Bemis 10-Q 2007 Q3 Quarterly report

EXHIBIT 19

FINANCIAL STATEMENTS - UNAUDITED

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

(in thousands, except per share amounts)

	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	$	.40		$	.46		$	1.34		$	1.28
Diluted earnings per share of common stock	$	.40		$	.45		$	1.32		$	1.26
Cash dividends paid per share of common stock	$	.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

See accompanying notes to consolidated financial statements.

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FINANCIAL STATEMENTS – UNAUDITED

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(dollars in thousands)

	September 30,			December 31,
	2007			2006
ASSETS
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	45,244			63,524
Total	783,916			769,338
TOTAL ASSETS	$	3,199,445		$	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	141,670			125,974
Total liabilities	1,667,233			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	132,003			29,098
Common stock held in treasury at cost (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	$	3,199,445		$	3,039,009

See accompanying notes to consolidated financial statements.

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FINANCIAL STATEMENTS - UNAUDITED

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

	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	(5,773		)	(864		)
Share-based compensation	12,490			8,368
Deferred income taxes	10,005			(12,525		)
Loss (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	(17,413		)	5,809
Net change in deferred charges and credits	33,113			20,457
Net cash provided by operating activities	292,504			288,515
Cash flows from investing activities
Additions to property and equipment	(139,742		)	(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	(132,189		)	(124,576		)
Cash flows from financing activities
Repayment of long-term debt	(18,394		)	(47,335		)
Net borrowing (repayment) of commercial paper	132,800			(32,704		)
Net borrowing (repayment) 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	5,773			864
Stock incentive programs and related withholdings	(14,745		)	51
Net cash (used) provided by financing activities	(121,070		)	(148,809		)
Effect of exchange rates on cash and cash equivalents	14,076			(828		)
Net 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

See accompanying notes to consolidated financial statements.

3

FINANCIAL STATEMENTS - UNAUDITED

BEMIS COMPANY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(dollars in thousands, except per share amounts)

									Accumulated
			Capital In						Other			Common			Total
	Common		Excess of			Retained			Comprehensive			Stock Held			Stockholders’
	Stock		Par Value			Earnings			Income (Loss			In Treasury			Equity
Balance at December 31, 2005	$	11,598	$	267,274		$	1,337,590		$	32,706		$	(299,813	)	$	1,349,355
Net income						176,296									176,296
Unrecognized gain on derivative reclassified to earnings, net of tax $(337)									(526		)				(526		)
Translation adjustment									60,850						60,850
Pension liability adjustment, net of tax effect $(15,988)									24,794						24,794
Total comprehensive income															261,414
Adjustment to initially apply FAS No. 158, net of tax $55,076									(88,726		)				(88,726		)
Cash dividends paid on common stock $0.76 per share						(82,139		)							(82,139		)
Stock incentive programs and related tax effects (135,601 shares)	13		2,914												2,927
Impact of adopting FAS No. 123(R)			35,295												35,295
Share-based compensation			11,694												11,694
Purchase of 600,000 shares of common stock												(17,804		)	(17,804		)
Balance at December 31, 2006	11,611		317,177			1,431,747			29,098			(317,617		)	1,472,016
Net income for the first nine months of 2007						138,821									138,821
Unrecognized gain on derivative reclassified to earnings, net of tax $(252)									(395		)				(395		)
Translation adjustment for the first nine months of 2007									98,994						98,994
Pension liability adjustment, net of tax effect $(2,705)									4,306						4,306
Total comprehensive income *															241,726
Adjustment to initially apply FIN 48						167									167
Cash dividends paid on common stock $0.63 per share						(67,162		)							(67,162		)
Stock incentive programs and related withholdings (826,779 shares)	83		(14,745		)										(14,662		)
Excess tax benefit from share-based compensation arrangements			6,908												6,908
Share-based compensation			12,490												12,490
Other			1,021												1,021
Purchase of 5,150,000 shares of common stock												(157,066		)	(157,066		)
Balance at September 30, 2007	$	11,694	$	322,851		$	1,503,573		$	132,003		$	(474,683	)	$	1,495,438

*  Total comprehensive income for the third quarter of 2007 and 2006 was $84,862 and $47,176, respectively, and was $177,825 for the first nine months of 2006.

    See accompanying notes to consolidated financial statements

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FINANCIAL STATEMENTS - UNAUDITED

BEMIS COMPANY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by Bemis Company, Inc. (the Company) in accordance with accounting principles for interim financial information generally accepted in the United States 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 operations. 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, 2006.

Note 2 – New Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (FAS) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115 (FAS No. 159),  which permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The standard is effective beginning after December 31, 2007. The Company is currently evaluating the impact of adopting FAS No. 159 on its consolidated financial position and results of operations.

In September 2006, the FASB issued FAS No. 157, Fair Value Measurements (FAS No. 157), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. FAS No. 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value to any new circumstances, and is effective beginning after December 31, 2007. The Company is currently evaluating the impact of adopting FAS No. 157 on its consolidated financial position and results of operations.

Note 3 – Accounting for Stock-Based Compensation

Options were granted at prices equal to fair market value on the date of the grant and are exercisable, upon vesting, over varying periods up to ten years from the date of grant. Options for directors vest immediately, while options for Company employees generally vest over three years (one-third per year). The following table summarizes all stock option plan activity from December 31, 2006 to September 30, 2007:

	Aggregate			Per Share			Weighted-Average
	Intrinsic		Number of	Option Price			Exercise Price
	Value		Shares	Range			Per Share
Outstanding at December 31, 2006	$	28,269,000	2,011,178	$15.86	-	$26.95	$	19.92
Exercised			337,096	$18.81	-	$22.52	$	22.10
Outstanding at September 30, 2007	$	16,112,000	1,674,082	$15.86	-	$26.95	$	19.49
Exercisable at September 30, 2007	$	16,112,000	1,674,082	$15.86	-	$26.95	$	19.49

The following table summarizes information about outstanding and exercisable stock options at September 30, 2007:

	Options Outstanding				Options Exercisable
	Number	Weighted-Average			Number	Weighted-
Range of	Outstanding	Remaining	Weighted-Average		Exercisable	Average
Exercise Prices	at 9/30/07	Contractual Life	Exercise Price		at 9/30/07	Exercise Price
$15.86 - $18.81	1,259,612	2.3 years	$	17.77	1,259,612	$	17.77
$22.04 - $26.95	414,470	4.9 years	$	24.70	414,470	$	24.70
	1,674,082	2.9 years	$	19.49	1,674,082	$	19.49

Stock options have not been granted since early 2003. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:  dividend yield 2.3%, expected volatility 29.2%, risk-free interest rate 6.75%, and expected life 10.0 years.

In 1994, 2001, and in 2006, the Company adopted Stock Incentive Plans for certain key employees. The 1994, 2001, and 2007 (adopted in 2006) Plans provide for the issuance of up to 4,000,000, 5,000,000, and 6,000,000 shares of common stock, respectively. Each Plan expires 10 years after its inception, at which point no further stock options or restricted stock units may be granted. Since 1994, 3,932,910, 3,677,162, and 1,252,800 grants of either stock options or restricted stock units have been made under the 1994, 2001, and 2007 Plans, respectively. Distribution of the restricted stock units is made in the form of shares of the Company’s common stock on a one for one basis. Distribution of the shares will normally be made not less than three years, nor more than six years, from the date of the restricted stock unit grant. All restricted stock units granted under the plan are subject to restrictions as to continuous employment, except in the case of death,

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permanent disability, or retirement. In addition, cash payments are made during the grant period on outstanding restricted stock units equal to the dividend on Bemis common stock. The cost of the award is based on the fair market value of the stock on the date of grant. The cost of the awards is charged to income over the requisite service period.

As of September 30, 2007, the unrecorded compensation cost for restricted stock units is $57,677,000 and will be recognized over the remaining vesting period for each grant which ranges between December 31, 2007 and December 31, 2012. The remaining weighted-average life of all restricted stock units outstanding is 3.25 years.

The following table summarizes all restricted stock unit activity from December 31, 2006 to September 30, 2007:

			Number of
	Aggregate		Restricted
	Intrinsic Value		Stock Units
Outstanding units at December 31, 2006			3,200,437
Restricted stock units granted			1,292,300
Restricted stock units paid			(1,146,821	)
Restricted stock units canceled			(39,500	)
Outstanding units at September 30, 2007	$	96,250,000	3,306,416

Note 4 – Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill attributable to each reportable operating segment follow:

	Flexible Packaging		Pressure Sensitive
(in thousands)	Segment		Materials Segment			Total
Reported balance at December 31, 2005	$	530,711	$	50,708		$	581,419
Business acquisition and purchase price adjustments	6,497		2,168			8,665
Currency translation adjustment	13,540		67			13,607
Reported balance at December 31, 2006	$	550,748	$	52,943		$	603,691
Currency translation adjustment	30,957		(28		)	30,929
Reported balance at September 30, 2007	$	581,705	$	52,915		$	634,620

The components of amortized intangible assets follow:

	September 30, 2007					December 31, 2006
	Gross Carrying		Accumulated			Gross Carrying		Accumulated
Intangible Assets (in thousands)	Amount		Amortization			Amount		Amortization
Contract based	$	15,447	$	(8,893	)	$	15,447	$	(8,055	)
Technology based	52,753		(18,727		)	52,609		(16,548		)
Marketing related	24,126		(7,226		)	21,405		(5,441		)
Customer based	65,952		(19,380		)	55,933		(13,227		)
Reported balance	$	158,278	$	(54,226	)	$	145,394	$	(43,271	)

Amortization expense for intangible assets during the first nine months of 2007 was $7.1 million. Estimated amortization expense for the remainder of 2007 is $2.0 million; for 2008 through 2010 is $9.0 million each year; $8.7 million for 2011; and $7.4 million for 2012.

Note 5 – Inventories

The Company’s inventories are valued at the lower of cost, determined by the first-in, first-out (FIFO) method, or market. Inventories are summarized as follows:

	September 30,			December 31,
(in thousands)	2007			2006
Raw materials and supplies	$	163,130		$	169,914
Work in process and finished goods	333,743			316,482
Total inventories, gross	496,873			486,396
Less inventory write-downs	(17,090		)	(18,543		)
Total inventories, net	$	479,783		$	467,853

Note 6 – Restructuring of  Operations

In January 2006, the Company committed to a plan to close five flexible packaging plants:  Peoria, Illinois; Denmark and Neenah, Wisconsin; Georgetown, Ontario, Canada; and Epernon, France. The closure of these plants, together with related support staff and capacity reductions within the flexible packaging business segment reduced fixed costs and improved capacity utilization elsewhere in the Company. During 2006, the Company incurred charges of $11.6 million for employee severance, $12.3 million for accelerated depreciation, and $5.1 million for other related costs. During the third quarter of 2007, the Company incurred nominal charges for employee severance and other related costs. During the first nine months of 2007, the Company incurred charges of $0.7 million for employee severance, $0.2 million for

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accelerated depreciation, and $0.4 million for other related costs which is offset by a gain of $1.6 million on the sale of idle manufacturing facilities.

Also in January 2006, the Company committed to a plan to close a pressure sensitive materials plant located in Hopkins, Minnesota. The closure of this plant, together with related support staff and capacity reductions within the pressure sensitive materials business segment, reduced fixed costs and improved capacity utilization. During 2006, the Company incurred charges of $0.5 million for employee severance and $0.5 million for other related costs. Nominal costs were incurred during the first nine months of 2007.

Manufacturing activity has been concluded at the six manufacturing plants identified for closure with customer order fulfillment absorbed by other facilities within the Company. While termination of manufacturing activity at these facilities has been accomplished, final relocation of equipment and employees and final settlement of pension related issues will continue during 2007.

During 2006, a total of $18.3 million has been charged to other costs (income) and $12.9 million has been included in cost of products sold within the consolidated statement of income. During the third quarter of 2007 nominal costs have been included in other costs (income) within the consolidated statement of income. For the first nine months of 2007 a net gain of $0.4 million has been included in other costs (income) and a $0.3 million charge has been included in cost of products sold within the consolidated statement of income. The accrued liability at September 30, 2007, is $0.2 million. Total costs of $35.0 million are expected for this restructuring effort, of which $31.0 million will be incurred by the flexible packaging segment, $1.8 million for the pressure sensitive materials segment, and $2.2 million for corporate relocation. Net cash cost is expected to be $18.3 million and non-cash cost is expected to total $16.7 million. The majority of these costs and payments were incurred in 2006.

An analysis of this restructuring plan and related costs activity follows:

				Facilities						Total
	Employee			Consolidation			Accelerated			Restructuring
(in thousands)	Costs			or Relocation			Depreciation			and Related Costs
2006 Activity
Reserve balance at December 31, 2005	$	0		$	0		$	0		$	0
Total net expense accrued
Corporate				(1,288		)				(1,288		)
Flexible Packaging	(11,555		)	(5,136		)	(12,262		)	(28,953		)
Pressure Sensitive	(519		)	(416		)	(47		)	(982		)
Charges to accrual account
Corporate				1,288						1,288
Flexible Packaging	11,170			5,136			12,262			28,568
Pressure Sensitive	519			416			47			982
Reserve balance at December 31, 2006	$	(385	)	$	0		$	0		$	(385	)
2007 Activity –Year-to-Date
Reserve balance at December 31, 2006	$	(385	)	$	0		$	0		$	(385	)
Total net expense accrued
Corporate				(195		)				(195		)
Flexible Packaging	(708		)	1,160			(174		)	278
Pressure Sensitive
Charges to accrual account
Corporate				195						195
Flexible Packaging	887			(1,160		)	174			(99		)
Pressure Sensitive
Reserve balance at September 30, 2007	$	(206	)	$	0		$	0		$	(206	)
2007 Activity – Third Quarter
Reserve balance at June 30, 2007	$	(206	)	$	0		$	0		$	(206	)
Total net expense accrued
Corporate
Flexible Packaging	(77		)	(8		)				(85		)
Pressure Sensitive
Charges to accrual account
Corporate
Flexible Packaging	77			8						85
Pressure Sensitive
Reserve balance at September 30, 2007	$	(206	)	$	0		$	0		$	(206	)

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Note 7 – Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) are as follows:

(in thousands)	September 30, 2007			December 31, 2006
Foreign currency translation	$	221,448		$	122,454
Pension liability, net of deferred tax benefit of $57,659 and $59,666	(91,814		)	(96,121		)
Unrecognized gain on derivative, net of deferred tax of $1,516 and $1,768	2,369			2,765
Accumulated other comprehensive income (loss)	$	132,003		$	29,098

Note 8 – Components of Net Periodic Benefit Cost

Benefit costs for defined pension benefit plans are shown below. Costs for other benefits include defined contribution pension plans and postretirement benefits other than pensions. The funding policy and expectations disclosed in the Company’s 2006 Annual Report on Form 10-K are expected to continue unchanged throughout 2007.

	Three Months Ended September 30,											Nine Months Ended September 30,
	Pension Benefits						Other Benefits					Pension Benefits						Other Benefits
(in thousands)	2007			2006			2007			2006		2007			2006			2007			2006
Service cost – benefits earned during the period	$	3,485		$	3,718		$	3,149		$	2,896	$	10,324		$	11,095		$	9,358		$	8,737
Interest cost on projected benefit obligation	8,152			7,681			294			393		24,305			22,990			883			1,177
Expected return on plan assets	(11,387		)	(10,422		)						(34,013		)	(31,209		)
Amortization of unrecognized transition obligation	67			62								188			180
Amortization of prior service cost	571			649			54			173		1,712			1,946			161			518
Recognized actuarial net (gain) or loss	1,965			2,624			(15		)	4		5,869			7,866			(46		)	12
Net periodic pension (income) cost	$	2,853		$	4,311		$	3,482		$	3,466	$	8,385		$	12,868		$	10,356		$	10,444

Note 9 – Segments of Business

The Company’s business activities are organized around and aggregated into its two principal business segments, Flexible Packaging and Pressure Sensitive Materials. Both internal and external reporting conforms to this organizational structure, with no significant differences in accounting policies applied. The Company evaluates the performance of its segments and allocates resources to them based primarily on operating profit, which is defined as profit before general corporate expense, interest expense, income taxes, and minority interest. A summary of the Company’s business activities reported by its two business segments follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Business Segments (in millions)	2007			2006			2007			2006
Net Sales to Unaffiliated Customers:
Flexible Packaging	$	745.7		$	749.2		$	2,247.5		$	2,257.1
Pressure Sensitive Materials	161.8			156.7			494.4			484.8
Intersegment Sales:
Flexible Packaging	(0.3		)	(0.1		)	(0.5		)	(0.3		)
Pressure Sensitive Materials	(1.5		)	(2.5		)	(4.8		)	(2.8		)
Total Net Sales	$	905.7		$	903.3		$	2,736.6		$	2,738.8
Operating Profit and Pretax Profit:
Flexible Packaging	$	81.6		$	92.0		$	263.3		$	251.5
Pressure Sensitive Materials	9.1			11.5			33.5			40.9
Total operating profit	90.7			103.5			296.8			292.4
General corporate expenses	(11.8		)	(12.2		)	(34.6		)	(31.7		)
Interest expense	(13.1		)	(11.7		)	(38.2		)	(37.5		)
Minority interest in net income	(1.1		)	(1.0		)	(2.8		)	(2.4		)
Income before income taxes	$	64.7		$	78.6		$	221.2		$	220.8
Identifiable Assets:
Flexible Packaging							$	2,711.8		$	2,584.8
Pressure Sensitive Materials							360.9			348.9
Total identifiable assets							3,072.7			2,933.7
Corporate assets							126.7			161.5
Total							$	3,199.4		$	3,095.2

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Note 10 – Income Taxes

The Company adopted FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (FIN 48), on January 1, 2007. The Company recognized no material adjustments as a result of the implementation of this policy. As of January 1, 2007, the Company had approximately $13.9 million of total unrecognized tax benefits. Of this total, approximately $6.0 million represented the amount of unrecognized tax benefits that would impact the effective income tax rate if recognized in any future periods.

In the nine months ended September 30, 2007, the Company reduced its unrecognized tax benefits by approximately $5.2 million. The Company does not expect significant changes to the balance of unrecognized tax benefits within the next 12 months. Since January 1, 2007, there has not been a material change in the amount of unrecognized tax benefits that would impact the effective income tax rate if recognized in any future periods.

The Company recognizes interest and penalties related to income tax matters as components of income tax expense. The Company had approximately $1.2 million accrued for interest and penalties at January 1, 2007. As of September 30, 2007, there has not been a material change in the amount accrued for interest and penalties.

The Company and its subsidiaries are subject to U.S. federal and state income tax as well as income tax in multiple international jurisdictions. With few exceptions, the Company is no longer subject to examinations by tax authorities for years prior to 2002 in the significant jurisdictions in which we operate.

Note 11 – Earnings Per Share Computations

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2007		2006		2007		2006
Weighted average common shares outstanding – basic	101,945		104,836		103,825		104,874
Dilutive shares	990		1,852		1,182		1,823
Weighted average common and common equivalent shares outstanding – diluted	102,935		106,688		105,007		106,697
Net income for basic and diluted earnings per share computation	$	41,039	$	47,981	$	138,821	$	134,691
Earnings per common share – basic	$	0.40	$	0.46	$	1.34	$	1.28
Earnings per common share – diluted	$	0.40	$	0.45	$	1.32	$	1.26

Note 12 – Legal Proceedings

The Company is involved in a number of lawsuits incidental to its business, including environmental related litigation. Although it is difficult to predict the ultimate outcome of these cases, management believes, except as discussed below, that any ultimate liability would not have a material adverse effect upon the Company’s consolidated financial condition or results of operations.

The Company is a potentially responsible party (PRP) in twelve superfund sites around the United States. The Company expects its future liability relative to these sites to be insignificant, individually and in the aggregate. The Company has reserved an amount that it believes to be adequate to cover its exposure.

Dixie Toga S.A., acquired by the Company on January 5, 2005, is involved in a tax dispute with the City of São Paulo, Brazil. The City imposes a tax on the rendering of printing services. The City has assessed this city services tax on the production and sale of printed labels and packaging products. Dixie Toga, along with a number of other packaging companies, disagree and contend that the city services tax is not applicable to its products and that the products are subject only to the state value added tax (VAT). Under Brazilian law, state VAT and city services tax are mutually exclusive and the same transaction can be subject to only one of those taxes. Based on a ruling from the State of São Paulo, advice from legal counsel, and long standing business practice, Dixie Toga appealed the city services tax and instead continued to collect and pay only the state VAT.

The City of São Paulo disagreed and assessed Dixie Toga the city services tax for the years 1991-1995. The assessments for those years are estimated to be approximately $59.6 million at the date the Company acquired Dixie Toga, translated to U.S. dollars at the September 30, 2007 exchange rate. Dixie Toga challenged the assessments and ultimately litigated the issue. A lower court decision in 2002 cancelled all of the assessments for 1991-1995. The City of São Paulo, the State of São Paulo, and Dixie Toga have each appealed parts of the lower court decision. The City continues to assert the applicability of the city services tax and has issued assessments for the subsequent years 1996-2001. The assessments for those years for tax and penalties (exclusive of interest) are estimated to be approximately $38.0 million at the date of acquisition, translated to U.S. dollars at the September 30, 2007 exchange rate. In the event of an adverse resolution, these estimated amounts for all assessments could be substantially increased for interest, monetary adjustments, and corrections.

The Company strongly disagrees with the City’s position and intends to vigorously challenge any assessments by the City of São Paulo. The Company is unable at this time to predict the ultimate outcome of the controversy and as such has not recorded any liability related to this matter. An adverse resolution could be material to the consolidated results of operations and/or cash flows of the period in which the matter is resolved.

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The Secretariat of Economic Law (SDE), a governmental agency in Brazil, has initiated an investigation into possible anti-competitive practices in the Brazilian flexible packaging industry against a number of Brazilian companies including a Dixie Toga subsidiary. The investigation relates to periods prior to the Company’s acquisition of control of Dixie Toga and its subsidiaries. Given the preliminary nature of the proceedings the Company is unable at the present time to predict the outcome of this matter.

The Company and its subsidiary, Morgan Adhesives Company, have been named as defendants in thirteen civil lawsuits related to an investigation that was initiated and subsequently closed by the U.S. Department of Justice without any further action.  Six of these lawsuits purport to represent a nationwide class of labelstock purchasers, and each alleges a conspiracy to fix prices within the self-adhesive labelstock industry.  On November 5, 2003, the Judicial Panel on MultiDistrict Litigation issued a decision consolidating all of the federal class actions for pretrial purposes in the United States District Court for the Middle District of Pennsylvania, before the Honorable Chief Judge Vanaskie.  Judge Vanaskie entered an order which called for discovery to be taken on the issues relating to class certification and briefing on plaintiffs’ motion for class certification to be completed by March 1, 2007. On March 1, 2007, oral argument was held on plaintiffs’ motion for class certification. The Court has taken the motion under advisement. At this time, a discovery cut-off and a trial date have not been set.  The Company has also been named in three lawsuits filed in the California Superior Court in San Francisco. Three of these lawsuits seek to represent a class of all California indirect purchasers of labelstock and each alleged a conspiracy to fix prices within the self-adhesive labelstock industry. These three lawsuits have been consolidated. The fourth lawsuit seeks to represent a class of California direct purchasers of labelstock and alleges a conspiracy to fix prices within the self-adhesive labelstock industry.  Finally, the Company has been named in one lawsuit in Vermont, seeking to represent a class of all Vermont indirect purchasers of labelstock, one lawsuit in Ohio, seeking to represent a class of all Ohio indirect purchasers of labelstock, one lawsuit in Nebraska seeking to represent a class of all Nebraska indirect purchasers of labelstock, one lawsuit in Kansas seeking to represent a class of all Kansas indirect purchasers of labelstock, and one lawsuit in Tennessee, seeking to represent a class of purchasers of labelstock in various jurisdictions, all alleging a conspiracy to fix prices within the self-adhesive labelstock industry.  The Company intends to vigorously defend these lawsuits.

Given the ongoing status of the class-action civil lawsuits, the Company is unable to predict the outcome of these matters although the effect could be material to the results of operations and/or cash flows of the period in which the matter is resolved.  The Company is currently not otherwise subject to any pending litigation other than routine litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on the business, results of operations, financial position, or liquidity of the Company.

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