ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Bemis Company, Inc. is a leading global manufacturer of flexible packaging and pressure sensitive materials supplying a variety of markets.

Market Conditions

The global recession that began in 2008 continued to impact our markets during the second quarter of 2009. Our flexible packaging business segment primarily serves the food, consumer staples, and medical packaging markets and is currently benefiting from a temporary raw material cost advantage which is expected to moderate during the second half of 2009 as customer contract mechanisms adjust to reflect current raw material costs.

Performance in our pressure sensitive materials business is reflecting the weakness in global economic conditions. Our customers in this segment operate in the advertising, automotive, housing, and consumer product markets, all of which have experienced a dramatic decline in product demand in this economic environment.

Acquisition of South American Rigid Packaging Operations of Huhtamaki Oyj

On June 3, 2009, Bemis announced that it acquired the South American rigid packaging operations of Huhtamaki Oyj, a global manufacturer of consumer and specialty packaging. This rigid packaging business, which includes three facilities in Brazil and one facility in Argentina, recorded annual net sales of approximately $86 million in 2008, primarily to dairy and food service markets. The purchase price of $43.0 million was paid with a combination of $32.3 million cash on hand, $1.9 million of debt assumed, and a $8.8 million note payable to the seller. As of June 30, 2009, $1.5 million remained outstanding on the note payable to seller which is due May 31, 2010. We expect this acquisition to be modestly accretive to earnings per share in 2009. The fair value of assets and liabilities acquired was $51.8 and $10.7 respectively.

Results of Operations - Second Quarter 2009

Consolidated Overview

Net sales for the second quarter ended June 30, 2009, were $866.4 million compared to $980.0 million in the second quarter of 2008, a decrease of 11.6 percent. Currency effects decreased net sales by 6.7 percent compared to the same quarter of 2008. The remaining 4.9 percent decrease in net sales reflects lower unit volume partially offset by a favorable price and mix impact compared to the second quarter of 2008.

Net income attributable to Bemis Company, Inc. totaled $48.5 million for the second quarter of 2009, compared to $46.4 million for the same period of 2008. Diluted earnings per share were $0.47 for the second quarter of 2009 compared to $0.45 in the second quarter of 2008. Results for the second quarter of 2009 were negatively impacted by a $0.03 per share charge related to acquisition related costs.

Flexible Packaging Business Segment

Net sales for the flexible packaging business segment, which represented about 85 percent of total Company net sales for the second quarter of 2009, decreased to $733.5 million compared to $813.9 million in the second quarter of 2008, a 9.9 percent decrease. Currency effects accounted for a 6.6 percent net sales decrease during the second quarter of 2009. The remaining 3.3 percent decrease in net sales was driven principally by lower overall sales volumes partially offset by improved price and mix. Flexible packaging for certain products, including dairy and liquids, dry foods, and bakery products, experienced higher sales volume compared to the prior year.

Operating profit from the flexible packaging business segment was $102.3 million during the second quarter of 2009 compared to $88.9 million during the second quarter of 2008. Operating profit as a percentage of net sales for the second quarter of 2009 was 13.9 percent compared to 10.9 percent for the second quarter of 2008. The net effect of foreign exchange gains and currency translation impacts decreased operating profit in the second quarter of 2009 by $5.0 million compared to the same quarter of 2008. Higher operating profit reflects the impact of both lower raw material costs in 2009 and the benefit of operating efficiency and cost improvement programs.

Pressure Sensitive Materials Business Segment

Second quarter net sales for the pressure sensitive materials business segment were $132.9 million in 2009 compared to $166.1 million in 2008, a decrease of 20.0 percent. Currency effects accounted for a 7.1 percent net sales decline. Net sales decreased in all market areas. Volumes in this business segment are down significantly as a result of the continuing weakness in global economic conditions.

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Operating profit from the pressure sensitive materials business in the second quarter of 2009 was $2.9 million, or 2.2 percent of net sales, compared to $9.1 million, or 5.5 percent of net sales, in the second quarter of 2008. Lower volume levels across all product lines in this segment have negatively impacted operating profit in spite of management's efforts to reduce costs and adjust operations to lower volume levels. The net effect of currency translation and foreign exchange transactions was insignificant to the results of the quarter.

Consolidated Selling, General and Administrative Expenses

Selling, general and administrative expenses were $88.7 million for the second quarter of 2009 compared to $88.2 million for the second quarter of 2008. As a percentage of sales, this category of expenses was 10.2 percent in the second quarter of 2009 and 9.0 percent in the second quarter of 2008, reflecting lower net sales levels in 2009.

Interest Expense

Interest expense was $5.9 million for the second quarter of 2009, a decrease of $5.2 million from the second quarter of 2008, reflecting lower debt levels and lower interest rates in 2009.

Other Costs (Income), Net

In the second quarter of 2009, other costs and income included $4.7 million of financial income compared to $8.8 million for the second quarter of 2008. This decrease reflects lower interest income from cash balances invested outside of the United States during 2009. Cash balances in our Brazilian operations were used to fund the acquisition of the rigid packaging business in Brazil this quarter. Other costs and income also included $4.7 million of professional fees associated with the acquisition of the South American rigid packaging operations of Huhtamaki Oyj and the pending acquisition of Alcan Packaging Food Americas described below.

Income Taxes

Our effective tax rate was 36.7 percent in the second quarter of 2009, a small increase from our rate of 36.5 percent for the same period of 2008. The difference between our overall tax rate and the U.S. statutory tax rate of 35.0 percent in each period principally relates to state and local income taxes net of federal income tax benefits. Our effective tax rate for each of the periods presented has been impacted by the recast of net income attributable to noncontrolling interests (formerly called minority interest) to a position after income before income taxes and noncontrolling interests in accordance with recent changes in accounting guidance.

Results of Operations - Six Months Ended June 30, 2009

Consolidated Overview

Net sales for the six months ended June 30, 2009, were $1.7 billion, a decrease of 11.3 percent compared to net sales for the first six months of 2008. Currency effects decreased net sales by 7.2 percent in the first six months of 2009 compared to the same period of 2008.

Net income attributable to Bemis Company, Inc. totaled $85.2 million for the first six months of 2009, compared to $88.7 million for the same period of 2008. Diluted earnings per share were $0.82 for the first six months of 2009 compared to $0.86 for the first six months of 2008. Results for the first six months of 2009 were negatively impacted by charges primarily associated with acquisition related costs totaling $0.11 per share.

Flexible Packaging Business Segment

Net sales for the flexible packaging business segment for the first six months of 2009 were $1.4 billion, a decrease of 9.2 percent compared to the same period of 2008. Currency effects decreased net sales by 7.3 percent in the first six months of 2009 compared to the same period of 2008. The remaining sales decrease was driven by lower sales of packaging for certain products in meat and cheese, confectionery and snack, health and hygiene, multipack, pet food, and industrial market categories. This was partially offset by increased sales of packaging for dairy and liquid, dry food, bakery and medical device market categories.

Operating profit from the flexible packaging business segment was $193.7 million, compared to $167.5 million during the first six months of 2008. Operating profit as a percent of net sales was 13.4 percent for the six months ended June 30, 2009 compared to 10.5 percent in the same period of 2008. Operating profit in 2009 reflects the positive impact of lower raw material costs in 2009 and the benefit of operating efficiency and cost improvement programs.

Pressure Sensitive Materials Business Segment

Net sales for the pressure sensitive materials business segment decreased 21.3 percent to $261.1 million during the first six months of 2009 compared to $331.7 million in 2008. Currency effects decreased net sales by 6.8 percent in the first six months of 2009. Excluding the effects of currency, the decrease in net sales reflects lower sales volume in all product lines due to weak global economic conditions.

Operating profit from the pressure sensitive materials business in the first six months of 2009 was $1.0 million, or 0.4 percent of net sales, compared to $20.9 million, or 6.3 percent of net sales, in the same period of 2008. Results of operations for this segment were negatively impacted by the substantial decline in sales volumes in 2009.

Consolidated Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $177.5 million for the six months ended June 30, 2009, compared to $177.0 million for the first six months of 2008. As a percentage of sales, this category of expenses increased in the first six months of 2009 to 10.4 percent compared to 9.2 percent in the same period of 2008, reflecting lower net sales levels in 2009.

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Interest Expense

Interest expense was $11.9 million for the first six months of 2009, a decrease of $8.3 million from the same period of 2008 driven by lower debt levels and interest rates in 2009.

Other Costs (Income), Net

For the first six months of 2009, other costs and income included $9.4 million of financial income compared to $16.4 million financial income for the same period of 2008. Financial income is primarily generated from fiscal incentives for certain locations and is considered as a part of flexible packaging operating profit. Financial income also includes interest income, which decreased compared to the first six months of 2008 primarily as a result of cash balances in our Brazilian operations being applied to debt repayment and used to fund the recent acquisition of the rigid packaging business in Brazil. Other costs and income also included $13.7 million of professional fees associated with the acquisition of the South American rigid packaging operations of Huhtamaki Oyj and planned purchase of Alcan Packaging Food Americas.

Income Taxes

Our effective tax rate was 36.5 percent in the first six months of 2009, compared to our rate for the same period of 2008 of 36.4 percent. The difference between our overall tax rate and the U.S. statutory tax rate of 35 percent in each period principally relates to state and local income taxes net of federal income tax benefits. We expect the effective tax rate for total year 2009 to be 36.5 percent. Our effective tax rate for each of the periods presented has been impacted by the recast of net income attributable to noncontrolling interests (formerly called minority interest) to a position after income before income taxes and noncontrolling interests in accordance with recent changes in accounting guidance.

Liquidity and Capital Resources

Debt to Total Capitalization

Debt to total capitalization (which includes total debt, long-term deferred tax liabilities, and total equity) was 26.3 percent at June 30, 2009, compared to 31.5 percent at December 31, 2008. Total equity as of December 31, 2008, has been recast in accordance with recent changes in accounting guidance. Total debt as of June 30, 2009, was $592.1 million, a decrease of $94.5 million from the balance of $686.6 at December 31, 2008.

Sources of Liquidity

Net cash provided by operating activities was $267.3 million for the first six months of 2009 compared to $127.9 million in the same period of 2008. Strong cash flow from operations for the six months of 2009 was driven by the successful reduction in working capital during the first half of 2009 compared to a use of cash for working capital driven by higher raw material costs during the same period of 2008.

As of June 30, 2009, Bemis had available from its banks a total of $425.0 million of revolving credit facilities. These credit facilities are used principally as back-up for the Company's commercial paper program. As of June 30, 2009, there was $257.6 million of debt outstanding supported by these credit facilities, leaving $167.4 million of available credit. Cash flows from operating activities are expected to continue to provide sufficient liquidity to meet future operating cash requirements.

In connection with the pending acquisition of Alcan Packaging Food Americas, we amended our $425 million revolving credit facility to increase available borrowings to $625 million in addition to changes made to accommodate new lenders and the impact of the planned acquisition. The amendment will be effective upon the closing of the acquisition. Combined with the net proceeds of the July 2009 bond and common stock offerings, our borrowing facilities are expected to provide liquidity sufficient to fund the acquisition and the future operating cash requirements of the combined company.

Uses of Liquidity

Capital expenditures were $45.3 million for the six months ended June 30, 2009, compared to $58.6 million for the same period of 2008. In addition to capital expenditures, cash flow during the first six months of 2009 supported $46.5 million of common stock dividend payments, a $30.0 million tax-deductible voluntary pension contribution, and a $43.0 million acquisition in the growing South American packaging market.

Subsequent Events

Pending Acquisition of Alcan Packaging Food Americas

On July 5, 2009, we signed a definitive agreement to acquire the Food Americas operations of Alcan Packaging, a business unit of international mining group Rio Tinto plc (LON: RIO; ASX: RIO), for $1.2 billion. Pursuant to the agreement, we will acquire 23 Food Americas flexible packaging facilities in the U.S., Canada, Mexico, Brazil, Argentina, and New Zealand. These facilities produce flexible packaging for the food and beverage industries. As a condition of signing, we secured bridge financing for $800 million of the total purchase price and had the option to pay to the seller up to $200 million of the purchase price in common stock of the Company. The transaction is expected to be accretive to diluted GAAP earnings per share beginning in 2010. The transaction is expected to close by the end of 2009, subject to customary closing conditions and regulatory review.

On July 29, 2009, the Company amended our July 5, 2009, agreement above to reflect the receipt of $800 million bond and $200 million equity offerings (see Acquisition Financing below). Accordingly, we no longer require bridge financing nor will we pay to the seller

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any common stock of the Company in connection with the acquisition. The amendment therefore, terminated our bridge financing and our option to fund a portion of the purchase price by issuing Company common stock to the seller.

Acquisition Financing

On July 27, 2009, we issued $800 million of senior notes, consisting of $400 million aggregate principal amount of 5.65% senior notes due 2014 and $400 million aggregate principal amount of 6.80% senior notes due 2019. We will pay interest on the notes semi-annually on February 1st and August 1st of each year, beginning on February 1, 2010. We will be required to redeem the notes in the event the acquisition is not completed. As a result of the bond issuance, our bridge financing was no longer considered necessary and the related bridge financing agreement was terminated.

On July 28, 2009, we sold 8,055,000 shares of Bemis Common Stock, including 355,000 shares sold pursuant to the partial exercise of the Underwriters' overallotment option. We received proceeds from the offering of approximately $200 million. The Underwriters have a remaining overallotment option for 800,000 shares until August 21, 2009.

The net proceeds from the bond and equity offerings will be used to finance a portion of the $1.2 billion purchase price of the pending acquisition of Alcan Packaging Food Americas described above. The remainder of the purchase price is expected to be financed with commercial paper near the time of the transaction closing. In connection with the pending Alcan Packaging Food Americas acquisition, management expects to incur ongoing financing costs and professional fees, which will negatively impact earnings per share until the transaction closing.

Rights Agreement

On July 8, 2009, the Company entered into an Amendment (Rights Agreement Amendment) to the Rights Agreement (Rights Agreement) dated as of July 29, 1999, between the Company and Wells Fargo Bank, National Association (formerly known as Norwest Bank Minnesota, National Association) as rights agent. The Rights Agreement Amendment changes the final expiration date of the Rights Agreement from August 23, 2009 to July 8, 2009. Accordingly, the preferred share purchase rights (Rights) granted under the Rights Agreement expired at the close of business on July 8, 2009, and the Rights Agreement has been terminated and is of no further force and effect.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain estimates, predictions, and other "forward-looking statements" (as defined in the Private Securities Litigation Reform Act of 1995, and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended). Forward-looking statements are generally identified with the words "believe," "expect," "anticipate," "intend," "estimate," "target," "may," "will," "plan," "project," "should," "continue," or the negative thereof or other similar expressions, or discussion of future goals or aspirations, which are predictions of or indicate future events and trends and which do not relate to historical matters. Such statements are based on information available to management as of the time of such statements and relate to, among other things, expectations of the business environment in which we operate, projections of future performance (financial and otherwise), including those of acquired companies, perceived opportunities in the market and statements regarding our mission and vision. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Factors that could cause actual results to differ from those expected include, but are not limited to, general economic conditions caused by inflation, interest rates, consumer confidence, rates of unemployment and foreign currency exchange rates; investment performance of assets in our pension plans; competitive conditions within our markets, including the acceptance of our new and existing products; unanticipated product liability costs or customer claims related to product quality issues; customer contract bidding activity; threats or challenges to our patented or proprietary technologies; raw material costs, availability, and terms, particularly for polymer resins and adhesives; price changes for raw materials and our ability to pass these price changes on to our customers or otherwise manage commodity price fluctuation risks; unexpected energy surcharges; broad changes in customer order patterns; our ability to achieve expected cost savings associated with cost management initiatives; the presence of adequate cash available for investment in our business in order to maintain desired debt levels; costs associated with the pursuit of business combinations; unexpected costs associated with acquisition related activities; changes in working capital requirements; a failure in our information technology infrastructure or applications; changes in governmental regulation, especially in the areas of environmental, health and safety matters, fiscal incentives, and foreign investment; unexpected outcomes in our current and future administrative and litigation proceedings; unexpected outcomes in our current and future tax proceedings; changes in our labor relations; and the impact of changes in the world political environment including threatened or actual armed conflict. These and other risks, uncertainties, and assumptions identified from time to time in our filings with the Securities and Exchange Commission, including without limitation, our Annual Report on Form 10-K for the year ended December 31, 2008 and our quarterly reports on Form 10-Q, could cause actual future results to differ materially from those projected in the forward-looking statements. In addition, actual future results could differ materially from those projected in the forward-looking statement as a result of changes in the assumptions used in making such forward-looking statement.

Explanation of Terms Describing the Company's Products

Barrier laminate - A multilayer plastic film made by laminating two or more films together with the use of adhesive or a molten plastic to achieve a barrier for the planned package contents.

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Barrier products - Products that provide protection and extend the shelf life of the contents of the package. These products provide this protection by combining different types of plastics and additives into a multilayered plastic package. These products protect the contents from such things as oxygen, moisture, light, odor, or other environmental factors.

Blown film - A plastic film that is extruded through an annular die in the form of a tube and then expanded by an internal column of air in the manufacturing process.

Bundling films - A film manufactured by a modified blown film process that is used for wrapping and holding multipacks of products such as canned goods and bottles of liquids, replacing corrugate and fiberboard.

Cast film - A plastic film that is extruded through a straight slot die as a flat sheet during its manufacturing process.

Coextruded film - A blown or cast film extruded with multiple layers extruded simultaneously.

Controlled atmosphere packaging - A package which limits the flow of elements, such as oxygen, carbon dioxide or moisture, into or out of the package.

Decorative products - Pressure sensitive materials used for decorative signage, promotional items, and displays and advertisements.

EZ Open Packaging - Any one of a series of technologies employed to allow the consumer easy access to a packaged product. Peelable closures, laser or other physical scoring/abrasion of a packaging film may be used. EZ Open can be combined with reclose features such as plastic zippers or the inclusion of pressure sensitive materials into the packaging film.

Flexible polymer film - A non-rigid plastic film. Generally the shape of the package changes as the product contained in it is removed.

Flexographic printing - The most common flexible packaging printing process in North America using a raised rubber or alternative material image mounted on a printing cylinder.

In-line overlamination - The ability to add a protective coating to a printed material during the printing process.

Label products - Pressure sensitive materials made up and sold in roll form.

Labelstock - Pressure sensitive material designed for the label markets.

Laminate/Barrier laminate - A multilayer plastic film made by laminating two or more films together with the use of adhesive or a molten plastic to achieve the distribution and use requirements for the planned package contents. Alternately, a barrier layer can also be included as one of the films or in the laminating medium to protect the packaged products from such things as moisture, oxygen or other environmental factors.

Modified atmosphere packaging - A package in which the normal atmospheric composition of air inside the package has been modified by replacing it with a gas such as nitrogen.

Monolayer film - A single layer extruded plastic film.

Multiwall paper bag - A package made from two or more layers, at least one of which is paper, which have not been laminated.

Pouches and bags - An option that delivers a semi-finished package, instead of rollstock, to a customer for filling product and sealing/closing the package for distribution.

Pressure sensitive material - A material coated with adhesive such that upon contact with another material it will stick.

Prime label - A pressure sensitive label used as the primary decorative label or secondary label, typically on a consumer product.

Rigid Packaging - A form of packaging in which the shape of the package is retained as its contents are removed in use. Bottles, trays and clamshell packaging are examples.

Rollstock - The principal form in which flexible packaging material is delivered to a customer. Finished film wound on a core is converted in a process at the end user's plant that forms, fills, and seals the package of product for delivery to customers.

Rotogravure printing - A high quality, long run printing process utilizing a metal engraved cylinder.

Sheet products - Pressure sensitive materials cut into sheets and sold in sheet form.

Shrink film/ Barrier shrink film- A packaging film consisting of polyethylene and/or polypropylene resins extruded via a tubular process. The film is cooled and then reheated and stretched at a temperature near its melting point. The film can be irradiated with an electron beam in a second process to cross link the molecules for added heat resistance and strength. The film is made to shrink around a product to be packaged by an application of a thermal treatment. Alternately, a layer of an oxygen barrier material can be included to manufacture a barrier shrink film product.

Stretch film - A plastic film with a significant ability to stretch which is used to wrap pallets of goods in the shipping process.

Technical products - Technically engineered pressure sensitive materials used primarily for fastening and mounting functions, for example in cell phones, appliances, and electronic devices.

Thermoformed plastic packaging - A package formed by applying heat to a film to shape it into a tray or cavity and then sealing a flat film on top of the package after it has been filled.

UV inhibitors - Chemical agents included in a film to protect products against ultraviolet rays.

Variable information label - A pressure sensitive label that is typically printed with a bar code or other type of variable information.