Bemis Company 2007 Annual Report - IR Solutions

Note 9 – LONG-TERM DEBT
Debt consisted of the following at December 31,
(dollars in thousands) 2007 2006
Commercial paper payable through 2008
at a weighted-average interest rate of 5.1% $ 161,500 $ 80,700
Notes payable in 2008 at an interest rate of 6.5% 250,000 250,000
Notes payable in 2012 at an interest rate of 4.9% 300,000 300,000
Interest rate swap (fair market value) 3,347 2,464
Industrial revenue bond payable through
2012 at an interest rate of 3.8% 8,000 8,000
Debt of subsidiary companies payable through
2012 at interest rates of 5.2% to 10.5% 54,221 97,118
Obligations under capital leases 146 274
Total debt 777,214 738,556
Less current portion 1,758 16,345
Total long-term debt $775,456 $722,211
The commercial paper and the $250 million note payable due in 2008 have 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, 2007, was 5.1 percent. The
maximum outstanding during 2007 was $235,710,000, and the average outstanding during 2007 was $154,637,000. The weightedaverage
interest rate during 2007 was 5.3 percent.
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, 2007, was 3.8 percent and the weighted-average interest rate during 2007 was 3.9
percent. Debt of subsidiary companies include $43.8 million and $10.4 million for European and South American operations,
respectively.
Long-term debt maturing in years 2008 through 2012 is $1,758,000, $462,461,000, $645,000, $898,000, and $308,105,000,
respectively. The Company is in compliance with all debt covenant agreements.
Under the terms of a revolving credit agreement with eight banks, the Company may borrow up to $500.0 million through
September 2, 2009, including a $100 million multicurrency limit to support the financing needs of our international subsidiaries. This
credit facility is used primarily to support the Company’s issuance of commercial paper. The Company currently pays a facility fee of
0.09 percent annually on the entire amount of the commitment. As of December 31, 2007, outstanding multicurrency borrowings under
the credit facility totaled $43.8 million. Borrowings from the credit agreement mature in September 2009 and charge a variable interest
rate.
The Company entered into three interest rate swap agreements with a total notional amount of $350.0 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 2005 one of these swaps terminated with the repayment of
the underlying $100.0 million debt. The Company does not enter into interest rate swap contracts for speculative or trading purposes.
The differential to be paid or received on the interest rate swap agreements is accrued and recognized as an adjustment to interest expense
as interest rates change. The remaining interest rate swap agreements have been designated as hedges of the fair value of the Company’s
fixed rate long-term debt obligation of $250.0 million, 6.5 percent notes due August 15, 2008.
The variable rate for each of the interest rate swaps is based on the six-month London Interbank Offered Rate (LIBOR), set in
arrears, plus a fixed spread. The variable rates are reset semi-annually at each net settlement date. The net settlement benefit to the
Company, which is recorded as a reduction in interest expense, was $1.3 million, $0.4 million, and $4.3 million in 2007, 2006, and 2005,
respectively. At December 31, 2007 and 2006, the fair value of these interest rate swaps was $3.3 million and $2.5 million, respectively,
in the Company’s favor, as determined by the respective counterparties using discounted cash flow or other appropriate methodologies,
and is included with deferred charges and other assets with a corresponding increase in long-term debt.
Note 10 – INCOME TAXES
(dollars in thousands) 2007 2006 2005
U.S. income before income taxes $206,544 $214,311 $191,183
Non-U.S. income before income taxes 79,310 71,485 85,246
Income before income taxes $285,854 $285,796 $276,429
Income tax expense consists of the following components:
Current tax expense:
U.S. federal $59,538 $ 71,754 $ 66,395
Foreign 29,588 31,374 32,902
State and local 9,371 14,302 12,243
Total current tax expense 98,497 117,430 111,540
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