NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Business

Greif Bros. Corporation and its subsidiaries (the "Company") principally manufacture industrial shipping containers and containerboard and corrugated products which it sells to customers in many industries primarily in the United States, Canada and Mexico. The Company has over 80 operating locations in the United States, Canada and Mexico. In addition, the Company owns timber properties which are harvested and regenerated in the United States and Canada.

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

Because the Company supplies a cross section of industries, such as chemicals, food products, petroleum products, pharmaceuticals and metal products, and must make 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 week.

The Company's raw materials are principally pulpwood, waste paper for recycling, paper, steel and resins.

The approximate number of persons employed during the year was 5,100.

Basis of Consolidation

The Consolidated Financial Statements include the accounts of Greif Bros. Corporation and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Item 8. Financial Statements and Supplementary Data (continued)

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant estimates are related to the allowance for doubtful accounts, expected useful lives assigned to properties, plants and equipment and goodwill, restructuring reserves, postretirement benefits, income taxes and contingencies. Actual amounts could differ from those estimated.

Revenue Recognition

Revenue is recognized when goods are shipped.

Income Taxes

Income taxes are accounted for under Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." In accordance with this statement, 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 which the deferred tax liabilities and assets are expected to be settled or realized.

Cash and Cash Equivalents

The Company considers highly liquid investments with an original maturity of three months or less to be cash and cash equivalents. Included in these amounts are repurchase agreements of $1,391,000 in 1999 ($23,300,000 in 1998).

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of trade accounts receivable. Such credit risk is considered by management to be limited due to the Company's many customers, none of whom are considered principal in the total operations of the Company, doing business in a variety of industries throughout the United States, Canada and Mexico.

Canadian Government Securities

The Canadian government securities are classified as available-for- sale and, as such, are reported at their fair value which approximates amortized cost.

Inventories

     Inventories are stated at the lower of cost (principally on last-in,
first-out basis) or market.  The inventories are comprised as follows at
October 31 (Dollars in thousands):

                                          1999              1998
Finished goods                            $20,504           $ 20,557

Raw materials and work-in-process          68,072             87,694

                                           88,576            108,251

Reduction to state inventories on
 last-in, first-out basis                 (37,870)           (43,400)

                                          $50,706           $ 64,851

                                           Years
Buildings                                  30-45
Machinery and equipment                     3-19

Depreciation expense was $35,237,000 in 1999, $35,585,000 in 1998 and $30,660,000 in 1997. Expenditures for repairs and maintenance are charged to expense as incurred.

Depletion on timber properties is computed on the basis of cost and the estimated recoverable timber acquired.

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.

Item 8. Financial Statements and Supplementary Data (continued)

Net Assets Held for Sale

Net assets held for sale represent land, buildings and land improvements less accumulated depreciation for locations that have been closed. As of October 31, 1999 and October 31, 1998, there were nine and three locations held for sale, respectively, the majority of which were the result of the 1998 restructuring plan. The net sales and loss before income tax benefit of these locations were $22,132,000 and $1,762,000, respectively, during 1999. The net sales and income before income taxes of these locations were $15,433,000 and $561,000, respectively, during 1998. The effect of suspending depreciation on the facilities held for sale is immaterial to the results of operations. The net assets held for sale have been listed for sale, and it is the Company's intention to complete the sales within the upcoming year.

Internal Use Software

In 1998, the Company adopted Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." Internal use software is software that is acquired, internally developed or modified solely to meet the entity'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, upgrades and enhancements that provide additional functionality are capitalized. Adoption of SOP 98-1 did not have a significant impact on the Company's financial position or results of operations.

Goodwill

Goodwill is amortized on a straight-line basis over fifteen or twenty- five year periods. The weighted average period of goodwill amortization is twenty-three years. Amortization expense was $6,482,000 in 1999, $3,547,000 in 1998 and $1,032,000 in 1997. Accumulated amortization was $11,081,000 at October 31, 1999 ($4,599,000 at October 31, 1998).

The Company's policy is to periodically review its goodwill and other long-lived assets based upon the evaluation of such factors as the occurrence of a significant adverse event or change in the environment in which the business operates or if the expected future net cash flows (undiscounted and without interest) would become less than the carrying amount of the asset. An impairment loss would be recorded in the period such determination is made based on the fair value of the related businesses.

Item 8. Financial Statements and Supplementary Data (continued)

Financial Instruments

The carrying amounts of cash and cash equivalents, Canadian government securities and long-term obligations approximate their fair values. The carrying amounts of interest rate swap agreements are $2,000 at October 31, 1999 and zero at October 31, 1998. The fair values of interest rate swap agreements are $2,738,000 at October 31, 1999 and $(7,020,000) at October 31, 1998.

The fair values of the long-term obligations are estimated based on current rates available to the Company for debt of the same remaining maturities. The fair values of interest rate swap agreements have been determined by the counterparties.

The Company uses interest rate swaps for the purpose of hedging its exposure to fluctuations in interest rates. The swaps meet the requirements of designation and correlation for use of the accrual method of accounting. Differentials in the swapped amounts are recorded as adjustments of the underlying periodic cash flows that are being hedged.

Foreign Currency Translation

In accordance with SFAS No. 52, "Foreign Currency Translation," the assets and liabilities denominated in foreign currency are translated into U.S. dollars at the current rate of exchange existing at year-end and revenues and expenses are translated at the average monthly exchange rates.

The cumulative translation adjustments, which represent the effects of translating assets and liabilities of the Company's foreign operations, are presented in the Consolidated Statements of Changes in Shareholders' Equity in "Accumulated Other Comprehensive Income." The transaction gains and losses included in income are immaterial.

Earnings Per Share

The Company has two classes of common stock and, as such, applies the "two-class method" of computing earnings per share as prescribed in SFAS No. 128, "Earnings Per Share." In accordance with the statement, earnings are allocated first to Class A and Class B Common Stock to the extent that dividends are actually paid and the remainder allocated assuming all of the earnings for the period have been distributed in the form of dividends.

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

                                    For the years ended October 31,

                                 1999             1998             1997

Class A Common Stock:
Basic earnings per share         10,882,081       10,905,692       10,878,233
Assumed conversion of stock
 options                             19,229           69,014           16,670
Diluted earnings per share       10,901,310       10,974,706       10,894,903

Class B Common Stock:
Basic and diluted earnings per
 share                           11,989,605       12,001,793       12,001,793

There are 496,789 options that are antidilutive for 1999 (12,000 for 1998 and 298,600 for 1997).

Environmental Cleanup Costs

The Company expenses environmental expenditures related to existing conditions resulting from past or current operations and from which no current or future benefit is discernable. Expenditures which 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.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 1999 presentation.

Recent Accounting Standards

The Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," in June 1998 and SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," in June 1999, which are effective for all quarters of 2001 for the Company. The statements require that all derivatives be recorded in the balance sheet as either assets or liabilities and be measured at fair value. The accounting for changes in fair value of a derivative depends on the intended use of the derivative and the resulting designation. The Company has not determined what impact these statements will have on the

Item 8. Financial Statements and Supplementary Data (continued)

Consolidated Financial Statements.

NOTE 2 - ACQUISITIONS AND DISPOSITIONS

CorrChoice Joint Venture

On November 1, 1998, the Company entered into a Joint Venture Agreement with RDJ Holdings Inc. ("RDJ") and a minority shareholder of a subsidiary of Ohio Packaging Corporation (the "Minority Shareholder") to form CorrChoice, Inc. ("CorrChoice"). Pursuant to the terms of the Joint Venture Agreement, the Company contributed all of its stock of Michigan Packaging Company ("Michigan Packaging") and Ohio Packaging Corporation ("Ohio Packaging") in exchange for a 63.24% ownership interest in CorrChoice. RDJ and the Minority Shareholder contributed all of their stock of Ohio Packaging and its subsidiaries in exchange for a 36.76% ownership interest in CorrChoice. The contribution of the Michigan Packaging stock and the Ohio Packaging stock was recorded by the Company at book value with no gain or loss recognized in accordance with Emerging Issues Task Force ("EITF') No. 86-29, "Nonmonetary Transactions: Magnitude of Boot and the Exceptions to the Use of Fair Value."

In connection with the closing of the CorrChoice joint venture, the Company and RDJ entered into a voting agreement which enables the Company and RDJ to be equally represented on CorrChoice's Board of Directors. As such, the Company does not control CorrChoice. Therefore, in accordance with generally accepted accounting principles, the Company has recorded its investment in CorrChoice using the equity method of accounting.

Prior to the formation of the CorrChoice joint venture, the Company accounted for its investment in Ohio Packaging's non-voting stock under the cost method of accounting because the Company did not have significant influence over the operations of Ohio Packaging. Because the Company's investment in the common stock of Ohio Packaging that previously was accounted for by the cost method now qualifies for use of the equity method (through the Company's ownership interest in CorrChoice), the Company's investment in Ohio Packaging, results of operations and retained earnings were retroactively restated in accordance with Accounting Principles Board Opinion ("APBO") No. 18, "The Equity Method of Accounting for Investments in Common Stock," to account for the Company's ownership interest in Ohio Packaging under the equity method. The previously reported amounts, Ohio Packaging adjustments and the restated amounts follow (Dollars in thousands, except per share amounts):

Item 8.    Financial Statements and Supplementary Data  (continued)

                                The Company
                                (As Previously  Ohio Packaging   The Company
                                Reported)       Adjustments      (As Restated)
As of and for the year
 ended October 31, 1998:
Investment in affiliates        $     --        $ 49,059         $ 49,059
Other long-term assets          $ 27,395        $     (2)        $ 27,393
Deferred tax liability          $ 36,412        $  5,887         $ 42,299
Retained earnings               $456,898        $ 43,170         $500,068
Net income                      $ 33,104        $  4,337         $ 37,441
Basic earnings per share:
 Class A Common Stock           $   1.15        $   0.15         $   1.30
 Class B Common Stock           $   1.71        $   0.23         $   1.94
Diluted earnings per share:
 Class A Common Stock           $   1.15        $   0.14         $   1.29
 Class B Common Stock           $   1.71        $   0.23         $   1.94

As of and for the year
 ended October 31, 1997:
Investment in affiliates        $     --        $ 44,130         $ 44,130
Other long-term assets          $ 22,022        $     (2)        $ 22,020
Deferred tax liability          $ 29,740        $  5,295         $ 35,035
Retained earnings               $437,550        $ 38,833         $476,383
Net income                      $ 18,086        $  4,440         $ 22,526
Basic earnings per share:
 Class A Common Stock           $   0.63        $   0.15         $   0.78
 Class B Common Stock           $   0.94        $   0.23         $   1.17
Diluted earnings per share:
 Class A Common Stock           $   0.63        $   0.15         $   0.78
 Class B Common Stock           $   0.94        $   0.23         $   1.17

The difference between the cost basis of the Company's investment in the underlying equity of CorrChoice of $5,600,000 is being amortized over a fifteen-year period.

At October 31, 1999, the financial position of CorrChoice included current and non-current assets of $112 million and $95 million, respectively, and current and non-current liabilities of $14 million and $8 million, respectively. For the year ended October 31, 1999, the results of operations for CorrChoice included net sales of $262 million, gross profit of $47 million, operating income of $29 million and net income of $19 million.

Item 8. Financial Statements and Supplementary Data (continued)

Intermediate Bulk Containers ("IBC") Acquisition

On January 11, 1999, the Company purchased the assets of the IBC business from Sonoco Products Company ("Sonoco") for $38,013,000 in cash. In addition, the Company paid $234,000 in legal and professional fees related to the acquisition. Prior to the acquisition date, and subsequent to March 30, 1998, the Company marketed and sold IBCs under a distributorship agreement with Sonoco.

The acquisition of the IBC business has been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets purchased and liabilities assumed based upon their fair values at the date of acquisition. The fair values of the assets acquired and liabilities assumed were $15,677,000 and $1,234,000, respectively. The excess of the purchase price over the fair values of the net assets acquired of $23,804,000 has been recorded as goodwill. The goodwill is being amortized on a straight-line basis over twenty-five years based on careful consideration regarding the age of the acquired business, its customers and the risk of obsolescence of its products.

Great Lakes and Trend Pak Acquisitions

On April 5, 1999, the Company purchased the common stock of Great Lakes Corrugated Corp. ("Great Lakes") and Trend Pak, Inc. ("Trend Pak") from their shareholders for $20,813,000 in cash. In addition, the Company paid $107,000 in legal and professional fees related to the acquisitions.

The acquisitions of Great Lakes and Trend Pak have been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets purchased and liabilities assumed based upon their fair values at the date of acquisition. The fair values of the assets acquired and liabilities assumed were $14,770,000 and $5,895,000, respectively. The excess of the purchase price over the fair values of the net assets acquired of $12,045,000 has been recorded as goodwill. The goodwill is being amortized on a straight-line basis over fifteen years based on careful consideration regarding the age of the acquired businesses, their customers and the risk of obsolescence of their products.

Abzac-Greif Investment

During June 1999, Greif Containers Inc., a wholly owned Canadian subsidiary of the Company, exchanged its spiral core manufacturing assets with Abzac S.A., a privately held company in France, for a 49% equity interest in Abzac's fibre drum business (which will be known as "Abzac- Greif"). The effective date of the transaction was January 1, 1999. The investment in Abzac-Greif of $2.0 million has been recorded using the equity method of accounting.

Item 8. Financial Statements and Supplementary Data (continued)

Industrial Containers Business of Sonoco Acquisition

On March 30, 1998, pursuant to the terms of a Stock Purchase Agreement between the Company and Sonoco, the Company acquired the industrial containers business of Sonoco by purchasing all of the outstanding shares of KMI Continental Fibre Drum, Inc., a Delaware corporation ("KMI"), Sonoco Plastic Drum, Inc., an Illinois corporation ("SPD"), GBC Holding Co., a Delaware corporation ("GBC Holding"), and Fibro Tambor, S.A. de C.V., a Mexican corporation ("Fibro Tambor") and the membership interest of Sonoco in Total Packaging Systems of Georgia, LLC, a Delaware limited liability company ("TPS"). KMI, SPD, GBC Holding, Fibro Tambor, TPS and their respective subsidiaries are in the business of manufacturing and selling plastic and fibre drums principally in the United States and Mexico and refurbishing and reconditioning plastic drums principally in the United States and Mexico.

As consideration for the shares of KMI, SPD, GBC Holding and Fibro Tambor and the membership interest of Sonoco in TPS, the Company paid $182,895,000 in cash. In addition, the Company paid $1,218,000 in legal and professional fees related to the acquisition. The acquisition was funded through new long-term obligations (see Note 4).

The acquisition of the industrial containers business from Sonoco has been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets purchased and liabilities assumed based upon their fair values at the date of acquisition. The fair values of the assets acquired and the liabilities assumed were $127,004,000 and $42,233,000, respectively. The excess of the purchase price over the fair values of the net assets acquired of $99,342,000 has been recorded as goodwill. During 1999, the Company's purchase price allocation was finalized resulting in a $10,065,000 reduction in goodwill and acquisition liabilities. The reasons for this decrease are the termination of certain postretirement benefits of $6,694,000 and an adjustment to the restructuring liability of $3,371,000. The goodwill is being amortized on a straight-line basis over twenty-five years based on careful consideration regarding the age of the acquired companies, their customers and the risk of obsolescence of their products.

Other Acquisitions

In November 1996, the Company purchased the assets of Aero Box Company, a corrugated container company, located in Michigan. In March 1997, the Company acquired the assets of two steel drum manufacturing plants located in California and Ontario, Canada. In May 1997, the Company purchased all of the outstanding common stock of Independent Container, Inc., a corrugated container company with two locations in Kentucky and a location in Indiana. In June 1997, the Company purchased all of the outstanding common stock of Centralia Container, Inc., located in Illinois.

Item 8. Financial Statements and Supplementary Data (continued)

These other acquisitions have been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated to the assets purchased and liabilities assumed based upon the fair values at the date of acquisition. The excess of the purchase price over the fair values of the net assets acquired has been recorded as goodwill. The Consolidated Financial Statements include the operating results of each business from the date of acquisition. Pro forma results of operations for these other acquisitions have not been presented because the results of these acquisitions were not significant to the Company.

Dispositions

In February 1997, the Company sold its injection molding plant in Ohio. In addition, the Company sold its wood component facilities, which manufactured door panels, wood moldings and window and door parts, with locations in Kentucky, California, Washington and Oregon in August 1997. The transactions resulted in a gain of $3.7 million which is included in other income.

                                                For the years ended
                                                    October 31,

                                                1999           1998
Net sales                                       $827,412       $846,936
Net income                                      $ 50,239       $ 37,558

Basic and diluted earnings per share:
Class A Common Stock                            $   1.74       $   1.30
Class B Common Stock                            $   2.61       $   1.95

The above amounts reflect adjustments for the contribution of Michigan Packaging to the CorrChoice joint venture and recognition of the Company's equity interest in CorrChoice. In addition, the amounts reflect the contribution of the spiral core assets and the recognition of the equity interest in Abzac-Greif by the Company's Canadian operation. Further, the amounts reflect adjustments for interest expense related to the debt issued for the purchases, amortization of goodwill and depreciation expense on the revalued properties, plants and equipment resulting from the acquisitions.

Item 8. Financial Statements and Supplementary Data (continued)

The pro forma information, as presented above, is not necessarily indicative of the results which would have been obtained had the transactions occurred on November 1, 1997, nor are they necessarily indicative of future results.

NOTE 3 - RESTRUCTURING CHARGES

During the third quarter of 1998, the Company approved a plan to consolidate some of its locations in order to improve operating efficiencies and capabilities. The plan was the result of an in-depth study to determine whether certain locations, either existing or newly acquired, should be closed and the sales and manufacturing volume associated with such plants relocated to a different facility. Eighteen existing fibre drum, steel drum and corrugated container plants were identified to be closed. The plants are located in Alabama, Georgia, Illinois, Kansas, Maryland, Massachusetts, Missouri, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee and Texas. As a result, the Company recognized a pretax restructuring charge of approximately $27.5 million, consisting of $20.9 million in employee separation costs (approximately 500 employees) and $6.6 million in other costs. The $6.6 million in other costs included $2.5 million for the impairment of long- lived assets due to the significant reduction in the remaining useful lives of the assets resulting from the decision to exit or close the facilities and other exit costs expected to be incurred after operations had ceased to maintain the facilities ($1.9 million) and remove the equipment ($2.2 million). The plant closures were announced and have been completed except for four plants expected to be announced and closed during 2000. The Company has sold or is planning to sell its seventeen owned facilities. A lease has been terminated on the remaining plant. Subsequent to the recognition of the restructuring charge, the Company did incur or, for plants not yet closed, expects to incur additional costs to relocate machinery and equipment and employees upon the closure of these plants.

The amounts charged against this restructuring reserve during 1999 are as follows (Dollars in thousands):

                                    Balance at                   Balance at
                                    10/31/98       Activity      10/31/99
Cash charges:
 Employee separation costs          $17,735        $(15,627)     $2,108
Cash and non-cash charges:
 Impairment of long-lived assets
  and other exit costs                7,012          (5,571)      1,441

                                    $24,747        $(21,198)     $3,549

Item 8. Financial Statements and Supplementary Data (continued)

The restructuring reserve activity in the preceding table includes the following non-cash charges: $1.0 million of accrued employee separation costs related to employees that have been terminated as of October 31, 1999 have been reclassified to accrued compensation costs; and a $1.4 million charge for the impairment of long-lived assets has been reclassified as a valuation account recorded net against the related fixed asset accounts.

During the year ended October 31, 1999, 299 employees were terminated in accordance with this restructuring plan. As of October 31, 1999, there were a total of 403 employees that had been terminated and provided severance benefits under this restructuring plan.

In addition, in connection with the acquisition of the industrial containers business from Sonoco and the consolidation plan, five locations purchased as part of the acquisition were identified to be closed. The locations are located in California, Georgia, Missouri and New Jersey. The plan to close or consolidate these locations was being formulated at the date of acquisition. Accordingly, the Company recognized a $9.5 million restructuring liability in its purchase price allocation related to these locations during the second quarter of 1998. This liability was accounted for under EITF No. 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination." The liability consisted of $6.1 million in employee separation costs (approximately 150 employees), $1.2 million in lease termination costs and $2.2 million in other exit costs. The $2.2 million in other exit costs included amounts expected to be incurred after operations had ceased to maintain the facilities ($1.0 million), remove the equipment ($0.5 million) and other closing costs ($0.7 million). The Company has sold or is planning to sell three of these locations. The leases have been or will be terminated on the remaining two locations.

The amounts charged against this restructuring reserve during 1999 are as follows (Dollars in thousands):

                                    Balance at                   Balance at
                                    10/31/98       Activity      10/31/99
Cash charges:
 Employee separation costs          $5,722         $(4,114)      $1,608
 Lease termination costs             1,183          (1,183)          --
Cash and non-cash charges:
 Other exit costs                      759            (759)          --

                                    $7,664         $(6,056)      $1,608

Item 8. Financial Statements and Supplementary Data (continued)

The restructuring reserve activity in the preceding table includes the following non-cash charges: $0.3 million of accrued employee separation costs related to employees that have been terminated as of October 31, 1999 have been reclassified to accrued compensation costs; and an adjustment of $3.4 million was recorded as a reduction to goodwill in accordance with EITF No. 95-3 because the ultimate cost is less than the amount initially recorded in the purchase price allocation.

During the year ended October 31, 1999, 89 employees were terminated in accordance with this restructuring plan. As of October 31, 1999, there were a total of 96 employees that had been terminated and provided severance benefits under this restructuring plan.

During the fourth quarter of 1997, the Company adopted a plan to consolidate its operations. This plan included a realignment of some of the administrative functions that were being performed at the subsidiary and division offices which resulted in staff reductions. In addition, costs associated with the reduction of certain support functions were incurred. As a result, a restructuring charge of $5.3 million, consisting of $3.8 million of severance benefits and $1.5 million for the impairment of long- lived assets, was recorded in the results of operations. During 1998, the Company paid $4.1 million in severance benefits to 62 employees. The additional $0.3 million was charged to the results of operations. As of October 31, 1998, all expenditures related to the charge had been made and the liability eliminated.

NOTE 4 - LONG-TERM OBLIGATIONS

On March 30, 1998, the Company entered into a credit agreement with various financial institutions, as banks, and KeyBank National Association, as agent, which provides a revolving credit facility of up to $325 million. The Company is required to pay a facility fee each quarter equal to .025% to .050% of the total commitment amount based upon the Company's leverage ratio. As of October 31, 1999, the Company has borrowed $258 million primarily to fund the Company's recent acquisitions and to consolidate all of the Company's other long-term borrowings. The interest rate is either based on the prime rate or LIBOR rate plus a calculated margin amount (.33% at October 31, 1999). Interest resets on a quarterly basis. At October 31, 1999, the interest rate is 6.20%. The revolving credit loans are due on March 31, 2003, however, management intends to extend a portion of the debt beyond that date.

At October 31, 1999, the Company has outstanding $6.2 million in letters of credit under the credit agreement. The quarterly fee related to these letters of credit is .03% of the outstanding amount plus a calculated margin (.33% at October 31, 1999).

Item 8. Financial Statements and Supplementary Data (continued)

The revolving credit facility contains certain covenants. Under the most restrictive of these covenants, the Company is required to maintain a certain leverage ratio, sufficient coverage of interest expense and a minimum net worth. In addition, the Company is limited with respect to additional debt. At October 31, 1999, the Company was in compliance with these covenants.

During 1998, the Company entered into an interest rate swap agreement with an original notional amount of $140 million which periodically reduces through the expiration date of March 30, 2008 ($130 million at October 31, 1999). The Company entered into another swap agreement during 1998 with a notional amount of $20 million expiring on October 31, 2001. The interest rate swaps were entered into to manage the Company's exposure to its variable rate debt. Under the agreements, the Company receives interest quarterly from the counterparty equal to the LIBOR rate and pays interest quarterly to the counterparty at a fixed rate of 6.15% and 5.22% for the $130 million and $20 million swap agreements, respectively. The differentials to be currently paid or received under these agreements are recorded as an adjustment to interest expense and are included in interest receivable or payable. The adjustment to interest expense resulting from the differentials was an increase of $1,414,000 during 1999 and $348,000 during 1998.

Annual maturities of long-term obligations are $258 million in 2003.

During 1999, the Company paid $15,472,000 of interest ($11,500,000 in 1998 and $3,726,000 in 1997) related to its long-term obligations. Interest of $377,000 in 1999, $344,000 in 1998 and $1,163,000 in 1997 was capitalized.

The Company has entered into non-cancelable operating leases for buildings, trucks and computer equipment. The future minimum lease payments for the non-cancelable operating leases are $6,618,000 in 2000, $6,105,000 in 2001, $4,067,000 in 2002, $3,024,000 in 2003, $2,160,000 in 2004 and $2,722,000 thereafter. Rent expense was $12,456,000 in 1999, $8,615,000 in 1998 and $5,684,000 in 1997.

NOTE 5 - CAPITAL STOCK

Class A Common Stock is entitled to cumulative dividends of one cent a share per year after which Class B Common Stock is entitled to non- cumulative dividends up to a half cent a share per year. Further distribution in any year must be made in proportion of one cent a share for Class A Common Stock to one and a half cents a share for Class B Common Stock. The Class A Common Stock shall have no voting power nor shall it be entitled to notice of meetings of the shareholders, all rights to vote and all voting power being vested exclusively in the Class B Common Stock unless four quarterly cumulative dividends upon the Class A Common Stock are in arrears. There is no cumulative voting.

Item 8. Financial Statements and Supplementary Data (continued)

NOTE 6 - STOCK OPTIONS

The Company has an Incentive Stock Option Plan ("Option Plan") which provides the discretionary granting of incentive stock options to key employees and non-statutory options for non-employees. The aggregate number of the Company's Class A Common Stock options which may be granted shall not exceed 1,000,000 shares. Under the terms of the Option Plan, options are granted at exercise prices equal to the market value on the date options are granted and become exercisable two years after date of grant. Options expire ten years after date of grant.

A Directors' Stock Option Plan ("Directors' Plan") which was adopted in 1996, provides the granting of stock options to directors who are not employees of the Company. The aggregate number of the Company's Class A Common Stock options which may be granted may not exceed 100,000 shares. Under the terms of the Directors' Plan, options are granted at exercise prices equal to the market value on the date options are granted and become exercisable immediately. Options expire ten years after date of grant.

In 1999, 225,452 incentive stock options were granted with option prices of $24.25 per share. Under the Directors' Plan, 10,000 options were granted to outside directors with option prices of $26.81 per share.

In 1998, 206,275 incentive stock options were granted with option prices of $31.75 per share. Under the Directors' Plan, 12,000 options were granted to outside directors with option prices of $36.53 per share.

In 1997, 136,500 incentive stock options were granted with option prices of $30.00 per share. Under the Directors' Plan, 12,000 options were granted to outside directors with option prices of $30.50 per share.

The Company applies APBO No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock option plans. If compensation cost would have been determined based on the fair values at the date of grant under SFAS No. 123, "Accounting for Stock-Based Compensation," pro forma net income and earnings per share would have been as follows (Dollars in thousands, except per share amounts):

                                            For the years ended
                                                October 31,

                                        1999        1998        1997
Net income                              $49,787     $36,055     $21,672

Basic and diluted earnings per share:
 Class A Common Stock                   $  1.73     $  1.25     $  0.75
 Class B Common Stock                   $  2.58     $  1.87     $  1.12

     The fair value for each option is estimated on the date of grant using
the Black-Scholes option pricing model, as allowed under SFAS No. 123, with
the following assumptions:

                                        1999           1998         1997
Dividend yield                           1.90%          1.36%        1.31%
Volatility rate                         25.10%         22.00%       20.60%
Risk-free interest rate                  6.15%          5.36%        6.29%
Expected option life                    6 years        6 years      6 years

The fair value of shares granted in 1999, 1998 and 1997 were $7.33, $9.08 and $9.03, respectively, as of grant date. Stock option activity was as follows (Shares in thousands):

                          1999               1998                   1997
                               Weighted           Weighted          Weighted
                               Average            Average           Average
                               Exercise           Exercise          Exercise
                     Shares    Price     Shares   Price      Shares Price
Beginning balance    659       $29.56    456      $28.26     374    $27.25
Granted              236       $24.36    218      $32.01     148    $30.04
Forfeited             22       $29.29      6      $29.63      38    $27.11
Exercised             12       $24.26      9      $22.94      28    $25.79
Ending balance       861       $28.23    659      $29.56     456    $28.26

As of October 31, 1999, the outstanding stock options had exercise prices ranging from $22.94 to $36.53 and a remaining weighted average contractual life of 8.11 years.

There are 432,000 options which were exercisable at October 31, 1999 (317,000 options at October 31, 1998 and 181,000 options at October 31, 1997).

NOTE 7 - INCOME TAXES

     Income tax expense is comprised as follows (Dollars in thousands):
                                                    State
                          U.S.                      and
                          Federal      Foreign      Local      Total
1999:
 Current                  $ 7,959      $2,306       $  660     $10,925
 Deferred                  13,702         360        1,753      15,815

                          $21,661      $2,666       $2,413     $26,740

1998:
 Current                  $15,755      $2,768       $3,039     $21,562
 Deferred                   1,763          --         (842)        921

                          $17,518      $2,768       $2,197     $22,483

1997:
 Current                  $ 3,617      $2,097       $1,607     $ 7,321
 Deferred                   4,087         (96)         107       4,098

                          $ 7,704      $2,001       $1,714     $11,419

Foreign income before income taxes amounted to $5,201,000 in 1999 ($6,212,000 in 1998 and $5,241,000 in 1997).

The following is a reconciliation of the U.S. Federal statutory income tax rate to the Company's effective tax rate:

                                       1999          1998          1997
U.S. Federal statutory tax rate        35.0%         35.0%         35.0%
State and local taxes, net of
 Federal tax benefit                    3.6%          2.6%          3.8%
Other                                   1.1%          2.9%         (0.1%)

Effective income tax rate              39.7%         40.5%         38.7%

     Significant components of the Company's deferred tax assets and
liabilities are as follows at October 31 (Dollars in thousands):

                                                   1999            1998
Restructuring reserves                             $ 2,047         $ 8,964
Workers compensation reserve                         1,713           1,663
Vacation accrual                                     1,251           1,335
Other                                                1,846           1,393
  Current deferred tax asset                       $ 6,857         $13,355

Deferred compensation                              $ 1,713         $ 1,614
Accrued environmental reserve                          699             644
Other                                                1,599             238
  Long-term deferred tax asset                     $ 4,011         $ 2,496

Properties, plants and equipment                   $39,381         $31,788
Equity investments                                   6,813           5,887
Timber condemnation                                  5,115           3,868
Other                                                1,662           3,252
  Long-term deferred tax liability                 $52,971         $44,795

At October 31, 1999 and 1998, the Company has provided deferred income taxes on all of its undistributed Canadian earnings.

During 1999, the Company paid $14,737,000 in income taxes ($22,697,000 in 1998 and $13,334,000 in 1997).

NOTE 8 - RETIREMENT PLANS

The Company has non-contributory defined benefit pension plans that cover most of its employees. These plans include plans self-administered by the Company along with union administered multi-employer plans. The self-administered hourly and union plans' benefits are based primarily upon years of service. The self-administered salaried plans' benefits are based primarily on years of service and earnings. The Company contributes an amount that is not less than the minimum funding nor more than the maximum tax-deductible amount to these plans. The plans' assets consist of unallocated insurance contracts, equity securities, government obligations and the allowable number of shares of the Company's common stock as follows:

                                            1999            1998
Class A Common Stock                        123,752         127,752
Class B Common Stock                         80,355          80,355

Item 8.    Financial Statements and Supplementary Data  (continued)

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

                                       1999          1998          1997
Service cost                           $4,760        $2,956        $2,714
Interest cost                           5,279         4,584         4,548
Expected return on plan assets         (6,238)       (5,716)       (7,569)
Amortization of prior service cost        662           508         3,294
Amortization of initial net asset        (562)         (562)         (615)
Recognized net actuarial loss (gain)       66          (231)         (122)
Cost of special termination benefits       --           852            --
                                        3,967         2,391         2,250

Multi-employer and non-U.S. pension
 expense                                  572           386           370

Total pension expense                  $4,539        $2,777        $2,620

The weighted average assumptions used in the actuarial valuations are as follows:

                                       1999          1998          1997
Discount rate                          7.50%         7.00%         8.00%
Expected return on plan assets         8.25%         8.25%         8.25%
Rate of compensation increase          4.25%         4.75%         4.75%

     The following table sets forth the plans' change in benefit
obligation, change in plan assets and amounts recognized in the
Consolidated Financial Statements (Dollars in thousands):

                                                     1999          1998

Change in benefit obligation:
Benefit obligation at beginning of year              $76,223       $58,525
Service cost                                           4,760         2,956
Interest cost                                          5,279         4,584
Amendments                                               450         1,832
Actuarial (gain) loss                                 (7,822)       11,246
Benefits paid                                         (3,793)       (3,772)
Cost of special termination benefits                      --           852

Benefit obligation at end of year                    $75,097       $76,223

Change in plan assets:
Fair value of plan assets at beginning of year       $74,986       $70,555
Actual return on plan assets                          11,536         3,234
Employer contribution                                  1,922         4,969
Benefits paid                                         (3,793)       (3,772)

Fair value of plan assets at end of year             $84,651       $74,986

Funded status                                        $ 9,584       $(1,231)
Unrecognized net actuarial (gain) loss                (8,942)        4,268
Unrecognized prior service cost                        9,439         9,929
Unrecognized initial net asset                        (6,619)       (7,459)

Net amount recognized                                $ 3,462       $ 5,507

Amounts recognized in the statement of financial
position consist of:
Prepaid benefit cost                                 $ 3,655       $ 5,507
Accrued benefit liability                               (193)           --
Intangible asset                                         153         3,422
Minimum liability                                       (153)       (3,422)

Net amount recognized                                $ 3,462       $ 5,507

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $18,029,000, $18,029,000 and $17,682,000, respectively, as of October 31, 1999 and $18,134,000, $18,134,000 and $15,489,000, respectively, as of October 31, 1998.

Item 8. Financial Statements and Supplementary Data (continued)

In addition to the defined benefit pension plans, the Company has several voluntary 401(k) savings plans which cover eligible employees. For certain plans, the Company matches a percentage of each employee's contribution up to a maximum percentage of base salary. Company contributions to the 401(k) plans were $546,000 in 1999, $566,000 in 1998 and $350,000 in 1997.

NOTE 9 - POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS

In conjunction with the acquisition of the industrial containers business from Sonoco, the Company assumed an obligation to reimburse Sonoco for its actual costs incurred in providing postretirement health care benefits to certain employees. Contributions by the Company are limited to an aggregate annual payment of $1,350,000 ($1,012,500 in 1998) for eligible employees at the date of purchase. Further, the Company is responsible for the cost of certain union hourly employees who were not eligible at the date of closing. The Company intends to fund these benefits from operations.

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

                                         1999              1998
Service cost                             $   --            $  380
Interest cost                             1,840             1,133
Cost of special termination
 benefits                                    --               306
                                         $1,840            $1,819

The following table sets forth the change in benefit obligation (Dollars in thousands):

                                            1999              1998
Benefit obligation at beginning of year     $27,257           $27,320
Service cost                                     --               380
Interest cost                                 1,840             1,133
Actuarial loss                                  468               691
Plan curtailment gain                        (8,411)           (2,573)
Cost of special termination benefits             --               306
                                            $21,154           $27,257

The plan curtailment gain relates to the resolution of certain benefit matters which resulted in the termination of certain benefit obligations. The 1999 curtailment gain includes a reduction in accrued benefit obligations of $6,694,000 existing as of the acquisition date. As a result, upon final resolution of the benefit matters in 1999, the Company adjusted its purchase price allocation and reduced goodwill by $6,694,000.

     The measurement assumes a discount rate of 7.50%. The health care cost
trend rates on gross eligible charges are as follows:

                                          Medical            Dental
Current trend rate                        8.25%              6.25%
Ultimate trend rate                       4.75%              4.75%

A one percentage point increase/decrease in the assumed health care cost trend rates would increase/decrease the postretirement benefit obligation as of October 31, 1999 by approximately $280,000 and the total of the service and interest cost components of postretirement benefits for the year then ended by approximately $21,000.

NOTE 10 - CONTINGENT LIABILITIES

Various lawsuits, claims and proceedings have been or may be instituted or asserted against the Company, including those pertaining to environmental, product liability, safety and health matters. While the amounts claimed may be substantial, the ultimate liability cannot now be determined because of the considerable uncertainties that exist. Therefore, it is possible that results of operations or liquidity in a particular period could be materially affected by certain contingencies. However, based upon the facts currently available, management believes that the disposition of matters that are pending or asserted will not have a materially adverse affect on the results of operations or financial position of the Company.

NOTE 11 - BUSINESS SEGEMENT INFORMATION

During 1999, the Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which changes the way companies report information about their operating segments. The information for 1997 and 1998 has been restated from the prior years' presentation in order to conform to the 1999 presentation.

The Company operates in three business segments: Industrial Shipping Containers; Containerboard & Corrugated Products; and Timber.

Operations in the Industrial Shipping Containers segment involve the production and sale of shipping containers and multiwall bags. These products are manufactured and principally sold throughout the United States, Canada and Mexico.

Operations in the Containerboard & Corrugated Products segment involve the production and sale of containerboard, both virgin and recycled, and related corrugated sheets and corrugated containers. The products are manufactured and sold in the United States and Canada.

Item 8. Financial Statements and Supplementary Data (continued)

Operations in the Timber segment involve the management and sale of timber on approximately 278,000 acres of timberlands in the states of Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi and Virginia.

The Company's reportable segments are strategic business units that offer different products. The Company evaluates performance and allocates resources based on income before income taxes and equity in earnings of affiliates. The accounting policies of the reportable segments are the same as those described in the "Description of Business and Summary of Significant Accounting Policies" note except that the Company accounts for inventory on a first-in, first-out basis at the segment level compared to a last-in, first-out basis at the consolidated level.

Corporate and other includes the costs associated with the Company's corporate headquarters, the Company's long-term obligations (see Note 4) and other non-segment items.

During 1998 and 1997, restructuring costs related to the Industrial Shipping Containers segment were $25,950,000 and $3,393,000, respectively. During 1998 and 1997, restructuring costs related to the Containerboard & Corrugated Products segment were $1,511,000 and $1,892,000, respectively.

     The following segment information is presented for the three years
ended October 31, 1999, except as to asset information which is as of
October 31, 1999, 1998 and 1997 (Dollars in thousands):

                                         1999           1998          1997
Net sales:
  Industrial shipping containers         $492,925       $444,130      $333,005
  Containerboard & corrugated products    301,770        357,001       315,979
  Timber                                   24,132         13,301        11,798

    Total                                $818,827       $814,432      $660,782

Income before income taxes and equity
 in earnings of affiliates:
  Industrial shipping containers         $ 41,563        $34,273      $ 24,171
  Containerboard & corrugated products     34,023         50,861         8,598
  Timber                                   25,951         18,982        10,744
    Total segment                         101,537        104,116        43,513

  Corporate and other                     (34,179)       (21,068)       (8,723)
  Restructuring costs                          --        (27,461)       (5,285)

    Total                                $ 67,358       $ 55,587      $ 29,505

Total assets:
  Industrial shipping containers         $438,255       $444,638      $193,304
  Containerboard & corrugated products    331,050        344,074       355,346
  Timber                                   16,712         15,633        10,834
    Total segment                         786,017        804,345       559,484

  Corporate and other                     124,969         74,075        34,733

    Total                                $910,986       $878,420      $594,217

Depreciation, depletion and amortization
 expense:
  Industrial shipping containers         $ 22,186       $ 16,092      $ 11,971
  Containerboard & corrugated products     17,809         19,305        18,371
  Timber                                      277            188            87
    Total segment                          40,272         35,585        30,429

  Corporate and other                       2,088          4,101         1,497

    Total                                $ 42,360       $ 39,686      $ 31,926

Additions to long-lived assets:
  Industrial shipping containers         $ 12,248       $ 22,046      $  3,843
  Containerboard & corrugated products     27,608          8,708        22,923
  Timber                                    1,285          3,769         2,195
    Total segment                          41,141         34,523        28,961

  Corporate and other                       8,112          3,570         7,232

    Total                                $ 49,253       $ 38,093      $ 36,193

     The following table presents net sales to external customers by
country:

                                      1999          1998          1997
United States                         $783,120      $778,012      $630,487
Canada                                  32,603        33,426        30,295
Mexico                                   3,104         2,994            --

                                      $818,827      $814,432      $660,782

 The following table presents total assets by country:

                                      1999          1998          1997

United States                         $875,914      $842,701      $550,968
Canada                                  30,374        31,673        43,249
Mexico                                   4,698         4,046            --

                                      $910,986      $878,420      $594,217

NOTE 12 - QUARTERLY FINANCIAL DATA (UNAUDITED)

     The quarterly results of operations for 1999 and 1998 are shown below
(Dollars in thousands, except per share amounts):

                                          Quarter ended,
                             Jan. 31,    Apr. 30,    July 31,    Oct. 31,
                               1999        1999        1999       1999
Net sales                    $180,004    $199,358    $205,032    $234,433
Gross profit                 $ 31,415    $ 39,867    $ 41,206    $ 65,866
Net income                   $  3,681    $ 10,861    $ 10,906    $ 25,925

Earnings per share:
 Basic:
 Class A Common Stock        $  0.13     $  0.38     $  0.38     $  0.90
 Class B Common Stock        $  0.19     $  0.56     $  0.57     $  1.35
 Diluted:
 Class A Common Stock        $  0.13     $  0.38     $  0.38     $  0.90
 Class B Common Stock        $  0.19     $  0.56     $  0.57     $  1.35

Earnings per share were
calculated using the
following number of shares:
 Basic:
 Class A Common Stock        10,909,672  10,894,548  10,852,101  10,872,002
 Class B Common Stock        12,001,793  12,000,535  11,998,793  11,957,299
 Diluted:
 Class A Common Stock        10,967,108  10,898,216  10,854,636  10,886,245
 Class B Common Stock        12,001,793  12,000,535  11,998,793  11,957,299

Market price (Class A Common Stock):
 High                        $  33.13    $  29.50    $  29.00    $  29.50
 Low                         $  27.38    $  20.63    $  24.50    $  23.75
 Close                       $  28.19    $  25.38    $  24.75    $  28.50
Market price (Class B Common Stock):
 High                        $  36.00    $  33.00    $  31.25    $  33.25
 Low                         $  31.50    $  29.63    $  28.88    $  26.50
 Close                       $  32.44    $  30.25    $  29.88    $  30.00

                                          Quarter ended,
                             Jan. 31,    Apr. 30,    July 31,    Oct. 31,
                             1998        1998        1998        1998
Net sales                    $172,383    $194,447    $222,514    $225,088
Gross profit                 $ 34,206    $ 40,815    $ 42,265    $ 52,254
Net income (loss)            $ 10,857    $ 13,937    $ (3,707)   $ 16,354

Earnings (loss) per share:
 Basic:
 Class A Common Stock        $   0.38    $   0.48    $  (0.13)   $  0.57
 Class B Common Stock        $   0.56    $   0.72    $  (0.19)   $  0.85
 Diluted:
 Class A Common Stock        $   0.38    $   0.48    $  (0.13)   $  0.56
 Class B Common Stock        $   0.56    $   0.72    $  (0.19)   $  0.85

Earnings (loss) per share were
calculated using the following
number of shares:
 Basic:
 Class A Common Stock        10,901,962  10,904,755  10,906,582  10,909,468
 Class B Common Stock        12,001,793  12,001,793  12,001,793  12,001,793
 Diluted:
 Class A Common Stock        10,950,796  10,977,776  10,977,466  10,957,728
 Class B Common Stock        12,001,793  12,001,793  12,001,793  12,001,793

 Market price (Class A Common Stock):
 High                        $  35.75    $  41.25    $  40.75    $  40.63
 Low                         $  32.00    $  35.00    $  35.00    $  27.50
 Close                       $  35.50    $  38.50    $  39.50    $  32.00
 Market price (Class B Common Stock):
 High                        $  39.50    $  44.00    $  43.75    $  43.00
 Low                         $  33.50    $  37.50    $  40.75    $  34.00
 Close                       $  39.50    $  42.63    $  42.75    $  35.00

Prior year amounts reported in the Company's quarterly reports on Form 10-Q in 1998 have been restated in the 1999 Form 10-Q's and herein to reflect the equity method of accounting for the Company's investment in non-voting stock of Ohio Packaging Corporation (see Note 2 to the Consolidated Financial Statements).

The Class A and Class B Common Stock are traded on the NASDAQ Stock Market.

As of December 6, 1999, there were 676 shareholders of record of the Class A Common Stock and 176 shareholders of record of the Class B Common Stock.

Item 8. Financial Statements and Supplementary Data (continued)

REPORT OF MANAGEMENT'S RESPONSIBILITIES

To the Shareholders of
Greif Bros. Corporation

The Company's management is responsible for the financial and operating information included in this Annual Report on Form 10-K, including the Consolidated Financial Statements of Greif Bros. Corporation and its subsidiaries. These statements were prepared in accordance with generally accepted accounting principles and, as such, include certain estimates and judgments made by management.

The system of internal accounting control, which is designed to provide reasonable assurance as to the integrity and reliability of financial reporting, is established and maintained by the Company's management. This system is continually reviewed by the internal auditors of the Company. In addition, Ernst & Young LLP, an independent accounting firm, audits the financial statements of Greif Bros. Corporation and its subsidiaries and considers the internal control structure of the Company in planning and performing its audit. The Audit Committee of the Board of Directors meets periodically with the internal auditors and independent accountants to discuss the internal control structure and the results of their audits.

/s/ Michael J. Gasser                      /s/ Joseph W. Reed
Michael J. Gasser                          Joseph W. Reed
Chairman and Chief Executive               Chief Financial Officer
  Officer                                  and Secretary

Item 8. Financial Statements and Supplementary Data (continued)