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BMS > SEC Filings for BMS > Form 10-Q on 2-May-2014All Recent SEC Filings

Show all filings for BEMIS CO INC

Form 10-Q for BEMIS CO INC


2-May-2014

Quarterly Report


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

Three Months Ended March 31, 2014

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

Three month review of results                                  Three Months Ended March 31,
(in millions, except per share amounts)                        2014                     2013
Net sales                                             $ 1,237.8     100.0  %   $ 1,255.0     100.0  %
Cost of products sold                                   1,023.2      82.7        1,013.2      80.7
Gross profit                                              214.6      17.3          241.8      19.3

Operating expenses
Selling, general, and administrative expenses             122.7       9.9          130.6      10.4
Research and development                                   13.1       1.1           11.3       0.9
Facility consolidation and other costs                        -         -            9.3       0.7
Other operating income                                     (0.4 )       -           (1.5 )    (0.1 )
Operating income                                           79.2       6.4           92.1       7.3

Interest expense                                           16.9       1.4           16.6       1.3
Other non-operating (income) expense                      (12.6 )    (1.0 )          4.1       0.3
Income before income taxes                                 74.9       6.1           71.4       5.7

Provision for income taxes                                 25.7       2.1           22.1       1.8

Net income                                            $    49.2       4.0  %   $    49.3       3.9  %

Effective income tax rate                                            34.3  %                  31.0  %

Diluted earnings per share                            $    0.48                $    0.47

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 2013. 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 while some low margin business was shed, most of the production from these facilities has been transferred to other facilities. The total cost of the programs was $152.5 million which included $58.0 million in employee-related costs, $51.2 million in fixed asset accelerated depreciation and write-downs, and $43.3 million in other facility consolidation costs.

We recorded $9.3 million of charges associated with the facility consolidation programs during the three months ended March 31, 2013. These costs have been recorded on the consolidated statement of income as facility consolidation and other costs. Cash payments for these programs during the three months ended March 31, 2013 totaled $10.8 million. At the end of 2013, the facility consolidation program was substantially complete.

Divestitures, Plant Closure, and Acquisition

Divestiture of Paper Packaging Division

On March 31, 2014, we completed the sale of our Paper Packaging Division. Annual net sales by this division were approximately $160 million. Net proceeds of the transaction totaled $79.8 million, subject to customary post-closing adjustments. A $9.4 million pre-tax gain on the sale was recorded as part of other non-operating (income) expense for the three months ended March 31, 2014.

Pressure Sensitive Materials Plant Closure

In March 2014, we announced we will close our plant in Stow, Ohio, one of our Pressure Sensitive Materials manufacturing facilities. Total estimated costs are approximately $30 million, with approximately $26 million in cash payments expected. During the three months ended March 31, 2014, plant closure costs of $25.0 million were recorded. These costs were primarily recorded within cost of products sold ($23.8 million) and included our best estimate of a withdrawal liability for a multi-employer pension plan settlement. Management expects to cease operations at this location in May 2014, with all closure costs and cash payments to be incurred during fiscal 2014.

Acquisition of Specialty Film Manufacturer in Foshan, China

On July 1, 2013, we acquired Foshan New Changsheng Plastics Films Co., LTD ("NCS"), a specialty film manufacturer located in Foshan, China. NCS is a supplier to our food packaging plant in Dongguan, China and other specialty film product customers. The acquisition of this film platform is expected to provide cost and logistics benefits to support the Company's broader Asia-Pacific growth strategy. The cash purchase price was $75.6 million.

Divestiture of 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 million.


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