<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, 1996
Commission File Number 1-5277
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, par value $.10 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant on March 3, 1997, based on a closing price of $41.25 per share as
reported on the New York Stock Exchange, was $1,996,103,000. As of March 3,
1997, the Registrant had 53,106,940 shares of Common Stock issued and
outstanding.
Documents Incorporated by Reference
-----------------------------------
1996 Annual Report to Shareholders - Part I and Part II
Proxy Statement - Annual Meeting of Stockholders
May 1, 1997 - Part I and Part III
<PAGE>
ITEM 1 - BUSINESS
Bemis Company, Inc., a Missouri corporation (the "Registrant"), 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 selling to customers throughout the
United States, Canada, and Europe with a growing presence in Australia,
Southeast Asia, and Mexico. In 1996, approximately 71% of the Registrant's
sales were derived from Flexible Packaging Products and approximately 29% were
derived from Specialty Coated and Graphics Products.
The primary market for its products is the food industry. Other markets
include companies in chemical, agribusiness, medical, pharmaceutical, sanitary
products, printing, and graphic industries. Further information about the
Registrant's operations in different business segments appearing on page 41 of
the accompanying 1996 Annual Report to Shareholders is expressly incorporated
by reference in this Form 10-K Annual Report.
As of December 31, 1996, the Registrant had approximately 8,900 employees,
of which an estimated 6,000 were classified as production employees. Most of
the production employees are covered by collective bargaining contracts
involving five different international unions and 21 individual contracts with
terms ranging from three to five years. During 1996, five contracts covering
approximately 450 employees at four different locations in the United States
and two contracts covering approximately 115 employees at two locations in
Canada were successfully negotiated. During 1997, four domestic 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 the
Registrant's 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:
FLEXIBLE PACKAGING PRODUCTS
The Registrant and its subsidiaries manufacture a broad range of
industrial and consumer packaging consisting of coated and laminated films,
polyethylene packaging,
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packaging machinery, and industrial and consumer paper bag packaging.
Coated and laminated film products include flexible polymer film
structures and barrier laminates for food, medical, and personal care products
utilizing controlled and modified atmosphere packaging and complementary
packaging machinery systems, with value added through printing. Primary
markets are processed meat, cheese, coffee, condiments, and candy. Additional
products include a full line of blown and cast stretchfilm products, carton
sealing tapes and application equipment for industrial use, and custom
thermoformed plastic packaging. Coated and laminated films accounted for 33
percent, 31 percent, and 31 percent of consolidated net sales for the years
1996, 1995, and 1994, respectively.
Polyethylene packaging consists of mono-layer and co-extruded films,
converted packaging and roll stock, and flexographic line and process printed
packaging for bakery products, seed, retail, lawn and garden, ice, fresh and
frozen produce, candy, sanitary products, and disposable diapers; printed
shrink overwrap for the food and beverage industry; extruded products including
wide width sheeting, bags on a roll, balers, pass-through and stretch
palletizing film, and shrink pallet covers. Polyethylene products accounted
for 19 percent, 17 percent, and 16 percent of consolidated net sales for the
years 1996, 1995, and 1994, respectively.
Packaging machinery products include consumer packaging machinery and
systems for flexible packaging including vertical and horizontal form/fill/seal
pouch packaging; equipment which weighs pieces, powders, and liquids for food,
chemical, and industrial products, and stand-up pouch packaging systems. The
Registrant also makes industrial packaging machinery, including automated bag
handling, weighing, filling, closing, sealing, and palletizing equipment for
multiwall paper open mouth and valve bags, and poly open mouth bags, Bulk-Pak
polyethylene liner insertion equipment for bag-in-box systems, and vertical
form/fill/seal machinery for large bags. Packaging machinery accounted for 5
percent, 8 percent, and 8 percent of consolidated net sales for the years 1996,
1995, and 1994, respectively.
Industrial and consumer paper bag packaging is made up of multiwall and
small paper bags, balers, printed paper roll stock, and bag closing materials
for industrial and consumer packaging products. Flexographic and rotogravure
printing are enhanced with in-line overlaminating capabilities. Innovations in
bag constructions include inner-ply laminations of odor, grease, and moisture
barriers. Primary markets include pet food, seed, chemicals, dairy products,
fertilizers, feed, minerals, flour, rice, sugar, and coffee beans. Sales of
this product line accounted for 14 percent, 15 percent, and 15 percent of
consolidated net sales for the years 1996, 1995, and 1994, respectively.
SPECIALTY COATED AND GRAPHICS PRODUCTS
The Registrant manufactures pressure sensitive materials such as sheet
printing
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products, roll label products, technical products, and graphic films.
Sheet printing products include pressure sensitive paper, film, and foil
sheet printing products and laser printing products for the sheet-fed printing
industry. In addition, the Registrant provides laser printer sheet stocks, pre-
die-cut printing labels, copier labels, data processing labels, and non-impact
printer products, which are designed to run on business equipment such as laser
printers and xerographic copiers.
Roll label products include narrow-web rolls of pressure sensitive film,
paper, and foil printing stocks used in high-speed printing and die-cutting of
primary package labeling, secondary or promotional decoration, and for high-
speed, high-volume data processing (EDP) stocks, bar code inventory control
labels, and numerous laser printing applications.
Technical products are pressure sensitive materials that are technically
engineered for performance in varied industrial applications. They include
micro-thin film adhesives used in delicate electronic parts assembly and
pressure sensitives utilizing foam and tape based stocks to perform fastening
and mounting functions.
Graphic films include pressure sensitive films used for decorative signage
through computer-aided plotters and screen printers, and photographic
overlaminate and mounting materials including optically-clear films with built-
in UV inhibitors. Also included are electronically-produced film color
separations and engravings used in rotogravure and flexographic printing by the
packaging industry.
Speciality Coated and Graphics Products accounted for 29 percent, 28
percent, and 29 percent of consolidated net sales for the years 1996, 1995, and
1994, 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, United Kingdom, Europe, Scandinavia, Australia,
Southeast Asia, and Mexico to provide prompt and economical service to more
than 30,000 customers. The Registrant's technically trained 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 both 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.
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Areas of competition include price, innovation, quality, and service. This
competition is significant as to both the size and the number of competing
firms.
Major competitors in the Flexible Packaging Products segment include
American National Can Company, Printpack, Inc., Cryovac, a division of W.R.
Grace & Co., Huntsman Chemical Corporation, AEP Industries, Inc., Stone
Container Corporation, and Union Camp Corporation. In the Specialty Coated and
Graphics Products segment major competitors include Avery Dennison Corporation,
Flexcon Co., Inc., Minnesota Mining and Manufacturing Company, Jackstadt GmbH
(Germany), and Haarla (Finland).
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
Research and development expenditures were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------------
<S> <C> <C> <C>
Flexible Packaging Products $ 8,523,000 $ 8,813,000 $ 9,132,000
Specialty Coated and Graphics Products 5,132,000 4,790,000 3,992,000
----------- ----------- -----------
Total $13,655,000 $13,603,000 $13,124,000
----------- ----------- -----------
----------- ----------- -----------
</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.
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<PAGE>
ITEM 2 - PROPERTIES
Properties utilized by the Registrant and its subsidiaries at December 31,
1996, were as follows:
FLEXIBLE PACKAGING PRODUCTS
The Registrant has 33 manufacturing plants located in 14 states and
three foreign countries, of which 25 are owned directly by the Registrant or
its subsidiaries and eight are leased from outside parties. Leases generally
provide for minimum terms of three to 20 years and have one or more renewal
options. The initial terms of leases in effect at December 31, 1996, expire
between 1997 and 2010.
SPECIALTY COATED AND GRAPHICS PRODUCTS
The Registrant has ten manufacturing plants located in five states and two
foreign countries, of which seven are owned directly by the Registrant or its
subsidiaries and three are leased from outside parties. Leases generally
provide for minimum terms of three to 25 years and have one or more renewal
options. The initial terms of leases in effect as of December 31, 1996, expire
between 1999 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. Although it is
difficult to predict the ultimate outcome of these cases, management believes,
based on consultation with counsel, that any ultimate liability would not 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
eighteen 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, the Registrant has full insurance protection at eight of these sites
and 50% insurance protection at three of these sites. The Registrant has
reserved an amount that it believes to be adequate to cover its exposure.
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ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The information required by this item appearing on pages 1 and 24 of the
accompanying 1996 Annual Report to Shareholders is expressly incorporated by
reference in this Form 10-K Annual Report.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item appearing on page 25 of the
accompanying 1996 Annual Report to Shareholders is expressly 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 22 to 24 of the
accompanying 1996 Annual Report to Shareholders is expressly 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, 1997, and the quarterly data appearing on
pages 26 to 42 of the accompanying 1996 Annual Report to Shareholders are
expressly 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, and 7 of this Form 10-K, the 1996 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
Not applicable.
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ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required to be submitted in response to this item with
respect to directors is omitted because a definitive proxy statement containing
such information will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days after December 31, 1996, and such
information is expressly incorporated herein by reference.
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 64 Vice President and Controller 1982 to present
Jeffrey H. Curler 46 President 1996 to present
Executive Vice President 1991 to 1995
Chairman - Curwood, Inc. (1) 1995 to present
President - Curwood, Inc. (1) 1982 to 1995
Benjamin R. Field, III 58 Senior Vice President, Chief
Financial Officer and Treasurer 1992 to present
Vice President and Treasurer 1982 to 1992
Scott W. Johnson 56 Senior Vice President, General
Counsel and Secretary 1992 to present
Vice President - General Counsel
and Secretary 1988 to 1992
Robert F. Mlnarik 55 Vice Chairman 1996 to present
Executive Vice President 1991 to 1995
President and Chief Executive
Officer - Morgan Adhesives Co. (2) 1987 to present
John H. Roe 57 Chairman and Chief Executive Officer 1996 to present
President and Chief Executive Officer 1990 to 1995
Lawrence E. Schwanke 56 Vice President - Human Resources 1990 to present
</TABLE>
___________
(1) Curwood, Inc. is a 100 percent owned subsidiary of the Registrant.
(2) Morgan Adhesives Co. is an 86.9 percent owned subsidiary of the Registrant.
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<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION
The information required to be submitted in response to this item is
omitted because a definitive proxy statement containing such information will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days after December 31, 1996, and such information is expressly
incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information required to be submitted in response to this item is
omitted because a definitive proxy statement containing such information will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days after December 31, 1996, and such information is expressly
incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required to be submitted in response to this item is
omitted because a definitive proxy statement containing such information will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days after December 31, 1996, and such information is expressly
incorporated herein by reference.
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of the report:
Pages in
Annual Report*
--------------
(1) FINANCIAL STATEMENTS:
Report of Independent Accountants...................... 26
Consolidated Statement of Income for
the Three Years Ended December 31, 1996.............. 27
Consolidated Balance Sheet
at December 31, 1996 and 1995........................ 28-29
Consolidated Statement of Cash Flows for
the Three Years Ended December 31, 1996.............. 30-31
Consolidated Statement of Stockholders' Equity
for the Three Years Ended December 31, 1996.......... 32
Notes to Consolidated Financial Statements ............ 33-42
_____________
*Incorporated by reference from the indicated pages of the 1996
Annual Report to Shareholders, a copy of which is filed
herewith as Exhibit 13.
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<PAGE>
<TABLE>
<CAPTION>
Pages in
Form 10-K
---------
<S> <C>
(2) FINANCIAL STATEMENT SCHEDULES FOR YEARS 1996, 1995, AND 1994
Report of Independent Accountants on Financial Statement
Schedules for the Three Years Ended December 31, 1996........... 12
Schedule V - Property and Equipment............................ 15-17
Schedule VI - Accumulated Depreciation
of Property and Equipment....................... 18-20
Schedule VIII - Valuation and Qualifying Accounts and
Reserves........................................ 21
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.
(3) EXHIBITS
3(a) Restated Articles of Incorporation of the Registrant,
as amended. (1)
3(b) By-Laws of the Registrant, as amended. (4)
4(a) Rights Agreement, dated as of August 3, 1989, between the
Registrant and Norwest Bank Minnesota, National
Association. (2)
4(b) Form of Indenture dated as of June 15, 1995, between the
Registrant and First Trust National Association, as
Trustee. (5)
10(a) Bemis Company, Inc. 1987 Stock Option Plan. * (1)
10(b) Bemis Company, Inc. 1994 Stock Incentive Plan. * (3)
10(c) Bemis Company, Inc. 1984 Stock Award Plan. * (4)
10(d) Bemis Retirement Plan, as amended effective January 1,
1994. * (4)
10(e) Bemis Company, Inc. Supplemental Retirement Plan dated
October 20, 1988. * (4)
10(f) Bemis Executive Incentive Plan dated April 1, 1990. * (4)
10(g) Bemis Company, Inc. Long Term Deferred Compensation
Plan. * (4)
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<PAGE>
10(h) Amended and Restated Credit Agreement among the Registrant,
the Banks Listed therein and Morgan Guaranty Trust Company
of York, as Agent, originally dated as of August 1, 1986,
Amended and Restated as of August 1, 1991, as amended by
Amendment No. 1 dated as of May 1, 1992, as amended by
Amendment No. 2 dated December 1, 1992, as amended by
Amendment No. 3 dated January 22, 1993, as amended by
Amendment No. 4 dated March 15, 1994, as amended by
Amendment No. 5 dated June 1, 1994; and as amended by
Amendment No. 6 dated February 1, 1995. (4)
13 1996 Annual Report to Shareholders
22 Subsidiaries of the Registrant
27 Financial Data Schedule (EDGAR electronic filing only).
(b) There were no reports on Form 8-K filed during the fourth
quarter ended December 31, 1996.
_____________
* Management contract, compensatory plan or arrangement filed
pursuant to Rule 601(b)(10)(iii)(A) of Regulation S-K under
the Securities Exchange Act of 1934.
(1) Incorporated by reference to the Registrant's Registration
Statement on Form S-8 (File No. 33-50560).
(2) Incorporated by reference to the Registrant's Registration
Statement on Form 8-A dated August 4, 1989 (File No. 0-1387).
(3) Incorporated by reference to the Registrant's Registration
Statement on Form S-8 (File No. 33-80666).
(4) Incorporated by reference to the Registrant's Annual Report on
Form 10-K/A for the year ended December 31, 1994 (File No.
1-5277).
(5) Incorporated by reference to the Registrant's Current Report on
Form 8-K dated June 30, 1995 (File No. 1-5277).
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<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, 1997, appearing on page 26 of the 1996 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, 1997
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (number 2-61796)
and Form S-3 (number 33-60253) of Bemis Company, Inc. of our report dated
January 23, 1997, appearing on page 26 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, 1997
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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/ Benjamin R. Field, III By /s/ LeRoy F. Bazany
------------------------------------ ------------------------------
Benjamin R. Field, III, Senior Vice LeRoy F. Bazany, Vice
President, Chief Financial Officr President and Controller
and Treasurer
Date March 3, 1997 Date March 3, 1997
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/ Jeffrey H. Curler /s/ Winslow H. Buxton
- ------------------------------- ------------------------------
Jeffrey H. Curler, Winslow H. Buxton, Director
President and Director
Date March 3, 1997 Date March 3, 1997
/s/ John H. Roe /s/ Loring W. Knoblauch
- ------------------------------- ------------------------------
John H. Roe, Chairman and Chief Loring W. Knoblauch, Director
Executive Officer; Director
Date March 3, 1997 Date March 3, 1997
/s/ Robert A. Greenkorn /s/ Angus Wurtele
- ------------------------------- ------------------------------
Robert A. Greenkorn, Director Angus Wurtele, Director
Date March 3, 1997 Date March 3, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS FORM OF FILING
- -------- --------------
<S> <C> <C>
3(a) Restated Articles of Incorporation of the Registrant, as amended. (1)
3(b) By-Laws of the Registrant, as amended. (4)
4(a) Rights Agreement, dated as of August 3, 1989, between the Registrant
and Norwest Bank Minnesota, National Association. (2)
4(b) Form of Indenture dated as of June 15, 1995, between the Registrant and
First Trust National Association, as Trustee. (5)
10(a) Bemis Company, Inc. 1987 Stock Option Plan. * (1)
10(b) Bemis Company, Inc. 1994 Stock Incentive Plan. * (3)
10(c) Bemis Company, Inc. 1984 Stock Award Plan. * (4)
10(d) Bemis Retirement Plan, as amended effective January 1, 1994. * (4)
10(e) Bemis Company, Inc. Supplemental Retirement Plan dated
October 20, 1988. * (4)
10(f) Bemis Executive Incentive Plan dated April 1, 1990. * (4)
10(g) Bemis Company, Inc. Long Term Deferred Compensation Plan. * (4)
10(h) Amended and Restated Credit Agreement among the Registrant, the
Banks Listed therein and Morgan Guaranty Trust Company of New York
as Agent, originally dated as of August 1, 1986, Amended and
Restated as of August 1, 1991, as amended by Amendment No. 1 dated
as of May 1, 1992, as amended by Amendment No. 2 dated December 1,
1992, as amended by Amendment No. 3 dated January 22, 1993,
as amended by Amendment No. 4 dated March 15, 1994, as amended
by Amendment No. 5 dated June 1, 1994; and as amended by
Amendment No. 6 dated February 1, 1995. (4)
13 1996 Annual Report to Shareholders Electronic/EDGAR
22 Subsidiaries of the Registrant Electronic/EDGAR
27 Financial Data Schedule (EDGAR electronic filing only). Electronic/EDGAR
</TABLE>
__________________
* Management contract, compensatory plan or arrangement filed pursuant
to Rule 601(b)(10)(iii)(A) of Regulation S-K under the Securities
Exchange Act of 1934.
(1) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (File No. 33-50560).
(2) Incorporated by reference to the Registrant's Registration Statement
on Form 8-A dated August 4, 1989 (File No. 0-1387).
(3) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (File No. 33-80666).
(4) Incorporated by reference to the Registrant's Annual Report on Form
10-K/A for the year ended December 31, 1994 (File No. 1-5277).
(5) Incorporated by reference to the Registrant's Current Report on Form
8-K dated June 30, 1995 (File No. 1-5277).
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BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
(in thousands of dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------
Deductions
Additions at Cost ------------------------ Other
------------------ Fully Changes Translation
Balance at Business Depreciated Debit Adjustment Balance
Beginning Acquisi- Retirements Assets (Credit) Debit at Close
of Year Normal tion or Sales Written Off (1) (Credit) of Year
--------- ------ ---- -------- ----------- ------- --------- -------
Owned Property and Equipment
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land and land improvements $ 11,445 $ 873 $ 26 $ 316 $ 121 18 $ (53) $ 11,872
Buildings 176,669 18,611 1,980 5,790 2,575 (378) (1,536) 186,981
Leasehold improvements 1,992 180 898 159 4 90 2,997
Machinery and equipment 629,178 92,286 8,875 6,743 27,723 360 (2,254) 693,979
-------- -------- ------- ------- ------- ---- ------- --------
$819,284 $111,950 $11,779 $13,008 $30,423 $ 0 $(3,753) $895,829
-------- -------- ------- ------- ------- ----- ------- --------
-------- -------- ------- ------- ------- ----- ------- --------
Leased Property and Equipment
- -----------------------------
Machinery and equipment 34 34
-------- --------
$ 34 $ 34
-------- --------
-------- --------
</TABLE>
(1) Reclassifications.
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BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
(in thousands of dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------------------------------
Deductions
Additions at Cost ------------------------
------------------ Fully Translation
Balance at Business Depreciated Adjustment Balance
Beginning Acquisi- Retirements Assets Debit at Close
of Year Normal tion or Sales Written Off (Credit) of Year
--------- ------ ---- -------- ----------- --------- -------
Owned Property and Equipment
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land and land improvements $ 11,257 $ 87 $ 216 $ 52 $ 113 $ 50 $ 11,445
Buildings 149,597 11,926 13,776 96 225 1,691 176,669
Leasehold improvements 1,879 186 84 11 1,992
Machinery and equipment 558,637 81,416 21,294 1,420 34,497 3,748 629,178
-------- ------- ------- -------- ------- ------ --------
$721,370 $93,615 $35,286 $ 1,568 $34,919 $5,500 $819,284
-------- ------- ------- -------- ------- ------ --------
-------- ------- ------- -------- ------- ------ --------
Leasehold Property and Equipment
- --------------------------------
Buildings $ 1,064 $ 1,064 $ 0
Machinery and equipment 29 18 13 34
-------- ------- -------- ------- --------
$ 1,093 $ 18 $ 1,064 $ 13 $ 34
-------- ------- -------- ------- --------
-------- ------- -------- ------- --------
</TABLE>
- 16 -
<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 Business Depreciated Adjustment Balance
Beginning Acquisi- Retirements Assets Debit at Close
of Year Normal tion or Sales Written Off (Credit) of Year
--------- ------ ---- -------- ----------- --------- -------
Owned Property and Equipment
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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>
- 17 -
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(in thousands of dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------------------------
Deductions
Additions at Cost ------------------------ Other
-------------------- Fully Changes Translation
Balance at Charged Business Depreciated Debit Adjustment Balance
Beginning to Profit Acquisi- Retirements Assets (Credit) Debit at Close
of Year and Loss tion or Sales Written Off (1) (Credit) of Year
--------- ------ ---- -------- ----------- ------- --------- -------
Owned Property and Equipment
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land improvements $ 2,031 $ 221 $ 55 $ 121 $ 2,076
Buildings 46,951 5,472 2,724 2,575 2 519 46,603
Leasehold improvements 781 225 289 49 4 (17) 1,259
Machinery and equipment 234,990 58,034 2,053 3,540 27,723 (2) 1,403 262,413
-------- --------- --------- -------- ------- ------ -------- --------
$284,753 $ 63,952 $ 2,342 $ 6,368 $30,423 $ 0 $ 1,905 $312,351
-------- --------- --------- -------- ------- ------ -------- --------
-------- --------- --------- -------- ------- ------ -------- --------
Leased Property and Equipment
- -----------------------------
Machinery 14 7 21
-------- --------- --------
$ 14 $ 7 $ 21
-------- --------- --------
-------- --------- --------
</TABLE>
(1) Reclassifications.
- 18 -
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(in thousands of dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------------------------------
Deductions
------------------------ Other
Fully Changes Translation
Balance at Charged Depreciated Debit Adjustment Balance
Beginning to 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 $ 1,916 $ 227 $ 1 $ 113 $ (2) $ 2,031
Buildings 40,868 5,014 68 225 (700) (662) 46,951
Leasehold improvements 667 193 1 84 (6) 781
Machinery and equipment 217,445 51,505 769 34,497 700 (2,006) 234,990
-------- ------- ------- ------- ------ -------- --------
$260,896 $56,939 $ 839 $34,919 $ 0 $(2,676) $284,753
-------- ------- ------- ------- ------ -------- --------
-------- ------- ------- ------- ------ -------- --------
Leased Property and Equipment
- -----------------------------
Buildings $ 229 $ 229 $ 0
Machinery and equipment 22 5 13 14
-------- ------- ------- ------- --------
$ 251 $ 5 $ 229 $ 13 $ 14
-------- ------- ------- ------- --------
-------- ------- ------- ------- --------
</TABLE>
1) Reclassifications.
- 19 -
<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 Depreciated Adjustment Balance
Beginning to 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>
- 20 -
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands of dollars)
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------
Balance at Additions Balance
Beginning Charged to Accounts at Close
of Year Profit & Loss Written Of of Year
---------- ------------- ---------- ---------
Reserves for doubtful
accounts and allowances $11,437 $2,766 $2,571(1) $11,632
------- ------ -------- -------
------- ------ -------- -------
YEAR ENDED DECEMBER 31, 1995
------------------------------------------------
Balance at Additions Balance
Beginning Charged to Accounts at Close
of Year Profit & Loss Written Of of Year
---------- ------------- ---------- ---------
Reserves for doubtful
accounts and allowances $11,811 $ 714 $1,088(2) $11,437
------- ------ -------- -------
------- ------ -------- -------
YEAR ENDED DECEMBER 31, 1994
------------------------------------------------
Balance at Additions Balance
Beginning Charged to Accounts at Close
of Year Profit & Loss Written Of of Year
---------- ------------- ---------- ---------
Reserve for doubtful
accounts and allowances $9,228 $4,059 $1,476(3) $11,811
------ ------ -------- -------
------ ------ -------- -------
(1) Net of $161 collections on accounts previously written off.
(2) Net of $33 collections on accounts previously written off.
(3) Net of $103 collections on accounts previously written off.
BEMIS COMPANY, INC. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(in thousands of dollars)
1996 1995 1994
---- ---- ----
Maintenance and repairs $56,584 $46,623 $40,565
------- ------- -------
------- ------- -------
- 21 -
<PAGE>
FINANCIAL HIGHLIGHTS BEMIS COMPANY, INC.
(IN THOUSANDS, EXCEPT PERCENTS, RATIOS, PER AND SUBSIDIARIES
SHARE AMOUNTS, STOCKHOLDERS, AND EMPLOYEES)
<TABLE>
%
1996 1995 Change
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and Earnings:
Net Sales................................. $1,655,431 $1,523,390 9%
Income Before Taxes....................... 162,781 136,110 20
Income Taxes.............................. 61,700 50,900
Net Income................................ 101,081 85,210 19
- --------------------------------------------------------------------------------------
Per Share:
Net Income................................ $ 1.90** $ 1.63 17%
Dividends Paid............................ .72 .64 13
Book Value................................ 10.83 9.76 11
- --------------------------------------------------------------------------------------
Ratios:
Net Income to Net Sales................... 6.1% 5.6%
Return on Average Common Equity........... 18.7% 18.3%
Return on Average Total Capital........... 13.7% 13.5%
Total Debt to Total Capital............... 28.3% 23.3%
Current Ratio............................. 2.2 2.0
- --------------------------------------------------------------------------------------
Additional Information:
Cash Flow Provided by Operations.......... $ 179,259 $ 155,480 15%
Capital Expenditures...................... 111,950 93,615 20
Stock PE Range............................ 14-20 14-18
Average Common Shares Outstanding
for Computation of EPS.................. 53,252 52,311 2
Common Shares Outstanding at Year-End..... 52,361 52,567
Number of Common Stockholders............. 5,947 5,711 4
Number of Employees....................... 8,876 8,515 4
</TABLE>
[CHARTS]
1
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
SUMMARY
In 1996 the Company focused on expanding its core businesses by both
internal investment and acquisitions. Capital expenditures for the year were
a record $112 million, compared to $94 million in 1995, and $93 million in
1994. The major part of the investment went into the Company's key flexible
plastic packaging and pressure sensitive materials operations, and was used
to expand the capacity and capabilities of these businesses.
In April of 1996, the Company acquired the Perfecseal Healthcare
Packaging Division of PM Co., a leading producer of flexible packaging for
the disposable sterile medical device industry with approximately $65 million
in sales. This acquisition complements Bemis' medical packaging activities
and provides new products and technology as well as a strong customer base.
In November of 1996, the Company announced an agreement in principal to
acquire Paramount Packaging, a flexible packaging firm with $130 million in
sales and a strong market position in the confectionery and disposable diaper
packaging markets. This acquisition was subsequently completed in January of
1997.
The Company sold a division of its Hayssen packaging machinery business
in January of 1996. This operation had sales of approximately $30 million.
Overall results for the year were quite positive with net sales of $1.66
billion, up 9 percent over 1995, and 19 percent over 1994. Sales for the year
were affected by the acquisition of Banner Packaging in October of 1995 and
Perfecseal in April of 1996 and the sale of a Hayssen division in January of
1996. Excluding the effect of these transactions, net sales increased 4
percent. Net income for the same period was $98.5 million, excluding a $2.6
million gain on the sale of the Hayssen division, and was up 16 percent over
1995 and 35 percent over 1994. On the same basis, earnings per share for
1996 were $1.85, up 13 percent over 1995 and 32 percent over 1994.
THREE-YEAR REVIEW OF RESULTS
PERCENT
- ------------------------------------------------------------
1996 1995 1994
----- ----- -----
Net Sales 100.0% 100.0% 100.0%
Cost of products sold 76.9 77.7 77.5
----- ----- -----
Gross margin 23.1 22.3 22.5
Selling, general, and
administrative expenses 11.6 11.7 12.3
All other expenses 1.7 1.7 1.7
----- ----- -----
Income before income taxes 9.8 8.9 8.5
Income taxes 3.7 3.3 3.3
----- ----- -----
Net income 6.1% 5.6% 5.2%
----- ----- -----
----- ----- -----
Effective tax rate 37.9% 37.4% 38.4%
Sales for both segments, Flexible Packaging and Specialty Coated and
Graphics Products, increased over the prior year's results in both 1996 and
1995. Raw material prices in both segments were generally lower during much
of 1996 compared to the prior year, and this effect tended to moderate the
growth in sales as selling prices broadly reflect raw material costs in these
businesses. Unit volumes, however, were quite strong in the Company's key
businesses. Sales growth in 1995 was generally helped by higher raw
materials price levels compared to 1994. In 1996, Flexible Packaging sales
benefited from the acquisitions described above. In 1995, Banner Packaging's
sales for the fourth quarter were included in the year's total, thereby
slightly increasing sales levels compared to 1994. In 1996, Specialty Coated
and Graphics Products sales were enhanced by very strong demand late in the
year compared to 1995, and 1995 sales grew at a less rapid pace over 1994 due
to a weakening in demand in 1995 as well as reduced economic activity in
Europe.
Operating profits in both business segments improved in both 1996 and
1995 as did profit margins. Flexible Packaging operating profits were $134.1
million in 1996, or 11.4 percent of sales, compared to $123.0 million, or
11.3 percent of sales in 1995. Profit margins for this segment in 1994 were
11.0 percent of sales. In Specialty Coated and Graphics Products, operating
profits were $60.5 million, or 12.7 percent of sales, compared to 10.7
percent of sales in 1995. The improvement in margins resulted from a better
mix of products, and improved plant efficiencies toward the end of the year.
In 1995, margins were 10.7 percent of sales compared to 10.6 percent in 1994.
FORWARD LOOK
We are enthusiastic about the progress of the Company and its future and
enter 1997 with good momentum. Our capital expenditure program and recent
acquisitions have added increased capacity and improved technology to our
business and are enabling the Company to increase its penetration in key
markets with key customers.
COSTS AND EXPENSES
Cost of Products Sold as a percentage of Net Sales decreased to 76.9
percent for 1996 compared to 77.7 percent for 1995 and 77.5 percent for 1994.
Sharp raw material
22
<PAGE>
price increases experienced in 1994 were partially reversed in 1995 and 1996
resulting in improved Cost of Products Sold percentages in 1996.
Selling, General, and Administrative Expense increased in absolute
dollars in 1996 and 1995 but declined as a percent of sales due to business
acquisitions, improving European business conditions, and higher sales
volume. Actual expense for 1996 increased $14.8 million or 8.3 percent
compared to 1995, and $6.8 million or 4 percent for 1995 versus 1994.
Research and Development Expense was $13.7 million in 1996, $13.6
million in 1995, and $13.1 million in 1994. The slight increase in 1996 is
net of the impact of the disposition of a portion of our packaging machinery
business.
Interest Expense was $13.4 million for 1996, compared to $11.5 million
in 1995 and $8.4 million in 1994. Higher debt levels resulted in the
increase in 1996 compared to 1995 whereas higher average interest rates
primarily caused the increase in 1995 compared to 1994. The increased debt
level was due to higher working capital to support rising business activity
and capital expenditures together with our business acquisition efforts.
Higher rates during 1995 were due to a combination of market factors and the
transfer, in 1995, of $100 million of Commercial Paper to 6.7 percent Notes
Payable due in 2005.
Other (Income) Costs reflect income of $5.5 million for 1996 versus $3.1
million in 1995 and $.8 million in 1994. The gain realized on the sale of a
division of Hayssen packaging machinery business generated the 1996 increase.
The lower income for 1994 compared to 1995 relates primarily to differences
in exchange losses on foreign currency transactions of $1.2 million in 1994
versus $.1 million in 1995, and income in 1995 related to a minority equity
investment, the balance of which was acquired in the fourth quarter of 1995.
RETURN ON INVESTMENT
Return on average common stockholders' equity in 1996 was 18.7 percent
compared to 18.3 percent in 1995 and 18.5 percent in 1994.
Operating profit as a percent of average investment, which appears in
the Five-Year Summary on page five, was 22.0 percent in 1996, compared to
21.4 percent in 1995 and 22.9 percent in 1994. The return in Flexible
Packaging was 19.6 percent in 1996 compared to 20.1 percent in 1995 and 21.8
percent in 1994. The return in Specialty Coated and Graphics Products was
30.0 percent in 1996 compared to 25.7 percent in 1995 and 26.1 percent in
1994.
Return on average total capital was 13.7 percent in 1996, 13.5 percent
in 1995 and 13.4 percent in 1994. 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 1996 were $112.0 million compared to $93.6
million in 1995 and $93.1 million in 1994, including capitalized interest of
$.8 million, $.7 million, and $.7 million for 1996, 1995, and 1994,
respectively. In 1997 management anticipates expenditures to exceed $115
million. The bulk of these expenditures, made from internally generated
funds, will be for continued expansion of the Company's growth businesses,
with major equipment purchases planned for both the coated and laminated film
and polyethylene packaging businesses and the completion of a major plant
expansion for our European pressure sensitive business.
CAPITAL STRUCTURE, LIQUIDITY, AND CASH FLOW
Stockholders' equity increased in 1996 to $567.1 million, up from $512.8
million in 1995 and $418.0 million in 1994, due primarily to earnings net of
dividend payments. In 1996, $9.0 million of common stock was repurchased
compared to $8.4 million in 1995 and none in 1994.
Total debt increased $74.9 million in 1996 to $245.8 million, making
debt as a percent of stockholders' equity 43 percent compared to 33 percent
in 1995 and 42 percent in 1994. In 1997, total debt is expected to increase
$60 - $70 million due to acquisition of subsidiary operations and increases
in capital expenditures and working capital.
Working capital (excluding short-term debt) increased by $29.6 million
to $257.2 million in 1996 following an increase of $17.0 million to $227.5
million in 1995, and an increase of $53.6 million to $210.5 million in 1994.
The current ratio was 2.2:1 in 1996 compared to 2.0:1 in 1995 and 1994.
The Company's cash flow remained strong in 1996 as cash provided by
operations was $179.3 million compared to $155.5 million in 1995 and $132.5
million in 1994. The following schedule presents the major sources and uses
of cash for the Company in 1996.
SOURCES AND USES OF CASH (IN MILLIONS OF DOLLARS)
SOURCES: Net income $101.1
Depreciation and amortization 66.2
Minority interest 4.7
Deferred income taxes 7.0
Increase in total debt 74.9
Other 8.6
------
Total Sources $262.5
------
------
USES: Capital expenditures $112.0
Increase in working capital* 29.6
Business acquisitions 74.1
Common stock repurchases 9.0
Dividends 37.8
------
Total Uses $262.5
------
------
*EXCLUDING SHORT-TERM DEBT.
CONTINUED
23
<PAGE>
MANAGEMENT'S DISCUSSION CONTINUED
The Company's pretax interest coverage was 13.2 times in 1996 compared
to 12.8 times in 1995 and 15.1 times in 1994. Pretax income increased to
$162.8 million in 1996 from $136.1 million in 1995 and $118.1 million in
1994. Interest expense was $13.4 million in 1996, $11.5 million in 1995, and
$8.4 million in 1994.
Following are pretax interest coverage ratios for the last five years:
PRETAX INTEREST COVERAGE
Coverage of Interest by Pretax Income and Interest
1992 1993 1994 1995 1996
- ----------------------------------------------
13.0 11.3 15.1 12.8 13.2
- ----------------------------------------------
Substantial credit is available to the Company for future use, including
a $150 million revolving credit agreement with five banks. Bemis is also an
issuer of commercial paper which carries an A1/P1 rating.
FOREIGN CURRENCY EXPOSURES
The Company enters into forward foreign currency exchange contracts to
hedge certain foreign currency denominated receivables and payables,
principally at operations in Belgium, France, Germany, Italy, England,
Sweden, and Spain. 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, 1996 and 1995, the Company had
outstanding forward foreign currency exchange contracts aggregating
$16,562,000 and $17,377,000, 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 $264,000 loss at December 31, 1996, and a
$559,000 loss at December 31, 1995, had outstanding contracts been settled at
those respective dates.
INCOME TAXES
The Company's effective tax rate was 38 percent in 1996 versus 37
percent in 1995 and 38 percent in 1994. The primary difference between our
overall tax rate and the U.S. statutory tax rate of 35 percent in 1996,
1995, and 1994 relates to state and local income taxes net of the federal
income tax benefit.
ACCOUNTING CHANGES
In 1996, the Company adopted the pro forma disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation." The footnoted pro forma presentation reflects a
$1.1 million charge against Net Income (2 cents per share) for 1996 and
substantially no impact on 1995. Currently, the Company follows the
requirements of Accounting Principles Board (APB) Opinion 25 issued in
October 1972.
MARKET PRICES* AND DIVIDENDS
The Bemis quarterly dividend was increased by 12.5 percent in the first
quarter of 1996 to 18 cents per share from 16 cents. This followed first
quarter increases of 18.5 percent in 1995 to 16 cents per share from 13.5
cents, and 8 percent in 1994 to 13.5 cents per share from 12.5 cents.
Common dividends for the year were 72 cents per share, up from 64 cents
in 1995 and 54 cents in 1994. The 1996 dividend payout ratio was 38 percent
compared to 39 percent in 1995 and 39 percent in 1994. Based on the market
price of $25.63 per share at the beginning of 1996, the dividend yield was
2.8 percent.
Stockholders' equity per common share (book value per share) increased
to $10.83 per share in 1996, up from $9.76 per share in 1995 and $8.16 per
share in 1994. Trading volume in Bemis common stock was 18.0 million shares
in 1996.
In February 1997, the Board of Directors increased the quarterly cash
dividend on common stock to 20 cents per share from 18 cents, a 11.1 percent
increase.
BEMIS COMMON STOCK PERFORMANCE
<TABLE>
1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
High Low Div. Paid High Low Div. Paid High Low Div. Paid
----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter 33 3/8 26 1/8 $.18 29 1/2 23 3/8 $.16 24 1/8 21 1/8 $.135
Second Quarter 36 30 .18 29 3/8 26 .16 24 7/8 21 .135
Third Quarter 36 29 3/8 .18 29 3/4 26 .16 25 5/8 22 1/2 .135
Fourth Quarter 37 1/8 34 .18 27 3/4 24 7/8 .16 25 21 7/8 .135
*New York Stock Exchange:BMS
</TABLE>
24
<PAGE>
FIVE-YEAR CONSOLIDATED REVIEW
(IN MILLIONS, EXCEPT PERCENTS, SHARES, RATIOS,
PER SHARE AMOUNTS, STOCKHOLDERS, AND EMPLOYEES)
<TABLE>
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Data
Net sales $1,655.4 $1,523.4 $1,390.5 $1,203.5 $1,181.3
Cost of products sold and other expenses 1,479.2 1,375.8 1,264.0 1,121.9 1,083.5
Interest expense 13.4 11.5 8.4 7.2 7.5
Income before income taxes 162.8 136.1 118.1 74.4 90.3
Income taxes 61.7 50.9 45.3 28.3 33.0
Income before effect of changes in
accounting principles 101.1 85.2 72.8 46.1 57.3
Cumulative effect of adoption
of FAS 112 in 1993 and FAS 106 and
FAS 109 in 1992 (1.8) (0.3)
Net income 101.1 85.2 72.8 44.3 57.0
Net income as a percentage of net sales 6.1% 5.6% 5.2% 3.7% 4.8%
- ------------------------------------------------------------------------------------------------------------------------
Common Share Data
Income before effect of changes in
accounting principles 1.90 1.63 1.40 .89 1.11
Cumulative effect of adoption of FAS 112 in
1993 and FAS 106 and FAS 109 in 1992 (.03) (.01)
Net income 1.90 1.63 1.40 .86 1.10
Dividends per common share .72 .64 .54 .50 .46
Book value per common share 10.83 9.76 8.16 7.24 7.06
Stock PE ratio range 14-20 14-18 15-18 24-31 18-27
Average common shares and common share
equivalents outstanding during the year
for computation of earnings per share 53,252,250 52,311,421 51,953,210 51,767,064 51,839,696
Common shares outstanding at year-end 52,360,699 52,567,349 51,211,326 51,201,326 51,151,770
- ------------------------------------------------------------------------------------------------------------------------
Capital Structure and Other Data
Current ratio 2.2 2.0 2.0 1.8 2.0
Working capital 252.5 223.1 208.1 152.8 154.0
Total assets 1,168.8 1,030.6 923.3 789.8 742.7
Long-term debt 240.9 166.4 170.7 120.5 127.8
Long-term obligations under capital leases 0.2 1.0 2.7 3.2
Stockholders' equity 567.1 512.8 418.0 370.5 361.0
Return on average common equity 18.7% 18.3% 18.5% 12.1% 16.5%
Return on average total capital 13.7% 13.5% 13.4% 9.2% 11.8%
Depreciation and amortization 66.2 58.0 51.8 47.0 48.3
Capital expenditures 112.0 93.6 93.1 60.7 70.7
Number of common stockholders 5,947 5,711 5,602 5,649 5,020
Number of employees 8,876 8,515 8,120 7,565 7,733
Wages and salaries 314.5 287.0 276.8 251.6 246.3
Research and development expense 13.7 13.6 13.1 14.1 15.9
</TABLE>
25
<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.
/s/ JOHN H. ROE /s/ BENJAMIN R. FIELD, III /s/ LEROY F. BAZANY
John H. Roe Benjamin R. Field, III LeRoy F. Bazany
CHAIRMAN AND SENIOR VICE PRESIDENT, VICE PRESIDENT AND CONTROLLER
CHIEF EXECUTIVE CHIEF FINANCIAL OFFICER
OFFICER 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, 1996 and 1995,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, 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.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
MINNEAPOLIS, MINNESOTA, JANUARY 23, 1997
26
<PAGE>
BEMIS COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
1996 1995 1994
- ----------------------------------------------------------------------------
Net sales $1,655,431 $1,523,390 $1,390,459
Costs and expenses:
Cost of products sold 1,273,570 1,183,514 1,077,130
Selling, general, and
administrative expenses 192,819 177,971 171,139
Research and development 13,655 13,603 13,124
Interest 13,397 11,549 8,395
Other (income) costs, net (5,497) (3,138) (802)
Minority interest in net
income 4,706 3,781 3,379
---------- ---------- ----------
Income before income taxes 162,781 136,110 118,094
Provision for income taxes 61,700 50,900 45,300
---------- ---------- ----------
Net income $ 101,081 $ 85,210 $ 72,794
---------- ---------- ----------
---------- ---------- ----------
Earnings per share of common
stock $1.90 $1.63 $1.40
---------- ---------- ----------
---------- ---------- ----------
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
27
<PAGE>
CONSOLIDATED BALANCE SHEET
DECEMBER 31,
(IN THOUSANDS OF DOLLARS)
ASSETS 1996 1995
- ------------------------------------------------------------------------------
Current assets:
Cash $ 10,223 $ 22,032
Accounts receivable, less $11,632 and $11,437
for doubtful accounts and allowances 216,740 201,725
Inventories 200,397 178,085
Prepaid expenses and deferred charges 39,561 40,432
---------- ----------
Total current assets 466,921 442,274
---------- ----------
Property and equipment:
Land and land improvements 11,872 11,445
Buildings and leasehold improvements 189,978 178,661
Machinery and equipment 694,013 629,212
---------- ----------
895,863 819,318
Less - accumulated depreciation 312,372 284,767
---------- ----------
583,491 534,551
---------- ----------
Excess of cost of investments in subsidiaries
over net assets acquired 108,928 42,437
Other assets 9,455 11,333
---------- ----------
118,383 53,770
---------- ----------
Total assets $1,168,795 $1,030,595
---------- ----------
---------- ----------
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.) CONTINUED
28
<PAGE>
BEMIS COMPANY, INC.
AND SUBSIDIARIES
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- ------------------------------------------------------------------------------
Current Liabilities:
Current portion of long-term debt $ 1,706 $ 3,405
Short-term borrowings 3,006 1,080
Accounts payable 164,638 163,692
Accrued liabilities:
Salaries and wages 34,163 29,128
Income taxes 5,463 13,455
Other taxes 5,469 8,455
---------- ----------
Total current liabilities 214,445 219,215
Long-term debt, less current portion 241,077 166,435
Deferred taxes 56,661 49,758
Other liabilities and deferred credits 57,726 53,943
---------- ----------
Total liabilities 569,909 489,351
---------- ----------
Minority interest 31,789 28,436
Commitments and contingencies
Stockholders' equity:
Common stock, $.10 par value:
Authorized - 123,800,000 shares
Issued - 57,897,316 and 57,811,966 shares 5,790 5,781
Capital in excess of par value 149,481 147,119
Retained income 561,049 496,252
Cumulative translation adjustment 6,588 10,505
Common stock held in treasury,
5,536,617 and 5,244,617 shares, at cost (155,811) (146,849)
---------- ----------
Total stockholders' equity 567,097 512,808
---------- ----------
Total liabilities and stockholders' equity $1,168,795 $1,030,595
---------- ----------
---------- ----------
29
<PAGE>
CONSOLIDATED STATEMENT
OF CASH FLOWS
YEARS ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS)
<TABLE>
1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $101,081 $ 85,210 $ 72,794
Non-cash items:
Depreciation and amortization 66,192 57,954 51,828
Minority interest in net income 4,706 3,781 3,379
Deferred income taxes, non-current portion 7,035 8,746 4,297
Loss (gain) on sale of property and equipment 245 (211) 210
-------- ------- --------
Cash provided by operations 179,259 155,480 132,508
Changes in working capital, net of
effect of acquisitions and dispositions:
Accounts receivable (14,062) 3,868 (20,863)
Inventories (25,243) (7,287) (23,784)
Prepaid expenses and deferred charges 1,065 1,019 (768)
Accounts payable (4,520) (1,187) 11,881
Accrued salaries and wages 4,180 (3,048) 7,530
Accrued income taxes (7,817) 4,254 (759)
Accrued other taxes (3,825) 304 (2,501)
Changes in other liabilities and
deferred credits 4,612 (1,077) 523
Changes in deferred charges and other
investments 2,563 (1,389) (230)
Other (1,158) 1,280
-------- ------- --------
Net cash provided by operating activities $136,212 $149,779 $104,817
-------- ------- --------
CONTINUED
</TABLE>
30
<PAGE>
BEMIS COMPANY, INC.
AND SUBSIDIARIES
<TABLE>
CONTINUED 1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from investing activities:
Additions to property, plant and equipment ($111,950) ($93,615) ($93,064)
Business acquisitions, net of cash acquired (74,114) (552) (31,956)
Business divestiture 12,752
Proceeds from sale of property and equipment 1,960 2,135 3,594
Other 37 3 337
--------- --------- ---------
Net cash used by investing activities (171,315) (92,029) (121,089)
--------- --------- ---------
Cash flows from financing activities:
Increase in long-term debt 79,952 579 57,601
Repayment of long-term debt (5,310) (11,166) (10,287)
Change in short-term borrowings 1,926 (591) 1,671
Change in current portion of long-term debt (1,699) (748) (3,769)
Cash dividends paid (37,830) (33,175) (27,654)
Subsidiary dividends to minority stockholders (1,841) (1,703)
Purchase of common stock for the treasury (8,962) (8,395)
Stock incentive programs and related tax
effects 312 3,449 138
--------- --------- ---------
Net cash provided (used) by financing activities 26,548 (50,047) 15,997
--------- --------- ---------
Effect of exchange rates (3,254) 1,603 4,090
--------- --------- ---------
Net (decrease) increase in cash ($11,809) $ 9,306 $3,815
--------- --------- ---------
--------- --------- ---------
Supplemental disclosure of cash flow information
Non-cash investing and financing activities:
Fair value of assets acquired $92,218 $64,646
Liabilities assumed 14,937 21,505
Minority interest acquired 1,108
------- -------
Net value acquired 76,173 43,141
Common stock issued 2,059 42,589
------- -------
Cash used for acquisition $74,114 $ 552
------- -------
------- -------
Interest paid during the year $14,268 $ 8,268 $ 9,223
Income taxes paid during the year $60,955 $39,296 $39,918
</TABLE>
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
31
<PAGE>
CONSOLIDATED STATEMENT BEMIS COMPANY, INC.
OF STOCKHOLDERS' EQUITY AND SUBSIDIARIES
(IN THOUSANDS OF DOLLARS)
<TABLE>
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, 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)
------ -------- -------- ------- ---------
Net income for 1995 85,210
Translation adjustment for 1995 5,211
Pension liability adjustment 4,853
Cash dividends paid on common stock,
$.64 per share (33,175)
Stock incentive programs and
related tax effects 28 3,421
Common stock transactions related to an
acquisition of a subsidiary company 181 42,408 (4,961)
Purchase of 330,300 shares
of common stock (8,395)
------ -------- -------- ------- ---------
Balance at December 31, 1995 $5,781 $147,119 $496,252 $10,505 $(146,849)
------ -------- -------- ------- ---------
Net income for 1996 101,081
Translation adjustment for 1996 (3,917)
Pension liability adjustment 1,546
Cash dividends paid on common stock,
$.72 per share (37,830)
Stock incentive programs and
related tax effects 2 310
Common stock transactions related to an
acquisition of a subsidiary company 7 2,052
Purchase of 292,000 shares
of common stock (8,962)
------ -------- -------- ------- ---------
Balance at December 31, 1996 $5,790 $149,481 $561,049 $ 6,588 $(155,811)
------ -------- -------- ------- ---------
------ -------- -------- ------- ---------
</TABLE>
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
32
<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. The recoverability of unamortized goodwill is assessed on an ongoing
basis by comparing undiscounted cash flows from applicable operations to
related net book value.
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
two-hundredth of a share of Series A Junior Preferred Stock for $60. The
rights become exercisable if a person or group 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. If a person or group acquires
20 percent or more of the Company's outstanding common stock, subject to
certain exceptions, 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, or, in certain circumstances, within 30
days (subject to extension) 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, 1996, none of these shares were issued or
outstanding.
33
<PAGE>
NOTE 1 - ACCOUNTING POLICIES CONTINUED
ENVIRONMENTAL COST: The Company is involved in a number of environmental
related disputes and claims. The Company accrues for environmental costs when
it is probable that these costs will be incurred and can be reasonably
estimated. In addition, costs which cannot be reasonably estimated, are
directly expensed when payment is made. At December 31, 1996 and 1995,
reserves were $745,000 and $745,000, respectively. Adjustments to the reserve
accounts and costs which were directly expensed for environmental remediation
matters resulted in charges to the income statements for 1996, 1995, and 1994
of $(181,000), $164,000, and $991,000, net of third party reimbursements
totaling $439,000, $335,000, and $366,000 for 1996, 1995, and 1994,
respectively. The Company is not aware of any pending or threatened
litigation that is likely to have a material adverse effect on the business,
operating results, or financial condition.
ESTIMATES AND ASSUMPTIONS REQUIRED: The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 2 - BUSINESS ACQUISITIONS AND DISPOSITIONS
Effective December 31, 1996, the Company, through its subsidiary
Milprint, Inc., acquired all of the assets of Paramount Packaging, LLC
(Paramount-LLC) of Lebanon, Pennsylvania, for a combination of cash and the
assumption of debt. Paramount LLC, with total annual sales of approximately
$30 million in the confectionery packaging market, operates a manufacturing
facility in Lebanon, Pennsylvania. The total purchase price of approximately
$11 million has been accounted for under the purchase method of accounting,
and, because of the acquisition date, no results of operations for Paramount
LLC are included in these financial statements. See Note 15 for subsequent
event discussion on a related 1997 business acquisition transaction.
On April 29, 1996, the Company acquired the Perfecseal Healthcare
Packaging Division (Perfecseal) of Paper Manufacturers Company, Inc. of
Philadelphia, Pennsylvania, for Bemis common stock valued at $2.1 million and
$62.9 million in cash. Perfecseal, with total annual sales of approximately
$65 million in the medical packaging market, operates manufacturing
facilities in Philadelphia, Pennsylvania, Northern Ireland, and Puerto Rico.
The total purchase price of $65 million has been accounted for under the
purchase method of accounting, and results of operations for Perfecseal
subsequent to April 28, 1996, are included in these financial statements.
Effective January 1, 1996, the Company's subsidiary, Hayssen
Manufacturing Company, sold its Paper Packaging Machinery Division, which had
annual sales of approximately $30 million, to Paper Converting Machine
Company of Green Bay, Wisconsin. Cash received totaled approximately $17
million, includng the $4.3 million pre-tax gain which is included in other
income.
On October 5, 1995, the Company acquired Banner Packaging, Inc., for
Bemis common stock valued at $42.6 million and $.5 million in cash. Banner,
with total annual sales of approximately $60 million, operates a large
manufacturing facility in Oshkosh, Wisconsin, producing co-extruded films,
flexographic printing, and bag conversion. The total purchase price of $43.1
million has been accounted for under the purchase method of accounting, and
results of operations for Banner subsequent to October 4, 1995, are included
in these financial statements.
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 with total annual sales of approximately $17 million. 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.
Supplemental pro forma results of operations giving effect to the
acquisitions and dispositions are not presented because they are not material.
34
<PAGE>
Note 3 - RESTRUCTURING OF OPERATIONS
In the third quarter of 1993, a restructuring plan was announced for the
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.
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 the project, actual employee reductions totaled 266 plus 26 transfers.
All facility closures and consolidations were essentially completed as of
the end of 1994 with the balance completed by mid-1995. Of the $21 million
estimated restructuring expense, actual cash cost was $5.6 million and total
non-cash cost was $15.3 million. The remaining $.1 million reserve was
restored to income in 1995, since the project was completed.
EMPLOYEE SEPARATIONS - RESTRUCTURING
HOURLY SALARIED TOTAL
- -------------------------------------------------------------------
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
--- --- ---
1995 - None
Cumulative Total 187 79 266
--- --- ---
--- --- ---
<TABLE>
ANALYSIS OF RESTRUCTURING RESERVE ASSET
EMPLOYEE WRITE-DOWNS/
(IN THOUSANDS OF DOLLARS) COSTS REDEPLOYMENT OTHER TOTAL CASH NON-CASH
- -----------------------------------------------------------------------------------------------------------------------
<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
------- -------- ------- -------- -------- --------
1995 Reserve charges: Packaging Machinery 252 1,073 1,325 1,325
Paper Packaging 249 (1,288) 698 (341) (523) 182
Nylon Resin Manufacturing 2 338 340 340
Other 248 140 388 388
------- -------- ------- -------- -------- --------
Reserve balance December 31, 1995 $ (40) $ (1,439) $ 1,333 $ (146)(A) $(4,010) $ 3,864
------- -------- ------- -------- -------- --------
------- -------- ------- -------- -------- --------
</TABLE>
(A) RESTORED TO INCOME IN JUNE 1995.
35
<PAGE>
NOTE 4 - INVENTORIES
The Company utilizes the LIFO method of inventory valuation for
essentially all domestic inventories. Approximately 80 percent of the
December 31, 1996, and 81 percent of the December 31, 1995, 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:
(IN THOUSANDS OF DOLLARS) 1996 1995
- -------------------------------------------------------------
Raw materials and supplies $ 91,439 $ 79,170
Work in process and
finished goods 165,033 151,745
-------- --------
256,472 230,915
Excess of current cost
over LIFO inventory value (56,075) (52,830)
-------- --------
Total inventories $200,397 $178,085
-------- --------
-------- --------
NOTE 5 - PENSION PLANS
Total pension expense in 1996, 1995, and 1994 was $9,640,000, $8,516,000,
and $7,704,000, 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
$1,390,000 in 1996, $1,099,000 in 1995, and $1,216,000 in 1994. Multiemployer
plans cover employees at two 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 1996, 1995,
and 1994 totaled $1,114,000, $1,000,000, and $1,034,000, 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.
The funded status of the defined benefit plans at December 31, 1996, is
as follows:
PLANS WITH PLANS WITH
ASSETS IN ACCUMULATED
EXCESS OF BENEFITS IN
ACCUMULATED EXCESS OF
(IN THOUSANDS OF DOLLARS) BENEFITS ASSETS
- --------------------------------------------------------------------------
Actuarial present value
of benefit obligation:
Vested benefit obligation $140,647 $ 73,461
Nonvested benefit obligation 8,210 3,094
-------- --------
Accumulated benefit obligation $148,857 $ 76,555
-------- --------
-------- --------
Projected benefit obligation $174,685 $ 80,780
Plan assets at fair value 178,125 70,605
-------- --------
Projected benefit obligations
less than (in excess of)
plan assets 3,440 (10,175)
Unrecognized net obligation 5,738 2,154
Unrecognized prior service cost (1,071) 5,987
Unrecognized net (gain) loss (17,381) 2,680
-------- --------
(Pension liability) or prepaid
pension cost $ (9,274) $ 646
-------- --------
-------- --------
Pension cost for defined benefit plans included the following components:
(IN THOUSANDS OF DOLLARS) 1996 1995 1994
- ----------------------------------------------------------------------
Service cost - benefits earned
during the year $ 6,320 $ 5,928 $ 5,942
Interest cost on projected
benefit obligation 16,443 15,611 15,199
Actual return on plan assets (35,743) (43,589) 1,241
Net amortization and deferral 19,579 27,641 (17,781)
-------- -------- --------
Net pension expense $ 6,599 $ 5,591 $ 4,601
-------- -------- --------
-------- -------- --------
The Company has recorded the following amounts pursuant to Statement of
Financial Accounting Standards No. 87, Employers' Accounting for Pensions at
December 31:
(IN THOUSANDS OF DOLLARS) 1996 1995
- ----------------------------------------------------------------------
Intangible asset $ 6,000 $ 7,725
Prepaid tax 226 1,174
Pension liability (6,595) (10,814)
------- --------
Reduction in stockholders' equity $ (369) $ (1,915)
------- --------
------- --------
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 7.0 percent and 5.5 percent, respectively.
The expected long-term rate of return on assets was 9.0 percent.
36
<PAGE>
NOTE 6 - 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 1996, 1995, and 1994
included the following components:
(IN THOUSANDS OF DOLLARS) 1996 1995 1994
- ----------------------------------------------------------------
Service cost - benefits earned
during the year $ 151 $ 206 $ 415
Interest cost on accumulated
postretirement benefit
obligation 792 944 1,322
Net amortization and deferral (371) (159) 68
----- ----- ------
Net periodic postretirement
benefit cost $ 572 $ 991 $1,805
----- ----- ------
----- ----- ------
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:
(IN THOUSANDS OF DOLLARS) 1996 1995 1994
- -------------------------------------------------------------------
Accumulated postretirement
benefit obligation:
Retirees and beneficiaries $ 9,574 $ 8,839 $10,473
Fully eligible active
plan participants 1,101 1,064 1,556
Other active plan
participants 1,670 1,797 1,939
------- ------- -------
Accumulated postretirement
benefit obligation in
excess of plan assets 12,345 11,700 13,968
Unrecognized net gain or
(loss) from past experience
different from that assumed 4,988 6,119 3,735
------- ------- -------
Accrued postretirement
benefit cost $17,333 $17,819 $17,703
------- ------- -------
------- ------- -------
For measurement purposes, an 11 percent annual rate of increase in the
per capita cost of covered health care benefits was assumed for 1997; 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, 1996, by $1,082,000 and the aggregate of the service and
interest cost components of net periodic postretirement benefit cost for the
year then ended by $96,000. The weighted-average discount rate used in
determining the accumulated postretirement benefit obligation was 7.0 percent.
NOTE 7 - STOCK OPTION AND INCENTIVE PLANS
Since 1983, the Company's stock option and stock award plans have
provided for the issuance of up to 6,800,000 shares of common stock to key
employees. As of December 31, 1996, 1995, and 1994, respectively, 1,657,447,
1,939,984, and 2,346,852 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, 1996, twelve participants hold options with expiration
dates ranging from 1999 to 2006 at option prices ranging from $12.63 to
$32.31 per share with a weighted-average price of $20.31 per share.
Details of the stock option plans at December 31, 1996, 1995, and 1994,
are:
WEIGHTED
AVERAGE PER SHARE
PRICE NUMBER OF OPTION PRICE
PER SHARE SHARES RANGE
- -------------------------------------------------------------------------
Outstanding at
Dec. 31, 1993 $14.50 710,000 $ 5.75 - $22.31
Granted 23.75 189,766 22.06 - 24.63
Exercised 8.31 (10,000) 8.31
- -------------------------------------------------------------------------
Outstanding at
Dec. 31, 1994 and
Dec. 31, 1995 $16.54 889,766 $ 5.75 - $24.63
Granted 32.31 255,117 32.31
Exercised 5.75 (20,000) 5.75
- -------------------------------------------------------------------------
Outstanding at
Dec. 31, 1996 $20.31 1,124,883 $12.63 - $32.31
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Exercisable at
Dec. 31, 1996 $16.29 811,511 $12.63 - $24.63
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
CONTINUED
37
<PAGE>
NOTE 7 - STOCK OPTION AND INCENTIVE PLANS CONTINUED
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: $4,291,000 was expensed in 1996, $3,954,000 in
1995, and $2,890,000 in 1994.
Details of the stock award plan at December 31, 1996, 1995, and 1994,
are:
NUMBER OF
SHARES
- ---------------------------------------------------------------
Outstanding at December 31, 1993 1,124,316
Paid 2,000
Cancelled (31,000)
---------
Outstanding at December 31, 1994 1,095,316
Granted 436,500
Paid (431,316)
Cancelled (29,632)
---------
Outstanding at December 31, 1995 1,070,868
Granted 59,557
Cancelled (32,137)
---------
Outstanding at December 31, 1996 1,098,288
---------
---------
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock option plan. Had compensation cost for the Company's stock-based
compensation plans been determined based on the fair value at the grant date
for stock options and awards in 1996 and 1995 consistent with the provisions
of SFAS No. 123, the Company's net earnings and earnings per share would have
been reduced to the pro forma amounts indicated below:
1996 1995
- ---------------------------------------------------------------------------
Net earnings - as reported $101,081,000 $85,210,000
Net earnings - pro forma 99,944,000 85,201,000
Earnings per share - as reported $1.90 $1.63
Earnings per share - pro forma $1.88 $1.63
Dividend yield 2.2% 2.3%
Expected volatility 27.3% 27.7%
Risk free interest rate 7.0% 7.0%
Expected lives 9.1 years 5.3 years
The fair value of each grant made in 1996 or 1995 is estimated on the
date of grant using the Black-Scholes option-pricing model using the above
indicated weighted-average assumptions for dividend yield, expected
volatility, risk-free interest rate, and expected lives.
NOTE 8 - 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 $9,664,000 in 1996, $9,242,000 in 1995, and $9,601,000
in 1994.
The present values of minimum future obligations shown in the following
chart are calculated based on an interest rate of 11 1/4 percent determined
to be applicable at the inception of the lease. Interest expense on the
outstanding obligations under capital leases was $2,000 in 1996, $21,000 in
1995, and $255,000 in 1994.
Minimum future obligations on leases in effect at December 31, 1996, are:
CAPITAL OPERATING
(IN THOUSANDS OF DOLLARS) LEASES LEASES
- ------------------------------------------------------
1997 $ 8 $ 8,779
1998 8 6,147
1999 8 5,424
2000 3 3,933
2001 0 2,394
Thereafter 0 11,821
--- -------
Total minimum obligations 27 $38,498
-------
-------
Less amount representing
interest 5
---
Present value of net
minimum obligations 22
Less current portion 6
---
Long-term obligations $16
---
---
38
<PAGE>
NOTE 9 - LONG-TERM DEBT
Long-term debt maturing in years 1998 through 2001 is $1,700,000,
$1,700,000, $0, and $7,500,000, respectively.
Under the terms of a revolving credit agreement with five banks, the
Company may borrow up to $150,000,000 through August 1, 2001. The Company
must pay a facility fee of 1/10 of 1 percent annually on the entire amount of
the commitment. There were no borrowings outstanding under this agreement at
December 31, 1996. Debt consisted of the following at December 31:
<TABLE>
(IN THOUSANDS OF DOLLARS) 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper payable through 1997 at an interest rate of 5.8%(1) $117,200 $ 37,500
Note payable in 2005 at an interest rate of 6.7%(2) 100,000 100,000
Industrial revenue bonds payable through 2011
at interest rates of 4 1/8% to 7 1/4% 20,250 23,250
Debt of subsidiary companies payable through 1999
at an interest rate of 6% 5,100 9,061
Obligations under capital leases 233 29
-------- --------
242,783 169,840
Less current portion 1,706 3,405
-------- --------
$241,077 $166,435
-------- --------
-------- --------
</TABLE>
(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 INTEREST RATE OF COMMERCIAL PAPER OUTSTANDING AT
DECEMBER 31, 1996, WAS 5.8 PERCENT. THE MAXIMUM OUTSTANDING AT ANY
MONTH-END DURING 1996 WAS $122,000,000, AND THE AVERAGE OUTSTANDING DURING
1996 WAS $84,581,000. THE WEIGHTED-AVERAGE INTEREST RATE DURING 1996 WAS
5 1/2 PERCENT.
(2) IN JULY, 1995, THE COMPANY SOLD $100,000,000 OF TEN-YEAR NOTES WITH A
COUPON OF 6.7 PERCENT. PROCEEDS FROM THE SALE WERE USED TO PAY OFF
OUTSTANDING COMMERCIAL PAPER DEBT.
NOTE 10 - INCOME TAXES
<TABLE>
(IN THOUSANDS OF DOLLARS) 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. income before income taxes $143,149 $119,880 $111,217
Non-U.S. income before income taxes 23,468 19,130 10,108
Consolidating eliminations (3,836) (2,900) (3,231)
-------- -------- --------
Income before income taxes $162,781 $136,110 $118,094
-------- -------- --------
-------- -------- --------
Income tax expense consists of the following components:
Current tax expense:
U.S. federal $ 40,922 $ 34,496 $ 31,053
Foreign 6,903 5,665 3,947
State and local 6,451 5,755 4,144
-------- -------- --------
Total current tax expense 54,276 45,916 39,144
-------- -------- --------
Deferred (prepaid) tax expense:
U.S. federal 6,937 5,071 5,349
Foreign (306) (333)
State 793 246 807
-------- -------- --------
Total deferred (prepaid) tax expense 7,424 4,984 6,156
-------- -------- --------
Total income tax expense $ 61,700 $ 50,900 $ 45,300
-------- -------- --------
-------- -------- --------
CONTINUED
</TABLE>
39
<PAGE>
NOTE 10 - INCOME TAXES continued
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>
(IN THOUSANDS OF DOLLARS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to allowances for
returns and doubtful accounts $ 5,410 $ 7,158 $ 6,180
Inventories, principally due to additional costs inventoried for
tax purposes pursuant to the Tax Reform Act of 1986 7,392 6,883 7,685
Employee compensation and benefits accrued for financial
reporting purposes 13,537 14,033 12,340
Restructuring costs 743
Other 2,176 1,834 1,997
-------- -------- --------
Deferred tax assets (included in prepaid expenses and
deferred charges) $ 28,515 $ 29,908 $ 28,945
-------- -------- --------
-------- -------- --------
Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation,
capitalized interest, and capitalized overhead $ 73,772 $ 65,296 $ 54,058
Noncurrent employee compensation and benefits accrued for
financial reporting purposes (16,326) (15,052) (15,513)
Other (785) (486) 1,468
-------- -------- --------
Deferred tax liabilities $ 56,661 $ 49,758 $ 40,013
-------- -------- --------
-------- -------- --------
</TABLE>
The Company's effective tax rate differs from the federal statutory rate
due to the following items:
<TABLE>
(IN THOUSANDS OF DOLLARS) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
% 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 $56,973 35.0% $47,639 35.0% $41,333 35.0%
Increase (decrease) in taxes resulting from:
State and local income taxes net of
federal income tax benefit 4,709 2.9 3,901 2.9 3,218 2.7
Foreign tax rate differential (1,719) (1.1) (1,716) (1.3) 126 0.1
Minority interest 1,647 1.0 1,323 1.0 1,183 1.0
Miscellaneous items 90 0.1 (247) (0.2) (560) (0.4)
------- ----- ------- ----- ------- -----
Actual income tax expense $61,700 37.9% $50,900 37.4% $45,300 38.4%
------- ----- ------- ----- ------- -----
------- ----- ------- ----- ------- -----
</TABLE>
The Company's federal income tax returns for the years prior to 1995
have been audited and completely settled.
Provision has not been made for U.S. or additional foreign taxes on
$91,242,000 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.
40
<PAGE>
Note 11 - 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 five of the Annual Report.
LINES OF BUSINESS
(IN MILLIONS OF DOLLARS) 1996 1995 1994
- --------------------------------------------------------------------------------
NET SALES TO UNAFFILIATED CUSTOMERS:
Flexible Packaging $1,182.3 $1,090.3 $ 978.8
Specialty Coated and Graphics 478.8 437.9 415.3
Intersegment Sales:
Flexible Packaging (1.7) (0.5) (0.3)
Specialty Coated and Graphics (4.0) (4.3) (3.3)
-------- -------- --------
Total $1,655.4 $1,523.4 $1,390.5
-------- -------- --------
-------- -------- --------
OPERATING PROFIT:
Flexible Packaging $ 134.1 $ 123.0 $ 107.6
Specialty Coated and Graphics 60.5 46.6 43.7
-------- -------- --------
Total operating profit (1) 194.6 169.6 151.3
General corporate expenses (13.7) (18.1) (21.4)
Interest expense (13.4) (11.6) (8.4)
Minority interest in net income (4.7) (3.8) (3.4)
-------- -------- --------
Income before income taxes $ 162.8 $ 136.1 $ 118.1
-------- -------- --------
-------- -------- --------
IDENTIFIABLE ASSETS:
Flexible Packaging $ 832.6 $ 729.2 $ 638.2
Specialty Coated and Graphics 280.4 247.5 229.9
-------- -------- --------
Total identifiable assets (2) 1,113.0 976.7 868.1
Corporate assets (3) 55.8 53.9 55.2
-------- -------- --------
Total $1,168.8 $1,030.6 $ 923.3
-------- -------- --------
-------- -------- --------
DEPRECIATION AND AMORTIZATION:
Flexible Packaging $ 50.8 $ 42.2 $ 36.9
Specialty Coated and Graphics 14.2 14.6 13.7
Corporate 1.2 1.2 1.2
-------- -------- --------
Total $ 66.2 $ 58.0 $ 51.8
-------- -------- --------
-------- -------- --------
EXPENDITURES FOR PROPERTY
AND EQUIPMENT:
Flexible Packaging $ 65.4 $ 78.0 $ 81.3
Specialty Coated and Graphics 44.6 14.9 10.2
Corporate 2.0 0.7 1.6
-------- -------- --------
Total $ 112.0 $ 93.6 $ 93.1
-------- -------- --------
-------- -------- --------
OPERATIONS BY GEOGRAPHIC AREAS
(IN MILLIONS OF DOLLARS) 1996 1995 1994
- --------------------------------------------------------------------------------
NET SALES TO
UNAFFILIATED CUSTOMERS:
United States $1,442.5 $1,317.9 $1,209.5
Canada 56.9 48.0 42.7
Europe 188.9 184.5 158.5
Other 4.5 0.5 0.2
Eliminations (37.4) (27.5) (20.4)
-------- -------- --------
Total $1,655.4 $1,523.4 $1,390.5
-------- -------- --------
-------- -------- --------
OPERATING PROFIT:
United States $ 170.2 $ 151.3 $ 136.8
Canada 9.3 6.2 4.3
Europe 16.2 15.2 11.6
Other 0.2 (0.2) (0.1)
Eliminations (1.3) (2.9) (1.3)
-------- -------- --------
Total $ 194.6 $ 169.6 $ 151.3
-------- -------- --------
-------- -------- --------
IDENTIFIABLE ASSETS:
United States $ 946.8 $ 828.9 $ 741.6
Canada 28.7 25.4 24.4
Europe 143.1 127.0 110.4
Other 3.1 1.1 0.8
Eliminations (8.7) (5.7) (9.1)
-------- -------- --------
Total $1,113.0 $ 976.7 $ 868.1
-------- -------- --------
-------- -------- --------
(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.
NOTE 12 - 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.
41
<PAGE>
NOTE 13 - 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:
(IN THOUSANDS OF DOLLARS) 1996 1995 1994
- ------------------------------------------------------------------------
Net sales of consolidated
foreign subsidiaries $246,405 $231,940 $198,521
Net income of consolidated
foreign subsidiaries 15,002 12,618 5,349
Foreign earnings in excess of
amounts received 11,167 9,718 2,089
Equity in net assets 105,200 94,329 78,779
Equity in total assets $168,185 $150,932 $133,320
NOTE 14 - 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, 1996 and 1995, the Company had outstanding forward foreign
currency exchange contracts aggregating $16,562,000 and $17,377,000,
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 $264,000 loss at December 31, 1996, and a $559,000 loss at
December 31, 1995, had outstanding contracts been settled at those respective
dates.
At December 31, 1996 and 1995, 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
$250,717,000 and $178,393,000 at December 31, 1996 and 1995, 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 $4,290,000 and
$7,788,000 at December 31, 1996 and 1995, 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, 1996 and 1995, the Company had no significant
concentrations of credit risk.
NOTE 15 - SUBSEQUENT EVENT
Effective January 1, 1997, the Company acquired all of the outstanding
common stock of Paramount Packaging Corporation (Paramount) with annual sales
of approximately $100 million. Paramount, which has facilities in
Pennsylvania, Tennessee, Texas, and England, manufactures flexible packaging
for a variety of markets, but with a strong emphasis on disposable diaper
packaging. The total Purchase price of approximately $65 million in cash,
Bemis common stock, and the assumption of debt, will be accounted for as a
purchase of assets. Pro forma financial information is not presented as this
acquisition would not have had a significant impact on 1996's results of
operation.
NOTE 16 - QUARTERLY FINANCIAL INFORMATION - UNAUDITED
(IN MILLIONS OF DOLLARS EXCEPT EPS)
<TABLE>
QUARTERLY RESULTS NET SALES GROSS PROFIT NET INCOME EARNINGS PER SHARE
- ------------------------------------------------------------------------------------------------------------------------------------
% % % %
Quarter 1996 1995 Change 1996 1995 Change 1996 1995 Change 1996 1995 Change
- ------- ------------------------------ -------------------------- ------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First $ 385.5 $ 368.5 5% $ 82.8 $ 77.9 6% $ 21.7 $16.1 35% $ .41 $ .31 32%
Second 411.9 383.2 7 96.0 83.5 15 25.2 21.1 19 .47 .41 15
Third 423.1 372.5 14 92.6 79.7 16 24.0 20.8 15 .45 .40 13
Fourth 434.9 399.2 9 110.5 98.8 12 30.2 27.2 11 .57 .51 12
------------------------------ -------------------------- ------------------------- -----------------------
Total $1,655.4 $1,523.4 9% $381.9 $339.9 12% $101.1 $85.2 19% $1.90 $1.83 17%
------------------------------ -------------------------- ------------------------- -----------------------
------------------------------ -------------------------- ------------------------- -----------------------
</TABLE>
42
<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, 1996.
Percentage of
Jurisdiction Voting Securities
of Owned By
Name Organization Immediate Parent
- --------------------------------------------------------------------------------
Bemis Company, Inc. (the "Registrant")
Banner Packaging, Inc. Wisconsin 100%
Bemis Export Co. Ltd. Jamaica 80%
Bemis Packaging Machinery
Company Mexico S.A. de C.V. Mexico 100%
Bolsas Bemis S.A. de C.V. Mexico 50%
Curwood, Inc. Delaware 100%
Curwood Packaging (Canada) Limited Canada 100%
Perfecseal, Inc Delaware 100%
Perfecseal Internacional de
Puerto Rico, Inc. Delaware 100%
Perfecseal International Ltd. Delaware 100%
Perfecseal Limited United Kingdom 100%
Hayssen Manufacturing Company Delaware 100%
Bemis U.K. Limited United Kingdom 50%
Hayssen Europa Limited United Kingdom 100%
Hayssen Europa GmbH Germany 100%
Hayssen Europa S.p.A. Italy 100%
Hayssen Mexico S.A. de C.V. Mexico 98%
Hayssen Mexico S.A. de C.V. Mexico 2%
MacKay, Inc. Kentucky 100%
Milprint, Inc. Wisconsin 100%
CONTINUED
- 22 -
<PAGE>
Percentage of
Jurisdiction Voting Securities
of Owned By
Name Organization Immediate Parent
- --------------------------------------------------------------------------------
Morgan Adhesives Company Ohio 86.9%
Accraply, Inc. Ohio 100%
Bemis Coordination Center S.A. Belgium 33%
Bemis Export Co. Ltd. Jamaica 20%
Bemis U.K. Limited United Kingdom 50%
MACtac U.K. Limited United Kingdom 100%
Enterprise Software, Inc. Ohio 100%
MACtac Europe S.A. Belgium 89%
Bemis Coordination Center S.A. Belgium 67%
Bemis Technologies S.A. Belgium 100%
MACtac Asia-Pacific Self-
Adhesive Products Pte Ltd. Singapore 100%
MACtac Deutschland GmbH Germany 100%
MACtac France S.a.r.l. France 100%
MACtac Scandinavia A.B. Sweden 100%
MACtac Canada Ltd/Ltee Canada 100%
MACtac Europe S.A. Belgium 11%
MACtac A.G. Switzerland 100%
MACtac Mexico S.A. Mexico 49%
MACtac, Inc. Ohio 100%
Pervel Industries, Inc. Delaware 100%
- 23 -
<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
Robert F. Kleiber
Director of Investor Relations
- 24 -
<PAGE>
APPENDIX TO THE ELECTRONIC FILING - 1996 FORM 10-K
Data appearing on bar charts on page one of the 1996 Annual Report.
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Earnings Per Share $1.10 $.86 $1.40 $1.63 $1.90
Net Sales ($ Millions) $1,181 $1,203 $1,390 $1,523 $1,655
Return on Average
Total Capital 11.8% 9.2% 13.4% 13.5% 13.7%
Dividends paid Per
Common Share $.46 $.50 $.54 $.64 $.72
- 25 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the December
31, 1996, 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> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 10,223
<SECURITIES> 0
<RECEIVABLES> 216,740
<ALLOWANCES> 0
<INVENTORY> 200,397
<CURRENT-ASSETS> 466,921
<PP&E> 895,863
<DEPRECIATION> (312,372)
<TOTAL-ASSETS> 1,168,795
<CURRENT-LIABILITIES> 214,445
<BONDS> 241,077
0
0
<COMMON> 5,790
<OTHER-SE> 561,307
<TOTAL-LIABILITY-AND-EQUITY> 1,168,795
<SALES> 1,655,431
<TOTAL-REVENUES> 1,655,431
<CGS> 1,273,570
<TOTAL-COSTS> 1,273,570
<OTHER-EXPENSES> (5,497)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,397
<INCOME-PRETAX> 162,781
<INCOME-TAX> 61,700
<INCOME-CONTINUING> 101,081
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,081
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.90
</TABLE>
