Bemis Company Reports 2012 First Quarter Results
Source: Bemis Company Inc.
NEENAH, WISCONSIN, April 26, 2012 – Bemis Company, Inc. (NYSE:BMS) today reported quarterly diluted earnings of $0.42 per share for the first quarter ended March 31, 2012. Diluted earnings per share would have been $0.49 for the first quarter of 2012, excluding the effect of facility consolidation and acquisition-related integration charges detailed in the attached schedule, “Reconciliation of Non-GAAP Data.”
Highlights of the first quarter 2012:
- Net sales totaled $1.3 billion.
- Gross margin as a percentage of net sales increased to 17.7 percent, the highest quarterly rate since 2010.
- Adjusted diluted earnings was $0.49 per share, an increase of 4.3 percent from the first quarter of 2011 and at the upper end of management’s guidance of $0.43 to $0.49 per share.
- Facility consolidation charges totaled $8.3 million.
- Cash flow generated from operating activities totaled $48.8 million compared to a use of cash during the first quarter of 2011.
- Bemis’ quarterly dividend increased by 4.2 percent, from $0.24 per share to $0.25 per share.
- Management established earnings guidance for the second quarter of 2012 in the range of $0.51 to $0.57 per share, and confirmed total year 2012 earnings guidance in the range of $2.05 to $2.20 per share.
“I am pleased to report that operating performance is improving, cash flow is healthy, and our facility consolidation activities are progressing as planned,” said Henry Theisen, Bemis Company’s President and Chief Executive Officer. “Unit sales volumes continue to be soft, reflecting weaker consumer demand in light of current economic conditions. Our full year guidance assumes volume growth during the second half of 2012.”
Total Bemis net sales for the first quarter of 2012 was $1.3 billion, a 1.5 percent decrease from the same period of 2011, reflecting the impact of lower unit volume in the flexible packaging business segment. Acquisitions completed during the second half of 2011 increased first quarter net sales by an estimated 1.6 percent. The impact of currency translation reduced net sales by 1.6 percent.
Diluted earnings per share for the first quarter of 2012 was $0.42 compared to $0.47 per share reported in the same quarter of 2011. Excluding the effect of acquisition-related integration costs and facility consolidation costs, as detailed in the attached schedule, “Reconciliation of Non-GAAP Data,” diluted earnings per share, as adjusted, would have been $0.49 for the first quarter of 2012.
During the fourth quarter of 2011, Bemis initiated a facility consolidation program to improve efficiencies and reduce fixed costs. As a part of this program, Bemis announced the planned closure of five facilities and the intent to move most of the production from these facilities to other Bemis operations. These facility consolidation activities are expected to save approximately $40 million in annualized costs beginning in 2013.
Highlights of the facility consolidation program:
- Total facility consolidation program cost is expected to be $83 million
- $38.4 million expensed in 2011 ($26.3 million of employee costs; $12.1 million of fixed asset-related expenses)
- $8.3 million expensed in the first quarter of 2012 ($1.2 million of employee costs; $7.1 million of fixed asset-related expenses)
- Most of the remaining charges are expected to occur during 2012
- Total cash paid for the program is expected to be approximately $52 million
- $3.3 million paid in the fourth quarter of 2011
- $8.0 million paid in the first quarter of 2012
- $24 million expected to be paid during the remainder of 2012
- Remaining cash expenditures are expected to be paid in 2013
FLEXIBLE PACKAGING BUSINESS SEGMENT
Net sales for Bemis’ flexible packaging business segment decreased 1.7 percent to $1.2 billion compared to the first quarter of 2011. The impact of currency translation reduced net sales by 1.5 percent compared to the previous year. Bemis estimates that acquisitions completed during the second half of 2011 increased net sales by 1.8 percent. The remaining reduction in sales principally represents the negative impact of lower unit sales volumes. Segment operating profit for the first quarter of 2012 was $107.9 million, or 9.3 percent of net sales, compared to $116.3 million, or 9.9 percent of net sales, for the same period of 2011. During the first quarter of 2012, acquisition-related integration costs and facility consolidation costs negatively impacted results. Segment operating profit, as adjusted, for the first quarter of 2012 would have been $117.9 million, or 10.2 percent of net sales. (See attached schedule: “Reconciliation of Non-GAAP Data.”) The effect of currency translation decreased operating profit in the first quarter of 2012 by $1.3 million compared to the same quarter of 2011. Performance for the quarter reflects the benefits of cost reductions partially offset by the negative impact of lower unit sales volumes.
Commenting on the flexible packaging segment results, Theisen said, “Performance in this segment reflects the positive impact of a manageable raw material cost environment and diligent cost management during the first quarter. While we benefit from our exposure to a diverse range of packaging applications, some of which continue to demonstrate volume growth, overall unit sales volume has declined. These volume levels are consistent with the experience of our customers and reflect the negative impact of weak economic conditions and inflation on consumer demand. Raw material costs increased during the first quarter, which will put some pressure on second quarter results. We have been modifying customer pricing agreement terms to accelerate our ability to adjust selling prices on a more timely basis in 2012 and reduce the impact of raw material cost changes. We expect volume to continue to be weak through the first half of this year and to strengthen during the second half of 2012.”
PRESSURE SENSITIVE MATERIALS BUSINESS SEGMENT
Pressure sensitive materials net sales for the first quarter of 2012 were $145.3 million compared to $145.0 million in the first quarter of 2011. The increase in net sales reflects the impact of increased sales of higher value products, partially offset by a negative impact from currency translation of 2.1 percent. For the first quarter of 2012, operating profit was $9.7 million, or 6.7 percent of net sales, compared to operating profit for the first quarter of 2011 of $9.9 million, or 6.8 percent of net sales. The impact of currency translation was insignificant to quarterly operating profit.
OTHER OPERATING (INCOME) EXPENSE, NET
For the first quarter of 2012, other operating income and expense included $5.2 million of fiscal incentive income, compared to $5.5 million for the first quarter of 2011. Fiscal incentives are associated with net sales and manufacturing activities in certain South American operations and are included in flexible packaging segment operating profit.
CAPITAL STRUCTURE AND CASH FLOW
Net debt (defined as total debt less cash) to adjusted EBITDA (defined as, for the last twelve month period, adjusted operating income plus depreciation and amortization) was 2.3 times at March 31, 2012 and December 31, 2011. Cash flow from operations for the first quarter of 2012 of $48.8 million supported capital expenditures of $23.7 million and common stock dividends of $26.1 million. Management intends to direct excess cash flow toward debt reduction in 2012 in order to reduce the ratio of net debt to adjusted EBITDA toward a target of approximately 2.0 times.
2012 EARNINGS OUTLOOK
Commenting on the outlook for the rest of the year, Theisen said, “This year, we are focused on initiatives that we expect to improve our operating performance and returns on invested capital. While we generally experience seasonally stronger volumes during the second quarter of the year, we expect unit sales volumes during the first half of 2012 to continue to be sluggish compared to 2011. Our full year guidance anticipates improved volumes during the second half of the year as our customers’ initiatives gain momentum.”
Management expects adjusted diluted earnings per share for the second quarter of 2012 to be in the range of $0.51 to $0.57. Management expects adjusted diluted earnings per share for the full year 2012 to be in the range of $2.05 to $2.20 per share. Capital expenditures are expected to be approximately $175 million for the full year 2012.
PRESENTATION OF NON-GAAP INFORMATION
This press release refers to non-GAAP financial measures: adjusted operating profit, adjusted operating profit as a percentage of net sales, net debt to adjusted EBITDA, and adjusted diluted earnings per share. These non-GAAP financial measures adjust for factors that are unusual or unpredictable. These measures exclude the impact of certain amounts related to facility consolidation activities including employee-related costs, lease termination payments, accelerated depreciation, and the write-down of equipment. These measures also exclude acquisition-related expenses including transaction expenses, due diligence expenses, professional and legal fees, purchase accounting adjustments for inventory and order backlog, integration expenses, the cash portion of any acquisition earn-out payments recorded as compensation expenses, changes in fair value of deferred acquisition payments, and goodwill and intangible asset impairment charges. This adjusted information should not be construed as an alternative to results determined in accordance with accounting principles generally accepted in the United States of America (GAAP). It is provided solely to assist in an investor’s understanding of the impact of these items on the comparability of the Company’s on-going business operations.
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, our ability to adjust selling prices, consumer buying patterns, changes in customer order patterns, the results of competitive bid processes, unexpected costs associated with plant closures, a failure in our information technology infrastructure or applications, foreign currency fluctuations, changes in working capital requirements, changes in government regulations, and the availability and related cost of financing from banks and capital markets. 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, 2011.
INVESTOR CONFERENCE CALL
Bemis Company, Inc. will webcast an investor telephone conference regarding its first quarter 2012 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.
ABOUT BEMIS COMPANY, INC.
Bemis Company, Inc. is a major supplier of flexible packaging and pressure sensitive materials used by leading food, consumer products, healthcare, and other companies worldwide. Founded in 1858, the Company is included in the S&P 500 index of stocks and reported 2011 net sales of $5.3 billion. The Company’s flexible packaging business has a strong technical base in polymer chemistry, film extrusion, coating and laminating, printing, and converting. Headquartered in Neenah, Wisconsin, Bemis employs approximately 20,000 individuals worldwide. More information about the Company is available at our website, www.bemis.com.
For additional information please contact:
Melanie E. R. Miller
Vice President, Investor Relations
Public Relations Specialist