Bemis Company Reports Third Quarter 2007 Results
Print this articleSource: Melanie E. R. Miller: Vice President, Investor Relations
Date: 10/30/2007
NEENAH, WISCONSIN, October 30, 2007 - Bemis Company, Inc. (NYSE-BMS) today reported quarterly diluted earnings of $0.40 per share for the third quarter ended September 30, 2007, compared to $0.45 per share for the same quarter of 2006. Diluted earnings per share for the third quarter of 2006 included restructuring and related charges totaling $0.03 per share. (See attached schedule: "Reconciliation of Non-GAAP Data".)
Net sales for the third quarter of 2007 were $905.7 million, comparable to net sales of $903.3 million for the same period of 2006. Currency benefits contributed 3.3 percent to net sales for the current quarter.
"Reduced demand for many food and consumer products in North America has adversely impacted our capacity utilization this quarter," said Jeffrey Curler, Chairman and Chief Executive Officer. "Several of our operations have reduced workforce levels, and all of our business units are focused on immediate cost reduction. We intend to accelerate sales and profit growth by strengthening our sales efforts in our target markets. Combined with opportunities related to our new packaging products, we expect to improve our competitive position and build positive sales and profit growth momentum going forward."
BUSINESS SEGMENTS
Flexible Packaging
Flexible packaging, which represented about 82 percent of total Company net sales during the quarter, reported net sales of $745.4 million in the third quarter, a decrease of 0.5 percent compared to net sales of $749.1 million for the third quarter of 2006. Currency related sales growth of 3.1 percent was more than offset by lower sales volumes in several markets. Segment operating profit for the third quarter of 2007 was $81.5 million, or 10.9 percent of net sales, which included restructuring and related charges of $0.1 million. Segment operating profit for the third quarter of 2006 was $92.0 million, or 12.3 percent of net sales, which included restructuring and related charges of $5.1 million. Excluding restructuring and related charges, segment operating profit as a percentage of net sales would have been 11.0 percent in the third quarter of 2007 compared to 13.0 percent a year ago. Currency benefits added $1.9 million to operating profit in the third quarter of 2007.
Commenting on the results of this business segment, Curler said, "Softening consumer demand in many food and consumer product markets has negatively impacted our manufacturing cost absorption. In response, we are reducing workforce levels and lowering overall costs in order to match capacity with current market demand and improve our competitive position. We intend to leverage these cost control measures to gain market share.
Our medical device packaging business completed the transition to its new European plant and coating equipment, temporarily increasing costs and reducing production efficiencies in this quarter. We are pleased with customer response to our new facilities and capacity, and we are now well positioned to serve this high growth market and expand into the global pharmaceutical market."
Pressure Sensitive Materials
Third quarter net sales from the pressure sensitive materials business segment were $160.2 million, a 3.9 percent increase from the third quarter of 2006. Currency effects accounted for all of this growth in net sales. Segment operating profit for the third quarter of 2007 was $9.1 million, or 5.7 percent of net sales, compared to the third quarter of 2006 when segment operating profit was $11.4 million or 7.4 percent of net sales. Currency benefits added $0.4 million to operating profit for the third quarter of 2007.
"While our label products sales are growing modestly in the competitive North American market with niche products and quality customer service, sales of our higher margin graphic products weakened sequentially from the second quarter of 2007," said Curler. "Production inefficiencies coupled with higher energy costs in the third quarter have eroded operating margins in our European operations where most of our graphic products are produced. Our business teams are taking action to immediately reduce costs and increase profitability."
Other Costs (Income), Net
For the third quarter of 2007, other costs and income included $7.2 million of financial income compared to $5.5 million for the third quarter of 2006. Bemis recorded a $4.7 million restructuring charge related to employee costs in the third quarter of 2006, which was substantially offset by the $4.4 million favorable resolution of a litigated foreign excise tax liability.
Capital Structure and Cash Flow from Operations
Total debt to total capitalization was 35.9 percent at September 30, 2007, compared to 33.0 percent at December 31, 2006. Total debt as of September 30, 2007 was $916.9 million, an increase of $127.1 million from the balance of $789.8 million at December 31, 2006. The increase in borrowing primarily reflects the impact of an accelerated share repurchase program executed on August 3, 2007 for $117.9 million. Cash flow from operations of $104.5 million in the third quarter of 2007 was used to fund capital expenditures of $44.3 million and dividend payments totaling $21.8 million during the quarter.
4th Quarter 2007 Earnings Outlook
Bemis expects challenging market conditions to continue through the remainder of 2007 and is focused on improving its cost structure to match anticipated fourth quarter volume levels. Multiple raw material cost increases have been announced by suppliers, which will put added pressure on operating profit levels for the next few quarters. In light of these factors, management's current forecast for diluted earnings per share for the fourth quarter of 2007 is in a range of $0.39 to $0.42 per share.
Management continues to expect capital expenditures to be in the $175 to $185 million range for 2007. With several multiyear expansion projects now completed or nearing completion, capital expenditures for 2008 are expected to be lower than 2007 levels.
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. Additional details related to these non-GAAP disclosures are provided in the Form 8-K that the Company filed with the Securities and Exchange Commission today.
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, unanticipated costs associated with workforce adjustments and equipment start-up, changes in customer order patterns, consumer buying trends in target markets, the results of competitive bid processes, a failure in our information technology infrastructure or applications, foreign currency fluctuations 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, 2006.
Conference call webcast
Bemis Company, Inc. will webcast an investor telephone conference regarding its third quarter 2007 financial results this morning at 10 a.m., Eastern Time. Individuals may listen to the call on the Internet at http://www.bemis.com/ under "Investor Relations". Listeners 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.
About Bemis Company, Inc.
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 2006 net sales of $3.6 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 15,700 individuals in 55 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 Nine Months Ended
September 30, September 30,
-------------------------------------------
2007 2006 2007 2006
-------------------------------------------
Net sales $905,659 $903,332 $2,736,609 $2,738,766
Costs and expenses:
Cost of products sold 744,747 729,262 2,221,633 2,211,085
Selling, general and
administrative expenses 84,041 81,191 256,010 249,746
Research and development 6,501 6,088 19,201 18,879
Interest expense 13,105 11,653 38,248 37,528
Other costs (income),
net (8,608) (4,428) (22,516) (1,710)
Minority interest in net
income 1,134 985 2,812 2,447
-------------------------------------------
Income before income taxes 64,739 78,581 221,221 220,791
Provision for income taxes 23,700 30,600 82,400 86,100
-------------------------------------------
Net income $ 41,039 $ 47,981 $ 138,821 $ 134,691
===========================================
Basic earnings per share
of common stock 0.40 $ .46 $ 1.34 $ 1.28
===========================================
Diluted earnings per share
of common stock 0.40 $ .45 $ 1.32 $ 1.26
===========================================
Cash dividends paid 0.21 $ .19 $ .63 $ .57
===========================================
Weighted average common
shares outstanding 101,945 104,836 103,825 104,874
===========================================
Weighted average common
shares and common stock
equivalents outstanding 102,935 106,688 105,007 106,697
======================================================================
BEMIS COMPANY, INC. AND SUBSIDIARIES
----------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
----------------------------------------------------------------------
(dollars in thousands)
(unaudited)
----------------------------------------------------------------------
September 30, December 31,
ASSETS 2007 2006
----------------------------------------------------------------------
Cash and cash equivalents $ 165,481 $ 112,160
Accounts receivable, net 470,556 448,382
Inventories, net 479,783 467,853
Prepaid expenses 60,497 65,317
--------------------------
Total current assets 1,176,317 1,093,712
--------------------------
Property and equipment, net 1,239,212 1,175,959
Goodwill 634,620 603,691
Other intangible assets, net 104,052 102,123
Deferred charges and other assets 45,243 63,524
--------------------------
Total 783,915 769,338
--------------------------
TOTAL ASSETS $3,199,444 $3,039,009
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------
Current portion of long-term debt $ 5,499 $ 16,345
Short-term borrowings 69,280 51,232
Accounts payable 381,526 383,351
Accrued salaries and wages 77,441 94,220
Accrued income and other taxes 10,308 10,307
--------------------------
Total current liabilities 544,054 555,455
Long-term debt, less current portion 842,083 722,211
Deferred taxes 139,426 134,168
Deferred credits and other liabilities 141,669 125,974
--------------------------
Total liabilities 1,667,232 1,537,808
--------------------------
Minority interest 36,774 29,185
Stockholders' equity:
Common stock issued (116,941,126 and
116,114,347 shares) 11,694 11,611
Capital in excess of par value 322,851 317,177
Retained income 1,503,573 1,431,747
Other comprehensive income (loss) 132,003 29,098
Treasury common stock (16,422,771 and
11,272,771 shares) (474,683) (317,617)
--------------------------
Total stockholders' equity 1,495,438 1,472,016
--------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,199,444 $3,039,009
======================================================================
BEMIS COMPANY, INC. AND SUBSIDIARIES
----------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------------------------------
(in thousands)
(unaudited)
----------------------------------------------------------------------
Nine Months Ended
September 30,
---------------------
2007 2006
---------------------
Cash flows from operating activities
------------------------------------------------
Net income $ 138,821 $ 134,691
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 119,260 118,075
Minority interest in net income 2,812 2,447
Excess tax benefit from share-based payment
arrangements (5,769) (864)
Stock award compensation 12,490 8,368
Deferred income taxes 10,005 (12,525)
Income of unconsolidated affiliated company (787) 114
Loss (gain) on sales of property and
equipment (132) 912
Non-cash restructuring related activities 108 11,031
Changes in working capital, net of effects of
acquisitions (17,415) 5,809
Net change in deferred charges and credits 33,114 20,457
---------------------
Net cash provided by operating activities 292,507 288,515
---------------------
Cash flows from investing activities
------------------------------------------------
Additions to property and equipment (139,741) (114,524)
Business acquisitions and adjustments, net of
cash acquired (97) (10,800)
Proceeds from sales of property and equipment 7,650 748
---------------------
Net cash used in investing activities (132,188) (124,576)
---------------------
Cash flows from financing activities
------------------------------------------------
Repayment of long-term debt (18,394) (47,335)
Net borrowing of commercial paper 132,800 (32,704)
Net borrowing of short-term debt (2,276) 9,730
Cash dividends paid to stockholders (67,162) (61,612)
Common stock purchased for the treasury (157,066) (17,803)
Excess tax benefit from share-based payment
arrangements 5,769 864
Stock incentive programs and related
withholdings (14,745) 51
---------------------
Net cash provided (used) by financing activities (121,074) (148,809)
---------------------
Effect of exchange rates on cash and cash
equivalents 14,076 (828)
---------------------
Net (decrease) increase in cash and cash
equivalents 53,321 14,302
Cash and cash equivalents balance at beginning
of year 112,160 91,125
---------------------
Cash and cash equivalents balance at end of
period $ 165,481 $ 105,427
======================================================================
BEMIS COMPANY, INC. AND SUBSIDIARIES
----------------------------------------------------------------------
RECONCILIATION OF NON-GAAP DATA
----------------------------------------------------------------------
(in millions, except per share amounts)
(unaudited)
----------------------------------------------------------------------
Reconciliation of GAAP to Non-
GAAP Three Months Ended Nine Months Ended
Operating Profit and Operating September 30, September 30,
Profit as a
--------------------------------------
Percentage of Net Sales by
Segment 2007 2006 2007 2006
----------------------------------------------------------------------
Flexible Packaging
Net Sales $745.4 $749.1 $2,247.0 $2,256.8
Operating Profit as reported $ 81.5 $ 92.0 $ 263.3 $ 251.5
Non-GAAP adjustments:
Restructuring and related
charges (income) $ 0.1 $ 5.1 $ (0.3) $ 24.8
--------------------------------------
Operating Profit as adjusted $ 81.6 $ 97.1 $ 263.0 $ 276.3
======================================
Operating Profit as a
percentage of Net Sales
As Reported 10.9% 12.3% 11.7% 11.1%
As Adjusted 11.0% 13.0% 11.7% 12.2%
Pressure Sensitive Materials
Net Sales $160.2 $154.2 $ 489.7 $ 481.9
Operating Profit as reported $ 9.1 $ 11.4 $ 33.5 $ 41.0
Non-GAAP adjustments:
Restructuring and related
charges (income) $ - $ 0.6 $ - $ 0.9
--------------------------------------
Operating Profit as adjusted $ 9.1 $ 12.0 $ 33.5 $ 41.9
======================================
Operating Profit as a
percentage of Net Sales
As Reported 5.7% 7.4% 6.8% 8.5%
As Adjusted 5.7% 7.8% 6.8% 8.7%
Reconciliation of GAAP to Non-
GAAP Earnings per Share
Diluted earnings per share as
reported $0.399 $0.450 $ 1.322 $ 1.262
Non-GAAP adjustments per
share, net of taxes:
Restructuring and related
charges (income) $ - $0.031 $ - $ 0.146
Diluted earnings per share as
adjusted $0.399 $0.481 $ 1.322 $ 1.408
----------------------------------------------------------------------
BEMIS COMPANY, INC. AND SUBSIDIARIES
----------------------------------------------------------------------
OPERATING PROFIT AND PRETAX PROFIT
----------------------------------------------------------------------
(in millions)
(unaudited)
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------
2007 2006 2007 2006
------------------------------------
Flexible Packaging operating
profit $ 81.5 $ 92.0 $263.3 $251.5
Pressure Sensitive Materials
operating profit $ 9.1 $ 11.4 $ 33.5 $ 41.0
General Corporate Expenses $(11.7) $(12.2) $(34.5) $(31.7)
Interest Expense $(13.1) $(11.6) $(38.3) $(37.5)
Minority Interest in Net Income $ (1.1) $ (1.0) $ (2.8) $ (2.5)
------------------------------------
Income before Income Taxes $ 64.7 $ 78.6 $221.2 $220.8
====================================
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Bemis Company, Inc. News
- [New] Bemis Completes Acquisition of Alcan Packaging Food Americas
- [New] Bemis Announces 2010 Earnings per Share Guidance of $1.95 To $2.10
- [New] Bemis Receives Regulatory Approval for the Alcan Packaging Food Americas Acquisition
- [New] Bemis Provides Update on Regulatory Review of the Alcan Packaging Food Americas Acquisition
- Bemis Company Elects Fliss Vice President of Human Resources
- Bemis Announces 27th Consecutive Annual Cash Dividend Increase and Approves CFO Succession Plan
- Bemis Company Reports 2009 Fourth Quarter and Year End Results
- Bemis Provides Update On Status Of Pending Alcan Packaging Food Americas Acquisition
- Bemis Company Declares Regular Quarterly Dividend
- Bemis Company Reports 2009 Third Quarter Results
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