Bemis Company, Inc. (
Q3 2010 Earnings Call Transcript
October 28, 2010 10:00 am ET
Melanie Miller – VP, IR and Treasurer
Scott Ullem – VP and CFO
Henry Theisen – President and CEO
Sara Magers – Wells Fargo
Punjabi Ghansham [ph]
George Staphos – Banc of America-Merrill Lynch
Mark Wilde – Deutsche Bank
Phillip Henry [ph] – Jefferies
Al Kabili – Macquarie
Chip Dillon – Credit Suisse
Chris Manuel – KeyBanc Capital Markets
David Rose – Citigroup
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» Bemis Co. Inc. Q3 2009 Earnings Call Transcript
Good day everyone. Welcome to the Bemis third quarter 2010 earnings release conference call. This call is being recorded. For opening remarks and introductions, I will now like to turn the call over to the Vice President and Treasurer for Bemis Company, Ms. Melanie Miller. Ms Miller, please go ahead.
Thank you, operator. Welcome to the Bemis company third quarter 2010 conference call. Today is October 28th, 2010. After today’s call a replay will be available on our website, www.bemis.com under the Investor Relations section. Joining me for this call today are Bemis Company's President and Chief Executive Officer, Henry Theisen, and our Vice President and Chief Financial Officer, Scott Ullem.
Today, Scott will begin with his comments on the financial results followed by Henry with comments on the business. After our comments, we will answer any questions you have. However, in order to allow everyone an opportunity to participate, we ask that you limit yourself to one question at a time with a related follow-up and then fall back into the queue for any additional questions.
Before we begin, I’d like to remind everyone that statements regarding future performance of the company made in this teleconference are forward-looking, and are subject to certain risks and uncertainties. Actual results may differ materially from historical, expected or projected results due to a variety of factors, including currency fluctuations, changes in raw material costs and availability, industry competition, unexpected consumer buying trends or customer order patterns, our ability to pass along increased costs in our selling prices, costs and integration risks associated with business combinations, interest rate fluctuations and regional economic conditions.
A more complete list of risk factors is included in our regular SEC filing including the most recently filed Form 10-K for the year ended December 31, 2009.
Now, I'll turn the call over to Scott Ullem.
Thanks, Melanie, and good morning everyone. We are pleased with the results of the third quarter and the growth that we are experiencing in sales and on the bottom line. We reported earnings per share from continuing operations of $0.56 on a GAAP basis and $0.57 excluding special charges associated with acquisition integration. This is an increase of about 19% over last year's adjusted earnings per share and it is within our third quarter guidance range of $0.55 to $0.60 that we provided in July. My comments this morning will focus on the primary drivers impacting operating profit. I will also provide some color on corporate expenses, cash flow and our focus on improving returns on capital.
Net sales this quarter increased by 44% including the impact of our Food Americas acquisition on March 1 of this year. To get a better measure of organic growth in the topline, we compared actual sales in the third quarter of 2010 to pro forma sales in the third quarter of 2009. With that comparison, sales increased by about 8% from the depressed sales levels of last year. We estimate that this increase was driven equally by a volume improvement and increased price mix. Currency exchange translations had no net effect on our sales this quarter, relative to the US dollar, the weaker euro and pound sterling was offset by the stronger Brazilian real and Mexican peso.
Selling prices were generally higher across-the-board reflecting the raw material cost increases that we experienced during the first half of 2010. Volumes were also up in certain flexible packaging categories such as diary and liquids, dry foods, confectionery and snack, beverage overwrap, health and hygiene, industrial and medical and pharmaceutical. In the Pressure Sensitive Material segment which represented about 11% of sales this quarter, we enjoyed a volume recovery in the label category in low to mid-single digit growth in our higher value-added graphic and technical products. Sales mix was generally consistent from 2009 to 2010.
Last year we benefited from sales mix improvements during the third quarter driven by increased sales of higher value-added products that delivered increased margins to the operating profit line as well. In 2010, we have maintained this sales mix while experiencing volume growth across the majority of our product offerings. Volumes in our European operations continued to be negatively impacted by weak market conditions in that region. In addition to topline improvements, operating profit is being impacted by several other factors in 2010. First, the lower operating profit margins associated with the newly acquired Food Americas business that have reduced our overall operating margins in 2010.
Second, we are on track to record $30 million of cost savings synergies related primarily to SG&A and raw material purchasing synergies. We continue to expect these savings to grow to a run rate of approximately $60 million by the end of 2011. In addition, our world-class manufacturing initiatives continue to make important improvements in our cost structure around the world. The discipline that is part of that program ensures that improvements are made and maintained and become the basis for further improvement in the future. Using these initiatives, we have improved our operational efficiency, reduced waste and manufacturing costs and reduced our capital expenditure needs. Over the next few years we expect these factors to contribute through improved operating profit.