Bemis Company, Inc. (NYSE:BMS) today reported financial results
for its second quarter ended June 30, 2017. Refer to the
reconciliation of Non-GAAP measures detailed in the attached
schedule, including adjusted earnings per share, adjusted EBITDA,
and net debt referenced in this release.
SUMMARY OF THE QUARTER
Q2 Q2 YTD ($ in millions
except per share amounts) 2017 2016
% change 2017 2016
% change
Earnings Per Share $ 0.30 $ 0.53 (43.4 )% $ 0.85 $ 1.12 (24.1 )%
Adjusted Earnings Per Share $ 0.48 $ 0.67 (28.4 )% $ 1.06 $ 1.27
(16.5 )% Cash from Operations $ 106.0 $ 100.4 5.6 % $ 200.5 $ 153.0
31.0 %
Refer to the reconciliation of Non-GAAP
measures detailed in the attached schedule, including adjusted
earnings per share, referenced in this release.
“Total company profits were less than expected this quarter due
to the impact of the challenging economic environment in Brazil.
Sales volumes declined sharply in Brazil versus our run rates as
consumers, retailers, and our customers reacted to the latest
political instability. In our U.S. business, profits were in line
with the expectations we shared last quarter,” said William F.
Austen, Bemis Company’s President and Chief Executive Officer.
“During June, we initiated a restructuring and cost savings plan to
better position the Company in the current environment and for the
long term. These efforts are progressing well to create a more
agile, streamlined, and efficient business that continues to be
successful over the long term.”
2017 RESTRUCTURING AND COST SAVINGS PLANRefer to the June
30, 2017 press release and the July 7, 2017 8-K for additional
details of this plan.
During June, the Company announced initial details on its
restructuring and cost savings plan to improve profitability
primarily in its U.S. and Latin American businesses by reducing its
manufacturing and administrative cost structure. This plan targets
an annual savings run rate of $55 to $60 million, with savings
starting in 2017 and fully realized during 2019. Estimated total
costs to implement the plan are $100 to $120 million.
As part of this plan, the Company announced that it will close
two manufacturing facilities and reduce approximately 300
administrative positions for a combined savings of approximately
$30 million, when fully implemented.
The Company continues to evaluate opportunities that build
toward its cost savings target of $55 to $60 million and plans to
provide final details, including total cash expenditures associated
with the cost savings plan, when it releases its third quarter
earnings.
During the second quarter, the Company recorded restructuring
charges totaling approximately $24 million or $0.18 per share, most
of which related to the initial steps in its 2017 Plan. These
charges consisted primarily of employee termination costs and fixed
asset write-downs of equipment. Management anticipates less than $5
million of cash expenditure during 2017 related to its 2017
Restructuring Plan.
BUSINESS SEGMENT RESULTS
U.S. Packaging
U.S. Packaging net sales of $661.5 million for the second
quarter of 2017 represented a decrease of 1.4 percent compared to
the same period of 2016. Compared to the prior second quarter, unit
volumes were up approximately one percent. This was offset by a
decrease in net sales driven primarily by mix of products sold and
contractual selling price reductions previously negotiated with
some customers to secure business for the long term.
U.S. Packaging operating profit decreased to $80.1 million in
the second quarter of 2017, or 12.1 percent of net sales, compared
to $103.5 million, or 15.4 percent of net sales, in 2016. Compared
to the prior year, lower profits were driven by the impact of mix
of products sold, previously-negotiated contractual selling price
reductions on select products, and inefficiencies related to an ERP
system implementation at one of the Company’s manufacturing
facilities.
Global Packaging
Global Packaging net sales for the second quarter of 2017 were
$350.6 million, approximately flat with the same period of 2016.
Currency translation decreased net sales by 0.6 percent.
Acquisitions increased net sales by 1.6 percent. Organic sales
decline of 0.9 percent reflects decreased unit volumes of
approximately 3 percent, partially offset by sales price and
mix.
Global Packaging operating profit for the second quarter was
$17.7 million, compared to $28.1 million for the same period in
2016. The net impact of currency translation decreased operating
profit by $0.6 million during the second quarter, as compared to
the prior year, primarily due to currencies in Latin America.
Compared to the prior year, lower profits in Global Packaging were
driven primarily by a 10 percent unit volume decline in Latin
America and the associated impacts of the challenging economic
environment in Brazil.
CASH FLOW AND CAPITAL STRUCTURE
Cash flow from operations for the six months ended June 30,
2017 was $200.5 million, compared to $153.0 million in the prior
year. This improvement was driven primarily by continued increases
in days payable outstanding.
Total company net debt to adjusted EBITDA was 2.6 times at
June 30, 2017.
Capital expenditures totaled $97.2 million for the six months
ended June 30, 2017, reflecting planned investment to support
productivity improvements in the U.S. Packaging segment and growth
initiatives in the Global Packaging segment.
OUTLOOK
Management expects adjusted diluted earnings per share to be in
the range of $2.35 to $2.50 for the full year 2017. Management
estimates GAAP diluted earnings per share to be in the range of
$2.00 to $2.15 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.
Austen stated, “Our guidance reduction is a result of the impact
of the sharp contraction and tough economic environment in Brazil.
As consumers and retailers scale back, our volumes and mix of
business suffer. While we are working to take costs out of our
business, the unfavorable headwinds in Brazil will pressure our
earnings during the balance of the year.”
Management expects full year 2017 cash from operations to be in
the range of $400 to $425 million, primarily a result of revised
earnings expectations. This guidance includes the planned impact
from initial actions related to the 2017 Restructuring Plan, which
is less than $5 million of cash expenditure during 2017.
Management expects capital expenditures for 2017 between $185
and $200 million to support projects underway. Management is
evaluating future capital spending levels as part of its current
comprehensive review of the business.
Management expects an effective income tax rate for 2017 of
approximately 32 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 second quarter 2017 financial results this
morning at 10:00 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.
Bemis Company, Inc. will webcast an investor telephone
conference regarding its third quarter 2017 financial results on
October 26, 2017 at 10:00 a.m., Eastern Time.
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 June
30,
Six Months Ended June
30,
2017 2016 2017 2016 Net
sales $ 1,012.1 $ 1,021.3 $ 2,007.5 $ 1,989.2 Cost of products sold
826.2 804.3 1,623.7
1,563.4 Gross profit 185.9 217.0 383.8 425.8
Operating expenses: Selling, general and administrative expenses
97.6 100.4 192.2 199.8 Research and development 11.1 11.6 23.6 23.1
Restructuring and acquisition-related costs 23.8 19.6 28.2 20.4
Other operating income (3.1 ) (3.6 ) (6.1 )
(5.9 ) Operating income 56.5 89.0 145.9 188.4
Interest expense 16.0 14.0 32.0 29.4 Other non-operating income
(0.6 ) (0.6 ) (1.5 ) (0.5 )
Income before income taxes 41.1 75.6 115.4 159.5 Provision
for income taxes 13.1 24.7 36.3
52.4 Net income $ 28.0 $ 50.9
$ 79.1 $ 107.1 Basic earnings per share
$ 0.31 $ 0.54 $ 0.86 $ 1.13
Diluted earnings per share $ 0.30 $ 0.53 $ 0.85
$ 1.12 Cash dividends paid per share $ 0.30
$ 0.29 $ 0.60 $ 0.58 Weighted
average shares outstanding: Basic 92.0 94.7 92.2 94.8 Diluted 92.3
95.7 92.5 95.8
BEMIS COMPANY,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEET
(in millions)
(unaudited)
June
30,
December 31, 2017 2016
ASSETS
Cash and cash equivalents $ 55.0 $ 74.2 Trade receivables
475.3 461.9 Inventories 608.5 549.4 Prepaid expenses and other
current assets 101.4 80.0 Total current
assets 1,240.2 1,165.5 Property
and equipment, net 1,311.6 1,283.8
Goodwill 1,036.5 1,028.8 Other intangible assets, net 149.0
155.2 Deferred charges and other assets 93.0
82.4 Total other long-term assets 1,278.5
1,266.4
TOTAL ASSETS $ 3,830.3 $
3,715.7
LIABILITIES
Current portion of long-term debt $ 5.0 $ 2.0 Short-term
borrowings 14.0 15.3 Accounts payable 507.0 378.0 Employee-related
liabilities 70.0 79.6 Accrued income and other taxes 31.2 31.2
Other current liabilities 67.9 70.0
Total current liabilities 695.1 576.1
Long-term debt, less current portion 1,516.8 1,527.8
Deferred taxes 229.9 219.7 Other liabilities and deferred credits
123.8 132.4
TOTAL
LIABILITIES 2,565.6 2,456.0
EQUITY
Common stock issued (129.1 and 128.8 shares, respectively)
12.9 12.9 Capital in excess of par value 581.8 581.5 Retained
earnings 2,365.0 2,341.7 Accumulated other comprehensive loss
(417.5 ) (447.8 ) Common stock held in treasury (37.1 and 36.1
shares at cost, respectively) (1,277.5 ) (1,228.6 )
TOTAL EQUITY 1,264.7 1,259.7
TOTAL LIABILITIES AND EQUITY $ 3,830.3
$ 3,715.7
BEMIS COMPANY,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS
(in millions)
(unaudited)
Six Months Ended June
30,
2017 2016
Cash flows from
operating activities
Net income $ 79.1 $ 107.1 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation and
amortization 85.0 81.3 Excess tax benefit from share-based payment
arrangements — (4.3 ) Share-based compensation 8.8 9.4 Deferred
income taxes 2.3 8.3 Income of unconsolidated affiliated company
(1.4 ) (0.9 ) Loss on sale or write-off of property and equipment
4.7 1.7 Changes in working capital, excluding effect of
acquisitions and currency 25.2 (62.1 ) Changes in other assets and
liabilities (3.2 ) 12.5 Net cash
provided by operating activities 200.5 153.0
Cash flows from
investing activities
Additions to property and equipment (97.2 ) (77.9 ) Business
acquisitions and adjustments, net of cash acquired — (107.3 )
Proceeds from sale of property and equipment 0.5
0.2 Net cash used in investing activities
(96.7 ) (185.0 )
Cash flows from
financing activities
Proceeds from issuance of long-term debt 2.2 0.2 Repayment of
long-term debt — (23.7 ) Net (repayment) borrowing of commercial
paper (13.3 ) 174.2 Net repayment of short-term debt (1.6 ) (3.7 )
Cash dividends paid to shareholders (56.7 ) (59.6 ) Common stock
purchased for the treasury (48.9 ) (44.3 ) Excess tax benefit from
share-based payment arrangements — 4.3 Stock incentive programs and
related tax withholdings (8.5 ) (14.6 ) Net
cash (used in) provided by financing activities (126.8 )
32.8 Effect of exchange rates on cash and cash
equivalents 3.8 1.8 Net
(decrease) increase in cash and cash equivalents (19.2 ) 2.6
Cash and cash equivalents balance at beginning of year 74.2
59.2 Cash and cash equivalents balance
at end of period $ 55.0 $ 61.8
BEMIS COMPANY,
INC. AND SUBSIDIARIES
SEGMENT SALES AND
PROFIT INFORMATION
(in millions, except per share amounts and
percentages)
(unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2017 2016 2017
2016 Net sales U.S. Packaging (a) $ 661.5 $ 671.0 $ 1,310.4
$ 1,331.5 Global Packaging (b) 350.6 350.3
697.1 657.7 Total net sales $
1,012.1 $
1,021.3
$ 2,007.5 $
1,989.2
Segment operating profit U.S. Packaging (c) $ 80.1 $
103.5 $ 163.6 $ 205.2 Global Packaging (d) 17.7 28.1 44.9 44.4
Restructuring and acquisition-related costs 23.8 19.6 28.2
20.4 General corporate expenses 17.5 23.0
34.4 40.8 Operating
income 56.5 89.0 145.9 188.4 Interest expense 16.0 14.0 32.0
29.4 Other non-operating income (0.6 ) (0.6 )
(1.5 ) (0.5 ) Income before income taxes $ 41.1
$ 75.6 $ 115.4 $ 159.5
Operating profit return on sales U.S. Packaging (c / a) 12.1
% 15.4 % 12.5 % 15.4 % Global Packaging (d / b) 5.0 % 8.0 % 6.4 %
6.8 %
Q2 Q2 YTD Components of changes in
net sales % Change YoY % Change YoY
U.S. Packaging:
Organic sales decline * (1.4 )% (1.6 )%
U.S.
Packaging (1.4 )% (1.6 )%
Global
Packaging: Currency effect (0.6 )% 1.1 % Acquisition effect 1.6
% 3.7 % Organic sales (decline) growth * (0.9 )% 1.2
%
Global Packaging 0.1 % 6.0 %
Total
Company: Currency effect (0.2 )% 0.4 % Acquisition effect 0.5 %
1.2 % Organic sales decline * (1.2 )% (0.7 )%
Total change in net sales (0.9 )% 0.9 %
*Organic sales (decline) growth = 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 June 30,
Six Months Ended June 30, 2017
2016 2017 2016 Non-GAAP earnings per
share Diluted earnings per share, as reported $ 0.30 $ 0.53 $
0.85 $ 1.12 Non-GAAP adjustments per share, net of taxes:
Restructuring costs (1) 0.18 0.09 0.21 0.09 Acquisition-related
costs (2) — 0.05 — 0.06 Diluted
earnings per share, as adjusted $ 0.48 $ 0.67 $ 1.06 $ 1.27
(1) Restructuring costs include costs related to the
2016 Plan focused on plant closures in Latin America and the 2017
Plan focused on aligning the Company's cost structure to its
environment. (2) Acquisition-related costs are comprised primarily
of acquisition costs associated with the Emplal Participações S. A.
and SteriPack acquisitions and were recorded both in operating
income and interest expense (reflecting fees to extinguish portions
of the Emplal seller's debt).
June 30, 2017
Net Debt Current portion of long-term debt $ 5.0 Short-term
borrowings 14.0 Long-term debt, less current portion 1,516.8
Total debt 1,535.8 Less cash and cash equivalents
(55.0 ) Net debt $ 1,480.8
BEMIS COMPANY,
INC. AND SUBSIDIARIES
RECONCILIATION OF
NON-GAAP RETURN ON INVESTED CAPITAL AND EBITDA
(in millions)
(unaudited)
Three Months Ended
12 months ended June 30,
2017
June 30,
2017
March 31,
2017
December 31, 2016
September 30, 2016
Net income $ 28.0 $ 51.1 $ 60.5 $ 68.6 $ 208.2 Income taxes
13.1 23.2 29.2 33.1 98.6 Interest expense 16.0 16.0 15.7 15.1 62.8
Other non-operating income (0.6 ) (0.9 ) (0.7
) (0.6 ) (2.8 )
Earnings before interest and taxes
(EBIT) 56.5 89.4 104.7 116.2 366.8 Restructuring and
acquisition-related costs 23.8 4.4
3.8 4.4 36.4
Adjusted
EBIT (a) 80.3 93.8 108.5 120.6 403.2 Depreciation and
amortization 43.2 41.8 40.7
40.1 165.8
Adjusted
EBITDA $ 123.5 $ 135.6 $ 149.2 $ 160.7
$ 569.0
Average Invested
Capital(1) (b) $ 2,747.4
Assumed tax
rate(2) (c) 35.0 %
Adjusted ROIC (a * (1 - c)
/ b) 9.5 %
Three Months Ended
12 months ended June 30,
2016
June 30,
2016
March 31,
2016
December 31, 2015
September 30, 2015
Net income $ 50.9 $ 56.2 $ 56.8 $ 62.5 $ 226.4 Income taxes
24.7 27.7 28.4 31.5 112.3 Interest expense 14.0 15.4 13.2 12.6 55.2
Other non-operating expense (income) (0.6 ) 0.1
(1.2 ) (0.8 ) (2.5 )
Earnings before
interest and taxes (EBIT) 89.0 99.4 97.2 105.8 $ 391.4
Restructuring and acquisition-related costs 19.6
0.8 2.2 4.6 27.2
Adjusted EBIT (a) 108.6 100.2 99.4 110.4 418.6
Depreciation and amortization 40.5 40.8
40.0 38.0 159.3
Adjusted EBITDA $ 149.1 $ 141.0 $ 139.4
$ 148.4 $ 577.9
Average Invested
Capital(1) (b) $ 2,613.7
Assumed tax
rate(2) (c) 35.0 %
Adjusted ROIC (a * (1 - c)
/ b) 10.4 % (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/20170727005403/en/
Bemis Company Inc.Erin M. Winters,
920-527-5288Director of Investor Relations
Bemis (NYSE:BMS)
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