-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NOJXLLLOtDR8rQAIu68GXm83Ycy07iQL8FdeoVsUrYHFTA/oG6ZFhkZgNF2vjmHt XRuXHEuB81fZbk4Z40sHpA== 0000912057-97-010132.txt : 19970327 0000912057-97-010132.hdr.sgml : 19970327 ACCESSION NUMBER: 0000912057-97-010132 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970326 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEMIS CO INC CENTRAL INDEX KEY: 0000011199 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 430178130 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05277 FILM NUMBER: 97563101 BUSINESS ADDRESS: STREET 1: 222 S 9TH ST STE 2300 CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4099 BUSINESS PHONE: 6123763000 MAIL ADDRESS: STREET 2: 222 S 9TH STREET SUITE 2300 CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4099 10-K 1 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1996 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) Registrant's telephone number, including area code: (612) 376-3000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered - ------------------- ----------------------- Common Stock, par value $.10 per share New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to section 12(g) of the Act: None Indicate by check mark whether the Registrant has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the Registrant on March 3, 1997, based on a closing price of $41.25 per share as reported on the New York Stock Exchange, was $1,996,103,000. As of March 3, 1997, the Registrant had 53,106,940 shares of Common Stock issued and outstanding. Documents Incorporated by Reference ----------------------------------- 1996 Annual Report to Shareholders - Part I and Part II Proxy Statement - Annual Meeting of Stockholders May 1, 1997 - Part I and Part III ITEM 1 - BUSINESS Bemis Company, Inc., a Missouri corporation (the "Registrant"), continues a business formed in 1858. The Registrant was incorporated in 1885 as Bemis Bro. Bag Company with the name changed to Bemis Company, Inc. in 1965. The Registrant is a principal manufacturer of flexible packaging products and specialty coated and graphics products selling to customers throughout the United States, Canada, and Europe with a growing presence in Australia, Southeast Asia, and Mexico. In 1996, approximately 71% of the Registrant's sales were derived from Flexible Packaging Products and approximately 29% were derived from Specialty Coated and Graphics Products. The primary market for its products is the food industry. Other markets include companies in chemical, agribusiness, medical, pharmaceutical, sanitary products, printing, and graphic industries. Further information about the Registrant's operations in different business segments appearing on page 41 of the accompanying 1996 Annual Report to Shareholders is expressly incorporated by reference in this Form 10-K Annual Report. As of December 31, 1996, the Registrant had approximately 8,900 employees, of which an estimated 6,000 were classified as production employees. Most of the production employees are covered by collective bargaining contracts involving five different international unions and 21 individual contracts with terms ranging from three to five years. During 1996, five contracts covering approximately 450 employees at four different locations in the United States and two contracts covering approximately 115 employees at two locations in Canada were successfully negotiated. During 1997, four domestic labor agreements are scheduled to expire. Working capital elements throughout the year fluctuate in relation to the level of business. Customer and vendor payment terms are generally net 30 days; exceptions to these terms are not material. Inventory levels reflect a reasonable balance between raw material pricing and availability, and the Registrant's commitment to promptly fill customer orders. Backlogs are not a significant factor in the industries in which the Registrant operates; most orders placed with the Registrant are for delivery within 90 days or less. The Registrant owns patents, licenses, trademarks, and trade names on its products. The loss of any or all patents, licenses, trademarks, or trade names would not have a materially adverse effect on the Registrant's results as a whole or either of its segments. The business of each of the segments is not seasonal to any significant extent. A summary of the Registrant's business activities reported by its two business segments follows: FLEXIBLE PACKAGING PRODUCTS The Registrant and its subsidiaries manufacture a broad range of industrial and consumer packaging consisting of coated and laminated films, polyethylene packaging, - 2- packaging machinery, and industrial and consumer paper bag packaging. Coated and laminated film products include flexible polymer film structures and barrier laminates for food, medical, and personal care products utilizing controlled and modified atmosphere packaging and complementary packaging machinery systems, with value added through printing. Primary markets are processed meat, cheese, coffee, condiments, and candy. Additional products include a full line of blown and cast stretchfilm products, carton sealing tapes and application equipment for industrial use, and custom thermoformed plastic packaging. Coated and laminated films accounted for 33 percent, 31 percent, and 31 percent of consolidated net sales for the years 1996, 1995, and 1994, respectively. Polyethylene packaging consists of mono-layer and co-extruded films, converted packaging and roll stock, and flexographic line and process printed packaging for bakery products, seed, retail, lawn and garden, ice, fresh and frozen produce, candy, sanitary products, and disposable diapers; printed shrink overwrap for the food and beverage industry; extruded products including wide width sheeting, bags on a roll, balers, pass-through and stretch palletizing film, and shrink pallet covers. Polyethylene products accounted for 19 percent, 17 percent, and 16 percent of consolidated net sales for the years 1996, 1995, and 1994, respectively. Packaging machinery products include consumer packaging machinery and systems for flexible packaging including vertical and horizontal form/fill/seal pouch packaging; equipment which weighs pieces, powders, and liquids for food, chemical, and industrial products, and stand-up pouch packaging systems. The Registrant also makes industrial packaging machinery, including automated bag handling, weighing, filling, closing, sealing, and palletizing equipment for multiwall paper open mouth and valve bags, and poly open mouth bags, Bulk-Pak polyethylene liner insertion equipment for bag-in-box systems, and vertical form/fill/seal machinery for large bags. Packaging machinery accounted for 5 percent, 8 percent, and 8 percent of consolidated net sales for the years 1996, 1995, and 1994, respectively. Industrial and consumer paper bag packaging is made up of multiwall and small paper bags, balers, printed paper roll stock, and bag closing materials for industrial and consumer packaging products. Flexographic and rotogravure printing are enhanced with in-line overlaminating capabilities. Innovations in bag constructions include inner-ply laminations of odor, grease, and moisture barriers. Primary markets include pet food, seed, chemicals, dairy products, fertilizers, feed, minerals, flour, rice, sugar, and coffee beans. Sales of this product line accounted for 14 percent, 15 percent, and 15 percent of consolidated net sales for the years 1996, 1995, and 1994, respectively. SPECIALTY COATED AND GRAPHICS PRODUCTS The Registrant manufactures pressure sensitive materials such as sheet printing - 3 - products, roll label products, technical products, and graphic films. Sheet printing products include pressure sensitive paper, film, and foil sheet printing products and laser printing products for the sheet-fed printing industry. In addition, the Registrant provides laser printer sheet stocks, pre- die-cut printing labels, copier labels, data processing labels, and non-impact printer products, which are designed to run on business equipment such as laser printers and xerographic copiers. Roll label products include narrow-web rolls of pressure sensitive film, paper, and foil printing stocks used in high-speed printing and die-cutting of primary package labeling, secondary or promotional decoration, and for high- speed, high-volume data processing (EDP) stocks, bar code inventory control labels, and numerous laser printing applications. Technical products are pressure sensitive materials that are technically engineered for performance in varied industrial applications. They include micro-thin film adhesives used in delicate electronic parts assembly and pressure sensitives utilizing foam and tape based stocks to perform fastening and mounting functions. Graphic films include pressure sensitive films used for decorative signage through computer-aided plotters and screen printers, and photographic overlaminate and mounting materials including optically-clear films with built- in UV inhibitors. Also included are electronically-produced film color separations and engravings used in rotogravure and flexographic printing by the packaging industry. Speciality Coated and Graphics Products accounted for 29 percent, 28 percent, and 29 percent of consolidated net sales for the years 1996, 1995, and 1994, respectively. This product segment also includes the manufacture of pressure sensitive label applicating equipment, rotogravure cylinders, and film services. MARKETING, DISTRIBUTION, AND COMPETITION While the Registrant's sales are made through a variety of distribution methods, more than 70 percent of each segment's sales are made by the Registrant's sales force. Sales offices and plants are located throughout the United States, Canada, United Kingdom, Europe, Scandinavia, Australia, Southeast Asia, and Mexico to provide prompt and economical service to more than 30,000 customers. The Registrant's technically trained sales force is supported by product development engineers, design technicians, and a customer service organization. No single customer accounts for 10 percent or more of the Registrant's total sales of both of its two business segments. Furthermore, the loss of one or a few major customers would not have a material adverse effect on their operating results. The major markets in which the Registrant sells its products are highly competitive. - 4 - Areas of competition include price, innovation, quality, and service. This competition is significant as to both the size and the number of competing firms. Major competitors in the Flexible Packaging Products segment include American National Can Company, Printpack, Inc., Cryovac, a division of W.R. Grace & Co., Huntsman Chemical Corporation, AEP Industries, Inc., Stone Container Corporation, and Union Camp Corporation. In the Specialty Coated and Graphics Products segment major competitors include Avery Dennison Corporation, Flexcon Co., Inc., Minnesota Mining and Manufacturing Company, Jackstadt GmbH (Germany), and Haarla (Finland). The Registrant considers itself to be a significant factor in the market niches it serves; however, due to the diversity of the Flexible Packaging and Specialty Coated and Graphics Products segments, the Registrant's precise competitive position in these markets is not reasonably determinable. Advertising is limited primarily to business and trade publications emphasizing our packaging and related capabilities and the individual problem- solving approach to customer problems. RAW MATERIALS Plastic resins, paper, and chemicals constitute the basic major raw materials. These are purchased from a variety of industry sources. While temporary shortages of raw materials may occur occasionally, these items are currently readily available. RESEARCH AND DEVELOPMENT EXPENSE Research and development expenditures were as follows:
1996 1995 1994 ------------------------------------------- Flexible Packaging Products $ 8,523,000 $ 8,813,000 $ 9,132,000 Specialty Coated and Graphics Products 5,132,000 4,790,000 3,992,000 ----------- ----------- ----------- Total $13,655,000 $13,603,000 $13,124,000 ----------- ----------- ----------- ----------- ----------- -----------
ENVIRONMENTAL CONTROL Compliance with federal, state, and local provisions which have been enacted or adopted regulating discharges of materials into the environment or otherwise relating to the protection of the environment, is not expected to have a material effect upon the capital expenditures, earnings, and competitive position of the Registrant and its subsidiaries. - 5 - ITEM 2 - PROPERTIES Properties utilized by the Registrant and its subsidiaries at December 31, 1996, were as follows: FLEXIBLE PACKAGING PRODUCTS The Registrant has 33 manufacturing plants located in 14 states and three foreign countries, of which 25 are owned directly by the Registrant or its subsidiaries and eight are leased from outside parties. Leases generally provide for minimum terms of three to 20 years and have one or more renewal options. The initial terms of leases in effect at December 31, 1996, expire between 1997 and 2010. SPECIALTY COATED AND GRAPHICS PRODUCTS The Registrant has ten manufacturing plants located in five states and two foreign countries, of which seven are owned directly by the Registrant or its subsidiaries and three are leased from outside parties. Leases generally provide for minimum terms of three to 25 years and have one or more renewal options. The initial terms of leases in effect as of December 31, 1996, expire between 1999 and 2008. CORPORATE The executive offices of the Registrant, which are leased, are located in Minneapolis, Minnesota. The Registrant considers its plants and other physical properties to be suitable, adequate, and of sufficient productive capacity to meet the requirements of its business. The manufacturing plants operate at varying levels of capacity depending on the type of operation and market conditions. ITEM 3 - LEGAL PROCEEDINGS The Registrant is involved in a number of lawsuits, including environmental related litigation, incidental to its business. Although it is difficult to predict the ultimate outcome of these cases, management believes, based on consultation with counsel, that any ultimate liability would not have a material adverse effect upon the Registrant's business, operating results, or financial condition. The Registrant is a potentially responsible party (PRP) in approximately eighteen superfund sites around the United States. In substantially all cases, the Registrant is a "de minimis" PRP and has negotiated a position as such. In addition, the Registrant has full insurance protection at eight of these sites and 50% insurance protection at three of these sites. The Registrant has reserved an amount that it believes to be adequate to cover its exposure. - 6 - ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 1996. ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this item appearing on pages 1 and 24 of the accompanying 1996 Annual Report to Shareholders is expressly incorporated by reference in this Form 10-K Annual Report. ITEM 6 - SELECTED FINANCIAL DATA The information required by this item appearing on page 25 of the accompanying 1996 Annual Report to Shareholders is expressly incorporated by reference in this Form 10-K Annual Report. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this item appearing on pages 22 to 24 of the accompanying 1996 Annual Report to Shareholders is expressly incorporated by reference in this Form 10-K Annual Report. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements, together with the report thereon of Price Waterhouse LLP dated January 23, 1997, and the quarterly data appearing on pages 26 to 42 of the accompanying 1996 Annual Report to Shareholders are expressly incorporated by reference in this Form 10-K Annual Report. With the exception of the aforementioned information and the information incorporated in Items 1, 5, 6, and 7 of this Form 10-K, the 1996 Annual Report to Shareholders is not to be deemed filed as part of this Form 10-K Annual Report. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. - 7 - ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required to be submitted in response to this item with respect to directors is omitted because a definitive proxy statement containing such information will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, 1996, and such information is expressly incorporated herein by reference. The following sets forth the name, age, and business experience for the last five years of the principal executive officers of the Registrant. Each officer has been an employee of the Registrant for the last five years and the positions described relate to positions with the Registrant.
Period The Positions Name Age Positions Held Were Held - --------------------------------------------------------------------------------------- LeRoy F. Bazany 64 Vice President and Controller 1982 to present Jeffrey H. Curler 46 President 1996 to present Executive Vice President 1991 to 1995 Chairman - Curwood, Inc. (1) 1995 to present President - Curwood, Inc. (1) 1982 to 1995 Benjamin R. Field, III 58 Senior Vice President, Chief Financial Officer and Treasurer 1992 to present Vice President and Treasurer 1982 to 1992 Scott W. Johnson 56 Senior Vice President, General Counsel and Secretary 1992 to present Vice President - General Counsel and Secretary 1988 to 1992 Robert F. Mlnarik 55 Vice Chairman 1996 to present Executive Vice President 1991 to 1995 President and Chief Executive Officer - Morgan Adhesives Co. (2) 1987 to present John H. Roe 57 Chairman and Chief Executive Officer 1996 to present President and Chief Executive Officer 1990 to 1995 Lawrence E. Schwanke 56 Vice President - Human Resources 1990 to present
___________ (1) Curwood, Inc. is a 100 percent owned subsidiary of the Registrant. (2) Morgan Adhesives Co. is an 86.9 percent owned subsidiary of the Registrant. - 8 - ITEM 11 - EXECUTIVE COMPENSATION The information required to be submitted in response to this item is omitted because a definitive proxy statement containing such information will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, 1996, and such information is expressly incorporated herein by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required to be submitted in response to this item is omitted because a definitive proxy statement containing such information will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, 1996, and such information is expressly incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required to be submitted in response to this item is omitted because a definitive proxy statement containing such information will be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after December 31, 1996, and such information is expressly incorporated herein by reference. ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of the report: Pages in Annual Report* -------------- (1) FINANCIAL STATEMENTS: Report of Independent Accountants...................... 26 Consolidated Statement of Income for the Three Years Ended December 31, 1996.............. 27 Consolidated Balance Sheet at December 31, 1996 and 1995........................ 28-29 Consolidated Statement of Cash Flows for the Three Years Ended December 31, 1996.............. 30-31 Consolidated Statement of Stockholders' Equity for the Three Years Ended December 31, 1996.......... 32 Notes to Consolidated Financial Statements ............ 33-42 _____________ *Incorporated by reference from the indicated pages of the 1996 Annual Report to Shareholders, a copy of which is filed herewith as Exhibit 13. - 9 -
Pages in Form 10-K --------- (2) FINANCIAL STATEMENT SCHEDULES FOR YEARS 1996, 1995, AND 1994 Report of Independent Accountants on Financial Statement Schedules for the Three Years Ended December 31, 1996........... 12 Schedule V - Property and Equipment............................ 15-17 Schedule VI - Accumulated Depreciation of Property and Equipment....................... 18-20 Schedule VIII - Valuation and Qualifying Accounts and Reserves........................................ 21 Schedule X - Supplementary Income Statement Information..................................... 21
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. (3) EXHIBITS 3(a) Restated Articles of Incorporation of the Registrant, as amended. (1) 3(b) By-Laws of the Registrant, as amended. (4) 4(a) Rights Agreement, dated as of August 3, 1989, between the Registrant and Norwest Bank Minnesota, National Association. (2) 4(b) Form of Indenture dated as of June 15, 1995, between the Registrant and First Trust National Association, as Trustee. (5) 10(a) Bemis Company, Inc. 1987 Stock Option Plan. * (1) 10(b) Bemis Company, Inc. 1994 Stock Incentive Plan. * (3) 10(c) Bemis Company, Inc. 1984 Stock Award Plan. * (4) 10(d) Bemis Retirement Plan, as amended effective January 1, 1994. * (4) 10(e) Bemis Company, Inc. Supplemental Retirement Plan dated October 20, 1988. * (4) 10(f) Bemis Executive Incentive Plan dated April 1, 1990. * (4) 10(g) Bemis Company, Inc. Long Term Deferred Compensation Plan. * (4) - 10 - 10(h) Amended and Restated Credit Agreement among the Registrant, the Banks Listed therein and Morgan Guaranty Trust Company of 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. (4) 13 1996 Annual Report to Shareholders 22 Subsidiaries of the Registrant 27 Financial Data Schedule (EDGAR electronic filing only). (b) There were no reports on Form 8-K filed during the fourth quarter ended December 31, 1996. _____________ * 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 Registration Statement on Form S-8 (File No. 33-50560). (2) Incorporated by reference to the Registrant's Registration Statement on Form 8-A dated August 4, 1989 (File No. 0-1387). (3) Incorporated by reference to the Registrant's Registration Statement on Form S-8 (File No. 33-80666). (4) 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). (5) Incorporated by reference to the Registrant's Current Report on Form 8-K dated June 30, 1995 (File No. 1-5277). - 11 - REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors of Bemis Company, Inc.: Our audits of the consolidated financial statements referred to in our report dated January 23, 1997, appearing on page 26 of the 1996 Annual Report to Shareholders of Bemis Company, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Minneapolis, Minnesota January 23, 1997 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-8 (number 2-61796) and Form S-3 (number 33-60253) of Bemis Company, Inc. of our report dated January 23, 1997, appearing on page 26 of the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules which appears above. /s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Minneapolis, Minnesota March 3, 1997 - 12- SIGNATURES Pursuant to the requirements of Section 13 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. By /s/ Benjamin R. Field, III By /s/ LeRoy F. Bazany ------------------------------------ ------------------------------ Benjamin R. Field, III, Senior Vice LeRoy F. Bazany, Vice President, Chief Financial Officr President and Controller and Treasurer Date March 3, 1997 Date March 3, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Jeffrey H. Curler /s/ Winslow H. Buxton - ------------------------------- ------------------------------ Jeffrey H. Curler, Winslow H. Buxton, Director President and Director Date March 3, 1997 Date March 3, 1997 /s/ John H. Roe /s/ Loring W. Knoblauch - ------------------------------- ------------------------------ John H. Roe, Chairman and Chief Loring W. Knoblauch, Director Executive Officer; Director Date March 3, 1997 Date March 3, 1997 /s/ Robert A. Greenkorn /s/ Angus Wurtele - ------------------------------- ------------------------------ Robert A. Greenkorn, Director Angus Wurtele, Director Date March 3, 1997 Date March 3, 1997 - 13 - EXHIBIT INDEX
EXHIBITS FORM OF FILING - -------- -------------- 3(a) Restated Articles of Incorporation of the Registrant, as amended. (1) 3(b) By-Laws of the Registrant, as amended. (4) 4(a) Rights Agreement, dated as of August 3, 1989, between the Registrant and Norwest Bank Minnesota, National Association. (2) 4(b) Form of Indenture dated as of June 15, 1995, between the Registrant and First Trust National Association, as Trustee. (5) 10(a) Bemis Company, Inc. 1987 Stock Option Plan. * (1) 10(b) Bemis Company, Inc. 1994 Stock Incentive Plan. * (3) 10(c) Bemis Company, Inc. 1984 Stock Award Plan. * (4) 10(d) Bemis Retirement Plan, as amended effective January 1, 1994. * (4) 10(e) Bemis Company, Inc. Supplemental Retirement Plan dated October 20, 1988. * (4) 10(f) Bemis Executive Incentive Plan dated April 1, 1990. * (4) 10(g) Bemis Company, Inc. Long Term Deferred Compensation Plan. * (4) 10(h) 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. (4) 13 1996 Annual Report to Shareholders Electronic/EDGAR 22 Subsidiaries of the Registrant Electronic/EDGAR 27 Financial Data Schedule (EDGAR electronic filing only). Electronic/EDGAR
__________________ * 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 Registration Statement on Form S-8 (File No. 33-50560). (2) Incorporated by reference to the Registrant's Registration Statement on Form 8-A dated August 4, 1989 (File No. 0-1387). (3) Incorporated by reference to the Registrant's Registration Statement on Form S-8 (File No. 33-80666). (4) 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). (5) Incorporated by reference to the Registrant's Current Report on Form 8-K dated June 30, 1995 (File No. 1-5277). - 14 - BEMIS COMPANY, INC. AND SUBSIDIARIES SCHEDULE V - PROPERTY AND EQUIPMENT (in thousands of dollars)
YEAR ENDED DECEMBER 31, 1996 ----------------------------------------------------------------------------------------------- Deductions Additions at Cost ------------------------ Other ------------------ Fully Changes Translation Balance at Business Depreciated Debit Adjustment Balance Beginning Acquisi- Retirements Assets (Credit) Debit at Close of Year Normal tion or Sales Written Off (1) (Credit) of Year --------- ------ ---- -------- ----------- ------- --------- ------- Owned Property and Equipment - ---------------------------- Land and land improvements $ 11,445 $ 873 $ 26 $ 316 $ 121 18 $ (53) $ 11,872 Buildings 176,669 18,611 1,980 5,790 2,575 (378) (1,536) 186,981 Leasehold improvements 1,992 180 898 159 4 90 2,997 Machinery and equipment 629,178 92,286 8,875 6,743 27,723 360 (2,254) 693,979 -------- -------- ------- ------- ------- ---- ------- -------- $819,284 $111,950 $11,779 $13,008 $30,423 $ 0 $(3,753) $895,829 -------- -------- ------- ------- ------- ----- ------- -------- -------- -------- ------- ------- ------- ----- ------- -------- Leased Property and Equipment - ----------------------------- Machinery and equipment 34 34 -------- -------- $ 34 $ 34 -------- -------- -------- --------
(1) Reclassifications. - 15 - BEMIS COMPANY, INC. AND SUBSIDIARIES SCHEDULE V - PROPERTY AND EQUIPMENT (in thousands of dollars)
YEAR ENDED DECEMBER 31, 1995 ------------------------------------------------------------------------------------- Deductions Additions at Cost ------------------------ ------------------ Fully Translation Balance at Business Depreciated Adjustment Balance Beginning Acquisi- Retirements Assets Debit at Close of Year Normal tion or Sales Written Off (Credit) of Year --------- ------ ---- -------- ----------- --------- ------- Owned Property and Equipment - ---------------------------- Land and land improvements $ 11,257 $ 87 $ 216 $ 52 $ 113 $ 50 $ 11,445 Buildings 149,597 11,926 13,776 96 225 1,691 176,669 Leasehold improvements 1,879 186 84 11 1,992 Machinery and equipment 558,637 81,416 21,294 1,420 34,497 3,748 629,178 -------- ------- ------- -------- ------- ------ -------- $721,370 $93,615 $35,286 $ 1,568 $34,919 $5,500 $819,284 -------- ------- ------- -------- ------- ------ -------- -------- ------- ------- -------- ------- ------ -------- Leasehold Property and Equipment - -------------------------------- Buildings $ 1,064 $ 1,064 $ 0 Machinery and equipment 29 18 13 34 -------- ------- -------- ------- -------- $ 1,093 $ 18 $ 1,064 $ 13 $ 34 -------- ------- -------- ------- -------- -------- ------- -------- ------- --------
- 16 - BEMIS COMPANY, INC. AND SUBSIDIARIES SCHEDULE V - PROPERTY AND EQUIPMENT (in thousands of dollars)
YEAR ENDED DECEMBER 31, 1994 --------------------------------------------------------------------------------------- Deductions Additions at Cost ------------------------ ------------------ Fully Translation Balance at Business Depreciated Adjustment Balance Beginning Acquisi- Retirements Assets Debit at Close of Year Normal tion or Sales Written Off (Credit) of Year --------- ------ ---- -------- ----------- --------- ------- Owned Property and Equipment - ---------------------------- Land and land improvements $ 11,900 $ 99 $ 200 $ 749 $ 229 $ 36 $ 11,257 Buildings 142,783 8,400 1,074 2,424 2,080 1,844 149,597 Leasehold improvements 1,769 105 8 13 1,879 Machinery and equipment 515,854 84,460 12,114 14,316 42,729 3,254 558,637 -------- ------- ------- ------- ------- ------ -------- $672,306 $93,064 $13,388 $17,497 $45,038 $5,147 $721,370 -------- ------- ------- ------- ------- ------ -------- -------- ------- ------- ------- ------- ------ -------- Leasehold Property and Equipment - -------------------------------- Buildings $ 4,262 $ 3,198 $ 1,064 Machinery and equipment 63 34 29 -------- ------- -------- $ 4,325 $ 3,232 $ 1,093 -------- ------- -------- -------- ------- --------
- 17 - BEMIS COMPANY, INC. AND SUBSIDIARIES SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT (in thousands of dollars)
YEAR ENDED DECEMBER 31, 1996 -------------------------------------------------------------------------------------------------- Deductions Additions at Cost ------------------------ Other -------------------- Fully Changes Translation Balance at Charged Business Depreciated Debit Adjustment Balance Beginning to Profit Acquisi- Retirements Assets (Credit) Debit at Close of Year and Loss tion or Sales Written Off (1) (Credit) of Year --------- ------ ---- -------- ----------- ------- --------- ------- Owned Property and Equipment - ---------------------------- Land improvements $ 2,031 $ 221 $ 55 $ 121 $ 2,076 Buildings 46,951 5,472 2,724 2,575 2 519 46,603 Leasehold improvements 781 225 289 49 4 (17) 1,259 Machinery and equipment 234,990 58,034 2,053 3,540 27,723 (2) 1,403 262,413 -------- --------- --------- -------- ------- ------ -------- -------- $284,753 $ 63,952 $ 2,342 $ 6,368 $30,423 $ 0 $ 1,905 $312,351 -------- --------- --------- -------- ------- ------ -------- -------- -------- --------- --------- -------- ------- ------ -------- -------- Leased Property and Equipment - ----------------------------- Machinery 14 7 21 -------- --------- -------- $ 14 $ 7 $ 21 -------- --------- -------- -------- --------- --------
(1) Reclassifications. - 18 - BEMIS COMPANY, INC. AND SUBSIDIARIES SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT (in thousands of dollars)
YEAR ENDED DECEMBER 31, 1995 --------------------------------------------------------------------------------------- Deductions ------------------------ Other Fully Changes Translation Balance at Charged Depreciated Debit Adjustment Balance Beginning to Profit Retirements Assets (Credit) Debit at Close of Year and Loss or Sales Written Off (1) (Credit) of Year --------- ------ -------- ----------- ------- --------- ------- Owned Property and Equipment - ---------------------------- Land improvements $ 1,916 $ 227 $ 1 $ 113 $ (2) $ 2,031 Buildings 40,868 5,014 68 225 (700) (662) 46,951 Leasehold improvements 667 193 1 84 (6) 781 Machinery and equipment 217,445 51,505 769 34,497 700 (2,006) 234,990 -------- ------- ------- ------- ------ -------- -------- $260,896 $56,939 $ 839 $34,919 $ 0 $(2,676) $284,753 -------- ------- ------- ------- ------ -------- -------- -------- ------- ------- ------- ------ -------- -------- Leased Property and Equipment - ----------------------------- Buildings $ 229 $ 229 $ 0 Machinery and equipment 22 5 13 14 -------- ------- ------- ------- -------- $ 251 $ 5 $ 229 $ 13 $ 14 -------- ------- ------- ------- -------- -------- ------- ------- ------- --------
1) Reclassifications. - 19 - BEMIS COMPANY, INC. AND SUBSIDIARIES SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT (in thousands of dollars)
YEAR ENDED DECEMBER 31, 1994 ----------------------------------------------------------------------------- Deductions ------------------------ Fully Translation Balance at Charged Depreciated Adjustment Balance Beginning to Profit Retirements Assets Debit at Close of Year and Loss or Sales Written Off (Credit) of Year --------- ------ -------- ----------- ---------- ------- Owned Property and Equipment - ---------------------------- Land improvements $ 2,100 $ 230 $ 181 $ 229 $ 4 $ 1,916 Buildings 38,911 4,524 521 2,080 (34) 40,868 Leasehold improvements 485 184 8 (6) 667 Machinery and equipment 218,784 45,864 6,639 42,729 (2,165) 217,445 -------- ------- ------ ------- ------- -------- $260,280 $50,802 $7,349 $45,038 $(2,201) $260,896 -------- ------- ------ ------- ------- -------- -------- ------- ------ ------- ------- -------- Leased Property and Equipment - ----------------------------- Buildings $ 1,417 $ 98 $1,286 $ 229 Machinery and equipment 46 9 33 22 -------- ------- ------ -------- $ 1,463 $ 107 $1,319 $ 251 -------- ------- ------ -------- -------- ------- ------ --------
- 20 - BEMIS COMPANY, INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (in thousands of dollars) YEAR ENDED DECEMBER 31, 1996 ------------------------------------------------ Balance at Additions Balance Beginning Charged to Accounts at Close of Year Profit & Loss Written Of of Year ---------- ------------- ---------- --------- Reserves for doubtful accounts and allowances $11,437 $2,766 $2,571(1) $11,632 ------- ------ -------- ------- ------- ------ -------- ------- YEAR ENDED DECEMBER 31, 1995 ------------------------------------------------ Balance at Additions Balance Beginning Charged to Accounts at Close of Year Profit & Loss Written Of of Year ---------- ------------- ---------- --------- Reserves for doubtful accounts and allowances $11,811 $ 714 $1,088(2) $11,437 ------- ------ -------- ------- ------- ------ -------- ------- YEAR ENDED DECEMBER 31, 1994 ------------------------------------------------ Balance at Additions Balance Beginning Charged to Accounts at Close of Year Profit & Loss Written Of of Year ---------- ------------- ---------- --------- Reserve for doubtful accounts and allowances $9,228 $4,059 $1,476(3) $11,811 ------ ------ -------- ------- ------ ------ -------- ------- (1) Net of $161 collections on accounts previously written off. (2) Net of $33 collections on accounts previously written off. (3) Net of $103 collections on accounts previously written off. BEMIS COMPANY, INC. AND SUBSIDIARIES SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION (in thousands of dollars) 1996 1995 1994 ---- ---- ---- Maintenance and repairs $56,584 $46,623 $40,565 ------- ------- ------- ------- ------- ------- - 21 - EX-13 2 EXHIBIT 13 FINANCIAL HIGHLIGHTS BEMIS COMPANY, INC. (IN THOUSANDS, EXCEPT PERCENTS, RATIOS, PER AND SUBSIDIARIES SHARE AMOUNTS, STOCKHOLDERS, AND EMPLOYEES) % 1996 1995 Change - -------------------------------------------------------------------------------------- Sales and Earnings: Net Sales................................. $1,655,431 $1,523,390 9% Income Before Taxes....................... 162,781 136,110 20 Income Taxes.............................. 61,700 50,900 Net Income................................ 101,081 85,210 19 - -------------------------------------------------------------------------------------- Per Share: Net Income................................ $ 1.90** $ 1.63 17% Dividends Paid............................ .72 .64 13 Book Value................................ 10.83 9.76 11 - -------------------------------------------------------------------------------------- Ratios: Net Income to Net Sales................... 6.1% 5.6% Return on Average Common Equity........... 18.7% 18.3% Return on Average Total Capital........... 13.7% 13.5% Total Debt to Total Capital............... 28.3% 23.3% Current Ratio............................. 2.2 2.0 - -------------------------------------------------------------------------------------- Additional Information: Cash Flow Provided by Operations.......... $ 179,259 $ 155,480 15% Capital Expenditures...................... 111,950 93,615 20 Stock PE Range............................ 14-20 14-18 Average Common Shares Outstanding for Computation of EPS.................. 53,252 52,311 2 Common Shares Outstanding at Year-End..... 52,361 52,567 Number of Common Stockholders............. 5,947 5,711 4 Number of Employees....................... 8,876 8,515 4
[CHARTS] 1 MANAGEMENT'S DISCUSSION AND ANALYSIS SUMMARY In 1996 the Company focused on expanding its core businesses by both internal investment and acquisitions. Capital expenditures for the year were a record $112 million, compared to $94 million in 1995, and $93 million in 1994. The major part of the investment went into the Company's key flexible plastic packaging and pressure sensitive materials operations, and was used to expand the capacity and capabilities of these businesses. In April of 1996, the Company acquired the Perfecseal Healthcare Packaging Division of PM Co., a leading producer of flexible packaging for the disposable sterile medical device industry with approximately $65 million in sales. This acquisition complements Bemis' medical packaging activities and provides new products and technology as well as a strong customer base. In November of 1996, the Company announced an agreement in principal to acquire Paramount Packaging, a flexible packaging firm with $130 million in sales and a strong market position in the confectionery and disposable diaper packaging markets. This acquisition was subsequently completed in January of 1997. The Company sold a division of its Hayssen packaging machinery business in January of 1996. This operation had sales of approximately $30 million. Overall results for the year were quite positive with net sales of $1.66 billion, up 9 percent over 1995, and 19 percent over 1994. Sales for the year were affected by the acquisition of Banner Packaging in October of 1995 and Perfecseal in April of 1996 and the sale of a Hayssen division in January of 1996. Excluding the effect of these transactions, net sales increased 4 percent. Net income for the same period was $98.5 million, excluding a $2.6 million gain on the sale of the Hayssen division, and was up 16 percent over 1995 and 35 percent over 1994. On the same basis, earnings per share for 1996 were $1.85, up 13 percent over 1995 and 32 percent over 1994. THREE-YEAR REVIEW OF RESULTS PERCENT - ------------------------------------------------------------ 1996 1995 1994 ----- ----- ----- Net Sales 100.0% 100.0% 100.0% Cost of products sold 76.9 77.7 77.5 ----- ----- ----- Gross margin 23.1 22.3 22.5 Selling, general, and administrative expenses 11.6 11.7 12.3 All other expenses 1.7 1.7 1.7 ----- ----- ----- Income before income taxes 9.8 8.9 8.5 Income taxes 3.7 3.3 3.3 ----- ----- ----- Net income 6.1% 5.6% 5.2% ----- ----- ----- ----- ----- ----- Effective tax rate 37.9% 37.4% 38.4% Sales for both segments, Flexible Packaging and Specialty Coated and Graphics Products, increased over the prior year's results in both 1996 and 1995. Raw material prices in both segments were generally lower during much of 1996 compared to the prior year, and this effect tended to moderate the growth in sales as selling prices broadly reflect raw material costs in these businesses. Unit volumes, however, were quite strong in the Company's key businesses. Sales growth in 1995 was generally helped by higher raw materials price levels compared to 1994. In 1996, Flexible Packaging sales benefited from the acquisitions described above. In 1995, Banner Packaging's sales for the fourth quarter were included in the year's total, thereby slightly increasing sales levels compared to 1994. In 1996, Specialty Coated and Graphics Products sales were enhanced by very strong demand late in the year compared to 1995, and 1995 sales grew at a less rapid pace over 1994 due to a weakening in demand in 1995 as well as reduced economic activity in Europe. Operating profits in both business segments improved in both 1996 and 1995 as did profit margins. Flexible Packaging operating profits were $134.1 million in 1996, or 11.4 percent of sales, compared to $123.0 million, or 11.3 percent of sales in 1995. Profit margins for this segment in 1994 were 11.0 percent of sales. In Specialty Coated and Graphics Products, operating profits were $60.5 million, or 12.7 percent of sales, compared to 10.7 percent of sales in 1995. The improvement in margins resulted from a better mix of products, and improved plant efficiencies toward the end of the year. In 1995, margins were 10.7 percent of sales compared to 10.6 percent in 1994. FORWARD LOOK We are enthusiastic about the progress of the Company and its future and enter 1997 with good momentum. Our capital expenditure program and recent acquisitions have added increased capacity and improved technology to our business and are enabling the Company to increase its penetration in key markets with key customers. COSTS AND EXPENSES Cost of Products Sold as a percentage of Net Sales decreased to 76.9 percent for 1996 compared to 77.7 percent for 1995 and 77.5 percent for 1994. Sharp raw material 22 price increases experienced in 1994 were partially reversed in 1995 and 1996 resulting in improved Cost of Products Sold percentages in 1996. Selling, General, and Administrative Expense increased in absolute dollars in 1996 and 1995 but declined as a percent of sales due to business acquisitions, improving European business conditions, and higher sales volume. Actual expense for 1996 increased $14.8 million or 8.3 percent compared to 1995, and $6.8 million or 4 percent for 1995 versus 1994. Research and Development Expense was $13.7 million in 1996, $13.6 million in 1995, and $13.1 million in 1994. The slight increase in 1996 is net of the impact of the disposition of a portion of our packaging machinery business. Interest Expense was $13.4 million for 1996, compared to $11.5 million in 1995 and $8.4 million in 1994. Higher debt levels resulted in the increase in 1996 compared to 1995 whereas higher average interest rates primarily caused the increase in 1995 compared to 1994. The increased debt level was due to higher working capital to support rising business activity and capital expenditures together with our business acquisition efforts. Higher rates during 1995 were due to a combination of market factors and the transfer, in 1995, of $100 million of Commercial Paper to 6.7 percent Notes Payable due in 2005. Other (Income) Costs reflect income of $5.5 million for 1996 versus $3.1 million in 1995 and $.8 million in 1994. The gain realized on the sale of a division of Hayssen packaging machinery business generated the 1996 increase. The lower income for 1994 compared to 1995 relates primarily to differences in exchange losses on foreign currency transactions of $1.2 million in 1994 versus $.1 million in 1995, and income in 1995 related to a minority equity investment, the balance of which was acquired in the fourth quarter of 1995. RETURN ON INVESTMENT Return on average common stockholders' equity in 1996 was 18.7 percent compared to 18.3 percent in 1995 and 18.5 percent in 1994. Operating profit as a percent of average investment, which appears in the Five-Year Summary on page five, was 22.0 percent in 1996, compared to 21.4 percent in 1995 and 22.9 percent in 1994. The return in Flexible Packaging was 19.6 percent in 1996 compared to 20.1 percent in 1995 and 21.8 percent in 1994. The return in Specialty Coated and Graphics Products was 30.0 percent in 1996 compared to 25.7 percent in 1995 and 26.1 percent in 1994. Return on average total capital was 13.7 percent in 1996, 13.5 percent in 1995 and 13.4 percent in 1994. Total capital is defined as the sum of all short-term and long-term debt, including obligations under capital leases, stockholders' equity, and deferred taxes. Return on capital is based on net income adjusted for interest expense on an after-tax basis. CAPITAL EXPENDITURES Capital expenditures in 1996 were $112.0 million compared to $93.6 million in 1995 and $93.1 million in 1994, including capitalized interest of $.8 million, $.7 million, and $.7 million for 1996, 1995, and 1994, respectively. In 1997 management anticipates expenditures to exceed $115 million. The bulk of these expenditures, made from internally generated funds, will be for continued expansion of the Company's growth businesses, with major equipment purchases planned for both the coated and laminated film and polyethylene packaging businesses and the completion of a major plant expansion for our European pressure sensitive business. CAPITAL STRUCTURE, LIQUIDITY, AND CASH FLOW Stockholders' equity increased in 1996 to $567.1 million, up from $512.8 million in 1995 and $418.0 million in 1994, due primarily to earnings net of dividend payments. In 1996, $9.0 million of common stock was repurchased compared to $8.4 million in 1995 and none in 1994. Total debt increased $74.9 million in 1996 to $245.8 million, making debt as a percent of stockholders' equity 43 percent compared to 33 percent in 1995 and 42 percent in 1994. In 1997, total debt is expected to increase $60 - $70 million due to acquisition of subsidiary operations and increases in capital expenditures and working capital. Working capital (excluding short-term debt) increased by $29.6 million to $257.2 million in 1996 following an increase of $17.0 million to $227.5 million in 1995, and an increase of $53.6 million to $210.5 million in 1994. The current ratio was 2.2:1 in 1996 compared to 2.0:1 in 1995 and 1994. The Company's cash flow remained strong in 1996 as cash provided by operations was $179.3 million compared to $155.5 million in 1995 and $132.5 million in 1994. The following schedule presents the major sources and uses of cash for the Company in 1996. SOURCES AND USES OF CASH (IN MILLIONS OF DOLLARS) SOURCES: Net income $101.1 Depreciation and amortization 66.2 Minority interest 4.7 Deferred income taxes 7.0 Increase in total debt 74.9 Other 8.6 ------ Total Sources $262.5 ------ ------ USES: Capital expenditures $112.0 Increase in working capital* 29.6 Business acquisitions 74.1 Common stock repurchases 9.0 Dividends 37.8 ------ Total Uses $262.5 ------ ------ *EXCLUDING SHORT-TERM DEBT. CONTINUED 23 MANAGEMENT'S DISCUSSION CONTINUED The Company's pretax interest coverage was 13.2 times in 1996 compared to 12.8 times in 1995 and 15.1 times in 1994. Pretax income increased to $162.8 million in 1996 from $136.1 million in 1995 and $118.1 million in 1994. Interest expense was $13.4 million in 1996, $11.5 million in 1995, and $8.4 million in 1994. Following are pretax interest coverage ratios for the last five years: PRETAX INTEREST COVERAGE Coverage of Interest by Pretax Income and Interest 1992 1993 1994 1995 1996 - ---------------------------------------------- 13.0 11.3 15.1 12.8 13.2 - ---------------------------------------------- Substantial credit is available to the Company for future use, including a $150 million revolving credit agreement with five banks. Bemis is also an issuer of commercial paper which carries an A1/P1 rating. FOREIGN CURRENCY EXPOSURES The Company enters into forward foreign currency exchange contracts to hedge certain foreign currency denominated receivables and payables, principally at operations in Belgium, France, Germany, Italy, England, Sweden, and Spain. Exchange gains and losses arising from these transactions are deferred and recognized when the transaction for which the hedge was obtained is finalized. At December 31, 1996 and 1995, the Company had outstanding forward foreign currency exchange contracts aggregating $16,562,000 and $17,377,000, respectively. Forward foreign currency exchange contracts generally have maturities of less than nine months and relate primarily to major Western currencies. Counterparties to the forward foreign currency exchange contracts are major financial institutions. Credit loss from counterparty nonperformance is not anticipated. Based on quoted year-end market prices of forward foreign currency exchange contracts the Company would have experienced a $264,000 loss at December 31, 1996, and a $559,000 loss at December 31, 1995, had outstanding contracts been settled at those respective dates. INCOME TAXES The Company's effective tax rate was 38 percent in 1996 versus 37 percent in 1995 and 38 percent in 1994. The primary difference between our overall tax rate and the U.S. statutory tax rate of 35 percent in 1996, 1995, and 1994 relates to state and local income taxes net of the federal income tax benefit. ACCOUNTING CHANGES In 1996, the Company adopted the pro forma disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." The footnoted pro forma presentation reflects a $1.1 million charge against Net Income (2 cents per share) for 1996 and substantially no impact on 1995. Currently, the Company follows the requirements of Accounting Principles Board (APB) Opinion 25 issued in October 1972. MARKET PRICES* AND DIVIDENDS The Bemis quarterly dividend was increased by 12.5 percent in the first quarter of 1996 to 18 cents per share from 16 cents. This followed first quarter increases of 18.5 percent in 1995 to 16 cents per share from 13.5 cents, and 8 percent in 1994 to 13.5 cents per share from 12.5 cents. Common dividends for the year were 72 cents per share, up from 64 cents in 1995 and 54 cents in 1994. The 1996 dividend payout ratio was 38 percent compared to 39 percent in 1995 and 39 percent in 1994. Based on the market price of $25.63 per share at the beginning of 1996, the dividend yield was 2.8 percent. Stockholders' equity per common share (book value per share) increased to $10.83 per share in 1996, up from $9.76 per share in 1995 and $8.16 per share in 1994. Trading volume in Bemis common stock was 18.0 million shares in 1996. In February 1997, the Board of Directors increased the quarterly cash dividend on common stock to 20 cents per share from 18 cents, a 11.1 percent increase. BEMIS COMMON STOCK PERFORMANCE 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------- High Low Div. Paid High Low Div. Paid High Low Div. Paid ----------------------------- ----------------------------- ----------------------------- First Quarter 33 3/8 26 1/8 $.18 29 1/2 23 3/8 $.16 24 1/8 21 1/8 $.135 Second Quarter 36 30 .18 29 3/8 26 .16 24 7/8 21 .135 Third Quarter 36 29 3/8 .18 29 3/4 26 .16 25 5/8 22 1/2 .135 Fourth Quarter 37 1/8 34 .18 27 3/4 24 7/8 .16 25 21 7/8 .135 *New York Stock Exchange:BMS
24 FIVE-YEAR CONSOLIDATED REVIEW (IN MILLIONS, EXCEPT PERCENTS, SHARES, RATIOS, PER SHARE AMOUNTS, STOCKHOLDERS, AND EMPLOYEES) 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ Operating Data Net sales $1,655.4 $1,523.4 $1,390.5 $1,203.5 $1,181.3 Cost of products sold and other expenses 1,479.2 1,375.8 1,264.0 1,121.9 1,083.5 Interest expense 13.4 11.5 8.4 7.2 7.5 Income before income taxes 162.8 136.1 118.1 74.4 90.3 Income taxes 61.7 50.9 45.3 28.3 33.0 Income before effect of changes in accounting principles 101.1 85.2 72.8 46.1 57.3 Cumulative effect of adoption of FAS 112 in 1993 and FAS 106 and FAS 109 in 1992 (1.8) (0.3) Net income 101.1 85.2 72.8 44.3 57.0 Net income as a percentage of net sales 6.1% 5.6% 5.2% 3.7% 4.8% - ------------------------------------------------------------------------------------------------------------------------ Common Share Data Income before effect of changes in accounting principles 1.90 1.63 1.40 .89 1.11 Cumulative effect of adoption of FAS 112 in 1993 and FAS 106 and FAS 109 in 1992 (.03) (.01) Net income 1.90 1.63 1.40 .86 1.10 Dividends per common share .72 .64 .54 .50 .46 Book value per common share 10.83 9.76 8.16 7.24 7.06 Stock PE ratio range 14-20 14-18 15-18 24-31 18-27 Average common shares and common share equivalents outstanding during the year for computation of earnings per share 53,252,250 52,311,421 51,953,210 51,767,064 51,839,696 Common shares outstanding at year-end 52,360,699 52,567,349 51,211,326 51,201,326 51,151,770 - ------------------------------------------------------------------------------------------------------------------------ Capital Structure and Other Data Current ratio 2.2 2.0 2.0 1.8 2.0 Working capital 252.5 223.1 208.1 152.8 154.0 Total assets 1,168.8 1,030.6 923.3 789.8 742.7 Long-term debt 240.9 166.4 170.7 120.5 127.8 Long-term obligations under capital leases 0.2 1.0 2.7 3.2 Stockholders' equity 567.1 512.8 418.0 370.5 361.0 Return on average common equity 18.7% 18.3% 18.5% 12.1% 16.5% Return on average total capital 13.7% 13.5% 13.4% 9.2% 11.8% Depreciation and amortization 66.2 58.0 51.8 47.0 48.3 Capital expenditures 112.0 93.6 93.1 60.7 70.7 Number of common stockholders 5,947 5,711 5,602 5,649 5,020 Number of employees 8,876 8,515 8,120 7,565 7,733 Wages and salaries 314.5 287.0 276.8 251.6 246.3 Research and development expense 13.7 13.6 13.1 14.1 15.9
25 MANAGEMENT'S RESPONSIBILITY STATEMENT The management of Bemis Company, Inc., is responsible for the integrity, objectivity, and accuracy of the financial statements of the Company. The financial statements are prepared by the Company in accordance with generally accepted accounting principles using management's best estimates and judgments, where appropriate. The financial information presented throughout the Annual Report is consistent with that in the financial statements. Management is also responsible for maintaining a system of internal accounting controls and procedures designed to provide reasonable assurance that the books and records reflect the transactions of the Company, and that assets are protected against loss from unauthorized use or disposition. Such a system is maintained through written accounting policies and procedures, administered by trained Company personnel and updated on a continuing basis to ensure their adequacy to meet the changing requirements of our business. The Company also maintains an internal audit department which evaluates the adequacy of and investigates adherence to these controls and procedures. In addition, the Company's General Orders require that all of its affairs, as reflected by the actions of its employees, will be conducted on a high ethical plane. Price Waterhouse LLP, independent accountants, are retained to audit the financial statements. Their audit is conducted in accordance with generally accepted auditing standards and includes selective reviews of internal accounting controls. The Audit Committee of the Board of Directors, which is composed solely of outside directors, meets periodically with management, internal auditors, and independent accountants to review the work of each and to satisfy itself that the respective parties are properly discharging their responsibilities. Both Price Waterhouse LLP and the internal auditors have had unrestricted access to the Audit Committee, without the presence of Company management, for the purpose of discussing the results of their examination and their opinions on the adequacy of internal accounting controls and the quality of financial reporting. /s/ JOHN H. ROE /s/ BENJAMIN R. FIELD, III /s/ LEROY F. BAZANY John H. Roe Benjamin R. Field, III LeRoy F. Bazany CHAIRMAN AND SENIOR VICE PRESIDENT, VICE PRESIDENT AND CONTROLLER CHIEF EXECUTIVE CHIEF FINANCIAL OFFICER OFFICER AND TREASURER REPORT OF INDEPENDENT ACCOUNTANTS TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF BEMIS COMPANY, INC.: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of stockholders' equity, and of cash flows present fairly, in all material respects, the financial position of Bemis Company, Inc., and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PRICE WATERHOUSE LLP PRICE WATERHOUSE LLP MINNEAPOLIS, MINNESOTA, JANUARY 23, 1997 26 BEMIS COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME YEARS ENDED DECEMBER 31, (IN THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS) 1996 1995 1994 - ---------------------------------------------------------------------------- Net sales $1,655,431 $1,523,390 $1,390,459 Costs and expenses: Cost of products sold 1,273,570 1,183,514 1,077,130 Selling, general, and administrative expenses 192,819 177,971 171,139 Research and development 13,655 13,603 13,124 Interest 13,397 11,549 8,395 Other (income) costs, net (5,497) (3,138) (802) Minority interest in net income 4,706 3,781 3,379 ---------- ---------- ---------- Income before income taxes 162,781 136,110 118,094 Provision for income taxes 61,700 50,900 45,300 ---------- ---------- ---------- Net income $ 101,081 $ 85,210 $ 72,794 ---------- ---------- ---------- ---------- ---------- ---------- Earnings per share of common stock $1.90 $1.63 $1.40 ---------- ---------- ---------- ---------- ---------- ---------- (SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.) 27 CONSOLIDATED BALANCE SHEET DECEMBER 31, (IN THOUSANDS OF DOLLARS) ASSETS 1996 1995 - ------------------------------------------------------------------------------ Current assets: Cash $ 10,223 $ 22,032 Accounts receivable, less $11,632 and $11,437 for doubtful accounts and allowances 216,740 201,725 Inventories 200,397 178,085 Prepaid expenses and deferred charges 39,561 40,432 ---------- ---------- Total current assets 466,921 442,274 ---------- ---------- Property and equipment: Land and land improvements 11,872 11,445 Buildings and leasehold improvements 189,978 178,661 Machinery and equipment 694,013 629,212 ---------- ---------- 895,863 819,318 Less - accumulated depreciation 312,372 284,767 ---------- ---------- 583,491 534,551 ---------- ---------- Excess of cost of investments in subsidiaries over net assets acquired 108,928 42,437 Other assets 9,455 11,333 ---------- ---------- 118,383 53,770 ---------- ---------- Total assets $1,168,795 $1,030,595 ---------- ---------- ---------- ---------- (SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.) CONTINUED 28 BEMIS COMPANY, INC. AND SUBSIDIARIES LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 - ------------------------------------------------------------------------------ Current Liabilities: Current portion of long-term debt $ 1,706 $ 3,405 Short-term borrowings 3,006 1,080 Accounts payable 164,638 163,692 Accrued liabilities: Salaries and wages 34,163 29,128 Income taxes 5,463 13,455 Other taxes 5,469 8,455 ---------- ---------- Total current liabilities 214,445 219,215 Long-term debt, less current portion 241,077 166,435 Deferred taxes 56,661 49,758 Other liabilities and deferred credits 57,726 53,943 ---------- ---------- Total liabilities 569,909 489,351 ---------- ---------- Minority interest 31,789 28,436 Commitments and contingencies Stockholders' equity: Common stock, $.10 par value: Authorized - 123,800,000 shares Issued - 57,897,316 and 57,811,966 shares 5,790 5,781 Capital in excess of par value 149,481 147,119 Retained income 561,049 496,252 Cumulative translation adjustment 6,588 10,505 Common stock held in treasury, 5,536,617 and 5,244,617 shares, at cost (155,811) (146,849) ---------- ---------- Total stockholders' equity 567,097 512,808 ---------- ---------- Total liabilities and stockholders' equity $1,168,795 $1,030,595 ---------- ---------- ---------- ---------- 29 CONSOLIDATED STATEMENT OF CASH FLOWS YEARS ENDED DECEMBER 31, (IN THOUSANDS OF DOLLARS) 1996 1995 1994 - ------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $101,081 $ 85,210 $ 72,794 Non-cash items: Depreciation and amortization 66,192 57,954 51,828 Minority interest in net income 4,706 3,781 3,379 Deferred income taxes, non-current portion 7,035 8,746 4,297 Loss (gain) on sale of property and equipment 245 (211) 210 -------- ------- -------- Cash provided by operations 179,259 155,480 132,508 Changes in working capital, net of effect of acquisitions and dispositions: Accounts receivable (14,062) 3,868 (20,863) Inventories (25,243) (7,287) (23,784) Prepaid expenses and deferred charges 1,065 1,019 (768) Accounts payable (4,520) (1,187) 11,881 Accrued salaries and wages 4,180 (3,048) 7,530 Accrued income taxes (7,817) 4,254 (759) Accrued other taxes (3,825) 304 (2,501) Changes in other liabilities and deferred credits 4,612 (1,077) 523 Changes in deferred charges and other investments 2,563 (1,389) (230) Other (1,158) 1,280 -------- ------- -------- Net cash provided by operating activities $136,212 $149,779 $104,817 -------- ------- -------- CONTINUED
30 BEMIS COMPANY, INC. AND SUBSIDIARIES CONTINUED 1996 1995 1994 - ------------------------------------------------------------------------------------------- Cash flows from investing activities: Additions to property, plant and equipment ($111,950) ($93,615) ($93,064) Business acquisitions, net of cash acquired (74,114) (552) (31,956) Business divestiture 12,752 Proceeds from sale of property and equipment 1,960 2,135 3,594 Other 37 3 337 --------- --------- --------- Net cash used by investing activities (171,315) (92,029) (121,089) --------- --------- --------- Cash flows from financing activities: Increase in long-term debt 79,952 579 57,601 Repayment of long-term debt (5,310) (11,166) (10,287) Change in short-term borrowings 1,926 (591) 1,671 Change in current portion of long-term debt (1,699) (748) (3,769) Cash dividends paid (37,830) (33,175) (27,654) Subsidiary dividends to minority stockholders (1,841) (1,703) Purchase of common stock for the treasury (8,962) (8,395) Stock incentive programs and related tax effects 312 3,449 138 --------- --------- --------- Net cash provided (used) by financing activities 26,548 (50,047) 15,997 --------- --------- --------- Effect of exchange rates (3,254) 1,603 4,090 --------- --------- --------- Net (decrease) increase in cash ($11,809) $ 9,306 $3,815 --------- --------- --------- --------- --------- --------- Supplemental disclosure of cash flow information Non-cash investing and financing activities: Fair value of assets acquired $92,218 $64,646 Liabilities assumed 14,937 21,505 Minority interest acquired 1,108 ------- ------- Net value acquired 76,173 43,141 Common stock issued 2,059 42,589 ------- ------- Cash used for acquisition $74,114 $ 552 ------- ------- ------- ------- Interest paid during the year $14,268 $ 8,268 $ 9,223 Income taxes paid during the year $60,955 $39,296 $39,918
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.) 31 CONSOLIDATED STATEMENT BEMIS COMPANY, INC. OF STOCKHOLDERS' EQUITY AND SUBSIDIARIES (IN THOUSANDS OF DOLLARS) Capital in Cumulative Common Common Excess of Retained Translation Stock Held Stock Par Value Income Adjustment in Treasury - ------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1993 5,571 101,153 397,922 (614) (133,493) Net income for 1994 72,794 Translation adjustment for 1994 5,908 Pension liability adjustment (3,698) Cash dividends paid on common stock, $.54 per share (27,654) Stock incentive programs and related tax effects 1 137 ------ -------- -------- ------- --------- Balance at December 31, 1994 $5,572 $101,290 $439,364 $5,294 $(133,493) ------ -------- -------- ------- --------- Net income for 1995 85,210 Translation adjustment for 1995 5,211 Pension liability adjustment 4,853 Cash dividends paid on common stock, $.64 per share (33,175) Stock incentive programs and related tax effects 28 3,421 Common stock transactions related to an acquisition of a subsidiary company 181 42,408 (4,961) Purchase of 330,300 shares of common stock (8,395) ------ -------- -------- ------- --------- Balance at December 31, 1995 $5,781 $147,119 $496,252 $10,505 $(146,849) ------ -------- -------- ------- --------- Net income for 1996 101,081 Translation adjustment for 1996 (3,917) Pension liability adjustment 1,546 Cash dividends paid on common stock, $.72 per share (37,830) Stock incentive programs and related tax effects 2 310 Common stock transactions related to an acquisition of a subsidiary company 7 2,052 Purchase of 292,000 shares of common stock (8,962) ------ -------- -------- ------- --------- Balance at December 31, 1996 $5,790 $149,481 $561,049 $ 6,588 $(155,811) ------ -------- -------- ------- --------- ------ -------- -------- ------- ---------
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.) 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1 - ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. REVENUE RECOGNITION: Sales and related cost of sales are recognized primarily upon shipment of products. RESEARCH AND DEVELOPMENT: Research and development expenditures are charged against income as incurred. EARNINGS PER SHARE: Earnings per common share are computed by dividing net income by the weighted-average number of common shares outstanding during the year including common stock equivalents, if dilutive. INVENTORIES ARE VALUED AT THE LOWER OF COST OR MARKET: Cost is determined by the last-in, first-out (LIFO) method for essentially all domestic inventories. Cost for all other inventories is determined using the first-in, first-out (FIFO) method. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Plant and equipment are depreciated for financial reporting purposes principally using the straight-line method over the estimated useful lives of assets. For tax purposes, the Company generally uses accelerated methods of depreciation. The tax effect of the difference between book and tax depreciation has been provided as deferred income taxes. On sale or retirement, the asset cost and related accumulated depreciation are removed from the accounts and any related gain or loss is reflected in income. Maintenance and repairs which do not improve efficiency or extend economic life are expensed currently. Interest costs are capitalized for major capital expenditures during construction. EXCESS OF COST OF INVESTMENTS IN SUBSIDIARIES OVER NET ASSETS ACQUIRED: The excess relating to companies acquired prior to 1971 is not amortized against income unless a loss of value becomes evident. The excess resulting from investments made subsequent to 1970 is being amortized against income over 40 years. The recoverability of unamortized goodwill is assessed on an ongoing basis by comparing undiscounted cash flows from applicable operations to related net book value. TAXES ON UNDISTRIBUTED EARNINGS: No provision is made for U.S. income taxes on earnings of subsidiary companies which the Company controls but does not include in the consolidated federal income tax return since it is management's practice and intent to permanently reinvest the earnings. TRANSLATION OF FOREIGN CURRENCIES: Assets and liabilities are translated at the exchange rate as of the balance sheet date. All revenue and expense accounts are translated at a weighted-average of exchange rates in effect during the year. Translation adjustments are recorded as a separate component of equity. STATEMENT OF CASH FLOWS: For purposes of reporting cash flows, cash includes cash on hand and demand deposit accounts. PREFERRED STOCK PURCHASE RIGHTS: On August 3, 1989, the Company's Board of Directors adopted a Shareholder Rights Plan by declaring a dividend of one preferred share purchase right for each outstanding share of common stock. Under certain circumstances, a right may be exercised to purchase one two-hundredth of a share of Series A Junior Preferred Stock for $60. The rights become exercisable if a person or group acquires 20 percent or more of the Company's outstanding common stock, subject to certain exceptions, or announces an offer which would result in such person acquiring 20 percent or more of the Company's outstanding common stock. If a person or group acquires 20 percent or more of the Company's outstanding common stock, subject to certain exceptions, each right will entitle its holder to buy common stock of the Company having a market value of twice the exercise price of the right. The rights expire August 22, 1999, and may be redeemed by the Company for 1 cent per right at any time before, or, in certain circumstances, within 30 days (subject to extension) following the announcement that a person has acquired 20 percent or more of the Company's outstanding common stock. In connection with the Shareholder Rights Plan, the Company's Board of Directors authorized 600,000 shares of Series A Junior Preferred Stock with a par value of $1 per share. At December 31, 1996, none of these shares were issued or outstanding. 33 NOTE 1 - ACCOUNTING POLICIES CONTINUED ENVIRONMENTAL COST: The Company is involved in a number of environmental related disputes and claims. The Company accrues for environmental costs when it is probable that these costs will be incurred and can be reasonably estimated. In addition, costs which cannot be reasonably estimated, are directly expensed when payment is made. At December 31, 1996 and 1995, reserves were $745,000 and $745,000, respectively. Adjustments to the reserve accounts and costs which were directly expensed for environmental remediation matters resulted in charges to the income statements for 1996, 1995, and 1994 of $(181,000), $164,000, and $991,000, net of third party reimbursements totaling $439,000, $335,000, and $366,000 for 1996, 1995, and 1994, respectively. The Company is not aware of any pending or threatened litigation that is likely to have a material adverse effect on the business, operating results, or financial condition. ESTIMATES AND ASSUMPTIONS REQUIRED: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 - BUSINESS ACQUISITIONS AND DISPOSITIONS Effective December 31, 1996, the Company, through its subsidiary Milprint, Inc., acquired all of the assets of Paramount Packaging, LLC (Paramount-LLC) of Lebanon, Pennsylvania, for a combination of cash and the assumption of debt. Paramount LLC, with total annual sales of approximately $30 million in the confectionery packaging market, operates a manufacturing facility in Lebanon, Pennsylvania. The total purchase price of approximately $11 million has been accounted for under the purchase method of accounting, and, because of the acquisition date, no results of operations for Paramount LLC are included in these financial statements. See Note 15 for subsequent event discussion on a related 1997 business acquisition transaction. On April 29, 1996, the Company acquired the Perfecseal Healthcare Packaging Division (Perfecseal) of Paper Manufacturers Company, Inc. of Philadelphia, Pennsylvania, for Bemis common stock valued at $2.1 million and $62.9 million in cash. Perfecseal, with total annual sales of approximately $65 million in the medical packaging market, operates manufacturing facilities in Philadelphia, Pennsylvania, Northern Ireland, and Puerto Rico. The total purchase price of $65 million has been accounted for under the purchase method of accounting, and results of operations for Perfecseal subsequent to April 28, 1996, are included in these financial statements. Effective January 1, 1996, the Company's subsidiary, Hayssen Manufacturing Company, sold its Paper Packaging Machinery Division, which had annual sales of approximately $30 million, to Paper Converting Machine Company of Green Bay, Wisconsin. Cash received totaled approximately $17 million, includng the $4.3 million pre-tax gain which is included in other income. On October 5, 1995, the Company acquired Banner Packaging, Inc., for Bemis common stock valued at $42.6 million and $.5 million in cash. Banner, with total annual sales of approximately $60 million, operates a large manufacturing facility in Oshkosh, Wisconsin, producing co-extruded films, flexographic printing, and bag conversion. The total purchase price of $43.1 million has been accounted for under the purchase method of accounting, and results of operations for Banner subsequent to October 4, 1995, are included in these financial statements. On January 3, 1994, the Company, through its subsidiary, Morgan Adhesives Company, acquired Fitchburg Coated Products. Fitchburg operates a pressure sensitive materials manufacturing plant in Scranton, Pennsylvania, and has sales of approximately $80 million. On January 20, 1994, the Company, through its subsidiary, Curwood, Inc., acquired the Hargro Health Care business with total annual sales of approximately $17 million. The combined net purchase price of $32 million has been accounted for under the purchase method of accounting. The results of operations for Fitchburg subsequent to January 2, 1994, and for Hargro subsequent to January 19, 1994, are included in these financial statements. Supplemental pro forma results of operations giving effect to the acquisitions and dispositions are not presented because they are not material. 34 Note 3 - RESTRUCTURING OF OPERATIONS In the third quarter of 1993, a restructuring plan was announced for the Flexible Packaging Products line of business. The objective of this plan was to increase profitability through improved operating efficiency. This plan resulted in a $21 million pretax charge to "Other Costs" in the third quarter of 1993 and was expected to produce annual pretax savings of $8 million when fully implemented. Key aspects of the plan included redeployment of assets in both the domestic and international packaging machinery businesses ($7.2 million), the closedown of a U.S. nylon resin production facility ($6.2 million), the consolidation of two paper packaging plants into larger facilities ($5.0 million), and $2.6 million for all other expenses principally related to the write-off of nonproductive assets in the coated and laminated film business. These restructuring actions were expected to result in the elimination of 264 jobs in the U.S. and Europe and the relocation of an additional 27 employees in conjunction with the closing of five manufacturing facilities. At the close of the project, actual employee reductions totaled 266 plus 26 transfers. All facility closures and consolidations were essentially completed as of the end of 1994 with the balance completed by mid-1995. Of the $21 million estimated restructuring expense, actual cash cost was $5.6 million and total non-cash cost was $15.3 million. The remaining $.1 million reserve was restored to income in 1995, since the project was completed. EMPLOYEE SEPARATIONS - RESTRUCTURING HOURLY SALARIED TOTAL - ------------------------------------------------------------------- Planned Employee Reductions 187 77 264 --- --- --- --- --- --- ACTUAL EMPLOYEE REDUCTIONS 1993 - Packaging Machinery 38 14 52 Paper Packaging 4 4 Coated and Laminated Film 29 4 33 --- --- --- Total 71 18 89 --- --- --- 1994 - Packaging Machinery 34 37 71 Paper Packaging 77 18 95 Coated and Laminated Film 5 6 11 --- --- --- Total 116 61 177 --- --- --- 1995 - None Cumulative Total 187 79 266 --- --- --- --- --- --- ANALYSIS OF RESTRUCTURING RESERVE ASSET EMPLOYEE WRITE-DOWNS/ (IN THOUSANDS OF DOLLARS) COSTS REDEPLOYMENT OTHER TOTAL CASH NON-CASH - ----------------------------------------------------------------------------------------------------------------------- Reserve balance September 30, 1993 $(4,100) $(13,600) $(3,300) $(21,000) $(9,600) $(11,400) ------- -------- ------- -------- -------- -------- 1993 Reserve charges: Packaging Machinery 250 672 420 1,342 861 481 Paper Packaging Nylon Resin Manufacturing 134 (1,462) 103 (1,225) (1,225) Other 1,837 1,837 70 1,767 ------- -------- ------- -------- -------- -------- Reserve balance December 31, 1993 $(3,716) $(12,553) $(2,777) $(19,046) $(9,894) $ (9,152) ------- -------- ------- -------- -------- -------- 1994 Reserve charges: Packaging Machinery 1,614 2,514 982 5,110 2,932 2,178 Paper Packaging 1,116 3,324 311 4,751 3,900 851 Nylon Resin Manufacturing 122 6,416 468 7,006 (2,442) 9,448 Other 73 8 240 321 (36) 357 ------- -------- ------- -------- -------- -------- Reserve balance December 31, 1994 $ (791) $ (291) $ (776) $ (1,858) $(5,540) $ 3,682 ------- -------- ------- -------- -------- -------- 1995 Reserve charges: Packaging Machinery 252 1,073 1,325 1,325 Paper Packaging 249 (1,288) 698 (341) (523) 182 Nylon Resin Manufacturing 2 338 340 340 Other 248 140 388 388 ------- -------- ------- -------- -------- -------- Reserve balance December 31, 1995 $ (40) $ (1,439) $ 1,333 $ (146)(A) $(4,010) $ 3,864 ------- -------- ------- -------- -------- -------- ------- -------- ------- -------- -------- --------
(A) RESTORED TO INCOME IN JUNE 1995. 35 NOTE 4 - INVENTORIES The Company utilizes the LIFO method of inventory valuation for essentially all domestic inventories. Approximately 80 percent of the December 31, 1996, and 81 percent of the December 31, 1995, inventories are valued using the last-in, first-out (LIFO) method. All other inventories are valued using the first-in, first-out (FIFO) method. Inventories are summarized at December 31, as follows: (IN THOUSANDS OF DOLLARS) 1996 1995 - ------------------------------------------------------------- Raw materials and supplies $ 91,439 $ 79,170 Work in process and finished goods 165,033 151,745 -------- -------- 256,472 230,915 Excess of current cost over LIFO inventory value (56,075) (52,830) -------- -------- Total inventories $200,397 $178,085 -------- -------- -------- -------- NOTE 5 - PENSION PLANS Total pension expense in 1996, 1995, and 1994 was $9,640,000, $8,516,000, and $7,704,000, respectively. Defined contribution plans cover employees at nine different manufacturing or administrative locations and provide for contributions ranging from 2 percent to 6 percent of covered employees' salaries or wages and totaled $1,390,000 in 1996, $1,099,000 in 1995, and $1,216,000 in 1994. Multiemployer plans cover employees at two different manufacturing locations and provide for contributions to a union administered defined benefit pension plan. Amounts charged to pension cost and contributed to the plan in 1996, 1995, and 1994 totaled $1,114,000, $1,000,000, and $1,034,000, respectively. The Company has defined benefit pension plans covering the majority of U.S. employees. The benefits under the plans are based on years of service and salary levels. Certain plans covering hourly employees provide benefits of stated amounts for each year of service. In addition, the Company also sponsors an unfunded supplemental retirement plan to provide senior management with benefits in excess of limits under the federal tax law and increased benefits to reflect a service adjustment factor. The funded status of the defined benefit plans at December 31, 1996, is as follows: PLANS WITH PLANS WITH ASSETS IN ACCUMULATED EXCESS OF BENEFITS IN ACCUMULATED EXCESS OF (IN THOUSANDS OF DOLLARS) BENEFITS ASSETS - -------------------------------------------------------------------------- Actuarial present value of benefit obligation: Vested benefit obligation $140,647 $ 73,461 Nonvested benefit obligation 8,210 3,094 -------- -------- Accumulated benefit obligation $148,857 $ 76,555 -------- -------- -------- -------- Projected benefit obligation $174,685 $ 80,780 Plan assets at fair value 178,125 70,605 -------- -------- Projected benefit obligations less than (in excess of) plan assets 3,440 (10,175) Unrecognized net obligation 5,738 2,154 Unrecognized prior service cost (1,071) 5,987 Unrecognized net (gain) loss (17,381) 2,680 -------- -------- (Pension liability) or prepaid pension cost $ (9,274) $ 646 -------- -------- -------- -------- Pension cost for defined benefit plans included the following components: (IN THOUSANDS OF DOLLARS) 1996 1995 1994 - ---------------------------------------------------------------------- Service cost - benefits earned during the year $ 6,320 $ 5,928 $ 5,942 Interest cost on projected benefit obligation 16,443 15,611 15,199 Actual return on plan assets (35,743) (43,589) 1,241 Net amortization and deferral 19,579 27,641 (17,781) -------- -------- -------- Net pension expense $ 6,599 $ 5,591 $ 4,601 -------- -------- -------- -------- -------- -------- The Company has recorded the following amounts pursuant to Statement of Financial Accounting Standards No. 87, Employers' Accounting for Pensions at December 31: (IN THOUSANDS OF DOLLARS) 1996 1995 - ---------------------------------------------------------------------- Intangible asset $ 6,000 $ 7,725 Prepaid tax 226 1,174 Pension liability (6,595) (10,814) ------- -------- Reduction in stockholders' equity $ (369) $ (1,915) ------- -------- ------- -------- The weighted-average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 7.0 percent and 5.5 percent, respectively. The expected long-term rate of return on assets was 9.0 percent. 36 NOTE 6 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company sponsors several defined benefit postretirement plans that cover more than 50 percent of salaried and nonsalaried employees. These plans provide health care benefits and, in some instances, provide life insurance benefits. Except for one closed-group plan, which is noncontributory, postretirement health care plans are contributory, with retiree contributions adjusted annually; life insurance plans are noncontributory. Net periodic postretirement benefit costs for 1996, 1995, and 1994 included the following components: (IN THOUSANDS OF DOLLARS) 1996 1995 1994 - ---------------------------------------------------------------- Service cost - benefits earned during the year $ 151 $ 206 $ 415 Interest cost on accumulated postretirement benefit obligation 792 944 1,322 Net amortization and deferral (371) (159) 68 ----- ----- ------ Net periodic postretirement benefit cost $ 572 $ 991 $1,805 ----- ----- ------ ----- ----- ------ The table below sets forth the plans' combined funded status reconciled with the amount shown in the Company's statement of financial position at December 31: (IN THOUSANDS OF DOLLARS) 1996 1995 1994 - ------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees and beneficiaries $ 9,574 $ 8,839 $10,473 Fully eligible active plan participants 1,101 1,064 1,556 Other active plan participants 1,670 1,797 1,939 ------- ------- ------- Accumulated postretirement benefit obligation in excess of plan assets 12,345 11,700 13,968 Unrecognized net gain or (loss) from past experience different from that assumed 4,988 6,119 3,735 ------- ------- ------- Accrued postretirement benefit cost $17,333 $17,819 $17,703 ------- ------- ------- ------- ------- ------- For measurement purposes, an 11 percent annual rate of increase in the per capita cost of covered health care benefits was assumed for 1997; the rate was assumed to decrease gradually to 5.5 percent by the year 2003 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. To illustrate, increasing the assumed health care cost trend rates by 1 percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1996, by $1,082,000 and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $96,000. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.0 percent. NOTE 7 - STOCK OPTION AND INCENTIVE PLANS Since 1983, the Company's stock option and stock award plans have provided for the issuance of up to 6,800,000 shares of common stock to key employees. As of December 31, 1996, 1995, and 1994, respectively, 1,657,447, 1,939,984, and 2,346,852 shares were available for future grants under these plans. Options are granted at prices equal to 100 percent of the market price on the date of the grant and are exercisable over varying periods up to ten years from the date of grant. Shares subject to options granted but not exercised become available for future grants. Option holders may deliver shares of common stock of the Company in lieu of cash payment for shares purchased upon the exercise of options under such plans. At December 31, 1996, twelve participants hold options with expiration dates ranging from 1999 to 2006 at option prices ranging from $12.63 to $32.31 per share with a weighted-average price of $20.31 per share. Details of the stock option plans at December 31, 1996, 1995, and 1994, are: WEIGHTED AVERAGE PER SHARE PRICE NUMBER OF OPTION PRICE PER SHARE SHARES RANGE - ------------------------------------------------------------------------- Outstanding at Dec. 31, 1993 $14.50 710,000 $ 5.75 - $22.31 Granted 23.75 189,766 22.06 - 24.63 Exercised 8.31 (10,000) 8.31 - ------------------------------------------------------------------------- Outstanding at Dec. 31, 1994 and Dec. 31, 1995 $16.54 889,766 $ 5.75 - $24.63 Granted 32.31 255,117 32.31 Exercised 5.75 (20,000) 5.75 - ------------------------------------------------------------------------- Outstanding at Dec. 31, 1996 $20.31 1,124,883 $12.63 - $32.31 - ------------------------------------------------------------------------- - ------------------------------------------------------------------------- Exercisable at Dec. 31, 1996 $16.29 811,511 $12.63 - $24.63 - ------------------------------------------------------------------------- - ------------------------------------------------------------------------- CONTINUED 37 NOTE 7 - STOCK OPTION AND INCENTIVE PLANS CONTINUED In 1984, the Company adopted a Stock Award Plan for certain key executive employees. Distribution of the shares will be made not less than three years nor more than seven years from the date of grant. All shares granted under the plan are subject to restrictions as to continuous employment, except in the case of death, permanent disability, or retirement. In addition, cash payments are made during the grant period equal to the dividend on Bemis common stock. The cost of the awards is charged to income over the period of the grant: $4,291,000 was expensed in 1996, $3,954,000 in 1995, and $2,890,000 in 1994. Details of the stock award plan at December 31, 1996, 1995, and 1994, are: NUMBER OF SHARES - --------------------------------------------------------------- Outstanding at December 31, 1993 1,124,316 Paid 2,000 Cancelled (31,000) --------- Outstanding at December 31, 1994 1,095,316 Granted 436,500 Paid (431,316) Cancelled (29,632) --------- Outstanding at December 31, 1995 1,070,868 Granted 59,557 Cancelled (32,137) --------- Outstanding at December 31, 1996 1,098,288 --------- --------- The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plan. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant date for stock options and awards in 1996 and 1995 consistent with the provisions of SFAS No. 123, the Company's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below: 1996 1995 - --------------------------------------------------------------------------- Net earnings - as reported $101,081,000 $85,210,000 Net earnings - pro forma 99,944,000 85,201,000 Earnings per share - as reported $1.90 $1.63 Earnings per share - pro forma $1.88 $1.63 Dividend yield 2.2% 2.3% Expected volatility 27.3% 27.7% Risk free interest rate 7.0% 7.0% Expected lives 9.1 years 5.3 years The fair value of each grant made in 1996 or 1995 is estimated on the date of grant using the Black-Scholes option-pricing model using the above indicated weighted-average assumptions for dividend yield, expected volatility, risk-free interest rate, and expected lives. NOTE 8 - LEASES All noncancelable leases have been categorized as capital or operating leases. The Company has leases for manufacturing plants, warehouses, machinery and equipment, and administrative offices with terms (including renewal options) ranging from one to 25 years. Under most leasing arrangements, the Company pays the property taxes, insurance, maintenance, and expenses related to the leased property. Total rental expense under operating leases was $9,664,000 in 1996, $9,242,000 in 1995, and $9,601,000 in 1994. The present values of minimum future obligations shown in the following chart are calculated based on an interest rate of 11 1/4 percent determined to be applicable at the inception of the lease. Interest expense on the outstanding obligations under capital leases was $2,000 in 1996, $21,000 in 1995, and $255,000 in 1994. Minimum future obligations on leases in effect at December 31, 1996, are: CAPITAL OPERATING (IN THOUSANDS OF DOLLARS) LEASES LEASES - ------------------------------------------------------ 1997 $ 8 $ 8,779 1998 8 6,147 1999 8 5,424 2000 3 3,933 2001 0 2,394 Thereafter 0 11,821 --- ------- Total minimum obligations 27 $38,498 ------- ------- Less amount representing interest 5 --- Present value of net minimum obligations 22 Less current portion 6 --- Long-term obligations $16 --- --- 38 NOTE 9 - LONG-TERM DEBT Long-term debt maturing in years 1998 through 2001 is $1,700,000, $1,700,000, $0, and $7,500,000, respectively. Under the terms of a revolving credit agreement with five banks, the Company may borrow up to $150,000,000 through August 1, 2001. The Company must pay a facility fee of 1/10 of 1 percent annually on the entire amount of the commitment. There were no borrowings outstanding under this agreement at December 31, 1996. Debt consisted of the following at December 31: (IN THOUSANDS OF DOLLARS) 1996 1995 - ------------------------------------------------------------------------------------------ Commercial paper payable through 1997 at an interest rate of 5.8%(1) $117,200 $ 37,500 Note payable in 2005 at an interest rate of 6.7%(2) 100,000 100,000 Industrial revenue bonds payable through 2011 at interest rates of 4 1/8% to 7 1/4% 20,250 23,250 Debt of subsidiary companies payable through 1999 at an interest rate of 6% 5,100 9,061 Obligations under capital leases 233 29 -------- -------- 242,783 169,840 Less current portion 1,706 3,405 -------- -------- $241,077 $166,435 -------- -------- -------- --------
(1) THE COMMERCIAL PAPER HAS BEEN CLASSIFIED AS LONG-TERM DEBT IN ACCORDANCE WITH THE COMPANY'S INTENTION AND ABILITY TO REFINANCE SUCH OBLIGATIONS ON A LONG-TERM BASIS. THE INTEREST RATE OF COMMERCIAL PAPER OUTSTANDING AT DECEMBER 31, 1996, WAS 5.8 PERCENT. THE MAXIMUM OUTSTANDING AT ANY MONTH-END DURING 1996 WAS $122,000,000, AND THE AVERAGE OUTSTANDING DURING 1996 WAS $84,581,000. THE WEIGHTED-AVERAGE INTEREST RATE DURING 1996 WAS 5 1/2 PERCENT. (2) IN JULY, 1995, THE COMPANY SOLD $100,000,000 OF TEN-YEAR NOTES WITH A COUPON OF 6.7 PERCENT. PROCEEDS FROM THE SALE WERE USED TO PAY OFF OUTSTANDING COMMERCIAL PAPER DEBT. NOTE 10 - INCOME TAXES (IN THOUSANDS OF DOLLARS) 1996 1995 1994 - ------------------------------------------------------------------------------------------ U.S. income before income taxes $143,149 $119,880 $111,217 Non-U.S. income before income taxes 23,468 19,130 10,108 Consolidating eliminations (3,836) (2,900) (3,231) -------- -------- -------- Income before income taxes $162,781 $136,110 $118,094 -------- -------- -------- -------- -------- -------- Income tax expense consists of the following components: Current tax expense: U.S. federal $ 40,922 $ 34,496 $ 31,053 Foreign 6,903 5,665 3,947 State and local 6,451 5,755 4,144 -------- -------- -------- Total current tax expense 54,276 45,916 39,144 -------- -------- -------- Deferred (prepaid) tax expense: U.S. federal 6,937 5,071 5,349 Foreign (306) (333) State 793 246 807 -------- -------- -------- Total deferred (prepaid) tax expense 7,424 4,984 6,156 -------- -------- -------- Total income tax expense $ 61,700 $ 50,900 $ 45,300 -------- -------- -------- -------- -------- -------- CONTINUED
39 NOTE 10 - INCOME TAXES continued The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below. (IN THOUSANDS OF DOLLARS) 1996 1995 1994 - --------------------------------------------------------------------------------------------------------- Deferred tax assets: Accounts receivable, principally due to allowances for returns and doubtful accounts $ 5,410 $ 7,158 $ 6,180 Inventories, principally due to additional costs inventoried for tax purposes pursuant to the Tax Reform Act of 1986 7,392 6,883 7,685 Employee compensation and benefits accrued for financial reporting purposes 13,537 14,033 12,340 Restructuring costs 743 Other 2,176 1,834 1,997 -------- -------- -------- Deferred tax assets (included in prepaid expenses and deferred charges) $ 28,515 $ 29,908 $ 28,945 -------- -------- -------- -------- -------- -------- Deferred tax liabilities: Plant and equipment, principally due to differences in depreciation, capitalized interest, and capitalized overhead $ 73,772 $ 65,296 $ 54,058 Noncurrent employee compensation and benefits accrued for financial reporting purposes (16,326) (15,052) (15,513) Other (785) (486) 1,468 -------- -------- -------- Deferred tax liabilities $ 56,661 $ 49,758 $ 40,013 -------- -------- -------- -------- -------- --------
The Company's effective tax rate differs from the federal statutory rate due to the following items: (IN THOUSANDS OF DOLLARS) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------ % OF INCOME % OF INCOME % OF INCOME AMOUNT BEFORE TAX AMOUNT BEFORE TAX AMOUNT BEFORE TAX ------ ---------- ------ ----------- ------ ----------- Computed "expected" tax expense on income before taxes at statutory rate $56,973 35.0% $47,639 35.0% $41,333 35.0% Increase (decrease) in taxes resulting from: State and local income taxes net of federal income tax benefit 4,709 2.9 3,901 2.9 3,218 2.7 Foreign tax rate differential (1,719) (1.1) (1,716) (1.3) 126 0.1 Minority interest 1,647 1.0 1,323 1.0 1,183 1.0 Miscellaneous items 90 0.1 (247) (0.2) (560) (0.4) ------- ----- ------- ----- ------- ----- Actual income tax expense $61,700 37.9% $50,900 37.4% $45,300 38.4% ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----
The Company's federal income tax returns for the years prior to 1995 have been audited and completely settled. Provision has not been made for U.S. or additional foreign taxes on $91,242,000 of undistributed earnings of foreign subsidiaries because those earnings are considered to be permanently reinvested in the operations of those subsidiaries. It is not practicable to estimate the amount of tax that might be payable on the eventual remittance of such earnings. 40 Note 11 - SEGMENTS OF BUSINESS The Company operates principally in two businesses (Flexible Packaging Products and Specialty Coated and Graphics Products) and three geographical areas (U.S., Canada, and Europe). A description of the Company's lines of business begins on page five of the Annual Report. LINES OF BUSINESS (IN MILLIONS OF DOLLARS) 1996 1995 1994 - -------------------------------------------------------------------------------- NET SALES TO UNAFFILIATED CUSTOMERS: Flexible Packaging $1,182.3 $1,090.3 $ 978.8 Specialty Coated and Graphics 478.8 437.9 415.3 Intersegment Sales: Flexible Packaging (1.7) (0.5) (0.3) Specialty Coated and Graphics (4.0) (4.3) (3.3) -------- -------- -------- Total $1,655.4 $1,523.4 $1,390.5 -------- -------- -------- -------- -------- -------- OPERATING PROFIT: Flexible Packaging $ 134.1 $ 123.0 $ 107.6 Specialty Coated and Graphics 60.5 46.6 43.7 -------- -------- -------- Total operating profit (1) 194.6 169.6 151.3 General corporate expenses (13.7) (18.1) (21.4) Interest expense (13.4) (11.6) (8.4) Minority interest in net income (4.7) (3.8) (3.4) -------- -------- -------- Income before income taxes $ 162.8 $ 136.1 $ 118.1 -------- -------- -------- -------- -------- -------- IDENTIFIABLE ASSETS: Flexible Packaging $ 832.6 $ 729.2 $ 638.2 Specialty Coated and Graphics 280.4 247.5 229.9 -------- -------- -------- Total identifiable assets (2) 1,113.0 976.7 868.1 Corporate assets (3) 55.8 53.9 55.2 -------- -------- -------- Total $1,168.8 $1,030.6 $ 923.3 -------- -------- -------- -------- -------- -------- DEPRECIATION AND AMORTIZATION: Flexible Packaging $ 50.8 $ 42.2 $ 36.9 Specialty Coated and Graphics 14.2 14.6 13.7 Corporate 1.2 1.2 1.2 -------- -------- -------- Total $ 66.2 $ 58.0 $ 51.8 -------- -------- -------- -------- -------- -------- EXPENDITURES FOR PROPERTY AND EQUIPMENT: Flexible Packaging $ 65.4 $ 78.0 $ 81.3 Specialty Coated and Graphics 44.6 14.9 10.2 Corporate 2.0 0.7 1.6 -------- -------- -------- Total $ 112.0 $ 93.6 $ 93.1 -------- -------- -------- -------- -------- -------- OPERATIONS BY GEOGRAPHIC AREAS (IN MILLIONS OF DOLLARS) 1996 1995 1994 - -------------------------------------------------------------------------------- NET SALES TO UNAFFILIATED CUSTOMERS: United States $1,442.5 $1,317.9 $1,209.5 Canada 56.9 48.0 42.7 Europe 188.9 184.5 158.5 Other 4.5 0.5 0.2 Eliminations (37.4) (27.5) (20.4) -------- -------- -------- Total $1,655.4 $1,523.4 $1,390.5 -------- -------- -------- -------- -------- -------- OPERATING PROFIT: United States $ 170.2 $ 151.3 $ 136.8 Canada 9.3 6.2 4.3 Europe 16.2 15.2 11.6 Other 0.2 (0.2) (0.1) Eliminations (1.3) (2.9) (1.3) -------- -------- -------- Total $ 194.6 $ 169.6 $ 151.3 -------- -------- -------- -------- -------- -------- IDENTIFIABLE ASSETS: United States $ 946.8 $ 828.9 $ 741.6 Canada 28.7 25.4 24.4 Europe 143.1 127.0 110.4 Other 3.1 1.1 0.8 Eliminations (8.7) (5.7) (9.1) -------- -------- -------- Total $1,113.0 $ 976.7 $ 868.1 -------- -------- -------- -------- -------- -------- (1) OPERATING PROFIT IS TOTAL REVENUE LESS OPERATING EXPENSES. (2) IDENTIFIABLE ASSETS BY LINES OF BUSINESS INCLUDE ONLY THOSE ASSETS THAT ARE SPECIFICALLY IDENTIFIED WITH EACH SEGMENT'S OPERATIONS. (3) CORPORATE ASSETS ARE PRINCIPALLY CASH AND SHORT-TERM INVESTMENTS, PREPAID EXPENSES, AND CORPORATE PROPERTY. NOTE 12 - CONTINGENCIES The Company is a defendant in lawsuits incidental to its business. The management of the Company believes, however, that the disposition of these lawsuits will not have any material effect on the financial position or operating results of the Company. 41 NOTE 13 - FOREIGN OPERATIONS The foreign countries in which the Company conducts operations generally impose no significant restrictions on transfers of funds. Amounts attributable to foreign operations included in the consolidated statements are as follows: (IN THOUSANDS OF DOLLARS) 1996 1995 1994 - ------------------------------------------------------------------------ Net sales of consolidated foreign subsidiaries $246,405 $231,940 $198,521 Net income of consolidated foreign subsidiaries 15,002 12,618 5,349 Foreign earnings in excess of amounts received 11,167 9,718 2,089 Equity in net assets 105,200 94,329 78,779 Equity in total assets $168,185 $150,932 $133,320 NOTE 14 - FINANCIAL INSTRUMENTS The Company enters into forward foreign currency exchange contracts to hedge certain foreign currency denominated receivables and payables. Exchange gains and losses arising from these transactions are deferred and recognized when the transaction for which the hedge was obtained is finalized. At December 31, 1996 and 1995, the Company had outstanding forward foreign currency exchange contracts aggregating $16,562,000 and $17,377,000, respectively. Forward foreign currency exchange contracts generally have maturities of less than nine months and relate primarily to major Western currencies. Counterparties to the forward foreign currency exchange contracts are major financial institutions. Credit loss from counterparty nonperformance is not anticipated. Based on quoted year-end market prices of forward foreign currency exchange contracts the Company would have experienced a $264,000 loss at December 31, 1996, and a $559,000 loss at December 31, 1995, had outstanding contracts been settled at those respective dates. At December 31, 1996 and 1995, the carrying value approximates the fair value of financial instruments such as cash, trade receivables and payables, and short-term debt because of the short-term maturities of these instruments. The fair value of the Company's long-term debt, including current maturities but excluding capitalized leases, is estimated to be $250,717,000 and $178,393,000 at December 31, 1996 and 1995, respectively, using discounted cash flow analyses, based on the incremental borrowing rates currently available to the Company for similar debt with similar terms and maturity. The Company is also a party to letters of credit totaling $4,290,000 and $7,788,000 at December 31, 1996 and 1995, respectively. In the Company's past experience, virtually no claims have been made against these financial instruments. Management does not expect any material losses to result from these off-balance-sheet instruments because performance is not expected to be required, and, therefore, is of the opinion that the fair value of these instruments is zero. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company's customer base and their dispersion across many different industries and countries. As of December 31, 1996 and 1995, the Company had no significant concentrations of credit risk. NOTE 15 - SUBSEQUENT EVENT Effective January 1, 1997, the Company acquired all of the outstanding common stock of Paramount Packaging Corporation (Paramount) with annual sales of approximately $100 million. Paramount, which has facilities in Pennsylvania, Tennessee, Texas, and England, manufactures flexible packaging for a variety of markets, but with a strong emphasis on disposable diaper packaging. The total Purchase price of approximately $65 million in cash, Bemis common stock, and the assumption of debt, will be accounted for as a purchase of assets. Pro forma financial information is not presented as this acquisition would not have had a significant impact on 1996's results of operation. NOTE 16 - QUARTERLY FINANCIAL INFORMATION - UNAUDITED (IN MILLIONS OF DOLLARS EXCEPT EPS) QUARTERLY RESULTS NET SALES GROSS PROFIT NET INCOME EARNINGS PER SHARE - ------------------------------------------------------------------------------------------------------------------------------------ % % % % Quarter 1996 1995 Change 1996 1995 Change 1996 1995 Change 1996 1995 Change - ------- ------------------------------ -------------------------- ------------------------- ----------------------- First $ 385.5 $ 368.5 5% $ 82.8 $ 77.9 6% $ 21.7 $16.1 35% $ .41 $ .31 32% Second 411.9 383.2 7 96.0 83.5 15 25.2 21.1 19 .47 .41 15 Third 423.1 372.5 14 92.6 79.7 16 24.0 20.8 15 .45 .40 13 Fourth 434.9 399.2 9 110.5 98.8 12 30.2 27.2 11 .57 .51 12 ------------------------------ -------------------------- ------------------------- ----------------------- Total $1,655.4 $1,523.4 9% $381.9 $339.9 12% $101.1 $85.2 19% $1.90 $1.83 17% ------------------------------ -------------------------- ------------------------- ----------------------- ------------------------------ -------------------------- ------------------------- -----------------------
42 EX-22 3 EXHIBIT 22 EXHIBIT 22 - PARENT AND SUBSIDIARIES OF THE REGISTRANT The Company has no parent. The following were subsidiaries of the Company as of December 31, 1996. Percentage of Jurisdiction Voting Securities of Owned By Name Organization Immediate Parent - -------------------------------------------------------------------------------- Bemis Company, Inc. (the "Registrant") Banner Packaging, Inc. Wisconsin 100% Bemis Export Co. Ltd. Jamaica 80% Bemis Packaging Machinery Company Mexico S.A. de C.V. Mexico 100% Bolsas Bemis S.A. de C.V. Mexico 50% Curwood, Inc. Delaware 100% Curwood Packaging (Canada) Limited Canada 100% Perfecseal, Inc Delaware 100% Perfecseal Internacional de Puerto Rico, Inc. Delaware 100% Perfecseal International Ltd. Delaware 100% Perfecseal Limited United Kingdom 100% Hayssen Manufacturing Company Delaware 100% Bemis U.K. Limited United Kingdom 50% Hayssen Europa Limited United Kingdom 100% Hayssen Europa GmbH Germany 100% Hayssen Europa S.p.A. Italy 100% Hayssen Mexico S.A. de C.V. Mexico 98% Hayssen Mexico S.A. de C.V. Mexico 2% MacKay, Inc. Kentucky 100% Milprint, Inc. Wisconsin 100% CONTINUED - 22 - Percentage of Jurisdiction Voting Securities of Owned By Name Organization Immediate Parent - -------------------------------------------------------------------------------- Morgan Adhesives Company Ohio 86.9% Accraply, Inc. Ohio 100% Bemis Coordination Center S.A. Belgium 33% Bemis Export Co. Ltd. Jamaica 20% Bemis U.K. Limited United Kingdom 50% MACtac U.K. Limited United Kingdom 100% Enterprise Software, Inc. Ohio 100% MACtac Europe S.A. Belgium 89% Bemis Coordination Center S.A. Belgium 67% Bemis Technologies S.A. Belgium 100% MACtac Asia-Pacific Self- Adhesive Products Pte Ltd. Singapore 100% MACtac Deutschland GmbH Germany 100% MACtac France S.a.r.l. France 100% MACtac Scandinavia A.B. Sweden 100% MACtac Canada Ltd/Ltee Canada 100% MACtac Europe S.A. Belgium 11% MACtac A.G. Switzerland 100% MACtac Mexico S.A. Mexico 49% MACtac, Inc. Ohio 100% Pervel Industries, Inc. Delaware 100% - 23 - BEMIS COMPANY, INC. 222 South Ninth Street, Suite 2300 Minneapolis, Minnesota 55402-4099 (612) 376-3000 Benjamin R. Field, III Senior Vice President, Chief Financial Officer and Treasurer Robert F. Kleiber Director of Investor Relations - 24 - APPENDIX TO THE ELECTRONIC FILING - 1996 FORM 10-K Data appearing on bar charts on page one of the 1996 Annual Report. 1992 1993 1994 1995 1996 ---- ---- ---- ---- ---- Earnings Per Share $1.10 $.86 $1.40 $1.63 $1.90 Net Sales ($ Millions) $1,181 $1,203 $1,390 $1,523 $1,655 Return on Average Total Capital 11.8% 9.2% 13.4% 13.5% 13.7% Dividends paid Per Common Share $.46 $.50 $.54 $.64 $.72 - 25 - EX-27 4 EXHIBIT 27
5 This schedule contains summary financial information extracted from the December 31, 1996, Consolidated Statement of Income and Consolidated Balance Sheet and is qualified in its entirety by reference to such Financial Statements. YEAR DEC-31-1996 DEC-31-1996 10,223 0 216,740 0 200,397 466,921 895,863 (312,372) 1,168,795 214,445 241,077 0 0 5,790 561,307 1,168,795 1,655,431 1,655,431 1,273,570 1,273,570 (5,497) 0 13,397 162,781 61,700 101,081 0 0 0 101,081 1.90 1.90
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