Bemis Company Reports Record Quarterly Sales and Earnings Per Share
Print this articleSource: Melanie E. R. Miller, Vice President, Investor Relations and Treasurer
Date: 7/27/2006
NEENAH, WISCONSIN, July 27, 2006 - Bemis Company, Inc. (NYSE-BMS) today reported quarterly diluted earnings of $0.46 per share for the second quarter ended June 30, 2006, which included $0.05 per share of restructuring and related charges. Excluding the impact of restructuring and related charges, earnings would have been $0.51 per share for the second quarter of 2006 compared to $0.38 per share for the same quarter of 2005, a 34.2 percent improvement. Second quarter net sales increased 6.1 percent to a record $933.8 million from $879.9 million in the prior year.
Commenting on the results of the second quarter, Jeff Curler, Bemis Company's Chairman, President and Chief Executive Officer, said, "Bemis' solid results for the second quarter and the first half of the year reflect strong market demand in key product lines and successful cost management. Innovative new products are creating opportunities that will drive margin growth over the next several years. I am confident in our ability to achieve strong 2006 results for our shareholders and to capitalize on prospects that will deliver solid growth for Bemis in the future."
BUSINESS SEGMENTS
Flexible Packaging
Flexible packaging, which represented about 82 percent of total Company net sales during the quarter, reported record net sales of $767.5 million in the second quarter, an increase of 5.9 percent compared to the same quarter in 2005. Currency effects accounted for sales growth of 2.1 percent. Operating profit for the second quarter of 2006 was $88.6 million, or 11.5 percent of net sales, which included restructuring and related charges of $8.7 million. Restructuring and related charges reflect the costs associated with our previously announced facility consolidation efforts that include the closure of five flexible packaging plants. Operating profit for the second quarter of 2005 was $80.7 million. Excluding restructuring and related charges, operating profit as a percentage of net sales would have increased to 12.7 percent from 11.2 percent a year ago.
Commenting on the flexible packaging business segment results for the quarter, Curler said, "During the second quarter, our flexible packaging plants experienced strong, steady production volumes that allowed many of our plants to optimize manufacturing efficiencies and capitalize on recent productivity improvements. Increasing demand for packaging for expanding markets such as meat and cheese, multipacks, medical products, dry foods, and liquids is creating opportunities for high margin growth as new capacity becomes available. Moderating raw material costs also contributed to higher operating margins during the second quarter. Material costs are expected to rise in the second half of the year, which would negatively impact operating margins in the near term."
Pressure Sensitive Materials
Second quarter net sales from the pressure sensitive materials business segment were $166.3 million, a 7.1 percent increase from the second quarter of 2005. Currency translation was insignificant to sales growth for the quarter. Operating profit of $14.8 million, or 8.9 percent of net sales, included restructuring and related charges of $0.1 million related to the previously announced closure of one plant. Excluding the impact of these charges, operating profit would have been $14.9 million or 9.0 percent of net sales for the quarter compared to the second quarter of 2005 when operating profit was $9.3 million or 6.0 percent of net sales.
"Our pressure sensitive materials business continued to experience volume growth during the second quarter," Curler noted when asked about the sustained improvements in the performance of this segment. "Both sequential and year-over-year quarterly volume increases are evidence of a successful growth strategy that reflects our focus on innovation and manufacturing excellence. While operating margins in this segment will be challenged during the second half of the year with increased raw material costs, we continue to expect average 2006 operating margins to be close to 8 percent, a substantial improvement from 2005 levels."
Restructuring and Related Charges
In January of 2006, the Company announced the planned closure of five flexible packaging facilities and one pressure sensitive materials facility in order to consolidate production capacity and improve overall cost structure and efficiency. Restructuring and related charges incurred during the second quarter totaled $8.8 million, of which $4.4 million relates primarily to accelerated depreciation and is recorded as a component of cost of sales. The remaining $4.4 million charge relates primarily to employee costs and is recorded as a component of other costs (income).
Capital Structure
Total debt to total capitalization was 34.4 percent at June 30, 2006, compared to 35.7 percent at December 31, 2005. Total debt as of June 30, 2006 was $845.8 million, almost equal to the balance of $844.1 million at December 31, 2005. Strong cash flows for the six months ended June 30, 2006, were used to support seasonally higher working capital levels at the end of the second quarter, dividend payments, a strong capital expenditure program, and first quarter share repurchases. Management expects cash flow from operations in the second half of 2006 to be comparable to the first six months.
2006 Earnings Outlook
Bemis expects third quarter 2006 diluted earnings per share to be in the range of $0.41 to $0.44 per share including a restructuring charge of $0.04 per share. Total year 2006 diluted earnings per share is expected to be in the range of $1.63 to $1.68, including about $0.18 per share of restructuring and related charges. Excluding the impact of restructuring and related charges, third quarter earnings guidance would be $0.45 to $0.48 per share and total year earnings guidance for 2006 would be $1.81 to $1.86 per share. This represents the high end of management's previous guidance for 2006 and reflects sustained productivity improvements initiated in 2005 in addition to estimated cost savings resulting from 2006 facilities consolidation efforts. Management continues to expect capital expenditures to be in the $175 to $185 million range for 2006.
Presentation of Non-GAAP Information
Some of the information presented in this press release reflects adjustments to "As reported" results to exclude certain amounts related to the Company's restructuring initiative. This adjusted information should not be construed as an alternative to the reported results determined in accordance with generally accepted accounting principles in the United States of America (GAAP). It is provided solely to assist in an investor's understanding of the impact of the Company's restructuring initiative on the comparability of the Company's operations. A reconciliation of the GAAP amounts to the Non-GAAP amounts is included with this press release.
Forward Looking Statements
Statements in this release that are not historical, including statements relating to the expected future performance of the Company, are considered "forward-looking" and are presented pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such content is subject to certain risks and uncertainties, including but not limited to future changes in cost or availability of raw materials, changes in customer order patterns, the results of competitive bid processes, estimates of restructuring and related charges, and changes in prevailing market interest rates. Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors which are detailed in the Company's regular SEC filings including the most recently filed Form 10-K for the year ended December 31, 2005.
Bemis Company, Inc. will Webcast an investor telephone conference regarding its second quarter 2006 financial results this morning at 10 a.m., Eastern Daylight Time. Individuals may listen to the call on the Internet at http://www.bemis.com/ under "Investor Relations". However, they are urged to check the website ahead of time to ensure their computers are configured for the audio stream. Instructions for obtaining the required, free, downloadable software are available in a pre-event system test on the site.
Bemis Company is a major supplier of flexible packaging and pressure sensitive materials used by leading food, consumer products, manufacturing, and other companies worldwide. Founded in 1858, the Company reported 2005 net sales of $3.5 billion. The Company's flexible packaging business has a strong technical base in polymer chemistry, film extrusion, coating and laminating, printing and converting. The Company's pressure sensitive materials business specializes in adhesive technologies. Headquartered in Neenah, Wisconsin, Bemis employs about 16,000 individuals in 58 manufacturing facilities in 10 countries around the world. More information about the Company is available at our website, http://www.bemis.com/.
BEMIS COMPANY, INC. AND SUBSIDIARIES
-------------------------------------
CONSOLIDATED STATEMENT OF INCOME
-------------------------------------
(in thousands, except per share amounts)
(unaudited)----------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------------
2006 2005 2006 2005
--------------------------------------------Net sales $933,785 $879,888 $1,835,434 $1,711,757
Costs and expenses:
Cost of products sold 747,521 711,988 1,481,823 1,388,587
Selling, general and
administrative
expenses 84,852 81,459 168,555 167,664
Research and
development 6,650 5,986 12,791 11,834
Interest expense 13,077 9,902 25,875 18,340
Other costs (income),
net 468 1,354 2,718 1,879
Minority interest in
net income 1,010 1,063 1,462 2,393
--------------------------------------------Income before income
taxes 80,207 68,136 142,210 121,060Provision for income
taxes 31,300 26,900 55,500 47,600
--------------------------------------------Net income $48,907 $41,236 $86,710 $73,460
============================================Basic earnings per share
of common stock $.47 $.38 $.83 $.69
============================================Diluted earnings per
share of common stock $.46 $.38 $.81 $.68
============================================
Cash dividends paid $.19 $.18 $.38 $.36
============================================Weighted average common
shares outstanding 104,829 107,164 104,894 107,092
============================================
Weighted average common
shares and common stock
equivalents outstanding 106,665 108,540 106,702 108,476
======================================================================
BEMIS COMPANY, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED BALANCE SHEET
-------------------------------------
(dollars in thousands)
(unaudited)----------------------------------------------------------------------
June 30, Dec 31,
ASSETS 2006 2005
-------- ------------------------Cash $110,445 $91,125
Accounts receivable, net 487,870 436,035
Inventories, net 454,661 420,950
Prepaid expenses 47,727 39,700
------------------------
Total current assets 1,100,703 987,810
------------------------Property and equipment, net 1,162,497 1,143,539
Goodwill 601,072 581,419
Other intangible assets, net 105,899 105,580
Deferred charges and other assets 141,627 146,252
------------------------
Total 848,598 833,251
------------------------TOTAL ASSETS $3,111,798 $2,964,600
========================LIABILITIES AND
STOCKHOLDERS' EQUITY
----------------------Current portion of long-term debt $16,733 $3,907
Short-term borrowings 52,508 50,107
Accounts payable 386,760 327,569
Accrued salaries and wages 74,293 79,056
Accrued income and other taxes 24,342 13,681
------------------------
Total current liabilities 554,636 474,320Long-term debt, less current portion 776,583 790,107
Deferred taxes 150,022 168,447
Deferred credits and other liabilities 139,918 154,679
------------------------
Total liabilities 1,621,159 1,587,553
------------------------Minority interest 27,190 27,692
Stockholders' equity:
Common stock issued (116,108,801 and
115,978,746 shares) 11,611 11,598
Capital in excess of par value 309,595 267,274
Retained income 1,383,215 1,337,590
Other comprehensive income (loss) 76,645 32,706
Treasury common stock (11,272,771 and
10,672,771 shares) (317,617) (299,813)
------------------------
Total stockholders' equity 1,463,449 1,349,355
------------------------TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,111,798 $2,964,600
======================================================================
BEMIS COMPANY, INC. AND SUBSIDIARIES
------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(in thousands)
(unaudited)----------------------------------------------------------------------
Six Months Ended
June 30,
------------------------
2006 2005
------------------------
Cash flows from operating activities
------------------------------------
Net income $86,710 $73,460
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 77,992 79,393
Minority interest in net income 1,462
Excess tax benefit from share-based
payment arrangements (864) 2,393
Stock award compensation 5,333 7,626
Deferred income taxes (16,950) 6,089
Income of unconsolidated affiliated
company (341) (588)
Loss (gain) on sales of property and
equipment 180 186
Non-cash restructuring related activities 11,177 515
Proceeds from cash flow hedge 6,079
Changes in working capital, net of
effects of acquisitions (12,750) (64,545)
Net change in deferred charges and
credits 16,194 (4,190)
------------------------Net cash provided by operating activities 168,143 106,418
------------------------Cash flows from investing activities
------------------------------------
Additions to property and equipment (79,750) (87,125)
Business acquisitions and adjustments, net of
cash acquired (10,800) (230,275)
Proceeds from sales of property and equipment 338 2,134
------------------------Net cash used in investing activities (90,212) (315,266)
------------------------Cash flows from financing activities
------------------------------------
Proceeds from issuance of long-term debt 300,000
Repayment of long-term debt (27,716) (18)
Net borrowing (repayment) of commercial paper 18,056 (34,281)
Net borrowing (repayment) of short-term debt 10,285 2,894
Cash dividends paid to stockholders (41,085) (38,545)
Common stock purchased for the treasury (17,804)
Excess tax benefit from share-based payment
arrangements 864
Stock incentive programs 51 1,316
------------------------Net cash provided (used) by financing
activities (57,349) 231,366
------------------------Effect of exchange rates on cash (1,262) 3,735
------------------------Net (decrease) increase in cash 19,320 26,253
Cash balance at beginning of year 91,125 93,898
------------------------Cash balance at end of period $110,445 $120,151
======================================================================
BEMIS COMPANY, INC. AND SUBSIDIARIES
------------------------------------
RECONCILIATION OF NON-GAAP DATA
------------------------------------
(in millions, except per share amounts)
(unaudited)----------------------------------------------------------------------
Reconciliation of GAAP to Non- Three Months Ended Six Months Ended
GAAP
Operating Profit and Operating June 30, June 30,
Profit as a
--------------------------------------
Percentage of Net Sales by
Segment 2006 2005 2006 2005
----------------------------------------------------------------------Flexible Packaging
Net Sales $767.5 $724.7 $1,507.7 $1,412.8Operating Profit as reported $88.6 $80.7 $159.5 $150.6
Non-GAAP adjustments:
Restructuring and related
charges (income) $8.7 $0.5 $19.7 $0.5--------------------------------------
Operating Profit as adjusted $97.3 $81.2 $179.2 $151.1
======================================Operating Profit as a
percentage of Net Sales
As Reported 11.5% 11.1% 10.6% 10.7%
As Adjusted 12.7% 11.2% 11.9% 10.7%
Pressure Sensitive Materials
Net Sales $166.3 $155.2 $327.7 $299.0Operating Profit as reported $14.8 $9.3 $29.5 $16.9
Non-GAAP adjustments:
Restructuring and related
charges (income) $0.1 $- $0.4 $---------------------------------------
Operating Profit as adjusted $14.9 $9.3 $29.9 $16.9
======================================Operating Profit as a
percentage of Net Sales
As Reported 8.9% 6.0% 9.0% 5.6%
As Adjusted 9.0% 6.0% 9.1% 5.6%
Reconciliation of GAAP to Non-
GAAP
Earnings per Share
Diluted earnings per share
as reported $0.459 $0.380 $0.813 $0.677Non-GAAP adjustments per
share, net of taxes:
Restructuring and related
charges (income) $0.050 $0.003 $0.115 $0.003Diluted earnings per share
as adjusted $0.509 $0.383 $0.928 $0.680
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