Bemis Company Reports 2008 Second Quarter Results
Print this articleSource: Melanie E. R. Miller: Vice President and Treasurer
Date: 7/29/2008
NEENAH, WISCONSIN, July 29, 2008 - Bemis Company, Inc. (NYSE-BMS) today reported quarterly diluted earnings of $0.46 per share for the second quarter ended June 30, 2008, at the upper end of management's guidance. This is compared to $0.47 per share for the same quarter of 2007. Net sales increased to a record $980.0 million for the second quarter of 2008, a 6.3 percent increase from $921.8 million for the same period of 2007. Currency benefits contributed 5.3 percent to net sales for the quarter.
"I am pleased to report that Bemis is regaining momentum in key markets where we have been investing in technology and processes," said Henry Theisen, Bemis Company's President and Chief Executive Officer. "Rapidly rising raw material costs and global economic uncertainty have created a challenging operating environment for our industry. Our business teams are aggressively responding to volatile raw material cost increases while maintaining their dedication to cost management and customer service initiatives. Prudent management of purchasing, pricing, and customer relationships is key to our success during this period. While I am confident in our ability to meet these challenges, we are adjusting our total year earnings per share guidance to reflect this uncertain environment."
BUSINESS SEGMENTS
Flexible Packaging
Flexible packaging, which represented about 83 percent of total Bemis net sales during the quarter, reported net sales of $813.9 million in the second quarter, a 7.3 percent increase compared to net sales of $758.3 million for the second quarter of 2007. Currency related sales growth totaled 4.9 percent. Segment operating profit for the second quarter of 2008 was $88.9 million, or 10.9 percent of net sales. Segment operating profit for the second quarter of 2007 was $93.5 million, or 12.3 percent of net sales. Currency benefits added $2.9 million to operating profit in the second quarter of 2008. Lower operating profit in 2008 compared to the previous year reflects the impact of the time lag that occurs before higher raw material costs are reflected in increased selling prices.
Commenting on the flexible packaging segment results, Theisen said, "Net sales growth in this business segment was driven by a combination of volume growth in some markets and improved sales mix in other markets. While this challenging economic climate continues to create volatile business conditions, we are pleased with the strength of our business model and the benefits of our end market diversity. Solid sales growth in the European region, where we have introduced several new products, is providing positive profit momentum that we expect to be an important contributor going forward. Lower operating margins reflect the impact of higher raw material costs and inflationary pressures. In response, we are aggressively adjusting selling prices and maintaining a keen focus on cost management and process improvement. Prompt response to volatile market conditions will be vital to meeting our flexible packaging business goals for 2008."
Pressure Sensitive Materials
Net sales from the pressure sensitive materials business segment for the second quarter of 2008 were $166.1 million, a 1.6 percent increase from net sales of $163.5 million in the second quarter of 2007. Currency related sales growth totaled 7.2 percent. Segment operating profit for the second quarter of 2008 was $9.1 million, or 5.5 percent of net sales, compared to the second quarter of 2007 when segment operating profit was $10.2 million, or 6.2 percent of net sales. Currency benefits added $1.2 million to operating profit in the second quarter of 2008.
"Our North American label product business is delivering relatively stable results," said Theisen. "We continue to experience lower sales volumes for our higher margin technical products sold into markets that are impacted by weakness in the housing and automotive sectors. Our global graphic products are also experiencing generally weak economic conditions and a negative change in sales mix. Our diligent cost management and attention to excellence in customer service are expected to improve performance in this business segment once the economy begins to strengthen."
Other Costs (Income), Net
For the second quarter of 2008, other costs and income included $8.8 million of financial income compared to $7.6 million for the second quarter of 2007.
Capital Structure
Total debt to total capitalization was 32.0 percent at June 30, 2008, compared to 32.9 percent at December 31, 2007. Total debt as of June 30, 2008 was $863.0 million, an increase of $19.7 million from the balance of $843.3 million at December 31, 2007. Cash flow from operations was $72.4 million in the second quarter of 2008. Increased working capital levels were driven by rising raw material costs and had a negative effect on cash flow from operations during the second quarter.
2008 Earnings Outlook
Rapidly increasing raw material costs and unpredictable consumer reaction to rising commodity costs will continue to increase pressure on operating profit during the second half of the year. In spite of this challenging cost environment, management expects third quarter 2008 diluted earnings per share to be in a range of $0.42 to $0.46, reflecting the ongoing benefits of successful cost management and productivity improvement programs. Management has adjusted total year 2008 guidance to a range of $1.75 to $1.83 per share in light of the current volatile raw material environment and uncertain economic conditions. The capital expenditures forecast continues to be in the $125 million range for 2008. Commenting on the outlook for the year, Theisen noted that market conditions remain difficult to predict. "Announcements of substantial raw material cost increases during the second quarter have set the stage for a challenging second half of the year. At Bemis, we remain diligent in our focus on strengthening our business model, customer relationships, and technological advantage in the industry. With this solid foundation, we expect to continue to be a dependable supplier to our customers and a valuable investment for our shareholders."
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, consumer buying patterns under certain economic conditions, the impact of weather conditions on consumer demand, changes in customer order patterns, the results of competitive bid processes, a failure in our information technology infrastructure or applications, foreign currency fluctuations, increased working capital requirements, 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, 2007.
Bemis Company, Inc. will webcast an investor telephone conference regarding its second quarter 2008 financial results this morning at 10 a.m., Eastern Time. Individuals may listen to the call on the Internet at 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.
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 2007 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 56 manufacturing facilities in 10 countries around the world. More information about the Company is available at our website, 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
Jun 30, Jun 30,
2008 2007 2008 2007
Net sales $979,959 $921,820 $1,927,241 $1,830,950
Costs and expenses:
Cost of products sold 807,422 744,907 1,591,735 1,476,886
Selling, general and administrative
expenses 88,235 86,493 176,979 171,969
Research and development 6,937 6,475 12,765 12,700
Interest expense 11,105 12,653 20,134 25,143
Other costs (income), net (9,141) (8,723) (18,246) (13,908)
Minority interest in net income 1,488 1,089 2,828 1,678
Income before income taxes 73,913 78,926 141,046 156,482
Provision for income taxes 27,500 29,400 52,300 58,700
Net income $46,413 $49,526 $88,746 $97,782
Basic earnings per share
of common stock 0.47 0.47 $.89 $.93
Diluted earnings per share
of common stock 0.46 0.47 $.88 $.92
Cash dividends paid 0.22 0.21 $.44 $.42
Weighted average common shares
outstanding 99,643 104,511 99,880 104,781
Weighted average common shares and
common stock equivalents outstanding 100,829 105,593 100,874 106,059
106,769
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(dollars in thousands)
(unaudited)
June 30 December 31
ASSETS 2008 2007
Cash and cash equivalents $171,013 $147,409
Accounts receivable, net 518,135 448,200
Inventories, net 526,868 478,727
Prepaid expenses 72,371 62,607
Total current assets 1,288,387 1,136,943
Property and equipment, net 1,262,716 1,248,456
Goodwill 665,133 642,507
Other intangible assets, net 104,996 103,756
Deferred charges and other assets 59,607 59,734
Total 829,736 805,997
TOTAL ASSETS $3,380,839 $3,191,396
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $10,856 $1,758
Short-term borrowings 111,706 66,047
Accounts payable 401,169 384,673
Accrued salaries and wages 74,774 70,248
Accrued income and other taxes 24,431 11,824
Total current liabilities 622,936 534,550
Long-term debt, less current portion 740,454 775,456
Deferred taxes 157,983 155,871
Deferred credits and other liabilities 139,344 124,261
Total liabilities 1,660,717 1,590,138
Minority interest 45,455 38,926
Stockholders' equity:
Common stock issued (117,073,260 and 116,941,126 shares) 11,707 11,694
Capital in excess of par value 336,100 327,387
Retained income 1,567,036 1,523,659
Other comprehensive income (loss) 258,165 171,162
Treasury common stock (17,422,771 and 16,422,771 shares) (498,341) (471,570)
Total stockholders' equity 1,674,667 1,562,332
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,380,839 $3,191,396
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
June 30,
2008 2007
Cash flows from operating activities
Net income $88,746 $97,782
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 83,752 79,126
Minority interest in net income 2,828 1,678
Excess tax benefit from share-based payment arrangements (52) (5,767)
Stock award compensation 8,806 8,003
Deferred income taxes (1,362) 2,615
Income of unconsolidated affiliated company (885) (625)
Loss (gain) on sales of property and equipment 905 (326)
Non-cash restructuring related activities 0 108
Changes in working capital, net of effects of acquisitions (73,094) (38,135)
Net change in deferred charges and credits 18,301 43,525
Net cash provided by operating activities 127,945 187,984
Cash flows from investing activities
Additions to property and equipment (58,615) (95,428)
Business acquisitions and adjustments, net of cash acquired 0 (97)
Proceeds from sales of property and equipment 1,222 7,611
Net cash used in investing activities (57,393) (87,914)
Cash flows from financing activities
Proceeds from issuance of long-term debt 15,773 12,087
Repayment of long-term debt (17,726) (17,890)
Net borrowing of commercial paper 43,750 30,550
Net (repayment) borrowing of short-term debt (26,633) 1,095
Cash dividends paid to stockholders (45,371) (45,725)
Common stock purchased for the treasury (26,771) (39,186)
Excess tax benefit from share-based payment arrangements 52 5,767
Stock incentive programs and related withholdings (1,364) (14,932)
Net cash used in financing activities (58,290) (68,234)
Effect of exchange rates on cash and cash equivalents 11,342 9,320
Net increase in cash and cash equivalents 23,604 41,156
Cash and cash equivalents balance at beginning of year 147,409 112,160
Cash and cash equivalents balance at end of period $171,013 $153,316
BEMIS COMPANY, INC. AND SUBSIDIARIES
OPERATING PROFIT AND PRETAX PROFIT
(in millions)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Flexible Packaging operating profit $88.9 $93.5 $167.5 $181.7
Pressure Sensitive Materials operating profi $9.1 $10.2 $20.9 $24.4
General Corporate Expenses ($11.5) ($11.0) ($24.5) ($22.8)
Interest Expense ($11.1) ($12.7) ($20.1) ($25.1)
Minority Interest in Net Income ($1.5) ($1.1) ($2.8) ($1.7)
Income before Income Taxes $73.9 $78.9 $141.0 $156.5
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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