Bemis Commences Comprehensive Plan to Improve U.S. Operations
and Profitability
Bemis to Host Conference Call and Webcast Today at 8:00 a.m.
Eastern Time
Bemis Company, Inc. (NYSE:BMS) today reported financial results
for its first quarter ended March 31, 2017. Refer to the
reconciliation of Non-GAAP measures detailed in the attached
schedule, including adjusted earnings per share and adjusted
EBITDA, referenced in this release.
SUMMARY OF THE QUARTER
First Quarter ($ in millions except per share
amounts) 2017 2016 % change
Earnings Per Share $ 0.55 $ 0.59 (6.8)% Adjusted Earnings Per Share
$ 0.58 $ 0.60 (3.3)% Net Income $ 51.1 $ 56.2 (9.1)% Adjusted
EBITDA $ 135.6 $ 141.0 (3.8)%
First Quarter
2017 2016 Change U.S. Packaging Return on
Sales 12.9 % 15.4 % -250 bps Global Packaging Return on Sales 7.8 %
5.3 %
+250 bps
Refer to the reconciliation of Non-GAAP
measures detailed in the attached schedule, including adjusted
earnings per share and adjusted EBITDA, referenced in this
release.
“We are clearly disappointed with our results this quarter,
which were impacted by lower-than-expected unit volumes and
operational issues in the U.S. Packaging segment,” said William F.
Austen, Bemis Company’s President and Chief Executive Officer. “We
are commencing a series of decisive actions and will execute a
comprehensive plan to improve financial and operational performance
in this segment. We are evaluating all aspects of our U.S. business
– including our manufacturing footprint, SG&A, and direct and
indirect spending – to better position the Company in the current
environment and for the long-term. We are committed to providing
additional details and updates as we make progress on these
critical initiatives.”
Austen continued, “Our Global Packaging segment met our
expectations this quarter, driven by continued operational
improvements in our Latin American and healthcare packaging
businesses. We are pleased with the traction our new leadership is
making in each of these businesses as they drive new ways of
thinking, enact change, and deliver on our commitments.”
Initiatives to Improve U.S. Packaging Operations and
Profitability
As part of the Company’s efforts to improve the profitability of
its U.S. Packaging business, Bemis is developing a comprehensive
plan that enhances focus and improves performance in its U.S.
business while maintaining the high quality products, best-in-class
service, and culture of innovation consistent with Bemis’
standards. Actions include:
- Strengthening the U.S. Packaging
leadership team. Bemis appointed Fred Stephan as President of
the Company’s U.S. Packaging business in February. Fred brings
significant experience and skills to his new role. He most recently
served as Senior Vice President & General Manager of the
Insulation Systems business at Johns Manville, a Berkshire Hathaway
company. Fred successfully served in a number of general management
and functional roles over the past 12 years at Johns Manville and
during the previous 20 years at General Electric.Austen stated,
“Fred is an outstanding addition to Bemis Company. He has a great
track record of leadership and success, and I have already been
impressed with his fresh insights, his drive for action and
results, and his practical and simple approach to our U.S.
business. I look forward to Fred’s impact on changing the way we do
business in the U.S. and to the financial performance improvement
that Fred will help drive in the long-term. I am personally
committed to working with Fred to get our U.S. business back on
track.”Bemis is also evaluating additional ways to enhance its U.S.
organizational structure to promote accountability and
efficiency.
- Optimizing manufacturing
capacity. The Company is evaluating its manufacturing footprint
and utilization in the U.S. to align with customer and end market
demand and to ensure optimal operational efficiency. A plan will be
announced during the second quarter and implemented during 2017,
with benefits expected in 2018.In late March and early April 2017,
Bemis eliminated approximately 200 manufacturing positions in its
U.S. Packaging business. The impact of this is included in the
Company’s updated 2017 outlook.
- Further reducing cost structure.
Bemis is taking actions to reduce SG&A expenses in the U.S. The
Company is evaluating all administrative activities and costs and
is accelerating its Global Business Services (shared services)
initiative in the U.S.
Any restructuring charges associated with completing these
actions will be announced when a definitive plan is finalized.
BUSINESS SEGMENT RESULTS
U.S. Packaging
U.S. Packaging net sales of $648.9 million for the first quarter
of 2017 represented a decrease of 1.8 percent compared to the same
period of 2016. Compared to the prior first quarter, unit volumes
were down approximately one percent. The remaining decrease in net
sales was driven primarily by contractual selling price reductions
previously negotiated with customers to retain and secure some
high-technology packaging business for the long-term, partially
offset by higher input costs that are passed through to
customers.
U.S. Packaging operating profit decreased to $83.5 million in
the first quarter of 2017, or 12.9 percent of net sales, compared
to $101.7 million, or 15.4 percent of net sales, in 2016. Compared
to the prior year, lower profits were driven by the impact of
previously negotiated contractual selling price reductions on
select high-technology products and unit volume declines and the
associated operational cost structure. Compared to management’s
expectations, lower profits were driven by lower than expected unit
volumes and poor operational performance.
Global Packaging
Global Packaging net sales for the first quarter of 2017 of
$346.5 million represent an increase of 12.7 percent compared to
the same period of 2016. Currency translation increased net sales
by 4.2 percent. Acquisitions increased net sales by 6.1 percent.
Organic sales growth of 2.4 percent reflects increased unit volumes
of approximately 3 percent, partially offset by the mix of products
sold.
Global Packaging operating profit for the first quarter was
$27.2 million, compared to $16.3 million for the same period in
2016. The net impact of currency translation increased operating
profit by $1.2 million during the first quarter, as compared to the
prior year, primarily due to currencies in Latin America. Compared
to the prior year, the profit increase was driven primarily by
operational improvements in the Company’s Latin American and
healthcare packaging businesses.
CASH FLOW AND CAPITAL STRUCTURE
Cash flow from operations for the three months ended
March 31, 2017 was $94.5 million, compared to $52.6 million in
the prior year.
Total company net debt to adjusted EBITDA was 2.5 times at
March 31, 2017. Net debt is defined as total debt less cash,
and adjusted EBITDA is defined as the last twelve months total
company adjusted operating income plus depreciation and
amortization.
Capital expenditures totaled $41.7 million for the three months
ended March 31, 2017, reflecting continued investment to
support productivity improvements in the U.S. Packaging segment and
growth initiatives in the Global Packaging segment.
During the first quarter, Bemis repurchased 1.0 million shares
for $48.9 million. At March 31, 2017, the remaining Board
authorization for the repurchase of Bemis common stock was 19.4
million shares.
OUTLOOK
Management expects adjusted diluted earnings per share to be in
the range of $2.50 to $2.60 for the full year 2017. Management
estimates GAAP diluted earnings per share to be in the range of
$2.44 to $2.54 for the full year 2017, excluding the impact of
items that cannot be reasonably predicted at this time, such as any
charges associated with future actions taken to improve financial
and operational performance in U.S. Packaging.
Austen stated, “Our updated guidance reflects the impact of
lower volume expectations from our core U.S. customer base and
near-term operating inefficiencies in our U.S. Packaging business.
We are confident that the initiatives to improve U.S. Packaging
operations and profitability will enhance our positioning and
performance, while driving enhanced value to our shareholders over
the long-term.”
Management expects full year 2017 cash from operations to be in
the range of $415 to $455 million, primarily a result of revised
earnings expectations. This guidance excludes the impact of future
U.S. Packaging restructuring efforts.
Management expects capital expenditures for 2017 of
approximately $200 million to support productivity and efficiency
projects as well as growth projects. Management will evaluate
capital spending as part of its comprehensive review of the U.S.
business.
Management expects an effective income tax rate for 2017 of
approximately 32.5 percent, which incorporates the new accounting
standard for stock-based compensation.
PRESENTATION OF NON-GAAP INFORMATION
This press release refers to non-GAAP financial measures:
adjusted diluted earnings per share, organic sales growth, adjusted
EBITDA, net debt to adjusted EBITDA, and adjusted return on
invested capital. These non-GAAP financial measures adjust for
factors that are unusual or unpredictable. These measures exclude
the impact of certain amounts related to the effect of changes in
currency exchange rates, acquisitions, and restructuring, including
employee-related costs, equipment relocation costs, accelerated
depreciation and the write-down of equipment. These measures also
exclude gains or losses on sales of significant property and
divestitures, certain litigation matters, and certain
acquisition-related expenses, including transaction expenses, due
diligence expenses, professional and legal fees, purchase
accounting adjustments for inventory and order backlog and changes
in the fair value of deferred acquisition payments. This adjusted
information should not be construed as an alternative to results
determined in accordance with accounting principles generally
accepted in the United States of America (GAAP). Management of the
Company uses the non-GAAP measures to evaluate operating
performance and believes that these non-GAAP measures are useful to
enable investors to perform comparisons of current and historical
performance of the Company. All historical non-GAAP information is
reconciled with reported GAAP results. Forward looking non-GAAP
measures contained in our 2017 outlook are reconciled to GAAP
measures as practically as possible; however the Company is unable
to predict with certainty the ultimate outcome of all non-GAAP
charges given future restructuring and acquisition plans are not
currently known or quantifiable.
FORWARD-LOOKING STATEMENTS
This release 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
strategy 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:
- The costs, availability, and terms of
acquiring our raw materials (particularly for polymer resins and
adhesives), as well as our ability to pass any price changes on to
our customers;
- Our ability to retain and build upon
the relationships and sales of our key customers;
- The potential loss of business or
increased costs due to customer or vendor consolidation;
- The ability of our foreign operations
to maintain working efficiencies, as well as properly adjust to
continuing changes in global politics, legislation, and economic
conditions;
- A failure to realize the full potential
of our restructuring activities.
- Variances in key exchange rates that
could affect the translation of the financial statements of our
foreign entities.
- Our ability to effectively implement
and update our global enterprise resource planning ("ERP")
systems;
- Our ability to realize the benefits of
our acquisitions and divestitures, and whether we are able to
properly integrate those businesses we have acquired;
- Fluctuations in interest rates and our
borrowing costs, along with other key financial variables;
- A potential failure in our information
technology infrastructure or applications and their ability to
protect our key functions from cyber-crime and other malicious
content;
- Unexpected outcomes in our current and
future administrative and litigation proceedings;
- Changes in governmental regulations,
particularly in the areas of environmental, health and safety
matters, fiscal incentives, and foreign investment;
- Changes in the competitive conditions
within our markets, as well as changes in the demand for our
goods;
- Our ability to effectively introduce
new products into the market and to protect or retain our
intellectual property rights;
- Changes in our ability to attract and
retain high performance employees;
- Changes in the value of our goodwill
and other intangible assets;
- Changes in import and export regulation
that could subject us to liability or impair our ability to compete
in international markets;
- Our ability to manage all costs
associated with our pension plans; and
- Changes in our credit rating
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 our 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 statements
as a result of changes in the assumptions used in making such
forward-looking statements.
INVESTOR CONFERENCE CALL
Bemis Company, Inc. will webcast an investor telephone
conference regarding its first quarter 2017 financial results this
morning at 8:00 a.m., Eastern Time. Individuals may listen to the
call on the Internet at www.bemis.com under “Investor Relations.”
Listeners are urged to check the website ahead of time to ensure
their computers are configured for the audio stream. Instructions
for obtaining the required, free, downloadable software are
available in a pre-event system test on the site.
ABOUT BEMIS COMPANY, INC.
Bemis Company, Inc. (“Bemis” or the “Company”) is a major
supplier of flexible and rigid plastic packaging used by leading
food, consumer products, healthcare, and other companies worldwide.
Founded in 1858, Bemis reported 2016 net sales from continuing
operations of $4.0 billion. Bemis has a strong technical base in
polymer chemistry, film extrusion, coating and laminating,
printing, and converting. Headquartered in Neenah, Wisconsin, Bemis
employs approximately 17,500 individuals worldwide. More
information about Bemis is available at our website,
www.bemis.com.
BEMIS COMPANY,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share
amounts)
(unaudited)
Three Months Ended March 31,
2017 2016 Net sales $ 995.4 $ 967.9 Cost of
products sold 797.5 759.1 Gross profit
197.9 208.8 Operating expenses: Selling, general and
administrative expenses 94.6 99.4 Research and development 12.5
11.5 Restructuring and acquisition-related costs 4.4 0.8 Other
operating income (3.0 ) (2.3 ) Operating
income 89.4 99.4 Interest expense 16.0 15.4 Other
non-operating (income) expense (0.9 ) 0.1
Income before income taxes 74.3 83.9 Provision for
income taxes 23.2 27.7 Net
income $ 51.1 $ 56.2 Basic earnings per share
$ 0.55 $ 0.59 Diluted earnings per share $
0.55 $ 0.59 Cash dividends paid per share $
0.30 $ 0.29 Weighted average shares
outstanding: Basic 92.4 94.9 Diluted 92.8 95.9
BEMIS COMPANY,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEET
(in millions)
(unaudited)
March
31,
December 31, 2017 2016
ASSETS
Cash and cash equivalents $ 50.8 $ 74.2 Trade receivables
475.7 461.9 Inventories 580.3 549.4 Prepaid expenses and other
current assets 89.2 80.0 Total current
assets 1,196.0 1,165.5 Property
and equipment, net 1,302.4 1,283.8
Goodwill 1,037.2 1,028.8 Other intangible assets, net 152.3
155.2 Deferred charges and other assets 90.9
82.4 Total other long-term assets 1,280.4
1,266.4
TOTAL ASSETS $ 3,778.8 $
3,715.7
LIABILITIES
Current portion of long-term debt $ 2.1 $ 2.0 Short-term
borrowings 14.4 15.3 Accounts payable 449.8 378.0 Employee-related
liabilities 68.2 79.6 Accrued income and other taxes 43.7 31.2
Other current liabilities 47.3 70.0
Total current liabilities 625.5 576.1
Long-term debt, less current portion 1,536.7 1,527.8
Deferred taxes 227.3 219.7 Other liabilities and deferred credits
127.5 132.4
TOTAL
LIABILITIES 2,517.0 2,456.0
EQUITY
Common stock issued (129.1 and 128.8 shares, respectively)
12.9 12.9 Capital in excess of par value 577.4 581.5 Retained
earnings 2,364.8 2,341.7 Accumulated other comprehensive loss
(415.8 ) (447.8 ) Common stock held in treasury (37.1 and 36.1
shares at cost, respectively) (1,277.5 ) (1,228.6 )
TOTAL EQUITY 1,261.8 1,259.7
TOTAL LIABILITIES AND EQUITY $ 3,778.8
$ 3,715.7
BEMIS COMPANY,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
Three Months Ended March 31,
2017 2016
Cash flows from
operating activities
Net income $ 51.1 $ 56.2 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization 41.8 40.8 Excess tax benefit from share-based payment
arrangements — (4.2 ) Share-based compensation 4.4 4.2 Deferred
income taxes 4.2 4.4 Income of unconsolidated affiliated company
(0.9 ) (0.4 ) Loss on sale of property and equipment 0.3 1.6
Changes in working capital, excluding effect of acquisitions and
currency (0.3 ) (55.2 ) Changes in other assets and liabilities
(6.1 ) 5.2 Net cash provided by
operating activities 94.5 52.6
Cash flows from
investing activities
Additions to property and equipment (41.7 ) (30.6 ) Proceeds from
sale of property and equipment 0.1 0.1
Net cash used in investing activities (41.6 )
(30.5 )
Cash flows from
financing activities
Repayment of long-term debt (0.4 ) (23.4 ) Net borrowing of
commercial paper 8.7 83.5 Net repayment of short-term debt (1.1 )
(5.7 ) Cash dividends paid to shareholders (29.1 ) (32.1 ) Common
stock purchased for the treasury (48.9 ) (44.3 ) Excess tax benefit
from share-based payment arrangements — 4.2 Stock incentive
programs and related tax withholdings (8.5 ) (14.6 )
Net cash used in financing activities (79.3 )
(32.4 ) Effect of exchange rates on cash and cash
equivalents 3.0 1.2 Net decrease
in cash and cash equivalents (23.4 ) (9.1 ) Cash and cash
equivalents balance at beginning of year 74.2
59.2 Cash and cash equivalents balance at end of
period $ 50.8 $ 50.1
BEMIS COMPANY,
INC. AND SUBSIDIARIES
SEGMENT SALES AND
PROFIT INFORMATION
(in millions, except per share amounts and
percentages)
(unaudited)
Three Months Ended March 31,
2017 2016 Net sales U.S. Packaging (a) $ 648.9
$ 660.5 Global Packaging (b) 346.5 307.4
Total net sales $ 995.4 $ 967.9 Segment
operating profit U.S. Packaging (c) $ 83.5 $ 101.7 Global Packaging
(d) 27.2 16.3 Restructuring and acquisition-related costs
4.4 0.8 General corporate expenses 16.9 17.8
Operating income 89.4 99.4 Interest expense
16.0 15.4 Other non-operating income (0.9 ) 0.1
Income from continuing operations before income taxes
$ 74.3 $ 83.9
Operating profit
return on sales U.S. Packaging (c / a) 12.9 % 15.4 % Global
Packaging (d / b) 7.8 % 5.3 %
Components of changes in
net sales
U.S. Packaging:
Organic sales decline * (1.8 )%
U.S. Packaging
(1.8 )%
Global Packaging: Currency effect 4.2 %
Acquisition effect 6.1 % Organic sales growth* 2.4 %
Global Packaging 12.7 %
Total Company:
Currency effect 1.3 % Acquisition effect 1.9 % Organic sales
decline * (0.4 )%
Total Change in Net Sales
2.8
% *Organic sales growth (decline) = sum of price, mix, and
volume
BEMIS COMPANY,
INC. AND SUBSIDIARIES
RECONCILIATION OF
NON-GAAP EARNINGS PER SHARE AND NET DEBT
(in millions, except per share
amounts)
(unaudited)
Three Months Ended March 31,
2017 2016 Non-GAAP earnings per share
Diluted earnings per share, as reported $ 0.55 $ 0.59
Non-GAAP adjustments per share, net of taxes: Restructuring costs
(1) 0.03 — Acquisition-related costs (2) — 0.01
Diluted earnings per share, as adjusted $ 0.58 $ 0.60
(1) Restructuring costs include costs primarily
related to plant closures in Latin America. (2) Acquisition-related
costs are comprised primarily of acquisition costs associated with
the Emplal Participações S. A. acquisition and were recorded both
in operating income and interest expense (reflecting fees to
extinguish portions of the Emplal seller's debt).
March 31, 2017
Net Debt Current portion of long-term debt $ 2.1 Short-term
borrowings 14.4 Long-term debt, less current portion 1,536.7
Total debt 1,553.2 Less cash and cash equivalents
(50.8 ) Net debt $ 1,502.4
BEMIS COMPANY,
INC. AND SUBSIDIARIES
RECONCILIATION OF
NON-GAAP RETURN ON INVESTED CAPITAL AND EBITDA
(in millions)
(unaudited)
Three Months Ended
12 months ended
March 31, 2017
March
31,
2017
December 31,
2016
September 30,
2016
June
30,
2016
Net income $ 51.1 $ 60.5 $ 68.6 $ 50.9 $ 231.1 Income
taxes 23.2 29.2 33.1 24.7 110.2 Interest expense 16.0 15.7 15.1
14.0 60.8 Other non-operating income (0.9 ) (0.7 )
(0.6 ) (0.6 ) (2.8 )
Earnings before
interest and taxes (EBIT) 89.4 104.7 116.2 89.0 399.3
Restructuring and acquisition-related costs 4.4
3.8 4.4 19.6 32.2
Adjusted EBIT (a) 93.8 108.5 120.6 108.6 431.5
Depreciation and amortization 41.8 40.7
40.1 40.5 163.1
Adjusted EBITDA $ 135.6 $ 149.2 $ 160.7
$ 149.1 $ 594.6
Average Invested
Capital(1) (b) $ 2,726.1
Assumed tax
rate(2) (c) 35.0 %
Adjusted ROIC (a * (1 - c)
/ b) 10.3 %
Three Months Ended
12 months ended
March 31, 2016
March
31,
2016
December 31,
2015
September 30,
2015
June
30,
2015
Net income $ 56.2 $ 56.8 $ 62.5 $ 65.6 $ 241.1 Income
taxes 27.7 28.4 31.5 33.0 120.6 Interest expense 15.4 13.2 12.6
12.8 54.0 Other non-operating expense (income) 0.1
(1.2 ) (0.8 ) (2.2 ) (4.1 )
Earnings
before interest and taxes (EBIT) 99.4 97.2 105.8 109.2 $ 411.6
Restructuring and acquisition-related costs 0.8
2.2 4.6 0.3 7.9
Adjusted EBIT (a) 100.2 99.4 110.4 109.5 419.5
Depreciation and amortization 40.8 40.0
38.0 40.4 159.2
Adjusted EBITDA $ 141.0 $ 139.4 $ 148.4
$ 149.9 $ 578.7
Average Invested
Capital(1) (b) $ 2,585.9
Assumed tax
rate(2) (c) 35.0 %
Adjusted ROIC (a * (1 - c)
/ b) 10.5 % (1) - Average invested capital includes all
equity and debt amounts, less cash, calculated on a five-quarter
average. (2) - Tax rate assumed to be the U.S. federal statutory
rate.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170427005560/en/
Bemis Company Inc.Erin M. Winters,
920-527-5288Director of Investor Relations
Bemis (NYSE:BMS)
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