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, 2009
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.) |
One Neenah Center, 4 th Floor, P.O. Box 669, Neenah, Wisconsin 54957-0669
(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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Title of Each Class |
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Name of
Each Exchange
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Common Stock, par value $.10 per share |
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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: (1) 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§232.405) 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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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 |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). 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, 2009, based on a closing price of $25.20 per share as reported on the New York Stock Exchange, was $2,518,321,000.
As of February 24, 2010, the Registrant had 109,012,133 shares of Common Stock issued and outstanding.
Documents Incorporated by Reference
Portions of the Proxy Statement - Annual Meeting of Stockholders May 6, 2010 - Part III
BEMIS COMPANY, INC. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
PART I — ITEMS 1, 1A, 1B, 2, and 3
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. In 2009, approximately 85 percent of the Company’s sales were derived from the Flexible Packaging segment and approximately 15 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 17 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Prior to the acquisition of the Food Americas operations of Alcan Packaging, the Company had approximately 16,000 employees, about 10,700 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 four years. During 2009, six contracts covering 1,520 employees at six different locations in the United States were successfully negotiated while one contract covering 88 employees at one domestic location continues to be negotiated. Seven domestic labor agreements covering 741 employees are scheduled to expire in 2010. 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.
The acquisition of the Food Americas operations of Alcan Packaging on March 1, 2010 added approximately 4,400 employees, of which approximately 3,200 are classified as production employees, bringing the total Company employee count to approximately 20,400 employees.
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 packaging for food, consumer goods, and industrial applications. 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 stretch film products, carton sealing tapes and application equipment, custom thermoformed and injection molded 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, graphic, 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. 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. Products for technical markets include micro-thin film adhesives used in delicate electronic parts assembly and pressure sensitive applications utilizing foam and tape based stocks to perform fastening and mounting functions.
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, 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 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
Polymer resins and films, paper, inks, adhesives, aluminum, 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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2009 |
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2008 |
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2007 |
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Flexible Packaging |
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$ |
17,301 |
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$ |
17,646 |
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$ |
19,477 |
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Pressure Sensitive Materials |
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7,041 |
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7,364 |
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6,506 |
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Total |
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$ |
24,342 |
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$ |
25,010 |
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$ |
25,983 |
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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.
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 principal form in which flexible packaging material is delivered to a customer. Finished film wound on a core is converted in a process at the end user’s plant that forms, fills, and seals the package of product for delivery to customers.
Rotogravure printing — A high quality, long run printing process utilizing a metal engraved cylinder.
Sheet products — Pressure sensitive materials cut into sheets and sold in sheet form.
Shrink film/ Barrier shrink film — A packaging film consisting of polyethylene and/or polypropylene resins extruded via a tubular process. The film is cooled and then reheated and stretched at a temperature near its melting point. The film can be irradiated with an electron beam in a second process to cross link the molecules for added heat resistance and strength. The film is made to shrink around a product to be packaged by an application of a thermal treatment. Alternately, a layer of an oxygen barrier material can be included to manufacture a barrier shrink film product.
Stretch film — A plastic film with a significant ability to stretch which is used to wrap pallets of goods in the shipping process.
Technical products — Technically engineered pressure sensitive materials used primarily for fastening and mounting functions, for example in cell phones, appliances, and electronic devices.
Thermoformed plastic packaging — A package formed by applying heat to a film to shape it into a tray or cavity and then sealing a flat film on top of the package after it has been filled.
UV inhibitors — Chemical agents included in a film to protect products against ultraviolet rays.
Variable information label — A pressure sensitive label that is typically printed with a bar code or other type of variable information.
The following factors, as well as factors described elsewhere in this Form 10-K, or in other filings by the Company with the Securities and Exchange Commission, could adversely affect the Company’s consolidated financial position, results of operations or cash flows. Other factors not presently known to us or that we presently believe are not material could also affect our business operations and financial results.
Acquisitions — We may not be able to successfully integrate 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.
Alcan Packaging Food Americas Acquisition.
On March 1, 2010, Bemis completed the acquisition of the Food Americas operations of Alcan Packaging (the Food Americas Acquisition), a business unit of international mining group Rio Tinto plc, for $1.2 billion. The acquisition will expand our global presence with 23 Food Americas flexible packaging facilities in the U.S., Canada, Mexico, Brazil, Argentina, and New Zealand. These flexible packaging facilities recorded net sales of $1.4 billion in 2009 to the food and beverage markets and include expertise in foil and crystallized polyester technologies.
This Food Americas Acquisition presents additional or increased risk factors as follows:
We may not realize the expected benefits of the Food Americas Acquisition because of integration difficulties and other challenges.
The success of the Food Americas Acquisition will depend, in part, on our ability to realize the anticipated synergies, and cost savings from integrating the Alcan Packaging Food Americas business with our existing businesses. The integration process may be complex, costly, and time-consuming. The difficulties of integrating the operations of the Alcan Packaging Food Americas business include, among others:
· failure to implement our business plan for the combined business;
· unanticipated issues in integrating manufacturing, logistics, information, communications, and other systems;
· unanticipated changes in applicable laws and regulations;
· failure to retain key employees;
· operating risks inherent in the Alcan Packaging Food Americas business and our business;
· the impact on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002; and
· unanticipated issues, expenses, and liabilities.
We may not accomplish the integration of the Alcan Packaging Food Americas business smoothly, successfully, or within the anticipated costs or timeframe. The diversion of the attention of management from our current operations to the integration effort and any difficulties encountered in combining operations could prevent us from realizing the full benefits anticipated to result from the Food Americas Acquisition and could adversely affect our business.
We have incurred and will incur significant transaction and acquisition-related costs in connection with the Food Americas Acquisition.
We have incurred and will incur significant costs in connection with the Food Americas Acquisition. The substantial majority of these costs will be non-recurring expenses related to the Food Americas Acquisition, facilities, and systems consolidation costs. We may incur additional costs to maintain employee morale and to retain key employees. We will also incur substantial transaction fees and costs related to formulating integration plans. Additional costs will be incurred in the integration of the Alcan Packaging Food Americas business. Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the business, should allow us to more than offset incremental transaction and acquisition-related costs over time, this net benefit may not be achieved in the near term, or at all.
Our increased debt obligations incurred to finance the Food Americas Acquisition could adversely affect our business and limit our ability to plan for or respond to changes in our business.
Our increased debt obligations could have important consequences to our business. For example:
· we may be more vulnerable to general adverse economic and industry conditions;
· we may be required to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow for other purposes, including business development efforts and mergers and acquisitions;
· we are exposed to the risk of increased interest rates because a portion of our borrowings is at variable rates of interest;
· our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate may be limited, thereby placing us at a competitive disadvantage compared to our competitors that have less indebtedness.
The transition services to be provided by Rio Tinto for the Alcan Packaging Food Americas business may be difficult for us to replace without operational problems and additional costs.
We have entered into a transition services agreement with Rio Tinto pursuant to which Rio Tinto will provide us certain transition services for the Alcan Packaging Food Americas business for certain periods of time following the closing date of the Food Americas Acquisition. These services include, among others, certain services relating to finance, administration, human resources, payroll, and information technology. If, after the expiration of the agreement, we are unable to perform these services for the Alcan Packaging Food Americas business or replace them in a timely manner or on terms and conditions as favorable as those we receive from Rio Tinto, we may experience operational problems and an increase in costs. In addition, the costs for such services may be higher than the allocated costs for such services when the Alcan Packaging Food Americas business was operated as part of Rio Tinto.
We may not be able to generate sufficient cash flows to meet our debt service obligations after the Food Americas Acquisition.
We have incurred and will incur additional debt in connection with the Food Americas Acquisition. Our ability to make payments on and to refinance our debt obligations and to fund planned capital expenditures depends on our ability to generate cash from our future operations. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control.
If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional equity, or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances, any of which could impede the implementation of our business strategy for us or prevent us from entering into transactions that would otherwise benefit our business. Additionally, we may not be able to effect such actions, if necessary, on commercially reasonable terms, or at all.
The market price of our common stock may decline as a result of the Food Americas Acquisition.
The market price of our common stock may decline as a result of the Food Americas Acquisition if, among other things, we are unable to achieve the expected growth in earnings, or if the operational cost savings estimates in connection with the integration of the Alcan Packaging Food Americas business are not realized, or if the transaction costs related to the Food Americas Acquisition are greater than expected, or if the value of the cash savings attributable to the amortization of tax deductible goodwill is less than anticipated. The market price of our common stock also may decline if we do not achieve the perceived benefits of the acquisition as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the acquisition on our financial results is not consistent with the expectations of financial or industry analysts.
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 other market disruptions 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.
Current accounting standards issued by the Financial Accounting Standards Board (FASB) require 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 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 — 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.
In accordance with current accounting standards, 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 current accounting standards. 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 currency exchange rates may reduce our reported results of operations.
We have operations in the United States, Canada, Mexico, South America, Europe, and Asia. In 2009, approximately 35 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, 2009, our variable rate borrowings approximated $123.4 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 $1.2 million on the $123.4 million of variable rate debt outstanding as of December 31, 2009.
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 interest 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 could 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.
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 customers’ 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 March 1, 2010, were as follows:
Flexible Packaging Segment
Prior to the acquisition of the Food Americas operations of Alcan Packaging, this segment had 53 manufacturing plants located in 13 states and ten non-USA countries, of which 46 are owned directly by the Company or its subsidiaries and seven 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, 2009, expire between 2010 and 2018.
The acquisition of the Food Americas operations of Alcan Packaging added 23 flexible packaging facilities in the U.S., Canada, Mexico, Brazil, Argentina, and New Zealand. We now have 76 worldwide manufacturing plants for the flexible packaging segment.
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.
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.
Environmental Matters
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. 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.
Alcan Packaging Acquisition
In compliance with regulatory requirements for approval of our acquisition of the Food Americas operations of Alcan Packaging in the United States, we have entered into a Consent Decree with the United States Department of Justice. Under the terms of the Consent Decree, we are obligated to divest certain Alcan Packaging Food Americas packaging assets in the United States within a specified time period after the closing date. The packaging assets that will be divested produced annual sales of approximately $100 million in 2009 and include manufacturing equipment used to produce shrink bags used for fresh meat products and flexible packaging used for natural cheese products.
São Paulo Tax Dispute
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.
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 $62.9 million at the date the Company acquired Dixie Toga, translated to U.S. dollars at the December 31, 2009 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 $9.5 million for Itap Bemis and $30.6 million for Dixie Toga, translated to U.S. dollars at the December 31, 2009 exchange rate. In the event of an adverse resolution, the estimated amounts for these years could be increased by $40.1 million for Itap Bemis and $115.6 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.
Recently, the City has also asserted the applicability of the city services tax for the subsequent years 2004-2009. The assessments issued by the City for these years have been received and are being challenged by the Company at the administrative level. The assessments for tax and penalties are estimated to be approximately $23.4 million, translated to U.S. dollars at the December 31, 2009 exchange rate.
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.
Brazil Investigation
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.
Labelstock Class Actions
The Company and its subsidiary, Morgan Adhesives Company, were 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 purported to represent a nationwide class of labelstock purchasers, and each alleged 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 sought 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 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. On May 26, 2009, the Company and Morgan Adhesives Company entered into a settlement with the plaintiff class, pursuant to which the Company agreed to pay $1.25 million in return for a full and complete release of all claims in the federal class actions. The Company agreed to pay this settlement amount to avoid the expense of further litigation. On June 10, 2009, Judge Vanaskie granted preliminary approval to the settlement. On September 17, 2009, Judge Vanaskie granted final approval of the settlement, and dismissed the class action against Morgan Adhesives with prejudice.
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. On November 20, 2009, the Company and Morgan Adhesives Company entered into a settlement with the plaintiffs in the class actions filed in Nebraska, Kansas, Tennessee, and Vermont, pursuant to which the Company agreed to pay $90,000 in return for a full and complete release of all claims in those class actions. The Company agreed to pay this settlement amount to avoid the expense of further litigation. On November 24, 2009, the Court granted preliminary approval to the settlement of the class actions filed in Nebraska, Kansas, Tennessee, and Vermont. The Company and Morgan Adhesives Company intend to vigorously defend the remaining state class actions.
Given the ongoing status of the remaining class-action civil lawsuit, 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.
PART II — ITEMS 5, 6, 7, 7A, 8, 9, 9A, and 9B
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, 2009, there were 3,870 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, 2009. As of December 31, 2009, 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 |
|
||||
|
2009 |
|
|
|
|
|
|
|
|
|
||||
|
Dividend paid per common share |
|
$ |
0.225 |
|
$ |
0.225 |
|
$ |
0.225 |
|
$ |
0.225 |
|
|
Common stock price per share |
|
|
|
|
|
|
|
|
|
||||
|
High |
|
$ |
26.27 |
|
$ |
26.32 |
|
$ |
27.65 |
|
$ |
31.41 |
|
|
Low |
|
$ |
16.85 |
|
$ |
20.34 |
|
$ |
23.88 |
|
$ |
24.92 |
|
|
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 |
|
ITEM 6 — SELECTED FINANCIAL DATA
FIVE-YEAR CONSOLIDATED REVIEW
(dollars in millions, except per share amounts)
|
Years Ended December 31, |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
|||||
|
Operating Data |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net sales |
|
$ |
3,514.6 |
|
$ |
3,779.4 |
|
$ |
3,649.3 |
|
$ |
3,639.4 |
|
$ |
3,474.0 |
|
|
Cost of products sold and other expenses |
|
3,232.2 |
|
3,471.5 |
|
3,309.4 |
|
3,300.8 |
|
3,153.0 |
|
|||||
|
Interest expense |
|
42.1 |
|
39.4 |
|
50.3 |
|
49.3 |
|
38.7 |
|
|||||
|
Income before income taxes |
|
240.3 |
|
268.5 |
|
289.6 |
|
289.3 |
|
282.3 |
|
|||||
|
Provision for income taxes |
|
87.8 |
|
96.3 |
|
104.3 |
|
109.5 |
|
113.9 |
|
|||||
|
Net income |
|
152.5 |
|
172.2 |
|
185.3 |
|
179.8 |
|
168.4 |
|
|||||
|
Less: net income attributable to noncontrolling interests |
|
5.3 |
|
6.0 |
|
3.7 |
|
3.5 |
|
5.9 |
|
|||||
|
Net income attributable to Bemis Company, Inc. |
|
147.2 |
|
166.2 |
|
181.6 |
|
176.3 |
|
162.5 |
|
|||||
|
Net income attributable to Bemis Company, Inc. as a percent of net sales |
|
4.2 |
% |
4.4 |
% |
5.0 |
% |
4.8 |
% |
4.7 |
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Common Share Data |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Basic earnings per share |
|
$ |
1.38 |
|
$ |
1.61 |
|
$ |
1.71 |
|
$ |
1.63 |
|
$ |
1.48 |
|
|
Diluted earnings per share |
|
1.38 |
|
1.61 |
|
1.70 |
|
1.62 |
|
1.48 |
|
|||||
|
Dividends per share |
|
0.90 |
|
0.88 |
|
0.84 |
|
0.76 |
|
0.72 |
|
|||||
|
Book value per share |
|
17.11 |
|
13.87 |
|
15.93 |
|
14.32 |
|
13.08 |
|
|||||
|
Weighted-average shares outstanding for computation of diluted earnings per share |
|
106,924,919 |
|
103,404,199 |
|
106,758,469 |
|
108,549,573 |
|
109,960,169 |
|
|||||
|
Common shares outstanding at December 31, |
|
108,223,740 |
|
99,708,191 |
|
100,518,355 |
|
104,841,576 |
|
105,305,975 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Capital Structure and Other Data |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Current ratio |
|
3.8 |
x |
2.3 |
x |
2.1 |
x |
2.0 |
x |
2.1 |
x |
|||||
|
Working capital |
|
$ |
1,480.5 |
|
$ |
560.9 |
|
$ |
602.4 |
|
$ |
538.3 |
|
$ |
513.5 |
|
|
Total assets |
|
3,928.7 |
|
2,822.3 |
|
3,191.4 |
|
3,039.0 |
|
2,964.6 |
|
|||||
|
Short-term debt |
|
31.3 |
|
26.6 |
|
67.8 |
|
67.6 |
|
54.0 |
|
|||||
|
Long-term debt |
|
1,227.5 |
|
660.0 |
|
775.5 |
|
722.2 |
|
790.1 |
|
|||||
|
Total equity |
|
1,851.7 |
|
1,382.5 |
|
1,601.3 |
|
1,501.2 |
|
1,377.0 |
|
|||||
|
Return on average total equity |
|
9.1 |
% |
11.1 |
% |
11.7 |
% |
12.3 |
% |
12.1 |
% |
|||||
|
Return on average total capital |
|
6.4 |
% |
8.0 |
% |
8.5 |
% |
8.6 |
% |
8.4 |
% |
|||||
|
Depreciation and amortization |
|
$ |
159.3 |
|
$ |
162.0 |
|
$ |
158.5 |
|
$ |
152.4 |
|
$ |
150.8 |
|
|
Capital expenditures |
|
89.2 |
|
120.5 |
|
178.9 |
|
158.8 |
|
187.0 |
|
|||||
|
Number of common stockholders |
|
3,870 |
|
3,920 |
|
4,111 |
|
4,192 |
|
4,359 |
|
|||||
|
Number of employees |
|
20,400 |
|
15,394 |
|
15,678 |
|
15,736 |
|
15,903 |
|
|||||
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) |
|
2009 |
|
2008 |
|
2007 |
|
|||||||||
|
Net sales |
|
$ |
3,514.6 |
|
100.0 |
% |
$ |
3,779.4 |
|
100.0 |
% |
$ |
3,649.3 |
|
100.0 |
% |
|
Cost of products sold |
|
2,814.4 |
|
80.1 |
|
3,131.4 |
|
82.9 |
|
2,973.3 |
|
81.5 |
|
|||
|
Gross margin |
|
700.2 |
|
19.9 |
|
648.0 |
|
17.1 |
|
676.0 |
|
18.5 |
|
|||
|
Selling, general, and administrative expenses |
|
370.9 |
|
10.5 |
|
342.7 |
|
9.0 |
|
341.6 |
|
9.4 |
|
|||
|
All other expenses |
|
89.0 |
|
2.5 |
|
36.8 |
|
1.0 |
|
44.8 |
|
1.2 |
|
|||
|
Income before income taxes |
|
240.3 |
|
6.8 |
|
268.5 |
|
7.1 |
|
289.6 |
|
7.9 |
|
|||
|
Provision for income taxes |
|
87.8 |
|
2.5 |
|
96.3 |
|
2.5 |
|
104.3 |
|
2.8 |
|
|||
|
Net income |
|
152.5 |
|
4.3 |
|
172.2 |
|
4.6 |
|
185.3 |
|
5.1 |
|
|||
|
Less: net income attributable to Noncontrolling interests |
|
5.3 |
|
0.1 |
|
6.0 |
|
0.2 |
|
3.7 |
|
0.1 |
|
|||
|
Net income attributable to Bemis Company, Inc. |
|
$ |
147.2 |
|
4.2 |
% |
$ |
166.2 |
|
4.4 |
% |
$ |
181.6 |
|
5.0 |
% |
|
Effective income tax rate |
|
|
|
36.5 |
% |
|
|
35.9 |
% |
|
|
36.0 |
% |
|||
Bemis Company, Inc. is a leading global manufacturer of flexible packaging and pressure sensitive materials supplying a variety of markets. Approximately 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 applications for 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 85 percent of our net sales. The remaining 15 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 such as advertising, housing, and automotive.
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 and films, paper, inks, adhesives, aluminum, and chemicals.
The global financial crisis which started late in 2008 continued to dampen consumer demand in many regions around the world during 2009. While the majority of our products are sold for more resilient food applications, our customers who operate in the advertising, automotive, housing, and industrial product markets experienced weakness in demand for their products throughout the year. In the food and grocery products markets, we experienced lower unit sales volumes but benefited from consumer trends that have prioritized value added products.
Polymer resins, the primary raw materials used in our flexible packaging business segment, experienced significant volatility in recent years. Our 2009 operating performance benefited from a temporary margin increase as raw material costs decreased ahead of contractual selling price adjustments. During the last half of 2009, resin costs were relatively stable and the majority of our contract selling prices had adjusted to reflect the change in input costs.
On March 1, 2010, Bemis completed the acquisition of the Food Americas operations of Alcan Packaging, a business unit of international mining group Rio Tinto plc, for $1.2 billion. The acquisition will expand our global presence with 23 Food Americas flexible packaging facilities in the U.S., Canada, Mexico, Brazil, Argentina, and New Zealand. These flexible packaging facilities, while owned by Rio Tinto plc, recorded net sales of $1.4 billion in 2009 to the food and beverage markets and include expertise in foil and crystallized polyester technologies.
In compliance with regulatory requirements for approval of the transaction in the United States, Bemis is obligated to divest certain Alcan Packaging Food Americas packaging assets in the United States within a specified time period after the closing date. The packaging assets that will be divested produced annual sales of approximately $100 million in 2009 and include manufacturing equipment used to produce packaging for fresh meat and retail natural cheese products.
The majority of the financing for this transaction was completed during the third quarter of 2009 through the issuance of $800.0 million of public bonds and 8.2 million common shares issued in a secondary public stock offering. The remaining cash purchase price was financed in the commercial paper market in advance of closing.
|
(in millions, except per share amounts) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Net sales |
|
$ |
3,514.6 |
|
$ |
3,779.4 |
|
$ |
3,649.3 |
|
|
Net income attributable to Bemis Company, Inc. |
|
147.2 |
|
166.2 |
|
181.6 |
|
|||
|
Diluted earnings per share |
|
1.38 |
|
1.61 |
|
1.70 |
|
|||
2009 versus 2008
For the year ended December 31, 2009, net sales decreased 7.0 percent. The effect of currency translation decreased net sales by 3.3 percent in 2009, while the June 2009 acquisition of a flexible packaging company in South America contributed 1.3 percent to net sales growth. Net of these impacts, the decline in net sales during 2009 primarily reflects lower unit sales volumes in both business segments.
Diluted earnings per share were $1.38 for 2009, a 14.3 percent decrease compared to $1.61 per share for 2008. For the year ended December 31, 2009, diluted earnings per share included a $0.50 per share charge representing the impact of acquisition related professional fees, acquisition financing, an administrative sales tax assessment, and severance charges, partially offset by a $0.02 per share gain on the sale of an asset. Operating results for the year ended December 31, 2009 benefited from an increased proportion of net sales of value added products and decreasing input costs during the first half of the year.
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 $1.61 for 2008, a 5.3 percent decrease compared to $1.70 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.
Our flexible packaging business segment provides packaging to a variety of end markets, including packaging for products such as meat and cheese, dairy and liquids, 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 multilayer film products. Our method of passing on input cost changes to customers through regularly adjusted contractual selling prices normally occurs with a several month lag. This methodology creates a short-term, negative impact on operating profit margins during periods of rapid raw material cost increases and a short-term, positive impact on operating profit margins during periods of rapid raw materials cost declines. Raw material costs have been quite volatile over the past few years. During the first half of 2008, raw material costs increased substantially, negatively impacting operating margins during 2008. This was followed by rapid decreases in raw material costs which benefited operating margins during the first half of 2009. Raw material costs were relatively stable during the latter half of 2009.
Acquisition of South American Rigid Packaging Operations of Huhtamaki Oyj
On June 3, 2009, Bemis acquired the South American rigid packaging operations of Huhtamaki Oyj, a global manufacturer of consumer and specialty packaging. This rigid packaging business, which includes three facilities in Brazil and one facility in Argentina, recorded annual net sales of approximately $86 million in 2008, primarily to dairy and food service markets. The purchase price of $43.0 million was paid with a combination of $32.3 million cash on hand, $1.9 million of debt assumed, and an $8.8 million note payable to the seller, the majority of which was paid during 2009.
|
(dollars in millions) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Net sales |
|
$ |
2,983.4 |
|
$ |
3,153.2 |
|
$ |
3,001.8 |
|
|
Operating profit (See Note 17 to the Consolidated Financial Statements) |
|
385.3 |
|
315.9 |
|
346.6 |
|
|||
|
Operating profit as a percentage of net sales |
|
12.9 |
% |
10.0 |
% |
11.5 |
% |
|||
2009 versus 2008
Net sales in our flexible packaging business segment decreased 5.4 percent in 2009. Currency effects accounted for a sales decline of 3.3 percent compared to 2008 and the operations of Huhtamaki Oyj, acquired in June 2009, accounted for $49.6 million of 2009 net sales following the acquisition, increasing net sales by 1.6 percent. The remaining 3.7 percent decrease in net sales reflects both lower selling prices and unit sales volume. Generally lower net sales of flexible packaging for markets such as meat and cheese, confectionery and snack, pet food, bakery products, overwrap for bottled beverages, health and hygiene, and industrial products reflects decreased consumer demand for products in those areas. These market segment applications represent approximately 70 percent of our total flexible packaging net sales and offset modestly higher net sales of value added packaging applications in other market segments such as dairy, liquids, and medical products.
Operating profit as a percentage of net sales increased to 12.9 percent in 2009 from 10.0 percent in 2008. This improvement reflects the combined impact of improved sales mix and production efficiency initiatives, as well as lower input costs experienced during the first half of 2009. The improvement in sales mix during 2009 is attributable to an increased proportion of net sales represented by value added packaging which incorporates consumer convenience features and extends shelf life. Net sales of packaging for less complex
applications generally experienced the largest unit volume decrease during 2009. In comparison, operating margins during 2008 were negatively impacted by dramatic increases in raw material costs during the summer months.
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.
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.
The pressure sensitive materials business segment offers adhesive products through three product lines: 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 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.
|
(dollars in millions) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Net sales |
|
$ |
531.2 |
|
$ |
626.2 |
|
$ |
647.5 |
|
|
Operating profit (See Note 17 to the Consolidated Financial Statements) |
|
13.6 |
|
34.3 |
|
40.3 |
|
|||
|
Operating profit as a percentage of net sales |
|
2.6 |
% |
5.5 |
% |
6.2 |
% |
|||
2009 versus 2008
Our pressure sensitive materials business segment reported a net sales decrease of 15.2 percent in 2009. Currency effects accounted for a net sales decline of 3.2 percent. The balance of the decrease reflects dramatically lower unit sales volumes compared to 2008. The markets for our graphic and technical products, which represent about 40 percent of total business segment sales, have experienced significant demand declines in light of weak global economic conditions, resulting in net sales declines for those products in excess of 20.0 percent.
Operating profit as a percent of net sales was lower in 2009 compared to 2008, reflecting the decline in unit sales volumes, particularly in high value added graphic and technical product lines. Operating profit in 2009 includes severance charges totaling $2.6 million related to workforce reductions intended to better match capacity levels with current production needs.
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. Operating profit as a percent of net sales was lower in 2008 compared to 2007, reflecting decreased unit sales volumes across all product lines.
|
(dollars in millions) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Gross margin |
|
$ |
700.2 |
|
$ |
648.0 |
|
$ |
676.0 |
|
|
Gross margin as a percentage of net sales |
|
19.9 |
% |
17.1 |
% |
18.5 |
% |
|||
Improved sales mix, production efficiency initiatives, and decreasing input costs during the first half of the year, each contributed to the improved gross margin in 2009. Input costs moderated during the second half of 2009, reducing the positive impact of the contractual lag in selling price adjustments. Improved sales mix throughout 2009 was driven by increased sales of value added flexible packaging products. Gross margins in 2008 were negatively impacted by dramatic, short-lived raw material cost increases during the year.
|
(dollars in millions) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Selling, general and administrative expenses (SG&A) |
|
$ |
370.9 |
|
$ |
342.7 |
|
$ |
341.6 |
|
|
SG&A as a percentage of net sales |
|
10.5 |
% |
9.0 |
% |
9.4 |
% |
|||
Selling, general, and administrative expenses increased in 2009 primarily as a result of higher benefit and incentive plan costs during the year. The increase in the ratio of these expenses to net sales in 2009 was magnified by lower sales levels for the year ended December 31, 2009.
Other Expenses
|
(dollars in millions) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Research and development (R&D) |
|
$ |
24.3 |
|
$ |
25.0 |
|
$ |
26.0 |
|
|
R&D as a percentage of net sales |
|
0.7 |
% |
0.7 |
% |
0.7 |
% |
|||
|
|
|
|
|
|
|
|
|
|||
|
Interest expense |
|
42.1 |
|
39.4 |
|
50.3 |
|
|||
|
Effective interest rate |
|
4.3 |
% |
4.8 |
% |
5.9 |
% |
|||
|
|
|
|
|
|
|
|
|
|||
|
Other costs (income), net |
|
22.6 |
|
(27.7 |
) |
(31.5 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Income taxes |
|
87.8 |
|
96.3 |
|
104.3 |
|
|||
|
Effective tax rate |
|
36.5 |
% |
35.9 |
% |
36.0 |
% |
|||
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 increased by $2.7 million during 2009. Interest expense includes interest costs of $21.3 million associated with public bonds issued in July of 2009 to finance the acquisition of the Alcan Packaging Food Americas business. The percentage of variable rate debt included in total debt is 13 percent in 2009, 55 percent in 2008, and 64 percent in 2007. Variable interest rates remained low in 2009, and we dedicated our excess cash flow to debt reduction throughout the year.
For the year ended December 31, 2009, other costs and income included $44.8 million of acquisition related professional fees and related expenses associated with the acquisition of the Alcan Packaging Food Americas business. Financial income recorded in 2009 was $20.2 million, compared to $33.5 million for the year ended December 31, 2008. The decrease in financial income primarily reflects a decline in interest income from lower cash balances invested outside of the United States in 2009. Financial income also includes 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 over the next few years in conjunction with sales growth in that region. Net foreign exchange gains totaled $1.4 million in 2009 compared to a net foreign exchange loss of $6.8 million in 2008. During 2009, other costs and income also included a $5.1 million accrual for an administrative sales tax assessment and a gain of $3.6 million on the sale of a property. 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.
The difference between our overall tax rate of 36.5 percent in 2009, 35.9 percent in 2008, and 36.0 percent in 2007 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.
Net Income Attributable to Noncontrolling Interests
Noncontrolling interest primarily represents the outstanding preferred shares of Dixie Toga, our Brazilian flexible packaging subsidiary.
Debt to total capitalization (which includes total debt, long-term deferred tax liabilities, and equity) was 38.8 percent at December 31, 2009, compared to 31.5 percent at December 31, 2008, and 32.4 percent at December 31, 2007. Total debt was $1,258.8 million, $686.6 million, and $843.3 million at December 31, 2009, 2008 and 2007, respectively. The increase in debt during 2009 reflects $800.0 million of public bonds issued in July 2009 in anticipation of the Alcan Packaging Food Americas acquisition, net of a reduction in commercial paper and other debt outstanding.
Net cash provided by operations was $475.8 million for the year ended December 31, 2009, compared to $293.6 million in 2008 and $406.2 million in 2007. During 2009, an emphasis on aggressive cost management, production efficiency, and working capital management all contributed to this improvement in cash flow. Net cash provided by operations was reduced by a voluntary pension contribution to our U.S. pension plans of $30.0 million in 2009. 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 $20 million to our U.S. pension plans in 2010. We expect to fund this contribution with cash provided by operations.
On July 27, 2009, we issued $400.0 million of bonds due in 2014 with a fixed interest rate of 5.7 percent and $400.0 million of bonds due in 2019 with a fixed interest rate of 6.8 percent. The proceeds of these bonds were used as partial funding of the acquisition of the Alcan Packaging Food Americas business completed on March 1, 2010.
During the third quarter of 2009, we issued 8.2 million shares of common stock through a public stock offering. The $202.8 million of net proceeds from this stock offering was also used as partial funding of the Alcan Packaging Food Americas business. The remaining cash purchase price was financed in the commercial paper market in advance of closing.
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 $90.5 million. Based upon our current credit rating, we enjoy ready access to the commercial paper markets.
As of December 31, 2009, Bemis had available from its banks a $425.0 million revolving credit facility. This credit facility is used principally as back-up for our commercial paper program. Our revolving credit facility is supported by a group of major U.S. and international banks. Covenants imposed by the revolving credit facility include limits on the sale of businesses, minimum net worth calculations, and a maximum ratio of debt to total capitalization. The revolving credit agreement includes a combined $100 million multicurrency limit to support the financing needs of our international subsidiaries. Upon completion of the Alcan Packaging Food Americas business acquisition on March 1, 2010, an amendment to the revolving credit facility became effective, increasing credit available and therefore total commercial paper capacity from $425.0 million to $625.0 million. If this revolving credit facility 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, 2009, 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 December 31, 2009, our revolving credit facilities supported total commercial paper outstanding of $90.5 million, industrial revenue bonds outstanding of $8.0 million, and multicurrency loans outstanding of $17.7 million. As a result, we had the capacity to borrow an additional $308.8 million under the credit facility as of December 31, 2009. In connection with the completion of the acquisition of Alcan Packaging Food Americas on March 1, 2010, an amendment to our existing revolving credit facility became effective and increased our available credit by $200.0 million. This amended balance of available credit, combined with future cash flows from operations, are expected to provide sufficient liquidity to meet our cash obligations projected for 2010, including acquisition related payments.
Management expects cash flow from operations and available liquidity described above to be sufficient to support operations going forward. We do not expect our liquidity needs to be materially impacted by the completion of the Alcan Packaging Food Americas acquisition. There can be no assurance, however, that the cost or availability of future borrowings will not be impacted by future capital market disruptions. In addition, substantial increases in raw material costs could increase our short term liquidity needs.
Capital expenditures were $89.2 million during 2009, compared to $120.5 million in 2008, and $178.9 million in 2007. Spending levels for 2008 and 2009 reflect the positive impact of improved capacity utilization initiatives combined with a general slowdown in sales volume. During 2007, we completed a multiyear investment for new facilities and equipment for the medical and pharmaceutical markets, a platform for formable, rigid packaging products, additional converting equipment in our Malaysian operation, and proprietary film production capacity for European markets. 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 2010 capital expenditures with cash provided by operating activities.
We increased our quarterly cash dividend by 2.3 percent during the first quarter of 2009 to 22.5 cents per share. This follows increases of 4.8 percent in 2008 and 10.5 percent in 2007. In February 2010, the Board of Directors approved the 27 th consecutive annual increase in the quarterly cash dividend on common stock to 23 cents per share, a 2.2 percent increase.
No shares were repurchased during 2009. During 2008, we purchased 1.0 million shares of common stock. During 2007, we purchased 5.15 million shares of common stock. As of December 31, 2009, 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, operating lease obligations, and certain other purchase obligations as of December 31, 2009. Capital leases are insignificant.
|
|
|
|
|
Less than |
|
1 to 3 |
|
3 to 5 |
|
More than |
|
||||
|
(in millions) |
|
Total |
|
1 year |
|
years |
|
years |
|
5 years |
|
||||
|
Long-term debt obligations (1) |
|
$ |
1,251.8 |
|
$ |
22.5 |
|
$ |
321.1 |
|
508.2 |
|
$ |
400.0 |
|
|
Interest expense (2) |
|
404.7 |
|
67.2 |
|
121.6 |
|
90.7 |
|
125.2 |
|
||||
|
Operating leases (3) |
|
23.5 |
|
6.4 |
|
7.8 |
|
4.5 |
|
4.8 |
|
||||
|
Purchase obligations (4) |
|
178.1 |
|
176.9 |
|
0.3 |
|
0.1 |
|
0.8 |
|
||||
|
Postretirement obligations (5) |
|
54.5 |
|
5.1 |
|
16.7 |
|
12.6 |
|
20.1 |
|
||||
Pursuant to current authoritative accounting guidance, 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 13 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, 2009.
(3) 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.
(4) Purchase obligations represent contracts or commitments for the purchase of raw materials, utilities, capital equipment and various other goods and services.
(5) Postretirement obligations represent contracts or commitments for postretirement healthcare benefits and benefit payments for the unfunded Bemis Supplemental Retirement Plan. See Note 9 to the Consolidated Financial Statements for additional information about our postretirement benefit obligations.
In September 2001, we entered into interest rate swap agreements with two U.S. banks, which increased our exposure to variable rates. 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 2007.
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 and to achieve greater exposure to variable interest rates.
A portion of the interest expense on our outstanding debt is 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 $123.4 million of variable rate debt outstanding would increase by $1.2 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, 2009 and 2008, we had outstanding forward exchange contracts with notional amounts aggregating $18.3 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, 2009 and 2008, we had outstanding currency swap contracts with notional amounts aggregating $18.4 million and $24.6 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, 2009 and 2008.
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 a decrease of $125.8 million in 2009 and an increase of $60.5 million in 2008. Operating profit decreased by approximately $9.4 million in 2009 and improved by $5.9 million in 2008 as a result 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 2009 was an increase in stockholders’ equity totaling $158.6 million.
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.
Amounts related to our defined benefit pension plans that are recognized in our financial statements are determined on an actuarial basis. The accounting for our pension plans 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 cost recorded in 2009 was $18.8 million, compared to pension cost of $10.5 million in 2008 and $15.2 million in 2007.
One element used in determining annual pension income and expense in accordance with accounting rules is the expected return on plan assets. For the year 2009, we maintained a target allocation to equity investments of 70 percent of total assets and an expected long-term rate of return on plan assets of 8.25 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. For the historical long-term investment periods of 10, 15, 20 and 25 years ending December 31, 2009, our pension plan assets earned annualized rates of return of 0.7 percent, 8.0 percent, 8.1 percent, and 9.3 percent, respectively. 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, 2009, for our U.S. defined benefit pension plans we determined this rate to be 5.75 percent, a decrease of one quarter of one percent from the 6.00 percent rate used at December 31, 2008.
Based upon current assumptions of 5.75 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 2010 to be in a range of $23 million to $27 million. The following charts depict the sensitivity of estimated 2010 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 |
|
|
|
||
|
5.00 percent |
|
$ |
3.6 |
|
7.50 percent |
|
$ |
3.3 |
|
|
5.25 percent |
|
2.4 |
|
7.75 percent |
|
2.3 |
|
||
|
5.50 percent |
|
1.2 |
|
8.00 percent |
|
1.1 |
|
||
|
5.75 percent — Current Assumption |
|
0.0 |
|
8.25 percent — Current Assumption |
|
0.0 |
|
||
|
6.00 percent |
|
(1.1 |
) |
8.50 percent |
|
(1.1 |
) |
||
|
6.25 percent |
|
(2.2 |
) |
8.75 percent |
|
(2.3 |
) |
||
|
6.50 percent |
|
(3.3 |
) |
9.00 percent |
|
(3.3 |
) |
||
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 |
|
|
|
|
|
5.00 percent |
|
$ |
(49.0 |
) |
|
5.25 percent |
|
(32.1 |
) |
|
|
5.50 percent |
|
(15.7 |
) |
|
|
5.75 percent — Current Assumption |
|
0.0 |
|
|
|
6.00 percent |
|
14.8 |
|
|
|
6.25 percent |
|
29.1 |
|
|
|
6.50 percent |
|
42.6 |
|
|
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. None of our reporting units with significant goodwill were at risk of failing step one of the goodwill impairment test. Goodwill was $646.9 million as of December 31, 2009.
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.
Accounting Guidance Adopted in the Year Ended December 31, 2009
Business Combinations
In December 2007, the FASB issued authoritative guidance to establish 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 noncontrolling interest in the acquiree. Guidance was also provided 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. This guidance was effective on a prospective basis for financial statements issued for fiscal years beginning after December 15, 2008. During the second half of 2008, we incurred accounting, legal, and other professional fees associated with the Company’s due diligence effort related to the Huhtamaki Oyj acquisition and the Alcan Packaging Food Americas acquisition. These costs were deferred in 2008 under the then existing accounting standards. Upon the adoption of this guidance on January 1, 2009, these costs were expensed. We incurred additional costs during the year ended December 31, 2009 which were expensed. The total
impact to our earnings for the year ended December 31, 2009, as a result of this due diligence effort was a pretax charge of $31.8 million, or a reduction in earnings per share of $0.19.
Defined Benefit Retirement Plan Disclosures
In December 2008, the FASB issued authoritative guidance regarding an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This guidance requires employers to disclose fair value measurements of plan assets, investment policies and strategies, and significant concentrations of risk. The guidance was effective for fiscal years ending after December 15, 2009, and has expanded the disclosures related to our benefit plan assets.
Earnings Per Share
In June 2008, the FASB issued authoritative guidance 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, must be included in the two-class method of computing earnings per share. As discussed in Note 15, “Earnings Per Share Computations,” we adopted this guidance on January 1, 2009. The calculation of basic and diluted earnings per share for prior years presented has been recast to reflect this guidance. The impact of this modification was a $0.04 per share decrease in diluted earnings per share for each of the years ended December 31, 2008 and 2007.
Noncontrolling Interests
In December 2007, the FASB issued authoritative guidance to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance was adopted by the Company on January 1, 2009. As required, the presentation of minority interest is now referred to as noncontrolling interest and repositioned in the consolidated financial statements. In the consolidated statement of income, noncontrolling interest is now presented following a subtotal entitled “Net income”. In the consolidated balance sheet, noncontrolling interest is now presented as a component of total equity with a corresponding presentation in the consolidated statement of equity. Prior periods have been recast to conform to the current year presentation in conformity with the requirements.
Accounting Guidance Not Yet Adopted
Fair Value Measurements and Disclosures
In January 2010, the FASB issued additional authoritative guidance regarding fair value measurements and disclosures. This guidance requires some new disclosures and provides clarifications on certain existing disclosure requirements. The majority of the guidance is effective for the Company for interim and annual reporting periods beginning after December 15, 2009. A portion of the guidance related to expanded disclosures in the roll forward of Level 3 activity is effective for interim and annual reporting periods beginning after December 15, 2010. This guidance will expand the Company’s disclosures and will not impact its financial position or results of operations.
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.
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 an enterprise resource system; costs associated with the pursuit of business combinations, unexpected costs associated with acquisitions or divestitures; the inability to complete a planned acquisition or divestiture; changes in governmental regulations, 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 QU ALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this Item 7A is included in Note 6 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 AN D 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, 2009. 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 |
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 equity and of cash flows present fairly, in all material respects, the financial position of Bemis Company, Inc. and its subsidiaries at December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 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, 2009, 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 13 to the consolidated financial statements, effective January 1, 2007, the Company changed the manner in which it accounts for uncertain tax positions. As described in Note 2 to the consolidated financial statements, in 2009 the Company changed the manner in which it accounts for noncontrolling interests, accounts for business combinations, and calculates earnings per share.
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
March 1, 2010
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
|
For the years ended December 31, |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Net sales |
|
$ |
3,514,586 |
|
$ |
3,779,373 |
|
$ |
3,649,281 |
|
|
|
|
|
|
|
|
|
|
|||
|
Costs and expenses: |
|
|
|
|
|
|
|
|||
|
Cost of products sold |
|
2,814,412 |
|
3,131,341 |
|
2,973,329 |
|
|||
|
Selling, general, and administrative expenses |
|
370,926 |
|
342,737 |
|
341,551 |
|
|||
|
Research and development |
|
24,342 |
|
25,010 |
|
25,983 |
|
|||
|
Interest expense |
|
42,052 |
|
39,413 |
|
50,268 |
|
|||
|
Other costs (income), net |
|
22,544 |
|
(27,653 |
) |
(31,455 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Income before income taxes |
|
240,310 |
|
268,525 |
|
289,605 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Provision for income taxes |
|
87,800 |
|
96,300 |
|
104,300 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Net income |
|
152,510 |
|
172,225 |
|
185,305 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Less: net income attributable to noncontrolling interests |
|
5,289 |
|
6,011 |
|
3,751 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Net income attributable to Bemis Company, Inc |
|
$ |
147,221 |
|
$ |
166,214 |
|
$ |
181,554 |
|
|
|
|
|
|
|
|
|
|
|||
|
Basic earnings per share |
|
$ |
1.38 |
|
$ |
1.61 |
|
$ |
1.71 |
|
|
|
|
|
|
|
|
|
|
|||
|
Diluted earnings per share |
|
$ |
1.38 |
|
$ |
1.61 |
|
$ |
1.70 |
|
See accompanying notes to consolidated financial statements.
BEMIS COMPANY, INC. AND SUBSIDIARIES
(dollars in thousands, except share amounts)
|
As of December 31, |
|
2009 |
|
2008 |
|
||
|
|
|
|
|
|
|
||
|
ASSETS |
|
|
|
|
|
||
|
Current assets: |
|
|
|
|
|
||
|
Cash and cash equivalents |
|
$ |
1,065,687 |
|
$ |
43,454 |
|
|
Accounts receivable, net |
|
467,988 |
|
426,888 |
|
||
|
Inventories |
|
399,067 |
|
435,667 |
|
||
|
Prepaid expenses |
|
72,606 |
|
76,649 |
|
||
|
Total current assets |
|
2,005,348 |
|
982,658 |
|
||
|
|
|
|
|
|
|
||
|
Property and equipment: |
|
|
|
|
|
||
|
Land and land improvements |
|
45,562 |
|
43,662 |
|
||
|
Buildings and leasehold improvements |
|
489,632 |
|
466,863 |
|
||
|
Machinery and equipment |
|
1,575,452 |
|
1,499,621 |
|
||
|
Total property and equipment |
|
2,110,646 |
|
2,010,146 |
|
||
|
Less accumulated depreciation |
|
(953,453 |
) |
(874,664 |
) |
||
|
Net property and equipment |
|
1,157,193 |
|
1,135,482 |
|
||
|
|
|
|
|
|
|
||
|
Other long-term assets: |
|
|
|
|
|
||
|
Goodwill |
|
646,852 |
|
595,466 |
|
||
|
Other intangible assets |
|
85,299 |
|
80,773 |
|
||
|
Deferred charges and other assets |
|
34,013 |
|
27,935 |
|
||
|
Total other long-term assets |
|
766,164 |
|
704,174 |
|
||
|
TOTAL ASSETS |
|
$ |
3,928,705 |
|
$ |
2,822,314 |
|
|
|
|
|
|
|
|
||
|
LIABILITIES |
|
|
|
|
|
||
|
Current liabilities: |
|
|
|
|
|
||
|
Current portion of long-term debt |
|
$ |
22,527 |
|
$ |
18,651 |
|
|
Short-term borrowings |
|
8,795 |
|
7,954 |
|
||
|
Accounts payable |
|
380,017 |
|
323,142 |
|
||
|
Accrued liabilities: |
|
|
|
|
|
||
|
Salaries and wages |
|
89,988 |
|
63,227 |
|
||
|
Income taxes |
|
15,742 |
|
561 |
|
||
|
Other |
|
7,786 |
|
8,246 |
|
||
|
Total current liabilities |
|
524,855 |
|
421,781 |
|
||
|
|
|
|
|
|
|
||
|
Long-term debt, less current portion |
|
1,227,514 |
|
659,984 |
|
||
|
Deferred taxes |
|
134,676 |
|
111,832 |
|
||
|
Other liabilities and deferred credits |
|
189,977 |
|
246,174 |
|
||
|
Total liabilities |
|
2,077,022 |
|
1,439,771 |
|
||
|
|
|
|
|
|
|
||
|
Commitments and contingencies |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
EQUITY |
|
|
|
|
|
||
|
Bemis Company, Inc. stockholders’ equity: |
|
|
|
|
|
||
|
Common stock, $.10 par value: |
|
|
|
|
|
||
|
Authorized — 500,000,000 shares |
|
|
|
|
|
||
|
Issued — 125,646,511 and 117,130,962 shares |
|
12,565 |
|
11,713 |
|
||
|
Capital in excess of par value |
|
567,247 |
|
345,982 |
|
||
|
Retained earnings |
|
1,649,804 |
|
1,599,178 |
|
||
|
Accumulated other comprehensive (loss) income |
|
72,457 |
|
(112,001 |
) |
||
|
Common stock held in treasury, 17,422,771 shares, at cost |
|
(498,341 |
) |
(498,341 |
) |
||
|
Total Bemis Company, Inc. stockholders’ equity |
|
1,803,732 |
|
1,346,531 |
|
||
|
Noncontrolling interests |
|
47,951 |
|
36,012 |
|
||
|
TOTAL EQUITY |
|
1,851,683 |
|
1,382,543 |
|
||
|
|
|
|
|
|
|
||
|
TOTAL LIABILITIES AND EQUITY |
|
$ |
3,928,705 |
|
$ |
2,822,314 |
|
See accompanying notes to consolidated financial statements.
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
|
For the years ended December 31, |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|||
|
Net income |
|
$ |
152,510 |
|
$ |
172,225 |
|
$ |
185,305 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|||
|
Depreciation and amortization |
|
159,274 |
|
162,004 |
|
158,546 |
|
|||
|
Excess tax benefit from share-based payment arrangements |
|
(509 |
) |
(209 |
) |
(5,773 |
) |
|||
|
Share-based compensation |
|
19,020 |
|
18,058 |
|
16,849 |
|
|||
|
Deferred income taxes |
|
4,956 |
|
15,666 |
|
5,803 |
|
|||
|
Income of unconsolidated affiliated companies |
|
(2,163 |
) |
(919 |
) |
(933 |
) |
|||
|
(Gain) loss on sale of property and equipment |
|
(1,149 |
) |
967 |
|
(2,055 |
) |
|||
|
Non-cash restructuring related activities |
|
|
|
|
|
2,483 |
|
|||
|
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
|||
|
Accounts receivable |
|
16,704 |
|
(25,015 |
) |
32,007 |
|
|||
|
Inventories |
|
67,508 |
|
8,584 |
|
11,705 |
|
|||
|
Prepaid expenses |
|
10,632 |
|
(20,607 |
) |
5,350 |
|
|||
|
Accounts payable |
|
15,034 |
|
(26,717 |
) |
(21,672 |
) |
|||
|
Accrued salaries and wages |
|
21,087 |
|
(3,222 |
) |
(27,218 |
) |
|||
|
Accrued income taxes |
|
16,459 |
|
616 |
|
5,310 |
|
|||
|
Accrued other taxes |
|
(1,605 |
) |
349 |
|
1,370 |
|
|||
|
Changes in other liabilities and deferred credits |
|
(21,488 |
) |
(12,341 |
) |
(8,014 |
) |
|||
|
Changes in deferred charges and other assets |
|
19,543 |
|
4,111 |
|
47,165 |
|
|||
|
Net cash provided by operating activities |
|
475,813 |
|
293,550 |
|
406,228 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|||
|
Additions to property and equipment |
|
(89,154 |
) |
(120,513 |
) |
(178,852 |
) |
|||
|
Business acquisitions, net of cash acquired |
|
(30,343 |
) |
|
|
|
|
|||
|
Proceeds from sales of property, equipment, and other assets |
|
10,921 |
|
2,429 |
|
7,405 |
|
|||
|
Proceeds from sale of restructuring related assets |
|
|
|
|
|
3,639 |
|
|||
|
Net cash used in investing activities |
|
(108,576 |
) |
(118,084 |
) |
(167,808 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|||
|
Proceeds from issuance of long-term debt |
|
823,088 |
|
16,334 |
|
25,061 |
|
|||
|
Repayment of long-term debt |
|
(24,154 |
) |
(267,327 |
) |
(60,546 |
) |
|||
|
Net borrowing (repayment) of commercial paper |
|
(240,295 |
) |
169,295 |
|
80,800 |
|
|||
|
Net borrowing (repayment) of short-term debt |
|
(10,894 |
) |
(62,956 |
) |
(9,977 |
) |
|||
|
Cash dividends paid to stockholders |
|
(96,595 |
) |
(90,695 |
) |
(89,809 |
) |
|||
|
Proceeds from issuance of common stock |
|
202,809 |
|
|
|
|
|
|||
|
Common stock purchased for the treasury |
|
|
|
(26,771 |
) |
(153,953 |
) |
|||
|
Excess tax benefit from share-based payment arrangements |
|
509 |
|
209 |
|
5,773 |
|
|||
|
Stock incentive programs and related withholdings |
|
(3,186 |
) |
(2,196 |
) |
(14,745 |
) |
|||
|
Net cash provided (used) by financing activities |
|
651,282 |
|
(264,107 |
) |
(217,396 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Effect of exchange rates on cash and cash equivalents |
|
3,714 |
|
(15,314 |
) |
14,225 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Net increase (decrease) in cash and cash equivalents |
|
1,022,233 |
|
(103,955 |
) |
35,249 |
|
|||
|
Cash and cash equivalents balance at beginning of year |
|
43,454 |
|
147,409 |
|
112,160 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Cash and cash equivalents balance at end of year |
|
$ |
1,065,687 |
|
$ |
43,454 |
|
$ |
147,409 |
|
|
|
|
|
|
|
|
|
|
|||
|
Interest paid during the year |
|
$ |
19,990 |
|
$ |
39,909 |
|
$ |
48,132 |
|
|
Income taxes paid during the year |
|
$ |
65,286 |
|
$ |
76,905 |
|
$ |
83,621 |
|
Supplemental information of noncash investing and financing activities
The Company acquired the South American rigid packaging operations of Huhtamaki Oyj for $43 million. In conjunction with the acquisition, cash paid and notes payable issued to finance the acquisition were $32.3 million and $8.8 million respectively. The fair value of assets and liabilities acquired was $51.7 million and $10.9 million respectively.
See accompanying notes to consolidated financial statements
BEMIS COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(dollars in thousands, except per share amounts)
|
|
|
Bemis Company, Inc. Stockholders |
|
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Accumulated |
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Capital In |
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Other |
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Common |
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Common |
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Excess of |
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Retained |
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Comprehensive |
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Stock Held |
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Noncontrolling |
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Stock |
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Par Value |
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Earnings |
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Income (Loss) |
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In Treasury |
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Interests |
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Total |
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Balance at December 31, 2006 |
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$ |
11,611 |
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$ |
317,177 |
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$ |
1,431,747 |
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$ |
29,098 |
|
$ |
(317,617 |
) |
29,185 |
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$ |
1,501,201 |
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Net income |
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181,554 |
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|
|
|
3,751 |
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185,305 |
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Unrecognized gain reclassified to earnings, net of tax $(337) |
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(527 |
) |
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(527 |
) |
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Translation adjustment |
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122,387 |
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5,990 |
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128,377 |
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Pension liability adjustment, net of tax effect $(11,942) |
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20,204 |
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20,204 |
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Total comprehensive income |
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333,359 |
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Adjustment to initially apply FIN No. 48 |
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167 |
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167 |
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Cash dividends paid on common stock $0.84 per share |
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(89,809 |
) |
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(89,809 |
) |
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Stock incentive programs and related tax effects (826,779 shares) |
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83 |
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(14,745 |
) |
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(14,662 |
) |
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Excess tax benefit from share-based Compensation arrangements |
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6,908 |
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6,908 |
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Share-based compensation |
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18,047 |
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18,047 |
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Purchase 5,150,000 shares |
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of common stock |
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(153,953 |
) |
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(153,953 |
) |
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Balance at December 31, 2007 |
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11,694 |
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327,387 |
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1,523,659 |
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171,162 |
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(471,570 |
) |
38,926 |
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1,601,258 |
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Net income |
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166,214 |
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|
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|
6,011 |
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172,225 |
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Unrecognized gain reclassified to earnings, net of tax $(305) |
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(527 |
) |
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(527 |
) |
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Translation adjustment |
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(183,175 |
) |
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(8,925 |
) |
(192,100 |
) |
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Pension liability adjustment, net of tax effect $(57,616) |
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(99,461 |
) |
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(99,461 |
) |
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Total comprehensive income |
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(119,863 |
) |
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Cash dividends paid on common stock $0.88 per share |
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(90,695 |
) |
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(90,695 |
) |
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Stock incentive programs and related tax effects (189,836 shares) |
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19 |
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(2,196 |
) |
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(2,177 |
) |
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Excess tax benefit from share-based compensation arrangements |
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960 |
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960 |
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Share-based compensation |
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19,831 |
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19,831 |
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Purchase 1,000,000 shares of common stock |
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(26,771 |
) |
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(26,771 |
) |
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Balance at December 31, 2008 |
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11,713 |
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345,982 |
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1,599,178 |
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(112,001 |
) |
(498,341 |
) |
36,012 |
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1,382,543 |
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|||||||
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Net income |
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|
|
|
|
147,221 |
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|
|
|
|
5,289 |
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152,510 |
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Unrecognized gain reclassified to earnings, net of tax $(337) |
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|
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|
|
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(526 |
) |
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(526 |
) |
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Translation adjustment |
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|
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|
158,631 |
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|
|
6,650 |
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165,281 |
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Pension liability adjustment, net of tax effect $(15,148) |
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|
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26,353 |
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|
26,353 |
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Total comprehensive income |
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|
|
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343,618 |
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Cash dividends paid on common stock $0.90 per share |
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(96,595 |
) |
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(96,595 |
) |
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Stock incentive programs and related tax effects (340,549 shares) |
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34 |
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(3,186 |
) |
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|
|
|
|
|
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(3,152 |
) |
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Excess tax benefit from share-based compensation arrangements |
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|
|
1,856 |
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|
|
|
|
|
|
|
|
1,856 |
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Share-based compensation |
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|
|
20,604 |
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|
|
|
|
|
|
|
|
20,604 |
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Common stock issued (8,175,000 shares) |
|
818 |
|
201,991 |
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|
|
|
|
|
|
|
|
202,809 |
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Balance at December 31, 2009 |
|
$ |
12,565 |
|
$ |
567,247 |
|
$ |
1,649,804 |
|
$ |
72,457 |
|
$ |
(498,341 |
) |
$ |
47,951 |
|
$ |
1,851,683 |
|
See accompanying notes to consolidated financial statements.
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 20,400 individuals and has 83 manufacturing facilities. The Company manufactures and sells flexible packaging products and pressure sensitive materials throughout the Americas, Europe, and Asia.
The Company’s business activities are organized around its two business segments, Flexible Packaging, which accounted for approximately 85 percent of 2009 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 2009 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 $2,163,000, $919,000, and $933,000 in 2009, 2008, and 2007, 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.
Noncontrolling interests: As of December 31, 2009, the Company held 54% of the outstanding non-voting preferred stock of Dixie Toga S.A. The remaining non-voting preferred shares not held by the Company are traded publicly on the Brazilian Bovespa Stock Exchange in São Paulo, Brazil, and represent the most significant component of noncontrolling interests included on our consolidated balance sheet.
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 functional 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 $1,359,000, $(6,755,000), and $2,445,000, in 2009, 2008, and 2007, respectively, are included as a component of other costs (income), net.
Revenue recognition: Sales and related costs of sales are recognized when persuasive evidence of an arrangement exists, title and risk of ownership have been transferred to the customer, the sales price is fixed or determinable, and collectability is reasonably assured. These conditions are typically fulfilled upon shipment of products. All costs associated with revenue, including customer volume discounts, are recognized at the time of sale. Customer volume discounts are accrued in accordance with current authoritative accounting guidance 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. Our reserve for environmental liabilities at December 31, 2009 and 2008 was $401,000 for both years. Adjustments to the reserve accounts and costs which were directly expensed for environmental remediation matters resulted in charges to the income statements for 2009, 2008, and 2007 of $42,000, $306,000, and $111,000 respectively. There were no third party reimbursements for any of the years presented.
Research and development: Research and development expenditures are expensed as incurred.
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 $21,078,000 and $16,262,000 at December 31, 2009 and 2008, 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) |
|
2009 |
|
2008 |
|
||
|
Raw materials and supplies |
|
$ |
139,821 |
|
$ |
161,451 |
|
|
Work in process and finished goods |
|
280,975 |
|
293,132 |
|
||
|
Total inventories, gross |
|
420,796 |
|
454,583 |
|
||
|
Less inventory write-downs |
|
(21,729 |
) |
(18,916 |
) |
||
|
Total inventories, net |
|
$ |
399,067 |
|
$ |
435,667 |
|
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 $150,808,000, $152,962,000, and $149,852,000 for 2009, 2008, and 2007, 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 $1,111,000 in 2009, $2,557,000 in 2008, and $4,220,000 in 2007.
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 twelve years and are reported as a component of machinery and equipment within property and equipment.
The Company is in the process of developing and implementing a new Enterprise Resource Planning (ERP) system. Certain costs incurred during the application development stage are being capitalized in accordance with authoritative accounting guidance related to accounting for costs of computer software developed or obtained for internal use. These costs are being amortized over the system’s estimated useful life 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. Goodwill and indefinite-lived intangible assets are not amortized, but are reviewed at least annually for impairment and 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 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 6 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, 2009, 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 have been exercised to purchase one four-hundredth of a share of Series A Junior Preferred Stock for $60, subject to adjustment. The rights would have become exercisable if, subject to certain exceptions, a person or group acquired beneficial ownership of 15 percent or more of the Company’s outstanding common stock or announced 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 acquired beneficial ownership of 15 percent or more of the Company’s outstanding common stock, subject to certain exceptions, each right would have entitled 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 preferred stock purchase rights expired July 8, 2009 and were not renewed.
Note 2 — NEW ACCOUNTING GUIDANCE
Accounting Guidance Adopted in the Year Ended December 31, 2009
Fair Value Measurements and Disclosures
In August 2009, the Financial Accounting Standards Board (FASB) issued additional authoritative guidance for the measurement of liabilities at fair value emphasizing the use of observable inputs when quoted prices are not available. The guidance was effective for the Company’s reporting period ended December 31, 2009. Adoption of the guidance did not have any impact on our consolidated financial statements.
In April 2009, the FASB issued additional authoritative guidance for estimating fair value when the market activity for an asset or liability has decreased significantly. This guidance assists both issuers and users of financial statements in determining whether a market is active or inactive, and whether a transaction is distressed. The guidance was effective for the Company for the quarter ended June 30, 2009 and did not have a material impact on our consolidated financial position or results of operations.
In September 2006, the FASB issued authoritative guidance for fair value measurements which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This guidance will apply whenever assets or liabilities are required (or permitted) to be measured at fair value. The guidance does not expand the use of fair value to any new circumstances. In early 2008, the FASB issued additional guidance which delayed by one year the effective date of the September 2006 guidance 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 the new guidance on January 1, 2008, and on January 1, 2009, as required, each with no effect on the measurement of the Company’s assets and liabilities or on its consolidated financial position and results of operations.
Accounting Standards Codification
In June 2009, the FASB issued authoritative guidance which defines the new hierarchy for U.S. generally accepted accounting principles (GAAP) and explains how the FASB will use its Accounting Standards Codification (ASC) as the sole source for all authoritative guidance. This guidance was effective for the Company’s interim quarterly period beginning July 1, 2009 and did not have any impact on our consolidated financial position or results of operations.
Subsequent Events
In May 2009, the FASB issued authoritative guidance for subsequent events which establishes general standards of accounting and disclosure for events that occur after the balance sheet date but before the financial statements are issued. This guidance was effective for interim or annual financial periods ending after June 15, 2009, and did not have a material impact on our consolidated financial position or results of operations.
Business Combinations
In April 2009, the FASB issued additional authoritative guidance regarding accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies. This guidance amends and clarifies earlier guidance to address application issues on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. The guidance was effective for the Company on January 1, 2009, and applies to business combinations with an acquisition date on or after the guidance became effective.
In December 2007, the FASB issued authoritative guidance to establish 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 noncontrolling interest in the acquiree. Guidance was also provided 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. This guidance was effective on a prospective basis for financial statements issued for fiscal years beginning after December 15, 2008. During the second half of 2008, we incurred accounting, legal, and other professional fees associated with the Company’s due diligence effort related to the Huhtamaki Oyj South American Rigid Packaging acquisition and the Alcan Packaging Food Americas acquisition. These costs were deferred in 2008 under the then existing accounting standards. Upon the adoption of this guidance on January 1, 2009, these costs were expensed. We incurred additional costs during the year ended December 31, 2009 which were expensed. The total impact to our earnings for the year ended December 31, 2009, as a result of this due diligence effort was a pretax charge of $31.8 million, or a reduction in earnings per share of $0.19.
Defined Benefit Retirement Plan Disclosures
In December 2008, the FASB issued authoritative guidance regarding an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This guidance requires employers to disclose fair value measurements of plan assets, investment policies and strategies and significant concentrations of risk. The guidance was effective for fiscal years ending after December 15, 2009, and has expanded the disclosures related to our benefit plan assets.
Earnings Per Share
In June 2008, the FASB issued authoritative guidance 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, must be included in the two-class method of computing earnings per share. As discussed in Note 15, “Earnings Per Share Computations,” we adopted this guidance on January 1, 2009. The calculation of basic and diluted earnings per share for both of the years presented has been recast to reflect the guidance, effective January 1, 2009. The impact of this modification was a $0.04 per share decrease in diluted earnings per share for each of the years ended December 31, 2008 and 2007.
Useful Lives of Intangible Assets
In April 2008, the FASB issued authoritative guidance 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. The guidance was effective for the Company on January 1, 2009. 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.
Derivatives and Hedging
In March 2008, the FASB issued authoritative guidance 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 , and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. As discussed in Note 6, “Derivative Instruments,” we adopted the guidance on January 1, 2009.
Noncontrolling Interests
In December 2007, the FASB issued authoritative guidance to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance was adopted by the Company on January 1, 2009. As required, the presentation of minority interest is now referred to as noncontrolling interest and repositioned in the consolidated financial statements. In the consolidated statement of income, noncontrolling interest is now presented following a subtotal entitled “Net income”. In the consolidated balance sheet, noncontrolling interest is now presented as a component of total equity with a corresponding presentation in the consolidated statement of equity. Prior periods have been recast to conform to the current year presentation in conformity with the requirements.
Accounting Guidance Not Yet Adopted
Fair Value Measurements and Disclosures
In January 2010, the FASB issued additional authoritative guidance regarding fair value measurements and disclosures. This guidance requires some new disclosures and provides clarifications on certain existing disclosure requirements. The majority of the guidance is effective for the Company for interim and annual reporting periods beginning after December 15, 2009. A portion of the guidance related to expanded disclosures in the roll forward of Level 3 activity is effective for interim and annual reporting periods beginning after December 15, 2010. This guidance will expand the Company’s disclosures and will not impact its financial position or results of operations.
Note 3 — ACQUISITIONS
Acquisition of South American Rigid Packaging Operations of Huhtamaki Oyj
On June 3, 2009, the Company announced that it acquired the South American rigid packaging operations of Huhtamaki Oyj, a global manufacturer of consumer and specialty packaging. This rigid packaging business, which includes three facilities in Brazil and one facility in Argentina, recorded annual net sales of approximately $86.0 million in 2008, primarily to dairy and food service markets. The purchase price of $43.0 million was paid with a combination of $32.3 million cash on hand, $1.9 million of debt assumed, and an $8.8 million note payable to the seller. As of December 31, 2009, $1.6 million remained outstanding on the note payable to seller which is due May 31, 2010. The fair value of assets and liabilities acquired was $51.7 million and $10.9 million respectively.
Note 4 — SUBSEQUENT EVENT — ACQUISITION OF ALCAN PACKAGING FOOD AMERICAS
On March 1, 2010, Bemis completed the acquisition of the Food Americas operations of Alcan Packaging, a business unit of international mining group Rio Tinto plc, for $1.2 billion. The acquisition will expand our global presence with 23 Food Americas flexible packaging facilities in the U.S., Canada, Mexico, Brazil, Argentina, and New Zealand. These flexible packaging facilities, while owned by Rio Tinto plc, recorded net sales of $1.4 billion in 2009 to the food and beverage markets and include expertise in foil and crystallized polyester technologies.
In compliance with regulatory requirements for approval of the transaction in the United States, Bemis is obligated to divest certain Alcan Packaging Food Americas packaging assets in the United States within a specified time period after the closing date. The packaging assets that will be divested produced annual sales of approximately $100 million in 2009 and include manufacturing equipment used to produce packaging for fresh meat and retail natural cheese products.
The majority of the financing for this transaction was completed during the third quarter of 2009 through the issuance of $800.0 million of public bonds and 8.2 million common shares issued in a secondary public stock offering. The remaining cash purchase price was financed in the commercial paper market in advance of closing.
The initial accounting for this business combination was incomplete as of the date of the filing of this Form 10-K as the acquisition was completed after our reporting date of December 31, 2009. Accordingly, the financial information contained herein does not include pro forma disclosures, acquisition-date fair values, or purchase price allocation information.
Note 5 — 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 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, 2009 and 2008, 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, was estimated to be $1,303,760,000 and $700,945,000 at December 31, 2009 and December 31, 2008, 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 fair values for derivatives 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 Observable Inputs (Level 2) |
|
||||
|
(in thousands) |
|
December 31, 2009 |
|
December 31, 2008 |
|
||
|
Currency swaps — net asset (liability) position |
|
$ |
(2,693 |
) |
$ |
4,944 |
|
|
Forward exchange contracts — net asset (liability) position |
|
$ |
29 |
|
$ |
(112 |
) |
Note 6 — DERIVATIVE INSTRUMENTS
On January 1, 2009, we adopted the authoritative accounting guidance issued by the FASB 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, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows.
The Company enters into derivative transactions to manage exposures arising in the normal course of business. 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 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.
The Company enters into currency swap contracts to manage changes in the fair value of U.S. dollar denominated debt held in Brazil, effectively converting a portion of that debt to the functional currency of its Brazilian operation. Currency swap contracts generally have maturities that match the maturities of the underlying debt. The Company has not designated these derivative instruments as hedging instruments. At December 31, 2009 and 2008, the Company had outstanding currency swap contracts with notional amounts aggregating $18,435,000 and $24,587,000, respectively. The 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 element of other costs (income), net, which offsets the related transaction gains or losses.
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, 2009, and December 31, 2008, the Company had outstanding forward exchange contracts with notional amounts aggregating $18,284,000 and $5,044,000, respectively. The net settlement amount (fair value) related to active forward exchange contracts is recorded on the balance sheet as either a current or long-term asset or liability and as an element of other costs (income), net, which offsets the related transaction gains or losses.
The Company is exposed to credit loss in the event of non-performance by counterparties in currency swap and forward exchange contracts. Collateral is generally not required of the counterparties or of the Company. In the event a counterparty fails to meet the contractual terms of a currency swap or forward exchange 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.
The fair values and balance sheet presentation of derivative instruments not designated as hedging instruments at December 31, 2009 and December 31, 2008 are presented in the tables below:
|
|
|
|
|
Fair Value |
|
Fair Value |
|
||
|
|
|
|
|
As of |
|
As of |
|
||
|
(in thousands) |
|
Balance Sheet Location |
|
December 31, 2009 |
|
December 31, 2008 |
|
||
|
Asset Derivatives |
|
|
|
|
|
|
|
||
|
Currency swaps |
|
Accounts receivable |
|
$ |
7,122 |
|
$ |
1,303 |
|
|
|
|
Deferred charges and other assets |
|
|
|
3,706 |
|
||
|
Forward exchange contracts |
|
Accounts receivable |
|
33 |
|
306 |
|
||
|
Total asset derivatives not designated as hedging instruments |
|
|
|
$ |
7,155 |
|
$ |
5,315 |
|
|
|
|
|
|
Fair Value |
|
Fair Value |
|
||
|
|
|
|
|
As of |
|
As of |
|
||
|
(in thousands) |
|
Balance Sheet Location |
|
December 31, 2009 |
|
December 31, 2008 |
|
||
|
Liability Derivatives |
|
|
|
|
|
|
|
||
|
Currency swaps |
|
Accounts payable |
|
9,815 |
|
|
|
||
|
|
|
Other liabilities and deferred credits |
|
|
|
66 |
|
||
|
Forward exchange contracts |
|
Accounts payable |
|
4 |
|
418 |
|
||
|
Total liability derivatives not designated as hedging instruments |
|
|
|
$ |
9,819 |
|
$ |
484 |
|
The income statement impact of derivatives not designated as hedging instruments for the twelve months ended December 31, 2009 is presented in the table below:
|
|
|
Location of Gain (Loss) |
|
Amount of Gain (Loss) Recognized in Income on Derivatives |
|
|
|
|
|
Recognized in Income |
|
Twelve Months Ended |
|
|
|
(in thousands) |
|
on Derivatives |
|
December 31, 2009 |
|
|
|
Currency swap contracts |
|
Other costs (income), net |
|
$ |
(7,919 |
) |
|
Forward exchange contracts |
|
Other costs (income), net |
|
3,964 |
|
|
|
Total |
|
|
|
$ |
(3,955 |
) |
Note 7 — 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, 2007 |
|
$ |
589,589 |
|
$ |
52,918 |
|
$ |
642,507 |
|
|
|
|
|
|
|
|
|
|
|||
|
Currency translation |
|
(46,611 |
) |
(430 |
) |
(47,041 |
) |
|||
|
Reported balance at December 31, 2008 |
|
542,978 |
|
52,488 |
|
595,466 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Currency translation |
|
51,320 |
|
66 |
|
51,386 |
|
|||
|
Reported balance at December 31, 2009 |
|
$ |
594,298 |
|
$ |
52,554 |
|
$ |
646,852 |
|
The components of amortized intangible assets follow:
|
|
|
December 31, 2009 |
|
December 31, 2008 |
|
||||||||
|
(in thousands) |
|
Gross Carrying |
|
Accumulated |
|
Gross Carrying |
|
Accumulated |
|
||||
|
Intangible Assets |
|
Amount |
|
Amortization |
|
Amount |
|
Amortization |
|
||||
|
Contract based |
|
$ |
15,447 |
|
$ |
(11,368 |
) |
$ |
15,447 |
|
$ |
(10,268 |
) |
|
Technology based |
|
51,694 |
|
(24,389 |
) |
51,422 |
|
(21,623 |
) |
||||
|
Marketing related |
|
25,962 |
|
(11,470 |
) |
20,435 |
|
(7,768 |
) |
||||
|
Customer based |
|
72,451 |
|
(33,028 |
) |
54,688 |
|
(21,560 |
) |
||||
|
Reported balance |
|
$ |
165,554 |
|
$ |
(80,255 |
) |
$ |
141,992 |
|
$ |
(61,219 |
) |
Amortization expense for intangible assets during 2009, 2008, and 2007 was $9.3 million, $9.7 million, and $9.6 million, respectively. Estimated annual amortization expense is $9.3 million for 2010 and $9.0 million for 2011, $7.9 million for 2012, $6.6 million for 2013, and $6.6 million for 2014. The Company completed its annual impairment tests in the fourth quarter of 2009 with no indications of impairment of goodwill found. The Company does not have any accumulated impairment losses.
Note 8 — PENSION PLANS
Total multiemployer plan, defined contribution, and defined benefit pension expense in 2009, 2008, and 2007 was $29,079,000, $16,909,000, and $26,311,000, respectively. The Company sponsors a 401(k) savings plan (a defined contribution 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 2009, 2008, and 2007 were $6,590,000, $6,417,000, and $5,993,000, respectively.
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 $9,514,000 in 2009, $5,661,000 in 2008, and $10,394,000 in 2007. 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 2009, 2008, and 2007 totaled $782,000, $780,000, and $749,000, 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.
Net periodic pension cost for defined benefit plans included the following components for the years ended December 31, 2009, 2008, and 2007:
|
(in thousands) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Service cost - benefits earned during the year |
|
$ |
12,584 |
|
$ |
13,109 |
|
$ |
13,868 |
|
|
Interest cost on projected benefit obligation |
|
33,776 |
|
34,217 |
|
32,497 |
|
|||
|
Expected return on plan assets |
|
(40,780 |
) |
(44,233 |
) |
(45,274 |
) |
|||
|
Settlement (gain) loss |
|
(5 |
) |
29 |
|
3,726 |
|
|||
|
Amortization of unrecognized transition obligation |
|
247 |
|
261 |
|
240 |
|
|||
|
Amortization of prior service cost |
|
2,367 |
|
2,355 |
|
2,290 |
|
|||
|
Recognized actuarial net (gain) or loss |
|
10,594 |
|
4,730 |
|
7,820 |
|
|||
|
Net periodic pension cost |
|
$ |
18,783 |
|
$ |
10,468 |
|
$ |
15,167 |
|
Changes in benefit obligations and plan assets, and a reconciliation of the funded status at December 31, 2009 and 2008, are as follows:
|
|
|
U.S. Pension Plans |
|
Non-U.S. Pension Plans |
|
||||||||
|
(in thousands) |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||
|
Change in Benefit Obligation: |
|
|
|
|
|
|
|
|
|
||||
|
Benefit obligation at the beginning of the year |
|
$ |
517,779 |
|
$ |
500,152 |
|
$ |
59,296 |
|
$ |
68,009 |
|
|
Service cost |
|
9,840 |
|
9,844 |
|
2,744 |
|
3,265 |
|
||||
|
Interest cost |
|
30,275 |
|
30,507 |
|
3,501 |
|
3,710 |
|
||||
|
Participant contributions |
|
|
|
|
|
571 |
|
634 |
|
||||
|
Plan amendments |
|
1,461 |
|
76 |
|
|
|
|
|
||||
|
Plan settlements |
|
|
|
|
|
(610 |
) |
|
|
||||
|
Acquisitions |
|
|
|
|
|
|
|
2,555 |
|
||||
|
Benefits paid |
|
(24,140 |
) |
(23,077 |
) |
(3,232 |
) |
(2,559 |
) |
||||
|
Actuarial (gain) or loss |
|
18,143 |
|
277 |
|
3,324 |
|
(4,916 |
) |
||||
|
Foreign currency exchange rate changes |
|
|
|
|
|
4,505 |
|
(11,402 |
) |
||||
|
Benefit obligation at the end of the year |
|
$ |
553,358 |
|
$ |
517,779 |
|
$ |
70,099 |
|
$ |
59,296 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Accumulated benefit obligation at the end of the year |
|
$ |
513,661 |
|
$ |
480,525 |
|
$ |
57,585 |
|
$ |
47,421 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Change in Plan Assets: |
|
|
|
|
|
|
|
|
|
||||
|
Fair value of plan assets at the beginning of the year |
|
$ |
338,043 |
|
481,889 |
|
$ |
42,573 |
|
$ |
53,937 |
|
|
|
Actual return on plan assets |
|
88,982 |
|
(123,041 |
) |
4,394 |
|
(2,834 |
) |
||||
|
Employer contributions |
|
31,121 |
|
2,271 |
|
3,269 |
|
3,450 |
|
||||
|
Participant contributions |
|
|
|
|
|
571 |
|
635 |
|
||||
|
Plan settlements |
|
|
|
|
|
(713 |
) |
(29 |
) |
||||
|
Benefits paid |
|
(24,140 |
) |
(23,076 |
) |
(3,232 |
) |
(2,559 |
) |
||||
|
Foreign currency exchange rate changes |
|
|
|
|
|
3,692 |
|
(10,027 |
) |
||||
|
Fair value of plan assets at the end of the year |
|
$ |
434,006 |
|
$ |
338,043 |
|
$ |
50,554 |
|
$ |
42,573 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Funded (unfunded) status at year end: |
|
$ |
(119,352 |
) |
$ |
(179,736 |
) |
$ |
(19,545 |
) |
$ |
(16,724 |
) |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Amount recognized in consolidated balance sheet consists of: |
|
|
|
|
|
|
|
|
|
||||
|
Prepaid benefit cost, non-current |
|
$ |
|
|
$ |
|
|
$ |
195 |
|
$ |
|
|
|
Accrued benefit liability, current |
|
(4,311 |
) |
(3,383 |
) |
(293 |
) |
(276 |
) |
||||
|
Accrued benefit liability, non-current |
|
(115,041 |
) |
(176,353 |
) |
(19,447 |
) |
(16,448 |
) |
||||
|
Sub-total |
|
(119,352 |
) |
(179,736 |
) |
(19,545 |
) |
(16,724 |
) |
||||
|
Deferred tax asset |
|
87,719 |
|
104,371 |
|
3,222 |
|
2,506 |
|
||||
|
Accumulated other comprehensive loss (income) |
|
152,608 |
|
180,173 |
|
5,605 |
|
4,327 |
|
||||
|
Net amount recognized in consolidated balance sheet |
|
$ |
120,975 |
|
$ |
104,808 |
|
$ |
(10,718 |
) |
$ |
(9,891 |
) |
Accumulated other comprehensive income related to pension benefit plans is as follows:
|
|
|
U.S. Pension Plans |
|
Non-U.S. Pension Plans |
|
||||||||
|
(in thousands) |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||
|
Unrecognized net actuarial losses |
|
$ |
230,857 |
|
$ |
274,230 |
|
$ |
5,563 |
|
$ |
3,412 |
|
|
Unrecognized net prior service costs |
|
9,470 |
|
10,314 |
|
713 |
|
709 |
|
||||
|
Unrecognized net transition costs |
|
|
|
|
|
2,551 |
|
2,712 |
|
||||
|
Tax benefit |
|
(87,719 |
) |
(104,371 |
) |
(3,222 |
) |
(2,506 |
) |
||||
|
Accumulated other comprehensive loss (income), end of year |
|
$ |
152,608 |
|
$ |
180,173 |
|
$ |
5,605 |
|
$ |
4,327 |
|
Estimated amounts in accumulated other comprehensive income expected to be reclassified to net period cost during 2010 are as follows:
|
|
|
|
|
Non-U.S. |
|
||
|
|
|
U.S. Pension Plans |
|
Pension Plans |
|
||
|
(in thousands) |
|
2009 |
|
2009 |
|
||
|
Net actuarial losses |
|
$ |
16,153 |
|
$ |
71 |
|
|
Net prior service costs |
|
2,526 |
|
67 |
|
||
|
Net transition costs |
|
|
|
257 |
|
||
|
Total |
|
$ |
18,679 |
|
$ |
395 |
|
The accumulated benefit obligation for all defined benefit pension plans was $571,246,000 and $527,946,000 at December 31, 2009, and 2008, 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, 2009 and 2008.
|
|
|
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) |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||||||
|
Projected benefit obligation |
|
$ |
553,358 |
|
$ |
517,779 |
|
$ |
67,904 |
|
$ |
59,296 |
|
$ |
553,358 |
|
$ |
517,779 |
|
$ |
67,904 |
|
$ |
34,769 |
|
|
Accumulated benefit obligation |
|
513,661 |
|
480,525 |
|
55,389 |
|
47,421 |
|
513,661 |
|
480,525 |
|
55,389 |
|
25,210 |
|
||||||||
|
Fair value of plan assets |
|
434,006 |
|
338,043 |
|
48,164 |
|
42,573 |
|
434,006 |
|
338,043 |
|
48,164 |
|
19,821 |
|
||||||||
The Company’s general funding policy is to make contributions as required by applicable regulations and when beneficial to the Company for tax purposes. The employer contributions for the years ended December 31, 2009 and 2008, were $34,390,000 and $5,722,000, respectively. The expected cash contribution for 2010 is $22,585,000 which is expected to satisfy plan funding requirements and regulatory funding requirements.
For each of the years ended December 31, 2009 and 2008, 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.
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 |
|
||||
|
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
|
Weighted-average discount rate |
|
5.75 |
% |
6.00 |
% |
5.39 |
% |
5.80 |
% |
|
Rate of increase in future compensation levels |
|
4.25 |
% |
4.25 |
% |
3.92 |
% |
3.90 |
% |
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 |
|
||||||||
|
|
|
2009 |
|
2008 |
|
2007 |
|
2009 |
|
2008 |
|
2007 |
|
|
Weighted-average discount rate |
|
6.00 |
% |
6.25 |
% |
5.75 |
% |
5.82 |
% |
5.60 |
% |
4.81 |
% |
|
Expected return on plan assets |
|
8.25 |
% |
8.50 |
% |
8.75 |
% |
6.16 |
% |
6.18 |
% |
6.44 |
% |
|
Rate of increase in future compensation levels |
|
4.25 |
% |
4.75 |
% |
4.75 |
% |
3.90 |
% |
3.98 |
% |
3.83 |
% |
The Pension Investment Committee appointed by our Board of Directors is responsible for overseeing the investments of the pension plans. The overall investment strategy is to achieve a long term rate of return that maintains an adequate funded ratio and minimizes the need for future contributions through diversification of asset types, investment strategies, and investment managers. A target asset allocation policy is used to balance investments in equity securities with investments in fixed income securities. The majority of pension plan assets relate to U.S. plans and employ a target asset allocation of 70% equity securities and 30% fixed income securities. Equity securities primarily include investments in diversified portfolios of domestic large cap and small cap firms. Fixed income securities include diversified investments across a broad spectrum of primarily investment-grade debt securities.
The pension plan assets measured at fair value at December 31, 2009 follow:
|
|
|
U.S. Pension Plans * |
|
Non-U.S. Pension Plans |
|
||||||||||||||
|
|
|
Quoted Prices |
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
||||||
|
|
|
In Active |
|
Significant |
|
|
|
In Active |
|
Significant |
|
|
|
||||||
|
|
|
Markets for |
|
Other |
|
Significant |
|
Markets for |
|
Other |
|
Significant |
|
||||||
|
|
|
Identical |
|
Observable |
|
Unobservable |
|
Identical |
|
Observable |
|
Unobservable |
|
||||||
|
|
|
Assets |
|
Inputs |
|
Inputs |
|
Assets |
|
Inputs |
|
Inputs |
|
||||||
|
(in thousands) |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
||||||
|
Cash and cash equivalents |
|
$ |
437 |
|
$ |
13,819 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Corporate debt securities |
|
|
|
55,660 |
|
2,767 |
|
|
|
|
|
|
|
||||||
|
U.S. Government debt securities |
|
|
|
34,689 |
|
7,981 |
|
|
|
|
|
|
|
||||||
|
State and municipal debt securities |
|
|
|
13,309 |
|
|
|
|
|
|
|
|
|
||||||
|
Corporate common stock |
|
271,572 |
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Registered investment company funds (a) |
|
26,434 |
|
|
|
|
|
26,557 |
|
|
|
|
|
||||||
|
Common trust funds (b) |
|
|
|
14,080 |
|
|
|
|
|
4,269 |
|
|
|
||||||
|
General insurance account (c) |
|
|
|
|
|
|
|
|
|
|
|
19,728 |
|
||||||
|
Balance at December 31, 2009 |
|
$ |
298,443 |
|
$ |
131,557 |
|
$ |
10,748 |
|
$ |
26,557 |
|
$ |
4,269 |
|
$ |
19,728 |
|
(a) This category includes mutual funds that are actively traded on public exchanges. The funds are invested in equity and debt securities that are actively traded on public exchanges.
(b) Common trust funds consist of shares in commingled funds that are not publicly traded. The funds are invested in equity and debt securities that are actively traded on public exchanges.
(c) The general insurance account is primarily comprised of insurance contracts that guarantee a minimum return.
Level 1 fair value measurements represent exchange-traded securities which are valued at quoted prices (unadjusted) in active markets for identical assets that we have the ability to access as of the reporting date. Level 2 fair value measurements are determined using input prices that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. Level 3 fair value measurements are determined using unobservable inputs, such as internally developed pricing models for the asset or liability due to little or no market activity for the asset or liability.
* The table presenting the fair value of plan assets does not include a $6.7 million liability related to the U.S. pension plans’ participation in a securities lending program. The securities lending program authorizes the pension plan trustee to lend securities, which are assets of the pension plans, to approved borrowers. The trustee requires that borrowers, pursuant to a securities lending agreement, deliver collateral to secure each loan. Cash collateral received is invested in collateral funds comprised primarily of high quality, short term investments. As of December 31, 2009, the value of the loans outstanding exceeded the value of the invested collateral by $6.7 million.
The reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3) is as follows:
|
|
|
U.S. Pension Plans |
|
Non-U.S. Pension Plans |
|
||
|
|
|
(Level 3) |
|
(Level 3) |
|
||
|
(in thousands) |
|
2009 |
|
2009 |
|
||
|
Fair value of plan assets at the beginning of the year |
|
$ |
14,877 |
|
$ |
18,164 |
|
|
Actual return on plan assets |
|
333 |
|
1,019 |
|
||
|
Purchases, sales and settlements, net |
|
6,784 |
|
(126 |
) |
||
|
Transfers into (out of) Level 3 |
|
(11,246 |
) |
|
|
||
|
Foreign currency exchange rate changes |
|
|
|
671 |
|
||
|
Fair value of plan assets at the end of the year |
|
$ |
10,748 |
|
$ |
19,728 |
|
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 |
|
||
|
2010 |
|
$ |
29,139 |
|
$ |
2,645 |
|
|
2011 |
|
36,085 |
|
2,362 |
|
||
|
2012 |
|
32,694 |
|
1,648 |
|
||
|
2013 |
|
34,115 |
|
4,352 |
|
||
|
2014 |
|
35,998 |
|
5,050 |
|
||
|
Years 2015-2019 |
|
187,258 |
|
29,328 |
|
||
As of January 1, 2010, we have assumed that the expected long-term annual rate of return on plan assets will be 8.25 percent, which is unchanged from our January 1, 2009 assumption. 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 ended December 31, 2009, our pension plan assets have earned annualized rates of return of 0.7 percent, 8.0 percent, 8.1 percent, and 9.3 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 our U.S. 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, 2009 and 2008, we determined this rate to be 5.75 percent and 6.00 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 in each individual country.
Note 9 — 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.
Net periodic postretirement benefit costs included the following components for the years ended December 31, 2009, 2008, and 2007.
|
(in thousands) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Service cost - benefits earned during the year |
|
$ |
224 |
|
$ |
221 |
|
$ |
904 |
|
|
Interest cost on accumulated postretirement benefit obligation |
|
610 |
|
688 |
|
1,178 |
|
|||
|
Amortization of prior service cost |
|
(454 |
) |
(455 |
) |
215 |
|
|||
|
Recognized actuarial net (gain) or loss |
|
(524 |
) |
(501 |
) |
(62 |
) |
|||
|
Net periodic postretirement benefit (income) cost |
|
$ |
(144 |
) |
$ |
(47 |
) |
$ |
2,235 |
|
Changes in benefit obligation and plan assets, and a reconciliation of the funded status at December 31, 2009 and 2008, are as follows:
|
(in thousands) |
|
2009 |
|
2008 |
|
||
|
Change in Benefit Obligation |
|
|
|
|
|
||
|
Benefit obligation at the beginning of the year |
|
$ |
10,651 |
|
$ |
11,510 |
|
|
Service cost |
|
224 |
|
221 |
|
||
|
Interest cost |
|
610 |
|
688 |
|
||
|
Participant contributions |
|
485 |
|
439 |
|
||
|
Plan amendments |
|
(882 |
) |
|
|
||
|
Actuarial (gain) or loss |
|
624 |
|
(737 |
) |
||
|
Benefits paid |
|
(1,725 |
) |
(1,470 |
) |
||
|
Benefit obligation at the end of the year |
|
$ |
9,987 |
|
$ |
10,651 |
|
|
|
|
|
|
|
|
||
|
Change in Plan Assets |
|
|
|
|
|
||
|
Fair value of plan assets at the beginning of the year |
|
$ |
0 |
|
$ |
0 |
|
|
Employee contributions |
|
485 |
|
439 |
|
||
|
Employer contribution |
|
1,240 |
|
1,031 |
|
||
|
Benefits paid |
|
(1,725 |
) |
(1,470 |
) |
||
|
Fair value of plan assets at the end of the year |
|
$ |
0 |
|
$ |
0 |
|
|
|
|
|
|
|
|
||
|
Funded (unfunded) status at year end: |
|
$ |
(9,987 |
) |
$ |
(10,651 |
) |
|
|
|
|
|
|
|
||
|
Amount recognized in consolidated balance sheet consists of: |
|
|
|
|
|
||
|
Prepaid benefit cost, non-current |
|
$ |
0 |
|
$ |
0 |
|
|
Accrued benefit liability, current |
|
(826 |
) |
(977 |
) |
||
|
Accrued benefit liability, non-current |
|
(9,161 |
) |
(9,674 |
) |
||
|
Deferred tax |
|
(3,971 |
) |
(4,255 |
) |
||
|
Accumulated other comprehensive income |
|
(6,909 |
) |
(7,346 |
) |
||
|
Net amount recognized in consolidated balance sheet |
|
$ |
(20,867 |
) |
$ |
(22,252 |
) |
Accumulated other comprehensive income related to other postretirement benefit plans is as follows:
|
(in thousands) |
|
2009 |
|
2 008 |
|
||
|
Unrecognized net actuarial losses (gains) |
|
$ |
(6,640 |
) |
$ |
(7,788 |
) |
|
Unrecognized net prior service costs (benefits) |
|
(4,240 |
) |
(3,813 |
) |
||
|
Tax expense (benefit) |
|
3,971 |
|
4,255 |
|
||
|
Accumulated other comprehensive loss (income), end of year |
|
$ |
(6,909 |
) |
$ |
(7,346 |
) |
Estimated amounts in accumulated other comprehensive income expected to be reclassified to net period cost during 2010 are as follows:
|
(in thousands) |
|
2009 |
|
|
|
Net actuarial (gains) losses |
|
$ |
(449 |
) |
|
Net prior service costs (benefits) |
|
(552 |
) |
|
|
Total |
|
$ |
(1,001 |
) |
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
|
(in thousands) |
|
Benefit Payments |
|
|
|
2010 |
|
$ |
826 |
|
|
2011 |
|
893 |
|
|
|
2012 |
|
898 |
|
|
|
2013 |
|
918 |
|
|
|
2014 |
|
922 |
|
|
|
Years 2015-2019 |
|
4,455 |
|
|
The employer contributions for the years ended December 31, 2009 and 2008, were $1,240,000 and $1,031,000, respectively. The expected contribution for 2010 is $826,000 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 7.5 percent for 2009 and was 8.0 percent for 2008; 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 both 2009 and 2008. A one-percentage point change in assumed health care trends would have the following effects:
|
|
|
One Percentage |
|
One Percentage |
|
||
|
(in thousands) |
|
Point Increase |
|
Point Decrease |
|
||
|
Effect on total of service and interest cost components for 2009 |
|
$ |
14 |
|
$ |
(13 |
) |
|
Effect on postretirement benefit obligation at December 31, 2009 |
|
$ |
196 |
|
$ |
(177 |
) |
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, 2009 and 2008 are 5.75 percent and 6.00 percent, respectively. The weighted-average discount rates used to determine the net postretirement benefit cost was 6.00 percent, 6.25 percent, and 5.75 percent for the years ended December 31, 2009, 2008, and 2007, respectively.
Note 10 — STOCK OPTION AND INCENTIVE PLANS
The 1994, 2001, and 2007 (adopted in 2006) Stock Incentive Plans provide for the issuance of up to 15,000,000 shares of common stock to key employees. Each Plan expires 10 years after its inception, at which point no further stock options or performance units (commonly referred to as restricted stock) may be granted. As of December 31, 2009, 2008, and 2007, respectively, 5,674,004, 5,915,585, and 6,146,961, shares were available for future grants under these plans. Shares forfeited by an employee become available for future grants.
Stock option awards have not been granted since 2003 and all stock options outstanding at December 31, 2009, 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 vested immediately, while options for Company employees generally vested over three years (one-third per year). Details of the stock option plans at December 31, 2009, 2008, and 2007, are:
|
|
|
Aggregate |
|
|
|
Per Share |
|
Weighted-Average |
|
||
|
|
|
Intrinsic |
|
Number of |
|
Option Price |
|
Exercise Price |
|
||
|
|
|
Value |
|
Options |
|
Range |
|
Per Share |
|
||
|
Exercisable at December 31, 2006 |
|
$ |
28,356,000 |
|
2,021,178 |
|
$15.86 - $26.95 |
|
$ |
19.95 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Exercised in 2007 |
|
$ |
3,494,000 |
|
(337,096 |
) |
$18.67 - $22.52 |
|
$ |
22.10 |
|
|
Exercisable at December 31, 2007 |
|
$ |
13,238,000 |
|
1,684,082 |
|
$15.86 - $26.95 |
|
$ |
19.52 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
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 |
|
|
Exercisable at December 31, 2008 |
|
$ |
5,467,000 |
|
1,389,338 |
|
$15.86 - $26.95 |
|
$ |
19.75 |
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Exercised in 2009 |
|
$ |
4,906,000 |
|
(563,156 |
) |
$15.86 - $17.44 |
|
$ |
17.40 |
|
|
Exercisable at December 31, 2009 |
|
$ |
6,860,000 |
|
826,182 |
|
$16.78 - $26.95 |
|
$ |
21.35 |
|
The following table summarizes information about outstanding and exercisable stock options at December 31, 2009.
|
|
|
Options Outstanding and Exercisable |
|
|||||
|
|
|
Number |
|
Weighted-Average |
|
|||
|
Range of |
|
Outstanding |
|
Remaining |
|
Weighted-Average |
|
|
|
Exercise Prices |
|
at 12/31/09 |
|
Contractual Life |
|
Exercise Price |
|
|
|
$16.78 - $18.81 |
|
401,712 |
|
0.7 years |
|
$ |
17.79 |
|
|
$22.04 - $26.95 |
|
424,470 |
|
2.6 years |
|
$ |
24.71 |
|
|
|
|
826,182 |
|
1.7 years |
|
$ |
21.35 |
|
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. Approximately 50 percent of the performance units granted in 2009 is also subject to the degree to which specified total shareholder return conditions are satisfied. 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 and is charged to income over the requisite service period.
Total compensation expense related to Stock Incentive Plans was $18,822,000 in 2009, $18,058,000 in 2008, and $16,849,000 in 2007.
As of December 31, 2009, the unrecorded compensation cost for performance units is $26,635,000 and will be recognized over the remaining vesting period for each grant which ranges between January 1, 2010 and December 31, 2013. The remaining weighted-average life of all performance units outstanding is 1.6 years. These awards are considered equity-based awards and are therefore classified as a component of additional paid-in capital.
The following table summarizes annual restricted stock unit activity for the three years ended December 31, 2009:
|
|
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Outstanding units granted at the beginning of the year |
|
3,342,414 |
|
3,296,583 |
|
3,200,437 |
|
|||
|
Units Granted |
|
285,470 |
|
318,441 |
|
1,302,800 |
|
|||
|
Units Paid (in shares) |
|
(280,858 |
) |
(182,943 |
) |
(1,146,821 |
) |
|||
|
Units Canceled |
|
(43,889 |
) |
(89,667 |
) |
(59,833 |
) |
|||
|
Outstanding units granted at the end of the year |
|
3,303,137 |
|
3,342,414 |
|
3,296,583 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Aggregate intrinsic value at year end of outstanding awards |
|
$ |
97,938,000 |
|
$ |
79,148,000 |
|
$ |
90,260,000 |
|
Note 11 — LONG-TERM DEBT
Debt consisted of the following at December 31,
|
(dollars in thousands) |
|
2009 |
|
2008 |
|
||
|
Commercial paper payable through 2010 at a weighted-average interest rate of 0.3% |
|
$ |
90,500 |
|
$ |
330,795 |
|
|
Notes payable in 2012 at an interest rate of 4.9% |
|
300,000 |
|
300,000 |
|
||
|
Industrial revenue bond payable through 2012 at an interest rate of 1.6% |
|
8,000 |
|
8,000 |
|
||
|
Notes payable in 2014, at an interest rate of 5.7% less unamortized discount of $620 |
|
399,380 |
|
|
|
||
|
Notes payable in 2019, at an interest rate of 6.8% less unamortized discount of $1,184 |
|
398,816 |
|
|
|
||
|
Debt of subsidiary companies payable through 2013 at interest rates of 0.6% to 21.5% |
|
53,334 |
|
39,775 |
|
||
|
Obligations under capital leases |
|
11 |
|
65 |
|
||
|
|
|
|
|
|
|
||
|
Total debt |
|
1,250,041 |
|
678,635 |
|
||
|
Less current portion |
|
22,527 |
|
18,651 |
|
||
|
Total long-term debt |
|
$ |
1,227,514 |
|
$ |
659,984 |
|
The commercial paper has 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, 2009, was 0.3 percent. The maximum outstanding during 2009 was $340,795,000, and the average outstanding during 2009 was $243,252,912. The weighted-average interest rate during 2009 was 0.7 percent.
As of December 31, 2009, Bemis had available from its banks a $425.0 million revolving credit facility. This credit facility is used principally as back-up for our commercial paper program. Our revolving credit facility is supported by a group of major U.S. and international banks. Covenants imposed by the revolving credit facility include limits on the sale of businesses, minimum net worth calculations, and a maximum ratio of debt to total capitalization. The revolving credit agreement includes a combined $100 million multicurrency limit to support the financing needs of our international subsidiaries. Upon completion of the Alcan Packaging Food Americas business acquisition on March 1, 2010, an amendment to the revolving credit facility became effective, increasing credit available and therefore total commercial paper capacity from $425.0 million to $625.0 million.
On July 27, 2009, we issued $400.0 million of bonds due in 2014 with a fixed interest rate of 5.7 percent and $400.0 million of bonds due in 2019 with a fixed interest rate of 6.8 percent. The proceeds of these bonds were used as partial funding of the acquisition of the Alcan Packaging Food Americas business.
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, 2009, was 1.6 percent and the weighted-average interest rate during 2009 was 1.1 percent.
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.
Long-term debt maturing in years 2010 through 2014 is $22,516,000, $1,021,000, $320,050,000, $108,247,000, and $400,000,000, respectively. The Company is in compliance with all debt covenants.
Note 12 — 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 32 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 $10,649,000 in 2009, $11,542,000 in 2008, and $10,378,000 in 2007. Capital leases are insignificant.
Minimum future obligations on leases in effect at December 31, 2009, are:
|
|
|
Operating |
|
|
|
(in thousands) |
|
Leases |
|
|
|
2010 |
|
$ |
6,409 |
|
|
2011 |
|
4,356 |
|
|
|
2012 |
|
3,500 |
|
|
|
2013 |
|
3,112 |
|
|
|
2014 |
|
1,382 |
|
|
|
Thereafter |
|
4,778 |
|
|
|
Total minimum obligations |
|
$ |
23,537 |
|
Note 13 — INCOME TAXES
|
(in thousands) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
U.S. income before income taxes |
|
$ |
148,447 |
|
$ |
180,719 |
|
$ |
206,544 |
|
|
Non-U.S. income before income taxes |
|
91,863 |
|
87,806 |
|
83,061 |
|
|||
|
Income before income taxes |
|
$ |
240,310 |
|
$ |
268,525 |
|
$ |
289,605 |
|
|
|
|
|
|
|
|
|
|
|||
|
Income tax expense consists of the following components: |
|
|
|
|
|
|
|
|||
|
Current tax expense: |
|
|
|
|
|
|
|
|||
|
U.S. federal |
|
$ |
51,921 |
|
$ |
42,963 |
|
$ |
59,538 |
|
|
Foreign |
|
26,019 |
|
28,579 |
|
29,588 |
|
|||
|
State and local |
|
4,904 |
|
9,092 |
|
9,371 |
|
|||
|
Total current tax expense |
|
82,844 |
|
80,634 |
|
98,497 |
|
|||
|
Deferred tax expense: |
|
|
|
|
|
|
|
|||
|
U.S. federal |
|
(22 |
) |
17,171 |
|
4,711 |
|
|||
|
Foreign |
|
4,232 |
|
(803 |
) |
(744 |
) |
|||
|
State |
|
746 |
|
(702 |
) |
1,836 |
|
|||
|
Total deferred tax expense |
|
4,956 |
|
15,666 |
|
5,803 |
|
|||
|
Total income tax expense |
|
$ |
87,800 |
|
$ |
96,300 |
|
$ |
104,300 |
|
The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are presented below.
|
(in thousands) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Deferred Tax Assets: |
|
|
|
|
|
|
|
|||
|
Accounts receivable, principally due to allowances for returns and doubtful accounts |
|
$ |
6,978 |
|
$ |
5,900 |
|
$ |
5,759 |
|
|
Inventories, principally due to additional costs inventoried for tax purposes |
|
14,417 |
|
15,884 |
|
14,898 |
|
|||
|
Employee compensation and benefits accrued for financial reporting purposes |
|
88,227 |
|
106,673 |
|
45,006 |
|
|||
|
Foreign net operating losses |
|
16,614 |
|
11,587 |
|
12,308 |
|
|||
|
Other |
|
4,024 |
|
5,042 |
|
4,377 |
|
|||
|
Total deferred tax assets |
|
130,260 |
|
145,086 |
|
82,348 |
|
|||
|
Less valuation allowance |
|
(13,474 |
) |
(9,242 |
) |
(7,059 |
) |
|||
|
Total deferred tax assets, after valuation allowance |
|
$ |
116,786 |
|
$ |
135,844 |
|
$ |
75,289 |
|
|
|
|
|
|
|
|
|
|
|||
|
Deferred Tax Liabilities: |
|
|
|
|
|
|
|
|||
|
Plant and equipment, principally due to differences in depreciation, capitalized interest, and capitalized overhead |
|
$ |
134,192 |
|
$ |
141,222 |
|
$ |
128,471 |
|
|
Goodwill and intangible assets, principally due to differences in amortization |
|
66,581 |
|
63,866 |
|
55,228 |
|
|||
|
Other |
|
5,531 |
|
465 |
|
6,419 |
|
|||
|
Total deferred tax liabilities |
|
206,304 |
|
205,553 |
|
190,118 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Deferred tax liabilities, net |
|
$ |
89,518 |
|
$ |
69,709 |
|
$ |
114,829 |
|
The net deferred tax liabilities are reflected in the balance sheet as follows:
|
(in thousands) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Deferred tax assets (included in prepaid expense) |
|
$ |
45,158 |
|
$ |
42,123 |
|
$ |
41,042 |
|
|
Deferred tax liabilities |
|
134,676 |
|
111,832 |
|
155,871 |
|
|||
|
Net deferred tax liabilities |
|
$ |
89,518 |
|
$ |
69,709 |
|
$ |
114,829 |
|
The Company’s effective tax rate differs from the federal statutory rate due to the following items:
|
|
|
2009 |
|
2008 |
|
2007 |
|
|||||||||
|
|
|
|
|
% 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 |
|
$ |
84,109 |
|
35.0 |
% |
$ |
93,984 |
|
35.0 |
% |
$ |
101,362 |
|
35.0 |
% |
|
Increase (decrease) in taxes resulting from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
State and local income taxes net of federal income tax benefit |
|
3,672 |
|
1.5 |
|
5,454 |
|
2.0 |
|
7,285 |
|
2.5 |
|
|||
|
Foreign tax rate differential |
|
(2,181 |
) |
(0.9 |
) |
(3,635 |
) |
(1.3 |
) |
(1,464 |
) |
(0.5 |
) |
|||
|
Manufacturing tax benefits |
|
(3,710 |
) |
(1.5 |
) |
(2,345 |
) |
(0.9 |
) |
(4,200 |
) |
(1.5 |
) |
|||
|
Other |
|
5,910 |
|
2.4 |
|
2,842 |
|
1.1 |
|
1,317 |
|
0.5 |
|
|||
|
Actual income tax expense |
|
$ |
87,800 |
|
36.5 |
% |
$ |
96,300 |
|
35.9 |
% |
$ |
104,300 |
|
36.0 |
% |
As of December 31, 2009, the Company had foreign net operating loss carryovers of approximately $47.3 million that are available to offset future taxable income. Approximately $18.7 million of the carryover expires over the period 2014-2023. The balance has no expiration. FASB authoritative guidance 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 $13.5 million against deferred tax assets primarily associated with the foreign net operating loss carryover was necessary at December 31, 2009.
Provision has not been made for U.S. or additional foreign taxes on $198.9 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 FASB authoritative guidance related to accounting for uncertainty in income taxes on January 1, 2007. The Company recognized no material adjustments as a result of the implementation of this policy.
The Company had total unrecognized tax benefits of $11.6 million, $11.9 million, and $9.1 million for the years ended December 31, 2009, 2008, and 2007, respectively. The approximate amount of unrecognized tax benefits that would impact the effective
income tax rate if recognized in any future periods was $7.7 million, $8.0 million, and $6.4 million for the years ended December 31, 2009, 2008, and 2007, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, in millions, is as follows:
|
|
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Balance at beginning of year |
|
$ |
11.9 |
|
$ |
9.1 |
|
$ |
13.9 |
|
|
Additions based on tax positions related to the current year |
|
1.0 |
|
2.0 |
|
1.0 |
|
|||
|
Additions for tax positions of prior years |
|
5.5 |
|
3.8 |
|
2.5 |
|
|||
|
Reductions for tax positions of prior years |
|
(0.5 |
) |
(1.6 |
) |
(0.3 |
) |
|||
|
Reductions due to a lapse of the statute of limitations |
|
(0.8 |
) |
(0.6 |
) |
(0.4 |
) |
|||
|
Settlements |
|
(5.5 |
) |
(0.8 |
) |
(7.6 |
) |
|||
|
|
|
|
|
|
|
|
|
|||
|
Balance at end of year |
|
$ |
11.6 |
|
$ |
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 $1.0 million, $1.4 million, and $1.3 million accrued for interest and penalties at December 31, 2009, 2008, and 2007, respectively.
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 2008 have been audited and completely settled. With few exceptions, the Company is no longer subject to examinations by tax authorities for years prior to 2004 in the significant jurisdictions in which it operates.
Note 14 — TOTAL COMPREHENSIVE INCOME
The components of total other comprehensive income (loss) are as follows:
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
||||||||
|
|
|
December 31, |
|
December 31, |
|
||||||||
|
(in thousands) |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
||||
|
Comprehensive income (loss) attributable to Bemis Company, Inc. |
|
$ |
58,977 |
|
$ |
(189,365 |
) |
$ |
331,679 |
|
$ |
(116,949 |
) |
|
Comprehensive income (loss) attributable to Noncontrolling interest |
|
(815 |
) |
(4,526 |
) |
11,939 |
|
(2,914 |
) |
||||
|
Total comprehensive income (loss) |
|
$ |
58,162 |
|
$ |
(193,891 |
) |
$ |
343,618 |
|
$ |
(119,863 |
) |
Note 15 — EARNINGS PER SHARE COMPUTATIONS
On January 1, 2009, the Company adopted the authoritative accounting guidance issued by the FASB 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). Participating securities under this statement include our unvested employee stock awards, which receive nonforfeitable cash payments equal to the dividend on Bemis common stock. The calculation of earnings per share for common stock shown below excludes the income attributable to the unvested employee stock awards from the numerator and excludes the dilutive impact of those awards from the denominator. All prior period EPS data presented have been adjusted retrospectively (including summaries of earnings and selected financial data) to conform to the provisions of this guidance.
|
(dollars in thousands, except per share amounts) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Numerator |
|
|
|
|
|
|
|
|||
|
Net income attributable to Bemis Company, Inc. |
|
$ |
147,221 |
|
$ |
166,214 |
|
$ |
181,554 |
|
|
Income allocated to participating securities |
|
(4,583 |
) |
(5,399 |
) |
(5,660 |
) |
|||
|
Net income available to common shareholders (1) |
|
$ |
142,638 |
|
$ |
160,815 |
|
$ |
175,894 |
|
|
|
|
|
|
|
|
|
|
|||
|
Denominator |
|
|
|
|
|
|
|
|||
|
Weighted-average common shares outstanding — basic |
|
103,447 |
|
99,777 |
|
102,992 |
|
|||
|
Dilutive shares |
|
154 |
|
277 |
|
453 |
|
|||
|
Weighted-average common and common equivalent shares outstanding — diluted |
|
103,601 |
|
100,054 |
|
103,445 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Earnings per share |
|
|
|
|
|
|
|
|||
|
Basic |
|
$ |
1.38 |
|
$ |
1.61 |
|
$ |
1.71 |
|
|
Diluted |
|
$ |
1.38 |
|
$ |
1.61 |
|
$ |
1.70 |
|
|
(1) |
Basic weighted-average common shares outstanding |
|
103,447 |
|
99,777 |
|
102,992 |
|
|
|
Basic weighted-average common shares outstanding and unvested employee stock awards |
|
106,771 |
|
103,127 |
|
106,306 |
|
|
|
Percentage allocated to common shareholders |
|
96.9 |
% |
96.8 |
% |
96.9 |
% |
Certain options outstanding at December 31, 2009, 2008, and 2007 (-0-, 410,720, and -0- shares, respectively) were not included in the computation of diluted earnings per share above because they would not have had a dilutive effect.
Note 16 — 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.
Environmental Matters
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. 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.
Alcan Packaging Acquisition
In compliance with regulatory requirements for approval of our acquisition of the Food Americas operations of Alcan Packaging in the United States, we have entered into a Consent Decree with the United States Department of Justice. Under the terms of the Consent Decree, we are obligated to divest certain Alcan Packaging Food Americas packaging assets in the United States within a specified time period after the closing date. The packaging assets that will be divested produced annual sales of approximately $100 million in 2009 and include manufacturing equipment used to produce shrink bags used for fresh meat products and flexible packaging used for natural cheese products.
São Paulo Tax Dispute
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.
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 $62.9 million at the date the Company acquired Dixie Toga, translated to U.S. dollars at the December 31, 2009 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 $9.5 million for Itap Bemis and $30.6 million for Dixie Toga, translated to U.S. dollars at the December 31, 2009 exchange rate. In the event of an adverse resolution, the estimated amounts for these years could be increased by $40.1 million for Itap Bemis and $115.6 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.
Recently, the City has also asserted the applicability of the city services tax for the subsequent years 2004-2009. The assessments issued by the City for these years have been received and are being challenged by the Company at the administrative level. The assessments for tax and penalties are estimated to be approximately $23.4 million, translated to U.S. dollars at the December 31, 2009 exchange rate.
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.
Brazil Investigation
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.
Labelstock Class Action
The Company and its subsidiary, Morgan Adhesives Company, were 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 purported to represent a nationwide class of labelstock purchasers, and each alleged 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 sought 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 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. On May 26, 2009, the Company and Morgan Adhesives Company entered into a settlement with the plaintiff class, pursuant to which the Company agreed to pay $1.25 million in return for a full and complete release of all claims in the federal class actions. The Company agreed to pay this settlement amount to avoid the expense of further litigation. On June 10, 2009, Judge Vanaskie granted preliminary approval to the settlement. On September 17, 2009, Judge Vanaskie granted final approval of the settlement, and dismissed the class action against Morgan Adhesives with prejudice.
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. On November 20, 2009, the Company and Morgan Adhesives Company entered into a settlement with the plaintiffs in the class actions filed in Nebraska, Kansas, Tennessee, and Vermont, pursuant to which the Company agreed to pay $90,000 in return for a full and complete release of all claims in those class actions. The Company agreed to pay this settlement amount to avoid the expense of further litigation. On November 24, 2009, the Court granted preliminary approval to the settlement of the class actions filed in Nebraska, Kansas, Tennessee, and Vermont. The Company and Morgan Adhesives Company intend to vigorously defend the remaining state 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 17 — 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 noncontrolling interests. 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) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Net Sales: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
$ |
2,986.2 |
|
$ |
3,154.4 |
|
$ |
3,002.5 |
|
|
Pressure Sensitive Materials |
|
537.4 |
|
632.2 |
|
653.0 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Intersegment Sales: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
(2.8 |
) |
(1.2 |
) |
(0.7 |
) |
|||
|
Pressure Sensitive Materials |
|
(6.2 |
) |
(6.0 |
) |
(5.5 |
) |
|||
|
Net Sales to Unaffiliated Customers |
|
$ |
3,514.6 |
|
$ |
3,779.4 |
|
$ |
3,649.3 |
|
|
BUSINESS SEGMENTS (Continued) (in millions) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
|
|
|
|
|
|
|
|
|||
|
Operating Profit and Pretax Profit: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
$ |
385.3 |
|
$ |
315.9 |
|
$ |
346.6 |
|
|
Pressure Sensitive Materials |
|
13.6 |
|
34.3 |
|
40.3 |
|
|||
|
Total operating profit (1) |
|
398.9 |
|
350.2 |
|
386.9 |
|
|||
|
General corporate expenses |
|
(116.5 |
) |
(42.3 |
) |
(47.0 |
) |
|||
|
Interest expense |
|
(42.1 |
) |
(39.4 |
) |
(50.3 |
) |
|||
|
Income before income taxes |
|
$ |
240.3 |
|
$ |
268.5 |
|
$ |
289.6 |
|
|
|
|
|
|
|
|
|
|
|||
|
Total Assets: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
$ |
2,483.3 |
|
$ |
2,343.8 |
|
$ |
2,672.7 |
|
|
Pressure Sensitive Materials |
|
303.0 |
|
339.0 |
|
358.0 |
|
|||
|
Total identifiable assets (2) |
|
2,786.3 |
|
2,682.8 |
|
3,030.7 |
|
|||
|
Corporate assets (3) |
|
1,142.4 |
|
139.5 |
|
160.7 |
|
|||
|
Total |
|
$ |
3,928.7 |
|
$ |
2,822.3 |
|
$ |
3,191.4 |
|
|
|
|
|
|
|
|
|
|
|||
|
Depreciation and Amortization: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
$ |
143.1 |
|
$ |
147.2 |
|
$ |
144.2 |
|
|
Pressure Sensitive Materials |
|
13.6 |
|
13.7 |
|
13.4 |
|
|||
|
Corporate |
|
2.6 |
|
1.1 |
|
0.9 |
|
|||
|
Total |
|
$ |
159.3 |
|
$ |
162.0 |
|
$ |
158.5 |
|
|
|
|
|
|
|
|
|
|
|||
|
Expenditures for Property and Equipment: |
|
|
|
|
|
|
|
|||
|
Flexible Packaging |
|
$ |
66.7 |
|
$ |
86.3 |
|
$ |
139.3 |
|
|
Pressure Sensitive Materials |
|
7.6 |
|
11.9 |
|
16.0 |
|
|||
|
Corporate |
|
14.9 |
|
22.3 |
|
23.6 |
|
|||
|
Total |
|
$ |
89.2 |
|
$ |
120.5 |
|
$ |
178.9 |
|
|
OPERATIONS BY GEOGRAPHIC AREA (in millions) |
|
2009 |
|
2008 |
|
2007 |
|
|||
|
Net Sales to Unaffiliated Customers: (4) |
|
|
|
|
|
|
|
|||
|
United States |
|
$ |
2,272.0 |
|
$ |
2,429.4 |
|
$ |
2,352.2 |
|
|
Canada |
|
9.9 |
|
12.3 |
|
15.6 |
|
|||
|
Europe |
|
545.9 |
|
656.5 |
|
647.6 |
|
|||
|
South America |
|
591.7 |
|
582.4 |
|
539.9 |
|
|||
|
Other |
|
95.1 |
|
98.8 |
|
94.0 |
|
|||
|
Total |
|
$ |
3,514.6 |
|
$ |
3,779.4 |
|
$ |
3,649.3 |
|
|
|
|
|
|
|
|
|
|
|||
|
Long-Lived Assets: (5) |
|
|
|
|
|
|
|
|||
|
United States |
|
$ |
734.3 |
|
$ |
772.1 |
|
$ |
820.6 |
|
|
Canada |
|
0.3 |
|
0.4 |
|
0.7 |
|
|||
|
Europe |
|
156.0 |
|
150.9 |
|
178.3 |
|
|||
|
South America |
|
264.8 |
|
207.2 |
|
270.0 |
|
|||
|
Other |
|
23.2 |
|
25.1 |
|
29.4 |
|
|||
|
Total |
|
$ |
1,178.6 |
|
$ |
1,155.7 |
|
$ |
1,299.0 |
|
(1) Operating profit is defined as profit before general corporate expense, interest expense, income taxes, and noncontrolling interests.
(2) Identifiable assets by business segment include only those assets that are specifically identified with each segment’s operations.
(3) Corporate assets are principally cash and cash equivalents, 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.
(5) Long-lived assets include net property and equipment, long-term receivables, and deferred charges.
Note 18 — QUARTERLY FINANCIAL INFORMATION — UNAUDITED
|
|
|
Quarter Ended |
|
|||||||||||||
|
(in millions, except per share amounts) |
|
March 31 |
|
June 30 |
|
September 30 |
|
December 31 |
|
Total |
|
|||||
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Net sales |
|
$ |
843.4 |
|
$ |
866.4 |
|
$ |
898.9 |
|
$ |
905.9 |
|
$ |
3,514.6 |
|
|
Gross profit |
|
164.0 |
|
178.4 |
|
180.1 |
|
177.7 |
|
700.2 |
|
|||||
|
Net income |
|
36.7 |
|
48.5 |
|
35.8 |
|
26.2 |
|
147.2 |
|
|||||
|
Basic earnings per common share |
|
0.36 |
|
0.47 |
|
0.33 |
|
0.23 |
|
1.38 |
|
|||||
|
Diluted earnings per common share |
|
0.36 |
|
0.47 |
|
0.33 |
|
0.23 |
|
1.38 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
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 |
|
0.41 |
|
0.45 |
|
0.43 |
|
0.32 |
|
1.61 |
|
|||||
|
Diluted earnings per common share |
|
0.41 |
|
0.45 |
|
0.43 |
|
0.32 |
|
1.61 |
|
|||||
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.
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, 2009.
The effectiveness of our internal control over financial reporting as of December 31, 2009, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears on page 23 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 reasonably likely to materially affect, the Company’s internal control over financial reporting.
Not applicable.
PART III — ITEMS 10, 11, 12, 13, and 14
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, 2009, 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. Unless otherwise indicated, positions shown are with the Company.
|
Name (Age) |
|
Positions Held |
|
Period The Position Was Held |
|
|
|
|
|
|
|
William F. Austen (51) |
|
Vice President — Operations |
|
2004 to present |
|
|
|
President and Chief Executive Officer — Morgan Adhesives Company (1) |
|
2000 to present |
|
|
|
|
|
|
|
Jeffrey H. Curler (59) |
|
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 |
|
|
|
|
|
|
|
Timothy S. Fliss (47) |
|
Vice President — Human Resources |
|
2010 to present |
|
|
|
Executive Vice President — Human Resources, Schneider National, Inc. |
|
2003 to 2009 |
|
|
|
Vice President — Human Resources, Schneider National, Inc. |
|
1995 to 2003 |
|
|
|
Various operational positions within Schneider National, Inc. |
|
1990 to 1995 |
|
|
|
|
|
|
|
Robert F. Hawthorne (60) |
|
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 (61) |
|
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 (46) |
|
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 (50) |
|
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. (60) |
|
Senior
Vice President
|
|
2010 to present
|
|
|
|
Various human resource and management positions within the Company |
|
1980 to 2000 |
|
|
|
|
|
|
|
James J. Seifert (53) |
|
Vice President, General Counsel and Secretary |
|
2002 to present |
|
|
|
|
|
|
|
Henry J. Theisen (56) |
|
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 (43) |
|
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 |
|
Name (Age) |
|
Positions Held |
|
Period The Position Was Held |
|
|
|
|
|
|
|
Gene C. Wulf (59) |
|
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 21, 2009. 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, 2009, and such information is expressly incorporated herein by reference.
ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL O WNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity compensation plans as of December 31, 2009, 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 |
|
|
|
|
|
warrants and rights |
|
warrants and rights |
|
reflected in column (a)) |
|
|
|
Plan Category |
|
(a) |
|
(b) |
|
(c) |
|
|
|
Equity compensation plans approved by security holders |
|
4,129,319 |
(1) |
$ |
21.35 |
(2) |
5,674,004 |
(3) |
|
Equity compensation plans not approved by security holders |
|
-0- |
|
N/A |
|
-0- |
|
|
|
Total |
|
4,129,319 |
(1) |
$ |
21.35 |
(2) |
5,674,004 |
(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.
The additional 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, 2009, and such information is expressly incorporated herein by reference.
ITEM 13 — CERTAIN RELATIONSHIP S 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, 2009, 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, 2009, and such information is expressly incorporated herein by reference.
ITEM 15 — EXHIBITS AND FIN ANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of Item 8 of this Annual Report on Form 10-K:
|
|
|
Pages in |
|
|
|
|
Form 10-K |
|
|
(1) Financial Statements |
|
|
|
|
|
22 |
|
|
|
|
23 |
|
|
|
Consolidated Statement of Income for each of the Three Years Ended December 31, 2009 |
|
24 |
|
|
|
25 |
|
|
|
Consolidated Statement of Cash Flows for each of the Three Years Ended December 31, 2009 |
|
26 |
|
|
Consolidated Statement of Equity for each of the Three Years Ended December 31, 2009 |
|
27 |
|
|
|
28-46 |
|
|
|
|
|
|
|
|
(2) Financial Statement Schedule for Years 2009, 2008, and 2007 |
|
|
|
|
Schedule II - Valuation and Qualifying Accounts and Reserves |
|
53 |
|
|
|
53 |
|
|
|
|
|
|
|
|
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. |
|
|
|
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 March 1, 2010 |
|
|
Date March 1, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 March 1, 2010 |
|
|
Date March 1, 2010 |
|
|
|
|
|
|
|
|
|
|
/s/ Jeffrey H. Curler |
|
|
/s/ William J. Bolton |
|
|
|
Jeffrey H. Curler, Chairman of the Board |
|
|
William J. Bolton, Director |
|
|
|
and Executive Chairman |
|
|
Date March 1, 2010 |
|
|
|
Date March 1, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ David S. Haffner |
|
|
/s/ Barbara L. Johnson |
|
|
|
David S. Haffner, Director |
|
|
Barbara L. Johnson, Director |
|
|
|
Date March 1, 2010 |
|
|
Date March 1, 2010 |
|
|
|
|
|
|
|
|
|
|
/s/ Timothy M. Manganello |
|
|
/s/ Roger D. O’Shaughnessy |
|
|
|
Timothy M. Manganello, Director |
|
|
Roger D. O’Shaughnessy, Director |
|
|
|
Date March 1, 2010 |
|
|
Date March 1, 2010 |
|
|
|
|
|
|
|
|
|
|
/s/ Paul S. Peercy |
|
|
/s/ Edward N. Perry |
|
|
|
Paul S. Peercy, Director |
|
|
Edward N. Perry, Director |
|
|
|
Date March 1, 2010 |
|
|
Date March 1, 2010 |
|
|
|
|
|
|
|
|
|
|
/s/ William J. Scholle |
|
|
/s/ Henry J. Theisen |
|
|
|
William J. Scholle, Director |
|
|
Henry J. Theisen, Director, President |
|
|
|
Date March 1, 2010 |
|
|
and Chief Executive Officer |
|
|
|
|
|
|
Date March 1, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Holly Van Deursen |
|
|
/s/ Philip G. Weaver |
|
|
|
Holly Van Deursen, Director |
|
|
Philip G. Weaver, Director |
|
|
|
Date March 1, 2010 |
|
|
Date March 1, 2010 |
|
|
|
|
|
|
|
|
|
|
/s/ Gene C. Wulf, |
|
|
/s/ Jeffrey H. Curler |
|
|
|
Gene C. Wulf, Director |
|
|
Jeffrey H. Curler, Director |
|
|
|
Date March 1, 2010 |
|
|
Date March 1, 2010 |
|
Pursuant to the rules and regulations of the Securities and Exchange Commission, we have filed certain agreements as exhibits to this Annual Report on Form 10-K. these agreements may contain representations and warranties by the parties thereto. These representations and warranties have been made solely for the benefit of the other party or parties to such agreements and (i) may have been qualified by disclosures made to such other party or parties, (ii) were made only as of the date of such agreements or such other date(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected in our public disclosure, (iii) may reflect the allocation of risk among the parties to such agreements and (iv) may apply materiality standards different from what may be viewed as material to investors. Accordingly, these representations and warranties may not describe our actual state of affairs at the date hereof and should not be relied upon.
|
Exhibit |
|
Description |
|
Form of Filing |
|
2(a) |
|
Sale and Purchase Agreement between Bemis Company, Inc. as buyer and Alcan Holdings Switzerland AG, Alcan Corporation, and certain Rio Tinto Alcan Group Companies as sellers, dated as of July 5, 2009 and amended and restated as of February 26, 2010, portions have been omitted pursuant to the request for confidential treatment filed with the Securities and Exchange Commission concurrent with this filing (excluding certain schedules and exhibits referred to in the agreement, as amended, which the Registrant agrees to furnish supplementally to the Securities and Exchange Commission upon request). (1) |
|
Incorporated by Reference |
|
2(b) |
|
Sale and Purchase Agreement between Bemis Company, Inc. as buyer and Alcan Holdings Switzerland AG and Alcan Corporation as sellers, dated July 5, 2009, as amended by that certain Letter agreement between Bemis Company, Inc., as buyer and Alcan Corporation and Pechiney Plastic Packaging, Inc. as sellers, dated July 29, 2009, (excluding all schedules and exhibits referred to in the agreement, as amended, which the Registrant agrees to furnish supplementally to the Securities and Exchange Commission (SEC) upon request). (2) |
|
Incorporated by Reference |
|
3(a) |
|
Restated Articles of Incorporation of the Registrant, as amended. (3) |
|
Incorporated by Reference |
|
3(b) |
|
By-Laws of the Registrant, as amended through May 6, 2004. (3) |
|
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. (4) Copies of constituent instruments defining rights of holders of long-term debt of the Company and Subsidiaries, other than the Indenture specified herein, are not filed herewith, pursuant to Instruction (b)(4)(iii)(A) to Item 601 of Regulation S-K, because the total amount of securities Authorized under any such instrument does not exceed 10% of the total assets of the Company and Subsidiaries on a consolidated basis. The registrant hereby agrees that it will, upon request by the SEC, furnish to the SEC a copy of each such instrument. |
|
|
|
10(a) |
|
Bemis Retirement Plan, Amended and Restated as of January 1, 2009.* |
|
Filed Electronically |
|
10(b) |
|
Commitment Letter among the Registrant, JPMorgan Chase Bank, N.A. (“JPMorgan”), Wells Fargo Bank, National Association (“Wells Fargo”), Bank of America, N.A. (“Bank of America”) and BNP Paribas dated July 5, 2009. (As reported by the Registrant on a current Report on Form 8-K, filed with the SEC on July 31, 2009, this agreement was terminated. It is being filed herewith in accordance with the requirements of Regulation S-K, Item 601(b)(10)). (2) |
|
Incorporated by Reference |
|
10(c) |
|
Credit Facility Amendment No. 1 to Amended and Restated Long-Term Credit Agreement among the Registrant, JPMorgan, Wells Fargo, Bank of America, BNP Paribas and certain subsidiaries of the Registrant, dated July 5, 2009. (2) |
|
Incorporated by Reference |
|
10(d) |
|
Share Purchase Agreement between the Company and Pechiney Plastic Packaging, Inc., dated July 5, 2009. (As reported by the Registrant on a current Report on Form 8-K, filed with the SEC on July 31, 2009, this agreement was terminated. It is being filed herewith in accordance with the requirements of Regulation S-K, Item 601(b)(10)). (2) |
|
Incorporated by Reference |
|
10(e) |
|
Bemis Deferred Compensation Plan, as amended Effective January 1, 2009.* (5) |
|
Incorporated by Reference |
|
10(f) |
|
Bemis Company, Inc. 2001 Stock Incentive Plan, Amended and Restated as of January 1, 2008.* (5) |
|
Incorporated by Reference |
|
10(g) |
|
Bemis Company, Inc. Supplemental Retirement Plan, Amended and Restated as of January 1, 2008.* (5) |
|
Incorporated by Reference |
|
10(h) |
|
Bemis Company, Inc. Supplemental Retirement Plan for Senior Officers, Amended and Restated as of January 1, 2008.* (5) |
|
Incorporated by Reference |
|
10(i) |
|
Bemis Company, Inc. 2007 Stock Incentive Plan, Amended and Restated as of January 1, 2008.* (5) |
|
Incorporated by Reference |
|
10(j) |
|
Bemis Supplemental BIPSP, as Established Effective January 1, 2006.* (5) |
|
Incorporated by Reference |
|
10(k) |
|
Bemis Company, Inc. 1994 Stock Incentive Plan, Amended and Restated as of August 4, 1999.* (6) |
|
Incorporated by Reference |
|
10(l) |
|
Bemis Company, Inc. Long Term Deferred Compensation Plan, Amended and Restated as of August 4, 1999.* (6) |
|
Incorporated by Reference |
|
10(m) |
|
Bemis Company, Inc. Form of Management Contract with Principal Executive Officers.* (7) |
|
Incorporated by Reference |
|
10(n) |
|
Bemis Executive Officer Incentive Plan as of October 29, 1999.* (8) |
|
Incorporated by Reference |
|
10(o) |
|
Bemis Company, Inc. 1997 Executive Officer Performance Plan.* (9) |
|
Incorporated by Reference |
|
10(p) |
|
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(q) |
|
Bemis Investment Incentive Plan, Amended and Restated Effective as of January 1, 2006.* (11) |
|
Incorporated by Reference |
|
10(r) |
|
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. (12) |
|
Incorporated by Reference |
|
10(s) |
|
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. (12) |
|
Incorporated by Reference |
|
10(t) |
|
Bemis Company, Inc. Form of Management Contract with Principal Executive Officers effective January 1, 2009.* |
|
Filed Electronically |
|
14 |
|
Financial Code of Ethics. (13) |
|
Incorporated by Reference |
|
21 |
|
Subsidiaries of the Registrant. |
|
Filed Electronically |
|
23 |
|
Consent of PricewaterhouseCoopers LLP. |
|
Filed Electronically |
|
Exhibit |
|
Description |
|
Form of Filing |
|
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 Form 8-K filed March 1, 2010 (File No. 1-5277). |
|
(2) |
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 (File No. 1-5277). |
|
(3) |
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 (File No. 1-5277). |
|
(4) |
Incorporated by reference to the Registrant’s Current Report on Form 8-K dated June 30, 1995 (File No. 1-5277). |
|
(5) |
Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 (File No. 1-5277). |
|
(6) |
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-5277). |
|
(7) |
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 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 Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-5277). |
|
(12) |
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 1-5277). |
|
(13) |
Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 1-5277). |
(in thousands)
|
|
|
Balance at |
|
Additions |
|
|
|
Foreign |
|
|
|
Balance |
|
||||||
|
Year Ended |
|
Beginning |
|
Charged to |
|
|
|
Currency |
|
|
|
at Close |
|
||||||
|
December 31, |
|
of Year |
|
Profit & Loss |
|
Write-offs |
|
Impact |
|
Other |
|
of Year |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
RESERVES FOR DOUBTFUL ACCOUNTS, SALES RETURNS, AND ALLOWANCES |
|
|
|
|
|
||||||||||||||
|
2009 |
|
$ |
16,262 |
|
$ |
18,674 |
|
$ |
(15,321) |
(1) |
$ |
1,383 |
|
$ |
80 |
(4) |
$ |
21,078 |
|
|
2008 |
|
$ |
19,311 |
|
$ |
17,073 |
|
$ |
(15,317) |
(2) |
$ |
(1,534 |
) |
$ |
(3,271) |
(5) |
$ |
16,262 |
|
|
2007 |
|
$ |
20,287 |
|
$ |
7,385 |
|
$ |
(9,252) |
(3) |
$ |
891 |
|
|
|
$ |
19,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
RESERVES FOR INVENTORY |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
2009 |
|
$ |
18,916 |
|
$ |
3,812 |
|
$ |
(1,611 |
) |
$ |
612 |
|
|
|
$ |
21,729 |
|
|
|
2008 |
|
$ |
19,718 |
|
$ |
4,858 |
|
$ |
(4,681 |
) |
$ |
(979 |
) |
|
|
$ |
18,916 |
|
|
|
2007 |
|
$ |
19,203 |
|
$ |
4,907 |
|
$ |
(4,703 |
) |
$ |
311 |
|
|
|
$ |
19,718 |
|
|
(1) Net of $310 collections on accounts previously written off.
(2) Net of $220 collections on accounts previously written off.
(3) Net of $396 collections on accounts previously written off.
(4) Customer receivable accrual related to a South American rigid packaging acquisition.
(5) Customer rebates accrual reclassified to accounts payable.
REPORT OF INDEPENDENT REG ISTERED 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 March 1, 2010 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
March 1, 2010
Exhibit 10.(a)
BEMIS RETIREMENT PLAN
(Amended and Restated Effective as of January 1, 2009)
BEMIS RETIREMENT PLAN
Table of Contents
|
ARTICLE I |
GENERAL |
|
1 |
|
Sec. 1.1 |
Name of Plan |
|
1 |
|
Sec. 1.2 |
Purpose |
|
1 |
|
Sec. 1.3 |
History of the Plan |
|
1 |
|
Sec. 1.4 |
Plan Year |
|
1 |
|
Sec. 1.5 |
Company |
|
1 |
|
Sec. 1.6 |
Participating Employer |
|
1 |
|
Sec. 1.7 |
Construction and Applicable Law |
|
2 |
|
Sec. 1.8 |
Benefits Determined Under Provisions in Effect at Termination of Employment |
|
2 |
|
Sec. 1.9 |
Transition Rules |
|
2 |
|
|
|
|
|
|
ARTICLE II |
MISCELLANEOUS DEFINITIONS |
|
3 |
|
Sec. 2.1 |
Accrued Monthly Pension |
|
3 |
|
Sec. 2.2 |
Accumulated Interest |
|
3 |
|
Sec. 2.3 |
Active Participant |
|
3 |
|
Sec. 2.4 |
Actuarial Equivalent |
|
3 |
|
Sec. 2.5 |
Actuarial Value |
|
3 |
|
Sec. 2.6 |
Actuary |
|
3 |
|
Sec. 2.7 |
Administrator |
|
3 |
|
Sec. 2.8 |
Affiliate |
|
3 |
|
Sec. 2.9 |
Bemis Elapsed Time |
|
3 |
|
Sec. 2.10 |
Beneficiary |
|
3 |
|
Sec. 2.11 |
Board |
|
4 |
|
Sec. 2.12 |
Code |
|
4 |
|
Sec. 2.13 |
Common Control |
|
4 |
|
Sec. 2.14 |
Credited Service |
|
4 |
|
Sec. 2.15 |
Disability Retirement |
|
4 |
|
Sec. 2.16 |
Early Retirement |
|
5 |
|
Sec. 2.17 |
Elapsed Time |
|
5 |
|
Sec. 2.18 |
Eligibility Computation Period |
|
5 |
|
Sec. 2.19 |
Employment Commencement Date |
|
5 |
|
Sec. 2.20 |
ERISA |
|
5 |
|
Sec. 2.21 |
Final Average Earnings |
|
5 |
|
Sec. 2.22 |
Fund |
|
5 |
|
Sec. 2.23 |
Funding Agency |
|
5 |
|
Sec. 2.24 |
Group A Participant |
|
5 |
|
Sec. 2.25 |
Group B Participant |
|
5 |
|
Sec. 2.26 |
Hour of Service |
|
5 |
|
Sec. 2.27 |
Leased Employee |
|
5 |
|
Sec. 2.28 |
Long-Term Disability Plan (Pre-2006) |
|
6 |
|
Sec. 2.29 |
Monthly Earnings |
|
6 |
|
Sec. 2.30 |
Named Fiduciary |
|
6 |
|
Sec. 2.31 |
Normal Retirement |
|
6 |
|
Sec. 2.32 |
Normal Retirement Age |
|
6 |
|
Sec. 2.33 |
Normal Retirement Date |
|
7 |
|
Sec. 2.34 |
Participant |
|
7 |
|
Sec. 2.35 |
Present Value |
|
7 |
|
Sec. 2.36 |
Primary Social Security Benefit |
|
7 |
|
Sec. 2.37 |
Qualified Employee |
|
7 |
|
Sec. 2.38 |
Qualified Military Service |
|
9 |
|
Sec. 2.39 |
Recognized Break In Service |
|
9 |
|
Sec. 2.40 |
Service Ratio |
|
9 |
|
Sec. 2.41 |
Termination of Employment |
|
9 |
|
Sec. 2.42 |
USERRA |
|
9 |
|
Sec. 2.43 |
Vested Termination |
|
9 |
|
Sec. 2.44 |
Year of Eligibility Service |
|
9 |
|
|
|
|
|
|
ARTICLE III |
SERVICE PROVISIONS |
|
10 |
|
Sec. 3.1 |
Employment Commencement Date |
|
10 |
|
Sec. 3.2 |
Termination of Employment |
|
10 |
|
Sec. 3.3 |
Recognized Break In Service |
|
10 |
|
Sec. 3.4 |
Elapsed Time |
|
10 |
|
Sec. 3.5 |
Credited Service |
|
12 |
|
Sec. 3.6 |
Eligibility Computation Period |
|
15 |
|
Sec. 3.7 |
Year of Eligibility Service |
|
15 |
|
Sec. 3.8 |
Hour of Service |
|
16 |
|
Sec. 3.9 |
Service Rules at Columbus, Indiana Facility |
|
17 |
|
Sec. 3.10 |
Bemis Elapsed Time |
|
17 |
|
|
|
|
|
|
ARTICLE IV |
BENEFIT DEFINITIONS |
|
19 |
|
Sec. 4.1 |
Normal Retirement |
|
19 |
|
Sec. 4.2 |
Early Retirement |
|
19 |
|
Sec. 4.3 |
Disability Retirement |
|
19 |
|
Sec. 4.4 |
Vested Termination |
|
19 |
|
Sec. 4.5 |
Accrued Monthly Pension |
|
19 |
|
Sec. 4.6 |
Service Ratio |
|
21 |
|
Sec. 4.7 |
Monthly Earnings |
|
22 |
|
Sec. 4.8 |
Final Average Earnings |
|
24 |
|
Sec. 4.9 |
Primary Social Security Benefit |
|
25 |
|
Sec. 4.10 |
Actuarial Equivalent, Actuarial Value, Present Value |
|
26 |
|
|
|
|
|
|
ARTICLE V |
PLAN PARTICIPATION |
|
29 |
|
Sec. 5.1 |
Eligibility for Participation |
|
29 |
|
Sec. 5.2 |
Duration of Participation |
|
29 |
|
Sec. 5.3 |
No Guarantee of Employment |
|
29 |
|
ARTICLE VI |
PENSION BENEFITS |
|
30 |
|
Sec. 6.1 |
Pension on Normal Retirement |
|
30 |
|
Sec. 6.2 |
Pension on Early Retirement |
|
30 |
|
Sec. 6.3 |
Pension on Disability Retirement |
|
30 |
|
Sec. 6.4 |
Pension on Vested Termination |
|
31 |
|
Sec. 6.5 |
Deduction for Other Pension Payments |
|
31 |
|
Sec. 6.6 |
Amendments Affecting Pension Rights |
|
32 |
|
Sec. 6.7 |
Suspension of Benefits and Effect of Reemployment |
|
32 |
|
Sec. 6.8 |
Family Income Coverage |
|
34 |
|
Sec. 6.9 |
Effect of Participation in Variable Annuity Fund Prior to January 1, 1969 |
|
34 |
|
Sec. 6.10 |
Preservation of Benefits Under Pre-1972 Formula |
|
34 |
|
Sec. 6.11 |
Preservation of Benefits Under Pre-1997 Formula |
|
34 |
|
Sec. 6.12 |
Special Vested Termination Provisions For Employees At Certain Discontinued Operations |
|
37 |
|
Sec. 6.13 |
Special Enhanced Benefit for Certain Employees at Stow, Ohio |
|
38 |
|
Sec. 6.14 |
Increase in Benefits for Persons Whose Benefits Commenced Prior to January 1, 1990 |
|
39 |
|
Sec. 6.15 |
Special Enhanced Benefit for Certain Employees at Bemis Clysar, Inc. |
|
40 |
|
Sec. 6.16 |
Special Provisions Applicable to Participants Who Terminated Due to Certain Plant Closings |
|
41 |
|
Sec. 6.17 |
Special Provisions Applicable to Participants Who Qualified for LTD Benefits Prior to 2006 |
|
41 |
|
Sec. 6.18 |
Missing Participant or Beneficiary |
|
42 |
|
|
|
|
|
|
ARTICLE VII |
SURVIVOR’S BENEFITS |
|
44 |
|
Sec. 7.1 |
Qualified Preretirement Survivor Annuity |
|
44 |
|
Sec. 7.2 |
Qualified Joint and Survivor Annuity |
|
46 |
|
Sec. 7.3 |
Election Procedure |
|
48 |
|
Sec. 7.4 |
Optional Settlements |
|
49 |
|
Sec. 7.5 |
Other Death Benefits |
|
50 |
|
|
|
|
|
|
ARTICLE VIII |
MISCELLANEOUS BENEFIT PROVISIONS |
|
51 |
|
Sec. 8.1 |
Commencement Date for Pension Payments |
|
51 |
|
Sec. 8.2 |
Payment of Small Amounts and Certain Consequences Thereof |
|
52 |
|
Sec. 8.3 |
No Other Benefits |
|
52 |
|
Sec. 8.4 |
Source of Benefits |
|
52 |
|
Sec. 8.5 |
Incompetent Payee |
|
52 |
|
Sec. 8.6 |
Assignment or Alienation of Benefits |
|
53 |
|
Sec. 8.7 |
Payment of Taxes |
|
53 |
|
Sec. 8.8 |
Conditions Precedent |
|
53 |
|
Sec. 8.9 |
Company Directions to Funding Agency |
|
54 |
|
Sec. 8.10 |
Benefits Not Increased by Actuarial Gains |
|
54 |
|
Sec. 8.11 |
Pensions Not Decreased on Account of Certain Social Security Increases |
|
54 |
|
Sec. 8.12 |
Maximum Limitations on Benefits |
|
54 |
|
Sec. 8.13 |
Distributions Made in Accordance with Code § 401(a)(9) |
|
57 |
|
Sec. 8.14 |
Deemed Cash-Out Upon Termination of Employment for Unvested Participants |
|
57 |
|
Sec. 8.15 |
Rollovers and Transfers to Other Qualified Plans |
|
57 |
|
Sec. 8.16 |
Special Benefit Limitation |
|
58 |
|
Sec. 8.17 |
Benefits of Reemployed Veterans |
|
59 |
|
Sec. 8.18 |
Retroactive Annuity Starting Dates |
|
60 |
|
Sec. 8.19 |
Limitations Pursuant to Code §436 |
|
61 |
|
|
|
|
|
|
ARTICLE IX |
FUND |
|
63 |
|
Sec. 9.1 |
Composition |
|
63 |
|
Sec. 9.2 |
Funding Agency |
|
63 |
|
Sec. 9.3 |
Compensation and Expenses of Funding Agency |
|
63 |
|
Sec. 9.4 |
Securities and Property of Participating Employers |
|
63 |
|
Sec. 9.5 |
No Diversion |
|
64 |
|
Sec. 9.6 |
Employer Contributions |
|
64 |
|
|
|
|
|
|
ARTICLE X |
ACTUARY |
|
65 |
|
Sec. 10.1 |
Appointment |
|
65 |
|
Sec. 10.2 |
Responsibilities |
|
65 |
|
Sec. 10.3 |
Compensation |
|
65 |
|
Sec. 10.4 |
Resignation, Removal, and Successor |
|
65 |
|
|
|
|
|
|
ARTICLE XI |
ADMINISTRATION OF PLAN |
|
66 |
|
Sec. 11.1 |
Administration by Company |
|
66 |
|
Sec. 11.2 |
Certain Fiduciary Provisions |
|
66 |
|
Sec. 11.3 |
Evidence |
|
67 |
|
Sec. 11.4 |
Correction of Errors |
|
67 |
|
Sec. 11.5 |
Records |
|
67 |
|
Sec. 11.6 |
Claims Procedure |
|
67 |
|
Sec. 11.7 |
Bonding |
|
68 |
|
Sec. 11.8 |
Waiver of Notice |
|
68 |
|
Sec. 11.9 |
Agent For Legal Process |
|
68 |
|
Sec. 11.10 |
Indemnification |
|
68 |
|
|
|
|
|
|
ARTICLE XII |
AMENDMENT, TERMINATION, MERGER |
|
69 |
|
Sec. 12.1 |
Amendment |
|
69 |
|
Sec. 12.2 |
Reorganization of Participating Employers |
|
69 |
|
Sec. 12.3 |
Termination |
|
69 |
|
Sec. 12.4 |
Partial Termination |
|
71 |
|
Sec. 12.5 |
Merger, Consolidation, or Transfer of Plan Assets |
|
72 |
|
Sec. 12.6 |
Deferral of Distributions |
|
72 |
|
|
|
|
|
|
ARTICLE XIII |
MISCELLANEOUS PROVISIONS |
|
73 |
|
Sec. 13.1 |
Headings |
|
73 |
|
Sec. 13.2 |
Capitalized Definitions |
|
73 |
|
Sec. 13.3 |
Gender |
|
73 |
|
Sec. 13.4 |
Use of Compounds of Word ‘Here’ |
|
73 |
|
Sec. 13.5 |
Construed as a Whole |
|
73 |
|
|
|
|
|
|
ARTICLE XIV |
TOP-HEAVY PLAN PROVISIONS |
|
74 |
|
Sec. 14.1 |
Key Employee Defined |
|
74 |
|
Sec. 14.2 |
Determination of Top-Heavy Status |
|
74 |
|
Sec. 14.3 |
Minimum Accrued Benefit |
|
76 |
|
Sec. 14.4 |
Vesting Schedule |
|
77 |
|
Sec. 14.5 |
Definition of Employer |
|
78 |
|
Sec. 14.6 |
Exception For Collective Bargaining Unit |
|
78 |
|
|
|
|
|
|
Schedule A |
|
|
79 |
|
|
|
|
|
|
Appendix A |
|
|
81 |
|
Appendix B |
|
|
85 |
|
Appendix C |
|
|
87 |
|
Appendix D |
|
|
90 |
|
Appendix E |
|
|
94 |
|
Appendix F |
|
|
95 |
|
Appendix G |
|
|
96 |
|
Appendix H |
|
|
98 |
|
Appendix I |
|
|
99 |
|
Appendix J |
|
|
100 |
BEMIS RETIREMENT PLAN
(Amended and Restated Effective as of January 1, 2009)
GENERAL
Sec. 1.1 Name of Plan . The name of the pension plan set forth herein is “Bemis Retirement Plan”. It is sometimes herein referred to as the “Plan”.
Sec. 1.2 Purpose . The Plan has been established so that eligible employees will have a source of retirement income in addition to the other sources of retirement income available to them.
Sec. 1.3 History of the Plan . The Company on December 21, 1945 established the Bemis Bro. Bag Company Retirement Income Plan and Trust (sometimes referred to as “S&RIP”), under which retirement benefits were to be provided for eligible employees. Subsequently, on March 12, 1958 the Company established the Bemis Bro. Bag Company Supplemental Pension Plan (sometimes referred to as “SPP”). Thereafter, the two plans were amended and combined into one plan, the Bemis Retirement Plan, said amendment being effective as of December 31, 1961 for the S&RIP and as of January 1, 1962 for the SPP. Subsequently, the Plan was amended from time to time.
Sec. 1.4 Plan Year . A “Plan Year” is the 12-consecutive-month period commencing on January 1 and is the year on which records of the Plan are kept.
Sec. 1.5 Company . The “Company” is Bemis Company, Inc., a Missouri corporation.
Sec. 1.6 Participating Employer . The Company is a Participating Employer in the Plan. With the consent of the Company, any other employer may also become a Participating Employer effective as of a date specified by it in its adoption of the Plan. Also with such consent, any such adopting employer may modify the provisions of the Plan as they shall be applicable to its employees. The other Participating Employers on January 1, 2009 are:
(a) Bemis Clysar, Inc. a Minnesota corporation.
(b) Curwood, Inc. a Delaware corporation.
(c) Electronic Printing Products, Inc., an Ohio corporation.
(d) MACtac Engineered Products, Inc., an Ohio corporation.
(e) Milprint, Inc., a Wisconsin corporation.
(f) Morgan Adhesives Company, an Ohio corporation.
(g) Perfecseal, Inc., a Delaware corporation.
Sec. 1.7 Construction and Applicable Law . The Plan is intended to meet the requirements for qualification under Code § 401(a). The Plan is also intended to be in full compliance with applicable requirements of ERISA. The Plan shall be administered and construed consistent with said intent. It shall also be construed and administered according to the internal, substantive laws of the State of Wisconsin (without regard to the conflict of law rules of the State of Wisconsin or of any other jurisdiction) to the extent that such laws are not preempted by the laws of the United States of America. All controversies, disputes, and claims arising hereunder shall be submitted to the United States District Court for the Eastern District of Wisconsin.
Sec. 1.8 Benefits Determined Under Provisions in Effect at Termination of Employment . Except as may be specifically provided herein to the contrary, with respect to a Participant whose Termination of Employment has occurred, benefits under the Plan attributable to service prior to his or her Termination of Employment shall be determined and paid in accordance with the provisions of the Plan as in effect on the date the Participant’s Termination of Employment occurred unless he or she becomes an Active Participant after that date and such active participation causes a contrary result under the provisions hereof.
Sec. 1.9 Transition Rules . The Plan has been amended from time to time. Each such amendment is effective as of the date specified in the amendment. The Plan as amended effective January 1, 2009 includes amendments required by the Pension Protection Act of 2006 (“PPA”). Such amendments are effective as of the dates required by PPA.
ARTICLE II
MISCELLANEOUS DEFINITIONS
Sec. 2.1 Accrued Monthly Pension . “Accrued Monthly Pension” is defined in Sec. 4.5.
Sec. 2.2 Accumulated Interest . “Accumulated Interest” respecting employee contributions made prior to their discontinuance effective January 1, 1972 and respecting the cash value of certain annuity contracts purchased in 1962 shall be determined as follows:
(a) Accumulated Interest for years prior to 1976 shall be determined according to the provisions of the Plan as in effect on December 31, 1975.
(b) Accumulated Interest for years after 1975 and prior to 1988 shall be computed at the annual rate of 5% per year, compounded annually.
(c) Accumulated Interest for years after 1987 shall be computed at an annual rate equal to 120% of the federal mid-term rate for January of the particular plan year.
Accumulated Interest shall be determined to the first day of the month in which said determination is to be made, but not later than the date as of which benefits with respect to the Participant commence under the Plan. If a retroactive pension payment is made with respect to a Participant, Accumulated Interest will not accrue after the first day of the earliest month with respect to which the retroactive payment is made.
Sec. 2.3 Active Participant . An employee is an “Active Participant” only while both a Participant and a Qualified Employee.
Sec. 2.4. Actuarial Equivalent . “Actuarial Equivalent” is defined in Sec. 4.10.
Sec. 2.5 Actuarial Value . “Actuarial Value” is defined in Sec. 4.10.
Sec. 2.6 Actuary . “Actuary” means the individual, partnership, corporation, or other organization appointed and acting as such from time to time pursuant to Article X.
Sec. 2.7 Administrator . The Company is the “Administrator” of the Plan for purposes of ERISA.
Sec. 2.8 Affiliate . “Affiliate” means any trade or business entity under Common Control with a Participating Employer.
Sec. 2.9 Bemis Elapsed Time . “Bemis Elapsed Time” is defined in Sec. 3.10.
Sec. 2.10 Beneficiary . A “Beneficiary” is the person or persons, natural or otherwise, designated by a Participant to receive any death benefit payable under Sec. 7.4(a) (life and 120
months certain) or 7.5 (other death benefits). Participants covered by certain Appendices to the Plan may also designate a Beneficiary to receive death benefits provided by the Appendices, as follows: (i) Appendix A — Sec. 7.4, (ii) Appendix C — Sec. 7, Appendix D — Sec. 6, and Appendix J — Sec. 2. A Participant who has designated a Beneficiary may, without the consent of such Beneficiary, alter or revoke such designation. To be effective, any such designation, alteration, or revocation shall be in writing, in such form as the Company may prescribe, and shall be filed with the Company prior to the Participant’s death. If at the time a death benefit becomes payable there is not on file with the Company a fully effectual designation of Beneficiary, or if the designated Beneficiary does not survive the 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:
(a) the Participant’s spouse;
(b) the Participant’s children, except that if any 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;
(c) the Participant’s parents;
(d) the Participant’s brothers and sisters;
(e) the Participant’s personal representative or representatives (executors or administrators).
Determination of who the Beneficiary is in each case shall be made by the Company.
Sec. 2.11 Board . The “Board” is the board of directors of the Company, and includes any executive committee thereof authorized to act for said board of directors.
Sec. 2.12 Code . “Code” means the Internal Revenue Code of 1986 as from time to time amended.
Sec. 2.13 Common Control . A trade or business entity (whether a corporation, partnership, sole proprietorship or otherwise) is under “Common Control” with another trade or business entity (i) if both entities are corporations which are members of a controlled group of corporations as defined in Code § 414(b), or (ii) if both entities are trades or businesses (whether or not incorporated) which are under common control as defined in Code § 414(c), or (iii) if both entities are members of an affiliated service group as defined in Code § 414(m), or (iv) if both entities are required to be aggregated pursuant to regulations under Code § 414(o). In applying the preceding sentence for purposes of Sec. 8.12, the provisions of Code § 414(b) and (c) are deemed to be modified as provided in Code § 415(h).
Sec. 2.14 Credited Service . “Credited Service” is defined in Sec. 3.5.
Sec. 2.15 Disability Retirement . “Disability Retirement” is defined in Sec. 4.3.
Sec. 2.16 Early Retirement . “Early Retirement” is defined in Sec. 4.2.
Sec. 2.17 Elapsed Time . “Elapsed Time” is defined in Sec. 3.4.
Sec. 2.18 Eligibility Computation Period . “Eligibility Computation Period” is defined in Sec. 3.6.
Sec. 2.19 Employment Commencement Date . “Employment Commencement Date” is defined in Sec. 3.1.
Sec. 2.20 ERISA . “ERISA” means the Employee Retirement Income Security Act of 1974 as from time to time amended.
Sec. 2.21 Final Average Earnings . “Final Average Earnings” is defined in Sec. 4.8.
Sec. 2.22 Fund . “Fund” means the aggregate of assets described in Sec. 9.1.
Sec. 2.23 Funding Agency . “Funding Agency” is a trustee or trustees or an insurance company appointed and acting from time to time in accordance with the provisions of Sec. 9.2 for the purpose of holding, investing, and disbursing all or a part of the Fund.
Sec. 2.24 Group A Participant . “Group A Participant” means a Participant who meets the requirements of (a) and (b):
(a) On December 31, 2005, he or she was 40 or older.
(b) On December 31, 2005, the sum of the following amounts is 60 or more:
(1) The Participant’s age on December 31, 2005, which is the Participant’s age on his or her 2005 birthday, plus a fractional year of age equal 1/365 of a year for each day after said birthday and prior to January 1, 2006.
(2) The Participant’s Bemis Elapsed Time on December 31,2005, which also is expressed in terms of whole and fractional years through December 31, 2005.
Sec. 2.25 Group B Participant . “Group B Participant” means any Participant who does not meet the requirements to be a Group A Participant as set forth in Sec. 2.24.
Sec. 2.26 Hour of Service . “Hour of Service” is defined in Sec. 3.8.
Sec. 2.27 Leased Employee . “Leased Employees” within the meaning of Code § 414(n)(2) and individuals who would meet those requirements but for failure to complete a year of leased service shall be counted as employees for purposes of determining Elapsed Time, but not for purposes of determining Credited Service. Leased Employees may not become
participants or accrue benefits under the Plan. “Leased Employee” means any person (other than an employee of the recipient) who, pursuant to an agreement between the recipient and any other person (“leasing organization”), has performed services for the recipient (or for the recipient and related persons determined in accordance with Code § 414(n)(6)) on a substantially full-time basis for a period of at least one year, and such services are performed under primary direction or control by the recipient. Contributions or benefits provided a leased employee by the leasing organization which are attributable to service performed for the recipient employer shall be treated as provided by the recipient employer.
Sec. 2.28 Long-Term Disability Plan (Pre-2006) . “Long Term Disability Plan (Pre-2006)” for purposes of applying the special rules in Sec. 6.17 means the long-term disability insurance program maintained prior to 2006 for most salaried and office clerical employees of the Participating Employers. As of January 1, 2005, this insurance was provided through CIGNA long-term disability policy LK 6337 (Class 1). “Long-Term Disability Plan (Pre-2006)” does not include:
(a) Any long-term disability insurance plan offered to salaried or office clerical employees after 2005, such as the Hartford Insurance LTD plan in effect during 2006-2008 or the CIGNA LTD plan established in 2009.
(b) Long-term disability insurance offered initially in 2005 to certain non-exempt plan employees through CIGNA long-term policy LK 6337 (Class 3) or any successor to such insurance.
Sec. 2.29 Monthly Earnings . “Monthly Earnings” is defined in Sec. 4.7.
Sec. 2.30 Named Fiduciary . The Company is a “Named Fiduciary” for purposes of ERISA with authority to control or manage the operation and administration of the Plan, including control or management of the assets of the Plan. Other persons are also Named Fiduciaries if so provided by ERISA or if so identified by the Company. Such other person or persons shall have such authority to control or manage the operation and administration of the Plan, including control or management of the assets of the Plan, as may be provided by ERISA or as may be allocated by the Company.
Sec. 2.31 Normal Retirement . “Normal Retirement” is defined in Sec. 4.1.
Sec. 2.32 Normal Retirement Age . A Participant’s “Normal Retirement Age” shall be determined as follows:
(a) Except as provided in (b) and (c), a Participant’s Normal Retirement Age shall be determined from the following table according to his or her year of birth:
|
Year of Birth |
|
Normal Retirement Age |
|
Before 1943 |
|
65 |
|
1943 - 1959 |
|
66 |
|
1960 and after |
|
67 |
(b) However, if a Participant’s earliest Employment Commencement Date is on or after March 1, 2000 and is on or after the date the Participant attains age 62, his or her Normal Retirement Age is not earlier than the third annual anniversary of his or her date of hire. For example, if a Participant is hired July 1, 2003, and is 68 on the date of hire, “Normal Retirement Age” is July 1, 2006, three years after the date of hire.
(c) For Participants who are “Eligible Employees” as defined in Sec. 6.11(a), Normal Retirement Age is age 65, regardless of year of birth.
Sec. 2.33 Normal Retirement Date. “Normal Retirement Date” is the last day of the month in which a person attains Normal Retirement Age.
Sec. 2.34 Participant. A “Participant” is an individual described as such in Article V.
Sec. 2.35 Present Value . “Present Value” is defined in Sec. 4.10.
Sec. 2.36 Primary Social Security Benefit . “Primary Social Security Benefit” is defined in Sec. 4.9.
Sec. 2.37 Qualified Employee . “Qualified Employee” means each employee described in (1), (2), (3) or (4) of subsection (a), subject to the provisions of subsections (b) through (h):
(a) Qualified Employee includes:
(1) Employees of a Participating Employer who are compensated in whole or in part on a regular stated salary basis.
(2) Employees who are paid hourly, for regular straight time at a Covered Location listed in Schedule A, provided, however, that an hourly paid employee at a location listed in Schedule A is not a Qualified Employee prior to the effective date shown in Schedule A for the particular location.
(3) Hourly paid employees of a Participating Employer who are employed in an office clerical or supervisory position, but only for service after December 31, 1999. (Prior to 2000, such employees participated in the Bemis Hourly Retirement Plan).
(4) Hourly paid non-bargaining unit employees of a Participating Employer at bargaining unit locations, but only for service after December 31, 1999.
(b) Except as to employees of the Company, an employee is not a Qualified Employee prior to the date as of which his or her employer becomes a Participating Employer.
(c) A non-resident alien while not receiving earned income (within the meaning of Code § 911(d)(2)) from a Participating Employer which constitutes income from sources within the United States (within the meaning of Code § 861(a)(3)) is not a Qualified Employee.
(d) Eligibility of employees in a collective bargaining unit to participate in the Plan shall be subject to negotiations with the representative of that unit. During any period that an employee is covered by the provisions of a collective bargaining agreement between a Participating Employer and such representative he or she shall not be considered a Qualified Employee for purposes of this Plan unless such agreement expressly so provides. For purposes of this section only, such an agreement shall be deemed to continue after its formal expiration during collective bargaining negotiations pending the execution of a new agreement.
(e) An employee shall be deemed to be a Qualified Employee during a period of absence from active service which does not result from Termination of Employment, provided he or she is a Qualified Employee at the commencement of such period of absence.
(f) A salaried, office clerical, or supervisory employee is not a Qualified Employee during any period of employment prior to January 1, 1997 at a location listed in this subsection. However, this exclusion does not apply to service at these locations on or after January 1, 1997. Also, this exclusion does not apply in cases where the Plan as in effect prior to 1997 recognized service at one of these locations as Credited Service because the individual transferred to the location after attaining age 35.
(1) Milprint Longview (formerly Paramount Texas).
(2) Milprint Oshkosh North (formerly Banner Packaging).
(3) Curwood - Fremont.
(4) Hazleton.
(5) MACtac Scranton.
(6) Milprint Corporate - Oshkosh.
(7) Milprint Denmark.
(8) Milprint Lancaster.
(9) Milprint Lebanon.
(10) Perfecseal Philadelphia.
(g) The Plan as in effect prior to January 1, 1997 excluded employees at the following locations. Effective as of January 1, 1997, employees at these locations are no longer excluded. Service prior to January 1, 1997 is recognized as provided:
(1) Non-exempt employees at the Nellis, Nevada plant of Morgan Adhesives, Inc. are Qualified Employees from the date of hire.
(2) Salaried employees at Perfecseal Oshkosh (formerly Cur-Med) are Qualified Employees from the date of hire or date of acquisition by the Company, if later.
(h) An employee is not a Qualified Employee during any period of employment prior to January 1, 1998 at Milprint Shelbyville (formerly Paramount Tennessee). This exclusion does not apply to service at this location on or after January 1, 1998.
(i) An employee is not a Qualified Employee during any period of employment at one of the following locations:
(1) Enterprise Software, Inc.
(2) Paramount Chalfont.
(j) An employee whose permanent assignment is outside the United States is not a Qualified Employee during a period when he or she is on temporary assignment within the United States.
Sec. 2.38 Qualified Military Service . “Qualified Military Service” is defined in Sec. 8.17.
Sec. 2.39 Recognized Break In Service . “Recognized Break In Service” is defined in Sec. 3.3.
Sec. 2.40 Service Ratio . “Service Ratio” is defined in Sec. 4.6.
Sec. 2.41 Termination of Employment . “Termination of Employment” is defined in Sec. 3.2.
Sec. 2.42 USERRA . “USERRA” is defined in Sec. 8.17, which outlines certain special benefit provisions applicable to employees returning following Qualified Military Service.
Sec. 2.43 Vested Termination . “Vested Termination” is defined in Sec. 4.4.
Sec. 2.44 Year of Eligibility Service . “Year of Eligibility Service” is defined in Sec. 3.7.
ARTICLE III
SERVICE PROVISIONS
Sec. 3.1 Employment Commencement Date . “Employment Commencement Date” means the date on which a person first becomes an employee of a Participating Employer (whether before or after the Participating Employer becomes such) or an Affiliate.
Sec. 3.2 Termination of Employment . The “Termination of Employment” of an employee for purposes of the Plan shall be deemed to occur on the date of resignation, discharge, retirement, death, failure to return to active work at the end of an authorized leave of absence or the authorized extension or extensions thereof, failure to return to work when duly called following a temporary layoff, or upon the happening of any other event or circumstance which, under the policy of his or her employer as in effect from time to time, results in the termination of the employer-employee relationship; provided, however, that “Termination of Employment” shall not be deemed to occur upon a transfer between any combination of Participating Employers and Affiliates.
Sec. 3.3 Recognized Break In Service . A “Recognized Break in Service” is a period of at least 12 consecutive months duration which begins on the day on which an individual’s Termination of Employment occurs. A Recognized Break In Service ends, if ever, on the day on which the individual again becomes an employee of a Participating Employer, an Affiliate or a Predecessor Employer.
(a) If an individual is absent from work for maternity or paternity reasons, the 12-month period beginning with the first day of such absence shall not be included in a Recognized Break In Service.
(b) For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual, (ii) by reason of a birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such a child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement.
Sec. 3.4 Elapsed Time . A Participant’s “Elapsed Time” is equal to the aggregate time elapsed between his or her Employment Commencement Date and his or her most recent Termination of Employment or any other date as of which a determination of Elapsed Time is to be made, expressed in years and days, reduced as follows:
(a) All Recognized Breaks In Service shall be subtracted. Any periods that would have been included in a Recognized Break In Service if Sec. 3.3(a) did not apply shall also be subtracted.
(b) With respect to employers participating in the Plan on December 31, 1969, service rendered by an employee prior to the date his or her employer adopted the
Plan shall be recognized as Elapsed Time only to the extent service with the employer was recognized as continuous service under the Plan as in effect on December 31, 1969; provided, however, that service with Jaite Paper Bag Company; Claremont Paper Mills, Inc.; W. T. Winn Company; Cello-Vision Corporation; Clear Bag-Winnpak, Inc.; and Mountain Paper Products Corporation shall be included in Elapsed Time.
(c) Except as otherwise specifically provided herein, service with an employer prior to the date it becomes a Participating Employer or Affiliate shall not be included in an employee’s Elapsed Time. However, if a Participant was an employee of any entity listed in this subsection immediately prior to the acquisition of that entity or some or all of its assets by the Company or an Affiliate, the Participant’s Elapsed Time for purposes of determining vesting under the Plan and for purposes of determining eligibility for an Early Retirement benefit, Disability Retirement benefit, or Qualified Preretirement Survivor Annuity shall include continuous service beginning on the Participant’s last date of hire prior to such acquisition date. However, the pre-acquisition service is not recognized as Credited Service. Preacquisition service at locations acquired before 1981 is recognized to the extent provided in Sec. 3.4(c) of the Plan as in effect on January 1, 1994.
(1) Milprint, Inc., acquired September 28, 1990.
(2) Princeton Packaging Co., from which the Hazelton, PA location was acquired on February 4, 1993.
(3) Fitchburg Coated Products, a division of Technographics, Inc., from which the MACtac Scranton OH location was acquired on January 3, 1994.
(4) Hargro Health Care Packaging, from which the Perfeseal Oshkosh WI location was acquired January 20, 1994.
(5) Banner Packaging, Inc., from which the Milprint Oshkosh WI North location was acquired October 5, 1995 and the predecessor corporation which operated that location before acquisition by Bemis.
(6) Paper Manufacturers Company (PMCO), from which the Perfecseal operations of the Company were acquired April 29, 1996.
(7) Paramount Packaging Corporation, from which the Milprint Shelbyville TN and Milprint Longview TX locations were acquired January 1, 1997.
(8) MACtac Electronic Printing Products, Inc. and its predecessor, Gum Products of America, acquired March 17, 1997.
(9) Viskase Companies, Inc., from which the Curwood Shrink Packaging locations of Centerville, Iowa and Pauls Valley, Oklahoma were acquired September 1, 2000.
(10) Arrow Industries, from which certain operations and assets were acquired in 2000.
(11) Kanzaki Specialty Papers, Inc., from which certain operations and assets were acquired in 2000.
(12) Weskote, Inc., from which certain assets were leased and employees hired and from which the MACtac Los Angeles location was acquired February 7, 2001.
(13) Duralam, Inc., from which Curwood Appleton and Curwood Neenah were acquired September 8, 2001.
(14) E. I. Dupont De Nemours & Company, from which certain operations and assets were acquired and from which the Bemis Clysar location was acquired July 31, 2002.
(d) If an employee has a Termination of Employment and is later rehired by a Participating Employer or Affiliate, his or her Elapsed Time prior to said Termination of Employment shall not be disregarded by reason of said Termination of Employment.
(e) Elapsed Time includes service in Brazil as an employee of ITAP/BEMIS, Ltda.
(f) Solely for purposes of determining whether a Participant’s attained age and Elapsed Time totals 65 or more so that the individual satisfies the requirements of Sec. 6.16(b), an individual placed on leave of absence due to closing of the locations listed in Sec. 6.16(a) will be credited with Elapsed Time for the period of said leave of absence. Such additional Elapsed Time will not be recognized as Credited Service.
Sec. 3.5 Credited Service . A Participant’s “Credited Service” shall be equal to his or her Elapsed Time, subject to the following:
(a) Credited Service does not include service when the employee was not a Qualified Employee, except as follows:
(1) An employee who was a Qualified Employee on January 1, 1976 shall be deemed to be a Qualified Employee during periods of service prior to said date during which he or she would have been a Qualified Employee but for the fact he or she was neither compensated in whole or in part on a regular stated salary basis nor employed in an office clerical position.
Credited Service for the period prior to January 1, 1976 shall be adjusted to reflect such additional service as a Qualified Employee.
(2) If a former employee was not an employee of a Participating Employer or Affiliate on January 1, 1976 but subsequently was re-employed and became a Qualified Employee upon re-employment, he or she shall be deemed to be a Qualified Employee during periods of service prior to January 1, 1976 during which he or she would have been a Qualified Employee but for the fact he or she was neither compensated in whole or in part on a regular stated salary basis nor employed in an office clerical position; provided, however, that he or she shall not be deemed to be a Qualified Employee for any such additional period with respect to which he or she is eligible to receive a vested benefit pursuant to any other pension plan that meets the requirements of Code § 401(a). Credited Service for the period prior to January 1, 1976 shall be adjusted to reflect such additional service as a Qualified Employee.
(3) Except as provided in the following sentence, service in Canada as an employee of a Participating Employer or Affiliate is not recognized as Credited Service. However, if an employee of MACtac-Canada Limited transferred to a position as a Qualified Employee in the United States, and the transfer occurred on or after January 1, 1994 and on or before July 1, 1996, the service in Canada will be included in Credited Service, subject to the limitations in (b) and (e).
(4) If a Participant is a Qualified Employee on December 31, 1986 and during the period January 1, 1976 through December 31, 1986 he or she transferred from an hourly paid position with Lustour Corporation or with Lustour’s MacKay Engraving operation to a position as a Qualified Employee of Lustour or MacKay, his or her Credited Service shall include service as an hourly paid employee of Lustour or MacKay from the later of (i) the date the Company acquired Lustour (which was on or about August 1, 1968) or (ii) the individual’s last Employment Commencement Date preceding the date of transfer. However, said additional Credited Service is subject to the limitations in subsections (b) and (e).
(5) If an employee was an Active Participant on April 30, 1997, his or her Credited Service will include Elapsed Time as an employee of Master Palletizer Systems, Inc. on or after June 18, 1985.
(6) If a Participant transfers from a position as a Qualified Employee in the United States to a position in Brazil as an employee of ITAP/BEMIS Ltda., later returns to a position as a Qualified Employee in the United States, and remains a Qualified Employee for at least 12 months after the transfer back to the United States, his or her service in Brazil will be recognized as Credited Service. Except as provided in the preceding
sentence, service as an employee of ITAP/Bemis Ltda. is not Credited Service.
(b) A Participant whose Termination of Employment occurs on or before June 30, 1999, will not accrue Credited Service for a Plan Year prior to 1985 if he or she did not attain age 25 on or before the last day of the Plan Year. The foregoing exclusion is not applicable in any case where the Participant’s Termination of Employment occurs on or after July 1, 1999.
(c) Service with an employer prior to the date it becomes a Participating Employer is not included in Credited Service, except as follows:
(1) Such service prior to January 1, 1976 shall be included in Credited Service to the extent provided in the Plan as in effect on December 31, 1975.
(2) Such service shall be included in Credited Service to the extent provided in any applicable appendix to the Plan.
(3) In the case of any Participant who was an employee of Arnoldware-Rogers, Inc., a Vermont corporation, immediately prior to the acquisition of said corporation by the Company in 1980 and who was a Qualified Employee on January 1, 1987, Credited Service shall include continuous service beginning on his or her last date of hire prior to said acquisition date and ending on said acquisition date. However, said additional Credited Service shall be limited to service as a salaried, office clerical, or supervisory employee, and is subject to the limitations in subsection (b).
(4) If a Participant is a Qualified Employee on October 31, 1996, and had service as a salaried, office clerical, or supervisory employee of Sackner Products, Inc. (“Sackner”) on or after June 30, 1966 (the date the Company acquired Sackner) and prior to January 1, 1982 (the date Sackner became a Participating Employer), his or her Credited Service shall include such service, subject to subsection (b), which excludes certain service before the Plan Year the Participant attains age 25.
(d) If a leave of absence or layoff continues for longer than 365 calendar days, the period of such leave of absence or layoff in excess of 365 calendar days shall not be counted as Credited Service.
(e) If a Participant withdrew employee contributions or received a single sum distribution in lieu of a monthly pension, his or her Credited Service will be disregarded if so provided in the Plan provision pursuant to which the withdrawal or distribution occurred.
(f) For Group B Participants, Credited Service excludes any service after December 31, 2005.
(g) If a Group A Participant has a Termination of Employment after December 31, 2005 and is later rehired by a Participating Employer, no additional Credited Service will accrue during the period of reemployment.
(h) If a Group A Participant permanently transfers to a position outside the U.S. with the Company or an Affiliate and later returns to a position as a Qualified Employee in the U.S., his or her services as a Qualified Employee following return to the U.S. will be included in his or her Credited Service.
Sec. 3.6 Eligibility Computation Period . An employee’s first Eligibility Computation Period is the 12-consecutive-month period beginning on his or her Employment Commencement Date. His or her second Eligibility Computation Period is the Plan Year commencing in said 12-consecutive-month period. Each subsequent Plan Year prior to the end of the Plan Year in which the employee has a 1-Year Break in Service is an Eligibility Computation Period. If subsequent to a 1-Year Break in Service the employee had another Employment Commencement Date, Eligibility Computation Periods for the period beginning on such date shall be computed as though such date were the first Employment Commencement Date. “1-Year Break in Service” means a Plan Year in which (i) the employee has no Hours of Service and (ii) an employer-employee relationship with a Participating Employer, Affiliate or Predecessor Employer is not in effect at any time. The 1-Year Break in Service shall be recognized as such on the last day of such Plan Year.
(a) Notwithstanding the provisions of Sec. 3.8, for purposes of determining whether a 1-Year Break in Service has occurred, an individual who is absent from work for maternity or paternity reasons shall receive credit for the Hours of Service which would otherwise have been credited to such individual but for such absence, or in any case in which such hours cannot be determined, eight Hours of Service per day of such absence; provided, however, that the total number of Hours of Service recognized under this subsection shall not exceed 501 hours. The Hours of Service credited under this subsection shall be credited in the Plan Year in which the absence begins if the crediting is necessary to prevent a 1-Year Break in Service in the Plan Year or, in all other cases, in the following Plan Year.
(b) For purposes of subsection (a), an absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual, (ii) by reason of a birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement.
Sec. 3.7 Year of Eligibility Service . A “Year of Eligibility Service” means an Eligibility Computation Period in which an employee completes 1000 or more Hours of Service. If an employee has a Termination of Employment and is later rehired by a Participating Employer or Affiliate, Years of Eligibility Service prior to said Termination of Employment shall not be disregarded by reason of said Termination of Employment. If a period of
preacquisition service at a location is recognized as Elapsed Time for vesting under Sec. 3.4, Hours of Service during that period will also be recognized for purposes of determining Years of Eligibility Service.
Sec. 3.8 Hour of Service . An “Hour of Service” or “Hours of Service” are determined according to the following subsections with respect to each applicable computation period:
(a) Hours of Service are computed only with respect to service with Participating Employers (for service both before and after the Participating Employer becomes such) and Affiliates and are aggregated for service with all such employers.
(b) For any portion of a computation period during which an individual is within a classification for which a record of hours for the performance duties is maintained, Hours of Service shall be credited as follows:
(1) Each hour for which the employee is paid, or entitled to payment, for the performance of duties for his or her employer during the applicable computation period is an Hour of Service.
(2) Each hour for which the employee is paid, or entitled to payment, by his or her employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence, is an Hour of Service, subject to the following:
(A) An hour for which the employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed shall not be credited to the employee if such payment is made or due under a plan maintained solely for the purpose of complying with applicable worker’s compensation, unemployment compensation, or disability insurance laws.
(B) Hours of Service shall not be credited for a payment which solely reimburses the individual for medical or medically related expenses.
(C) For purposes of this paragraph a payment shall be deemed to be made by or due from an employer regardless of whether such payment is made by or due from the employer directly, or indirectly through, among others, a trust fund or insurer to which the employer contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer, or other entity are for the benefit of particular employees or are on behalf of a group of employees in the aggregate.
(3) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the employer is an Hour of Service. Crediting of Hours of Service for back pay awarded or agreed to with respect to periods described in paragraph (2) shall be subject to the limitations set forth in that paragraph. Such Hours of Service shall be credited to the computation period or periods to which the award or agreement for back pay pertains, rather than to the computation period in which the award, agreement or payment is made.
(4) Hours under this subsection shall be calculated and credited pursuant to section 2530.200b-2 of the Department of Labor Regulations, which are incorporated herein by this reference.
(5) The Company may use any record to determine Hours of Service which it considers an accurate reflection of the actual facts.
(c) For any portion of a computation period during which an employee is within a classification for which a record of hours for the performance of duties is not maintained, he or she shall be credited with 190 Hours of Service for each month for which he or she would otherwise be credited with at least one Hour of Service under subsection (b).
(d) If an employee becomes eligible to receive benefits under a sickness and accident program sponsored by his or her employer, his or her Hours of Service, when aggregated with the Hours of Service to which he or she is entitled with respect to said period of absence pursuant to the foregoing provisions of this section, shall be equal to 190 Hours of Service for each month for which sickness and accident benefits are paid.
(e) Nothing in this section shall be construed as denying an employee credit for an Hour of Service if credit is required by any federal law other than ERISA. The nature and extent of such credit shall be determined under such other law.
(f) In no event shall duplicate credit as an Hour of Service be given for the same hour.
Sec. 3.9 Service Rules at Columbus, Indiana Facility . Certain individuals working at Morgan Adhesives Company’s Columbus, Indiana facility will be employed initially by a temporary staffing agency and will become employees of Morgan Adhesives Company after completing approximately 480 hours or 90 days of service with the agency. In such cases, the individual’s service with the agency at Morgan’s Columbus facility will be recognized under this Plan for purposes of determining Years of Eligibility Service, Elapsed Time and Credited Service.
Sec. 3.10 Bemis Elapsed Time . “Bemis Elapsed Time” means a Participant’s whole and fractional years of Elapsed Time through December 31, 2005 determined under Sec. 3.4 but
disregarding the pre-acquisition service referred to in Sec. 3.4(c). That is to say, Bemis Elapsed Time is limited to service with the Company, Affiliates of the Company (but only during the period while the Affiliate is under Common Control with the Company), and with ITAP/Bemis Ltda. Service after 2005 is not included in Bemis Elapsed Time.
ARTICLE IV
BENEFIT DEFINITIONS
Sec. 4.1 Normal Retirement . “Normal Retirement” means Termination of Employment of a Participant (except termination by his or her death) occurring on or after the date he or she attains Normal Retirement Age.
Sec. 4.2 Early Retirement . “Early Retirement” means any Termination of Employment of a Participant (except termination by his or her death) (i) after he or she has both attained age 55 and completed 10 years of Elapsed Time and (ii) before he or she attains Normal Retirement Age.
Sec. 4.3 Disability Retirement . If the Company determines upon the basis of competent medical advice that a Participant’s Termination of Employment occurred because he or she is permanently disabled by bodily injury or disease while employed by a Participating Employer, and if at the time of such Termination of Employment the Participant has attained age 50 and completed 10 years of Elapsed Time, such Termination of Employment shall be considered to be a “Disability Retirement.”
Sec. 4.4 Vested Termination . “Vested Termination” means any Termination of Employment of a Participant (except termination by his or her death) that occurs after he or she completes five years of Elapsed Time and that is not defined herein as a form of retirement. However, each Participant employed at the Hayssen Duncan, Bemis Packaging Machinery (BPMC) or Accraply location who has a Termination of Employment on or about May 5, 1997 due to sale of said locations is eligible for Vested Termination even if he or she had fewer than five years of Elapsed Time.
Sec. 4.5 Accrued Monthly Pension . A Participant’s “Accrued Monthly Pension” is the amount in (a) or (b), whichever is applicable, but not less than any minimum amount for which the Participant is eligible under (c), (d), (e), or (f):
(a) A Group A Participant’s Accrued Monthly Pension is the amount in (1) or (2), whichever is applicable:
(1) If the Group A Participant’s Termination of Employment occurs before he or she has both attained age 55 and completed 10 or more years of Elapsed Time, the Accrued Monthly Pension is the product of (A), (B) and (C):
(A) 50% of the Participant’s Final Average Earnings minus 50% of his or her Primary Social Security Benefit.
(B) The amount in (i) divided by the amount in (ii):
(i) The Participant’s actual years of Credited Service as of the date of his or her most recent Termination of Employment plus the deemed additional years of Credited Service the Participant would have completed if the period from the most recent Termination of Employment to his or her Normal Retirement Date was Credited Service. However, the sum of the actual and deemed years in the preceding sentence may not exceed 30 years.
(ii) 30 years.
(C) The Participant’s Service Ratio.
(2) If the Group A Participant’s Termination of Employment occurs after he or she has both attained age 55 and completed 10 or more years of Elapsed Time, the Accrued Monthly Pension is the product of (A) and (B):
(A) 50% of the Participant’s Final Average Earnings minus 50% of his or her Primary Social Security Benefit.
(B) The Participant’s actual years of Credited Service determined as of the date of his or her Termination of Employment (but not more than 30 years), divided by 30.
(b) A Group B Participant’s Accrued Monthly Pension is the amount in (1) or (2), whichever is applicable:
(1) If the Group B Participant’s Termination of Employment occurs before he or she has both attained age 55 and completed 10 or more years of Elapsed Time, the Accrued Monthly Pension is the product of (A) and (B):
(A) 50% of the Participant’s Final Average Earnings minus 50% of his or her Primary Social Security Benefit.
(B) The Participant’s years of Credited Service through December 31, 2005, divided by the amount in (i) or (ii), whichever is greater.
(i) 30 years
(ii) The Participant’s years of Credited Service through December 31, 2005 plus 1/12 of a year for each month during the period beginning on January 1, 2006 and ending on his or her Normal Retirement Date.
(2) If Group B Participant’s Termination of Employment occurs after he or she has both attained age 55 and completed 10 or more years of Elapsed Time, the Accrued Monthly Pension is the product of (A) and (B):
(A) 50% of the Participant’s Final Average Earnings minus 50% of his or her Primary Social Security Benefit.
(B) The Participant’s years of Credited Service through December 31, 2005 (but not more than 30 years), divided by 30.
(c) A Participant’s Accrued Monthly Pension shall not be less than $75, provided he or she has completed at least one year of Credited Service. However, in any case where an Appendix to the Plan provides that a Participant’s Accrued Monthly Pension includes amounts earned under a prior plan, said $75 minimum applies to the Participant’s total combined benefit under the Appendix and this section. (However, the $75 minimum does not apply in cases where an individual’s benefit is computed solely by reference to the prior plan and the individual did not have at least one year of Credited Service recognized under this Plan.)
(d) If a Participant is listed in Appendix E, his or her Accrued Monthly Pension shall not be less than the amount shown in said Appendix multiplied by his or her years of Credited Service through December 31, 2005, but not more than 30 years. For purposes of this subsection, Credited Service after 2005 shall be disregarded.
(e) A Participant’s Accrued Monthly Pension shall not be less than $6 multiplied by his or her years of Credited Service through February 29, 2000, disregarding (i) any Credited Service in excess of 30 years and (ii) any Credited Service after February 29, 2000.
(f) In no event shall a Participant’s Accrued Monthly Pension as of any January 1 be less than his or her Accrued Monthly Pension as of the preceding January 1.
Sec. 4.6 Service Ratio . A Participant’s “Service Ratio” is the amount in (a) divided by the amount in (b):
(a) The Participant’s actual years of Credited Service.
(b) The Participant’s actual years of Credited Service plus the additional years of Credited Service he or she would have had if the period from his or her most recent Termination of Employment to his or her Normal Retirement Date was Credited Service.
The number of years in (a) and (b) shall exclude any period prior to the individual’s most recent Termination of Employment which was not recognized in Credited Service ( e.g. , breaks in service occurring before the individual’s most recent Termination of Employment or periods while the individual was in a job category not covered by the Plan).
Sec. 4.7 Monthly Earnings . The “Monthly Earnings” of an employee whose Termination of Employment occurs on or after January 1, 1997 shall be determined as follows:
(a) If an employee is paid on a salaried or commission basis on the earliest date in a Plan Year on which he is a Qualified Employee, Monthly Earnings for said Plan Year is equal to the greater of:
(1) An amount equal to his or her regular monthly salary as in effect on January 1 of said Plan Year plus, where applicable, an amount equal to the total commissions paid to him or her during the preceding Plan Year divided by 12. In any case where an employee was not a Qualified Employee on January 1 of a Plan Year, but transferred to a position as a Qualified Employee on a later date in said Plan Year, Monthly Earnings for said Plan Year shall be determined according to the preceding sentence except that said amount shall be based on salary in effect immediately following said transfer. Said amount shall not exceed one-twelfth the annual limit under Code § 401(a)(17) in effect on said January 1. For example, Monthly Earnings determined under this paragraph on the basis of a Participant’s January 1, 2009 or 2010 salary rate may not exceed $20,416.67, reflecting the 2009 and 2010 Code § 401(a)(17) limit.
(2) One-twelfth of the sum of the following amounts:
(A) The total compensation (other than the annual, non-discretionary bonus) paid to the employee during the preceding Plan Year.
(B) The annual, non-discretionary bonus, if any, the employee earned during the preceding Plan Year. Such bonuses will be recognized for the Plan Year in which earned, even if the bonus is actually paid after the close of that Plan Year or payment is deferred to a later date.
However, if the employee was never a Qualified Employee at any time during the preceding Plan Year, this paragraph (2) shall not be applicable and Monthly Earnings shall be determined pursuant to paragraph (1). Said sum shall not exceed the limit under Code § 401(a)(17) for the preceding Plan Year. For example, Monthly Earnings determined under this paragraph for 2009 on the basis of 2008 total compensation and earned bonus may not exceed $19.166.66, which is one-twelfth of the 2008 Code § 401(a)(17) limit.
(b) If an employee is hourly paid on the earliest date in a Plan Year on which he or she is a Qualified Employee, Monthly Earnings for said Plan Year is equal to the greater of:
(1) 173 1/3 multiplied by the employee’s base hourly pay rate as in effect on January 1 of said Plan Year (or on the earliest date he or she is a Qualified Employee, if later). Said amount shall not exceed one-twelfth of the annual limit in effect under Code § 401(a)(17) on said January 1.
(2) One-twelfth of the employee’s total compensation during the preceding Plan Year. However, if the employee was never a Qualified Employee at any time during the preceding Plan Year, this paragraph (2) shall not be applicable and Monthly Earnings shall be determined pursuant to paragraph (1). Monthly Earnings determined under this paragraph shall not exceed one twelfth of the limit under Code § 401(a)(17) for the preceding Plan Year.
(c) Notwithstanding the foregoing:
(1) No Monthly Earnings shall be determined for an employee for a Plan Year unless he or she was a Qualified Employee during part or all of that Plan Year. However, if a Participant who was age 34 or younger transferred on or after September 28, 1990, and before January 1, 1997, from a position as a Qualified Employee to a position in which the individual was a salaried, office clerical, or supervisory employee at a location listed in Sec. 2.37(f) or at an Affiliate which is not a Participating Employer, Monthly Earnings will continue to be determined for each Plan Year during all or any part of which the individual was a salaried, office clerical, or supervisory employee. The preceding sentence does not apply if the individual is not a Qualified Employee due to application of Sec. 2.37(c) (relating to non-resident aliens) or Sec. 2.37(d) (relating to bargaining unit employees), or during any period while the individual’s principal place of employment is outside the United States.
(2) Allowances or reimbursements for expenses, payments or contributions to or for the benefit of the employee under any profit sharing, insurance, workers’ compensation or other employee benefit plan, income derived from receipt or exercise of stock options, phantom stock awards, or benefits in the form of property or the use of property shall not be included in computing Monthly Earnings.
(3) An employee’s Monthly Earnings for any Plan Year before 1992 will be determined pursuant to the Plan as in effect prior to the amendment effective January 1, 1997.
(4) If an employee elects to defer salary or bonus pursuant to a non-qualified deferred compensation plan, Monthly Earnings will be determined without regard to said deferral. For example, monthly salary under (a)(1) is the monthly salary rate in effect before any voluntary deferral. Similarly, the annual bonus under (a)(2)(B) is the amount earned without regard to any
election to defer receipt. When the deferred compensation later is paid to the employee, it will not be included in Monthly Earnings at the time of payment.
(d) Monthly Earnings is the gross amount, before any reduction pursuant to Code §§ 125, 132(f)(4), or 401(k).
(e) Notwithstanding any other provision of this section to the contrary, if a Participant’s service in Brazil with ITAP/BEMIS, Ltda. is recognized as Credited Service pursuant to Sec. 3.5(a)(6), Monthly Earnings for each Plan Year beginning after his or her transfer to Brazil and ending before his or her return to the United States shall be equal to the average of his or her last Monthly Earnings rate before the transfer and first Monthly Earnings rate after the return.
(f) Monthly Earnings shall be determined for periods while an individual was a salaried employee of a Participating Employer or Affiliate in Canada. Said determination will be made in accordance with this section, but Monthly Earnings expressed in Canadian dollars as of any January 1 will be converted to U.S. dollars using the rate of exchange on the last business day of the preceding December as reported in the Exchange Rate Table as published in the Wall Street Journal .
(g) The Code § 401(a)(17) limit referred to in (a) and (b) is $200,000 for 2002 and all prior Plan Years, and is subject to a cost of living adjustment for Plan Years after 2002. The limit for 2009 is $245,000.
(h) If a Group A or Group B Participant formerly employed by the Company or its Affiliates is rehired by the Company or an Affiliate on or after January 1, 2006, amounts paid during the period of reemployment will be disregarded for purposes of determining his or her Monthly Earnings.
(i) If a Group A or Group B Participant permanently transfers to a position outside the U.S. with the Company or an Affiliate and later returns to a position as a Qualified Employee in the U.S., Monthly Earnings shall be determined for each Plan Year he or she is a Qualified Employee following his or her return to the U.S.
Sec. 4.8 Final Average Earnings . A Participant’s “Final Average Earnings” is the highest average Monthly Earnings for any five consecutive years out of the last 15 years for which Monthly Earnings was determined under Sec. 4.7, or the average for all such years if five or less. Years for which no Monthly Earnings was determined are disregarded in determining this average, and the years used to determine the average may be interspersed with the years for which there was no Monthly Earnings. For example, if a Participant had Monthly Earnings for 1975 through 1988, had no Monthly Earnings for 1989 through 2002, and resumed having Monthly Earnings for 2003 through 2005, the most recent 15 year period used in this section would be 1977 through 1988 and 2003 through 2005, and the five highest consecutive years
would be 1987, 1988, 2003, 2004 and 2005 if they produced the highest average. Because the years with no Monthly Earnings are totally disregarded, in this example, 1988 and 2003 are treated as consecutive with each other.
Sec. 4.9 Primary Social Security Benefit . “Primary Social Security Benefit” for purposes of the Plan is an amount estimated by the Company as of the date of an employee’s Termination of Employment to be the Social Security Act primary monthly old-age insurance benefit to which such employee is entitled on the basis of his or her employment record, with benefit payments commencing for the month in which he or she attains Normal Retirement Age or in which his or her Termination of Employment occurs, if later. In making such estimate, recognition shall be given to any adjustment in the benefit that is retroactive to the month in which he or she attains Normal Retirement Age or the month in which his or her Termination of Employment occurs, if later. Such estimate shall be made as follows:
(a) The employee’s compensation while employed by the Company shall be determined on either or a combination of the following bases:
(1) On the basis of the employee’s actual wage history as set forth in the Company’s books and records, except that the employee may elect to supply the Company with actual wage history as provided in subsection (d).
(2) On the basis of an estimate of compensation while employed by the Company, subject to the following:
(A) The employee has the right to elect to supply the Company with his or her actual wage history as provided in subsection (d).
(B) If the employee does not elect to supply the Company with actual wage history, the estimate is consistent with subsection (c).
(b) The employee’s wage history prior to his or her Employment Commencement Date shall be determined as follows:
(1) The employee has the right to elect to supply the Company with his or her actual wage history as provided in subsection (d).
(2) If the employee does not elect to supply the Company with his or her actual wage history, an estimate of wage history prior to his or her Employment Commencement Date shall be made in a manner consistent with subsection (c).
(c) If an employee does not elect to supply the Company with actual wage history, any estimate of wage history prior to his or her Termination of Employment or Employment Commencement Date shall be made by applying a salary scale, projected backwards, to the employee’s annual rate of compensation as in effect
immediately after the period for which the estimate is being made. Said scale is the actual percentage change in average wages from year to year as determined by the Social Security Administration.
(d) If the employee so elects, in lieu of the Company estimating his or her wage history as provided in (c), he or she may direct the Company to estimate the Primary Social Security Benefit on the basis of the employee’s actual wage history as furnished by the Social Security Administration or such other source as the Company deems to be reliable. The employee must, however, supply the Company with satisfactory documentation of the actual wage history within a reasonable period of time following the later of his or her Termination of Employment and the date the Company notifies him or her of the benefit, if any, that he or she is entitled to receive under the Plan.
(e) Estimates under this section shall be based on the assumption that the Social Security Act as in effect on the December 31 immediately preceding the employee’s Termination of Employment will remain unchanged thereafter.
(f) Estimates under this section shall be based on the assumption that after the December 31 immediately preceding the employee’s Termination of Employment, there will be no benefit or wage base changes under the Social Security Act resulting from changes in the cost of living.
(g) Estimates under this section shall be based on the assumption that the employee will be in covered employment under the Social Security Act until attainment of Normal Retirement Age and will continue to receive compensation that would be treated as wages for purposes of the Social Security Act at the same annual rate as he or she received such compensation for the Plan Year ending on the December 31 coincident with or immediately preceding Termination of Employment.
(h) Estimates under this section shall be based on the assumption that the employee will make timely application to receive a Social Security Act primary monthly old-age insurance benefit with payments commencing for the month in which he or she attains Normal Retirement Age, or the month in which Termination of Employment occurs, if later, and will not be disqualified from receiving said payments by employment, self-employment, or in any other way.
Sec. 4.10 “Actuarial Equivalent”, “Actuarial Value”, “Present Value” . Each “Actuarial Equivalent”, “Actuarial Value”, or “Present Value” shall be determined as follows:
(a) For determinations involving benefits payable pursuant to the sections listed below, the amount of such benefit shall equal the Participant’s Accrued Monthly Pension multiplied by the appropriate factor as set forth in the following table:
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Form of Benefit |
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Factor |
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|
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Sec. 7.2 (Qualified Joint and Survivor Annuity) and Sec. 7.4 (Joint and ½ Survivor Annuity) |
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90% increased by 3/4 of 1% for each year that the Participant’s spouse or designated joint annuitant is older than the Participant and decreased by 3/4 of 1% for each year that the Participant’s spouse or designated joint annuitant is younger than the Participant; provided, however, that such factor shall never exceed 100%. |
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|
|
|
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Sec. 7.4 (Joint and 3/4 Survivor Annuity) |
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85% increased by 88/100 of 1% for each year that the Participant’s designated joint annuitant is older than the Participant and decreased by 88/100 of 1% for each year that the Participant’s designated joint annuitant is younger than the Participant; provided, however, that such factor shall never exceed 100%. |
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|
|
|
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Sec. 7.4 (Joint and Full Survivor Annuity) |
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80% increased by 1% for each year that the Participant’s designated joint annuitant is older than the Participant and decreased by 1% for each year that the Participant’s designated joint annuitant is younger than the Participant; provided, however, that such factor shall never exceed 100%. |
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|
|
|
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Sec. 7.4 (Life and 10 Years Certain) |
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91% |
For the purposes of the above table, the difference in age between the Participant and the Participant’s spouse or designated joint annuitant, as the case may be, shall be measured in whole years, and partial years shall be disregarded.
(b) For determinations pursuant to Sec. 8.12, the “Actuarial Equivalent” factors are as specified in that section.
(c) Effective as of January 1, 2008, for determinations of lump sum payment of benefits which would otherwise be payable as monthly annuities, each Actuarial Equivalent shall be determined on the basis of the following actuarial assumptions:
(1) The interest rate used to calculate any lump sum paid during a Plan Year will be the annual interest rate prescribed under Code §417(e)(3) as amended by the Pension Protection Act of 2006 for October of the Plan Year preceding the Plan Year in which the payment is made.
(2) The mortality table used for such calculations is the “applicable mortality table” for the calendar year in which the distribution is made as prescribed under Code §417(e)(3)(B) as amended by the Pension Protection Act of 2006.
Said assumptions shall also be used (i) for purposes of Sec. 8.6 in determining the present value of accrued benefits which are to be paid under a qualified domestic relations order, (ii) for purposes of the adjustment in Sec. 7.3 of Appendix A if a Hayssen Plan Participant withdraws his or her Prior Service Benefit, (iii) for purposes of determining whether the Plan is “top heavy” under Sec. 14.2, and (iv) for all purposes for which Actuarial Equivalents must be determined under the plan except as specifically provided elsewhere in the Plan.
(d) Each determination involving an Actuarial Equivalent shall be made in accordance with any applicable regulation promulgated by the Secretary of Labor or the Secretary of the Treasury.
ARTICLE V
PLAN PARTICIPATION
Sec. 5.1 Eligibility for Participation . No employee shall become a Participant after December 31, 2005. Prior to January 1, 2006, an employee of a Participating Employer became a Participant in the Plan on the earliest date, on or after the date the Plan became effective with respect to his or her Participating Employer, on which he or she both (i) was a Qualified Employee and (ii) had completed one Year of Eligibility Service. Because employees with Employment Commencement Dates during 2005 will not complete a year of Eligibility Service before January 1, 2006, such individuals are not eligible to become Participants.
Sec. 5.2 Duration of Participation . A Participant shall continue to be such until the later of:
(a) His or her Termination of Employment.
(b) The date all benefits, if any, to which he or she is entitled hereunder have been distributed from the Fund.
Sec. 5.3 No Guarantee of Employment . Participation in the Plan does not constitute a guarantee or contract of employment with the employee’s Participant Employer. Such participation shall in no way interfere with any rights the Participating Employer would have in the absence of such participation to determine the duration of the employee’s employment with the Participating Employer.
ARTICLE VI
PENSION BENEFITS
Sec. 6.1 Pension on Normal Retirement . On Normal Retirement a Participant shall be entitled to a pension payable monthly for life, the first payment to be made as of the first day of the month following the Normal Retirement (if he or she is living on said first day of the month) and the last payment to be made as of the first day of the month in which his or her death occurs, in a monthly amount equal to his or her Accrued Monthly Pension. The pension payable under this section is subject to all the provisions of the Plan, and in this regard special reference is to be made to the provisions of Articles VI, VII, and VIII.
Sec. 6.2 Pension on Early Retirement . On Early Retirement, a Participant shall be entitled to a pension payable monthly for life, the first payment to be made on the first day of the month following his or her Normal Retirement Date (if he or she is living on said first day of the month) and the last payment to be made as of the first day of the month in which his or her death occurs, in a monthly amount equal to his or her Accrued Monthly Pension. However, he or she may elect a monthly pension which is in lieu of the aforesaid pension, the first payment to be made as of the first day of any month he or she elects which is after the Early Retirement and prior to his or her Normal Retirement Date (if he or she is living on the commencement date so elected) and the last payment to be made as of the first day of the month in which his or her death occurs, in a monthly amount equal to his or her Accrued Monthly Pension, reduced by 5/12 of 1% for each of the first 60 months and by 1/3 of 1% for each additional month by which the pension commencement date precedes his or her Normal Retirement Date.
The election shall be made by requesting the appropriate form from the Company and completing, signing and filing the form with the Company before the commencement date elected. The pension payable under this section is subject to all the provisions of the Plan, and in this regard special reference is to be made to the provisions of Articles VI, VII and VIII.
Sec. 6.3 Pension on Disability Retirement . On Disability Retirement, a Participant shall be entitled to a pension payable monthly for life, the first payment to be made as of the first day of the month following his or her Termination of Employment, if the Participant is then living, and the last as of the first day of the month in which his or her death occurs. The monthly amount of said pension shall be determined as follows:
(a) If the Participant has attained age 55 when the Disability Retirement occurs, the monthly amount of the Disability Retirement pension shall be determined in the same manner as an Early Retirement pension under Sec. 6.2.
(b) If the Participant’s Disability Retirement occurs prior to the date he or she attains age 55, the monthly pension amount shall be his or her Accrued Monthly Pension, reduced by 5/9 of 1% for each of the first 60 months and 5/18 of 1% for each additional month by which the commencement date precedes his or her Normal Retirement Date.
The pension payable under this section is subject to all the provisions of the Plan, and in this regard special reference is to be made to the provisions of Articles VI, VII, and VIII.
Sec. 6.4 Pension on Vested Termination . On a Vested Termination, a Participant shall be entitled to a pension payable monthly for life, the first payment to be made as of the first day of the month next following his or her Normal Retirement Date, if he or she is then living, and the last as of the first day of the month in which his or her death occurs. The monthly amount of said pension shall equal the Participant’s Accrued Monthly Pension. However, if the Participant has completed 10 years of Elapsed Time, he or she may elect to receive a monthly pension which is in lieu of the aforesaid pension, the first payment to be made as of the first day of any month after the month in which the Participant attains age 55 but not later than the first day of the month after his or her Normal Retirement Date (if the Participant is living on the commencement date so elected) and the last payment to be made as of the first day of the month in which his or her death occurs. The monthly amount of such pension shall be the monthly amount otherwise payable following his or her Normal Retirement Date reduced by 5/9 of 1% for each of the first 60 months and 5/18 of 1 % for each additional month by which the pension commencement date precedes his or her Normal Retirement Date.
The election shall be made by requesting the appropriate form from the Company and completing, signing, and filing the form with the Company before the commencement date elected. A Participant who has fewer than 10 years of Elapsed Time may not elect to have his or her pension commence prior to his or her Normal Retirement Date. The pension payable under this section is subject to all the provisions of the Plan, and in this regard special reference is to be made to the provisions of Articles VI, VII, and VIII.
Sec. 6.5 Deduction for Other Pension Payments . Notwithstanding the foregoing provisions, the monthly amounts otherwise payable thereunder shall be reduced by the amount (expressed on a comparable basis that is an Actuarial Equivalent) of the monthly pension, if any, to which the Participant is entitled under any other pension plan that meets the requirements of Code § 401(a) and that is financed in whole or in part by a Participating Employer, but only to the extent such other pension is attributable to employer contributions and to the same period of service for which the pension is being paid under this Plan. Said reduction is subject to the following:
(a) In cases where service outside the United States is recognized as Credited Service under this Plan, said reduction also shall apply with respect to any benefits a Participant accrued under a retirement plan financed in whole or in part by a Participating Employer or Affiliate outside the U.S. for the benefit of employees working outside the U.S.
(b) If an individual Participant transfers to or from a position covered by the Bemis Hourly Retirement Plan (the “BHRP”), any benefit accrued under this Plan for the Plan Year the transfer occurred will not be offset by benefits accrued for the same year under the BHRP. The preceding sentence only applies to individual transfers; if a location or group of employees transfers from the BHRP to this Plan or vice versa, and the same period of service is recognized under both plans,
benefits earned under this Plan for such service will be offset by benefits earned under the BHRP for the same service.
Sec. 6.6 Amendments Affecting Pension Rights . Notwithstanding the foregoing provisions, in the event of an amendment to the Plan, the following shall be applicable:
(a) The amendment shall not reduce the accrued benefit, within the meaning of Code § 411(d)(6), of a Participant determined at the time of such amendment except in conformity with said section.
(b) If the amendment to the Plan should change the vesting schedule of the Plan, each Participant having not less than three years of Elapsed Time by the end of the election period with respect to such amendment shall be permitted within such election period to elect in writing to have his or her vested percentage computed under the Plan without regard to such amendment. The election period shall be a reasonable period determined by the Company commencing not later than the date the amendment is adopted. However, the Company need not provide such an election for any Participant whose vested percentage under the Plan, as amended, at any time cannot be less than such percentage determined without regard to such amendment.
Sec. 6.7 Suspension of Benefits and Effect of Reemployment . If a Participant has a Termination of Employment and is subsequently reemployed by a Participating Employer, or if a Participant’s employment with a Participating Employer continues after he or she attains Normal Retirement Age, the following shall be applicable:
(a) If a Participant is reemployed by a Participating Employer, pension payments shall continue through the month the Participant completes 1000 Hours of Service following said reemployment. After said month and prior to the month following the Participant’s subsequent Termination of Employment, pension payments he or she would otherwise be entitled to receive for the following calendar months shall be permanently withheld:
(1) Each calendar month ending on or before the Participant’s Normal Retirement Date in which he or she completes one or more Hours of Service.
(2) Each calendar month ending after the Participant’s Normal Retirement Date in which he or she completes 40 or more Hours of Service.
(b) If a Participant’s employment with a Participating Employer continues after his or her Normal Retirement Date, pension payments will be permanently withheld for each calendar month in which he or she completes 40 or more Hours of Service.
(c) If a monthly pension payment is made for a calendar month and it later is determined that such payment was subject to permanent withholding, the amount
of such payment shall be applied as an offset against subsequent monthly payments unless the Participant has previously repaid the overpayment. However, the amount of any such offset shall not exceed, in any one month after the Participant attains Normal Retirement Age, 25 percent of the monthly total benefit payment that would have been paid but for the offset.
(d) The Company shall notify a Participant of any suspension under subsection (a)(2) or (b). The notice shall conform to the requirements of Section 2530.203-3(b)(4) of the Department of Labor Regulations.
(e) If the Participant’s reemployment date was prior to January 1, 2006, when benefit payments resume following any period of suspension under subsection (a), the pension shall be paid under the same form as previously in effect and shall be in a monthly amount equal to the sum of (i) the monthly amount payable prior to the suspension plus (ii) any additional amount based on service during the period of reemployment. However, notwithstanding any other provision of the Plan to the contrary, no additional amount will be accrued for any Plan Year during the period of reemployment prior to the earliest Plan Year therein during which the Participant completes 1000 or more Hours of Service.
(f) If the Participant’s reemployment date is after December 31, 2005:
(1) Pay received during the period of reemployment will be disregarded for purposes of determining the individual’s Monthly Earnings.
(2) Service during the period of reemployment will be disregarded for purposes of determining the individual’s Credited Service.
(3) When benefits resume following any period of suspension under subsection (a), the monthly amount payable will be determined using the following steps:
(A) Calculate amount payable upon date benefits resume, based on early commencement reduction factor for that date.
(B) Subtract Actuarial Value of benefits paid prior to period of suspension. (Actuarial Value for this purpose will be determined using actuarial assumptions in Sec. 4.10(c).)
(C) Pay benefit under the same form as previously in effect.
(g) “Hour of Service” for purposes of this section is as defined in Sections 2530.200b-2(a)(1) and (2) of the Labor Department regulations.
(h) The provisions of this section shall be administered in accordance with section 2530.203-3 of the Department of Labor Regulations.
Sec. 6.8 Family Income Coverage . Section 12.04 of the Plan as in effect on December 31, 1968, relating to continuation of family income coverage comparable to that provided under the S&RIP prior to 1962, shall be deemed to continue in effect for Participants who had elected to continue such coverage. However, for purposes of all other provisions of the Plan as set forth herein, contributions made by a Participant and benefits paid to his or her Beneficiary in connection with said family income coverage shall be deemed to be unrelated to this Plan.
Sec. 6.9 Effect of Participation in Variable Annuity Fund Prior to January 1, 1969 . Pursuant to Article 9 of the Plan as in effect prior to the revision of the Plan effective January 1, 1969, members could elect to have a portion of their accrued benefits funded through a “Variable Annuity Fund.” Effective as of January 1, 1969, said elections were no longer effective and said Variable Annuity Fund was discontinued with respect to Participants hereunder. However, a Participant in the Plan on or after January 1, 1969 who made such election under the prior provisions of the Plan shall be deemed to have made a contribution in support of the Plan on December 31, 1968 in an amount equal to the increase in value as of that date of all contributions on his behalf that were allocated to said Variable Annuity Fund, to the extent such increase is attributable to the investment experience of the Variable Annuity Fund in excess of the assumed yield rate for said Variable Annuity Fund. The Actuary shall determine the amount to be so credited to each such Participant as of December 31, 1968 in a manner consistent with the provisions of said Article 9 of the Plan as previously in effect. At such time as a Participant who made such an election under the prior provisions of the Plan becomes entitled to a benefit under the foregoing provisions of this Article VI, he or she shall be entitled to a supplemental benefit, which shall be in the same form as the benefit under said provisions. Said supplemental benefit shall be the Actuarial Equivalent of the amount deemed to be an employee contribution pursuant to this section, together with Accumulated Interest from the year 1968.
Sec. 6.10 Preservation of Benefits Under Pre-1972 Formula . The pension payable to any person who became a Participant on or before January 1, 1972 shall not be less than the amount provided under Article XV of the Plan as in effect on December 31, 1988.
Sec. 6.11 Preservation of Benefits Under Pre-1997 Formula . For each Participant who is an “Eligible Employee” as defined in subsection (a), the benefit provisions of subsection (b) will be applicable. These provisions preserve certain features of the Plan as in effect on December 31, 1996. Also, for each person who was a Participant on March 31, 1997, regardless of whether he or she is an Eligible Employee, his or her benefit under the Plan will not be less than the amount determined under subsection (c):
(a) Definition of Eligible Employee . A Participant is an “Eligible Employee” for purposes of this section if he or she meets the requirements of (1) and (2):
(1) The requirements of this paragraph (1) are met if he or she had an Employment Commencement Date prior to January 1, 1992. For this purpose, if he or she first became an employee of the Company or a subsidiary of the Company through an acquisition, and the acquisition occurred before July 1, 1996, the individual’s Employment Commencement Date is his or her most recent date of hire by the acquired company. Persons who became employees of the Company or a Company subsidiary through acquisitions on or after July 1, 1996 do not satisfy the requirements of this paragraph, and therefore are not Eligible Employees.
(2) The requirements of this paragraph (2) are met if any one of the following requirements is satisfied:
(A) The individual was an Active Participant on December 31, 1996.
(B) The individual was an active employee on January 1, 1997 in a group that became eligible to participate in the Plan on said date, and if the individual became an employee of the Company or a Company subsidiary through an acquisition, the acquisition occurred before July 1, 1996. (Individuals who became employees of the Company or its subsidiaries through acquisitions on or after July 1, 1996 do not satisfy this requirement.)
(C) He or she had an Early Retirement prior to December 31, 1996, but becomes a Qualified Employee after said date.
Also, a Participant employed at Bemis Packaging Machinery Company, Hayssen Manufacturing Company, or Accraply, Inc. immediately prior to sale of these units on May 6, 1997 is an Eligible Employee regardless of whether he or she meets the requirements of (1) and (2). In addition, Patricia Stone (Employee ID 108484) and Gary Vacek (Employee ID 103002) are Eligible Employees regardless of whether they meet the requirements of (1) and (2).
(b) Pre-1997 Benefit Provisions Which Are Preserved for Eligible Employees. The following benefit provisions that were in effect on December 31, 1996 are preserved for Eligible Employees. For Eligible Employees, these preserved benefit provisions apply to the individual’s entire pension, not just the amount accrued through the date these provisions were deleted from the Plan:
(1) Normal Retirement Age. For Eligible Employees, Normal Retirement Age under the Plan is age 65, regardless of the year of the Participant’s birth.
(2) Early Retirement Reduction Factors. If an Eligible Employee has an Early Retirement and elects to have his or her pension begin before Normal Retirement Age, the monthly amount of said pension shall be equal to his
or her Accrued Monthly Pension, multiplied by the early retirement factor determined from the table set forth below according to the Participant’s age when payments commence:
|
Attained Age on Due Date |
|
Early |
|
|
of First Monthly Payment |
|
Retirement Factor |
|
|
|
|
|
|
|
64 |
|
98 |
% |
|
63 |
|
96 |
% |
|
62 |
|
94 |
% |
|
61 |
|
90 |
% |
|
60 |
|
86 |
% |
|
59 |
|
82 |
% |
|
58 |
|
78 |
% |
|
57 |
|
74 |
% |
|
56 |
|
70 |
% |
|
55 |
|
66 |
% |
(A proportionate intermediary percentage will be applied for each completed month after the given age is attained.)
(3) Disability Retirement . The early retirement factors in (2) also apply if an Eligible Employee has a Disability Retirement after attaining age 55. If the Eligible Employee’s Disability Retirement occurs after the Participant attains age 50 but before he attains age 55, the reduction factor is 5/9 of 1% for each of the first 60 months and 5/18 of 1% for each additional month by which the benefit commencement date precedes age 65.
(4) Social Security Supplement . If an Eligible Employee has an Early Retirement and elects to have his or her pension begin before age 65, in addition to the reduced monthly pension as provided in (b)(2), with each monthly payment prior to age 65, the Eligible Employee shall receive a supplemental benefit equal to (i) 50% of his or her Primary Social Security Benefit; multiplied by (ii) the fraction described in Sec. 4.5(a)(2)(B) (if the Eligible Employee is a Group A Participant) or the fraction in Sec. 4.5 (b)(2)(B) (if the Eligible Employee is a Group B Participant); multiplied by (iii) the early retirement factor determined from the table set forth in (b)(2) of this section according to the Participant’s age when payments commence.
(c) Benefits Will Not Be Less Than Amount Accrued Through March 31, 1997 Under Plan As Then In Effect. For any person who was a Participant on March 31, 1997, and who qualifies for a benefit under Sec. 6.1, 6.2, 6.3 or 6.4, his or her monthly pension will not be less than an amount determined as follows:
(1) For purposes of calculating said minimum pension, the Participant’s Accrued Monthly Pension will be based solely upon Monthly Earnings and Credited Service through March 31, 1997; Monthly Earnings and Credited Service after said date will be disregarded.
(2) The Participant’s Normal Retirement Age for purposes of determining said minimum pension is age 65, regardless of his or her date of birth.
(3) The minimum pension under this subsection does not include the Social Security Supplement in (b)(4). The Social Security Supplement will only be paid if the individual is an Eligible Employee under subsection (a).
Sec. 6.12 Special Vested Termination Provisions For Employees At Certain Discontinued Operations . If a Participant was employed immediately prior to his or her Termination of Employment at a location listed in subsection (a), the Termination of Employment occurred on or after the date specified in subsection (a) for the Participant’s location, and the Participant meets the requirements of subsection (b), his or her pension on Vested Termination will be calculated as provided in subsection (c):
(a) Locations and dates covered:
(1) Hayssen Manufacturing Company, Accraply, Inc., and Bemis Packaging Machinery Company (a division of Bemis Company, Inc.), but only if the Participant’s Termination of Employment occurred on or after May 1, 1997.
(2) Pepperell, Massachusetts plant, but only if Participant’s Termination of Employment occurred on or after January 1, 1998.
(b) A Participant meets the requirements of this subsection (b) only if all of the following requirements are met:
(1) The Participant’s Employment Commencement Date was prior to the date the Participant attained age 35.
(2) The Participant’s Termination of Employment occurred on or after the date the Participant attained age 45, but before he or she attained age 55.
(3) The Participant completed 10 or more years of Credited Service prior to his or her Termination of Employment.
(c) If a Participant meets the foregoing requirements, the monthly pension on Vested Termination payable under Sec. 6.4 on a life only basis beginning the month following the Participant’s attainment of age 65 will not be determined under Sec. 4.5(a)(1), but rather will be determined under Sec. 4.5(a)(2). If the Participant
elects to have the pension begin after he or she attains age 55, but before age 65, it will be subject to the reduction factors specified in Sec. 6.4.
Sec. 6.13 Special Enhanced Benefit for Certain Employees at Stow, Ohio . A Participant who has satisfied the eligibility requirements of subsection (a) shall be entitled to an enhanced benefit determined as provided in subsection (b):
(a) Eligibility . To be eligible for the special enhanced benefit under this section, a Participant must have satisfied the requirements of (1), (2), (3) and (4):
(1) On July 1, 1998, the Participant was employed by Morgan Adhesives Company at its Stow, Ohio facility, and was working in a job category designated by the Company as eligible to elect this benefit.
(2) The Participant attained age 55 and completed 10 or more years of Elapsed Time prior to July 1, 1998.
(3) The Participant elected Termination of Employment during a window period established by the Company, the last day of which shall be not later than October 31, 1998. A Participant may make such an election by executing and submitting to the Company such forms and releases as the Company requires. The special enhanced benefit will not be payable if the Participant (i) fails to execute the proper forms or releases or (ii) subsequently rescinds the election in accordance with procedures specified by the Company.
(4) The Participant’s Termination of Employment occurs on or about a date approved by the Company, which generally will not be later than December 31, 1998, but which may be later (but not later than June 30, 1999) if the Company reasonably determines that the Participant’s continued services are necessary during a longer transition period.
(b) Benefit Amount . If a Participant satisfies the foregoing eligibility requirements, his benefit under the Plan will be enhanced as follows:
(1) The Participant will receive one “point” for each five years of Credited Service he or she will have under Sec. 3.5 as of the date of Termination of Employment, determined without regard to any enhanced Credited Service provided under this section. Participants will receive whole points only, and will not receive fractional points for years of Credited Service fewer than five years. For example, a Participant with 28.5 years of Credited Service under Sec. 3.5 will receive five points based on 25 years of Credited Service, and the remaining three and one-half years of Credited Service will be disregarded.
(2) For each “point” awarded in (1), the Participant will receive one additional year of Credited Service. However, the Participant’s total Credited Service, enhanced as provided by this paragraph, may not exceed 30 years, nor may it exceed the years the Participant would have had at age 65 if he or she had continued working. If the number of full and fractional years of additional Credited Service which may be awarded due to the limitations in the preceding sentence is less than the number of points granted in (1), the remaining points will be applied as provided in (3). For example, if the Participant referred to in (1) is age 61 and has 28.5 years of Credited Service without regard to this section, 1.5 of his points will be used to give him an additional 1.5 years of Credited Service (bringing him to 30 years of Credited Service) and the remaining 3 full points will be applied as provided in (3).
(3) Any full points which were not applied to increase Credited Service will be converted to full years of age and applied to increase the Participant’s deemed age for purposes of calculating the benefit on Early Retirement. (Only full points will be used for this purpose; fractional points will be disregarded.) The reduction factor for early commencement in Sec. 6.2 and Sec. 6.11(b)(2) will be based on the Participant’s deemed age rather than his or her actual age. For example, the remaining 3 full points of the 61 year old Participant referred to in (1) and (2) would be converted to 3 years of age, bringing him to a deemed age of 64 for purposes of determining his early retirement reduction factor. A Participant’s deemed age after such enhancement shall not be more than 65.
Sec. 6.14 Increase in Benefits for Persons Whose Benefits Commenced Prior to January 1, 1990 . Effective as of July 1, 2000, benefits under the Plan shall be increased by the percentage or amount determined from the following table:
|
Benefit Commencement Date |
|
Increase |
|
Before January 1, 1970 |
|
40%, but not less than $50 and not more than $200 |
|
|
|
|
|
After December 31, 1969 and prior to January 1, 1975 |
|
30%, but not less than $50 and not more than $200 |
|
|
|
|
|
After December 31, 1974 and prior to January 1, 1980 |
|
20%, but not less than $50 and not more than $200 |
|
|
|
|
|
After December 31, 1979 and prior to January 1, 1990 |
|
10%, but not less than $50 and not more than $200 |
|
|
|
|
After December 31, 1989 |
|
No increase |
For purposes of determining the amount of the increase applicable with respect to a surviving spouse, contingent annuitant, or Beneficiary of a deceased Participant, the “Benefit Commencement Date” is the earlier of (i) the date benefit payments to the deceased Participant commenced or (ii) the date benefit payments to the surviving spouse, contingent annuitant, or Beneficiary commenced. In the case of any living Participant who qualifies for the increase, the increased amount of the Participant’s pension shall be taken into account in determining benefits, if any, payable to the Participant’s surviving spouse, contingent annuitant, or Beneficiary.
However, said benefit increase does not apply with respect to any individual who participated in a plan which was merged into this Plan and whose Termination of Employment occurred prior to said merger, nor to the surviving spouse, contingent annuitant, or Beneficiary of such an individual.
Sec. 6.15 Special Enhanced Benefit for Certain Employees at Bemis Clysar, Inc. The following provisions apply to former employees of E. I. Dupont De Nemours & Company or its subsidiaries who became employees of Bemis Clysar, Inc. on or about July 30, 2002 and who are referred to in this section as “Bemis Clysar Participants”.
(a) A Bemis Clysar Participant whose Termination of Employment occurs after he or she attains age 60 will be entitled to a pension payable monthly for life, the first payment to be made as of the first day of the month following his or her Termination of Employment and the last as of the first day of the month in which his or her death occurs, in a monthly amount equal to his or her Accrued Monthly Pension.
(b) If a Bemis Clysar Participant’s Termination of Employment occurs after he or she attains age 55 but before age 60 and the individual has completed 10 or more years of Elapsed Time:
(1) The individual will be entitled to a pension payable monthly for life, the first payment to be made as of the first day of the month following the month in which he or she attains age 60 and the last as of the first day of the month in which his or her death occurs, in a monthly amount equal to his or her Accrued Monthly Pension.
(2) In lieu of the pension in (1), he or she may elect a reduced pension beginning as of the first day of any month after his or her Termination of Employment and prior to his or her attainment of age 60, in a monthly amount equal to his or her Accrued Monthly Pension, reduced by 5/12 of 1% for each month by which the pension commencement date precedes for the first day of the month following the month in which the individual will attain age 60.
(c) If a Bemis Clysar Participant has a Termination of Employment after completing at least five years of Elapsed Time but under circumstances where neither (a) nor (b) is applicable ( i.e., termination before age 55 regardless of length of service, or
between ages 55 and 60 with fewer than 10 years of Elapsed Time), his or her pension will be determined under Sec. 6.4.
Sec. 6.16 Special Provisions Applicable to Participants Who Terminated Due to Certain Plant Closings . If a Participant employed at a location listed in subsection (a) has a Termination of Employment due to the closing of said location, and he or she meets the requirements of subsection (b), his or her pension will be calculated as provided in subsection (c):
(a) This section applies to employees who terminated employment due to closing of the following locations:
(1) Murphysboro, Illinois — closed September 2003.
(2) Union City, California — closed September 2003.
(3) Nellis, Nevada — closed March 2004.
(4) Milprint - Denmark, Wisconsin — closed April 2006.
(5) Peoria, Illinois — closed June 2006.
(6) Mactac Engineered Products (MEP) — Hopkins, Minnesota — closed July 2006.
(b) A Participant meets the requirements of this subsection if he or she is not eligible for Normal Retirement or Early Retirement and satisfies either of the following requirements on the date of Termination of Employment:
(1) He or she has attained age 50 and completed 10 or more years of Elapsed Time.
(2) The sum of his or her attained age and Elapsed Time totals 65 or more.
(c) If a Group A Participant meets the requirements of this section, his or her Accrued Monthly Pension upon Vested Termination will not be determined under Sec. 4.5(a)(1), but rather will be determined under Sec. 4.5(a)(2). If a Group B Participant meets the requirements of this section, his or her Accrued Monthly Pension upon Vested Termination will not be determined under Sec. 4.5(b)(1), but rather will be determined under Sec. 4.5(b)(2). In all other respects, the Participant’s pension will remain subject to the usual terms applicable under Sec. 6.4 to pensions upon Vested Termination, including the requirement that a Participant must have completed at least 10 years of Elapsed Time in order to elect to have his or her pension commence after attainment of age 55 but prior to Normal Retirement Age, and the early commencement reduction factors in Sec. 6.4. Such Participants are not eligible for the Social Security Supplement under Sec. 6.11(b)(4).
Sec. 6.17 Special Provisions Applicable to Participants Who Qualified for LTD Benefits Prior to 2006 . If a Participant qualified for long-term disability benefits under the Long-Term Disability Plan (Pre-2006):
(a) Notwithstanding any provision of the Plan to the contrary, his or her Termination of Employment will be deemed not to have occurred until the termination of such benefits. Prior to the termination of such benefits, he or she shall be considered to be a Qualified Employee and Monthly Earnings shall be deemed to remain the same as last determined.
(b) If the individual is a Group A Participant, the entire period while he or she was receiving long-term disability benefits will be recognized as Credited Service. If the individual is a Group B Participant, the period prior to January 1, 2006 while he or she was receiving long-term disability benefits will be recognized as Credited Service, but no additional Credited Service will be recognized for periods after 2005.
(c) The following will be applicable for purposes of determining his or her Primary Social Security Benefit:
(1) It shall be assumed that during the period while receiving such benefits the Participant was receiving compensation that would be treated as wages for purposes of the Social Security Act in the same amount as he or she received such compensation for the Plan Year ending on the December 31 immediately preceding the date as of which he or she became eligible to receive such benefits.
(2) After December 31 immediately preceding the date as of which he or she became eligible to receive such benefits, there will be no benefits or wage base changes under the Social Security Act resulting from changes in the cost of living.
This subsection is not applicable in any case where an employee returns to active employment with a Participating Employer or Affiliate after a period of long term disability.
(d) This section applies only with respect to Participants who receive benefits under Long-Term Disability Plan (Pre-2006) (See Sec. 2.28 for definition). This section does not apply to Participants receiving benefits under any other long-term disability program.
Sec. 6.18 Missing Participant or Beneficiary . Each Participant and each Beneficiary of a deceased Participant must file with the Administrator in writing his or her mailing address and each change of mailing address. Any communication, statement or notice addressed to a Participant or Beneficiary at his or her last mailing address filed with the Administrator or, if no address is filed with the Administrator, then at the last mailing address as shown on the Administrator’s records, will be binding on the Participant and his or her Beneficiary for purposes of the Plan. Notwithstanding any other provision in the Plan, if a Participant (or Beneficiary) to whom the Plan owes benefits cannot be located and cannot be
reached by diligent efforts, then that Participant (or Beneficiary) forfeits his or her benefits under the Plan, subject to reinstatement if the Participant (or Beneficiary) contacts the Administrator.
ARTICLE VII
SURVIVOR’S BENEFITS
Sec. 7.1 Qualified Preretirement Survivor Annuity . A Qualified Preretirement Survivor Annuity shall be payable to a Participant’s surviving qualified spouse following the Participant’s death, subject to the following:
(a) A Qualified Preretirement Survivor Annuity shall be payable only if all of the following conditions are satisfied:
(1) Immediately prior to the Participant’s death he or she had a nonforfeitable right to a pension under the Plan.
(2) The Participant’s death occurred before the due date of his or her first pension payment.
(3) The Participant is survived by a qualified spouse. A person is a “qualified spouse” of a Participant if, and only if, such person and the Participant have been married to each other throughout the one-year period ending on the date of the Participant’s death.
(4) The Participant had Elapsed Time on or after August 23, 1984.
(5) No waiver of the Qualified Preretirement Survivor Annuity is in effect under subsection (e).
(b) If the Participant’s death occurs on or after the earliest retirement date, the Qualified Preretirement Survivor Annuity shall be the same as the annuity that would have been payable to the Participant’s qualified spouse if the Participant had retired with a benefit commencing immediately prior to the date of death in a form determined under subsection (d).
(c) If the Participant’s death occurs before the earliest retirement date, the Qualified Preretirement Survivor Annuity shall be the same as the annuity that would have been payable to the Participant’s qualified spouse under the following circumstances:
(1) The Participant’s Termination of Employment occurred on the date of death, or on actual date of Termination of Employment, if earlier.
(2) The Participant survived to the earliest retirement date.
(3) The Participant commenced receiving a pension on the earliest retirement date in a form determined under subsection (d).
(4) The Participant died on the day after the earliest retirement date.
(d) For purposes of subsection (b) and subsection (c)(3), the applicable form of benefit shall be a benefit payable under the option described in Sec. 7.4(b) if the Participant’s death occurs after he or she has completed ten years of Elapsed Time and attained age 55 and either (i) he or she was an Active Participant immediately prior to his or her death or (ii) his or her Termination of Employment had occurred after he or she attained age 55. In all other cases, the applicable form of benefit shall be a Qualified Joint and Survivor Annuity.
(e) A Participant may waive coverage under the Qualified Preretirement Survivor Annuity with respect to periods described in paragraph (1). If he or she does not waive such coverage, the Accrued Monthly Pension will be reduced. The following provisions apply to such waivers and reductions.
(1) A Participant may waive the Qualified Preretirement Survivor Annuity with respect to periods after his or her Termination of Employment and prior to his or her pension commencement date. However, he or she may not waive said annuity if such accruals have ceased due to Normal or Early Retirement.
(2) On or about the date a Participant becomes eligible to waive the Qualified Preretirement Survivor Annuity, the Company will notify the Participant with regard to the election procedure under Sec. 7.3 and the effect of said waiver.
(3) The Participant’s Accrued Monthly Pension will be reduced by 25/1000 of 1% for each full month that he or she was eligible to waive the Qualified Preretirement Survivor Annuity but failed to do so. However, no such reduction will be imposed for any month throughout which the Participant did not have a spouse to whom he or she had been married for at least one year.
(4) If a Qualified Preretirement Survivor Annuity becomes payable under this section, the reduction in (e)(3) will not be applicable. The reduction in (e)(3) is applicable only if the Participant is living on the pension commencement date.
(f) For purposes of this section, the “earliest retirement date” with respect to a Participant means:
(1) If the Participant has completed ten Years of Elapsed Time, the first day of the month following the month he or she attains (or would have attained) age 55.
(2) If the Participant has completed less than ten years of Elapsed Time, the first day of the month following his or her Normal Retirement Date.
(g) The Qualified Preretirement Survivor Annuity is a monthly benefit payable to the Participant’s qualified spouse, with the first payment to be made as of whichever of the following dates is applicable:
(1) If the Participant’s death occurs after his or her Normal Retirement Date, the first payment shall be made as of the first day of the month following his or her death.
(2) If the Participant’s death occurs (i) after he or she completed five Years of Elaspsed Time, (ii) at a time when he or she had not completed 10 Years of Elapsed Time, and (iii) prior to his or her Normal Retirement Date, the first payment shall be made as of the first day of the month following the Participant’s Normal Retirement Date.
(3) If the Participant’s death occurs both (i) after he or she attained age 55 and completed 10 Years of Elapsed Time and (ii) prior to his or her Normal Retirement Date, the first payment shall be made as of the first day of the month following his or her death.
(4) If the Participant’s death occurs (i) after he or she completed 10 Years of Elapsed Time and (ii) prior to his or her attainment of age 55, the first payment shall be made as of the first day of the month following the date the Participant would have attained age 55.
(5) In place of the commencement date specified in (3) or (4), a qualified spouse who is eligible under either of those paragraphs may elect to have the benefit commence as of the first day of any later month, but not later than the first day of the month after the Participant’s Normal Retirement Date.
The last monthly payment shall be made as of the first day of the month in which the qualified spouse’s death occurs.
Sec. 7.2 Qualified Joint and Survivor Annuity . Notwithstanding the provisions of Article VI, a pension otherwise payable to a Participant for life only shall instead be paid in the form of a Qualified Joint and Survivor Annuity unless the Participant elects otherwise, subject to all of the following:
(a) A “Qualified Joint and Survivor Annuity” is a pension commencing at the same time as the life-only pension would commence, with monthly payments for the life of the Participant, and, if the Participant dies after the date for commencement of pension payments, with monthly payments for the life of the spouse of the Participant after the Participant’s death which are each one-half the amount of the monthly payment made to the Participant during his or her lifetime.
(b) Written Explanation of QJSA.
(1) The Company shall provide each Participant no less than 30 days and no more than 180 days prior to the date of the Participant’s first scheduled pension payment a written explanation of:
(i) the terms and conditions of a Qualified Joint and Survivor Annuity;
(ii) the Participant’s right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity form of benefit;
(iii) the rights of a Participant’s spouse to consent to a Participant’s election;
(iv) the right to make, and the effect of, a revocation of an election to waive the Qualified Joint and Survivor Annuity;
(v) a general description of the eligibility conditions and other material features of the optional forms of benefit under the Plan;
(vi) the financial effect of electing the optional form of benefit (i.e., the amount payable under the form of benefit to the Participant during his or her lifetime and the amount payable after the death of the Participant); and
(vii) the relative values of the optional forms of benefit.
(2) Notwithstanding the other requirements of this section, a Participant may elect (with spousal consent, as applicable) to waive the requirement that the written explanation be provided at least 30 days before the first scheduled pension payment, provided that in such cases the first pension payment must not be issued to the Participant until at least 8 days after the day the written explanation was provided. The Participant is permitted to revoke any affirmative pension payment election at least until the date as of which the pension commences, or, if later, at any time prior to the expiration of the 7-day period that begins the day after the explanation of the Qualified Joint and Survivor Annuity was provided to the Participant. For example, if the written explanation is provided on October 28, 2007 and the Participant and spouse want the pension to begin as of November 1, 2007, they can waive the 30 day requirement, in which case the November 1, 2007 pension check will be issued on or after November 5, 2007. During the seven day period beginning October 29, 2007 and ending November 4, 2007, the Participant and spouse have the right to revoke any payment election and make a new election.
(c) A Participant who elects not to receive his or her pension in the form of a Qualified Joint and Survivor Annuity will receive a pension for life only unless he or she elects an optional settlement under Sec. 7.4.
(d) The provisions of this section shall not be applicable unless the Participant and spouse are married to each other on the due date for the first pension payment to the Participant. References to “spouse” in this section are to such spouse.
(e) The benefit, if any, payable under Sec. 6.11(b)(4) is not payable as a Qualified Joint and Survivor Annuity.
Sec. 7.3 Election Procedure . Elections under Sec. 7.1 and Sec. 7.2 are subject to the following requirements:
(a) The “election period” for waiver of the Qualified Preretirement Survivor Annuity begins on the earlier of (i) the first day of the Plan Year in which the Participant attains age 35 or (ii) the date of the Participant’s Termination of Employment and ends on the date of his or her death. The “election period” for the Qualified Joint and Survivor Annuity is the 180 day period ending on the due date of the Participant’s first pension payment; said period may be extended as provided in Sec. 7.2(b)(2).
(b) An election under Sec. 7.1 or Sec. 7.2 may be revoked in writing during the election period, and after such revocation another written election may be made during the election period.
(c) All elections and revocations shall be made on the appropriate form available from the Company and shall be effective only upon completing, signing, and filing of the form with the Company during the election period.
(d) A Participant’s election to waive the Qualified Joint and Survivor Annuity or Qualified Preretirement Survivor Annuity shall not take effect unless all of the following conditions are satisfied:
(1) The Participant’s spouse consents in writing to the election.
(2) If the election pertains to a Qualified Joint and Survivor Annuity, the Participant’s election designates a specific form of benefit payment (i.e., life annuity or an optional form of settlement under Sec. 7.4) and a specific beneficiary or contingent annuitant, if applicable in connection with such form of benefit payment, which designations may not be changed without further spousal consent (unless the spouse’s initial consent expressly permits future designations by the Participant without any further spousal consent.)
(3) The spouse’s consent acknowledges the effect of the Participant’s election.
(4) The spouse’s consent is witnessed by a Plan representative or notary public.
However, the above requirements will be deemed to be satisfied if it is established to the satisfaction of a Plan representative that the spouse’s consent may not be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe. Any consent by a spouse, or establishment that the consent of a spouse may not be obtained, shall be effective only with respect to such spouse. A consent by a spouse is not revocable by that spouse.
Sec. 7.4 Optional Settlements . In lieu of the amount and form of pension payable under the preceding sections of this Article, a Participant with respect to whom the Qualified Preretirement Survivor Annuity under Sec. 7.1 or the Qualified Joint and Survivor Annuity under Sec. 7.2 is not payable may, under such rules and regulations as the Company may prescribe which are in accord with the advice of the Actuary, elect to have a pension which is the Actuarial Equivalent of his or her life-only pension payable under one of the following options:
(a) An option providing a reduced monthly pension payable to the Participant commencing on the same date as that upon which payments would otherwise commence and terminating with the last monthly payment before his death. If his or her death occurs on or after the due date of the first monthly payment under the option and before 120 monthly payments have been made, such benefit shall be continued to his or her Beneficiary until a total of 120 monthly payments have been made to the Participant and Beneficiary.
(b) An option providing a reduced monthly pension payable to the Participant for his or her lifetime commencing on the same date as that upon which payments would otherwise commence, with provision for continuance upon his or her death of monthly payments of 100% of such reduced amount to his or her spouse for life if the spouse survives the Participant. (The “spouse” referred to in the preceding sentence is the spouse to whom the Participant was married on the date the Participant’s pension commenced.)
(c) An option providing a reduced monthly pension payable to the Participant for his lifetime commencing on the same date as that upon which payments would otherwise commence, with provision for continuance upon the Participant’s death of monthly payments of 100%, 75% or 50% of such reduced amount, as he shall have designated, to the person designated by the Participant as joint annuitant, if such joint annuitant survives the Participant, with such monthly payments to continue for the lifetime of the joint annuitant. An election of this option shall be automatically cancelled if either the person electing the option or the joint annuitant dies before the due date of the first monthly payment under the option.
Election of an option may be made at any time prior to commencement of pension payments.
Sec. 7.5 Other Death Benefits . Upon the death of a Participant, his or her Beneficiary shall be entitled to receive a single sum payment equal to the amount by which the total amount of benefit payments hereunder, if any, theretofore paid to the deceased (including payments to his or her spouse under Sec. 7.1) is less than the sum of (i) the cash value as of the surrender date in 1962 of any contracts on his or her life originally purchased under the S&RIP and subsequently surrendered to the insurance carrier by the trustees of said plan, with Accumulated Interest thereon, and (ii) the contributions made by the Participant after 1961 (including any amount deemed to have been contributed pursuant to Sec. 6.7 of the Plan as in effect on December 31, 1975) and prior to the cessation of contributions, with Accumulated Interest; subject to the following:
(a) If a benefit is payable with respect to the Participant pursuant to Sec. 7.2 or Sec. 7.4, this section shall not be applicable and all death benefits, if any, shall be payable under the terms of whichever of said sections is applicable.
(b) If a benefit is payable to the Participant’s spouse pursuant to Sec. 7.1, the benefit, if any, payable pursuant to this section shall be determined and paid after the death of said spouse.
ARTICLE VIII
MISCELLANEOUS BENEFIT PROVISIONS
Sec. 8.1 Commencement Date for Pension Payments . Pension payments under this Plan shall be subject to the following rules:
(a) Pension payments shall commence at the earlier of the times specified in paragraph (1) or (2) as follows:
(1) As soon as administratively feasible after the date specified by the applicable Plan provision for the commencement of pension payments.
(2) The 60th day after the close of the Plan Year in which the Participant reaches age 65 or has a Termination of Employment, whichever is later; provided, however, that if the amount of the payment to be made cannot be determined by the later of said dates, a payment retroactive to such date may be made no later than 60 days after the earliest date on which the amount of such payment can be ascertained.
(b) Pension payments must commence not later than April 1 following the later of:
(1) The calendar year in which the Participant attains age 70½.
(2) The calendar year in which the Participant has a Termination of Employment.
If a Participant’s pension commences after April 1 following the Plan Year he or she attains age 70½, the monthly pension amount will be increased by an amount which is the Actuarial Equivalent of the additional amount he or she would have received if (i) his or her pension had commenced April 1 following the Plan Year he or she attained age 70½, and (ii) the monthly pension amount was adjusted each January 1 thereafter to reflect additional benefit accruals.
(c) However, if (i) the Participant is a 5% owner as defined in Code § 416 or (ii) the Participant attained age 70½ prior to January 1, 2000, his or her pension shall commence not later than April 1 following the calendar year he or she attains age 70½, regardless of whether Termination of Employment has yet occurred. In such cases, the calculation of the initial pension amount shall be based on the assumption that Termination of Employment occurred on December 31 of the Plan Year in which the Participant attains age 70½. The amount of the monthly payments in each Plan Year following the Plan Year in which payments commence shall be adjusted to reflect any additional benefit accrued through December 31 of the preceding Plan Year.
Sec. 8.2 Payment of Small Amounts and Certain Consequences Thereof . If the Actuarial Equivalent present value of an individual’s entire benefit is $5,000 or less ($3,500 or less for Participants who had Terminations of Employment before January 1, 1998 and for Participants at the Pepperell, Massachusetts and Memphis, Tennessee facilities, regardless of termination date), the benefit shall be paid in a single lump sum as soon as administratively feasible following the Participant’s Termination of Employment, subject to the following:
(a) Service performed by the Participant with respect to which a lump sum distribution of his or her entire accrued benefit was made shall be disregarded in determining his or her Years of Credited Service under the Plan if the Participant is reemployed, provided such distribution was made not later than the close of the second Plan Year following the Plan Year in which his or her Termination of Employment occurred.
(b) If the requirements of subsection (a) are not met, and the Participant is later reemployed, his or her Accrued Monthly Pension upon termination of said period of reemployment will be reduced by the amount of Accrued Monthly Pension that was cashed out under the foregoing provisions of this section.
(c) If a Participant dies under circumstances such that a death benefit is payable under the Plan, the death benefit will be cashed out if the Actuarial Equivalent present value is $5,000 or less.
(d) Certain distributions pursuant to this section are subject to automatic rollover pursuant to Sec. 8.15(d).
Sec. 8.3 No Other Benefits . No benefits other than those specifically provided for herein are to be provided under the Plan.
Sec. 8.4 Source of Benefits . All benefits to which persons become entitled hereunder shall be provided only out of the Fund and only to the extent that the Fund is adequate therefor. No benefits are provided under the Plan except those expressly described herein.
Sec. 8.5 Incompetent Payee . If in the opinion of the Company a person entitled to payments hereunder is disabled from caring for his or her affairs because of mental condition, physical condition, or age, payment due such person may be made to such person’s guardian, conservator, or other legal personal representative upon furnishing the Company with evidence satisfactory to the Company of such status. Prior to the furnishing of such evidence, the Company may cause payments due the person under disability to be made, for such person’s use and benefit, to any person or institution then in the opinion of the Company caring for or maintaining the person under disability. The Company shall have no liability with respect to payments so made. The Company shall have no duty to make inquiry as to the competence of any person entitled to receive payments hereunder.
Sec. 8.6 Assignment or Alienation of Benefits . Except as otherwise expressly permitted by the Plan or required by law, the interests of persons entitled to benefits under the Plan may not in any manner whatsoever be assigned or alienated, whether voluntarily or involuntarily, or directly or indirectly, subject to the following:
(a) Once a Participant, beneficiary, or contingent annuitant begins receiving benefits under the Plan, he or she may assign or alienate the right to future benefit payments provided that the assignments or alienations (i) are voluntary and revocable, (ii) do not in the aggregate exceed 10% of any benefit payment, and (iii) are neither for the purpose, nor have the effect of defraying plan administration costs.
(b) An arrangement whereby a Participant, beneficiary, or contingent annuitant directs the Plan to pay all or any portion of a Plan benefit to a third party (including but not limited to a Participating Employer) will not constitute an “assignment or alienation” for purposes of this section if (i) it is revocable at any time by the Participant, beneficiary, or contingent annuitant, and (ii) the third party files a written acknowledgement with the Company stating that the third party has no enforceable right in, or to, any plan benefit payment or portion thereof (except to the extent of payments actually received pursuant to the arrangement). The written acknowledgement must be filed with the Company not later than 90 days after the arrangement is entered into.
(c) The Plan shall comply with the provisions of any court order which the Company determines is a qualified domestic relations order as defined in Code § 414(p). Where payments are to be made under a qualified domestic relations order before payments commence to the Participant, the present value of the benefits actually accrued for the Participant shall be determined on an Actuarial Equivalent basis. All benefits otherwise payable under the Plan with respect to a Participant shall be adjusted to the extent necessary to comply with a qualified domestic relations order. The Company may defer pension payments subject to a domestic relations order pending determination that the order is qualified.
Sec. 8.7 Payment of Taxes . The Funding Agency may pay any estate, inheritance, income, or other tax, charge, or assessment attributable to any benefit payable hereunder which in the Funding Agency’s opinion it shall be or may be required to pay out of such benefit. The Funding Agency may require, before making any payment, such release or other document from any taxing authority and such indemnity from the intended payee as the Funding Agency shall deem necessary for its protection.
Sec. 8.8 Conditions Precedent . No person shall be entitled to a benefit hereunder until his or her right thereto has finally been determined by the Company or until he or she has submitted to the Company relevant data reasonably requested by the Company, including, but not limited to, proof of birth or death.
Sec. 8.9 Company Directions to Funding Agency . The Company shall issue such written directions to the Funding Agency as are necessary to accomplish distributions to the Participants and Beneficiaries in accordance with the provisions of the Plan.
Sec. 8.10 Benefits Not Increased by Actuarial Gains . Forfeitures arising from severance of employment, death, or for any other reason shall not be applied to increase the benefits that any person would otherwise receive under the Plan.
Sec. 8.11 Pensions Not Decreased on Account of Certain Social Security Increases . Notwithstanding any provisions of the Plan to the contrary, if a Participant has a Termination of Employment and does not subsequently again become eligible to accrue benefits under the Plan, any pension to which he or his beneficiary is entitled under the Plan shall not be decreased by reason of any post-Termination of Employment social security increase effective after his Termination of Employment. If a Participant has a Termination of Employment and subsequently again becomes eligible to accrue benefits under the Plan, no post-Termination of Employment social security benefit increase effective before he again becomes eligible to accrue benefits under the Plan shall be applied to reduce his pension under the Plan to less than the pension to which he would have been entitled had he not again become eligible to accrue benefits under the Plan. For purposes of this section, “post-Termination of Employment social security benefit increase” means an increase in a benefit level or wage base under Title II of the Social Security Act occurring after the later of (i) the Participant’s Termination of Employment or (ii) September 2, 1974.
Sec. 8.12 Maximum Limitations on Benefits . Notwithstanding any provision of the Plan to the contrary, a Participant’s benefit under the Plan shall not exceed the maximum amount permitted under Code § 415 and applicable regulations, all of which are incorporated herein by this reference. For purposes of the preceding sentence:
(a) A Participant’s annual pension for any Plan Year may not exceed the lesser of:
(1) The amount permitted by Code § 415(b)(1)(A), which is $195,000 for 2009 and is subject to a cost of living adjustment for years after 2009.
(2) 100% of the Participant’s average Compensation for his high three consecutive years of employment.
(b) If a Participant’s benefit is paid in any form other than a straight life annuity or a qualified joint and survivor annuity (as defined in Code § 417(b)), such benefit shall be converted on an Actuarial Equivalent basis to a straight life annuity beginning at the same age for purposes of applying the limit in (a). For this purpose, the Actuarially Equivalent straight life annuity is whichever of the following amounts is greater:
(1) The annual amount of the straight life annuity (if any) that could be paid to the Participant under the Plan commencing on the same annuity starting date as the Participant’s actual form of payment.
(2) The annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the form of benefit actually payable to the Participant, computed using these actuarial assumptions:
(A) Interest. Use 5% annual interest.
(B) Mortality. Use the “applicable mortality table” referenced in Code §417(e)(3)(B) as amended by the Pension Protection Act of 2006.
(c) If a Participant’s benefit commences before age 62, the limit in (a)(1) shall be reduced so that it is the equivalent of a $195,000 annual benefit commencing at age 62. (The $195,000 amount is subject to adjustment for years after 2009.) For this purpose, the reduced limit shall be whichever of the following amounts is less:
(1) Multiply limit by a fraction, numerator of which is the amount payable on the annuity starting date, and the denominator of which is the amount which would be payable if the annuity starting date was delayed to the date the Participant attained age 62. The numerator and denominator both are determined without regard to the limits under Code §415.
(2) Reduce limit so that it is the actuarial equivalent of a straight life annuity commencing at age 62 in an amount equal to the limit in (a)(1). For this calculation, use a 5% annual interest rate and the “applicable mortality table” referenced in Code §417 (e)(3)(B) as amended by the Pension Protection Act of 2006. Also, if the Participant’s Termination of Employment was a Vested Termination, an adjustment for the probability of death prior to age 62 shall be applied. However, no adjustment for the probability of death prior to age 62 is required if the Participant’s Termination of Employment was an Early Retirement.
(d) If a Participant’s benefit commences after age 65, the limit in (a)(1) shall be increased so that it is the actuarial equivalent of a $195,000 annual benefit commencing at age 65. (The $195,000 amount is subject to adjustment for years after 2009.) This increase will be calculated as provided in Treas. Reg. 1.415(b)-1(e). No adjustment will be made to reflect the probability of the Participant dying after age 65 but before benefit payments commence.
(e) If a Participant has less than ten years of participation in this Plan, the limit in (a)(1) shall be reduced by multiplying it by a fraction, the numerator of which is the number of years (or part thereof) of participation (not to exceed ten and not to be less than one) in this Plan and the denominator of which is ten.
(f) If a Participant has less than ten years of service with the Company and its Affiliates, the limit in (a)(2) shall be reduced by multiplying it by a fraction, the numerator of which is the number of years (or part thereof) of service (not to exceed ten and not to be less than one) and the denominator of which is ten.
(g) If a Participant is or has been covered under more than one defined benefit plan maintained by a Participating Employer or an Affiliate, the sum of the Participant’s annual benefits under all such plans may not exceed the maximum amount permitted under this section. To the extent necessary to comply with such limit, the benefits under all such plans shall be reduced on a pro rata basis.
(h) Annual adjustments of the limit under (a)(1) will not apply with respect to a Participant for Plan Years beginning after the Participant’s Termination of Employment or attainment of age 55, whichever is later.
(i) For purposes of this section, “Compensation” means a Participant’s wages as defined for purposes of federal income tax withholding, subject to the following:
(1) Compensation means the gross amount before any reduction pursuant to Code §§ 125, 132(f)(4) or 401(k).
(2) Compensation excludes amounts by which an employee’s pay is reduced pursuant to an unfunded non-qualified plan of deferred compensation. However, payments received pursuant to such a plan are Compensation in the year such amounts are subject to federal income tax withholding.
(3) Compensation includes amounts realized from the exercise of non-qualified stock options, or the value of restricted stock (including restricted stock units or property) held by the Participant when such amounts become subject to federal income tax withholding. Compensation also includes dividends or dividend equivalents that are paid on restricted stock or restricted stock units, as applicable, that are reported as income on an employee’s Form W-2.
(4) Compensation recognized for an employee for a Plan Year shall not exceed the amount permitted by Code § 401(a)(17), which is $245,000 for 2009 and is subject to a cost of living adjustment for years after 2009.
(5) Severance pay is not included in Compensation. However, payments representing a Participant’s regular pay, overtime pay, sick pay, shift differential and commissions earned while an employee and paid by the later of 2 ½ months after severance from employment or the end of the Plan Year that includes the date of severance from employment are included in Compensation.
(j) This Section shall be applied in accordance with final regulations under Code
§415 that were issued by the Department of Treasury and Internal Revenue Service on April 5, 2007, which are hereby incorporated by reference.
Sec. 8.13 Distributions Made in Accordance with Code § 401(a)(9) . Distributions hereunder shall be made in accordance with the requirements of Code § 401(a)(9) and regulations thereunder, including Treasury Regulation Section 1.401(a)(9)-1 through 9. Any provisions of the Plan that are inconsistent with Code § 401(a)(9) and the regulations thereunder shall be deemed inoperative.
Sec. 8.14 Deemed Cash-Out Upon Termination of Employment for Unvested Participants . A Participant who is zero percent vested and experiences a Termination of Employment is deemed upon his or her Termination of Employment to have received an immediate cash-out of his or her Accrued Monthly Pension under the Plan and to have forfeited the unvested portion of his or her Accrued Monthly Pension under the Plan.
Sec. 8.15 Rollovers and Transfers to Other Qualified Plans . Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee’s election under this section, a distributee may elect, at the time and in the manner prescribed by the Company, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee. The following definitions shall be used in administering the provisions of this section.
(a) Eligible rollover distribution : For purposes of this section, an eligible rollover distribution is a distribution paid in a single lump sum pursuant to Sec. 8.2 or any Appendix to the Plan.
(b) Eligible retirement plan : An eligible retirement plan is an individual retirement account described in Code § 408(a), an individual retirement annuity described in Code § 408(b), a qualified trust described in Code §401(a), an annuity plan described in Code § 403(a), an eligible deferred compensation plan described in Code § 457(b) maintained by a governmental entity which agrees to separately account for amounts transferred from this Plan, a tax sheltered annuity contract described in Code § 403(b), or a Roth IRA described in Code §408A.
(c) Distributee : A distributee means a Participant, a Participant’s surviving spouse, or a former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code § 414(p). A Beneficiary who is not the surviving spouse also is a distributee eligible to elect a direct rollover under this section, but such a rollover may only be made to the Beneficiary’s individual retirement account or individual retirement annuity, and not to any other type of Plan.
(d) Automatic rollovers : On or after March 28, 2005, each lump sum distribution made to a Participant under Sec. 8.2 which is in excess of $1,000 shall be automatically rolled over to an individual retirement account selected by the Company unless the Participant directs that the distribution be paid directly to the distributee or rolled over to another eligible retirement plan. Automatic rollovers
are subject to Code § 401(a)(31) and any applicable Treasury Department or Labor Department guidance interpreting the automatic rollover requirements. However, the automatic rollover requirement does not apply to the following types of lump sum distributions:
(a) Death benefits distributed to a surviving spouse or other Beneficiary.
(b) Distributions to a Participant who has attained Normal Retirement Age.
Sec. 8.16 Special Benefit Limitation . Notwithstanding any other provision of the Plan to the contrary, the payment of benefits under the conditions set forth in this section shall be limited as follows:
(a) Upon termination of the Plan, the benefit of any Participant who is either a “highly compensated employee” or a “highly compensated former employee” shall be limited to a benefit that is nondiscriminatory under Code § 401(a)(4).
(b) The annual benefit payable under the Plan to any Participant described in subsection (c) of this section shall not exceed an amount equal to the payments which would be made to him in that year under a straight life annuity that is the Actuarial Equivalent of the nonforfeitable benefit to which he is entitled under the Plan; provided that the restrictions set forth in this subsection (b) shall not apply if:
(1) after payment to the Participant of his benefit under the Plan, the value of the Plan’s assets equals or exceeds 110% of the value of the Plan’s current liabilities; or
(2) the value of such Participant’s benefit under the Plan is less than 1% of the value of such current liabilities; or
(3) the Actuarial Equivalent value of the Participant’s benefit is $5,000 or less.
(c) The restriction set forth in subsection (b) shall apply to benefits payable under the Plan for any Plan Year to any Participant who is either a “highly compensated employee” or “highly compensated former employee” with respect to such Plan Year; provided, that if the number of such highly compensated employees and highly compensated former employees for any Plan Year exceeds 25, the restriction set forth in subsection (b) shall apply for the Plan Year only to the 25 such highly compensated employees and highly compensated former employees with the greatest Compensation (as defined in Sec. 8.12(i)) for the current or any prior Plan Year.
(d) For purposes of this section, the terms “highly compensated employee” and “highly compensated former employee” shall have the meanings ascribed to such terms in Code §§ 414(q)(1) and 414(q)(6), respectively.
Sec. 8.17 Benefits of Reemployed Veterans . Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to Qualified Military Service will be provided in accordance with Code § 414(u). For this purpose:
(a) As provided by Code § 414(u), “Qualified Military Service” means service in the uniformed services (as defined in Chapter 43 of Title 38, United States Code) by an individual if he or she is qualified under such chapter to reemployment rights with the Company or an Affliate following such military service.
(b) “USERRA” means the Uniformed Services Employment and Reemployment Rights Act of 1994 as amended.
(c) If an individual returns to employment with the Company or an Affiliate following a period of Qualified Military Service under circumstances and that he or she has reemployment rights under USERRA, and the individual reports for said reemployment within the time frame required by USERRA, the following provisions shall apply:
(1) The Qualified Military Service shall be recognized as Elapsed Time, Credited Service, Years of Eligibility Service, and Bemis Elapsed Time to the same extent as it would have been if the employee had remained continuously employed with the Company or an Affiliate rather than going in the military.
(2) Monthly Earnings shall be determined for the individual as of each January 1 during the period of Qualified Military Service. The amount of Monthly Earnings shall be determined by the Company consistent with the requirements of the USERRA, and shall reflect the Company’s best estimate of the earnings the individual would have received but for the Qualified Military Service.
(3) If the individual received a lump sum cashout of the benefits accrued under the Plan prior to the Qualified Military Service, he or she may repay said lump sum with interest. Interest for this purpose shall be calculated in accordance with any applicable regulations under USERRA. Any such repayment must be made within five years after the individual’s reemployment date.
(d) If a Participant dies while performing Qualified Military Service (as defined in USERRA), the Participant’s survivors shall receive the same benefits under the Plan as if the Participant died while employed by a Participating Employer. This
rule does not, however, require survivors to be provided with any additional benefit accruals relating to the period of Qualified Military Service.
(e) Regardless of whether the individual returns to employment with a Participating Employer following the military service, any “differential pay” paid to the Participant by a Participating Employer on or after January 1, 2009 will be recognized by the Plan to the extent required by the Heroes Earnings Assistance and Tax Relief Act (“HEART Act”) of 2008. This provision will be administered in a way so that it does not result in reducing the individual’s Final Average Earnings.
(f) The foregoing provisions are intended to provide the benefits required by USERRA and the HEART Act, and are not intended to provide any other benefits. This section shall be construed consistently with said intent.
Sec. 8.18 Retroactive Annuity Starting Dates . A Participant may elect to have his or her pension begin as of a “retroactive annuity starting date”, subject to the following:
(a) “Retroactive annuity starting date” means a date elected by a Participant which is prior to the date the written explanation of qualified joint and survivor annuity required by Code § 417(a)(3) is provided to the Participant.
(b) The retroactive annuity starting date may be the first day of any month on or after the earliest date the Participant was eligible to receive a pension. However, if the pension is being paid under Sec. 6.2 or 6.4 as of a date prior to the Participant’s Normal Retirement Date, the retroactive annuity starting date may not be earlier than the date the Participant notified the Company that he or she would like the pension to commence. If the pension is being paid under Sec. 6.3, the retroactive annuity starting date may not be earlier than 12 months before the date the Participant establishes to the Company’s satisfaction that the Participant is eligible for a Disability Retirement.
(c) The monthly pension amount payable under this section will be equal to the amount that would have been payable if the Participant’s pension had begun on the retroactive annuity starting date.
(d) A Participant who elects a pension with a retroactive annuity starting date shall receive a makeup payment reflecting any missed payments from the retroactive annuity starting date through the date the makeup payment is paid. The makeup payment shall include interest on each missed payment for the period beginning on the date the missed payment would have been paid if the pension had commenced on the retroactive annuity starting date and ending on the date the makeup payment is paid. Interest shall be determined using the interest rate for lump sums payable in the Plan Year the makeup payment is paid, as provided in Sec. 4.12(c)(1). For example, if a pension has a retroactive annuity starting date
of May 1, 2004 and the makeup payment is paid April 1, 2005, interest on the missed payments will be at the 2005 rate (i.e., the October 2004 30-year Treasury rate).
(e) If the Participant has a spouse on the date the first pension payment is actually paid, the Participant’s election is subject to the consent of said spouse. However, said spouse’s consent is not required if the Participant elects to receive the retroactive pension as a Qualified Joint and Survivor Annuity and the death benefit payable to said spouse is at least equal to the death benefit the spouse would have received if the benefit commenced on the date the first pension payment actually is paid and in the form of a Qualified Joint and 50% Survivor Annuity.
(f) If the Participant was married on the Retroactive Annuity Starting Date, but is no longer married to that spouse on the date the first pension payment actually is paid, the consent of the former spouse is not required except to the extent provided in any applicable qualified domestic relations order.
Sec. 8.19 Limitations Pursuant to Code §436 . To the extent required by Code §436 and any applicable regulations or other guidance, the Plan is subject to the following limitations:
(a) Limitation on unpredictable contingent event benefits. Any unpredictable contingent event benefit will not be paid if the event occurs at a time when the Plan’s AFTAP is less than 60% (or would be less than 60% if the unpredictable contingent event benefit were taken into account). For this purpose, “unpredictable contingent event benefit” means any benefit (or increase in benefits) that is contingent on a plant shutdown or similar event, or on a factor other than age, service, compensation, death or disability.
(b) Limitation on Plan amendments. No amendment that has the effect of increasing liabilities of the Plan will take effect at a time when the Plan’s AFTAP is less than 80% (or would be less than 80% if the amendment were taken into account). However, this restriction does not apply to a benefit increase under a formula which is not based on a participant’s compensation, provided the rate of increase does not exceed the contemporaneous rate of increase in wages of Participants covered by the amendment.
(c) Limitation on accelerated benefit payments. The following limitations apply to amounts which are considered “prohibited payments” for purposes of Code §436(d):
(1) If the Plan’s AFTAP is less than 60%, the Plan will not pay any prohibited payment with an annuity starting date on or after the applicable Code §436 measurement date.
(2) The Plan will not pay any prohibited payment with an annuity starting date while the Company is in bankruptcy, provided, however, that this restriction does not apply if the Plan’s Actuary certifies that the Plan’s AFTAP is not less than 100%.
(3) If the Plan’s AFTAP is 60% or more but less than 80%, prohibited payments will be restricted to the extent required by applicable regulations.
(4) For purposes of this subsection, an amount payable for a month is a “prohibited payment” to the extent it exceeds the sum of (i) the amount payable for that month under a straight life annuity with the same annuity starting date plus (ii) any social security supplement payable under the Plan for that month. Purchase of an irrevocable annuity is also a prohibited payment, as is any other form of payment so identified in applicable guidance. However, a lump sum payment under Sec. 8.2 is not a prohibited payment.
(d) Limitation on benefit accruals. If the Plan’s AFTAP is less than 60%, benefit accruals under the Plan will cease until such time as the Plan’s AFTAP is at least 60%.
(e) AFTAP. The Plans “AFTAP” is its Adjusted Funded Target Attained Percentage as determined by the Plan Actuary in accordance with Code §436 and §430.
(f) Rules of construction. The foregoing provisions are intended to limit benefits to the extent required by Code §436 and are not intended to impose any other limitations. This section shall be construed consistently with that intent.
ARTICLE IX
FUND
Sec. 9.1 Composition . All sums of money and all securities and other property received by the Funding Agency for purposes of the Plan, together with all investment made therewith, the proceeds thereof, and all earnings and accumulations thereon, and the part from time to time remaining shall constitute the “Fund”. The Company may cause the Fund to be divided into any number of parts for investment purposes or any other purposes necessary or advisable for the proper administration of the Plan. If for any purpose it is necessary to determine the value of an asset in the Fund for which fair market value is not available, the value of such asset shall be its fair value as determined in good faith by the Company or other Named Fiduciary assigned such function, or if the asset is held in trust and the trust agreement so provides, as determined in good faith by the trustee.
Sec. 9.2 Funding Agency . The Fund may be held and invested as one fund or may be divided into any number of parts for investment purposes. Each part of the Fund, or the entire Fund if it is not divided into parts for investment purposes, shall be held and invested by one or more trustees or by an insurance company. The trustee or trustees or the insurance company so acting with respect to any part of the Fund is referred to herein as the Funding Agency with respect to such part of the Fund. The selection and appointment of each Funding Agency shall be made by the Company. The Company shall have the right at any time to remove a Funding Agency and appoint a successor thereto, subject only to the terms of any applicable trust agreement or group annuity contract. The Company shall have the right to determine the form and substance of each trust agreement and group annuity contract under which any part of the Fund is held, subject only to the requirement that they are not inconsistent with the provisions of the Plan. Any such trust agreement may contain provisions pursuant to which the trustee will make investments on direction of a third party.
Sec. 9.3 Compensation and Expenses of Funding Agency . The Funding Agency shall be entitled to receive reasonable compensation for its services as may be agreed upon with the Company. The Funding Agency shall also be entitled to reimbursement for all reasonable and necessary costs, expenses, and disbursements incurred by it in the performance of its services. Such compensation and reimbursements shall be paid from the Fund if not paid directly by the Participating Employers in such proportions as the Company shall determine.
Sec. 9.4 Securities and Property of Participating Employers . An agreement with a Funding Agency may provide that the Fund may be invested in qualifying employer securities or qualifying employer real property, as those terms are used in ERISA, and to the extent permitted by ERISA. If qualifying employer securities or qualifying employer real property are purchased or sold as an investment of the Fund from or to a disqualified person or party in interest, as those terms are used in ERISA, and if there is no generally recognized market for such securities or property, the purchase shall be for not more than fair market value and the sale shall be for not less than fair market value, as determined in good faith by the Company or other Named Fiduciary assigned such function, or if such assets are held in trust and the trust agreement so provides, as determined in good faith by the trustee.
Sec. 9.5 No Diversion . The Fund shall be for the exclusive purpose of providing benefits to Participants and their beneficiaries and defraying reasonable expenses of administering the Plan. Such expenses may include premiums for the bonding of Plan officials required by ERISA and may also include premiums payable to the Pension Benefit Guaranty Corporation. No part of the Fund may be used for, or diverted to, purposes other than for the exclusive benefit of employees of the Participating Employers or their beneficiaries. Notwithstanding the foregoing:
(a) If any contribution or portion thereof is made by a Participating Employer by a mistake of fact, the Funding Agency shall, upon written request of the Company, return such contribution or portion thereof to the Participating Employer within one year after the payment of the contribution to the Funding Agency; however, earnings attributable to such contribution or portion thereof shall not be returned to the Participating Employer but shall remain in the Fund, and the amount returned to the Participating Employer shall be reduced by any losses attributable to such contribution or portion thereof.
(b) Contributions by the Participating Employers are conditioned upon the deductibility of each contribution under Code § 404. To the extent the deduction is disallowed, the Funding Agency shall, upon written request of the Company, return such contribution to the Participating Employer within one year after the disallowance of the deduction; however, earnings attributable to such contribution (or disallowed portion thereof) shall not be returned to the Participating Employer but shall remain in the Fund, and the amount returned to the Participating Employer shall be reduced by any losses attributable to such contribution (or disallowed portion thereof).
(c) If, in the case of termination of the Plan, any residual assets remain in the Fund after all liabilities of the Plan to Participants and their beneficiaries have been satisfied, such residual assets shall be returned to the Participating Employers in such proportions as the Company may determine.
Sec. 9.6 Employer Contributions . The Participating Employers shall make such contributions to the Fund from time to time as they consider advisable.
ARTICLE X
ACTUARY
Sec. 10.1 Appointment . The Company shall appoint as Actuary hereunder an individual who is an enrolled actuary as defined in ERISA or a partnership, corporation, or other organization which has as a partner or employee thereof such an enrolled actuary.
Sec. 10.2 Responsibilities . The Actuary shall have the responsibilities expressly allocated to it hereunder and shall have such other responsibilities with respect to the Plan as may be agreed upon by the Company and the Actuary.
Sec. 10.3 Compensation . The Actuary shall receive such reasonable compensation for its services hereunder as may be agreed upon by the Company and the Actuary. To the extent not paid from the Fund, such compensation shall be paid by the Participating Employers in such proportions as the Company shall determine.
Sec. 10.4 Resignation, Removal, and Successor . Any agreement between the Company and the Actuary for services hereunder may be terminated by either party on 30 days written notice to the other. In the event of a vacancy in the office of Actuary, the Company shall appoint a successor.
ARTICLE XI
ADMINISTRATION OF PLAN
Sec. 11.1 Administration by Company . The Company is the “administrator” of the Plan for purposes of ERISA. Except as expressly otherwise provided herein, the Company shall control and manage the operation and administration of the Plan and make all decisions and determinations incident thereto. In carrying out its Plan responsibilities, the Company shall have discretionary authority to construe the terms of the Plan. Except in cases where the Plan expressly provides to the contrary, action on behalf of the Company may be taken by any of the following:
(a) The Board.
(b) The chief executive officer of the Company.
(c) Any person or persons, natural or otherwise, or committee, to whom responsibilities for the operation and administration of the Plan are allocated by the Company, by resolution of the Board or by written instrument executed by the chief executive officer of the Company and filed with its permanent records, but action of such person or persons or committee shall be within the scope of said allocation.
Sec. 11.2 Certain Fiduciary Provisions . For purposes of the Plan:
(a) Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan.
(b) A Named Fiduciary, or a fiduciary designated by a Named Fiduciary pursuant to the provisions of the Plan, may employ one or more persons to render advice with regard to any responsibility such fiduciary has under the Plan.
(c) To the extent permitted by any applicable trust agreement or group annuity contract a Named Fiduciary with respect to control or management of the assets of the Plan may appoint an investment manager or managers, as defined in ERISA, to manage (including the power to acquire and dispose of) any assets of the Plan.
(d) At any time that the Plan has more than one Named Fiduciary, if pursuant to the Plan provisions fiduciary responsibilities are not already allocated among such Named Fiduciaries, the Company, by action of the Board or chief executive officer, may provide for such allocation; except that such allocation shall not include any responsibility, if any, in a trust agreement to manage or control the assets of the Plan other than a power under the trust agreement to appoint an investment manager as defined in ERISA.
(e) Unless expressly prohibited in the appointment of a Named Fiduciary which is not the Company acting as provided in Sec. 11.1, such Named Fiduciary by written instrument may designate a person or persons other than such Named Fiduciary to carry out any or all of the fiduciary responsibilities under the Plan of such Named Fiduciary; except that such designation shall not include any responsibility, if any, in a trust agreement to manage or control the assets of the Plan other than a power under the trust agreement to appoint an investment manager as defined in ERISA.
(f) A person who is a fiduciary with respect to the Plan, including a Named Fiduciary, shall be recognized and treated as a fiduciary only with respect to the particular fiduciary functions as to which such person has responsibility.
Each Named Fiduciary (other than the Company), each other fiduciary, each person employed pursuant to subsection (b) above, and each investment manager shall be entitled to receive reasonable compensation for services rendered, or for the reimbursement of expenses properly and actually incurred in the performance of their duties with the Plan and to payment therefor from the Fund if not paid directly by the Participating Employers in such proportions as the Company shall determine. However, no person so serving who already receives full-time pay from a Participating Employer shall receive compensation from the Plan, except for reimbursement of expenses properly and actually incurred.
Sec. 11.3 Evidence . Evidence required of anyone under this Plan may be by certificate, affidavit, document, or other instrument which the person acting in reliance thereon considers to be pertinent and reliable and to be signed, made, or presented by the proper party.
Sec. 11.4 Correction of Errors . It is recognized that in the operation and administration of the Plan certain mathematical and accounting errors may be made or mistakes may arise by reason of factual errors in information supplied to the Company or Funding Agency. The Company shall have power to cause such equitable adjustments to be made to correct for such errors as the Company in its discretion considers appropriate. Such adjustments shall be final and binding on all persons.
Sec. 11.5 Records . Each Participating Employer, each fiduciary with respect to the Plan, and each other person performing any functions in the operation or administration of the Plan or the management or control of the assets of the Plan shall keep such records as may be necessary or appropriate in the discharge of their respective functions hereunder, including records required by ERISA or any other applicable law. Records shall be retained as long as necessary for the proper administration of the Plan and at least for any period required by said Act or other applicable law.
Sec. 11.6 Claims Procedure . The Company shall establish a claims procedure consistent with the requirements of ERISA. Such claims procedure shall provide adequate notice in writing to any Participant or beneficiary whose claim for benefits under the Plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the claimant and shall afford a reasonable opportunity to a claimant whose claim for benefits has been denied for a full and fair review by the appropriate Named Fiduciary of the
decision denying the claim. No person claiming a benefit under the Plan may initiate a civil action regarding the claim until all steps under the claims procedure (including appeals) have been completed.
Sec. 11.7 Bonding . Plan personnel shall be bonded to the extent required by ERISA. Premiums for such bonding may, in the sole discretion of the Company, be paid in whole or in part from the Fund. Such premiums may also be paid in whole or in part by the Participating Employers in such proportions as the Company shall determine. The Company may provide by agreement with any person that the premium for required bonding shall be paid by such person.
Sec. 11.8 Waiver of Notice . Any notice required hereunder may be waived by the person entitled thereto.
Sec. 11.9 Agent For Legal Process . The Company shall be the agent for service of legal process with respect to any matter concerning the Plan, unless and until the Company designates some other person as such agent.
Sec. 11.10 Indemnification . In addition to any other applicable provisions for indemnification, the Participating Employers jointly and severally agree to indemnify and hold harmless, to the extent permitted by law, each director, each officer, and each employee (collectively referred to as the “Indemnitee”) of the Participating Employers against any and all liabilities, losses, costs, or expenses (including legal fees) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against such person at any time by reason of such person’s services as a fiduciary 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.
ARTICLE XII
AMENDMENT, TERMINATION, MERGER
Sec. 12.1 Amendment . Subject to the non-diversion provisions of Sec. 9.5, the Company, by action of the Board, or by action of a person or committee so authorized by resolution of the Board, may amend the Plan at any time and from time to time. No amendment of the Plan shall have the effect of changing the rights, duties, and liabilities of any Funding Agency without its written consent. The Company agrees that promptly upon the adoption of any amendment to the Plan it will furnish a copy of the amendment together with a certificate evidencing its adoption to each Funding Agency then acting.
Sec. 12.2 Reorganization of Participating Employers . If two or more Participating Employers are consolidated or merged or if one or more Participating Employers acquire the assets of another Participating Employer, the Plan shall be deemed to have continued, without termination and without a complete discontinuance of contributions, as to all the Participating Employers involved in such reorganization and their employees. In such event, in administering the Plan, the corporation resulting from the consolidation, the surviving corporation in the merger, or the employer acquiring the assets shall be considered as a continuation of all of the Participating Employers involved in the reorganization.
Sec. 12.3 Termination . The Plan may be terminated by the Company, by action of the Board. Any such termination shall be made in compliance with all applicable provisions of ERISA. The Plan may also be terminated by action of the Pension Benefit Guaranty Corporation pursuant to the provisions of ERISA. Upon termination of the Plan, the following shall be applicable:
(a) No further benefits shall accrue, and the rights of each employee to benefits accrued to the date of such termination, to the extent then funded, shall be nonforfeitable; provided, however, that the sole recourse for satisfaction of such rights shall be to the Fund and, where applicable, to the Pension Benefit Guaranty Corporation.
(b) The Funding Agency shall receive for the Fund any amount recovered under § 4045 of ERISA.
(c) The Funding Agency shall deduct from the Fund its compensation, expenses properly chargeable thereto, and any and all taxes that may be imposed upon the Fund by virtue of the Plan termination or otherwise; provided, however, that the Funding Agency may accept such reasonable indemnity therefor from the Participating Employers as the Funding Agency shall specify.
(d) If adequate the Fund shall then be applied to provide, in accordance with the provisions of the Plan as in effect at the time of such termination, all benefits accrued to the date of such termination whether vested or not.
(e) If the Fund is not adequate to provide all benefits accrued to the date of termination, the assets of the Fund shall be allocated to provide benefits in the following order of priority subject to any applicable regulations promulgated by the Pension Benefit Guaranty Corporation or the Secretary of the Treasury:
(1) To provide that portion of each individual’s accrued benefit that is derived from the Participant’s contributions to the Fund, if any.
(2) In the case of benefits payable as an annuity:
(A) In the case of the benefit of a Participant or beneficiary which was in pay status as of the beginning of the 3-year period ending on the termination date of the Plan, to provide each such benefit, based on the provisions of the Plan (as in effect during the 5-year period ending on such date) under which such benefit would be the least. The lowest benefit in pay status during the 3-year period shall be considered the benefit in pay status for such period.
(B) In the case of the benefit of a Participant or beneficiary (other than a benefit described in subparagraph (A) above) which would have been in pay status as of the beginning of the 3-year period ending on the termination date of the Plan if the Participant had retired prior to the beginning of the 3-year period and if his benefits had commenced as a life only annuity as of the beginning of such period, to provide each such benefit based on the provisions of the Plan (as in effect during the 5-year period ending on such date) under which such benefit would be the least.
(3) To provide all other benefits, if any, of individuals under the Plan guaranteed under ERISA (determined without regard to ERISA § 4022(b)(5)), and the additional benefits, if any, which would be so provided if ERISA § 4022(b)(6) did not apply. In determining such benefits, ERISA § 4021 shall be applied without regard to subsection (c) thereof.
(4) To provide all other nonforfeitable benefits under the Plan. If the assets available are not sufficient to satisfy in full such benefits:
(A) The assets shall be allocated to provide individuals with such benefits accrued under the Plan as in effect at the beginning of the 5-year period ending on the date of Plan termination.
(B) If the assets available for allocation under subparagraph (A) above are sufficient to satisfy in full the benefits described therein (without regard to this subparagraph (B)), then for purposes of subparagraph (A), benefits of individuals thereunder shall be
determined on the basis of the Plan as amended by the most recent Plan amendment effective during such 5-year period under which the assets available for allocation are sufficient to satisfy in full the benefits of such individuals, and any assets remaining to be allocated shall be allocated on the basis of the Plan as amended by the next succeeding Plan amendment effective during such period.
(5) To provide all other accrued benefits under the Plan.
The amount allocated under any of paragraphs (1) through (5) above with respect to any benefit shall be properly adjusted for any allocation of assets with respect to that benefit under any of the preceding of said paragraphs. Except as otherwise provided in paragraph (4) above, if the assets available for allocation under any of said paragraphs are insufficient to satisfy in full the benefits to be provided individuals under such paragraph, the assets shall be allocated pro rata among such individuals on the basis of the present value, as of the termination date of the plan, of their respective benefits described in such paragraph. If the Secretary of the Treasury determines that the allocation made pursuant to this subsection results in discrimination prohibited by Code § 401(a)(4) then, if required to prevent the disqualification of the Plan, the assets shall be reallocated to the extent necessary to avoid such discrimination but only to the extent permitted by ERISA.
(f) If all liabilities of the Plan to Participants and their beneficiaries have been satisfied, any residual assets of the Plan shall be returned to the Participating Employers if such distribution does not contravene any provision of law; provided, however, that if any asset of the Plan attributable to employee contributions should remain after all liabilities of the Plan to Participants and their beneficiaries have been satisfied, such assets shall be equitably distributed to the employees who made such contributions (or their beneficiaries) in accordance with their rate of contributions.
(g) If the Actuarial Equivalent present value of an individual’s entire benefit is $5,000 or less, the benefit shall be paid in a single sum promptly after termination of the Plan; provided, however, that payment may be deferred as provided in Sec. 12.6. In all other cases, benefits following termination of the Plan shall be provided through purchase of an annuity contract from an insurance company offering the same settlement options and payment terms as are provided under the Plan.
(h) In the event of the termination of the Plan, all Plan provisions and any agreements with Funding Agencies relating to the Plan shall continue to have effect for the purpose of completing distributions in accordance with this section.
Sec. 12.4 Partial Termination . If there is a partial termination of the Plan, either by operation of law, by amendment of the Plan, or for any other reason, which partial termination shall be confirmed by the Company, the right to benefits of each Participant with respect to
whom the Plan is partially terminated, to the extent then funded, shall be fully vested and nonforfeitable.
Sec. 12.5 Merger, Consolidation, or Transfer of Plan Assets . In the case of any merger or consolidation of the Plan with any other plan, or in the case of the transfer of assets or liabilities of the Plan to any other plan, provision shall be made so that each Participant and beneficiary would (if such other plan then terminated) receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated). No such merger, consolidation, or transfer shall be effected until such statements with respect thereto, if any, required by ERISA to be filed in advance thereof have been filed.
Sec. 12.6 Deferral of Distributions . Notwithstanding any provisions of the Plan to the contrary, in the case of a complete or partial termination of the Plan, the Company or the Funding Agency may (but is not required to) defer any distribution of benefit payments to Participants and beneficiaries with respect to which such termination applies until after the following have occurred:
(a) Receipt of a final determination from the Treasury Department or any court of competent jurisdiction regarding the effect of such termination on the qualified status of the Plan under Code § 401(a).
(b) Appropriate adjustment of the Fund to reflect taxes, costs, and expenses, if any, incident to such termination.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Sec. 13.1 Headings . Headings at the beginning of articles and sections hereof are for convenience of reference, shall not be considered a part of the text of the Plan, and shall not influence its construction.
Sec. 13.2 Capitalized Definitions . Capitalized terms used in the Plan shall have their meaning as defined in the Plan unless the context clearly indicates to the contrary.
Sec. 13.3 Gender . Any references to the masculine gender include the feminine and vice versa.
Sec. 13.4 Use of Compounds of Word “Here” . Use of the words “hereof”, “here”, “hereunder”, or similar compounds of the word “here” shall mean and refer to the entire Plan unless the context clearly indicates to the contrary.
Sec. 13.5 Construed as a Whole . The provisions of the Plan shall be construed as a whole in such manner as to carry out the provisions thereof and shall not be construed separately without relation to the context.
ARTICLE XIV
TOP-HEAVY PLAN PROVISIONS
Sec. 14.1 Key Employee Defined . “Key Employee” means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of the Company or an Affiliate having annual Compensation greater than $160,000 (as adjusted under Code § 416(i)(1) for Plan Years after 2009), a five-percent owner of the Company or of an Affiliate, or a one-percent owner of the Company having annual Compensation of more than $150,000. “Compensation” for this purpose is as defined in Sec. 8.12(i). The determination of who is a key employee will be made in accordance with Code § 416(i)(1) and the applicable regulations and other guidance of general applicability issued thereunder.
Sec. 14.2 Determination of Top-Heavy Status . The top-heavy status of the Plan shall be determined according to the following standards and definitions:
(a) The Plan is a Top-Heavy Plan for a Plan Year if either of the following applies:
(1) If this Plan is not part of a required aggregation group and the top-heavy ratio for this Plan exceeds 60 percent.
(2) If this Plan is part of a required aggregation group of plans and the top-heavy ratio for the group of plans exceeds 60 percent.
Notwithstanding paragraphs (1) and (2) above, the Plan is not a Top-Heavy Plan with respect to a Plan Year if it is part of a permissive aggregation group of plans for which the top-heavy ratio does not exceed 60 percent.
(b) The “top-heavy ratio” shall be determined as follows:
(1) If the ratio is being determined only for this Plan or if the aggregation group only includes defined benefit pension plans, the top-heavy ratio is a fraction, the numerator of which is the sum of the present values of the accrued benefits of all Key Employees under the Plan or plans as of the determination date (including any part of any accrued benefit distributed in the one-year period ending on the determination date), and the denominator of which is the sum of the present value of all accrued benefits (including any part of any accrued benefit distributed in the one-year period ending on the determination date) of all employees under the Plan or plans as of the determination date. (The “plans” referred to in the preceding sentence are the plans in the required or permissive aggregation group.)
(2) If the determination is being made for a required or permissive aggregation group which includes one or more defined contribution plans,
the top-heavy ratio is a fraction, the numerator of which is the sum of account balances of all Key Employees under the defined contribution plans and the present value of accrued benefits under the defined benefit plans for all Key Employees as of the determination date (including any part of any account balance or accrued benefit distributed in the one-year period ending on the determination date), and the denominator of which is the sum of the account balances under the defined contribution plans for all employees and the present value of accrued benefits under the defined benefit plans for all employees as of the determination date (including any part of any account balance or accrued benefit distributed in the one-year period ending on the determination date). (The “plans” referred to in the preceding sentence are the plans in the required or permissive aggregation group.) Both the numerator and denominator of the top-heavy ratio shall be adjusted to reflect any contribution due but unpaid as of the determination date.
(3) In the case of any distribution made for a reason other than severance from employment, death or disability, paragraphs (1) and (2) shall be applied by substituting “five-year period” for “one-year period”.
(4) For purposes of paragraphs (1) and (2), the value of account balances and the present value of accrued benefits will be determined as of the most recent valuation date that falls within the 12-month period ending on the determination date. The calculation of the top-heavy ratio and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Code § 416 and the regulations thereunder. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the determination dates that fall within the same calendar year.
(c) “Required aggregation group” means (i) each qualified plan of the employer in which at least one Key Employee participates, and (ii) any other qualified plan of the Employer that enables a plan described in (i) to meet the requirements of Code §§ 401(a)(4) and 410.
(d) “Permissive aggregation group” means the required aggregation group of plans plus any other plan or plans of the employer which, when consolidated as a group with the required aggregation group, would continue to satisfy the requirements of Code §§ 401(a)(4) and 410.
(e) “Determination date” for any Plan Year means the last day of the preceding Plan Year.
(f) The “valuation date” is the last day of each Plan Year and is the date as of which account balances or accrued benefits are valued for purposes of calculating the top-heavy ratio.
(g) If an individual has not performed services for the employer during the one-year period ending on the determination date with respect to a Plan Year, any account balance or accrued benefit for such individual shall not be taken into account for such Plan Year.
Sec. 14.3 Minimum Accrued Benefit . If the Plan is a Top-Heavy Plan, notwithstanding any other provisions of this Plan, each Participant who is not a Key Employee shall have a minimum accrued benefit (to be provided by employer contributions and expressed as a single life annuity, with no ancillary benefits, commencing at age 65) equal to the applicable percentage of the Participant’s average monthly compensation for years in the testing period.
(a) For purposes of this section:
(1) The “applicable percentage” is the lesser of 2 percent multiplied by the Participant’s number of years of service with the employer, or 20 percent. For purposes of this paragraph (1), a Participant has a year of service for each Plan Year in which he completes 1000 Hours of Service; provided, however, that the following years shall not be taken into account:
(A) Plan Years commencing before January 1, 1984.
(B) Plan Years in which the Plan is not a Top-Heavy Plan.
(C) Plan Years in which the Participant is a Key Employee.
(D) Plan Years that end before the Participant attains age 18.
(E) Plan Years during which the employer did not maintain the Plan or a predecessor plan.
(2) “Compensation” is defined in Sec. 8.12(i).
(3) “Hour of Service” is defined in Sec. 6.7(f).
(4) A Participant’s “testing period” comprises the five consecutive Plan Years during which the Participant had the greatest aggregate compensation from the employer, subject to the following:
(A) The Plan Years taken into account for purposes of this paragraph shall be adjusted for years not included in years of service for purposes of paragraph (1) above, as provided in Code § 416(c)(1)(D)(ii).
(B) Any Plan Year commencing after the last Plan Year in which the Plan was a Top-Heavy Plan shall be disregarded for purposes of
this paragraph if by disregarding such Plan Year the Participant’s average monthly compensation for years in the testing period will be reduced.
(b) If a Participant becomes entitled to a benefit under the Plan, and (i) if the form of the benefit is other than a single life annuity and/or (ii) if the benefit commences at an age other than age 65, the benefit payable to the Participant must be at least the Actuarial Equivalent of the minimum single life annuity benefit commencing at age 65.
(c) A Participant’s minimum accrued benefit required under this section, to the extent required to be nonforfeitable under Sec. 14.4, shall not be subject to suspension of payment under Sec. 6.7(a)(2).
(d) This section shall not apply to any Participant who is covered under any other defined benefit plan of the employer to the extent the minimum benefit requirement otherwise applicable under this Plan will be satisfied by such other plan.
Sec. 14.4 Vesting Schedule . If a Participant’s Termination of Employment occurs under such circumstances that he is not entitled to a benefit under Sections 6.1-6.4, and if he was an Active Participant during a Plan Year for which the Plan was a Top-Heavy Plan, he shall be entitled to a benefit under this section. Except as modified by this section, such benefit shall be payable under the terms and conditions that would be applicable to a Vested Termination benefit under Sec. 6.4.
(a) The monthly amount of the benefit under this section shall be an amount equal to the Participant’s Accrued Monthly Pension multiplied by the vested percentage determined according to the number of his years of Elapsed Time, as follows:
|
Years of Elapsed Time |
|
Vested Percentage |
|
|
|
|
|
|
|
Less than 2 |
|
0 |
% |
|
2 but less than 3 |
|
20 |
% |
|
3 but less than 4 |
|
40 |
% |
|
4 but less than 5 |
|
60 |
% |
|
5 or more |
|
100 |
% |
(b) This section shall not apply to a Participant who has no Elapsed Time after the Plan becomes a Top-Heavy Plan.
(c) If the Plan ceases to be a Top-Heavy Plan and continues to be a non-Top-Heavy Plan until the Participant’s Termination of Employment, the benefit to which the Participant is entitled under this section shall not exceed the benefit to which he would have been entitled if his Termination of Employment had occurred on the date of such cessation. However, the preceding sentence shall not apply to any
Participant who has completed three years of Elapsed Time by the end of the last Plan Year for which the Plan was a Top-Heavy Plan.
Sec. 14.5 Definition of Employer . For purposes of this Article XIV, the term “employer” means the Company and any trade or business entity under Common Control with the Company.
Sec. 14.6 Exception For Collective Bargaining Unit . Sections 14.3 and 14.4 shall not apply with respect to any employee included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers if there is evidence that retirement benefits were the subject of good faith bargaining between such employee representative and such employer or employers.
Schedule A
BEMIS RETIREMENT PLAN
Locations Where Hourly Paid Employees Are
Qualified Employees (Plan Sec. 2.37(a)(2))
1. Effective as of January 20, 1994:
(a) Perfecseal Oshkosh, Wisconsin.
2. Effective as of January 1, 1997:
(a) Curwood Fremont, Ohio.
(b) Curwood Bemistape Oshkosh, Wisconsin.
(c) Curwood Weldon Oshkosh, Wisconsin.
(d) Milprint Lancaster, Wisconsin.
(e) Milprint Lebanon, Pennsylvania.
(f) MACtac Scranton, Pennsylvania.
(g) Nellis, Nevada.
(h) MACtac Kansas City.
(i) Bemis Hazleton, Pennsylvania (non-bargaining unit employees only).
(j) MACtac Stow (non-bargaining unit employees only).
3. Effective as of January 1, 1998:
(a) Milprint Oshkosh North, Wisconsin (formerly Banner Packaging).
(b) Milprint Shelbyville, Tennessee (formerly Bemis Custom Products and Paramount Tennessee).
4. Effective as of January 1, 1999:
(a) Milprint Longview, Texas (formerly Bemis Custom Products and Paramount Texas).
(b) Morgan Adhesives Company — Columbus, Indiana
5. Effective as of January 1, 2000:
(a) Curwood New London, Wisconsin (non-bargaining unit employees only).
(c) Terre Haute, Indiana (non-bargaining unit employees only).
6. Effective as of September 1, 2000:
(a) Curwood Shrink Packaging, Centerville, Iowa.
(b) Curwood Shrink Packaging, Paul’s Valley, Oklahoma.
7. Effective as of January 1, 2001:
(a) Bemis Specialty Films — Oshkosh, Wisconsin
(b) Bemis Converter Films — Oshkosh, Wisconsin
(c) Milprint South Oshkosh (formerly Curwood Snack Films) — Oshkosh, Wisconsin
8. Effective as of September 8, 2001:
(a) Curwood Appleton, Wisconsin
(b) Curwood Neenah, Wisconsin
9. Effective as of July 30, 2002: Bemis Clysar, Inc.
10. Effective as of date employer became a Participating Employer:
(a) Morgan Adhesives Company — Lawrenceville, Georgia.
Note: An hourly paid employee at a location listed in “1” through “9” above is not a Qualified Employee with regard to service prior to the effective date shown for that location. Hourly paid employees at Lawrenceville Georgia are eligible to be Qualified Employees retroactive to the date Morgan Adhesives Company became a Participating Employer.
Appendix A
BEMIS RETIREMENT PLAN
Modifications Applicable to Certain
Employees and Former Employees of
Hayssen Manufacturing Company
Prior to April 1, 1980, Hayssen Manufacturing Company (“Hayssen”) maintained the Hayssen Retirement Plan as a separate plan for the benefit of its eligible employees. Effective as of April 1, 1980, the Hayssen Retirement Plan was merged with and into the Bemis Retirement Plan. The following modifications of the Bemis Retirement Plan are applicable in determining benefits payable with respect to persons who were participants in the Hayssen Retirement Plan and who terminated employment on or after January 1, 1989. Such persons are hereafter referred to as “Hayssen Plan Participants”. This Appendix is also applicable in determining the pension payable to any person who was a salaried employee of Hayssen and who transferred to a position as a salaried employee of Bemis Company, Inc. prior to July 1, 1976, and such a person is considered to be a “Hayssen Plan Participant”, provided he is a Qualified Employee on January 1, 1980 and has a Termination of Employment on or after January 1, 1989.
1.
Hayssen is a Participating Employer effective as of April 1, 1980.
2.
A Hayssen Plan Participant shall be deemed to have been a Qualified Employee during his employment with Hayssen prior to April 1, 1980, subject to the provisions of Sec. 2.37 other than Sec. 2.37(a). However, in the case of any person who became a participant in the Hayssen Retirement Plan on or before January 1, 1980, service with Hayssen prior to January 1, 1980 in capacities other than as an employee compensated in whole or in part on a regular stated salary basis or employed in an office clerical or supervisory position shall not be excluded from service as a Qualified Employee, except to the extent provided in Sec. 2.37(c).
3.
A Hayssen Plan Participant’s years of Elapsed Time shall be determined under Sec. 3.4; subject to the following:
(a) A Hayssen Plan Participant shall not have fewer years of Elapsed Time for service prior to January 1, 1981 than his years of vesting service for such service
as defined in Section 1.01(z) of the Hayssen Retirement Plan as in effect prior to the Merger Date.
(b) If a Hayssen Plan Participant either (i) has an Employment Commencement Date which is prior to January 1, 1976 or (ii) has, on January 1, 1981, at least five years of vesting service as defined in Section 1.01(z) of the Hayssen Retirement Plan, his years of Elapsed Time shall not be less than the years of vesting service he would have had under Section 1.01(z) of the Hayssen Retirement Plan if said plan had remained in effect until his Termination of Employment.
4.
For purposes of determining his Credited Service under Sec. 3.5, a Hayssen Plan Participant’s Credited Service with respect to service as an employee of Hayssen prior to January 1, 1976 shall be equal to his Credited Service prior to January 1, 1976 as determined under the Hayssen Retirement Plan as in effect on June 30, 1976; provided, however, that all service as a Qualified Employee as defined in ‘2’ of this Appendix shall be recognized in computing said benefit if he became a participant in the Hayssen Retirement Plan on or before January 1, 1980. However, in the case of any person referred to in the last sentence of the preamble to this Appendix, his Credited Service prior to January 1, 1976 shall be equal to the Credited Service he would have had under the Bemis Retirement Plan if Hayssen had been a Participating Employer on and after the person’s Employment Commencement Date.
5.
Each Hayssen Plan Participant shall be a Participant in the Plan as of April 1, 1980.
6.
The following sentences shall be added at the end of Sec. 6.5:
In the case of any person who became a participant in the Hayssen Retirement Plan prior to January 1, 1980 and who was formerly a Participant in the Hayssen Manufacturing Company Retirement Plan for Production, Maintenance and Nonsupervisory Engineering Employees, said reduction of his monthly benefit shall be based on the amount (expressed on a comparable basis that is an Actuarial Equivalent) he would have been eligible to receive under said plan. Said amount shall be the monthly benefit payable under said plan plus any additional benefit attributable to his account balance under Hayssen Manufacturing Company Employees’ Trust Number 2.
7.
7.1 Prior Service Benefit Described . Prior to establishment of the Hayssen Retirement Plan, Hayssen maintained a profit sharing plan for the benefit of certain employees. That plan was named Hayssen Manufacturing Company Employees’ Trust Number 1 (“Trust
Number 1”). Hayssen discontinued contributions to Trust Number 1 for calendar years 1972 and following. Amounts held in Trust Number 1 for the benefit of persons who became participants in the Hayssen Retirement Plan, to the extent such amounts were attributable to employer contributions, were transferred to the Hayssen Retirement Plan as of December 31, 1972. Certain benefits under the Hayssen Retirement Plan were based on the amounts so transferred plus interest.
7.2 Definition of Prior Service Benefit . A Hayssen Plan Participant’s “Prior Service Benefit” is the value of his individual account in Trust Number 1 determined as of December 31, 1972 plus accumulated interest thereon, determined as follows:
(a) For the period from December 31, 1972 though December 31, 1984, accumulated interest shall be computed at the annual rate of 5%, compounded annually.
(b) For the period commencing January 1, 1985, accumulated interest shall be compounded annually, as of each December 31, with interest for a particular Plan Year to be credited at the same annual rate as was used as the interest rate in the actuarial valuation of the Plan for the actuarial valuation date occurring within that Plan Year. However, no interest will be credited for periods after the Participant’s death or the date as of which his pension commences, whichever first occurs. For the year in which an event referred to in the preceding sentence occurs, interest on the Participant’s Prior Service Benefit will be credited up to said event based on the interest rate used at the end of the preceding Plan Year for the year end adjustment of Prior Service Benefits.
7.3 Election to Receive Prior Service Benefit . Upon Termination of Employment, any Hayssen Plan Participant may elect to receive his Prior Service Benefit. A Hayssen Plan Participant who continues to be employed by a Participating Employer after attaining age 65 may also elect to receive his Prior Service Benefit. Said elections shall be made in accordance with rules prescribed by the Company. Said rules may prescribe the method of so electing and the deadline by which the election must be filed with the Company. If a Participant makes such an election, an amount equal to his Prior Service Benefit shall be paid to him in one sum as soon as practicable after his election, provided he is living on the payment date. If a Participant’s Prior Service Benefit is paid to him pursuant to this section, his benefit under the Plan shall be reduced by an amount which is the Actuarial Equivalent of the Prior Service Benefit.
If a Participant’s death occurs prior to the date payment of his Prior Service Benefit would be made under this section, no payment shall be made under this section, but his Beneficiary may be entitled to a benefit under 7.4 of this Appendix.
7.4 Other Death Benefits . After all benefits payable with respect to a Participant have been paid (including any benefits payable to the Participant during his lifetime plus any death benefits payable under Sec. 7.1, 7.2, or 7.4), his Beneficiary shall be entitled to receive a single sum payment equal to the amount, if any, by which (a) exceeds (b):
(a) The Participant’s Prior Service Benefit.
(b) All benefits paid to the Participant during his lifetime (including monthly pension benefits and also including any refund of his Prior Service Benefit pursuant to the foregoing provisions of this Appendix) plus any death benefits payable under Sec. 7.1, 7.2, or 7.4.
7.5 Distributions Prior to July 1, 1976 . In any case where a Hayssen Plan Participant’s benefit under Trust Number 1 was paid to him prior to July 1, 1976 upon his transfer from employment with Hayssen to a position as a salaried employee of Bemis Company, Inc., said payment shall not result in any reduction of his Accrued Monthly Pension.
Appendix B
BEMIS RETIREMENT PLAN
Modifications Applicable to Certain
Employees and Former Employees of
Perfecseal
On April 29, 1996, Perfecseal, Inc. (“Perfecseal”), a wholly owned subsidiary of the Company, acquired certain assets from Paper Manufacturers Company. Paper Manufacturers Company sponsored the Pension Plan of Paper Manufacturers Company (the “PMCO Plan”) for the benefit of its salaried employees. Salaried employees of Perfecseal continued accruing benefits under the PMCO Plan through December 31, 1996. Effective as of January 1, 1997, these employees became participants in the Bemis Retirement Plan. Effective as of February 28, 1997, certain assets and liabilities of the PMCO Plan were transferred to this Plan. The following modifications of the Bemis Retirement Plan are applicable in determining benefits payable with respect to persons who were participants in the PMCO Plan and who terminated employment on or after January 1, 1997. Such persons are hereafter referred to as “PMCO Plan Participants”.
1.
Perfecseal is a Participating Employer effective as of January 1, 1997.
2.
A PMCO Plan Participant’s years of Elapsed Time shall be determined under Sec. 3.4; subject to the following:
(a) A PMCO Plan Participant’s Elapsed Time for service prior to April 29, 1996 for purposes of determining vesting under the Plan shall include continuous service with Paper Manufacturers Company and its affiliates beginning on the Participant’s last date of hire prior to April 29, 1996.
(b) A PMCO Plan Participant’s Elapsed Time for purposes of determining vesting under the Plan shall not be less than the Years of Vesting Service he would have had if the PMCO Plan, as in effect on December 31, 1996, had remained in effect until his Termination of Employment.
3.
Each PMCO Plan Participant shall be a Participant in the Plan as of January 1, 1997 (or as of the date he completes one Year of Eligibility Service, if later).
4.
A PMCO Plan Participant shall be eligible for Early Retirement as defined by Sec. 4.2 of this Plan after he has attained age 55 and completed 5 years of Elapsed Time and before he attains Normal Retirement Age. Similarly, the provisions of Sec. 7.1, which normally require 10 years of Elapsed Time for early commencement of the Qualified Pre-retirement Survivor Annuity, are modified to instead require five years.
5.
For purposes of determining a PMCO Plan Participant’s Accrued Monthly Pension under Sec. 4.5, a Perfecseal Plan Participant’s Accrued Monthly Pension shall be the sum of (a) plus (b):
(a) His Accrued Benefit as of December 31, 1996 calculated in accordance with Sec. 3.1 of the PMCO Plan in effect before the Merger. For purposes of calculating said Accrued Benefit, pay and service after December 31, 1996 will be disregarded.
(b) His Accrued Monthly Pension calculated under Sec. 4.5 of this Plan, based solely upon pay and service after December 31, 1996.
6.
If assets and liabilities of the PMCO Plan with respect to a Participant whose Termination of Employment occurred prior to January 1, 1997 are transferred to this Plan, and such Participant does not have service under this Plan after December 31, 1996, his or her benefits will be determined under the PMCO Plan, but will be paid by this Plan.
Appendix C
BEMIS RETIREMENT PLAN
Modifications Applicable to Certain
Employees and Former Employees of
Paramount Packaging Corporation -Tennessee
On January 1, 1997, the Company acquired Paramount Packaging Corporation and its subsidiaries, including Paramount Packaging Corporation - Tennessee (“Paramount Tennessee”), a Tennessee corporation. Paramount Tennessee sponsored the Pension Plan for Salaried and Clerical Employees of Paramount Packaging Corporation (Tennessee) (the “Paramount Salaried Plan”), and the Pension Plan for Production and Maintenance Employees of Paramount Packaging Corporation (Tennessee), (the “Paramount Hourly Plan”), for the benefit of its employees. These plans are sometimes collectively referred to as the “Paramount Plans”. The Paramount Plans were merged into the Bemis Retirement Plan effective as of December 31, 1997.
Benefits payable with respect to participants in the Paramount Plans who terminated employment prior to December 31, 1997 will be paid by this Plan, but will be determined according to the terms of the Paramount Salaried Plan or Paramount Hourly Plan, whichever is applicable, as in effect at the time the individual terminated employment. However, Sec. 8.2 and 4.10(c) of this Plan regarding lump sum payment of pensions having a present value of $5,000 or less applies to said individuals, and the $5,000 amount applies regardless of the individual’s termination date.
Benefits payable with respect to persons who are employees of Paramount Tennessee on or after December 31, 1997 (hereafter referred to as “Paramount Plan Participants”) will be determined under this Plan, subject to the following terms of this Appendix:
1.
Paramount Tennessee is a Participating Employer effective as of January 1, 1998.
2.
A Paramount Plan Participant’s years of Elapsed Time shall be determined under Sec. 3.4, but shall include service with Paramount Tennessee and its affiliates prior to January 1, 1998, on the same basis as if they had then been under Common Control with the Company.
3.
Each Paramount Plan Participant shall be a Participant in the Plan as of January 1, 1998 (or as of the date he completes one Year of Eligibility Service, if later).
4.
If a person who was an employee of Paramount Tennessee on December 31, 1997 has a Termination of Employment after he has completed three but fewer than four years of Elapsed Time, he will be 20% vested, and if his Termination of Employment occurs after he has completed four but fewer than five years of Elapsed Time, he shall be 40% vested. In such cases the Participant will be eligible for a benefit under Sec. 6.4, but the benefit amount will be adjusted to reflect the vested percentage. The foregoing special vesting rule applies to the individual’s entire benefit, not just the portion accrued before 1998.
5.
A Paramount Plan Participant’s Accrued Monthly Pension under Sec. 4.5 shall be the sum of (a) plus (b):
(a) His Accrued Monthly Pension as of December 31, 1997 calculated in accordance with Sec. 1.1 of the Paramount Salaried Plan or Paramount Hourly Plan, whichever is applicable, as in effect immediately before the merger of the Paramount Plans into this Plan. For purposes of calculating said Accrued Monthly Pension, service after December 31, 1997 will be disregarded.
(b) His Accrued Monthly Pension calculated under Sec. 4.5 of this Plan, based solely upon pay and service after December 31, 1997.
6.
A Paramount Plan Participant’s monthly pension will not be less than his “Minimum Monthly Pension” determined as follows:
(a) The amount of said Minimum Monthly Pension will be the Participant’s Accrued Monthly Pension as of December 31, 1997, calculated in accordance with Sec. 1.1 of the Paramount Salaried Plan or Paramount Hourly Plan, whichever is applicable, adjusted as provided in (b), (c), and (d). For purposes of calculating said Minimum Monthly Pension, service after December 31, 1997 will be disregarded.
(b) If the Participant’s pension begins before he attains age 65, the Minimum Monthly Pension will be reduced by 5/9 of 1% for each month by which the commencement date precedes the end of the month in which he attains age 65. Said reduction does not apply if the Participant’s pension begins after he attains age 65.
(c) The Minimum Monthly Pension will be multiplied by a fraction, the numerator of which is 100 and the denominator of which is 97, to reflect the value of the life and 60 months certain normal form of payment under the Paramount Plans.
(d) If the Participant’s pension is being paid in a form other than life only, the Minimum Monthly Pension will be adjusted as provided in Sec. 4.12(a) of this Plan or Section 7 of this Appendix to reflect the payment form elected.
(e) For purposes of determining whether a Paramount Plan Participant’s benefit will be paid in a single sum pursuant to Sec. 8.2 of this Plan, and for purposes of determining the amount of the single sum payment, the lump sum benefit will be the amount in (i) or the amount in (ii), whichever is greater:
(i) The Actuarial Equivalent present value of a monthly pension for the Participant’s lifetime beginning the first day of the month following his attainment of age 65 (or following his Termination of Employment if after he attains age 65), in a monthly amount equal to the amount in (a) of section 5 of this Appendix, adjusted as provided in (c) of section 6 of this Appendix to reflect the value of the life and 60-months-certain normal form of payment under the Paramount Plan.
(ii) The Actuarial Equivalent present value of a monthly pension for the Participant’s lifetime beginning the first day of the month following the date he attains Normal Retirement Age (as defined in Sec. 2.15 of this Plan) or following his Termination of Employment if after he attains Normal Retirement Age, in a monthly amount equal to the sum of the amounts in (a) and (b) of section 5 of this Appendix.
The Actuarial Equivalent factors in Sec. 4.10(c) of this Plan will be used to calculate said present values. If either amount is more than $5,000, no lump sum payment will be made, and the Participant will instead receive a monthly pension.
7.
In addition to the optional settlements listed in Sec. 7.4 of the Plan, a Paramount Plan Participant may elect an option providing a reduced monthly pension payable to the Participant commencing on the same date as that upon which payments would otherwise commence and terminating with the last monthly payment before his death. If his death occurs on or after the due date of the first monthly payment under the option and before 60 monthly payments have been made to him, such benefit shall be continued to his Beneficiary until a total of 60 monthly payments have been made to him and his Beneficiary. If the Participant elects this option, his monthly pension will be 97% of the amount otherwise payable.
Appendix D
BEMIS RETIREMENT PLAN
Modifications Applicable to Certain
Employees and Former Employees of
Paramount Packaging Corporation -Texas
On January 1, 1997, the Company acquired Paramount Packaging Corporation and its subsidiaries, including Paramount Packaging Corporation - Texas (“Paramount Texas”), a Texas corporation with operations at Longview, Texas. Paramount Texas sponsored the Pension Plan for Longview Employees of Paramount Packaging Corporation (Texas) (the “Paramount Texas Plan”), for the benefit of its salaried and hourly employees. On December 31, 1997, the Paramount Texas Plan was merged into the Bemis Company, Inc. Retirement Plan for Bemis Hourly Employees (the “BHRP”). Effective as of December 31, 1998, assets and liabilities of the BHRP with respect to the following individuals at Longview, Texas were transferred to this Plan:
(i) Hourly employees hired before January 1, 1998 who were active employees on January 1, 1999 (“Paramount Hourly Employees”).
(ii) Salaried employees hired before January 1, 1997 who were active employees on January 1, 1999, or who terminated employment during 1997 or 1998 (“Paramount Salaried Employees”). However, if such an individual terminated employment and received a lump sum cash distribution from this Plan prior to the date the assets were transferred from the BHRP, his or her remaining benefit will remain in the BHRP and will not be transferred to this Plan.
Benefits payable with respect to such persons will be determined under this Plan, subject to the terms of this Appendix. Benefits for other participants in the Paramount Texas Plan ( i.e., hourly employees who terminated before January 1, 1999 or salaried employees who terminated before January 1, 1997) will be paid by the BHRP.
1.
Such an individual’s Elapsed Time includes service with Paramount Texas and its affiliates prior to January 1, 1997 on the same basis as if they had then been under Common Control with the Company.
2.
Such employees will be eligible to participate in this Plan as of whichever of the following dates is applicable:
(1) For Paramount Salaried Employees, January 1, 1997.
(2) For Paramount Hourly Employees, January 1, 1999.
3.
If a person who was a participant in the Paramount Texas Plan on December 31, 1997 has a Termination of Employment after he has completed three, but fewer than four years of Elapsed Time, he will be 20% vested, and if his Termination of Employment occurs after he has completed four, but fewer than five years of Elapsed Time, he shall be 40% vested. In such cases, the Participant will be eligible for a benefit under Sec. 6.4, but the benefit amount will be adjusted to reflect the vested percentage. The foregoing special vesting rule applies to the individual’s entire benefit.
4.
For Paramount Salaried Employees, the Accrued Monthly Pension under Sec. 4.5 means the sum of (a) plus (b):
(a) $15 multiplied by his credited service through December 31, 1996 determined under the Paramount Texas Plan.
(b) His Accrued Monthly Pension calculated under Sec. 4.5 of this Plan, based solely upon pay and service after December 31, 1996.
For Paramount Hourly Employees, the Accrued Monthly Pension under Sec. 4.5 means the sum of (c) plus (d) plus (e):
(c) $15 multiplied by his credited service through December 31, 1997 determined under the Paramount Texas Plan.
(d) $15 multiplied by his credited service during 1998 determined under the BHRP.
(e) His Accrued Monthly Pension calculated under Sec. 4.5 of this Plan, based solely upon pay and service after December 31, 1998.
5.
Such an employee’s monthly pension will not be less than his “Minimum Monthly Pension” determined as follows:
(a) The amount of said Minimum Monthly Pension will be the Participant’s Accrued Monthly Pension as of December 31, 1997, calculated in accordance with Sec. 1.1 of the Paramount Texas Plan, adjusted as provided in (b), (c), and (d). For purposes of calculating said Minimum Monthly Pension, service after December 31, 1997 will be disregarded.
(b) If the Participant’s pension begins before he attains age 65, the Minimum Monthly Pension will be reduced by 5/9 of 1% for each month by which the commencement date precedes the end of the month in which he attains age 65. Said reduction does not apply if the Participant’s pension begins after he attains age 65.
(c) The Minimum Monthly Pension will be multiplied by a fraction, the numerator of which is 100 and the denominator of which is 97, to reflect the value of the life and 60 months certain normal form of payment under the Paramount Texas Plan.
(d) If the Participant’s pension is being paid in a form other than life only, the Minimum Monthly Pension will be adjusted as provided in Sec. 4.12(a) of this Plan or Section 6 of this Appendix to reflect the payment form elected.
(e) For purposes of determining whether the benefit will be paid in a single sum pursuant to Sec. 8.2 of this Plan, and for purposes of determining the amount of the single sum payment, the lump sum benefit will be the amount in (i) or the amount in (ii), whichever is greater:
(i) The Actuarial Equivalent present value of a monthly pension for the Participant’s lifetime beginning the first day of the month following his attainment of age 65 (or following his Termination of Employment if after he attains age 65), in a monthly amount equal to the amount in (a) adjusted as provided in (c) to reflect the value of the life and 60-months-certain normal form of payment under the Paramount Texas Plan.
(ii) The Actuarial Equivalent present value of a monthly pension for the Participant’s lifetime beginning the first day of the month following the date he attains Normal Retirement Age (as defined in Sec. 2.15 of this Plan) or following his Termination of Employment if after he attains Normal Retirement Age, in a monthly amount determined under Section 4 of this Appendix.
The Actuarial Equivalent factors in Sec. 4.10(c) of this Plan will be used to calculate said present values. If either amount is more than $5,000, no lump sum payment will be made, and the Participant will instead receive a monthly pension.
6.
In addition to the optional settlements listed in Sec. 7.4 of the Plan, Paramount Salaried Employees and Paramount Hourly Employees may elect an option providing a reduced monthly pension payable to the Participant commencing on the same date as that upon which payments would otherwise commence and terminating with the last monthly payment before his death. If his death occurs on or after the due date of the first monthly payment under the option and before 60 monthly payments have been made to him, such benefit shall be continued to his Beneficiary
until a total of 60 monthly payments have been made to him and his Beneficiary. If the Participant elects this option, his monthly pension will be 97% of the amount otherwise payable.
Appendix E
BEMIS RETIREMENT PLAN
Amounts referred to in Sec. 4.5(d)
|
Name of Employee |
|
Date of Birth |
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
Curler, Jeffrey |
|
09/03/50 |
|
$ |
666.67 |
|
|
Emenecker, Timothy F. |
|
08/03/46 |
|
$ |
250.00 |
|
|
Martin, Christopher C. |
|
08/14/49 |
|
$ |
250.00 |
|
|
Seashore, Eugene H. Jr. |
|
12/27/49 |
|
$ |
375.00 |
|
|
Stone, Gary V. |
|
09/22/46 |
|
$ |
541.67 |
|
|
Theisen, Henry |
|
09/09/53 |
|
$ |
375.00 |
|
|
Unton, Theodore F. |
|
11/09/44 |
|
$ |
291.67 |
|
|
Wulf, Gene C. |
|
10/15/50 |
|
$ |
375.00 |
|
Employees at the Company’s Custom Resins Division
Prior to September 1, 1984, employees of the Company’s Custom Resins division were not eligible to participate in the Plan. Such employees instead participated in the Bemis Custom Resins Division Employees’ Pension Plan (the “Custom Resins Plan”). Effective as of September 1, 1984, employees of the Custom Resins division are eligible to participate in this Plan, subject to the following special provisions applicable to Participants who were employees of said division prior to said date:
1.
Each such employee shall be deemed to have been a Qualified Employee during his employment with the Custom Resins division after December 31, 1976 and prior to September 1, 1984, subject to the definition of Qualified Employee in Sec. 2.19, other than subsection (a) thereof. As a result, service and earnings during said period may be taken into account in determining Years of Credited Service and Final Average Salary.
2.
Each such employee who was an employee of Custom Resins, Inc. immediately prior to acquisition of said corporation by the Company in December, 1976 shall have years of Elapsed Time for his uninterrupted service with Custom Resins, Inc. from his last date of hire by said corporation until December 31, 1976. Each such employee shall have years of Elapsed Time for service on and after January 1, 1977 as determined under Sec. 3.4.
3.
Each such employee’s Accrued Monthly Pension is equal to the amount determined under Sec. 4.5, less an offset reflecting his Regular Account under the Custom Resins Plan, said offset to be determined under the following table:
|
Name of Employee |
|
Monthly Offset Amount |
|
|
|
|
|
|
|
|
|
E. J. Gentry |
|
$ |
175.98 |
|
|
W. J. Bridwell |
|
218.17 |
|
|
|
W. M. Warner |
|
987.33 |
|
|
|
A. Lasswell |
|
36.90 |
|
|
|
G. L. Stanley |
|
205.66 |
|
|
|
W. Littlepage |
|
254.29 |
|
|
NOTE: Section references in this Appendix are to the Bemis Retirement Plan in effect as of January 1, 1994.
Modifications Applicable to
Employees of Mankato Division of
Harrison & Smith Company, Inc.
1.
Sec. 1.3 is modified by adding the following paragraphs thereto:
Harrison & Smith Company, Inc. (a Delaware corporation) adopted this Plan for the benefit of its eligible employees and became a Participating Employer hereunder as of January 1, 1969. At that time, Mankato Corporation (a Minnesota corporation) was a wholly-owned subsidiary of Harrision & Smith Company, Inc. Subsequently, on December 31, 1969, Mankato Corporation (a Minnesota corporation) was liquidated into Harrison & Smith, Inc. and become an operating division thereof known as the Mankato Division of Harrison & Smith Company, Inc. (hereinafter referred to as the “Mankato Division”). Mankato Corporation (a Minnesota Corporation) was never a Participating Employer hereunder.
The Mankato Division maintains the Mankato Retirement Plan (hereinafter referred to as the “Mankato Plan”) for the benefit of its eligible employees. The Mankato Plan is embodied in a group annuity contract issued by The Prudential Insurance Company of America. Effective as of January 1, 1971, Harrison & Smith Company, Inc. amended the Mankato Plan so as to discontinue the further accrual of benefits thereunder by salaried and office-clerical employees of the Mankato Division and simultaneously adopted this Appendix to provide for the participation of such employees under this Plan. Persons formerly employed by the Mankato Division later became employees of Mankato Corporation, a Delaware corporation, which became a Participating Employer. The participation of such employees under this Plan shall be governed by the provisions of this Appendix.
2.
Sec. 6.5 is amended in its entirety to read as follows:
Sec. 6.5 Benefits Under Mankato Plan . Benefits accrued under the Mankato Plan shall be provided under the conditions, at the times, in the manner, and in the amounts provided by such Mankato Plan, and the provisions of the other sections contained in this Article VI shall not apply to benefits payable under the Mankato Plan. Nevertheless, pension benefits payable under this Plan to former Participants who were participants in the Mankato Plan prior to January 1,
NOTE: Section references in this Appendix are to the Bemis Retirement Plan in effect as of January 1, 1994.
1971 and to the Beneficiaries of such former Participants shall be paid only in accordance with the following terms and conditions:
(a) Each monthly pension benefit otherwise payable to such a former Participant under Sec. 6.1, Sec. 6.2, Sec. 6.3, or Sec. 6.4 shall be reduced by the monthly amount of the normal retirement annuity accrued on his behalf on December 31, 1970 under the Mankato Plan as in effect on December 31, 1970; provided, however, that if benefits under this Plan commence prior to his Normal Retirement Date, the monthly amount of the normal retirement annuity accrued under the Mankato Plan on December 31, 1970 shall be converted by the Actuary (without giving effect to any death benefit payable under the Mankato Plan) to the monthly amount that would be payable under an actuarially equivalent benefit commencing on the same date and in the same form as his benefit under this Plan.
(b) Any optional form of pension elected by such a former Participant pursuant to the terms of Sec. 7.4 shall be applicable only to the net amount of the monthly pension benefit payable after making the reduction provided for in paragraph (a) of this section.
3.
Sec. 7.5 is deleted in its entirety.
4.
Actuarial Equivalents for this Appendix will be determined under Sec. 4.10.
NOTE: Section references in this Appendix are to the Bemis Retirement Plan in effect as of January 1, 1994.
Appendix H
Modifications Applicable to Certain Employees of Ross & Roberts, Inc. and Ross & Roberts Sales Co., Inc.
The Company sold its share of Ross & Roberts, Inc. and Ross & Roberts Sales Co., Inc. (collectively referred to herein as “Ross & Roberts”) on September 1, 1987. The following provisions apply with regard to each Participant who is an employee of Ross & Roberts on September 1, 1987:
1.
Each such Participant is fully vested regardless of his length of service.
2.
Service with Ross & Roberts after September 1, 1987 shall not be included in such a Participant’s Credited Service or Elapsed Time.
3.
Such a Participant shall be deemed to have had a Termination of Employment on September 1, 1987. Compensation from and service with Ross & Roberts or any successor of Ross & Roberts after September 1, 1987 shall be disregarded for purposes of determining whether such a Participant is eligible for a pension and for purposes of determining the amount of that pension.
4.
Ross & Roberts ceases to be a Participating Employer as of September 1, 1987.
NOTE: Terms used in this Appendix are defined as provided in the Bemis Retirement Plan in effect as of September 1, 1987.
Western Litho Plate & Supply Co.
The Company sold its shares of Western Litho Plate & Supply Co. (“Western Litho”) on April 30, 1987. The following provisions apply with regard to each Participant who is an employee of Western Litho on April 30, 1987:
1.
Each such Participant is fully vested regardless of his length of service.
2.
Service with Western Litho after April 30, 1987 shall not be included in such a Participant’s Credited Service or Elapsed Time.
3.
Such a Participant shall be deemed to have had a Termination of Employment on April 30, 1987. Compensation from and service with Western Litho or any successor of Western Litho after April 30, 1987 shall be disregarded for purposes of determining whether such a Participant is eligible for a pension and for purposes of determining the amount of that pension.
4.
Western Litho ceases to be a Participating Employer as of April 30, 1987.
NOTE: Terms used in this Appendix are defined as provided in the Bemis Retirement Plan in effect as of September 1, 1987.
Modifications Applicable to
Employees of Western Litho
Plate and Supply Company
1.
Sec. 1.3 is modified by adding the following paragraph thereto:
Prior to January 1, 1969, Western Litho Plate and Supply Company (a Delaware corporation) maintained the Western Litho Plate and Supply Company, Inc. Employees’ Pension Trust (herein referred to as the “Western Plan”). Effective January 1, 1969, Western Litho Plate and Supply Company adopted this Plan and immediately thereafter amended the Western Plan as it applied to employees eligible to participate hereunder by merging it into this Plan. With respect to said employees, the Western Plan shall be deemed to continue as this Plan.
2.
Sec. 7.5 is modified to read as follows:
Sec. 7.5 Other Death Benefits . Upon the death of a Participant or former Participant, his Beneficiary shall be entitled to receive a single sum payment equal to the amount by which the total amount of benefit payments hereunder, if any, theretofore paid to the deceased (including payments to his spouse pursuant to Sec. 7.1) is less than the cash value as of December 31, 1968 of any contracts on his life originally purchased under the Western Litho Plate and Supply Company, Inc. Employees’ Pension Trust and subsequently surrendered to the insurance carrier by the trustees of said plan, with Accumulated Interest thereon; subject to the following:
(a) If a benefit is payable with respect to the Participant pursuant to Sec. 7.2 or Sec. 7.4 this section shall not be applicable and all death benefits, if any, shall be payable under the terms of whichever of said sections is applicable.
(b) If a benefit is payable to the Participant’s spouse pursuant to Sec. 7.1, the benefit, if any, payable pursuant to this section shall be determined and paid after the death of said spouse.
NOTE: Section references in this Appendix are to the Bemis Retirement Plan in effect as of January 1, 1984.
3.
A new Sec. 15.2 is added to the Plan to read as follows:
Sec. 15.2 Minimum Benefit. Notwithstanding the provisions of Article VI, with respect to a Participant who was a participant in the Western Litho Plate and Supply Company, Inc. Employees’ Pension Trust on December 31, 1968, the monthly amount of any pension (i) payable under Sec. 6.1, or 6.2, or (ii) otherwise payable under Sec. 6.4 as if said section contained no requirements as to age or service for vesting shall not be less than the minimum benefit determined in accordance with this section. The “minimum benefit” referred to herein shall be the Actuarial Equivalent of:
(a) the cash value as of December 31, 1968 of any contracts on his life originally purchased under the Western Plan and subsequently surrendered to the insurance carrier by the trustees of said plan, with Accumulated Interest thereon, plus
(b) the value of a benefit payable for life commencing at Normal Retirement Date in a monthly amount equal to (i) 1/30 th of an amount equal to 45% of his Final Average Salary minus 75% of his Primary Social Security Benefit, (ii) multiplied by his years of Credited Service after 1968 (but not more than 30 years), and (iii) if said benefit commences prior to his Normal Retirement Date, also multiplied by the applicable early retirement factor set forth in the table in Sec. 6.2.
In determining the monthly amount of such minimum benefit, the death benefit described in Sec. 7.5 shall be taken into consideration.
NOTE: Section references in this Appendix are to the Plan in effect as of January 1, 1984.
Exhibit 10.(t)
10-30-2009
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the “Agreement”) is entered into by and between Bemis Company, Inc., a Missouri corporation (the “Company”) and (the “Executive”).
WHEREAS, the Executive is a key member of the management of the Company and has devoted substantial skill and effort to the affairs of the Company; and
WHEREAS, the Company and its shareholders wish to continue to obtain the benefits of the Executive’s services and attention to the affairs of the Company; and
WHEREAS, the Company recognizes that, as a publicly-held corporation, it is subject to the ongoing risk of a change of control, and that the adverse personal consequences of a change of control may distract Executive or encourage Executive’s premature termination of employment to the detriment of the Company and its shareholders; and
WHEREAS, it is desirable and in the best interests of the Company and its shareholders to take steps that will allow the Executive to make judgments and advise the Company with respect to proposed changes of control without regard to the possible adverse personal consequences of such events, and to provide an inducement for the Executive to remain in the service of the Company prior to any proposed or anticipated change of control, and to remain in the service of the Company after any change of control to the extent necessary to facilitate an orderly transition; and
WHEREAS, the Executive desires to obtain appropriate protection in the event of an actual or anticipated change of control; and
WHEREAS, the Company recognizes that it is important to Executive to receive prompt and certain payment of any amounts which become due under this Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the Company and the Executive hereby agree as follows:
1. Defined Terms . Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in Appendix A.
2. Duration . This Agreement establishes certain rights and obligations in the event Executive has a Qualifying Event (as defined in Section 5 below). Unless earlier terminated or modified, which in either case can be done only by mutual written consent of the parties, this Agreement shall continue in effect until either (i) the benefits due and payable under this Agreement have been paid in full or (ii) the Executive’s employment with Company terminates under circumstances that do not entitle Executive to any benefits under this Agreement.
3. Prior Agreements . Any prior agreement entered into by and between Executive and the Company that was titled “Management Agreement” and that, among other things, provided compensation upon the occurrence of a “Change in Control Event,” is hereby terminated. Except as otherwise provided herein, this Agreement supercedes any such “Management Agreement” and the portion or portions of any and all other agreements entered into prior to the effective date of this Agreement relating to severance pay and post-employment welfare benefits due to Executive in the event Executive has a Qualifying Event. Nothing in this Agreement shall adversely affect any rights Executive may have to equity-based compensation (including but not limited to stock options, equity units, and restricted stock), long-term incentive compensation, supplemental retirement benefits, deferred compensation that is not severance pay, and benefits under any employee benefit plan (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended), all of which shall be administered after a Qualifying Event in accordance with the terms of the applicable plan documents and agreements and without regard to this Agreement.
4. No Employment Contract . This Agreement shall not be construed as creating an express or implied contract of employment. Except as otherwise agreed in writing between the Executive and the Company, the Executive’s employment shall be “at will” and Executive shall not have any right to be retained in the employ of the Company and its affiliates.
5. Qualifying Event . The Executive shall be deemed to have had a “Qualifying Event” if prior to attaining age 65:
(a) the Executive has an Involuntary Termination or Constructive Involuntary Termination on, or within 36 months after, the date of a Change of Control Event;
(b) the Executive has an Involuntary Termination or Constructive Involuntary Termination within three months prior to the date of a Change of Control Event; or
(c) the Executive has an Involuntary Termination or Constructive Involuntary Termination (i) less than twelve months prior to the date of a Change of Control Event or (ii) while a Change of Control Event is under serious consideration (whether or not it actually occurs), unless (in either case) the Company can establish that the Executive’s Involuntary Termination or Constructive Involuntary Termination was for reasons unrelated to such Change of Control Event.
Whether a Qualifying Event has occurred shall be determined separately with respect to each Change of Control Event and each event constituting a Constructive Involuntary Termination or Involuntary Termination. If the event constituting a Constructive Involuntary Termination is a failure by the Company to obtain assumption of this Agreement by any successor as contemplated by Section 12 of this Agreement, the date on which the succession became effective shall be deemed the date of the Qualifying Event. Amounts shall not be paid under Sections 6 and 7 of this Agreement for more than one Qualifying Event.
For purposes of subsection (c) above, a Change of Control Event shall be deemed to be “under serious consideration” at any time after negotiations with respect to the possible Change of Control Event have commenced (including, but not limited to, negotiations prior to the execution of a non-binding letter of intent) and at any time after the Company receives direct or indirect notice of a Person’s intent to cause an event that would, if it occurred, result in a Change of Control Event. Serious consideration as described in the preceding sentence shall be deemed to end on the earliest of the date on which such negotiations are abandoned, the Company receives direct or indirect notice that such Person has abandoned efforts to cause the event that would be a Change of Control Event, or the relevant Change of Control Event actually occurs.
6. Compensation and Benefits Through Date of Termination . If the Executive has a Qualifying Event, Company shall immediately pay Executive (a) the full amount of Executive’s salary through the date of Executive’s Qualifying Event to the extent not previously paid, and (b) the product of (i) an amount equal to Executive’s target annual bonus for the fiscal year of the Company in which the Qualifying Event occurs and (ii) a fraction, the numerator of which is the number of days in the current fiscal year through and including the date of the Executive’s Qualifying Event and the denominator of which is 365. In addition, in the event of Executive’s Qualifying Event, Company shall also, to the extent not previously paid or provided, pay or provide Executive with all other amounts and benefits that Executive has accrued or is eligible to receive through the date of such Qualifying Event under any plan, program, policy, practice or arrangement of the Company and/or its affiliates (including but not limited to welfare benefits and perquisites).
7. Change of Control Severance Payments . If the Executive has a Qualifying Event, the Executive also shall be entitled:
(a) to immediately receive from the Company a cash payment in an amount equal to two times the sum of (i) the Executive’s salary for the calendar year last preceding the date of Executive’s Qualifying Event or, if higher, the Executive’s annual salary rate in effect immediately prior to such Qualifying Event, (ii) the Executive’s target annual bonus for the fiscal year of the Company in which the Qualifying Event occurs or, if higher, the Executive’s highest annual bonus for the five-year period ending with the full calendar year (or if such bonuses are determined on the basis of a fiscal year, the full fiscal year) last preceding the date of Executive’s Qualifying Event, and (iii) 30 percent of the annual salary used in (i) above, which amount is intended to serve as an estimate of the annual value of the fringe benefits and other perquisites to which Executive was entitled immediately prior to the Qualifying Event; and
(b) for twenty-four months after the Qualifying Event, to participate in any health, disability and life insurance plan or program in which Executive was entitled to participate immediately prior to the Qualifying Event as if he were an employee of the Company during such twenty-four month period; provided, however, that in the event that Executive cannot participate in any such health, disability or life insurance plan or program, the Company, at its sole cost and expense, shall arrange to provide the Executive with benefits no less favorable to Executive than those which Executive would have been entitled to receive if Executive had continued to participate in such plan or program.
The compensation and benefits described above in this Section 7 shall be subject to the following:
(1) For purposes of subsection (a) above, the Executive’s salary, annual salary rate, target annual bonus and highest annual bonus shall be the gross amounts of such compensation determined without regard to any deductions, deferrals or withholding.
(2) If Executive’s Qualifying Event occurs after the month in which the Executive attains age 63, the amount in subsection (a) above shall be determined by substituting for “two” a fraction, the numerator of which is the number of whole and partial calendar months in the period beginning with the month in which the Executive’s Qualifying Event occurs and ending with the month in which the Executive attains age 65, and the denominator of which is 12.
(3) If Executive’s Qualifying Event occurs after the month in which the Executive attains age 63, the number of months referred to in subsection (c) above shall be determined by substituting for “twenty-four” the number of whole and partial calendar months in the period beginning with the month in which the Executive’s Qualifying Event occurs and ending with the month in which the Executive attains age 65.
(4) The sum of the amounts payable under subsections (a) and (b) above shall be reduced by any severance pay which the Executive receives from the Company under any other policy or agreement of the Company on account of Executive’s Qualifying Event.
(5) For purposes of subsection (b) above, a health plan or program shall include any separate dental, vision, prescription drug, or other health-related benefit.
(6) If immediate payment of any amounts payable pursuant to subsection (a) above would violate Section 409A of the Code or Treas. Reg. 1.409A-3(i)(2), payment of those amounts shall be delayed until the earliest time at which payment of those amounts can be made without such violation.
8. Excise Tax Adjustment . If it shall be determined that a Payment would make the Executive liable for any Excise Tax, the cash compensation payable under this Agreement shall be reduced by an amount sufficient so that no Excise Tax is due. The amount of any reduction shall be determined by the Accounting Firm, which shall provide detailed supporting calculations both to the Company and to the Executive. The Accounting Firm shall furnish the Executive and the Company with a written opinion as to whether a reduction is required pursuant to this Section, and the amount of reduction that is required. All fees and expenses of the Accounting Firm shall be borne solely by the Company.
9. Late Payment . Any amount payable under this Agreement that is not paid within ten calendar days after it becomes due shall bear interest from the date it became due through the date of payment at the “prime rate” (the base annual lending rate used by a plurality of the
nation’s largest banks) as reported in the Wall St. Journal for the date on which the payment was due (or if that is not a date on which the prime rate is so reported, the then current prime rate as most recently reported) plus 5%, compounded monthly.
10. Legal Fees . The Company shall pay all legal fees and expenses (including but not limited to attorneys’ fees and court costs) reasonably incurred by the Executive in connection with efforts by or on behalf of the Executive to obtain or enforce any right or benefit provided by or claimed under this Agreement, regardless of the ultimate outcome or resolution of such claims. Such legal fees and expenses shall be paid within ten calendar days after Executive’s written request for payment. Payments made after such tenth day shall incur interest at the rate set forth in Section 9 above. Company’s payment of Executive’s legal fees and expenses shall not give Company any right to select or to approve counsel retained by Executive. No dispute regarding the reasonableness of such fees and expenses shall authorize or excuse their late payment.
11. Mitigation Not Required . Executive shall not be required to mitigate the amount of any payment or other benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or other benefit provided for in this Agreement be reduced by any compensation earned by the Executive as the result of employment by another employer after termination, or otherwise.
12. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the successors, legal representatives and assigns of the parties hereto; provided, however, that the Executive shall not have any right to assign, pledge or otherwise dispose of or transfer any interest in this Agreement or any payments hereunder, whether directly or indirectly or in whole or in part, without the written consent of the Company. The Company will require any successor (whether direct or indirect, by purchase of a majority of the outstanding voting stock of the Company or all or substantially all of the assets of the Company, or by merger, consolidation or otherwise), by agreement in form and substance satisfactory to the Executive, to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement, shall constitute a Constructive Involuntary Termination, and shall be treated as a Qualifying Event entitling the Executive to the compensation and benefits described in Sections 6 and 7 of this Agreement unless such failure is remedied within 10 calendar days after Company receives written notice thereof. As used in this Agreement, Company shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which is required to execute and deliver the Agreement provided for in this Section 12 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.
13. Governing Law . This Agreement shall be construed in accordance with the laws of the State of Minnesota, applied without giving effect to any choice of law provisions thereof.
14. Notices . All notices, requests and demands given to or made pursuant hereto shall be in writing and shall be delivered or mailed to any such party at its address which:
(a) In the case of the Company shall be:
Bemis Company, Inc.
One Neenah Center, 4 th Floor
PO Box 669
Neenah, WI 54957
Attn: General Counsel
(b) In the case of Executive shall be:
|
[HOME ADDRESS ON FILE] |
|
Either party may, by notice hereunder, designate a changed address. Any notice, if mailed properly addressed, postage prepaid, registered or certified mail, shall be deemed to have been given on the registered date or that date stamped on the certified mail receipt.
15. Severability . In the event that any portion of this Agreement is held to be invalid or unenforceable for any reason, it is hereby agreed that such invalidity or unenforceability shall not affect the other portions of this Agreement and that the remaining covenants, terms and conditions or portions hereof shall remain in full force and effect, and any court of competent jurisdiction may so modify the objectionable provision as to make it valid, reasonable and enforceable. In the event that any benefits to the Executive provided in this Agreement are held to be unavailable to the Executive as a matter of law, the Executive shall be entitled after a Qualifying Event to the remaining benefits available under this Agreement, or if better, severance benefits at least as favorable to Executive (when aggregated with the benefits under this Agreement that are actually received by the Executive) as the most advantageous severance benefits made available by the Company to employees of comparable position and seniority to the Executive during the five-year period prior to Executive’s Qualifying Event or the Change of Control Event, whichever happens first.
16. Effect of Code §409A . This Agreement shall be construed in accordance with any applicable requirements of Code §409A.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
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EXECUTIVE |
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BEMIS COMPANY, INC. |
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By: |
Henry J. Theisen |
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Its: |
President and Chief Executive Officer |
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Date Signed: |
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Date Signed: |
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APPENDIX A
As used in this Agreement the capitalized terms not otherwise defined shall have the meanings ascribed to them below.
The term “Accounting Firm” shall mean a nationally recognized certified public accounting firm designated by the Executive.
“Cause” shall mean, and be limited to, (i) willful and gross neglect of duties by the Executive that has not been substantially corrected within 30 days after Executive’s receipt from Company of written notice describing the neglect and the steps necessary to substantially correct it, or (ii) an act or acts committed by the Executive constituting a felony and substantially detrimental to the Company or its reputation.
A “Change of Control Event” shall be deemed to have occurred if any of the following occur:
(1) Any “Person” (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended, or any successor statute thereto (the Exchange Act) acquires or becomes a beneficial owner (as defined in Rule 13d-3 or any successor rule under the Exchange Act), 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 of the Company (“Common Stock”), provided, however, that the following shall not constitute a “Change of Control Event.”
(a) any acquisition or beneficial ownership by the Company or a subsidiary of the Company;
(b) any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by the Company or one or more of its subsidiaries;
(c) any transaction with respect to which, immediately following such acquisition, more than 80% respectively, of (i) the combined voting power of the Company’s then outstanding 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 respectively, of the Company immediately prior to such transaction in substantially the same proportions as their ownership prior to such acquisition;
(2) Continuing Directors shall not constitute a majority of the members of the Board of Directors of the Company. Continuing Directors shall mean: (a) individuals who, on the date hereof, are directors of the Company, (b) individuals elected as directors of the Company subsequent to the date hereof for whose election proxies shall have been solicited by the Board of Directors of the Company, or (c) any individual elected or appointed by the Board of Directors of the Company to fill vacancies on the Board of Directors of the Company 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 of Directors of the Company;
(3) 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 entitled to vote generally in the election of directors, 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;
(4) Approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) 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 a sale or other disposition, more than 80%, respectively, of (i) the combined voting power of the then outstanding Voting Securities of such corporation entitled to vote generally in the election of directors, 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;
(5) The Company enters into a letter of intent, an agreement in principle or a definitive agreement relating to a “Change of Control Event” described in Subparagraphs (1), (2), (3) or (4) hereof 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 of Control of Event”.
Notwithstanding anything stated above, a “Change of Control Event” shall not be deemed to occur with respect to the Executive if the acquisition or beneficial ownership of the 20% or greater interest referred to in Subparagraph (1) is by the Executive or by a group, acting in concert, that includes the Executive.
Code
“Code” shall mean the Internal Revenue Code of 1986, as amended.
Constructive Involuntary Termination
Any of the six occurrences below shall constitute a “Constructive Involuntary Termination”:
(1) Reduction of the Executive’s title, duties, responsibilities or authority, other than for “Cause” or on account of “Disability”;
(2) Reduction of the Executive’s annual base salary;
(3) Reduction of the aggregate benefits under the Company’s pension, profit sharing, retirement, life insurance, medical, health and accident, disability, bonus and incentive plans and other employee benefit plans and arrangements or reduction of the number of paid vacation days to which the Executive is entitled;
(4) Company fails to obtain assumption of this Agreement by any successor as contemplated by Section 12 of the Agreement;
(5) Company requires Executive to perform his primary duties at a location that is more than 25 miles further from Executive’s primary residence than the location at which the Executive performs his primary duties on the effective date of this Agreement (or, if Executive changes his primary residence, that is more than 25 miles further from Executive’s primary residence after such change than the location at which the Executive performed his primary duties at the time of such change); or
(6) A termination of employment with the Company by the Executive after any of the occurrences in Subparagraphs (1) through (5) above.
The foregoing definition of Constructive Involuntary Termination shall be subject to the following:
(i) Notwithstanding the above, “Constructive Involuntary Termination” shall not include an inadvertent failure to obtain assumption of this Agreement that is remedied by the Company within 10 calendar days after its receipt of notice thereof.
(ii) If the Executive’s duties, responsibilities or authority prior to a Change in Control Event relate to the Company as a whole, rather than to a specific business or operating unit (e.g., as in the case of the Company’s Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel or a Vice President with authority for an aspect of the Company’s business that is not limited to any particular business or operational unit, such as the Vice President of Human Resources), then a reduction described in subparagraph (1) above shall be deemed to occur if such duties, responsibilities or authority do not extend after the Change in Control Event to the entire successor organization. If the Executive’s duties, responsibilities or authority prior to a Change in Control Event relate exclusively to a specific business or operating unit of the Company, then a reduction described in subparagraph (1) shall be deemed to occur if such duties, responsibilities or authority after the Change in Control Event do not extend after the Change in Control Event to all or substantially all of the same business or operating unit.
(iii) Notwithstanding the above, if Executive believes there are grounds for a “Constructive Involuntary Discharge” under (1), (2), (3), (5) or (6), Executive must notify the Company within 30 days after Executive becomes aware of such circumstances. “Constructive Involuntary Discharge” shall not occur without such notice and shall not include any circumstances that are remedied by the Company within 30 days after receiving such notice.
Disability
“Disability” shall be a condition entitling the Executive to benefits under Bemis’ Long Term Disability Plan.
Equity Unit
“Equity Unit” shall mean a unit awarded under a long-term incentive compensation plan maintained by the Company, such as the Bemis Company, Inc. 2007 Stock Incentive Plan, that is, or entitles the award recipient to receive, a share of common stock of the Company (regardless of whether such unit is subject to a risk of forfeiture).
Excise Tax
“Excise Tax” shall mean the excise tax imposed on Executive by Section 4999 of the Code or any successor provision thereto, and any interest and penalties incurred by the Executive with respect to such excise tax.
Fair Market Value
“Fair Market Value” of a share of the Company’s common stock as of a particular day shall mean 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.
Involuntary Termination
“Involuntary Termination” shall mean a termination by the Company of the Executive’s employment that is not a termination for “Cause” and that is not on account of the death or “Disability” of the Executive.
Payment(s)
A “Payment” is any payment or distribution by the Company to or for the benefit of the Executive whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, any stock option, equity unit, restricted stock agreement or otherwise.
Exhibit 21
EXHIBIT 21 — SUBSIDIARIES OF THE REGISTRANT
The Company has no parent. The following were subsidiaries of the Company as of December 31, 2009.
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Percentage of |
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Jurisdiction |
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Voting Securities |
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|
|
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of |
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Owned By |
|
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Name |
|
Organization |
|
Immediate Parent |
|
|
Bemis Company, Inc. |
|
Missouri |
|
|
|
|
Bemis Cayman Islands |
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Cayman Islands |
|
94 |
% |
|
Dixie Toga S.A. |
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Brazil |
|
100 |
% |
|
American Plast S.A. |
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Argentina |
|
61 |
% |
|
Dixie Toga Argentina, S.A. |
|
Argentina |
|
95 |
% |
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Dixie Toga Argentina, S.A. |
|
Argentina |
|
3 |
% |
|
Dixie Toga International Ltd. |
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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 |
% |
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Curwood Chile Ltda. |
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Chile |
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100 |
% |
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Laminor S.A. |
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Brazil |
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50 |
% |
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Bemis Clysar, Inc. |
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Minnesota |
|
100 |
% |
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Bemis Czech Republic, s.r.o. |
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Czech Republic |
|
100 |
% |
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Bemis Deutschland Holdings GmbH |
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Germany |
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100 |
% |
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Bemis Packaging Deutschland GmbH |
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Germany |
|
100 |
% |
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Bemis Europe Holdings, S.A. |
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Belgium |
|
100 |
% |
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Bemis Monceau S.A. |
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Belgium |
|
100 |
% |
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Bemis Flexible Packaging de Mexico, S.A. de C.V. |
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Mexico |
|
100 |
% |
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Bemis Flexible Packaging Mexico Servicios, S.A. de C.V. |
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Mexico |
|
100 |
% |
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Bemis Flexible Packaging (Suzhou) Co., Ltd. |
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China |
|
100 |
% |
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Bemis France Holdings S.A.S. |
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France |
|
100 |
% |
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Bemis Le Trait S.A.S. |
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France |
|
100 |
% |
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Bemis Packaging France S.A.S. |
|
France |
|
100 |
% |
|
Bemis Hungary Trading Limited Liability Company |
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Hungary |
|
100 |
% |
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Bemis Packaging Danmark ApS |
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Denmark |
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100 |
% |
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Bemis Packaging Sverige A.B. |
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Sweden |
|
100 |
% |
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Bemis Packaging U.K. Ltd. |
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United Kingdom |
|
100 |
% |
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Bemis (Shanghai) Trading Co., Ltd. |
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China |
|
100 |
% |
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Bemis Valkeakoski Oy |
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Finland |
|
100 |
% |
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Bolsas Bemis S.A. de C.V. |
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Mexico |
|
100 |
% |
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Bolsas Bemis Servicios Mexico S.A. de C.V. |
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Mexico |
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100 |
% |
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Curwood, Inc. |
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Delaware |
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100 |
% |
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Curwood Minnesota, LLC |
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Delaware |
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100 |
% |
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Curwood Packaging (Canada) Limited |
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Canada |
|
100 |
% |
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Curwood Wisconsin, LLC |
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Delaware |
|
100 |
% |
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Bemis Packaging Ireland Limited |
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Ireland |
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100 |
% |
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Bemis Swansea Limited |
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United Kingdom |
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100 |
% |
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Bemis Packaging Espana sl |
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Spain |
|
100 |
% |
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Itap Bemis Ltda. |
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Brazil |
|
22 |
% |
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Perfecseal, Inc. |
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Delaware |
|
100 |
% |
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Perfecseal Internacional de Puerto Rico, Inc. |
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Delaware |
|
100 |
% |
|
Perfecseal International Ltd. |
|
Delaware |
|
100 |
% |
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Perfecseal Limited |
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United Kingdom |
|
100 |
% |
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Bemis Asia Pacific Sdn Bhd |
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Malaysia |
|
100 |
% |
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DEMF DT Holdings I, LLC |
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Delaware |
|
100 |
% |
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Bemis Cayman Islands |
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Cayman Islands |
|
6 |
% |
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DF Acquisition Limited |
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New Zealand |
|
100 |
% |
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Itap Bemis Ltda. |
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Brazil |
|
23 |
% |
Continued
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Percentage of |
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|
|
|
Jurisdiction |
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Voting Securities |
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|
|
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of |
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Owned By |
|
|
Name |
|
Organization |
|
Immediate Parent |
|
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Hayco Liquidation Company |
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Delaware |
|
100 |
% |
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Bemis U.K. Limited |
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United Kingdom |
|
50 |
% |
|
MacKay, Inc. |
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Kentucky |
|
100 |
% |
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MACtac Mexico Servicios, S.A. de C.V. |
|
Mexico |
|
51 |
% |
|
Milprint, Inc. |
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Wisconsin |
|
100 |
% |
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Bemis Elsham Limited |
|
United Kingdom |
|
100 |
% |
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Milprint Illinois, LLC |
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Delaware |
|
100 |
% |
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Milprint Packaging, LLC |
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Delaware |
|
100 |
% |
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Morgan Adhesives Company |
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Ohio |
|
100 |
% |
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Bemis Coordination Center S.A. |
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Belgium |
|
33 |
% |
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Bemis U.K. Limited |
|
United Kingdom |
|
50 |
% |
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MACtac U.K. Limited |
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United Kingdom |
|
100 |
% |
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Electronic Printing Products, Inc. |
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Ohio |
|
100 |
% |
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MACtac Canada Limited/Limitee |
|
Canada |
|
100 |
% |
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MACtac Europe S.A. |
|
Belgium |
|
11 |
% |
|
MACtac Europe S.A. |
|
Belgium |
|
89 |
% |
|
Bemis Coordination Center S.A. |
|
Belgium |
|
67 |
% |
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Bemis Polska Sp. z o.o. |
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Poland |
|
100 |
% |
|
MACtac Asia-Pacific Self-Adhesive Products Pte Ltd. |
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Singapore |
|
100 |
% |
|
MACtac Deutschland GmbH |
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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. |
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Delaware |
|
100 |
% |
Exhibit 23
EXHIBIT 23 — CONSENT OF PRICEWATERHOUSECOOPERS LLP
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-160681) and the Registration Statements on Form S-8 (No. 33-80666, 333-61556, and 333-136698) of Bemis Company, Inc. of our reports dated March 1, 2010 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.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
Exhibit 31.1
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 |
March 1, 2010 |
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By |
/s/ Henry J. Theisen |
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Henry J. Theisen, President and |
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|
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Chief Executive Officer |
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Exhibit 31.2
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 |
March, 1, 2010 |
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By |
/s/ Gene C. Wulf |
|
|
|
|
Gene C. Wulf, Senior Vice President |
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|
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and Chief Financial Officer |
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Exhibit 32
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, 2009 (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 |
|
Chief Executive Officer |
|
and Chief Financial Officer |
|
March 1, 2010 |
|
March 1, 2010 |