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BMS > SEC Filings for BMS > Form 10-Q on 2-Aug-2013All Recent SEC Filings

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Form 10-Q for BEMIS CO INC


2-Aug-2013

Quarterly Report


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

Three and Six Months Ended June 30, 2013

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

Three and six month review of results                 Three Months Ended June 30,                            Six Months Ended June 30,
(in millions, except per share amounts)             2013                       2012                       2013                       2012
Net sales                                 $ 1,297.1       100.0  %   $ 1,312.7       100.0  %   $ 2,552.1       100.0  %   $ 2,617.5       100.0  %
Cost of products sold                       1,045.3        80.6        1,079.4        82.2        2,058.5        80.7        2,153.2        82.3
Gross profit                                  251.8        19.4          233.3        17.8          493.6        19.3          464.3        17.7

Operating expenses
Selling, general, and administrative
expenses                                      132.1        10.2          124.0         9.4          262.7        10.3          253.2         9.7
Research and development                       11.7         0.9           10.4         0.8           23.0         0.9           21.3         0.8
Facility consolidation and other costs         20.9         1.6           19.7         1.5           30.2         1.2           28.0         1.1
Other operating (income) expense, net          (3.2 )      (0.2 )         (3.6 )      (0.3 )         (4.7 )      (0.2 )         (9.5 )      (0.4 )
Operating income                               90.3         7.0           82.8         6.3          182.4         7.1          171.3         6.5

Interest expense                               17.0         1.3           17.3         1.3           33.6         1.3           37.8         1.4
Other non-operating (income) expense,
net                                            (7.2 )      (0.6 )         (1.0 )      (0.1 )         (3.1 )      (0.1 )         (0.9 )         -
Income before income taxes                     80.5         6.2           66.5         5.1          151.9         6.0          134.4         5.1

Provision for income taxes                     27.4         2.1           24.2         1.8           49.5         1.9           48.1         1.8

Net income                                $    53.1         4.1  %   $    42.3         3.2  %   $   102.4         4.0  %   $    86.3         3.3  %

Effective income tax rate                                  34.0  %                    36.4  %                    32.6  %                    35.8  %

Diluted earnings per share                $    0.51                  $    0.40                  $    0.98                  $    0.82

Overview

Bemis Company, Inc. is a leading global manufacturer of 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 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 U.S. Packaging and Global Packaging business segments, which accounted for approximately 89 percent of our net sales in 2012. Our remaining net sales are from our Pressure Sensitive Materials business segment which, while diversified in end use products, is more exposed to economically sensitive end markets.

Market Conditions

The markets into which our products are sold are highly competitive. Our leading market positions in packaging for perishable food and medical device products reflect our focus on value-added, proprietary products that provide food safety and sterility benefits. 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 and films, paper, inks, adhesives, aluminum and chemicals.


Facility Consolidation

To improve efficiencies and reduce fixed costs, we initiated a facility consolidation program during the fourth quarter of 2011 and expanded the program in the second quarter of 2012. In total, nine production facilities were closed and most of the production from these facilities has been transferred to other facilities. The most current estimate of the total cost of the programs is $141 million, which includes approximately $51 million in employee-related costs, approximately $50 million in fixed asset accelerated depreciation and write-downs, and approximately $40 million in other facility consolidation costs.

We recorded $20.9 million and $30.2 million of charges associated with the facility consolidation programs during the three and six months ended June 30, 2013, respectively. These costs have been recorded on the consolidated statement of income as facility consolidation and other costs. We expect the remaining costs of approximately $4 million to be expensed during the remainder of 2013. Cash payments for these programs in the six months ended June 30, 2013 and 2012, totaled $22.5 million and $12.5 million, respectively. Cash payments in the remainder of 2013 are expected to be approximately $25 million.

Acquisitions and divestiture

Australia and New Zealand Distributors

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

Clysar Plant in Clinton, Iowa

On May 29, 2013, we completed the sale of our Clysar thin gauge shrink film plant. Annual net sales of Clysar films were approximately $70 million and were sold primarily through distributors into the display market. Net proceeds of the transaction totaled $30.4 million, subject to customary post-closing adjustments. A $5.9 million pre-tax gain on the sale was recorded as part of other non-operating income during the second quarter of 2013.


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