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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report - July 23, 1999
(Date of earliest event reported)
BEMIS COMPANY, INC.
(Exact name of Registrant as specified in its charter)
Commission File Number 1-5277
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
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ITEM 5 - OTHER EVENTS
A. INVENTORY VALUATION METHOD CHANGED FROM LIFO TO FIFO
During the quarter ended June 30, 1999, the Company changed its
method of determining the cost of inventories from the last-in, first-out
(LIFO) method to the first-in, first-out (FIFO) valuation method. Management
believes the change from LIFO to FIFO inventory valuation method benefits the
Company by providing the best matching of the applicable raw material cost of
a unit of product to the product's selling price and, therefore, presents a
clearer picture of operating results.
The accounting change has been applied to prior years by
retroactively restating the financial statements, which are filed as part of
ITEM 7 of this Form 8-K filing with the United States Securities and Exchange
Commission. All financial statements and data included in the Company's June
30, 1999, Form 10-Q filing, reflect the impact of this accounting principle
change. The effect of this restatement was to increase retained earnings as
of January 1, 1996, by $31,553 million.
The following summarizes the effect on net income and earnings per
share for the three years ended December 31, 1998, and for the four quarters
of 1998.
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<CAPTION>
For the Year Ended December 31,
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$000's except per share amounts 1998 1997 1996
- ------------------------------------ -----------------------------------------------
<S> <C> <C> <C>
Net income, as previously reported $ 111,432 $ 107,584 $ 101,081
Effect of change in accounting method for
inventories, net of income taxes (10,302) (6,160) 1,956
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Net income, as restated $ 101,130 $ 101,424 $ 103,037
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Earnings per share of common stock
- ----------------------------------
Basic EPS, as previously reported $ 2.10 $ 2.03 $ 1.92
Effect of change in accounting method for
inventories, net of income taxes (0.19) (0.12) 0.04
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Basic EPS, as restated $ 1.91 $ 1.91 $ 1.96
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Diluted EPS, as previously reported $ 2.09 $ 2.00 $ 1.90
Effect of change in accounting method for
inventories, net of income taxes (0.19) (0.12) 0.03
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Diluted EPS, as restated $ 1.90 $ 1.88 $ 1.93
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</TABLE>
2
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<TABLE>
<CAPTION>
For the 1998 Quarters Ended,
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$000's except earnings per share Mar 31 Jun 30 Sep 30 Dec 31
- ------------------------------------ ----------------------------------------------------------
<S> <C> <C> <C> <C>
Net income, as previously reported $ 21,928 $ 30,182 $ 27,754 $ 31,568
Effect of change in accounting method for
inventories, net of income taxes (1,218) (2,543) (513) (6,028)
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Net income, as restated $ 20,710 $ 27,639 $ 27,241 $ 25,540
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Earnings per share of common stock
- ----------------------------------
Basic EPS, as previously reported $ 0.41 $ 0.57 $ 0.52 $ 0.60
Effect of change in accounting method for
inventories, net of income taxes (0.02) (0.05) (0.01) (0.11)
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Basic EPS, as restated $ 0.39 $ 0.52 $ 0.51 $ 0.49
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Diluted EPS, as previously reported $ 0.41 $ 0.56 $ 0.52 $ 0.60
Effect of change in accounting method for
inventories, net of income taxes (0.02) (0.05) (0.01) (0.11)
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Diluted EPS, as restated $ 0.39 $ 0.51 $ 0.51 $ 0.49
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</TABLE>
B. DIVIDEND OF PREFERRED SHARE PURCHASE RIGHT DECLARED, PAYABLE AUGUST 23, 1999
On July 29, 1999, the Board of Directors of Bemis Company, Inc. (the
"Company"), declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock, $.10 par value (the
"Common Shares"), of the Company. The dividend is payable on August 23, 1999,
(the "Record Date") to shareholders of record at the close of business on
that date.
Each Right entitles the registered holder to purchase from the
Company one two-hundredth of a share of Series A Junior Preferred Stock, $1
par value (the "Preferred Shares"), of the Company at a price of $120 per one
two-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement"), dated as of July 29, 1999, between the
Company and Norwest Bank Minnesota, National Association, as Rights Agent
(the "Rights Agent").
Initially, the Rights will attach to all certificates representing
Common Shares then outstanding and no separate Right Certificates will be
distributed. The Rights will separate from the Common Shares and a
Distribution Date for the Rights will occur upon the earlier of:
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(i) the close of business on the fifteenth day following a
public announcement that a person or group of affiliated or associated
persons has become an "Acquiring Person" (i.e., has, subject to certain
exceptions, become the beneficial owner of 15% or more of the
outstanding Common Shares), or
(ii) the close of business on the fifteenth day following
the commencement or public announcement of a tender offer or exchange
offer the consummation of which would result in a person or group of
affiliated or associated persons becoming the beneficial owner of 15%
or more of the outstanding Common Shares (or such later date as may be
determined by the Board of Directors of the Company prior to a person
or group of affiliated or associated persons becoming an Acquiring
Person).
Until the Distribution Date,
(i) the Rights will be evidenced by the Common Share
certificates and will be transferred with and only with the Common
Shares,
(ii) new Common Share certificates issued after the Record
Date upon transfer or new issuance of the Common Shares will contain a
notation incorporating the Rights Agreement by reference, and
(iii) the surrender for transfer of any Common Share
certificate, even without such notation or a copy of this Summary of
Rights attached to it, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate.
As promptly as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence
the Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire at the close of business on August 23, 2009, unless
extended or earlier redeemed or exchanged by the Company as described below.
The Purchase Price payable, and the number of Preferred Shares or
other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution:
(i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Preferred Shares,
(ii) upon the grant to holders of the Preferred Shares of
certain rights, options or warrants to subscribe for or purchase
Preferred Shares or convertible securities at less than the then
current market price of the Preferred Shares, or
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(iii) upon the distribution to holders of the Preferred
Shares of evidences of indebtedness or assets (excluding regular
periodic cash dividends or dividends payable in Preferred Shares) or of
subscription rights or warrants (other than those described in clause
(ii) above).
The number of Preferred Shares issuable upon the exercise of a Right
is also subject to adjustment in the event of a dividend on Common Shares
payable in Common Shares, or a subdivision, combination or consolidation of
the Common Shares.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
the Purchase Price. No fractional Preferred Shares will be issued (other than
fractional shares which are integral multiples of one two-hundredth (subject
to adjustment) of a Preferred Share, which may, at the election of the
Company, be evidenced by depositary receipts) if in lieu of such issuance, a
payment in cash is made based on the closing price (pro-rated for the
fraction) of the Preferred Shares on the last trading date prior to the date
of exercise.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that
each holder of a Right, other than Rights that are or were beneficially owned
by the Acquiring Person (which will thereafter be void), will have the right
to receive upon exercise of the Right at the then current exercise price of
the Right that number of Common Shares having a market value of two times the
exercise price of the Right, subject to certain possible adjustments.
In the event that, on or after the Distribution Date or within 15
days prior thereto, the Company is acquired in certain mergers or other
business combination transactions or 50% or more of the assets or earning
power of the Company and its subsidiaries (taken as a whole) are sold on or
after the Distribution Date or within 15 days prior to the Distribution Date
in one or a series of related transactions, each holder of a Right (other
than Rights which have become void under the terms of the Rights Agreement)
will have the right to receive, upon exercise of the Right at the then
current exercise price of the Right, that number of Common Shares of the
acquiring company (or, in certain cases, one of its affiliates) having a
market value of two times the exercise price of the Right.
In certain events specified in the Rights Agreement, the Company is
permitted temporarily to suspend the exercisability of the Rights.
At any time after a person or group of affiliated or associated
persons becomes an Acquiring Person and prior to the acquisition by a person
or group of affiliated or associated persons of 50% or more of the
outstanding Common Shares, the Board of Directors of the Company may exchange
the Rights (other than Rights which have become void under the terms of the
Rights Agreement), in whole or in part, for Common Shares or equivalent
securities at an exchange ratio per Right equal to the result obtained by
dividing the exercise price of a Right by the current per share market price
of the Common Shares, subject to adjustment.
At any time prior to the time that a person or group of affiliated
or associated persons has become an Acquiring Person, the Board of Directors
of the Company may redeem the Rights in whole,
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but not in part, at a price of $.001 per Right, subject to adjustment (the
"Redemption Price"), payable in cash. The redemption of the Rights may be
made effective at such time, on such basis and with such conditions as the
Board of Directors in its sole discretion may establish. The Board of
Directors and the Company shall not have any liability to any person as a
result of the redemption or exchange of the Rights pursuant to the provisions
of the Rights Agreement.
The terms of the Rights may be amended by the Board of Directors of
the Company, subject to certain limitations after the Distribution Date,
without the consent of the holders of the Rights, including an amendment
prior to the date a person or group of affiliated or associated persons
becomes an Acquiring Person to lower the threshold for exercisability of the
Rights from 15% to not less than the greater of (i) the sum of .001% and the
largest percentage of the outstanding Common Shares then known by the Company
to be beneficially owned by any person or group of affiliated or associated
persons, or (ii) 10% (subject to certain exceptions).
Until a Right is exercised, the holder of the Right, as such, will
have no rights as a shareholder of the Company, including, without
limitation, the right to vote or to receive dividends.
The Rights Agreement (including all exhibits thereto) is
incorporated by reference herein. This summary description of the Rights does
not purport to be complete and is qualified in its entirety by reference to
the Rights Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. Financial statements
The following prior period documents, which have been restated where
required, are filed as part of this report:
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<CAPTION>
Page(s) in
This Report
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<S> <C>
Management's Discussion and Analysis of
Financial Condition and Results of Operations for
the Three Years Ended December 31, 1998.................................... 8-18
Accountant's Opinions and Consent.............................................. 19-20
Consolidated Statement of Income for
the Three Years Ended December 31, 1998.................................... 21
Consolidated Balance Sheet
at December 31, 1998 and 1997.............................................. 22-23
Consolidated Statement of Cash Flows for
the Three Years Ended December 31, 1998.................................... 24-25
6
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Consolidated Statement of Stockholders' Equity
for the Three Years Ended December 31, 1998.............................. 26
Notes to Consolidated Financial Statements for the Three Years
Ended December 31, 1998 ................................................. 27-44
Schedule II - Valuation and Qualifying Accounts and Reserves
for the Three Years Ended December 31, 1998 .............................. 45
</TABLE>
C. Exhibits
4(a). Share Rights Agreement, dated as of July 29, 1999, between
Bemis Company, Inc. and Norwest Bank Minnesota, National Association, as
Rights Agent (incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A, dated August 4, 1999).
<TABLE>
<S> <C>
27. Financial Data Schedule (EDGAR electronic filing only).
99. Press Release dated July 23, 1999. 46-51
Press Release dated July 29, 1999. 52
Restated, 1998 Quarterly Financial Statements - Unaudited. 53-57
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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/ Gene C. Wulf
--------------------------------------- ------------------------------
Benjamin R. Field, III, Senior Vice Gene C. Wulf, Vice President
President, Chief Financial Officer and Controller
and Treasurer
Date August 9, 1999 Date August 9, 1999
7
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
RESTATED MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE-YEAR REVIEW OF RESULTS
<TABLE>
<CAPTION>
PERCENT
-----------------------------------
1998 1997 1996
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<S> <C> <C> <C>
Net sales........................................................................ 100.0% 100.0% 100.0%
Cost of products sold............................................................ 78.9 79.1 76.6
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Gross margin..................................................................... 21.1 20.9 23.4
Selling, general, and administrative expenses.................................... 10.1 10.1 11.6
All other expenses............................................................... 2.1 2.0 1.8
-------------------------------
Income before income taxes....................................................... 8.9 8.8 10.0
Income taxes..................................................................... 3.4 3.4 3.8
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Net income....................................................................... 5.5% 5.4% 6.2%
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-------------------------------
Effective tax rate............................................................... 38.7% 38.5% 37.9%
</TABLE>
SUMMARY
Capital expenditures for 1998 were $139.8 million compared to $167.5
million in 1997 and $112.0 million in 1996. Throughout this three-year
period, the Company has focused on building and expanding its manufacturing
capacity to support its technological strengths. This continuing investment
in efficient, technologically-advanced manufacturing capacity provides the
solid platform required to continue to introduce new products which will meet
the needs of both our domestic and international customers.
8
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Effective June 30, 1998, the Company completed the acquisition of
Techy International S.A., a manufacturer of flexible packaging materials
based in Charleroi, Belgium. This acquisition added manufacturing and sales
locations in Belgium, France, and the United Kingdom and provides a platform
for growth in the European market for the Flexible Packaging business segment.
Effective February 1, 1998, the Company acquired, for cash,
one-third of all outstanding shares of Dixie Toga, S.A.'s flexible packaging
business located in Brazil. This joint venture between Bemis, the largest
supplier of flexible packaging in North America, and Dixie Toga, the largest
supplier of flexible packaging in South America, creates an organization
strong in market knowledge and leading technology to service the needs of the
South American marketplace. During 1998, this joint venture, ITAP/Bemis
Ltda., began the consolidation of its manufacturing facilities at a newly
constructed business campus in Londrina, Parana, Brazil. ITAP/Bemis Ltda.
serves a variety of markets in Brazil and the Mercosul, the Southern Cone
Common Market. This joint venture has strong relationships with the major
consumer goods companies in the markets it serves. Since Bemis did not
purchase a controlling interest in the company, the investment and earnings
are recorded on the equity basis of accounting.
During 1998, the Company completed the reorganization of its paper
products product line which was announced mid-1997, and returned to income
$0.5 million of the $7.8 million charge originally recorded to absorb the
cost of this effort. This reorganization principally involved the closure of
two manufacturing facilities and realignment of the organization into
operating units targeting specific focused markets in which the Company
anticipates faster growing market segments.
Two other smaller, strategic changes were accomplished in the
international arena during 1998. To speed up delivery and service to our
valued Asian customers, especially for coated and thermoformed medical
packaging products, the Company, through its subsidiary, Perfecseal Inc.,
started up operations in the recently formed Malaysian company, Perfecseal
(Asia Pacific) Sdn Bhd. In addition, the Company, through its subsidiary,
Morgan Adhesives Company, formed a sales subsidiary in Brazil, Morgan
Adhesives America do Sul, Ltda., to pursue sales opportunities for our
pressure sensitive materials business throughout South America and Central
America.
Overall results for the year produced net sales of $1.85 billion
compared to $1.88 billion and $1.66 billion for 1997 and 1996 respectively.
The sales decline of 1.6 percent in 1998, which occurred exclusively in the
Flexible Packaging segment, is principally due to the sale of the machinery
business in 1997, lower paper products sales following the reorganization of
the paper products product line, and lower raw material costs which tend to
drive down selling prices. Net income for 1998 totaled $101.1 million
compared with $101.4 million and $103.0 for 1997 and 1996 respectively.
Diluted earnings per share were $1.90 for 1998, $1.88 for 1997, and $1.93 for
1996. Excluding the effects of business acquisitions and dispositions as well
as the 1997 restructuring charge of $7.8 million, 1998 net sales decreased
0.2 percent from 1997 while operating profit decreased 0.3 percent from the
1997 level.
Sales for the Flexible Packaging segment declined 2.1 percent from
the very strong level achieved in 1997 while remaining more than 15.1 percent
over the 1996 sales level. Very strong unit sales increases in high barrier
products and polyethylene products helped to offset the impact of the
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reorganization of paper products, lower plastic raw material prices, and the
sale of the machinery business. The 1997 sales volume benefited from the
acquisition of Paramount Packaging. Flexible Packaging operating profits were
$156.3 million in 1998, or 11.4 percent of sales, compared to $142.6 million,
or 10.2 percent of sales in 1997, and $142.5 million, or 12.0 percent of
sales in 1996. Increasing unit sales and a lower cost structure largely
account for the 1998 improvements in operating profit.
Sales for the Pressure Sensitive Materials segment increased
slightly over the 1997 level. Operating profit, however, was lower as this
business segment faced less favorable economic conditions around the globe,
increased price competition in certain markets, and inefficiencies in
manufacturing operations brought on by changes in sales mix and volumes.
Pressure Sensitive Materials operating profits were $51.0 million in 1998, or
10.6 percent of sales, compared to $67.2 million, or 14.0 percent of sales in
1997, and $59.6 million, or 12.8 percent of sales in 1996. The 1997
improvement in operating margins resulted from a better mix of products and
improved plant efficiencies.
FORWARD LOOK
Heavy capital investments during the past several years together
with an ongoing product development effort well position the Company to
efficiently provide superior packaging solutions to the marketplace. We have
strong positions in our markets, excellent technology throughout our product
lines, efficient manufacturing, and highly talented and capable people. The
recently announced efforts to reorganize the Pressure Sensitive Materials
segment to more effectively align its products, markets, and customers are
expected to enhance its future performance. This process will, however,
result in additional costs in 1999 which are expected to keep operating
profits in the Pressure Sensitive Materials business essentially flat with
1998, leading to substantially better results in 2000 and beyond. The
Company's packaging operations are expected to remain strong while market
conditions are expected to be less favorable in 1999 than in 1998.
COSTS AND EXPENSES
Cost of products sold as a percentage of net sales was 78.9 percent
for 1998 compared to 79.1 percent for 1997 and 76.6 percent for 1996. The
favorable experience in 1998 is largely due to a lower cost structure and the
absence, in 1998, of the disruptive nature of the Paramount acquisition and
the paper products product line restructuring in 1997.
Selling, general, and administrative expense decreased in absolute
dollars in 1998 and 1997 as a result of improved cost control and business
unit dispositions. Actual expense for 1998 decreased $3.7 million or 2.0
percent compared to 1997, and decreased $3.2 million or 1.7 percent for 1997
versus 1996.
Research and development expense was $12.2 million in 1998, $12.0
million in 1997, and $13.7 million in 1996. The disposition of the balance of
our packaging machinery business reduced
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costs in 1997 and 1998. However, that impact was more than offset in 1998 by
increased product development efforts within the Pressure Sensitive Materials
business segment.
Higher debt levels have resulted in interest expense increasing to
$21.9 million for 1998 compared to $18.9 million in 1997 and $13.4 million in
1996. The increasing debt level during the three-year period was due to
modestly higher working capital to support rising business activity, common
stock repurchases, capital expenditures, and our business acquisition efforts.
Other costs (income) reflect expense of $0.3 million for 1998 versus
expense of $0.9 million and income of $4.0 million in 1997 and 1996,
respectively. Gains realized on the sale of business units in 1996 and 1997
were not repeated in 1998. Also included in 1998 were losses at our Brazilian
joint venture. The net expense position for 1997 compared to 1996 relates
primarily to the charge for the restructuring of our paper products
organization. See Notes 2 and 3 to the Financial Statements for an expanded
discussion of these 1996 and 1997 gains and 1997 restructuring charge.
RETURN ON INVESTMENT
Return on average common stockholders' equity in 1998 was 14.9
percent compared to 16.0 percent in 1997 and 18.0 percent in 1996.
Operating profit as a percent of average investment was 17.1 percent
in 1998, compared to 18.5 percent in 1997 and 21.5 percent in 1996.
Operating profit as a percent of average investment for Flexible
Packaging was 15.9 percent in 1998 compared to 15.6 percent in 1997 and 19.3
percent in 1996. This same ratio for Pressure Sensitive Materials was 22.1
percent in 1998 compared to 30.2 percent in 1997 and 29.7 percent in 1996.
Return on average total capital was 10.3 percent in 1998, 11.3
percent in 1997, and 13.0 percent in 1996. 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 1998 were $139.8 million compared to $167.5
million in 1997 and $112.0 million in 1996, including capitalized interest of
$1.3 million, $1.3 million, and $.8 million for 1998, 1997, and 1996,
respectively. In 1999, management anticipates expenditures to be slightly
less than 1998 levels. 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 the Flexible Packaging
segment in both the high barrier products and polyethylene products and the
expansion of our Pressure Sensitive Materials segment.
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CAPITAL STRUCTURE, LIQUIDITY, AND CASH FLOW
Stockholders' equity increased in 1998 to $687.9 million, up from
$667.2 million in 1997 and $600.6 million in 1996, due primarily to earnings
net of dividend payments and common stock repurchases. In 1998, $41.3 million
of common stock was repurchased compared to $5.1 million in 1997 and $9.0
million in 1996. Common stock totaling $7.4 million was issued in 1998 in
connection with employee stock incentive programs.
Total debt increased $56.8 million in 1998 to $377.9 million, making
total debt as a percent of total capital 32.8 percent compared to 30.0
percent in 1997 and 26.6 percent in 1996. In 1999, total debt is expected to
decrease due to an expected reduction in common stock repurchases and capital
expenditures from 1998 and 1997 levels offset by increases in working capital
attributable to an expected increase in sales levels.
Working capital (excluding short-term debt) decreased by $7.5
million to $307.8 million in 1998 following an increase of $2.2 million to
$315.3 million in 1997, and an increase of $32.9 million to $313.1 million in
1996. The current ratio was 2.2:1 in 1998 compared to 2.2:1 in 1997 and 2.4:1
1996.
The Company's cash flow remained strong in 1998 as cash provided by
operations was $199.5 million compared to $190.3 million in 1997 and $182.5
million in 1996. The following schedule presents the major sources and uses
of cash for the Company in 1998.
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<S> <C>
SOURCES AND USES OF CASH (IN MILLIONS OF DOLLARS)
SOURCES
Net Income ..................................... $ 101.1
Depreciation and amortization .................. 88.9
Minority Interest .............................. 4.5
Decrease in working capital* (net of effects of
acquisitions and dispositions) ............ 12.0
Deferred income taxes .......................... 3.5
Increase in total debt (net of effects of
acquisitions and dispositions) ............ 56.4
Other .......................................... 11.6
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Total Sources ......................... $ 278.0
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USES
Capital expenditures ........................... $ 139.8
Business acquisitions, net of cash acquired .... 50.2
Common stock repurchases ....................... 41.3
Dividends ...................................... 46.7
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Total Uses ............................ $ 278.0
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</TABLE>
* Excluding short-term debt ....................
The Company's pretax interest coverage was 8.6 times in 1998
compared to 9.7 times in 1997
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and 13.4 times in 1996. Pretax income increased to $165.0 million in 1998
from $164.9 million in 1997 and $166.0 million in 1996. Interest expense was
$21.9 million in 1998, $18.9 million in 1997, and $13.4 million in 1996.
Following are pretax interest coverage ratios for the last five years:
<TABLE>
<CAPTION>
COVERAGE OF PRETAX INTEREST BY PRETAX INCOME AND INTEREST
1994 1995 1996 1997 1998
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<S> <C> <C> <C> <C>
16.2 12.5 13.4 9.7 8.6
</TABLE>
Substantial credit is available to the Company for future use,
including a $327 million revolving credit agreement with seven 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, United Kingdom,
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, 1998 and 1997, the Company had
outstanding forward foreign currency exchange contracts aggregating
$19,736,000 and $19,144,000, 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 $26,000 loss at December 31, 1998, and a $120,000
loss at December 31, 1997, had outstanding contracts been settled at those
respective dates.
In mid-January 1999, the Brazilian Government reversed a policy
which will have a negative impact on the Company in the first quarter of
1999. Previously, the Brazilian Government controlled their currency by
pegging it to a narrow band as it relates to the U.S. dollar. This policy was
dropped in favor of allowing the Brazilian currency, the real, to float
against the U.S. dollar. The immediate effect was a devaluation of the real
against the U.S. dollar. The Company has a one-third interest in a Brazilian
joint venture, ITAP/Bemis Ltda. The joint venture has foreign denominated
debt exposures which are only partially hedged. Net conversion losses on the
debt will be recorded as an expense.
INCOME TAXES
The Company's effective tax rate was 38.7 percent in 1998 versus
38.5 percent in 1997 and 37.9 percent in 1996. The primary difference between
our overall tax rate and the U.S. statutory tax rate of 35 percent in 1998,
1997, and 1996 relates to state and local income taxes net of the federal
income tax benefit.
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NEW ACCOUNTING PRONOUNCEMENTS
In 1998, the Company adopted, as required, the provisions of
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures
about Segments of an Enterprise and Related Information." This SFAS requires
disclosure of selected financial information based on the "operating
segments" of the enterprise rather than "industry segments" standard required
by superseded authoritative requirements. No significant changes were
required upon adoption of this SFAS No. 131. For many years the Company's
business activities have been organized around its two principal business
segments, Flexible Packaging and Pressure Sensitive Materials.
In 1998, the Company adopted, as required, the expanded disclosure
provisions of SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." The additional disclosure requirements are included
in the Notes to the Consolidated Financial Statements which are part of the
Company's annual financial statements.
In June 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities."
This statement, which is required to be adopted for annual periods beginning
after June 15, 1999, establishes standards for recognition and measurement of
derivatives and hedging activities. The Company will implement this statement
in the year 2000 as required. The adoption of SFAS No. 133 is not expected to
have a material effect on the Company's financial position or results of
operations.
MARKET PRICES AND DIVIDENDS
The Bemis quarterly dividend was increased by 10.0 percent in the
first quarter of 1998 to 22 cents per share from 20 cents. This followed
first quarter increases of 11.1 percent in 1997 to 20 cents per share from 18
cents, and 12.5 percent in 1996 to 18 cents per share from 16 cents in 1995.
Common dividends for the year were 88 cents per share, up from 80
cents in 1997 and 72 cents in 1996. The 1998 dividend payout ratio was 46.4
percent compared to 42.5 percent in 1997 and 37.2 percent in 1996. Based on
the market price of $44.06 per share at the beginning of 1998, the dividend
yield was 2.0 percent.
Stockholders' equity per common share (book value per share)
increased to $13.16 per share in 1998, up from $12.60 per share in 1997 and
$11.47 per share in 1996. Trading volume in Bemis common stock was 25.5
million shares in 1998.
In February 1999, the Board of Directors increased the quarterly
cash dividend on common stock to 23 cents per share from 22 cents, a 4.5
percent increase.
14
<PAGE>
EUROPEAN COMMON CURRENCY (EURO)
The European Economic and Monetary Union (EMU) and a new currency,
the "euro", began in Europe on January 1, 1999. This is a significant and
critical element in the European Union's (EU) plan to blend the economies of
the EU's member states into one integrated market, with unrestricted and
unencumbered trade and commerce across borders. Eleven of the fifteen member
EU countries are initially participating. Other member states may join in the
years to come.
On January 1, 1999, the European Central Bank (ECB) established
fixed conversion rates between the euro and existing currencies (legacy
currencies) of participating member countries of the EMU. The euro now trades
on currency exchanges and is available for noncash transactions on a "no
compulsion, no prohibition" basis. The euro will coexist with the legacy
currencies through January 1, 2002. During this transition period, currency
conversion rates no longer will be computed directly from one legacy currency
to another. Instead, a "triangulation" process must be applied with any
amount denominated in a legacy currency first converted into a euro amount
and then into the second legacy currency. Beginning on January 1, 2002, the
ECB will issue euro-denominated bills and coins for use in cash transactions.
On or before July 1, 2002, the participating countries will withdraw all
legacy bills and coins and use the euro as their legal currency.
The principal impact on the Company will be experienced by its
operations whose functional currency is the existing currency (legacy
currency) of a participating member country of the EMU. The "triangulation"
process and the resulting single currency denomination (the euro) will impact
the information technology infrastructure, accounting record keeping
requirements, and cross-border purchasing and selling. The Company recognizes
that failure to timely resolve internal euro issues could result, in a worst
case, in the Company's European operations' inability to obtain raw materials
in a timely manner; reductions, delays, or cancellations of customer orders;
delays in payments by customers for products shipped; or a general inability
to record, track, and consummate business transactions. Any or all of these
events could have a material adverse effect on the Company's business,
financial condition, and results of operations.
The Company has selected and installed new computer software which
is euro-compliant (also Year 2000 compliant) and expects that the initial
positive experience during the first few weeks of 1999 will continue as
actual utilization of the new software more fully tests its functionality
over a longer period of time. The cost of these efforts is expected to total
$1.5 million of which approximately $1.0 million was incurred in 1998 for
both expense and capital items. The overall effect on the Company's
international operations, principally its Pressure Sensitive Materials
business segment, is not expected to be material. In addition, the increased
"price and cost transparency" expected to result from a single currency for a
larger integrated market, is expected to lower material cost and lower costs
associated with currency transactions, however, selling prices may be
adversely affected. The experience during the first few weeks of 1999 has not
been out of the ordinary and the Company expects this transition experience
to continue.
15
<PAGE>
YEAR 2000 ISSUE
In late-1992, the Company began to set direction for upgrading all
of its information technology (IT) systems with a focus on significant
enhancement of IT support at the division level. It was the Company's
intention to replace legacy IT systems with hardware and software that
reflected the current state of technology. Principal objectives of this major
effort were to significantly improve the quality and usefulness of
computerized information management systems, to improve employee and
manufacturing efficiencies, and to notably enhance the quality of service to
customers, suppliers, and employees. "Year 2000 compliant," was one of many
necessary attributes of any system considered. Computers and related
equipment, computer software, and other office and manufacturing equipment
utilizing microprocessors that use only two digits to identify a year in a
date field may be unable to accurately process certain date-based information
at or after the Year 2000. This is commonly referred to as the "Year 2000
issue."
The Company, like commerce in general, is highly dependent on
computerized systems or controls for the administrative recording of business
transactions, for the administrative control and actual manufacture of
products it sells, and for the efficient interaction between third parties
such as suppliers, customers, banks, and employees. The Company recognizes
that failure to timely resolve internal Year 2000 issues could result, in a
worst case, in the Company's inability to obtain raw materials in a timely
manner; reductions in the quality or quantity of materials obtained;
reductions, delays, or cancellations of customer orders; delays in payments
by customers for products shipped; or a general inability to record, track,
and consummate business transactions. Any or all of these events could have a
material adverse effect on the Company's business, financial condition, and
results of operations.
The Company is addressing its Year 2000 issue in three areas: (1) IT
system applications, (2) non-IT systems, including engineering and
manufacturing equipment applications, and (3) relationships with third
parties.
The Company has conducted an assessment of its company-wide Year
2000 issue surrounding its IT systems. Since the initial assessment in
late-1992, concurrent efforts have been underway to evaluate, select, and
implement third party supplied or internally developed software for
company-wide or division-wide applications. Currently, a portion of all new
major software applications is in daily operation. Internally developed
software is Year 2000 compliant, and where third party supplied software is
not Year 2000 compliant the Company has received assurance of such compliance
once the updated software version is released and installed in 1999. While
the current stages of completion for these concurrent efforts vary, the
Company believes that implementation will be complete and Year 2000 compliant
by mid-1999.
The Company has completed the initial assessment of the Year 2000
issue surrounding its non-IT systems, including engineering and manufacturing
equipment applications. Year 2000 remediation and testing efforts, which are
continuing throughout the Company, are more than 50 percent complete. This
Company-wide effort is being centrally coordinated with actual assessment,
remediation, and implementation assigned to identified individuals at each
manufacturing, warehouse, or office site.
16
<PAGE>
While the degree of effort and extensiveness of remediation will vary by
site, it is expected that all sites will be Year 2000 compliant by mid-1999.
Finally, the Company is continuing to examine its relationship with
third parties whose failure to become Year 2000 compliant in a timely manner,
if at all, could have a material effect on the Company. The Company has been
in contact with significant vendors and customers with respect to such
companies' Year 2000 compliance programs and status. In addition, follow-up
conversations have been conducted with key customers and vendors. The Company
is continuing to evaluate this effort and expects to request more detailed
and updated information from its principal suppliers and customers over the
next several months.
The Company is developing contingency plans to address the effects
of the failure of the Company or any of its principal suppliers, customers,
or other third parties to become Year 2000 compliant in a timely manner.
While the initial contingency plan development is expected to be completed
during the first quarter of 1999, it is expected that this plan will be
updated throughout 1999 as required by changes in events, facts, and
circumstances surrounding the Company's Year 2000 compliance efforts as well
as that of its principal suppliers, customers, and other third parties.
Most business units meet at least monthly to review progress and
plans. Senior level representatives from the various concurrent
implementation and remediation teams meet at least quarterly with senior
level Company management to assess progress, to assure a coordinated effort
where required, and to verify a continued Company-wide focus toward a
satisfactory resolution of the Company's Year 2000 issue. The Company is
utilizing both internal and external resources to meet its timetable for
becoming Year 2000 compliant.
Since late-1992, when the Company began to set direction for
upgrading all of its IT systems in the normal course of business, the Company
has made capital investments in certain third party software and hardware
systems to address the financial and operational needs of the business. These
systems, which will improve the efficiencies and productivity of the replaced
systems, have been, or will be certified Year 2000 compliant by the vendors
and have been or will be installed by mid-1999. To date all of these capital
projects were part of the Company's long term strategic capital plan and
their timing was not accelerated as a result of the Year 2000 issue. Total
expenditures for the remediation of "embedded chip exposures" in
manufacturing equipment and facilities together with the unexpected
replacement of selected computer equipment is estimated to total $2.6
million, of which approximately $0.3 million has been incurred in 1998. This
effort is expected to be completed by mid-1999. All expenditures are made
from internally generated funds and have not had a negative impact on the
Company's capital expenditure program.
FORWARD-LOOKING STATEMENTS
The following "Safe Harbor Statement" is made pursuant to the
Private Securities Litigation Reform Act of 1995. Certain of the statements
contained in the body of this report are forward-looking statements (rather
than historical facts). With respect to such forward-looking statements, the
Company seeks the protections afforded by the Private Securities Litigation
Reform Act of 1995. Such
17
<PAGE>
forward-looking statements are based on management's current plans and
expectations and are subject to a number of uncertainties and risks that
could cause actual results to differ materially from those described in such
statements. These forward-looking statements include, but are not limited to,
the following: the successful reorganization of the Pressure Sensitive
Materials segments; the expectation that packaging operations will remain
strong in 1999; the success of the Company in expanding its international
business; the amount and distribution of expected capital expenditures in
1999; the expectation that total debt will decrease slightly in 1999; the
cost and success of the Company's Year 2000 compliance program and euro
conversion program; and the opinion of management that resolution of the
Company's current environmental litigation will not produce a material
adverse effect on its financial condition or results of operations.
Factors that could cause actual results to differ from those
expected include, but are not limited to, general economic conditions such as
inflation, interest rates, and foreign currency exchange rates; competitive
conditions within the Company's markets, including the acceptance of new and
existing products offered by the Company; price increases for raw materials
and the ability of the Company to pass these price increases on to its
customers or otherwise manage commodity price fluctuation risks; the presence
of adequate cash available for investment in the Company's business in order
to maintain desired debt levels; unanticipated consequences of the Year 2000,
including noncompliance by the Company's customers or suppliers;
unanticipated consequences of the EMU's conversion to the euro; changes in
governmental regulation, especially in the areas of environmental, health and
safety matters, and foreign investment; unexpected outcomes in the Company's
current and future litigation proceedings; and changes in the Company's labor
relations.
BEMIS COMMON STOCK PERFORMANCE *
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------------------------------------------
Dividend Dividend Dividend
High Low Paid High Low Paid High Low Paid
------------------------------ ---------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter 46-15/16 40-1/4 $.22 43-3/8 35-7/8 $.20 33-3/8 26-1/8 $.18
Second Quarter 46 40-5/8 $.22 43-3/4 36-1/2 .20 36 30 .18
Third Quarter 41 34-15/16 $.22 47-3/16 43-3/8 .20 36 29-3/8 .18
Fourth Quarter 42-3/16 33-15/16 $.22 45-1/16 35-13/16 .20 37-1/8 34 .18
</TABLE>
*New York Stock Exchange: BMS
18
<PAGE>
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, 1998 and 1997,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, 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/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
January 22, 1999, except as to Note 17, which is as of July 20, 1999
19
<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 22, 1999, except as to Note 17 which is as of July
20, 1999, also included an audit of Financial Statement Schedules listed in
Item 7 of this Current Report on Form 8-K dated July 23, 1999. 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/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
July 20, 1999
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in 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 22, 1999,
except as to Note 17 which is as of July 20, 1999, relating to the financial
statements and financial statement schedule which appear in the Current
Report on Form 8-K dated July 23, 1999.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
August 10, 1999
20
<PAGE>
RESTATED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED DECEMBER 31, 1998
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
RESTATED TO REFLECT CHANGE TO FIFO INVENTORY METHOD
YEARS ENDED DECEMBER 31,
(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,848,004 $1,877,237 $1,655,431
Costs and expenses:
Cost of products sold 1,458,215 1,485,494 1,268,824
Selling, general, and administrative expenses 185,841 189,590 192,819
Research and development 12,224 12,012 13,655
Interest 21,866 18,893 13,397
Other costs (income), net 332 918 (3,996)
Minority interest in net income 4,496 5,406 4,695
---------------------------------------------
Income before income taxes 165,030 164,924 166,037
Provision for income taxes 63,900 63,500 63,000
---------------------------------------------
Net income $ 101,130 $ 101,424 $ 103,037
---------------------------------------------
---------------------------------------------
Basic earnings per share of common stock $ 1.91 $ 1.91 $ 1.96
---------------------------------------------
---------------------------------------------
Diluted earnings per share of common stock $ 1.90 $ 1.88 $ 1.93
---------------------------------------------
---------------------------------------------
</TABLE>
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
21
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
RESTATED TO REFLECT CHANGE TO FIFO INVENTORY METHOD
DECEMBER 31,
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ASSETS 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash $ 23,738 $ 13,827
Accounts receivable, less $12,863 and $12,110
for doubtful accounts and allowances 246,676 233,547
Inventories 241,585 267,372
Prepaid expenses and deferred charges 34,912 47,443
------------------------------
Total current assets 546,911 562,189
------------------------------
Property and equipment:
Land and land improvements 14,811 13,563
Buildings and leasehold improvements 219,055 204,263
Machinery and equipment 918,782 826,671
------------------------------
1,152,648 1,044,497
Less - accumulated depreciation 412,547 359,270
------------------------------
740,101 685,227
------------------------------
Excess of cost of investments in subsidiaries
over net assets acquired 160,819 150,632
Other assets 34,195 10,315
------------------------------
195,014 160,947
------------------------------
Total Assets $ 1,482,026 $ 1,408,363
------------------------------
------------------------------
</TABLE>
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
CONTINUED
22
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
RESTATED TO REFLECT CHANGE TO FIFO INVENTORY METHOD
DECEMBER 31,
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 2,946 $ 2,173
Short-term borrowings 3,553 2,105
Accounts payable 193,088 195,346
Accrued liabilities:
Salaries and wages 31,629 34,892
Income taxes 5,752 8,445
Other taxes 8,645 8,226
------------------------------
Total current liabilities 245,613 251,187
Long-term debt, less current portion 371,363 316,791
Deferred taxes 84,679 81,966
Other liabilities and deferred credits 54,655 56,876
------------------------------
Total liabilities 756,310 706,820
------------------------------
Minority interest 37,862 34,309
Commitments and contingencies
Stockholders' equity:
Common stock, $.10 par value:
Authorized - 248,000,000 shares
Issued - 59,056,047 and 58,643,557 shares 5,906 5,864
Capital in excess of par value 181,908 174,562
Retained income 708,362 653,933
Other comprehensive income (loss) (6,116) (6,263)
Common stock held in treasury,
6,786,889 and 5,676,046 shares, at cost (202,206) (160,862)
------------------------------
Total stockholders' equity 687,854 667,234
------------------------------
Total liabilities and stockholders' equity $ 1,482,026 $ 1,408,363
------------------------------
------------------------------
</TABLE>
23
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT 0F CASH FLOWS
RESTATED TO REFLECT CHANGE TO FIFO INVENTORY METHOD
YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 101,130 $ 101,424 $ 103,037
Noncash items:
Depreciation and amortization 88,910 78,856 66,192
Minority interest in net income 4,496 5,406 4,695
Deferred income taxes, noncurrent portion 3,516 3,412 8,335
Undistributed earnings of affiliated companies 1,546
(Gain) loss on sale of property and equipment (74) 1,155 245
--------------------------------------------
Cash provided by operations 199,524 190,253 182,504
Changes in working capital, net of effect of
acquisitions and dispositions:
Accounts receivable (9,816) (13,982) (14,062)
Inventories 28,332 (17,776) (28,488)
Prepaid expenses and deferred charges 12,565 (7,684) 1,065
Accounts payable (3,141) (13,610) (4,520)
Accrued salaries and wages (3,780) (731) 4,180
Accrued income taxes (2,668) 2,969 (7,817)
Accrued other taxes 429 2,495 (3,825)
Changes in other liabilities and deferred credits (2,002) (2,223) 4,612
Changes in deferred charges and other investments 1,497 4,000 2,563
--------------------------------------------
Net cash provided by operating activities $ 220,940 $ 143,711 $ 136,212
--------------------------------------------
</TABLE>
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
CONTINUED
24
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT 0F CASH FLOWS
RESTATED TO REFLECT CHANGE TO FIFO INVENTORY METHOD
YEARS ENDED DECEMBER 31
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from investing activities:
Additions to property, plant, and equipment $ (139,833) $ (167,520) $ (111,950)
Business acquisitions, net of cash acquired (50,206) 2,055 (74,114)
Business divestiture 27,984 12,752
Proceeds from sale of property and equipment 3,993 2,652 1,960
Other 11 (22) 37
-----------------------------------------------
Net cash used by investing activities (186,035) (134,851) (171,315)
-----------------------------------------------
Cash flows from financing activities:
Increase in long-term debt 56,946 59,628 79,952
Repayment of long-term debt (2,374) (14,875) (5,310)
Change in short-term borrowings 1,272 (618) 1,926
Change in current portion of long-term debt 574 467 (1,699)
Cash dividends paid (46,701) (42,418) (37,830)
Subsidiary dividends to minority stockholders (1,835) (1,835) (1,841)
Purchase of common stock for the treasury (41,344) (5,051) (8,962)
Stock incentive programs and related tax effects 7,388 51 312
-----------------------------------------------
Net cash (used) provided by financing activities (26,074) (4,651) 26,548
-----------------------------------------------
Effect of exchange rates 1,080 (605) (3,254)
-----------------------------------------------
Net increase (decrease) in cash $ 9,911 $ 3,604 $ (11,809)
-----------------------------------------------
-----------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Noncash investing and financing activities:
Fair value of assets acquired $ 54,180 $ 123,262 $ 92,218
Liabilities assumed 3,974 100,213 14,937
Minority interest acquired 1,108
-----------------------------------------------
Net value acquired 50,206 23,049 76,173
Common stock issued 25,104 2,059
-----------------------------------------------
Cash used for acquisition $ 50,206 $ (2,055) $ 74,114
-----------------------------------------------
-----------------------------------------------
Interest paid during the year $ 22,900 $ 19,752 $ 14,268
Income taxes paid during the year $ 48,897 $ 55,813 $ 60,955
</TABLE>
25
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
RESTATED TO REFLECT CHANGE TO FIFO INVENTORY METHOD
<TABLE>
<CAPTION>
Capital In Other Common Total
Common Excess Of Retained Comprehensive Stock Held Stockholder's
(IN THOUSANDS OF DOLLARS) Stock Par Value Income Income (Loss) In Treasury Equity
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995,
as previously reported $ 5,781 $147,119 $498,167 $ 8,590 ($146,849) $ 512,808
Cumulative effect on prior years
of change in accounting for inventory
from the LIFO to FIFO method 31,553 31,553
--------------------------------------------------------------------------------------
Balance at January 1, 1996, as restated 5,781 147,119 529,720 8,590 (146,849) 544,361
--------------------------------------------------------------------------------------
Net income for 1996, as
previously reported 101,081 101,081
1996 net income adjustment for LIFO
to FIFO change 1,956 1,956
Translation adjustment for 1996 (3,917) (3,917)
Pension liability adjustment,
net of $948 tax benefit 1,546 1,546
-----------
Total comprehensive income 100,666
-----------
Cash dividends paid on common
stock, $. 72 per share (37,830) (37,830)
Stock incentive programs and
related tax effects 2 310 312
Common stock transactions related to an
acquisition of a subsidiary company 7 2,052 2,059
Purchase of 292,000 shares of common stock (8,962) (8,962)
--------------------------------------------------------------------------------------
Balance at December 31, 1996, as restated 5,790 149,481 594,927 6,219 (155,811) 600,606
--------------------------------------------------------------------------------------
Net income for 1997, as previously reported 107,584 107,584
1997 net income adjustment for LIFO
to FIFO change (6,160) (6,160)
Translation adjustment for 1997 (11,109) (11,109)
Pension liability adjustment, net
of $842 tax benefit (1,373) (1,373)
-----------
Total comprehensive income 88,942
-----------
Cash dividends paid on common
stock, $.80 per share (42,418) (42,418)
Stock incentive programs and related
tax effects 4 47 51
Common stock transactions related to an
acquisition of a subsidiary company 70 25,034 25,104
Purchase of 139,429 shares of common stock (5,051) (5,051)
--------------------------------------------------------------------------------------
Balance at December 31, 1997, as restated 5,864 174,562 653,933 (6,263) (160,862) 667,234
--------------------------------------------------------------------------------------
Net income for 1998, as previously reported 111,432 111,432
1998 net income adjustment for LIFO
to FIFO change (10,302) (10,302)
Translation adjustment for 1998 (72) (72)
Pension liability adjustment, net
of $102 tax benefit 219 219
-----------
Total comprehensive income 101,277
-----------
Cash dividends paid on common stock,
$.88 per share (46,701) (46,701)
Stock incentive programs and
related tax effects 42 7,346 7,388
Purchase of 1,110,843 shares of
common stock (41,344) (41,344)
--------------------------------------------------------------------------------------
Balance at December 31, 1998,
as restated $5,906 $181,908 $708,362 ($6,116) ($202,206) $687,854
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.)
26
<PAGE>
RESTATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE YEARS ENDED
DECEMBER 31, 1998
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: Basic earnings per common share are computed by dividing
net income by the weighted-average number of common shares outstanding during
the year. Diluted earnings per 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.
INVENTORY VALUATION: Inventories are valued at the lower of cost, determined
by the first-in, first-out (FIFO) method, or market.
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 TANGIBLE 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 various periods ranging from 20 to 40 years. The recoverability
of unamortized goodwill and other intangible assets 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 average exchange rates in effect during the year.
Translation adjustments are recorded as a separate component of equity.
27
<PAGE>
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, 1998, none of these shares were issued or
outstanding.
BUSINESS SEGMENT INFORMATION: In 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of
an Enterprise and Related Information." The "operating" approach required by
SFAS No. 131 supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise," which focused on an "industry segment" approach. No
significant change in disclosure was required by the Company as a result of
the adoption of SFAS No. 131.
FINANCIAL INSTRUMENTS: In June 1998, the Financial Accounting Standards Board
(FASB) issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities." This statement, which is required to be adopted for annual
periods beginning after June 15, 1999, establishes standards for recognition
and measurement of derivatives and hedging activities. The Company will
implement this statement in the year 2000 as required. The adoption of SFAS
No. 133 is not expected to have a material effect on the Company's financial
position or results of operations.
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. At December 31, 1998 and 1997, reserves were $1,971,000 and
$1,745,000, respectively. Adjustments to the reserve accounts and costs which
were directly expensed for environmental remediation matters resulted in
charges to the income statements for 1998, 1997, and 1996 of $169,000,
$896,000, and ($181,000), net of third party reimbursements totaling
$186,000, $515,000, and $439,000, for 1998, 1997, and 1996, respectively.
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.
28
<PAGE>
NOTE 2 - BUSINESS ACQUISITIONS AND DISPOSITIONS
On June 4, 1998, the Company formed Bemis Europe Holdings, S.A. to
acquire the Techy group, a European manufacturer of flexible packaging. The
acquisition, which was effective on June 30, 1998, and was accounted for
under the purchase method of accounting, added manufacturing and sales
locations in Belgium, France, and the United Kingdom. Approximately $11.3
million was paid at closing to acquire 100% control.
Effective February 1, 1998, the Company purchased a one-third
interest in a newly formed Brazilian joint venture, ITAP/Bemis Ltda. for
$38.9 million. This joint venture between the Company and Dixie Toga, S.A.,
the largest supplier of flexible packaging in South America, creates an
organization that is strong in market knowledge and presence to serve the
needs of the South American marketplace. Since Bemis did not purchase a
controlling interest in the company, this investment and future earnings are
being recorded on the equity basis of accounting.
On May 4, 1997, the Company sold the remainder of its Packaging
Machinery Division, which had annual sales of approximately $93 million, to
Barry-Wehmiller Group, Inc. of St. Louis, Missouri. Cash received totaled
approximately $39 million, including the $10.7 million pretax gain which is
included in other income.
On March 14, 1997, the Company, through its subsidiary, Morgan
Adhesives Company, acquired the assets of a division of GPOA, L.P. for a cash
payment of approximately $6 million. This business now serves as a catalog
distribution channel for the Company's pressure sensitive labeling products.
Results of operations for this new division subsequent to March 13, 1997, are
included in these financial statements.
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 with a strong emphasis on disposable
diaper packaging and other sanitary products. The total purchase price, net
of cash acquired, of approximately $53 million in Bemis common stock and the
assumption of debt, has been accounted for under the purchase method of
accounting, and results of operations for Paramount subsequent to December
31, 1996, are included in these financial statements.
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 Pennsylvania. The total purchase price of approximately $11
million has been accounted for under the purchase method of accounting, and
results of operations for Paramount-LLC subsequent to December 31, 1996, are
included in these financial statements.
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
29
<PAGE>
approximately $65 million in the medical packaging market, operates
manufacturing facilities in 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, including the $4.3 million pre-tax gain which is included in other
income.
Supplemental pro forma results of operations giving effect to the
acquisitions and dispositions are not presented because they are not material.
NOTE 3 - RESTRUCTURING OF OPERATIONS
During the second quarter of 1997, the Company announced the
reorganization of its paper products operations and recorded a $7.8 million
charge to absorb the cost of this effort. The reorganization principally
involved the closure of two manufacturing facilities and the realignment of
the business organization into operating units targeting specific focused
markets in which the company anticipates faster growing market segments. With
the realigned organization the Company expects increased market share and
enhanced profitability through reduced product specification and improved
plant efficiency.
The restructuring effort was expected to result in the elimination
of 289 jobs in the U.S. in conjunction with the closing of two manufacturing
facilities. Other costs associated with the integration of equipment,
business, and people from closed facilities into the remaining business units
was expensed as incurred. At the close of the project, actual employee
reductions totaled 278 with 11 employee relocations.
Both manufacturing facility closures and the realignment of the
business organization were completed as of the end of 1998. Of the $7.8
million estimated restructuring expense, actual cash cost was $4.8 million
and total non-cash cost was $2.5 million. The remaining $.5 million reserve
was restored to income in 1998, since the project was completed.
ANALYSIS OF RESTRUCTURING RESERVE
<TABLE>
<CAPTION>
OTHER
EMPLOYEE ASSET EXIT
(IN THOUSANDS OF DOLLARS) COSTS WRITE-DOWNS COSTS TOTAL CASH NON-CASH
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reserve balance at June 30, 1997 $ (3,004) $(1,798) $(2,972) $(7,774) $(6,201) $(1,573)
1997 Reserve charges 351 523 164 1,038 517 521
-------- ------- ------- ------- ------- -------
Reserve balance at December 31, 1997 (2,653) (1,275) (2,808) (6,736) (5,684) (1,052)
1998 Reserve charges 2,339 2,024 1,864 6,227 4,227 2,000
-------- ------- ------- ------- ------- -------
$ (314) $ 749 $ (944) $ (509)(A) $(1,457) $ 948
-------- ------- ------- ------- ------- -------
-------- ------- ------- ------- ------- -------
</TABLE>
(A) Restored to income in the fourth quarter of 1998.
30
<PAGE>
EMPLOYEE SEPARATIONS - RESTRUCTURING
<TABLE>
<CAPTION>
HOURLY SALARIED TOTAL
------ -------- -----
<S> <C> <C> <C>
Planned Employee Reductions 236 53 289
--- --- ---
--- --- ---
Actual Employee Reductions - 1997 135 23 158
Actual Employee Reductions - 1998 102 18 120
Employee Relocations 2 9 11
--- --- ---
Cumulative Total 239 50 289
--- --- ---
--- --- ---
</TABLE>
NOTE 4 - INVENTORIES
The Company's inventories are valued at the lower of cost,
determined by the first-in, first-out (FIFO) method, or market. Inventories
are summarized at December 31, as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $ 87,242 $ 101,104
Work in process and finished goods 154,343 166,268
--------- ---------
Total inventories 241,585 267,372
--------- ---------
--------- ---------
</TABLE>
NOTE 5 - PENSION PLANS
Total pension expense in 1998, 1997, and 1996 was $3,525,000,
$8,351,000, and $9,912,000, respectively.
Defined contribution plans cover employees at five different
manufacturing or administrative locations and provide for contributions
ranging from 2 percent to 6 percent of covered employees' salaries or wages
and totaled $733,000 in 1998, $688,000 in 1997, and $1,390,000 in 1996.
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 1998,
1997, and 1996 totaled $1,267,000, $1,186,000, and $1,114,000, 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.
Changes in benefit obligation and plan assets, and a reconciliation
of the funded status at December 31, 1998 and 1997, is as follows:
31
<PAGE>
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at the beginning of the year $ 262,775 $ 255,465
Service cost 7,575 6,634
Interest cost 17,891 17,622
Plan amendments 1,626 2,270
Curtailment (gain) or loss 0 (2,504)
Special termination benefits 336 0
Actuarial (gain) or loss 13,069 (5,085)
Acquisition (11) 2,975
Benefits paid (15,519) (14,606)
Foreign currency exchange rate changes (90) 4
--------- ---------
Benefit obligation at the end of the year $ 287,652 $ 262,775
--------- ---------
--------- ---------
CHANGE IN PLAN ASSETS
Fair value of plan assets at the beginning of the year $ 301,038 $ 248,730
Actual return on plan assets 84,086 63,419
Acquisition 0 3,303
Employer contribution 249 117
Benefits paid (15,519) (14,606)
Foreign currency exchange rate changes (250) 75
--------- ---------
Fair value of plan assets at the end of the year $ 369,604 $ 301,038
--------- ---------
--------- ---------
RECONCILIATION OF FUNDED STATUS
Funded status $ 81,952 $ 38,263
Unrecognized net (gain) or loss (106,782) (63,138)
Unrecognized transition (asset) or obligation 4,287 5,743
Unrecognized prior service cost 7,027 6,064
--------- ---------
Accrued pension liability $ (13,516) $ (13,068)
--------- ---------
--------- ---------
</TABLE>
Net periodic pension cost for defined benefit plans included the
following components:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1998 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 7,575 $ 6,634 $ 6,320
Interest cost on projected benefit obligation 17,891 17,622 16,443
Expected return on plan assets (26,045) (20,796) (18,237)
Amortization of unrecognized transition obligation 1,060 1,216 1,327
Amortization of prior service cost 662 490 468
Recognized net (gain) or loss (429) 444 278
-------- -------- --------
Net periodic pension cost $ 714 $ 5,610 $ 6,599
-------- -------- --------
-------- -------- --------
</TABLE>
32
<PAGE>
The Company has recorded the following amounts pursuant to Statement
of Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions," to reflect the minimum pension obligation at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1998 1997
- -----------------------------------------------------------
<S> <C> <C>
Intangible asset $ 749 $ 906
Prepaid tax 966 1,068
Pension liability (3,238) (3,716)
-------- --------
Reduction in stockholders' equity $(1,523) $(1,742)
-------- --------
-------- --------
</TABLE>
Presented below are the projected benefit obligation, accumulated
benefit obligation, and fair value of plan assets for the pension plan with
accumulated benefit obligations in excess of plan assets at December 31:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Projected benefit obligation $14,393 $12,539
Accumulated benefit obligation 10,566 9,214
Fair value of assets 0 0
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation together with the expected long-term rate of
return on assets is presented below.
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Weighted-average discount rate 6.75% 7.0%
Rate of increase in future compensation levels 5.25% 5.5%
Expected long-term rate of return on assets 10.00% 9.4%
</TABLE>
NOTE 6 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors several defined benefit postretirement plans
that cover a majority of salaried and a portion of nonunion hourly 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.
Changes in benefit obligation and plan assets, and a reconciliation
of the funded status at December 31, 1998 and 1997, is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at the beginning of the year $ 11,373 $ 12,345
Service cost 195 176
Interest cost 765 843
Actuarial (gain) or loss 781 (822)
Benefits paid (880) (1,169)
-------- --------
Benefit obligation at the end of the year $ 12,234 $ 11,373
-------- --------
-------- --------
</TABLE>
33
<PAGE>
<TABLE>
<S> <C> <C>
CHANGE IN PLAN ASSETS
Fair value of plan assets at the beginning of the year $ 0 $ 0
Employer contribution 880 1,169
Benefits paid (880) (1,169)
-------- --------
Fair value of plan assets at the end of the year $ 0 $ 0
-------- --------
-------- --------
RECONCILIATION OF FUNDED STATUS
Funded status $(12,234) $(11,373)
Unrecognized net (gain) or loss (4,117) (5,240)
Unrecognized prior service cost 103 114
-------- --------
Accrued postretirement benefit liability $(16,248) $(16,499)
-------- --------
-------- --------
</TABLE>
Net periodic postretirement benefit costs for 1998, 1997, and 1996
included the following components:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1998 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 195 $ 176 $ 151
Interest cost on accumulated postretirement benefit obligation 765 843 792
Amortization of prior service cost 12 11 0
Recognized net (gain) or loss (342) (340) (371)
----- ----- -----
Net periodic postretirement benefit cost $ 630 $ 690 $ 572
----- ----- -----
----- ----- -----
</TABLE>
The health care cost trend rate assumption has a significant effect on
the amounts reported. A one percentage point change in assumed health care
trends would have the following effects:
<TABLE>
<CAPTION>
1 Percentage 1 Percentage
Point Increase Point Decrease
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost components $103,000 $(86,000)
Effect on postretirement benefit obligation $1,029,000 $(900,000)
</TABLE>
For measurement purposes, a 9.0 percent annual rate of increase in
the per capita cost of covered health care benefits was assumed for 1999; the
rate was assumed to decrease gradually to 5.5 percent by the year 2003 and
remain at that level thereafter. The weighted-average discount rate used in
determining the accumulated postretirement benefit obligation was 6.75
percent in 1998 and 7.0 percent in 1997.
NOTE 7 - STOCK OPTION AND INCENTIVE PLANS
Since 1987, the Company's stock option and stock award plans have
provided for the issuance of up to 4,400,000 shares of common stock to key
employees. As of December 31, 1998, 1997, and
34
<PAGE>
1996, respectively, 922,179, 1,025,501, and 1,657,447 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, 1998, fourteen participants held options with
expiration dates ranging from 1999 to 2007 at option prices ranging from
$12.63 to $45.03 per share with a weighted-average price of $24.32 per share.
Details of the stock option plans at December 31, 1998, 1997, and
1996, are:
<TABLE>
<CAPTION>
PER SHARE WEIGHTED-
NUMBER OF OPTION PRICE AVERAGE PRICE
SHARES RANGE PER SHARE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at December 31, 1995 889,766 $ 5.75 - $24.63 $ 16.54
Granted 255,117 32.31 32.31
Exercised (20,000) 5.75 5.75
- ---------------------------------------------------------------------------------------
Outstanding at December 31, 1996 1,124,883 $12.63 - $32.31 $ 20.31
Granted 155,000 37.34 - 45.03 44.78
Exercised (100,000) 12.63 12.63
- ---------------------------------------------------------------------------------------
Outstanding at December 31, 1997 1,179,883 $12.63 - $45.03 $ 24.18
Exercised (39,756) 18.72 - 24.63 20.17
- ---------------------------------------------------------------------------------------
Outstanding at December 31, 1998 1,140,127 $12.63 - $45.03 $ 24.32
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
Exercisable at December 31, 1998 955,088 $12.63 - $45.03 $ 21.44
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
In 1994, the Company adopted a Stock Incentive Plan for certain key
executive employees. Since its adoption, all of the grants of either stock
options or performance units (commonly referred to as restricted stock) have
been made under this plan. Distribution of the performance units is normally
made in the form of shares of Bemis common stock on a one for one basis.
Distribution of the shares will normally be made not less than four years nor
more than six years from the date of the performance unit grant. All
performance units 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 on
outstanding performance units equal to the dividend on Bemis common stock.
The cost of the awards is charged to income over the period of the grant:
$7,012,000 was expensed in 1998, $4,230,000 in 1997, and $4,291,000 in 1996.
35
<PAGE>
Details of the stock award plan at December 31, 1998, 1997, and
1996, are:
<TABLE>
<CAPTION>
NUMBER
OF SHARES
<S> <C>
Outstanding at December 31, 1995 1,070,868
Granted 59,557
Canceled (32,137)
---------
Outstanding at December 31, 1996 1,098,288
Granted 538,278
Canceled (61,332)
---------
Outstanding at December 31, 1997 1,575,234
Granted 185,438
Paid (626,399)
Canceled (82,116)
---------
Outstanding at December 31, 1998 1,052,157
---------
---------
</TABLE>
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 1998, 1997, and 1996 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:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings - as reported ................ $ 101,130,000 $ 101,424,000 $ 103,037,000
Net earnings - pro forma .................. $ 98,883,000 $ 100,368,000 $ 101,900,000
Diluted earnings per share - as reported... $ 1.90 $ 1.88 $ 1.93
Diluted earnings per share - pro forma..... $ 1.86 $ 1.86 $ 1.91
Dividend yield ............................ 2.0% 1.9% 2.2%
Expected volatility ....................... 27.1% 27.0% 27.3%
Risk-free interest rate ................... 7.0% 7.0% 7.0%
Expected lives ............................ 5.9 years 9.0years 9.1 years
</TABLE>
The fair value of each grant made in 1998, 1997, or 1996 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
36
<PAGE>
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 $13,095,000 in 1998, $14,129,000 in 1997,
and $9,664,000 in 1996.
The present values of minimum future obligations shown in the
following chart are calculated based on interest rates ranging from 11-1/4
percent to 23-3/4 percent determined to be applicable at the inception of the
lease. Interest expense on the outstanding obligations under capital leases
was $31,000 in 1998, $2,000 in 1997, and $2,000 in 1996.
Minimum future obligations on leases in effect at December 31, 1998,
are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
(IN THOUSANDS OF DOLLARS) LEASES LEASES
-----------------------------------------------------------------------------------
<S> <C> <C>
1999 $ 94 $ 10,440
2000 2 6,928
2001 0 4,620
2002 0 2,529
2003 0 2,033
Thereafter 0 3,484
--------- -----------
Total minimum obligations 96 $ 30,034
-----------
-----------
Less amount representing interest 9
---------
Present value of net minimum obligations 87
Less current portion 83
---------
Long-term obligations $ 4
---------
</TABLE>
NOTE 9 - LONG-TERM DEBT
Long-term debt maturing in years 1999 through 2002 is $2,946,000,
$1,237,000, $8,688,000, and $720,000, respectively.
Under the terms of a revolving credit agreement with seven banks,
the Company may borrow up to $327,000,000 through August 1, 2003. The Company
must pay a facility fee ranging from 6/10 of 1 percent to 8/10 of 1 percent
annually on the entire amount of the commitment. There were no borrowings
outstanding under this agreement at December 31, 1998. Debt consisted of the
following at December 31,
37
<PAGE>
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1998 1997
-----------------------------------------------------------------------------
<S> <C> <C>
Commercial paper payable through
1999 at an interest rate of 5.2% (1) $252,000 $199,000
Note payable in 2005 at an interest rate of 6.7% 100,000 100,000
Industrial revenue bonds payable through
2012 at interest rates of 4.2% to 5.4% 15,500 15,500
Debt of subsidiary companies payable through
2007 at interest rates of 4.1% to 9.3% 6,722 4,214
Obligations under capital leases 87 250
-------- --------
374,309 318,964
Less current portion 2,946 2,173
-------- --------
$371,363 $316,791
-------- --------
-------- --------
</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, 1998, was 5.2 percent. The maximum
outstanding during 1998 was $286,000,000, and the average outstanding
during 1998 was $251,436,000. The weighted-average interest rate during
1998 was 5.6 percent.
NOTE 10 - INCOME TAXES
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 $111,996,000 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.
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. income before income taxes $ 149,917 $ 144,877 $ 146,405
Non-U.S. income before income taxes 17,288 24,273 3,468
Consolidating eliminations (2,175) (4,226) (3,836)
--------- --------- ---------
Income before income taxes $ 165,030 $ 164,924 $ 166,037
--------- --------- ---------
--------- --------- ---------
Income tax expense consists of the following components:
Current tax expense:
U.S. federal $ 44,009 $ 47,237 $ 40,922
Foreign 3,413 6,697 6,903
State and local 7,535 7,206 6,451
--------- --------- ---------
Total current tax expense 54,957 61,140 54,276
--------- --------- ---------
Deferred (prepaid) tax expense:
U.S. federal 6,562 837 7,985
Foreign 1,721 1,387 (306)
State 660 136 1,045
--------- --------- ---------
Total deferred (prepaid) tax expense 8,943 2,360 8,724
--------- --------- ---------
Total income tax expense $ 63,900 $ 63,500 $ 63,000
--------- --------- ---------
--------- --------- ---------
</TABLE>
38
<PAGE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities
are presented below.
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1998 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to
allowances for returns and doubtful accounts $ 4,574 $ 4,443 $ 5,410
Inventories, principally due to additional
costs inventoried for tax purposes
pursuant to the Tax Reform Act of 1986 4,646 4,766 7,392
Employee compensation and benefits
accrued for financial reporting purposes 15,115 15,714 13,537
Restructuring costs 2,694
Other 1,687 2,165 2,176
-------- -------- --------
Deferred tax assets (included in
prepaid expenses and deferred charges) $ 26,022 $29,782 $ 28,515
-------- -------- --------
-------- -------- --------
Deferred tax liabilities:
Plant and equipment, principally due
to differences in depreciation,
capitalized interest, and capitalized overhead $ 90,087 $79,645 $ 73,772
Noncurrent employee compensation and benefits
accrued for financial reporting purposes (16,127) (16,936) (16,326)
Change of inventory accounting method from
LIFO to FIFO 8,475 17,900 21,800
Other 2,244 1,357 (785)
-------- -------- --------
Deferred tax liabilities $ 84,679 $81,966 $ 78,461
-------- -------- --------
-------- -------- --------
</TABLE>
The Company's effective tax rate differs from the federal statutory
rate due to the following items:
<TABLE>
(IN THOUSANDS OF DOLLARS) 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
% of % of % of
Income Income 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 $ 57,761 35.0% $ 57,723 35.0% $ 58,113 35.0%
Increase (decrease) in taxes
resulting from:
State and local income taxes net
of federal income tax benefit 5,327 3.3 4,772 2.9 4,873 2.9
Foreign tax rate differential (1,113) (0.7) (471) (0.3) (1,719) (1.1)
Minority interest 1,574 1.0 1,892 1.1 1,643 1.0
Miscellaneous items 351 0.2 (416) (0.2) 90 0.1
-------- ---- -------- ----- -------- -----
Actual income tax expense $ 63,900 38.7% $ 63,500 38.5% $ 63,000 37.9%
-------- ---- -------- ----- -------- -----
-------- ---- -------- ----- -------- -----
</TABLE>
39
<PAGE>
NOTE 11- SEGMENTS OF BUSINESS
The Company's business activities are organized around its two
principal business segments, Flexible Packaging and Pressure Sensitive
Materials. Both internal and external reporting conform to this
organizational structure with no significant differences in accounting
policies applied. Minor intersegment sales are generally priced to reflect
minor markups. The Company evaluates the performance of its segments and
allocates resources to them based on operating profit which is defined as
profit before general corporate expense, interest expense, income taxes, and
minority interest. While there are similarities in selected technology and
manufacturing processes utilized, notable differences exist in products,
application of products, and customer base. Products produced within the
Flexible Packaging business segment include high barrier, polyethylene, and
paper products for food, medical, personal care products, fertilizers, seeds,
chemicals, pet food, and minerals. Products produced within the Pressure
Sensitive Materials business segment include film, paper, and metalized
plastic film printing stocks used for primary package labeling, promotional
decoration, bar code inventory control labels, and laser printing for
administrative office and promotional applications. This segment also
includes micro-thin film adhesives used in delicate electronic parts assembly
and graphic films for decorative signage. A summary of the Registrant's
business activities reported by its two business segments follows:
<TABLE>
<CAPTION>
BUSINESS SEGMENTS (IN MILLIONS OF DOLLARS) 1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES TO UNAFFILIATED CUSTOMERS:
Flexible Packaging $ 1,368.4 $ 1,398.6 $ 1,189.8
Pressure Sensitive Materials 480.0 479.7 467.9
INTERSEGMENT SALES:
Flexible Packaging (0.2) (0.9) (1.8)
Pressure Sensitive Materials (0.2) (0.2) (0.5)
---------- ---------- ----------
Total $ 1,848.0 $ 1,877.2 $ 1,655.4
---------- ---------- ----------
---------- ---------- ----------
OPERATING PROFIT AND PRETAX PROFIT:
Flexible Packaging $ 156.3 $ 142.6 $ 142.5
Pressure Sensitive Materials 51.0 67.2 59.6
---------- ---------- ----------
Total operating profit (1) 207.3 209.8 202.1
General corporate expenses (15.9) (20.6) (18.0)
Interest expense (21.9) (18.9) (13.4)
Minority interest in net income (4.5) (5.4) (4.7)
---------- ---------- ----------
Income before income taxes $ 165.0 $ 164.9 $ 166.0
---------- ---------- ----------
---------- ---------- ----------
IDENTIFIABLE ASSETS:
Flexible Packaging $ 1,144.3 $ 1,068.9 $ 890.1
Pressure Sensitive Materials 289.8 292.0 278.8
---------- ---------- ----------
Total identifiable assets (2) 1,434.1 1,360.9 1,168.9
Corporate assets (3) 47.9 47.5 55.8
---------- ---------- ----------
Total $ 1,482.0 $ 1,408.4 $ 1,224.7
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
BUSINESS SEGMENTS (IN MILLIONS OF DOLLARS) 1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
DEPRECIATION AND AMORTIZATION:
Flexible Packaging $ 69.5 $ 62.3 $ 52.1
Pressure Sensitive Materials 18.6 15.6 12.9
Corporate .8 1.0 1.2
-------- -------- --------
Total $ 88.9 $ 78.9 $ 66.2
-------- -------- --------
-------- -------- --------
EXPENDITURES FOR PROPERTY AND EQUIPMENT:
Flexible Packaging $ 115.7 $ 139.3 $ 66.1
Pressure Sensitive Materials 22.1 25.5 43.9
Corporate 2.0 2.7 2.0
-------- -------- --------
Total $ 139.8 $ 167.5 $ 112.0
-------- -------- --------
-------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
OPERATIONS BY GEOGRAPHIC AREAS 1998 1997 1996
- -----------------------------------------------------------------------------------------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C>
NET SALES TO UNAFFILIATED CUSTOMERS: (4)
United States $ 1,575.4 $ 1,615.3 $ 1,408.8
Canada 64.4 61.4 54.5
Europe 192.8 193.7 187.6
Other 15.4 6.8 4.5
---------- ---------- ---------
Total $ 1,848.0 $ 1,877.2 $ 1,655.4
---------- ---------- ---------
---------- ---------- ---------
IDENTIFIABLE ASSETS:
United States $ 1,172.0 $ 1,168.5 $ 995.7
Canada 28.5 28.0 28.6
Europe 195.2 160.9 141.7
Other 38.4 3.5 2.9
---------- ---------- ---------
Total $ 1,434.1 $ 1,360.9 $ 1,168.9
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
(1) Operating profit is defined as profit before general corporate expense,
interest expense, income taxes, and minority interest.
(2) Identifiable assets by business segment 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.
(4) Net sales are attributed to countries based on location of the Company's
manufacturing or selling operation.
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 impact on the financial position or
operating results of the Company.
41
<PAGE>
In December 1996, the United States brought an action in Federal
District Court for the District of Columbia against the Company and its
wholly owned subsidiary Pervel Industries in relation to Pervel's disposal of
liquid industrial wastes at the Yaworski Lagoon site in Canterbury,
Connecticut. The Company believes both it and Pervel have fulfilled all
obligations required by the 1990 consent decree or guarantee, which is the
subject of this litigation, and that both have meritorious defenses. In
management's opinion, neither a settlement of this matter nor results
following litigation will produce a result having a material adverse effect
on the Company's financial condition or results of operations.
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:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS) 1998 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales of consolidated foreign subsidiaries $277,572 $262,241 $246,405
Net income of consolidated foreign subsidiaries 11,456 14,850 15,002
Foreign earnings in excess of amounts received 9,281 11,706 11,167
Equity in net assets 136,330 117,500 105,200
Equity in total assets 211,553 185,450 168,185
</TABLE>
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, 1998 and 1997, the Company had outstanding forward
foreign currency exchange contracts aggregating $19,736,000 and $19,144,000,
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 $26,000 loss at December 31, 1998, and a $120,000 loss at
December 31, 1997, had outstanding contracts been settled at those respective
dates.
At December 31, 1998 and 1997, 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
$384,563,000 and $325,395,000 at December 31, 1998 and 1997, 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 $4,275,000
and $4,275,000 at December 31, 1998 and 1997, respectively. In the Company's
past experience, virtually no claims
42
<PAGE>
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. The Company has a loan due from ITAP/Bemis Ltda, a flexible
packaging joint venture in Brazil in which the Company holds a one-third
interest, for $7,000,000. The loan is denominated in U.S. dollars with a 10
percent interest rate compounded annually. The principal and interest
totaling $7,700,000 are due one year from the loan date which was October 1,
1998. This is the only significant concentration of credit risk as of
December 31, 1998. There were no significant concentrations of credit risk as
of December 31, 1997.
NOTE 15 - EARNINGS PER SHARE COMPUTATIONS
<TABLE>
<CAPTION>
FOR YEARS ENDED DECEMBER 31, 1998 1997
---------------------------------------- ---------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Income available to common
stockholders $101,130,000 53,029,779 $1.91 $101,424,000 53,010,999 $2.03
Dilutive effects of stock option and
stock awards net of windfall
tax benefits 293,925 868,949
---------------------------------------- ---------------------------------------
Diluted EPS
Income available to common
stockholders plus assumed
conversions $101,130,000 53,323,704 $1.90 $101,424,000 53,879,948 $1.88
---------------------------------------- ---------------------------------------
---------------------------------------- ---------------------------------------
<CAPTION>
FOR YEARS ENDED DECEMBER 31, 1996
--------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------------------------------------
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $103,037,000 52,522,016 $1.96
Dilutive effects of stock option and
stock awards net of windfall
tax benefits 730,234
--------------------------------------
Diluted EPS
Income available to common
stockholders plus assumed
conversions $103,037,000 53,252,250 $1.93
--------------------------------------
--------------------------------------
</TABLE>
NOTE 16 - QUARTERLY FINANCIAL INFORMATION - UNAUDITED
<TABLE>
<CAPTION>
(IN MILLIONS OF DOLLARS
EXCEPT EPS) Net Sales Gross Profit Net Income Diluted Earnings Per Share
- ----------------------------------------------------------------------------------------------------------------------------------
% % % %
Quarter 1998 1997 Change 1998 1997 Change 1998 1997 Change 1998 1997 Change
- ---------------------- -------------------------- ------------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First $ 451.5 $ 475.5 (5%) $ 88.7 $ 96.5 (8%) $ 20.7 $ 20.4 1% $ .39 $.38 3%
Second 470.6 481.3 (2) 101.1 104.1 (3) 27.6 26.1 6 .51 .48 6
Third 465.5 465.5 - 99.7 90.4 10 27.2 23.9 14 .51 .44 16
Fourth 460.4 454.9 1 100.3 100.7 - 25.6 31.0 (17) .49 .58 (16)
-------------------------- ----------------------- ------------------------ ------------------------
Total $1,848.0 $1,877.2 (2%) $389.8 $391.7 (1%) $101.1 $101.4 - $1.90 $1.88 1%
-------------------------- ----------------------- ------------------------- ------------------------
-------------------------- ----------------------- ------------------------- ------------------------
</TABLE>
43
<PAGE>
NOTE 17 - INVENTORY VALUATION METHOD CHANGED FROM LIFO TO FIFO DURING THE SECOND
QUARTER OF 1999
During the quarter ended June 30, 1999, the Company changed its
method of determining the cost of inventories from the last-in, first-out
(LIFO) method to the first-in, first-out (FIFO) valuation method. Management
believes the change from LIFO to FIFO inventory valuation method benefits the
Company by providing the best matching of the applicable raw material cost of
a unit of product to the product's selling price and, therefore, presents a
clearer picture of operating results.
The accounting change has been applied to prior years by
retroactively restating the financial statements. The effect of this
restatement was to increase retained earnings as of January 1, 1996, by
$31,553 million.
The following summarizes the effect on net income and earnings per
share for the three years ended December 31, 1998.
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
$000's except per share amounts 1998 1997 1996
- ------------------------------------ --------------------------------------------
<S> <C> <C> <C>
Net income, as previously reported $ 111,432 $ 107,584 $ 101,081
Effect of change in accounting method for
inventories, net of income taxes (10,302) (6,160) 1,956
--------------------------------------------
Net income, as restated $ 101,130 $ 101,424 $ 103,037
--------------------------------------------
--------------------------------------------
Earnings per share of common stock
Basic EPS, as previously reported $ 2.10 $ 2.03 $ 1.92
Effect of change in accounting method for
inventories, net of income taxes (0.19) (0.12) 0.04
--------------------------------------------
Basic EPS, as restated $ 1.91 $ 1.91 $ 1.96
--------------------------------------------
--------------------------------------------
Diluted EPS, as previously reported $ 2.09 $ 2.00 $ 1.90
Effect of change in accounting method for
inventories, net of income taxes (0.19) (0.12) 0.03
--------------------------------------------
Diluted EPS, as restated $ 1.90 $ 1.88 $ 1.93
--------------------------------------------
--------------------------------------------
</TABLE>
44
<PAGE>
RESTATED FINANCIAL STATEMENT SCHEDULES FOR THE THREE YEARS ENDED
DECEMBER 31, 1998,
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands of dollars)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
Balance at Additions Balance
Beginning Charged to Write- at Close
of Year Profit & Loss Offs Other of Year
---------- -------------- ------ ----- --------
<S> <C> <C> <C> <C> <C>
INVENTORY RESERVES
1998 $ 5,562 $8,453 $(7,726) $ 6,289
------- ------ ------- ------- -------
------- ------ ------- ------- -------
1997 $ 8,199 $7,886 $(9,093) $(1,430) (1) $ 5,562
------- ------ ------- ------- -------
------- ------ ------- ------- -------
1996 $10,314 $7,074 $(9,347) $158 (2) $ 8,199
------- ------ ------- ------- -------
------- ------ ------- ------- -------
(1) Net of business units sold, ($3,196), and business units acquired, $1,766.
(2) Business unit acquired, $158.
RESERVES FOR DOUBTFUL
ACCOUNTS AND ALLOWANCES
1998 $12,111 $2,073 $(1,321)(1) $12,863
------- ------ ------- -------
------- ------ ------- -------
1997 $11,632 $1,191 $(1,302)(2) $590 (4) $12,111
------- ------ ------- ------- -------
------- ------ ------- ------- -------
1996 $11,437 $2,766 $(2,571)(3) $12,632
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
(1) Net of $152 collections on accounts previously written off.
(2) Net of $120 collections on accounts previously written off.
(3) Net of $161 collections on accounts previously written off.
(4) Business unit acquisitions, net of divestitures.
45
<PAGE>
EXHIBIT 99 - PRESS RELEASES DATED JULY 23, 1999
- -------------------------------------------------
BEMIS COMPANY, INC.
222 South Ninth Street
Suite 2300
Minneapolis, MN 55402-4099
For additional information please contact:
ROBERT F. KLEIBER, DIRECTOR OF INVESTOR RELATIONS
(612) 376-3030
July 23, 1999
FOR IMMEDIATE RELEASE
BEMIS COMPANY REPORTS SECOND QUARTER RESULTS, ADOPTS FIFO INVENTORY
ACCOUNTING METHOD
Bemis Company, Inc. (NYSE-BMS) today announced second quarter diluted
earnings of $0.60 per share, up 18% from $0.51 per share in the second
quarter of 1998. The 1998 earnings have been restated to reflect the
Company's change to FIFO (first-in, first-out) inventory valuation method
from LIFO (last-in, first-out). Revenues in the second quarter were $481.3
million, up two percent from $470.6 million in the year earlier quarter. For
the first six months of 1999, diluted earnings were $0.96 per share compared
with a restated $0.90 per share in the first half of 1998. The Company
estimates that, had it remained on the LIFO inventory method, second quarter
diluted earnings would have been reduced by approximately two cents per share
using June 30, 1999 inventory quantities.
Bemis has used the LIFO inventory system since 1960 and, since that time,
substantial changes have occurred in its business. These changes include new
and different customer requirements, the introduction of new technology,
products, and raw materials, and increased volatility of raw material prices.
Management believes the change from LIFO to FIFO inventory valuation method
benefits the company by providing the best matching of the applicable raw
material cost of a unit of product to the product's selling price and,
therefore, presents a clearer picture of operating results. The change also
enables management to forecast costs more accurately. The change to FIFO
inventory accounting will result in incremental tax payments of approximately
$12 million expected to be spread over the next four years. These taxes have
been reflected in the restatement of prior years and will, therefore, have no
effect on income for 1999 and future years. A schedule of restated net income
and earnings per share for the previous three years is included in this
release.
The Company's flexible packaging operations reported a 4% increase in net
sales and profit growth of about 20% compared to the second quarter of last
year due to strong results in both high barrier plastic products and
polyethylene products. The pressure sensitive materials operations reported
slightly
46
<PAGE>
lower sales and lower profits compared with the year earlier quarter, as that
business' previously announced reorganization and the costs of adding new
focused manufacturing capacity affected profitability.
Commenting on the results, Chairman and CEO, John H. Roe, said "I am pleased
with the overall results of the Company in the second quarter. Our flexible
plastic packaging operations turned in a strong quarter and have excellent
prospects heading into the second half of the year. We are expanding our
share in several key markets, our manufacturing operations are running very
efficiently, and we continue to do what it takes to be the preferred
packaging supplier to many of the largest food and consumer products
companies. With key raw material prices rising quickly, we must be very
efficient throughout our manufacturing operations to maintain a high level of
performance through the second half of the year.
"Our pressure sensitive materials business continues to work through its
reorganization and the activities associated with capacity expansion, but we
are expecting sequential improvement in its results as the second half
progresses. Our focus is on the efficient transition to a major new
manufacturing facility in the second half of the year. We have good growth
opportunities throughout this business and will be aggressively pursuing
those with new products.
"Looking at the balance of 1999, we expect second half earnings growth of
about 20% compared with last year's restated results, with stronger growth
occurring in the fourth quarter."
Statements in this release which are not historical are considered "forward
looking" and are subject to certain risks and uncertainties. Among these are
the future direction of raw material prices, the Company's ability to achieve
expected improvements in the operations of the pressure sensitive materials
business, levels of domestic and international economic activity, and others
noted in the Company's regular SEC filings.
Bemis Company is a major supplier of flexible packaging and pressure
sensitive materials used by leading food, consumer products, manufacturing,
and other companies worldwide.
47
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands of dollars except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------------------------
1999 1998* 1999* 1998*
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $481,259 $470,595 $931,866 $922,086
Costs and expenses:
Cost of products sold 372,956 369,449 727,105 732,279
Selling, general, and administrative
expenses 48,049 46,370 98,898 92,998
Research and development 3,653 3,113 6,156 6,021
Interest expense 5,198 5,627 10,342 10,867
Other costs (income), net (864) (189) 5,307 (942)
Minority interest in net income 976 1,086 1,929 2,014
-------------------------------------------------------------------
Income before income taxes 51,291 45,139 82,129 78,849
Provision for income taxes 19,700 17,500 31,800 30,500
-------------------------------------------------------------------
Net income $31,591 $27,639 $50,329 $48,349
-------------------------------------------------------------------
-------------------------------------------------------------------
Basic earnings per share
of common stock $.60 $.52 $.96 $.91
-------------------------------------------------------------------
-------------------------------------------------------------------
Diluted earnings per share
of common stock $.60 $.51 $.96 $.90
-------------------------------------------------------------------
-------------------------------------------------------------------
Cash dividends paid $.23 $.22 $.46 $.44
-------------------------------------------------------------------
-------------------------------------------------------------------
Average common shares and common
stock equivalents outstanding 52,616 53,710 52,592 53,684
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* PERIODS PRIOR TO APRIL 1, 1999, HAVE BEEN RESTATED TO REFLECT THE SECOND
QUARTER 1999 CHANGE IN METHOD OF ACCOUNTING FOR INVENTORY TO THE FIRST-IN,
FIRST-OUT (FIFO) METHOD FROM THE LAST-IN, FIRST-OUT (LIFO) METHOD PREVIOUSLY
USED FOR THE MAJORITY OF DOMESTIC INVENTORY.
48
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
June 30, Dec. 31,
ASSETS 1999 1998*
------ ----------------------------------
<S> <C> <C>
Cash $19,494 $23,738
Accounts receivable - net 258,905 246,676
Inventories 267,329 241,585
Prepaid expenses and deferred charges 34,846 34,912
----------------------------------
Total current assets 580,574 546,911
----------------------------------
Property and equipment, net 744,282 740,101
Excess of cost of investments in
subsidiaries over net assets acquired 154,740 160,819
Other assets 19,636 34,195
----------------------------------
Total 174,376 195,014
----------------------------------
TOTAL ASSETS $1,499,232 $1,482,026
----------------------------------
----------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $2,749 $2,946
Short-term borrowings 3,449 3,553
Accounts payable 195,554 193,088
Accrued salaries and wages 28,719 31,629
Accrued income and other taxes 22,873 14,397
----------------------------------
Total current liabilities 253,344 245,613
Long-term debt, less current portion 369,166 371,363
Deferred taxes 85,389 84,679
Other liabilities and deferred credits 59,389 54,655
----------------------------------
Total liabilities 767,288 756,310
----------------------------------
Minority interest 37,582 37,862
STOCKHOLDERS' EQUITY:
Common stock (59,098,203 and 59,056,047 shares ) 5,910 5,906
Capital in excess of par value 181,957 181,908
Retained income 734,628 708,362
Other comprehensive income (loss) (25,884) (6,116)
Treasury common stock (6,788,088 and 6,786,889 shares) (202,249) (202,206)
----------------------------------
Total stockholders' equity 694,362 687,854
----------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,499,232 $1,482,026
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* PERIODS PRIOR TO APRIL 1, 1999, HAVE BEEN RESTATED TO REFLECT THE SECOND
QUARTER 1999 CHANGE IN METHOD OF ACCOUNTING FOR INVENTORY TO THE FIRST-IN,
FIRST-OUT (FIFO) METHOD FROM THE LAST-IN, FIRST-OUT (LIFO) METHOD PREVIOUSLY
USED FOR THE MAJORITY OF DOMESTIC INVENTORY.
49
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30,
----------------------------------
1999* 1998*
----------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $50,329 $48,349
NON-CASH ITEMS:
Depreciation and amortization 50,561 45,725
Minority interest in net income 1,929 2,014
Deferred income taxes, non-current portion 1,097 (728)
Undistributed earnings of affiliated companies 5,729 (509)
Loss (gain) on sale of property and equipment 125 (17)
----------------------------------
Cash provided by operations 109,770 94,834
Changes in working capital, net of effects of acquisitions
and dispositions (32,400) (882)
Net change in deferred charges and credits 4,732 (2,446)
----------------------------------
Net cash provided by operating activities 82,102 91,506
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (58,349) (74,828)
Business acquisitions (1,424) (46,319)
Proceeds from sale of property and equipment 974 1,419
Other 16 2
----------------------------------
Net cash used in investing activities (58,783) (119,726)
----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in long-term debt excluding debt assumed in
business acquisition (2,070) 47,454
Change in short-term debt 169 (329)
Cash dividends paid (24,063) (23,486)
Subsidiary dividends to minority stockholders (1,835)
Common stock purchased for the treasury (43)
Stock incentive programs and related tax effects 53 7,388
----------------------------------
Net cash (used) provided by financing activities (25,954) 29,192
----------------------------------
Effect of exchange rates on cash (1,609) (38)
----------------------------------
Net (decrease) increase in cash ($4,244) $934
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
* PERIODS PRIOR TO APRIL 1, 1999, HAVE BEEN RESTATED TO REFLECT THE SECOND
QUARTER 1999 CHANGE IN METHOD OF ACCOUNTING FOR INVENTORY TO THE FIRST-IN,
FIRST-OUT (FIFO) METHOD FROM THE LAST-IN, FIRST-OUT (LIFO) METHOD PREVIOUSLY
USED FOR THE MAJORITY OF DOMESTIC INVENTORY.
50
<PAGE>
RESTATED TO REFLECT CHANGE TO FIFO INVENTORY METHOD
(in thousands of dollars except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FOR THE 1998 QUARTERS ENDED
Mar 31 Jun 30 Sep 30 Dec 31
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $451,491 $470,595 $465,497 $460,421
Costs and expenses:
Cost of products sold 362,830 369,449 365,808 360,128
All other costs 54,951 56,007 54,848 58,953
-------------------------------------------------------------------
Income before income taxes 33,710 45,139 44,841 41,340
Provision for income taxes 13,000 17,500 17,600 15,800
-------------------------------------------------------------------
Net income $20,710 $27,639 $27,241 $25,540
-------------------------------------------------------------------
-------------------------------------------------------------------
Diluted earnings per share $0.39 $0.51 $0.51 $0.49
- -------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DEC 31,
1998 1997 1996
--------------------------------------------------
--------------------------------------------------
Net sales $1,848,004 $1,877,237 $1,655,431
Costs and expenses:
Cost of products sold 1,458,215 1,485,494 1,268,824
All other costs 224,759 226,819 220,570
--------------------------------------------------
Income before income taxes 165,030 164,924 166,037
Provision for income taxes 63,900 63,500 63,000
--------------------------------------------------
Net income $101,130 $101,424 $103,037
--------------------------------------------------
--------------------------------------------------
Diluted earnings per share $1.90 $1.88 $1.93
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
RESTATED TO REFLECT THE SECOND QUARTER 1999 CHANGE IN METHOD OF ACCOUNTING FOR
INVENTORY TO THE FIRST-IN, FIRST-OUT (FIFO) METHOD FROM THE LAST-IN, FIRST-OUT
(LIFO) METHOD PREVIOUSLY USED FOR THE MAJORITY OF DOMESTIC INVENTORY.
51
<PAGE>
EXHIBIT 99 - PRESS RELEASES DATED JULY 29, 1999
- -------------------------------------------------
BEMIS COMPANY, INC.
222 South Ninth Street
Suite 2300
Minneapolis, MN 55402-4099
For additional information please contact:
ROBERT F. KLEIBER, DIRECTOR OF INVESTOR RELATIONS
(612) 376-3030
July 29, 1999
FOR IMMEDIATE RELEASE
BEMIS COMPANY DECLARES REGULAR QUARTERLY DIVIDEND AND ADOPTS
REPLACEMENT SHARE RIGHTS PLAN
MINNEAPOLIS -- Bemis Company, Inc. (NYSE-BMS) today announced that its
Board of Directors declared a regular quarterly dividend of $.23 per share,
payable September 1, 1999, to shareholders of record on August 11, 1999.
The Board also approved today a share rights plan that will replace
an existing plan when it expires on August 23, 1999. Under the plan, the
Board has declared a dividend of one preferred share purchase right on each
outstanding share of Bemis common stock held by shareholders of record as of
the close of business on August 23, 1999. The rights will expire on August
23, 2009.
Like the existing plan, the new share rights plan is intended to
increase the likelihood that Bemis shareholders will realize the long-term
value of their investment and that all shareholders will receive fair and
equal treatment in the event of an attempted takeover of the Company. The new
share rights plan was not adopted in response to any current takeover
approach or similar development.
The rights will generally become exercisable after any person or
group acquires beneficial ownership of 15 percent or more of Bemis' common
stock or announces a tender or exchange offer to do so. Each right will
entitle its holder (other than the 15 percent shareholder) to purchase shares
of Bemis common stock having a value of twice the right's exercise price or
under certain circumstances purchase common shares of the acquiring company
having a market value of twice the right's exercise price.
In certain circumstances, Bemis may exchange the rights for shares
of its common stock, delay or temporarily suspend the exercisability of the
rights, reduce the stock ownership threshold of 15 percent to not less than
10 percent or redeem the rights at $.001 per right (subject to adjustment) at
any time before a person or group becomes the beneficial owner of at least 15
percent of Bemis' common stock. Further details of the new share rights plan
will be outlined in a letter to be mailed to all Bemis shareholders of record
as of August 23, 1999.
Bemis is a major supplier of flexible packaging and pressure
sensitive materials used by leading food, consumer products, manufacturing,
and other companies worldwide.
52
<PAGE>
EXHIBIT 99 - QUARTERLY RESTATED 1998 FINANCIAL STATEMENTS
- -----------------------------------------------------------
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
RESTATED TO REFLECT CHANGE TO FIFO INVENTORY METHOD
Quarterly Restatement for 1998
(in thousands of dollars except per share amounts)
UNAUDITED
<TABLE>
<CAPTION>
For the 1998 quarter ended
---------------------------------------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $451,491 $470,595 $465,497 $460,421
Costs and expenses:
Cost of products sold 362,830 369,449 365,808 360,128
Selling, general, and
administrative expenses 46,628 46,370 45,055 47,788
Research and development 2,908 3,113 2,994 3,209
Interest 5,240 5,627 5,467 5,532
Other costs (income), net (753) (189) 535 739
Minority interest in net income 928 1,086 797 1,685
---------------------------------------------------------------------
Income before income taxes 33,710 45,139 44,841 41,340
Provision for income taxes 13,000 17,500 17,600 15,800
---------------------------------------------------------------------
Net income $20,710 $27,639 $27,241 $25,540
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic earnings per
share of common stock $0.39 $0.52 $0.51 $0.49
---------------------------------------------------------------------
---------------------------------------------------------------------
Diluted earnings per
share of common stock $0.39 $0.51 $0.51 $0.49
---------------------------------------------------------------------
---------------------------------------------------------------------
</TABLE>
53
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
RESTATED TO REFLECT CHANGE TO FIFO INVENTORY METHOD
Quarterly Restatement for 1998
(in thousands of dollars)
UNAUDITED
<TABLE>
<CAPTION>
For the 1998 quarter ended
----------------------------------------------------------------
ASSETS Mar 31 Jun 30 Sep 30 Dec 31
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current assets:
Cash $23,404 $14,761 $23,561 $23,738
Accounts receivable - net 227,041 235,595 231,842 246,676
Inventories 263,355 257,351 245,533 241,585
Prepaid expenses and deferred charges 46,070 41,615 38,761 34,912
----------------------------------------------------------------
Total current assets 559,870 549,322 539,697 546,911
----------------------------------------------------------------
Property and equipment:
Land and land improvements 12,999 12,962 13,097 14,811
Buildings and leasehold improvements 211,265 212,213 219,675 219,055
Machinery and equipment 841,349 866,371 890,652 918,782
----------------------------------------------------------------
1,065,613 1,091,546 1,123,424 1,152,648
Less - accumulated depreciation 358,231 376,159 407,411 412,547
----------------------------------------------------------------
707,382 715,387 716,013 740,101
----------------------------------------------------------------
Excess of cost of investments in subsidiaries
over net assets acquired 159,299 167,191 162,865 160,819
Other assets 39,556 38,308 37,478 34,195
----------------------------------------------------------------
198,855 205,499 200,343 195,014
----------------------------------------------------------------
Total Assets $1,466,107 $1,470,208 $1,456,053 $1,482,026
----------------------------------------------------------------
----------------------------------------------------------------
</TABLE>
54
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
RESTATED TO REFLECT CHANGE TO FIFO INVENTORY METHOD
Quarterly Restatement for 1998
(in thousands of dollars)
<TABLE>
<CAPTION>
For the 1998 quarter ended
LIABILITIES AND -------------------------------------------------------------
STOCKHOLDERS' EQUITY Mar 31 Jun 30 Sep 30 Dec 31
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Current portion of long-term debt $2,215 $2,151 $2,179 $2,946
Short-term borrowings 1,931 1,741 2,122 3,553
Accounts payable 177,768 179,748 165,746 193,088
Accrued salaries and wages 25,976 29,407 32,067 31,629
Accrued income and other taxes 20,562 24,916 23,861 14,397
-------------------------------------------------------------
Total current liabilities 228,452 237,963 225,975 245,613
Long-term debt, less current portion 384,524 364,245 379,447 371,363
Deferred taxes 81,953 81,201 81,877 84,679
Other liabilities and deferred credits 56,441 55,025 55,667 54,655
-------------------------------------------------------------
Total liabilities 751,370 738,434 742,966 756,310
-------------------------------------------------------------
Minority interest 33,097 34,336 35,279 37,862
Stockholders' equity:
Common stock 5,905 5,905 5,905 5,906
Capital in excess of par value 181,909 181,909 181,909 181,908
Retained income 662,899 678,796 694,343 708,362
Other comprehensive income (loss) (8,211) (8,310) (7,794) (6,116)
Common stock held in treasury (160,862) (160,862) (196,555) (202,206)
-------------------------------------------------------------
Total stockholders' equity 681,640 697,438 677,808 687,854
-------------------------------------------------------------
Total liabilities and stockholders' equity $1,466,107 $1,470,208 $1,456,053 $1,482,026
-------------------------------------------------------------
-------------------------------------------------------------
</TABLE>
55
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT 0F CASH FLOWS
RESTATED TO REFLECT CHANGE TO FIFO INVENTORY METHOD
Quarterly Restatement for 1998
UNAUDITED
<TABLE>
<CAPTION>
For the 1998 quarter ended
------------------------------------------------------------
(IN THOUSANDS OF DOLLARS) Mar 31 Jun 30 Sep 30 Dec 31
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $20,710 $48,349 $75,590 $101,130
Noncash items:
Depreciation and amortization 22,903 45,725 68,290 88,910
Minority interest in net income 928 2,014 2,811 4,496
Deferred income taxes, noncurrent portion 48 (728) (59) 3,516
Undistributed earnings of affiliated companies (422) (509) 500 1,546
(Gain) loss on sale of property and equipment (22) (17) (107) (74)
------------------------------------------------------------
Cash provided by operations 44,145 94,834 147,025 199,524
Changes in working capital, net of
effect of acquisitions and dispositions (11,736) (882) 6,353 21,921
Net change in deferred charges and credits (569) (2,446) (957) (505)
------------------------------------------------------------
Net cash provided by operating activities 31,840 91,506 152,421 220,940
------------------------------------------------------------
Cash flows from investing activities:
Additions to property, plant, and equipment (45,184) (74,828) (95,456) (139,833)
Business acquisitions, net of cash acquired (38,868) (46,319) (46,319) (50,206)
Proceeds from sale of property and equipment 374 1,419 1,868 3,993
Other 4 2 0 11
------------------------------------------------------------
Net cash used by investing activities (83,674) (119,726) (139,907) (186,035)
------------------------------------------------------------
Cash flows from financing activities:
Increase in long-term debt 67,733 47,454 62,656 55,232
Change in short-term borrowings (16) (329) (305) 1,186
Cash dividends paid (11,744) (23,486) (35,180) (46,701)
Subsidiary dividends to minority stockholders (1,835) (1,835) (1,835) (1,835)
Purchase of common stock for the treasury 0 0 (35,693) (41,344)
Stock incentive programs and related tax effects 7,388 7,388 7,388 7,388
------------------------------------------------------------
Net cash (used) provided by financing activities 61,526 29,192 (2,969) (26,074)
------------------------------------------------------------
Effect of exchange rates (115) (38) 189 1,080
------------------------------------------------------------
Net increase (decrease) in cash $9,577 $934 $9,734 $9,911
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
56
<PAGE>
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
1998 QUARTERLY RESTATEMENT TO REFLECT CHANGE TO FIFO INVENTORY METHOD
UNAUDITED
<TABLE>
<CAPTION>
Capital In Other Common Total
Common Excess Of Retained Comprehensive Stock Held Stockholder's
(IN THOUSANDS OF DOLLARS) Stock Par Value Income Income (Loss) In Treasury Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997, as restated $5,864 $174,562 $653,933 ($6,263) ($160,862) $667,234
Net income for three months ended
March 31, 1998, as previously reported 21,928 21,928
Quarterly net income adjustment for LIFO to FIFO change (1,218) (1,218)
Translation adjustment for 1st quarter 1998 (1,948) (1,948)
--------
Total comprehensive income 18,762
--------
Cash dividends paid on common stock, $. 22 per share (11,744) (11,744)
Stock incentive programs and related tax effects 41 7,347 7,388
-----------------------------------------------------------------------
Balance at March 31, 1998, as restated 5,905 181,909 662,899 (8,211) (160,862) 681,640
-----------------------------------------------------------------------
Net income for three months ended
June 30, 1998, as previously reported 30,182 30,182
Quarterly net income adjustment for LIFO to FIFO change (2,543) (2,543)
Translation adjustment for 2nd quarter 1998 (99) (99)
--------
Total comprehensive income 27,540
--------
Cash dividends paid on common stock, $.22 per share (11,742) (11,742)
-----------------------------------------------------------------------
Balance at June 30, 1998, as restated 5,905 181,909 678,796 (8,310) (160,862) 697,438
-----------------------------------------------------------------------
Net income for three months ended
September 30, 1998, as previously reported 27,754 27,754
Quarterly net income adjustment for LIFO to FIFO change (513) (513)
Translation adjustment for third quarter 1998 516 516
--------
Total comprehensive income 27,757
--------
Cash dividends paid on common stock, $.22 per share (11,694) (11,694)
Purchase of 949,800 shares of common stock (35,693) (35,693)
-----------------------------------------------------------------------
Balance at September 30, 1998, as restated 5,905 181,909 694,343 (7,794) (196,555) 677,808
-----------------------------------------------------------------------
Net income for three months ended
December 31, 1998, as previously reported 31,568 31,568
Quarterly net income adjustment for LIFO to FIFO change (6,028) (6,028)
Translation adjustment for fourth quarter 1998 1,459 1,459
Pension liability adjustment, net of $102 tax benefit 219 219
--------
Total comprehensive income 27,218
--------
Cash dividends paid on common stock, $.22 per share (11,521) (11,521)
Stock incentive programs and related tax effects 1 (1) 0
Purchase of 161,043 shares of common stock (5,651) (5,651)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Balance at December 31, 1998, as restated $5,906 $181,908 $708,362 ($6,116) ($202,206) $687,854
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
57
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED
DECEMBER 31, 1998, 1997, AND 1996 CONSOLIDATED STATEMENT OF INCOME AND
CONSOLIDATED BALANCE SHEET, WHICH HAVE BEEN RESTATED TO REFLECT A CHANGE IN
INVENTORY ACCOUNTING FROM LAST-IN, FIRST-OUT TO FIRST-IN, FIRST-OUT VALUATION
METHOD AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<CASH> 23,738 13,827 10,223
<SECURITIES> 0 0 0
<RECEIVABLES> 259,539 245,657 228,372
<ALLOWANCES> 12,863 12,110 11,632
<INVENTORY> 241,585 267,372 256,297
<CURRENT-ASSETS> 546,911 562,189 522,821
<PP&E> 1,152,648 1,044,497 895,863
<DEPRECIATION> 412,547 359,270 312,372
<TOTAL-ASSETS> 1,482,026 1,408,363 1,224,695
<CURRENT-LIABILITIES> 245,613 251,187 214,445
<BONDS> 371,363 316,791 241,077
0 0 0
0 0 0
<COMMON> 5,906 5,864 5,790
<OTHER-SE> 681,948 661,370 594,816
<TOTAL-LIABILITY-AND-EQUITY> 1,482,026 1,408,363 1,224,695
<SALES> 1,848,004 1,877,237 1,655,431
<TOTAL-REVENUES> 1,848,004 1,877,237 1,655,431
<CGS> 1,458,215 1,485,494 1,268,824
<TOTAL-COSTS> 1,458,215 1,485,494 1,268,824
<OTHER-EXPENSES> 332 918 (3,996)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 21,866 18,893 13,397
<INCOME-PRETAX> 165,030 164,924 166,037
<INCOME-TAX> 63,900 63,500 63,000
<INCOME-CONTINUING> 101,130 101,424 103,037
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 101,130 101,424 103,037
<EPS-BASIC> 1.91 1.91 1.96
<EPS-DILUTED> 1.90 1.88 1.93
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RESTATED
1998 QUARTERLY CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED BALANCE SHEET,
WHICH HAVE BEEN RESTATED TO REFLECT A CHANGE IN INVENTORY ACCOUNTING FROM
LAST-IN, FIRST-OUT TO FIRST-IN, FIRST-OUT VALUATION METHOD AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1998 JAN-01-1998 JAN-01-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998 SEP-30-1998
<CASH> 23,404 14,761 23,561
<SECURITIES> 0 0 0
<RECEIVABLES> 227,041 235,595 231,842
<ALLOWANCES> 0 0 0
<INVENTORY> 263,355 257,351 245,533
<CURRENT-ASSETS> 559,870 549,322 539,697
<PP&E> 1,065,613 1,091,546 1,123,424
<DEPRECIATION> 358,231 376,159 407,411
<TOTAL-ASSETS> 1,466,107 1,470,208 1,456,053
<CURRENT-LIABILITIES> 228,452 237,963 225,975
<BONDS> 384,524 364,245 379,447
0 0 0
0 0 0
<COMMON> 5,905 5,905 5,905
<OTHER-SE> 675,735 691,533 671,903
<TOTAL-LIABILITY-AND-EQUITY> 1,466,107 1,470,208 1,456,053
<SALES> 451,491 922,086 1,387,583
<TOTAL-REVENUES> 451,491 922,086 1,387,583
<CGS> 362,830 732,279 1,098,087
<TOTAL-COSTS> 362,830 732,279 1,098,087
<OTHER-EXPENSES> (753) (942) (407)
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 5,240 10,867 16,334
<INCOME-PRETAX> 33,710 78,849 123,690
<INCOME-TAX> 13,000 30,500 48,100
<INCOME-CONTINUING> 20,710 48,349 75,590
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 20,710 48,349 75,590
<EPS-BASIC> .39 .91 1.42
<EPS-DILUTED> .39 .90 1.41
</TABLE>
