ITEM 1 - BUSINESS
Bemis Company, Inc., a Missouri corporation (the "Registrant"), continues a business formed in 1858. The Registrant was incorporated in 1885 as Bemis Bro. Bag Company with the name changed to Bemis Company, Inc. in 1965. The Registrant is a principal manufacturer of flexible packaging products and pressure sensitive materials selling to customers throughout the United States, Canada, and Europe with a growing presence in Southeast Asia, and Mexico. In 1997, approximately 74 percent of the Registrant's sales were derived from Flexible Packaging Products and approximately 26 percent were derived from Pressure Sensitive Materials.
The primary market for its products is the food industry. Other markets include companies in chemical, agribusiness, medical, pharmaceutical, sanitary products, printing, and graphic industries. Further information about the Registrant's operations in different business segments appearing on page 40 of the accompanying 1997 Annual Report to Shareholders is expressly incorporated by reference in this Form 10-K Annual Report.
As of December 31, 1997, the Registrant had approximately 9,300 employees, of which an estimated 6,400 were classified as production employees. Most of the production employees are covered by collective bargaining contracts involving five different international unions and 20 individual contracts with terms ranging from three to five years. During 1997, five contracts covering approximately 700 employees at five different locations in the United States were successfully negotiated. During 1998, two domestic labor agreements are scheduled to expire.
Working capital elements throughout the year fluctuate in relation to the level of business. Customer and vendor payment terms are split approximately equal between net 30 days and discountable terms. Discounts are generally one percent for payment within ten days. Inventory levels reflect a reasonable balance between raw material pricing and availability, and the Registrant's commitment to promptly fill customer orders. Backlogs are not a significant factor in the industries in which the Registrant operates; most orders placed with the Registrant are for delivery within 90 days or less.
The Registrant owns patents, licenses, trademarks, and trade names on its products. The loss of any or all patents, licenses, trademarks, or trade names would not have a materially adverse effect on the Registrant's results as a whole or either of its segments. The business of each of the segments is not seasonal to any significant extent. A summary of the Registrant's business activities reported by its two business segments follows:
FLEXIBLE PACKAGING PRODUCTS
The Registrant and its subsidiaries manufacture a broad range of consumer and industrial packaging consisting of coated and laminated films, polyethylene packaging, and consumer and industrial paper packaging.
Coated and laminated film products include flexible polymer film structures and barrier laminates for food, medical, and personal care products utilizing controlled and modified
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atmosphere packaging, with value added through printing. Primary markets are processed meat, cheese, coffee, condiments, candy, and medical packaging. Additional products include a full line of blown and cast stretchfilm products, carton sealing tapes and application equipment for industrial use, and custom thermoformed plastic packaging. Also included are electronically-produced film color separations and engravings used in rotogravure and flexographic printing by the packaging industry. Coated and laminated films accounted for 36 percent, 33 percent, and 31 percent of consolidated net sales for the years 1997, 1996, and 1995, respectively.
Polyethylene packaging consists of mono-layer and co-extruded films, converted packaging and roll stock, and flexographic line and process printed packaging for bakery products, seed, retail, lawn and garden, ice, fresh and frozen produce, candy, sanitary products, and disposable diapers; printed shrink overwrap for the food and beverage industry; extruded products including wide width sheeting, bags on a roll, balers, and shrink pallet covers. Polyethylene products accounted for 25 percent, 19 percent, and 17 percent of consolidated net sales for the years 1997, 1996, and 1995, respectively.
Consumer and industrial paper packaging is made up of multiwall and small paper bags, balers, printed paper roll stock, and bag closing materials for consumer and industrial packaging products. Flexographic and rotogravure printing are enhanced with in-line overlaminating capabilities. Innovations in bag constructions include inner-ply laminations of odor, grease, and moisture barriers. Primary markets include pet food, seed, chemicals, dairy products, fertilizers, feed, minerals, flour, rice, and sugar. Sales of this product line accounted for 12 percent, 14 percent, and 15 percent of consolidated net sales for the years 1997, 1996, and 1995, respectively.
PRESSURE SENSITIVE MATERIALS
The Registrant and its subsidiaries manufacture pressure sensitive materials such as sheet printing products, roll label products, technical products, and graphic films. Pressure Sensitive Materials accounted for 26 percent, 29 percent, and 28 percent of consolidated net sales for the years 1997, 1996, and 1995, respectively.
Sheet printing products include pressure sensitive paper, film, and foil sheet printing products and laser printing products for the sheet-fed printing industry. In addition, the Registrant provides laser printer sheet stocks, pre-die-cut printing labels, copier labels, data processing labels, and non-impact printer products, which are designed to run on business equipment such as laser printers and xerographic copiers.
Roll label products include narrow-web rolls of pressure sensitive film, paper, and foil printing stocks used in high-speed printing and die-cutting of primary package labeling, secondary or promotional decoration, and for high-speed, high-volume data processing (EDP) stocks, bar code inventory control labels, and numerous laser printing applications.
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Technical products are pressure sensitive materials that are technically engineered for performance in varied industrial applications. They include micro-thin film adhesives used in delicate electronic parts assembly and pressure sensitives utilizing foam and tape based stocks to perform fastening and mounting functions.
Graphic films include pressure sensitive films used for decorative signage through computer-aided plotters and screen printers, and photographic overlaminate and mounting materials including optically-clear films with built-in UV inhibitors.
MARKETING, DISTRIBUTION, AND COMPETITION
While the Registrant's sales are made through a variety of distribution methods, more than 70 percent of each segment's sales are made by the Registrant's sales force. Sales offices and plants are located throughout the United States, Canada, United Kingdom, Europe, Scandinavia, Southeast Asia, and Mexico to provide prompt and economical service to more than 30,000 customers. The Registrant'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 Registrant's total sales. Furthermore, the loss of one or a few major customers would not have a material adverse effect on their operating results.
The major markets in which the Registrant sells its products are highly competitive. Areas of competition include price, innovation, quality, and service. This competition is significant as to both the size and the number of competing firms.
Major competitors in the Flexible Packaging Products segment include American National Can Company, Printpack, Inc., Cryovac, a division of W.R. Grace & Co., Huntsman Chemical Corporation, AEP Industries, Inc., Southern Bag Corporation, Stone Container Corporation, and Union Camp Corporation. In the Pressure Sensitive Materials segment major competitors include Avery Dennison Corporation, Flexcon Co., Inc., Minnesota Mining and Manufacturing Company, Jackstadt GmbH (Germany), and UPM - Kymmene (Finland).
The Registrant 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 Registrant's precise competitive position in these markets is not reasonably determinable.
Advertising is limited primarily to business and trade publications emphasizing the Registrant's packaging and related capabilities and the individual problem-solving approach to customer problems.
RAW MATERIALS
Plastic resins and films, paper, inks, and chemicals constitute the basic major raw materials. These are purchased from a variety of industry sources. While temporary shortages of raw materials may occur occasionally, these items are currently readily available.
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RESEARCH AND DEVELOPMENT EXPENSE
Research and development expenditures were as follows:
The expense reduction experienced in 1997 is principally due to the sale of machinery manufacturing operations in May 1997.
ENVIRONMENTAL CONTROL
Compliance with federal, state, and local provisions 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, and competitive position of the Registrant and its subsidiaries.
ITEM 2
ITEM 2 - PROPERTIES
Properties utilized by the Registrant and its subsidiaries at December 31, 1997, were as follows:
FLEXIBLE PACKAGING PRODUCTS
The Registrant has 35 manufacturing plants located in 15 states and four foreign countries, of which 29 are owned directly by the Registrant or its subsidiaries and six are leased from outside parties. Leases generally provide for minimum terms of four to 20 years and have one or more renewal options. The initial terms of leases in effect at December 31, 1997, expire between 1998 and 2010.
PRESSURE SENSITIVE MATERIALS
The Registrant has nine manufacturing plants located in four states and two foreign countries, of which seven are owned directly by the Registrant or its subsidiaries and two are leased from outside parties. Leases generally provide for minimum terms of three to 25 years and have one or more renewal options. The initial terms of leases in effect as of December 31, 1997, expire between 1999 and 2008.
CORPORATE
The executive offices of the Registrant, which are leased, are located in Minneapolis, Minnesota. The Registrant considers its plants and other physical properties to be suitable,
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adequate, and of sufficient productive capacity to meet the requirements of its business. The manufacturing plants operate at varying levels of capacity depending on the type of operation and market conditions.
ITEM 3
ITEM 3 - LEGAL PROCEEDINGS
The Registrant is involved in a number of lawsuits incidental to its business, including environmental related litigation, the most active of which is discussed in the following paragraph. Although it is difficult to predict the ultimate outcome of these cases, management believes, based on consultation with counsel, that any ultimate liability would not have a material adverse effect upon the Registrant's financial condition or results of operations.
In December 1996, the United States brought an action in Federal District Court for the District of Columbia against the Registrant and its wholly owned subsidiary, "Pervel Industries." From 1961 to 1973 Pervel disposed of liquid industrial wastes at the Yaworski Lagoon site in Canterbury, Connecticut. Pervel entered into a consent decree with the United States in 1990 guaranteed by the Registrant regarding the clean up of the Lagoon. The United States alleges that neither Pervel nor the Registrant has fulfilled its obligations under the consent decree or guarantee. The Registrant believes both it and Pervel have fulfilled all such obligations and that both have meritorious defenses to all allegations brought by the government. In management's opinion, neither a settlement of this matter nor results following litigation will produce a result having a material adverse effect on the Registrant's financial condition or results of operations.
The Registrant is a potentially responsible party (PRP) in approximately fourteen superfund sites around the United States. In substantially all cases, the Registrant is a "de minimis" PRP and has negotiated a position as such. The Registrant has reserved an amount that it believes to be adequate to cover its exposure.
ITEM 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 1997.
ITEM 5
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item appearing on pages 1 and 24 of the accompanying 1997 Annual Report to Shareholders is expressly incorporated by reference in this Form 10-K Annual Report.
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ITEM 6
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item appearing on page 25 of the accompanying 1997 Annual Report to Shareholders is expressly incorporated by reference in this Form 10-K Annual Report.
ITEM 7
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this item appearing on pages 22 to 24 of the accompanying 1997 Annual Report to Shareholders is expressly incorporated by reference in this Form 10-K Annual Report.
ITEM 7A
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, together with the report thereon of Price Waterhouse LLP dated January 22, 1998, and the quarterly data appearing on pages 26 to 42 of the accompanying 1997 Annual Report to Shareholders are expressly incorporated by reference in this Form 10-K Annual Report. With the exception of the aforementioned information and the information incorporated in items 1, 5, 6, and 7 of this Form 10-K, the 1997 Annual Report to Shareholders is not to be deemed filed as part of this Form 10-K Annual Report.
ITEM 9
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 10
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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, 1997, and such information is expressly incorporated herein by reference.
The following sets forth the name, age, and business experience for the last five years of the principal executive officers of the Registrant. Each officer has been an employee of the Registrant for the last five years and the positions described relate to positions with the Registrant.
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- ---------------- (1) Curwood, Inc. is a 100 percent owned subsidiary of the Registrant. (2) Morgan Adhesives Co. is an 86.9 percent owned subsidiary of the Registrant. (3) Curwood Group includes the following 100 percent owned subsidiaries of the Registrant: Curwood, Inc., MacKay, Inc., Milprint, Inc., and Perfecseal, Inc.
ITEM 11
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, 1997, and such information is expressly incorporated herein by reference.
ITEM 12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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, 1997, and such information is expressly incorporated herein by reference.
ITEM 13
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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, 1997, and such information is expressly incorporated herein by reference.
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ITEM 14
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of the report:
(1) FINANCIAL STATEMENTS:
---------------- * Incorporated by reference from the indicated pages of the 1997 Annual Report to Shareholders, a copy of which is filed herewith as Exhibit 13.
(2) FINANCIAL STATEMENT SCHEDULES FOR YEARS 1997, 1996, AND 1995
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
---------------- * 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 Definitive Proxy Statement filed with the Securities and Exchange Commission on March 18, 1997 (File No. 1-5277). (2) Incorporated by reference to the Registrant's Annual Report on Form 10-K/A for the year ended December 31, 1994 (File No. 1-5277). (3) Incorporated by reference to the Registrant's Registration Statement on Form 8-A dated August 4, 1989 (File No. 0-1387). (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 Registration Statement on Form S-8 (File No. 33-50560). (6) Incorporated by reference to the Registrant's Registration Statement on Form S-8 (File No. 33-80666).
(b) There were no reports on Form 8-K filed during the fourth quarter ended December 31, 1997.
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REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Bemis Company, Inc.:
Our audits of the consolidated financial statements referred to in our report dated January 22, 1998, appearing on page 26 of the 1997 Annual Report to Shareholders of Bemis Company, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Minneapolis, Minnesota January 22, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-8 (number 2-61796) and Form S-3 (number 33-60253) of Bemis Company, Inc. of our report dated January 22, 1998, appearing on page 26 of the 1997 Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules which appears above.
/s/ Price Waterhouse LLP PRICE WATERHOUSE LLP Minneapolis, Minnesota March 3, 1998
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SIGNATURES
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/ Benjamin R. Field, III By /s/ Gene C. Wulf ----------------------------------- ------------------------------------ Benjamin R. Field, III, Senior Vice Gene C. Wulf, Vice President President, Chief Financial Officer and Controller and Treasurer
Date March 3, 1998 Date March 3, 1998
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/ Jeffrey H. Curler /s/ Winslow H. Buxton - ----------------------------------- ------------------------------------ Jeffrey H. Curler Winslow H. Buxton, Director President and Director
Date March 3, 1998 Date March 3, 1998
/s/ John H. Roe /s/ Loring W. Knoblauch - ----------------------------------- ------------------------------------ John H. Roe, Chairman and Chief Loring W. Knoblauch, Director Executive Officer; Director
Date March 3, 1998 Date March 3, 1998
/s/ Robert A. Greenkorn /s/ Angus Wurtele - ----------------------------------- ------------------------------------ Robert A. Greenkorn, Director Angus Wurtele, Director
Date March 3, 1998 Date March 3, 1998
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EXHIBIT INDEX
---------------- * 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 Definitive Proxy Statement filed with the Securities and Exchange Commission on March 18, 1997 (File No. 1-5277). (2) Incorporated by reference to the Registrant's Annual Report on Form 10-K/A for the year ended December 31, 1994 (File No. 1-5277). (3) Incorporated by reference to the Registrant's Registration Statement on Form 8-A dated August 4, 1989 (File No. 0-1387). (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 Registration Statement on Form S-8 (File No. 33-50560). (6) Incorporated by reference to the Registrant's Registration Statement on Form S-8 (File No. 33-80666).
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BEMIS COMPANY, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (in thousands of dollars)
(1) Net of $120 collections on accounts previously written off. (2) Net of $161 collections on accounts previously written off. (3) Net of $33 collections on accounts previously written off.
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