UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2008
Commission File Number 1-5277
BEMIS COMPANY, INC.
(Exact name of Registrant as specified in its charter)
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Missouri |
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43-0178130 |
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(State or other jurisdiction of |
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(I.R.S. Employer |
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incorporation or organization) |
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Identification No.) |
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One Neenah Center, 4 th Floor, P.O. Box 669, Neenah, Wisconsin 54957-0669 |
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(Address of principal executive offices) |
Registrant’s telephone number, including area code: (920) 727-4100
Securities registered pursuant to Section 12(b) of the Act:
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Name of Each Exchange |
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Title of Each Class |
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on Which Registered |
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Common Stock, par value $.10 per share |
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New York Stock Exchange |
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Preferred Share Purchase Rights |
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New York Stock Exchange |
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if
the Registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
YES
x
NO
o
Indicate by check
mark if the Registrant is not required to file reports pursuant to Section 13
or Section 15(d) of the Act.
YES
o
NO
x
Indicate by check mark
whether the Registrant has filed all reports required to be filed by Section 13
or 15(d) 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
o
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
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
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Large Accelerated Filer x |
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Accelerated Filer o |
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Non-Accelerated Filer o |
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Smaller Reporting Company o |
Indicate by check mark whether the Registrant is a shell company. YES o NO x
The aggregate market value of the voting and non-voting common equity held by nonaffiliates of the Registrant on June 30, 2008, based on a closing price of $22.42 per share as reported on the New York Stock Exchange, was $2,234,164,000.
As of February 27, 2009, the Registrant had 99,871,584 shares of Common Stock issued and outstanding.
Documents Incorporated by Reference
Portions of the Proxy Statement - Annual Meeting of Stockholders May 7, 2009 - Part III
BEMIS COMPANY, INC. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
2
PART I – ITEMS 1, 1A, 1B, 2, 3, and 4
Bemis Company, Inc., a Missouri corporation (the “Registrant” or “Company”), continues a business formed in 1858. The Company was incorporated in 1885 as Bemis Bro. Bag Company with the name changed to Bemis Company, Inc. in 1965. The Company is a principal manufacturer of flexible packaging products and pressure sensitive materials, selling to customers throughout the United States, Canada, Mexico, South America, Europe, and Asia Pacific. In 2008, approximately 83 percent of the Company’s sales were derived from the Flexible Packaging segment and approximately 17 percent were derived from the Pressure Sensitive Materials segment.
The Company’s products are sold to customers primarily in the food industry. Other customers include companies in the following types of businesses: chemical, agribusiness, medical, pharmaceutical, personal care, electronics, automotive, construction, graphic industries, and other consumer goods. Further information about the Company’s operations in its business segments is available at Note 12 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
As of December 31, 2008, the Company had approximately 15,400 employees, about 10,200 of whom were classified as production employees. Many of the North American production employees are covered by collective bargaining contracts involving three different international unions, one independent union, and 16 individual contracts with terms ranging from one to five years. During 2008, three contracts covering approximately 600 employees at three different locations in the United States were successfully negotiated while two contracts covering approximately 120 employees at one domestic location continue to be negotiated. Five domestic labor agreements covering approximately 1,400 employees are scheduled to expire in 2009. Many of the non-North American production employees as well as some of the non-North American salaried workforce are covered by collective bargaining contracts involving 23 different unions with terms ranging from one to two years.
Working capital elements fluctuate throughout the year in relation to the level of customer volume and other marketplace conditions. Inventory levels reflect a reasonable balance between raw material pricing and availability, and the Company’s commitment to promptly fill customer orders. Manufacturing backlogs are not a significant factor in the industries in which the Company operates. The business of each of the segments is not seasonal to any significant extent.
The Company is the owner or licensee of a number of United States and foreign patents and patent applications that relate to certain of its products, manufacturing processes, and equipment. The Company also has a number of trademarks and trademark registrations in the United States and in foreign countries. The Company’s patents, licenses, and trademarks collectively provide a competitive advantage. However, the loss of any single patent or license alone would not have a material adverse effect on the Company’s results as a whole or those of either of its segments.
The Company’s business activities are organized around its two business segments, Flexible Packaging and Pressure Sensitive Materials. Both internal and external reporting conform to this organizational structure. A summary of the Company’s business activities reported by its two business segments follows.
Flexible Packaging Segment
The flexible packaging segment manufactures a broad range of food, consumer goods, and industrial packaging. Multilayer flexible polymer film structures and laminates are sold for food, medical, and personal care products as well as non-food applications utilizing vacuum or modified atmosphere packaging. Additional products include blown and cast stretchfilm products, carton sealing tapes and application equipment, custom thermoformed plastic packaging, multiwall paper bags, printed paper roll stock, and bag closing materials. Markets for our products include processed and fresh meat, liquids, frozen foods, cereals, snacks, cheese, coffee, condiments, candy, pet food, bakery, seed, lawn and garden, tissue, fresh produce, personal care and hygiene, disposable diapers, printed shrink overwrap for the food and beverage industry, agribusiness, pharmaceutical, minerals, and medical device packaging.
Pressure Sensitive Materials Segment
The pressure sensitive materials segment manufactures pressure sensitive adhesive coated paper and film substrates sold into label markets, graphic markets, and technical markets.
Products for label markets include narrow-web rolls of pressure sensitive paper, film, and metalized film printing stocks used in high-speed printing and die-cutting of primary package labeling, secondary or promotional decoration, and for high-speed, high-volume electronic data processing (EDP) stocks, bar code labels, and numerous laser printing applications. Primary markets include food and consumer goods, inventory control labeling, shipping labels, postage stamps, and laser/ink jet printed labels.
Products for graphic markets include pressure sensitive films used for decorative signage through computer-aided plotters, digital and screen printers, and photographic overlaminate and mounting materials including optically clear films with built-in UV inhibitors. Offset printers, sign makers, and photo labs use these products on short-run and/or digital printing technology to create signs or vehicle graphics. Primary markets are indoor and outdoor signage, photograph and digital print overlaminates, and vehicle graphics.
Products for technical markets 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. Tapes sold to medical markets feature medical-grade adhesives suitable for direct skin contact. Primary markets are electronics, automotive, construction, medical, and pharmaceuticals.
3
Marketing, Distribution, and Competition
While the Company’s sales are made through a variety of distribution methods, more than 90 percent of each segment’s sales are made by the Company’s direct sales force. Sales offices and plants are located throughout the United States, Canada, United Kingdom, Continental Europe, Scandinavia, Asia Pacific, South America, and Mexico to provide prompt and economical service to more than 30,000 customers. The Company’s technically trained sales force is supported by product development engineers, design technicians, and a customer service organization.
No single customer accounts for ten percent or more of the Company’s total sales. Furthermore, the loss of one or a few major customers would not have a material adverse effect on the Company’s operating results. Nevertheless, business arrangements with large customers require a large portion of the manufacturing capacity at a few individual manufacturing sites. Any change in the business arrangement would typically occur over a period of time, which would allow for an orderly transition for both the Company’s manufacturing site and the customer.
The major markets in which the Company sells its products are highly competitive. Areas of competition include service, innovation, quality, and price. This competition is significant as to both the size and the number of competing firms. Major competitors in the Flexible Packaging segment include Alcan Packaging, Amcor Limited, Exopack Company, Hood Packaging Corporation, Bryce Corporation, Pliant Corporation, Printpack, Inc., Sealed Air Corporation, Sonoco Products Company, Winpak Ltd., and Wihuri OY. In the Pressure Sensitive Materials segment major competitors include 3M, Acucote, Inc., Avery Dennison Corporation, Flexcon Corporation, Green Bay Packaging Inc., Ricoh Company, Ltd., Ritrama Inc., Spinnaker Industries, Inc., Technicote Inc., UPM-Kymmene Corporation, and Wausau Coated Products Inc.
The Company considers itself to be a significant factor in the market niches it serves; however, due to the diversity of the Flexible Packaging and Pressure Sensitive Materials segments, the Company’s precise competitive position in these markets is not reasonably determinable. Advertising is limited primarily to business and trade publications emphasizing the Company’s product features and related technical capabilities and the individual problem-solving approach to customer problems.
Raw Materials
Plastic resins and films, paper, inks, adhesives, and chemicals constitute the basic major raw materials. These are purchased from a variety of global industry sources and the Company is not dependent on any one supplier for its raw materials. While temporary industry-wide shortages of raw materials may occur, the Company expects to continue to successfully manage raw material supplies without significant supply interruptions. Currently, raw materials are readily available.
Research and Development Expense
Research and development expenditures were as follows:
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(in thousands) |
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2008 |
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2007 |
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2006 |
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Flexible Packaging |
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$ |
17,646 |
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$ |
19,477 |
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$ |
20,036 |
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Pressure Sensitive Materials |
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7,364 |
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6,506 |
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4,988 |
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Total |
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$ |
25,010 |
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$ |
25,983 |
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$ |
25,024 |
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Compliance with federal, state, and local laws, rules, and regulations 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, or competitive position of the Company and its subsidiaries.
The Company is a large accelerated filer (as defined in Exchange Act Rule 12b-2) and is also an electronic filer. Electronically filed reports (Forms 4, 8-K, 10-K, 10-Q, S-3, S-8, etc.) can be accessed at the Securities and Exchange Commission (SEC) website (http://www.sec.gov) or by visiting the SEC’s Public Reference Room located at 100 F St., N.E., Washington, DC 20549 (call 1-202-551-8090 or 1-800-732-0330 for hours of operation). Electronically filed reports can also be accessed through the Company’s own website (http://www.bemis.com), under Investor Relations/SEC Filings or by writing for free information, including SEC filings, to Investor Relations, Bemis Company, Inc., One Neenah Center, 4 th Floor, P.O. Box 669, Neenah, Wisconsin 54957-0669, or calling (920) 727-4100. In addition, the Company’s Board Committee charters, Principles of Corporate Governance, and the Company’s code of business conduct and ethics can be electronically accessed at the Company’s website under Company Overview or, free of charge, by writing directly to the Company, Attention: Corporate Secretary. The Company has adopted a Financial Code of Ethics which is filed as an exhibit to this Annual Report on Form 10-K, and is also posted on the Company’s website. The Company intends to post any amendment to, or waiver from, a provision of the Financial Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, controller and other persons performing similar functions on the Investor Relations section of its website (www.bemis.com) promptly following the date of such amendment or waiver.
4
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.
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 principle 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.
Domestic and international economic conditions.
Disruption in the domestic and international equity and financial markets has negatively impacted the United States’ economy as well as international markets in which we conduct business. We are not able to predict the future impact of this global financial crisis on our liquidity and consolidated statements of financial position, results of operations, and cash flows.
Funded status of pension plans — Recognition of pension liabilities may cause a significant reduction in stockholders’ equity.
Statement of Financial Accounting Standards (FAS) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans , requires balance sheet recognition of the funded status of our defined benefit pension and postretirement benefit plans. If the fair value of our pension plans’ assets at a future reporting date decreases or if the discount rate used to calculate the projected benefit obligation (PBO) as of that date decreases, we will be required to record the incremental change in the excess of PBO over the fair value of the assets as a reduction of stockholders’ equity. The resulting non-cash after-tax charge would not reduce reported
5
earnings as this amount would represent future expense. It would be recorded directly as a decrease in the Other Comprehensive Income component of stockholders’ equity. While we cannot estimate the future funded status of our pension liability with any certainty at this time, we believe that if the market value of assets or the discount rate used to calculate our pension liability materially decreases, the adjustment could significantly reduce our stockholders’ equity. A significant reduction in stockholders’ equity may impact our compliance with debt covenants or could cause a downgrade in our credit ratings that could also adversely impact our future cost and speed of borrowing and have an adverse affect on our financial condition, results of operations and liquidity. We have identified pension assumptions as critical accounting estimates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Judgments—Accounting for pension costs” and “—Pension assumptions sensitivity analysis” included in Item 7 of this Annual Report on Form 10-K.
Goodwill and other intangible assets – A significant write down of goodwill and/or other intangible assets would have a material adverse effect on our reported results of operations and net worth.
On January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (FAS No. 142). We no longer amortize goodwill, but we review our goodwill balance for impairment at least once a year using the business valuation methods required by FAS No. 142. These methods include the use of a weighted-average cost of capital to calculate the present value of the expected future cash flows of our reporting units. Future changes in the cost of capital, expected cash flows, or other factors may cause our goodwill and/or other intangible assets to be impaired, resulting in a non-cash charge against results of operations to write down these assets for the amount of the impairment. If a significant write down is required, the charge would have a material adverse effect on our reported results of operations and net worth. We have identified the valuation of intangibles as a critical accounting estimate. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Judgments—Intangible assets and goodwill” included in Item 7 of this Annual Report on Form 10-K.
Foreign operations – Conditions in foreign countries and changes in foreign exchange rates may reduce our reported results of operations.
We have operations in the United States, Canada, Mexico, South America, Europe, and Asia. In 2008, approximately 36 percent of our sales were generated by entities operating outside of the United States. Fluctuations in currencies can cause transaction and translation losses. In addition, our revenues and net income may be adversely affected by economic conditions, political situations, and changing laws and regulations in foreign countries, as to which we have no control.
Interest rates – An increase in interest rates could reduce our reported results of operations.
At December 31, 2008, our variable rate borrowings approximated $380.7 million. Fluctuations in interest rates can increase borrowing costs and have an adverse impact on results of operations. Accordingly, increases in short-term interest rates will directly impact the amount of interest we pay. For each one percent increase in variable interest rates, our annual interest expense would increase by $3.8 million on the $380.7 million of variable rate debt outstanding as of December 31, 2008.
Credit rating – A downgrade in our credit rating could increase our borrowing costs and negatively affect our financial condition and results of operations.
In addition to using cash provided by operations, we regularly issue commercial paper to meet our short-term liquidity needs. Our credit ratings are important to our ability to issue commercial paper at favorable rates of interest. A downgrade in our credit rating could increase the cost of borrowing by increasing the spread over prevailing market rates that we pay for our commercial paper or the fees associated with our bank credit facility. In addition, our bank credit facility has covenants that include limits on the sale of businesses, minimum net worth calculations, and a maximum ratio of debt to total capitalization. If for any reason our existing credit arrangements were no longer available to us we would be required to seek alternative sources of financing. We would expect to meet our financial liquidity needs by accessing the bank market, which would further increase our borrowing costs.
Raw materials – Raw material cost increases or shortages could adversely affect our results of operations.
As a manufacturer, our sales and profitability are dependent upon the availability and cost of raw materials, which are subject to price fluctuations. Inflationary and other increases in the costs of raw materials have occurred in the past and are expected to recur, and our performance depends in part on our ability to reflect changes in costs in selling prices for our products. In the past, we have been generally successful in managing increased raw material costs and increasing selling prices when necessary. Past performance may or may not be replicable in the future. Natural disasters such as hurricanes, in addition to terrorist activity and government regulation of environmental emissions, may negatively impact the production or delivery capacity of our raw material suppliers in the chemical and paper industries. This could result in increased raw material costs or supply shortages, which may have a negative impact on our profitability if we are unable to pass along the increased costs in our selling prices or, in the case of a shortage, secure raw materials from alternative sources.
Patents and proprietary technology – Our success is dependent on our ability to develop and successfully introduce new products and to acquire and retain intellectual property rights.
Our ability to develop and successfully market new products and to develop, acquire, and retain necessary intellectual property rights is essential to our continued success, which ability cannot be assured.
Industry investigations – Several lawsuits have been filed against us related to alleged unlawful competitive activities in the industry in connection with now-concluded investigations of the labelstock industry by the U.S. Department of Justice and of the paper and forest products sector by the European Commission.
In April 2003, we were notified by the U.S. Department of Justice’s Antitrust Division that it expected to initiate a criminal investigation into competitive practices in the labelstock industry, and in August 2003 the U.S. Department of Justice issued a subpoena to us in connection with the investigation. In May 2004, the European Commission, seeking evidence of unlawful anticompetitive activities, initiated inspections and obtained documents from our pressure sensitive materials facility in Belgium. We cooperated fully
6
with these investigations, and both investigations were closed by each agency without further action. We and one of our subsidiaries are named defendants in lawsuits in the United States seeking treble damages and other relief for alleged unlawful competitive practices, which were filed after the announcement of the U.S. Department of Justice investigation. We are unable to predict the outcome of these matters although the effect could be material to the results of operations and/or cash flows of the period in which the matter is resolved.
Acquisitions – We may not be able to successfully integrate the businesses that we acquire.
We have made numerous acquisitions in the past and are actively seeking new acquisitions that we believe will provide meaningful opportunities to grow our business and improve profitability. Acquired businesses may not achieve the levels of revenue, profit, productivity, or otherwise perform as we expect. Acquisitions involve special risks, including, without limitation, the potential assumption of unanticipated liabilities and contingencies as well as difficulties in integrating acquired businesses. While we believe that our acquisitions will improve our competitiveness and profitability, we can give no assurance that acquisitions will be successful or accretive to earnings.
Information technology – A failure in our information technology infrastructure or applications could negatively affect our business.
We depend on information technology to record and process customer’s orders, manufacture and ship products in a timely manner, and maintain the financial accuracy of our business records. We are in the process of developing and implementing a global Enterprise Resource Planning (ERP) system that will redesign and deploy new processes and a common information system across our plants over a period of several years. There can be no certainty that this system will deliver the expected benefits. The failure to achieve our goals may impact our ability to (1) process transactions accurately and efficiently and (2) remain in step with the changing needs of the trade, which could result in the loss of customers. In addition, the failure to either deliver the application on time, or anticipate the necessary readiness and training needs, could lead to business disruption and loss of customers and revenue. Finally, failure or abandonment of the ERP system could result in a write-off of part or all of the costs that have been capitalized on the project.
Our information systems could also be penetrated by outside parties intent on extracting information, corrupting information, or disrupting business processes. Such unauthorized access could disrupt our business and could result in the loss of assets.
Numerous other factors over which we may have limited or no control may affect our performance and profitability.
Other factors that may influence our earnings, financial position, and liquidity include: legal and administrative cases and proceedings (whether civil, such as environmental or product related, or criminal), settlements, judgments, and investigations; developments or assertions by or against us relating to intellectual property rights and intellectual property licenses; adoption of new, or changes in, accounting policies or practices and the application of such policies and practices; changes in business mix; customer and supplier business reorganizations or combinations; increase in cost of debt; ability to retain adequate levels of insurance coverage at acceptable rates; fluctuations in pension and employee benefit costs; loss of significant contract(s); risks and uncertainties relating to investment in development activities and new facilities; timely development and successful market acceptance of new products; pricing of competitive products; disruptions in transportation networks; increased participation in potentially less stable emerging markets; reliability of utility services; impact of computer viruses; general or specific economic conditions and the ability and willingness of purchasers to substitute other products for the products that we manufacture; financial condition and inventory strategies of customers and suppliers; credit risks; changes in customer order patterns; employee work stoppages at plants; increased competition; changes in government regulations and the impact of changes in the world political environment, including the ability to estimate the impact of foreign currency exchange rates on financial results; the impact of epidemiological events on the economy and on our customers and suppliers; and acts of war, terrorism, weather, and other natural disasters.
ITEM 1B – UNRESOLVED STAFF COMMENTS
None.
Properties utilized by the Company at December 31, 2008, were as follows:
Flexible Packaging Segment
This segment has 50 manufacturing plants located in 13 states and ten non-USA countries, of which 45 are owned directly by the Company or its subsidiaries and five are leased from outside parties. Initial lease terms generally provide for minimum terms of five to 15 years and have one or more renewal options. The initial term of leases in effect at December 31, 2008, expire between 2009 and 2014.
Pressure Sensitive Materials Segment
This segment has seven manufacturing plants located in three states and two non-USA countries, all of which are owned directly by the Company or its subsidiaries.
Corporate and General
The Company 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 utilization depending on the type of operation and market conditions. The executive offices of the Company, which are leased, are located in Neenah, Wisconsin.
7
The Company is involved in a number of lawsuits incidental to its business, including environmental related litigation. Although it is difficult to predict the ultimate outcome of these cases, management believes, except as discussed below, that any ultimate liability would not have a material adverse effect upon the Company’s consolidated financial condition or results of operations.
The Company is a potentially responsible party (PRP) pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (commonly known as “Superfund”) and similar state laws in proceedings associated with seventeen sites around the United States. During 2008, the Company was identified as a PRP in four new sites. In addition, two sites previously considered closed have been re-opened for potential further remediation. These proceedings were instituted by the United States Environmental Protection Agency and certain state environmental agencies at various times beginning in 1983. Superfund and similar state laws create liability for investigation and remediation in response to releases of hazardous substances in the environment. Under these statutes, joint and several liability may be imposed on waste generators, site owners and operators, and others regardless of fault. Although these regulations could require the Company to remove or mitigate the effects on the environment at various sites, perform remediation work at such sites, or pay damages for loss of use and non-use values, we expect the Company’s liability in these proceedings to be limited to monetary damages. The Company expects its future liability relative to these sites to be insignificant, individually and in the aggregate. The Company has reserved an amount that it believes to be adequate to cover its exposure.
Dixie Toga S.A., acquired by the Company on January 5, 2005, is involved in a tax dispute with the City of São Paulo, Brazil. The City imposes a tax on the rendering of printing services. The City has assessed this city services tax on the production and sale of printed labels and packaging products. Dixie Toga, along with a number of other packaging companies, disagrees and contends that the city services tax is not applicable to its products and that the products are subject only to the state value added tax (VAT). Under Brazilian law, state VAT and city services tax are mutually exclusive and the same transaction can be subject to only one of those taxes. Based on a ruling from the State of São Paulo, advice from legal counsel, and long standing business practice, Dixie Toga appealed the city services tax and instead continued to collect and pay only the state VAT.
The City of São Paulo disagreed and assessed Dixie Toga the city services tax for the years 1991-1995. The assessments for those years are estimated to be approximately $47.0 million at the date the Company acquired Dixie Toga, translated to U.S. dollars at the December 31, 2008 exchange rate. Dixie Toga challenged the assessments and ultimately litigated the issue in two annulment actions filed on November 24, 1998 and August 16, 1999 in the Lower Tax Court in the city of São Paulo. A decision by the Lower Tax Court in the city of São Paulo in 2002 cancelled all of the assessments for the years 1991-1995. The City of São Paulo, the State of São Paulo, and Dixie Toga have each appealed parts of the lower court decision. In the event of an adverse resolution, the estimated amount for these years could be substantially increased for additional interest, monetary adjustments and costs from the date of acquisition.
The City has also asserted the applicability of the city services tax for the subsequent years 1996-2001 and has issued assessments for those years for Dixie Toga and for Itap Bemis Ltda., a Dixie Toga subsidiary. The assessments for those years were upheld at the administrative level and are being challenged by the companies. The assessments at the date of acquisition for these years for tax and penalties (exclusive of interest and monetary adjustments) are estimated to be approximately $7.1 million for Itap Bemis and $22.8 million for Dixie Toga, translated to U.S. dollars at the December 31, 2008 exchange rate. In the event of an adverse resolution, the estimated amounts for these years could be increased by $27.1 million for Itap Bemis and $77.9 million for Dixie Toga for interest, monetary adjustments and costs.
The 1996-2001 assessments for Dixie Toga are currently being challenged in the courts. In pursuing its challenge through the courts, taxpayers are generally required, in accordance with court procedures, to pledge assets as security for its lawsuits. Under certain circumstances, taxpayers may avoid the requirement to pledge assets. Dixie Toga has secured a court injunction that avoids the current requirement to pledge assets as security for its lawsuit related to the 1996-2001 assessments.
The Company strongly disagrees with the City’s position and intends to vigorously challenge any assessments by the City of São Paulo. The Company is unable at this time to predict the ultimate outcome of the controversy and as such has not recorded any liability related to this matter. An adverse resolution could be material to the consolidated results of operations and/or cash flows of the period in which the matter is resolved.
On September 18, 2007, the Secretariat of Economic Law (SDE), a governmental agency in Brazil, initiated an investigation into possible anti-competitive practices in the Brazilian flexible packaging industry against a number of Brazilian companies including a Dixie Toga subsidiary. The investigation relates to periods prior to the Company’s acquisition of control of Dixie Toga and its subsidiaries. Given the preliminary nature of the proceedings the Company is unable at the present time to predict the outcome of this matter.
The Company and its subsidiary, Morgan Adhesives Company, have been named as defendants in thirteen civil lawsuits related to an investigation that was initiated and subsequently closed by the U.S. Department of Justice without any further action. Six of these lawsuits purport to represent a nationwide class of labelstock purchasers, and each alleges a conspiracy to fix prices within the self-adhesive labelstock industry. The first of these lawsuits was filed on May 27, 2003. In these lawsuits, the plaintiffs seek actual damages for the period of the alleged conspiracy (January 1, 1996 through July 25, 2003) trebled, plus an award of attorneys’ fees and costs. On November 5, 2003, the Judicial Panel on MultiDistrict Litigation issued a decision consolidating all of the federal class actions for pretrial purposes in the United States District Court for the Middle District of Pennsylvania, before the Honorable Chief Judge Vanaskie. On November 20, 2007, the Court granted plaintiffs’ motion for class certification. On March 6, 2008, the Third Circuit Court of Appeals denied Defendant’s petition for leave to appeal the district court’s decision granting class certification. On June 24, 2008, the Court in the consolidated federal class actions issued a decision dismissing the Company from those actions. On January 27, 2009, the defendants filed a motion to decertify the class based on new case law in the Third Circuit. At this time, a discovery cut-off has been set for
8
December 21, 2009. However, no trial date has been set. The Company and Morgan Adhesives Company have also been named in three lawsuits filed in the California Superior Court in San Francisco. These three lawsuits, which have been consolidated, seek to represent a class of all California indirect purchasers of labelstock and each alleges a conspiracy to fix prices within the self-adhesive labelstock industry. Finally, the Company has been named in one lawsuit in Vermont, seeking to represent a class of all Vermont indirect purchasers of labelstock, one lawsuit in Nebraska seeking to represent a class of all Nebraska indirect purchasers of labelstock, one lawsuit in Kansas seeking to represent a class of all Kansas indirect purchasers of labelstock, and one lawsuit in Tennessee, seeking to represent a class of purchasers of labelstock in various jurisdictions, all alleging a conspiracy to fix prices within the self-adhesive labelstock industry. The Company and Morgan Adhesives Company intend to vigorously defend the state class actions, and Morgan Adhesives Company intends to vigorously defend the federal class actions.
Given the ongoing status of the class-action civil lawsuits, the Company is unable to predict the outcome of these matters although the effect could be material to the results of operations and/or cash flows of the period in which the matter is resolved. The Company is currently not otherwise subject to any pending litigation other than routine litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on the business, results of operations, financial position, or liquidity of the Company.
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 2008.
ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is traded on the New York Stock Exchange under the symbol BMS. On December 31, 2008, there were 3,920 registered holders of record of our common stock. The Company did not repurchase any of its equity securities in the fourth quarter of the fiscal year ended December 31, 2008. As of December 31, 2008, under authority granted by the Board of Directors, the Company may repurchase an additional 4,074,886 shares of its common stock.
Dividends paid and the high and low common stock prices per share were as follows:
|
For the Quarterly Periods Ended: |
|
March 31 |
|
June 30 |
|
September 30 |
|
December 31 |
|
||||
|
2008 |
|
|
|
|
|
|
|
|
|
||||
|
Dividend paid per common share |
|
$ |
0.22 |
|
$ |
0.22 |
|
$ |
0.22 |
|
$ |
0.22 |
|
|
Common stock price per share |
|
|
|
|
|
|
|
|
|
||||
|
High |
|
$ |
27.87 |
|
$ |
27.86 |
|
$ |
29.70 |
|
$ |
27.02 |
|
|
Low |
|
$ |
22.50 |
|
$ |
22.40 |
|
$ |
21.82 |
|
$ |
20.62 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
||||
|
Dividend paid per common share |
|
$ |
0.21 |
|
$ |
0.21 |
|
$ |
0.21 |
|
$ |
0.21 |
|
|
Common stock price per share |
|
|
|
|
|
|
|
|
|
||||
|
High |
|
$ |
36.53 |
|
$ |
34.81 |
|
$ |
34.53 |
|
$ |
29.92 |
|
|
Low |
|
$ |
31.92 |
|
$ |
31.95 |
|
$ |
28.01 |
|
$ |
25.53 |
|
|
2006 |
|
|
|
|
|
|
|
|
|
||||
|
Dividend paid per common share |
|
$ |
0.19 |
|
$ |
0.19 |
|
$ |
0.19 |
|
$ |
0.19 |
|
|
Common stock price per share |
|
|
|
|
|
|
|
|
|
||||
|
High |
|
$ |
34.25 |
|
$ |
33.10 |
|
$ |
33.28 |
|
$ |
34.99 |
|
|
Low |
|
$ |
27.86 |
|
$ |
28.84 |
|
$ |
28.54 |
|
$ |
32.45 |
|
Equity compensation plans as of December 31, 2008, were as follows:
|
|
|
|
|
|
|
Number of securities |
|
|
|
|
|
|
|
|
|
remaining available for |
|
|
|
|
|
Number of securities to be |
|
Weighted-average |
|
future issuance under |
|
|
|
|
|
issued upon exercise of |
|
exercise price of |
|
equity compensation plans |
|
|
|
|
|
outstanding options, |
|
outstanding options, |
|
(excluding securities |
|
|
|
Plan Category |
|
warrants and rights |
|
warrants and rights |
|
reflected in column (a)) |
|
|
|
|
|
(a) |
|
(b) |
|
(c) |
|
|
|
Equity compensation plans approved by security holders |
|
4,731,752 |
(1) |
$ |
19.75 |
(2) |
5,915,585 |
(3) |
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders |
|
0 |
|
N/A |
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
4,731,752 |
(1) |
$ |
19.75 |
(2) |
5,915,585 |
(3) |
(1) Includes outstanding options and restricted stock units.
(2) Represents weighted-average exercise price of outstanding options only. Restricted stock units do not have an exercise price.
(3) May be issued as options or restricted stock units.
9
ITEM 6 — SELECTED FINANCIAL DATA
FIVE-YEAR CONSOLIDATED REVIEW
(dollars in millions, except per share amounts)
|
Years Ended December 31, |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
2004 |
|
|||||
|
Operating Data |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net sales |
|
$ |
3,779.4 |
|
$ |
3,649.3 |
|
$ |
3,639.4 |
|
$ |
3,474.0 |
|
$ |
2,834.4 |
|
|
Cost of products sold and other expenses |
|
3,477.5 |
|
3,313.1 |
|
3,304.3 |
|
3,158.9 |
|
2,525.2 |
|
|||||
|
Interest expense |
|
39.4 |
|
50.3 |
|
49.3 |
|
38.7 |
|
15.5 |
|
|||||
|
Income before income taxes |
|
262.5 |
|
285.9 |
|
285.8 |
|
276.4 |
|
293.7 |
|
|||||
|
Provision for income taxes |
|
96.3 |
|
104.3 |
|
109.5 |
|
113.9 |
|
113.7 |
|
|||||
|
Net income |
|
166.2 |
|
181.6 |
|
176.3 |
|
162.5 |
|
180.0 |
|
|||||
|
Net income as a percent of net sales |
|
4.4 |
% |
5.0 |
% |
4.8 |
% |
4.7 |
% |
6.3 |
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Common Share Data |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Basic earnings per share |
|
$ |
1.67 |
|
$ |
1.76 |
|
$ |
1.68 |
|
$ |
1.53 |
|
$ |
1.68 |
|
|
Diluted earnings per share |
|
1.65 |
|
1.74 |
|
1.65 |
|
1.51 |
|
1.67 |
|
|||||
|
Dividends per share |
|
0.88 |
|
0.84 |
|
0.76 |
|
0.72 |
|
0.64 |
|
|||||
|
Book value per share |
|
13.50 |
|
15.40 |
|
14.04 |
|
12.81 |
|
12.23 |
|
|||||
|
Stock price/earnings ratio range |
|
13-18x |
|
15-21x |
|
17-21x |
|
16-21x |
|
14-18x |
|
|||||
|
Weighted-average shares outstanding for computation of diluted earnings per share |
|
100,969,449 |
|
104,114,043 |
|
106,767,114 |
|
107,818,708 |
|
107,941,738 |
|
|||||
|
Common shares outstanding at December 31, |
|
99,708,191 |
|
100,518,355 |
|
104,841,576 |
|
105,305,975 |
|
106,947,128 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Capital Structure and Other Data |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Current ratio |
|
2.3x |
|
2.1x |
|
2.0x |
|
2.1x |
|
2.3x |
|
|||||
|
Working capital |
|
$ |
560.9 |
|
$ |
602.4 |
|
$ |
538.3 |
|
$ |
513.5 |
|
$ |
498.9 |
|
|
Total assets |
|
2,822.3 |
|
3,191.4 |
|
3,039.0 |
|
2,964.6 |
|
2,486.7 |
|
|||||
|
Short-term debt |
|
26.6 |
|
67.8 |
|
67.6 |
|
54.0 |
|
5.7 |
|
|||||
|
Long-term debt |
|
660.0 |
|
775.5 |
|
722.2 |
|
790.1 |
|
533.9 |
|
|||||
|
Stockholders’ equity |
|
1,346.5 |
|
1,562.3 |
|
1,472.0 |
|
1,349.4 |
|
1,307.9 |
|
|||||
|
Return on average stockholders’ equity |
|
11.4 |
% |
12.0 |
% |
12.5 |
% |
12.2 |
% |
14.7 |
% |
|||||
|
Return on average total capital |
|
8.1 |
% |
8.6 |
% |
8.7 |
% |
8.5 |
% |
9.7 |
% |
|||||
|
Depreciation and amortization |
|
$ |
162.0 |
|
$ |
158.5 |
|
$ |
152.4 |
|
$ |
150.8 |
|
$ |
130.8 |
|
|
Capital expenditures |
|
120.5 |
|
178.9 |
|
158.8 |
|
187.0 |
|
134.5 |
|
|||||
|
Number of common stockholders |
|
3,920 |
|
4,111 |
|
4,192 |
|
4,359 |
|
4,465 |
|
|||||
|
Number of employees |
|
15,394 |
|
15,678 |
|
15,736 |
|
15,903 |
|
11,907 |
|
|||||
ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis
Management’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8 of this Annual Report on Form 10-K.
|
(dollars in millions) |
|
2008 |
|
2007 |
|
2006 |
|
|||||||||
|
Net sales |
|
$ |
3,779.4 |
|
100.0 |
% |
$ |
3,649.3 |
|
100.0 |
% |
$ |
3,639.4 |
|
100.0 |
% |
|
Cost of products sold |
|
3,131.4 |
|
82.9 |
|
2,973.3 |
|
81.5 |
|
2,942.7 |
|
80.9 |
|
|||
|
Gross margin |
|
648.0 |
|
17.1 |
|
676.0 |
|
18.5 |
|
696.7 |
|
19.1 |
|
|||
|
Selling, general, and administrative expenses |
|
342.7 |
|
9.1 |
|
341.6 |
|
9.4 |
|
336.4 |
|
9.2 |
|
|||
|
All other expenses |
|
42.8 |
|
1.1 |
|
48.5 |
|
1.3 |
|
74.5 |
|
2.0 |
|
|||
|
Income before income taxes |
|
262.5 |
|
6.9 |
|
285.9 |
|
7.8 |
|
285.8 |
|
7.9 |
|
|||
|
Provision for income taxes |
|
96.3 |
|
2.5 |
|
104.3 |
|
2.9 |
|
109.5 |
|
3.1 |
|
|||
|
Net income |
|
$ |
166.2 |
|
4.4 |
% |
$ |
181.6 |
|
5.0 |
% |
$ |
176.3 |
|
4.8 |
% |
|
Effective income tax rate |
|
|
|
36.7 |
% |
|
|
36.5 |
% |
|
|
38.3 |
% |
|||
10
Bemis Company, Inc. is a leading global manufacturer of flexible packaging and pressure sensitive materials supplying a variety of markets. Generally about 60 percent of our total company 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. Other markets into which we sell our flexible packaging products include medical devices, personal care, and lawn and garden. Our emphasis on supplying packaging to the food industry has historically provided a more stable market environment for our flexible packaging business segment, which accounts for about 83 percent of our net sales. The remaining 17 percent of our net sales is from the 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.
The markets into which our products are sold are highly competitive. Our leading flexible packaging market positions in North and South America reflect our focus on expanding our offering of value-added, proprietary products. We also manufacture products that are less unique but 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, and adhesives.
During 2008, economic conditions continued to weaken and global financial markets experienced a significant liquidity crisis. Governments around the world have responded to the financial crisis with funding support for their regional financial systems. Consumer spending declined and unemployment in the United States increased. The housing and automotive markets continue to be weak. Commodity prices hit historically high levels during the second and third quarters of 2008, resulting in increased raw material and energy costs for manufacturers. Some of the commodity grade raw material costs steadily decreased throughout the fourth quarter as the global financial crisis widened. Our raw material costs hit historic highs during the year, but by the end of the year certain material costs had declined to early 2007 levels. While lower raw material costs benefit operating profit on a short-term basis, our selling prices will decrease to reflect these lower costs over a few months.
In January 2006, we announced the planned closure of five flexible packaging facilities and one pressure sensitive materials facility in order to consolidate production capacity and improve overall cost structure and efficiency. These efforts were substantially complete as of December 31, 2006. Total remaining costs incurred in 2007 were substantially offset by restructuring related gains. Restructuring and related charges incurred in 2006 totaled $31.2 million, of which $12.9 million primarily reflected accelerated depreciation and was recorded as a component of cost of products sold. The remaining $18.3 million primarily reflected employee-related costs and was recorded as a component of other costs (income).
In April 2006, we acquired the remaining shares of our three majority-owned joint ventures in Mexico for $6.8 million.
|
(in millions, except per share amounts) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Net sales |
|
$ |
3,779.4 |
|
$ |
3,649.3 |
|
$ |
3,639.4 |
|
|
Net income |
|
166.2 |
|
181.6 |
|
176.3 |
|
|||
|
Diluted earnings per share |
|
1.65 |
|
1.74 |
|
1.65 |
|
|||
2008 versus 2007
For the year ended December 31, 2008, net sales increased 3.6 percent, reflecting increased raw material costs incorporated into higher selling prices during the year. Unit volume sold into certain food packaging markets increased compared to 2007, while unit volumes declined in advertising, display film, and construction-related markets that are more sensitive to economic conditions. Currency translation benefits increased net sales by 1.7 percent.
Diluted earnings per share were $1.65 for 2008, a 5.2 percent decrease compared to $1.74 per share for 2007. In 2007, diluted earnings per share included $0.02 per share tax benefit related to dividends from foreign subsidiaries. Higher raw material costs in 2008 negatively impacted gross margins.
2007 versus 2006
For the year ended December 31, 2007, net sales increased 0.3 percent, reflecting a net sales benefit from currency translation of 3.4 percent, offset by a 3.1 percent decrease in net sales related to lower unit sales volume.
Diluted earnings per share were $1.74 for 2007, including a $0.02 per share tax benefit related to dividends from foreign subsidiaries. In 2006, diluted earnings per share were $1.65 for 2006, including $0.18 per share of restructuring and related charges.
Our flexible packaging business segment provides packaging to a variety of end markets, including meat and cheese, confectionery and snack, frozen foods, lawn and garden, health and hygiene, beverages, medical devices, bakery, and dry foods. The most significant raw materials used in this business segment are polymer resins, which we use to develop and manufacture single layer and multilayer film products. Selling price changes lag behind changes in our raw material costs. During 2008, resin costs dramatically increased during the second and third quarters. Certain commodity resin costs subsequently decreased during the fourth quarter. The magnitude and frequency of these cost changes negatively impacted operating profit during 2008.
11
In January of 2006, we announced a restructuring plan to close five flexible packaging plants in order to consolidate production capacity and improve overall cost structure and efficiency throughout this business segment. These efforts were substantially completed by December 31, 2006. Restructuring and related charges for the flexible packaging business segment totaled $29.0 million in 2006.
|
(dollars in millions) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Net sales |
|
$ |
3,153.2 |
|
$ |
3,001.8 |
|
$ |
3,000.1 |
|
|
Operating profit (See Note 12 to the Consolidated Financial Statements) |
|
315.9 |
|
346.6 |
|
335.1 |
|
|||
|
Operating profit as a percentage of net sales |
|
10.0 |
% |
11.5 |
% |
11.2 |
% |
|||
2008 versus 2007
Net sales in our flexible packaging business segment increased 5.0 percent in 2008, principally reflecting the impact of higher selling prices. Currency effects accounted for sales growth of 1.4 percent during 2008. Increases in net sales of packaging for meat and cheese, dairy and liquids, bakery products, and medical products markets reflected higher unit volume. These markets represent approximately 48 percent of total flexible packaging net sales. Net sales also increased in packaging for dry foods, health and hygiene, and industrial product markets, driven primarily by higher selling prices. These markets represent approximately 22 percent of flexible packaging net sales. We experienced lower net sales in the remaining 30 percent of our flexible packaging market categories as a result of lower unit volume. These lower volume markets include confectionery and snack markets, pet products, overwrap film for bottled water, frozen foods, lawn and garden, and protective display films. Non-discretionary food markets have historically provided defensive characteristics during times of economic weakness. Markets for protective display films and packaging for discretionary food and consumer products have been negatively impacted during the recent economic downturn. We expect these trends to continue until the economy begins to strengthen and consumer confidence improves.
Operating profit as a percentage of net sales decreased to 10.0 percent in 2008 from 11.5 percent in 2007. Restructuring and related activities increased 2007 operating income by $1.5 million. Raw material prices increased substantially during the first eight months of 2008, and many specialty materials used in our food packaging products maintained those prices through the end of the year. Our method of passing these input costs on to customers through increased selling prices normally occurs with a several month lag and pressures operating profit margins during that period.
2007 versus 2006
Net sales in our flexible packaging business segment were virtually unchanged from 2006 to 2007. A benefit from currency translation of 3.1 percent was completely offset by weak demand across many of our packaging markets. Net sales of packaging for meat and cheese, which represent about 30 percent of our flexible packaging net sales, decreased about 3 percent excluding the impact of currency. Packaging for bakery products and dry foods, for which consumer demand has been impacted by increased wheat prices, experienced a drop in net sales of about 10 percent from 2006 levels. Packaging for pet products and industrial products also decreased over 9 percent in 2007. Packaging for bakery, dry foods, pet products, and industrial products represents about 17 percent of flexible packaging net sales. Growth in other flexible packaging markets representing a combined 17 percent of total flexible packaging net sales substantially offset the impact of these decreases. Packaging for dairy and liquid products and overwrap for bottled beverages each increased by about 11 percent. Net sales of medical device packaging increased almost 6 percent compared to 2006, despite a slowdown related to a period of manufacturing shutdown during 2007 in order to move equipment to a new facility in Northern Ireland.
Operating profit as a percentage of net sales increased to 11.5 percent in 2007 from 11.2 percent in 2006. Restructuring and related activities resulted in $1.5 million of operating income in 2007 and a $29.0 million reduction in operating profit in 2006. During 2007, operating profit was negatively impacted by the lower unit sales volume noted in the previous paragraph and a steady increase in raw material costs.
The pressure sensitive materials business segment offers adhesive products to three markets: prime and variable information labels, which include roll label stock used in a wide variety of label markets; graphic design, used to create signage and decorations; and technical components, which represent pressure sensitive components for industries such as the electronics, automotive, construction and medical industries.
Paper and adhesive are the primary raw materials used in our pressure sensitive materials business segment. For the last several years, general economic conditions and competitive pressures have had a greater influence on selling prices and operating performance than raw material costs.
In January of 2006, we announced a restructuring plan which included the closure of one pressure sensitive materials plant in order to consolidate production capacity and improve overall cost structure and efficiency. This effort was completed by December 31, 2006. Restructuring and related charges incurred for this business segment totaled $1.0 million in 2006. These costs were primarily employee-related costs and were recorded as a component of other costs (income), net.
|
(dollars in millions) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Net sales |
|
$ |
626.2 |
|
$ |
647.5 |
|
$ |
639.3 |
|
|
Operating profit (See Note 12 to the Consolidated Financial Statements) |
|
34.3 |
|
40.3 |
|
50.1 |
|
|||
|
Operating profit as a percentage of net sales |
|
5.5 |
% |
6.2 |
% |
7.8 |
% |
|||
12
2008 versus 2007
Our pressure sensitive materials business segment reported a net sales decrease of 3.3 percent in 2008, reflecting a benefit from currency translation of 2.8 percent which was more than offset by lower unit sales. Unit volumes declined in each of our pressure sensitive product lines, partially offset by increased label products prices and improved sales mix for technical products. Our label and graphic product lines represent 88 percent of our 2008 pressure sensitive materials net sales. Demand for these products in the discretionary consumer and advertising markets declined during the recent global economic downturn.
Operating profit as a percent of net sales was lower in 2008 compared to 2007, reflecting decreased unit sales volumes across all product lines. Due to the nature of the markets served by this business segment, we expect operating profit as a percent of net sales to continue to decline until global economic conditions improve.
2007 versus 2006
Our pressure sensitive materials business segment reported a net sales increase of 1.3 percent in 2007, reflecting a benefit from currency translation of 4.5 percent, substantially offset by lower unit sales for label and technical products. Increased industry capacity for label products dampened unit sales volume and pricing during 2007, resulting in a 4 percent decrease in net sales of label products, excluding the impact of currency. Technical product net sales decreased by over 8 percent as customers faced economic challenges associated with the housing and medical markets. Graphic product net sales increased by about 5 percent during 2007.
Operating profit as a percent of net sales was lower in 2007 compared to 2006, reflecting decreased sales of value-added technical products and a lower margin sales mix in our graphic product sales.
|
(dollars in millions) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Gross margin |
|
$ |
648.0 |
|
$ |
676.0 |
|
$ |
696.7 |
|
|
Gross margin as a percentage of net sales |
|
17.1 |
% |
18.5 |
% |
19.1 |
% |
|||
Restructuring and related charges reduced gross margins by $0.3 million in 2007 and $12.9 million in 2006. There were no restructuring charges during 2008. The time lag between increases in raw material costs and the implementation of related selling price increases negatively impacted gross margins as a percent of net sales in each of the years presented. In addition, lower production volume associated with weak consumer demand for products in our markets reduced fixed cost absorption during 2007 and 2008. The impact of these cost pressures was partially offset by ongoing initiatives to improve production efficiency and cost management during the same timeframe.
|
(dollars in millions) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Selling, general and administrative expenses (SG&A) |
|
$ |
342.7 |
|
$ |
341.6 |
|
$ |
336.4 |
|
|
SG&A as a percentage of net sales |
|
9.1 |
% |
9.4 |
% |
9.2 |
% |
|||
Selling, general and administrative expenses have remained relatively stable over the past few years, reflecting management’s focus on cost management. The decline in the ratio of these expenses to net sales was driven by higher selling prices included in net sales over these time periods.
Other Expenses
|
(dollars in millions) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Research and development (R&D) |
|
$ |
25.0 |
|
$ |
26.0 |
|
$ |
25.0 |
|
|
R&D as a percentage of net sales |
|
0.7 |
% |
0.7 |
% |
0.7 |
% |
|||
|
Interest expense |
|
$ |
39.4 |
|
$ |
50.3 |
|
$ |
49.3 |
|
|
Other costs (income), net |
|
(27.6 |
) |
(31.5 |
) |
(3.3 |
) |
|||
|
Minority interest in net income |
|
6.0 |
|
3.7 |
|
3.5 |
|
|||
|
Income taxes |
|
96.3 |
|
104.3 |
|
109.5 |
|
|||
|
Effective tax rate |
|
36.7 |
% |
36.5 |
% |
38.3 |
% |
|||
Our efforts to introduce new products continue at a steady pace and are an integral part of our daily plant operations. Our research and development engineers work directly on commercial production equipment, bringing new products to market without the use of pilot equipment. We believe this approach significantly improves the efficiency, effectiveness, and relevance of our research and development activities and results in earlier commercialization of new products. Expenditures that are not distinctly identifiable as research and development costs are included in costs of products sold.
Interest expense decreased by $10.9 million during 2008, reflecting lower levels of debt outstanding and lower average interest rates. The percentage of variable rate debt included in total debt is 55 percent in 2008, 64 percent in 2007, and 59 percent in 2006. The effective interest rate was 4.8 percent in 2008, 5.9 percent in 2007, and 5.9 percent in 2006.
13
In 2008, other costs (income) included $33.5 million of financial income, about 40 percent of which relates to interest income on cash held at non-U.S. locations. The use of cash on hand for debt reduction during the fourth quarter of 2008 is expected to result in lower interest income during 2009. The remainder of the financial income is generated from fiscal incentives for certain flexible packaging locations and is considered as a part of flexible packaging operating profit. These fiscal incentives are associated with net sales in South America and are expected to continue to grow at a modest pace over the next few years in conjunction with sales growth in that region. Transaction losses on foreign currency totaling $6.8 million offset financial income in 2008. Of this total, $6.1 million of transaction losses were recorded during the fourth quarter as dramatic changes in currency exchange rates occurred as a result of the global financial crisis.
In 2007, other costs (income) included $28.3 million of financial income, about half of which related to interest income on cash held at non-U.S. locations. In 2006, other costs (income) included $18.3 million of restructuring and related charges, which were more than offset by financial income of $18.0 million and a $4.5 million favorable resolution of a litigated foreign excise tax liability.
Minority Interest in Net Income
Minority interest in net income is primarily associated with the accounting for the outstanding preferred shares of Dixie Toga, our Brazilian flexible packaging subsidiary.
The difference between our overall tax rate of 36.7 percent in 2008, 36.5 percent in 2007, and 38.3 percent in 2006 and the U.S. statutory rate of 35 percent in each of the three years presented principally relates to state and local income taxes net of federal income tax benefits. The lower effective tax rates in 2008 and 2007 as compared to 2006 reflect benefits related to dividends from a foreign subsidiary, the increasing impact of U.S. tax incentives for manufacturing companies, and a change in the geographic mix of pretax income.
In the second half of 2008, global financial markets experienced a liquidity crisis. This crisis resulted in a substantial reduction in available funding for commercial banks and corporate debt issuers. Governments around the world have responded with funding support for their regional financial systems. Despite this government intervention, capital market financing has become less available and more expensive. We use commercial paper to finance our daily operations. Our strong balance sheet and short-term A-1/P-2 credit ratings have preserved our ability to access the commercial paper market at a reasonable cost. If the commercial paper market becomes unavailable to us, we would expect to use our revolving bank credit facilities to finance our operations until the commercial paper market is restored or alternative financing can be arranged.
Debt to total capitalization (which includes total debt, long-term deferred tax liabilities and equity) was 32.0 percent at December 31, 2008, compared to 32.9 percent at December 31, 2007 and 33.0 percent at December 31, 2006. Improvement in this ratio was driven by debt repayments, partially offset by reductions to stockholders’ equity for pension and currency translation effects. Total debt was $686.6 million, $843.3 million, and $789.8 million at year-end 2008, 2007 and 2006, respectively.
Net cash provided by operations was $293.6 million for the year ended December 31, 2008, compared to $406.2 million in 2007 and $349.0 million in 2006. During 2008, cash flow was negatively impacted by lower operating profit and higher levels of working capital compared to 2007. Working capital increases during 2008 reflect the impact of higher raw material costs on inventory and increased selling prices on accounts receivable. Net cash provided by operations in the year ended December 31, 2006, was reduced by voluntary pension contributions to our U.S. pension plans of $24.0 million. Contributions of $2.3 million and $1.1 million were made to our U.S. pension plans in 2008 and 2007, respectively. We expect to contribute approximately $30 million to our U.S. pension plans in 2009. We expect to fund this contribution with cash provided by operations.
Available Financing
In addition to using cash provided by operations, we issue commercial paper to meet our short-term liquidity needs. At year-end, our commercial paper debt outstanding was $330.8 million. Based upon our current credit rating, we enjoy ready access to the commercial paper markets. During the fourth quarter of 2008, the global financial crisis threatened to eliminate liquidity in the commercial paper market. While not anticipated, if these markets were to become illiquid or if a credit rating downgrade limited our ability to issue commercial paper, we would draw upon our existing back-up credit facility. Under the terms of our revolving credit agreements, we have the capacity to borrow up to $625 million, of which $425 million matures April 28, 2013, and $200 million matures April 28, 2009. These facilities are primarily used to support our issuance of commercial paper. Our revolving credit facilities are supported by a group of major U.S. and international banks. Covenants imposed by these revolving credit facilities include limits on the sale of businesses, minimum net worth calculations, and a maximum ratio of debt to total capitalization. The revolving credit agreements include a combined $100 million multicurrency limit to support the financing needs of our international subsidiaries. In addition, we have arrangements in place to issue up to $100 million of Extendable Commercial Notes (ECNs), which are short-term instruments whose
14
maturity can be extended to 390 days from the date of issuance. As of December 31, 2008, the ECN market was unavailable due to unfavorable market conditions. If these revolving credit facilities and ECNs were no longer available to us, we would expect to meet our financial liquidity needs by accessing the bank market, which would increase our borrowing costs. Borrowings under the credit agreement are subject to a variable interest rate.
Commercial paper outstanding at December 31, 2008, has been classified as long-term debt in accordance with our intention and ability to refinance such obligations on a long-term basis. The related back-up credit agreement expires on April 28, 2013.
On August 15, 2008, notes totaling $250 million matured and were repaid using proceeds from the issuance of commercial paper. On December 31, 2008, our revolving credit facilities supported total commercial paper outstanding of $330.8 million, industrial revenue bond outstanding of $8.0 million, and multicurrency loans outstanding of $5.8 million. As a result, we had the capacity to borrow an additional $280.4 million under the credit facility as of December 31, 2008. Of this available liquidity, $200 million of revolving credit facilities mature on April 28, 2009. While cash flows from operations are expected to provide sufficient liquidity to meet our cash obligations projected for 2009, we will continue to evaluate the need to refinance this excess revolving credit capacity in light of existing capital market conditions and updated liquidity needs.
Management expects cash flow from operations and available liquidity described above to be sufficient to support operations going forward. Our liquidity has not been materially impacted by the current credit environment or the recent economic slowdown, and we do not expect that it will be materially impacted in the near future. There can be no assurance, however, that the cost or availability of future borrowings will not be impacted by ongoing capital market disruptions. In addition, substantial increases in raw material costs could increase our short term liquidity needs.
Capital expenditures were $120.5 million during 2008, compared to $178.9 million in 2007, and $158.8 million in 2006. Capital expenditures during the years presented supported multiyear investments for new facilities and equipment for the medical and pharmaceutical markets, a platform for rigid polyester packaging products, additional converting equipment in our Malaysian operation, proprietary film production capacity for European markets, and a new enterprise resource planning system. Capital expenditures for 2009 are estimated to be approximately $105 million. Over the long-term, we expect average annual capital expenditures to be approximately equivalent to total annual depreciation and amortization expenses. We expect to fund 2009 capital expenditures with cash provided by operating activities.
We increased our quarterly cash dividend by 4.8 percent during the first quarter of 2008 to 22 cents per share from 21 cents per share. This follows increases of 10.5 percent in 2007 and 5.6 percent in 2006. In February 2009, the Board of Directors approved the 26 th consecutive annual increase in the quarterly cash dividend on common stock to 22.5 cents per share, a 2.3 percent increase.
During 2008, we purchased 1.0 million shares of common stock in the open market. During 2007, we purchased 5.15 million shares of common stock, of which 4.0 million shares were repurchased in conjunction with an accelerated share repurchase program. The remaining 1.15 million shares were purchased in the open market. During 2006, we purchased 0.6 million shares of common stock in the open market. As of December 31, 2008, we were authorized to purchase up to 4.1 million additional shares of common stock for the treasury.
Contractual Obligations
The following table provides a summary of contractual obligations including our debt payment obligations, capital lease obligations, operating lease obligations, and certain other purchase obligations as of December 31, 2008.
|
|
|
|
|
Less than |
|
1 to 3 |
|
3 to 5 |
|
More than |
|
|||||
|
(in millions) |
|
Total |
|
1 year |
|
years |
|
years |
|
5 years |
|
|||||
|
Debt payments (1) |
|
$ |
686.6 |
|
$ |
26.6 |
|
$ |
21.1 |
|
$ |
638.9 |
|
$ |
0.0 |
|
|
Interest expense (2) |
|
91.9 |
|
26.8 |
|
49.8 |
|
15.3 |
|
0.0 |
|
|||||
|
Capital leases (3) |
|
0.1 |
|
0.1 |
|
0.0 |
|
0.0 |
|
0.0 |
|
|||||
|
Operating leases (4) |
|
25.6 |
|
6.8 |
|
8.6 |
|
4.5 |
|
5.8 |
|
|||||
|
Purchase obligations (5) |
|
149.1 |
|
146.8 |
|
1.4 |
|
0.1 |
|
0.8 |
|
|||||
|
Postretirement obligations (6) |
|
53.0 |
|
4.4 |
|
15.9 |
|
12.6 |
|
20.1 |
|
|||||
Pursuant to the application of FIN 48, the Company has accrued income tax liabilities associated with uncertain tax positions. These liabilities have been excluded from the table above due to the high degree of uncertainty as to amounts and timing regarding future payments. See Note 10 of the Consolidated Financial Statements for additional information.
(1) These amounts are included in our Consolidated Balance Sheet. A portion of this debt is commercial paper backed by a bank credit facility that expires on April 28, 2013.
(2) A portion of the interest expense disclosed is subject to variable interest rates. The amounts disclosed above assume that variable interest rates are equal to rates at December 31, 2008.
15
(3) Amount noted also includes estimated interest costs. The present value of these obligations, excluding interest, is included on our Consolidated Balance Sheet. See Note 11 to the Consolidated Financial Statements for additional information about our capital lease obligations.
(4) We enter into operating leases in the normal course of business. Substantially all lease agreements have fixed payment terms based on the passage of time. Some lease agreements provide us with the options to renew the lease. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease agreements.
(5) Purchase obligations represent contracts or commitments for the purchase of raw materials, utilities, capital equipment and various other goods and services.
(6) Postretirement obligations represent contracts or commitments for postretirement healthcare benefits and benefit payments for the unfunded Bemis Supplemental Retirement Plan. See Note 6 to the Consolidated Financial Statements for additional information about our postretirement benefit obligations.
As of December 31, 2007, our long-term unsecured notes included $250 million due in August 2008. In September 2001, we entered into interest rate swap agreements with two U.S. banks, which increased our exposure to variable rates. We generally prefer variable rate debt since it has been our experience that borrowing at variable rates is less expensive than borrowing at fixed rates over the long term. These interest rate swap agreements, which expired on the date the related notes matured in August 2008, reduced the interest cost of the notes from 6.5 percent to about 6.0 percent in 2008 and 6.0 percent in 2007. Since these variable rates are based upon six-month London Interbank Offered Rates (LIBOR), calculated in arrears, at the semiannual interest payment dates of the corresponding notes, increases in short-term interest rates will directly impact the amount of interest we pay.
Accounting principles generally accepted in the U.S. (GAAP) require that the fair value of these swaps, which were designated as hedges of our fixed rate unsecured notes outstanding, be recorded as an asset or liability of the Company. The fair value of these swaps was recorded as an asset of $3.3 million at December 31, 2007. An offsetting increase was recorded in the fair value of the related long-term notes outstanding. This fair value adjustment did not impact the actual balance of outstanding principal on the notes, nor did it impact the income statement or related cash flows.
We enter into contractual arrangements (derivatives) in the ordinary course of business to manage foreign currency exposure and interest rate risks. We do not enter into derivative transactions for trading purposes. Our use of derivative instruments is subject to internal policies that provide guidelines for control, counterparty risk, and ongoing reporting. These derivative instruments are designed to reduce the income statement volatility associated with movement in foreign exchange rates, establish rates for future issuance of public notes, and to achieve greater exposure to variable interest rates.
Interest expense on our outstanding debt is substantially subject to short-term interest rates. As such, increases in short-term interest rates will directly impact the amount of interest we pay. For each one percent increase in variable interest rates, the annual interest expense on $380.7 million of variable rate debt outstanding would increase by $3.8 million.
Our international operations enter into forward foreign currency exchange contracts to manage foreign currency exchange rate exposures associated with certain foreign currency denominated receivables and payables. At December 31, 2008 and 2007, we had outstanding forward exchange contracts with notional amounts aggregating $1.9 million and $5.0 million, respectively. Forward exchange contracts generally have maturities of less than six months. Counterparties to the forward exchange contracts are major financial institutions. Credit loss from counterparty nonperformance is not anticipated. We have not designated these derivative instruments as hedging instruments. The net settlement amount (fair value) related to the active forward foreign currency exchange contracts is insignificant and recorded on the balance sheet within current liabilities and as an element of other costs (income), net, which offsets the related transactions gains and losses on the related foreign denominated asset or liability.
Our business in Brazil holds U.S. dollar denominated debt which creates exposure to changes in currency rates when compared to its functional currency of the Brazilian real. In order to hedge this exposure, we enter into currency swaps with maturities that match the underlying debt, effectively converting a portion of the U.S. denominated debt to the local currency. We have not designated these derivative instruments as hedging instruments. At December 31, 2008 and 2007, we had outstanding currency swap contracts with notional amounts aggregating $24.6 million and $49.6 million, respectively. The net settlement amounts (fair value) related to active swap contracts is recorded on the balance sheet as part of the underlying debt and as an expense element of other costs (income), net, which offsets the related transaction gains or losses and were not significant at December 31, 2008 and 2007.
The operating results of our international operations are recorded in local currency and translated into U.S. dollars for consolidation purposes. The impact of foreign currency translation on net sales was an increase of $60.5 million in 2008 and $123.2 million in 2007. Operating profit improved by approximately $5.9 million in 2008 and $9.6 million in 2007 as a result of the positive effect of foreign currency translation.
Stockholders’ equity includes adjustments to other comprehensive income for changes in currency translation for consolidated balance sheet accounts. The impact of currency translation during 2008 was a reduction in stockholders’ equity totaling $183.2 million.
16
The majority of our pension liabilities are funded with assets that are invested in equity and fixed income securities whose market values are readily available from published market sources. During 2008, the market value of these assets declined in conjunction with the global economic downturn. This decline in market value is the principal reason that pension expense in 2009 is expected to increase by approximately $9.7 million. As of December 31, 2008, the unfunded portion of our pension liabilities increased by $164.1 million compared to the balance as of December 31, 2007. The after-tax impact of this increased liability is a charge to other comprehensive income of $99.5 million, which is reflected as reduction in stockholders’ equity at December 31, 2008.
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to retirement benefits, intangible assets, goodwill, and expected future performance of operations. Our estimates and judgments are based upon historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following are critical accounting estimates used in the preparation of our consolidated financial statements.
· The calculation of annual pension costs and related assets and liabilities; and
· The valuation and useful lives of intangible assets and goodwill.
We account for our defined benefit pension plans in accordance with FAS No. 87, Employers’ Accounting for Pensions , as amended by FAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans , which requires that amounts recognized in financial statements be determined on an actuarial basis. FAS No. 158 requires us to recognize the overfunded or underfunded status of the pension plans on our balance sheet. A substantial portion of our pension amounts relate to our defined benefit plans in the United States.
Net periodic pension costs recorded in 2008 was $10.5 million, compared to pension cost of $15.2 million in 2007 and $17.7 million in 2006. Effective January 1, 2006, our U.S. defined benefit pension plans were amended for approximately two-thirds of the participant population. For those employees impacted, future pension benefits were replaced with a defined contribution plan which is subject to achievement of certain financial performance goals of the Company. As a result, future pension liability is no longer adjusted for additional years of service for those employees impacted by the amendment and the related service cost and pension expense have decreased.
One element used in determining annual pension income and expense in accordance with accounting rules is the expected return on plan assets. As of January 1, 2008, in conjunction with a change in the allocation of the U.S. pension assets to equity investments from 80 percent to 70 percent of total assets, we reduced our expected long-term rate of return on plan assets to 8.50 percent. For the years 2006 and 2007, we maintained a target allocation to equity investments of 80 percent of total assets and had assumed that the expected long-term rate of return on plan assets would be 8.75 percent.
To develop the expected long-term rate of return on assets assumption, we considered compound historical returns and future expectations based upon our target asset allocation. Using historical long-term investment periods of 10, 15, 20 and 25 years ending December 31, 2008, our pension plan assets have earned annualized rates of return of 0.5 percent, 6.4 percent, 7.7 percent, and 8.9 percent, respectively. This is a substantial decline from the annualized long-term investment returns as of December 31, 2007 of 6.3 percent, 9.0 percent, 9.8 percent and 10.5 percent. This decline reflects substantially lower investment market values on U.S. pension assets during 2008. Considering these long-term results, we further reduced our expected return on assets assumption to 8.25 percent as of January 1, 2009. Using our target asset allocation of plan assets of 70 percent equity securities and 30 percent fixed income securities, our outside actuaries have used their independent economic model to calculate a range of expected long-term rates of return and have determined our assumptions to be reasonable.
This assumed long-term rate of return on assets is applied to a calculated value of plan assets, which recognizes changes in the fair value of plan assets in a systematic manner over approximately three years. This process calculates the expected return on plan assets that is included in pension income or expense. The difference between this expected return and the actual return on plan assets is generally deferred and recognized over subsequent periods. The net deferral of asset gains and losses affects the calculated value of pension plan assets and, ultimately, future pension income and expense.
At the end of each year, we determine the discount rate to be used to calculate the present value of pension plan liabilities. This discount rate is an estimate of the current interest rate at which the pension liabilities could be effectively settled at the end of the year. In estimating this rate, we look to changes in rates of return on high quality, fixed income investments that receive one of the two highest ratings given by a recognized ratings agency. At December 31, 2008, for our U.S. defined benefit pension plans we determined this rate to be 6.00 percent, a decrease of one quarter of one percent from the 6.25 percent rate used at December 31, 2007.
17
Based upon current assumptions of 6.00 percent for the discount rate and 8.25 percent for the expected rate of return on pension plan assets, we expect pension expense before the effect of income taxes for 2009 to be in a range of $18 million to $23 million. The following charts depict the sensitivity of estimated 2009 pension expense to incremental changes in the discount rate and the expected long-term rate of return on assets.
|
|
|
Total increase (decrease) |
|
|
|
Total increase (decrease) |
|
||
|
|
|
to pension expense |
|
|
|
to pension expense |
|
||
|
(dollars in millions) |
|
from current assumptions |
|
|
|
from current assumptions |
|
||
|
Discount rate |
|
|
|
Rate of Return on Plan Assets |
|
|
|
||
|
5.25 percent |
|
$ |
3.6 |
|
7.50 percent |
|
$ |
3.4 |
|
|
5.50 percent |
|
2.4 |
|
7.75 percent |
|
2.2 |
|
||
|
5.75 percent |
|
1.1 |
|
8.00 percent |
|
1.1 |
|
||
|
6.00 percent – Current Assumption |
|
0.0 |
|
8.25 percent – Current Assumption |
|
0.0 |
|
||
|
6.25 percent |
|
(1.1 |
) |
8.50 percent |
|
(1.1 |
) |
||
|
6.50 percent |
|
(2.2 |
) |
8.75 percent |
|
(2.2 |
) |
||
|
6.75 percent |
|
(3.4 |
) |
9.00 percent |
|
(3.4 |
) |
||
In accordance with FAS No. 158, the amount by which the fair value of plan assets differs from the projected benefit obligation of a pension plan must be recorded on the Consolidated Balance Sheet as an asset, in the case of an overfunded plan, or as a liability, in the case of an underfunded plan. The gains or losses and prior service costs or credits that arise but are not recognized as components of pension cost are recorded as a component of other comprehensive income. The following chart depicts the sensitivity of the total pension adjustment to other comprehensive income to changes in the assumed discount rate.
|
|
|
Total increase (decrease) in Accumulated Other Comprehensive |
|
|
|
(dollars in millions) |
|
Income, net of taxes, from current assumptions |
|
|
|
Discount rate |
|
|
|
|
|
5.25 percent |
|
$ |
(45.5 |
) |
|
5.50 percent |
|
(29.7 |
) |
|
|
5.75 percent |
|
(14.5 |
) |
|
|
6.00 percent – Current Assumption |
|
0.0 |
|
|
|
6.25 percent |
|
13.7 |
|
|
|
6.50 percent |
|
26.9 |
|
|
|
6.75 percent |
|
39.6 |
|
|
The purchase price of each new acquisition is allocated to tangible assets, identifiable intangible assets, liabilities assumed, and goodwill. Determining the portion of the purchase price allocated to identifiable intangible assets and goodwill requires us to make significant estimates. The amount of the purchase price allocated to intangible assets is generally determined by estimating the future cash flows of each asset and discounting the net cash flows back to their present values. The discount rate used is determined at the time of the acquisition in accordance with accepted valuation methods.
Goodwill represents the excess of the aggregate purchase price over the fair value of net assets acquired, including intangible assets. We review our goodwill for impairment annually and assess whether significant events or changes in the business circumstances indicate that the carrying value of the goodwill may not be recoverable. The test for impairment requires us to make estimates about fair value, most of which are based on projected future cash flows. Our estimates associated with the goodwill impairment tests are considered critical due to the amount of goodwill recorded on our consolidated balance sheet and the judgment required in determining fair value amounts, including projected future cash flows. Goodwill was $595.5 million as of December 31, 2008.
Intangible assets consist primarily of purchased technology, customer relationships, patents, trademarks, and tradenames and are amortized using the straight-line method over their estimated useful lives, which range from one to 30 years, when purchased. We review these intangible assets for impairment as changes in circumstances or the occurrence of events suggest that the remaining value is not recoverable. The test for impairment requires us to make estimates about fair value, most of which are based on projected future cash flows. These estimates and projections require judgments as to future events, condition and amounts of future cash flows.
In December 2008, the Financial Accounting Standards Board (FASB) issued Staff Position (FSP) No. FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets (FSP FAS 132(R)), which provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This FSP is effective for fiscal years ending after December 15, 2009. We are currently evaluating the impact of adopting FSP FAS 132(R) on our defined benefit pension and other postretirement plan note disclosures.
In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1), which clarified that unvested share-based payment awards that contain nonforfeitable rights to receive dividends or dividend equivalents (whether paid or unpaid) are participating securities, and thus, should be included in the two-class method of computing earnings per share (EPS). As discussed in Note 7, nonforfeitable dividend equivalent payments are made during the grant period on outstanding, unvested performance units. This FSP is effective for fiscal years beginning
18
after December 15, 2008, and interim periods within those years, and requires that all prior period EPS data be adjusted retroactively. We are currently evaluating the impact of adopting FSP EITF 03-6-1 on our calculation and disclosure of basic and diluted EPS.
In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP FAS 142-3), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under Statement of Financial Accounting Standards (FAS) No. 142, Goodwill and Other Intangible Assets . This FSP is effective for fiscal years beginning after December 15, 2008. As this guidance applies only to assets we may acquire in the future, we are not able to predict the impact, if any, on our consolidated financial statements.
In March 2008, the FASB issued FAS No. 161, The Disclosures about Derivative Instruments and Hedging Activities (FAS 161), which requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FAS 133, Accounting for Derivative Instruments and Hedging Activities, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for fiscal years and interim periods beginning after November 15, 2008. For the Company, FAS No. 161 will be effective at the beginning of its 2009 fiscal year and will result in additional disclosures in notes to the Company’s consolidated financial statements.
In December 2007, the FASB issued FAS No. 160, Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51 (FAS 160), which amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The standard is effective for the Company on January 1, 2009. We are currently evaluating the impact of adopting FAS 160 on our consolidated statements of financial position, results of operations, and cash flows.
In December 2007, the FASB issued FAS No. 141 (Revised 2007), Business Combinations (FAS 141(R)). FAS 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements, the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of business combinations. The new standard also requires the expensing of acquisition-related costs as incurred. FAS 141(R) is effective on a prospective basis for financial statements issued for fiscal years beginning after December 15, 2008. Accordingly, any business combination we enter into and/or close after December 31, 2008, will be subject to this new standard. Beginning January 1, 2009, the Company will expense all acquisition-related costs as incurred as well as any capitalized costs related to business combinations that were in process, but not completed by the effective date of FAS 141(R).
In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115 (FAS 159), which permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The standard was effective for the Company on January 1, 2008 and, as permitted, the Company has not elected the “fair value option” for its financial assets and financial liabilities.
In September 2006, the FASB issued FAS No. 157, Fair Value Measurements (FAS 157), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. FAS 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value to any new circumstances. In early 2008, the FASB issued FSP No. FAS 157-2, which delays by one year the effective date of FAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis. The Company adopted FAS 157 on January 1, 2008, as required, with no effect on the measurement of the Company’s financial assets and financial liabilities or on its consolidated financial position and results of operations. We are continuing to evaluate the impact the standard will have on the determination of fair value related to non-financial assets and non-financial liabilities in years after 2008.
This Annual Report 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.
19
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; threats or challenges to our patented or proprietary technologies; raw material costs and availability, particularly for polymer resins and adhesives; the magnitude and volatility of price changes for raw materials and our ability to pass these price changes on to our customers in selling prices or otherwise manage commodity price fluctuation risks; changes in the availability of financing; the presence of adequate cash available for investment in our business in order to maintain desired debt levels; unexpected costs or manufacturing issues related to the implementation of a new enterprise resource system; changes in governmental regulation, especially in the areas of environmental, health and safety matters, and foreign investment; unexpected outcomes in our current and future litigation proceedings and any related proceedings or civil lawsuits; unexpected outcomes in our current and future domestic and international 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, those described under Item 1A “Risk Factors” of this Annual Report on Form 10-K 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.
ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item 7A is included in Note 14 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, and under the caption “Market Risks and Foreign Currency Exposures” which is part of Management’s Discussion and Analysis included in Item 7 of this Annual Report on Form 10-K. Based on a sensitivity analysis (assuming a 10 percent adverse change in market rates) of our foreign exchange, currency swaps, and interest rate derivatives and other financial instruments, changes in exchange rates or interest rates would not materially affect our financial position and liquidity. The effect on our results of operations would be substantially offset by the impact of the hedged items.
ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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 accounting principles generally accepted in the United States of America, and using management’s best estimates and judgments, where appropriate. The financial information presented throughout this Annual Report on Form 10-K is consistent with that in the financial statements.
The management of Bemis Company, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the direction, supervision, and participation of the Chief Executive Officer and the Chief Financial Officer, the Company’s management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO-Framework). Based on the results of this evaluation management has concluded that internal control over financial reporting was effective as of December 31, 2008. Item 9A of this Annual Report on Form 10-K contains management’s favorable assessment of internal controls over financial reporting based on their review and evaluation utilizing the COSO-Framework criteria.
The Audit Committee of the Board of Directors, which is composed solely of outside directors, meets quarterly with management, the Internal Audit Director, the Director of Global Financial Compliance, and independent accountants to review the work of each and to satisfy itself that the respective parties are properly discharging their responsibilities. PricewaterhouseCoopers LLP, the Director of Global Financial Compliance, and the Internal Audit Director have had and continue to have unrestricted access to the Audit Committee, without the presence of Company management.
|
Henry J. Theisen |
|
Gene C. Wulf |
|
Stanley A. Jaffy |
|
President and |
|
Senior Vice President and |
|
Vice President and |
Chief Executive Officer |
|
Chief Financial Officer |
|
Controller |
20
To the Board of Directors of Bemis Company, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of stockholders’ equity and of cash flow present fairly, in all material respects, the financial position of Bemis Company, Inc. and its subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in “Management’s Report on Internal Control over Financial Reporting” appearing under Item 9A in this Annual Report. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included 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. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in Note 5 to the consolidated financial statements, effective December 31, 2006, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Statement No, 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. As described in Note 10 to the consolidated financial statements, effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
|
PricewaterhouseCoopers LLP |
|
|
Minneapolis, Minnesota |
|
|
February 27, 2009 |
|
21
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
|
For the years ended December 31, |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Net sales |
|
$ |
3,779,373 |
|
$ |
3,649,281 |
|
$ |
3,639,363 |
|
|
|
|
|
|
|
|
|
|
|||
|
Costs and expenses: |
|
|
|
|
|
|
|
|||
|
Cost of products sold |
|
3,131,341 |
|
2,973,329 |
|
2,942,650 |
|
|||
|
Selling, general, and administrative expenses |
|
342,737 |
|
341,551 |
|
336,409 |
|
|||
|
Research and development |
|
25,010 |
|
25,983 |
|
25,024 |
|
|||
|
Interest expense |
|
39,413 |
|
50,268 |
|
49,252 |
|
|||
|
Other costs (income), net |
|
(27,653 |
) |
(31,455 |
) |
(3,308 |
) |
|||
|
Minority interest in net income |
|
6,011 |
|
3,751 |
|
3,540 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Income before income taxes |
|
262,514 |
|
285,854 |
|
285,796 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Provision for income taxes |
|
96,300 |
|
104,300 |
|
109,500 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Net income |
|
$ |
166,214 |
|
$ |
181,554 |
|
$ |
176,296 |
|
|
|
|
|
|
|
|
|
|
|||
|
Basic earnings per share of common stock |
|
$ |
1.67 |
|
$ |
1.76 |
|
$ |
1.68 |
|
|
|
|
|
|
|
|
|
|
|||
|
Diluted earnings per share of common stock |
|
$ |
1.65 |
|
$ |
1.74 |
|
$ |
1.65 |
|
See accompanying notes to consolidated financial statements.
22
BEMIS COMPANY, INC. AND SUBSIDIARIES
(dollars in thousands, except per share amounts)
|
As of December 31, |
|
2008 |
|
2007 |
|
||
|
|
|
|
|
|
|
||
|
ASSETS |
|
|
|
|
|
||
|
Current assets: |
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
43,454 |
|
$ |
147,409 |
|
|
Accounts receivable, net |
|
426,888 |
|
448,200 |
|
||
|
Inventories |
|
435,667 |
|
478,727 |
|
||
|
Prepaid expenses |
|
76,649 |
|
62,607 |
|
||
|
Total current assets |
|
982,658 |
|
1,136,943 |
|
||
|
|
|
|
|
|
|
||
|
Property and equipment: |
|
|
|
|
|
||
|
Land and land improvements |
|
43,662 |
|
52,129 |
|
||
|
Buildings and leasehold improvements |
|
466,863 |
|
482,005 |
|
||
|
Machinery and equipment |
|
1,499,621 |
|
1,609,424 |
|
||
|
Total property and equipment |
|
2,010,146 |
|
2,143,558 |
|
||
|
Less accumulated depreciation |
|
(874,664 |
) |
(895,102 |
) |
||
|
Net property and equipment |
|
1,135,482 |
|
1,248,456 |
|
||
|
|
|
|
|
|
|
||
|
Other long-term assets: |
|
|
|
|
|
||
|
Goodwill |
|
595,466 |
|
642,507 |
|
||
|
Other intangible assets |
|
80,773 |
|
103,756 |
|
||
|
Deferred charges and other assets |
|
27,935 |
|
59,734 |
|
||
|
Total other long-term assets |
|
704,174 |
|
805,997 |
|
||
|
TOTAL ASSETS |
|
$ |
2,822,314 |
|
$ |
3,191,396 |
|
|
|
|
|
|
|
|
||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
||
|
Current liabilities: |
|
|
|
|
|
||
|
Current portion of long-term debt |
|
$ |
18,651 |
|
$ |
1,758 |
|
|
Short-term borrowings |
|
7,954 |
|
66,047 |
|
||
|
Accounts payable |
|
323,142 |
|
384,673 |
|
||
|
Accrued liabilities: |
|
|
|
|
|
||
|
Salaries and wages |
|
63,227 |
|
70,248 |
|
||
|
Income taxes |
|
561 |
|
2,168 |
|
||
|
Other |
|
8,246 |
|
9,656 |
|
||
|
Total current liabilities |
|
421,781 |
|
534,550 |
|
||
|
|
|
|
|
|
|
||
|
Long-term debt, less current portion |
|
659,984 |
|
775,456 |
|
||
|
Deferred taxes |
|
111,832 |
|
155,871 |
|
||
|
Other liabilities and deferred credits |
|
246,174 |
|
124,261 |
|
||
|
Total liabilities |
|
1,439,771 |
|
1,590,138 |
|
||
|
|
|
|
|
|
|
||
|
Minority interest |
|
36,012 |
|
38,926 |
|
||
|
|
|
|
|
|
|
||
|
Commitments and contingencies |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Stockholders’ equity: |
|
|
|
|
|
||
|
Common stock, $.10 par value: |
|
|
|
|
|
||
|
Authorized — 500,000,000 shares |
|
|
|
|
|
||
|
Issued — 117,130,962 and 116,941,126 shares |
|
11,713 |
|
11,694 |
|
||
|
Capital in excess of par value |
|
345,982 |
|
327,387 |
|
||
|
Retained earnings |
|
1,599,178 |
|
1,523,659 |
|
||
|
Accumulated other comprehensive (loss) income |
|
(112,001 |
) |
171,162 |
|
||
|
Common stock held in treasury, 17,422,771 and 16,422,771 shares, at cost |
|
(498,341 |
) |
(471,570 |
) |
||
|
Total stockholders’ equity |
|
1,346,531 |
|
1,562,332 |
|
||
|
|
|
|
|
|
|
||
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
2,822,314 |
|
$ |
3,191,396 |
|
See accompanying notes to consolidated financial statements.
23
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
|
For the years ended December 31, |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|||
|
Net income |
|
$ |
166,214 |
|
$ |
181,554 |
|
$ |
176,296 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|||
|
Depreciation and amortization |
|
162,004 |
|
158,546 |
|
152,375 |
|
|||
|
Minority interest in net income |
|
6,011 |
|
3,751 |
|
3,540 |
|
|||
|
Excess tax benefit from share-based payment arrangements |
|
(209 |
) |
(5,773 |
) |
(926 |
) |
|||
|
Share-based compensation |
|
18,058 |
|
16,849 |
|
11,694 |
|
|||
|
Deferred income taxes |
|
15,666 |
|
5,803 |
|
(7,930 |
) |
|||
|
Income of unconsolidated affiliated companies |
|
(919 |
) |
(933 |
) |
(32 |
) |
|||
|
(Gain) loss on sale of property and equipment |
|
967 |
|
(2,055 |
) |
896 |
|
|||
|
Non-cash restructuring related activities |
|
|
|
2,483 |
|
13,145 |
|
|||
|
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
|||
|
Accounts receivable |
|
(25,015 |
) |
32,007 |
|
9,709 |
|
|||
|
Inventories |
|
8,584 |
|
11,705 |
|
(31,387 |
) |
|||
|
Prepaid expenses |
|
(20,607 |
) |
5,350 |
|
(23,505 |
) |
|||
|
Accounts payable |
|
(26,717 |
) |
(21,672 |
) |
36,720 |
|
|||
|
Accrued salaries and wages |
|
(3,222 |
) |
(27,218 |
) |
15,694 |
|
|||
|
Accrued income taxes |
|
616 |
|
5,310 |
|
(438 |
) |
|||
|
Accrued other taxes |
|
349 |
|
1,370 |
|
(1,730 |
) |
|||
|
Changes in other liabilities and deferred credits |
|
(12,341 |
) |
(8,014 |
) |
2,329 |
|
|||
|
Changes in deferred charges and other assets |
|
4,111 |
|
47,165 |
|
(7,491 |
) |
|||
|
Net cash provided by operating activities |
|
293,550 |
|
406,228 |
|
348,959 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|||
|
Additions to property and equipment |
|
(120,513 |
) |
(178,852 |
) |
(158,837 |
) |
|||
|
Business acquisitions, net of cash acquired |
|
|
|
|
|
(10,800 |
) |
|||
|
Proceeds from sales of property, equipment, and other assets |
|
2,429 |
|
7,405 |
|
1,373 |
|
|||
|
Proceeds from sale of restructuring related assets |
|
|
|
3,639 |
|
2,116 |
|
|||
|
Net cash used in investing activities |
|
(118,084 |
) |
(167,808 |
) |
(166,148 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|||
|
Proceeds from issuance of long-term debt |
|
16,334 |
|
25,061 |
|
76,177 |
|
|||
|
Repayment of long-term debt |
|
(267,327 |
) |
(60,546 |
) |
(118,036 |
) |
|||
|
Net borrowing (repayment) of commercial paper |
|
169,295 |
|
80,800 |
|
(31,254 |
) |
|||
|
Net borrowing (repayment) of short-term debt |
|
(62,956 |
) |
(9,977 |
) |
7,364 |
|
|||
|
Cash dividends paid to stockholders |
|
(90,695 |
) |
(89,809 |
) |
(82,139 |
) |
|||
|
Common stock purchased for the treasury |
|
(26,771 |
) |
(153,953 |
) |
(17,804 |
) |
|||
|
Excess tax benefit from share-based payment arrangements |
|
209 |
|
5,773 |
|
926 |
|
|||
|
Stock incentive programs and related withholdings |
|
(2,196 |
) |
(14,745 |
) |
51 |
|
|||
|
Net cash used by financing activities |
|
(264,107 |
) |
(217,396 |
) |
(164,715 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Effect of exchange rates on cash and cash equivalents |
|
(15,314 |
) |
14,225 |
|
2,939 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Net (decrease) increase in cash and cash equivalents |
|
(103,955 |
) |
35,249 |
|
21,035 |
|
|||
|
Cash and cash equivalents balance at beginning of year |
|
147,409 |
|
112,160 |
|
91,125 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Cash and cash equivalents balance at end of year |
|
$ |
43,454 |
|
$ |
147,409 |
|
$ |
112,160 |
|
|
|
|
|
|
|
|
|
|
|||
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|||
|
Business acquisitions, net of divestures and cash: |
|
|
|
|
|
|
|
|||
|
Working capital acquired (net) |
|
|
|
|
|
$ |
(147 |
) |
||
|
Goodwill and intangible assets (divested) or acquired, net |
|
|
|
|
|
8,398 |
|
|||
|
Long-term debt, deferred taxes, and other liabilities |
|
|
|
|
|
2,549 |
|
|||
|
Cash used for acquisitions |
|
|
|
|
|
$ |
10,800 |
|
||
|
|
|
|
|
|
|
|
|
|||
|
Interest paid during the year |
|
$ |
39,909 |
|
$ |
48,132 |
|
$ |
46,396 |
|
|
Income taxes paid during the year |
|
$ |
76,905 |
|
$ |
83,621 |
|
$ |
116,520 |
|
See accompanying notes to consolidated financial statements
24
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
||||||
|
|
|
|
|
Capital In |
|
|
|
Other |
|
Common |
|
Total |
|
||||||
|
|
|
Common |
|
Excess of |
|
Retained |
|
Comprehensive |
|
Stock Held |
|
Stockholders’ |
|
||||||
|
|
|
Stock |
|
Par Value |
|
Earnings |
|
Income (Loss) |
|
In Treasury |
|
Equity |
|
||||||
|
Balance at December 31, 2005 |
|
$ |
11,598 |
|
$ |
267,274 |
|
$ |
1,337,590 |
|
$ |
32,706 |
|
$ |
(299,813 |
) |
$ |
1,349,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net income |
|
|
|
|
|
176,296 |
|
|
|
|
|
176,296 |
|
||||||
|
Unrecognized gain reclassified to earnings, net of tax $(337) |
|
|
|
|
|
|
|
(526 |
) |
|
|
(526 |
) |
||||||
|
Translation adjustment |
|
|
|
|
|
|
|
60,850 |
|
|
|
60,850 |
|
||||||
|
Pension liability adjustment, net of tax effect $(15,988) |
|
|
|
|
|
|
|
24,794 |
|
|
|
24,794 |
|
||||||
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
261,414 |
|
||||||
|
Adjustment to initially apply FAS No. 158, net of tax $55,076 |
|
|
|
|
|
|
|
(88,726 |
) |
|
|
(88,726 |
) |
||||||
|
Cash dividends paid on common stock $0.76 per share |
|
|
|
|
|
(82,139 |
) |
|
|
|
|
(82,139 |
) |
||||||
|
Stock incentive programs and related tax effects (135,601 shares) |
|
13 |
|
2,914 |
|
|
|
|
|
|
|
2,927 |
|
||||||
|
Impact of adopting FAS No. 123(R) |
|
|
|
35,295 |
|
|
|
|
|
|
|
35,295 |
|
||||||
|
Share-based compensation |
|
|
|
11,694 |
|
|
|
|
|
|
|
11,694 |
|
||||||
|
Purchase of 600,000 shares of common stock |
|
|
|
|
|
|
|
|
|
(17,804 |
) |
(17,804 |
) |
||||||
|
Balance at December 31, 2006 |
|
11,611 |
|
317,177 |
|
1,431,747 |
|
29,098 |
|
(317,617 |
) |
1,472,016 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net income |
|
|
|
|
|
181,554 |
|
|
|
|
|
181,554 |
|
||||||
|
Unrecognized gain reclassified to earnings, net of tax $(337) |
|
|
|
|
|
|
|
(527 |
) |
|
|
(527 |
) |
||||||
|
Translation adjustment |
|
|
|
|
|
|
|
122,387 |
|
|
|
122,387 |
|
||||||
|
Pension liability adjustment, net of tax effect ($11,942) |
|
|
|
|
|
|
|
20,204 |
|
|
|
20,204 |
|
||||||
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
323,618 |
|
||||||
|
Adjustment to initially apply FIN No. 48 |
|
|
|
|
|
167 |
|
|
|
|
|
167 |
|
||||||
|
Cash dividends paid on common stock $0.84 per share |
|
|
|
|
|
(89,809 |
) |
|
|
|
|
(89,809 |
) |
||||||
|
Stock incentive programs and related tax effects (826,779 shares) |
|
83 |
|
(14,745 |
) |
|
|
|
|
|
|
(14,662 |
) |
||||||
|
Excess tax benefit from share-based compensation arrangements |
|
|
|
6,908 |
|
|
|
|
|
|
|
6,908 |
|
||||||
|
Share-based compensation |
|
|
|
18,047 |
|
|
|
|
|
|
|
18,047 |
|
||||||
|
Purchase of 5,150,000 shares of common stock |
|
|
|
|
|
|
|
|
|
(153,953 |
) |
(153,953 |
) |
||||||
|
Balance at December 31, 2007 |
|
11,694 |
|
327,387 |
|
1,523,659 |
|
171,162 |
|
(471,570 |
) |
1,562,332 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Net income |
|
|
|
|
|
166,214 |
|
|
|
|
|
166,214 |
|
||||||
|
Unrecognized gain reclassified to earnings, net of tax $(305) |
|
|
|
|
|
|
|
(527 |
) |
|
|
(527 |
) |
||||||
|
Translation adjustment |
|
|
|
|
|
|
|
(183,175 |
) |
|
|
(183,175 |
) |
||||||
|
Pension liability adjustment, net of tax effect ($57,616) |
|
|
|
|
|
|
|
(99,461 |
) |
|
|
(99,461 |
) |
||||||
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
(116,949 |
) |
||||||
|
Cash dividends paid on common stock $0.88 per share |
|
|
|
|
|
(90,695 |
) |
|
|
|
|
(90,695 |
) |
||||||
|
Stock incentive programs and related tax effects (189,836 shares) |
|
19 |
|
(2,196 |
) |
|
|
|
|
|
|
(2,177 |
) |
||||||
|
Excess tax benefit from share-based compensation arrangements |
|
|
|
960 |
|
|
|
|
|
|
|
960 |
|
||||||
|
Share-based compensation |
|
|
|
19,831 |
|
|
|
|
|
|
|
19,831 |
|
||||||
|
Purchase of 1,000,000 shares of common stock |
|
|
|
|
|
|
|
|
|
(26,771 |
) |
(26,771 |
) |
||||||
|
Balance at December 31, 2008 |
|
$ |
11,713 |
|
$ |
345,982 |
|
$ |
1,599,178 |
|
$ |
(112,001 |
) |
$ |
(498,341 |
) |
$ |
1,346,531 |
|
See accompanying notes to consolidated financial statements.
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Description of the business: Bemis Company, Inc., a Missouri corporation, was founded in 1858 and incorporated in 1885 as Bemis Bro. Bag Company. In 1965 the name was changed to Bemis Company, Inc. (the Company). Based in Neenah, Wisconsin, the Company employs approximately 15,400 individuals and has 57 manufacturing facilities located in the United States and ten other countries. The Company manufactures and sells flexible packaging products and pressure sensitive materials throughout the Americas, Europe, and Asia Pacific.
The Company’s business activities are organized around its two business segments, Flexible Packaging, which accounted for approximately 83 percent of 2008 net sales, and Pressure Sensitive Materials, which accounted for the remaining net sales. The Company’s flexible packaging business has a strong technical base in polymer chemistry, film extrusion, coating, laminating, printing, and converting. The Company’s pressure sensitive materials business specializes in adhesive technologies. The primary markets for the Company’s products are in the food industry, which accounted for approximately 60 percent of 2008 net sales. The Company’s flexible packaging products are widely diversified among food categories and can be found in nearly every aisle of the grocery store. Other markets include chemical, agribusiness, medical, pharmaceutical, personal care products, electronics, automotive, construction, graphic industries, and other consumer goods. All markets are considered to be highly competitive as to price, innovation, quality, and service.
Principles of consolidation: The consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All intercompany transactions and accounts have been eliminated. Joint ventures which are not majority controlled are accounted for by the equity method of accounting with earnings of $919,000, $933,000, and $32,000 in 2008, 2007, and 2006, respectively, included in other costs (income), net, on the accompanying consolidated statement of income. Investments in joint ventures are included in deferred charges and other assets on the accompanying consolidated balance sheet. Certain prior year amounts have been restated to conform to current year presentation.
Estimates and assumptions required: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.
Translation of foreign currencies: The Company considers the local currency to be the reporting currency for all foreign subsidiaries. Assets and liabilities are translated at the exchange rate as of the balance sheet date. All revenue and expense accounts are translated at average exchange rates in effect during the year. Translation gains or losses are recorded in the foreign currency translation component in accumulated other comprehensive income (loss) in stockholders’ equity. Foreign currency transaction gains (losses) of $(6,755,000) $2,445,000, and $(849,000), in 2008, 2007, and 2006, respectively, are included as a component of other costs (income), net.
Revenue recognition: Sales and related costs of sales are recognized upon shipment of products or when all of the conditions of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104 are fulfilled. All costs associated with revenue, including customer volume discounts, are recognized at the time of sale. Customer volume discounts are accrued in accordance with EITF No. 01-9, Accounting for Consideration Given by a Vendor to a Customer and recorded as a reduction to sales. Shipping and handling costs are classified as a component of costs of sales while amounts billed to customers for shipping and handling are classified as a component of sales. The Company accrues for estimated warranty costs when specific issues are identified and the amounts are determinable.
Environmental cost: The Company is involved in a number of environmental related disputes and claims. The Company accrues environmental costs when it is probable that these costs will be incurred and can be reasonably estimated. At December 31, 2008 and 2007, reserves were $401,000 and $588,000, respectively. Adjustments to the reserve accounts and costs which were directly expensed for environmental remediation matters resulted in charges to the income statements for 2008, 2007, and 2006 of $306,000, $111,000, and $128,000, net of third party reimbursements totaling $0, $0, and $102,000, for 2008, 2007, and 2006, respectively.
Earnings per share: Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the year and dilutive shares relating to stock incentive plans. The following table presents information necessary to compute basic and diluted earnings per common share:
|
(in thousands, except per share amounts) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Weighted average common shares outstanding — basic |
|
99,777 |
|
102,992 |
|
104,865 |
|
|||
|
Dilutive shares |
|
1,192 |
|
1,122 |
|
1,902 |
|
|||
|
Weighted average common and common equivalent shares outstanding — diluted |
|
100,969 |
|
104,114 |
|
106,767 |
|
|||
|
Net income for basic and diluted earnings per share computation |
|
$ |
166,214 |
|
$ |
181,554 |
|
$ |
176,296 |
|
|
Earnings per common share — basic |
|
$ |
1.67 |
|
$ |
1.76 |
|
$ |
1.68 |
|
|
Earnings per common share — diluted |
|
$ |
1.65 |
|
$ |
1.74 |
|
$ |
1.65 |
|
Certain options outstanding at December 31, 2008 (410,720 shares) were not included in the computation of diluted earnings per share above because they would not have had a dilutive effect.
Research and development: Research and development expenditures are expensed as incurred.
26
Taxes on undistributed earnings: No provision is made for U.S. income taxes on earnings of non-U.S. subsidiary companies which the Company controls but does not include in the consolidated federal income tax return as it is management’s practice and intent to indefinitely reinvest the earnings.
Cash and cash equivalents: The Company considers all highly liquid temporary investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents include certificates of deposit that can be readily liquidated without penalty at the Company’s option. Cash equivalents are carried at cost which approximates fair market value.
Accounts receivable: Trade accounts receivable are stated at the amount the Company expects to collect, which is net of an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The following factors are considered when determining the collectibility of specific customer accounts: customer creditworthiness, past transaction history with the customer, and changes in customer payment terms or practices. In addition, overall historical collection experience, current economic industry trends, and a review of the current status of trade accounts receivable are considered when determining the required allowance for doubtful accounts. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Accounts receivable are presented net of an allowance for doubtful accounts of $16,262,000 and $19,311,000 at December 31, 2008 and 2007, respectively.
Inventory valuation: Inventories are valued at the lower of cost, as determined by the first-in, first-out (FIFO) method, or market. Inventories are summarized at December 31, as follows:
|
(in thousands) |
|
2008 |
|
2007 |
|
||
|
Raw materials and supplies |
|
$ |
161,451 |
|
$ |
169,687 |
|
|
Work in process and finished goods |
|
293,132 |
|
328,758 |
|
||
|
Total inventories, gross |
|
454,583 |
|
498,445 |
|
||
|
Less inventory write-downs |
|
(18,916 |
) |
(19,718 |
) |
||
|
Total inventories, net |
|
$ |
435,667 |
|
$ |
478,727 |
|
Property and equipment: Property and equipment are stated at cost. Maintenance and repairs that do not improve efficiency or extend economic life are expensed as incurred. Plant and equipment are depreciated for financial reporting purposes principally using the straight-line method over the estimated useful lives of assets as follows: land improvements, 15-30 years; buildings, 15-45 years; leasehold and building improvements, the lesser of the lease term or 8-20 years; and machinery and equipment, 3-16 years. 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. Depreciation expense was $152,962,000, $149,852,000, and $144,058,000 for 2008, 2007, and 2006, respectively. 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. Interest costs which are capitalized during the construction of major capital projects totaled $2,557,000 in 2008, $4,220,000 in 2007, and $2,871,000 in 2006.
The Company reviews its long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If impairment indicators are present and the estimated future undiscounted cash flows are less than the carrying value of the assets, the carrying values are reduced to the estimated fair value.
The Company capitalizes direct costs (internal and external) of materials and services used in the development and purchase of internal-use software. Amounts capitalized are amortized on a straight-line basis over a period of three to seven years and are reported as a component of machinery and equipment within property and equipment.
The Company is in the process of configuring and developing a new Enterprise Resource Planning (ERP) system. Certain costs incurred during the application development stage are being capitalized in accordance with Statement of Position (SOP) 98-1, Accounting for Costs of Computer Software Developed or Obtained for Internal Use . These costs will be amortized over the system’s estimated useful life and amortization will begin as the ERP system is placed in service.
Goodwill: Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations. Effective January 1, 2002, the Company adopted the reporting requirements of Statement of Financial Accounting Standards (FAS) No. 141, Business Combinations, and FAS No. 142, Goodwill and Other Intangible Assets, and as required, has applied its requirements to acquisitions made after June 30, 2001. In accordance with FAS No. 142, goodwill and indefinite-lived intangible assets are no longer amortized, but are reviewed at least annually for impairment. The Company tests goodwill and indefinite-lived intangible assets for impairment on an annual basis, or whenever there is an impairment indicator, using a fair-value based approach.
Intangible assets: Contractual or separable intangible assets that have finite useful lives are being amortized against income using the straight-line method over their estimated useful lives, with original periods ranging from one to 30 years. The straight-line method of amortization reflects an appropriate allocation of the costs of the intangible assets to earnings in proportion to the amount of economic benefits obtained by the Company in each reporting period. The Company tests finite-lived intangible assets for impairment whenever there is an impairment indicator. Intangible assets are tested for impairment by comparing anticipated undiscounted future cash flows from operations to net book value.
Financial instruments: The Company recognizes all derivative instruments on the balance sheet at fair value. Derivatives that are not hedges are adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair
27
value of derivatives are either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in stockholders’ equity through other comprehensive income until the hedged item is recognized. Gains or losses, if any, related to the ineffective portion of any hedge are recognized through earnings in the current period. Note 14 contains expanded details relating to specific derivative instruments included on the Company’s balance sheet, such as forward foreign currency exchange contracts, currency swap contracts, and interest rate swap arrangements.
Treasury stock: Repurchased common stock is stated at cost and is presented as a separate reduction of stockholders’ equity. At December 31, 2008, 4.1 million common shares can be repurchased, at management’s discretion, under authority granted by the Company’s Board of Directors in 2008.
Preferred stock purchase rights: On July 29, 1999, 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 four-hundredth of a share of Series A Junior Preferred Stock for $60, subject to adjustment. The rights become exercisable if, subject to certain exceptions, a person or group acquires beneficial ownership of 15 percent or more of the Company’s outstanding common stock or announces an offer which would result in such person acquiring beneficial ownership of 15 percent or more of the Company’s outstanding common stock. If a person or group acquires beneficial ownership of 15 percent or more of the Company’s outstanding common stock, subject to certain exceptions, each right will entitle its holder to buy from the Company, common stock of the Company having a market value of twice the exercise price of the right. The rights expire August 23, 2009, and may be redeemed by the Company for $.001 per right at any time before a person becomes a beneficial owner of 15 percent or more of the Company’s outstanding common stock. The Company’s Board of Directors has designated 600,000 shares of Series A Junior Preferred Stock with a par value of $1 per share that relate to the Shareholder Rights Plan. At December 31, 2008, none of these shares were issued or outstanding.
Note 2 — NEW ACCOUNTING PRONOUNCEMENTS
In December 2008, the Financial Accounting Standards Board (FASB) issued Staff Position (FSP) No. FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets (FSP FAS 132(R)), which provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This FSP is effective for fiscal years ending after December 15, 2009. We are currently evaluating the impact of adopting FSP FAS 132(R) on our defined benefit pension and other postretirement plan note disclosures.
In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1), which clarified that unvested share-based payment awards that contain nonforfeitable rights to receive dividends or dividend equivalents (whether paid or unpaid) are participating securities, and thus, should be included in the two-class method of computing earnings per share (EPS). As discussed in Note 7, nonforfeitable dividend equivalent payments are made during the grant period on outstanding, unvested performance units. This FSP is effective for fiscal years beginning after December 15, 2008, and interim periods within those years, and requires that all prior period EPS data be adjusted retroactively. We are currently evaluating the impact of adopting FSP EITF 03-6-1 on our calculation and disclosure of basic and diluted EPS.
In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets (FSP FAS 142-3), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under Statement of Financial Accounting Standards (FAS) No. 142, Goodwill and Other Intangible Assets . This FSP is effective for fiscal years beginning after December 15, 2008. As this guidance applies only to assets we may acquire in the future, we are not able to predict the impact, if any, on our consolidated financial statements.
In March 2008, the FASB issued FAS No. 161, The Disclosures about Derivative Instruments and Hedging Activities (FAS 161), which requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FAS 133, Accounting for Derivative Instruments and Hedging Activities, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for fiscal years and interim periods beginning after November 15, 2008. For the Company, FAS No. 161 will be effective at the beginning of its 2009 fiscal year and will result in additional disclosures in notes to the Company’s consolidated financial statements.
In December 2007, the FASB issued FAS No. 160, Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51 (FAS 160), which amends ARB No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The standard is effective for the Company on January 1, 2009. We are currently evaluating the impact of adopting FAS 160 on our consolidated statements of financial position, results of operations, and cash flows.
In December 2007, the FASB issued FAS No. 141 (Revised 2007), Business Combinations (FAS 141(R)). FAS 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements, the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of business combinations. The new standard also requires the expensing of acquisition-related costs as incurred. FAS 141(R) is effective on a prospective basis for financial statements issued for fiscal years beginning after December 15, 2008. Accordingly, any business combination we enter into and/or close after December 31, 2008, will be subject to this new standard. Beginning January 1, 2009, the Company will expense all acquisition-related costs as incurred as well as any capitalized costs related to business combinations that were in process, but not completed by the effective date of FAS 141(R).
28
In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115 (FAS 159), which permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The standard was effective for the Company on January 1, 2008 and, as permitted, the Company has not elected the “fair value option” for its financial assets and financial liabilities.
In September 2006, the FASB issued FAS No. 157, Fair Value Measurements (FAS 157), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. FAS 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value to any new circumstances. In early 2008, the FASB issued FSP No. FAS 157-2, which delays by one year the effective date of FAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis. The Company adopted FAS 157 on January 1, 2008, as required, with no effect on the measurement of the Company’s financial assets and financial liabilities or on its consolidated financial position and results of operations. We are continuing to evaluate the impact the standard will have on the determination of fair value related to non-financial assets and non-financial liabilities in years after 2008.
Note 3 — FINANCIAL ASSETS AND FINANCIAL LIABILITIES MEASURED AT FAIR VALUE
The fair values of the Company’s financial assets and financial liabilities listed below reflect the amounts that would be received to sell the assets or paid to transfer the liabilities in an orderly transaction between market participants at the measurement date (exit price). The fair values are based on inputs other than quoted prices that are observable for the asset or liability. These inputs include foreign currency exchange rates and interest rates. The financial assets and financial liabilities are primarily valued using standard calculations / models that use as their basis readily observable market parameters. Industry standard data providers are the primary source for forward and spot rate information for both interest rates and currency rates, with resulting valuations periodically validated through third-party or counterparty quotes.
|
|
|
|
|
Significant Other |
|
||
|
|
|
Balance at |
|
Observable Inputs |
|
||
|
(in thousands) |
|
December 31, 2008 |
|
(Level 2) |
|
||
|
Currency swaps — net asset position |
|
$ |
4,944 |
|
$ |
4,944 |
|
|
Forward exchange contracts — net liability position |
|
$ |
(112 |
) |
$ |
(112 |
) |
Note 4 — GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in the carrying amount of goodwill attributable to each reportable business segment follow:
|
|
|
Flexible Packaging |
|
Pressure Sensitive |
|
|
|
|||
|
(in thousands) |
|
Segment |
|
Materials Segment |
|
Total |
|
|||
|
Reported balance at December 31, 2006 |
|
$ |
550,748 |
|
$ |
52,943 |
|
$ |
603,691 |
|
|
|
|
|
|
|
|
|
|
|||
|
Currency translation and other adjustments |
|
38,841 |
|
(25 |
) |
38,816 |
|
|||
|
Reported balance at December 31, 2007 |
|
589,589 |
|
52,918 |
|
642,507 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Currency translation and other adjustments |
|
(46,611 |
) |
(430 |
) |
(47,041 |
) |
|||
|
Reported balance at December 31, 2008 |
|
$ |
542,978 |
|
$ |
52,488 |
|
$ |
595,466 |
|
The components of amortized intangible assets follow:
|
|
|
December 31, 2008 |
|
December 31, 2007 |
|
||||||||
|
(in thousands) |
|
Gross Carrying |
|
Accumulated |
|
Gross Carrying |
|
Accumulated |
|
||||
|
Intangible Assets |
|
Amount |
|
Amortization |
|
Amount |
|
Amortization |
|
||||
|
Contract based |
|
$ |
15,447 |
|
$ |
(10,268 |
) |
$ |
15,447 |
|
$ |
(9,168 |
) |
|
Technology based |
|
51,422 |
|
(21,623 |
) |
52,673 |
|
(19,383 |
) |
||||
|
Marketing related |
|
20,435 |
|
(7,768 |
) |
25,230 |
|
(8,125 |
) |
||||
|
Customer based |
|
54,688 |
|
(21,560 |
) |
69,444 |
|
(22,362 |
) |
||||
|
Reported balance |
|
$ |
141,992 |
|
$ |
(61,219 |
) |
$ |
162,794 |
|
$ |
(59,038 |
) |
Amortization expense for intangible assets during 2008, 2007, and 2006 was $9.7 million, $9.6 million, and $9.2 million, respectively. Estimated annual amortization expense is $9.7 million for 2009 and 2010, $9.5 million for 2011, $8.0 million for 2012, and $6.9 million for 2013. The Company completed its annual impairment tests in the fourth quarter of 2008 with no indications of impairment of goodwill found.
Note 5 — PENSION PLANS
Total multiemployer plan, defined contribution, and defined benefit pension expense in 2008, 2007, and 2006 was $16,909,000, $26,311,000, and $28,942,000, respectively. In addition to these plans, the Company also sponsors a 401(k) savings plan for substantially all U.S. employees. The Company contributes $0.50 for every pre-tax $1.00 an employee contributes on the first two percent of eligible compensation plus $0.25 for every pre-tax $1.00 an employee contributes on the next six percent of eligible compensation. Company contributions are invested in Company stock and are fully vested after three years of service. Total Company contributions for 2008, 2007, and 2006 were $6,417,000, $5,993,000, and $5,830,000, respectively.
29
Effective January 1, 2006, our U.S. defined benefit pension plans were amended for approximately two-thirds of the participant population. For those employees impacted, future pension benefits were replaced with the Bemis Investment Profit Sharing Plan (BIPSP), a defined contribution plan which is subject to achievement of certain financial performance goals of the Company. Total contribution expense for BIPSP and previously existing defined contribution plans was $5,661,000 in 2008, $10,394,000 in 2007, and $10,551,000 in 2006. 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 multiemployer plans in 2008, 2007, and 2006 totaled $780,000, $749,000, and $740,000, respectively.
The Company’s defined benefit pension plans continue to cover a substantial number of U.S. employees, and the non-U.S. defined benefit plans cover select employees at various international locations. 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.
Effective December 31, 2006, the Company adopted Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106, and 132 (R) (FAS 158). As a result of the adoption of FAS 158, the Company has recorded a cumulative effect adjustment as a component of accumulated other comprehensive income within stockholders’ equity (also see Note 6). The Company’s disclosures for the fiscal year ended 2006 also reflected the revised accounting and disclosure requirements of FAS 158. Reported items for fiscal year 2005 were not affected.
The adoption of FAS 158 on December 31, 2006, resulted in incremental adjustments to the following individual line items in the consolidated balance sheet:
|
|
|
Before |
|
|
|
After |
|
|||
|
|
|
Application of |
|
|
|
Application of |
|
|||
|
(in thousands) |
|
FAS 158 |
|
Adjustments |
|
FAS 158 |
|
|||
|
Deferred charges and other assets |
|
$ |
188,748 |
|
$ |
(125,224 |
) |
$ |
63,524 |
|
|
Total assets |
|
3,164,233 |
|
(125,224 |
) |
3,039,009 |
|
|||
|
Deferred taxes |
|
189,244 |
|
(55,076 |
) |
134,168 |
|
|||
|
Other liabilities and deferred credits |
|
107,396 |
|
18,578 |
|
125,974 |
|
|||
|
Total stockholders’ equity |
|
1,560,742 |
|
(88,726 |
) |
1,472,016 |
|
|||
|
Total liabilities and stockholders’ equity |
|
3,164,233 |
|
(125,224 |
) |
3,039,009 |
|
|||
Net periodic pension cost for defined benefit plans included the following components for the years ended December 31, 2008, 2007, and 2006:
|
(in thousands) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Service cost - benefits earned during the year |
|
$ |
13,109 |
|
$ |
13,868 |
|
$ |
14,572 |
|
|
Interest cost on projected benefit obligation |
|
34,217 |
|
32,497 |
|
30,726 |
|
|||
|
Expected return on plan assets |
|
(44,233 |
) |
(45,274 |
) |
(41,626 |
) |
|||
|
Settlement (gain) loss |
|
29 |
|
3,726 |
|
|
|
|||
|
Curtailment |
|
|
|
|
|
667 |
|
|||
|
Amortization of unrecognized transition obligation |
|
261 |
|
240 |
|
158 |
|
|||
|
Amortization of prior service cost |
|
2,355 |
|
2,290 |
|
2,352 |
|
|||
|
Recognized actuarial net (gain) or loss |
|
4,730 |
|
7,820 |
|
10,802 |
|
|||
|
Net periodic pension (income) cost |
|
$ |
10,468 |
|
$ |
15,167 |
|
$ |
17,651 |
|
Changes in benefit obligations and plan assets, and a reconciliation of the funded status at December 31, 2008 and 2007, are as follows:
|
|
|
U.S. Pension Plans |
|
Non-U.S. Pension Plans |
|
|||||||||
|
(in thousands) |
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
|||||
|
Change in Benefit Obligation: |
|
|
|
|
|
|
|
|
|
|||||
|
Benefit obligation at the beginning of the year |
|
$ |
500,152 |
|
$ |
510,663 |
|
$ |
68,009 |
|
$ |
75,046 |
|
|
|
Service cost |
|
9,844 |
|
10,346 |
|
3,265 |
|
3,522 |
|
|||||
|
Interest cost |
|
30,507 |
|
28,633 |
|
3,710 |
|
3,864 |
|
|||||
|
Participant contributions |
|
|
|
|
|
634 |
|
652 |
|
|||||
|
Plan amendments |
|
76 |
|
114 |
|
|
|
418 |
|
|||||
|
Plan curtailments |
|
|
|
|
|
|
|
(418 |
) |
|||||
|
Plan settlements |
|
|
|
|
|
|
|
(1,139 |
) |
|||||
|
Acquisitions |
|
|
|
|
|
2,555 |
|
|
|
|||||
|
Benefits paid |
|
(23,077 |
) |
(22,386 |
) |
(2,559 |
) |
(13,533 |
) |
|||||
|
Actuarial (gain) or loss |
|
277 |
|
(27,218 |
) |
(4,916 |
) |
(6,117 |
) |
|||||
|
Foreign currency exchange rate changes |
|
|
|
|
|
(11,402 |
) |
5,714 |
|
|||||
|
Benefit obligation at the end of the year |
|
$ |
517,779 |
|
$ |
500,152 |
|
$ |
59,296 |
|
$ |
68,009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Accumulated benefit obligation at the end of the year |
|
$ |
480,525 |
|
$ |
448,679 |
|
$ |
47,421 |
|
$ |
54,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Change in Plan Assets: |
|
|
|
|
|
|
|
|
|
|||||
|
Fair value of plan assets at the beginning of the year |
|
$ |
481,889 |
|
$ |
484,567 |
|
$ |
53,937 |
|
$ |
56,541 |
|
|
|
Actual return on plan assets |
|
(123,041 |
) |
18,594 |
|
(2,834 |
) |
2,258 |
|
|||||
|
Employer contributions |
|
2,271 |
|
1,114 |
|
3,450 |
|
3,973 |
|
|||||
|
Participant contributions |
|
|
|
|
|
635 |
|
652 |
|
|||||
|
Plan settlements |
|
|
|
|
|
(29 |
) |
|
|
|||||
|
Benefits paid |
|
(23,076 |
) |
(22,386 |
) |
(2,559 |
) |
(13,533 |
) |
|||||
|
Foreign currency exchange rate changes |
|
|
|
|
|
(10,027 |
) |
4,046 |
|
|||||
|
Fair value of plan assets at the end of the year |
|
$ |
338,043 |
|
$ |
481,889 |
|
$ |
42,573 |
|
$ |
53,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Funded (unfunded) status at year end: |
|
$ |
(179,736 |
) |
$ |
(18,263 |
) |
$ |
(16,724 |
) |
$ |
(14,072 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Amount recognized in consolidated balance sheet consists of: |
|
|
|
|
|
|
|
|
|
|||||
|
Prepaid benefit cost, non-current |
|
$ |
|
|
$ |
21,407 |
|
$ |
|
|
$ |
124 |
|
|
|
Accrued benefit liability, current |
|
(3,383 |
) |
(1,944 |
) |
(276 |
) |
(162 |
) |
|||||
|
Accrued benefit liability, non-current |
|
(176,353 |
) |
(37,726 |
) |
(16,448 |
) |
(14,034 |
) |
|||||
|
Sub-total |
|
(179,736 |
) |
(18,263 |
) |
(16,724 |
) |
(14,072 |
) |
|||||
|
Deferred tax asset |
|
104,371 |
|
47,248 |
|
2,506 |
|
2,726 |
|
|||||
|
Accumulated other comprehensive income |
|
180,173 |
|
79,934 |
|
4,327 |
|
4,611 |
|
|||||
|
Net amount recognized in consolidated balance sheet |
|
$ |
104,808 |
|
$ |
108,919 |
|
$ |
(9,891 |
) |
$ |
(6,735 |
) |
|
30
Accumulated other comprehensive income related to pension benefit plans is as follows:
|
|
|
U.S. Pension Plans |
|
Non-U.S. Pension Plans |
|
||||||||
|
(in thousands) |
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
||||
|
Unrecognized net actuarial losses |
|
$ |
274,230 |
|
$ |
114,655 |
|
$ |
3,412 |
|
$ |
3,317 |
|
|
Unrecognized net prior service costs (benefits) |
|
10,314 |
|
12,527 |
|
709 |
|
889 |
|
||||
|
Unrecognized net transition costs |
|
|
|
|
|
2,712 |
|
3,131 |
|
||||
|
Tax expense (benefit) |
|
(104,371 |
) |
(47,248 |
) |
(2,506 |
) |
(2,726 |
) |
||||
|
Accumulated other comprehensive loss (income), end of year |
|
$ |
180,173 |
|
$ |
79,934 |
|
$ |
4,327 |
|
$ |
4,611 |
|
Estimated amounts in accumulated other comprehensive income expected to be reclassified to net period cost during 2009 are as follows:
|
|
|
|
|
Non-U.S. |
|
||
|
|
|
U.S. Pension Plans |
|
Pension Plans |
|
||
|
(in thousands) |
|
2008 |
|
2008 |
|
||
|
Net actuarial losses |
|
$ |
10,569 |
|
$ |
24 |
|
|
Net prior service costs (benefits) |
|
2,304 |
|
60 |
|
||
|
Net transition costs |
|
|
|
248 |
|
||
|
Total |
|
$ |
12,873 |
|
$ |
332 |
|
The accumulated benefit obligation for all defined benefit pension plans was $527,946,000 and $503,214,000 at December 31, 2008, and 2007, respectively.
Presented below are the projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with projected benefit obligations in excess of plan assets and pension plans with accumulated benefit obligations in excess of plan assets as of December 31, 2008 and 2007.
|
|
|
Projected Benefit Obligation |
|
Accumulated Benefit Obligation |
|
||||||||||||||||||||
|
|
|
Exceeds the Fair Value of Plan’s Assets |
|
Exceeds the Fair Value of Plan’s Assets |
|
||||||||||||||||||||
|
|
|
U.S. Plans |
|
Non-U.S. Plans |
|
U.S. Plans |
|
Non-U.S. Plans |
|
||||||||||||||||
|
(in thousands) |
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
||||||||
|
Projected benefit obligation |
|
$ |
517,779 |
|
$ |
39,670 |
|
$ |
59,296 |
|
$ |
68,009 |
|
$ |
517,779 |
|
$ |
39,670 |
|
$ |
34,769 |
|
$ |
33,074 |
|
|
Accumulated benefit obligation |
|
480,525 |
|
33,747 |
|
47,421 |
|
54,534 |
|
480,525 |
|
33,747 |
|
25,210 |
|
23,096 |
|
||||||||
|
Fair value of plan assets |
|
338,043 |
|
|
|
42,573 |
|
53,812 |
|
338,043 |
|
|
|
19,821 |
|
19,987 |
|
||||||||
The Company’s general funding policy is to make contributions as required by applicable regulations and when beneficial to the Company for tax and planning purposes. The employer contributions for the years ended December 31, 2008 and 2007, were $5,722,000 and $5,087,000, respectively. The expected cash contribution for 2009 is $36,567,000 which is expected to satisfy plan funding requirements and regulatory funding requirements.
For each of the years ended December 31, 2008 and 2007, the U.S. pension plans represented approximately 89 percent of the Company’s total plan assets and approximately 89 percent of the Company’s total projected benefit obligation. Considering the significance of the U.S. pension plans in comparison with the Company’s total pension plans, we separately present and discuss the critical pension assumptions related to the U.S. pension plans and the non-U.S. pension plans.
31
The Company’s actuarial valuation date is December 31. The weighted-average discount rates and rates of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation for the years ended December 31 are as follows:
|
|
|
U.S. Pension Plans |
|
Non-U.S. Pension Plans |
|
||||
|
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
|
Weighted-average discount rate |
|
6.00 |
% |
6.25 |
% |
5.80 |
% |
5.62 |
% |
|
Rate of increase in future compensation levels |
|
4.25 |
% |
4.75 |
% |
3.90 |
% |
4.06 |
% |
The weighted-average discount rates, expected returns on plan assets, and rates of increase in future compensation levels used to determine the net benefit cost for the years ended December 31 are as follows:
|
|
|
U.S. Pension Plans |
|
Non-U.S. Pension Plans |
|
||||||||
|
|
|
2008 |
|
2007 |
|
2006 |
|
2008 |
|
2007 |
|
2006 |
|
|
Weighted-average discount rate |
|
6.25 |
% |
5.75 |
% |
5.50 |
% |
5.60 |
% |
4.81 |
% |
4.53 |
% |
|
Expected return on plan assets |
|
8.50 |
% |
8.75 |
% |
8.75 |
% |
6.18 |
% |
6.44 |
% |
6.56 |
% |
|
Rate of increase in future compensation levels |
|
4.75 |
% |
4.75 |
% |
4.75 |
% |
3.98 |
% |
3.83 |
% |
4.12 |
% |
The weighted-average plan asset allocation at December 31, 2008, and 2007, and target allocation for 2009, are as follows:
|
|
|
U.S. Pension Plans |
|
Non-U.S. Pension Plans |
|
||||||||
|
|
|
2009 |
|
Percentage |
|
2009 |
|
Percentage |
|
||||
|
|
|
Target |
|
of Plan Assets |
|
Target |
|
of Plan Assets |
|
||||
|
Asset Category |
|
Allocation |
|
2008 |
|
2007 |
|
Allocation |
|
2008 |
|
2007 |
|
|
Equity Securities |
|
70 |
% |
58 |
% |
76 |
% |
27 |
% |
28 |
% |
41 |
% |
|
Debt Securities |
|
30 |
% |
42 |
% |
20 |
% |
27 |
% |
25 |
% |
24 |
% |
|
Other |
|
|
|
|
|
4 |
% |
46 |
% |
47 |
% |
35 |
% |
|
Total |
|
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
100 |
% |
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
|
(in thousands) |
|
U.S. Pension Plans |
|
Non-U.S. Pension Plans |
|
||
|
2009 |
|
$ |
26,867 |
|
$ |
1,005 |
|
|
2010 |
|
28,740 |
|
3,206 |
|
||
|
2011 |
|
36,063 |
|
3,050 |
|
||
|
2012 |
|
32,826 |
|
1,339 |
|
||
|
2013 |
|
34,173 |
|
3,726 |
|
||
|
Years 2014-2018 |
|
179,858 |
|
24,814 |
|
||
As of January 1, 2009, we have assumed that the expected long-term annual rate of return on plan assets will be 8.25 percent. This is a decrease from the 8.50 percent level assumed for 2008. To develop the expected long-term rate of return on assets assumption, we considered historical returns and future expectations. Using historical long-term investment periods of 10, 15, 20, and 25 years ending December 31, 2008, our pension plan assets have earned annualized rates of return of 0.5 percent, 6.4 percent, 7.7 percent, and 8.9 percent, respectively. Using our target asset allocation for plan assets of 70 percent equity securities and 30 percent fixed income securities, our outside actuaries have used their independent economic model to calculate a range of expected long-term rates of return and have determined our assumptions to be reasonable.
At the end of each year, we determine the discount rate to be used to calculate the present value of pension plan liabilities. This discount rate is an estimate of the current interest rate at which pension liabilities could be effectively settled at the end of the year. In estimating this rate, we look to rates of return on high quality, fixed income investments that receive one of the two highest ratings given by a recognized ratings agency. For the years ended December 31, 2008 and 2007, we determined this rate to be 6.00 percent and 6.25 percent, respectively.
For our non-U.S. pension plans we follow similar methodologies in determining the appropriate expected rates of return on assets and discount rates, to be used in our actuarial calculations for the pension plans offered in each individual country. We tailor each of these assumptions in accordance with the historical market performance and prevailing market expectations for each respective country. As a result, each pension plan contains unique assumptions, which reflect the general market environment within each respective country, and are often quite different from the corresponding assumptions applied to our U.S. pension plans.
Note 6 — POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors several defined postretirement benefit plans that cover a majority of salaried and a portion of nonunion hourly 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.
32
Net periodic postretirement benefit costs included the following components for the years ended December 31, 2008, 2007, and 2006.
|
(in thousands) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Service cost - benefits earned during the year |
|
$ |
221 |
|
$ |
904 |
|
$ |
1,107 |
|
|
Interest cost on accumulated postretirement benefit obligation |
|
688 |
|
1,178 |
|
1,569 |
|
|||
|
Amortization of prior service cost |
|
(455 |
) |
215 |
|
691 |
|
|||
|
Recognized actuarial net (gain) or loss |
|
(501 |
) |
(62 |
) |
16 |
|
|||
|
Net periodic postretirement benefit (income) cost |
|
$ |
(47 |
) |
$ |
2,235 |
|
$ |
3,383 |
|
Changes in benefit obligation and plan assets, and a reconciliation of the funded status at December 31, 2008 and 2007, are as follows:
|
(in thousands) |
|
2008 |
|
2007 |
|
||||||
|
Change in Benefit Obligation |
|
|
|
|
|
||||||
|
Benefit obligation at the beginning of the year |
|
$ |
11,510 |
|
$ |
21,054 |
|
||||
|
Service cost |
|
221 |
|
904 |
|
||||||
|
Interest cost |
|
688 |
|
1,178 |
|
||||||
|
Participant contributions |
|
439 |
|
439 |
|
||||||
|
Plan amendments |
|
|
|
(5,888 |
) |
||||||
|
Actuarial (gain) or loss |
|
(737 |
) |
(4,759 |
) |
||||||
|
Benefits paid |
|
(1,470 |
) |
(1,418 |
) |
||||||
|
Benefit obligation at the end of the year |
|
$ |
10,651 |
|
$ |
11,510 |
|
||||
|
|
|
|
|
|
|
||||||
|
Change in Plan Assets |
|
|
|
|
|
||||||
|
Fair value of plan assets at the beginning of the year |
|
$ |
0 |
|
$ |
0 |
|
||||
|
Employee contributions |
|
439 |
|
439 |
|
||||||
|
Employer contribution |
|
1,031 |
|
979 |
|
||||||
|
Benefits paid |
|
(1,470 |
) |
(1,418 |
) |
||||||
|
Fair value of plan assets at the end of the year |
|
$ |
0 |
|
$ |
0 |
|
||||
|
|
|
|
|
|
|
||||||
|
Funded (unfunded) status at year end: |
|
$ |
(10,651 |
) |
$ |
(11,510 |
) |
||||
|
|
|
|
|
|
|
||||||
|
Amount recognized in consolidated balance sheet consists of: |
|
|
|
|
|
||||||
|
Prepaid benefit cost, non-current |
|
$ |
0 |
|
$ |
0 |
|
||||
|
Accrued benefit liability, current |
|
(977 |
) |
(1,020 |
) |
||||||
|
Accrued benefit liability, non-current |
|
(9,674 |
) |
(10,490 |
) |
||||||
|
Deferred tax |
|
(4,255 |
) |
(4,391 |
) |
||||||
|
Accumulated other comprehensive income |
|
(7,346 |
) |
(7,429 |
) |
||||||
|
Net amount recognized in consolidated balance sheet |
|
$ |
(22,252 |
) |
$ |
(23,330 |
) |
||||
Accumulated other comprehensive income related to other postretirment benefit plans is as follows:
|
(in thousands) |
|
2008 |
|
2007 |
|
||
|
Unrecognized net actuarial losses (gains) |
|
$ |
(7,788 |
) |
$ |
(7,553 |
) |
|
Unrecognized net prior service costs (benefits) |
|
(3,813 |
) |
(4,267 |
) |
||
|
Tax expense (benefit) |
|
4,255 |
|
4,391 |
|
||
|
Accumulated other comprehensive loss (income), end of year |
|
$ |
(7,346 |
) |
$ |
(7,429 |
) |
Estimated amounts in accumulated other comprehensive income expected to be reclassified to net period cost during 2009 are as follows:
|
(in thousands) |
|
2008 |
|
|
|
Net actuarial (gains) losses |
|
$ |
(524 |
) |
|
Net prior service costs (benefits) |
|
(455 |
) |
|
|
Total |
|
$ |
(979 |
) |
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
|
(in thousands) |
|
Benefit Payments |
|
|
|
2009 |
|
$ |
977 |
|
|
2010 |
|
955 |
|
|
|
2011 |
|
1,003 |
|
|
|
2012 |
|
1,003 |
|
|
|
2013 |
|
1,015 |
|
|
|
2014-2018 |
|
4,874 |
|
|
33
The employer contributions for the years ended December 31, 2008 and 2007, were $1,031,000 and $979,000, respectively. The expected contribution for 2009 is $978,000 which is expected to satisfy plan funding requirements.
The health care cost trend rate assumption affects the amounts reported. For measurement purposes, the assumed annual rate of increase in the per capita cost of covered health care benefits was 8.0 percent for 2008 and was 7.0 percent for 2007; each year’s estimated rate was assumed to decrease gradually to 5.0 percent and remain at that level thereafter. The annual incremental decrease was assumed to be one-half percent for 2008 and one percent for 2007. A one-percentage point change in assumed health care trends would have the following effects:
|
(in thousands) |
|
One Percentage
|
|
One Percentage
|
|
||
|
Effect on total of service and interest cost components for 2008 |
|
$ |
19 |
|
$ |
(17 |
) |
|
Effect on postretirement benefit obligation at December 31, 2008 |
|
$ |
239 |
|
$ |
(217 |
) |
The Company’s actuarial valuation date is December 31. The weighted-average discount rates used to determine the actuarial present value of the net postretirement projected benefit obligation for the years ended December 31, 2008 and 2007 are 6.00 percent and 6.25 percent, respectively. The weighted-average discount rates used to determine the net postretirement benefit cost was 6.25 percent, 5.75 percent, and 5.75 percent for the years ended December 31, 2008, 2007, and 2006, respectively.
Note 7 — STOCK OPTION AND INCENTIVE PLANS
Since 1987, the Company’s stock option and stock award plans have provided for the issuance of up to 19,800,000 shares of common stock to key employees. As of December 31, 2008, 2007, and 2006, respectively, 5,915,585, 6,146,961, and 7,389,928, shares were available for future grants under these plans. Shares forfeited by the employee become available for future grants.
Stock option awards have not been granted since 2003 and all stock options outstanding at December 31, 2008, are fully vested. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model. Stock options were granted at prices equal to fair market value on the date of the grant and are exercisable, upon vesting, over varying periods up to ten years from the date of grant. Options for directors vest immediately, while options for Company employees generally vest over three years (one-third per year). Details of the stock option plans at December 31, 2008, 2007, and 2006, are:
|
|
|
Aggregate |
|
|
|
Per Share |
|
Weighted-Average |
|
||
|
|
|
Intrinsic |
|
Number of |
|
Option Price |
|
Exercise Price |
|
||
|
|
|
Value |
|
Shares |
|
Range |
|
Per Share |
|
||
|
Outstanding at December 31, 2005 |
|
|
|
2,153,378 |
|
$15.86 -$26.95 |
|
$ |
19.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Exercised in 2006 |
|
$ |
1,870,000 |
|
(132,200 |
) |
$16.16 -$22.04 |
|
$ |
16.64 |
|
|
Outstanding at December 31, 2006 |
|
$ |
28,269,000 |
|
2,021,178 |
|
$15.86 -$26.95 |
|
$ |
19.92 |
|
|
Exercisable at December 31, 2006 |
|
$ |
27,884,000 |
|
1,979,178 |
|
$15.86 -$26.95 |
|
$ |
19.82 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Exercised in 2007 |
|
$ |
3,494,000 |
|
(337,096 |
) |
$18.67 -$22.52 |
|
$ |
22.10 |
|
|
Outstanding at December 31, 2007 |
|
$ |
13,238,000 |
|
1,684,082 |
|
$15.86 -$26.95 |
|
$ |
19.49 |
|
|
Exercisable at December 31, 2007 |
|
$ |
13,238,000 |
|
1,684,082 |
|
$15.86 -$26.95 |
|
$ |
19.49 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Exercised in 2008 |
|
$ |
2,385,000 |
|
(287,346 |
) |
$15.88 -$18.81 |
|
$ |
18.45 |
|
|
Forfeited in 2008 |
|
$ |
46,000 |
|
(7,398 |
) |
$ 18.81 |
|
$ |
18.81 |
|
|
Outstanding at December 31, 2008 |
|
$ |
5,467,000 |
|
1,389,338 |
|
$15.86 -$26.95 |
|
$ |
19.75 |
|
|
Exercisable at December 31, 2008 |
|
$ |
5,467,000 |
|
1,389,338 |
|
$15.86 -$26.95 |
|
$ |
19.75 |
|
The following table summarizes information about outstanding and exercisable stock options at December 31, 2008.
|
|
|
Options Outstanding and Exercisable |
|
|||||
|
|
|
Number |
|
Weighted-Average |
|
|
|
|
|
Range of |
|
Outstanding |
|
Remaining |
|
Weighted-Average |
|
|
|
Exercise Prices |
|
at 12/31/08 |
|
Contractual Life |
|
Exercise Price |
|
|
|
$15.86 - $18.81 |
|
964,868 |
|
1.3 years |
|
$ |
17.56 |
|
|
$22.04 - $26.95 |
|
424,470 |
|
3.6 years |
|
$ |
24.71 |
|
|
|
|
1,389,338 |
|
2.0 years |
|
$ |
19.75 |
|
In 1994, 2001, and in 2006, the Company adopted Stock Incentive Plans for certain key employees. The 1994, 2001, and 2007 (adopted in 2006) Plans provide for the issuance of up to 4,000,000, 5,000,000, and 6,000,000 grants, respectively. Each Plan expires 10 years after its inception, at which point no further stock options or performance units may be granted. Since 1994, 3,932,910, 3,677,162, and 1,474,343 grants of either stock options or performance units (commonly referred to as restricted stock) have been made under the 1994, 2001, and 2007 Plans, respectively. Distribution of the performance units is made in the form of shares of the Company’s common stock on a one for one basis. Distribution of the shares will normally be made not less than three years, nor more than six years, from the date of the performance unit grant. All performance units 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 on outstanding performance units equal to the dividend on Bemis common stock. The cost of the award is based on the fair market value of the stock on the date of grant. The cost of the awards is charged to income over the requisite service period.
34
Total compensation expense related to Stock Incentive Plans was $18,058,000 in 2008, $16,849,000 in 2007, and $11,694,000 in 2006.
As of December 31, 2008, the unrecorded compensation cost for performance units is $40,445,000 and will be recognized over the remaining vesting period for each grant which ranges between January 1, 2009 and October 5, 2013. The remaining weighted-average life of all performance units outstanding is 2.3 years. Prior to the adoption of FAS 123(R) the Company maintained liability balances of $37,629,000 related to the portion of performance units for which compensation expense had been previously recognized. As these awards are considered equity-based awards under FAS 123(R), the Company has reclassified this balance from a liability classification to a component of additional paid-in capital.
The following table summarizes annual restricted stock unit activity for the three years ended December 31, 2008:
|
|
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Outstanding shares granted at the beginning of the year |
|
3,296,583 |
|
3,200,437 |
|
3,069,163 |
|
|||
|
Shares Granted |
|
318,441 |
|
1,302,800 |
|
346,143 |
|
|||
|
Shares Paid |
|
(182,943 |
) |
(1,146,821 |
) |
(142,869 |
) |
|||
|
Shares Canceled |
|
(89,667 |
) |
(59,833 |
) |
(72,000 |
) |
|||
|
Outstanding shares granted at the end of the year |
|
3,342,414 |
|
3,296,583 |
|
3,200,437 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Aggregate intrinsic value at year end of outstanding awards |
|
$ |
79,148,000 |
|
$ |
90,260,000 |
|
$ |
108,751,000 |
|
Note 8 — LONG-TERM DEBT
Debt consisted of the following at December 31,
|
(dollars in thousands) |
|
2008 |
|
2007 |
|
||
|
Commercial paper payable through 2009 at a weighted-average interest rate of 2.9% |
|
$ |
330,795 |
|
$ |
161,500 |
|
|
Notes payable in 2008 at an interest rate of 6.5% |
|
|
|
250,000 |
|
||
|
Notes payable in 2012 at an interest rate of 4.9% |
|
300,000 |
|
300,000 |
|
||
|
Interest rate swap (fair market value) |
|
|
|
3,347 |
|
||
|
Industrial revenue bond payable through 2012 at an interest rate of 1.6% |
|
8,000 |
|
8,000 |
|
||
|
Debt of subsidiary companies payable through 2012 at interest rates of 5.4% to 11.3% |
|
39,775 |
|
54,221 |
|
||
|
Obligations under capital leases |
|
65 |
|
146 |
|
||
|
|
|
|
|
|
|
||
|
Total debt |
|
678,635 |
|
777,214 |
|
||
|
Less current portion |
|
18,651 |
|
1,758 |
|
||
|
Total long-term debt |
|
$ |
659,984 |
|
$ |
775,456 |
|
The commercial paper and the $250 million note payable, which matured in 2008, have been classified as long-term debt, to the extent of available long-term backup credit agreements, in accordance with the Company’s intent and ability to refinance such obligations on a long-term basis. The weighted-average interest rate of commercial paper outstanding at December 31, 2008, was 2.9 percent. The maximum outstanding during 2008 was $476,052,000, and the average outstanding during 2008 was $290,211,536. The weighted-average interest rate during 2008 was 3.2 percent.
The industrial revenue bond has a variable interest rate which is determined weekly by a “Remarketing Agent” based on similar debt then available. The interest rate at December 31, 2008, was 1.6 percent and the weighted-average interest rate during 2008 was 2.6 percent. Long-term debt maturing in years 2009 through 2013 is $18,651,000, $20,763,000, $368,000, $308,058,000, and $330,795,000, respectively. The Company is in compliance with all debt covenant agreements.
Under the terms of our revolving credit agreements, we have the capacity to borrow up to $625 million, of which $425 million matures April 28, 2013, and $200 million matures April 28, 2009. These facilities are primarily used to support our issuance of commercial paper. The revolving credit agreements include a combined $100 million multicurrency limit to support to financing needs of our international subsidiaries. In addition, we have arrangements in place to issue up to $100 million of Extendable Commercial Notes (ECNs), which are short-term instruments whose maturity can be extended to 390 days from the date of issuance. As of December 31, 2008, the ECN market was unavailable due to unfavorable market conditions.
The Company entered into two interest rate swap agreements with a total notional amount of $250.0 million in the third quarter of 2001, effectively converting a portion of the Company’s fixed interest rate exposure to a variable rate basis to hedge against the risk of higher borrowing costs in a declining interest rate environment. During 2008 these swaps matured and were net settled, concurrent with the repayment of the underlying $250.0 million debt. The Company does not enter into interest rate swap contracts for speculative or trading purposes. The differential to be paid or received on the interest rate swap agreements is accrued and recognized as an adjustment to interest expense as interest rates change. The interest rate swap agreements as of December 31, 2007, were designated as hedges of the fair value of the Company’s fixed rate long-term debt obligation of $250.0 million, 6.5 percent notes due August 15, 2008.
The variable rate for each of the interest rate swaps was based on the six-month London Interbank Offered Rate (LIBOR), set in arrears, plus a fixed spread. The variable rates were reset semi-annually at each net settlement date. The net settlement benefit to the
35
Company, which is recorded as a reduction in interest expense, was $5.7 million, $1.3 million, and $0.4 million in 2008, 2007, and 2006, respectively. At December 31, 2007, the fair value of these interest rate swaps was $3.3 million in the Company’s favor, as determined by the respective counterparties using discounted cash flow or other appropriate methodologies, and is included with deferred charges and other assets with a corresponding increase in long-term debt.
Note 9 — RESTRUCTURING OF OPERATIONS
In January 2006, the Company committed to a plan to close five flexible packaging plants: Peoria, Illinois; Denmark and Neenah, Wisconsin; Georgetown, Ontario, Canada; and Epernon, France. The closure of these plants, together with related support staff and capacity reductions within the flexible packaging business segment, has reduced fixed costs and improved capacity utilization elsewhere in the Company. During 2006, the Company incurred charges of $11.6 million for employee severance, $12.3 million for accelerated depreciation, and $5.1 million for other related costs. The restructuring effort is complete.
Also in January 2006, the Company committed to a plan to close a pressure sensitive materials plant located in Hopkins, Minnesota. The closure of this plant, together with related support staff and capacity reductions within the pressure sensitive materials business segment, has reduced fixed costs and improved capacity utilization. During 2006, the Company incurred charges of $0.5 million for employee severance and $0.5 million for other related costs. The restructuring effort is complete.
During 2006, a total of $18.3 million has been charged to other costs (income) and $12.9 million has been charged to cost of products sold within the consolidated statement of income. During 2007, a total of $0.3 million restructuring income has been recorded as a component of other costs (income) and $0.3 million has been charged to cost of products sold within the consolidated statement of income. Included in the amount recorded in other costs (income) was a $1.5 million charge associated with corporate restructuring and related costs, which was more than offset by net restructuring income of $1.8 million related to our flexible packing operations.
Note 10 — INCOME TAXES
|
(dollars in thousands) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
U.S. income before income taxes |
|
$ |
180,719 |
|
$ |
206,544 |
|
$ |
214,311 |
|
|
Non-U.S. income before income taxes |
|
81,795 |
|
79,310 |
|
71,485 |
|
|||
|
Income before income taxes |
|
$ |
262,514 |
|
$ |
285,854 |
|
$ |
285,796 |
|
|
|
|
|
|
|
|
|
|
|||
|
Income tax expense consists of the following components: |
|
|
|
|
|
|
|
|||
|
Current tax expense: |
|
|
|
|
|
|
|
|||
|
U.S. federal |
|
$ |
42,963 |
|
$ |
59,538 |
|
$ |
71,754 |
|
|
Foreign |
|
28,579 |
|
29,588 |
|
31,374 |
|
|||
|
State and local |
|
9,092 |
|
9,371 |
|
14,302 |
|
|||
|
Total current tax expense |
|
80,634 |
|
98,497 |
|
117,430 |
|
|||
|
Deferred tax expense: |
|
|
|
|
|
|
|
|||
|
U.S. federal |
|
17,171 |
|
4,711 |
|
(6,266 |
) |
|||
|
Foreign |
|
(803 |
) |
(744 |
) |
(796 |
) |
|||
|
State |
|
(702 |
) |
1,836 |
|
(868 |
) |
|||
|
Total deferred tax expense |
|
15,666 |
|
5,803 |
|
(7,930 |
) |
|||
|
Total income tax expense |
|
$ |
96,300 |
|
$ |
104,300 |
|
$ |
109,500 |
|
The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are presented below.
|
(dollars in thousands) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Deferred Tax Assets: |
|
|
|
|
|
|
|
|||
|
Accounts receivable, principally due to allowances for returns and doubtful accounts |
|
$ |
5,900 |
|
$ |
5,759 |
|
$ |
6,317 |
|
|
Inventories, principally due to additional costs inventoried for tax purposes |
|
15,884 |
|
14,898 |
|
15,699 |
|
|||
|
Employee compensation and benefits accrued for financial reporting purposes |
|
106,673 |
|
45,006 |
|
54,402 |
|
|||
|
Foreign net operating losses |
|
11,587 |
|
12,308 |
|
12,596 |
|
|||
|
Other |
|
5,042 |
|
4,377 |
|
8,003 |
|
|||
|
Total deferred tax assets |
|
145,086 |
|
82,348 |
|
97,017 |
|
|||
|
Less valuation allowance |
|
(9,242 |
) |
(7,059 |
) |
(6,701 |
) |
|||
|
Total deferred tax assets, after valuation allowance |
|
$ |
135,844 |
|
$ |
75,289 |
|
$ |
90,316 |
|
|
|
|
|
|
|
|
|
|
|||
|
Deferred Tax Liabilities: |
|
|
|
|
|
|
|
|||
|
Plant and equipment, principally due to differences in depreciation, capitalized interest, and capitalized overhead |
|
$ |
141,222 |
|
$ |
128,471 |
|
$ |
127,817 |
|
|
Goodwill and intangible assets, principally due to differences in amortization |
|
63,866 |
|
55,228 |
|
50,980 |
|
|||
|
Other |
|
465 |
|
6,419 |
|
8,532 |
|
|||
|
Total deferred tax liabilities |
|
205,553 |
|
190,118 |
|
187,329 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Deferred tax liabilities, net |
|
$ |
69,709 |
|
$ |
114,829 |
|
$ |
97,013 |
|
36
The net deferred tax liabilities are reflected in the balance sheet as follows:
|
(dollars in thousands) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Deferred tax assets (included in prepaid expense) |
|
$ |
42,123 |
|
$ |
41,042 |
|
$ |
37,155 |
|
|
Deferred tax liabilities |
|
111,832 |
|
155,871 |
|
134,168 |
|
|||
|
Net deferred tax liabilities |
|
$ |
69,709 |
|
$ |
114,829 |
|
$ |
97,013 |
|
The Company’s effective tax rate differs from the federal statutory rate due to the following items:
|
|
|
2008 |
|
2007 |
|
2006 |
|
||||||||||
|
|
|
|
|
% of |
|
|
|
% of |
|
|
|
% of |
|
||||
|
|
|
|
|
Income |
|
|
|
Income |
|
|
|
Income |
|
||||
|
(dollars in thousands) |
|
Amount |
|
Before Tax |
|
Amount |
|
Before Tax |
|
Amount |
|
Before Tax |
|
||||
|
Computed “expected” tax expense on income before taxes at federal statutory rate |
|
$ |
91,880 |
|
35.0 |
% |
$ |
100,049 |
|
35.0 |
% |
$ |
100,029 |
|
35.0 |
% |
|
|
Increase (decrease) in taxes resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
State and local income taxes net of federal income tax benefit |
|
5,454 |
|
2.1 |
|
7,285 |
|
2.5 |
|
8,732 |
|
3.1 |
|
||||
|
Foreign tax rate differential |
|
(3,635 |
) |
(1.4 |
) |
(1,464 |
) |
(0.5 |
) |
3,930 |
|
1.4 |
|
||||
|
Minority interest |
|
2,104 |
|
0.8 |
|
1,313 |
|
0.5 |
|
1,239 |
|
0.4 |
|
||||
|
Manufacturing tax benefits |
|
(2,345 |
) |
(0.9 |
) |
(4,200 |
) |
(1.5 |
) |
(3,146 |
) |
(1.1 |
) |
||||
|
Other |
|
2,842 |
|
1.1 |
|
1,317 |
|
0.5 |
|
(1,284 |
) |
(0.5 |
) |
||||
|
Actual income tax expense |
|
$ |
96,300 |
|
36.7 |
% |
$ |
104,300 |
|
36.5 |
% |
$ |
109,500 |
|
38.3 |
% |
|
As of December 31, 2008, the Company had foreign net operating loss carryovers of approximately $34.1 million that are available to offset future taxable income. Approximately $16.7 million of the carryover expires over the period 2014-2018. The balance of the loss carryovers has no expiration. FAS No. 109, Accounting for Income Taxes, requires that a valuation allowance be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. The Company’s management determined that a valuation allowance of $9.2 million against deferred tax assets primarily associated with the foreign net operating loss carryover was necessary at December 31, 2008.
Provision has not been made for U.S. or additional foreign taxes on $163.7 million of undistributed earnings of foreign subsidiaries because those earnings are considered to be indefinitely reinvested in the operations of those subsidiaries. It is not practical to estimate the amount of tax that might be payable on the eventual remittance of such earnings.
The Company adopted FAS Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (FIN 48), on January 1, 2007. The Company recognized no material adjustments as a result of the implementation of this policy.
As of December 31, 2007, the Company had approximately $9.1 million of total unrecognized tax benefits. Of this total, approximately $6.4 million represented the amount of unrecognized tax benefits that would impact the effective income tax rate if recognized in any future periods. As of December 31, 2008, the Company had approximately $11.9 million of total unrecognized tax benefits. Of this total, approximately $8.0 million represented the amount of unrecognized tax benefits that would impact the effective income tax rate if recognized in any future periods.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, in millions, is as follows:
|
|
|
2008 |
|
2007 |
|
||
|
Balance at January 1, |
|
$ |
9.1 |
|
$ |
13.9 |
|
|
Additions based on tax positions related to the current year |
|
2.0 |
|
1.0 |
|
||
|
Additions for tax positions of prior years |
|
3.8 |
|
2.5 |
|
||
|
Reductions for tax positions of prior years |
|
(1.6 |
) |
(0.3 |
) |
||
|
Reductions due to a lapse of the statute of limitations |
|
(0.6 |
) |
(0.4 |
) |
||
|
Settlements |
|
(0.8 |
) |
(7.6 |
) |
||
|
|
|
|
|
|
|
||
|
Balance at December 31, |
|
$ |
11.9 |
|
$ |
9.1 |
|
The Company does not expect significant changes to the balance of unrecognized tax benefits within the next 12 months.
The Company recognizes interest and penalties related to unrecognized tax benefits as components of income tax expense. The Company had approximately $1.3 million accrued for interest and penalties at December 31, 2007. As of December 31, 2008, the Company had approximately $1.4 million accrued for interest and penalties.
37
The Company and its subsidiaries are subject to U.S. federal and state income tax as well as income tax in multiple international jurisdictions. The Company’s U.S. federal income tax returns for the years prior to 2006 have been audited and completely settled. With few exceptions, the Company is no longer subject to examinations by tax authorities for years prior to 2003 in the significant jurisdictions in which it operates.
Note 11 — LEASES
The Company has operating leases for manufacturing plants, land, warehouses, machinery and equipment, and administrative offices that expire at various times over the next 33 years. Under most leasing arrangements, the Company pays the property taxes, insurance, maintenance, and other expenses related to the leased property. Total rental expense under operating leases was approximately $11,542,000 in 2008, $10,378,000 in 2007, and $10,870,000 in 2006.
The Company has capitalized leases for machinery and equipment that expire at various times over the next two years. The present values of minimum future obligations shown in the following chart are calculated based on an interest rate of approximately 4.7 percent, which is the lessor’s implicit rate of return. Interest expense on the outstanding obligations under capital leases was approximately $5,000 in 2008, $16,000 in 2007, and $15,000 in 2006.
Minimum future obligations on leases in effect at December 31, 2008, are:
|
|
|
Capital |
|
Operating |
|
||
|
(in thousands) |
|
Leases |
|
Leases |
|
||
|
2009 |
|
$ |
67 |
|
$ |
6,682 |
|
|
2010 |
|
1 |
|
5,009 |
|
||
|
2011 |
|
0 |
|
3,632 |
|
||
|
2012 |
|
0 |
|
2,488 |
|
||
|
2013 |
|
0 |
|
2,036 |
|
||
|
Thereafter |
|
0 |
|
5,801 |
|
||
|
Total minimum obligations |
|
68 |
|
$ |
25,648 |
|
|
|
Less amount representing interest |
|
3 |
|
|
|
||
|
Present value of net minimum obligations |
|
65 |
|
|
|
||
|
Less current portion |
|
64 |
|
|
|
||
|
Long-term obligations |
|
$ |
1 |
|
|
|
|
Note 12 — SEGMENTS OF BUSINESS
The Company’s business activities are organized around and aggregated into its two principal business segments, Flexible Packaging and Pressure Sensitive Materials. Both internal and external reporting conform to this organizational structure, with no significant differences in accounting policies applied. Minor intersegment sales are generally priced to reflect nominal markups. The Company evaluates the performance of its segments and allocates resources to them based primarily on operating profit, which is defined as profit before general corporate expense, interest expense, income taxes, and minority interest. While there are similarities in selected technology and manufacturing processes utilized between the Company’s business segments, notable differences exist in products, application and distribution of products, and customer base.
Products produced within the Flexible Packaging business segment service packaging applications for markets such as food, medical devices, personal care, agribusiness, chemicals, pet food, and tissue. Products produced within the Pressure Sensitive Materials business segment include film, paper, and metalized plastic film printing stocks used for primary package labeling, promotional decoration, bar code inventory control labels, and laser printing for administrative office and promotional applications. This segment also includes micro-thin film adhesives used in delicate electronic parts assembly and graphic films for decorative signage.
A summary of the Company’s business activities reported by its two business segments follows:
|
BUSINESS SEGMENTS (in millions) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Net Sales: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
$ |
3,154.4 |
|
$ |
3,002.5 |
|
$ |
3,000.6 |
|
|
Pressure Sensitive Materials |
|
632.2 |
|
653.0 |
|
643.3 |
|
|||
|
Intersegment Sales: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
(1.2 |
) |
(0.7 |
) |
(0.5 |
) |
|||
|
Pressure Sensitive Materials |
|
(6.0 |
) |
(5.5 |
) |
(4.0 |
) |
|||
|
Net Sales to Unaffiliated Customers |
|
$ |
3,779.4 |
|
$ |
3,649.3 |
|
$ |
3,639.4 |
|
|
|
|
|
|
|
|
|
|
|||
|
Operating Profit and Pretax Profit: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
$ |
315.9 |
|
$ |
346.6 |
|
$ |
335.1 |
|
|
Pressure Sensitive Materials |
|
34.3 |
|
40.3 |
|
50.1 |
|
|||
|
Total operating profit (1) |
|
350.2 |
|
386.9 |
|
385.2 |
|
|||
|
General corporate expenses |
|
(42.3 |
) |
(46.9 |
) |
(46.6 |
) |
|||
|
Interest expense |
|
(39.4 |
) |
(50.3 |
) |
(49.3 |
) |
|||
|
Minority interest in net income |
|
(6.0 |
) |
(3.8 |
) |
(3.5 |
) |
|||
|
Income before income taxes |
|
$ |
262.5 |
|
$ |
285.9 |
|
$ |
285.8 |
|
|
|
|
|
|
|
|
|
|
|||
|
Identifiable Assets: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
$ |
2,343.8 |
|
$ |
2,672.7 |
|
$ |
2,579.5 |
|
|
Pressure Sensitive Materials |
|
339.0 |
|
358.0 |
|
339.9 |
|
|||
|
Total identifiable assets (2) |
|
2,682.8 |
|
3,030.7 |
|
2,919.4 |
|
|||
|
Corporate assets (3) |
|
139.5 |
|
160.7 |
|
119.6 |
|
|||
|
Total |
|
$ |
2,822.3 |
|
$ |
3,191.4 |
|
$ |
3,039.0 |
|
|
|
|
|
|
|
|
|
|
|||
|
Depreciation and Amortization: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
$ |
147.2 |
|
$ |
144.2 |
|
$ |
138.4 |
|
|
Pressure Sensitive Materials |
|
13.7 |
|
13.4 |
|
13.1 |
|
|||
|
Corporate |
|
1.1 |
|
0.9 |
|
0.9 |
|
|||
|
Total |
|
$ |
162.0 |
|
$ |
158.5 |
|
$ |
152.4 |
|
|
|
|
|
|
|
|
|
|
|||
|
Expenditures for Property and Equipment: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
$ |
86.3 |
|
$ |
139.3 |
|
$ |
122.4 |
|
|
Pressure Sensitive Materials |
|
11.9 |
|
16.0 |
|
10.2 |
|
|||
|
Corporate |
|
22.3 |
|
23.6 |
|
26.2 |
|
|||
|
Total |
|
$ |
120.5 |
|
$ |
178.9 |
|
$ |
158.8 |
|
38
|
OPERATIONS BY GEOGRAPHIC AREA (in millions) |
|
2008 |
|
2007 |
|
2006 |
|
|||
|
Net Sales to Unaffiliated Customers: (4) |
|
|
|
|
|
|
|
|||
|
United States |
|
$ |
2,429.4 |
|
$ |
2,352.2 |
|
$ |
2,400.5 |
|
|
Canada |
|
12.3 |
|
15.6 |
|
64.8 |
|
|||
|
Europe |
|
656.5 |
|
647.6 |
|
595.9 |
|
|||
|
South America |
|
582.4 |
|
539.9 |
|
491.3 |
|
|||
|
Other |
|
98.8 |
|
94.0 |
|
86.9 |
|
|||
|
Total |
|
$ |
3,779.4 |
|
$ |
3,649.3 |
|
$ |
3,639.4 |
|
|
|
|
|
|
|
|
|
|
|||
|
Identifiable Assets: (2) |
|
|
|
|
|
|
|
|||
|
United States |
|
$ |
1,622.4 |
|
$ |
1,677.7 |
|
$ |
1,706.6 |
|
|
Canada |
|
2.5 |
|
5.7 |
|
21.2 |
|
|||
|
Europe |
|
383.8 |
|
441.7 |
|
419.0 |
|
|||
|
South America |
|
603.5 |
|
830.1 |
|
696.1 |
|
|||
|
Other |
|
70.2 |
|
75.5 |
|
76.5 |
|
|||
|
Total |
|
$ |
2,682.4 |
|
$ |
3,030.7 |
|
$ |
2,919.4 |
|
|
(1) |
|
Operating profit is defined as profit before general corporate expense, interest expense, income taxes, and minority interest. |
|
(2) |
|
Identifiable assets by business segment include only those assets that are specifically identified with each segment’s operations. |
|
(3) |
|
Corporate assets are principally prepaid expenses, prepaid income taxes, prepaid pension benefit costs, fair value of the interest rate swap agreements, and corporate tangible and intangible property. |
|
(4) |
|
Net sales are attributed to countries based on location of the Company’s manufacturing or selling operation. |
Note 13 — COMMITMENTS AND CONTINGENCIES
The Company is involved in a number of lawsuits incidental to its business, including environmental related litigation. Although it is difficult to predict the ultimate outcome of these cases, management believes, except as discussed below, that any ultimate liability would not have a material adverse effect upon the Company’s consolidated financial condition or results of operations.
The Company is a potentially responsible party (PRP) pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (commonly known as “Superfund”) and similar state laws in proceedings associated with seventeen sites around the United States. During 2008, the Company was identified as a PRP in four new sites. In addition, two sites previously considered closed have been re-opened for potential further remediation. These proceedings were instituted by the United States Environmental Protection Agency and certain state environmental agencies at various times beginning in 1983. Superfund and similar state laws create liability for investigation and remediation in response to releases of hazardous substances in the environment. Under these statutes, joint and several liability may be imposed on waste generators, site owners and operators, and others regardless of fault. Although these regulations could require the Company to remove or mitigate the effects on the environment at various sites, perform remediation work at such sites, or pay damages for loss of use and non-use values, we expect the Company’s liability in these proceedings to be limited to monetary damages. The Company expects its future liability relative to these sites to be insignificant, individually and in the aggregate. The Company has reserved an amount that it believes to be adequate to cover its exposure.
Dixie Toga S.A., acquired by the Company on January 5, 2005, is involved in a tax dispute with the City of São Paulo, Brazil. The City imposes a tax on the rendering of printing services. The City has assessed this city services tax on the production and sale of printed labels and packaging products. Dixie Toga, along with a number of other packaging companies, disagree and contend that the city services tax is not applicable to its products and that the products are subject only to the state value added tax (VAT). Under Brazilian law, state VAT and city services tax are mutually exclusive and the same transaction can be subject to only one of those taxes. Based on a ruling from the State of São Paulo, advice from legal counsel, and long standing business practice, Dixie Toga appealed the city services tax and instead continued to collect and pay only the state VAT.
39
The City of São Paulo disagreed and assessed Dixie Toga the city services tax for the years 1991-1995. The assessments for those years are estimated to be approximately $47.0 million at the date the Company acquired Dixie Toga, translated to U.S. dollars at the December 31, 2008 exchange rate. Dixie Toga challenged the assessments and ultimately litigated the issue in two annulment actions filed on November 24, 1998 and August 16, 1999 in the Lower Tax Court in the city of São Paulo. A decision by the Lower Tax Court in the city of São Paulo in 2002 cancelled all of the assessments for the years 1991-1995. The City of São Paulo, the State of São Paulo, and Dixie Toga have each appealed parts of the lower court decision. In the event of an adverse resolution, the estimated amount for these years could be substantially increased for additional interest, monetary adjustments and costs from the date of acquisition.
The City has also asserted the applicability of the city services tax for the subsequent years 1996-2001 and has issued assessments for those years for Dixie Toga and for Itap Bemis Ltda., a Dixie Toga subsidiary. The assessments for those years were upheld at the administrative level and are being challenged by the companies. The assessments at the date of acquisition for these years for tax and penalties (exclusive of interest and monetary adjustments) are estimated to be approximately $7.1 million for Itap Bemis and $22.8 million for Dixie Toga, translated to U.S. dollars at the December 31, 2008 exchange rate. In the event of an adverse resolution, the estimated amounts for these years could be increased by $27.1 million for Itap Bemis and $77.9 million for Dixie Toga for interest, monetary adjustments and costs.
The 1996-2001 assessments for Dixie Toga are currently being challenged in the courts. In pursuing its challenge through the courts, taxpayers are generally required, in accordance with court procedures, to pledge assets as security for its lawsuits. Under certain circumstances, taxpayers may avoid the requirement to pledge assets. Dixie Toga has secured a court injunction that avoids the current requirement to pledge assets as security for its lawsuit related to the 1996-2001 assessments.
The Company strongly disagrees with the City’s position and intends to vigorously challenge any assessments by the City of São Paulo. The Company is unable at this time to predict the ultimate outcome of the controversy and as such has not recorded any liability related to this matter. An adverse resolution could be material to the consolidated results of operations and/or cash flows of the period in which the matter is resolved.
On September 18, 2007, the Secretariat of Economic Law (SDE), a governmental agency in Brazil, initiated an investigation into possible anti-competitive practices in the Brazilian flexible packaging industry against a number of Brazilian companies including a Dixie Toga subsidiary. The investigation relates to periods prior to the Company’s acquisition of control of Dixie Toga and its subsidiaries. Given the preliminary nature of the proceedings the Company is unable at the present time to predict the outcome of this matter.
The Company and its subsidiary, Morgan Adhesives Company, have been named as defendants in thirteen civil lawsuits related to an investigation that was initiated and subsequently closed by the U.S. Department of Justice without any further action. Six of these lawsuits purport to represent a nationwide class of labelstock purchasers, and each alleges a conspiracy to fix prices within the self-adhesive labelstock industry. The first of these lawsuits was filed on May 27, 2003. In these lawsuits, the plaintiffs seek actual damages for the period of the alleged conspiracy (January 1, 1996 through July 25, 2003) trebled, plus an award of attorneys’ fees and costs. On November 5, 2003, the Judicial Panel on MultiDistrict Litigation issued a decision consolidating all of the federal class actions for pretrial purposes in the United States District Court for the Middle District of Pennsylvania, before the Honorable Chief Judge Vanaskie. On November 20, 2007, the Court granted plaintiffs’ motion for class certification. On March 6, 2008, the Third Circuit Court of Appeals denied Defendant’s petition for leave to appeal the district court’s decision granting class certification. On June 24, 2008, the Court in the consolidated federal class actions issued a decision dismissing the Company from those actions. On January 27, 2009, the defendants filed a motion to decertify the class based on new case law in the Third Circuit. At this time, a discovery cut-off has been set for December 21, 2009. However, no trial date has been set. The Company and Morgan Adhesives Company have also been named in three lawsuits filed in the California Superior Court in San Francisco. These three lawsuits, which have been consolidated, seek to represent a class of all California indirect purchasers of labelstock and each alleges a conspiracy to fix prices within the self-adhesive labelstock industry. Finally, the Company has been named in one lawsuit in Vermont, seeking to represent a class of all Vermont indirect purchasers of labelstock, one lawsuit in Nebraska seeking to represent a class of all Nebraska indirect purchasers of labelstock, one lawsuit in Kansas seeking to represent a class of all Kansas indirect purchasers of labelstock, and one lawsuit in Tennessee, seeking to represent a class of purchasers of labelstock in various jurisdictions, all alleging a conspiracy to fix prices within the self-adhesive labelstock industry. The Company and Morgan Adhesives Company intend to vigorously defend the state class actions, and Morgan Adhesives Company intends to vigorously defend the federal class actions.
Given the ongoing status of the class-action civil lawsuits, the Company is unable to predict the outcome of these matters although the effect could be material to the results of operations and/or cash flows of the period in which the matter is resolved. The Company is currently not otherwise subject to any pending litigation other than routine litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on the business, results of operations, financial position, or liquidity of the Company.
Note 14 — FINANCIAL INSTRUMENTS
The Company enters into forward exchange contracts to manage foreign currency exchange rate exposures associated with certain foreign currency denominated receivables and payables. Forward exchange contracts generally have maturities of less than six months and relate primarily to major Western European currencies for our European operations, and the U.S. dollar for our Brazilian operations. The Company has not designated these derivative instruments as hedging instruments. At December 31, 2008 and 2007, the Company had outstanding forward exchange contracts with notional amounts aggregating $1,902,000 and $4,971,000, respectively. The net settlement amount (fair value) related to active forward exchange contracts is recorded on the balance sheet as part of accounts payable and as an expense element of other costs (income), net, which offsets the related transaction gains or losses and was not significant at December 31, 2008 and 2007.
40
Fluctuations in foreign currency exchange rates expose the Company to changes in the fair value of U.S. dollar denominated debt held at our Dixie Toga business in Brazil. To hedge this exposure, Dixie Toga enters into currency swaps, with maturities that match the underlying debt, effectively converting a portion of Dixie Toga’s U.S. denominated debt to their functional currency, which is the Brazilian real. Dixie Toga and the Company have not designated these derivative instruments as hedging instruments. At December 31, 2008 and 2007, the Company had outstanding currency swap contracts with notional amounts aggregating $24,587,000 and $49,621,000 respectively. The net settlement amount (fair value) related to active swap contracts is recorded on the balance sheet as either a current or long-term asset or liability and as an expense element of other costs (income), net, which offsets the related transaction gains or losses and was not significant at December 31, 2008 and 2007.
The Company is exposed to changes in the fair value of its fixed-rate debt resulting from interest rate fluctuations. To hedge this exposure, the Company entered into two interest rate swap agreements with a total notional amount of $250 million in the third quarter of 2001, effectively converting a portion of the Company’s fixed interest rate exposure to a variable rate basis to hedge against the risk of higher borrowing costs in a declining interest rate environment. During 2008, these swaps matured and were net settled, concurrent with the repayment of the underlying $250.0 million debt. The interest rate swaps were accounted for as a fair value hedge. The terms of the interest rate swap agreements were specifically designed to conform to the applicable terms of the hedged items and with the requirements of paragraph 68 of FAS No. 133 to support the assumption of no ineffectiveness (changes in fair value of the debt and the swaps exactly offset). The fair value of these interest rate swaps was recorded within long-term debt. Changes in the payment of interest resulting from the interest rate swaps were recorded as an offset to interest expense. See Note 8 for further discussion of the interest rate swaps.
In connection with the issue of seven-year, $300 million notes in March 2005, we entered into a forward starting swap on February 3, 2005, in order to lock in an interest rate in advance of the pricing date for the notes. On March 14, 2005, in connection with the pricing of the notes, we terminated the swap and recorded the resulting gain of $6.1 million (pre-tax) on the balance sheet as a component of other comprehensive income. This gain is being amortized as a component of interest expense over the term of the notes.
The Company’s non-derivative financial instruments included cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings, and long-term debt. At December 31, 2008 and 2007, the carrying value of these financial instruments, excluding long-term debt, approximates fair value 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 $700,945,000 and $779,541,000 at December 31, 2008 and 2007, respectively, using discounted cash flow analyses and based on the incremental borrowing rates currently available to the Company for similar debt with similar terms and maturity.
The Company is exposed to credit loss in the event of non-performance by counterparties in interest rate swaps and forward exchange contracts. Collateral is generally not required of the counterparties or of the Company. In the unlikely event a counterparty fails to meet the contractual terms of an interest rate swap or foreign exchange forward contract, the Company’s risk is limited to the fair value of the instrument. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting major international banks and financial institutions as counterparties. The Company has not had any historical instances of non-performance by any counterparties, nor does it anticipate any future instances of non-performance. 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, 2008 and 2007, the Company had no significant concentrations of credit risk.
Note 15 — QUARTERLY FINANCIAL INFORMATION — UNAUDITED
|
|
|
Quarter Ended |
|
|||||||||||||
|
(in millions, except per share amounts) |
|
March 31 |
|
June 30 |
|
September 30 |
|
December 31 |
|
Total |
|
|||||
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net sales |
|
$ |
947.3 |
|
$ |
980.0 |
|
$ |
984.2 |
|
$ |
867.9 |
|
$ |
3,779.4 |
|
|
Gross profit |
|
163.0 |
|
172.5 |
|
165.9 |
|
146.6 |
|
648.0 |
|
|||||
|
Net income |
|
42.3 |
|
46.4 |
|
44.3 |
|
33.2 |
|
166.2 |
|
|||||
|
Basic earnings per common share |
|
0.42 |
|
0.47 |
|
0.44 |
|
0.33 |
|
1.67 |
|
|||||
|
Diluted earnings per common share |
|
0.42 |
|
0.46 |
|
0.44 |
|
0.33 |
|
1.65 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net sales |
|
$ |
909.1 |
|
$ |
921.8 |
|
$ |
905.7 |
|
$ |
912.7 |
|
$ |
3,649.3 |
|
|
Gross profit |
|
177.2 |
|
176.9 |
|
160.9 |
|
161.0 |
|
676.0 |
|
|||||
|
Net income |
|
48.3 |
|
49.5 |
|
41.1 |
|
42.7 |
|
181.6 |
|
|||||
|
Basic earnings per common share |
|
0.46 |
|
0.47 |
|
0.40 |
|
0.43 |
|
1.76 |
|
|||||
|
Diluted earnings per common share |
|
0.45 |
|
0.47 |
|
0.40 |
|
0.42 |
|
1.74 |
|
|||||
The summation of quarterly earnings per share may not equate to the calculation for the full year as quarterly calculations are performed on a discrete basis.
41
ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A — CONTROLS AND PROCEDURES
(a) Management’s Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
The Company’s management, under the direction, supervision, and involvement of the Chief Executive Officer and the Chief Financial Officer, has carried out an evaluation, as of the end of the period covered by this report, of the effectiveness of the design and operation of the disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) of the Company. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that disclosure controls and procedures in place at the Company are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms.
(b) Management’s Report on Internal Control Over Financial Reporting
The management of Bemis Company, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the direction, supervision, and participation of the Chief Executive Officer and the Chief Financial Officer, the Company’s management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO-Framework). Based on the results of this evaluation management has concluded that internal control over financial reporting was effective as of December 31, 2008.
The effectiveness of our internal control over financial reporting as of December 31, 2008, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears on page 20 of this Form 10-K.
(c) Changes in Internal Control Over Financial Reporting
There was no change in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is likely to materially affect, the Company’s internal control over financial reporting.
Not applicable.
ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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, 2008, and such information is expressly incorporated herein by reference.
The following sets forth the name, age, and business experience for at least the last five years of the principal executive officers of the Company. Each officer, except Mr. Ullem, has been an employee of the Company for the last five years and the positions described relate to positions with the Company.
|
Name (Age) |
|
Positions Held |
|
Period The Position Was Held |
|
|
|
|
|
|
|
William F. Austen (50) |
|
Vice President — Operations |
|
2004 to present |
|
|
|
President and Chief Executive Officer — Morgan Adhesives Company (1) |
|
2000 to present |
|
|
|
|
|
|
|
Jeffrey H. Curler (58) |
|
Executive Chairman and Chairman of the Board |
|
2008 to present |
|
|
|
Chief Executive Officer and Chairman of the Board |
|
2007 to 2008 |
|
|
|
President, Chief Executive Officer and Chairman of the Board |
|
2005 to 2007 |
|
|
|
President and Chief Executive Officer |
|
2000 to 2005 |
|
|
|
President and Chief Operating Officer |
|
1998 to 2000 |
|
|
|
President |
|
1996 to 1998 |
|
|
|
Director |
|
1992 to Present |
|
|
|
Executive Vice President |
|
1991 to 1995 |
|
|
|
Various R&D and management positions within the Company |
|
1973 to 1991 |
42
|
Name (Age) |
|
Positions Held |
|
Period The Position Was Held |
|
|
|
|
|
|
|
Robert F. Hawthorne (59) |
|
Vice President — Operations |
|
2007 to present |
|
|
|
Vice President — Operations (Paper Packaging Division and Bemis Clysar, Inc. (1)) |
|
2005 to 2007 |
|
|
|
President — Curwood, Inc. (1) |
|
2003 to 2005 |
|
|
|
Various sales, marketing, and management positions within the Company |
|
1985 to 2003 |
|
|
|
|
|
|
|
Stanley A. Jaffy (60) |
|
Vice President and Controller |
|
2002 to present |
|
|
|
Vice President - Tax and Assistant Controller |
|
1998 to 2002 |
|
|
|
Various finance management positions within the Company |
|
1987 to 1998 |
|
|
|
|
|
|
|
Melanie E.R. Miller (45) |
|
Vice President, Investor Relations and Treasurer |
|
2005 to present |
|
|
|
Vice President, Investor Relations and Assistant Treasurer |
|
2002 to 2005 |
|
|
|
Various finance management positions within the Company |
|
2000 to 2002 |
|
|
|
|
|
|
|
James W. Ransom (49) |
|
Vice President — Operations |
|
2007 to present |
|
|
|
President — Curwood, Inc. (1) |
|
2005 to present |
|
|
|
President — Banner Packaging, Inc. (1) |
|
2002 to 2005 |
|
|
|
|
|
|
|
Eugene H. Seashore, Jr. (59) |
|
Vice President — Human Resources |
|
2000 to present |
|
|
|
Various human resource and management positions within the Company |
|
1980 to 2000 |
|
|
|
|
|
|
|
James J. Seifert (52) |
|
Vice President, General Counsel and Secretary |
|
2002 to present |
|
|
|
|
|
|
|
Henry J. Theisen (55) |
|
President and Chief Executive Officer |
|
2008 to present |
|
|
|
President and Chief Operating Officer |
|
2007 to 2008 |
|
|
|
Director |
|
2006 to present |
|
|
|
Executive Vice President and Chief Operating Officer |
|
2003 to 2007 |
|
|
|
Vice President — Operations |
|
2002 to 2003 |
|
|
|
Various R&D, marketing, and management positions within the Company |
|
1976 to 2002 |
|
|
|
|
|
|
|
Scott B. Ullem (42) |
|
Vice President, Finance |
|
2008 to present |
|
|
|
Managing Director, Banc of America Securities LLC |
|
2005 to 2008 |
|
|
|
Various investment banking positions leading to Managing Director, Goldman, Sachs & Co. |
|
1989 to 1992 & 1994 to 2005 |
|
|
|
|
|
|
|
Gene C. Wulf (58) |
|
Director |
|
2006 to present |
|
|
|
Senior Vice President and Chief Financial Officer |
|
2005 to present |
|
|
|
Vice President, Chief Financial Officer and Treasurer |
|
2002 to 2005 |
|
|
|
Vice President and Controller |
|
1998 to 2002 |
|
|
|
Vice President and Assistant Controller |
|
1997 to 1998 |
|
|
|
Various financial and management positions within the Company |
|
1975 to 1997 |
(1) Identified operation is a 100 percent owned subsidiary or division of the Company.
The Company’s annual CEO certification to the NYSE for the previous year was submitted to the NYSE on May 19, 2008. The Company’s CEO and CFO executed the certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 which are filed as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K. No qualifications were taken with respect to any of the certifications.
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, 2008, and such information is expressly incorporated herein by reference.
ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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, 2008, and such information is expressly incorporated herein by reference.
43
ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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, 2008, and such information is expressly incorporated herein by reference.
ITEM 14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES
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, 2008, and such information is expressly incorporated herein by reference.
ITEM 15 — EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of Item 8 of this Annual Report on Form 10-K:
|
|
|
|
|
Pages in
|
|
|
(1) Financial Statements |
|
|
|||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
Consolidated Statement of Income for each of the Three Years Ended December 31, 2008 |
|
|
|
|
|
|
|
|
||
|
|
|
Consolidated Statement of Cash Flows for each of the Three Years Ended December 31, 2008 |
|
|
|
|
|
|
Consolidated Statement of Stockholders’ Equity for each of the Three Years Ended December 31, 2008 |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
(2) Financial Statement Schedule for Years 2008, 2007, and 2006 |
|
|
|
||
|
|
|
Schedule II - Valuation and Qualifying Accounts and Reserves |
|
|
|
|
|
|
|
|
||
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
The Exhibit Index is incorporated herein by reference.
44
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/ Gene C. Wulf |
|
By |
/s/ Stanley A. Jaffy |
||||
|
|
Gene C. Wulf, Senior Vice President |
|
Stanley A. Jaffy, Vice President |
|||||
|
|
and Chief Financial Officer |
|
and Controller |
|||||
|
|
Date February 27, 2009 |
|
Date February 27, 2009 |
|||||
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/ Gene C. Wulf |
|
/s/ Stanley A. Jaffy |
|
Gene C. Wulf, Senior Vice President |
|
Stanley A. Jaffy, Vice President |
|
and Chief Financial Officer |
|
and Controller (principal accounting officer) |
|
Date February 27, 2009 |
|
Date February 27, 2009 |
|
|
|
|
|
|
|
|
|
/s/ Jeffrey H. Curler |
|
/s/ William J. Bolton |
|
Jeffrey H. Curler, Chairman of the Board |
|
William J. Bolton, Director |
|
and Executive Chairman |
|
Date February 27, 2009 |
|
Date February 27, 2009 |
|
|
|
|
|
|
|
/s/ David S. Haffner |
|
/s/ Barbara L. Johnson |
|
David S. Haffner, Director |
|
Barbara L. Johnson, Director |
|
Date February 27, 2009 |
|
Date February 27, 2009 |
|
|
|
|
|
|
|
|
|
/s/ Timothy M. Manganello |
|
/s/ Roger D. O’Shaughnessy |
|
Timothy M. Manganello, Director |
|
Roger D. O’Shaughnessy, Director |
|
Date February 27, 2009 |
|
Date February 27, 2009 |
|
|
|
|
|
|
|
|
|
/s/ Paul S. Peercy |
|
/s/ Edward N. Perry |
|
Paul S. Peercy, Director |
|
Edward N. Perry, Director |
|
Date February 27, 2009 |
|
Date February 27, 2009 |
|
|
|
|
|
|
|
|
|
/s/ William J. Scholle |
|
/s/ Henry J. Theisen |
|
William J. Scholle, Director |
|
Henry J. Theisen, Director, President |
|
Date February 27, 2009 |
|
and Chief Executive Officer |
|
|
|
Date February 27, 2009 |
|
|
|
|
|
|
|
|
|
/s/ Holly Van Deursen |
|
/s/ Philip G. Weaver |
|
Holly Van Deursen, Director |
|
Philip G. Weaver, Director |
|
Date February 27, 2009 |
|
Date February 27, 2009 |
|
|
|
|
|
|
|
|
|
/s/ Gene C. Wulf, Director |
|
/s/ Jeffrey H. Curler |
|
Gene C. Wulf, Director |
|
Jeffrey H. Curler, Director |
|
Date February 27, 2009 |
|
Date February 27, 2009 |
45
|
Exhibit |
|
Description |
|
Form of Filing |
|
|
|
3(a) |
|
Restated Articles of Incorporation of the Registrant, as amended. (1) |
|
Incorporated by Reference |
|
|
3(b) |
|
By-Laws of the Registrant, as amended through May 6, 2004. (1) |
|
Incorporated by Reference |
|
|
4(a) |
|
Form of Indenture dated as of June 15, 1995, between the Registrant and U.S. Bank Trust |
|
|
|
|
|
|
National Association (formerly known as First Trust National Association), as Trustee. (2) |
|
Incorporated by Reference |
|
|
4(b) |
|
Certificate of Bemis Company, Inc. regarding Rights Agreement. (3) |
|
Incorporated by Reference |
|
|
4(c) |
|
Rights Agreement, dated as of July 29, 1999, between the Registrant and Wells Fargo |
|
|
|
|
|
|
Bank Minnesota, National Association (formerly known as Norwest Bank Minnesota, National Association). (4) |
|
Incorporated by Reference |
|
|
10(a) |
|
Bemis Company, Inc. 2001 Stock Incentive Plan, Amended and |
|
|
|
|
|
|
Restated as of January 1, 2008.* |
|
Filed Electronically |
|
|
10(b) |
|
Bemis Company, Inc. 1994 Stock Incentive Plan, Amended and |
|
|
|
|
|
|
Restated as of August 4, 1999.* (5) |
|
Incorporated by Reference |
|
|
10(c) |
|
Bemis Company, Inc. Form of Management Contract with Principal Executive Officers.* (6) |
|
Incorporated by Reference |
|
|
10(d) |
|
Bemis Retirement Plan, Amended and Restated as of December 31, 2005.* (7) |
|
Incorporated by Reference |
|
|
10(e) |
|
Bemis Company, Inc. Supplemental Retirement Plan, Amended and Restated as of January 1, 2008.* |
|
Filed Electronically |
|
|
10(f) |
|
Bemis Company, Inc. Supplemental Retirement Plan for Senior Officers, Amended and Restated as of January 1, 2008.* |
|
Filed Electronically |
|
|
10(g) |
|
Bemis Company, Inc. Long Term Deferred Compensation Plan, Amended and Restated as of August 4, 1999.* (5) |
|
Incorporated by Reference |
|
|
10(h) |
|
Bemis Executive Officer Incentive Plan as of October 29, 1999.* (8) |
|
Incorporated by Reference |
|
|
10(i) |
|
Bemis Company, Inc. 1997 Executive Officer Performance Plan.* (9) |
|
Incorporated by Reference |
|
|
10(j) |
|
Credit Agreement dated as of August 14, 2008, among the Registrant, the various banks listed therein, and JPMorgan Chase Bank, NA, as Administrative Agent. (10) |
|
Incorporated by Reference |
|
|
10(k) |
|
Bemis Supplemental BIPSP, as Established Effective January 1, 2006.* |
|
Filed Electronically |
|
|
10(l) |
|
Bemis Investment Incentive Plan, Amended and Restated Effective as of January 1, 2006.* (7) |
|
Incorporated by Reference |
|
|
10(m) |
|
Bemis Company, Inc. 2007 Stock Incentive Plan, Amended and Restated as of January 1, 2008.* |
|
Filed Electronically |
|
|
10(n) |
|
Amended and Restated Long-Term Credit Agreement dated as of April 29, 2008, among the Registrant, |
|
|
|
|
|
|
the various banks listed therein, and JPMorgan Chase Bank, as Administrative Agent. (11) |
|
Incorporated by Reference |
|
|
10(o) |
|
Amended and Restated 364-Day Credit Agreement dated as of April 29, 2008, among the Registrant, |
|
|
|
|
|
|
the various banks listed therein, and JPMorgan Chase Bank, as Administrative Agent. (11) |
|
Incorporated by Reference |
|
|
10(p) |
|
Bemis Deferred Compensation Plan, as amended Effective January 1, 2009.* |
|
Filed Electronically |
|
|
14 |
|
Financial Code of Ethics. (3) |
|
Incorporated by Reference |
|
|
21 |
|
Subsidiaries of the Registrant. |
|
Filed Electronically |
|
|
23 |
|
Consent of PricewaterhouseCoopers LLP. |
|
Filed Electronically |
|
|
31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of CEO. |
|
Filed Electronically |
|
|
31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of CFO. |
|
Filed Electronically |
|
|
32 |
|
Section 1350 Certification of CEO and CFO. |
|
Filed Electronically |
|
* |
|
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 Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (File No. 1-5277). |
|
(2) |
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K dated June 30, 1995 (File No. 1-5277). |
|
(3) |
|
Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-5277). |
|
(4) |
|
Incorporated by reference to Exhibit 1 to the Registrant’s Registration Statement on Form 8-A filed on August 4, 1999 (File No. 1-5277). |
|
(5) |
|
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-5277). |
|
(6) |
|
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (File No. 1-5277). |
|
(7) |
|
Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-5277). |
|
(8) |
|
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (File No. 1-5277). |
|
(9) |
|
Incorporated by reference to Exhibit B to the Registrant’s Definitive Proxy Statement filed with the Securities and Exchange Commission on March 21, 2005 (File No. 1-5277). |
|
(10) |
|
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (File No. 1-5277). |
|
(11) |
|
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 1-5277). |
46
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands)
|
Year Ended
|
|
Balance at
|
|
Additions
|
|
Writeoffs |
|
Foreign
|
|
Other |
|
Balance
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
RESERVES FOR DOUBTFUL ACCOUNTS AND ALLOWANCES |
|
|
|
|
|
|
|
|||||||||||
|
2008 |
|
$ |
19,311 |
|
$ |
17,073 |
|
$ |
(15,317 |
)(1) |
$ |
(1,534 |
) |
(3,271 |
)(4) |
$ |
16,262 |
|
|
2007 |
|
$ |
20,287 |
|
$ |
7,385 |
|
$ |
(9,252 |
)(2) |
$ |
891 |
|
|
|
$ |
19,311 |
|
|
2006 |
|
$ |
19,120 |
|
$ |
12,599 |
|
$ |
(11,947 |
)(3) |
$ |
515 |
|
|
|
$ |
20,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RESERVES FOR INVENTORY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
2008 |
|
$ |
19,718 |
|
$ |
4,858 |
|
$ |
(4,681 |
) |
$ |
(979 |
) |
|
|
$ |
18,916 |
|
|
2007 |
|
$ |
19,203 |
|
$ |
4,907 |
|
$ |
(4,703 |
) |
$ |
311 |
|
|
|
$ |
19,718 |
|
|
2006 |
|
$ |
16,438 |
|
$ |
5,101 |
|
$ |
(2,659 |
) |
$ |
323 |
|
|
|
$ |
19,203 |
|
(1) Net of $220 collections on accounts previously written off.
(2) Net of $396 collections on accounts previously written off.
(3) Net of $245 collections on accounts previously written off.
(4) Customer rebates accrual reclassified to accounts payable.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANACIAL STATEMENT SCHEDULE
Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred to in our report dated February 27, 2009 appearing in Item 8 of this Form 10-K also included an audit of the financial statement schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 27, 2009
47
EXHIBIT 10(a)
10-10-2007
BEMIS COMPANY, INC.
2001 STOCK INCENTIVE PLAN
(As Amended and Restated Effective January 1, 2008)
1. Purpose of Plan .
Under this Stock Incentive Plan (the “Plan”), the Company may grant both Options and Equity Units to Employees and Directors. The Plan is designed to enable the Company and its Subsidiaries to attract, retain and motivate Participants by providing them the opportunity to acquire equity ownership in the Company.
2. Definitions .
The following defined terms are used in this Plan:
2.1 “ Board ” means the Board of Directors of the Company.
2.2 “ Broker Exercise Notice ” means a written notice pursuant to which a Participant, upon exercise of an Option, irrevocably instructs a broker or dealer to sell a sufficient number of shares or loan a sufficient amount of money to pay all or a portion of the exercise price of the Option and/or any related withholding tax obligations and remit such sums to the Company and directs the Company to deliver stock certificates to be issued upon such exercise directly to such broker or dealer.
2.3 “ Change of Control Event ” means an event described in Section 10.1 (including a Code §409A Event as defined in Section 10.2).
2.4 “ Code ” means the Internal Revenue Code of 1986, as amended.
2.5 “ Committee ” means the compensation committee appointed under Section 3 to administer the Plan.
2.6 “ Common Stock ” means the common stock of the Company, par value $.10 per share, or the number and kind of shares of stock or other securities into which such Common Stock may be changed in accordance with Section 4.3.
2.7 “ Company ” means Bemis Company, Inc., a Missouri corporation.
2.8 “ Control Group ” means the Company and any trade or business under common control with the Company within the meaning of Code §414(b) and (c).
2.9 “ Director ” means a member of the Board.
2.10 A Participant has a “ Disability ” if, by reason of any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of at least 12 months:
(a) The Participant is unable to engage in any substantial gainful activity, or
(b) The Participant has received income replacement benefits for a period of at least three months under a Participating Employer’s accident and health plan.
2.11 “ Early Retirement ” of an Employee means early retirement under the Bemis Retirement Plan as in effect from time to time.
2.12 “ Employee ” means each employee of the Company or any Subsidiary.
2.13 “ Equity Unit ” means a right granted to an Employee or Director to receive a payment from the Company in the form of a share of Common Stock, subject to terms established under Section 7.
2.14 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
2.15 “ Expiration Date ” means the date an Option is scheduled to expire and no longer be exercisable.
2.16 “ Fair Market Value ” of a share of Common Stock as of a particular day means the closing price of a share of the Company’s Common Stock on the New York Stock Exchange on such day, or if no sale has been made on such exchange on such day, on the last preceding day on which any such sale was made.
2.17 “ Incentive Stock Option ” means a right to purchase Common Stock granted to an Employee pursuant to Section 6.1 that qualifies as an “incentive stock option” within the meaning of Code § 422.
2.18 “ Non-Qualified Stock Option ” means a right to purchase Common Stock granted to an Employee or Director pursuant to Section 6.1 or 6.2 that does not qualify as an Incentive Stock Option.
2.19 “ Normal Retirement ” of an Employee means normal retirement under the Bemis Retirement Plan as in effect from time to time.
2.20 “ Officer ” means an Employee who has been designated by the Board to serve as an executive officer of the Company.
2.21 “ Option ” means an Incentive Stock Option or a Non-Qualified Stock Option.
2.22 “ Participant ” means an Employee or Director who has been designated as such.
2.23 “ Payment Date ” is defined in Section 8.5.
2.24 “ Performance Period ” means the period of time over which Equity Units are earned or become vested.
2.25 “ Previously Acquired Shares ” means shares of Common Stock that are already owned by a Participant.
2
2.26 “ Securities Act ” means the Securities Act of 1933, as amended.
2.27 “ Separation from Service ” is defined in applicable guidance under Code §409A, which generally provides that:
(1) a Participant will be deemed to have a Separation from Service only if the Participant ceases to perform any services for the Company and other members of the Control Group, or the Participant continues to provide only “insignificant” services;
(2) service is “insignificant” if it is performed at a rate that is no more than 20% of the average level of services provided by the Participant for the preceding three full calendar years;
(3) a bona fide leave of absence will not be considered a Separation from Service for the first six months of such leave or until the Participant no longer has a right to reemployment by statute or contract, whichever is longer;
(4) transfer to an employer in which the Company or another member of the Control Group has at least 50% ownership interest is not a Separation from Service; and
(5) for purposes of determining benefits earned by a Participant for service as a Director, Separation from Service occurs when he or she ceases to be a Director.
2.28 “ Subsidiary ” means any entity that is directly or indirectly controlled by the Company or any entity in which the Company has a significant equity interest.
2.29 “ Year ” means the 12-month period ending each December 31.
3. Plan Administration .
The Plan shall be administered by the Board or by a Committee appointed by the Board. Any such Committee shall consist solely of not less than two members of the Board who are considered (i) non-employee directors within the meaning of Exchange Act Rule 16b-3 and (ii) outside directors within the meaning of Code § 162(m). The Board or any such Committee shall have the following authority, subject to the terms of the Plan:
(a) To determine which Employees and Directors will be designated as Participants.
(b) To determine the terms of each Option including the number of shares of Common Stock subject to the Option, the exercise price, the terms under which the Option will vest or become exercisable, the Expiration Date of the Option, and the period of time (if any) following Separation from Service that the option may be exercised.
(c) To determine whether the Option will be granted as an Incentive Stock Option or as a Non-Qualified Stock Option, recognizing that Incentive Stock Options can be granted only to Employees and not to non-employee Directors.
3
(d) To determine the terms of each award of Equity Units, including any performance goals or other requirements that must be met for the underlying shares of Common Stock to be distributed.
(e) To modify the terms of any outstanding Option or Equity Unit in any manner permitted by the Plan as then in effect, or to cancel the Option or Equity Unit, subject to the following:
(1) Subject to Section 4.3, outstanding Options granted under this Plan shall not be repriced.
(2) If the modification or cancellation adversely affects a Participant, it will not apply to that Participant without his or her consent, unless required by law or necessary to avoid adverse tax treatment.
(f) To delegate to one or more Employees all or any part of its authority under the Plan with regard to granting and administering Options or Equity Units for persons who are not then subject to the reporting requirements of Section 16 of the Exchange Act. (However, Options or Equity Units so granted generally will not qualify as “performance based compensation” for purposes of Code § 162(m).)
(g) To exercise discretionary authority to construe the terms of the Plan and to make all decisions and interpretations necessary to operate the Plan.
4. Shares Available for Issuance .
4.1 Maximum Number of Shares Available . Subject to adjustment as provided in Section 4.3, the maximum number of shares of Common Stock that will be available for issuance under the Plan will be 2,500,000 shares of Common Stock in addition to any shares of Common Stock which, as of the date the Plan is approved by the shareholders of the Company, are reserved for issuance under the Company’s 1994 Stock Incentive Plan and which are not thereafter issued.
4.2 Accounting for Incentive Awards . Shares of Common Stock that are issued under the Plan or are subject to outstanding Options or Equity Units will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan. Any shares of Common Stock that are subject to an Option or Equity Unit that lapses, expires, is forfeited or for any reason is terminated unexercised or unvested will automatically again become available for issuance under the Plan. However, shares withheld for the purpose of paying applicable withholding taxes will not again become available for issuance under the Plan.
4.3 Adjustments . In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) will make appropriate adjustment (which determination will be conclusive) as to the number and kind of
4
securities available for issuance under the Plan and, in order to prevent dilution or enlargement of the rights of the Participants, the number, kind and, where applicable, exercise price of securities subject to outstanding Option or Equity Units.
5. Participation .
The Board or Committee may designate any Employee or Director as a Participant.
6. Options .
6.1 Grants to Employees . The Board or Committee may grant Options to Employees, subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Board or Committee in its sole discretion. The Board or Committee may designate whether an Option is to be considered an Incentive Stock Option or a Non-Qualified Stock Option. The aggregate number of shares on which Options may be granted to any one Employee during any calendar year may not exceed 25% of the total shares of Common Stock available for issuance under the Plan. If an Option granted to an Employee is canceled, said Option will nevertheless be included in applying said 25% limit.
6.2 Grants to Non-Employee Directors . The Board may grant Non-Qualified Stock Options to Directors who are not Employees, subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Board in its sole discretion.
6.3 Exercise Price . The per share price to be paid upon exercise of an Option will be determined by the Board or Committee at the time of the Option grant. The per share price to be paid by a Participant upon exercise of an Option will not be less than 100% of the Fair Market Value of one share of Common Stock on the date of grant.
6.4 Exercisability and Duration . An Option will become exercisable at such times and in such installments as may be determined by the Board or Committee at the time of grant. Unless otherwise determined by the Board or Committee at the time of grant, the Expiration Date of each Option will be 10 years from its date of grant.
6.5 Payment of Exercise Price . The total purchase price of the shares to be purchased upon exercise of an Option will be paid entirely in cash (including check, bank draft or money order); provided, however, that the Board or Committee may allow such payments to be made, in whole or in part, by tender of a Broker Exercise Notice, Previously Acquired Shares, Attestation, or by a combination of such methods. “Attestation” means delivery by a Participant to the Company of a written affidavit of ownership of Previously Acquired Shares having a Fair Market Value equal to the exercise price of the Option in lieu of actual delivery of such Previously Acquired Shares. Upon receipt of such Attestation of Previously Acquired Shares, the Company shall deliver to the Participant a stock certificate for the number of Option shares so exercised, minus the number of Previously Acquired Shares attested to in the written affidavit, and minus any shares required to cover tax withholding obligations.
6.6 Manner of Exercise . An Option may be exercised by a Participant in whole or in part from time to time, subject to the conditions contained in the Plan and in the agreement evidencing
5
such Option, by delivery in person, by facsimile or electronic transmission or through the mail of written notice of exercise to the Company (Attention: Secretary) at its principal executive office in Neenah, Wisconsin and by paying in full the total exercise price for the shares of Common Stock to be purchased in accordance with Section 6.5 of the Plan. The Board or Committee may permit a Participant to enter into a written plan pursuant to Exchange Act Rule 10b5-1 specifying the date or dates the Participant’s Options will automatically be exercised.
7. Equity Units .
7.1 Grants . An Employee or Director may be granted one or more Equity Units under the Plan, and such Equity Units will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Board or Committee. The Board or Committee may impose such restrictions or conditions, not inconsistent with the provisions of the Plan, to the vesting of such Equity Units as it deems appropriate, including, without limitation, that the Participant remain in the continuous employ of the Company or any Subsidiary until the end of the Performance Period established for said Equity Units or that the Participant or the Company (or any Subsidiary or division thereof) satisfy certain performance goals or criteria during the Performance Period.
7.2 Payments . Upon satisfaction of any applicable restrictions or conditions for payment, each Equity Unit will be payable in the form of a share of Common Stock (less any applicable tax withholding). Payment with respect to an Equity Unit will occur as soon as administratively feasible in the Year after the Year in which the Performance Period for the Equity Unit ends. Each Equity Unit may (but is not required to) include the right to receive periodic payments from the Company equivalent to the dividends paid on the underlying Common Stock. Any such dividend equivalents will be paid as of the dates the dividends are paid.
7.3 Holding Requirement Applicable to Grants Made to Officers After November 30, 2002 . Equity Units granted to Officers after November 30, 2002 are subject to the holding requirement of this section. Upon payment of such grants, half of the net shares issued after any required tax withholding must be held and may not be transferred by the officer for at least three years after the date any applicable restrictions or conditions for payment were satisfied. The other half of the shares may be sold or transferred immediately. The Company may adopt appropriate procedures to assure compliance with the holding requirement, such as placing a legend on the share certificates or retaining possession of the certificates until the three year holding period expires. If an Officer has a Separation from Service, the holding requirement will no longer apply and the individual will be free to sell or transfer the shares. The holding requirement does not apply to grants made to individuals who are not Officers, nor to grants made to Officers prior to December 1, 2002.
6
8. Effect of Separation from Service .
8.1 Death or Disability . If a Participant’s Separation from Service occurs by reason of his or her death or Disability, then the provisions of (a) and (b) shall apply:
(a) Options outstanding at the time of said Separation from Service will not expire as a result of said Separation from Service but rather will remain in effect for the remaining term of the Option. However, the Committee in its sole discretion may provide at the time it grants an Option to a Participant that the Option will expire not later than a fixed period of time after the Participant’s Separation from Service.
(b) All Equity Units then held by the Participant will vest. The Company will transfer to the Participant (or to the beneficiary, legal representative, heir, or legatee of a deceased Participant) a number of shares of Common Stock equal to the number of the Participant’s outstanding Equity Units, reduced as provided in Section 9 to cover any applicable withholding taxes. Said transfer shall occur as of a date or dates determined by the Committee which shall not be later than December 31 of the Year in which the Participant died or was determined to have a Disability. However, as permitted by Code §409A, in cases where a Participant’s death or Disability occurred in October, November, or December, payment shall be considered timely if made by the fifteenth day of the third month after the month in which the Participant died or was determined to have a Disability.
8.2 Separation from Service After Attaining Applicable Age . If a Participant’s Separation from Service occurs after he or she has attained the applicable age specified in (a) and for a reason other than the Participant’s death or Disability, then the provisions of (a) through (e) shall apply:
(a) The “applicable age” for purposes of this section is:
(1) For any Participant who is an Officer, the applicable age is 60 with respect to Options and 55 with respect to Equity Units.
(2) For any Participant who is an Employee but not an Officer, the applicable age is 65.
(b) Options outstanding at the time of said Separation from Service will not expire as a result of said Separation from Service but rather will vest and remain in effect for the remaining term of the Option. However, the Committee in its sole discretion may provide at the time it grants an Option to a Participant that the Option will expire not later than a fixed period of time after the Participant’s Separation from Service.
(c) A fraction of each outstanding grant of Equity Units will be vested. The fraction of a grant that will be vested is the number of Equity Units in that grant, multiplied by a fraction (i) the numerator of which is the number of months from the beginning of the Performance Period for that grant through the month in which the Participant’s Separation from Service occurred and (ii) the denominator of which is the total number of months in said Performance Period. Except as otherwise provided by the Committee, any Equity Units which are not vested will be forfeited.
7
(d) However, if a Participant meets all three of the following requirements, all Equity Units will be vested and none will be forfeited:
(1) The Participant is 60 or older on the date of his or her Separation from Service;
(2) The Participant was born on or before January 1, 1954; and
(3) The Participant was elected as an Officer prior to January 1, 2007.
(e) The Company will transfer to the Participant a number of shares of Common Stock equal to the number of the Participant’s vested Equity Units (determined as provided in (c) or (d), whichever is applicable, less any shares withheld to cover taxes. Said transfer shall occur as of a date or dates determined by the Committee which shall not be earlier than the Participant’s Payment Date and shall not be later than December 31 of the Year in which the Participant’s Payment Date occurred. However, as permitted by Code §409A, if a Participant’s Payment Date occurs during October, November, or December, payment shall be considered timely if made by the fifteenth day of the third month after the month in which the Participant’s Payment Date occurred.
8.3 Other Separation from Service . If a Participant’s Separation from Service occurs under circumstances not covered by sections 8.1 and 8.2 (i.e. not due to death or Disability and before the applicable age specified in section 8.2(a)), then the provisions of (a) through (c) shall apply:
(a) If the Separation from Service is not for “cause”, (i) Options held by the Participant which are exercisable as of the date of Separation from Service will remain exercisable for a period of three months after such separation (but in no event after the expiration date of any such options), and (ii) Options which are not yet exercisable as of the date of the Separation from Service will be forfeited immediately. If the Separation from Service is for “cause”, all options will be forfeited immediately upon Separation from Service, regardless of whether they were then exercisable.
(b) All Equity Units then outstanding will be forfeited, and no payment will be made with respect thereto. However, if the Separation from Service is not for “cause”, the Committee may, in its sole discretion, provide for vesting and payment with respect to all or a portion of the outstanding Equity Units. Any such payment shall occur as of a date determined by the Committee which shall not be earlier than the Participant’s Payment Date and shall not be later than December 31 of the Year in which the Participant’s Payment Date occurred. However, as permitted by Code §409A, if a Participant’s Payment Date occurs during October, November, or December, payment shall be considered timely if made by the fifteenth day of the third month after the month in which the Payment Date occurred.
8
When such a payment occurs, the Participant will receive one share of Common Stock for each vested Equity Unit, less any applicable withholding taxes. The Committee’s decision with respect to such payment will be not be binding or precedential with regard to subsequent Separations from Service by other Participants. The Committee may delegate its authority under this paragraph to the Company’s chief executive officer. If the Separation from Service is for “cause”, then any outstanding Equity Units will be forfeited immediately and are not subject to discretionary payout.
(c) For purposes of this section, the existence of “cause” will be determined by the Committee by reference to any employment or other agreement or policy applicable to the Participant. In addition, the Committee may determine any of the following to constitute “cause”: (i) dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each case related to the Company or any Subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a duty or duties that, individually or in the aggregate, are material in relation to the Participant’s overall duties, or (iv) any material breach of any employment, service, confidentiality or noncompete agreement entered into with the Company or any Subsidiary.
8.4 Breach of Confidentiality or Noncompete Agreements . Notwithstanding anything in the Plan to the contrary, in the event that a Participant materially breaches the terms of any confidentiality or noncompete agreement entered into with the Company or any Subsidiary, whether such breach occurs before or after such Participant’s Separation from Service, the Committee in its sole discretion may immediately terminate all rights of the Participant under the Plan and any agreements evidencing an Option or Equity Unit grant then held by the Participant without notice of any kind.
8.5 Payment Date . A Participant’s “Payment Date” is the first day of the seventh month after the month in which the Participant’s Separation from Service occurred. For example, if a Participant’s Separation from Service occurs on May 15, 2007 her Payment Date is December 1, 2007, and payment must occur on or after December 1, 2007 and on or before March 15, 2008. If another Participant’s Separation from Service occurs January 31, 2008, his Payment Date is August 1, 2008 and payment must occur on or after August 1, 2008 and on or before December 31, 2008.
8.6 Non-Employee Directors . Sections 8.1 through 8.5 are not applicable to Options or Equity Units granted to Directors who are not Employees. If such an individual has a Separation from Service (i.e. ceases to be a Director):
(a) He or she may exercise any outstanding Options within 12 months after ceasing to be a Director (or within such other period as approved by the Board or Committee at the time the Options were granted).
(b) All Equity Units then held by the Participant will vest. The Company will transfer to the Participant a number of shares of Common Stock equal to the number of the Participant’s outstanding Equity Units. Said transfer shall occur as of a date or dates
9
determined by the Company which shall not be later than December 31 of the Year in which the Participant ceased to be a Director. However, as permitted by Code §409A, if a Participant’s Separation from Service occurs during October, November, or December, payment shall be considered timely if made by the fifteenth day of the third month after the month in which the Participant ceased to be a Director.
8.7 Options Not Exercisable After Expiration Date . Notwithstanding any provisions of this Section 8 to the contrary, no Option will be exercisable after its Expiration Date.
8.8 Provisions Applicable If a Participant’s Employer Ceases to be a Subsidiary . For purposes of sections 8.2 and 8.3, if a Participant’s employer ceases to be a Subsidiary of the Company due to a sale of stock which qualifies as a change of control for purposes of Code §409A, and the Participant remains an employee of that employer, the Participant will be considered to have a separation from service as of the date the employer ceases to be a Subsidiary. The preceding sentence does not apply if, at the time the employer ceases to be a Subsidiary, the Participant transfers to employment with the Company or another Subsidiary.
9. Payment of Withholding Taxes .
9.1 General Rules . The Company is entitled to (b) withhold and deduct from future wages of the Participant (or from other amounts that may be due and owing to the Participant from the Company or a Subsidiary), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all federal, state and local withholding and employment-related tax requirements attributable to an Option or Equity Unit, including, without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an Equity Unit or a disqualifying disposition of stock received upon exercise of an Incentive Stock Option, or (c) require the Participant promptly to remit the amount of such withholding to the Company before taking any action, including issuing any shares of Common Stock, with respect to the Option or Equity Unit.
9.2 Special Rules . The Committee may, in its sole discretion and upon terms and conditions established by the Committee, permit or require a Participant to satisfy, in whole or in part, any withholding or employment-related tax obligation described in Section 9.1 of the Plan by electing to tender Previously Acquired Shares (including but not limited to the Shares the acquisition of which triggered the tax obligation), by withholding shares of Common Stock payable to the Participant under this Plan, or by payments made pursuant to a Broker Exercise Notice, or by a combination of such methods.
10. Change of Control Event .
10.1 Change of Control Event . A “Change of Control Event” shall be deemed to have occurred if any of the following occurs:
(a) Any “Person” (as defined in Section 13(d) of the Exchange Act) acquires or becomes a beneficial owner (as defined in Exchange Act Rule 13d-3), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors (Voting Securities) or 30% or more of the outstanding shares of Common
10
Stock; provided, however, that the following shall not constitute a “Change of Control Event”:
(1) any acquisition or beneficial ownership by the Company or a Subsidiary;
(2) any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by the Company or a Subsidiary;
(3) any transaction immediately following which more than 70% respectively, of (i) the combined voting power of the Company’s Voting Securities and (ii) the Common Stock is then beneficially owned, directly or indirectly, by all or substantially all of the persons who beneficially owned Voting Securities and Common Stock immediately prior to such transaction in substantially the same proportions as their ownership immediately prior to such acquisition;
(b) Continuing Directors do not constitute a majority of the members of the Board;
(c) Consummation of a reorganization, merger or consolidation of the Company (other than a merger or consolidation with a subsidiary of the Company), unless immediately following such reorganization, merger or consolidation, all or substantially all of the persons who were the beneficial owners, respectively, of Voting Securities and Common Stock immediately prior to such reorganization, merger or consolidation beneficially own, directly or indirectly, more than 70% respectively of (i) the combined voting power of the then outstanding Voting Securities and (ii) the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation in substantially the same proportions as their ownership of the Voting Securities and Common Stock as the case may be, immediately prior to such reorganization, merger or consolidation;
(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company (in one or a series of transactions), other than to a corporation with respect to which, immediately following such sale or other disposition, more than 70%, respectively, of (i) the combined voting power of the then outstanding Voting Securities and (ii) the then outstanding shares of Common Stock of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the persons who were the beneficial owners respectively of the Voting Securities and Common Stock immediately prior to such sale or other disposition in substantially the same proportions as their ownership of the Voting Securities and Common Stock, as the case may be, immediately prior to such sale or other disposition;
(e) The Company enters into a letter of intent, an agreement in principle or a definitive agreement relating to a “Change in Control Event” described in (a), (b), (c) or (d) that ultimately results in such a “Change of Control Event”, or a tender or exchange offer or proxy contest is commenced which ultimately results in such a “Change in Control Event”.
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Notwithstanding anything stated above, a “Change of Control Event” shall not be deemed to occur with respect to a Participant if the acquisition or beneficial ownership of the 30% or greater interest referred to in (a) is by the Participant or by a group, acting in concert, that includes the Participant or a majority of the then combined voting power of the then outstanding Voting Securities (or voting equity interests) of the surviving corporation or of any corporation (or other entity) acquiring all or substantially all of the assets of the Company shall, immediately after a reorganization, merger, consolidation or disposition of assets referred to in (c) or (d), be beneficially owned, directly or indirectly, by the Participant or by a group, acting in concert, that includes the Participant
10.2 Code §409A Event . A “Code §409A Event” is a Change of Control Event (as defined in section 10.1) that qualifies as a change in control event for purposes of Code §409A and any applicable regulations.
10.3 Continuing Directors . Continuing Directors means:
(a) individuals who, on January 1, 2001, are Directors;
(b) individuals elected as Directors after January 1, 2001 for whose election proxies are solicited by the Board; or
(c) individuals elected or appointed by the Board to fill vacancies on the Board caused by death or resignation (but not by removal) or to fill newly-created directorships, provided that a Continuing Director shall not include an individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the threatened election or removal of directors (or other actual or threatened solicitation of proxies or consents) by or on behalf of any person other than the Board.
10.4 Acceleration of Vesting . If a Change of Control Event occurs, (a) all Options will become immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the Participants to whom such Options have been granted remain in the employ or service of the Company or any Subsidiary; and (b) all Equity Units then held by Participants will vest and be payable as follows:
(a) If the Change of Control Event qualifies as a Code §409A Event, all Equity Units then held by Participants will vest and be payable immediately.
(b) If the Change of Control Event does not qualify as a Code §409A Event:
(1) All Equity Units which would not have been vested immediately before the Change of Control Event if the Participant then had a Separation from Service will vest and be paid as soon as administratively feasible during the year in which the Change of Control Event occurred.
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(2) All Equity Units which would have been vested immediately before the Change of Control Event if the Participant then had a Separation from Service will vest and will be paid as of whichever of the following dates is earlier:
(A) As soon as administratively feasible in the Year after the Year in which the Performance Period for the Equity Unit ends.
(B) During the seventh month after the month in which the Participant’s Separation from Service occurs.
10.5 Cash Payment . If a Code §409A Event occurs, then the Board or Committee may, without the consent of any Participant affected thereby, terminate the Plan and all substantially similar plans. Upon such termination, all Participants will receive the following amounts as payment for their outstanding Options or Equity Units:
(a) With respect to the shares of Common Stock subject to Options, as of the effective date of any such Change of Control Event, cash in an amount equal to the excess of the Fair Market Value of such shares immediately prior to the effective date of such Change of Control Event over the exercise price per share of such Option.
(b) With respect to the Equity Units, cash in an amount equal to the Fair Market Value (determined immediately prior to the effective date of the Change of Control Event), of the shares of Common Stock represented by such Equity Units.
10.6 Gross-Up for Change of Control Payments . If, with respect to a Participant, the acceleration of the vesting of an Option or Equity Unit as provided in Section 10.4 (which acceleration could be deemed a “Payment” within the meaning of Code § 280G(b)(2)) or the payment of cash in exchange for all or part of an Option or Equity Unit as provided in Section 10.5, together with any other payments which such Participant has the right to receive from the Company or any corporation that is a member of an “affiliated group” (as defined in Code § 1504(a) without regard to Code § 1504(b)) of which the Company is a member, would constitute an “excess parachute payment” (as defined in Code § 280G(b)(1)), and therefore be subject to the excise tax imposed under Code § 4999, then the Participant shall be entitled to receive an additional cash payment from the Company in an amount such that the Participant would be in the same financial position as if there were no excise tax imposed on such payments. That is, if any amount paid pursuant to this Plan is subject to the excise tax imposed by Code § 4999, the Company shall pay the Participant an additional amount such that, after payment by the Participant of all income taxes and excise taxes imposed upon such additional payment, the Participant will retain a portion of the additional payment equal to the excise tax. For this purpose, the Company shall assume that the Participant’s income is taxed at the highest federal and state marginal rate then in effect.
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11. Rights of Eligible Recipients and Participants; Transferability .
11.1 Employment . Nothing in the Plan will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment of any Employee or Participant at any time, nor confer upon any Employee or Participant any right to continue in the employ of the Company or any Subsidiary.
11.2 Rights as a Shareholder . As a holder of Options or Equity Units, a Participant will have no rights as a shareholder unless and until the Options are exercised or the Equity Units are paid in the form of Common Stock. However, as part of any grant of Equity Units, the Board or Committee may provide that a Participant will be entitled to receive cash distributions equivalent to the dividends paid from time to time on the Common Stock underlying such Units.
11.3 Restrictions on Transfer . Any Option or Equity Unit granted under this Plan shall by its terms be non-transferable by the grantee other than by will or the laws of descent and distribution and shall be exercisable during the grantee’s lifetime only by the grantee or by the grantee’s guardian or legal representative, except that a Non-Qualified Stock Option may, if the Option Agreement so provides, also be transferable to members of the grantee’s immediate family, to a partnership whose members are only the optionee and/or members of the grantee’s immediate family, or to a trust for the benefit of only the grantee and/or members of the grantee’s immediate family. “Immediate Family” for purposes of this section includes only the grantee’s spouse, parents, children, and other direct descendants of the grantee and his or her spouse (including children and other descendants by adoption).
11.4 Non-Exclusivity of the Plan . Nothing contained in the Plan is intended to modify or rescind any previously approved compensation plans or programs of the Company or create any limitations on the power or authority of the Board to adopt such additional or other compensation arrangements as the Board may deem necessary or desirable.
12. Securities Law and Other Restrictions .
Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan, the Company will not be required to issue any shares of Common Stock under this Plan, and a Participant may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued pursuant to the Plan, unless (a) there is in effect with respect to such shares a registration statement under the Securities Act and any applicable state securities laws or an exemption from such registration under the Securities Act and applicable state securities laws, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions.
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13. Plan Amendment, Modification and Termination
The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time to time in such respects as the Board may deem advisable. However, no amendments to the Plan will be effective without approval of the stockholders of the Company if stockholder approval of the amendment is then required pursuant to Code § 422 or the rules of the New York Stock Exchange. No termination, suspension or amendment of the Plan may adversely affect any outstanding award without the consent of the affected Participant; provided, however, that this sentence will not impair the right of the Committee to take whatever action it deems appropriate under Sections 4.3 and 10.4.
14. Effective Date and Duration of the Plan
The Plan is effective as of January 1, 2001. However, no Options will be granted prior to the date the Plan is approved by the Company’s shareholders, and any Equity Units granted prior to the Company’s 2001 annual meeting will be cancelled if the shareholders fail to approve the Plan at that meeting. The Plan will terminate at midnight on December 31, 2010, and may be terminated prior to such time to by Board action, and no Options or Equity Units will be granted after such termination. Awards outstanding upon termination of the Plan may continue to be exercised, or become free of restrictions, in accordance with their terms.
15. Miscellaneous
15.1 Governing Law . The Plan will be construed in accordance with the laws of Missouri.
15.2 Successors and Assigns . The Plan will be binding upon and inure to the benefit of the successors and permitted assigns of the Company and the Participants.
15.3 Code §409A . The Plan is intended to satisfy all applicable requirements of Code §409A and will be construed in light of that intent. The Committee may modify the Plan and Options or Equity Units granted pursuant to the Plan to the extent the Committee deems necessary to comply with Code §409A, even if such modifications adversely affect outstanding Options and Equity Units, provided the Committee determines that such modifications are necessary to avoid adverse tax consequences.
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APPROVED IN BEHALF OF THE COMPANY |
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By: |
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E. H. Seashore, Vice President |
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Date Signed: , 2008 |
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EXHIBIT 10(e)
12-16-2008
(As Amended And Restated Effective January 1, 2008)
Section 1. Purpose of Plan . The Bemis Supplemental Retirement Plan (the “Plan”) has been established for the following purposes:
(a) To provide the additional benefits which would have been provided under the regular benefit formula in Sec. 4.5(a) and (b) of the Bemis Retirement Plan (the “Retirement Plan”) but for the limitations imposed by Code § 415 and/or Retirement Plan Sec. 8.12 or any successor to either of said sections. By providing such benefits, the Plan is an “excess benefit plan” under § 3 (36) of ERISA.
(b) To provide benefits which would have been payable under the Retirement Plan but for the annual limit on covered compensation imposed by Code §401 (a) (17). Said limit is $245,000 for 2009 and is subject to a cost of living adjustment for future years. By providing such benefits, the Plan provides deferred compensation for a select group of management or highly compensated employees and therefore is exempt from most requirements of ERISA.
The Plan is intended to comply with the requirements of Code §409A.
Section 2. Transition Rules . The Plan as set forth herein applies to Participants whose benefits commence after December 31, 2008.
Benefits which commenced during 2005 — 2008 are being paid pursuant to transition rules applicable under Code §409A.
Benefits commencing prior to 2005 were paid under the Plan as previously in effect.
Section 3. Definitions . Unless otherwise specified herein, capitalized terms used herein shall have the meanings specified in the Retirement Plan as amended from time to time. Terms defined in this Plan include:
(a) The “Actuarial Equivalent” factors used in the Plan are as follows:
(1) The interest rate used will be the annual interest rate on 30-year Treasury securities as specified by the Commissioner of Internal Revenue for October immediately preceding whichever of the following Plan Years is applicable:
(A) For calculation of monthly amounts payable under alternative forms of annuity, the Plan Year which contains the commencement date specified in Section 5(b).
(B) For purposes of determining elective lump sum payments to Participants under Section 6 (a) or 120-month installment payments under Section 6(b), the Plan Year which contains the commencement date specified in Section 5(b).
(C) For purposes of determining elective lump sum death benefits payable under Section 6(d), the Plan Year which contains the first day of the month after the month in which the Participant’s death occurs.
(D) For purposes of determining and paying mandatory lump sum cash-outs to participants under Section 8(a), the Plan Year which contains the seventh month after the month in which the Participant’s Separation from Service occurs.
(E) For purposes of determining and paying mandatory lump sum cash- outs of death benefits with respect to deceased participants under Section 8(b), the Plan Year in which the Participant’s death occurs.
(F) For purposes of applying Section 8(d) (mandatory cashouts of certain benefits where Separation from Service or death occurred prior to 2008), the 2008 Plan Year (i.e. use October 2007 rate).
(2) The mortality table used for all such calculations is the “applicable mortality table” referred to in Income Tax Reg. 1.417(e)-1(d)(2), or any successor to said regulation.
(b) “Beneficiary” means the person or persons a Participant designates as such on his or her Beneficiary designation form. The Company may prescribe a combined Beneficiary designation form for use under this Plan and other plans providing non-qualified deferred compensation. The Participant may alter or revoke such designation without the consent of the Beneficiary. If there is not on file with the Company an effective designation of Beneficiary by a deceased Participant, the Beneficiary shall be the person or persons surviving the Participant in the first of the following classes in which there is a survivor, share and share alike:
(1) The Participant’s spouse.
(2) The Participant’s children, except that if any of the Participant’s children predecease the Participant but leave issue surviving the Participant, such issue shall take by right of representation the share their parent would have taken if living.
(3) The Participant’s personal representative (executor or administrator).
Determination of the identity of the Beneficiary in each case shall be made by the Company. If a Beneficiary survives the Participant, but dies before payment of all amounts to which the Beneficiary is entitled, any remaining payments will be made to the Beneficiary’s estate.
(c) “Board” means the board of directors of the Company.
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(d) “Change in Control” means any event which qualifies as a change in the ownership or effective control or a change in the ownership of a substantial portion of the assets of the Company or another member of the Control Group pursuant to Code §409A and any applicable regulations interpreting said section.
(e) “Code” means the Internal Revenue Code of 1986, as from time to time amended.
(f) “Committee” means the Bemis Employee Benefits Committee.
(g) “Company” means Bemis Company, Inc., a Missouri corporation.
(h) “ERISA” means the Employee Retirement Income Security Act of 1974, as from time to time amended.
(i) “Participant” means an individual who qualifies as such pursuant to Section 4.
(j) “Participating Employer” means each corporation which is a Participating Employer under the Retirement Plan.
(k) “Plan” means the Bemis Supplemental Retirement Plan as amended from time to time.
(l) “Plan Year” means the 12 month period ending each December 31.
(m) “Retirement Plan” means the Bemis Retirement Plan as amended from time to time.
(n) “Senior SERP” means the Bemis Supplemental Retirement Plan for Senior Officers as amended from time to time.
(o) “Separation from Service” is defined in Code §409A(a)(2)(A)(i) and applicable guidance thereunder, which generally provides that:
(1) a Participant will be deemed to have a Separation from Service only if the Participant ceases to perform any services for the Company and other members of the Control Group, or the Participant continues to provide only “insignificant” services;
(2) service is “insignificant” if it is performed at a rate that is no more than 20% of the average level of services provided by the Participant for the preceding three full calendar years;
(3) a bona fide leave of absence will not be considered a Separation of Service for the first six months of such leave or until the Participant no longer has a right to reemployment by statute or contract, whichever is longer; and
(4) transfer to an employer in which the Company or another member of the Control Group has at least 50% ownership interest is not a Separation from Service.
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(p) “Supplemental BIPSP” means the Bemis Supplemental BIPSP as amended from time to time.
(q) “Supplemental Pension”, “Target Benefit”, and “Actual Benefit” are defined in Section 5.
Section 4. Eligibility to Receive a Benefit . If a person’s Separation from Service occurs under circumstances that a benefit is payable under the Retirement Plan to such individual to his or her surviving spouse, contingent annuitant, or Beneficiary, a benefit shall also be payable under this Plan if the benefit under the Retirement Plan is limited for one or more of the reasons listed in Section 1. Each employee or former employee eligible to receive a benefit under the Plan is a “Participant” in this Plan.
Section 5. Amount Payable . The benefit payable with respect to a Participant shall be determined and paid as follows:
(a) The “Supplemental Pension” payable to a Participant under this Plan is a monthly amount equal to the amount, if any, by which the “Target Benefit” in (1) exceeds the “Actual Benefit” in (2):
(1) The “Target Benefit” is the monthly amount which would have been payable to the Participant or to his or her surviving spouse, contingent annuitant, or beneficiary under the Retirement Plan for that month if the limits referred to in Section 1 were not applicable. The Target Benefit shall be calculated as follows:
(A) If the Participant is a Group A Participant under the Retirement Plan, the Target Benefit is the Accrued Monthly Pension he or she would have had under Sec. 4.5(a) of the Retirement Plan if the limits referred to in Section 1 of this Plan were not applicable, adjusted as provided in (D) and (E).
(B) If the Participant is a Group B Participant under the Retirement Plan, the Target Benefit is the Accrued Monthly Pension he or she would have had under Sec. 4.5(b) of the Retirement Plan if the limits referred to in Section 1 of this Plan were not applicable, adjusted as provided in (D) and (E).
(C) For purposes of determining the Target Benefit, the special benefit formula in Sec. 4.5(d) of the Retirement Plan shall be disregarded.
(D) If the commencement date specified in (b) of this section is prior to the Participant’s Normal Retirement Date, the Target Benefit will be reduced by the factor which would apply under Sec. 6.2, 6.3, 6.4 or 6.11(b) of the Retirement Plan, whichever is applicable, if the Participant’s Retirement Plan benefit began on the same date.
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(E) If the Participant’s benefit under this Plan is paid in a form other than life only, the monthly amount of the Target Benefit shall be adjusted so that it is the Actuarial Equivalent of a life only pension, using the factors specified in Section 3(a) of this Plan. The Target Benefit for months after the Participant’s death will be determined in accordance with the applicable form of payment.
(2) The “Actual Benefit” is the monthly amount actually payable to the Participant under the Retirement Plan, calculated as follows:
(A) The Actual Benefit will be the Accrued Monthly Pension calculated under Retirement Plan Sec. 4.5(a) (if the Participant is a Group A Participant) or Sec. 4.5(b) (if the Participant is a Group B Participant) but in either case will not be less than the amount payable under Sec. 4.5(d) if applicable. Said amount shall be adjusted as provided in (B), (C), and (D).
(B) The Actual Benefit is the amount actually payable after application of the limits referred to in Section 1.
(C) If the commencement date specified in (b) of this section is prior to the Participant’s Normal Retirement Date, the Actual Benefit will be reduced by the factor which would apply under Sec. 6.2, 6.3, 6.4, or 6.11(b) of the Retirement Plan, whichever is applicable, if the Participant’s Retirement Plan benefit began on the same date.
(D) If the Participant’s benefit under this Plan is paid in a form other than life only, the Actual Benefit shall be adjusted to reflect the appropriate factor from Sec. 4.10(a) of the Retirement Plan for that form of payment. The Actual Benefit for months after the Participant’s death will be determined in accordance with the applicable form of payment.
(b) A Participant’s Supplemental Pension under this Plan will begin as of whichever of the following dates is later:
(1) The first day of the month after the Participant’s Separation from Service.
(2) The first day of the month after the date the Participant attains age 55.
(c) If the commencement date in (b) is earlier than the first day of the seventh month after the month in which the Participant’s Separation from Service occurred, payments due under this Plan for months prior to said seventh month will be withheld by the Company and paid in a lump sum during said seventh month.
(d) If the benefit under the Retirement Plan begins as of a date on or before the date specified in (b), the benefit under this Plan with be paid in the same annuity form as under the Retirement Plan.
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(e) If the Participant chooses not to receive his benefit under the Retirement Plan until after the date determined in (b):
(1) His benefit under this Plan will be paid in the form elected by the Participant and will commence as of the date specified in (b). For this purpose, a Participant may elect any form of payment permitted by Section 7.4 or 7.5 of the Retirement Plan (i.e. joint and 50%, 75%, or 100% annuity or life and 10 years certain annuity).
(2) Any such election by a Participant must be made before any annuity payment has been made under this Plan. If no election is made, the Participant’s benefit will be paid in the form of a life annuity.
(3) The amount in (a)(2) will be the amount which could have been paid by the Retirement Plan in the same form as the benefit under this Plan commencing as of the date specified in (b). This amount will be calculated using the reduction factors in Retirement Plan Sec. 6.2, 6.3, 6.4, or 6.11(b), whichever is applicable, and the optional settlement factors in Retirement Plan Sec. 4.10(a).
(f) If the Participant’s death occurs prior to the date his monthly pension begins under the Retirement Plan, and a Qualified Preretirement Survivor Annuity is payable under the Retirement Plan to his or her surviving spouse, the monthly amount of the Supplemental Pension shall be determined by reference to the benefits payable to said person rather than by reference to the pension the Participant would have received had he lived. Said benefit will be paid to the surviving spouse. For this purpose, the Supplemental Pension under this Plan will commence as of the earliest date the Qualified Pre-retirement Survivor Annuity was available for payment under the Retirement Plan, and the offset for benefits under the Retirement Plan will be calculated as of said earliest date. That is to say, while a surviving spouse may elect to delay commencement of her benefit under the Retirement Plan, no such election is available under this Plan and the benefit and offset under this Plan will be calculated accordingly.
Section 6. Alternative Forms of Payment . In lieu of a monthly annuity, a Participant may elect to receive his or her benefit in the form of a lump sum under (a) of this section or in 120 monthly installments as provided in (b) of this section, subject to the following:
(a) Lump Sum Option . A Participant may elect to receive a lump sum payment which is the Actuarial Equivalent of the benefit payable under Section 5. Such elections are subject to the following:
(1) A Participant may make such an election on or before December 31, 2008. Such an election is irrevocable after December 31, 2008. A Participant who makes such election will receive his or her lump sum payment in whichever of the following months is later:
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(A) The twelfth month after the month in which his or her Separation from Service occurred.
(B) The month following the month in which he or she attained age 55.
(2) Lump sum elections made after 2008 are subject to the following requirements:
(A) The election must be made not later than at least 12 months prior to the Participant’s Separation from Service. However, in the case of any Participant whose Separation from Service occurs prior to his attainment of age 55, the election may be made anytime prior to the Participant’s 54 th birthday.
(B) The lump sum will be paid in the month that is five years after the month in which the earliest payment would have been made to the Participant but for the election. For example, if a Participant makes a lump sum election on December 15, 2009, has a Separation from Service on February 15, 2011, and is eligible for a benefit under this Plan commencing as of March 1, 2011, but for the lump sum election, his monthly benefits under this Plan for March through September of 2011 would have been paid as of September 1, 2011, and his lump sum payment will be made during September, 2016.
(C) The lump sum election is irrevocable.
(3) The lump sum amount will be calculated as of the commencement date specified in Section 5(b) and is the Actuarial Equivalent of a life only pension commencing on said date. For this purpose, it will be assumed that the Participant’s benefit under the Retirement Plan and Regular SERP also are paid on a life-only basis commencing on the same date.
(4) If a Participant who elected a lump sum payment dies after making the election but before receiving the lump sum payment, the lump sum will be paid to the Participant’s Beneficiary.
Such payment will be made on a date determined by the Company which shall not be later than December 31 of the Plan Year in which the Participant died. For this purpose, if the Participant’s death occurs in October, November, or December, as permitted by Code §409A, payment will be considered timely if made not later than the fifteenth day of the third month after the month in which the Participant died.
However, if a Participant makes a lump sum election after December 31, 2008, and dies within 12 months after making the election, as required by Code §409A, the lump sum election will be of no force or effect and no lump sum payment will be made. The restriction in the preceding sentence does not apply to lump sum elections made on or before December 31, 2008.
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(5) The lump sum amount payable in (4) will be the Actuarial Equivalent (as of the date the lump sum is paid) of the benefit the Participant would have received under this Plan if:
(A) His Separation from Service occurred on the date of his death (or on his actual Separation from Service date, if earlier),
(B) His benefit under the Plan began as of the first day of the month following such Separation from Service (but not before the first day of the month following his attainment of age 55), and
(C) His benefit under this Plan, the Retirement Plan, and the Regular SERP was paid on a life only basis.
(b) 120 Monthly Installment Option : During 2008 a Participant may elect to receive his or her monthly benefit in the form of 120 equal monthly payments, subject to the following:
(1) Such an election must be made not later than December 31, 2008 and is irrevocable after said date.
(2) The monthly payments will commence as of the commencement date specified in Section 5(b) and will be the Actuarial Equivalent of a life only pension commencing on said date. For purposes of computing this amount, it will be assumed that the Participant’s benefit under the Retirement Plan and Regular SERP also are paid on a life only basis commencing the same date.
(3) If the commencement date specified in Section 5(b) is earlier than the first day of the seventh month after the month in which the Participant’s Separation from Service occurred, payments for months prior to said seventh month will be withheld by the Company and paid in a lump sum during said seventh month.
(4) If a Participant who elected 120 monthly installments under this subsection dies before all 120 installments have been paid:
(A) If the Participant dies after attaining age 55, the remaining installments will be paid to the Participant’s Beneficiary.
(B) If the Participant dies before attaining age 55, the Actuarial Value of the Participant’s benefit will be paid to the Participant’s Beneficiary in a lump sum. Such payment will be made on a date determined by the Company which shall not be later than December 31 of the Plan Year in which the Participant died. For this purpose, if the Participant’s death occurs in October, November or December, as permitted by Code §409A, payment will be considered timely if made not later than the fifteenth day of the third month after the month in which the Participant died. The lump sum amount will be the
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Actuarial Equivalent (as of the date the lump sum is paid) of the benefit the Participant would have received under this Plan if:
(A) His Separation from Service occurred on the date of his death (or on his actual Separation from Service date, if earlier),
(B) His benefit under the Plan began as of the first day of the month following such Separation from Service (but not before the first day of the month following his attainment of age 55), and
(C) His benefit under this Plan, the Retirement Plan, and the Regular SERP was paid on a life only basis.
(c) Any election under this section will be effective only if the Participant also elected the same form of payment under the Regular SERP.
Section 7. Benefits Under this Plan and Senior SERP Must Be Paid in the Same Form . Any benefits payable to a Participant under the Senior SERP must be paid in the same form as his or her benefit under this Plan. For example, a Participant’s lump sum election under this Plan will also apply to any benefits payable under the Senior SERP. Similarly, if a Participant chooses a life and 10 years certain annuity, both plans will pay in that form.
Section 8. Mandatory Cash-Out of Certain Benefits .
(a) In any case where the sum of the following amounts is $100,000 or less, in lieu of monthly benefits, the Company shall pay a lump sum equal to the sum of said amounts:
(1) The Actuarial Equivalent of the benefits payable under this Plan.
(2) The Actuarial Equivalent of the benefits payable under the Senior SERP, if any.
The amounts in (1) and (2) shall be determined as of the first day of the seventh month following the month in which the Participant’s Separation from Service occurs and shall be paid during said seventh month.
(b) In any case where the sum of the following amounts is $100,000 or less as of the date of a Participant’s death, in lieu of monthly benefits, the Company shall pay the Participant’s Beneficiary a lump sum death benefit equal to the sum of said amounts:
(1) The Actuarial Equivalent of the death benefit payable under this Plan.
(2) The Actuarial Equivalent of the death benefits payable under the Senior SERP, if any.
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The amounts in (1) and (2) shall be determined as of the date of the Participant’s death. Payment will occur on a date determined by the Company which shall be not later than December 31 of the Plan Year in which the Participant’s death occurred. For this purpose, if a Participant’s death occurs in October, November, or December, as permitted by Code §409A, payment will be considered timely if made not later than the fifteenth day of the third month after the month in which the Participant’s death occurred.
(c) If the $5,000 amount specified in Code § 411(a)(11) (i.e. the maximum amount a qualified plan may require to be cashed out in lieu of annuity or installment distributions) is increased, the $100,000 amount in this section automatically will be increased to 20 times the new Code § 411(a)(11) amount.
Section 9. Interest on Delayed Payments .
(a) Any lump sum payment will include interest (at the rate used under Section 2(a) to calculate the lump sum) from the date as of which the lump sum is calculated through the payment date.
(b) Interest will also be paid on monthly benefits which are delayed due to the six month rule under Code §409A. For this purpose, the interest rate used will be the “applicable interest rate” under Code §417(e) for October immediately preceding the Plan Year in which benefits would have commenced but for the six-month delay.
Section 10. Individual Agreements . Benefits provided by this Plan may be evidenced by individual employment agreements between the Company and individuals who are or may become eligible for such benefits. Benefits provided by the Plan will be paid to an individual regardless of whether those benefits are evidenced by an individual employment agreement.
Section 11. Miscellaneous Provisions .
(a) The Plan will be administered in behalf of the Company by the Committee. The Committee has discretionary authority to construe the terms of the Plan, and the Committee’s determinations shall be final and binding on all persons. The Committee may delegate all or any part of its administrative responsibilities to employees of the Company.
(b) No Participant or Beneficiary shall have any right to assign, pledge, transfer or otherwise hypothecate this Plan or the payments hereunder, in whole or in part. Benefits under this Plan will not be subject to execution, attachment, garnishment or similar process.
(c) This Plan constitutes the Company’s unconditional promise to pay the amounts which become payable pursuant to the terms hereof. A Participant’s rights are solely those of an unsecured creditor. This Plan does not give any Participant or beneficiary a security interest in any specific assets of the Company.
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(d) The Committee may in its sole discretion arrange for payment by a subsidiary of the Company of the amounts the Committee determines are attributable to service with that subsidiary.
(e) This Plan or any Participation Agreement under the Plan shall not be construed as a contract of employment and does not restrict the right of the Company or any of its subsidiaries to discharge the Participant or the right of the Participant to terminate employment.
(f) The provisions of the Plan shall be construed and enforced according to the laws of Wisconsin to the extent such laws are not preempted by ERISA.
(g) This Plan shall be binding upon and for the benefit of the successors and assigns of the Company, whether by way of merger, consolidation, operation of the law, assignment, purchase or other acquisition of substantially all of the assets or business of the Company, and any such successor or assign shall absolutely and unconditionally assume all of the Company’s obligations hereunder.
(h) In addition to any other applicable provisions of indemnification, the Company agrees to indemnify and hold harmless, to the extent permitted by law, each member of the Committee (collectively referred to herein as “Indemnitee”) against any and all liabilities, losses, costs or expenses (including legal fees) of whatsoever kind an nature which may be imposed on, reasonably incurred by or asserted against such person at any time by reason of such person’s services in connection with the Plan, but only if such person did not act dishonestly or in bad faith or in willful violation of the law or regulations under which such liability, loss, cost or expense arises. The Company shall have the right, but not the obligation, to select counsel and control the defense and settlement of any action against the Indemnitee for which the Indemnitee may be entitled to indemnification under this provision.
(i) The Plan may be amended from time to time by the Board, subject to the following:
(1) The Committee or the Chief Executive Officer of the Company also may amend the Plan, provided the amendment does not materially increase the cost of the Plan or the amount of benefits provided by the Plan.
(2) In addition, the Board may delegate to the Committee or the Chief Executive Officer authority to approve amendments not falling with the scope of (1).
(3) No amendment will have the effect of reducing a Participant’s aggregate benefit under this Plan and the Retirement Plan to less than the amount which would have been payable if the amendment had not occurred, said amount to be based solely on compensation and service prior to the effective date of the amendment.
(j) Certain terms used in this Plan are defined in the Retirement Plan.
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Section 12. Change In Control . If a Change in Control occurs, than the Board or Committee may, without the consent of any Participant affected thereby, terminate the Plan and all substantially similar plans. Upon such termination, each Participant who has met the requirements of (a) or (b) as of the date the Plan is terminated will receive an immediate lump sum payment equal to the Actuarial Equivalent of his or her benefit under this Plan:
(a) A Participant meets the requirements of this subsection (a) if he or she had a Separation from Service prior to the date the Plan is terminated under circumstances such that pursuant to Section 4, he or she is eligible for a benefit under this Plan.
(b) A Participant who did not have a Separation from Service prior to the date the Plan is terminated meets the requirements of this subsection (b) if he or she would have been eligible pursuant to Section 4 for a benefit under this Plan if his or her Separation from Service had occurred immediately prior to the date the Plan is terminated.
Any such termination of the Plan must occur during the 1-month period preceding or the 12-month period following the Change in Control. The lump sum payments must be completed within 12 months after the Plan is terminated.
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APPROVED ON BEHALF OF THE COMPANY |
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By: |
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Henry J. Theisen, President and CEO |
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Date Signed: , 2008 |
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EXHIBIT 10(f)
12-16-08
BEMIS SUPPLEMENTAL RETIREMENT PLAN FOR SENIOR OFFICERS
(As Amended Effective January 1, 2008)
Section 1. Purpose of Plan . The Bemis Supplemental Retirement Plan for Senior Officers (the “Plan”) has been established to provide supplemental benefits in addition to those provided through the Retirement Plan and Regular SERP. By providing said benefits, the Plan provides deferred compensation for a select group of management or highly compensated employees and therefore is exempt from most requirements of ERISA. The Plan is intended to comply with the requirements of Code §409A.
Section 2. Transition Rules . The Plan as set forth herein applies to Participants whose benefits commence after December 31, 2008.
Benefits which commenced during 2005-2008 are being paid pursuant to transition rules applicable under Code §409A.
Benefits commencing prior to 2005 were paid under the Plan as previously in effect.
Section 3. Definitions . The following definitions shall apply for purposes of this Plan:
(a) The “Actuarial Equivalent” factors used in the Plan are as follows:
(1) The interest rate used will be the annual interest rate on 30-year Treasury securities as specified by the Commissioner of Internal Revenue for October immediately preceding whichever of the following Plan Years is applicable:
(A) For calculation of the BIPSP Offset, the Plan Year in which occurs the first day of the month following the month of the Participant’s Separation from Service.
(B) For calculation of monthly amounts payable under alternative forms of annuity, the Plan Year which contains the commencement date specified in Section 7(a).
(C) For calculation of elective lump sum payments to Participants under Section 8(a) or 120-month installment payments under Section 8(b), the Plan Year which contains the date specified in Section 7(a).
(D) For calculation of lump sum death benefits under Section 8, the Plan Year which contains the first day of the month after the month in which the Participant’s death occurred.
(E) For calculations under Section 9, the Plan Year which contains the applicable date is defined in said section.
(F) For purposes of calculating whether the amount in Section 11 is $100,000 or less, the Plan Year which contains the seventh month following the month in which the Participant’s Separation from Service occurs.
(G) For purposes of calculating whether the amount in Section 11 is $100,000 or less, the Plan Year in which the Participant’s death occurred.
(H) For purposes of applying Section 11(d) (mandatory cashouts of certain benefits where Separation from Service or death occurred prior to 2008), the 2008 Plan Year (i.e. use October 2007 rate).
(2) The mortality table used for such calculations is the “applicable mortality table” referred to in Income Tax Reg. 1.417(e)-1(d)(2), or any successor to said regulation.
(b) “Beneficiary” means the person or persons a Participant designates as such on his or her Beneficiary designation form. The Company may prescribe a combined Beneficiary designation form for use under this Plan and other plans providing non-qualified deferred compensation. The Participant may alter or revoke such designation without the consent of the Beneficiary. If there is not on file with the Company an effective designation of Beneficiary by a deceased Participant, the Beneficiary shall be the person or persons surviving the Participant in the first of the following classes in which there is a survivor, share and share alike:
(1) The Participant’s spouse.
(2) The Participant’s children, except that if any of the Participant’s children predecease the Participant but leave issue surviving the Participant, such issue shall take by right of representation the share their parent would have taken if living.
(3) The Participant’s personal representative (executor or administrator).
Determination of the identity of the Beneficiary in each case shall be made by the Company. If a Beneficiary survives the Participant, but dies before payment of all amounts to which the Beneficiary is entitled, any remaining payments will be made to the Beneficiary’s estate.
(c) “BIIP” means the Bemis Investment Incentive Plan as amended from time to time.
(d) “BIPSP Offset” means the amount calculated as provided in Section 12.
(e) “Board” means the board of directors of the Company.
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(f) “Change in Control” of the Company means any event which qualifies as a change in the ownership or effective control or a change in the ownership of a substantial portion of the assets of the Company or another member of the Control Group pursuant to Code §409A and any applicable regulations interpreting said section.
(g) “Code” means the Internal Revenue Code of 1986, as from time to time amended.
(h) “Committee” means the Compensation Committee of the Board.
(i) “Company” means Bemis Company, Inc., a Missouri corporation.
(j) “Control Group” means the Company and any trade or business under common control with the Company within the meaning of Code §414(b) and (c).
(k) “Deemed Commencement Date” is defined in Section 13.
(l) “Elapsed Time” is defined in the Retirement Plan. However, for purposes of determining the amount of a Participant’s Supplemental Accrued Benefit under Section 6 or Supplemental Preretirement Death Benefit under Section 9, Elapsed Time with an employer prior to the date that employer became a member of the Control Group shall be disregarded. The exclusion in the preceding sentence does not apply for purposes of determining whether a Participant is vested under Section 5.
(m) “ERISA” means the Employee Retirement Income Security Act of 1974, as from time to time amended.
(n) “Final Average Earnings” as defined in the Retirement Plan, subject to the following adjustments:
(1) Said amount shall be calculated without regard to the Code § 401(a)(17) limit on annual pay, which is $245,000 for 2009 and is subject to a cost-of-living adjustment for years after 2009.
(2) The years used in calculating the average shall be the five highest years (regardless of whether such years are consecutive) out of the last 15 years. (The Retirement Plan uses the average for the five highest consecutive years.)
(o) “Normal Retirement Age” is defined in the Retirement Plan.
(p) “Participant” means an individual designated as such pursuant to Section 4.
(q) “Participating Employer” means each corporation which is a member of the Control Group and which employs one or more Participants.
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(r) “Participation Agreement” is the agreement entered into between a Participant and the Company regarding participation in this Plan.
(s) “Plan Year” means the 12 month period ending each December 31.
(t) “Qualified Spouse” is defined in Sec. 7.1 of the Retirement Plan.
(u) “Regular SERP” means the Bemis Supplemental Retirement Plan as amended from time to time.
(v) “Retirement Plan” means the Bemis Retirement Plan as amended from time to time.
(w) “Separation from Service” is defined in Code §409A(a)(2)(A)(i) and applicable guidance thereunder, which generally provides that:
(1) a Participant will be deemed to have a Separation from Service only if the Participant ceases to perform any services for the Company and other members of the Control Group, or the Participant continues to provide only “insignificant” services;
(2) service is “insignificant” if it is performed at a rate that is no more than 20% of the average level of services provided by the Participant for the preceding three full calendar years;
(3) a bona fide leave of absence will not be considered a Separation of Service for the first six months of such leave or until the Participant no longer has a right to reemployment by statute or contract, whichever is longer; and
(4) transfer to an employer in which the Company or another member of the Control Group has at least 50% ownership interest is not a Separation from Service.
(x) “Supplemental Accrued Benefit” is defined in Section 6.
(y) “Supplemental BIPSP” means the Bemis Supplemental BIPSP as amended from time to time.
Section 4. Eligibility to Participate . Participants shall be designated by the Committee from among senior officers of the Company. The Company will enter into a Participation Agreement with each Participant.
Section 5. Eligibility for a Benefit (Vesting) . If a Participant’s Separation from Service occurs for a reason other than his or her death under either of the following circumstances, he or she shall be entitled to a Supplemental Accrued Benefit determined as provided in Sections 6, 7 and 8:
(a) The Participant’s Separation from Service occurs after he or she has attained age 50 and completed 20 or more years of Elapsed Time.
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(b) The Participant’s Separation from Service occurs at a time when the sum of the Participant’s attained age on his or her last birthday and his or her whole years of Elapsed Time is 75 or more.
If a Participant’s Separation from Service occurs after he or she has met the requirements of (a) or (b) and the Participant dies after Separation from Service but before his or her benefit commencement date under Section 7(a), no benefit will be payable under Section 7, but the Participant’s Qualified Spouse, if any, shall be entitled to a Supplemental Preretirement Death Benefit determined as provided in Section 9. Also, if a Participant’s Separation from Service is due to his or her death and occurs after he or she has met the requirements of (a) or (b), no benefit will be payable under Sections 6 and 7 and the Participant’s Qualified Spouse, if any, shall be entitled to a Supplemental Preretirement Death Benefit determined as provided in Section 9. However, if a Participant dies after electing a lump sum or 120 monthly installments under Section 8 but before the lump sum or installments are paid, the lump sum or remaining installments will be paid as provided in Section 8, and no benefit will be paid under Section 9.
No benefit will be payable under the Plan if the Participant’s Separation from Service occurs before the Participant met the foregoing age and service requirements.
Section 6. Supplemental Accrued Benefit. A Participant’s “Supplemental Accrued Benefit” is a monthly amount equal to the amount in (a) minus the amount in (b):
(a) 2.5% of the Participant’s Final Average Monthly Earnings multiplied by his or her years of Elapsed Time (but not more than 20 years). If the Participant’s benefit under this Plan is paid in a form of annuity other than life only, said amount shall be adjusted so that it is the Actuarial Equivalent of a life annuity.
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(b) The sum of the following amounts:
(1) The Participant’s monthly pension under the Retirement Plan, if any, under the form of payment actually paid under said Plan, but excluding any social security supplement payable pursuant to Sec. 6.11(b)(4) of the Retirement Plan. (If the Participant’s pension under the Retirement Plan does not begin until after his pension under this Plan, this offset will be calculated as provided in Section 7(d)(3)).
(2) 2.5% of the Participant’s Primary Social Security Benefit determined under Sec. 4.9 of the Retirement Plan, multiplied by the Participant’s years of Elapsed Time (but not more than 20 years). If the Participant’s benefit under this Plan is paid in a form of annuity other than life only, said amount shall be adjusted so that it is the Actuarial Equivalent of a life annuity.
(3) The Participant’s monthly pension under the Regular SERP, if any, under the form of payment actually paid under said Plan.
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(4) The BIPSP Offset computed as provided in Section 13. If the Participant’s benefit under this Plan is paid in a form of annuity other than life only, the BIPSP Offset shall be adjusted so that it is the Actuarial Equivalent of a life annuity.
Section 7. Form of Payment and Commencement Date . Except as provided in Section 8, a Participant’s benefit under Section 6 shall be paid as follows:
(a) The Supplemental Accrued Benefit will commence as of whichever of the following dates is later:
(1) The first day of the month after the Participant’s Separation from Service.
(2) The first day of the month after the date the Participant attains age 55.
(b) If the commencement date in (a) is earlier than the first day of the seventh month after the month in which the Participant’s Separation from Service occurred, payments due under this Plan for months prior to said seventh month will be withheld by the Company and paid in a lump sum during said seventh month. For example, if a Participant has a Separation from Service on June 8, 2009 and the commencement date in (a) is July 1, 2009, his payments under this Plan for July 1 through December 1, 2009 will be withheld and paid during January 2010.
(c) If the benefit under the Retirement Plan begins as of a date on or before the date specified in (a), the benefit under this Plan will be paid in the same annuity form as under the Retirement Plan.
(d) If the Participant chooses not to receive his benefit under the Retirement Plan until after the date determined in (a):
(1) His benefit under this Plan will be paid in the form elected by the Participant and will commence as of the date specified in (a). For this purpose, a Participant may elect any form of payment permitted by Section 7.4 or 7.5 of the Retirement Plan (i.e. joint and 50%, 75%, or 100% annuity or life and 10 years certain annuity).
(2) Any such election by a Participant must be made before any annuity payment has been made under this Plan. If no election is made, the Participant’s benefit will be paid in the form of a life annuity.
(3) The amount in Section 6(b)(1) will be the amount which could have been paid by the Retirement Plan in the same form as the benefit under this Plan commencing as of the date specified in (a). This amount will be calculated using the reduction factors in Retirement Plan Sec. 6.2, 6.3, 6.4, or 6.11(b), whichever is applicable, and the optional settlement factors in Retirement Plan Sec. 4.10(a).
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(e) If payment begins before the Participant attains Normal Retirement Age, the Supplemental Accrued Benefit will not be subject to reduction for early commencement.
(f) If the benefit is paid in a form other than for the Participant’s life only, the monthly amount payable during the Participant’s lifetime will be subject to the Actuarial Equivalent adjustments specified in Section 3(a), and the monthly amount payable after the Participant’s death will be determined in accordance with the form of payment the Participant elected.
Section 8. Alternative Forms of Payment . In lieu of a monthly annuity in a form provided in Section 7(d), a Participant may elect to receive his or her benefit in the form of a lump sum under (a) of this section or in 120 monthly installments as provided in (b) of this section, subject to the following:
(a) Lump Sum Option . A Participant may elect to receive a lump sum payment which is the Actuarial Equivalent of the benefit payable under Section 7. Such elections are subject to the following:
(1) A Participant may make such an election on or before December 31, 2008. Such an election is irrevocable after December 31, 2008. A Participant who makes such election will receive his or her lump sum payment in whichever of the following months is later:
(A) The twelfth month after the month in which his or her Separation from Service occurred.
(B) The month following the month in which he or she attained age 55.
(2) Lump sum elections made after 2008 are subject to the following requirements:
(A) The election must be made not later than at least 12 months prior to the Participant’s Separation from Service. However, in the case of any Participant whose Separation from Service occurs prior to his attainment of age 55, the election may be made anytime prior to the Participant’s 54 th birthday.
(B) The lump sum will be paid in the month that is five years after the month in which the earliest payment would have been made to the Participant but for the election. For example, if a Participant makes a lump sum election on December 15, 2009, has a Separation from Service on February 15, 2011, and is eligible for a benefit under this Plan commencing as of March 1, 2011, but for the lump sum election, his monthly benefits under this Plan for March through September of 2011 would have been paid as of September 1, 2011, and his lump sum payment will be made during September, 2016.
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(C) The lump sum election is irrevocable.
(3) The lump sum amount will be calculated as of the commencement date specified in Section 7(a) and is the Actuarial Equivalent of a life only pension commencing on said date. For this purpose, it will be assumed that the Participant’s benefit under the Retirement Plan and Regular SERP also are paid on a life-only basis commencing on the same date.
(4) If a Participant who elected a lump sum payment dies after making the election but before receiving the lump sum payment, the lump sum will be paid to the Participant’s Beneficiary.
Such payment will be made on a date determined by the Company which shall not be later than December 31 of the Plan Year in which the Participant died. For this purpose, if the Participant’s death occurs in October, November, or December, as permitted by Code §409A, payment will be considered timely if made not later than the fifteenth day of the third month after the month in which the Participant died.
However, if a Participant makes a lump sum election after December 31, 2008, and dies within 12 months after making the election, as required by Code §409A, the lump sum election will be of no force or effect and no lump sum payment will be made. The restriction in the preceding sentence does not apply to lump sum elections made on or before December 31, 2008.
(5) The lump sum amount payable in (4) will be the Actuarial Equivalent (as of the date the lump sum is paid) of the benefit the Participant would have received under this Plan if:
(A) His Separation from Service occurred on the date of his death (or on his actual Separation from Service date, if earlier),
(B) His benefit under the Plan began as of the first day of the month following such Separation from Service (but not before the first day of the month following his attainment of age 55), and
(C) His benefit under this Plan, the Retirement Plan, and the Regular SERP was paid on a life only basis.
(b) 120 Monthly Installment Option : During 2008 a Participant may elect to receive his or her monthly benefit in the form of 120 equal monthly payments, subject to the following:
(1) Such an election must be made not later than December 31, 2008 and is irrevocable after said date.
(2) The monthly payments will commence as of the commencement date specified in Section 7(a) and will be the Actuarial Equivalent of a life only
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pension commencing on said date. For purposes of computing this amount, it will be assumed that the Participant’s benefit under the Retirement Plan and Regular SERP also are paid on a life only basis commencing the same date.
(3) If the commencement date specified in Section 7(a) is earlier than the first day of the seventh month after the month in which the Participant’s Separation from Service occurred, payments for months prior to said seventh month will be withheld by the Company and paid in a lump sum during said seventh month.
(4) If a Participant who elected 120 monthly installments under this subsection dies before all 120 installments have been paid:
(A) If the Participant dies after attaining age 55, the remaining installments will be paid to the Participant’s Beneficiary.
(B) If the Participant dies before attaining age 55, the Actuarial Value of the Participant’s benefit will be paid to the Participant’s Beneficiary in a lump sum. Such payment will be made on a date determined by the Company which shall not be later than December 31 of the Plan Year in which the Participant died. For this purpose, if the Participant’s death occurs in October, November or December, as permitted by Code §409A, payment will be considered timely if made not later than the fifteenth day of the third month after the month in which the Participant died. The lump sum amount will be the Actuarial Equivalent (as of the date the lump sum is paid) of the benefit the Participant would have received under this Plan if:
(A) His Separation from Service occurred on the date of his death (or on his actual Separation from Service date, if earlier),
(B) His benefit under the Plan began as of the first day of the month following such Separation from Service (but not before the first day of the month following his attainment of age 55), and
(C) His benefit under this Plan, the Retirement Plan, and the Regular SERP was paid on a life only basis.
(c) Any election under this section will be effective only if the Participant also elected the same form of payment under the Regular SERP.
Section 9. Supplemental Preretirement Death Benefit . The Supplemental Preretirement Death Benefit payable to a Qualified Spouse will be a monthly amount equal to the amount in (a) minus the amount in (b):
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(a) The monthly amount which would be payable if:
(1) The Participant survived to the date in (i) or (ii) below, whichever is applicable (hereafter referred to as the “applicable date”).
(2) The Participant was eligible for a life annuity beginning on the applicable date in a monthly amount equal to 2.5% of the Participant’s Final Average Monthly Earnings multiplied by his or her years of Elapsed Time.
(3) The life annuity in (2) was converted to a joint and 100% survivor annuity for the Participant and Qualified Spouse beginning on the applicable date which is the Actuarial Equivalent of the life annuity.
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(b) The sum of the following amounts:
(1) The monthly amount, if any, payable to the Qualified Spouse under the Retirement Plan commencing as of the applicable date.
(2) The monthly amount which would be payable if:
(A) The Participant survived to the applicable date.
(B) The Participant was eligible for a life annuity beginning on the applicable date in a monthly amount equal to 2.5% of the Participant’s Primary Social Security Benefit determined under Sec. 4.9 of the Retirement Plan multiplied by the Participant’s years of Elapsed Time (but not more than 20 years).
(C) The life annuity in (B) was converted to a joint and 100% survivor annuity for the Participant and Qualified Spouse beginning on the applicable date which is the Actuarial Equivalent of the life annuity.
(3) The monthly amount which would be payable if:
(1) The Participant survived to the applicable date.
(2) The BIPSP Offset computed as provided in Section 13 was converted to a joint and 100% survivor annuity for the Participant and Qualified Spouse beginning on the applicable date which is the Actuarial Equivalent thereof.
If payment begins before the Participant would have attained Normal Retirement Age, the amounts in (a) and (b)(2) will not be subject to reduction for early commencement.
Said death benefit will commence on whichever of the following dates is applicable (the “applicable date”):
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(i) If the Participant’s death occurs on or after the date he or she attained age 55, said death benefit will commence as of the first day of the month following the month in which the Participant’s death occurred.
(ii) If the Participant’s death occurs before he or she attained age 55, said death benefit will commence as of the first day of the month following the month the Participant would have attained age 55. No death benefit will be paid for months prior to said commencement date.
However, if the Participant elected a lump sum or 120 monthly installments pursuant to Section 8, no benefit will be paid under this section.
Section 10. Benefits Under This Plan and the Regular SERP Must be Paid in the Same Form . Any benefits payable to a Participant under the Regular SERP must be paid in the same form as his or her benefit under this Plan. For example, a Participant’s lump sum election under this Plan will also apply to any benefits payable under the Regular SERP. Similarly, if a Participant chooses a life and 10 years certain annuity, both plans will pay in that form.
Section 11. Mandatory Cash-Out of Certain Benefits .
(a) In any case where the sum of the following amounts is $100,000 or less, in lieu of monthly benefits, the Company shall pay a lump sum equal to the sum of said amounts:
(1) The Actuarial Equivalent of the benefits payable under this Plan.
(2) The Actuarial Equivalent of the benefits payable under the Regular SERP, if any.
The amounts in (1) and (2) shall be determined as of the first day of the seventh month following the month in which the Participant’s Separation from Service occurs and shall be paid during said seventh month.
(b) In any case where the sum of the following amounts is $100,000 or less as of the date of a Participant’s death, in lieu of monthly benefits, the Company shall pay the Participant’s Beneficiary a lump sum death benefit equal to the sum of said amounts:
(1) The Actuarial Equivalent of the death benefit payable under this Plan.
(2) The Actuarial Equivalent of the death benefits payable under the Regular SERP, if any.
The amounts in (1) and (2) shall be determined as of the date of the Participant’s death. Payment will occur on a date determined by the Company which shall be not later than December 31 of the Plan Year in which the Participant’s death occurred. For this purpose, if a Participant’s death occurs in October, November, or December, as permitted by Code §409A, payment will be considered timely if
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made not later than the fifteenth day of the third month after the month in which the Participant’s death occurred.
(c) If the $5,000 amount specified in Code § 411(a)(11) (i.e. the maximum amount a qualified plan may require to be cashed out in lieu of annuity or installment distributions) is increased, the $100,000 amount in this section automatically will be increased to 20 times the new Code § 411(a)(11) amount.
Section 12. Interest on Delayed Payments .
(a) Any lump sum payment will include interest (at the rate used under Section 2(a) to calculate the lump sum) from the date as of which the lump sum is calculated through the payment date.
(b) Interest will also be paid on monthly benefits which are delayed due to the six-month rule under Code §409A. For this purpose, the interest rate used will be the interest rate under Section 2(a) for October immediately preceding the Plan Year in which benefits would have commenced but for the six-month delay.
Section 13. BIPSP Offset . The BIPSP offset will be determined as follows:
(a) The Company will determine the sum of the following amounts:
(1) Whichever of the following amounts is larger:
(A) The balance in the Participant’s Retirement Account under the BIIP as of the last day of the month preceding the month in which his or her Separation from Service occurred.
(B) The amount which would have been held in the Participant’s Retirement Account in the BIIP as of the last day of the month preceding the month in which his or her Separation from Service occurred if (i) the BIPSP contributions the Participant received for each Plan Year were made on December 31 of that Plan Year and (ii) said contributions earned an annual return of 7% (compounded annually) from the December 31 credited to the account.
(2) The Participant’s “Deemed Supplemental BIPSP Balance” as of the last day of the month preceding the month in which his or her Separation from Service occurred, which is the amount that would have been held in such individual’s Supplemental BIPSP Account on said date if (i) BIPSP allocations each year the Participant was eligible for such allocations were 3 ½% of certified earnings as defined in the BIIP, (ii) such contributions for a Plan Year were made on December 31 of that Plan Year, and (iii) such contributions earned an annual return of 7% (compounded annually) from the December 31 credited to the account.
(b) The Company will use the Actuarial Equivalent factors in Section 3(a) to convert the sum in (a) to the BIPSP Offset, which is a monthly annuity with the first
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payment on the Participant’s Deemed Commencement Date and the last payment on the first day of the month in which the Participant’s death occurs. For this purpose:
(1) If the Participant has a Separation from Service after attaining age 55, the Deemed Commencement Date is the first day of the month after the month in which the Separation from Service occurs.
(2) If the Participant has a Separation from Service before attaining age 55, the Deemed Commencement Date is the first day of the month after the Participant attains age 55.
(3) If the Participant’s Separation from Service is due to his or her death or the Participant dies after Separation from Service but before the Deemed Commencement Date, the BIPSP Offset will be calculated as if the Participant was living on the Deemed Commencement Date and had a normal life expectancy on said date.
(c) The BIPSP Offset applies only to Participants who are Group B Participants under the BIIP. Individuals who are Group A Participants under the BIIP are not eligible for BIPSP or Supplemental BIPSP allocations and therefore do not have BIPSP Offsets under this Plan.
Section 14. Misconduct. No benefits will be paid to a Participant under this Plan if the Participant’s Separation from Service occurs due to commission of any act of fraud, misappropriation, or embezzlement, or due to commission of a felony in connection with his or her termination (or such grounds for termination existed at the time of Participant’s Separation from Service for other reasons).
Section 15. Miscellaneous Provisions .
(a) The Plan will be administered in behalf of the Company by the Committee. The Committee has discretionary authority to construe the terms of the Plan, and the Committee’s determinations shall be final and binding on all persons. The Committee may delegate all or any part of its administrative responsibilities to employees of the Company.
(b) No Participant shall have any right to assign, pledge, transfer or otherwise hypothecate this Plan or the payments hereunder, in whole or in part. Benefits under this Plan will not be subject to execution, attachment, garnishment, or similar process.
(c) This Plan constitutes the Company’s unconditional promise to pay the amounts which become payable pursuant to the terms hereof. A Participant’s rights are solely those of an unsecured wage creditor. This Agreement does not give any Participant a security interest in any specific assets of the Company. The Company may establish a trust for the purpose of paying all or any part of the benefits payable under the Plan. If such a trust is established, the trust’s assets
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will be subject to the claims of the Company’s creditors, and the trust’s assets will not be considered Plan assets for purposes of ERISA.
(d) The Committee may, in its sole discretion, arrange for payment by each Participating Employer of the amounts the Committee determines are attributable to service with that Participating Employer. Absent such arrangements, a Participant’s entire benefit shall be paid by the Participating Employer by which the Participant was last employed. The Committee may also arrange for one Participating Employer to serve as agent for the other Participating Employers for purposes of issuing benefit payment checks under the Plan.
(e) This Plan or any Participation Agreement under the Plan shall not be construed as a contract of employment and does not restrict the right of the Company or any other member of the Control Group to discharge the Participant or the right of the Participant to terminate employment.
(f) The provisions of this Plan shall be construed and enforced according to the laws of Wisconsin to the extent such laws are not preempted by ERISA.
(g) This Plan shall be binding upon and for the benefit of the successors and assigns of the Company, whether by way of merger, consolidation, operation of the law, assignment, purchase or other acquisition of substantially all of the assets or business of the Company, and any such successor or assign shall absolutely and unconditionally assume all of the Company’s obligations hereunder.
(h) The Plan may be amended from time to time by the Company, subject to the following:
(1) The amendment must be approved by the Board or Committee, except as follows:
(A) The Chief Executive Officer of the Company also may amend the Plan, provided the amendment does not materially increase the cost of the Plan or the amount of benefits provided by the Plan.
(B) In addition, the Board or Committee may delegate to the Chief Executive Officer authority to approve amendments not falling with the scope of (1).
(2) No amendment will have the effect of reducing benefits payable to any Participant whose Separation from Service occurred prior to the date the amendment is adopted or who has satisfied the age and length of service requirements of Section 4.
(i) Certain terms used in this Plan are defined in the Retirement Plan. For such terms, the Retirement Plan definitions apply to all Participants in this Plan, regardless of whether they are also eligible for the Retirement Plan.
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Section 16. Change In Control . If a Change in Control occurs, the Board or Committee may, without the consent of any Participant affected thereby, terminate the Plan and all substantially similar plans. Upon such termination, each Participant who has met the requirements of (a) or (b) as of the date the Plan is terminated will receive an immediate lump sum payment equal to the Actuarial Equivalent of his or her benefit under this Plan:
(a) A Participant meets the requirements of this subsection (a) if he or she had a Separation from Service prior to the date the Plan is terminated under circumstances such that pursuant to Section 4, he or she is eligible for a benefit under this Plan.
(b) A Participant who did not have a Separation from Service prior to the date the Plan is terminated meets the requirements of this subsection (b) if he or she would have been eligible pursuant to Section 4 for a benefit under this Plan if his or her Separation from Service had occurred immediately prior to the date the Plan is terminated.
Any such termination of the Plan must occur during the 1-month period preceding or the 12-month period following the Change in Control. The lump sum payments must be completed within 12 months after the Plan is terminated.
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APPROVED ON BEHALF OF THE COMPANY |
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By: |
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Henry J. Theisen, President and CEO |
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Date Signed: |
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, 2008 |
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15
EXHIBIT 10(k)
12-16-2008
BEMIS SUPPLEMENTAL BIPSP
(As Established Effective January 1, 2006)
Section 1. Purpose of Plan . The Bemis Supplemental BIPSP (the “Plan”) has been established to provide supplemental benefits in addition to those provided through Sec. 5.7 of the Bemis Investment Incentive Plan. By providing said benefits, the Plan provides deferred compensation for a select group of management or highly compensated employees and therefore is exempt from most requirements of ERISA. The Plan is intended to comply with the requirements of Code §409A.
Section 2. Definitions . The following definitions shall apply for purposes of this Plan:
(a) “Account” means an Account established pursuant to Section 4.
(b) “Aggregate Continuous Service” is defined in the BIIP.
(c) “Beneficiary” means the person or persons the Participant designated as such under the BIIP. If there is no designated Beneficiary under the BIIP, the Beneficiary will be determined as provided in BIIP Sec. 7.3.
(d) “BIIP” means the Bemis Investment Incentive Plan as amended from time to time.
(e) “BIPSP” means the Bemis Investment Profit Sharing Plan, which is part of the BIIP.
(f) “Board” means the board of directors of the Company.
(g) “Certified Earnings” is defined in the BIIP.
(h) “Change in Control” means any event which qualifies as a change in the ownership or effective control or a change in the ownership of a substantial portion of the assets of the Company or another member of the Control Group pursuant to Code §409A and any applicable regulations interpreting said section.
(i) “Code” means the Internal Revenue Code of 1986, as from time to time amended.
(j) “Committee” means the Compensation Committee of the Board.
(k) “Company” means Bemis Company, Inc., a Missouri corporation.
(l) “Control Group” means the Company and any trade or business under common control with the Company within the meaning of Code section 414(b) and (c).
(m) “Disability Retirement” is defined in the BIIP.
(n) “ERISA” means the Employee Retirement Income Security Act of 1974, as from time to time amended.
(o) “Excess Certified Earnings” for a Plan Year makes the amount, if any, which was excluded from an individual’s Certified Earnings due to the annual limit under Code §401(a)(17), which is $245,000 for 2009 and is subject to a cost-of-living adjustment for Plan Years after 2009.
(p) “Group B Participant” is defined in the BIIP.
(q) “Hour of Service” is defined in the BIIP.
(r) “Interest” means interest at an annual rate of 7%, compounded annually. This rate will be reviewed by the Company every fifth Plan Year or more frequently to assure that it remains a “reasonable rate of interest” for purposes of Treas. Reg. 31.3121(v)(2)-1(d)(2).
(s) “Participant” means an individual who qualifies as such pursuant to Section 3.
(t) “Participating Employer” means each corporation which is a member of the Control Group and which employs one or more Participants.
(u) “Plan Year” means the calendar year.
(v) “Qualified Employee” is defined in the BIIP.
(w) “Separation from Service” is defined in Code §409A(a)(2)(A)(i) and applicable guidance thereunder, which generally provides that:
(1) a Participant will be deemed to have a Separation from Service only if the Participant ceases to perform any services for the Company and other members of the Control Group, or the Participant continues to provide only “insignificant” services;
(2) service is “insignificant” if it is performed at a rate that is no more than 20% of the average level of services provided by the Participant for the preceding three full calendar years;
(3) a bona fide leave of absence will not be considered a Separation from Service for the first six months of such leave or until the Participant no longer has a right to reemployment by statute or contract, whichever is longer; and
(4) transfer to an employer in which the Company or another member of the Control Group has at least 50% ownership interest is not a Separation from Service.
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Section 3. Eligibility to Participate . Each Group B Participant who has Excess Certified Earnings for a Plan Year after 2005 shall become a Participant in the Plan as of December 31 of said Plan Year.
Section 4. Accounts . The Company will maintain an Account for each Participant on the books of the Company. Amounts credited to an Account will earn Interest from the date credited to the Account.
Section 5. Annual Allocations . As of each December 31 beginning with December 31, 2006, the Company shall credit the Account of each Participant who meets the eligibility requirements in (a) with an amount determined in (b).
(a) To share in the allocations for a Plan Year under this Plan, a Participant must meet all of the following requirements:
(1) He or she is a Group B Participant.
(2) He or she is a Qualified Employee on December 31 of the Plan Year. No allocation will be made to a Participant’s Account for a Plan Year if he or she had a Separation from Service prior to the end of the Plan Year, or transferred to a position such that he or she was not a Qualified Employee at the end of the Plan Year.
(3) He or she completed at least 1000 Hours of Service during said Plan Year.
(4) He or she had Excess Certified Earnings for the Plan Year.
(b) A Participant who meets the eligibility requirements in (a) for a Plan Year will receive the following allocations for said Plan Year:
(1) 2% of his or her Excess Certified Earnings for such Plan Year.
(2) An additional allocation in an amount up to 3% of his or her Excess Certified Earnings, as determined by the Company in its sole discretion. (The percent allocated under this paragraph will be the same as the percent allocated under Sec. 5.7(b) of the BIIP.)
Section 6. Payment of Benefits . Upon a Participant’s Separation from Service, the Company will pay the Participant an amount equal to the vested portion of his or her Account, subject to the following:
(a) If the Participant’s Separation from Service occurs under any of the following circumstances, the vested percentage is 100% and the entire Account balance will be payable:
(1) The Separation from Service occurs after the Participant has completed at least three years of Aggregate Continuous Service.
(2) The Separation from Service occurs after the Participant has attained age
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65, regardless of length of service.
(3) The Separation from Service is a Disability Retirement.
(4) The Separation from Service is due to the Participant’s death.
If the Participant’s Separation from Service occurs before he or she has completed three years of Aggregate Continuous Service and is not for a reason listed in (2), (3), or (4) above, the vested percentage is zero and no amount is payable under the Plan.
(b) If the Participant is living, the Vested Account balance, if any, will be paid to the Participant in a lump sum during the Plan Year following the Plan Year in which the Participant’s Separation from Service occurred. Said payment may not be made earlier than the first day of the seventh month after the month in which the Separation from Service occurred. For example, if Participant’s Separation from Service occurs on October 15, 2010, the payment will be made during 2011, but not earlier than May 1, 2011.
(c) If the Participant is no longer living (e.g. the Participant’s Separation from Service was due to his or her death, or the Participant died after Separation from Service but before payment of his or her vested account balance), the vested account balance will be paid to the Participant’s Beneficiary. Such payment will be made on a date determined by the Company which shall not be later than December 31 of the Plan Year in which the Participant died. For this purpose, if the Participant’s death occurs in October, November, or December, as permitted by Code §409A, payment will be considered timely if made not later than the fifteenth day of the third month after the month in which the Participant died.
Section 7. Misconduct. No benefits will be paid to a Participant under this Plan if the Participant’s Separation from Service occurs due to commission of any act of fraud, misappropriation, or embezzlement, or due to commission of a felony in connection with his or her termination (or such grounds for termination existed at the time of Participant’s Separation from Service for other reasons).
Section 8. Miscellaneous Provisions .
(a) The Plan will be administered in behalf of the Company by the Committee. The Committee has discretionary authority to construe the terms of the Plan, and the Committee’s determinations shall be final and binding on all persons. The Committee may delegate all or any part of its administrative responsibilities to employees of the Company.
(b) No Participant shall have any right to assign, pledge, transfer or otherwise hypothecate this Plan or the payments hereunder, in whole or in part. Benefits under this Plan will not be subject to execution, attachment, or similar process.
(c) This Plan constitutes the Company’s unconditional promise to pay the amounts which become payable pursuant to the terms hereof. A Participant’s rights are
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solely those of an unsecured wage creditor. This Agreement does not give any Participant a security interest in any specific assets of the Company. The Company may establish a trust for the purpose of paying all or any part of the benefits payable under the Plan. If such a trust is established, the trust’s assets will be subject to the claims of the Company’s creditors, and the trust’s assets will not be considered Plan assets for purposes of ERISA.
(d) The Committee may, in its sole discretion, arrange for payment by each Participating Employer of the amounts the Committee determines are attributable to service with that Participating Employer. Absent such arrangements, a Participant’s entire benefit shall be paid by the Participating Employer by which the Participant was last employed. The Committee may also arrange for one Participating Employer to serve as agent for the other Participating Employers for purposes of issuing benefit payment checks under the Plan.
(e) This Plan shall not be construed as a contract of employment and does not restrict the right of the Company or any other member of the Control Group to discharge the Participant or the right of the Participant to terminate employment.
(f) The provisions of this Plan shall be construed according to the laws of Wisconsin.
(g) This Plan shall be binding upon and for the benefit of the successors and assigns of the Company, whether by way of merger, consolidation, operation of the law, assignment, purchase or other acquisition of substantially all of the assets or business of the Company, and any such successor or assign shall absolutely and unconditionally assume all of the Company’s obligations hereunder.
(h) The Plan may be amended from time to time by the Company, subject to the following:
(1) The amendment must be approved by the Board or Committee, except as follows:
(A) The Chief Executive Officer of the Company also may amend the Plan, provided the amendment does not materially increase the cost of the Plan or the amount of benefits provided by the Plan.
(B) In addition, the Board or Committee may delegate to the Chief Executive Officer authority to approve amendments not falling with the scope of (A).
(2) No amendment will have the effect of reducing vested benefits accrued prior to the date of the amendment.
Section 9. Change in Control . If a Change in Control occurs, then the Board or Committee may, without the consent of any Participant affected thereby, terminate the Plan and all substantially similar plans. Upon such termination, each Participant who has attained age 65 or completed at least three years of Aggregate Continuous Service as of the date the Plan is terminated will receive an immediate distribution equal to his or her Account balance. Any such
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termination of the Plan must occur during the 1-month period preceding or the 12-month period following the Change in Control. The lump sum payment must be completed within 12 months after the Plan is terminated.
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APPROVED ON BEHALF OF THE COMPANY |
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By: |
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Henry J. Theisen, President and CEO |
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Date signed: |
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6
EXHIBIT 10(m)
6-24-2008
BEMIS COMPANY, INC.
2007 STOCK INCENTIVE PLAN
(As Amended and Restated Effective January 1, 2008)
1. Purpose of Plan .
Under the Bemis Company, Inc. 2007 Stock Incentive Plan (the “Plan”), the Company may grant both Options and Equity Units to Employees and Directors. The Plan is designed to enable the Company and its Subsidiaries to attract, retain and motivate Participants by providing them the opportunity to acquire equity ownership in the Company.
2. Definitions .
The following defined terms are used in this Plan:
2.1 “ Board ” means the Board of Directors of the Company.
2.2 “ Broker Exercise Notice ” means a notice whereby a Participant, upon exercise of an Option, irrevocably instructs a broker or dealer to sell a sufficient number of shares or loan a sufficient amount of money to pay all or a portion of the exercise price of the Option and/or any related withholding tax obligations and remit such sums to the Company and directs the Company to deliver stock certificates to be issued upon such exercise directly to such broker or dealer.
2.3 “ Change of Control Event ” means an event described in Section 10.1 (including a Code §409A Event as defined in Section 10.2).
2.4 “ Code ” means the Internal Revenue Code of 1986, as amended.
2.5 “ Committee ” means the compensation committee appointed under Section 3 to administer the Plan.
2.6 “ Common Stock ” means the common stock of the Company, par value $.10 per share, or the number and kind of shares of stock or other securities into which such Common Stock may be changed in accordance with Section 4.3.
2.7 “ Company ” means Bemis Company, Inc., a Missouri corporation.
2.8 “ Control Group ” means the Company and any trade or business under common control with the Company within the meaning of Code §414(b) and (c).
2.9 “ Director ” means a member of the Board.
2.10 A Participant has a “ Disability ” if, by reason of any medically determinable physical or mental impairment that can be expected to result in death or to last for a continuous period of at least 12 months:
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(a) The Participant is unable to engage in any substantial gainful activity, or
(b) The Participant has received income replacement benefits for a period of at least three months under a Participating Employer’s accident and health plan.
2.11 “ Employee ” means a common law employee of the Company or a Subsidiary.
2.12 “ Equity Unit ” means a right to receive a share of Common Stock, subject to terms established under Section 7.
2.13 “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
2.14 “ Expiration Date ” means the date an Option is scheduled to expire and no longer be exercisable.
2.15 “ Fair Market Value ” of a share of Common Stock as of a particular day means the closing price of a share of the Company’s Common Stock on the New York Stock Exchange on such day, or if no sale has been made on such exchange on such day, on the last preceding day on which any such sale was made.
2.16 “ Incentive Stock Option ” means a right to purchase Common Stock granted to an Employee pursuant to Section 6.1 that qualifies as an “incentive stock option” within the meaning of Code § 422.
2.17 “ Non-Qualified Stock Option ” means a right to purchase Common Stock granted to an Employee or Director pursuant to Section 6.1 or 6.2 that does not qualify as an Incentive Stock Option.
2.18 “ Officer ” means an Employee who has been designated by the Board to serve as an executive officer of the Company.
2.19 “ Option ” means an Incentive Stock Option or a Non-Qualified Stock Option.
2.20 “ Participant ” means an Employee or Director who has been designated as such.
2.21 “ Payment Date ” is defined in Section 8.5.
2.22 “ Performance Period ” means the period of time over which Equity Units are earned or become vested.
2.23 “ Previously Acquired Shares ” means shares of Common Stock that are already owned by a Participant.
2.24 “ Securities Act ” means the Securities Act of 1933, as amended.
2.25 “ Separation from Service ” is defined in applicable guidance under Code §409A, which generally provides that:
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(1) a Participant will be deemed to have a Separation from Service only if the Participant ceases to perform any services for the Company and other members of the Control Group, or the Participant continues to provide only “insignificant” services;
(2) service is “insignificant” if it is performed at a rate that is no more than 20% of the average level of services provided by the Participant for the preceding three full calendar years;
(3) a bona fide leave of absence will not be considered a Separation from Service for the first six months of such leave or until the Participant no longer has a right to reemployment by statute or contract, whichever is longer;
(4) transfer to an employer in which the Company or another member of the Control Group has at least 50% ownership interest is not a Separation from Service; and
(5) for purposes of determining benefits earned by a Participant for service as a Director, Separation from Service occurs when he or she ceases to be a Director.
2.26 “ Subsidiary ” means any entity in which the Company has a direct or indirect ownership interest sufficient so that the entity is a member of the Control Group.
2.27 “ Year ” means the 12-month period ending each December 31.
3. Plan Administration .
Except to the extent the Plan explicitly reserves responsibility to the Board, the Plan shall be administered by the compensation committee (the “Committee”) appointed by the Board. The Committee shall consist solely of not less than two members of the Board who are considered (i) non-employee directors within the meaning of Exchange Act Rule 16b-3 and (ii) outside directors within the meaning of Code § 162(m). If no such Committee is appointed, the Plan shall be administered by the Board and all references to the Committee shall be deemed references to the Board. If the Board determines that an individual appointed to the Committee does not meet any of the criteria for Committee membership, the actions of the Committee taken prior to that determination due to the appointment of that individual shall remain in effect unless the Board determines otherwise.
The Committee (and in the absence of a Committee, the Board) shall have the following authority, subject to the terms of the Plan:
(a) To determine which Employees and Directors will be designated as Participants.
(b) To determine the terms of each Option including the number of shares of Common Stock subject to the Option, the exercise price, the terms under which the Option will
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vest or become exercisable, the Expiration Date of the Option, and the period of time (if any) following Separation from Service that the option may be exercised.
(c) To determine whether the Option will be granted as an Incentive Stock Option or as a Non-Qualified Stock Option, recognizing that Incentive Stock Options can be granted only to Employees and not to non-employee Directors.
(d) To determine the terms of each award of Equity Units, including any performance goals or other requirements that must be met for the underlying shares of Common Stock to be distributed.
(e) To modify the terms of any outstanding Option or Equity Unit in any manner permitted by the Plan as then in effect, or to cancel the Option or Equity Unit, subject to the following:
(1) Subject to Section 4.3, outstanding Options granted under this Plan shall not be repriced.
(2) If the modification or cancellation adversely affects a Participant, it will not apply to that Participant without his or her consent, unless required by law or necessary to avoid adverse tax treatment.
(f) To delegate to one or more Employees all or any part of its authority under the Plan with regard to granting and administering Options or Equity Units for persons who are not then subject to the reporting requirements of Section 16 of the Exchange Act. (However, Options or Equity Units so granted generally will not qualify as “performance-based compensation” for purposes of Code § 162(m).)
(g) To exercise discretionary authority to construe the terms of the Plan and to make all decisions and interpretations necessary or advisable to operate the Plan.
4. Shares Available for Issuance .
4.1 Maximum Number of Shares Available . Subject to adjustment as provided in Section 4.3, the maximum number of shares of Common Stock that will be available for issuance under the Plan will be 6,000,000 shares of Common Stock plus any shares of Common Stock which, as of the date the Plan is approved by the shareholders of the Company, are reserved for issuance under the Company’s 2001 Stock Incentive Plan and which are not thereafter issued.
4.2 Accounting for Incentive Awards . Shares of Common Stock that are issued under the Plan or are subject to outstanding Options or Equity Units will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan. Any shares of Common Stock that are subject to an Option or Equity Unit that lapses, expires, is forfeited or for any reason is terminated unexercised or unvested will automatically again become available for issuance under the Plan. However, shares withheld for the purpose of paying applicable withholding taxes will not again become available for issuance under the Plan.
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4.3 Adjustments . In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) will make appropriate adjustment (which determination will be conclusive) as to the number and kind of securities available for issuance under the Plan and, in order to prevent dilution or enlargement of the rights of the Participants, the number, kind and, where applicable, exercise price of securities subject to outstanding Options or Equity Units.
5. Participation .
The Board or Committee may designate any Employee or Director as a Participant.
6. Options .
6.1 Grants to Employees . The Committee may grant Options to Employees, subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may designate whether an Option is to be considered an Incentive Stock Option or a Non-Qualified Stock Option. The aggregate number of shares on which Options may be granted to any one Employee during any calendar year may not exceed 25% of the 6,000,000 shares of Common Stock available for issuance under the Plan. If an Option granted to an Employee is canceled, said Option will nevertheless be included in applying said 25% limit.
6.2 Grants to Non-Employee Directors . The Committee may grant Non-Qualified Stock Options to Directors who are not Employees, subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion.
6.3 Exercise Price . The per share price to be paid upon exercise of an Option will be determined at the time of the Option grant. The per share price to be paid by a Participant upon exercise of an Option will be not less than 100% of the Fair Market Value of one share of Common Stock on the date of grant.
6.4 Exercisability and Duration . An Option will become exercisable at such times and in such installments as may be determined by the Committee at the time of grant. Unless otherwise determined by the Committee at the time of grant, the Expiration Date of each Option will be 10 years from its date of grant.
6.5 Payment of Exercise Price . The total purchase price of the shares to be purchased upon exercise of an Option will be paid entirely in cash (including check, bank draft or money order); provided, however, that the Committee may allow such payments to be made, in whole or in part, by tender of a Broker Exercise Notice, tender of Previously Acquired Shares, Attestation, or by a combination of such methods. “Attestation” means delivery by a Participant to the Company of a written affidavit of ownership of Previously Acquired Shares the Fair Market Value of which is then
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applied to the exercise price of the Option in lieu of actual delivery of such Previously Acquired Shares. Upon receipt of such Attestation of Previously Acquired Shares and payment for any portion of the exercise price not paid by Attestation, the Company shall deliver to the Participant a stock certificate for the number of Option shares so exercised, minus the number of Previously Acquired Shares attested to in the written affidavit, and minus any shares withheld to cover tax obligations.
6.6 Manner of Exercise . An Option may be exercised by a Participant in whole or in part from time to time, subject to the conditions contained in the Plan and in the agreement evidencing such Option, by delivering in person, by facsimile or electronic transmission or through the mail, a written notice of exercise to the Company (Attention: Secretary) at its principal executive office in Neenah, Wisconsin and paying in full the total exercise price for the shares of Common Stock to be purchased in accordance with Section 6.5 of the Plan. The Committee may permit a Participant to enter into a written plan pursuant to Exchange Act Rule 10b5-1 specifying the date or dates the Participant’s Options will automatically be exercised.
7. Equity Units .
7.1 Grants . An Employee or Director may be granted one or more Equity Units under the Plan, and such Equity Units will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee. The Committee may impose such restrictions or conditions, not inconsistent with the provisions of the Plan, to the vesting of such Equity Units as it deems appropriate, including, without limitation, that the Participant remain in the continuous employ of the Company or any Subsidiary until the end of the Performance Period established for said Equity Units or that the Participant or the Company (or any Subsidiary or division thereof) satisfy certain performance goals or criteria during the Performance Period.
7.2 Payments . Upon satisfaction of all applicable restrictions and conditions for payment, each Equity Unit will be payable in the form of a share of Common Stock (less any applicable tax withholding). Payment with respect to an Equity Unit will occur as soon as administratively feasible in the Year after the Year in which the Performance Period for the Equity Unit ends. Each Equity Unit may (but is not required to) include the right to receive periodic payments from the Company equivalent to the dividends paid on the underlying Common Stock. Any such dividend equivalents will be paid as of the dates the dividends are paid.
7.3 Holding Requirement Applicable to Grants Made to Officers . Equity Units granted to Officers are subject to the holding requirement of this section. Upon payment of such grants, half of the net shares issued after any required tax withholding must be held and may not be transferred by the Officer for at least three years after the date any applicable restrictions or conditions for payment were satisfied. The other half of the shares may be sold or transferred immediately. The Company may adopt appropriate procedures to assure compliance with the holding requirement, such as placing a legend on the share certificates or retaining possession of the certificates until the three-year holding period expires. If an Officer has a Separation from Service, the holding requirement will no longer apply and the individual will be free to sell or transfer the shares. The holding requirement does not apply to grants made to individuals who are not Officers.
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8. Effect of Separation from Service .
8.1 Death or Disability . If a Participant’s Separation from Service occurs by reason of his or her death or Disability, then the provisions of (a) and (b) shall apply:
(a) Options outstanding at the time of said Separation from Service will not expire as a result of said Separation from Service but rather will vest and remain in effect for the remaining term of the Option. However, the Committee in its sole discretion may provide at the time it grants an Option to a Participant that the Option will expire not later than a fixed period of time after the Participant’s Separation from Service.
(b) All Equity Units then held by the Participant will vest. The Company will transfer to the Participant (or to the beneficiary, legal representative, heir, or legatee of a deceased Participant) a number of shares of Common Stock equal to the number of the Participant’s outstanding Equity Units, less any shares withheld to cover taxes. Said transfer shall occur as of a date or dates determined by the Committee which shall not be later than December 31 of the Year in which the Participant died or was determined to have a Disability. However, as permitted by Code §409A, in cases where a Participant’s death or Disability occurred in October, November, or December, payment shall be considered timely if made by the fifteenth day of the third month after the month in which the Participant died or was determined to have a Disability.
8.2 Separation from Service After Attaining Applicable Age . If a Participant’s Separation from Service occurs after he or she has attained the applicable age specified in (a) and for a reason other than the Participant’s death or Disability, then the provisions of (a) through (e) shall apply:
(a) The “applicable age” for purposes of this section is:
(1) For any Participant who is an Officer, the applicable age is 60 with respect to Options and 55 with respect to Equity Units.
(2) For any Participant who is an Employee but not an Officer, the applicable age is 65.
(b) Options outstanding at the time of said Separation from Service will not expire as a result of said Separation from Service but rather will vest and remain in effect for the remaining term of the Option. However, the Committee in its sole discretion may provide at the time it grants an Option to a Participant that the Option will expire not later than a fixed period of time after the Participant’s Separation from Service.
(c) A fraction of each outstanding grant of Equity Units will be vested. The fraction of a grant that will be vested is the number of Equity Units in that grant, multiplied by a fraction (i) the numerator of which is the number of months from the beginning of the Performance Period for that grant through the month in which the Participant’s Separation from Service occurred and (ii) the denominator of which is the total
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number of months in said Performance Period. Except as otherwise provided by the Committee, any Equity Units which are not vested will be forfeited.
(d) However, if a Participant meets the requirements of (1), his or her Equity Units will be vested as provided in (2).
(1) The requirements of this paragraph (1) are met if the Participant satisfies all three of the following requirements:
(A) The Participant is 60 or older on the date of his or her Separation from Service;
(B) The Participant was born on or before January 1, 1954; and
(C) The Participant was elected as an Officer prior to January 1, 2007.
(2) If the Participant meets the requirements of (1):
(A) If the Participant’s Separation from Service occurs during the Year he or she attained age 60:
(i) All Equity Units awarded to the Participant prior to the Year he or she attained age 60 will be vested.
(ii) All Equity Units awarded to the Participant during the Year he or she attained age 60 will be vested to the extent provided in section 8.2(c).
(B) If the Participant’s Separation from Service occurs during or after the Year he or she attained age 61:
(i) All Equity Units awarded to the Participant prior to the Year he or she attained age 61 will be vested.
(ii) Equity Units awarded to the Participant in or after the Year he or she attained age 61 will be vested to the extent provided in section 8.2(c).
(C) However, the Committee may, in its sole discretion, prescribe a longer or shorter vesting period with respect to Equity Units awarded to a Participant in the Year he or she attains age 61 or any subsequent Year.
(e) The Company will transfer to the Participant a number of shares of Common Stock equal to the number of the Participant’s vested Equity Units (determined as provided in (c) or (d), whichever is applicable, less any shares withheld to cover taxes. Said
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transfer shall occur as of a date or dates determined by the Committee which shall not be earlier than the Participant’s Payment Date and shall not be later than December 31 of the Year in which the Participant’s Payment Date occurred. However, as permitted by Code §409A, if a Participant’s Payment Date occurs during October, November, or December, payment shall be considered timely if made by the fifteenth day of the third month after the month in which the Participant’s Payment Date occurred.
8.3 Other Separation from Service . If a Participant’s Separation from Service occurs under circumstances not covered under sections 8.1 and 8.2 (i.e. not due to death or Disability and before the applicable age specified in section 8.2(a)), then the provisions of (a) through (c) shall apply:
(a) If the Separation from Service is not for “cause”, (i) Options held by the Participant which are exercisable as of the date of Separation from Service will remain exercisable for a period of three months after such separation (but in no event after the expiration date of any such options), and (ii) Options which are not yet exercisable as of the date of the Separation from Service will be forfeited immediately. If the Separation from Service is for “cause”, all options will be forfeited immediately upon Separation from Service, regardless of whether they were then exercisable.
(b) All Equity Units then outstanding will be forfeited, and no payment will be made with respect thereto. However, if the Separation from Service is not for “cause”, the Committee may, in its sole discretion, provide for vesting and payment with respect to all or a portion of the outstanding Equity Units. Any such payment shall occur as of a date determined by the Committee which shall not be earlier than the Participant’s Payment Date and shall not be later than December 31 of the Year in which the Participant’s Payment Date occurred. However, as permitted by Code §409A, if a Participant’s Payment Date occurs during October, November, or December, payment shall be considered timely if made by the fifteenth day of the third month after the month in which the Payment Date occurred.
When such a payment occurs, the Participant will receive one share of Common Stock for each vested Equity Unit, less any applicable withholding taxes. The Committee’s decision with respect to such payment will be not be binding or precedential with regard to subsequent Separations from Service by other Participants. The Committee may delegate its authority under this paragraph to the Company’s chief executive officer. If the Separation from Service is for “cause”, then any outstanding Equity Units will be forfeited immediately and are not subject to discretionary payout.
(c) For purposes of this section, the existence of “cause” will be determined by the Committee by reference to any employment or other agreement or policy applicable to the Participant. In addition, the Committee may determine any of the following to constitute “cause”: (i) dishonesty, fraud, misrepresentation, embezzlement or
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deliberate injury or attempted injury, in each case related to the Company or any Subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a duty or duties that, individually or in the aggregate, are material in relation to the Participant’s overall duties, or (iv) any material breach of any employment, service, confidentiality or noncompete agreement entered into with the Company or any Subsidiary.
8.4 Breach of Confidentiality or Noncompete Agreements . Notwithstanding anything in the Plan to the contrary, in the event that a Participant materially breaches the terms of any confidentiality or noncompete agreement entered into with the Company or any Subsidiary, whether such breach occurs before or after such Participant’s Separation from Service, the Committee in its sole discretion may immediately terminate all rights of the Participant under the Plan and any agreements evidencing an Option or Equity Unit grant then held by the Participant without notice of any kind.
8.5 Payment Date . A Participant’s “Payment Date” is the first day of the seventh month after the month in which the Participant’s Separation from Service occurred. For example, if a Participant’s Separation from Service occurs on May 15, 2007 her Payment Date is December 1, 2007, and payment must occur on or after December 1, 2007 and on or before March 15, 2008. If another Participant’s Separation from Service occurs January 31, 2008, his Payment Date is August 1, 2008 and payment must occur on or after August 1, 2008 and on or before December 31, 2008.
8.6 Non-Employee Directors . Sections 8.1 through 8.5 are not applicable to Options or Equity Units granted to Directors who are not Employees. If such an individual has a Separation from Service (i.e. ceases to be a Director):
(a) He or she may exercise any outstanding Options within 12 months after ceasing to be a Director (or within such other period as approved by the Board or Committee at the time the Options were granted).
(b) All Equity Units then held by the Participant will vest. The Company will transfer to the Participant a number of shares of Common Stock equal to the number of the Participant’s outstanding Equity Units. Said transfer shall occur as of a date or dates determined by the Company which shall not be later than December 31 of the Year in which the Participant ceased to be a Director. However, as permitted by Code §409A, if a Participant’s Separation from Service occurs during October, November, or December, payment shall be considered timely if made by the fifteenth day of the third month after the month in which the Participant ceased to be a Director.
8.7 Options Not Exercisable After Expiration Date . Notwithstanding any provisions of this Section 8 to the contrary, no Option will be exercisable after its Expiration Date.
8.8 Provisions Applicable If a Participant’s Employer Ceases to be a Subsidiary . For purposes of sections 8.2 and 8.3, if a Participant’s employer ceases to be a Subsidiary of the Company due to a sale of stock which qualifies as a change of control for purposes of Code §409A, and the Participant remains an employee of that employer, the Participant will be considered to have
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a Separation from Service as of the date the employer ceases to be a Subsidiary. The preceding sentence does not apply if, at the time the employer ceases to be a Subsidiary, the Participant transfers to employment with the Company or another Subsidiary.
9. Payment of Withholding Taxes .
9.1 General Rules . The Company is entitled to (i) withhold and deduct from the shares of Common Stock payable under the Plan, from future wages of the Participant, or from other amounts that may be due and owing to the Participant from the Company or a Subsidiary, or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all federal, state and local withholding and employment-related tax requirements attributable to an Option or Equity Unit, including, without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an Equity Unit or a disqualifying disposition of stock received upon exercise of an Incentive Stock Option, or (ii) require the Participant promptly to remit the amount of such withholding to the Company before taking any action, including issuing any shares of Common Stock, with respect to the Option or Equity Unit.
9.2 Special Rules . The Committee may, in its sole discretion and upon terms and conditions established by the Committee, permit or require a Participant to satisfy, in whole or in part, any withholding or employment-related tax obligation described in Section 9.1 of the Plan by electing to tender Previously Acquired Shares (including but not limited to the Shares the acquisition of which triggered the tax obligation), by withholding shares of Common Stock payable to the Participant under this Plan, or by payments made pursuant to a Broker Exercise Notice, or by a combination of such methods.
10. Change of Control Event .
10.1 Change of Control Event . A “Change of Control Event” shall be deemed to have occurred if any of the following occurs:
(a) Any “Person” (as defined in Section 13(d) of the Exchange Act) acquires or becomes a beneficial owner (as defined in Exchange Act Rule 13d-3), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors (Voting Securities) or 20% or more of the outstanding shares of Common Stock; provided, however, that the following shall not constitute a “Change of Control Event”:
(1) any acquisition or beneficial ownership by the Company or a Subsidiary;
(2) any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by the Company or a Subsidiary;
(3) any transaction immediately following which more than 80% respectively, of (i) the combined voting power of the Company’s Voting Securities and (ii) the Common Stock is then beneficially owned, directly or indirectly, by all or
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substantially all of the persons who beneficially owned Voting Securities and Common Stock immediately prior to such transaction in substantially the same proportions as their ownership immediately prior to such acquisition;
(b) Continuing Directors do not constitute a majority of the members of the Board;
(c) Consummation of a reorganization, merger or consolidation of the Company (other than a merger or consolidation with a subsidiary of the Company), unless immediately following such reorganization, merger or consolidation, all or substantially all of the persons who were the beneficial owners, respectively, of Voting Securities and Common Stock immediately prior to such reorganization, merger or consolidation beneficially own, directly or indirectly, more than 80% respectively of (i) the combined voting power of the then outstanding Voting Securities and (ii) the then outstanding shares of Common Stock of the corporation resulting from such reorganization, merger or consolidation in substantially the same proportions as their ownership of the Voting Securities and Common Stock as the case may be, immediately prior to such reorganization, merger or consolidation;
(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company (in one or a series of transactions), other than to a corporation with respect to which, immediately following such sale or other disposition, more than 80%, respectively, of (i) the combined voting power of the then outstanding Voting Securities and (ii) the then outstanding shares of Common Stock of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the persons who were the beneficial owners respectively of the Voting Securities and Common Stock immediately prior to such sale or other disposition in substantially the same proportions as their ownership of the Voting Securities and Common Stock, as the case may be, immediately prior to such sale or other disposition;
(e) The Company enters into a letter of intent, an agreement in principle or a definitive agreement relating to a “Change in Control Event” described in (a), (b), (c) or (d) that ultimately results in such a “Change of Control Event”, or a tender or exchange offer or proxy contest is commenced which ultimately results in such a “Change in Control Event”.
Notwithstanding anything stated above, a “Change of Control Event” shall not be deemed to occur with respect to a Participant if the acquisition or beneficial ownership of the 20% or greater interest referred to in (a) is by the Participant or by a group, acting in concert, that includes the Participant or a majority of the then combined voting power of the then outstanding Voting Securities (or voting equity interests) of the surviving corporation or of any corporation (or other entity) acquiring all or substantially all of the assets of the Company shall, immediately after a reorganization, merger, consolidation or disposition of assets referred to in (c) or (d), be beneficially owned, directly or indirectly, by the Participant or by a group, acting in concert, that includes the Participant
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10.2 Code §409A Event . A “Code §409A Event” is a Change of Control Event (as defined in section 10.1) that qualifies as a change in control event for purposes of Code §409A and any applicable regulations.
10.3 Continuing Directors . Continuing Directors means:
(a) individuals who, on January 1, 2006, are Directors;
(b) individuals elected as Directors after January 1, 2006 for whose election proxies are solicited by the Board; or
(c) individuals elected or appointed by the Board to fill vacancies on the Board caused by death or resignation (but not by removal) or to fill newly-created directorships, provided that a Continuing Director shall not include an individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the threatened election or removal of directors (or other actual or threatened solicitation of proxies or consents) by or on behalf of any person other than the Board.
10.4 Acceleration of Vesting . If a Change of Control Event occurs, (a) all Options will become immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the Participants to whom such Options have been granted remain in the employ or service of the Company or any Subsidiary; and (b) all Equity Units then held by Participants will vest and be payable as follows:
(a) If the Change of Control Event qualifies as a Code §409A Event, all Equity Units then held by Participants will vest and be payable immediately.
(b) If the Change of Control Event does not qualify as a Code §409A Event:
(1) All Equity Units which would not have been vested immediately before the Change of Control Event if the Participant then had a Separation from Service will vest and be paid as soon as administratively feasible during the year in which the Change of Control Event occurred.
(2) All Equity Units which would have been vested immediately before the Change of Control Event if the Participant then had a Separation from Service will vest and will be paid as of whichever of the following dates is earlier:
(A) As soon as administratively feasible in the Year after the Year in which the Performance Period for the Equity Unit ends.
(B) During the seventh month after the month in which the Participant’s Separation from Service occurs.
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10.5 Cash Payment . If a Code §409A Event occurs, then the Board or Committee may, without the consent of any Participant affected thereby, terminate the Plan and all substantially similar plans. Upon such termination, all Participants will receive the following amounts as payment for their outstanding Options or Equity Units:
(a) With respect to the shares of Common Stock subject to Options, as of the effective date of any such Change of Control Event, cash in an amount equal to the excess of the Fair Market Value of such shares immediately prior to the effective date of such Change of Control Event over the exercise price per share of such Option.
(b) With respect to the Equity Units, cash in an amount equal to the Fair Market Value (determined immediately prior to the effective date of the Change of Control Event), of the shares of Common Stock represented by such Equity Units.
10.6 Gross-Up for Change of Control Payments . If, with respect to a Participant, the acceleration of the vesting of an Option or Equity Unit as provided in Section 10.4 (which acceleration could be deemed a “Payment” within the meaning of Code § 280G(b)(2)) or the payment of cash in exchange for all or part of an Option or Equity Unit as provided in Section 10.5, together with any other payments which such Participant has the right to receive from the Company or any corporation that is a member of an “affiliated group” (as defined in Code § 1504(a) without regard to Code § 1504(b)) of which the Company is a member, would constitute an “excess parachute payment” (as defined in Code § 280G(b)(1)), and therefore be subject to the excise tax imposed under Code § 4999, then the Participant shall be entitled to receive an additional cash payment from the Company in an amount such that the Participant would be in the same financial position as if there were no excise tax imposed on such payments. That is, if any amount paid pursuant to this Plan is subject to the excise tax imposed by Code § 4999, the Company shall pay the Participant an additional amount such that, after payment by the Participant of all income taxes and excise taxes imposed upon such additional payment, the Participant will retain a portion of the additional payment equal to the excise tax. For this purpose, the Company shall assume that the Participant’s income is taxed at the highest federal and state marginal rate then in effect.
11. Rights of Eligible Recipients and Participants; Transferability .
11.1 Employment . Nothing in the Plan will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment of any Employee or Participant at any time, nor confer upon any Employee or Participant any right to continue in the employ of the Company or any Subsidiary.
11.2 Rights as a Shareholder . As a holder of Options or Equity Units, a Participant will have no rights as a shareholder unless and until the Options are exercised or the Equity Units are paid in the form of Common Stock. However, as part of any grant of Equity Units, the Committee may
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provide that a Participant will be entitled to receive cash distributions equivalent to the dividends paid from time to time on the Common Stock underlying such Units.
11.3 Restrictions on Transfer . Any Option or Equity Unit granted under this Plan shall by its terms be non-transferable by the grantee other than by will or the laws of descent and distribution and shall be exercisable during the grantee’s lifetime only by the grantee or by the grantee’s guardian or legal representative, except that a Non-Qualified Stock Option may, if the Option Agreement so provides, also be transferable to members of the grantee’s immediate family, to a partnership whose members are only the optionee and/or members of the grantee’s immediate family, or to a trust for the benefit of only the grantee and/or members of the grantee’s immediate family. “Immediate Family” for purposes of this section includes only the grantee’s spouse, parents, children, and other direct descendants of the grantee and his or her spouse (including children and other descendants by adoption).
11.4 Non-Exclusivity of the Plan . Nothing contained in the Plan is intended to modify or rescind any previously approved compensation plans or programs of the Company or create any limitations on the power or authority of the Board to adopt such additional or other compensation arrangements as the Board may deem necessary or desirable.
12. Securities Law and Other Restrictions .
Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan, the Company will not be required to issue any shares of Common Stock under this Plan, and a Participant may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued pursuant to the Plan, unless (a) there is in effect with respect to such shares a registration statement under the Securities Act and any applicable state securities laws or an exemption from such registration under the Securities Act and applicable state securities laws, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions.
13. Plan Amendment, Modification and Termination .
The Board or Committee may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time to time in such respects as the Board or Committee may deem advisable. However, no amendments to the Plan will be effective without approval of the stockholders of the Company if stockholder approval of the amendment is then required pursuant to Code § 422 or the rules of the New York Stock Exchange. No termination, suspension or amendment of the Plan may adversely affect any outstanding award without the consent of the affected Participant; provided, however, that this sentence will not impair the right of the Board or Committee to take whatever action it deems appropriate under Sections 3(e), 4.3 and 10.5.
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14. Effective Date and Duration of the Plan .
The Plan is effective upon approval by the Company’s shareholders. The Plan will terminate at midnight on December 31, 2015, and may be terminated prior to such time to by Board action, and no Options or Equity Units will be granted after such termination. Except as provided in section 10.5, awards outstanding upon termination of the Plan may continue to be exercised, or become free of restrictions and paid, in accordance with their terms.
15. Miscellaneous .
15.1 Governing Law . The Plan will be construed in accordance with the laws of Missouri.
15.2 Successors and Assigns . The Plan will be binding upon and inure to the benefit of the successors and permitted assigns of the Company and the Participants.’
15.3 Code §409A . The Plan is intended to satisfy all applicable requirements of Code §409A and will be construed in light of that intent. The Committee may modify the Plan and Options or Equity Units granted pursuant to the Plan to the extent the Committee deems necessary to comply with Code §409A, even if such modifications adversely affect outstanding Options and Equity Units, provided the Committee determines that such modifications are necessary to avoid adverse tax consequences.
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APPROVED IN BEHALF OF THE COMPANY |
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By: |
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E. H. Seashore, Vice President |
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Date Signed: , 2008 |
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EXHIBIT 10(p)
12-18-2008
BEMIS DEFERRED COMPENSATION PLAN
(As Amended Effective January 1, 2009)
Section 1. Purpose of Plan . The purpose of the Bemis Deferred Compensation Plan (the “Plan”) is to enable directors to accumulate additional funds for retirement or other future needs by deferring current income. The Plan is intended to comply with the requirements of Code §409A and will be construed and administered consistent with that intent.
Section 2. Definitions . The following definitions shall apply for purposes of this Plan:
(a) “Account” means an Account established pursuant to Section 6.
(b) “Beneficiary” means the person or persons a Participant designates as such on his or her Participation Agreement or by means of a separate written designation filed with the Company. The Participant may alter or revoke such designation without the consent of the Beneficiary. If there is no such designation in effect at the time of the Participant’s death, or none of the designated Beneficiaries survives the Participant, the Participant’s estate shall be the Beneficiary. If a Beneficiary survives the Participant, but dies before payment of all amounts to which the Beneficiary is entitled, any remaining payments will be made to the Beneficiary’s estate, unless the Participant designates otherwise.
(c) “Board” means the board of directors of the Company, and includes any executive committee thereof authorized to act for the board of directors.
(d) “Committee” means the Bemis Employee Benefits Committee.
(e) “Company” means Bemis Company, Inc., a Missouri corporation.
(f) “Participant” means an individual designated as such pursuant to Section 4.
(g) “Participation Agreement” is the agreement entered into between a Participant and the Company regarding participation in this Plan.
(h) “Plan Year” means the twelve month period ending each December 31, and corresponds to the fiscal year of the Participating Employers.
(j) “Separation from Service” for purposes of the Plan occurs on the date the individual ceases to be a director of the Company.
Section 3. Administration of Plan . The Plan shall be administered in behalf of the Company by the Committee, subject to the following:
(a) The Committee shall have discretionary authority to construe the terms of the Plan and to make all decisions and interpretations incident thereto. The Committee may from time to time adopt such rules for the administration of the Plan as it deems appropriate.
(b) The decision of the Committee on any matter affecting the Plan or the rights and obligations arising under the Plan shall be final and binding upon all persons.
(c) The Committee shall enter into a Participation Agreement with each Participant. Such Agreements may be executed in behalf of the Committee by one or more members thereof.
(d) As of the beginning of each Plan Year the Committee shall approve the value of each Account and shall review all other calculations made under the Plan.
Section 4. Eligibility to Participate . Each director of the Company who is not an employee is a Participant. The terms of a Participant’s deferral election shall be set forth in a Participation Agreement executed by the Participant and Committee.
Section 5. Deferral of Compensation . Each Plan Year a Participant may elect to have his or director fees with respect to that Plan Year reduced by an amount or percentage designated by the Participant, subject to the following:
(a) The reduction must be specified in a written Participation Agreement filed with the Committee. Participation Agreements are subject to the following:
(1) Elections by a non-employee director with regard to deferral of director fees must be made not later than December 31 of the Plan Year preceding the Plan Year the fees are earned.
(2) However, a non-employee director may make his initial deferral election not later than thirty days after the date he becomes a director. In such cases, the deferral election will apply to fees earned in calendar quarters after the quarter the election is made.
(b) The amount by which a Participant’s director fees are reduced will be credited to his Account as provided in Section 6.
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Section 6. Participant Accounts . An Account shall be established for each Participant who elects to defer compensation pursuant to Section 5, subject to the following:
(a) As part of his election to defer all or a part of his director fees, the Participant shall designate whether the deferral amount will be credited 100% to Account A, 100% to Account B, or 50% to Account A and 50% to Account B. Account A will be credited with interest as specified in subsection (b). Account B will be adjusted up or down to reflect the market performance and dividends on common stock of the Company, as provided in subsection (c). Director fees which are deferred will be credited to Account A and/or Account B as of the first day of the month in which the director fees would have been paid but for the deferral.
(b) Amounts a Participant elects to have credited to his Account A will be credited with interest each Plan Year at an annual rate equal to the published prime rate in effect on the first business day of said Plan Year by a bank designated by the Company. Said interest will be accrued and compounded quarterly.
(c) Amounts a Participant elects to have credited to his Account B will be adjusted to reflect the performance of common stock of the Company as follows:
(1) Amounts credited to Account B as of the first day of any month as a result of a non-employee director = s election to defer director fees, will be converted to phantom units by dividing the dollar amount credited by the closing price of a share of the Company = s common stock on the New York Stock Exchange on the first business day of that month.
(2) Phantom units outstanding on the record date for a dividend on the Company = s common stock will be credited with dividends on said phantom units in a dollar amount per unit equal to the actual dividend on the Company = s common stock. Each such dividend will be converted to additional phantom units as of the dividend payment date with the number of additional units to be determined by dividing the aggregate dividend on the existing phantom units by the closing price of a share of the Company = s common stock on the New York Stock Exchange on said dividend payment date.
(3) As of the first business day of any month in which a payment is to be made to a Participant or a Beneficiary under the Plan, the phantom units with respect to which payment is being made will be converted back to a dollar amount by multiplying each phantom unit by the average closing price of a share of the Company = s common stock on the New York Stock Exchange on the last 20 trading days of the preceding month.
(4) The Committee may adjust the number of phantom units credited to a Participant = s Account to reflect the effect of stock dividends, splits, reverse
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splits, or any other adjustments for which the Committee deems such an adjustment to be appropriate.
(d) During the Plan Year in which the Participant has a Separation from Service, he may direct that all or any part of his units in Account B be converted to a fixed dollar amount and transferred to Account A. The fixed dollar amount shall be determined as of January 1 of the Plan Year following the Plan Year in which the election is made and will be determined by multiplying the number of phantom units which are being converted by the average closing price of a share of the Company = s common stock on the New York Stock Exchange on the last 20 trading days of the preceding December.
Section 7. Payment of Benefits . As part of his deferral election, a Participant shall designate the year or years in which the deferred amounts will be paid to him. A Participant may designate that the entire amount will be paid in one year, or that payment will be made in annual installments over a period of five or ten years beginning with a designated year. Such elections are subject to the following:
(a) A designation may designate a particular year for commencement of payments (e.g., 2010) or the commencement date may be by reference to the Plan Year following the year of the Participant’s Separation from Service.
(b) If the Participant designates that payments will occur over a period of five or ten years, the amount payable in a particular year will be equal to his Account balance divided by the number of remaining installments including the current installment. Payments will come pro rata from Account A and Account B, in proportion to the relative values of the Accounts from which payment is being made.
(c) In the event of a Participant’s death, payments will be made to his Beneficiary in installments over the five year period beginning with the year following the Participant’s death. However, a Participant may as part of his deferral election designate some other form of payment with regard to death benefits, provided, however that in any event all death benefit payments must be completed not later than ten years following the Participant’s death.
(d) Amounts payable in a particular Plan Year will be paid in January of that Plan Year. However, a payment due to Separation from Service will not be paid until six months after the Separation from Service.
Section 8. Miscellaneous Provisions .
(a) No Participant or Beneficiary shall have any right to assign, pledge, transfer or otherwise hypothecate this Plan or the payments hereunder, in whole or in part. Benefits under this Plan will not be subject to execution, attachment, garnishment or similar process.
(b) This Plan constitutes the Company’s unconditional promise to pay the amounts which become payable pursuant to the terms hereof. A Participant’s rights are solely those
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of an unsecured creditor. This Plan does not give any Participant or Beneficiary a security interest in any specific assets of the Company. Accounts are for bookkeeping purposes only, and do not require any segregation of assets.
(c) In the event of a dispute over whether a Participant is eligible for a benefit hereunder (or the amount thereof), the Participant is responsible for paying any costs he or she incurs in pursuing said claim, including his or her legal expenses and attorney fees, and the Company is responsible for payment of any costs, legal expenses and attorney fees it incurs.
(d) The provisions of this Agreement shall be construed and enforced according to the laws of Wisconsin.
(e) This Agreement shall be binding upon and for the benefit of the successors and assigns of the Company, whether by way of merger, consolidation, operation of the law, assignment, purchase or other acquisition of substantially all of the assets or business of the Company, and any such successor or assign shall absolutely and unconditionally assume all of the Company’s obligations hereunder.
(f) In addition to any other applicable provisions of indemnification, the Company agrees to indemnify and hold harmless, to the extent permitted by law, each member of the Committee (collectively referred to herein as “Indemnitee”) against any and all liabilities, losses, costs or expenses (including legal fees) of whatsoever kind and nature which may be imposed on, reasonably incurred by or asserted against such person at any time by reason of such person’s services in connection with the Plan, but only if such person did not dishonestly or in bad faith or in willful violation of the law or regulations under which such liability, loss, cost or expense arises. The Company shall have the right, but not the obligation, to select counsel and control the defense and settlement of any action against the Indemnitee for which the Indemnitee may be entitled to indemnification under this provision.
(g) The Plan formerly allowed certain executives of the Company to defer amounts from their bonuses. All such deferrals were completed prior to 2005 and are being paid in accordance with the Plan as previously in effect.
(h) The Plan may be amended from time to time by the Company, by action of the Board, the Committee, or an officer of the Company to whom the Board or Committee has delegated such authority.
5
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The Company has no parent. The following were subsidiaries of the Company as of December 31, 2008.
|
|
|
|
|
Percentage of |
|
|
|
|
Jurisdiction |
|
Voting Securities |
|
|
|
|
of |
|
Owned By |
|
|
Name |
|
Organization |
|
Immediate Parent |
|
|
Bemis Company, Inc. |
|
Missouri |
|
|
|
|
|
|
|
|
|
|
|
Bemis Clysar, Inc. |
|
Minnesota |
|
100 |
% |
|
Bemis Czech Republic, s.r.o. |
|
Czech Republic |
|
100 |
% |
|
Bemis Deutschland Holdings GmbH |
|
Germany |
|
100 |
% |
|
Bemis Packaging Deutschland GmbH |
|
Germany |
|
100 |
% |
|
Bemis Europe Holdings, S.A. |
|
Belgium |
|
100 |
% |
|
Bemis Monceau S.A. |
|
Belgium |
|
100 |
% |
|
|
|
|
|
|
|
|
Bemis Flexible Packaging de Mexico, S.A. de C.V. |
|
Mexico |
|
100 |
% |
|
Bemis Flexible Packaging Mexico Servicios, S.A. de C.V. |
|
Mexico |
|
100 |
% |
|
Bemis Flexible Packaging (Suzhou) Co., Ltd. |
|
China |
|
100 |
% |
|
Bemis France Holdings S.A.S. |
|
France |
|
100 |
% |
|
Bemis Le Trait S.A.S. |
|
France |
|
100 |
% |
|
Bemis Packaging France S.A.S. |
|
France |
|
100 |
% |
|
|
|
|
|
|
|
|
Bemis Hungary Trading Limited Liability Company |
|
Hungary |
|
100 |
% |
|
Bemis Packaging Danmark ApS |
|
Denmark |
|
100 |
% |
|
Bemis Packaging Sverige A.B. |
|
Sweden |
|
100 |
% |
|
Bemis Packaging U.K. Ltd. |
|
United Kingdom |
|
100 |
% |
|
|
|
|
|
|
|
|
Bemis (Shanghai) Trading Co., Ltd. |
|
China |
|
100 |
% |
|
Bemis Valkeakoski Oy |
|
Finland |
|
100 |
% |
|
Bolsas Bemis S.A. de C.V. |
|
Mexico |
|
100 |
% |
|
Bolsas Bemis Servicios Mexico S.A. de C.V. |
|
Mexico |
|
100 |
% |
|
|
|
|
|
|
|
|
Curwood, Inc. |
|
Delaware |
|
100 |
% |
|
Curwood Packaging (Canada) Limited |
|
Canada |
|
100 |
% |
|
Bemis Packaging Ireland Limited |
|
Ireland |
|
100 |
% |
|
Bemis Swansea Limited |
|
United Kingdom |
|
100 |
% |
|
Bemis Packaging Espana sl |
|
Spain |
|
100 |
% |
|
Itap Bemis Ltda. |
|
Brazil |
|
22 |
% |
|
|
|
|
|
|
|
|
Perfecseal, Inc. |
|
Delaware |
|
100 |
% |
|
Perfecseal Internacional de Puerto Rico, Inc. |
|
Delaware |
|
100 |
% |
|
Perfecseal International Ltd. |
|
Delaware |
|
100 |
% |
|
Perfecseal Limited |
|
United Kingdom |
|
100 |
% |
|
Bemis Asia Pacific Sdn Bhd |
|
Malaysia |
|
100 |
% |
|
|
|
|
|
|
|
|
DEMF DT Holdings I, LLC |
|
Delaware |
|
100 |
% |
|
Itap Bemis Ltda. |
|
Brazil |
|
23 |
% |
|
Hayco Liquidation Company |
|
Delaware |
|
100 |
% |
|
Bemis U.K. Limited |
|
United Kingdom |
|
50 |
% |
|
|
|
|
|
|
|
|
MacKay, Inc. |
|
Kentucky |
|
100 |
% |
|
MACtac Mexico Servicios, S.A. de C.V. |
|
Mexico |
|
51 |
% |
|
Milprint, Inc. |
|
Wisconsin |
|
100 |
% |
|
Bemis Elsham Limited |
|
United Kingdom |
|
100 |
% |
48
|
|
|
|
|
Percentage of |
|
|
|
|
Jurisdiction |
|
Voting Securities |
|
|
|
|
of |
|
Owned By |
|
|
Name |
|
Organization |
|
Immediate Parent |
|
|
|
|
|
|
|
|
|
Dixie Toga S.A. |
|
Brazil |
|
100 |
% |
|
American Plast S.A. |
|
Argentina |
|
61 |
% |
|
Dixie Toga International Ltd. |
|
Cayman Islands |
|
100 |
% |
|
Impressora Paranaense S.A. |
|
Brazil |
|
100 |
% |
|
Insit Embalagens Ltda. |
|
Brazil |
|
90 |
% |
|
Itap Bemis Ltda. |
|
Brazil |
|
55 |
% |
|
Itap Bemis Centro Oeste-Industria e Comércio de Embalagens Ltda. |
|
Brazil |
|
100 |
% |
|
Curwood Chile Ltda. |
|
Chile |
|
100 |
% |
|
Laminor S.A. |
|
Brazil |
|
50 |
% |
|
|
|
|
|
|
|
|
Morgan Adhesives Company |
|
Ohio |
|
100 |
% |
|
Bemis Coordination Center S.A. |
|
Belgium |
|
33 |
% |
|
Bemis U.K. Limited |
|
United Kingdom |
|
50 |
% |
|
MACtac U.K. Limited |
|
United Kingdom |
|
100 |
% |
|
Electronic Printing Products, Inc. |
|
Ohio |
|
100 |
% |
|
MACtac Canada Limited/Limitee |
|
Canada |
|
100 |
% |
|
MACtac Europe S.A. |
|
Belgium |
|
11 |
% |
|
MACtac Europe S.A. |
|
Belgium |
|
89 |
% |
|
Bemis Coordination Center S.A. |
|
Belgium |
|
67 |
% |
|
Bemis Polska Sp. z o.o. |
|
Poland |
|
100 |
% |
|
MACtac Asia-Pacific Self-Adhesive Products Pte Ltd. |
|
Singapore |
|
100 |
% |
|
|
|
|
|
|
|
|
MACtac Deutschland GmbH |
|
Germany |
|
100 |
% |
|
MACtac France E.U.R.L. |
|
France |
|
100 |
% |
|
Multi-Fix N.V. |
|
Belgium |
|
100 |
% |
|
|
|
|
|
|
|
|
MACtac Mexico, S.A. de C.V. |
|
Mexico |
|
100 |
% |
|
MACtac Mexico Servicios, S.A. de C.V. |
|
Mexico |
|
49 |
% |
|
MACtac Scandinavia A.B. |
|
Sweden |
|
100 |
% |
|
|
|
|
|
|
|
|
Pervel Industries, Inc. |
|
Delaware |
|
100 |
% |
49
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-80666, 333-61556, and 333-136698) of Bemis Company, Inc. of our reports dated February 27, 2009 relating to the consolidated financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
50
EXHIBIT 31.1
RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CEO
I, Henry J. Theisen, certify that:
1. I have reviewed this report on Form 10-K of Bemis Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date |
February 27, 2009 |
|
By /s/ Henry J. Theisen |
|
|
Henry J. Theisen, President and
|
||
51
EXHIBIT 31.2
RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CFO
I, Gene C. Wulf, certify that:
1. I have reviewed this report on Form 10-K of Bemis Company, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date |
February 27, 2009 |
|
By /s/ Gene C. Wulf |
|
|
|
|
Gene C. Wulf, Senior Vice President
|
52
EXHIBIT 32
SECTION 1350 CERTIFICATIONS OF CEO AND CFO
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned certifies that the annual report on Form 10-K of Bemis Company, Inc. for the year ended December 31, 2008 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Bemis Company, Inc.
|
/s/ Henry J. Theisen |
|
/s/ Gene C. Wulf |
|
Henry J. Thiesen, President and
|
|
Gene C. Wulf, Senior Vice President
|
|
February 27, 2009 |
|
February 27, 2009 |
53