SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Six Months Ended June 30, 1998
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.
53,380,001 shares of Common Stock, $.10 par value on July 29, 1998
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements (enclosed as Exhibit 19) are incorporated by
reference in 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 six months ended June 30, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - SECOND QUARTER 1998
Net sales for the second quarter of 1998 were $470.6 million compared to
$481.3 million for the second quarter of 1997, a decrease of 2.2 percent or
$10.7 million. Net income was $30.2 million for the second quarter of 1998
compared to $28.0 million for the same quarter in 1997, an increase of 7.8
percent.
Excluding noncomparable business activity, principally the packaging
machinery operations which were divested in the second quarter of 1997, net
sales declined 0.7 percent while operating income increased 7.1 percent. The
previously announced acquisition of Techy International S.A., a Belgian
flexible packaging company, was successfully completed late in the second
quarter.
Flexible packaging net sales, adjusted for noncomparable business
activity, declined 0.5 percent while operating income increased 20.7 percent.
Pressure sensitive materials net sales, adjusted for noncomparable business
activity, declined 1.3 percent while operating income declined 24.1 percent.
Within flexible packaging, net sales of plastic packaging rose 3.3
percent with the strongest growth in coated and laminated films. Net sales
growth in polyethylene packaging was limited by declining raw material prices
which resulted in reduced unit selling prices. Both businesses reported
higher profits due to improved manufacturing efficiencies and improved
product mix. Net sales and profits fell in the paper packaging business
compared with the year earlier quarter. The reorganization of the paper
packaging business begun in mid-1997 is nearing completion, with facilities
disposal being the principal effort remaining.
The pressure sensitive materials business reported flat sales and lower
profits compared with the year earlier quarter as weaker performance in the
roll label and sheet products businesses offset good results in the graphics
and technical products segments.
Addressing the second quarter Statement of Income line item changes of
consequence:
Higher average debt levels resulting principally from business unit
acquisitions account for the 15.9 percent increase in interest expense.
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PART I - FINANCIAL INFORMATION
Minority interest decreases resulted from lower operating income in the
Company's pressure sensitive materials business segment. The effective tax
rate for the second quarter of 1998 and 1997 was 38.9 percent and 38.7
percent, respectively.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1998
Net sales for the six-month period of 1998 were $922.1 million compared
to $956.8 million for the same period in 1997, a decrease of 3.6 percent.
Net income was $52.1 million for 1998 compared to $47.9 million for the
same six-month period in 1997, an increase of 8.9 percent. Excluding
non-comparable operating results of business acquisitions and dispositions
from the first half of 1998 and 1997, net sales declined 0.4 percent while
operating profit increased 9.1 percent.
Flexible packaging net sales, adjusted for noncomparable business
activity, declined 0.4 percent while operating income increased 21.8 percent.
Pressure sensitive materials net sales, adjusted for noncomparable business
activity, declined 0.3 percent while operating income declined 17.4 percent.
Addressing the Statement of Income line item changes of consequence:
Selling, general, and administrative expenses declined $8.7 million or 8.6
percent as a result of the 1997 sale of the Company's machinery operations,
reorganization efforts surrounding paper packaging operations, and
successfully absorbing 1997 business unit acquisitions.
Higher average debt levels resulting principally from business unit
acquisitions account for the 17.2 percent increase in interest expense.
The 1997 sale of the Company's machinery operations accounted for the $0.7
million decline in research and development expense. Minority interest
decreases resulted from lower operating income in the Company's pressure
sensitive materials business segment. The effective tax rates for the
first half of 1998 and 1997 was 38.8 percent and 38.5 percent,
respectively.
FINANCIAL CONDITION
A statement of cash flow for the six months ended June 30, 1998, is as
follows:
Millions
--------
CASH FLOWS FROM OPERATING ACTIVITIES:
------------------------------------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52.1
Non-cash items:
Depreciation and amortization . . . . . . . . . . . . . . . . . . 45.7
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . 2.0
Deferred income taxes, non-current portion. . . . . . . . . . . . 1.9
Net increase in working capital, net of effects of acquisitions . (7.2)
Net change in deferred charges and credits. . . . . . . . . . . . (2.4)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.6)
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PART I - FINANCIAL INFORMATION
FINANCIAL CONDITION (CONTINUED)
Net cash provided by operating activities . . . . . . . . . . . . 91.5
-----
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment . . . . . . . . . . . . . . . (74.9)
Business acquisitions . . . . . . . . . . . . . . . . . . . . . . (46.3)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5
-----
Net cash used in investing activities . . . . . . . . . . . . . . . (119.7)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Change in long-term debt. . . . . . . . . . . . . . . . . . . . . 47.5
Change in short-term debt . . . . . . . . . . . . . . . . . . . . (0.4)
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . (23.5)
Subsidiary dividends to minority stockholders . . . . . . . . . . (1.8)
Stock incentive programs and related tax effects. . . . . . . . . 7.4
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Net cash provided by financing activities . . . . . . . . . . . . . 29.2
-----
Effect of exchange rates. . . . . . . . . . . . . . . . . . . . . . (0.1)
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Net increase in cash. . . . . . . . . . . . . . . . . . . . . . . . $0.9
-----
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Registrant's 1998 Annual Meeting of Shareholders was held on May
7, 1998.
(c) (1) The shareholders voted for four director nominees for three-year
terms. There were no abstentions and no broker non-votes. The vote
was as follows:
Name of Candidate Votes For Votes Withheld
----------------- --------- --------------
Jeffrey H. Curler 46,112,136 197,781
Nancy Parsons McDonald 46,128,981 180,936
Roger D. O'Shaughnessy 46,101,207 208,710
C. Angus Wurtele 46,094,714 215,203
(2) The shareholders voted to ratify the appointment of Price
Waterhouse LLP as independent auditors for the 1998 fiscal year.
The vote was 46,110,265 for, 79,043 against, and 120,609 abstentions.
There were no broker non-votes.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(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 Reports Furnished to Security Holders.
27 Financial Data Schedule (EDGAR electronic filing only).
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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).
(b) There were no reports on Form 8-K filed during the second quarter
ended June 30, 1998.
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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 July 30, 1998 /s/ Gene C. Wulf
----------------------------- ----------------------------
Gene C. Wulf, Vice President
and Controller
Date July 30, 1998 /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 filing only). Filed Electronically
---------------
* 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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