<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1994
Commission File Number 0-1387
BEMIS COMPANY, INC.
(Exact name of registrant as specified in its charter)
Missouri 43-0178130
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 South 9th Street, Suite 2300, Minneapolis, Minnesota 55402-4099
(Address of principal executive offices)
Registrant's telephone number, including area code (612) 376-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common stock New York Stock Exchange
Par Value $.10 Per Share (51,211,326
shares outstanding as of December 31, 1994)
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark whether the registrant has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934
during the preceding 12 months and has been subject to such filing
requirements for the past 90 days.
YES X NO
-------- --------
Aggregate market value of the voting stock held by non-affiliates of the
registrant:
51,490,961 shares @ $27.125 per share as of March 3, 1995 - $1,396,692,000
DOCUMENTS INCORPORATED BY REFERENCE
1994 Annual Report to Shareholders - Part I and Part II
Proxy Statement - Annual Meeting of Stockholders
May 4, 1995 - Part I and Part III
<PAGE>
ITEM 1 - BUSINESS
Bemis Company, Inc., a Missouri corporation, continues a business formed in
1858. The Registrant was incorporated in 1885 as Bemis Bro. Bag Company with
the name changed to Bemis Company, Inc. in 1965.
The Registrant is a principal manufacturer of flexible packaging products
and specialty coated and graphics products. Information about the Registrant's
operations in different business segments appearing on page 38 of the
accompanying 1994 Annual Report to Shareholders is incorporated by reference in
this Form 10-K Annual Report.
As of December 31, 1994, the Registrant had approximately 8,100 employees,
of which an estimated 5,500 were classified as production employees. Most of
the production employees are covered by collective bargaining contracts
involving five different international unions and 19 individual contracts with
terms ranging from three to five years. During 1994, eight contracts covering
approximately 1,750 employees at eight different locations in the United States
were successfully negotiated. During 1995, three labor agreements are scheduled
to expire.
Working capital elements throughout the year fluctuate in relation to the
level of business. Customer and vendor payment terms are generally net 30 days;
exceptions to these terms are not material. Inventory levels reflect a
reasonable balance between raw material pricing and availability, and our
commitment to promptly fill customer orders.
Backlogs are not a significant factor in the industries in which the
Registrant operates; most orders placed with the Registrant are for delivery
within 90 days or less.
The Registrant owns patents, licenses, trademarks, and trade names on its
products. The loss of any or all patents, licenses, trademarks, or trade names
would not have a materially adverse effect on the Registrant's results as a
whole or either of its segments. The business of each of the segments is not
seasonal to any significant extent. A summary of the Registrant's business
activities reported by its two business segments follows:
- 2 -
<PAGE>
FLEXIBLE PACKAGING PRODUCTS - The Registrant and its subsidiaries manufacture a
broad range of industrial and consumer packaging comprised of coated and
laminated films, polyethylene packaging, packaging machinery, industrial and
consumer paper bag packaging, and specialty containers.
Coated and laminated film packaging includes extruding, coating, laminating,
metallizing, printing, converting to perishable and frozen food packaging, and
products such as stretch film and carton sealing tape. Coated and laminated
films accounted for 31 percent, 32 percent, and 32 percent of consolidated net
sales for the years 1994, 1993, and 1992, respectively.
Polyethylene packaging products include extruded products, printed roll stock
and preformed bags. Polyethylene products accounted for 16 percent, 16 percent,
and 10 percent of consolidated net sales for the years 1994, 1993, and 1992,
respectively.
Packaging machinery includes the manufacture of packaging systems for an
extensive list of consumer and industrial products ranging from toilet tissue,
candy, and frozen vegetables to fertilizer, insulation materials, detergent, and
pharmaceutical products. Packaging machinery accounted for 8 percent,
9 percent, and 9 percent of consolidated net sales for the years 1994, 1993, and
1992, respectively.
Industrial and consumer paper bags include a wide range of packaging for
products such as seed, feed, flour, cement, and chemicals and small consumer-
size packages for such products as sugar, flour, rice, and pet food. Sales of
this product line accounted for 15 percent, 17 percent, and 16 percent of
consolidated net sales for the years 1994, 1993, and 1992, respectively.
- 3 -
<PAGE>
SPECIALTY COATED AND GRAPHICS PRODUCTS - The Registrant manufactures pressure-
sensitive materials which includes quality roll label and sheet print stocks for
numerous applications including packaging labels and laser printing, a full line
of industrial adhesive products for mounting and bonding, and a line of highly
specialized laminates for graphics and photography. Pressure-sensitive
materials accounted for 29 percent, 24 percent, and 27 percent of consolidated
net sales for the years 1994, 1993, and 1992, respectively. This product
segment also includes the manufacture of pressure-sensitive label applicating
equipment, rotogravure cylinders, and film services.
MARKETING, DISTRIBUTION AND COMPETITION
While the Registrant's sales are made through a variety of distribution
methods, more than 70 percent of each segment's sales are made by the
Registrant's sales force. Sales offices and plants are located throughout the
United States, Canada, Great Britain, Europe, Scandinavia, Australia, and Mexico
to provide prompt and economical service to more than 30,000 customers. The
highly technical sales force is supported by product development engineers,
design technicians, and a customer service organization.
No single customer accounts for 10 percent or more of the Registrant's
total sales of either of its two business segments. Furthermore, the loss of
one or a few major customers would not have a material adverse effect on their
operating results.
The major markets in which the Registrant sells its products are highly
competitive. Areas of competition include price, innovation, quality, and
service. This competition is significant as to both the size the number of
competing firms.
Major competitors in the Flexible Packaging Products segment include
American National Can, Printpack, James River, Cryovac, Huntsman Chemical, AEP
Industries, Stone Container, and Union Camp. In the Specialty Coated and
Graphics Products segment major competitors include Avery-Dennison, Flexcon,
Minnesota Mining and Manufacturing, Jackstadt (Germany), and Haarla (Finland).
- 4 -
<PAGE>
The Registrant considers itself to be a significant factor in the market
niches it serves; however, due to the diversity of the Flexible Packaging and
Specialty Coated and Graphics Products segments, the Registrant's precise
competitive position in these markets is not reasonably determinable.
Advertising is limited primarily to business and trade publications
emphasizing our packaging and related capabilities and the individual problem-
solving approach to customer problems.
RAW MATERIALS
Plastic resins, paper, and chemicals constitute the basic major raw
materials. These are purchased from a variety of industry sources. While
temporary shortages of raw materials may occur occasionally, these items are
currently readily available.
RESEARCH AND DEVELOPMENT EXPENSE
<TABLE>
<CAPTION>
Research and development expenditures were as follows:
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Flexible Packaging Products $ 9,132,000 $ 9,910,000 $10,791,000
Specialty Coated and Graphics Products 3,992,000 4,174,000 5,148 000
----------- ----------- -----------
Total $13,124,000 $14,084 000 $15,939,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
ENVIRONMENTAL CONTROL
Compliance with federal, state, and local provisions which have been
enacted or adopted regulating discharges of materials into the environment or
otherwise relating to the protection of the environment, is not expected to have
a material effect upon the capital expenditures, earnings, and competitive
position of the Registrant and its subsidiaries.
ITEM 2 - PROPERTIES
Properties utilized by the Registrant and its subsidiaries at December 31,
1994, were as follows:
- 5 -
<PAGE>
FLEXIBLE PACKAGING PRODUCTS - The Registrant has 30 manufacturing plants of
which six are leased, located in 15 states and one foreign country. Leases
generally provide for minimum terms of seven to 20 years and have one or more
five-year renewal options. The initial terms of leases in effect at
December 31, 1994, expire between 1995 and 2010.
SPECIALTY COATED AND GRAPHICS PRODUCTS - The Registrant has ten manufacturing
plants of which three are leased, located in five states and three foreign
countries. Leases generally provide for minimum terms of five to 25 years and
have one or more renewal options. The initial terms of leases in effect as of
December 31, 1994, expire between 1996 and 2008.
CORPORATE - The executive offices of the Registrant, which are leased, are
located in Minneapolis, Minnesota.
The Registrant considers its plants and other physical properties to be
suitable, adequate, and of sufficient productive capacity to meet the
requirements of its business. The manufacturing plants operate at varying
levels of capacity depending on the type of operation and market conditions.
ITEM 3 - LEGAL PROCEEDINGS
The Registrant is involved in a number of lawsuits, including environmental
related litigation, incidental to its business. None of the litigation is
material to the Registrant, and the Registrant is not aware of any pending or
threatened litigation that is likely to have a material adverse effect upon the
Registrant's business, operating results, or financial condition. The
registrant is a potentially responsible party (PRP) in approximately thirteen
superfund sites around the United States. In substantially all cases, the
Registrant is a "de minimis" PRP and has negotiated a position as such. In
addition, at approximately one-half of these sites the Registrant has full
insurance protection. The Registrant has reserved an amount that it believes to
be adequate to cover its exposure.
- 6 -
<PAGE>
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The information required by this item appearing on pages 1 and 22 of the
accompanying 1994 Annual Report to Shareholders is incorporated by reference in
this Form 10-K Annual Report.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item appearing on page 23 of the
accompanying 1994 Annual Report to Shareholders is incorporated by reference in
this Form 10-K Annual Report.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this item appearing on pages 19 to 22 of the
accompanying 1994 Annual Report to Shareholders is incorporated by reference in
this Form 10-K Annual Report.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, together with the report thereon of Price
Waterhouse LLP dated January 23, 1995, and the quarterly data appearing on pages
24 to 39 of the accompanying 1994 Annual Report to Shareholders are
incorporated by reference in this Form 10-K Annual Report. With the exception
of the aforementioned information and the information incorporated in items 1,
5, 6, 7, and 8, the 1994 Annual Report to Shareholders is not to be deemed filed
as part of this Form 10-K Annual Report.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
- 7 -
<PAGE>
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on directors is omitted because the Registrant will have filed
with the Commission a definitive proxy statement pursuant to Regulation 14A
within 120 days after December 31, 1994.
The following sets forth the name, age, and business experience for the
last five years of the principal executive officers of the Registrant. Each
officer has been an employee of the Registrant for the last five years and the
positions described relate to positions with the Registrant.
<TABLE>
<CAPTION>
Period
The Positions
Name Age Positions Held Were Held
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LeRoy F. Bazany 62 Vice President and Controller 1982 to Present
Jeffrey H. Curler 44 Executive Vice President 1991 to present
President - Curwood, Inc. (1) 1982 to present
Benjamin R. Field, III 56 Senior Vice President, Chief
Financial Officer and Treasurer 1992 to present
Vice President and Treasurer 1982 to 1992
Scott W. Johnson 54 Senior Vice President, General
Counsel and Secretary 1992 to present
Vice President - General Counsel
and Secretary 1988 to 1992
Robert F. Mlnarik 53 Executive Vice President 1991 to present
President and Chief Executive
Officer - Morgan Adhesives Co. (2) 1986 to present
John H. Roe 55 President and Chief Executive Officer 1990 to present
President and Chief Operating Officer 1987 to 1990
Executive Vice President 1983 to 1987
Lawrence E. Schwanke 54 Vice President - Human Resources 1990 to present
Director, Personnel - Industrial Relations 1985 to 1990
<FN>
(1) Curwood, Inc. is a 100 percent owned subsidiary of the Registrant.
(2) Morgan Adhesives Co. is 86.9 percent owned subsidiary of the Registrant.
</TABLE>
- 8 -
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is omitted because the Registrant
will have filed with the Commission a definitive proxy statement pursuant to
Regulation 14A within 120 days after December 31, 1994.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is omitted because the Registrant
will have filed with the Commission a definitive proxy statement pursuant to
Regulation 14A within 120 days after December 31, 1994.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is omitted because the Registrant
will have filed with the Commission a definitive proxy statement pursuant to
Regulation 14A within 120 days after December 31, 1994.
- 9 -
<PAGE>
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) The following documents are filed as part of the report:
Pages in
Annual Report *
---------------
(1) FINANCIAL STATEMENTS:
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . 24
Consolidated Statement of Income for
the Three Years Ended December 31, 1994 . . . . . . . . . . . . 25
Consolidated Balance Sheet
at December 31, 1994 and 1993 . . . . . . . . . . . . . . . . . 26-27
Consolidated Statement of Cash Flows for
the Three Years Ended December 31, 1994 . . . . . . . . . . . . 28-29
Consolidated Statement of Stockholders' Equity
for the Three Years Ended December 31, 1994 . . . . . . . . . . 30
Notes to Consolidated Financial Statements . . . . . . . . . . . 31 to 39
<FN>
*Incorporated by reference from the indicated
pages of the 1994 Annual Report to Shareholders.
</TABLE>
<TABLE>
<CAPTION>
Pages in
Form 10-K
---------
(2) FINANCIAL STATEMENT SCHEDULES FOR YEARS 1994, 1993, AND 1992
<S> <C>
Report of Independent Accountants on Financial Statement
Schedules for the Three Years Ended December 31, 1994 . . . . . 12
Schedule V - Property and Equipment. . . . . . . . . . . . . . 14 to 16
Schedule VI - Accumulated Depreciation
of Property and Equipment . . . . . . . . . . . 17 to 19
Schedule VIII - Valuation and Qualifying
Accounts and Reserves . . . . . . . . . . . . . 20
Schedule X - Supplementary Income Statement Information. . . . 21
</TABLE>
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
- 10 -
<PAGE>
(3) EXHIBITS
13. 1994 Annual Report to Shareholders
22. Subsidiaries of the Registrant
27. Financial Data Schedule (EDGAR electronic filing only)
All other exhibits are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
(b) There were no reports on Form 8-K filed during the fourth quarter ended
December 31, 1994.
- 11 -
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of
Directors of Bemis Company, Inc.
Our audits of the consolidated financial statements referred to in our
report dated January 23, 1995, appearing on page 24 of the 1994 Annual Report to
Shareholders of Bemis Company, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of Financial Statement Schedules listed in Item 14(a) of
this Form 10-K. In our opinion, these Financial Statement Schedules present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
S\ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
January 23, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (number 2-61796) of
Bemis Company, Inc. of our report dated January 23, 1995, appearing on page 24
of the Annual Report to Shareholders which is incorporated in this Annual Report
on Form 10-K. We also consent to the incorporation by reference of our report
on the Financial Statement Schedules which appears above.
S\ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
March 3, 1995
- 12 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
BEMIS COMPANY, INC.
By S\ B. R. Field, III By S\ LeRoy F. Bazany
-------------------------------- -------------------------------
Benjamin R. Field, III, Senior Vice LeRoy F. Bazany, Vice President
President, Chief Financial Officer and Controller
and Treasurer
Date March 3, 1995 Date March 3, 1995
----------------------------- ------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
S\ Howard Curler S\ Winslow S. Buxton
- ----------------------------------- -----------------------------------
Howard Curler, Director Winslow S. Buxton, Director
Date March 3, 1995 Date March 3, 1995
----------------------------- ------------------------------
S\ John H. Roe S\ Loring W. Knoblauch
- ----------------------------------- -----------------------------------
John H. Roe, President and Chief Loring W. Knoblauch, Director
Executive Officer; Director
Date March 3, 1995 Date March 3, 1995
----------------------------- ------------------------------
S\ Robert A. Greenkorn S\ Robert F. Zicarelli
- ----------------------------------- -----------------------------------
Robert A. Greenkorn, Director Robert F. Zicarelli, Director
Date March 3, 1995 Date March 3, 1995
----------------------------- ------------------------------
- 13 -
<PAGE>
BEMIS COMPANY, INC.
222 South Ninth Street, Suite 2300
Minneapolis, Minnesota
55402-4099
(612) 376-3000
Benjamin R. Field, III
Senior Vice President, Chief
Financial Officer and Treasurer
<PAGE>
APPENDIX TO THE ELECTRONIC FILING - 1994 FORM 10-K
Data appearing on bar charts on indicated pages of the 1994 Annual Report.
<TABLE>
<CAPTION>
PAGE 1990 1991 1992 1993 1994
- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
19 Earnings Per Share $ .99 $1.03 $1.10 $.86 $1.40
20 Net Sales ($ Millions) $1,128 $1,142 $1,181 $1,203 $1,390
20 Return on Average Common
Stockholders' Equity 18.1% 17.0% 16.5% 12.1% 18.5%
20 Return on Average
Total Capital 12.3% 11.8% 11.8% 9.2% 13.4%
21 Total Debt (including capital
leases) as a Percent of Equity 61% 42% 38% 34% 42%
21 Total Stockholders'
Equity ($ Millions) $296 $329 $361 $371 $418
21 Total Debt ($ Millions) $179 $137 $139 $127 $174
21 Capital Expenditures
($ Millions) $73 $57 $71 $61 $93
22 Dividends paid Per
Common Share $.36 $.42 $.46 $.50 $.54
</TABLE>
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
(in thousands of dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-----------------------------------------------------------------------------------------------
Deductions
------------------------
Additions at Cost Fully Translation
Balance at --------------------- Depreciated Adjustment Balance
Beginning Business Retirements Assets Debit at Close
of Year Normal Acquisition or Sales Written Off (Credit) of Year
--------- ----- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OWNED PROPERTY AND EQUIPMENT
Land and land improvements $ 11,900 $ 99 $ 200 $ 749 $ 229 $ 36 $ 11,257
Buildings 142,783 8,400 1,074 2,424 2,080 1,844 149,597
Leasehold improvements 1,769 105 8 13 1,879
Machinery and equipment 515,854 84,460 12,114 14,316 42,729 3,254 558,637
------- ------ ------ ------ ------ ----- -------
$672,306 $93,064 $13,388 $17,497 $45,038 $5,147 $721,370
------- ------ ------ ------ ------ ----- -------
------- ------ ------ ------ ------ ----- -------
LEASEHOLD PROPERTY AND EQUIPMENT
Buildings $ 4,262 $ 3,198 $ 1,064
Machinery and equipment 63 34 29
------- ------ ------
$ 4,325 $ 3,232 $ 1,093
------- ------ ------
------- ------ ------
</TABLE>
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
(in thousands of dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-----------------------------------------------------------------------------------------------
Deductions
-------------------------
Additions at Cost Other
--------------------- Fully Changes Translation
Balance at Depreciated Debit Adjustment Balance
Beginning Business Retirements Assets (Credit) Debit at Close
of Year Normal Acquisition or Sales Written Off (1) (Credit) of Year
--------- ------ ----------- ----------- ----------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OWNED PROPERTY AND EQUIPMENT
Land and land improvements $ 11,815 $ 627 $ 393 $ 524 $ 351 $ (60) $ 11,900
Buildings 140,877 5,706 4,382 5,894 227 (2,061) 142,783
Leasehold improvements 2,531 120 684 184 (14) 1,769
Machinery and equipment 504,530 54,276 26,266 36,111 28,969 662 (4,800) 515,854
-------- ------ ------ ------ ------ ------ ------- -------
$659,753 $60,729 $31,041 $43,213 $29,731 $ 662 $(6,935) $672,306
-------- ------ ------ ------ ------ ------ ------- -------
-------- ------ ------ ------ ------ ------ ------- -------
LEASED PROPERTY AND EQUIPMENT
Buildings $ 4,262 $ 4,262
Machinery and equipment 1,900 757 (1,001) (79) 63
----- ----- ------- ------- --------
$ 6,162 $ 757 $(1,001) $ (79) $ 4,325
----- ----- ------- ------- --------
----- ----- ------- ------- --------
<FN>
(1) Reclassifications.
</TABLE>
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
(in thousands of dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
-----------------------------------------------------------------------------
Deductions
-------------------------
Other
Additions Fully Changes Translation
Balance at at Cost Depreciated Debit Adjustment Balance
Beginning --------- Retirements Assets (Credit) Debit at Close
of Year Normal or Sales Written Off (1) (Credit) of Year
--------- --------- ----------- ----------- -------- ----------- --------
OWNED PROPERTY AND EQUIPMENT
<S> <C> <C> <C> <C> <C> <C> <C>
Land and land improvements $ 12,785 $ 214 $ 209 $ 45 $ (906) $ (24) $ 11,815
Buildings 130,733 10,623 959 466 1,094 (148) 140,877
Leasehold improvements 2,825 244 121 (415) (2) 2,531
Machinery and equipment 462,284 59,607 1,501 14,003 (13) (1,844) 504,530
------- ------ ----- ------ ------ ------- -------
$608,627 $70,688 $2,669 $14,635 $ (240) $(2,018) $659,753
------- ------ ----- ------ ------ ------- -------
------- ------ ----- ------ ------ ------- -------
LEASED PROPERTY AND EQUIPMENT
Buildings $ 4,262 $ 4,262
Machinery and equipment 1,979 16 111 16 1,900
------- ------- ------- ------- -------
$ 6,241 $ 16 $ 111 $ 16 $ 6,162
------- ------- ------- ------- -------
------- ------- ------- ------- -------
<FN>
(1) Reclassifications and correction of prior year capitalization.
</TABLE>
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(in thousands of dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-----------------------------------------------------------------------------------------------
DEDUCTIONS
----------------------------
Fully Translation
Balance at Charged to Depreciated Adjustment Balance
Beginning Profit Retirements Assets Debit at Close
of Year and Loss or Sales Written Off (Credit) of Year
----------- --------- ----------- ------------ ----------- -----------
OWNED PROPERTY AND EQUIPMENT
<S> <C> <C> <C> <C> <C> <C>
Land improvements $ 2,100 $ 230 $ 181 $ 229 $ 4 $ 1,916
Buildings 38,911 4,524 521 2,080 (34) 40,868
Leasehold improvements 485 184 8 (6) 667
Machinery and equipment 218,784 45,864 6,639 42,729 (2,165) 217,445
----------- ---------- ---------- ----------- ---------- ----------
$260,280 $50,802 $7,349 $45,038 $(2,201) $260,896
----------- ---------- ---------- ----------- ---------- ----------
----------- ---------- ---------- ----------- ---------- ----------
LEASED PROPERTY AND EQUIPMENT
Buildings $ 1,417 $ 98 $1,286 $ 229
Machinery and equipment 46 9 33 22
---------- ---------- ---------- -------------
$ 1,463 $ 107 $1,319 $ 251
---------- ---------- ---------- -------------
---------- ---------- ---------- -------------
</TABLE>
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(in thousands of dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-----------------------------------------------------------------------------------------------
DEDUCTIONS
---------------------------- Other
Fully Changes Translation
Balance at Charged to Depreciated Debit Adjustment Balance
Beginning Profit Retirements Assets (Credit) Debit at Close
of Year and Loss or Sales Written Off (1) (Credit) of Year
---------- --------- ----------- ----------- -------- ----------- -------
OWNED PROPERTY AND EQUIPMENT
<S> <C> <C> <C> <C> <C> <C> <C>
Land improvements $ 2,259 $ 243 $ 48 $ 351 $ 3 $ 2,100
Buildings 38,434 4,274 2,787 227 783 38,911
Leasehold improvements 713 211 249 184 6 485
Machinery and equipment 231,190 41,240 22,749 28,969 (208) 2,136 218,784
------- ------ ------ ------ ----- ----- -------
$272,596 $45,968 $25,833 $29,731 $(208) $2,928 $260,280
------- ------ ------ ------ ----- ----- -------
------- ------ ------ ------ ----- ----- -------
Leased Property and Equipment
Buildings $ 1,291 $ 126 $ 1,417
Machinery and equipment 1,298 127 757 547 75 46
------- ------ ------ ----- ----- -------
$ 2,589 $ 253 $ 757 $547 $ 75 $ 1,463
------- ------ ------ ----- ----- -------
------- ------ ------ ----- ----- -------
<FN>
(1) Reclassifications.
</TABLE>
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(in thousands of dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
-----------------------------------------------------------------------------------------------
DEDUCTIONS
---------------------------- Other
Fully Changes Translation
Balance at Charged to Depreciated Debit Adjustment Balance
Beginning Profit Retirements Assets (Credit) Debit at Close
of Year and Loss or Sales Written Off (1) (Credit) of Year
---------- --------- ----------- ----------- -------- ----------- -------
OWNED PROPERTY AND EQUIPMENT
<S> <C> <C> <C> <C> <C> <C> <C>
Land improvements $ 2,064 $ 247 $ 45 $ 7 $ 2,259
Buildings 34,871 4,190 173 466 (99) 87 38,434
Leasehold improvements 732 204 121 99 3 713
Machinery and equipment 205,021 42,255 996 14,003 13 1,074 231,190
------- ------ ----- ------ --- ----- -------
$242,688 $46,896 $1,169 $14,635 $ 13 $1,171 $272,596
------- ------ ----- ------ --- ----- -------
------- ------ ----- ------ --- ----- -------
LEASED PROPERTY AND EQUIPMENT
Buildings $ 1,166 $ 125 $ 1,291
Machinery and equipment 1,158 244 111 (7) 1,298
------- ------ ------ ------ -------
$ 2,324 $ 369 $ 111 $ (7) $ 2,589
------- ------ ------ ------ -------
------- ------ ------ ------ -------
<FN>
(1) Reclassifications.
</TABLE>
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands of dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------
Additions
Balance at --------- Balance
Beginning Charged to Accounts at Close
of Year Profit & Loss Written Off of Year
---------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Reserves for doubtful
accounts and allowances $9,228 $4,059 $1,476(1) $11,811
------ ----- ----- ------
------ ----- ----- ------
YEAR ENDED DECEMBER 31, 1993
----------------------------------------------------
Additions
Balance at --------- Balance
Beginning Charged to Accounts at Close
of Year Profit & Loss Written Off of Year
---------- -------------- ----------- --------
Reserves for doubtul
accounts and allowances $7,352 $3,750 $1,874 (2) $9,228
----- ---- ----- ------
----- ---- ----- ------
YEAR ENDED DECEMBER 31, 1992
----------------------------------------------------
Additions
Balance at --------- Balance
Beginning Charged to Accounts at Close
of Year Profit & Loss Written Off of Year
---------- -------------- ----------- --------
Reserves for doubtful
accounts and allowances $8,281 $ 810 $1,739 (3) $7,352
----- ---- ----- -----
----- ---- ----- -----
<FN>
(1) Net of $103 collections on accounts previously written off.
(2) Net of $ 55 collections on accounts previously written off.
(3) Net of $141 collections on accounts previously written off.
</TABLE>
- 20 -
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(in thousands of dollars)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs $40,565 $37,565 $36,864
------ ------ ------
------ ------ ------
</TABLE>
- 21 -
<PAGE>
FINANCIAL HIGHLIGHTS BEMIS COMPANY, INC.
AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PERCENTS, RATIOS, PER
SHARE AMOUNTS, STOCKHOLDERS, AND EMPLOYEES)
<TABLE>
<CAPTION>
%
1994 1993 Change
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . $1,390,459 $1,203,494 16%
Income before income taxes . . . . . . . . . . . . . . . 118,094 74,377 59
Income taxes . . . . . . . . . . . . . . . . . . . . . . 45,300 28,300 60
Cumulative effect on prior years of
adoption of FAS 112 in 1993. . . . . . . . . . . . . . (1,746)
Net income . . . . . . . . . . . . . . . . . . . . . . . 72,794 44,331 64
Return on average common
stockholders' equity . . . . . . . . . . . . . . . . . 18.5% 12.1% 53
Cash dividends paid on
common stock . . . . . . . . . . . . . . . . . . . . . 27,654 25,586 8
Expenditures for property
and equipment. . . . . . . . . . . . . . . . . . . . . 93,064 60,729 53
Working capital. . . . . . . . . . . . . . . . . . . . . 208,054 152,820 36
Current ratio. . . . . . . . . . . . . . . . . . . . . . 2.0 1.8 11
Per share of common stock:
Income before effect of change
in accounting principles . . . . . . . . . . . . . . 1.40 .89 57
Cumulative effect of adoption of FAS 112 in 1993 . . . (.03)
Net income . . . . . . . . . . . . . . . . . . . . . . 1.40 .86 63
Dividends paid . . . . . . . . . . . . . . . . . . . . .54 .50 8
Book value . . . . . . . . . . . . . . . . . . . . . . 8.16 7.24 13
Stock PE ratio range . . . . . . . . . . . . . . . . . . 15-18 24-31
Average common shares and common share
equivalents outstanding during the year for
computation of earnings per share. . . . . . . . . . . 51,953 51,767
Common shares outstanding at year-end. . . . . . . . . . 51,211 51,201
Number of common stockholders. . . . . . . . . . . . . . 5,602 5,649 (1)
Number of employees. . . . . . . . . . . . . . . . . . . 8,120 7,565 7
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
SUMMARY
During 1994, the Company continued its strategic focus on its core
businesses by acquiring Fitchburg Coated Products, a pressure-sensitive
materials plant in Scranton, Pennsylvania, and Hargro Health Care Packaging
located in Chicago, Illinois. These actions follow the first quarter 1993
acquisitions of Princeton Packaging's bakery business and the sale of two
non-core rigid container businesses, Louisiana Plastics, Inc. (injection molded
containers) and Nashua Division (blow molded containers).
The Fitchburg Coated Products business, acquired by our MACtac subsidiary,
gives our pressure-sensitive business an entry into the Eastern U.S. market.
This acquisition has been successfully integrated into MACtac's business and
accounted for more than 60 percent of the 1994 sales increase in the Specialty
Coated and Graphics line of business. Hargro Health Care Products of Chicago was
acquired by our Coated and Laminated Film subsidiary, Curwood, Inc. While its
contribution in 1994 was not significant, together with Curwood's already
established Cur*Med Division, it provides us with an initial presence in the
growing medical packaging market. A new state-of-the-art, dedicated
manufacturing facility was completed in June of 1994 to house the Hargro
operation, which was moved from Chicago in July, as well as the existing Cur*Med
business.
The $21 million restructuring program announced in the third quarter of
1993 has progressed well and was substantially complete by the end of the year.
We estimate this program contributed approximately $7 million in pretax income
in 1994, with additional benefits to be realized in 1995.
As further evidence of the Company's commitment to growth, 1994 had record
capital expenditures of $93 million, a $32 million increase over 1993 and $22
million more than 1992. The 1995 capital plan calls for expenditures of $115
million.
Overall, the Company did very well in 1994, registering its twelfth
consecutive year of increased sales at $1.39 billion, up 16 percent over 1993
and 18 percent ahead of 1992. Both the Flexible Packaging and Specialty Coated
and Graphics Products lines reflected healthy sales increases over the prior two
years' results.
On the profit side, earnings per share for the year were up 23 percent over
1993, or $1.40 per share versus $1.14 per share, before the restructuring charge
of 25 cents and a 3 cent charge for FAS 112 in 1993. Earnings per share for 1992
were $1.11, before the one cent special charge for the cumulative effect of
adopting FAS 106 and 109 in that year. The 1994 earnings speak well for all of
our operations and the manner in which they coped with price/ cost pressures,
manufacturing inefficiencies due to the new nutritional labeling law effective
midyear, problems related to the restructuring program, expanded capital
programs, and integration of new acquisitions.
Operating profits for both Flexible Packaging Products and Specialty Coated
and Graphics Products segments were up in 1994 versus the prior year. Strong
sales growth was evident in both segments but particularly so in the Specialty
Coated and Graphics line. The rebound of our European pressure-sensitive
operations, after a difficult 1993, plus the acquisition of Fitchburg Coated
Products contributed to a 54 percent operating profit increase from $28.4
million in 1993 to $43.7 million in 1994. Flexible Packaging's operating profits
were up $12.9 million from the $94.7 million earned in 1993 (exclusive of the
$21 million restructuring charge) to $107.6 in 1994. The 1993 versus 1992
increase in the operating profit was generated entirely from the Flexible
Packaging segment, which
CONTINUED
<TABLE>
<CAPTION>
THREE-YEAR REVIEW OF RESULTS PERCENT
-------------------------
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Net Sales...................................... 100.0% 100.0% 100.0%
Cost of products sold.......................... 77.5 77.0 76.9
----- ----- ------
Gross margin................................... 22.5 23.0 23.1
Selling, general and administrative expenses... 12.3 13.4 13.4
All other expenses............................. 1.7 3.4 2.1
----- ----- ------
Income before income taxes..................... 8.5 6.2 7.6
Income taxes................................... 3.3 2.4 2.8
----- ----- ------
Income before effect of changes in
accounting principles........................ 5.2 3.8 4.8
Cumulative effect on prior years of adoption
of FAS 112 in 1993 and FAS 106 and
FAS 109 in 1992.............................. (0.1)
----- ----- ------
Net income..................................... 5.2% 3.7% 4.8%
Effective tax rate............................. 38.4% 38.0% 36.6%
</TABLE>
[Earnings Per Share Bar Graph]
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
CONTINUED
rose from $79.2 million in 1992 to $94.7 million in 1993 (excluding the
$21 million restructuring charge). The Specialty Coated and Graphics Products
operating profits declined from $40.2 million in 1992 to $28.4 million in 1993
on a sales drop from $322.6 million to $298.4 million for the comparable
periods. The key factors in this decline were currency dislocations and the
weak economy in Europe.
FORWARD LOOK
We are enthusiastic about 1995 and beyond. Europe appears to be on a more
stable economic footing, our restructuring program is about completed, the
recent surge in raw material prices is expected to top out and the U.S. economy
seems relatively stable. These external factors coupled with our own programs
aimed at operational improvements, technological leadership and more customer
intimacy should result in continued growth in sales and earnings.
RESTRUCTURING
In the third quarter of 1993, a restructuring plan was announced for our
Flexible Packaging Products line of business. The objective of this plan was to
increase profitability through improved operating efficiency. This plan resulted
in a $21 million pretax charge to "Other Costs" in the third quarter of 1993 and
was expected to produce annual pretax savings of $8 million when fully
implemented.
Key aspects of the plan included redeployment of assets in both the domestic
and international packaging machinery businesses ($7.2 million), the closedown
of a U.S. nylon resin production facility ($6.2 million), and the consolidation
of two paper packaging plants into larger facilities ($5.0 million). These
restructuring actions were expected to result in the elimination of 264 jobs in
the U.S. and Europe and the relocation of an additional 27 employees in
conjunction with the closing of five manufacturing facilities. At the close of
1994, actual employee reductions totaled 266 plus 26 transfers.
The total 1993 charge of $21 million included $13.6 million for asset
write-downs/redeployment, $4.1 million for employee severance and relocation,
and $3.3 million for all other expenses. As of December 31, 1994, actual charges
against the reserve for the same comparable categories were $13.3 million, $3.3
million, and $2.5 million, respectively. Of this $19.1 million in total net
charges, $15.1 million was for non-cash write-offs and $4.0 million represents
cash outlays net of recoveries on asset disposals. Three of the five closed
facilities have been sold; one sublease and one plant sale still remain to be
completed along with some ongoing severance payments and project costs.
COSTS AND EXPENSES
Costs of Goods Sold as a percentage of Net Sales increased slightly for the
three-year period. Sharp raw material price increases experienced in 1994 were
nearly offset by our own pricing efforts together with manufacturing
efficiencies resulting from our restructuring efforts which were initiated in
late 1993. The slight decrease in gross margins in 1993 relates primarily to
higher overhead rates in our Flexible Packaging area due to substantial capital
additions not fully utilized in 1993. In addition, the sharp drop in European
sales in 1993, due to the weak European economy, contributed to under
utilization of our manufacturing facilities there.
Selling, General and Administrative Expense increased in absolute dollars in
1994 but declined in relation to sales due to business acquisitions and
improving European business conditions. The somewhat higher expenditures in 1993
versus 1992 relate primarily to increased costs associated with the acquisition
and integration of the new bakery packaging business, additional expenditures
associated with the implementation of new management information systems, and
added 1993 costs for postretirement benefits associated with FAS 106 adopted in
1992.
[Net Sales Bar Graph]
[Return on Average Common Stockholders' Equity Bar Graph]
[Return on Average Total Capital Bar Graph]
20
<PAGE>
Research and Development Expense was $13.1 million in 1994, $14.1 million in
1993, and $15.9 million in 1992. The 1994 decline was due to reduced product
development expense in our packaging machinery business. The 1993 decline was
due to reduced product development expense in our coated and laminated business
and our pressure-sensitive materials business.
Interest Expense was $8.4 million for 1994, compared to $7.2 million in 1993
and $7.5 million in 1992. Higher average interest rates and debt levels in 1994
account for the higher interest expense. The increased debt level was due to
acquisitions and higher working capital. The modest decrease between 1993 and
1992 is due entirely to lower average interest rates during 1993.
Other Costs (Income) reflects an $.8 million income for 1994 versus costs of
$17.7 million in 1993 and income of $1.7 million in 1992. The sharp expense
increase in 1993 versus 1994 and 1992 is due principally to a third quarter 1993
restructuring charge of $21 million. Additionally, 1993's expense is partially
offset by income from business and product line sales.
RETURN ON INVESTMENT
Return on average common stockholders' equity in 1994 was 18.5 percent
compared to 12.1 percent in 1993 and 16.5 percent in 1992. The sharp decline for
1993 versus 1992 is due primarily to the $21 million restructuring charge in
1993, previously explained.
Operating profit as a percent of average investment, which appears in the
Five-Year Summary on page five of this report, was 22.9 percent in 1994,
compared to 16.9 percent in 1993 and 20.9 percent in 1992.
The return in Flexible Packaging was 21.8 percent in 1994 compared to 16.2
percent in 1993 and 19.3 percent in 1992. The return in Specialty Coated and
Graphics Products was 26.1 percent in 1994 compared to 18.9 percent in 1993 and
25.2 percent in 1992.
Return on average total capital was 13.4 percent in 1994, 9.2 percent in 1993
and 11.8 percent in 1992. Total capital is defined as the sum of all short-term
and long-term debt, including obligations under capital leases, stockholders'
equity and deferred taxes. Return on capital is based on net income adjusted for
interest expense on an after-tax basis.
CAPITAL EXPENDITURES
Capital expenditures in 1994 were $93.1 million compared to $60.7 million in
1993 and $70.7 million in 1992, including capitalized interest of $.7 million,
$.5 million, and $1.0 million for 1994, 1993, and 1992, respectively. In 1995
management anticipates expenditures in the $115 million range. The bulk of these
expenditures, made from internally generated funds, will be for continued
expansion of the Company's major growth businesses, with major equipment planned
for both the coated and laminated film and polyethylene packaging businesses.
CAPITAL STRUCTURE, LIQUIDITY AND CASH FLOW
Stockholders' equity increased in 1994 to $418.0 million, up from $370.5
million in 1993 and $361.0 million in 1992, due primarily to earnings net of
dividend payments. In 1994 there were no common stock purchases compared to $1.3
million in 1993 and no purchases in 1992.
Total debt increased $46.9 million in 1994 to $174.2 million, making debt as a
percent of stockholders' equity 42 percent compared to 34 percent in 1993 and 38
percent in 1992. In 1995 total debt is expected to increase $10-$20 million due
to increases in capital expenditures and working capital.
Working capital (excluding short-term debt) increased by $53.6 million to
$210.5 million in 1994 following a decrease of $4.6 million to $156.9 million in
1993, and an increase of $13 million in 1992. The 1994 increase resulted from
higher business activity and more aggressive purchasing of inventory during the
year. The current ratio in 1994 was 2.0:1 compared to 1.8:1 in 1993 and 2.0:1 in
1992.
CONTINUED
[Capital Expenditures Bar Graph]
[Total Stockholders' Equity Bar Graph]
[Total Debt as a Percent of Equity Bar Graph]
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
CONTINUED
The Company's cash flow remained strong in 1994 as cash provided by operations
was $132.5 million compared to $97.5 million in 1993 and $93.8 million in 1992.
Cash provided by operations was reduced in 1993 by charges against income of
$15.9 million for restructuring and FAS 112, and in 1992 by $13.3 million
relating to FAS 106. The following schedule presents the major sources and uses
of cash for the Company in 1994.
<TABLE>
<CAPTION>
SOURCES AND USES OF CASH
(IN MILLIONS OF DOLLARS)
SOURCES
<S> <C>
Net income . . . . . . . . . . . . $ 72.8
Depreciation and
amortization . . . . . . . . . . 51.8
Increase in total debt . . . . . . 46.9
Minority interest. . . . . . . . . 3.4
Deferred income taxes. . . . . . . 4.2
Proceeds from
property sales . . . . . . . . . 3.6
Other . . . . . . . . . . . . . . 4.5
------
Total Sources. . . . . . . . . . $187.2
------
------
<CAPTION>
USES
<S> <C>
Capital expenditures . . . . . . . $ 93.1
Increase in working capital* . . . 34.4
Business acquisitions. . . . . . . 32.0
Dividends. . . . . . . . . . . . . 27.7
------
Total Uses . . . . . . . . . . . . $187.2
------
------
<FN>
*EXCLUDING SHORT-TERM DEBT AND WORKING
CAPITAL ACQUIRED WITH BUSINESS ACQUISITIONS.
</TABLE>
The Company's pretax interest coverage was 15 times in 1994 compared to 11
times in 1993 and 13 times in 1992. Pretax income increased to $118.1 million in
1994 from $74.4 million in 1993 and $90.3 million in 1992. Interest expense was
$8.4 million in 1994, $7.2 million in 1993 and $7.5 million in 1992.
PRETAX INTEREST COVERAGE
COVERAGE OF INTEREST BY
PRETAX INCOME AND INTEREST
1990 1991 1992 1993 1994
--------------------------------------------
8.0 8.0 13.0 11.3 15.1
--------------------------------------------
Substantial credit is available to the Company for future use, including a
revolving credit agreement with five banks which was increased from $140 million
to $160 million early in 1994. Bemis is also an issuer of commercial paper which
carries an A1/P1 rating.
INCOME TAXES
Our effective tax rates were 38 percent in 1994 and 1993 versus 37 percent
in 1992. The increase in 1993 is due primarily to the 1 percent increase in the
U.S. Federal statutory tax rate during 1993. The primary difference between our
overall tax rate and the U.S. statutory tax rate of 35 percent in 1994 and 1993
and 34 percent in 1992 relates to state and local income taxes net of the
federal income tax benefit.
ACCOUNTING CHANGES
In 1993, the Company elected early adoption of FAS 112, Employers'
Accounting for Postemployment Benefits, which resulted in a $1.7 million charge
against Net Income (3 cents per share). In 1992, the Company elected early
adoption of FAS 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions, and also adopted FAS 109, Accounting for Income Taxes. These two
accounting changes combined resulted in a charge against Net Income for 1992 of
$.3 million (1 cent per share).
MARKET PRICES* AND DIVIDENDS PER COMMON SHARE OF STOCK
The Bemis quarterly dividend was increased by 8 percent in the first
quarter of 1994 to 13.5 cents per share from 12.5 cents. This followed first
quarter increases of 9 percent in 1993 to 12.5 cents per share from 11.5 cents,
and 10 percent in 1992 to 11.5 cents per share from 10.5 cents.
Common dividends for the year were 54 cents per share, up from 50 cents in
1993 and 46 cents in 1992. The 1994 payout ratio was 39 percent compared to 58
percent in 1993 and 42 percent in 1992. Based on the market price of $23.62 per
share at the beginning of 1994, the dividend yield was 2.3 percent.
Stockholders' equity per common share (book value per share) increased to
$8.16 per share in 1994, up from $7.24 per share in 1993 and $7.06 per share in
1992. Trading volume in Bemis common stock was 14,200,000 shares in 1994.
In February 1995, the Board of Directors increased the quarterly cash
dividend on common stock to 16 cents per share from 13.5 cents, an 18.5 percent
increase.
The accompanying schedule shows quarterly closing market prices and
dividend information.
[Dividends Paid Per Common Share Bar Graph]
<TABLE>
<CAPTION>
BEMIS COMMON STOCK 1994 1993 1992
PERFORMANCE --------------------------------------------------------------------------------------
Dividend Dividend Dividend
High Low Paid High Low Paid High Low Paid
-------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter . . . . . 24-1/8 21-1/8 $.135 26-3/4 24 $.125 24-1/8 20-1/8 $.115
Second Quarter . . . . 24-7/8 21 .135 24-7/8 21-1/4 .125 26-1/8 21-3/4 .115
Third Quarter . . . . . 25-5/8 22-1/2 .135 23-1/8 20-1/4 .125 29-1/4 24-3/8 .115
Fourth Quarter . . . . 25 21-7/8 .135 23-5/8 20-1/4 .125 27 21-3/8 .115
<FN>
*NEW YORK STOCK EXCHANGE: BMS
</TABLE>
22
<PAGE>
FIVE-YEAR CONSOLIDATED REVIEW BEMIS COMPANY, INC.
AND SUBSIDIARIES
(IN MILLIONS, EXCEPT PERCENTS, SHARES, RATIOS, PER
SHARE AMOUNTS, STOCKHOLDERS, AND EMPLOYEES)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Net sales. . . . . . . . . . . . . . . . . . . . . . . . $1,390.5 $1,203.5 $1,181.3 $1,141.6 $1,128.2
Cost of products sold and other expenses . . . . . . . . 1,264.0 1,121.9 1,083.5 1,044.6 1,034.8
Interest expense . . . . . . . . . . . . . . . . . . . . 8.4 7.2 7.5 12.1 11.7
Income before income taxes . . . . . . . . . . . . . . . 118.1 74.4 90.3 84.9 81.7
Income taxes . . . . . . . . . . . . . . . . . . . . . . 45.3 28.3 33.0 31.9 30.8
Income before effect of changes in
accounting principles. . . . . . . . . . . . . . . . . 72.8 46.1 57.3 53.0 50.9
Cumulative effect on prior years of adoption
of FAS 112 in 1993 and FAS 106 and
FAS 109 in 1992. . . . . . . . . . . . . . . . . . . . (1.8) (0.3)
Net income . . . . . . . . . . . . . . . . . . . . . . . 72.8 44.3 57.0 53.0 50.9
Net income as a percentage of net sales. . . . . . . . . 5.2% 3.7% 4.8% 4.6% 4.5%
COMMON SHARE DATA
Income before effect of changes in
accounting principles. . . . . . . . . . . . . . . . . 1.40 .89 1.11 1.03 .99
Cumulative effect of adoption of FAS 112 in. . . . . . .
1993 and FAS 106 and FAS 109 in 1992 . . . . . . . . . (.03) (.01)
Net income . . . . . . . . . . . . . . . . . . . . . . . 1.40 .86 1.10 1.03 .99
Dividends per common share . . . . . . . . . . . . . . . .54 .50 .46 .42 .36
Book value per common share. . . . . . . . . . . . . . . 8.16 7.24 7.06 6.46 5.81
Stock PE ratio range . . . . . . . . . . . . . . . . . . 15-18 24-31 18-27 13-20 13-19
Average common shares and common share
equivalents outstanding during the year for
computation of earnings per share. . . . . . . . . . . 51,953,210 51,767,064 51,839,696 51,529,806 51,402,988
Common shares outstanding at year-end. . . . . . . . . . 51,211,326 51,201,326 51,151,770 50,986,128 50,918,932
CAPITAL STRUCTURE AND OTHER DATA
Current ratio. . . . . . . . . . . . . . . . . . . . . . 2.0 1.8 2.0 1.8 1.8
Working capital. . . . . . . . . . . . . . . . . . . . . 208.1 152.8 154.0 140.6 150.2
Total assets . . . . . . . . . . . . . . . . . . . . . . 923.3 789.8 742.7 714.9 756.5
Long-term debt . . . . . . . . . . . . . . . . . . . . . 170.7 120.5 127.8 125.2 166.9
Long-term obligations under capital leases . . . . . . . 1.0 2.7 3.2 3.6 4.2
Stockholders' equity . . . . . . . . . . . . . . . . . . 418.0 370.5 361.0 329.2 295.6
Return on average common equity. . . . . . . . . . . . . 18.5% 12.1% 16.5% 17.0% 18.1%
Return on average total capital. . . . . . . . . . . . . 13.4% 9.2% 11.8% 11.8% 12.3%
Depreciation and amortization. . . . . . . . . . . . . . 51.8 47.0 48.3 47.1 42.3
Capital expenditures . . . . . . . . . . . . . . . . . . 93.1 60.7 70.7 56.9 73.1
Number of common stockholders. . . . . . . . . . . . . . 5,602 5,649 5,020 4,411 4,479
Number of employees. . . . . . . . . . . . . . . . . . . 8,120 7,565 7,733 7,796 7,950
Wages and salaries . . . . . . . . . . . . . . . . . . . 276.8 251.6 246.3 234.5 225.9
Research and development expense . . . . . . . . . . . . 13.1 14.1 15.9 13.2 15.4
</TABLE>
23
<PAGE>
MANAGEMENT'S RESPONSIBILITY STATEMENT
The management of Bemis Company, Inc., is responsible for the integrity,
objectivity and accuracy of the financial statements of the Company. The
financial statements are prepared by the Company in accordance with generally
accepted accounting principles using management's best estimates and judgments,
where appropriate. The financial information presented throughout the Annual
Report is consistent with that in the financial statements.
Management is also responsible for maintaining a system of internal
accounting controls and procedures designed to provide reasonable assurance that
the books and records reflect the transactions of the Company, and that assets
are protected against loss from unauthorized use or disposition. Such a system
is maintained through written accounting policies and procedures, administered
by trained Company personnel and updated on a continuing basis to ensure their
adequacy to meet the changing requirements of our business. The Company also
maintains an internal audit department which evaluates the adequacy of and
investigates adherence to these controls and procedures. In addition, the
Company's General Orders require that all of its affairs, as reflected by the
actions of its employees, will be conducted on a high ethical plane.
Price Waterhouse LLP, independent accountants, are retained to audit the
financial statements. Their audit is conducted in accordance with generally
accepted auditing standards and includes selective reviews of internal
accounting controls.
The Audit Committee of the Board of Directors, which is composed solely of
outside directors, meets periodically with management, internal auditors, and
independent accountants to review the work of each and to satisfy itself that
the respective parties are properly discharging their responsibilities. Both
Price Waterhouse LLP and the internal auditors have had unrestricted access to
the Audit Committee, without the presence of Company management, for the purpose
of discussing the results of their examination and their opinions on the
adequacy of internal accounting controls and the quality of financial reporting.
JOHN H. ROE BENJAMIN R. FIELD, III LEROY F. BAZANY
PRESIDENT AND SENIOR VICE PRESIDENT, VICE PRESIDENT
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER AND CONTROLLER
AND TREASURER
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF BEMIS COMPANY, INC.:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholders' equity, and of cash flows
present fairly, in all material respects, the financial position of Bemis
Company, Inc., and its subsidiaries at December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
MINNEAPOLIS, MINNESOTA, JANUARY 23, 1995
24
<PAGE>
CONSOLIDATED STATEMENT OF INCOME BEMIS COMPANY, INC.
AND SUBSIDIARIES
YEARS ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . $1,390,459 $1,203,494 $1,181,336
Costs and expenses:
Cost of products sold. . . . . . . . . . . . . . . . . . . . 1,077,130 926,135 908,394
Selling, general and administrative expenses . . . . . . . . 171,139 161,598 157,383
Research and development . . . . . . . . . . . . . . . . . . 13,124 14,084 15,939
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 8,395 7,201 7,546
Other (income) costs, net. . . . . . . . . . . . . . . . . . (802) 17,739 (1,661)
Minority interest in net income. . . . . . . . . . . . . . . 3,379 2,360 3,449
---------- ---------- ----------
Income before income taxes . . . . . . . . . . . . . . . . . . 118,094 74,377 90,286
Provision for income taxes . . . . . . . . . . . . . . . . . . 45,300 28,300 33,000
---------- ---------- ----------
Income before effect of changes in accounting principles . . . 72,794 46,077 57,286
Cumulative effect on prior years of adoption of FAS 112
in 1993 and FAS 106 and FAS 109 in 1992. . . . . . . . . . . (1,746) (274)
---------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,794 $ 44,331 $ 57,012
---------- ---------- ----------
---------- ---------- ----------
Earnings per share of common stock before effect
of changes in accounting principles. . . . . . . . . . . . . $1.40 $ .89 $1.11
Cumulative effect of adoption of FAS 112 in 1993
and FAS 106 and FAS 109 in 1992. . . . . . . . . . . . . . . (.03) (.01)
---------- ---------- ----------
Earnings per share of common stock . . . . . . . . . . . . . . $1.40 $ .86 $1.10
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
25
<PAGE>
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ASSETS 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . $ 12,726 $ 8,911
Accounts receivable, less $11,811 and $9,228
for doubtful accounts and allowances . . . . . . . 197,164 161,695
Inventories. . . . . . . . . . . . . . . . . . . . . 168,153 127,123
Prepaid expenses and deferred charges. . . . . . . . 40,829 39,280
-------- --------
Total current assets . . . . . . . . . . . . . . . 418,872 337,009
-------- --------
Property and equipment:
Land and land improvements . . . . . . . . . . . . . 11,257 11,900
Buildings and leasehold improvements . . . . . . . . 152,540 148,814
Machinery and equipment. . . . . . . . . . . . . . . 558,666 515,917
-------- --------
722,463 676,631
Less - accumulated depreciation. . . . . . . . . . . 261,147 261,743
-------- --------
461,316 414,888
-------- --------
Excess of cost of investments in subsidiaries over
net assets acquired. . . . . . . . . . . . . . . . . 29,743 24,814
Other assets . . . . . . . . . . . . . . . . . . . . . 13,408 13,056
-------- --------
43,151 37,870
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . $923,339 $789,767
-------- --------
-------- --------
</TABLE>
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.) CONTINUED
26
<PAGE>
BEMIS COMPANY, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt. . . . . . . . . . $ 753 $ 4,035
Short-term borrowings. . . . . . . . . . . . . . . . 1,671 1,299
Accounts payable . . . . . . . . . . . . . . . . . . 159,272 138,243
Accrued liabilities:
Salaries and wages . . . . . . . . . . . . . . . . 31,956 22,015
Income taxes . . . . . . . . . . . . . . . . . . . 9,495 9,875
Other taxes. . . . . . . . . . . . . . . . . . . . 7,671 10,021
-------- --------
Total current liabilities. . . . . . . . . . . . 210,818 184,189
Long-term debt, less current portion . . . . . . . . . 171,728 123,215
Deferred taxes . . . . . . . . . . . . . . . . . . . . 40,013 35,813
Other liabilities and deferred credits . . . . . . . . 58,823 54,602
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . 481,382 397,819
-------- --------
Minority interest. . . . . . . . . . . . . . . . . . . 23,930 21,409
Stockholders' equity:
Common stock, $.10 par value:
Authorized - 123,800,000 shares
Issued - 55,723,731 and 55,713,731 shares. . . . . 5,572 5,571
Capital in excess of par value . . . . . . . . . . . 101,290 101,153
Retained income. . . . . . . . . . . . . . . . . . . 439,364 397,922
Cumulative translation adjustment. . . . . . . . . . 5,294 (614)
Common stock held in treasury,
4,512,405 shares, at cost. . . . . . . . . . . . . (133,493) (133,493)
-------- --------
Total stockholders' equity . . . . . . . . . . . . 418,027 370,539
-------- --------
Total liabilities and stockholders' equity . . . . . . $923,339 $789,767
-------- --------
-------- --------
</TABLE>
27
<PAGE>
CONSOLIDATED STATEMENT
OF CASH FLOWS
YEARS ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 72,794 $ 44,331 $57,012
Non-cash items:
Depreciation and amortization. . . . . . . . . . . . . 51,828 46,982 48,304
Minority interest in net income. . . . . . . . . . . . 3,379 2,360 3,449
Deferred income taxes, non-current portion . . . . . . 4,297 2,582 (13,144)
Loss (gain) on sale of property and equipment. . . . . 210 1,231 (1,850)
-------- -------- -------
Cash provided by operations. . . . . . . . . . . . . . . 132,508 97,486 93,771
Changes in working capital, net of
effects of acquisitions and dispositions:
Accounts receivable. . . . . . . . . . . . . . . . . . (20,863) (3,188) (12,982)
Inventories. . . . . . . . . . . . . . . . . . . . . . (23,784) (654) 61
Prepaid expenses and deferred charges. . . . . . . . . (768) (19,589) (1,524)
Accounts payable . . . . . . . . . . . . . . . . . . . 11,881 19,038 2,505
Accrued salaries and wages . . . . . . . . . . . . . . 7,530 (1,110) (1,079)
Accrued income taxes . . . . . . . . . . . . . . . . . (759) 1,586 (3,247)
Accrued other taxes. . . . . . . . . . . . . . . . . . (2,501) 3,798 (2,439)
Changes in other liabilities and deferred credits. . . . 523 18,284 12,780
Changes in deferred charges and other investments. . . . (230) (742) (1,041)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 1,280 (1,005) (479)
-------- -------- -------
Net cash provided by operating activities. . . . . . . . . $104,817 $113,904 $86,326
-------- -------- -------
</TABLE>
CONTINUED
28
<PAGE>
BEMIS COMPANY, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONTINUED 1994 1993 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from investing activities:
Additions to property and equipment. . . . . . . . . . . ($93,064) ($60,729) ($70,688)
Business acquisition, net of divestitures. . . . . . . . (31,956) (7,684)
Proceeds from sale of property and equipment . . . . . . 3,594 2,491 3,577
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 337 111 433
-------- -------- -------
Net cash used by investing activities. . . . . . . . . . . (121,089) (65,811) (66,678)
-------- -------- -------
Cash flows from financing activities:
Increase in long-term debt . . . . . . . . . . . . . . . 57,601 4,791 8,101
Repayment of long-term debt. . . . . . . . . . . . . . . (10,287) (11,426) (6,355)
Change in short-term borrowings. . . . . . . . . . . . . 1,671 (1,131) (107)
Change in current portion of long-term debt. . . . . . . (3,769) (1,701) (48)
Cash dividends paid. . . . . . . . . . . . . . . . . . . (27,654) (25,586) (23,530)
Subsidiary dividends to minority stockholders. . . . . . (1,703) (3,406) (1,611)
Purchase of common stock for the treasury . . . . . . . (1,262) (1)
Stock incentive programs and related tax effects . . . . 138 1,642 1,374
-------- -------- -------
Net cash provided (used) by financing activities . . . . . 15,997 (38,079) (22,177)
-------- -------- -------
Effect of exchange rate changes on cash. . . . . . . . . . 4,090 (1,204) 1,238
-------- -------- -------
Net increase (decrease) in cash. . . . . . . . . . . . . . $ 3,815 $ 8,810 ($1,291)
-------- -------- -------
-------- -------- -------
</TABLE>
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
DURING THE THREE YEARS ENDED DECEMBER 31, 1994, 1993, AND
1992, THE COMPANY PAID INTEREST OF $9,223,000, $7,633,000, AND
$9,573,000 AND INCOME TAXES OF $39,918,000, $34,872,000,
AND $36,127,000, RESPECTIVELY.
29
<PAGE>
CONSOLIDATED STATEMENT BEMIS COMPANY, INC.
OF STOCKHOLDERS' EQUITY AND SUBSIDIARIES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Capital in Cumulative Common
Common Excess of Retained Translation Stock Held
Stock Par Value Income Adjustment in Treasury
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 . . . . . . . . . . . . $5,544 $ 98,164 $348,167 $9,581 ($132,230)
Net income for 1992. . . . . . . . . . . . . . . . . 57,012
Translation adjustment for 1992. . . . . . . . . . . (3,538)
Pension liability adjustment . . . . . . . . . . . . 407
Cash dividends paid on common stock,
$.46 per share . . . . . . . . . . . . . . . . . . (23,530)
Stock incentive programs and
related tax effects. . . . . . . . . . . . . . . . 17 1,357
Purchase of 4 shares of
common stock . . . . . . . . . . . . . . . . . . . (1)
------ -------- -------- ------ ---------
Balance at December 31, 1992 . . . . . . . . . . . . 5,561 99,521 382,056 6,043 (132,231)
Net income for 1993. . . . . . . . . . . . . . . . . 44,331
Translation adjustment for 1993. . . . . . . . . . . (6,657)
Pension liability adjustment . . . . . . . . . . . . (2,879)
Cash dividends paid on common stock,
$.50 per share . . . . . . . . . . . . . . . . . . (25,586)
Stock incentive programs and
related tax effects. . . . . . . . . . . . . . . . 10 1,632
Purchase of 56,112 shares of
common stock . . . . . . . . . . . . . . . . . . . (1,262)
------ -------- -------- ------ ---------
Balance at December 31, 1993 . . . . . . . . . . . . 5,571 101,153 397,922 (614) (133,493)
------ -------- -------- ------ ---------
Net income for 1994. . . . . . . . . . . . . . . . . 72,794
Translation adjustment for 1994. . . . . . . . . . . 5,908
Pension liability adjustment . . . . . . . . . . . . (3,698)
Cash dividends paid on common stock,
$.54 per share . . . . . . . . . . . . . . . . . . (27,654)
Stock incentive programs and
related tax effects. . . . . . . . . . . . . . . . 1 137
------ -------- -------- ------ ---------
Balance at December 31, 1994 . . . . . . . . . . . . $5,572 $101,290 $439,364 $5,294 ($133,493)
------ -------- -------- ------ ---------
------ -------- -------- ------ ---------
</TABLE>
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation.
REVENUE RECOGNITION:
Sales and related cost of sales are recognized primarily upon shipment of
products.
RESEARCH AND DEVELOPMENT:
Research and development expenditures are charged against income as
incurred.
EARNINGS PER SHARE:
Earnings per common share are computed by dividing net income by the
weighted-average number of common shares outstanding during the year
including common stock equivalents, if dilutive.
INVENTORIES ARE VALUED AT THE LOWER OF COST OR MARKET:
Cost is determined by the last-in, first-out (LIFO) method for essentially
all domestic inventories. Cost for all other inventories is determined
using the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Plant and equipment are
depreciated for financial reporting purposes principally using the
straight-line method over the estimated useful lives of assets. For tax
purposes, the Company generally uses accelerated methods of depreciation.
The tax effect of the difference between book and tax depreciation has been
provided as deferred income taxes. On sale or retirement, the asset cost
and related accumulated depreciation are removed from the accounts and any
related gain or loss is reflected in income. Maintenance and repairs which
do not improve efficiency or extend economic life are expensed currently.
Interest costs are capitalized for major capital expenditures during
construction.
EXCESS OF COST OF INVESTMENTS IN SUBSIDIARIES
OVER NET ASSETS ACQUIRED:
The excess relating to companies acquired prior to 1971 is not amortized
against income unless a loss of value becomes evident. The excess resulting
from investments made subsequent to 1970 is being amortized against income
over 40 years.
TAXES ON UNDISTRIBUTED EARNINGS:
No provision is made for U.S. income taxes on earnings of subsidiary
companies which the Company controls but does not include in the
consolidated federal income tax return since it is management's practice
and intent to permanently reinvest the earnings.
TRANSLATION OF FOREIGN CURRENCIES:
Assets and liabilities are translated at the exchange rate as of the
balance sheet date. All revenue and expense accounts are translated at a
weighted-average of exchange rates in effect during the year. Translation
adjustments are recorded as a separate component of equity.
STATEMENT OF CASH FLOWS:
For purposes of reporting cash flows, cash includes cash on hand and demand
deposit accounts.
PREFERRED STOCK PURCHASE RIGHTS:
On August 3, 1989, the Company's Board of Directors adopted a Shareholder
Rights Plan by declaring a dividend of one preferred share purchase right
for each outstanding share of common stock. Under certain circumstances, a
right may be exercised to purchase one one-hundredth of a share of Series A
Junior Preferred Stock for $120. The rights become exercisable if and when
a person acquires 20 percent or more of the Company's outstanding common
stock, subject to certain exceptions, or announces an offer which would
result in such person acquiring 20 percent or more of the Company's
outstanding common stock. Upon the rights becoming exercisable, each right
will entitle its holder to buy common stock of the Company having a market
value of twice the exercise price of the right. The rights expire August
22, 1999, and may be redeemed by the Company for 1 cent per right at any
time before the 30th day following the announcement that a person has
acquired 20 percent or more of the Company's outstanding common stock. In
connection with the Shareholder Rights Plan, the Company's Board of
Directors authorized 600,000 shares of Series A Junior Preferred Stock with
a par value of $1 per share. At December 31, 1994, none of these shares
were issued or outstanding.
31
<PAGE>
- --------------------------------------------------------------------------------
NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLES
The Company adopted Financial Accounting Standards related to
postemployment benefits (Statement 112), income taxes (Statement 109), and
postretirement benefits other than pensions (Statement 106) during 1993 and
1992. Accordingly, the cumulative effect of these changes in accounting
principles have been reported in the Consolidated Statement of Income as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS, EXCEPT EPS) 1993 1992
- -------------------------------------------------------------------------
<S> <C> <C>
Statement 112, Postemployment Benefits:
Cumulative effect on prior years . . . . . . . $(2,798)
Income tax benefit upon
adoption of FAS 112. . . . . . . . . . . . . 1,052
Statement 106, Postretirement Benefits
Other Than Pensions:
Cumulative effect on prior years . . . . . . . $(13,345)
Income tax benefit upon
adoption of FAS 106. . . . . . . . . . . . . 4,978
Statement 109, Accounting for Income Taxes:
Cumulative effect on prior years . . . . . . . 8,093
------- --------
Cumulative net effect on prior years of
adoption of FAS 112 in 1993 and
FAS 106 and FAS 109 in 1992. . . . . . . . . . $(1,746) $ (274)
------- --------
------- --------
Effect on EPS of common stock
of adoption of FAS 112 (1993 -
$2,798 less $1,052 tax benefit). . . . . . . . $ (.03)
-------
-------
Effect on EPS of common stock
of adoption of FAS 106
($13,345 less $4,978 tax benefit). . . . . . . $ (.161)
Effect on EPS of common stock
of adoption of FAS 109 . . . . . . . . . . . . .156
------- --------
Net effect on EPS. . . . . . . . . . . . . . . . $ (.03) $ (.005)
------- --------
------- --------
</TABLE>
- --------------------------------------------------------------------------------
NOTE 3 - BUSINESS ACQUISITIONS AND DISPOSITIONS
On January 3, 1994, the Company, through its subsidiary, Morgan Adhesives
Company, acquired Fitchburg Coated Products. Fitchburg operates a
pressure-sensitive materials manufacturing plant in Scranton, Pennsylvania, and
has sales of approximately $80 million. On January 20, 1994, the Company,
through its subsidiary, Curwood, Inc., acquired the Hargro Health Care business
which totaled approximately $17 million in annual sales. The combined net
purchase price of $32 million has been accounted for under the purchase method
of accounting. The results of operations for Fitchburg subsequent to January 2,
1994, and for Hargro subsequent to January 19, 1994, are included in these
financial statements.
On February 4, 1993, the Company acquired the Princeton Packaging Bakery
Division, with sales of approximately $70 million, for $32.7 million in cash.
The acquisition has been accounted for under the purchase method of accounting.
The Bakery Division's results of operations subsequent to February 3, 1993, are
included in these financial statements.
On February 26, 1993, the Company's blow-molding operation located in
Nashua, New Hampshire, was sold. On March 12, 1993, the Company's subsidiary,
Louisiana Plastics, Inc., was sold. Combined 1992 sales for these two operations
totaled nearly $59 million. Cash received for these two operations totaled $25
million. The nominal gain realized on these transactions is included in other
income.
Supplemental pro forma results of operations giving effect to the
acquisitions and dispositions are not presented because they are not material.
- --------------------------------------------------------------------------------
NOTE 4 - RESTRUCTURING OF OPERATIONS
In the third quarter of 1993, a restructuring plan was announced for our
Flexible Packaging Products line of business. The objective of this plan was to
increase profitability through improved operating efficiency. This plan resulted
in a $21 million pretax charge to "Other Costs" in the third quarter of 1993 and
was expected to produce annual pretax savings of $8 million when fully
implemented.
Key aspects of the plan included redeployment of assets in both the
domestic and international packaging machinery businesses ($7.2 million), the
closedown of a U.S. nylon resin production facility ($6.2 million), the
consolidation of two paper packaging plants into larger facilities ($5.0
million), and $2.6 million for all other expenses principally related to the
write-off of nonproductive assets in the coated and laminated film business.
CONTINUED
32
<PAGE>
NOTE 4 - RESTRUCTURING OF OPERATIONS CONTINUED
These restructuring actions were expected to result in the elimination of
264 jobs in the U.S. and Europe and the relocation of an additional 27 employees
in conjunction with the closing of five manufacturing facilities. At the close
of 1994, actual employee reductions totaled 266 plus 26 transfers.
All facility closures and consolidations were essentially completed as of
the end of 1994. One sublease and one plant sale are pending completion in 1995
as well as some ongoing severance payments and project costs. Because of these
pending transactions and final restructuring actions, final adjustments to the
reserve cannot be made until 1995; however, no material gain or loss is
expected.
EMPLOYEE SEPARATIONS - RESTRUCTURING
<TABLE>
<CAPTION>
HOURLY SALARIED TOTAL
- ----------------------------------------------------------------
<S> <C> <C> <C>
Planned Employee Reductions. . . 187 77 264
--- --- ---
--- --- ---
ACTUAL EMPLOYEE REDUCTIONS
1993 - Packaging Machinery . . . 38 14 52
Paper Packaging . . . . . 4 4
Coated and Laminated Film 29 4 33
--- --- ---
Total. . . . . . . . . 71 18 89
--- --- ---
1994 - Packaging Machinery . . . 34 37 71
Paper Packaging . . . . . 77 18 95
Coated and Laminated Film 5 6 11
--- --- ---
Total. . . . . . . . . 116 61 177
--- --- ---
Cumulative Total. . . . . 187 79 266
--- --- ---
--- --- ---
</TABLE>
ANALYSIS OF RESTRUCTURING RESERVE
<TABLE>
<CAPTION>
ASSET
EMPLOYEE WRITE-DOWNS/
(IN THOUSANDS OF DOLLARS) COSTS REDEPLOYMENT OTHER TOTAL CASH NONCASH
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reserve balance September 30, 1993 . . . . . . . . . $(4,100) $(13,600) $(3,300) $(21,000) $(9,600) $(11,400)
1993 Reserve charges: Packaging Machinery. . . . . . 250 672 420 1,342 861 481
Paper Packaging. . . . . . . .
Nylon Resin Manufacturing. . . 134 (1,462) 103 (1,225) (1,225)
Other. . . . . . . . . . . . . 1,837 1,837 70 1,767
------- -------- ------- -------- ------- --------
Reserve balance December 31, 1993. . . . . . . . . . (3,716) (12,553) (2,777) (19,046) (9,894) (9,152)
------- -------- ------- -------- ------- --------
1994 Reserve charges: Packaging Machinery. . . . . . 1,614 2,514 982 5,110 2,932 2,178
Paper Packaging. . . . . . . . 1,116 3,324 311 4,751 3,900 851
Nylon Resin Manufacturing. . . 122 6,416 468 7,006 (2,442) 9,448
Other. . . . . . . . . . . . . 73 8 240 321 (36) 357
------- -------- ------- -------- ------- --------
Reserve balance December 31, 1994. . . . . . . . . . $ (791) $ (291) $ (776) $ (1,858) $(5,540) $ 3,682
------- -------- ------- -------- ------- --------
------- -------- ------- -------- ------- --------
</TABLE>
- --------------------------------------------------------------------------------
NOTE 5 - INVENTORIES
The Company utilizes the LIFO method of inventory valuation for essentially
all domestic inventories. Approximately 84 percent of the December 31, 1994, and
80 percent of the December 31, 1993, inventories are valued using the last-in,
first-out (LIFO) method. All other inventories are valued using the first-in,
first-out (FIFO) method.
Inventories are summarized at December 31, as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Raw materials and supplies . . $ 83,198 $ 53,966 $ 56,791
Work in process and
finished goods . . . . . . . 140,425 119,581 127,762
-------- -------- --------
223,623 173,547 184,553
Excess of current cost
over LIFO inventory value. . (55,470) (46,424) (55,699)
-------- -------- --------
Total inventories. . . . . . . $168,153 $127,123 $128,854
-------- -------- --------
-------- -------- --------
</TABLE>
- --------------------------------------------------------------------------------
NOTE 6 - PENSION PLANS
Total pension expense in 1994, 1993 and 1992 was $7,704,000, $7,908,000,
and $9,483,000, respectively.
Defined contribution plans cover employees at nine different manufacturing
or administrative locations and provide for contributions ranging from 2 percent
to 6 percent of covered employees' salaries or wages and totaled $1,316,000 in
1994, $1,125,000 in 1993 and $321,000 in 1992. Multiemployer plans cover
employees at three different manufacturing locations and provide for
contributions to a union administered defined benefit pension plan. Amounts
charged to pension cost and contributed to the plan in 1994, 1993, and 1992
totaled $1,034,000, $974,000, and $864,000, respectively.
The Company has defined benefit pension plans covering the majority of U.S.
employees. The benefits under the plans are based on years of service and salary
levels. Certain plans covering hourly employees provide benefits of stated
amounts for each year of service. In addition, the Company also sponsors an
unfunded supplemental retirement plan to provide senior management with benefits
in excess of limits under the federal tax law and increased benefits to reflect
a service adjustment factor.
CONTINUED
33
<PAGE>
The funded status of the defined benefit plans at December 31, 1994, is as
follows:
<TABLE>
<CAPTION>
PLANS WITH PLANS WITH
ASSETS IN ACCUMULATED
EXCESS OF BENEFITS IN
ACCUMULATED EXCESS OF
(IN THOUSANDS OF DOLLARS) BENEFITS ASSETS
- ----------------------------------------------------------------
<S> <C> <C>
Actuarial present value
of benefit obligation:
Vested benefit obligation. . . . $127,495 $65,949
Nonvested benefit obligation . . 7,981 2,160
-------- -------
Accumulated benefit obligation . $135,476 $68,109
Projected benefit obligation . . . $160,060 $70,667
Plan assets at fair value. . . . . 136,527 53,666
-------- -------
Projected benefit obligations
in excess of plan assets . . . . (23,533) (17,001)
Unrecognized net obligation. . . . 8,563 2,633
Unrecognized prior service cost. . (1,366) 5,543
Unrecognized net loss. . . . . . . 11,693 12,513
-------- -------
(Pension liability) or prepaid
pension cost . . . . . . . . . . $ (4,643) $ 3,688
-------- -------
-------- -------
</TABLE>
Pension cost for defined benefit plans included the following components:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the year. . . . . . . . $ 5,942 $ 5,458 $ 5,962
Interest cost on projected
benefit obligation . . . . . . 15,199 14,983 14,992
Actual return on plan assets . . 1,241 (12,042) (10,268)
Net amortization and deferral. . (17,781) (3,387) (3,118)
-------- -------- --------
Net pension expense. . . . . . . $ 4,601 $ 5,012 $ 7,568
-------- -------- --------
-------- -------- --------
</TABLE>
The Company has recorded the following amounts pursuant to Statement of
Financial Accounting Standards No. 87, Employers' Accounting for Pensions:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) DEC. 31, 1994 DEC. 31, 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Intangible asset . . . . . . . . . . . $ 7,215 $ 7,164
Prepaid tax. . . . . . . . . . . . . . 4,149 1,850
Pension liability. . . . . . . . . . . (18,132) (12,084)
-------- --------
Reduction in stockholders' equity. . . $ (6,768) $ (3,070)
-------- --------
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7 percent and 5.5 percent, respectively. The
expected long-term rate of return on assets was 9 percent.
- --------------------------------------------------------------------------------
NOTE 7 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors several defined benefit postretirement plans that
cover more than 50 percent of salaried and nonsalaried employees. These plans
provide health care benefits and in some instances provide life insurance
benefits. Except for one closed-group plan, which is noncontributory,
postretirement health care plans are contributory, with retiree contributions
adjusted annually; life insurance plans are noncontributory.
Net periodic postretirement benefit costs for 1994, 1993, and 1992 included
the following components:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- -----------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the year. . . . . . . . $ 415 $ 277 $ 258
Interest cost on accumulated
postretirement benefit
obligation . . . . . . . . . . 1,322 1,180 1,148
Net amortization and deferral. . 68 1
------ ------ ------
Net periodic postretirement
benefit cost . . . . . . . . . $1,805 $1,458 $1,406
------ ------ ------
------ ------ ------
</TABLE>
The table below sets forth the plans' combined funded status reconciled
with the amount shown in the Company's statement of financial position at
December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees and beneficiaries . . $10,473 $12,967 $11,874
Fully eligible active
plan participants. . . . . . 1,556 1,866 1,243
Other active plan
participants . . . . . . . . 1,939 4,687 3,080
------- ------- -------
Accumulated postretirement
benefit obligation in
excess of plan assets. . . 13,968 19,520 16,197
Unrecognized net gain or
(loss) from past experience
different from that assumed. . 3,735 (2,926) (463)
------- ------- -------
Accrued postretirement
benefit cost . . . . . . . . . $17,703 $16,594 $15,734
------- ------- -------
------- ------- -------
</TABLE>
- --------------------------------------------------------------------------------
For measurement purposes, a 13 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1995; the rate was
assumed to decrease gradually to 5.5 percent by the year 2003 and remain at that
level thereafter. The health care cost trend rate assumption has a significant
effect on the amounts reported. To illustrate, increasing the assumed health
care cost trend rates by 1 percentage point in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1994, by
$1,653,000 and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year then ended by $196,000. The
weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.0 percent.
34
<PAGE>
- --------------------------------------------------------------------------------
NOTE 8 - STOCK OPTION AND INCENTIVE PLANS
The Company's stock option and stock award plans provide for the issuance
of up to 15,968,000 shares of common stock to key employees. As of December 31,
1994, 1993, and 1992, respectively, 2,346,852, 507,618, and 504,328 shares were
available for future grants under these plans.
Options are granted at prices equal to 100 percent of the market price on
the date of the grant and are exercisable over varying periods up to ten years
from the date of grant. Shares subject to options granted but not exercised
become available for future grants. Option holders may deliver shares of common
stock of the Company in lieu of cash payment for shares purchased upon the
exercise of options under such plans.
At December 31, 1994, thirteen participants hold options with expiration
dates ranging from 1996 to 2004 at option prices ranging from $5.75 to $24.63
per share with a weighted-average option price of $16.54 per share.
Details of the stock option plans at December 31, 1994, 1993, and 1992,
are:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
NUMBER OF OPTION PRICE
SHARES PER SHARE
- --------------------------------------------------------------
<S> <C> <C>
Outstanding at
December 31, 1991 and
December 31, 1992. . . . . 810,000 $14.11
Granted. . . . . . . . . . 10,000 21.34
Exercised. . . . . . . . . (110,000) 12.23
- --------------------------------------------------------------
Outstanding at
December 31, 1993. . . . . 710,000 $14.50
Granted. . . . . . . . . . 189,766 23.75
Exercised. . . . . . . . . (10,000) 8.31
- --------------------------------------------------------------
Outstanding at
December 31, 1994. . . . . 889,766 $16.54
- --------------------------------------------------------------
- --------------------------------------------------------------
Exercisable at
December 31, 1994. . . . . 692,500 $14.66
- --------------------------------------------------------------
- --------------------------------------------------------------
</TABLE>
In 1984, the Company adopted a Stock Award Plan for certain key executive
employees. Distribution of the shares will be made not less than three years nor
more than seven years from the date of grant. All shares granted under the plan
are subject to restrictions as to continuous employment, except in the case of
death, permanent disability, or retirement. In addition, cash payments are made
during the grant period equal to the dividend on Bemis common stock. The cost of
the awards is charged to income over the period of the grant: $2,90,000 was
expensed in 1994, $3,685,000 in 1993, and $3,264,000 in 1992.
Details of the stock award plan at December 31, 1994, 1993, and 1992, are:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- ------------------------------------------------------
<S> <C>
Outstanding at December 31, 1991 . . . . 1,383,052
Granted. . . . . . . . . . . . . . . . 25,000
Paid . . . . . . . . . . . . . . . . . (236,000)
Cancelled. . . . . . . . . . . . . . . (30,000)
---------
Outstanding at December 31, 1992 . . . . 1,142,052
Paid . . . . . . . . . . . . . . . . . (4,446)
Cancelled. . . . . . . . . . . . . . . (13,290)
---------
Outstanding at December 31, 1993 . . . . 1,124,316
Paid . . . . . . . . . . . . . . . . . 2,000
Cancelled. . . . . . . . . . . . . . . (31,000)
---------
Outstanding at December 31, 1994 . . . . 1,095,316
---------
---------
</TABLE>
- --------------------------------------------------------------------------------
NOTE 9 - LEASES
All noncancelable leases have been categorized as capital or operating
leases. The Company has leases for manufacturing plants, warehouses, machinery
and equipment, and administrative offices with terms (including renewal options)
ranging from one to 25 years. Under most leasing arrangements, the Company pays
the property taxes, insurance, maintenance, and expenses related to the leased
property. Total rental expense under operating leases was $9,601,000 in 1994,
$10,268,000 in 1993, and $12,029,000 in 1992.
The present values of minimum future obligations shown in the following
chart are calculated based on interest rates (ranging from 3 1/2 percent to
13 percent with a weighted-average of approximately 11 1/4 percent) determined
to be applicable at the inception of the leases. Interest expense on the
outstanding obligations under capital leases was $255,000 in 1994, $418,000 in
1993, and $469,000 in 1992.
Minimum future obligations on leases in effect at December 31, 1994, are:
<TABLE>
<CAPTION>
Capital Operating
(IN THOUSANDS OF DOLLARS) Leases Leases
- ----------------------------------------------------------------
<S> <C> <C>
1995 . . . . . . . . . . . . . . . . . $ 143 $ 5,236
1996 . . . . . . . . . . . . . . . . . 143 3,303
1997 . . . . . . . . . . . . . . . . . 140 2,149
1998 . . . . . . . . . . . . . . . . . 139 1,449
1999 . . . . . . . . . . . . . . . . . 139 1,291
Thereafter . . . . . . . . . . . . . . 1,529 5,824
------ -------
Total minimum obligations. . . . . . . 2,233 $19,252
-------
-------
Less amount representing interest. . . 1,201
------
Present value of net
minimum obligations. . . . . . . . . 1,032
Less current portion . . . . . . . . . 32
------
Long-term obligations. . . . . . . . . $1,000
------
------
</TABLE>
35
<PAGE>
- --------------------------------------------------------------------------------
NOTE 10 - LONG-TERM DEBT
Long-term debt maturing in years 1996 through 1999 is $3,721,000, $721,000,
$720,000, and $0, respectively.
Under the terms of a revolving credit agreement with five banks, the
Company may borrow up to $160,000,000 through August 1, 1999. The Company must
pay a facility fee of 1/8 of 1 percent annually on the entire amount of the
commitment. There were no borrowings outstanding under this agreement at
December 31, 1994.
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper payable through 1995 at interest rates of 6% to 6 1/8% (1) . . $145,316 $ 87,716
Industrial revenue bonds payable through 2011 at interest rates of
5 1/2% to 7 1/4% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,250 23,350
Debt of foreign subsidiaries payable through 1998 at an interest rate of
8 3/8%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,883 13,287
Obligations under capital leases . . . . . . . . . . . . . . . . . . . . . . . . 1,032 2,897
-------- --------
172,481 127,250
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 753 4,035
-------- --------
$171,728 $123,215
-------- --------
-------- --------
<FN>
(1) THE COMMERCIAL PAPER HAS BEEN CLASSIFIED AS LONG-TERM DEBT IN ACCORDANCE
WITH THE COMPANY'S INTENTION AND ABILITY TO REFINANCE SUCH OBLIGATIONS ON A
LONG-TERM BASIS. THE AVERAGE INTEREST RATE OF COMMERCIAL PAPER OUTSTANDING
AT DECEMBER 31, 1994, WAS 6 PERCENT. THE MAXIMUM OUTSTANDING AT ANY
MONTH-END DURING 1994 WAS $145,316,000, AND THE AVERAGE OUTSTANDING DURING
1994 WAS $133,963,000. THE WEIGHTED-AVERAGE INTEREST RATE DURING 1994 WAS
4 1/2 PERCENT.
</TABLE>
- --------------------------------------------------------------------------------
NOTE 11 - INCOME TAXES
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. income before income taxes. . . . . . . . . . . . . . . . . . $111,217 $72,643 $80,554
Non-U.S. income before income taxes. . . . . . . . . . . . . . . . 10,108 5,404 11,882
Consolidating eliminations . . . . . . . . . . . . . . . . . . . . (3,231) (3,670) (2,150)
-------- ------- -------
Income before income taxes . . . . . . . . . . . . . . . . . . . . $118,094 $74,377 $90,286
-------- ------- -------
-------- ------- -------
Income tax expense consists of the following components:
Current tax expense:
U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,053 $31,578 $27,498
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,947 1,544 3,429
State and local. . . . . . . . . . . . . . . . . . . . . . . . 4,144 4,234 2,996
-------- ------- -------
Total current tax expense. . . . . . . . . . . . . . . . . . 39,144 37,356 33,923
-------- ------- -------
Deferred (prepaid) tax expense:
U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . 5,349 (7,408) (1,395)
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . (277) 180
State. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807 (1,371) 292
-------- ------- -------
Total deferred (prepaid) tax expense . . . . . . . . . . . . 6,156 (9,056) (923)
-------- ------- -------
Total income tax expense . . . . . . . . . . . . . . . . . $ 45,300 $28,300 $33,000
-------- ------- -------
-------- ------- -------
</TABLE>
36
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below.
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowances for
returns and doubtful accounts. . . . . . . . . . . . . . . . . . . . . . . . $ 6,180 $ 2,538 $ 2,278
Inventories, principally due to additional costs inventoried for
tax purposes pursuant to the Tax Reform Act of 1986. . . . . . . . . . . . . 7,685 5,876 5,110
Employee compensation and benefits accrued for financial
reporting purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,340 9,861 5,745
Restructuring costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743 9,374
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,997 785 1,477
------- ------- -------
Deferred tax assets (included in prepaid expenses and
deferred charges). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,945 $28,434 $14,610
------- ------- -------
------- ------- -------
Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation,
capitalized interest, and capitalized overhead . . . . . . . . . . . . . . . $54,058 $47,945 $44,370
Noncurrent employee compensation and benefits accrued for
financial reporting purposes . . . . . . . . . . . . . . . . . . . . . . . . (15,513) (13,867) (10,649)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,468 1,735 (380)
------- ------- -------
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,013 $35,813 $33,341
------- ------- -------
------- ------- -------
</TABLE>
The Company's effective tax rate differs from the federal statutory rate
due to the following items:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
% of Income % of Income % of Income
Amount Before Tax Amount Before Tax Amount Before Tax
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax
expense on income before
taxes at statutory rate. . . . . . . . . . . $41,333 35.0% $26,032 35.0% $30,697 34.0%
Increase (decrease) in taxes
resulting from:
Adjustment to deferred tax assets
and liabilities for enacted
changes in tax rates . . . . . . . . . . . 385 0.5
State and local income taxes net of
federal income tax benefit . . . . . . . . 3,218 2.7 1,861 2.5 2,170 2.4
Foreign tax rate differential. . . . . . . . 126 0.1 (802) (1.1) (951) (1.0)
Minority interest. . . . . . . . . . . . . . 1,183 1.0 826 1.1 1,173 1.3
Miscellaneous items. . . . . . . . . . . . . (560) (0.4) (2) (89) (0.1)
------- ----- ------- ----- ------- -----
Actual income tax expense. . . . . . . . . . . $45,300 38.4% $28,300 38.0% $33,000 36.6%
------- ------ ------- ---- ------- ----
------- ----- ------- ------ ------- ----
</TABLE>
The Company's federal income tax returns for the years prior to 1989 have
been audited and completely settled.
Provision has not been made for U.S. or additional foreign taxes on
$69,447,000 of undistributed earnings of foreign subsidiaries because those
earnings are considered to be permanently reinvested in the operations of those
subsidiaries. It is not practicable to estimate the amount of tax that might be
payable on the eventual remittance of such earnings.
37
<PAGE>
- --------------------------------------------------------------------------------
NOTE 12 - SEGMENTS OF BUSINESS
The Company operates principally in two businesses (Flexible Packaging
Products and Specialty Coated and Graphics Products) and three geographical
areas (U.S., Canada, and Europe). A description of the Company's lines of
business begins on page four of the Annual Report.
<TABLE>
<CAPTION>
LINES OF BUSINESS
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- -------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES TO UNAFFILIATED CUSTOMERS:
Flexible Packaging . . . . . . . . . . . . $ 978.8 $ 905.3 $ 858.8
Specialty Coated and Graphics. . . . . . . 415.3 300.5 324.3
INTERSEGMENT SALES:
Flexible Packaging . . . . . . . . . . . . (0.3) (0.2) (0.1)
Specialty Coated and Graphics. . . . . . . (3.3) (2.1) (1.7)
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . $1,390.5 $1,203.5 $1,181.3
-------- -------- --------
-------- -------- --------
OPERATING PROFIT:
Flexible Packaging . . . . . . . . . . . . $ 107.6 $ 73.7 $ 79.2
Specialty Coated and Graphics. . . . . . . 43.7 28.4 40.2
-------- -------- --------
Total operating profit(1). . . . . . . . 151.3 102.1 119.4
General corporate expenses . . . . . . . . (21.4) (18.1) (18.1)
Interest expense . . . . . . . . . . . . . (8.4) (7.2) (7.5)
Minority interest in net income. . . . . . (3.4) (2.4) (3.5)
-------- -------- --------
Income before income taxes . . . . . . . $ 118.1 $ 74.4 $ 90.3
-------- -------- --------
-------- -------- --------
IDENTIFIABLE ASSETS:
Flexible Packaging . . . . . . . . . . . . $ 638.2 $ 551.9 $ 511.7
Specialty Coated and Graphics. . . . . . . 229.9 186.7 203.2
-------- -------- --------
Total identifiable assets(2) . . . . . . 868.1 738.6 714.9
Corporate assets(3). . . . . . . . . . . . 55.2 51.2 27.8
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . $ 923.3 $ 789.8 $ 742.7
-------- -------- --------
-------- -------- --------
DEPRECIATION AND AMORTIZATION:
Flexible Packaging . . . . . . . . . . . . $ 36.9 $ 34.0 $ 35.2
Specialty Coated and Graphics. . . . . . . 13.7 11.8 11.9
Corporate. . . . . . . . . . . . . . . . . 1.2 1.2 1.2
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . $ 51.8 $ 47.0 $ 48.3
-------- -------- --------
-------- -------- --------
EXPENDITURES FOR PROPERTY
AND EQUIPMENT:
Flexible Packaging . . . . . . . . . . . . $ 81.3 $ 52.6 $ 59.0
Specialty Coated and Graphics. . . . . . . 10.2 7.0 10.9
Corporate. . . . . . . . . . . . . . . . . 1.6 1.1 0.8
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . $ 93.1 $ 60.7 $ 70.7
-------- -------- --------
-------- -------- --------
<CAPTION>
OPERATIONS BY GEOGRAPHIC AREAS
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- -------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES TO
UNAFFILIATED CUSTOMERS:
United States. . . . . . . . . . . . . . . $1,209.5 $1,031.6 $ 975.8
Canada . . . . . . . . . . . . . . . . . . 42.7 42.4 47.3
Europe . . . . . . . . . . . . . . . . . . 158.5 147.6 175.9
Other. . . . . . . . . . . . . . . . . . . 0.2
Eliminations . . . . . . . . . . . . . . . (20.4) (18.1) (17.7)
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . $1,390.5 $1,203.5 $1,181.3
-------- -------- --------
-------- -------- --------
OPERATING PROFIT:
United States. . . . . . . . . . . . . . . $ 136.8 $ 96.8 $ 106.1
Canada . . . . . . . . . . . . . . . . . . 4.3 2.7 3.2
Europe . . . . . . . . . . . . . . . . . . 11.6 5.6 12.8
Other. . . . . . . . . . . . . . . . . . . (0.1)
Eliminations . . . . . . . . . . . . . . . (1.3) (3.0) (2.7)
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . $ 151.3 $ 102.1 $ 119.4
-------- -------- --------
-------- -------- --------
IDENTIFIABLE ASSETS:
United States. . . . . . . . . . . . . . . $ 741.6 $ 608.6 $ 566.1
Canada . . . . . . . . . . . . . . . . . . 24.4 29.4 31.9
Europe . . . . . . . . . . . . . . . . . . 110.4 107.6 122.3
Other. . . . . . . . . . . . . . . . . . . 0.8
Eliminations . . . . . . . . . . . . . . . (9.1) (7.0) (5.4)
-------- -------- --------
Total. . . . . . . . . . . . . . . . . . $ 868.1 $ 738.6 $ 714.9
-------- -------- --------
-------- -------- --------
<FN>
(1) Operating profit is total revenue less operating expenses.
(2) Identifiable assets by lines of business include only those assets that are
specifically identified with each segment's operations.
(3) Corporate assets are principally cash and short-term investments, prepaid
expenses, and corporate property.
</TABLE>
- --------------------------------------------------------------------------------
NOTE 13 - CONTINGENCIES
The Company is a defendant in lawsuits incidental to its business. The
management of the Company believes, however, that the disposition of these
lawsuits will not have any material effect on the financial position or
operating results of the Company.
38
<PAGE>
NOTE 14 - FOREIGN OPERATIONS
The foreign countries in which the Company conducts operations generally
impose no significant restrictions on transfers of funds. Amounts attributable
to foreign operations included in the consolidated statements are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1994 1993 1992
- --------------------------------------------------------------------
<S> <C> <C> <C>
Net sales of consolidated
foreign subsidiaries . . . . . . . $198,521 $188,559 $223,171
Net income of
consolidated foreign
subsidiaries . . . . . . . . . . . 5,349 3,398 7,547
Foreign earnings in excess
of or (less than) amounts
received . . . . . . . . . . . . . 2,089 (272) 5,397
Equity in net assets . . . . . . . . 78,779 70,153 76,561
Equity in total assets . . . . . . . $133,320 $127,333 $148,525
</TABLE>
- --------------------------------------------------------------------------------
NOTE 15 - FINANCIAL INSTRUMENTS
The Company enters into forward foreign currency exchange contracts to
hedge certain foreign currency denominated receivables and payables. Exchange
gains and losses arising from these transactions are deferred and recognized
when the transaction for which the hedge was obtained is finalized. At December
31, 1994 and 1993, the Company had outstanding forward foreign currency exchange
contracts aggregating $16,127,000 and $15,046,000, respectively. Forward foreign
currency exchange contracts generally have maturities of less than nine months
and relate primarily to major Western currencies. Counterparties to the forward
foreign currency exchange contracts are major financial institutions. Credit
loss from counterparty nonperformance is not anticipated. Based on quoted year
end market prices of forward foreign currency exchange contracts the Company
would have experienced a $52,000 loss at December 31, 1994, and a $211,000 gain
at December 31, 1993, had outstanding contracts been settled at those respective
dates.
At December 31, 1994 and 1993, the carrying value approximates the fair
value of financial instruments such as cash, trade receivables and payables, and
short-term debt because of the short-term maturities of these instruments. The
fair value of the Company's long-term debt, including current maturities but
excluding capitalized leases, is estimated to be $172,277,000 and $125,830,000
at December 31, 1994 and 1993, respectively, using discounted cash flow
analyses, based on the incremental borrowing rates currently available to the
Company for similar debt with similar terms and maturity.
The Company is also a party to letters of credit totaling $8,004,000 and
$8,226,000 at December 31, 1994 and 1993, respectively. In the Company's past
experience, virtually no claims have been made against these financial
instruments. Management does not expect any material losses to result from these
off-balance-sheet instruments because performance is not expected to be
required, and, therefore, is of the opinion that the fair value of these
instruments is zero.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
base and their dispersion across many different industries and countries. As of
December 31, 1994 and 1993, the Company had no significant concentrations of
credit risk.
- --------------------------------------------------------------------------------
NOTE 16 - QUARTERLY FINANCIAL INFORMATION - UNAUDITED
<TABLE>
<CAPTION>
(IN MILLIONS OF DOLLARS EXCEPT EPS)
- -------------------------------------------------------------------------------------------------------------------------------
QUARTERLY
RESULTS Net Sales Gross Profit Net Income Earnings Per Share
- -------------------------------------------------------------------------------------------------------------------------------
% % % %
QUARTER 1994 1993 Change 1994 1993 Change 1994 1993 Change 1994 1993 Change
--------------------------- ------------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First. . . . . . . $ 323.3 $ 292.6 10% $ 72.3 $ 63.8 13% $13.6 $10.7 27% $ .26 $.21 24%
Second . . . . . . 337.7 303.3 11 75.4 68.6 10 18.7 15.5 21 .36 .30 20
Third(A)(B). . . . 356.2 299.5 19 77.1 65.8 17 18.3 1.0 173 .35 .02 165
Fourth . . . . . . 373.3 308.1 21 88.5 79.2 12 22.2 18.9 17 .43 .36 19
--------------------------- ------------------------- ------------------------ -----------------------
Total. . . . . . . 1,390.5 1,203.5 16 313.3 277.4 13 72.8 46.1 58 1.40 .89 57
Cumulative effect on prior years of accounting changes (1.8) (.03)
------------------------ -----------------------
Total Year . . . . $1,390.5 $1,203.5 16% $313.3 $277.4 13% $72.8 $44.3 58% $1.40 $.86 63%
--------------------------- ------------------------- ------------------------ -----------------------
--------------------------- ------------------------- ------------------------ -----------------------
<FN>
(A) DURING THE THIRD QUARTER OF 1993, THE COMPANY RECORDED A $13.1 AFTER-TAX
($.25 PER SHARE) RESTRUCTURING CHARGE.
(B) FEDERAL TAX LAW CHANGES ENACTED IN THE THIRD QUARTER OF 1993, BUT
RETROACTIVE TO THE BEGINNING OF THE YEAR, DECREASED NET INCOME BY $.9 IN
THE THIRD QUARTER AND $1.2 OR $.02 PER SHARE FOR THE YEAR.
</TABLE>
<PAGE>
EXHIBIT 22 - PARENT AND SUBSIDIARIES OF THE REGISTRANT
The Company has no parent. The following were subsidiaries of the Company
as of December 31, 1994.
Percentage of
Voting
Jurisdiction Securities
of Owned By
Name Organization Immediate Parent
- --------------------------------------------------------------------------------
Bemis Company, Inc. (the "Registrant")
Bemis Maral, S.A. Mexico 49%
Bemis Export Co., Ltd. Jamaica 80%
Bemis Canada Limited Canada 100%
Curwood , Inc. Delaware 100%
Curwood Packaging (Canada) Limited Canada 100%
Hayssen Manufacturing Company Delaware 100%
Hayssen Europa Limited United Kingdom 100%
Hayssen Europa G.m.b.H. Germany 100%
Hayssen Europa S.p.A. Italy 100%
Hayssen Mexico S.A. de C.V. Mexico 100%
MacKay Gravure Systems, Inc. Kentucky 100%
Mankato Corporation Delaware 100%
Master Palletizer Systems, Inc. Colorado 100%
Milprint, Inc. Wisconsin 100%
<PAGE>
Percentage of
Voting
Jurisdiction Securities
of Owned By
Name Organization Immediate Parent
- --------------------------------------------------------------------------------
Morgan Adhesives Company Ohio 86.9%
MACtac Europe, S.A. Belgium 100%
Bemis Coordination Center, S.A. Belgium 100%
MACtac Deutschland, G.m.b.H. Germany 100%
MACtac France, S.a.r.L. France 100%
MACtac Scandinavia, A.B. Sweden 100%
MACtac Canada Ltd/Ltee Canada 100%
MACtac U.K. Limited United Kingdom 100%
MACtac, A.G. Switzerland 100%
MACtac Mexico, S.A. Mexico 49%
Accraply, Inc. Ohio 100%
MACtac, Inc. Ohio 100%
Bemis Export Co., Ltd. Jamaica 20%
Pervel Industries, Inc. Delaware 100%
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 1994, Consolidated Statement of Income and Consolidated
Balance Sheet and is qualified in its entirety by reference to such
Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> $ 12,726
<SECURITIES> 0
<RECEIVABLES> 197,164
<ALLOWANCES> 0
<INVENTORY> 168,153
<CURRENT-ASSETS> 418,872
<PP&E> 722,463
<DEPRECIATION> (261,147)
<TOTAL-ASSETS> 923,339
<CURRENT-LIABILITIES> 210,818
<BONDS> 171,728
<COMMON> 5,572
0
0
<OTHER-SE> 412,455
<TOTAL-LIABILITY-AND-EQUITY> 923,339
<SALES> 1,390,459
<TOTAL-REVENUES> 1,390,459
<CGS> 1,077,130
<TOTAL-COSTS> 1,077,130
<OTHER-EXPENSES> (802)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,395
<INCOME-PRETAX> 118,094
<INCOME-TAX> 45,300
<INCOME-CONTINUING> 72,794
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,794
<EPS-PRIMARY> $1.40
<EPS-DILUTED> $1.40
</TABLE>
