SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
Commission File Number 1-5277
BEMIS COMPANY, INC.
(Exact name of registrant as specified in its charter)
Missouri 43-0178130
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 South 9th Street, Suite 2300
Minneapolis, Minnesota 55402-4099
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 376-3000
Indicate by check mark whether the registrant has: (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
53,002,715 shares of Common Stock, $.10 par value, on November 3, 1997
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements (enclosed as Exhibit 19) are incorporated by
reference into this Form 10-Q.
In the opinion of management, the financial statements reflect all
adjustments necessary to a fair statement of the results for the nine months
ended September 30, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THIRD QUARTER 1997
Net Sales for the third quarter of 1997 were $465.5 million compared to
$423.1 million for the third quarter of 1996, an increase of 10.0 percent or
$42.4 million. Net Income increased 5.7 percent to $25.4 million for the third
quarter of 1997 compared to the same quarter in 1996. Excluding non-comparable
operating results of the acquisition of Paramount Packaging Corporation in
January 1997 and the disposition of the Company's packaging machinery business
in May 1997 from both 1997 and 1996, third quarter Net Sales showed an increase
of $31.2 million or 7.8 percent and operating profit showed an increase of $6.7
million or 14.8 percent.
Third quarter 1997 Net Sales for the flexible packaging line of business
increased 12.8 percent to $346.1 million. Operating profits increased 11.4
percent to $35.4 million. Excluding noncomparable operating results of business
acquisitions and dispositions Net Sales showed an increase of $27.4 million or
9.6 percent and operating profit showed an increase of $4.0 million or 13.1
percent.
Within the flexible packaging segment, third quarter Net Sales in coated
and laminated films excluding acquisitions rose 11.0 percent, with the strongest
sales gains in new multi-layer films. The conversion to more sophisticated film
structures negatively impacted margins. The start-up of several new film
manufacturing lines for this family of films, resulted in higher than normal
scrap rates and lower production efficiency.
In the polyethylene packaging business, Net Sales in the third quarter
excluding acquisitions rose 12.0 percent. Profitability was impacted by an
unusually high level of new equipment start-up as well as lower productivity
resulting from the continued plant reorganizations involving the Paramount
facilities acquired in the first quarter.
The paper bag business reported slightly higher revenues and weaker profit
amidst a continued difficult pricing environment. Reduced manufacturing volumes
at the two plants which will be closed as part of the consolidation announced in
the second quarter, and costs of transferring equipment and training new
employees at the remaining plants also adversely impacted profitability.
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PART I - FINANCIAL INFORMATION
Third quarter 1997 Net Sales for the specialty coated and graphics line of
business increased 2.7 percent to $119.4 million. Operating profits increased
14.5 percent to $17.0 million. Excluding noncomparable operating results of
business acquisition and disposition Net Sales showed an increase of $3.9
million or 3.4 percent and operating profit showed an increase of $2.7 million
or l8.3 percent. Net Sales grew at a modest rate with good profitability. Both
revenue and profit growth were affected by unfavorable currency translation for
the pressure sensitive materials business which derives about 35.0 percent of
its revenue from outside North America.
Cost of Products Sold increased 12.7 percent compared to Net Sales
increases of 10.0 percent. The third quarter was negatively affected by several
factors, including a product transition in the coated and laminated film
business, continued integration costs associated with the Paramount acquisition
made earlier in the year, an unusually large amount of new equipment start-ups
which resulted in higher than normal scrap levels and lower productivity in
certain parts of the flexible packaging business, and lower profitability in the
paper bag business resulting from the consolidation activities announced at the
end of the second quarter.
Selling, General, and Administrative Expenses for the current quarter
declined both in absolute terms, $2.2 million, and expressed as a percent of Net
Sales, from 10.8 percent for the third quarter of 1996 compared to 9.3 percent
in the third quarter of 1997. This favorable fluctuation resulted from a
combination of factors the most significant of which was the Company's sale of
its remaining packaging machinery businesses in the second quarter of 1997.
The sale of the Company's remaining machinery manufacturing business during
the second quarter of 1997 is also the primary reason for the $1.2 million
decrease in Research and Development Expense.
Increasing debt levels resulting from business unit acquisitions in 1996
and early 1997, and a very aggressive capital improvement effort principally
account for the $1.2 million rise in Interest Expense compared to the third
quarter of 1996.
The increase in Minority Interest in Net Income reflects the improving
performance of the pressure sensitive materials business.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997
Net Sales for the nine-month period of 1997 increased 16.5 percent to $1.42
billion compared to the same period in 1996. Net Income was $73.3 million for
1997 compared to $70.9 million for the same nine-month period in 1996, an
increase of 3.3 percent. Excluding non-comparable operating results of business
acquisitions and dispositions from the first nine months of 1997 and 1996, Net
Sales showed an increase of $105.2 million or 8.9 percent and operating profit
showed an increase of $16.5 million or 12.4 percent.
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PART I - FINANCIAL INFORMATION
Net Sales for the flexible packaging line of business increased 21.1
percent to $1.06 billion with operating profits increasing 4.4 percent to
$101.9 million compared to the same nine-month period in 1996. Net Sales for
the specialty coated and graphics line of business increased 5.2 percent to
$366.8 million with operating profits increasing 19.6 percent to $50.2 million
compared to the same nine-month period in 1996.
Excluding noncomparable operating results of business acquisitions and
dispositions Net Sales for the flexible packaging line of business showed an
increase of $86.9 million or 10.4 percent with operating profits increasing $8.0
million or 8.6 percent. Excluding noncomparable operating results of business
acquisitions and dispositions Net Sales for the specialty coated and graphics
line of business showed an increase of $18.3 million or 5.3 percent with
operating profits increasing $8.6 million or 20.6 percent.
Cost of Products Sold increased 19.2 percent compared to Net Sales
increases of 16.5 percent generally reflecting a less favorable raw material
price environment together with continued integration costs associated with the
Paramount acquisition, an unusually large amount of new equipment start-ups, and
lower profitability in the paper bag business resulting from the consolidation
efforts announced at the end of the second quarter.
The $1.0 million decrease in Research and Development Expense is primarily
due to the sale of the Company's machinery manufacturing business during the
second quarter.
Increasing debt levels, associated with business unit acquisitions net of
dispositions together with an aggressive capital investment program, account for
the $4.2 million rise in Interest Expense compared to the first nine months of
1996.
Other Income decreased $4.2 million largely due to the gain on the sale of
Hayssen's Paper Packaging Machinery Division in January 1996 not matched in
1997. The increase in Minority Interest in Net Income results from the
continued improvement in the Company's pressure sensitive materials business
segment.
The first quarter 1997 acquisition of Paramount Packaging Corporation and
the second quarter 1997 sale of the Company's packaging machinery business
combined with the working capital effects of added sales and an aggressive
capital additions program account for all significant increases in our balance
sheet accounts.
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PART I - FINANCIAL INFORMATION
FINANCIAL CONDITION
A statement of cash flow for the nine months ended September 30, 1997, is
as follows:
Millions
--------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ 73.3
Non-cash items:
Depreciation and amortization. . . . . . . . . . . . . . 60.7
Minority interest. . . . . . . . . . . . . . . . . . . . 3.8
Deferred income taxes, non-current portion . . . . . . . 1.6
Net increase in working capital items net of effects
of acquisitions and divestitures. . . . . . . . . . . (5.2)
Net change in deferred charges and credits.. . . . . . . (8.7)
--------
Net cash provided by operating activities. . . . . . . . . . . 125.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment.. . . . . . . . . . . . (117.5)
Business acquisitions . . . . . . . . . . . . . . . . . . . (6.9)
Business divestitures . . . . . . . . . . . . . . . . . . . 28.0
Proceeds from sales of property and equipment.. . . . . . . 1.8
--------
Net cash used in investing activities. . . . . . . . . . . . . (94.6)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in long-term debt. . . . . . . . . . . . . . . . . . 15.9
Change in short-term debt . . . . . . . . . . . . . . . . . .5
Cash dividends paid . . . . . . . . . . . . . . . . . . . . (31.8)
Subsidiary dividends to minority stockholders . . . . . . . (1.8)
Common stock purchased for the treasury.. . . . . . . . . . (3.7)
--------
Net cash used by financing activities. . . . . . . . . . . . . (20.9)
--------
Effect of exchange rates on cash.. . . . . . . . . . . . . . . (.9)
--------
Net increase in cash.. . . . . . . . . . . . . . . . . . . . . $ 9.1
--------
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
(a) The following documents are filed as part of this report:
3(a) Restated Articles of Incorporation of the Registrant, as
amended. (1)
3(b) By-Laws of the Registrant, as amended. (2)
4(a) Rights Agreement, dated as of August 3, 1989, between
the Registrant and Norwest Bank Minnesota, National
Association. (3)
4(b) Form of Indenture dated as of June 15, 1995, between the
Registrant and First Trust National Association, as
Trustee. (4)
10(a) Bemis Company, Inc. 1987 Stock Option Plan. *(5)
10(b) Bemis Company, Inc. 1994 Stock Incentive Plan. *(6)
10(c) Bemis Company, Inc. 1984 Stock Award Plan .*(2)
10(d) Bemis Retirement Plan, as amended effective January 1,
1994.*(2)
10(e) Bemis Company, Inc. Supplemental Retirement Plan dated
October 20, 1988.*(2)
10(f) Bemis Executive Incentive Plan dated April 1, 1990.*(2)
10(g) Bemis Company, Inc. Long Term Deferred Compensation
Plan.*(2)
10(h) Bemis Company, Inc. 1997 Executive Officer Performance
Plan. *(1)
10(i) Amended and Restated Credit Agreement among the
Registrant, the Banks Listed therein and Morgan Guaranty
Trust Company of New York, as Agent, originally dated as
of August 1, 1986, Amended and Restated as of August 1,
1991, as amended by amendment No. 1 dated as of May 1,
1992, as amended by Amendment No. 2 dated December 1,
1992, as amended by Amendment No. 3 dated January 22,
1993, as amended by Amendment No. 4 dated March 15, 1994,
as amended by Amendment No. 5 dated June 1, 1994; and as
amended by Amendment No. 6 dated February 1, 1995. (2)
19 Financial Statements Furnished to Security Holders.
27 Financial Data Schedule (EDGAR electronic filing only).
(b) There were no reports on Form 8-K filed during the third quarter
ended September 30, 1997.
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*Management contract, compensatory plan or arrangement filed
pursuant to Rule 601(b)(10)(iii)(A) of Regulation S-K under the
Securities Exchange Act of 1934.
(1) Incorporated by reference to the Registrant's Definitive
Proxy Statement filed with the Securities and Exchange
Commission on March 18, 1997 (File No. 1-5277)
(2) Incorporated by reference to the Registrant's Annual Report
on Form 10-K/A for the year ended December 31, 1994 (File No.
1-5277).
(3) Incorporated by reference to the Registrant's Registration
Statement on Form 8-A dated August 4, 1989 (File No. 0-1387).
(4) Incorporated by reference to the Registrant's Current Report
on Form 8-K dated June 30, 1995 (File No. 1-5277).
(5) Incorporated by reference to the Registrant's Registration
Statement on Form S-8 (File No. 33-50560).
(6) Incorporated by reference to the Registrant's Registration
Statement on Form S-8 (File No. 33-80666).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BEMIS COMPANY, INC.
Date November 3, 1997 /s/ LeRoy F. Bazany
------------------------------ ----------------------------------------
LeRoy F. Bazany, Vice President
and Controller
Date November 3, 1997 /s/ Benjamin R. Field, III
------------------------------ ----------------------------------------
Benjamin R. Field, III, Senior Vice
President, Chief Financial
Officer and Treasurer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION FORM OF FILING
3(a) Restated Articles of Incorporation of the Registrant,
as amended. (1)
3(b) By-Laws of the Registrant, as amended. (2)
4(a) Rights Agreement, dated as of August 3, 1989, between
the Registrant and Norwest Bank Minnesota, National
Association. (3)
4(b) Form of Indenture dated as of June 15, 1995, between
the Registrant and First Trust National Association,
as Trustee. (4)
10(a) Bemis Company, Inc. 1987 Stock Option Plan. * (5)
10(b) Bemis Company, Inc. 1994 Stock Incentive Plan. * (6)
10(c) Bemis Company, Inc. 1984 Stock Award Plan. * (2)
10(d) Bemis Retirement Plan, as amended effective
January 1, 1994. * (2)
10(e) Bemis Company, Inc. Supplemental Retirement Plan dated
October 20, 1988. * (2)
10(f) Bemis Executive Incentive Plan dated
April 1, 1990. * (2)
10(g) Bemis Company, Inc. Long Term Deferred Compensation
Plan. * (2)
10(h) Bemis Company, Inc. 1997 Executive Officer Performance
Plan. * (1)
10(i) Amended and Restated Credit Agreement among the
Registrant, the Banks Listed therein and Morgan
Guaranty Trust Company of New York as Agent, originally
dated as of August 1, 1986, Amended and Restated as of
August 1, 1991, as amended by Amendment No. 1 dated as of
May 1, 1992, as amended by Amendment No. 2 dated
December 1, 1992, as amended by Amendment No. 3 dated
January 22, 1993, as amended by Amendment No. 4 dated
March 15, 1994, as amended by Amendment No. 5 dated
June 1, 1994; and as amended by Amendment No. 6 dated
February 1, 1995. (2)
19 Reports Furnished to Security Holders. Filed Electronically
27 Financial Data Schedule (EDGAR electronic Filed Electronically
filing only)
---------------
* Management contract, compensatory plan or arrangement filed
pursuant to Rule 601(b)(10)(iii)(A) of Regulation S-K under the
Securities Exchange Act of 1934.
(1) Incorporated by reference to the Registrant's Definitive Proxy
Statement filed with the Securities and Exchange Commission on
March 18, 1997 (File No. 1-5277).
(2) Incorporated by reference to the Registrant's Annual Report on Form
10-K/A for the year ended December 31, 1994 (File No. 1-5277).
(3) Incorporated by reference to the Registrant's Registration Statement
on Form 8-A dated August 4, 1989 (File No. 0-1387).
(4) Incorporated by reference to the Registrant's Current Report on Form
8-K dated June 30, 1995 (File No. 1-5277).
(5) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (File No. 33-50560).
(6) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (File No. 33-80666).
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