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BMS > SEC Filings for BMS > Form 10-Q on 9-Nov-2012All Recent SEC Filings

Show all filings for BEMIS CO INC

Form 10-Q for BEMIS CO INC


9-Nov-2012

Quarterly Report


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

Three and Nine Months Ended September 30, 2012

Management's Discussion and Analysis should be read in conjunction with the
Condensed Consolidated Financial Statements.

Three and nine month review of results             Three Months Ended September 30,                       Nine Months Ended September 30,
(in millions, except per share amounts)             2012                       2011                       2012                       2011
Net sales                                 $ 1,287.8       100.0  %   $ 1,357.9       100.0  %   $ 3,905.3       100.0  %   $ 4,052.5       100.0  %
Cost of products sold                       1,040.7        80.8        1,134.2        83.5        3,193.9        81.8        3,361.0        82.9
Gross profit                                  247.1        19.2          223.7        16.5          711.4        18.2          691.5        17.1

Operating expenses
Selling, general, and administrative
expenses                                      128.4        10.0          111.6         8.2          381.6         9.8          364.5         9.0
Research and development                       10.2         0.8           10.6         0.8           31.5         0.8           28.2         0.7
Facility consolidation and other costs         21.4         1.7              -           -           49.4         1.3              -           -
Other operating (income) expense, net          (2.8 )      (0.2 )         (2.7 )      (0.2 )        (12.3 )      (0.3 )        (13.9 )      (0.3 )
Operating income                               89.9         7.0          104.2         7.7          261.2         6.7          312.7         7.7

Interest expense                               17.0         1.3           18.4         1.4           54.8         1.4           54.8         1.3
Other non-operating (income) expense,
net                                            (1.3 )      (0.1 )         (1.4 )      (0.1 )         (2.2 )      (0.1 )            -           -
Income before income taxes                     74.2         5.8           87.2         6.4          208.6         5.3          257.9         6.4

Provision for income taxes                     26.8         2.1           31.0         2.3           74.9         1.9           93.3         2.3

Net income                                     47.4         3.7           56.2         4.1          133.7         3.4          164.6         4.1

Less: net income attributable to
noncontrolling interests                          -           -            0.3           -              -           -            3.3         0.1

Net income attributable to Bemis
Company, Inc.                             $    47.4         3.7  %   $    55.9         4.1  %   $   133.7         3.4  %   $   161.3         4.0  %

Effective income tax rate                                  36.1  %                    35.5  %                    35.9  %                    36.2  %

Diluted earnings per share                $    0.45                  $    0.53                  $    1.27                  $    1.51


Overview

Bemis Company, Inc. is a leading global manufacturer of flexible packaging and pressure sensitive materials supplying a variety of markets. Historically about 65 percent of our total net sales are to customers in the food industry. Sales of our flexible packaging products are widely diversified among food categories and can be found in nearly every aisle of the grocery store. Our emphasis on supplying packaging to the food industry has typically provided a more stable market environment for our Flexible Packaging business segment, which accounts for approximately 90 percent of our net sales. Our remaining net sales are from our Pressure Sensitive Materials business segment which, while diversified in end use products, is less focused on food industry applications and more exposed to economically sensitive end markets.

Market Conditions

The markets into which our products are sold are highly competitive. Our leading flexible packaging market positions in packaging for perishable food and medical device products reflect our focus on value-added, proprietary products. We also manufacture products for which our technical know-how and economies of scale offer us a competitive advantage. The primary raw materials for our business segments are polymer resins, films, paper, ink, adhesives, and aluminum.

Over the past several years, global economic conditions have been weak and prices of food products have increased. While economic growth in Latin America and Asia has exceeded that of North America and Europe, the pace of growth in these regions has slowed over the past 12 months. As a result, we have generally experienced a slowdown in demand in the various geographic regions in which we operate. In addition, foreign currency exchange rates have weakened against the U.S. dollar during 2012, reducing operating results reported from our foreign operations as it is translated to U.S. dollars in our consolidated financial statements.

Facility Consolidation

During the fourth quarter of 2011, we initiated a facility consolidation program to improve efficiencies and reduce fixed costs. As a part of this program, we announced the planned closure of five facilities. Most of the production from these five facilities is being transferred to other facilities. As of September 30, 2012, manufacturing operations had ceased at four of these manufacturing facilities. The most current estimate of the total cost of this program is $86 million.

During the second quarter of 2012, we expanded the facility consolidation program to include the planned closure of an additional four production locations, including three facilities outside of the United States. The expansion of the program increased the total estimated program costs by approximately $55 million, which includes approximately $23 million in employee-related costs, approximately $17 million in fixed asset accelerated depreciation and write-downs, and approximately $15 million in other facility consolidation costs.

We recorded $21.4 million and $49.4 million of charges associated with the facility consolidation programs during the three and nine months ended September 30, 2012, respectively. These costs have been recorded on the consolidated statement of income as facility consolidation and other costs. Of the remaining approximately $54 million of estimated costs to be expensed for the programs, approximately $29 million of charges are expected to occur during the fourth quarter of 2012, with about $25 million remaining to be expensed in early 2013. Plant closings associated with the programs are expected to be completed in early 2013.

Facility consolidation program related cash payments made during the third quarter totaled $11.2 million, bringing total 2012 cash payments to $23.7 million. Cash payments for the fourth quarter of 2012 are expected to be approximately $24 million, with an additional $43 million estimated to be paid in 2013.


Acquisitions

Australia and New Zealand Distributors

On August 22, 2012, we acquired two flexible packaging businesses in Australia and New Zealand. The acquisition supports our strategy to enhance our presence in the Asia-Pacific region. The combined purchase price of approximately $19.1 million was financed with commercial paper and is subject to customary post-closing adjustments.

Shield Pack

On December 1, 2011, we acquired the common stock of Shield Pack, LLC of West Monroe, Louisiana for a cash purchase price of approximately $44.5 million, subject to customary post-closing adjustments. Shield Pack is a manufacturer of high barrier liners for bulk container packaging.

Mayor Packaging Acquisition

On August 1, 2011, we acquired Mayor Packaging, a Hong Kong-based manufacturer of consumer and specialty flexible packaging, including a manufacturing facility in Dongguan, China for a cash purchase price of approximately $96.7 million.

Noncontrolling Interest of Dixie Toga Ltda. (formerly Dixie Toga S.A.)

During the third quarter of 2011, we completed the purchase of the remaining shares owned by the noncontrolling interest of our Brazilian subsidiary, Dixie Toga Ltda., for approximately $90 million.


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