Bemis Company, Inc. (Bemis) has reported net sales of $3.8 billion for the year-end 2008, up 3.6%, compared with the net sales of $3.6 billion in the previous year-end. It has also reported a net income of $166.2 million, or $1.65 per diluted share, for the year-end 2008, compared with the net income of $181.5 million, or $1.74 per diluted share, in the previous year-end.
The company has reported quarterly diluted earnings of $0.33 per share for the fourth quarter of 2008, down 21.4%, compared to $0.42 per share for the fourth quarter of 2007. Compared to the fourth quarter of 2007, earnings per share for the fourth quarter of 2008 were negatively impacted by volatile currency exchange rates resulting in net foreign exchange losses and currency translation impacts totaling $10.7 million before taxes or about $0.07 per share. In the fourth quarter of 2007, results included a $0.02 per share tax benefit related to dividends from a foreign subsidiary. Net sales of $867.9 million for the fourth quarter of 2008 represented a 4.9% decrease from $912.7 million for the same period of 2007. Currency effects reduced net sales by 6.7% for the quarter.
The net effect of currency translation and foreign exchange losses reduced earnings per share for 2008 by about $0.02 when compared to 2007. The 2007 results include the tax benefit of $0.02 per share discussed above. The currency benefits increased net sales by 1.7% in 2008.
Henry Theisen, Bemis’s president and chief executive officer, said, “Our business experienced volatility from many fronts during 2008. During the second and third quarters, we saw record increases in raw material costs. In the fourth quarter, the global financial crisis and weakening economy caused many customers to destock inventories in order to conserve cash and limit exposure to unpredictable changes in consumer buying patterns. Consumers reduced discretionary spending, which impacted sales volumes in our pressure sensitive materials and display film product lines during the fourth quarter. Currency fluctuations negatively impacted our results in the fourth quarter as the U.S. dollar strengthened against other currencies around the world. At Bemis, our disciplined pricing strategy and strong balance sheet have been valuable assets to our business in this challenging environment. We continue to focus our efforts on aggressively managing costs and improving the flexibility of our operations to respond to slowing demand in certain markets.”
Business Segments:
Flexible Packaging:
Flexible packaging that represented about 84% of total company net sales during the quarter, reported net sales of $731.3 million in the fourth quarter, down 3.1%, compared to net sales of $754.8 million for the fourth quarter of 2007. The currency related effects reduced flexible packaging net sales by 6.9%. Segment operating profit for the fourth quarter of 2008 was $66.2 million, or 9.1% of net sales. Segment operating profit for the fourth quarter of 2007 was $83.3 million, or 11.0% of net sales, which included restructuring related income of $1.2 million. The net effect of currency translation and foreign exchange losses decreased operating profit in the fourth quarter of 2008 by $8.7 million compared to the same quarter of 2007.
For the total year ended 2008, flexible packaging net sales of $3.2 billion represented a 5.0% increase compared to 2007. The currency effects accounted for sales growth of 1.4% during 2008. Excluding the impact of currency, the increase in net sales reflects generally higher selling prices and increased sales volumes across a number of markets. Operating profit decreased to $315.9 million, or 10.0% of net sales, compared to $346.6 million, or 11.5% of net sales in 2007. The net effect of currency translation and foreign exchange losses reduced operating profit in 2008 by $4.4 million compared to 2007. Operating profit in 2007 included restructuring related income of $1.5 million.
Commenting on the results of this business segment, Theisen said, “This has been a demanding year for our flexible packaging business. We recorded improved sales volumes in several of our key markets, including packaging for meat and cheese, dairy and liquids, and medical markets. The benefits of this sales growth were offset by declines in sales volume for protective display films as well as packaging for industrial, confectionery and snack, pet food, and multipacks markets. We responded decisively to recover increasing raw material costs during the second half of 2008, but the rapid decline in economic conditions during the fourth quarter created a difficult operating environment for many of our businesses. We are entering 2009 with a strong core business and well prepared to react promptly to future market fluctuations.”
Pressure Sensitive Materials:
The fourth quarter net sales from the pressure sensitive materials business segment were $136.6 million, a decrease of 13.5% from net sales of $157.8 million recorded in the fourth quarter of 2007. The currency effects reduced net sales by 5.7% in the fourth quarter of 2008. The segment operating profit for the fourth quarter of 2008 was $4.4 million, or 3.2% of net sales, compared to the fourth quarter of 2007 when segment operating profit was $6.7 million or 4.3% of net sales. The net effect of currency translation and foreign exchange losses decreased operating profit by $1.2 million during the fourth quarter of 2008 compared to the same period of 2007.
For the total year ended 2008, net sales of pressure sensitive materials were $626.2 million, a 3.3% decrease from net sales in 2007. The currency effects accounted for net sales growth of 2.8%. Operating profit was $34.3 million or 5.5% of net sales in 2008. This compares to operating profit of $40.3 million or 6.2% of net sales in 2007. The net effect of currency translation and foreign exchange losses increased operating profit in 2008 by $1.9 million.
“Our pressure sensitive materials business provides materials to customers who have exposure to advertising, housing, and consumer goods markets, all of which have been hit hard by the recent economic downturn,” stated Theisen. “Sales volumes in this segment decreased across all product lines during the fourth quarter. While our business teams continue to identify new business opportunities and cost cutting measures, it has been difficult to show improvement in this environment. We expect our efforts to generate increased operating performance once the global economy begins to recover.”
Other Costs (Income), Net:
In the fourth quarter of 2008, other costs and income included $7.9 million of financial income compared to $8.3 million of financial income for the fourth quarter of 2007. About 60% of the financial income is generated from fiscal incentives, while the remainder is interest income. Other costs and income also included a net foreign exchange loss of $6.1 million during the fourth quarter of 2008 compared to a net gain of $0.7 million in the same quarter of 2007. Foreign currency transaction losses were divided evenly between currencies of Mexico, Brazil, Canada, and the European region. Fiscal incentives and foreign exchange gains and losses are included in segment operating profit.
For the total year 2008, other costs and income included $33.5 million of financial income compared to $28.3 million for the year ended December 31, 2007. The net foreign exchange loss totaled $6.8 million in 2008 compared to a gain of $2.4 million in 2007.
Capital Structure and Cash Flow from Operations:
Total debt to total capitalization was 32.1% at December 31, 2008, compared to 32.9% at December 31, 2007. Improvement in this ratio was driven by debt repayments, partially offset by reductions to shareholders’ equity for pension and currency translation effects. Total debt as of December 31, 2008 was $686.6 million, a decrease of $156.7 million from the balance of $843.3 million at December 31, 2007. The debt reduction during 2008 principally reflects debt payments using a combination of cash from operating activities and cash on hand.