As noted on Slide 3, this presentation uses certain non-GAAP financial measures, including those that exclude special items, such as restructuring charges and acquisition-related costs, and EBITDA before and after special items. EBITDA is defined as net income, plus interest expense net, plus income tax expense, less equity earnings of unconsolidated subsidiaries, net of tax plus depreciation, depreciation and amortization expense.Management believes that non-GAAP measures provide a better indication of operational performance and a more stable platform on which to compare the historical performance of the company than the most nearly equivalent GAAP data. All non-GAAP data in the presentation are indicated by footnotes. Tables showing the reconciliation between GAAP and non-GAAP measures are available at the end of this presentation and in the first quarter 2012 earnings release. Giving prepared remarks today are in order of speaking, Senior Vice President and CFO, Rob McNutt; and President and CEO, David Fischer. I will now turn the call over to Rob. Robert M. McNutt Thank you, Deb. Please turn to Slide 4. During the past two years, we have been actively involved in building a foundation to execute the next phase of our growth strategy. This has involved 20 acquisitions, which included some smaller tuck-in acquisitions that reinforce our core and strategic acquisitions that have set the base for three global growth platforms Flexibles, reconditioning and rigid IBCs. With those transactions completed in 2011, we are focused on integration and we are beginning to realize synergies and the Greif Business System benefits. Since July of 2011, our business leaders have been responding to market weakness in Europe and the related downstream follow-on effects elsewhere in the world by implementing contingency plans to adapt to the decline in volumes. While there are initial signs of improvement in market conditions, we expect to continue to be somewhat impacted by European market conditions in the second quarter. We are anticipating a modest recovery in sales volumes for the second half of this year.
Overall, first quarter operating profit and net income exceeded our budget, with Paper above our expectations and Rigid and Land essentially on budget. Our Flexibles business was under our expectations, primarily driven by market pressures in Europe. Cash flow from operations was positive compared with same period last year, improving by approximately $75 million compared with first quarter 2011.The financial summary on Slide 5 includes key performance items on a year-over-year basis. The 5% increase in net sales to $993 million for first quarter was principally due to higher sales volumes of 3%, including 7% from acquisitions completed during the past 12 months, which offset a 4% decline in volumes on a same-structure basis. Selling prices increased 4% versus first quarter of 2011, primarily due to the pass-through of higher raw material costs. There was also a negative impact of 2% from foreign currency translation. The market conditions in Europe during first quarter of 2012 particularly impacted our Rigid Industrial Packaging & Services and Flexible Products & Services segment results. The decline in volume in our Flexible Products business occurred later than in Rigid Packaging, principally due to differences in the business of supply chain. First quarter 2012 volume for Paper Packaging, which operates in North America, increased 9% in the quarter versus a year ago. Gross profit was basically flat at $179 million for the first quarter of 2012 versus a year ago. Gross profit margin was 18% for first quarter of 2012 versus 18.7% for the same period last year. Lower volumes and market pressures in the Rigid Industrial Packaging & Services segment were partially offset by higher volumes and lower input costs in the Paper Packaging segment compared with first quarter of 2011. SG&A expenses were $113 million for first quarter of 2012 compared with $107 million a year ago. This $6 million increase was principally due to expenses related to acquired companies. SG&A expenses were 11.3% of net sales for first quarter of 2012, which is unchanged from a year ago. Operating profit was $58 million for first quarter of 2012 compared with $69 million for the same period in 2011. Operating profit before special items was $69 million for first quarter of 2012 versus $80 million last year. This decline was primarily due to lower results in Rigid Industrial Packaging & Services in Europe and Asia Pacific, which was partially offset by improved results in North America for Rigid Industrial Packaging & Services and Paper Packaging. Read the rest of this transcript for free on seekingalpha.com