Bemis Company 2007 Annual Report - IR Solutions

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(dollars in thousands) 2007 2006 2005 Deferred tax expense: U.S. federal 4,711 (6,266) (2,122) Foreign (744) (796) 2,855 State 1,836 (868) 1,627 Total deferred tax expense 5,803 (7,930) 2,360 Total income tax expense $104,300 $109,500 $113,900 The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are presented below. (dollars in thousands) 2007 2006 2005 Deferred Tax Assets: Accounts receivable, principally due to allowances for returns and doubtful accounts $5,759 $6,317 $3,651 Inventories, principally due to additional costs inventoried for tax purposes 14,898 15,699 3,569 Employee compensation and benefits accrued for financial reporting purposes 45,006 54,402 18,077 Foreign net operating losses 12,308 12,596 10,179 Other 4,377 8,003 880 Total deferred tax assets 82,348 97,017 36,356 Less valuation allowance (7,059) (6,701) (3,167) Total deferred tax assets, after valuation allowance $75,289 $90,316 $33,189 Deferred Tax Liabilities: Plant and equipment, principally due to differences in depreciation, capitalized interest, and capitalized overhead $128,471 $127,817 $127,803 Goodwill and intangible assets, principally due to differences in amortization 55,228 50,980 42,787 Other 6,419 8,532 6,392 Total deferred tax liabilities 190,118 187,329 176,982 Deferred tax liabilities, net $114,829 $ 97,013 $143,793 The net deferred tax liabilities are reflected in the balance sheet as follows: (dollars in thousands) 2007 2006 2005 Deferred tax assets (included in prepaid expense) $ 41,042 $ 37,155 $ 24,654 Deferred tax liabilities 155,871 134,168 168,447 Net deferred tax liabilities $114,829 $ 97,013 $143,793 The Company's effective tax rate differs from the federal statutory rate due to the following items: (dollars in thousands) 2007 2006 2005 % of % of % of Income Income Income Amount Before Tax Amount Before Tax Amount Before Tax Computed "expected" tax expense on income before taxes at federal statutory rate $100,049 35.0% $100,029 35.0% $96,750 35.0% Increase (decrease) in taxes resulting from: State and local income taxes net of federal income tax benefit 7,285 2.5 8,732 3.1 9,016 3.3 Foreign tax rate differential (1,464) (0.5) 3,930 1.4 637 0.2 Minority interest 1,313 0.5 1,239 0.4 2,078 0.8 Jobs Act repatriation 6,000 2.2 Manufacturing tax benefits (4,200) (1.5) (3,146) (1.1) (840) (0.4) Other 1,317 0.5 (1,284) (0.5) 259 0.1 Actual income tax expense $104,300 36.5% $109,500 38.3% $113,900 41.2% As of December 31, 2007, the Company had foreign net operating loss carryovers of approximately $35.5 million that are available to offset future taxable income. Approximately $13.8 million of the carryover expires over the period 2014-2016. The balance of the loss carryovers have no expiration. FAS No. 109, Accounting for Income Taxes, requires that a valuation allowance be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. The Company’s management determined 36
that a valuation allowance of $7.1 million against deferred tax assets primarily associated with the foreign net operating loss carryover was necessary at December 31, 2007. Provision has not been made for U.S. or additional foreign taxes on $170,319,000 of undistributed earnings of foreign subsidiaries because those earnings are considered to be indefinitely reinvested in the operations of those subsidiaries. It is not practical to estimate the amount of tax that might be payable on the eventual remittance of such earnings. The American Jobs Creation Act of 2004 (the Jobs Act) provided U.S. corporations with a one-time opportunity to repatriate the undistributed earnings of non-U.S. subsidiaries at a potentially reduced U.S. tax cost. During 2005, the Company repatriated approximately $105.0 million of foreign earnings to the United States pursuant to the provisions of the Jobs Act. As a result, the Company recognized additional tax expense of approximately $6.0 million, net of available foreign tax credits, associated with the repatriation plan. The Company adopted FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109 (FIN 48), on January 1, 2007. The Company recognized no material adjustments as a result of the implementation of this policy. As of January 1, 2007, the Company had approximately $13.9 million of total unrecognized tax benefits. Of this total, approximately $6.0 million represented the amount of unrecognized tax benefits that would impact the effective income tax rate if recognized in any future periods. As of December 31, 2007, the Company had approximately $9.1 million of total unrecognized tax benefits. Of this total, approximately $6.4 million represented the amount of unrecognized tax benefits that would impact the effective income tax rate if recognized in any future periods. A reconciliation of the beginning and ending amount of unrecognized tax benefits, in millions, is as follows: Balance at January 1, 2007 $13.9 Additions based on tax positions related to the current year 1.0 Additions for tax positions of prior years 2.5 Reductions for tax positions of prior years (0.3) Reductions due to a lapse of the statute of limitations (0.4) Settlements (7.6) Balance at December 31, 2007 $ 9.1 The Company does not expect significant changes to the balance of unrecognized tax benefits within the next 12 months. The Company recognizes interest and penalties related to income tax matters as components of income tax expense. The Company had approximately $1.2 million accrued for interest and penalties at January 1, 2007. As of December 31, 2007, the Company had approximately $1.3 million accrued for interest and penalties. The Company and its subsidiaries are subject to U.S. federal and state income tax as well as income tax in multiple international jurisdictions. The Company's U.S. federal income tax returns for the years prior to 2006 have been audited and completely settled. With few exceptions, the Company is no longer subject to examinations by tax authorities for years prior to 2002 in the significant jurisdictions in which it operates. Note 11 – LEASES The Company has operating leases for manufacturing plants, land, warehouses, machinery and equipment, and administrative offices that expire at various times over the next 34 years. Under most leasing arrangements, the Company pays the property taxes, insurance, maintenance, and other expenses related to the leased property. Total rental expense under operating leases was approximately $7,948,000 in 2007, $10,870,000 in 2006, and $13,178,000 in 2005. The Company has capitalized leases for a manufacturing site and some machinery and equipment that expire at various times over the next five years. The present values of minimum future obligations shown in the following chart are calculated based on an interest rate of approximately 4.6 percent, which is the lessor’s implicit rate of return. Interest expense on the outstanding obligations under capital leases was approximately $16,000 in 2007, $15,000 in 2006, and $13,000 in 2005. Minimum future obligations on leases in effect at December 31, 2007, are: Capital Operating (in thousands) Leases Leases 2008 $113 $5,177 2009 42 3,649 2010 0 3,003 2011 0 2,146 2012 0 1,380 Thereafter 0 5,166 Total minimum obligations 155 $20,521 Less amount representing interest 9 Present value of net minimum obligations 146 Less current portion 106 Long-term obligations $ 40 37
Page 1 and 2:
2007 ANNUAL REPORT
Page 3 and 4:
FINANCIAL HIGHLIGHTS Years Ended De
Page 5 and 6:
In 1900, in order to secure a depen
Page 7 and 8: In the 1960s, Bemis embarked on an
Page 9 and 10: BUSINESS STRATEGY Our long-term bus
Page 11 and 12: Pictured from left to right are Hen
Page 13 and 14: PRESSURE SENSITIVE MATERIALS In 195
Page 15 and 16: This pizza package utilizes our ICE
Page 17 and 18: This pizza package utilizes our ICE
Page 19 and 20: BEMIS OFFICERS & DIRECTORS Director
Page 21 and 22: $0.94 $1.54 $0.40 $0.52 $144 $287 D
Page 23 and 24: UNITED STATES SECURITIES AND EXCHAN
Page 25 and 26: PART I - ITEMS 1, 1A, 1B, 2, 3, and
Page 27 and 28: Blown film - A plastic film that is
Page 29 and 30: and the application of such policie
Page 31 and 32: Equity compensation plans as of Dec
Page 33 and 34: Diluted earnings per share were $1.
Page 35 and 36: Research and Development Our effort
Page 37 and 38: (5) Purchase obligations represent
Page 39 and 40: Total increase (decrease) in Accumu
Page 41 and 42: Report of Independent Registered Pu
Page 43 and 44: BEMIS COMPANY, INC. AND SUBSIDIARIE
Page 45 and 46: BEMIS COMPANY, INC. AND SUBSIDIARIE
Page 47 and 48: Taxes on undistributed earnings: No
Page 49 and 50: In early 2008, the FASB issued Staf
Page 51 and 52: Also in January 2006, the Company c
Page 53 and 54: Accumulated other comprehensive inc
Page 55 and 56: (in thousands) 2007 2006 Change in
Page 57: Note 9 - LONG-TERM DEBT Debt consis
Page 61 and 62: (in millions) 2007 2006 2005 Identi
Page 63 and 64: ITEM 9 - CHANGES IN AND DISAGREEMEN
Page 65 and 66: PART IV - ITEM 15 ITEM 15 - EXHIBIT
Page 67 and 68: Exhibit Index Exhibit Description F
Page 69 and 70: EXHIBIT 21 - SUBSIDIARIES OF THE RE
Page 71 and 72: EXHIBIT 23 - CONSENT OF PRICEWATERH
Page 73 and 74: (THIS PAGE INTENTIONALLY BLANK) 51
Page 75 and 76: SHAREHOLDER & CORPORATE Information
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