BEMIS CO INC, 10-K405, 2000-03-29

BEMIS CO INC
10-K405, 2000-03-29
CONVERTED PAPER & PAPERBOARD PRODS (NO CONTANERS/BOXES)

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BEMIS COMPANY, INC. AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS

In thousands, except percentages, ratios, per share amounts, stockholders, and employees	1999			1998*			% Change
SALES AND EARNINGS
Net sales	$	1,918,025		$	1,848,004		4	%
Income before taxes		185,875			165,030		13
Income taxes		71,100			63,900		11
Net income		114,775			101,130		13

PER SHARE
Basic earnings per share		2.19			1.91		15	%
Diluted earnings per share		2.18			1.90		15
Dividends paid		.92			.88		5
Book value		13.91			13.16		6

RATIOS
Net income to net sales		6.0	%		5.5	%
Return on average common equity		16.2	%		14.9	%
Return on average total capital		10.9	%		10.3	%
Total debt to total capital		31.7	%		32.8	%
Current ratio		2.3			2.2		5	%

ADDITIONAL INFORMATION
Cash flow provided by operations	$	230,692		$	199,524		16	%
Capital expenditures		137,382			139,833		(2	)
Stock price/earnings range		14-18			18-25
Average common shares outstanding for computation of diluted EPS		52,657			53,324		(1	)
Common shares outstanding at year-end		52,189			52,269
Number of common stockholders		5,316			5,721		(7	)
Number of employees		9,534			9,364		2

*: 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.

FIVE-YEAR SUMMARY

[GRAPH]
		Total Company net sales were $1.9 billion in 1999. Operating profit was $231.5 million, 12.1 percent of net sales. Average investment for the year was $1,244.0 million, as the Company continued to invest for long-term growth.
NOTE: Operating profit is defined as profit before general corporate expense, interest expense, income taxes, and minority interest.

Business Segments (in millions)	1999			1998*			1997*			1996*			1995*
Flexible Packaging
Net sales	$	1,435.6		$	1,368.2		$	1,397.7		$	1,188.0		$	1,097.6
Operating profit**		187.2			156.3			142.6			142.5			119.2
Average investment		1,007.4			984.4			912.0			739.3			674.2
Operating profit as % of net sales		13.0	%		11.4	%		10.2	%		12.0	%		10.9	%
Operating profit as % of average investment		18.6	%		15.9	%		15.6	%		19.3	%		17.7	%
Pressure Sensitive Materials
Net sales	$	482.4		$	479.8		$	479.5		$	467.4		$	425.8
Operating profit		44.3			51.0			67.2			59.6			47.7
Average investment		236.6			230.4			222.5			200.4			178.7
Operating profit as % of net sales		9.2	%		10.6	%		14.0	%		12.8	%		11.2	%
Operating profit as % of average investment		18.7	%		22.1	%		30.2	%		29.7	%		26.7	%
Total Company
Net sales	$	1,918.0		$	1,848.0		$	1,877.2		$	1,655.4		$	1,523.4
Operating profit**		231.5			207.3			209.8			202.1			166.9
Average investment		1,244.0			1,214.8			1,134.5			939.7			852.9
Operating profit as % of net sales		12.1	%		11.2	%		11.2	%		12.2	%		11.0	%
Operating profit as %of average investment		18.6	%		17.1	%		18.5	%		21.5	%		19.6	%

*: 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.
**: Reflects gain of $5.8 million and $2.8 million in 1997 and 1996, respectively, realized on the sale of machinery operations, and restructuring charges of $7.8 million in 1997.

MANAGEMENT'S DISCUSSION AND ANALYSIS

Three-Year Review of Results

	Percent
	1999		1998		1997
Net sales	100.0	%	100.0	%	100.0	%
Cost of products sold	77.9		78.9		79.1

Gross margin	22.1		21.1		20.9
Selling, general, and adminstrative expenses	10.1		10.1		10.1
All other expenses	2.3		2.1		2.0

Income before income taxes	9.7		8.9		8.8
Income taxes	3.7		3.4		3.4

Net income	6.0	%	5.5	%	5.4	%

Effective tax rate	38.3	%	38.7	%	38.5	%

Summary

Overall results for the year produced net sales of $1.92 billion compared to $1.85 billion and $1.88 billion for 1998 and 1997 respectively. The sales increase of 3.8 percent in 1999, which occurred principally in the Flexible Packaging segment, was led by strong unit volume growth in high barrier products. Net income for 1999 totaled $114.8 million compared with $101.1 million and $101.4 for 1998 and 1997 respectively. Diluted earnings per share were $2.18 for 1999, $1.90 for 1998, and $1.88 for 1997. Excluding the effects of business acquisitions and dispositions, 1999 net sales increased 3.4 percent from 1998 while operating profit increased 12.1 percent from the 1998 level.

Sales for the Flexible Packaging segment increased 4.9 percent from the level achieved in 1998 while remaining more than 2.7 percent over the 1997 sales level. Strong unit sales increases in high barrier products and polyethylene products offset the impact of the reorganization of paper products which was completed in 1999. Flexible Packaging operating profits were $187.2 million in 1999, or 13.0 percent of sales, compared to $156.3 million, or 11.4 percent of sales in 1998, and $142.6 million, or 10.2 percent of sales in 1997. Increasing unit sales and a lower cost structure largely account for the improvements in operating profit.

Sales for the Pressure Sensitive Materials segment increased slightly over the 1998 level. Operating profit, however, was lower as this business segment continued to face less favorable economic conditions around the globe and increased price competition in certain markets. This business also incurred additional costs associated with the 1999 reorganization effort intended to address inefficiencies in manufacturing operations brought on by changes in sales mix and volumes. Pressure Sensitive Materials operating profits were $44.3 million in 1999, or 9.2 percent of sales, compared to $51.0 million, or 10.6 percent of sales in 1998, and $67.2 million, or 14.0 percent of sales in 1997.

Capital expenditures for 1999 were $137.4 million compared to $139.8 million in 1998 and $167.5 million in 1997. 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.

In mid-December 1999, the Company announced an agreement to acquire the 13 percent minority interest in Morgan Adhesives Company (MACtac). This transaction was completed on January 6, 2000, with the issuance of 1,728,000 shares of Bemis common stock and the payment of $3.4 million to acquire all of the minority owned shares of MACtac. Upon the aquisition of these minority shares, MACtac became a wholly owned subsidiary of Bemis Company, Inc. This transaction is expected to be dilutive in the range of one to two cents per share to the Company's earnings per share in 2000, and accretive after that.

Effective January 13, 1999, the Company purchased the remaining minority interest in voting preference shares of Perfecseal Limited in accordance with an agreement dated April 29, 1996, relating to the acquisition of Perfecseal Healthcare Packaging Division (Perfecseal) of Paper Manufacturers Company, Inc. A cash payment of $1.4 million was made to acquire the remaining outstanding minority shares.

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 reorganization of the Pressure Sensitive Materials business in North America is substantially complete. While dampening 1999 operating results, this effort to more effectively align products, markets, and customers will position this business segment for improved financial performance in 2000 and beyond. The paper products business has made very significant strides and is in a position to deliver substantially improved results in 2000. The Company's remaining packaging operations are expected to remain strong even though market conditions can be difficult to forecast.

Costs and Expenses

Cost of products sold as a percentage of net sales was 77.9 percent for 1999 compared to 78.9 percent for 1998 and 79.1 percent for 1997. The continuing improvement trend is largely due to a lower cost structure and the absence, in 1998, of the disruptive nature of the Paramount integration and the paper products restructuring in 1997. The Paramount acquisition has become a solid, profitable contributor.

Selling, general, and administrative expense decreased in absolute dollars in 1998 versus 1997 as a result of improved cost control and business unit dispositions. Actual expense for 1999 increased $8.0 million or 4.3 percent compared to 1998, while decreasing $3.7 million or 2.0 percent for 1998 versus 1997. Increased 1999 costs are in line with increasing sales remaining at 10.1 percent for 1999, 1998, and 1997.

Research and development expense was $11.7 million in 1999, $12.2 million in 1998, and $12.0 million in 1997. The slight decrease is due to increased 1998 efforts within the Pressure Sensitive Materials segment, related to its reorganization, not repeated in 1999.

While debt increased slightly in 1999, lower average interest rates reduced 1999 interest expense to $21.2 million compared to $21.9 million in 1998 and $18.9 million in 1997. 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 business acquisition efforts.

Other costs reflect expense of $6.9 million for 1999 versus expense of $0.3 million and $0.9 million in 1998 and 1997, respectively. The 1999 expense is principally due to losses at our Brazilian joint venture that included $1.7 million for currency losses and $2.6 million for relocation and reorganization costs.

Return on Investment

Return on average common stockholders' equity in 1999 was 16.2 percent compared to 14.9 percent in 1998 and 16.0 percent in 1997.

Operating profit as a percent of average investment was 18.6 percent in 1999 compared to 17.1 percent in 1998 and 18.5 percent in 1997.

Operating profit as a percent of average investment for Flexible Packaging was 18.6 percent in 1999 compared to 15.9 percent in 1998 and 15.6 percent in 1997. This same ratio for Pressure Sensitive Materials was 18.7 percent in 1999 compared to 22.1 percent in 1998 and 30.2 percent in 1997.

Return on average total capital was 10.9 percent in 1999, 10.3 percent in 1998, and 11.3 percent in 1997. Total capital is defined as the sum of all short-term and long-term interest-bearing debt, including obligations under capital leases, stockholders' equity, and deferred taxes. Return on total capital is based on net income adjusted for interest expense on an after-tax basis.

Capital Expenditures

Capital expenditures in 1999 were $137.4 million compared to $139.8 million in 1998 and $167.5 million in 1997, including capitalized interest of $1.6 million, $1.3 million, and $1.3 million for 1999, 1998, and 1997, respectively. In 2000, management anticipates expenditures to be approximately $110 million. The bulk of these expenditures, made from internally generated funds, will be for continued expansion of the Company's growth businesses, with major equipment purchases planned for the Flexible Packaging segment in both the high barrier products and polyethylene products and the expansion of our Pressure Sensitive Materials segment.

Capital Structure, Liquidity, and Cash Flow

Stockholders' equity increased in 1999 to $725.9 million, up from $687.9 million in 1998 and $667.2 million in 1997, due primarily to earnings net of both dividend payments and common stock repurchases. In 1999, $4.1 million of common stock was repurchased compared to $41.3 million in 1998 and $5.1 million in 1997. Common stock totaling $0.05 million and $7.4 million was issued in 1999 and 1998, respectively, in connection with employee stock incentive programs.

Total debt increased $1.2 million in 1999 to $379.1 million, making total debt as a percent of total capital 31.7 percent compared to 32.8 percent in 1998 and 30.0 percent in 1997. In 2000, total debt is expected to decrease due to an expected reduction in capital expenditures from 1999 and 1998 levels partially offset by increases in working capital due to an expected increase in sales levels.

Working capital (excluding short-term interest-bearing debt) increased by $29.3 million to $337.1 million in 1999 following a decrease of $7.5 million to $307.8 million in 1998 and an increase of $2.2 million to $315.3 million in 1997. The current ratio was 2.3:1 in 1999 compared to 2.2:1 in 1998 and 2.2:1 in 1997.

The Company's cash flow remained strong in 1999 as cash provided by operations was $230.7 million compared to $199.5 million in 1998 and $190.3 million in 1997. The following schedule presents the major sources and uses of cash for the Company in 1999.

Sources and Uses of Cash (in millions of dollars)

Sources
Net Income	$	114.8
Depreciation and amortization		97.7
Minority Interest		4.2
Deferred income taxes		5.0
Increase in total debt (net of effects of acquisitions and dispositions)		1.2

Total Sources	$	222.9

Uses
Capital expenditures	$	137.4
Business acquisitions, net of cash acquired		1.4
Increase in working capital* (net of effects of acquisitions and dispositions)		29.3
Common stock repurchases		4.1
Dividends		48.1
Other		2.6

Total Uses	$	222.9

*: Excluding short-term interest-bearing debt.

The Company's pretax interest coverage was 9.8 times in 1999 compared to 8.6 times in 1998 and 9.7 times in 1997. Pretax income increased to $185.9 million in 1999 from $165.0 million in 1998 and $164.9 million in 1997. Interest expense was $21.2 million in 1999, $21.9 million in 1998, and $18.9 million in 1997. Following are pretax interest coverage ratios for the last five years:

Coverage of Pretax Interest by Pretax Income and Interest

1995		1996		1997		1998		1999
12.5		13.4		9.7		8.6		9.8

Substantial credit is available to the Company for future use, including a $334 million revolving credit agreement with six banks. Bemis is also an issuer of commercial paper that carries an A1/P1 rating.

Foreign Currency Exposures

The Company's Belgium operation 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, 1999 and 1998, the Company had outstanding forward foreign currency exchange contracts aggregating $7,921,000 and $19,736,000, respectively. The introduction of the "euro" on January 1, 1999, by the European Economic and Monetary Union (EMU) has reduced the exposure to currency fluctuations among participating countries resulting in reduced volume of forward foreign currency exchange contracts. 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 $126,000 loss at December 31, 1999, and a $26,000 loss at December 31, 1998, had outstanding contracts been settled at those respective dates.

In mid-January 1999, the Brazilian Government reversed a policy that had a negative impact on the Company in the first quarter of 1999. Previously, the Brazilian Government controlled its 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 that are only partially hedged. Net conversion losses on the debt are recorded as an expense. The Company's share of currency losses for this joint venture totaled $1.7 million in 1999.

Income Taxes

The Company's effective tax rate was 38.3 percent in 1999 versus 38.7 percent in 1998 and 38.5 percent in 1997. The primary difference between our overall tax rate and the U.S. statutory tax rate of 35 percent in 1999, 1998, and 1997 relates to state and local income taxes net of the federal income tax benefit.

New Accounting Pronouncements

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, 2000, establishes standards for recognition and measurement of derivatives and hedging activities. The Company will implement this statement in the year 2001 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 4.5 percent in the first quarter of 1999 to 23 cents per share from 22 cents. This followed first quarter increases of 10.0 percent in 1998 to 22 cents per share from 20 cents, and 11.1 percent in 1997 to 20 cents per share from 18 cents in 1996.

Common dividends for the year were 92 cents per share, up from 88 cents in 1998 and 80 cents in 1997. The 1999 dividend payout ratio was 42.2 percent compared to 46.3 percent in 1998 and 42.6 percent in 1997. Based on the market price of $37.94 per share at the beginning of 1999, the dividend yield was 2.4 percent.

Stockholders' equity per common share (book value per share) increased to $13.91 per share in 1999, up from $13.16 per share in 1998 and $12.60 per share in 1997. Trading volume in Bemis common stock was 26.4 million shares in 1999.

In February 2000, the Board of Directors increased the quarterly cash dividend on common stock to 24 cents per share from 23 cents, a 4.3 percent increase. In addition, the Board of Directors authorized the repurchase of an additional one million shares of Bemis common stock, supplementing the current buyback authorization, which has approximately 800,000 shares remaining.

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 an 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 positive experience during 1999 will continue. The cost of these efforts totaled $1.1 million for both expense and capital items, of which approximately $1.0 million was incurred in 1998 with the balance spent in 1999. The overall effect on the Company's international operations, principally its Pressure Sensitive Materials business segment, was not material. Initially, the increased "price and cost transparency" expected to result from a single currency for a larger integrated market was expected to lower material cost and lower costs associated with currency transactions while adversely affecting selling prices. Although the Company's European business performance is strong and improving, it is not possible to accurately define the impact of the euro apart from other normal, changing business conditions such as the introduction of new products, changing product mix, customer growth (or loss), labor availability, etc. The Company is well positioned to continue to transact business throughout the EMU.

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.

The Company assessed its dependency on computerized systems and addressed 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. Year 2000 issue costs which were not part of the Company's long-term strategic capital plan, totaled $3.3 million principally for the remediation of "embedded chip exposures" in manufacturing equipment and facilities together with the unexpected replacement or upgrade of selected computer equipment, of which approximately $0.3 million was incurred in 1998 with the balance spent in 1999.

Concluding the Company's reporting on its Year 2000 issue, no significant problems have been experienced. All required IT system applications are installed and functioning satisfactorily. All manufacturing equipment applications and other non-IT systems continue to function as intended. Finally, relationships with suppliers, customers, and other third parties continue in a productive and uninterrupted manner. In addition to fully meeting the challenge of the Year 2000 issue, the Company is now better positioned to meet the needs of its employees, suppliers, and customers as well as other future opportunities.

Forward-Looking Statements

This Annual Report contains certain statements that are "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995, and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934. The words "believe", "expect", "anticipate", "intend", "estimate", "target", "may", "will", "plan", "project", "should", "continue", or the negative thereof or other expressions, which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward-looking statements. Such statements are based on information available to management as of the time of such statements and relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market, and statements regarding the Company's mission and vision. Forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results, performance, or achievements of the Company to differ materially from anticipated future results, performance, or achievements expressed or implied by such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

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 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. These and other risks, uncertainties, and assumptions identified from time to time in the Company's filings with the Securities and Exchange Commission, including without limitation, its annual report on Form 10-K and its quarterly report on Form 10-Q, could cause the Company's actual future results to differ materially from those projected in the forward-looking statements as a result of the factors set forth in the Company's various filings with the Securities and Exchange Commission and of changes in general economic conditions and changes in the assumptions used in making such forward-looking statements.

Bemis Common Stock Performance*

	1999			1998			1997
	High	Low	Dividend Paid	High	Low	Dividend Paid	High	Low	Dividend Paid
First Quarter	$38¹¹/16	$31¹/16	$.23	$46¹⁵/16	$40¹/4	$.22	$43³/8	$35⁷/8	$.20
Second Quarter	39¹⁵/16	30⁷/16	.23	46	40⁵/8	.22	43³/4	36¹/2	.20
Third Quarter	39⁷/8	32¹³/16	.23	41	34¹⁵/16	.22	47³/16	43³/8	.20
Fourth Quarter	34¹⁵/16	30¹⁵/16	.23	42³/16	33¹⁵/16	.22	45¹/16	35¹³/16	.20

*: New York Stock Exchange: BMS

FIVE-YEAR CONSOLIDATED REVIEW

In millions, except percentages, shares, ratios, per share amounts, stockholders, and employees	1999			1998*			1997*			1996*			1995*
Operating Data
Net sales	$	1,918.0		$	1,848.0		$	1,877.2		$	1,655.4		$	1,523.4
Cost of products sold and other expenses		1,710.9			1,661.1			1,693.4			1,476.0			1,378.6
Interest expense		21.2			21.9			18.9			13.4			11.5
Income before income taxes		185.9			165.0			164.9			166.0			133.3
Income taxes		71.1			63.9			63.5			63.0			49.8
Net income		114.8			101.1			101.4			103.0			83.5
Net income as a percent of net sales		6.0	%		5.5	%		5.4	%		6.2	%		5.5	%
Common Share Data
Diluted earnings per share		2.18			1.90			1.88			1.93			1.60
Dividends per common share		.92			.88			.80			.72			.64
Book value per common share		13.91			13.16			12.60			11.47			10.36
Stock price/earnings ratio range		14-18			18-25			19-25			14-19			15-19
Average common shares and common share equivalents outstanding during the year for computation of diluted earnings per share		52,657,068			53,323,704			53,879,948			53,252,250			52,311,421
Common shares outstanding at year-end		52,188,715			52,269,158			52,967,511			52,360,699			52,567,349
Capital Structure and Other Data
Current ratio		2.3			2.2			2.2			2.4			2.3
Working capital		330.3			301.3			311.0			308.4			275.7
Total assets		1,532.1			1,482.0			1,408.4			1,224.7			1,083.3
Long-term debt		372.3			371.4			316.8			240.9			166.4
Long-term obligations under capital leases											0.2
Stockholders' equity		725.9			687.9			667.2			600.6			544.4
Return on average common equity		16.2	%		14.9	%		16.0	%		18.0	%		16.8	%
Return on average total capital		10.9	%		10.3	%		11.3	%		13.0	%		12.3	%
Depreciation and amortization		97.7			88.9			78.9			66.2			58.0
Capital expenditures		137.4			139.8			167.5			112.0			93.6
Number of common stockholders		5,316			5,721			5,874			5,947			5,711
Number of employees		9,534			9,364			9,275			8,876			8,515
Wages and salaries		368.7			351.2			348.8			314.5			287.0
Research and development expense		11.7			12.2			12.0			13.7			13.6

*: 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.

MANAGEMENT'S RESPONSIBILITY STATEMENT

The management of Bemis Company, Inc., is responsible for the integrity, objectivity, and accuracy of the financial statements of the Company. The financial statements are prepared by the Company in accordance with generally accepted accounting principles using management's best estimates and judgments, where appropriate. The financial information presented throughout the Annual Report is consistent with that in the financial statements.

Management is also responsible for maintaining a system of internal accounting controls and procedures designed to provide reasonable assurance that the books and records reflect the transactions of the Company, and that assets are protected against loss from unauthorized use or disposition. Such a system is maintained through written accounting policies and procedures, administered by trained Company personnel and updated on a continuing basis to ensure their adequacy to meet the changing requirements of our business. The Company also maintains an internal audit department that evaluates the adequacy of and investigates adherence to these controls and procedures. In addition, the Company requires that all of its affairs, as reflected by the actions of its employees, will be conducted on a high ethical plane.

PricewaterhouseCoopers LLP, independent accountants, are retained to audit the financial statements. Their audit is conducted in accordance with generally accepted auditing standards and includes selective reviews of internal accounting controls.

The Audit Committee of the Board of Directors, which is composed solely of outside directors, meets periodically with management, internal auditors, and independent accountants to review the work of each and to satisfy itself that the respective parties are properly discharging their responsibilities. Both PricewaterhouseCoopers LLP and the internal auditors have had unrestricted access to the Audit Committee, without the presence of Company management, for the purpose of discussing the results of their examination and their opinions on the adequacy of internal accounting controls and the quality of financial reporting.

/s/ JOHN H. ROE	/s/ BENJAMIN R. FIELD, III	/s/ GENE C. WULF
John H. Roe	Benjamin R. Field, III	Gene C. Wulf
Chairman and Chief Executive Officer	Senior Vice President, Chief Financial Officer and Treasurer	Vice President and Controller

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and the Board of Directors of Bemis Company, Inc.:

In our opinion, the accompanying consolidated balance sheets 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, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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 21, 2000

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

	Years ended December 31,
	1999		1998		1997
	in thousands of dollars except per share amounts
Net sales	$	1,918,025	$	1,848,004	$	1,877,237
Costs and expenses:
Cost of products sold		1,494,354		1,458,215		1,485,494
Selling, general, and administrative expenses		193,793		185,841		189,590
Research and development		11,684		12,224		12,012
Interest		21,218		21,866		18,893
Other costs (income), net		6,877		332		918
Minority interest in net income		4,224		4,496		5,406

Income before income taxes		185,875		165,030		164,924
Provision for income taxes		71,100		63,900		63,500

Net income	$	114,775	$	101,130	$	101,424

Basic earnings per share of common stock	$	2.19	$	1.91	$	1.91

Diluted earnings per share of common stock	$	2.18	$	1.90	$	1.88

See accompanying notes to consolidated financial statements.

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

	December 31,
	1999		1998
	in thousands of dollars
Assets
Current Assets:
Cash	$	18,187	$	23,738
Accounts receivable—less $13,201 and $12,863 for doubtful accounts and allowances		257,260		246,676
Inventories		274,597		241,585
Prepaid expenses and deferred charges		33,537		34,912

Total current assets		583,581		546,911

Property and equipment:
Land and land improvements		16,237		14,811
Buildings and leasehold improvements		239,889		219,055
Machinery and equipment		988,715		918,782

Total property and equipment		1,244,841		1,152,648
Less—accumulated depreciation		468,600		412,547

Net property and equipment		776,241		740,101

Excess of cost of investments in subsidiaries over net assets acquired		150,496		160,819
Other assets		21,825		34,195

Total other long-term assets		172,321		195,014

Total assets	$	1,532,143	$	1,482,026

See accompanying notes to consolidated financial statements.

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (Continued)

	December 31,
	1999			1998
	in thousands of dollars
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long-term debt	$	1,049		$	2,946
Short-term borrowings		5,741			3,553
Accounts payable		189,749			193,088
Accrued liabilities:
Salaries and wages		39,861			31,629
Income taxes		7,540			5,752
Other taxes		9,328			8,645

Total current liabilities		253,268			245,613
Long-term debt, less current portion		372,267			371,363
Deferred taxes		89,635			84,679
Other liabilities and deferred credits		51,580			54,655

Total liabilities		766,750			756,310

Minority interest		39,498			37,862
Commitments and Contingencies
Stockholders' equity:
Common stock, $.10 par value: Authorized—248,000,000 shares Issued—59,098,203 and 59,056,047 shares		5,910			5,906
Capital in excess of par value		181,957			181,908
Retained income		775,011			708,362
Other comprehensive income (loss)		(30,644	)		(6,116	)
Common stock held in treasury, 6,909,488 and 6,786,889 shares, at cost		(206,339	)		(202,206	)

Total stockholders' equity		725,895			687,854

Total liabilities and stockholders' equity	$	1,532,143		$	1,482,026

See accompanying notes to consolidated financial statements.

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

	Years Ended December 31,
	1999			1998			1997
	in thousands of dollars
Cash flows from operating activities:
Net income	$	114,775		$	101,130		$	101,424
Noncash items:
Depreciation and amortization		97,717			88,910			78,856
Minority interest in net income		4,224			4,496			5,406
Deferred income taxes, noncurrent portion		5,478			3,516			3,412
Losses of unconsolidated affiliated companies		7,874			1,546
Loss (gain) on sale of property and equipment		624			(74	)		1,155

Cash provided by operations		230,692			199,524			190,253
Changes in working capital, net of effect of acquisitions and dispositions:
Accounts receivable		(22,064	)		(9,816	)		(13,982	)
Inventories		(36,554	)		28,332			(17,776	)
Prepaid expenses and deferred charges		1,362			12,565			(7,684	)
Accounts payable		2,242			(3,141	)		(13,610	)
Accrued salaries and wages		9,045			(3,780	)		(731	)
Accrued income taxes		1,872			(2,668	)		2,969
Accrued other taxes		752			429			2,495
Changes in other liabilities and deferred credits		(3,250	)		(2,002	)		(2,223	)
Changes in deferred charges and other investments		992			1,497			4,000

Net cash provided by operating activities	$	185,089		$	220,940		$	143,711

Cash flows from investing activities:
Additions to property, plant, and equipment	$	(137,382	)	$	(139,833	)	$	(167,520	)
Business acquisitions, net of cash acquired		(1,424	)		(50,206	)		2,055
Business divestiture								27,984
Proceeds from sale of property and equipment		2,201			3,993			2,652
Other		61			11			(22	)

Net cash used by investing activities		(136,544	)		(186,035	)		(134,851	)

Cash flows from financing activities:
Increase in long-term debt		3,130			56,946			59,628
Repayment of long-term debt		(2,204	)		(2,374	)		(14,875	)
Change in short-term borrowings		2,520			1,272			(618	)
Change in current portion of long-term debt		(1,897	)		574			467
Cash dividends paid		(48,126	)		(46,701	)		(42,418	)
Subsidiary dividends to minority stockholders					(1,835	)		(1,835	)
Purchase of common stock for the treasury		(4,133	)		(41,344	)		(5,051	)
Stock incentive programs and related tax effects		53			7,388			51

Net cash used by financing activities		(50,657	)		(26,074	)		(4,651	)

Effect of exchange rates		(3,439	)		1,080			(605	)

Net (decrease) increase in cash	$	(5,551	)	$	9,911		$	3,604

See accompanying notes to consolidated financial statements.

	Years Ended December 31,
	1999		1998		1997
	in thousands of dollars
Supplemental disclosure of cash flow information:
Noncash investing and financing activities:
Fair value of assets acquired			$	54,180	$	123,262
Liabilities assumed				3,974		100,213
Minority interest acquired	$	1,424

Net value acquired		1,424		50,206		23,049
Common stock issued						25,104

Cash used for acquisition	$	1,424	$	50,206	$	(2,055	)

Interest paid during the year	$	22,941	$	22,900	$	19,752
Income taxes paid during the year	$	62,504	$	48,897	$	55,813

See accompanying notes to consolidated financial statements.

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

	Common Stock		Capital in Excess of Par Value		Retained Income			Other Comprehensive Income (Loss)			Common Stock Held in Treasury			Total Stockholders' Equity
	In thousands of dollars except per share data
Balance at December 31, 1996	$	5,790	$	149,481	$	594,927		$	6,219		$	(155,811	)	$	600,606

Net income for 1997						101,424									101,424
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	$	5,864	$	174,562	$	653,933		$	(6,263	)	$	(160,862	)	$	667,234

Net income for 1998						101,130									101,130
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	$	5,906	$	181,908	$	708,362		$	(6,116	)	$	(202,206	)	$	687,854

Net income for 1999						114,775									114,775
Translation adjustment for 1999									(24,353	)					(24,353	)
Pension liability adjustment, net of $536 tax benefit									(175	)					(175	)

Total comprehensive income															90,247

Cash dividends paid on common stock, $.92 per share						(48,126	)								(48,126	)
Stock incentive programs and related tax effects		4		49											53
Purchase of 122,599 shares of common stock												(4,133	)		(4,133	)

Balance at December 31, 1999	$	5,910	$	181,957	$	775,011		$	(30,644	)	$	(206,339	)	$	725,895

See accompanying notes to consolidated financial statements.

BEMIS COMPANY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 Accounting Policies

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Revenue recognition: Sales and related cost of sales are recognized primarily upon shipment of products.

Research and development: Research and development expenditures are charged against income as incurred.

Earnings per share: 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 that 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 non-U.S. 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.

Statement of Cash Flows: For purposes of reporting cash flows, cash includes cash on hand and demand deposit accounts.

Preferred Stock Purchase Rights: On July 29, 1999, 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 $120, subject to adjustment. The rights become exercisable if, subject to certain exceptions, a person or group acquires beneficial ownership of 15 percent or more of the Company's outstanding common stock or announces an offer which would result in such person acquiring beneficial ownership of 15 percent or more of the Company's outstanding common stock. If a person or group acquires beneficial ownership of 15 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 23, 2009, and may be redeemed by the Company for $.001 per right at any time before a person has acquired beneficial ownership of 15 percent or more of the Company's outstanding common stock. The Company's Board of Directors has designated 600,000 shares of Series A Junior Preferred Stock with a par value of $1 per share that relate to the Shareholder Rights Plan. At December 31, 1999, 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, 2000, establishes standards for recognition and measurement of derivatives and hedging activities. The Company will implement this statement in the year 2001 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, 1999 and 1998, reserves were $3,359,000 and $1,971,000, respectively. Adjustments to the reserve accounts and costs which were directly expensed for environmental remediation matters resulted in charges to the income statements for 1999, 1998, and 1997 of $2,046,000, $169,000, and $896,000, net of third party reimbursements totaling $442,000, $186,000, and $515,000, for 1999, 1998, and 1997, 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.

Note 2 Changes in Accounting Principles

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 is preferred as it provides 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, related footnotes, and all financial data included in this report.

Note 3 Business Acquisitions And Dispositions

On January 13, 1999, the Company purchased the remaining minority interest in voting preference shares of Perfecseal Limited in accordance with an agreement dated April 29, 1996, relating to the acquisition of Perfecseal Healthcare Packaging Division (Perfecseal) of Paper Manufacturers Company, Inc. A cash payment of $1.4 million was made to acquire the remaining outstanding minority shares.

On June 4, 1998, the Company formed Bemis Europe Holdings, S.A. to acquire Techy, 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 $5.8 million pretax gain that 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 United Kingdom, 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.

Note 4 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 were 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

	Employee Costs			Asset Write-Downs			Other Exit Costs			Total			Cash			Non-Cash
	(in thousands of dollars)
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	)(1)	$	(1,457	)	$	948

(1): Restored to income in the fourth quarter of 1998.

Employee Separations—Restructuring

	Hourly	Salaried	Total
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

Note 5 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:

	1999		1998
	(in thousands of dollars)
Raw materials and supplies	$	93,539	$	87,242
Work in process and finished goods		181,058		154,343

Total inventories	$	274,597	$	241,585

Note 6 Pension Plans

Total pension expense in 1999, 1998, and 1997 was $(1,214,000), $3,525,000, and $8,351,000, 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 $695,000 in 1999, $733,000 in 1998, and $688,000 in 1997. 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 1999, 1998, and 1997 totaled $1,136,000, $1,267,000, and $1,186,000, 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. Net periodic pension cost for defined benefit plans included the following components for the year ended December 31, 1999, 1998, and 1997:

	1999			1998			1997
	(in thousands of dollars)
Service cost—benefits earned during the year	$	8,992		$	7,575		$	6,634
Interest cost on projected benefit obligation		19,157			17,891			17,622
Expected return on plan assets		(31,434	)		(26,045	)		(20,796	)
Amortization of unrecognized transition obligation		1,019			1,060			1,216
Amortization of prior service cost		810			662			490
Recognized net (gain) or loss		(2,328	)		(429	)		444

Net periodic pension (income) cost	$	(3,784	)	$	714		$	5,610

Changes in benefit obligation and plan assets, and a reconciliation of the funded status at December 31, 1999 and 1998, are as follows:

	1999			1998
	(in thousands of dollars)
Change in Benefit Obligation
Benefit obligation at the beginning of the year	$	287,652		$	262,775
Service cost		8,992			7,575
Interest cost		19,157			17,891
Plan amendments		3,580			1,626
Curtailment (gain) or loss		0			0
Special termination benefits		0			336
Actuarial (gain) or loss		6,261			13,069
Acquisition		4,588			(11	)
Benefits paid		(16,387	)		(15,519	)
Foreign currency exchange rate changes		89			(90	)

Benefit obligation at the end of the year	$	313,932		$	287,652

Change in Plan Assets
Fair value of plan assets at the beginning of the year	$	369,604		$	301,038
Actual return on plan assets		80,868			84,086
Acquisition		4,667			0
Employer contribution		358			249
Benefits paid		(16,387	)		(15,519	)
Foreign currency exchange rate changes		153			(250	)

Fair value of plan assets at the end of the year	$	439,263		$	369,604

Reconciliation of Funded Status
Funded status	$	125,331		$	81,952
Unrecognized net (gain) or loss		(148,021	)		(106,782	)
Unrecognized transition (asset) or obligation		2,854			4,287
Unrecognized prior service cost		9,787			7,027

Accrued pension liability	$	(10,049	)	$	(13,516	)

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:

	1999			1998
	(in thousands of dollars)
Intangible asset	$	236		$	749
Prepaid tax		532			966
Pension liability		(1,628	)		(3,238	)

Reduction in stockholders' equity	$	(860	)	$	(1,523	)

Presented below are the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets at December 31:

	1999		1998
	(in thousands of dollars)
Projected benefit obligation	$	17,399	$	14,393
Accumulated benefit obligation	$	12,257	$	10,566
Fair value of assets	$	1,252	$	0

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.

	1999		1998
Weighted-average discount rate	6.75	%	6.75	%
Rate of increase in future compensation levels	5.25	%	5.25	%
Expected long-term rate of return on assets	10.00	%	10.00	%

Note 7 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.

Net periodic postretirement benefit costs included the following components for the year ended December 31, 1999, 1998, and 1997.

	1999			1998			1997
	(in thousands of dollars)
Service cost—benefits earned during the year	$	217		$	195		$	176
Interest cost on accumulated postretirement benefit obligation		794			765			843
Amortization of prior service cost		11			12			11
Recognized net (gain) or loss		(266	)		(342	)		(340	)

Net periodic postretirement benefit cost	$	756		$	630		$	690

Changes in benefit obligation and plan assets, and a reconciliation of the funded status at December 31, 1999 and 1998, are as follows:

	1999			1998
	(in thousands of dollars)
Change in Benefit Obligation
Benefit obligation at the beginning of the year	$	12,234		$	11,373
Service cost		217			195
Interest cost		794			765
Plan amendments		394			0
Actuarial (gain) or loss		1,608			781
Benefits paid		(1,025	)		(880	)

Benefit obligation at the end of the year	$	14,222		$	12,234

Change in Plan Assets
Fair value of plan assets at the beginning of the year	$	0		$	0
Employer contribution		1,025			880
Benefits paid		(1,025	)		(880	)

Fair value of plan assets at the end of the year	$	0		$	0

Reconciliation of Funded Status
Funded status	$	(14,222	)	$	(12,234	)
Unrecognized net actuarial (gain) or loss		(2,243	)		(4,117	)
Unrecognized prior service cost		486			103

Accrued postretirement benefit liability	$	(15,979	)	$	(16,248	)

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:

		1 Percentage Point Increase			1 Percentage Point Decrease
Effect on total of service and interest cost components		$	108,000		$	(92,000	)
Effect on postretirement benefit obligation		$	1,261,000		$	(1,099,000	)

For measurement purposes, an 8.0 percent annual rate of increase in the per capita cost of covered health care benefits was assumed for 2000; 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 1999 and 6.75 percent in 1998.

Note 8 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, 1999, 1998, and 1997, respectively, 711,194, 922,179, and 1,025,501 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, 1999, sixteen participants held options with expiration dates ranging from 2000 to 2009 at option prices ranging from $14.94 to $45.03 per share with a weighted-average price of $27.09 per share.

Details of the stock option plans at December 31, 1999, 1998, and 1997, are:

	Number of Shares		Per Share Option Price Range	Weighted Avg. Price Per Share
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
Granted	168,346		35.56— 37.63		37.26
Exercised	(100,000	)	12.63		12.63

Outstanding at December 31, 1999	1,208,473		$14.94—$45.03	$	27.09

Exercisable at December 31, 1999	990,127		$14.94—$45.03	$	24.45

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: $7,548,000 was expensed in 1999, $7,012,000 in 1998, and $4,230,000 in 1997.

Details of the stock award plan at December 31, 1999, 1998, and 1997, are:

	Number of Shares
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
Granted	103,558
Canceled	(60,919	)

Outstanding at December 31, 1999	1,094,796

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 1999, 1998, and 1997 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:

	1999			1998			1997
Net earnings—as reported	$	114,775,000		$	101,130,000		$	101,424,000
Net earnings—pro forma	$	112,426,000		$	98,883,000		$	100,368,000
Diluted earnings per share—as reported	$	2.18		$	1.90		$	1.88
Diluted earnings per share—pro forma	$	2.14		$	1.86		$	1.86
Dividend yield		2.4	%		2.0	%		1.9	%
Expected volatility		27.6	%		27.1	%		27.0	%
Risk-free interest rate		7.0	%		7.0	%		7.0	%
Expected lives		8.1 years			5.9 years			9.0 years

The fair value of each grant made in 1999, 1998, or 1997 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 9 Leases

All noncancelable leases have been categorized as capital or operating leases. The Company has leases for manufacturing plants, warehouses, machinery and equipment, and administrative offices with terms (including renewal options) ranging from one to 25 years. Under most leasing arrangements, the Company pays the property taxes, insurance, maintenance, and expenses related to the leased property. Total rental expense under operating leases was $11,281,000 in 1999, $13,095,000 in 1998, and $14,129,000 in 1997.

The present values of minimum future obligations shown in the following chart are calculated based on an interest rate of 11¹/4 percent determined to be applicable at the inception of the lease. Interest expense on the outstanding obligations under capital leases was $13,000 in 1999, $31,000 in 1998, and $2,000 in 1997.

Minimum future obligations on leases in effect at December 31, 1999, are:

	Capital Leases		Operating Leases
	(in thousands of dollars)
2000	$	5	$	7,871
2001		0		6,260
2002		0		4,754
2003		0		2,312
2004		0		1,387
Thereafter		0		2,209

Total minimum obligations		5	$	24,793

Less amount representing interest		1

Present value of net minimum obligations		4
Less current portion		4

Long-term obligations	$	0

Note 10 Long-Term Debt

Long-term debt maturing in years 2000 through 2002 is $1,049,000, $8,456,000, and $739,000, respectively. There are no maturities due in 2003.

Under the terms of a revolving credit agreement with six banks, the Company may borrow up to $334,000,000 through August 1, 2004. The Company must pay a facility fee of .12 of 1 percent annually on

the entire amount of the commitment. There were no borrowings outstanding under this agreement at December 31, 1999. Debt consisted of the following at December 31,

	1999		1998
	(in thousands of dollars)
Commercial paper payable through 2000 at an interest rate of 5.8%(1)	$	255,072	$	252,000
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 5.25% to 5.8%		15,500		15,500
Debt of subsidiary companies payable through 2002 at interest rates of 2.25% to 9.25%		2,740		6,722
Obligations under capital leases		4		87

Total debt		373,316		374,309
Less current portion		1,049		2,946

Total long-term debt	$	372,267	$	371,363

(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, 1999, was 5.8 percent. The maximum outstanding during 1999 was $285,000,000, and the average outstanding during 1999 was $257,489,000. The weighted-average interest rate during 1999 was 5.3 percent.

Note 11 Income Taxes

	1999			1998			1997
	(in thousands of dollars)
U.S. income before income taxes	$	169,210		$	149,917		$	144,877
Non-U.S. income before income taxes		26,068			17,288			24,273
Consolidating eliminations		(9,403	)		(2,175	)		(4,226	)

Income before income taxes	$	185,875		$	165,030		$	164,924

Income tax expense consists of the following components:
Current tax expense:
U.S. federal	$	50,032		$	44,009		$	47,237
Foreign		7,095			3,413			6,697
State and local		8,442			7,535			7,206

Total current tax expense		65,569			54,957			61,140

Deferred (prepaid) tax expense:
U.S. federal		3,375			6,562			837
Foreign		1,556			1,721			1,387
State		600			660			136

Total deferred (prepaid) tax expense		5,531			8,943			2,360

Total income tax expense	$	71,100		$	63,900		$	63,500

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below.

	1999			1998			1997
	(in thousands of dollars)
Deferred tax assets:
Accounts receivable, principally due to allowances for returns and doubtful accounts	$	4,589		$	4,574		$	4,443
Inventories, principally due to additional costs inventoried for tax purposes pursuant to the Tax Reform Act of 1986		3,593			4,646			4,766
Employee compensation and benefits accrued for financial reporting purposes		14,404			15,115			15,714
Restructuring costs								2,694
Other		1,149			1,687			2,165

Total deferred tax assets (included in prepaid expenses and deferred charges)	$	23,735		$	26,022		$	29,782

Deferred tax liabilities:
Plant and equipment, principally due to differences in depreciation, capitalized interest, and capitalized overhead	$	102,262		$	90,087		$	79,645
Noncurrent employee compensation and benefits accrued for financial reporting purposes		(17,424	)		(16,127	)		(16,936	)
Change of inventory accounting method from LIFO to FIFO		4,657			8,475			17,900
Other		140			2,244			1,357

Total deferred tax liabilities	$	89,635		$	84,679		$	81,966

The Company's effective tax rate differs from the federal statutory rate due to the following items:

	1999					1998					1997
	Amount			% of Income Before Tax		Amount			% of Income Before Tax		Amount			% of Income Before Tax
	(in thousands of dollars)
Computed "expected" tax expense on income before taxes at statutory rate	$	65,056		35.0	%	$	57,761		35.0	%	$	57,723		35.0	%
Increase (decrease) in taxes resulting from:
State and local income taxes net of federal income tax benefit		5,877		3.2			5,327		3.2			4,772		2.9
Foreign tax rate differential		(776	)	(0.4	)		(1,113	)	(0.7	)		(471	)	(0.3	)
Minority interest		1,478		0.8			1,574		1.0			1,892		1.1
Miscellaneous items		(535	)	(0.3	)		351		0.2			(416	)	(0.2	)

Actual income tax expense	$	71,100		38.3	%	$	63,900		38.7	%	$	63,500		38.5	%

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 $116,911,000 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.

Note 12 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, agribusiness, chemicals, pet food, and sanitary products. 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:

Business Segments

	1999			1998			1997
	(in millions of dollars)
Net Sales to Unaffiliated Customers:
Flexible Packaging	$	1,435.9		$	1,368.4		$	1,398.6
Pressure Sensitive Materials		482.6			480.0			479.7
Intersegment Sales:
Flexible Packaging		(0.3	)		(0.2	)		(0.9	)
Pressure Sensitive Materials		(0.2	)		(0.2	)		(0.2	)

Total	$	1,918.0		$	1,848.0		$	1,877.2

Operating Profit and Pretax Profit:
Flexible Packaging	$	187.2		$	156.3		$	142.6
Pressure Sensitive Materials		44.3			51.0			67.2

Total operating profit (1)		231.5			207.3			209.8
General corporate expenses		(20.2	)		(15.9	)		(20.6	)
Interest expense		(21.2	)		(21.9	)		(18.9	)
Minority interest in net income		(4.2	)		(4.5	)		(5.4	)

Income before income taxes	$	185.9		$	165.0		$	164.9

Identifiable Assets:
Flexible Packaging	$	1,180.8	$	1,144.3	$	1,068.9
Pressure Sensitive Materials		310.5		289.8		292.0
Total identifiable assets(2)		1,491.3		1,434.1		1,360.9
Corporate assets(3)		40.8		47.9		47.5

Total	$	1,532.1	$	1,482.0	$	1,408.4

Depreciation and Amortization:
Flexible Packaging	$	76.1	$	69.5	$	62.3
Pressure Sensitive Materials		20.1		18.6		15.6
Corporate		1.5		.8		1.0

Total	$	97.7	$	88.9	$	78.9

Expenditures for Property and Equipment:
Flexible Packaging	$	101.4	$	115.7	$	139.3
Pressure Sensitive Materials		34.9		22.1		25.5
Corporate		1.1		2.0		2.7

Total	$	137.4	$	139.8	$	167.5

Operations by Geographic Areas

	1999		1998		1997
	(in millions of dollars)
Net Sales to Unaffiliated Customers:(4)
United States	$	1,614.5	$	1,570.4	$	1,615.3
Canada		71.6		64.4		61.4
Europe		207.2		197.8		193.7
Other		24.7		15.4		6.8

Total	$	1,918.0	$	1,848.0	$	1,877.2

Identifiable Assets:
United States	$	1,237.8	$	1,172.0	$	1,168.5
Canada		31.0		28.5		28.0
Europe		196.3		195.2		160.9
Other		26.2		38.4		3.5

Total	$	1,491.3	$	1,434.1	$	1,360.9

(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 13 Contingencies

The Company is a defendant in lawsuits incidental to its business. The management of the Company believes, however, that the disposition of these lawsuits will not have any material impact on the financial position or operating results of the Company.

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. Notwithstanding these allegations and meritorious defenses, both parties have reached a tentative agreement, pending regulatory approval, which will require an additional $3.0 million expenditure by the Registrant. This expense had been provided for by December 31, 1999.

Note 14 Foreign Operations

The foreign countries in which the Company conducts operations generally impose no significant restrictions on transfers of funds. Amounts attributable to foreign operations included in the consolidated statements are as follows:

	1999		1998		1997
	(in thousands of dollars)
Net sales of consolidated foreign subsidiaries	$	303,482	$	277,572	$	261,900
Net income of consolidated foreign subsidiaries	$	16,336	$	11,456	$	14,850
Foreign earnings in excess of dividends received	$	6,931	$	9,281	$	11,706
Equity in net assets	$	135,034	$	136,330	$	117,500
Equity in total assets	$	214,792	$	211,553	$	185,450

Note 15 Financial Instruments

The Company enters into forward foreign currency exchange contracts to hedge certain foreign currency denominated receivables and payables. Exchange gains and losses arising from these transactions are deferred and recognized when the transaction for which the hedge was obtained is finalized. At December 31, 1999 and 1998, the Company had outstanding forward foreign currency exchange contracts aggregating $7,921,000 and $19,736,000, 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 $126,000 loss at December 31, 1999, and a $26,000 loss at December 31, 1998, had outstanding contracts been settled at those respective dates.

At December 31, 1999 and 1998, 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 $379,532,000 and $384,563,000 at December 31, 1999 and 1998, 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, 1999 and 1998, respectively. In the Company's past experience, virtually no claims have been made against these financial instruments. Management does not expect any material losses to result from these off-balance-sheet instruments because performance is not expected to be required, and, therefore, is of the opinion that the fair value of these instruments is zero.

Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company's customer base and their dispersion across many different industries and countries. As of December 31, 1999, the Company had no significant concentrations of credit risk. As of December 31, 1998, the Company had 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 was denominated in U.S. dollars with a 10 percent interest rate compounded annually. This was the only significant concentration of credit risk as of December 31, 1998. The loan was converted to an equity interest with a pro rata investment from the other partner in 1999.

Note 16 Earnings Per Share Computations

	For years ended December 31,
	1999					1998					1997
	Income (Numerator)		Shares (Denominator)	Per-Share Amount		Income (Numerator)		Shares (Denominator)	Per-Share Amount		Income (Numerator)		Shares (Denominator)	Per-Share Amount
Basic EPS
Income available to common stockholders	$	114,775,000	52,306,945	$	2.19	$	101,130,000	53,029,779	$	1.91	$	101,424,000	53,010,999	$	1.91
Dilutive effects of stock option and stock awards net of windfall tax benefits			350,123					293,925					868,949

Diluted EPS
Income available to common stockholders plus assumed conversions	$	114,775,000	52,657,068	$	2.18	$	101,130,000	53,323,704	$	1.90	$	101,424,000	53,879,948	$	1.88

Note 17 Quarterly Financial Information—Unaudited

	Net Sales						Gross Profit						Net Income						Diluted Earnings Per Share
	1999		1998		% Change		1999		1998		% Change		1999		1998		% Change		1999		1998		% Change
	(In millions of dollars except EPS)
First	$	450.6	$	451.5	—		$	96.5	$	88.7	9	%	$	18.7	$	20.7	(10	)%	$	.36	$	.39	(8	)%
Second		481.3		470.6	2			108.3		101.1	7			31.6		27.6	14			.60		.51	18
Third		492.2		465.5	6			106.0		99.7	6			31.2		27.2	15			.59		.51	16
Fourth		493.9		460.4	7			112.9		100.3	13			33.3		25.6	30			.63		.49	29

Total	$	1,918.0	$	1,848.0	4	%	$	423.7	$	389.8	9	%	$	114.8	$	101.1	14	%	$	2.18	$	1.90	15	%

Note 18 Subsequent Event

Effective January 6, 2000, the Company completed the previously announced agreement to acquire the 13 percent minority interest in Morgan Adhesives Company (MACtac). The Company issued 1,728,000 shares of its common stock and paid $3.4 million to acquire all of the minority owned shares of MACtac. Upon the aquisition of these minority shares, MACtac became a wholly owned subsidiary of Bemis Company, Inc. This transaction is expected to be dilutive in the range of one to two cents per share to the Company's earnings per share in 2000, and accretive after that.