Bemis 10-Q 1999 Q3 Quarterly report

EXHIBIT 19—FINANCIAL STATEMENTS FURNISHED TO SECURITY HOLDERS

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

(in thousands except per share amounts)

	Three Months Ended September 30				Nine Months Ended September 30
	1999		1998		1999		1998
Net sales	$	492,218	$	465,497	$	1,424,084	$	1,387,583
Costs and expenses:
Cost of products sold		386,256		365,808		1,113,361		1,098,087
Selling, general, and administrative expenses		46,317		45,055		145,215		138,053
Research and development		2,661		2,994		8,817		9,015
Interest expense		5,318		5,467		15,660		16,334
Other (income) costs, net		778		535		6,085		(407	)
Minority interest in net income		936		797		2,865		2,811
Income before income taxes		49,952		44,841		132,081		123,690
Provision for income taxes		18,800		17,600		50,600		48,100
Net income	$	31,152	$	27,241	$	81,481	$	75,590
Basic earnings per share of common stock	$	.60	$	.51	$	1.56	$	1.42
Diluted earnings per share of common stock	$	.59	$	.51	$	1.55	$	1.41
Cash dividends paid per share of common stock	$	.23	$	.22	$	.69	$	.66
Average common shares and common stock equivalents outstanding		52,778		53,303		52,654		53,554

EXHIBIT 19—FINANCIAL STATEMENTS FURNISHED TO SECURITY HOLDERS

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(in thousands of dollars)

	Sep 30 1999			Dec 31 1998
ASSETS
Cash	$	24,996		$	23,738
Accounts receivable -net		256,077			246,676
Inventories		279,447			241,585
Prepaid expenses and deferred charges		36,418			34,912
Total current assets		596,938			546,911
Property and equipment, net		758,269			740,101
Excess of cost of investments in subsidiaries over net assets acquired		153,173			160,819
Other assets		23,737			34,195
Total		176,910			195,014
TOTAL ASSETS	$	1,532,117		$	1,482,026
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt	$	2,778		$	2,946
Short-term borrowings		4,215			3,553
Accounts payable		208,564			193,088
Accrued salaries and wages		29,797			31,629
Accrued income and other taxes		20,687			14,397
Total current liabilities		266,041			245,613
Long-term debt, less current portion		366,807			371,363
Deferred taxes		86,485			84,679
Other liabilities and deferred credits		60,868			54,655
Total liabilities		780,201			756,310
Minority interest		38,770			37,862
Stockholders' equity:
Common stock (59,098,203 and 59,056,047 shares)		5,910			5,906
Capital in excess of par value		181,957			181,908
Retained income		753,748			708,362
Other comprehensive income (loss)		(26,220	)		(6,116	)
Common stock held in treasury (6,788,088 and 6,786,889 shares)		(202,249	)		(202,206	)
Total stockholders' equity		713,146			687,854
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,532,117		$	1,482,026

EXHIBIT 19—FINANCIAL STATEMENTS FURNISHED TO SECURITY HOLDERS

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands of dollars)

	Nine Months Ended September 30
	1999			1998
Cash flows from operating activities
Net income	$	81,481		$	75,590
Non-cash items:
Depreciation and amortization		75,282			68,290
Minority interest in net income		2,865			2,811
Deferred income taxes, non-current portion		2,123			(59	)
Undistributed earnings of affiliated companies		6,981			500
(Gain) loss on sale of property and equipment		136			(107	)
Cash provided by operations		168,868			147,025
Changes in working capital, net of effects of acquisitions and dispositions		(37,595	)		6,353
Net change in deferred charges and credits		6,539			(957	)
Net cash provided by operating activities		137,812			152,421
Cash flows from investing activities
Additions to property and equipment		(94,428	)		(95,456	)
Business acquisition		(1,424	)		(46,319	)
Proceeds from sale of property and equipment		1,006			1,868
Other		49
Net cash used in investing activities		(94,797	)		(139,907	)
Cash flows from financing activities
Change in long-term debt excluding debt assumed in business acquisitions		(4,498	)		62,656
Change in short-term debt		661			(305	)
Cash dividends paid		(36,095	)		(35,180	)
Subsidiary dividends to minority stockholders					(1,835	)
Common stock purchased for the treasury		(43	)		(35,693	)
Stock incentive programs and related tax effects		53			7,388
Net cash used by financing activities		(39,922	)		(2,969	)
Effect of exchange rates on cash		(1,835	)		189
Net increase in cash	$	1,258		$	9,734

EXHIBIT 19—FINANCIAL STATEMENTS FURNISHED TO SECURITY HOLDERS

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

Periods prior to 1998 have been revised to reflect provisions of SFAS No. 130

(in thousands of dollars)	Common Stock		Capital In Excess Of Par Value		Retained Income			Other Comprehensive Income (Loss)			Common Stock Held In Treasury			Total Stockholder's Equity
Balance at December 31, 1995	$	5,781	$	147,119	$	529,720		$	8,590		($	146,849	)	$	544,361
Net income for 1996						103,037									103,037
Translation adjustment for 1996									(3,917	)					(3,917	)
Pension liability adjustment, net of $948 tax benefit									1,546						1,546
Total comprehensive income															100,666
Cash dividends paid on common stock, $.72 per share						(37,830	)								(37,830	)
Stock incentive programs and related tax effects		2		310											312
Common stock transactions related to an acquisition of a subsidiary company		7		2,052											2,059
Purchase of 292,000 shares of common stock												(8,962	)		(8,962	)
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 first nine months of 1999						81,481									81,481
Translation adjustment for first nine months of 1999									(20,104	)					(20,104	)
Total comprehensive income															61,377
Cash dividends paid on common stock, $.69 per share						(36,095	)								(36,095	)
Stock incentive programs and related tax effects		4		49											53
Purchase of 1,199 shares of common stock												(43	)		(43	)
Balance at September 30, 1999	$	5,910	$	181,957	$	753,748		($	26,220	)	($	202,249	)	$	713,146

EXHIBIT 19—FINANCIAL STATEMENTS FURNISHED TO SECURITY HOLDERS

BEMIS COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Inventory Accounting Change

    Inventories are valued at the lower of cost, using the first-in, first-out (FIFO) method, or market. During the second quarter of 1999, the Company changed its method of determining the cost of inventories from the last-in, first-out (LIFO) method to the FIFO valuation method. Management believes the change from LIFO to FIFO inventory valuation method benefits the Company by providing 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, which are available by reference to the Company's August 1999, Form 8-K filing with the United States Securities and Exchange Commission. All financial statements and data included in this September 30, 1999, Form 10-Q filing, reflect the impact of this accounting principle change.

Note 2. Basis of Presentation

    The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position and results of operation. It is management's opinion, however, that all material adjustments (consisting of normal recurring accruals) have been made which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.

    For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 1998.

Note 3. Taxes Based On Income

    The Company's 1999 effective tax rate of 38% differs from the federal statutory rate of 35% primarily due to state and local income taxes.

Note 4. Segments of Business

    The Registrant'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. The Registrant 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. A summary of the Registrant's business activities reported by its two business segments follows:

	For Nine Months Ended September 30,
Business Segments (in millions of dollars)
	1999			1998
Net Sales to Unaffiliated Customers:
Flexible Packaging	$	1,066.9		$	1,031.8
Pressure Sensitive Materials		357.4			356.1
Intersegment Sales:
Flexible Packaging		(0.2	)		(0.2	)
Pressure Sensitive Materials		(0.0	)		(0.1	)
Total	$	1,424.1		$	1,387.6
Operating Profit and Pretax Profit:
Flexible Packaging	$	133.3		$	116.6
Pressure Sensitive Materials		31.6			37.5
Total operating profit		164.9			154.1
General corporate expenses		(14.2	)		(11.3	)
Interest expense		(15.7	)		(16.3	)
Minority interest in net income		(2.9	)		(2.8	)
Income before income taxes	$	132.1		$	123.7
Identifiable Assets:
Flexible Packaging	$	1,169.7		$	1,111.6
Pressure Sensitive Materials		317.3			295.2
Total identifiable assets		1,487.0			1,406.8
Corporate assets		45.1			49.3
Total	$	1,532.1		$	1,456.1

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EXHIBIT 19—FINANCIAL STATEMENTS FURNISHED TO SECURITY HOLDERS
BEMIS COMPANY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS