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On Thursday, Greif, Inc. Class A (NYSE:GEF) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.
George Staphos – Bank of America Merrill Lynch: Congratulations on your free cash flow progress. The question I had was around volume and volume outlook. David I think you mentioned that the polywovens business the secular growth rate was 4% to 5% you are seeing 6% decline year-to-date. Should we assume that was the growth rate, secular growth rate was what you expected in the third quarter and for the back half of the year. Similarly for the other businesses Rigid in particular you mentioned that volumes were below your expectations, what were you actually expecting in the quarter and the back half of the year, that was initially in your guidance and then lastly can you update us on what kind of volume you are seeing early thus far in the fourth quarter? Thank you.
Robert M. McNutt – SVP and CFO: The growth rate we had pegged for the flexible business was in fact that 4% to 5% for the second half of this year. For the rest of the business I think you asked the question I’m assuming that means the rest of the Rigid Industrial Packaging business will (act in three) and as far as third part of your question remind me real quick.
George Staphos – Bank of America Merrill Lynch: What are you seeing thus far early in the fourth quarter?
David B. Fischer – President and CEO: This maybe a little bit of a lengthy answer, but just to give you the usual flavor of volumes around the world let me start with paper. Our paper business in general remains very strong. Our order book remains good and similar to the past six months for the mills. For our CorrChoice our sheet-feeding operations, we’re actually running just near or just shy of capacity so the business there is very strong. We’re up about 13% in the CorrChoice business over last year and we expect that growth to stay stagnant at a high level or stay at a level at a high level for the remainder of this year based upon what we’re seeing. When you take a look at the rigid business I would tell you that this is where the demand has become more choppy, more volatile like it was about a year ago. Up until July when we had a drop-off in volume we had commented that volumes have been stabilizing slightly or modestly stronger for EMEA and Asia had remained fairly solid, but since July we’ve seen the turn down in Asia and a resumption of choppy order patterns across North America. Latin America is just coming out of their seasonal low period. What’s been a bit surprising for us is that the August volumes for the Rigid business in North America have bounced back to pre-July levels, but some of our — in terms of our other businesses we’re seeing — we use this kind of as a triangulation, this choppy period resuming, reconditioning our empty units both in North America and Europe when they remain scarce and hard to come by and a little bit more expensive, our closure sales are mixed I would say across the globe with the softening order book for the coming month. New drum sales vary by region, and I can give you some details about on that if you’d like, and we have our big customers expressing a little more uncertainty around the globe and in North America tied to the geopolitical outcome of the election and what may happen with certain economic policies. Lastly, our filling and warehousing business has also seemed to have softened in July and remain soft for August. Just to go around the world real quick and not take everybody’s time up, but in Rigid’s North America — let me just give you a series of indicators on volume versus Q3 2011 and then I’ll run down the same geographic areas versus Q2 of 2012, but versus Q3 2011 we see North America up slightly, we see EMEA flat, essentially flat, APAC versus Q3 2011, up about high single-digits, Latin America down mid-teens, so it remains down versus 2011. Then I commented earlier on poly woven and the mills versus last quarter, looking at the more near-term trend of what is happening around the world. North America Q3 versus Q2 of this year up slightly, Europe up high-single digits, APAC, Asia-Pacific has fallen off low-single digits and Latin America up slightly. So, hopefully that gives you some flavor about this choppy environment we’re facing and the uncertainty echoing from our customer base.
CEO’s View on Restructuring Opportunities
Phil Gresh – JPMorgan: If I could just throw two together here. You talked a lot about potential restructuring activities, I was wondering if you could in anyway give us some sense of the scope or scale of this opportunity you see ahead and would you say that’s mostly in Europe or is it on a more global basis. Then for Rob, obviously the very strong free cash flow continues here in the third quarter, hoping you could give us a sense of how you see the longer term free cash flow generation potential of the Company. Obviously there has been some working capital benefits this year, but how should we think about the longer term opportunity?
David B. Fischer – President and CEO: Without being too quantitative on the restructuring, I’ll give you my perspective on it. The Company has grown rapidly over the last 10 years and has grown up seven or eight individual business units that operate across the globe. We operate in 58 countries and we have about 280 manufacturing sites. We’re ought to be able to take a clean sheet look at some of those particularly in the stressed economies and look at ways of consolidating some of the manufacturing footprint, warehousing footprint, capabilities footprint across the globe and look for ways to leverage our management structure across businesses a little bit more efficiently, and I’ll let Rob, comment about the free cash flow.
Robert M. McNutt – SVP and CFO: On the free cash flow if you look at the components of where it comes from clearly the EBITDA component of it has been a big portion of it as we continue to grow the business over time and as we take advantage of some of the strategies for example grow Flexibles take advantage of the hub and the cost structure improvement there. We should see increasing EBITDA over time when we started the year we said that we were going to get about $25 million was our expectation ahead of working capital for this year. Year-to-date we’re about $44 million. Now part of that relates to just the business not grown to the level that we had anticipated this year. So I am working for the lower base, we’ve also taken about between three and four days out of our working capital in terms of related to days of sales and so that’s what I really look at is what are the terms to the individual components of working capital and those we can permanently embed, but again you’ll get a lot of traction up front with that than it will take more time and you get some diminishing returns. So the objective is to grow working capital at a slower pace than what it’s grown in the past as the company’s grown. Big components of that as you look at our inventory management and inventory turns the guys who run our GBS shop have done a great job working hand-in-hand with the business, rolling out some new tools to help them get a better handle on their inventories and tie the sales through the inventory through the production and so that’s increased turns. We’ve got that in place in parts of Latin America virtually all of North America. We’re now rolling it out in EMEA and in Asia Pacific and as well into our Flexibles business I was speaking to Rigid there. So, I think we’ll see some more traction from that over the coming quarters on the inventory side. On the payable side we’ve had some improvement in North America as we’ve reset the dial terms on many of our payables here in North America now rolling that out to other places in the world. On the receivables side that’s tougher especially in a tough market like this to reset receivable. So as you go through the components there I think you’ve got some more opportunity. The other pieces would put the halt on acquisitions this year thus far. As we integrate the acquisitions that we’ve made anticipate that, that will continue to grow the business and so as those occur that will obviously have an impact on cash flow going forward, but I think that goes through the major components.
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