GEF US Equity☆

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The terms “Greif,” the “Company,” “we,” “us” and “our” as used in this discussion refer to Greif, Inc. and its subsidiaries.

COVID-19

The impact of COVID-19 on our future results of operations and financial condition is highly uncertain at this time and outside of our control. The scope, duration and magnitude of the effects of COVID-19 are evolving rapidly and in ways that are difficult or impossible to anticipate.

RESULTS OF OPERATIONS

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 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 at the date of our consolidated financial statements.

Historical revenues and earnings may or may not be representative of future operating results due to various economic and other factors.

The non-GAAP financial measures of EBITDA and Adjusted EBITDA are used throughout the following discussion of our results of operations, both for our consolidated and segment results. For our consolidated results, EBITDA is defined as net income, plus interest expense, net, plus debt extinguishment charges, plus income tax expense, plus depreciation, depletion and amortization, and Adjusted EBITDA is defined as EBITDA plus restructuring charges, plus acquisition and integration related costs, plus non-cash asset impairment charges, plus non-cash pension settlement (income) charges, plus incremental COVID-19 costs, net, less (gain) loss on disposal of properties, plants, equipment and businesses, net. Since we do not calculate net income by business segment, EBITDA and Adjusted EBITDA by business segment are reconciled to operating profit by business segment. In that case, EBITDA is defined as operating profit by business segment less other (income) expense, net, less non-cash pension settlement (income) charges, less equity earnings of unconsolidated affiliates, net of tax, plus depreciation, depletion and amortization expense for that business segment, and Adjusted EBITDA is defined as EBITDA plus restructuring charges, plus acquisition and integration related costs, plus non-cash asset impairment charges, plus non-cash pension settlement (income) charges, plus incremental COVID-19 costs, net, less (gain) loss on disposal of properties, plants, equipment and businesses, net, for that business segment. We use EBITDA and Adjusted EBITDA as financial measures to evaluate our historical and ongoing operations and believe that these non-GAAP financial measures are useful to enable investors to perform meaningful comparisons of our historical and current performance. In addition, we present our U.S. and non-U.S. income before income taxes after eliminating the impact of non-cash asset impairment charges, non-cash pension settlement (income) charges, restructuring charges, acquisition and integration related costs, plus incremental COVID-19 costs, net, and (gains) losses on sales of businesses, net, which are non-GAAP financial measures. We believe that excluding the impact of these adjustments enable investors to perform a meaningful comparison of our current and historical performance that investors find valuable. The foregoing non-GAAP financial measures are intended to supplement and should be read together with our financial results. These non-GAAP financial measures should not be considered an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of this financial information should not place undue reliance on the non-GAAP financial measures.

The following table sets forth the net sales, operating profit (loss), EBITDA and Adjusted EBITDA for each of our business segments for 2020, 2019 and 2018:

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Net sales:

Operating profit:

Rigid Industrial Packaging & Services $ 209.9 $ 179.6 $ 183.2

EBITDA:

Rigid Industrial Packaging & Services $ 284.6 $ 251.6 $ 249.0

Adjusted EBITDA:

Rigid Industrial Packaging & Services $ 297.5 $ 269.9 $ 273.4

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The following table sets forth EBITDA and Adjusted EBITDA, reconciled to net income and operating profit, for our consolidated results for 2020, 2019 and 2018:

Plus: debt extinguishment charges — 22.0 —

Plus: depreciation, depletion and amortization expense 242.5 206.1 126.9

Plus: debt extinguishment charges — 22.0 —

Plus: non-cash pension settlement charges 0.3 — 1.3

Plus: other expense, net 2.7 2.6 18.4

Plus: equity earnings of unconsolidated affiliates, net of tax (1.5) (2.9) (3.0)

Less: other expense, net 2.7 2.6 18.4

Less: non-cash pension settlement charges 0.3 — 1.3

Less: equity earnings of unconsolidated affiliates, net of tax (1.5) (2.9) (3.0)

Plus: depreciation, depletion and amortization expense 242.5 206.1 126.9

Plus: acquisition and integration related costs 17.0 29.7 0.7

Plus: non-cash asset impairment charges 18.5 7.8 8.3

Plus: non-cash pension settlement charges 0.3 — 1.3

Plus: incremental COVID-19 costs, net 2.6 — —

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The following table sets forth EBITDA and Adjusted EBITDA for each of our business segments, reconciled to the operating profit for each segment, for 2020, 2019 and 2018:

Rigid Industrial Packaging & Services

Less: other expense, net 5.3 7.2 17.1

Less: non-cash pension settlement charges 0.4 — 1.3

Less: equity earnings of unconsolidated affiliates, net of tax (1.5) (2.9) (3.0)

Plus: depreciation and amortization expense 78.9 76.3 81.2

Plus: acquisition and integration related costs — 0.6 0.7

Plus: non-cash asset impairment charges 5.1 2.7 8.3

Plus: non-cash pension settlement charges 0.4 — 1.3

Plus: incremental COVID-19 costs, net 0.1 — —

Paper Packaging & Services

Less: other (income) expense, net (1.3) (3.4) 0.7

Less: non-cash pension settlement charges (0.1) — —

Plus: depreciation and amortization expense 153.5 119.3 34.2

Plus: restructuring charges 9.9 6.2 0.4

Plus: acquisition and integration related costs 17.0 29.1 —

Plus: non-cash asset impairment charges 12.5 5.1 —

Plus: non-cash pension settlement charges (0.1) — —

Plus: incremental COVID-19 costs, net 1.9 — —

Flexible Products & Services

Less: other (income) expense, net (1.3) (1.2) 0.6

Plus: depreciation and amortization expense 5.6 6.2 6.9

Plus: restructuring charges 2.8 1.0 0.9

Plus: non-cash asset impairment charges 0.9 — —

Plus: incremental COVID-19 costs, net 0.6 — —

Land Management

Operating profit $ 8.5 $ 9.9 $ 9.6

Plus: depreciation, depletion and amortization expense 4.5 4.3 4.6

Plus: restructuring charges — 0.1 —

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Year 2020 Compared to Year 2019

Net Sales

Net sales were $4,515.0 million for 2020 compared with $4,595.0 million for 2019. The $80.0 million decrease was primarily due to decreased volumes and sale prices across the segments, the impact to net sales resulting from the Consumer Packaging Group ("CPG") divestiture, and the negative impacts of foreign currency translation, partially offset by a full year contribution from the acquired Caraustar operations.

Gross Profit

Gross profit was $914.7 million for 2020 compared with $959.9 million for 2019. The respective reasons for the improvement or decline in gross profit, as the case may be, for each segment are described below in the "Segment Review." Gross profit margin was 20.3 percent for 2020 compared to 20.9 percent for 2019.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses increased $8.6 million to $516.0 million for 2020 from $507.4 million for 2019. SG&A expenses were 11.4 percent of net sales for 2020 compared with 11.0 percent of net sales for 2019.

Restructuring Charges

Restructuring charges were $38.7 million for 2020 compared with $26.1 million for 2019. The increase in restructuring charges was primarily due to increased strategic restructuring efforts within the Rigid Industrial Packaging & Services segment. See Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information.

Acquisition and Integration Related Costs

Acquisition and integration related costs were $17.0 million for 2020 compared with $29.7 million for 2019. The decrease was primarily due to fewer expenses incurred in connection with the Caraustar Acquisition and related integration activities.

Impairment Charges

There were no goodwill impairment charges for 2020 and 2019.

Non-cash asset impairment charges were $18.5 million for 2020 compared with $7.8 million for 2019. In 2020, these charges were primarily related to plant closures. See Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information.

Gain on Disposal of Properties, Plants and Equipment, net

The gain on disposal of properties, plants, and equipment, net was $19.2 million and $13.9 million for 2020 and 2019, respectively.

Loss on Disposal of Businesses, net

The loss on disposal of business, net was $38.8 million for 2020 and $3.7 million for 2019. The current year disposal of business, net was primarily due to goodwill allocated to the divestiture of the CPG business. See Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information.

Financial Measures

Operating profit was $304.9 million for 2020 compared with $399.1 million for 2019. Net income was $124.3 million for 2020 compared with $194.2 million for 2019. Adjusted EBITDA was $642.6 million for 2020 compared with $658.9 million for 2019. The respective reasons for the improvement or decline in Adjusted EBITDA, as the case may be, for each segment are described below in the "Segment Review."

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Trends

We anticipate demand growth in the industrial manufacturing businesses but continued lingering uncertainty in the global economy to continue in early 2021. Raw material prices for old corrugated containers are expected to increase, while prices for steel, resin and recycled coated and uncoated paperboard are expected to remain relatively stable after the first quarter of 2021. Additionally, we expect higher transportation and insurance costs due to tighter market conditions and higher incentive accruals to impact costs of goods sold and SG&A.

Segment Review

Rigid Industrial Packaging & Services

Key factors influencing profitability in the Rigid Industrial Packaging & Services segment are:

•Selling prices, product mix, customer demand and sales volumes;

•Raw material costs, primarily steel, resin, containerboard and used industrial packaging for reconditioning;

•Energy and transportation costs;

•Benefits from executing the Greif Business System;

•Restructuring charges;

•Acquisition of businesses and facilities;

•Divestiture of businesses and facilities; and

•Impact of foreign currency translation.

Net sales were $2,298.9 million for 2020 compared with $2,490.6 million for 2019. The $191.7 million decrease in net sales was due primarily to decreased volumes and decreased average sale prices driven by contractual price adjustment mechanisms related to raw material price decreases, as well as negative impacts of foreign currency translation.

Gross profit was $465.3 million for 2020 compared with $460.1 million for 2019. The $5.2 million increase in gross profit was primarily due to lower priced raw materials, the timing of contractual pass through arrangements, product mix shifts, and strategic pricing actions. Gross profit margin increased to 20.2 percent in 2020 from 18.5 percent in 2019.

Operating profit was $209.9 million for 2020 compared with $179.6 million for 2019. The $30.3 million increase was primarily attributable to a decrease in the segment's SG&A expenses due to strategic cost management efforts. Adjusted EBITDA was $297.5 million for 2020 compared with $269.9 million for 2019. The $27.6 million increase was primarily due to the same factors that impacted operating profit. Depreciation and amortization expense was $78.9 million and $76.3 million for 2020 and 2019, respectively.

Paper Packaging & Services

Key factors influencing profitability in the Paper Packaging & Services segment are:

•Selling prices, product mix, customer demand and sales volumes;

•Raw material costs, primarily old corrugated containers;

•Energy and transportation costs;

•Benefits from executing the Greif Business System;

•Acquisition of businesses and facilities;

•Restructuring charges; and

•Divestiture of businesses and facilities.

Net sales were $1,916.9 million for 2020 compared with $1,780.0 million for 2019. The $136.9 million increase was primarily due to full year contribution from the acquired Caraustar operations, partially offset by lower published containerboard and boxboard prices, decreased volumes, and the impact to net sales resulting from the CPG divestiture.

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Gross profit was $382.7 million for 2020 compared with $425.4 million for 2019. The decrease in gross profit was primarily due to the same factors that impacted net sales and higher old corrugated container input costs. Gross profit margin decreased 20.0 percent in 2020 from 23.9 percent 2019.

Operating profit was $71.0 million for 2020 compared with $184.3 million for 2019. The decrease in operating profit was primarily due to the factors discussed above in gross profit, the loss on sale of the CPG divestiture and the segment receiving a greater portion of allocated corporate costs. Adjusted EBITDA was $306.4 million for 2020 compared with $348.3 million for 2019. The decrease was due primarily to the same factors that impacted gross profit and the segment receiving a greater portion of allocated corporate costs. Depreciation and amortization expense was $153.5 million and $119.3 million for 2020 and 2019, respectively.

Flexible Products & Services

Key factors influencing profitability in the Flexible Products & Services segment are:

•Selling prices, product mix, customer demand and sales volumes;

•Raw material costs, primarily resin;

•Energy and transportation costs;

•Benefits from executing the Greif Business System;

•Restructuring charges;

•Divestiture of businesses and facilities; and

•Impact of foreign currency translation.

Net sales were $272.9 million for 2020 compared with $297.5 million for 2019. The $24.6 million decreased was primarily due to continued lower volumes and lower average sale prices primarily as a result of raw material price decreases and corresponding contractual price adjustment mechanisms.

Gross profit was $57.5 million for 2020 compared with $64.2 million for 2019. The decrease was primarily attributable to the same factors that impacted net sales. Gross profit margin decreased to 21.1 percent in 2020 from 21.6 percent in 2019.

Operating profit was $15.5 million for 2020 compared with $25.3 million for 2019. The decrease in operating profit was primarily due to the same factors that impacted gross profit, partially offset by a reduction in segment SG&A expenses. Adjusted EBITDA was $26.8 million for 2020 compared with $28.6 million for 2019. The decrease was due to lower gross profit. Depreciation and amortization expense was $5.6 million for 2020 compared with $6.2 million for 2019.

Land Management

As of October 31, 2020, our Land Management segment consisted of approximately 244,000 acres of timber properties in the southeastern United States. Key factors influencing profitability in the Land Management segment are:

•Planned level of timber sales;

•Selling prices and customer demand;

•Gains on timberland sales; and

•Gains on the disposal of development, surplus and HBU properties (“special use property”).

In order to maximize the value of our timber properties, we continue to review our current portfolio and explore the development of certain of these properties. 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; and

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

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We report the sale of timberland property in "timberland gains," the sale of HBU and surplus property in “gain on disposal of properties, plants and equipment, net” and the sale of timber and development property under “net sales” and “cost of products sold" in our consolidated statements of income. All HBU and development property, together with surplus property, is used to productively grow and sell timber until the property is 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 lakes or rivers, 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 October 31, 2020, we estimated that there were 18,800 acres in the United States of special use property, which we expect will be available for sale in the next four to six years.

Net sales decreased to $26.3 million for 2020 compared with $26.9 million for 2019.

Operating profit decreased to $8.5 million for 2020 from $9.9 million for 2019.

Adjusted EBITDA was $11.9 million and $12.1 million for 2020 and 2019, respectively. Depreciation, depletion and amortization expense was $4.5 million and $4.3 million for 2020 and 2019, respectively.

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U.S. and Non-U.S. Income before Income Tax Expense

See the following tables for details of the U.S. and non-U.S. income before income taxes and U.S. and non-U.S. income before income taxes after eliminating the impact of non-cash asset impairment charges, non-cash pension settlement income, restructuring charges, acquisition and integration related costs, debt extinguishment charges, and losses on sales of businesses (collectively, "Adjustments").

Summary

Year endedOctober 31,

Non-U.S. % of Consolidated Net Sales 38.9 % 40.6 %

U.S. % of Consolidated Net Sales 61.1 % 59.4 %

Non-U.S. % of Consolidated I.B.I.T. 86.3 % 50.4 %

U.S. % of Consolidated I.B.I.T. 13.7 % 49.6 %

Non-U.S. % of Consolidated I.B.I.T. before Adjustments 60.0 % 44.0 %

U.S. % of Consolidated I.B.I.T. before Adjustments 40.0 % 56.0 %

Non-U.S. I.B.I.T. Reconciliation

Year endedOctober 31,

Non-cash asset impairment charges 5.5 2.7

Non-cash pension settlement charge 0.4 —

Restructuring charges 12.0 16.3

Acquisition and integration related costs 0.1 0.5

Loss on sale of businesses 0.9 2.9

Total Non-U.S. Adjustments 18.9 22.4

Non-U.S. I.B.I.T. before Adjustments $ 179.5 $ 154.5

U.S. I.B.I.T. Reconciliation

Year endedOctober 31,

Non-cash asset impairment charges 13.0 5.1

Non-cash pension settlement charge (0.1) —

Restructuring charges 26.7 9.8

Acquisition and integration related costs 16.9 29.2

Debt extinguishment charges — 22.0

Loss on sale of businesses 37.9 0.8

Total U.S. Adjustments 94.4 66.9

U.S. I.B.I.T. before Adjustments $ 119.9 $ 196.8

* Income Before Income Tax expense = I.B.I.T.

Income Tax Expense

We had operations in over 40 countries during 2020. Operations outside the United States are subject to additional risks that may not exist, or be as significant, within the United States. Because of our global operations in numerous countries we are required to address different and complex tax systems and issues which are constantly changing.

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Preparation of our financial statements requires the use of estimates and assumptions that affect the reported amounts of our assets and liabilities; and revenues and expenses as of the balance sheet date. The numerous tax jurisdictions in which we operate, along with the variety and complexity of the various tax laws, creates a level of uncertainty, and requires judgment when addressing the impact of complex tax issues. Our effective tax rate and the amount of tax expense are dependent upon various factors, including the following: the tax laws of the jurisdictions in which income is earned; the ability to realize deferred tax assets; negotiation and dispute resolution with taxing authorities in the U.S. and international jurisdictions; and changes in tax laws.

The provision for income taxes is computed using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized currently based on the anticipated future tax consequences of changes in the temporary differences between the book and tax bases of assets and liabilities. This method includes an estimate of the future realization of tax benefits associated with tax losses. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those assets are expected to be realized or settled.

Income tax expense for 2020 was $63.3 million on $186.1 million of pretax income and for 2019 was $70.7 million on $262.0 million of pretax income. For 2020, the mix of income and losses among various jurisdictions resulted in a net tax decrease of $17.0 million on $75.9 million less of pretax income, which was offset by additional tax expense of $7.5 million related to non-deductible goodwill allocated to the CPG divestiture. Various other items resulted in a net tax increase of $2.1 million.

Included in the net tax decrease of $17.0 million noted in the previous paragraph was a $28.4 million net decrease in valuation allowances. This decrease was primarily due to the ability to utilize foreign tax credits for which a valuation allowance had previously been provided. The release of the valuation allowance related to foreign tax credits resulted in the reduction of the valuation allowance and a tax benefit of $21.5 million. Other decreases in the valuation allowances related to foreign jurisdictions resulted in an additional decrease of $6.9 million. The valuation allowance activity resulted in an overall decrease in the valuation allowance account from 2019 to 2020 of $34.7 million. Offsetting these amounts was tax expense of $31.0 million as a result of a one-time elimination related to an intra-company sale. This one-time activity was the primary driver that resulted in an overall net increase in permanent items for 2019 to 2020 of $28.3 million

We analyze potential income tax liabilities related to uncertain tax positions in the United States and international jurisdictions. The analysis of potential income tax liabilities results in estimates of income tax liabilities recognized for uncertain tax positions following the guidance of ASC 740, “Income Taxes.” The estimation of potential tax liabilities related to uncertain tax positions involves significant judgment in evaluating the impact of uncertainties in the application of ASC 740 and complex tax laws. We periodically analyze both potential income tax liabilities and existing liabilities for uncertain tax positions resulting in both new reserves and adjustments to existing reserves in light of changing facts and circumstances. This includes the release of existing liabilities for uncertain tax positions based on the expiration of statutes of limitation. During 2020, lapses in the statute of limitations, which were partially offset by the recognition of new uncertain tax position liabilities recorded during the current year, resulted in an overall net decrease in our uncertain tax position liability.

The ultimate resolution of potential income tax liabilities may result in a payment that is materially different from our current estimates. If our estimates recognized under ASC 740 prove to be different than what is ultimately resolved, such resolution could have a material impact on our financial condition and results of operations. While predicting the final outcome or the timing of the resolution of any particular tax matter is subject to various risks and uncertainties, we believe that our tax accounts related to uncertain tax positions are appropriately stated.

See Note 9 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for further information.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests represents the portion of earnings from the operations of our non-wholly owned, consolidated subsidiaries that belongs to the noncontrolling interests in those subsidiaries. Net income attributable to noncontrolling interests was $15.5 million and $23.2 million for 2020 and 2019, respectively. The decrease in net income attributable to noncontrolling interests was due primarily to decreased earnings of the joint venture ("Flexible Packaging JV") formed in 2010, with Dabbagh Group Holdings Company Limited and one of its subsidiaries, originally National Scientific Company Limited and now Gulf Refined Packaging for Industrial Packaging Company LTD.

Year 2019 Compared to Year 2018

Results of year 2019 compared to year 2018 are included in our Annual Report on Form 10-K for the year ended October 31, 2019, File No. 001-00566 (see Item 7 therein).

OTHER COMPREHENSIVE INCOME CHANGES

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Other comprehensive loss, net of tax for 2020 and 2019 was $6.7 million and $55.9 million, respectively. The components of those other comprehensive income changes were as follows:

Foreign Currency Translation

In accordance with ASC 830, “Foreign Currency Matters,” the assets and liabilities denominated in a foreign currency are translated into United States Dollars at the rate of exchange existing at the end of the current period, and revenues and expenses are translated at average exchange rates over the month in which they are incurred. The cumulative translation adjustments, which represent the effects of translating assets, liabilities and operations of our international subsidiaries, are presented in the consolidated statements of changes in equity in accumulated other comprehensive loss. Other comprehensive loss resulting from foreign currency translation for 2020 and 2019 was $9.8 million and $4.5 million, respectively.

Derivative Financial Instruments

The change in derivative financial instruments, net of tax for 2020 and 2019 was a loss of $12.0 million and a loss of $26.1 million, respectively. The other comprehensive loss in 2020 resulting from the change in derivative financial instruments, net, was primarily due to decreases in market interest rates on the swaps.

Minimum Pension Liability, net

The change in minimum pension liability, net of tax for 2020 and 2019 was an income of $15.1 million and loss of $25.3 million, respectively. The other comprehensive income in 2020 resulting from the change in minimum pension liability, net was primarily due to higher actual returns compared to assumptions on plan assets and amortization of prior net plan losses.

BALANCE SHEET CHANGES

Working Capital Changes

The $27.6 million decrease in accounts receivable to $636.6 million as of October 31, 2020 from $664.2 million as of October 31, 2019 was primarily due to the CPG divestiture and decrease in net sales.

The $64.6 million decrease in inventories to $293.6 million as of October 31, 2020 from $358.2 million as of October 31, 2019 was primarily due to the CPG divestiture and strong demand at the end of the year.

The $15.5 million increase in accounts payable to $450.7 million as of October 31, 2020 from $435.2 million as of October 31, 2019 was primarily due to the timing of payments, offset by the CPG divestiture.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are operating cash flows and borrowings under our senior secured credit facilities, proceeds from the senior notes we have issued, and proceeds from our trade accounts receivable credit facilities. 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 facilities, and proceeds from our trade accounts receivable credit facilities will be sufficient to fund our anticipated working capital, capital expenditures, cash dividends, stock purchases, debt repayment, potential acquisitions of businesses and other liquidity needs for at least 12 months.

Capital Expenditures

During 2020 and 2019, we invested $131.4 million (excluding $5.4 million for purchases of and investments in timber properties) and $156.9 million (excluding $5.4 million for purchases of and investments in timber properties), respectively, in capital expenditures.

United States Trade Accounts Receivable Credit Facility

On September 24, 2020, we amended our existing receivables facility in the United States (the "U.S. Receivables Facility") to decrease the available financing amount from $275.0 million to $250.0 million. The U.S. Receivables Facility matures on September 24, 2021. As of October 31, 2020, $232.8 million, net of deferred financing costs of $0.2 million, was outstanding under the U.S. Receivable Facility, which was reported in long-term debt in the consolidated balance sheets because we intend to refinance the obligation on a long-term basis and have the intent and ability to consummate a long-term refinancing by exercising the renewal option in the agreement or entering into a new financing arrangement.

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We may terminate the U.S. Receivables Facility at any time upon five days prior written notice. The U.S. 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 U.S. Receivables Facility. The U.S. Receivables Facility also contains certain covenants and events of default, which are substantially the same as the covenants under the 2019 Credit Agreement. See "Borrowing Arrangements - 2019 Credit Agreement" below for a description of these covenants. As of October 31, 2020, we were in compliance with these covenants. Proceeds of the U.S. Receivables Facility are available for working capital and general corporate purposes.

See Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information regarding the U.S. Receivables Facility.

International Trade Accounts Receivable Credit Facilities

On April 17, 2020, Cooperage Receivables Finance B.V. and Greif Coordination Center BVBA, an indirect wholly owned subsidiary of Greif, Inc., amended and restated the Nieuw Amsterdam Receivables Financing Agreement (the "European RFA"). The European RFA provides an accounts receivable financing facility of up to €100.0 million ($117.5 million as of October 31, 2020) secured by certain European accounts receivable. The $77.2 million outstanding on the European RFA as of October 31, 2020 is reported as 'Long-term debt' on the interim condensed consolidated balance sheets because we intend to refinance these obligations on a long-term basis and have the intent and ability to consummate a long-term refinancing by exercising the renewal option in the respective agreement or entering into new financing arrangements.

See Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information regarding the European RFA.

Borrowing Arrangements

Long-term debt is summarized as follows:

Accounts receivable credit facilities 310.0 351.6

2019 Credit Agreement - Revolving Credit Facility — 76.1

Other debt — 0.4

Less deferred financing costs 11.1 13.6

2019 Credit Agreement

On February 11, 2019, we and certain of our subsidiaries entered into an amended and restated senior secured credit agreement (the “2019 Credit Agreement”) with a syndicate of financial institutions. Our obligations under the 2019 Credit Agreement are guaranteed by certain of our U.S. and non-U.S. subsidiaries.

The 2019 Credit Agreement provides for (a) an $800.0 million secured revolving credit facility, consisting of a $600.0 million multicurrency facility and a $200.0 million U.S. dollar facility, maturing on February 11, 2024, (b) a $1,275.0 million secured term A-1 loan with quarterly principal installments commencing on April 30, 2019 and continuing through maturity on January 31, 2024, and (c) a $400.0 million secured term A-2 loan with quarterly principal installments commencing on April 30, 2019 and continuing through maturity on January 31, 2026. In addition, we have an option to add an aggregate of $700.0 million to the secured revolving credit facility under the 2019 Credit Agreement with the agreement of the lenders. As of October 31, 2020, we had $538.1 million of available borrowing capacity under the $800.0 million secured revolving credit facility provided by the 2019 Credit Agreement. The available borrowing capacity is determined by the lesser of the available capacity or the amount that could be borrowed without causing the Company's leverage ratio to exceed 4.50 to 1.00.

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On November 13, 2020, we and certain of our U.S. subsidiaries entered into an incremental term loan agreement (the "Incremental Term A-3 Loan Agreement") with a syndicate of farm credit institutions. The Incremental Term A-3 Loan Agreement constitutes an amendment to the 2019 Credit Agreement. The Incremental Term A-3 Loan Agreement provides for a loan commitment in the aggregate principal amount of $225.0 million that must be funded in a single draw on a business day occurring on or before July 15, 2021 (the "Incremental Term A-3 Loan"). The Incremental Term A-3 Loan matures on July 15, 2026, with quarterly installments of principal payable on the last day of each of our fiscal quarters commencing with the first such date to occur after the funding date. The Incremental Term A-3 has, for all material purpose, the identical terms and provisions as the term A-1 and the term A-2 loans under the 2019 Credit Agreement, discussed above. Our obligations with respect to the Incremental Term A-3 Loan will constitute obligations under the 2019 Credit Agreement and will be secured and guaranteed with the other obligations as provided under the 2019 Credit Facility on a pari passu basis. We intend to draw upon Incremental Term A-3 Loan prior to July 15, 2021, and use the loan proceeds to pay all of the outstanding principal of and interest on the Senior Notes due 2021, discussed below.

The 2019 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 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 (as used in this paragraph only, “EBITDA”) to be greater than 4.75 to 1.00 and stepping down annually by 0.25 increments beginning on July 31, 2020 to 4.00 on July 31, 2023. The current leverage ratio covenant requirement was 4.50 as of October 31, 2020. The interest coverage ratio generally requires that, at the end of any quarter, we will not permit the ratio of (a) our consolidated EBITDA, to (b) our consolidated interest expense to the extent paid or payable, to be less than 3.00 to 1.00, during the applicable preceding twelve month period. As of October 31, 2020, we were in compliance with the covenants and other agreements in the 2019 Credit Agreement.

See Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional disclosures regarding the 2019 Credit Agreement.

Senior Notes

On February 11, 2019, we issued $500.0 million of 6.50% Senior Notes due March 1, 2027 (the "Senior Notes due 2027"). Interest on the Senior Notes due 2027 is payable semi-annually commencing on September 1, 2019. Our obligations under the Senior Notes due 2027 are guaranteed by our U.S. subsidiaries that guarantee the 2019 Credit Agreement, as described above. The Senior Notes due 2027 are governed by an Indenture that contains various covenants. Certain of these covenants will be suspended if the Senior Notes due 2027 achieve investment grade ratings from both Moody’s Investors Service, Inc. and Standard & Poor’s Global Ratings and no default or event of default has occurred and is continuing. As of October 31, 2020, we were in compliance with these covenants.

Our Luxembourg subsidiary has issued €200.0 million of 7.375% Senior Notes due July 15, 2021 (the "Senior Notes due 2021"). Interest on the Senior Notes due 2021 is payable semi-annually. The Senior Notes due 2021 are guaranteed on a senior basis by Greif, Inc. The Senior Notes due 2021 are governed by an Indenture that contains various covenants. As of October 31, 2020, we were in compliance with these covenants. As discussed above, we intend to draw upon the Incremental Term A-3 Loan prior to July 15, 2021, and use the loan proceeds to pay all of the outstanding principal of and interest on the Senior Notes due 2021.

See Note 6 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional disclosures regarding the Senior Notes discussed above.

Financial Instruments

Interest Rate Derivatives

We have various borrowing facilities which charge interest based on the one-month U.S. dollar LIBOR rate plus a spread. Refer to Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for discussion of ASU 2020-04 "Reference Rate Reform" for the our considerations of the impact of reference rate reform on contracts utilizing LIBOR rates.

In 2020, we entered into four forward starting interest rate swaps with a total notional amount of $200.0 million effective July 15, 2021. We receive variable rate interest payments based upon one-month U.S. dollar LIBOR, and in return we are obligated to pay interest at a weighted-average interest rate of 0.90% plus a spread.

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In 2019, we entered into six interest rate swaps with a total notional amount of $1,300.0 million that amortize to $200.0 million over a five-year term. The outstanding notional amount was $600.0 million as of October 31, 2020. We receive variable rate interest payments based upon one-month U.S. dollar LIBOR, and in return we are obligated to pay interest at a weighted-average interest rate of 2.49%.

In 2017, we entered into an interest rate swap with a notional amount of $300.0 million and received variable rate interest payments based upon one-month U.S. dollar LIBOR, and in return we are obligated to pay interest at a fixed rate of 1.19% plus a spread.

These derivatives are designated as cash flow hedges for accounting purposes. Accordingly, the gain or loss on these derivative instruments are reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transactions and in the same period during which the hedged transaction affects earnings.

See Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional disclosures regarding our interest rate derivatives.

Foreign Exchange Hedges

We conduct business in 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 cash flows.

As of October 31, 2020, and 2019, we had outstanding foreign currency forward contracts in the notional amount of $268.6 million and $275.0 million, respectively.

See Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional disclosures regarding our foreign exchange hedges.

Cross Currency Swap

We have operations and investments in various international locations and are subject to risks associated with changing foreign exchange rates. On March 6, 2018, we entered into a cross currency interest rate swap agreement that synthetically swaps $100.0 million of fixed rate debt to Euro denominated fixed rate debt at a rate of 2.35%. The agreement is designated as a net investment hedge for accounting purposes and will mature on March 6, 2023. Accordingly, the gain or loss on this derivative instrument is included in the foreign currency translation component of other comprehensive income until the net investment is sold, diluted, or liquidated. Interest payments received from the cross currency swap are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense, net on the consolidated statements of income.

See Note 7 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional disclosures regarding our cross currency swap.

Contractual Obligations

As of October 31, 2020, we had the following contractual obligations:

Payments Due by Period

(in millions) Total Less than 1year 1-3 years 3-5 years After 5 years

Short-term borrowings 28.4 28.4

Liabilities held by special purpose entities 43.3 43.3

Current portion of long-term debt 123.1 123.1

Mandatorily redeemable noncontrolling interests 8.4 — 5.0 3.4

Deferred purchase price of Tholu 28.1 3.3 24.8

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Environmental reserves are estimates based on current remediation plans; actual liabilities could significantly differ from the reserve estimates.

We have no near-term post-retirement benefit plan funding obligations. Because the amount of such obligations in future years is not reasonably estimable, they have been excluded from the contractual obligations table. We intend to make post-retirement benefit plan contributions of $30.0 million during 2021, which consists of $24.7 million of employer contributions and $5.3 million of benefits paid directly by the employer. These contributions are not contractually obligated, and therefore are not included in the table above.

Our unrecognized tax benefits under ASC 740, “Income Taxes” have been excluded from the contractual obligations table because of the inherent uncertainty and the inability to reasonably estimate the timing of cash outflows.

Stock Repurchase Program and Other Share Acquisitions

Our Board of Directors has authorized the repurchase of Class A Common Stock or Class B Common Stock or any combination of the foregoing. As of October 31, 2020, the remaining number of shares that could be repurchased under this authorization was 4,703,487 shares. See Note 12 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for additional information regarding this program and the repurchase of shares of Class A and Class B Common Stock.

Effects of Inflation

We generally identify hyper-inflationary markets as those markets whose cumulative inflation rate over a three-year period exceeds 100%. During the third quarter of 2018, Argentina was deemed as a hyper-inflationary market and our Argentine operations changed functional currency from Argentine Pesos to U.S. Dollars for GAAP reporting purposes. As a result, non-U.S. Dollar denominated monetary assets and liabilities of our Argentine operations are subject to re-measurement and recorded in Other Expense, Net, within the Consolidated Statements of Income. During 2020, foreign currency losses, net recorded in Other expense, net, related to our Argentine operations were $2.8 million. Inflation did not have a material impact on our operations during 2020.

Critical Accounting Policies

A summary of our significant accounting policies is included in Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this 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. The following are the accounting policies that we believe are most important to the portrayal of our results of operations and financial condition and require our most difficult, subjective or complex judgments.

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. Actual results could differ materially using different estimates and assumptions, or if conditions are significantly different in the future.

Goodwill and Indefinite-Lived Intangibles Impairment Testing. We account for goodwill in accordance with ASC 350, “Intangibles – Goodwill and Other.” Under ASC 350, purchased goodwill is not amortized, but instead is tested for impairment either annually on August 1 or when events and circumstances indicate an impairment may have occurred. Our goodwill impairment assessment is performed by reporting unit. A reporting unit is the operating segment, or a business one level below that operating segment (the component level) if discrete financial information is prepared and regularly reviewed by segment management. However, components are aggregated as a single reporting unit if they have similar economic characteristics. In conducting the annual impairment tests, the estimated fair value of each of our reporting units is compared to its carrying amount including goodwill. If the estimated fair value exceeds the carrying amount, then no impairment exists. If the carrying amount exceeds the estimated fair value we record an impairment of goodwill equal to the amount by which the carrying value exceeds the fair value of the reporting unit, not to exceed the recorded amount of goodwill.

The Rigid Industrial Packaging & Services reportable segment consists of five operating segments: Rigid Industrial Packaging & Services – North America; Rigid Industrial Packaging & Services – Latin America; Rigid Industrial Packaging & Services – Europe, Middle East and Africa; Rigid Industrial Packaging & Services – Asia Pacific; and Rigid Industrial Packaging & Services – Tri-Sure. Each of these operating segments also qualify as a component that has discrete financial information available that is reviewed by segment management on a regular basis. As such, these components also represent our reporting units for purposes of goodwill impairment testing.

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The Paper Packaging & Services reportable segment is also an operating segment. This operating segment consists of multiple components that have discrete financial information available that is reviewed by segment management on a regular basis. We have evaluated those components and concluded that they are economically similar and should be aggregated into single reporting unit. For the purpose of aggregating our components, we review the long-term performance of gross profit margin and operating profit margin. Additionally, we review qualitative factors such as common customers, similar products, similar manufacturing processes, sharing of resources, level of integration, and interdependency of processes across components. We place greater weight on the qualitative factors outlined in ASC 280 “Segment Reporting” and consider the guidance in ASC 350 in determining whether two or more components of an operating segment are economically similar and can be aggregated into a single reporting unit. However, our assessment of the aggregation includes both qualitative and quantitative factors and is based on the facts and circumstances specific to the components.

The estimated fair value of the reporting units utilized in the impairment test is based on a discounted cash flow analysis or income approach and market multiple approach. Under this method, the principal valuation focus is on the reporting unit’s cash-generating capabilities. The discount rates used for impairment testing are based on a market participant’s weighted average cost of capital. The use of alternative estimates, peer groups or changes in the industry, or adjusting the discount rate, earnings before interest, taxes, depreciation, depletion and amortization multiples or price earnings ratios used could affect the estimated fair value of the assets and potentially result in impairment. Any identified impairment would result in an adjustment to our results of operations.

In performing the test, we first evaluate qualitative factors, such as macroeconomic conditions and our overall financial performance to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. We then evaluate how significant each of the identified factors could be to the fair value or carrying amount of a reporting unit and weigh those factors in totality in forming a conclusion of whether or not it is more likely than not that the fair value of a reporting unit is less than its carrying amount (the Step 0 Test). If necessary, the next step in the goodwill impairment test involves comparing the fair value of each of the reporting units to the carrying value of those reporting units. If the carrying value of a reporting unit exceeds the fair value of the reporting unit, an impairment loss would be recognized (not to exceed the carrying amount of goodwill). We did not utilize any Step 0 tests in 2020.

For our Rigid Industrial Packaging & Services - North America; Rigid Industrial Packaging & Services - Europe, Middle East and Africa; Rigid Industrial Packaging & Services - Asia Pacific; Rigid Industrial Packaging & Services - Tri-Sure; and Paper Packaging & Services reporting unit, we proceeded directly to the quantitative impairment testing. The fair value of each reporting unit was substantially in excess of its respective carrying value, with a minimum cushion of 27% for the Paper Packaging & Services reporting unit, so no impairment was deemed to exist. Discount rates, revenue growth rates and other cash flow projections are the assumptions that are most sensitive and susceptible to change as they require significant management judgment. In addition, certain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in actual and expected consumption and demand, could result in changes to those assumptions and judgments. A revision of those assumptions could cause the fair value of the reporting unit to fall below its respective carrying value. As for all of our reporting units, if in future years, the reporting unit's actual results are not consistent with our estimates and assumptions used to calculate fair value, we may be required to recognize material impairments to goodwill.

The following table summarizes the carrying amount of goodwill by reporting unit for the year ended October 31, 2020 and 2019:

Goodwill Balance

Rigid Industrial Packaging & Services

Europe, Middle East and Africa 331.4 313.0

We test for impairment of indefinite-lived intangible assets during the fourth quarter of each year as of August 1, or more frequently if certain indicators are present or changes in circumstances suggest that impairment may exist.

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Recent Accounting Standards

See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Form 10-K for a detailed description of recently issued and newly adopted accounting standards.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are subject to interest rate risk related to our financial instruments that include borrowings under the 2019 Credit Agreement and proceeds from our Senior Notes, U.S. Receivables Facility and the European RFA (collectively, "Accounts Receivables Facilities"), and cross currency and interest rate swap agreements. We do not enter into financial instruments for trading or speculative purposes. The interest rate swap agreements have been entered into to manage our exposure to variability in interest rates.

We have six interest rate swap agreements with an aggregate notional amount of $600.0 million as of October 31, 2020. Under these agreements, we receive variable rate interest payments based upon one month U.S. dollar LIBOR, and in return we are obligated to pay interest at a weighted-average interest rate of 2.49%, plus an interest spread.

We have another interest rate swap agreement with an aggregate notional amount of $300.0 million as of October 31, 2020. Under this agreement, we receive interest monthly from the counterparties equal to LIBOR and pay interest at a fixed rate over the life of the contracts.

(Losses)/Gains reclassified to earnings under these interest rate swaps were recorded in the amount of $(16.5) million, $3.0 million and $1.8 million for the years ended October 31, 2020, 2019 and 2018, respectively.

We have a cross currency interest rate swap agreement that synthetically swaps $100.0 million of fixed rate debt to Euro denominated fixed rate debt at a rate of 2.35%. The gain or loss on this derivative instrument is included in the foreign currency translation component of other comprehensive income until the net investment is sold, diluted, or liquidated. Interest payments received for the cross currency swap are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense, net on the consolidated statements of income. A gain on the cross currency swap agreement was recorded in interest expense for the amount of $2.4 million, $2.4 million and $1.6 million for the years ended October 31, 2020, 2019 and 2018, respectively.

The tables below provide information about our derivative financial instruments and other financial instruments that are sensitive to changes in interest rates. For our 2019 Credit Agreement, Senior Notes and Accounts Receivables Facilities, the tables present scheduled amortizations of principal and the weighted average interest rate by contractual maturity dates as of October 31, 2020 and 2019.

The fair values of our 2019 Credit Agreement, Senior Notes and Accounts Receivables Facilities are based on rates available to us for debt of the same remaining maturity as of October 31, 2020 and 2019.

Financial Instruments

As of October 31, 2020 (Dollars in millions)

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Expected Maturity Date

2019 Credit Agreement:

Senior Notes due 2021:

Scheduled maturity $ 235 $ — — — — — $ 235 $ 242

Average interest rate 7.38 % — — — — — 7.38 %

Senior Notes due 2027:

Scheduled maturity — — — — — $ 500 $ 500 $ 524

Average interest rate — — — — — 6.50 % 6.50 %

Receivables Facilities:

Scheduled maturity $ 310 — — — — — $ 310 $ 310

Weighted average interest rate 2.06 % — — — — — 2.06 %

(1) Variable rate specified is based on LIBOR or an alternative base rate plus a calculated margin as of October 31, 2020. The rates presented are not intended to project our expectations for the future.

As of October 31, 2019 (Dollars in millions)

Expected Maturity Date

2019 Credit Agreement:

Senior Notes due 2021:

Scheduled maturity — $ 222 — — — — $ 222 $ 248

Average interest rate — 7.38 % — — — — 7.38 %

Senior Notes due 2027:

Scheduled maturity — — — — — $ 500 $ 500 $ 538

Average interest rate — — — — — 6.50 % 6.50 %

Receivables Facility:

Scheduled maturity $ 352 — — — — — $ 352 $ 352

Weighted average interest rate 2.00 % — — — — — 2.00 %

(1) Variable rate specified is based on LIBOR or an alternative base rate plus a calculated margin as of October 31, 2019. The rates presented are not intended to project our expectations for the future.

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Currency Risk

As a result of our international operations, our operating results are subject to fluctuations in currency exchange rates. The geographic presence of our operations mitigates this exposure to some degree. Additionally, our transaction exposure is somewhat limited because we produce and sell a majority of our products in local currency within most countries in which we operate.

As of October 31, 2020, and 2019 we had outstanding foreign currency forward contracts in the notional amount of $268.6 million and $275.0 million, respectively. The purpose of these contracts is to hedge our exposure to foreign currency transactions and short-term intercompany loan balances in our international businesses. The fair value of these contracts resulted in realized (losses) gains recorded in other expense, net of $(3.2) million, $4.6 million and $(9.2) million for the years ended October 31, 2020, 2019 and 2018, respectively.

A sensitivity analysis (with respect only to these instruments) to changes in the foreign currencies hedged indicates that if the U.S. dollar strengthened by 10 percent, the fair value of these instruments would increase by $3.1 million to a net asset of $2.9 million. Conversely, if the U.S. dollar weakened by 10 percent, the fair value of these instruments would decrease by $4.4 million to a net liability of $4.6 million.

Commodity Price Risk

We purchase commodities such as steel, resin, containerboard, pulpwood and energy. We do not currently engage in material hedging of commodities, although in the past we have sometimes engaged in hedges in natural gas. There were no commodity hedging contracts outstanding as of October 31, 2020 and 2019.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF INCOME

Year Ended October 31, (in millions, except per share amounts) 2020 2019 2018

Selling, general and administrative expenses 516.0 507.4 397.2

Acquisition and integration related costs 17.0 29.7 0.7

Non-cash asset impairment charges 18.5 7.8 8.3

Gain on disposal of properties, plants and equipment, net (19.2) (13.9) (5.6)

(Gain) loss on disposal of businesses, net 38.8 3.7 (0.8)

Debt extinguishment charges — 22.0 —

Non-cash pension settlement charges 0.3 — 1.3

Equity earnings of unconsolidated affiliates, net of tax (1.5) (2.9) (3.0)

Net income attributable to noncontrolling interests (15.5) (23.2) (20.1)

Net income attributable to Greif, Inc. $ 108.8 $ 171.0 $ 209.4

Basic earnings per share attributable to Greif, Inc. common shareholders:

Diluted earnings per share attributed to Greif, Inc. common shareholders:

See accompanying Notes to Consolidated Financial Statements.

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GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Other comprehensive income (loss), net of tax:

Foreign currency translation (9.8) (4.5) (45.5)

Derivative financial instruments (12.0) (26.1) 7.7

Other comprehensive income (loss), net of tax (6.7) (55.9) (21.5)

Comprehensive income attributable to noncontrolling interests 2.6 23.9 18.1

Comprehensive income attributable to Greif, Inc. $ 115.0 $ 114.4 $ 189.9

See accompanying Notes to Consolidated Financial Statements.

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GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

ASSETS

Current assets

Cash and cash equivalents $ 105.9 $ 77.3

Inventories:

Assets held for sale 57.0 4.1

Assets held by special purpose entities 50.9 —

Long-term assets

Other intangible assets, net of amortization 715.3 776.5

Assets held by special purpose entities — 50.9

Operating lease assets 307.5 —

Other long-term assets 99.2 90.9

Properties, plants and equipment

Timber properties, net of depletion 224.5 272.4

See accompanying Notes to Consolidated Financial Statements.

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GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

Accrued payroll and employee benefits 122.3 142.4

Restructuring reserves 21.6 11.3

Current portion of long-term debt 123.1 83.7

Short-term borrowings 28.4 9.2

Liabilities held by special purpose entities 43.3 —

Current portion of operating lease liabilities 52.3 —

Long-term liabilities

Operating lease liabilities 257.7 —

Post-retirement benefit obligations 11.6 12.2

Liabilities held by special purpose entities — 43.3

Contingent liabilities and environmental reserves 20.2 18.7

Mandatorily redeemable noncontrolling interests 8.4 8.4

Long-term income tax payable 27.8 27.8

Commitments and Contingencies (Note 11)

Redeemable Noncontrolling Interests (Note 18) 20.0 21.3

Equity

Common stock, without par value 170.2 162.6

Accumulated other comprehensive income (loss), net of tax:

Foreign currency translation (294.9) (298.0)

Derivative financial instruments (24.7) (12.7)

Minimum pension liabilities (107.9) (123.0)

Total Greif, Inc. shareholders’ equity 1,152.2 1,133.1

Noncontrolling interests 48.5 58.0

Total liabilities and shareholders’ equity $ 5,510.9 $ 5,426.7

See accompanying Notes to Consolidated Financial Statements.

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GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities:

Non-cash asset impairment charges 18.5 7.8 8.3

Non-cash pension settlement charges 0.3 — 1.3

Gain on disposals of properties, plants and equipment, net (19.2) (13.9) (5.6)

(Gain) loss on disposals of businesses, net 38.8 3.7 (0.8)

Unrealized foreign exchange (gain) loss (4.2) 3.0 (0.7)

Deferred income tax (benefit) expense 16.7 2.1 (44.8)

Transition tax (benefit) expense — (0.8) 52.8

Debt extinguishment charges — 14.0 —

Non-cash lease expense 57.4 — —

Increase (decrease) in cash from changes in certain assets and liabilities:

Trade accounts receivable (9.1) 55.1 (34.0)

Deferred purchase price on sold receivables — (6.9) 2.1

Restructuring reserves 10.2 6.7 (0.8)

Operating leases (56.8) — —

Pension and post-retirement benefit liabilities (13.3) (15.3) (66.8)

Cash flows from investing activities:

Acquisitions of companies, net of cash acquired — (1,857.9) —

Purchases of properties, plants and equipment (131.4) (156.8) (140.2)

Purchases of and investments in timber properties (5.4) (5.4) (8.9)

Purchases of equity method investments (3.6) — —

Proceeds from the sale of businesses 80.9 1.5 1.4

Proceeds on insurance recoveries 0.9 0.6 —

Net cash used in investing activities (25.2) (1,989.3) (135.2)

Cash flows from financing activities:

Proceeds (payments) on short-term borrowings, net 17.0 2.2 (11.0)

Proceeds from trade accounts receivable credit facility 76.8 181.4 2.8

Payments on trade accounts receivable credit facility (122.9) (89.2) (2.8)

Dividends paid to Greif, Inc. shareholders (104.3) (104.0) (100.0)

Dividends paid to noncontrolling interests (13.4) (9.2) (4.6)

Payments for debt extinguishment and issuance costs — (44.1) —

Purchases of redeemable noncontrolling interest — (11.9) —

Cash contribution from noncontrolling interest holder — 1.6 2.0

Net cash provided (used in) by financing activities (405.3) 1,583.5 (158.3)

Effects of exchange rates on cash 4.4 (0.6) (7.6)

Net increase (decrease) in cash and cash equivalents 28.6 (16.9) (48.1)

Cash and cash equivalents at beginning of year 77.3 94.2 142.3

Cash and cash equivalents at end of year $ 105.9 $ 77.3 $ 94.2

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Supplemental information:

Non-cash transactions:

Capital expenditures included in accounts payable $ 17.2 $ 18.6 $ 11.4

Schedule of interest and income taxes paid:

Cash payments for interest expense $ 119.9 $ 161.8 $ 58.3

See accompanying Notes to Consolidated Financial Statements.

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GREIF, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Shares Amount Shares Amount

Other comprehensive income (loss):

– Foreign currency translation (43.5) (43.5) (2.0) (45.5)

Net income allocated to redeemable noncontrolling interests (3.7) (3.7)

Dividends paid to noncontrolling interests (4.6) (4.6)

Restricted stock executives and directors 21 1.2 (21) — 1.2 1.2

Other comprehensive income (loss):

– Foreign currency translation (5.2) (5.2) 0.7 (4.5)

Net income allocated to redeemable noncontrolling interests (2.3) (2.3)

Dividends paid to noncontrolling interests (7.9) (7.9)

Acquisition of noncontrolling interest and other (0.6) (0.6) (2.1) (2.7)

Other comprehensive income (loss):

– Foreign currency translation 3.1 3.1 (12.9) (9.8)

Net income allocated to redeemable noncontrolling interests (0.1) (0.1)

Dividends paid to noncontrolling interests and other (12.0) (12.0)

Share based compensation — 1.5 — — 1.5 1.5

Restricted stock, executive 3 0.1 (3) — 0.1 0.1

See accompanying Notes to Consolidated Financial Statements.

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GREIF, INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Business

Greif, Inc. and its subsidiaries (collectively, “Greif,” “our,” or the “Company”), principally manufacture 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 provides services, such as container life cycle management, filling, logistics, warehousing and other packaging services. The Company produces containerboard, corrugated sheets, corrugated containers and other corrugated and specialty products to customers in North America. The Company also produces coated and uncoated recycled paperboard, along with tubes and cores which are used in a variety of applications that include industrial products (construction products, protective packaging, and adhesives). In addition, we also purchase and sell recycled fiber. The Company is a leading global producer of flexible intermediate bulk containers. In addition, the Company owns timber properties in the southeastern United States which are actively harvested and regenerated. The Company has operations in over 40 countries.

Due to the variety of its products, the Company has many customers buying different products and due to the scope of the Company’s sales, no one customer is considered principal in the total operations of the Company.

The Company supplies a cross section of industries, such as chemicals, paints and pigments, food and beverage, petroleum, industrial coatings, agricultural, pharmaceutical, mineral, packaging, automotive and building products, and makes spot deliveries on a day-to-day basis as its products are required by its customers. The Company does not operate on a backlog to any significant extent and maintains only limited levels of finished goods. Many customers place their orders weekly for delivery during the same week.

The Company’s raw materials are principally steel, resin, containerboard, old corrugated containers, pulpwood, recycled coated and uncoated paperboard and used industrial packaging for reconditioning.

There were approximately 16,000 full time employees of the Company as of October 31, 2020.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Greif, Inc., all wholly-owned and majority-owned subsidiaries, joint ventures controlled by the Company or for which the Company is the primary beneficiary, including the joint venture relating to the Flexible Products & Services segment, and equity earnings of unconsolidated affiliates. All intercompany transactions and balances have been eliminated in consolidation. Investments in unconsolidated affiliates are accounted for using the equity method based on the Company’s ownership interest in the unconsolidated affiliate.

The Company’s consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Certain prior year amounts have been reclassified to conform to the current year presentation.

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

Argentina Currency

The Company’s results with respect to the business of its Argentinian subsidiary have been reported under highly inflationary accounting in accordance with Accounting Standards Codification ("ASC") 830, "Foreign Currency Matters," beginning on August 1, 2018. As of October 31, 2020, the Company's Argentina subsidiary represented approximately 1% of the Company’s consolidated net revenues and less than 1% of its consolidated total assets.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The most significant estimates are related to the expected useful lives assigned to properties, plants and equipment, goodwill and other intangible assets, estimates of fair value, environmental liabilities, pension and post-retirement benefits, including plan assets, income taxes, net assets held for sale and contingencies. Actual amounts could differ from those estimates.

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Cash and Cash Equivalents

The Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. The carrying value of cash equivalents approximates fair value.

Allowance for Doubtful Accounts

Trade receivables represent amounts owed to the Company through its operating activities and are presented net of allowance for doubtful accounts. The allowance for doubtful accounts totaled $9.4 million and $6.8 million as of October 31, 2020 and 2019, respectively. The Company evaluates the collectability of its accounts receivable based on a combination of factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations to the Company, the Company records a specific allowance for bad debts against amounts due to reduce the net recognized receivable to the amount the Company reasonably believes will be collected. In addition, the Company recognizes allowances for bad debts based on the length of time receivables are past due with allowance percentages, based on its historical experiences, applied on a graduated scale relative to the age of the receivable amounts. If circumstances such as higher than expected bad debt experience or an unexpected material adverse change in a major customer’s ability to meet its financial obligations to the Company were to occur, the recoverability of amounts due to the Company could change by a material amount. Amounts deemed uncollectible are written-off against an established allowance for doubtful accounts.

Concentration of Credit Risk and Major Customers

The Company maintains cash depository accounts with banks throughout the world and invests in high quality short-term liquid instruments. Such investments are made only in instruments issued by high quality institutions. These investments mature within three months and the Company has not incurred any related losses for the years ended October 31, 2020, 2019, and 2018.

Trade receivables can be potentially exposed to a concentration of credit risk with customers or in particular industries. Such credit risk is considered by management to be limited due to the Company’s many customers, none of which are considered principal in the total operations of the Company, and its geographic scope of operations in a variety of industries throughout the world. The Company does not have an individual customer that exceeds 10 percent of total revenue. In addition, the Company performs ongoing credit evaluations of its customers’ financial conditions and maintains reserves for credit losses. Such losses historically have been within management’s expectations.

Inventory

The Company primarily uses the FIFO method of inventory valuation. Reserves for slow moving and obsolete inventories are provided based on historical experience, inventory aging and product demand. The Company continuously evaluates the adequacy of these reserves and makes adjustments to these reserves as required.

The Paper Packaging & Services segment trades certain inventories with third parties. These inventory trades are accounted for as non-monetary exchanges and any unfavorable imbalances, resulting from these trades, are recorded as a liability.

Net Assets Held for Sale

Net assets held for sale represent land, buildings and other assets and liabilities for locations that have met the criteria of “held for sale” accounting, as specified by ASC 360, “Property, Plant, and Equipment,” at the lower of carrying value or fair value less cost to sell. Fair value is based on the estimated proceeds from the sale of the assets utilizing recent purchase offers, market comparables and/or reliable third party data. The Company's estimate as to fair value is regularly reviewed and assets are subject to changes, such as in the commercial real estate markets and the Company's continuing evaluation as to the asset’s acceptable sale price. As of October 31, 2020, there was one asset group within the Rigid Industrial Packaging & Services, four asset groups within Paper Packaging & Services segment, one asset group within Land Management segment and zero asset groups within the Corporate and Other segment classified as assets and liabilities held for sale. The effect of suspending depreciation and depletion on the facilities and timberlands, respectively, held for sale is immaterial to the results of operations. The net assets held for sale are being marketed for sale and it is the Company’s intention to complete the sales of these assets within the upcoming year, assuming offers deemed sufficient by management are received as result of marketing efforts. See Note 7 herein for additional information regarding assets and liabilities held for sale.

Goodwill and Indefinite-Lived Intangibles

Goodwill is the excess of the purchase price of an acquired entity over the amounts assigned to tangible and intangible assets and liabilities assumed in the business combination. The Company accounts for purchased goodwill and indefinite-lived

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intangible assets in accordance with ASC 350, “Intangibles – Goodwill and Other.” Under ASC 350, purchased goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment at least annually. The Company tests for impairment of goodwill and indefinite-lived intangible assets as of August 1, or more frequently if certain indicators are present or changes in circumstances suggest that impairment may exist.

In accordance with ASC 350, the Company has the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative test for goodwill impairment. If the Company believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. The quantitative test for goodwill impairment is conducted at the reporting unit level by comparing the carrying value of each reporting unit to the estimated fair value of the unit. If the carrying value of a reporting unit exceeds its estimated fair value, then the goodwill of the reporting unit is impaired. Goodwill impairment is recognized as the amount that the carrying value exceeds the fair value; not to exceed the balance of goodwill attributable to the reporting unit. When a portion of a reporting unit is disposed of, goodwill is allocated to the gain or loss on that disposition based on the relative fair values of the portion of the reporting unit subject to disposition and the portion of the reporting unit that will be retained.

The Company’s determinations of estimated fair value of the reporting units are based on both the market approach and a discounted cash flow analysis utilizing the income approach. Under the market approach, the principal inputs are market prices and valuation multiples for public companies engaged in businesses that are considered comparable to the reporting unit. Under the income approach, the principal inputs are the reporting unit’s cash-generating capabilities and the discount rate. The discount rates used in the income approach are based on a market participant’s weighted average cost of capital. The use of alternative estimates, including different peer groups or changes in the industry, or adjusting the discount rate, earnings before interest, taxes, depreciation, depletion and amortization forecasts or cash flow assumptions used could affect the estimated fair value of the reporting units and potentially result in goodwill impairment. Any identified impairment would result in an expense to the Company’s results of operations. See Note 3 for additional information regarding goodwill and other intangible assets.

Other Intangibles

The Company accounts for intangible assets in accordance with ASC 350. Definite lived intangible assets are amortized over their useful lives on a straight-line basis. The useful lives for definite lived intangible assets vary depending on the type of asset and the terms of contracts or the valuation performed. Amortization expense on intangible assets is recorded on the straight-line method over their useful lives as follows:

Years

Trade names 1-15

Customer relationships 5-25

Non-compete agreements 1-10

Other intangibles 1-20

Acquisitions

From time to time, the Company acquires businesses and/or assets that augment and complement its operations. In accordance with ASC 805, “Business Combinations,” these acquisitions are accounted for under the purchase method of accounting. Under this method, the Company allocates the fair value of purchase consideration transferred to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the date of the acquisition. The excess purchase consideration over the aggregate fair value of tangible and intangible assets, net of liabilities assumed, is recorded as goodwill. The Company's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred.

The Company classifies costs incurred in connection with acquisitions and their integration as acquisition and integration related costs. These costs are expensed as incurred and consist primarily of transaction costs, legal and consulting fees, integration costs and changes in the fair value of contingent payments (earn-outs) and are recorded within Acquisition and Integration related Costs line item presented on the consolidated income statement. Acquisition transaction costs are incurred during the initial evaluation of a potential targeted acquisition and primarily relate to costs to analyze, negotiate and

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consummate the transaction as well as financial and legal due diligence activities. Post-acquisition integration activities are costs incurred to combine the operations of an acquired enterprise into the Company’s operations.

The consolidated financial statements include the results of operations from these business combinations from the date of acquisition.

Internal Use Software

Internal use software is accounted for under ASC 985, “Software.” Internal use software is software that is acquired, internally developed or modified solely to meet the Company’s needs and for which, during the software’s development or modification, a plan does not exist to market the software externally. Costs incurred to develop the software during the application development stage and for upgrades and enhancements that provide additional functionality are capitalized and then amortized over a three to ten year period. Internal use software is capitalized as a component of machinery and equipment on the Consolidated Balance Sheets.

Long-Lived Assets

Properties, plants and equipment are stated at cost. Depreciation on properties, plants and equipment is provided on the straight-line method over the estimated useful lives of the assets as follows:

Years

Machinery and equipment 5-15

Depreciation expense was $169.1 million, $149.0 million and $107.5 million in 2020, 2019 and 2018, respectively. Expenditures for repairs and maintenance are charged to expense as incurred. When properties are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the asset and related allowance accounts. Gains or losses are credited or charged to income as incurred.

The Company capitalizes interest on long-term fixed asset projects using a rate that approximates the weighted average cost of borrowing. For the years ended October 31, 2020, 2019, and 2018, the Company capitalized interest costs of $4.5 million, $5.6 million, and $4.5 million, respectively.

The Company tests for impairment of properties, plants and equipment if certain indicators are present to suggest that impairment may exist. Long-lived assets are grouped together at the lowest level, generally at the plant level, for which identifiable cash flows are largely independent of cash flows of other groups of long-lived assets. As events warrant, the Company evaluates the recoverability of long-lived assets, other than goodwill and indefinite-lived intangible assets, by assessing whether the carrying value can be recovered over their remaining useful lives through the expected future undiscounted operating cash flows of the underlying business. Impairment indicators include, but are not limited to, a significant decrease in the market price of a long-lived asset; a significant adverse change in the manner in which the asset is being used or in its physical condition; a significant adverse change in legal factors or the business climate that could affect the value of a long-lived asset; an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset; current period operating or cash flow losses combined with a history of operating or cash flow losses associated with the use of the asset; or a current expectation that it is more likely than not that a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. Future decisions to change our manufacturing processes, exit certain businesses, reduce excess capacity, temporarily idle facilities and close facilities could also result in material impairment losses. Any impairment loss that may be required is determined by comparing the carrying value of the assets to their estimated fair value.

As of October 31, 2020, the Company's timber properties consisted of approximately 244,000 acres, all of which were located in the southeastern United States. The Company’s land costs are maintained by tract. Upon acquisition of a new timberland tract, the Company records separate amounts for land, merchantable timber and pre-merchantable timber allocated as a percentage of the values being purchased. The Company begins recording pre-merchantable timber costs at the time the site is prepared for planting. Costs capitalized during the establishment period include site preparation by aerial spray, costs of seedlings, including refrigeration rental and trucking, planting costs, herbaceous weed control, woody release, and labor and machinery use. The Company does not capitalize interest costs in the process. Property taxes are expensed as incurred. New road construction costs are capitalized as land improvements and depreciated over 20 years. Road repairs and maintenance costs are expensed as incurred. Costs after establishment of the seedlings, including management costs, pre-commercial thinning costs and fertilization costs, are expensed as incurred. Once the timber becomes merchantable, the cost is transferred from the pre-merchantable timber category to the merchantable timber category in the depletion block.

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Merchantable timber costs are maintained by five product classes: pine sawtimber, pine chip-n-saw, pine pulpwood, hardwood sawtimber and hardwood pulpwood, within a depletion block, with each depletion block based upon a geographic district or subdistrict. Currently, the Company has eight depletion blocks. These same depletion blocks are used for pre-merchantable timber costs. Each year, the Company estimates the volume of the Company’s merchantable timber for the five product classes by each depletion block and depletion costs recognized upon sales are calculated as volumes sold times the unit costs in the respective depletion block. Depletion expense was $4.0 million, $3.7 million and $4.0 million in 2020, 2019 and 2018, respectively.

Contingencies

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 currently be determined because of the considerable uncertainties that exist.

All lawsuits, claims and proceedings are considered by the Company in establishing reserves for contingencies in accordance with ASC 450, “Contingencies.” In accordance with the provisions of ASC 450, 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 effect on the Company’s financial position or results of operations.

Environmental Cleanup Costs

The Company accounts for environmental cleanup costs in accordance with ASC 410, “Asset Retirement and Environmental Obligations.” The Company expenses environmental expenditures related to existing conditions resulting from past or current operations and from which no current or future benefit is discernible. Expenditures that extend the life of the related property or mitigate or prevent future environmental contamination are capitalized. The Company determines its liability on a site-by-site basis and records a liability at the time when it is probable and can be reasonably estimated. The Company’s estimated liability is 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 the relevant costs.

Self-insurance

The Company is self-insured for certain of the claims made under its employee medical and dental insurance programs. The Company had recorded liabilities totaling $7.2 million and $7.6 million for estimated costs related to outstanding claims as of October 31, 2020 and 2019, respectively. These costs include an estimate for expected settlements on pending claims, administrative fees and an estimate for claims incurred but not reported. These estimates are based on management’s assessment of outstanding claims, historical analyses and current payment trends. The Company recorded an estimate for the claims incurred, but not reported using an estimated lag period based upon historical information.

The Company has certain deductibles applied to various insurance policies including general liability, product, vehicle and workers’ compensation. The Company maintains liabilities totaling $24.7 million and $27.5 million for anticipated costs related to general liability, product, vehicle and workers’ compensation claims as of October 31, 2020 and 2019, respectively. These costs include an estimate for expected settlements on pending claims, defense costs and an estimate for claims incurred but not reported. These estimates are based on the Company’s assessment of its deductibles, outstanding claims, historical analysis, actuarial information and current payment trends.

Income Taxes

Income taxes are accounted for under ASC 740, “Income Taxes.” In accordance with ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as measured by enacted tax rates that are expected to be in effect in the periods when the deferred tax assets and liabilities are expected to be settled or realized. Valuation allowances are established when management believes it is more likely than not that some portion of the deferred tax assets will not be realized.

The Company’s effective tax rate is impacted by the amount of income generated in each taxing jurisdiction, statutory tax rates and tax planning opportunities available to the Company in the various jurisdictions in which the Company operates. Significant judgment is required in determining the Company’s effective tax rate and in evaluating its tax positions.

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Tax benefits from uncertain tax positions are recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. The amount recognized is measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement. The Company’s effective tax rate includes the impact of reserve provisions and changes to reserves on uncertain tax positions that are not more likely than not to be sustained upon examination as well as related interest and penalties.

A number of years may elapse before a particular matter, for which the Company has established a reserve, is audited and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes that its reserves reflect the probable outcome of known tax contingencies. Unfavorable settlement of any particular issue would require use of the Company’s cash. Favorable resolution would be recognized as a reduction to the Company’s effective tax rate in the period of resolution.

Equity earnings of unconsolidated affiliates, net of tax

Equity earnings of unconsolidated affiliates, net of tax represent the Company’s share of earnings of affiliates in which the Company does not exercise control, but has significant influence. Investments in such affiliates are accounted for using the equity method of accounting. The Company has an equity interest in three such affiliates as of October 31, 2020. 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.

Other Comprehensive Income

The Company's other comprehensive income is significantly impacted by foreign currency translation, effective cash flow hedges and defined benefit pension and post-retirement benefit adjustments.

The impact of foreign currency translation is affected by the translation of assets, liabilities and operations of the Company's foreign subsidiaries which are denominated in functional currencies other than the U.S. dollar and the recognition of accumulated foreign currency translation upon the disposal of foreign entities. The primary assets and liabilities affecting the adjustments are: cash and cash equivalents; accounts receivable; inventory; properties, plants and equipment; accounts payable; pension and other post-retirement benefit obligations; and certain intercompany loans payable and receivable. The primary currencies in which these assets and liabilities are denominated are the Euro, Brazilian real, and Chinese yuan.

The impact of effective cash flow hedges is reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Currently, interest rate swaps are held by the Company to effectively convert a portion of floating rate debt to a fixed rate basis, thus reducing the impact of interest rate increases on future interest expense. The Company uses the regression method for assessing the effectiveness of the swaps.

The impact of defined benefit pension and post-retirement benefit adjustments is primarily affected by unrecognized actuarial gains and losses related to the Company's defined benefit and other post-retirement benefit plans, as well as the subsequent amortization of gains and losses from accumulated other comprehensive income in periods following the initial recording of such items. These actuarial gains and losses are determined using various assumptions, the most significant of which are (i) the weighted average rate used for discounting the liability, (ii) the weighted average expected long-term rate of return on pension plan assets, (iii) the method used to determine market-related value of pension plan assets, (iv) the weighted average rate of future salary increases and (v) the anticipated mortality rate tables.

Restructuring Charges

The Company accounts for all exit or disposal activities in accordance with ASC 420, “Exit or Disposal Cost Obligations.” Under ASC 420, a liability is measured at its fair value and recognized as incurred.

Employee-related costs primarily consist of one-time termination benefits provided to employees who have been involuntarily terminated. A one-time benefit arrangement is an arrangement established by a plan of termination that applies for a specified termination event or for a specified future period. A one-time benefit arrangement exists at the date the plan of termination meets all of the following criteria and has been communicated to employees:

(1)Management, having the authority to approve the action, commits to a plan of termination.

(2)The plan identifies the number of employees to be terminated, their job classifications or functions and their locations, and the expected completion date.

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(3)The plan establishes the terms of the benefit arrangement, including the benefits that employees will receive upon termination (including but not limited to cash payments), in sufficient detail to enable employees to determine the type and amount of benefits they will receive if they are involuntarily terminated.

(4)Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Facility exit and other costs consist of equipment relocation costs and project consulting fees. A liability for other costs associated with an exit or disposal activity is recognized and measured at its fair value in the period in which the liability is incurred (generally, when goods or services associated with the activity are received). The liability is no recognized before it is incurred, even if the costs are incremental to other operating costs and will be incurred as a direct result of a plan.

Pension and Post-retirement Benefits

Under ASC 715, “Compensation – Retirement Benefits,” the Company recognizes the funded status of its defined benefit pension and other post-retirement plans on the consolidated balance sheet and records as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that have not been recognized as components of the net periodic benefit cost.

Stock-Based Compensation Expense

The Company recognizes stock-based compensation expense in accordance with ASC 718, “Compensation – Stock Compensation.” ASC 718 requires the measurement and recognition of compensation expense, based on estimated fair values, for all share-based awards made to employees and directors, including stock options, restricted stock, restricted stock units and participation in the Company’s employee stock purchase plan.