax rate was 46.4 percent for the first nine months of 2014 compared with 33.9 percent for the first nine months of 2013. The higher 2014 effective tax rate reflects the impact of non-deductible asset impairment charges and non-cash losses on sales of businesses as well as a shift in global earnings mix to countries with higher tax rates.

Equity earnings of unconsolidated affiliates, net of tax We recorded $0.9 million of equity earnings of unconsolidated affiliates, net of tax, during the first nine months of 2014 compared to $1.5 million for the same period 2013.

Net (income) loss attributable to noncontrolling interests Net (income) loss attributable to noncontrolling interests for the first nine months of 2014 and 2013 were $2.4 million and ($5.5) million, respectively.

Net income attributable to Greif, Inc.

Based on the factors noted above, net income attributable to Greif, Inc. was $77.5 million for the first nine months of 2014 compared to $110.5 million for the first nine months of 2013.

BALANCE SHEET CHANGES Working capital changes The $44.8 million increase in accounts receivable to $526.7 million as of July 31, 2014 from $481.9 million as of October 31, 2013 was primarily due to timing of collections.

The $35.7 million increase in inventories to $411.0 million as of July 31, 2014 from $375.3 million as of October 31, 2013 was primarily due to purchases of certain materials in advance to take advantage of available discounts.

The $11.8 million increase in prepaid expenses and other current assets to $144.0 million as of July 31, 2014 from $132.2 million as of October 31, 2013 was due primarily to the timing of sales of accounts receivable under the Nieuw Amsterdam Receivables Purchase Agreement.

The $16.9 million increase in accounts payable to $448.2 million as of July 31, 2014 from $431.3 million as of October 31, 2013 was primarily due to the timing of payments.

The $13.7 million increase in short-term borrowings to $77.8 million as of July 31, 2014 from $64.1 million as of October 31, 2013 was primarily due to higher working capital requirements at various subsidiary operations.

43 -------------------------------------------------------------------------------- Other balance sheet changes The $35.0 million decrease in goodwill to $968.5 million as of July 31, 2014 from $1,003.5 as of October 31, 2013 was primarily due to goodwill allocated to the divestiture of an asset group in the Rigid Industrial Packaging & Services segment, reclassification of goodwill associated with businesses held for sale, foreign currency fluctuations and a reclassification of an amount improperly classified as goodwill in a prior period, offset by an acquisition in the Rigid Industrial Packaging & Services segment.

The $21.7 million increase in long-term debt to $1,228.9 million as of July 31, 2014 from $1,207.2 million as of October 31, 2013 was partially attributable to two acquisitions completed in the first quarter of 2014.

LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are operating cash flows and borrowings under our senior secured credit facility and the senior notes we have issued and, to a lesser extent, proceeds from our trade accounts receivable credit facility and proceeds from the sale of our non-United States accounts receivable. We use these sources to fund our working capital needs, capital expenditures, cash dividends, common stock repurchases and acquisitions. We anticipate continuing to fund these items in a like manner. We currently expect that operating cash flows, borrowings under our senior secured credit facility, proceeds from our U.S. trade accounts receivable credit facility and proceeds from the sale of our non-United States accounts receivable will be sufficient to fund our anticipated working capital, capital expenditures, debt repayment, potential acquisitions of businesses and other liquidity needs for at least 12 months.

Capital Expenditures During the first nine months of 2014, we invested $94.0 million in capital expenditures, which does not include our timberland purchases of $55.7 million, compared with capital expenditures of $82.6 million, excluding timberland purchases of $0.5 million, during the first nine months of 2013.

We expect capital expenditures, excluding timberland purchases and acquisitions, to be approximately $130 million in 2014. The 2014 capital expenditures will replace and improve existing equipment and fund new facilities.

Sale of Non-United States Accounts Receivable Certain of our international subsidiaries have entered into discounted receivables purchase agreements and factoring agreements (collectively, the "RPAs") pursuant to which trade receivables generated from certain countries other than the United States and which meet certain eligibility requirements are sold to certain international banks or their affiliates.

Transactions under the RPAs are structured to provide for legal true sales, on a revolving basis, of the receivables transferred from our various subsidiaries to the respective banks or their affiliates. The banks or their affiliates fund an initial purchase price of a certain percentage of eligible receivables based on a formula with the initial purchase price paid by the banks approximating 75 percent to 90 percent of eligible receivables, and under our new RPA, the balance of purchase price to the originating subsidiaries is paid from the proceeds of a related party subordinated loan. The remaining deferred purchase price and the repayment of the subordinated loan are settled upon collection of the receivables. As of the balance sheet reporting dates, we remove from accounts receivable the amount of proceeds received from the initial purchase price since they meet the applicable criteria of Accounting Standards Codification ("ASC") 860 "Transfers and Servicing", and continue to recognize the deferred purchase price in our other current assets. The receivables are sold on a non-recourse basis with the total funds in the servicing collection accounts pledged to the respective banks between the settlement dates. The maximum amount of aggregate receivables that may be financed under our various RPAs was $207.0 million as of July 31, 2014. As of July 31, 2014, total accounts receivable of $179.3 million were sold to and held by third party financial institutions or their affiliates under the various RPAs.

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 and classified as "other expense" in the consolidated statements of income.

Expenses associated with the various RPAs were immaterial for the three months ended July 31, 2014 and for the three months ended July 31, 2013. Expenses associated with the various RPAs were $0.1 million for the nine months ended July 31, 2014 and $0.2 million for the nine months ended July 31, 2013.

Additionally, we perform collections and administrative functions on the receivables sold similar to the procedures we use for collecting all of our receivables. The servicing liability for these receivables is not material to the consolidated financial statements.

44 -------------------------------------------------------------------------------- Refer to Note 3 to the Consolidated Financial Statements included in Item 1 of Part I of this Form 10-Q for additional information regarding these various RPAs.

Acquisitions, Divestitures and Other Significant Transactions There were two acquisitions during the first nine months of 2014 and one divestiture during the same period. One acquisition was in the Rigid Industrial Packaging & Services segment in November and the other acquisition was in the Paper Packaging segment in November. The rigid industrial packaging acquisition is expected to complement our existing product lines and provide growth opportunities and economies of scale. The paper packaging acquisition was made in part to obtain technologies, equipment, and customer lists. The divestiture was of a nonstrategic business in the Rigid Industrial Packaging & Services segment and resulted in a loss on sale of $9.1 million, which includes the write-off of allocated goodwill.

We completed no acquisitions and no material divestitures for the nine months ended July 31, 2013.

Refer to Note 2 to the Consolidated Financial Statements included in Item 1 of Part I of this Form 10-Q for additional information regarding these acquisitions.

Borrowing Arrangements Credit Agreement We and two of our international subsidiaries have a senior secured credit agreement (the "Amended Credit Agreement") with a syndicate of financial institutions.

The Amended Credit Agreement provides us with an $800 million revolving multicurrency credit facility and a $200 million term loan, both expiring in December 2017, with an option to add $250 million to the facilities with the agreement of the lenders. The $200 million term loan is scheduled to amortize by the payment of principal in the amount of $2.5 million each quarter-end for the first eight quarters, beginning January 2013, $5.0 million each quarter-end for the next twelve quarters and the remaining balance on the maturity date. The revolving credit facility 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 an agreed upon margin amount. As of July 31, 2014, a total of $233.8 million was outstanding and $732.8 million was available for borrowing under this facility, which has been reduced by $15.9 million for outstanding letters of credit as of July 31, 2014. The weighted average interest rate under the Amended Credit Agreement was 1.68% for the nine months ended July 31, 2014.

The Amended Credit Agreement contains certain covenants, which include financial covenants that require us to maintain a certain leverage ratio and an interest coverage ratio. The leverage ratio generally requires that at the end of any fiscal quarter we will not permit the ratio of (a) our total consolidated indebtedness, to (b) our consolidated net income plus depreciation, depletion and amortization, interest expense (including capitalized interest), income taxes, and minus certain extraordinary gains and non-recurring gains (or plus certain extraordinary losses and non-recurring losses) and plus or minus certain other items for the preceding twelve months ("adjusted EBITDA") to be greater than 4.00 to 1. The interest coverage ratio generally requires that at the end of any fiscal quarter we will not permit the ratio of (a) our consolidated adjusted EBITDA for the preceding twelve month period to (b) our consolidated interest expense to the extent paid or payable, to be less than 3.00 to 1 (the "Interest Coverage Ratio Covenant"). As of July 31, 2014, we were in compliance with these covenants.

The terms of the Amended Credit Agreement limit our ability to make "restricted payments," which include dividends and purchases, redemptions and acquisitions of our equity interests. The repayment of amounts borrowed under the Amended Credit Agreement are secured by a security interest in the personal property of Greif, Inc. and certain of our United States subsidiaries, including equipment and inventory and certain intangible assets, as well as a pledge of the capital stock of substantially all of our United States subsidiaries. The repayment of amounts borrowed under the Amended Credit Agreement is also secured, in part, by capital stock of the non-U.S. subsidiaries that are parties to the Amended Credit Agreement. However, in the event that we receive and maintain an investment grade rating from either Moody's Investors Service, Inc. or Standard & Poor's Corporation, we may request the release of such collateral.

The payment of outstanding principal under the Amended Credit Agreement and accrued interest thereon may be accelerated and become immediately due and payable upon our default in its payment or other performance obligations or its failure to comply with the financial and other covenants in the Amended Credit Agreement, subject to applicable notice requirements and cure periods as provided in the Amended Credit Agreement.

45 -------------------------------------------------------------------------------- Refer to Note 9 to the Consolidated Financial Statements included in Item I of Part I of this Form 10-Q for additional disclosures regarding the Amended Credit Agreement and 2010 Credit Agreement.

Senior Notes We have issued $300.0 million of our 6.75% Senior Notes due February 1, 2017.

Proceeds from the issuance of these Senior Notes were principally used to fund the purchase of our previously outstanding senior subordinated notes and for general corporate purposes. These Senior Notes are general unsecured obligations of Greif, Inc., provide for semi-annual payments of interest at a fixed rate of 6.75%, and do not require any principal payments prior to maturity on February 1, 2017. These Senior Notes are not guaranteed by any of our subsidiaries and thereby are effectively subordinated to all of our subsidiaries' existing and future indebtedness. The Indenture pursuant to which these Senior Notes were issued contains covenants, which, among other matters, limit our ability to create liens on our assets to secure debt and to enter into sale and leaseback transactions. These covenants are subject to a number of limitations and exceptions as set forth in the Indenture. As of July 31, 2014, we were in compliance with these covenants.

We have issued $250.0 million of our 7.75% Senior Notes due August 1, 2019.

Proceeds from the issuance of these Senior Notes were principally used for general corporate purposes, including the repayment of amounts outstanding under our revolving multicurrency credit facility, without any permanent reduction of the commitments. These Senior Notes are general unsecured obligations of Greif, Inc., provide for semi-annual payments of interest at a fixed rate of 7.75%, and do not require any principal payments prior to maturity on August 1, 2019. These Senior Notes are not guaranteed by any of our subsidiaries and thereby are effectively subordinated to all of our subsidiaries' existing and future indebtedness. The Indenture pursuant to which these Senior Notes were issued contains covenants, which, among other matters, limit our ability to create liens on our assets to secure debt and to enter into sale and leaseback transactions. These covenants are subject to a number of limitations and exceptions as set forth in the Indenture. As of July 31, 2014, we were in compliance with these covenants.

Our Luxembourg subsidiary has issued €200.0 million of 7.375% Senior Notes due July 15, 2021. These Senior Notes are fully and unconditionally guaranteed on a senior basis by Greif, Inc. A portion of the proceeds from the issuance of these Senior Notes was used to repay non-U.S. borrowings under the 2010 Credit Agreement, without any permanent reduction of the commitments thereunder, with the remaining proceeds available for general corporate purposes, including the financing of acquisitions. These Senior Notes are general unsecured obligations of the Luxembourg subsidiary and Greif, Inc. and provide for semi-annual payments of interest at a fixed rate of 7.375%, and do not require any principal payments prior to maturity on July 15, 2021. These Senior Notes are not guaranteed by any subsidiaries of the issuer or Greif, Inc. and thereby are effectively subordinated to all existing and future indebtedness of the subsidiaries of the issuer and Greif, Inc. The Indenture pursuant to which these Senior Notes were issued contains covenants, which, among other matters, limit our ability to create liens on our assets to secure debt and to enter into sale and leaseback transactions. These covenants are subject to a number of limitations and exceptions as set forth in the Indenture. As of July 31, 2014, we were in compliance with these covenants.

Refer to Note 9 to the Consolidated Financial Statements included in Item 1 of Part I of this Form 10-Q for additional disclosures regarding the Senior Notes.

United States Trade Accounts Receivable Credit Facility We and certain of our domestic subsidiaries have a $170.0 million United States Accounts Receivable Credit Facility (the "Amended Receivables Facility") with a financial institution. The Amended Receivables Facility matures in September 2016. In addition, we can terminate the Amended Receivables Facility at any time upon five days prior written notice. The Amended Receivables Facility is secured by certain of our United States trade accounts receivables and bears interest at a variable rate based on the London InterBank Offered Rate ("LIBOR") or an applicable base rate, plus a margin, or a commercial paper rate plus a margin.

Interest is payable on a monthly basis and the principal balance is payable upon termination of the Amended Receivables Facility. The Amended Receivables Facility also contains certain covenants and events of default, including a requirement that we maintain a certain interest coverage ratio, which requires that at the end of any fiscal quarter we will not permit the Interest Coverage Ratio Covenant to be less than 3.00 to 1 during the applicable trailing twelve-month period. As of July 31, 2014, we were in compliance with this covenant. Proceeds of the Amended Receivables Facility are available for working capital and general corporate purposes. As of July 31, 2014, $170.0 million was outstanding under the Amended Receivables Facility.

46 -------------------------------------------------------------------------------- Other In addition to the amounts borrowed under the Amended Credit Agreement and proceeds from the Senior Notes and the Receivables Facility, as of July 31, 2014, we had outstanding other debt of $108.0 million, comprised of $30.1 million in long-term debt and $77.9 million in short-term borrowings.

As of July 31, 2014, the current portion of our long-term debt was $17.5 million. Annual maturities, including the current portion, of long-term debt under our various financing arrangements are $2.5 million in 2014, $50.0 million in 2015, $190.0 million in 2016, $321.4 million in 2017, $171.3 million in 2018 and $511.4 million thereafter.

As of July 31, 2014 and October 31, 2013, we had deferred financing fees and debt issuance costs of $11.1 million and $13.4 million, respectively, which were included in other long-term assets.

Financial Instruments Interest Rate Derivatives We have interest rate swap agreements with various maturities through December 2014. These interest rate swap agreements are used to manage our fixed and floating rate debt mix, specifically debt under the Amended Credit Agreement.

The assumptions used in measuring fair value of these interest rate derivatives are considered level 2 inputs, which were based on interest received monthly from the counterparties based upon the LIBOR and interest paid based upon a designated fixed rate over the life of the swap agreements. These derivative instruments are designated and qualify as cash flow hedges. Accordingly, the effective portion of the gain or loss on these derivative instruments is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument is recognized in earnings immediately.

We have two interest rate derivatives (floating to fixed swap agreements designated as cash flow hedges) with a total notional amount of $150 million.

Under these swap agreements, we receive interest based upon a variable interest rate from the counterparties (weighted average of 0.15% as of July 31, 2014 and 0.17% as of October 31, 2013) and pay interest based upon a fixed interest rate (weighted average of 0.75% as of July 31, 2014 and 0.75% as of October 31, 2013). Losses reclassified to earnings under these contracts were $0.2 million and $0.2 million for the three months ended July 31, 2014 and 2013, respectively; and were $0.7 million and $0.6 million for the nine months ended July 31, 2014 and 2013, respectively. These losses were recorded within the consolidated statements of income as interest expense, net. The fair value of these contracts was $0.2 million and $0.6 million recorded in accumulated other comprehensive income as of July 31, 2014 and October 31, 2013, respectively.

Foreign Exchange Hedges We conduct business in major international currencies and are subject to risks associated with changing foreign exchange rates. Our objective is to reduce volatility associated with foreign exchange rate changes to allow management to focus its attention on business operations. Accordingly, we enter into various contracts that change in value as foreign exchange rates change to protect the value of certain existing foreign currency assets and liabilities, commitments and anticipated foreign currency revenues and expenses.

As of July 31, 2014, we had outstanding foreign currency forward contracts in the notional amount of $115.7 million ($137.6 million as of October 31, 2013).

At July 31, 2014, these derivative instruments were designated and qualified as fair value hedges. Adjustments to fair value for fair value hedges are recognized in earnings, offsetting the impact of the hedged item. Adjustments to fair value for fair value hedges are recognized in earnings, offsetting the impact of the hedged item. The assumptions used in measuring fair value of foreign exchange hedges are considered level 2 inputs, which were based on observable market pricing for similar instruments, principally foreign exchange futures contracts. Losses recorded under fair value contracts were $2.5 million and $1.2 million for the three months ended July 31, 2014 and 2013, respectively; and were $2.6 million and $0.8 million for the nine months ended July 31, 2014 and 2013, respectively.

Energy Hedges We are exposed to changes in the price of certain commodities. Our objective is to reduce volatility associated with forecasted purchases of these commodities to allow management to focus its attention on business operations. Accordingly, we may enter into derivative contracts to manage the price risk associated with certain of these forecasted purchases.

47 -------------------------------------------------------------------------------- From time to time, we have entered into certain cash flow hedges to mitigate our exposure to cost fluctuations in natural gas prices. Under these hedge agreements, we had agreed to purchase natural gas at a fixed price. There were no energy hedges in effect as of July 31, 2014 or October 31, 2013.

Stock Repurchase Program and Other Share Acquisitions Our 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 nine months ended July 31, 2014 and 2013, we repurchased no shares of Class A or Class B Common Stock, respectively. As of July 31, 2014, we have repurchased 3,184,272 shares, including 1,425,452 shares of Class A Common Stock and 1,758,820 shares of Class B Common Stock, under this program, all of which were repurchased in prior years. There were no shares repurchased from November 1, 2012 through July 31, 2014.

VARIABLE INTEREST ENTITIES We evaluate whether an entity is a variable interest entity ("VIE") and determine if the primary beneficiary status is appropriate on a quarterly basis.

We consolidate VIE's for which we are the primary beneficiary. If we are not the primary beneficiary and an ownership interest is held, the VIE is accounted for under the equity method of accounting. When assessing the determination of the primary beneficiary, we consider 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.

Significant Nonstrategic Timberland Transactions In March 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. 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 our 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.

In May 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 a separate and distinct legal entity from us; however the Buyer SPE has been consolidated into our operations.

The Buyer SPE is deemed to be a VIE since the Buyer SPE is not able to satisfy its liabilities without financing support from us. While Buyer SPE is a separate and distinct legal entity from us, we are the primary beneficiary because we have (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.

As a result, Buyer SPE has been consolidated into our operations.

Flexible Packaging Joint Venture In 2010, we formed a joint venture (referred to herein as the "Flexible Packaging JV") with Dabbagh Group Holding Company Limited and its subsidiary National Scientific Company Limited ("NSC"). The Flexible Packaging JV owns the operations in the Flexible Products & Services segment, with the exception of the North American multi-wall bag business. The Flexible Packaging JV has been consolidated into our operations as of its formation date of September 29, 2010.

48 -------------------------------------------------------------------------------- All entities contributed to the Flexible Packaging JV were existing businesses acquired by us and were reorganized under Greif Flexibles Asset Holding B.V. and Greif Flexibles Trading Holding B.V. ("Asset Co." and "Trading Co."), respectively. The Flexible Packaging JV also includes Global Textile Company LLC ("Global Textile"), which owns and operates a fabric hub in the Kingdom of Saudi Arabia that commenced operations in the fourth quarter of 2012. We have 51 percent ownership in Trading Co. and 49 percent ownership in Asset Co. and Global Textile. However, we and NSC have equal economic interests in the Flexible Packaging JV, notwithstanding the actual ownership interests in the various legal entities. All investments, loans and capital contributions are to be shared equally by us 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 Flexible Packaging 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 from us. We are the primary beneficiary because we have (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.

In April 2014, there was a conversion of the short-term loans payable and accrued interest to equity. This transaction was comprised of loans payable to another Greif entity and those payable to NSC. As of October 31, 2013, Asset Co.

had outstanding advances to NSC of $0.6 million which were being used to fund certain costs incurred in the Kingdom of Saudi Arabia in respect of the fabric hub. These advances were recorded within the current portion related party notes and advances receivable on our consolidated balance sheet. As of October 31, 2013, Asset Co. and Trading Co. held short term loans payable to NSC for $12.7 million recorded within short-term borrowings on our consolidated balance sheet.

These loans were interest bearing and were used to fund certain operational requirements.

Non-United States Accounts Receivable VIE As further described in Note 3 to the Consolidated Financial Statements included in Item 1 of Part I of this Form 10-Q, Cooperage Receivables Finance B.V. is a party to the Nieuw Amsterdam Receivables Purchase Agreement (the "European RPA"). Cooperage Receivables Finance B.V. is deemed to be a VIE since this entity is not able to satisfy its liabilities without the financial support from us. While this entity is a separate and distinct legal entity from us and no ownership interest in Cooperage Receivables Finance B.V. is held by us, we are the primary beneficiary because we have (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. As a result, Cooperage Receivables Finance B.V. has been consolidated into our operations.

RECENT ACCOUNTING STANDARDS Newly Adopted Accounting Standards In December 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-11 "Balance Sheet: Disclosures about Offsetting Assets and Liabilities." Subsequently, in January 2013, the FASB issued updated guidance in ASU 2013-01 "Balance Sheet: Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities." The balance sheet offsetting disclosures were limited in scope to derivatives, repurchase agreements, and securities lending transactions to the extent they are offset in the financial statements or subject to an enforceable master netting arrangement or similar arrangement. We adopted the new guidance beginning on November 1, 2013, and the adoption of the new guidance did not impact our financial position, results of operations, comprehensive income or cash flows, other than the related disclosures.

In February 2013, the FASB issued ASU 2013-02 "Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." The objective of this update is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this update seek to attain that objective by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. For other amounts that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under GAAP that provide additional detail about those amounts. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account instead of directly to income or expense in the same reporting period.

We adopted the new guidance beginning on November 1, 2013, and the adoption of the new guidance did not impact our financial position, results of operations, comprehensive income or cash flows, other than the related disclosures.

49 -------------------------------------------------------------------------------- In April 2014, the FASB issued ASU 2014-08 "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." The objective of this update is to prevent disposals of small groups of assets that are recurring in nature to qualify for discontinued operations presentation under Subtopic 205-20. The amendments in this update seek to attain this objective by only allowing disposals representing a strategic shift in operations to be presented as discontinued operations. We adopted the new guidance beginning on May, 1 2014, after which, new disposals of components are evaluated for discontinued operations treatment using the new guidance . As a result of the adoption of this standard, businesses sold and classified as held for sale during the three months ended July 31, 2014 did not qualify as discontinued operations under the new standard.

Recently Issued Accounting Standards As of July 31, 2014, the FASB has issued ASU's through 2014-14. We have reviewed each recently issued ASU and the adoption of each ASU that is applicable to us is not expected to have a material impact on our financial position, results of operations, comprehensive income or cash flows, other than the related disclosures.

In March 2013, the FASB issued ASU 2013-05 "Foreign Currency Matters: Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or an Investment in a Foreign Entity." The objective of this update is to resolve the diversity in practice about whether Accounting Standards Codification ("ASC") 810-10 or ASC 830-30 applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas rights) within a foreign entity. We are expected to adopt the new guidance beginning November 1, 2014, and the impact of the adoption of the new guidance will be evaluated when an acquisition or divestiture occurs with respect to the our financial position, results of operations, comprehensive income, cash flows and disclosures.

In July 2013, the FASB issued ASU 2013-11 "Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." The objective of this update is to eliminate the diversity in practice in the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. The amendments in this update seek to attain that objective by requiring an entity to present an unrecognized tax benefit in the financial statements as a reduction to a deferred tax asset for those instances described above, except in certain situations discussed in the update. We are expected to adopt the new guidance beginning on November 1, 2014 and the adoption of the new guidance is not expected to impact the Company's financial position, results of operations, comprehensive income or cash flows, other than the related disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date will be the first quarter of fiscal year 2018 using one of two retrospective application methods. The Company has not yet determined the potential impact on the Company's financial position, results of operations, comprehensive income, cash flow and disclosures.

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