Tableof Contents

 

 

 

**UNITEDSTATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC  20549**

 

**FORM 10-K**

 

**ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the Fiscal Year Ended December 31,2008**

**Commission File Number 1-5277**

 

**BEMIS COMPANY, INC.**

(Exact name of Registrant asspecified in its charter)

 

| **Missouri**                    | ** ** | **43-0178130**      |
|---------------------------------|------------|---------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer    |
| incorporation or organization)  |       | Identification No.) |

 

| **One Neenah Center, 4****th**** Floor, P.O. Box 669, Neenah, Wisconsin    ****54957-0669** |
|---------------------------------------------------------------------------------------------------------------------------|
| (Address  of principal executive offices)                                                                                 |

 

Registrant’stelephone number, including area code:   **(920) 727-4100**

 

Securities registered pursuant to Section 12(b) of the Act:

 

| ** **                              | ** ** | **Name of  Each Exchange** |
|-----------------------------------------|------------|----------------------------|
| **Title of  Each Class**                | ** ** | **on Which  Registered**   |
| Common  Stock, par value $.10 per share |       | New York Stock Exchange    |
| Preferred  Share Purchase Rights        |       | New York Stock Exchange    |

 

Securities registeredpursuant to section 12(g) of the Act:  **None**

 

Indicate by check mark ifthe Registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.YES  x   NO  o

 

Indicate by checkmark if the Registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Act.YES  o    NO  x

 

Indicate by check markwhether the Registrant has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months and has been subject to such filing requirements for the past 90 days.YES  x   NO  o

 

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of the Registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K.   x

 

Indicate by check markwhether the Registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company.

 
| Large Accelerated Filer  x |   | Accelerated Filer  o |   | Non-Accelerated Filer  o |   | Smaller Reporting  Company  o |
|---------------------------------|--------|---------------------------|--------|-------------------------------|--------|------------------------------------|

 

Indicate by checkmark whether the Registrant is a shell company.   YES   o    NO    x

 

The aggregate marketvalue of the voting and non-voting common equity held by nonaffiliates of theRegistrant on June 30, 2008, based on a closing price of $22.42 per shareas reported on the New York Stock Exchange, was $2,234,164,000.

 

As of February 27,2009, the Registrant had 99,871,584 shares of Common Stock issued andoutstanding.

 

Documents Incorporated by Reference

Portions of theProxy Statement - Annual Meeting of Stockholders May 7, 2009 - Part III

 

 

 

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**BEMIS COMPANY, INC. AND SUBSIDIARIES**

**ANNUAL REPORT ON FORM 10-K**

**TABLE OF CONTENTS**

 
| **Part I**   |                                                                                                                                                                                                                       |   |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Item 1.           | Business                                                                                                                                                                                                                   | 3      |
| Item 1A.          | Risk Factors                                                                                                                                                                                                               | 5      |
| Item 1B.          | Unresolved  Staff Comments                                                                                                                                                                                                 | 7      |
|              |                                                                                                                                                                                                                       |   |
| Item 2.           | Properties                                                                                                                                                                                                                 | 7      |
| Item 3.           | Legal  Proceedings                                                                                                                                                                                                         | 8      |
| Item 4.           | Submission of  Matters to a Vote of Security Holders                                                                                                                                                                       | 9      |
|              |                                                                                                                                                                                                                       |   |
| **Part II**  |                                                                                                                                                                                                                       |   |
| Item 5.           | Market For  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities                                                                                                        | 9      |
| Item 6.           | Selected Financial  Data                                                                                                                                                                                                   | 10     |
|              |                                                                                                                                                                                                                       |   |
| Item 7.           | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                | 10     |
| Item 7A.          | Quantitative and  Qualitative Disclosures About Market Risk                                                                                                                                                                | 20     |
|              |                                                                                                                                                                                                                       |   |
| Item 8.           | Financial  Statements and Supplementary Data                                                                                                                                                                               | 20     |
|              | Management’s Responsibility Statement                                                                                                                                                                                 | 20     |
|              | Report of  Independent Registered Public Accounting Firm                                                                                                                                                                   | 21     |
|              | Consolidated Statement of Income                                                                                                                                                                                           | 22     |
|              | Consolidated  Balance Sheet                                                                                                                                                                                                | 23     |
|              | Consolidated Statement of Cash Flows                                                                                                                                                                                       | 24     |
|              | Consolidated Statement of Stockholders’ Equity                                                                                                                                                                        | 25     |
|              | Notes to Consolidated Financial Statements                                                                                                                                                                                 | 26     |
|              |                                                                                                                                                                                                                       |   |
| Item 9.           | Changes In and Disagreements  With Accountants on Accounting and Financial Disclosure                                                                                                                                      | 42     |
| Item 9A.          | Controls and  Procedures                                                                                                                                                                                                   | 42     |
| Item 9B.          | Other  Information                                                                                                                                                                                                         | 42     |
|              |                                                                                                                                                                                                                       |   |
| **Part III** |                                                                                                                                                                                                                       |   |
| Item 10.          | Directors,  Executive Officers and Corporate Governance                                                                                                                                                                    | 42     |
| Item 11.          | Executive  Compensation                                                                                                                                                                                                    | 43     |
|              |                                                                                                                                                                                                                       |   |
| Item 12.          | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                                                                                                                           | 43     |
|              |                                                                                                                                                                                                                       |   |
| Item 13.          | Certain  Relationships and Related Transactions, and Director Independence                                                                                                                                                 | 44     |
| Item 14.          | Principal  Accountant Fees and Services                                                                                                                                                                                    | 44     |
|              |                                                                                                                                                                                                                       |   |
| **Part IV**  |                                                                                                                                                                                                                       |   |
| Item 15.          | Exhibits and  Financial Statement Schedules                                                                                                                                                                                | 44     |
|              |                                                                                                                                                                                                                       |   |
|              | Signatures                                                                                                                                                                                                                 | 45     |
|              | Exhibit Index                                                                                                                                                                                                         | 46     |
|              |                                                                                                                                                                                                                       |   |
|              | Schedule II –  Valuation and Qualifying Accounts and Reserves                                                                                                                                                         | 47     |
|              | Report of Independent Registered Public Accounting  Firm on Financial Statement Schedule                                                                                                                                   | 47     |
|              |                                                                                                                                                                                                                       |   |
|              | Exhibit 21 –  Subsidiaries of the Registrant                                                                                                                                                                     | 48     |
|              | Exhibit 23  – Consent of PricewaterhouseCoopers LLP                                                                                                                                                              | 50     |
|              |                                                                                                                                                                                                                       |   |
|              | Exhibit 31.1  – Certification of Henry J. Theisen, Chief Executive Officer of the Company,  pursuant to Rule 13a-14(a)/15d-14(a), dated                                                                     | 51     |
|              |                                                                                                                                                                                                                       |   |
|              | Exhibit 31.2  – Certification of Gene C. Wulf, Chief Financial Officer of the Company,  pursuant to Rule 13a-14(a)/15d-14(a), dated                                                                         | 52     |
|              |                                                                                                                                                                                                                       |   |
|              | Exhibit 32  – Certification of Henry J. Theisen, Chief Executive Officer of the Company,  and Gene C. Wulf, Chief Financial Officer of the Company, pursuant to  Section 1350, dated February 27, 2009 | 53     |

 

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**PART I – ITEMS 1, 1A, 1B, 2, 3, and 4**

 

**ITEM 1 – BUSINESS**

 

BemisCompany, Inc., a Missouri corporation (the “Registrant” or “Company”),continues a business formed in 1858.  TheCompany was incorporated in 1885 as Bemis Bro. Bag Company with the namechanged to Bemis Company, Inc. in 1965. The Company is a principal manufacturer of flexible packaging productsand pressure sensitive materials, selling to customers throughout the UnitedStates, Canada, Mexico, South America, Europe, and Asia Pacific.  In 2008, approximately 83 percent of theCompany’s sales were derived from the Flexible Packaging segment andapproximately 17 percent were derived from the Pressure Sensitive Materialssegment.

 

TheCompany’s products are sold to customers primarily in the food industry.  Other customers include companies in thefollowing types of businesses: chemical, agribusiness, medical, pharmaceutical,personal care, electronics, automotive, construction, graphic industries, andother consumer goods.  Furtherinformation about the Company’s operations in its business segments isavailable at Note 12 to the Consolidated Financial Statements included in Item8 of this Annual Report on Form 10-K.

 

Asof December 31, 2008, the Company had approximately 15,400 employees,about 10,200 of whom were classified as production employees.  Many of the North American productionemployees are covered by collective bargaining contracts involving threedifferent international unions, one independent union, and 16 individualcontracts with terms ranging from one to five years.  During 2008, three contracts coveringapproximately 600 employees at three different locations in the United Stateswere successfully negotiated while two contracts covering approximately 120employees at one domestic location continue to be negotiated.  Five domestic labor agreements coveringapproximately 1,400 employees are scheduled to expire in 2009.  Many of the non-North American productionemployees as well as some of the non-North American salaried workforce are coveredby collective bargaining contracts involving 23 different unions with termsranging from one to two years.

 

Workingcapital elements fluctuate throughout the year in relation to the level ofcustomer volume and other marketplace conditions.  Inventory levels reflect a reasonable balancebetween raw material pricing and availability, and the Company’s commitment topromptly fill customer orders. Manufacturing backlogs are not a significant factor in the industries inwhich the Company operates.  The businessof each of the segments is not seasonal to any significant extent.

 

TheCompany is the owner or licensee of a number of United States and foreignpatents and patent applications that relate to certain of its products,manufacturing processes, and equipment. The Company also has a number of trademarks and trademark registrationsin the United States and in foreign countries. The Company’s patents, licenses, and trademarks collectively provide acompetitive advantage.  However, the lossof any single patent or license alone would not have a material adverse effecton the Company’s results as a whole or those of either of its segments.

 

TheCompany’s business activities are organized around its two business segments,Flexible Packaging and Pressure Sensitive Materials.  Both internal and external reporting conformto this organizational structure.  Asummary of the Company’s business activities reported by its two businesssegments follows.

 

**Flexible Packaging Segment**

Theflexible packaging segment manufactures a broad range of food, consumer goods,and industrial packaging.  Multilayerflexible polymer film structures and laminates are sold for food, medical, andpersonal care products as well as non-food applications utilizing vacuum ormodified atmosphere packaging. Additional products include blown and cast stretchfilm products, cartonsealing tapes and application equipment, custom thermoformed plastic packaging,multiwall paper bags, printed paper roll stock, and bag closing materials.  Markets for our products include processedand fresh meat, liquids, frozen foods, cereals, snacks, cheese, coffee,condiments, candy, pet food, bakery, seed, lawn and garden, tissue, freshproduce, personal care and hygiene, disposable diapers, printed shrink overwrapfor the food and beverage industry, agribusiness, pharmaceutical, minerals, andmedical device packaging.

 

**Pressure Sensitive Materials Segment**

Thepressure sensitive materials segment manufactures pressure sensitive adhesivecoated paper and film substrates sold into label markets, graphic markets, andtechnical markets.

 

Productsfor label markets include narrow-web rolls of pressure sensitive paper, film,and metalized film printing stocks used in high-speed printing and die-cuttingof primary package labeling, secondary or promotional decoration, and forhigh-speed, high-volume electronic data processing (EDP) stocks, bar codelabels, and numerous laser printing applications.  Primary markets include food and consumergoods, inventory control labeling, shipping labels, postage stamps, andlaser/ink jet printed labels.

 

Productsfor graphic markets include pressure sensitive films used for decorativesignage through computer-aided plotters, digital and screen printers, andphotographic overlaminate and mounting materials including optically clearfilms with built-in UV inhibitors. Offset printers, sign makers, and photo labs use these products onshort-run and/or digital printing technology to create signs or vehiclegraphics.  Primary markets are indoor andoutdoor signage, photograph and digital print overlaminates, and vehiclegraphics.

 

Productsfor technical markets are pressure sensitive materials that are technicallyengineered for performance in varied industrial applications.  They include micro-thin film adhesives usedin delicate electronic parts assembly and pressure sensitives utilizing foamand tape based stocks to perform fastening and mounting functions.  Tapes sold to medical markets feature medical-gradeadhesives suitable for direct skin contact. Primary markets are electronics, automotive, construction, medical, andpharmaceuticals.

 

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**Marketing, Distribution, and Competition**

Whilethe Company’s sales are made through a variety of distribution methods, morethan 90 percent of each segment’s sales are made by the Company’s direct salesforce.  Sales offices and plants arelocated throughout the United States, Canada, United Kingdom, ContinentalEurope, Scandinavia, Asia Pacific, South America, and Mexico to provide promptand economical service to more than 30,000 customers.  The Company’s technically trained sales forceis supported by product development engineers, design technicians, and acustomer service organization.

 

Nosingle customer accounts for ten percent or more of the Company’s totalsales.  Furthermore, the loss of one or afew major customers would not have a material adverse effect on the Company’soperating results.  Nevertheless,business arrangements with large customers require a large portion of themanufacturing capacity at a few individual manufacturing sites.  Any change in the business arrangement wouldtypically occur over a period of time, which would allow for an orderlytransition for both the Company’s manufacturing site and the customer.

 

Themajor markets in which the Company sells its products are highlycompetitive.  Areas of competitioninclude service, innovation, quality, and price.  This competition is significant as to boththe size and the number of competing firms. Major competitors in the Flexible Packaging segment include Alcan Packaging,Amcor Limited, Exopack Company, Hood Packaging Corporation, Bryce Corporation,Pliant Corporation, Printpack, Inc., Sealed Air Corporation, SonocoProducts Company, Winpak Ltd., and Wihuri OY. In the Pressure Sensitive Materials segment major competitors include3M, Acucote, Inc., Avery Dennison Corporation, Flexcon Corporation, GreenBay Packaging Inc., Ricoh Company, Ltd., Ritrama Inc., Spinnaker Industries, Inc.,Technicote Inc., UPM-Kymmene Corporation, and Wausau Coated Products Inc.

 

TheCompany considers itself to be a significant factor in the market niches itserves; however, due to the diversity of the Flexible Packaging and PressureSensitive Materials segments, the Company’s precise competitive position inthese markets is not reasonably determinable. Advertising is limited primarily to business and trade publicationsemphasizing the Company’s product features and related technical capabilitiesand the individual problem-solving approach to customer problems.

 

**Raw Materials**

Plasticresins and films, paper, inks, adhesives, and chemicals constitute the basicmajor raw materials.  These are purchasedfrom a variety of global industry sources and the Company is not dependent onany one supplier for its raw materials. While temporary industry-wide shortages of raw materials may occur, theCompany expects to continue to successfully manage raw material supplieswithout significant supply interruptions. Currently, raw materials are readily available.

 

**Research and Development Expense**

Research and development expenditures were as follows:

 
| **(in thousands)**       | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Flexible  Packaging           |       | $        | 17,646     |     | $          | 19,477   |       | $ | 20,036 |   |
| Pressure  Sensitive Materials |       | 7,364    |       | 6,506    |       | 4,988    |       |
| Total                         |       | $        | 25,010     |     | $          | 25,983   |       | $ | 25,024 |   |

 

#### **Environmental Control**

Compliancewith federal, state, and local laws, rules, and regulations which have beenenacted or adopted regulating discharges of materials into the environment orotherwise relating to the protection of the environment, is not expected tohave a material effect upon the capital expenditures, earnings, or competitiveposition of the Company and its subsidiaries.

 

#### **Available Information**

TheCompany is a large accelerated filer (as defined in Exchange Act Rule 12b-2)and is also an electronic filer. Electronically filed reports (Forms 4, 8-K, 10-K, 10-Q, S-3, S-8, etc.)can be accessed at the Securities and Exchange Commission (SEC) website(http://www.sec.gov) or by visiting the SEC’s Public Reference Room locatedat 100 F St., N.E., Washington, DC 20549 (call 1-202-551-8090 or 1-800-732-0330for hours of operation). Electronically filed reports can also be accessedthrough the Company’s own website (http://www.bemis.com), under InvestorRelations/SEC Filings or by writing for free information, including SECfilings, to Investor Relations, Bemis Company, Inc., One Neenah Center, 4th Floor, P.O. Box 669, Neenah,Wisconsin 54957-0669, or calling (920) 727-4100.  In addition, the Company’s Board Committeecharters, Principles of Corporate Governance, and the Company’s code ofbusiness conduct and ethics can be electronically accessed at the Company’swebsite under Company Overview or, free of charge, by writing directly to theCompany, Attention:  CorporateSecretary.  The Company has adopted aFinancial Code of Ethics which is filed as an exhibit to this Annual Report on Form 10-K,and is also posted on the Company’s website. The Company intends to post any amendment to, or waiver from, aprovision of the Financial Code of Ethics that applies to our principalexecutive officer, principal financial officer, principal accounting officer,controller and other persons performing similar functions on the InvestorRelations section of its website (www.bemis.com) promptly following the date ofsuch amendment or waiver.

 

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#### **Explanation of TermsDescribing the Company’s Products**

Barrierlaminate – Amultilayer plastic film made by laminating two or more films together with theuse of adhesive or a molten plastic to achieve a barrier for the plannedpackage contents.

Barrierproducts – Productsthat provide protection and extend the shelf life of the contents of thepackage.  These products provide thisprotection by combining different types of plastics and additives into amultilayered plastic package.  Theseproducts protect the contents from such things as oxygen, moisture, light,odor, or other environmental factors.

Blownfilm – A plastic filmthat is extruded through an annular die in the form of a tube and then expandedby an internal column of air in the manufacturing process.

Bundlingfilms – A filmmanufactured by a modified blown film process that is used for wrapping andholding multipacks of products such as canned goods and bottles of liquids,replacing corrugate and fiberboard.

Castfilm – A plastic filmthat is extruded through a straight slot die as a flat sheet during itsmanufacturing process.

Coextrudedfilm – A blown or castfilm extruded with multiple layers extruded simultaneously.

Controlledatmosphere packaging –A package which limits the flow of elements, such as oxygen, carbon dioxide ormoisture, into or out of the package.

Decorativeproducts – Pressuresensitive materials used for decorative signage, promotional items, anddisplays and advertisements.

EZOpen Packaging – Anyone of a series of technologies employed to allow the consumer easy access to apackaged product. Peelable closures, laser or other physical scoring/abrasionof a packaging film may be used. EZ Open can be combined with reclose featuressuch as plastic zippers or the inclusion of pressure sensitive materials intothe packaging film.

Flexiblepolymer film – Anon-rigid plastic film. Generally the shape of the package changes as theproduct contained in it is removed.

Flexographicprinting – The mostcommon flexible packaging printing process in North America using a raisedrubber or alternative material image mounted on a printing cylinder.

In-lineoverlamination – Theability to add a protective coating to a printed material during the printingprocess.

Labelproducts – Pressuresensitive materials made up and sold in roll form.

Labelstock – Pressure sensitive material designed forthe label markets.

Laminate/Barrierlaminate – Amultilayer plastic film made by laminating two or more films together with theuse of adhesive or a molten plastic to achieve the distribution and userequirements for the planned package contents. Alternately, a barrier layer canalso be included as one of the films or in the laminating medium to protect thepackaged products from such things as moisture, oxygen or other environmentalfactors.

Modifiedatmosphere packaging –A package in which the normal atmospheric composition of air inside the packagehas been modified by replacing it with a gas such as nitrogen.

Monolayerfilm – A single layerextruded plastic film.

Multiwallpaper bag – A packagemade from two or more layers, at least one of which is paper, which have notbeen laminated.

Pouchesand bags – An optionthat delivers a semi-finished package, instead of rollstock, to a customer forfilling product and sealing/closing the package for distribution.

Pressuresensitive material – Amaterial coated with adhesive such that upon contact with another material itwill stick.

Primelabel – A pressuresensitive label used as the primary decorative label or secondary label,typically on a consumer product.

RigidPackaging – A form ofPackaging in which the shape of the package is retained as its contents areremoved in use. Bottles, trays and clamshell packaging are examples.

Rollstock – The principle form in which flexiblepackaging material is delivered to a customer. Finished film wound on a core is converted in a process at the end user’splant that forms, fills, and seals the package of product for delivery tocustomers.

Rotogravureprinting – A highquality, long run printing process utilizing a metal engraved cylinder.

Sheetproducts – Pressuresensitive materials cut into sheets and sold in sheet form.

Shrinkfilm/ Barrier shrink film– A packaging film consisting of polyethylene and/or polypropyleneresins extruded via a tubular process. The film is cooled and then reheated and stretched at a temperature nearits melting point. The film can be irradiated with an electron beam in a secondprocess to cross link the molecules for added heat resistance andstrength.  The film is made to shrinkaround a product to be packaged by an application of a thermal treatment.  Alternately, a layer of an oxygen barriermaterial can be included to manufacture a barrier shrink film product.

Stretchfilm – A plastic filmwith a significant ability to stretch which is used to wrap pallets of goods inthe shipping process.

Technicalproducts – Technicallyengineered pressure sensitive materials used primarily for fastening andmounting functions, for example in cell phones, appliances, and electronicdevices.

Thermoformedplastic packaging – Apackage formed by applying heat to a film to shape it into a tray or cavity andthen sealing a flat film on top of the package after it has been filled.

UVinhibitors – Chemicalagents included in a film to protect products against ultraviolet rays.

Variableinformation label – Apressure sensitive label that is typically printed with a bar code or othertype of variable information.

 

**ITEM 1A – RISK FACTORS**

 

**Domestic and international economic conditions.**

Disruption in the domestic and international equityand financial markets has negatively impacted the United States’ economy aswell as international markets in which we conduct business.  We are not able to predict the future impactof this global financial crisis on our liquidity and consolidated statements offinancial position, results of operations, and cash flows.

 

**Funded status of pension plans****—****Recognition of pensionliabilities may cause a significant reduction in stockholders’ equity.**

Statementof Financial Accounting Standards (FAS) No. 158, *Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans*,requires balance sheet recognition of the funded status of our defined benefitpension and postretirement benefit plans. If the fair value of our pension plans’ assets at a future reportingdate decreases or if the discount rate used to calculate the projected benefitobligation (PBO) as of that date decreases, we will be required to record theincremental change in the excess of PBO over the fair value of the assets as areduction of stockholders’ equity.  Theresulting non-cash after-tax charge would not reduce reported 

 

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earningsas this amount would represent future expense. It would be recorded directly as a decrease in the Other ComprehensiveIncome component of stockholders’ equity. While we cannot estimate the future funded status of our pensionliability with any certainty at this time, we believe that if the market valueof assets or the discount rate used to calculate our pension liability materiallydecreases, the adjustment could significantly reduce our stockholders’equity.  A significant reduction instockholders’ equity may impact our compliance with debt covenants or couldcause a downgrade in our credit ratings that could also adversely impact ourfuture cost and speed of borrowing and have an adverse affect on our financialcondition, results of operations and liquidity. We have identified pension assumptions as critical accounting estimates.  See “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Critical Accounting Estimates andJudgments—Accounting for pension costs” and “—Pension assumptions sensitivityanalysis” included in Item 7 of this Annual Report on Form 10-K.

 

**Goodwill and other intangible assets****–****A significant write down ofgoodwill and/or other intangible assets would have a material adverse effect onour reported results of operations and net worth.**

OnJanuary 1, 2002, we adopted Statement of Financial Accounting Standards No. 142,*Goodwill and Other Intangible Assets*(FAS No. 142).  We no longeramortize goodwill, but we review our goodwill balance for impairment at leastonce a year using the business valuation methods required by FAS No. 142.  These methods include the use of a weighted-averagecost of capital to calculate the present value of the expected future cashflows of our reporting units.  Futurechanges in the cost of capital, expected cash flows, or other factors may causeour goodwill and/or other intangible assets to be impaired, resulting in anon-cash charge against results of operations to write down these assets forthe amount of the impairment.  If asignificant write down is required, the charge would have a material adverseeffect on our reported results of operations and net worth.  We have identified the valuation ofintangibles as a critical accounting estimate. See “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Critical Accounting Estimates and Judgments—Intangibleassets and goodwill” included in Item 7 of this Annual Report on Form 10-K.

 

**Foreign operations****–****Conditions in foreign countries and changes in foreignexchange rates may reduce our reported results of operations.**

Wehave operations in the United States, Canada, Mexico, South America, Europe,and Asia.  In 2008, approximately 36percent of our sales were generated by entities operating outside of the UnitedStates.  Fluctuations in currencies cancause transaction and translation losses. In addition, our revenues and net income may be adversely affected byeconomic conditions, political situations, and changing laws and regulations inforeign countries, as to which we have no control.

 

**Interest rates****–****An increase in interest ratescould reduce our reported results of operations.**

AtDecember 31, 2008, our variable rate borrowings approximated $380.7million.  Fluctuations in interest ratescan increase borrowing costs and have an adverse impact on results ofoperations.  Accordingly, increases inshort-term interest rates will directly impact the amount of interest wepay.  For each one percent increase invariable interest rates, our annual interest expense would increase by $3.8million on the $380.7 million of variable rate debt outstanding as of December 31,2008.

 

**Credit rating****–****A downgrade in our credit rating could increase our borrowingcosts and negatively affect our financial condition and results of operations.**

Inaddition to using cash provided by operations, we regularly issue commercialpaper to meet our short-term liquidity needs. Our credit ratings are important to our ability to issue commercialpaper at favorable rates of interest.  Adowngrade in our credit rating could increase the cost of borrowing byincreasing the spread over prevailing market rates that we pay for ourcommercial paper or the fees associated with our bank credit facility.  In addition, our bank credit facility hascovenants that include limits on the sale of businesses, minimum net worth calculations,and a maximum ratio of debt to total capitalization.  If for any reason our existing creditarrangements were no longer available to us we would be required to seekalternative sources of financing.  We wouldexpect to meet our financial liquidity needs by accessing the bank market, whichwould further increase our borrowing costs.

 

**Raw materials****–****Raw material cost increases or shortages could adverselyaffect our results of operations.**

Asa manufacturer, our sales and profitability are dependent upon the availabilityand cost of raw materials, which are subject to price fluctuations.  Inflationary and other increases in the costsof raw materials have occurred in the past and are expected to recur, and ourperformance depends in part on our ability to reflect changes in costs in sellingprices for our products.  In the past, wehave been generally successful in managing increased raw material costs andincreasing selling prices when necessary. Past performance may or may not be replicable in the future.  Natural disasters such as hurricanes, inaddition to terrorist activity and government regulation of environmentalemissions, may negatively impact the production or delivery capacity of our rawmaterial suppliers in the chemical and paper industries.  This could result in increased raw materialcosts or supply shortages, which may have a negative impact on ourprofitability if we are unable to pass along the increased costs in our sellingprices or, in the case of a shortage, secure raw materials from alternativesources.

 

**Patents and proprietary technology****–****Our success is dependent onour ability to develop and successfully introduce new products and to acquireand retain intellectual property rights.**

Ourability to develop and successfully market new products and to develop, acquire,and retain necessary intellectual property rights is essential to our continuedsuccess, which ability cannot be assured.

 

**Industry investigations****–****Several lawsuits have beenfiled against us related to alleged unlawful competitive activities in the industryin connection with now-concluded investigations of the labelstock industry bythe U.S. Department of Justice and of the paper and forest products sector bythe European Commission.**

InApril 2003, we were notified by the U.S. Department of Justice’s AntitrustDivision that it expected to initiate a criminal investigation into competitivepractices in the labelstock industry, and in August 2003 the U.S.Department of Justice issued a subpoena to us in connection with theinvestigation.  In May 2004, theEuropean Commission, seeking evidence of unlawful anticompetitive activities,initiated inspections and obtained documents from our pressure sensitivematerials facility in Belgium.  Wecooperated fully

 

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withthese investigations, and both investigations were closed by each agencywithout further action.  We and one ofour subsidiaries are named defendants in lawsuits in the United States seekingtreble damages and other relief for alleged unlawful competitive practices,which were filed after the announcement of the U.S. Department of Justiceinvestigation.  We are unable to predictthe outcome of these matters although the effect could be material to theresults of operations and/or cash flows of the period in which the matter isresolved.

 

**Acquisitions****–****We may not be able to successfully integrate the businessesthat we acquire.**

Wehave made numerous acquisitions in the past and are actively seeking newacquisitions that we believe will provide meaningful opportunities to grow ourbusiness and improve profitability. Acquired businesses may not achieve the levels of revenue, profit,productivity, or otherwise perform as we expect.  Acquisitions involve special risks,including, without limitation, the potential assumption of unanticipatedliabilities and contingencies as well as difficulties in integrating acquiredbusinesses.  While we believe that ouracquisitions will improve our competitiveness and profitability, we can give noassurance that acquisitions will be successful or accretive to earnings.

 

**Information technology****–****A failure in our informationtechnology infrastructure or applications could negatively affect our business.**

Wedepend on information technology to record and process customer’s orders,manufacture and ship products in a timely manner, and maintain the financialaccuracy of our business records.  We arein the process of developing and implementing a global Enterprise ResourcePlanning (ERP) system that will redesign and deploy new processes and a commoninformation system across our plants over a period of several years.  There can be no certainty that this systemwill deliver the expected benefits.  Thefailure to achieve our goals may impact our ability to (1) processtransactions accurately and efficiently and (2) remain in step with thechanging needs of the trade, which could result in the loss of customers.  In addition, the failure to either deliverthe application on time, or anticipate the necessary readiness and trainingneeds, could lead to business disruption and loss of customers andrevenue.  Finally, failure or abandonmentof the ERP system could result in a write-off of part or all of the costs thathave been capitalized on the project.

 

Ourinformation systems could also be penetrated by outside parties intent onextracting information, corrupting information, or disrupting businessprocesses.  Such unauthorized accesscould disrupt our business and could result in the loss of assets.

 

**Numerous other factors over which we may have limitedor no control may affect our performance and profitability.**

Otherfactors that may influence our earnings, financial position, and liquidity include:  legal and administrative cases andproceedings (whether civil, such as environmental or product related, orcriminal), settlements, judgments, and investigations; developments orassertions by or against us relating to intellectual property rights andintellectual property licenses; adoption of new, or changes in, accountingpolicies or practices and the application of such policies and practices;changes in business mix; customer and supplier business reorganizations orcombinations; increase in cost of debt; ability to retain adequate levels ofinsurance coverage at acceptable rates; fluctuations in pension and employeebenefit costs; loss of significant contract(s); risks and uncertaintiesrelating to investment in development activities and new facilities; timelydevelopment and successful market acceptance of new products; pricing ofcompetitive products; disruptions in transportation networks; increasedparticipation in potentially less stable emerging markets; reliability ofutility services; impact of computer viruses; general or specific economicconditions and the ability and willingness of purchasers to substitute otherproducts for the products that we manufacture; financial condition andinventory strategies of customers and suppliers; credit risks; changes incustomer order patterns; employee work stoppages at plants; increasedcompetition; changes in government regulations and the impact of changes in theworld political environment, including the ability to estimate the impact offoreign currency exchange rates on financial results; the impact ofepidemiological events on the economy and on our customers and suppliers; andacts of war, terrorism, weather, and other natural disasters.

 

**ITEM 1B – UNRESOLVED STAFF COMMENTS**

 

None.

 

**ITEM 2 – PROPERTIES**

 

Propertiesutilized by the Company at December 31, 2008, were as follows:

 

**Flexible Packaging Segment**

Thissegment has 50 manufacturing plants located in 13 states and ten non-USAcountries, of which 45 are owned directly by the Company or its subsidiariesand five are leased from outside parties. Initial lease terms generally provide for minimum terms of five to 15years and have one or more renewal options. The initial term of leases in effect at December 31, 2008, expirebetween 2009 and 2014.

 

**Pressure Sensitive Materials Segment**

Thissegment has seven manufacturing plants located in three states and two non-USAcountries, all of which are owned directly by the Company or its subsidiaries.

 

**Corporate and General**

TheCompany considers its plants and other physical properties to be suitable,adequate, and of sufficient productive capacity to meet the requirements of itsbusiness.  The manufacturing plantsoperate at varying levels of utilization depending on the type of operation andmarket conditions.  The executive officesof the Company, which are leased, are located in Neenah, Wisconsin.

 

7

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**ITEM 3 – LEGAL PROCEEDINGS**

The Company is involved in a number oflawsuits incidental to its business, including environmental relatedlitigation.  Although it is difficult to predict the ultimate outcome ofthese cases, management believes, except as discussed below, that any ultimateliability would not have a material adverse effect upon the Company’sconsolidated financial condition or results of operations.

 

The Company is a potentially responsible party (PRP) pursuant to theComprehensive Environmental Response, Compensation and Liability Act of 1980(commonly known as “Superfund”) and similar state laws in proceedingsassociated with seventeen sites around the United States.  During 2008, the Company was identified as aPRP in four new sites.  In addition, twosites previously considered closed have been re-opened for potential furtherremediation.  These proceedings wereinstituted by the United States Environmental Protection Agency and certainstate environmental agencies at various times beginning in 1983.  Superfund and similar state laws createliability for investigation and remediation in response to releases ofhazardous substances in the environment. Under these statutes, joint andseveral liability may be imposed on waste generators, site owners and operators,and others regardless of fault.  Althoughthese regulations could require the Company to remove or mitigate the effectson the environment at various sites, perform remediation work at such sites,or pay damages for loss of use and non-use values, we expect the Company’sliability in these proceedings to be limited to monetary damages. The Companyexpects its future liability relative to these sites to be insignificant,individually and in the aggregate.  The Company has reserved an amountthat it believes to be adequate to cover its exposure.

 

Dixie Toga S.A., acquired by the Company on January 5, 2005, isinvolved in a tax dispute with the City of São Paulo, Brazil.  The Cityimposes a tax on the rendering of printing services.  The City has assessedthis city services tax on the production and sale of printed labels andpackaging products.  Dixie Toga, along with a number of other packagingcompanies, disagrees and contends that the city services tax is not applicableto its products and that the products are subject only to the state value addedtax (VAT).  Under Brazilian law, state VAT and city services tax aremutually exclusive and the same transaction can be subject to only one of thosetaxes.  Based on a ruling from the State of São Paulo, advice from legalcounsel, and long standing business practice, Dixie Toga appealed the cityservices tax and instead continued to collect and pay only the state VAT.

 

TheCity of São Paulo disagreed and assessed Dixie Toga the city services tax forthe years 1991-1995.  The assessments forthose years are estimated to be approximately $47.0 million at the date theCompany acquired Dixie Toga, translated to U.S. dollars at the December 31,2008 exchange rate.  Dixie Togachallenged the assessments and ultimately litigated the issue in two annulmentactions filed on November 24, 1998 and August 16, 1999 in the LowerTax Court in the city of São Paulo.  Adecision by the Lower Tax Court in the city of São Paulo in 2002 cancelled allof the assessments for the years 1991-1995. The City of São Paulo, the State of São Paulo, and Dixie Toga have eachappealed parts of the lower court decision. In the event of an adverse resolution, the estimated amount for theseyears could be substantially increased for additional interest, monetaryadjustments and costs from the date of acquisition.

 

TheCity has also asserted the applicability of the city services tax for thesubsequent years 1996-2001 and has issued assessments for those years for DixieToga and for Itap Bemis Ltda., a Dixie Toga subsidiary.  The assessments for those years were upheldat the administrative level and are being challenged by the companies.  The assessments at the date of acquisitionfor these years for tax and penalties (exclusive of interest and monetaryadjustments) are estimated to be approximately $7.1 million for Itap Bemis and$22.8 million for Dixie Toga, translated to U.S. dollars at the December 31,2008 exchange rate.  In the event of anadverse resolution, the estimated amounts for these years could be increased by$27.1 million for Itap Bemis and $77.9 million for Dixie Toga for interest,monetary adjustments and costs.

 

The1996-2001 assessments for Dixie Toga are currently being challenged in thecourts.  In pursuing its challenge throughthe courts, taxpayers are generally required, in accordance with courtprocedures, to pledge assets as security for its lawsuits.  Under certain circumstances, taxpayers mayavoid the requirement to pledge assets. Dixie Toga has secured a court injunction that avoids the currentrequirement to pledge assets as security for its lawsuit related to the1996-2001 assessments.

 

The Company strongly disagrees with the City’s position and intends tovigorously challenge any assessments by the City of São Paulo.  TheCompany is unable at this time to predict the ultimate outcome of thecontroversy and as such has not recorded any liability related to thismatter.  An adverse resolution could be material to the consolidatedresults of operations and/or cash flows of the period in which the matter isresolved.

 

On September 18, 2007, the Secretariat of Economic Law (SDE), agovernmental agency in Brazil, initiated an investigation into possibleanti-competitive practices in the Brazilian flexible packaging industry againsta number of Brazilian companies including a Dixie Toga subsidiary.  Theinvestigation relates to periods prior to the Company’s acquisition of controlof Dixie Toga and its subsidiaries.  Given the preliminary nature of theproceedings the Company is unable at the present time to predict the outcome ofthis matter.

 

The Company and its subsidiary, Morgan Adhesives Company, have beennamed as defendants in thirteen civil lawsuits related to an investigationthat was initiated and subsequently closed by the U.S. Department of Justicewithout any further action.  Six of these lawsuits purport torepresent a nationwide class of labelstock purchasers, and each alleges aconspiracy to fix prices within the self-adhesive labelstock industry. The first of these lawsuits was filed on May 27, 2003.  In these lawsuits, the plaintiffs seek actualdamages for the period of the alleged conspiracy (January 1, 1996 through July 25,2003) trebled, plus an award of attorneys’ fees and costs.  On November 5, 2003, the Judicial Panelon MultiDistrict Litigation issued a decision consolidating all of the federalclass actions for pretrial purposes in the United States District Court for theMiddle District of Pennsylvania, before the Honorable Chief Judge Vanaskie. On November 20, 2007, the Court granted plaintiffs’ motion for classcertification.  On March 6, 2008, the Third Circuit Court of Appealsdenied Defendant’s petition for leave to appeal the district court’s decisiongranting class certification.  On June 24,2008, the Court in the consolidated federal class actions issued a decisiondismissing the Company from those actions. On January 27, 2009, the defendants filed a motion to decertify theclass based on new case law in the Third Circuit.  At this time, a discoverycut-off has been set for

 

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December 21,2009.  However, no trial date has beenset.  The Company and Morgan Adhesives Company have also been namedin three lawsuits filed in the California Superior Court in San Francisco.These three lawsuits, which have been consolidated, seek to represent a classof all California indirect purchasers of labelstock and each alleges aconspiracy to fix prices within the self-adhesive labelstock industry.  Finally,the Company has been named in one lawsuit in Vermont, seeking to represent aclass of all Vermont indirect purchasers of labelstock, one lawsuit inNebraska seeking to represent a class of all Nebraska indirect purchasers oflabelstock, one lawsuit in Kansas seeking to represent a class of all Kansasindirect purchasers of labelstock, and one lawsuit in Tennessee, seeking torepresent a class of purchasers of labelstock in various jurisdictions, allalleging a conspiracy to fix prices within the self-adhesive labelstockindustry.  The Company and Morgan Adhesives Company intend to vigorouslydefend the state class actions, and Morgan Adhesives Company intends tovigorously defend the federal class actions.

 

Giventhe ongoing status of the class-action civil lawsuits, the Company is unable topredict the outcome of these matters although the effect could be material tothe results of operations and/or cash flows of the period in which the matteris resolved.  The Company is currently not otherwise subject to anypending litigation other than routine litigation arising in the ordinary courseof business, none of which is expected to have a material adverse effect on thebusiness, results of operations, financial position, or liquidity of theCompany.

 

**ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

Nomatters were submitted to a vote of security holders during the fourth quarterof 2008.

 

**PART II — ITEMS 5, 6, 7, 7A, 8, 9, 9A, and 9B**

 

**ITEM 5 — MARKET FORREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES**

 

TheCompany’s common stock is traded on the New York Stock Exchange under thesymbol BMS.  On December 31, 2008,there were 3,920 registered holders of record of our common stock.  The Company did not repurchase any of itsequity securities in the fourth quarter of the fiscal year ended December 31,2008.  As of December 31, 2008,under authority granted by the Board of Directors, the Company may repurchasean additional 4,074,886 shares of its common stock.

 

Dividendspaid and the high and low common stock prices per share were as follows:

 
| **For the Quarterly Periods Ended:** | ** ** | **March 31** | ** ** | **June 30** | ** ** | **September 30** | ** ** | **December 31** | ** ** |
|----------------------------------------------------------|------------|-------------------|------------|------------------|------------|-----------------------|------------|----------------------|------------|
| 2008                                                     |       |              |       |             |       |                  |       |                 |       |
| Dividend paid  per common share                          |       | $                 | 0.22       |             | $          | 0.22                  |       | $                    | 0.22       |   | $ | 0.22 |   |
| Common stock  price per share                            |       |              |       |             |       |                  |       |                 |       |
| High                                                     |       | $                 | 27.87      |             | $          | 27.86                 |       | $                    | 29.70      |   | $ | 27.02 |   |
| Low                                                      |       | $                 | 22.50      |             | $          | 22.40                 |       | $                    | 21.82      |   | $ | 20.62 |   |
| 2007                                                     |       |              |       |             |       |                  |       |                 |       |
| Dividend paid  per common share                          |       | $                 | 0.21       |             | $          | 0.21                  |       | $                    | 0.21       |   | $ | 0.21 |   |
| Common stock  price per share                            |       |              |       |             |       |                  |       |                 |       |
| High                                                     |       | $                 | 36.53      |             | $          | 34.81                 |       | $                    | 34.53      |   | $ | 29.92 |   |
| Low                                                      |       | $                 | 31.92      |             | $          | 31.95                 |       | $                    | 28.01      |   | $ | 25.53 |   |
| 2006                                                     |       |              |       |             |       |                  |       |                 |       |
| Dividend paid  per common share                          |       | $                 | 0.19       |             | $          | 0.19                  |       | $                    | 0.19       |   | $ | 0.19 |   |
| Common stock  price per share                            |       |              |       |             |       |                  |       |                 |       |
| High                                                     |       | $                 | 34.25      |             | $          | 33.10                 |       | $                    | 33.28      |   | $ | 34.99 |   |
| Low                                                      |       | $                 | 27.86      |             | $          | 28.84                 |       | $                    | 28.54      |   | $ | 32.45 |   |

 

Equitycompensation plans as of December 31, 2008, were as follows:

 
| ** **                                                  | ** ** | ** **                                         | ** ** | ** **                        | ** ** | **Number of securities**          | ** ** |
|-------------------------------------------------------------|------------|----------------------------------------------------|------------|-----------------------------------|------------|---------------------------------------------|------------|
| ** **                                                  | ** ** | ** **                                         | ** ** | ** **                        | ** ** | **remaining available for**       | ** ** |
| ** **                                                  | ** ** | **Number of securities to be** | ** ** | **Weighted-average**              | ** ** | **future issuance under**         | ** ** |
| ** **                                                  | ** ** | **issued upon exercise of**         | ** ** | **exercise price of**   | ** ** | **equity compensation plans**     | ** ** |
| ** **                                                  | ** ** | **outstanding options,**                      | ** ** | **outstanding options,**     | ** ** | **(excluding securities**              | ** ** |
| **Plan Category**                                      | ** ** | **warrants and rights**                  | ** ** | **warrants and rights** | ** ** | **reflected in column (a))** | ** ** |
| ** **                                                  | ** ** | **(a)**                                            | ** ** | **(b)**                           | ** ** | **(c)**                                     | ** ** |
| Equity  compensation plans approved by security holders     |       | 4,731,752                                          | (1)        | $                                 | 19.75      | (2)                                         | 5,915,585  | (3) |
|                                                        |       |                                               |       |                              |       |                                        |       |
| Equity  compensation plans not approved by security holders |       | 0                                                  |       | N/A                               |       | 0                                           |       |
|                                                        |       |                                               |       |                              |       |                                        |       |
| Total                                                       |       | 4,731,752                                          | (1)        | $                                 | 19.75      | (2)                                         | 5,915,585  | (3) |

 

----

(1)   Includes outstanding options and restricted stock units.

(2)   Represents weighted-average exercise price of outstanding optionsonly.  Restricted stock units do not havean exercise price.

(3)   May be issued as options or restricted stock units.

 

9

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**ITEM 6 — SELECTED FINANCIAL DATA**

 

**FIVE-YEARCONSOLIDATED REVIEW**

*(dollarsin millions, except per share amounts)*

 
| **Years Ended December 31,**                                        | ** ** | **2008**    | ** ** | **2007**    | ** ** | **2006**    | ** ** | **2005**    | ** ** | **2004**    | ** ** |
|------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|
| **Operating  Data**                                                                |       |        |       |        |       |        |       |        |       |        |       |
| Net sales                                                                          |       | $           | 3,779.4    |        | $          | 3,649.3     |       | $           | 3,639.4    |        | $          | 3,474.0 |   | $ | 2,834.4 |   |
| Cost of products  sold and other expenses                                          |       | 3,477.5     |       | 3,313.1     |       | 3,304.3     |       | 3,158.9     |       | 2,525.2     |       |
| Interest expense                                                                   |       | 39.4        |       | 50.3        |       | 49.3        |       | 38.7        |       | 15.5        |       |
| Income before  income taxes                                                        |       | 262.5       |       | 285.9       |       | 285.8       |       | 276.4       |       | 293.7       |       |
| Provision for  income taxes                                                        |       | 96.3        |       | 104.3       |       | 109.5       |       | 113.9       |       | 113.7       |       |
| Net income                                                                         |       | 166.2       |       | 181.6       |       | 176.3       |       | 162.5       |       | 180.0       |       |
| Net income as a  percent of net sales                                              |       | 4.4         | %          | 5.0         | %          | 4.8         | %          | 4.7         | %          | 6.3         | %          |
|                                                                               |       |        |       |        |       |        |       |        |       |        |       |
| **Common  Share Data**                                                             |       |        |       |        |       |        |       |        |       |        |       |
| Basic earnings  per share                                                          |       | $           | 1.67       |        | $          | 1.76        |       | $           | 1.68       |        | $          | 1.53 |   | $ | 1.68 |   |
| Diluted earnings  per share                                                        |       | 1.65        |       | 1.74        |       | 1.65        |       | 1.51        |       | 1.67        |       |
| Dividends per  share                                                               |       | 0.88        |       | 0.84        |       | 0.76        |       | 0.72        |       | 0.64        |       |
| Book value per  share                                                              |       | 13.50       |       | 15.40       |       | 14.04       |       | 12.81       |       | 12.23       |       |
| Stock  price/earnings ratio range                                                  |       | 13-18x      |       | 15-21x      |       | 17-21x      |       | 16-21x      |       | 14-18x      |       |
| Weighted-average  shares outstanding for computation of diluted earnings per share |       | 100,969,449 |       | 104,114,043 |       | 106,767,114 |       | 107,818,708 |       | 107,941,738 |       |
| Common shares  outstanding at December 31,                                    |       | 99,708,191  |       | 100,518,355 |       | 104,841,576 |       | 105,305,975 |       | 106,947,128 |       |
|                                                                               |       |        |       |        |       |        |       |        |       |        |       |
| **Capital  Structure and Other Data**                                              |       |        |       |        |       |        |       |        |       |        |       |
| Current ratio                                                                      |       | 2.3x        |       | 2.1x        |       | 2.0x        |       | 2.1x        |       | 2.3x        |       |
| Working capital                                                                    |       | $           | 560.9      |        | $          | 602.4       |       | $           | 538.3      |        | $          | 513.5 |   | $ | 498.9 |   |
| Total assets                                                                       |       | 2,822.3     |       | 3,191.4     |       | 3,039.0     |       | 2,964.6     |       | 2,486.7     |       |
| Short-term debt                                                                    |       | 26.6        |       | 67.8        |       | 67.6        |       | 54.0        |       | 5.7         |       |
| Long-term debt                                                                     |       | 660.0       |       | 775.5       |       | 722.2       |       | 790.1       |       | 533.9       |       |
| Stockholders’  equity                                                         |       | 1,346.5     |       | 1,562.3     |       | 1,472.0     |       | 1,349.4     |       | 1,307.9     |       |
| Return on  average stockholders’ equity                                       |       | 11.4        | %          | 12.0        | %          | 12.5        | %          | 12.2        | %          | 14.7        | %          |
| Return on  average total capital                                                   |       | 8.1         | %          | 8.6         | %          | 8.7         | %          | 8.5         | %          | 9.7         | %          |
| Depreciation and  amortization                                                     |       | $           | 162.0      |        | $          | 158.5       |       | $           | 152.4      |        | $          | 150.8 |   | $ | 130.8 |   |
| Capital  expenditures                                                              |       | 120.5       |       | 178.9       |       | 158.8       |       | 187.0       |       | 134.5       |       |
| Number of common  stockholders                                                     |       | 3,920       |       | 4,111       |       | 4,192       |       | 4,359       |       | 4,465       |       |
| Number of  employees                                                               |       | 15,394      |       | 15,678      |       | 15,736      |       | 15,903      |       | 11,907      |       |

 

**ITEM 7 — MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

***Management’s Discussion and Analysis***

 

## ***Three Years Ended December 31,2008***

## ** **

Management’sDiscussion and Analysis should be read in conjunction with the ConsolidatedFinancial Statements and related Notes included in Item 8 of this Annual Reporton Form 10-K.

 

## **Three-year review of results**

## ** **

| **(dollars in millions)**            | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                                      |       | $        | 3,779.4    |     | 100.0      | %        | $          | 3,649.3 |   | 100.0 | % | $ | 3,639.4 |   | 100.0 | % |
| Cost of products  sold                         |       | 3,131.4  |       | 82.9     |       | 2,973.3  |       | 81.5 |   | 2,942.7 |   | 80.9 |   |
| Gross margin                                   |       | 648.0    |       | 17.1     |       | 676.0    |       | 18.5 |   | 696.7 |   | 19.1 |   |
| Selling,  general, and administrative expenses |       | 342.7    |       | 9.1      |       | 341.6    |       | 9.4 |   | 336.4 |   | 9.2 |   |
| All other expenses                             |       | 42.8     |       | 1.1      |       | 48.5     |       | 1.3 |   | 74.5 |   | 2.0 |   |
| Income before  income taxes                    |       | 262.5    |       | 6.9      |       | 285.9    |       | 7.8 |   | 285.8 |   | 7.9 |   |
| Provision for  income taxes                    |       | 96.3     |       | 2.5      |       | 104.3    |       | 2.9 |   | 109.5 |   | 3.1 |   |
| Net income                                     |       | $        | 166.2      |     | 4.4        | %        | $          | 181.6 |   | 5.0 | % | $ | 176.3 |   | 4.8 | % |
| Effective income  tax rate                     |       |     |       | 36.7     | %          |     |       | 36.5 | % |   |   | 38.3 | % |

 

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# **Overview**

# ** **

BemisCompany, Inc. is a leading global manufacturer of flexible packaging andpressure sensitive materials supplying a variety of markets.  Generally about 60 percent of our totalcompany net sales are to customers in the food industry.  Sales of our flexible packaging products arewidely diversified among food categories and can be found in nearly every aisleof the grocery store.  Other markets intowhich we sell our flexible packaging products include medical devices, personalcare, and lawn and garden.  Our emphasison supplying packaging to the food industry has historically provided a morestable market environment for our flexible packaging business segment, whichaccounts for about 83 percent of our net sales. The remaining 17 percent of ournet sales is from the pressure sensitive materials business segment which,while diversified in end use products, is less focused on food industryapplications and more exposed to economically sensitive end markets.

 

Themarkets into which our products are sold are highly competitive.  Our leading flexible packaging marketpositions in North and South America reflect our focus on expanding ouroffering of value-added, proprietary products. We also manufacture products that are less unique but for which ourtechnical know-how and economies of scale offer us a competitiveadvantage.  The primary raw materials forour business segments are polymer resins, films, paper, ink, and adhesives.

 

## **Market Conditions**

## ** **

During2008, economic conditions continued to weaken and global financial marketsexperienced a significant liquidity crisis. Governments around the world have responded to the financial crisis withfunding support for their regional financial systems. Consumer spendingdeclined and unemployment in the United States increased.  The housing and automotive markets continueto be weak.  Commodity prices hithistorically high levels during the second and third quarters of 2008,resulting in increased raw material and energy costs for manufacturers.  Some of the commodity grade raw materialcosts steadily decreased throughout the fourth quarter as the global financialcrisis widened.  Our raw material costshit historic highs during the year, but by the end of the year certain materialcosts had declined to early 2007 levels. While lower raw material costs benefit operating profit on a short-termbasis, our selling prices will decrease to reflect these lower costs over a fewmonths.

 

## **Restructuring and Related Charges**

## ** **

InJanuary 2006, we announced the planned closure of five flexible packagingfacilities and one pressure sensitive materials facility in order toconsolidate production capacity and improve overall cost structure andefficiency.  These efforts weresubstantially complete as of December 31, 2006.  Total remaining costs incurred in 2007 weresubstantially offset by restructuring related gains.  Restructuring and related charges incurred in2006 totaled $31.2 million, of which $12.9 million primarily reflectedaccelerated depreciation and was recorded as a component of cost of productssold.  The remaining $18.3 millionprimarily reflected employee-related costs and was recorded as a component ofother costs (income).

 

## **Acquisitions**

## ** **

InApril 2006, we acquired the remaining shares of our three majority-ownedjoint ventures in Mexico for $6.8 million.

 

# **Results of Operations**

## ***Consolidated Overview***

## ** **

| **(in millions, except per share amounts)** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                                                            |       | $        | 3,779.4    |     | $          | 3,649.3  |       | $ | 3,639.4 |   |
| Net income                                                           |       | 166.2    |       | 181.6    |       | 176.3    |       |
| Diluted earnings  per share                                          |       | 1.65     |       | 1.74     |       | 1.65     |       |
|                                                                      |            |          |            |          |            |          |            |  |  |  |

 

***2008 versus 2007***

 

Forthe year ended December 31, 2008, net sales increased 3.6 percent,reflecting increased raw material costs incorporated into higher selling pricesduring the year.   Unit volume sold intocertain food packaging markets increased compared to 2007, while unit volumesdeclined in advertising, display film, and construction-related markets thatare more sensitive to economic conditions. Currency translation benefits increased net sales by 1.7 percent.

 

Dilutedearnings per share were $1.65 for 2008, a 5.2 percent decrease compared to$1.74 per share for 2007.  In 2007,diluted earnings per share included $0.02 per share tax benefit related todividends from foreign subsidiaries. Higher raw material costs in 2008 negatively impacted gross margins.

 

***2007 versus 2006***

 

Forthe year ended December 31, 2007, net sales increased 0.3 percent,reflecting a net sales benefit from currency translation of 3.4 percent, offsetby a 3.1 percent decrease in net sales related to lower unit sales volume.

 

Dilutedearnings per share were $1.74 for 2007, including a $0.02 per share tax benefitrelated to dividends from foreign subsidiaries. In 2006, diluted earnings per share were $1.65 for 2006, including $0.18per share of restructuring and related charges.

 

# ***Flexible Packaging Business Segment***

# ** **

Ourflexible packaging business segment provides packaging to a variety of endmarkets, including meat and cheese, confectionery and snack, frozen foods, lawnand garden, health and hygiene, beverages, medical devices, bakery, and dryfoods.  The most significant rawmaterials used in this business segment are polymer resins, which we use todevelop and manufacture single layer and multilayer film products.  Selling price changes lag behind changes inour raw material costs.  During 2008, resincosts dramatically increased during the second and third quarters.  Certain commodity resin costs subsequentlydecreased during the fourth quarter.  Themagnitude and frequency of these cost changes negatively impacted operatingprofit during 2008.

 

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InJanuary of 2006, we announced a restructuring plan to close five flexiblepackaging plants in order to consolidate production capacity and improveoverall cost structure and efficiency throughout this business segment.  These efforts were substantially completed byDecember 31, 2006.  Restructuringand related charges for the flexible packaging business segment totaled $29.0million in 2006.

 
| **(dollars in millions)**                                      | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                                                                |       | $        | 3,153.2    |     | $          | 3,001.8  |       | $ | 3,000.1 |   |
| Operating profit  (See Note 12 to the Consolidated Financial Statements) |       | 315.9    |       | 346.6    |       | 335.1    |       |
| Operating profit  as a percentage of net sales                           |       | 10.0     | %          | 11.5     | %          | 11.2     | %          |
|                                                                          |            |          |            |          |            |          |            |  |  |  |

 

***2008 versus 2007***

 

Netsales in our flexible packaging business segment increased 5.0 percent in 2008,principally reflecting the impact of higher selling prices.  Currency effects accounted for sales growthof 1.4 percent during 2008. Increases in net sales of packaging for meat andcheese, dairy and liquids, bakery products, and medical products marketsreflected higher unit volume.  Thesemarkets represent approximately 48 percent of total flexible packaging netsales.  Net sales also increased inpackaging for dry foods, health and hygiene, and industrial product markets,driven primarily by higher selling prices. These markets represent approximately 22 percent of flexible packaging netsales.  We experienced lower net sales inthe remaining 30 percent of our flexible packaging market categories as aresult of lower unit volume.  These lowervolume markets include confectionery and snack markets, pet products, overwrapfilm for bottled water, frozen foods, lawn and garden, and protective displayfilms.  Non-discretionary food marketshave historically provided defensive characteristics during times of economicweakness.  Markets for protective displayfilms and packaging for discretionary food and consumer products have beennegatively impacted during the recent economic downturn.  We expect these trends to continue until theeconomy begins to strengthen and consumer confidence improves.

 

Operatingprofit as a percentage of net sales decreased to 10.0 percent in 2008 from 11.5percent in 2007.  Restructuring andrelated activities increased 2007 operating income by $1.5 million.  Raw material prices increased substantiallyduring the first eight months of 2008, and many specialty materials used in ourfood packaging products maintained those prices through the end of theyear.  Our method of passing these inputcosts on to customers through increased selling prices normally occurs with aseveral month lag and pressures operating profit margins during that period.

 

***2007 versus 2006***

 

Netsales in our flexible packaging business segment were virtually unchanged from2006 to 2007.  A benefit from currencytranslation of 3.1 percent was completely offset by weak demand across many ofour packaging markets. Net sales of packaging for meat and cheese, whichrepresent about 30 percent of our flexible packaging net sales, decreased about3 percent excluding the impact of currency. Packaging for bakery products and dry foods, for which consumer demandhas been impacted by increased wheat prices, experienced a drop in net sales ofabout 10 percent from 2006 levels. Packaging for pet products and industrial products also decreased over 9percent in 2007.  Packaging for bakery,dry foods, pet products, and industrial products represents about 17 percent offlexible packaging net sales. Growth in other flexible packaging marketsrepresenting a combined 17 percent of total flexible packaging net salessubstantially offset the impact of these decreases.  Packaging for dairy and liquid products andoverwrap for bottled beverages each increased by about 11 percent.  Net sales of medical device packagingincreased almost 6 percent compared to 2006, despite a slowdown related to aperiod of manufacturing shutdown during 2007 in order to move equipment to anew facility in Northern Ireland.

 

Operatingprofit as a percentage of net sales increased to 11.5 percent in 2007 from 11.2percent in 2006.  Restructuring andrelated activities resulted in $1.5 million of operating income in 2007 and a$29.0 million reduction in operating profit in 2006.  During 2007, operating profit was negativelyimpacted by the lower unit sales volume noted in the previous paragraph and asteady increase in raw material costs.

 

# ***Pressure Sensitive Materials Business Segment***

# ** **

Thepressure sensitive materials business segment offers adhesive products to threemarkets:  prime and variable informationlabels, which include roll label stock used in a wide variety of label markets;graphic design, used to create signage and decorations; and technicalcomponents, which represent pressure sensitive components for industries suchas the electronics, automotive, construction and medical industries.

 

Paperand adhesive are the primary raw materials used in our pressure sensitivematerials business segment.  For the lastseveral years, general economic conditions and competitive pressures have had agreater influence on selling prices and operating performance than raw materialcosts.

 

InJanuary of 2006, we announced a restructuring plan which included theclosure of one pressure sensitive materials plant in order to consolidateproduction capacity and improve overall cost structure and efficiency.  This effort was completed by December 31,2006.  Restructuring and related chargesincurred for this business segment totaled $1.0 million in 2006.  These costs were primarily employee-relatedcosts and were recorded as a component of other costs (income), net.

 
| **(dollars in millions)**                                      | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                                                                |       | $        | 626.2      |     | $          | 647.5    |       | $ | 639.3 |   |
| Operating profit  (See Note 12 to the Consolidated Financial Statements) |       | 34.3     |       | 40.3     |       | 50.1     |       |
| Operating profit  as a percentage of net sales                           |       | 5.5      | %          | 6.2      | %          | 7.8      | %          |
|                                                                          |            |          |            |          |            |          |            |  |  |  |

 

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***2008 versus 2007***

 

Ourpressure sensitive materials business segment reported a net sales decrease of3.3 percent in 2008, reflecting a benefit from currency translation of 2.8percent which was more than offset by lower unit sales.  Unit volumes declined in each of our pressuresensitive product lines, partially offset by increased label products pricesand improved sales mix for technical products. Our label and graphic product lines represent 88 percent of our 2008pressure sensitive materials net sales. Demand for these products in the discretionary consumer and advertisingmarkets declined during the recent global economic downturn.

 

Operatingprofit as a percent of net sales was lower in 2008 compared to 2007, reflectingdecreased unit sales volumes across all product lines.  Due to the nature of the markets served bythis business segment, we expect operating profit as a percent of net sales tocontinue to decline until global economic conditions improve.

 

***2007 versus 2006***

 

Ourpressure sensitive materials business segment reported a net sales increase of1.3 percent in 2007, reflecting a benefit from currency translation of 4.5percent, substantially offset by lower unit sales for label and technical products.  Increased industry capacity for labelproducts dampened unit sales volume and pricing during 2007, resulting in a 4percent decrease in net sales of label products, excluding the impact ofcurrency.  Technical product net salesdecreased by over 8 percent as customers faced economic challenges associatedwith the housing and medical markets. Graphic product net sales increased by about 5 percent during 2007.

 

Operatingprofit as a percent of net sales was lower in 2007 compared to 2006, reflectingdecreased sales of value-added technical products and a lower margin sales mixin our graphic product sales.

 

# **Consolidated Gross Margin**

# ** **

| **(dollars in millions)**        | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Gross margin                               |       | $        | 648.0      |     | $          | 676.0    |       | $ | 696.7 |   |
| Gross margin as  a percentage of net sales |       | 17.1     | %          | 18.5     | %          | 19.1     | %          |
|                                            |            |          |            |          |            |          |            |  |  |  |

 

Restructuringand related charges reduced gross margins by $0.3 million in 2007 and $12.9million in 2006.  There were norestructuring charges during 2008.  Thetime lag between increases in raw material costs and the implementation ofrelated selling price increases negatively impacted gross margins as a percentof net sales in each of the years presented. In addition, lower production volume associated with weak consumerdemand for products in our markets reduced fixed cost absorption during 2007and 2008.  The impact of these costpressures was partially offset by ongoing initiatives to improve productionefficiency and cost management during the same timeframe.

 

# **Consolidated Selling, Generaland Administrative Expenses**

# ** **

| **(dollars in millions)**                      | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Selling, general  and administrative expenses (SG&A) |       | $        | 342.7      |     | $          | 341.6    |       | $ | 336.4 |   |
| SG&A as a  percentage of net sales                   |       | 9.1      | %          | 9.4      | %          | 9.2      | %          |
|                                                          |            |          |            |          |            |          |            |  |  |  |

 

Selling,general and administrative expenses have remained relatively stable over thepast few years, reflecting management’s focus on cost management.  The decline in the ratio of these expenses tonet sales was driven by higher selling prices included in net sales over thesetime periods.

 

**OtherExpenses**

 
| **(dollars in millions)**   | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Research and  development (R&D)   |       | $        | 25.0       |     | $          | 26.0     |       | $ | 25.0 |   |
| R&D as a  percentage of net sales |       | 0.7      | %          | 0.7      | %          | 0.7      | %          |
| Interest expense                      |       | $        | 39.4       |     | $          | 50.3     |       | $ | 49.3 |   |
| Other costs  (income), net            |       | (27.6    | )          | (31.5    | )          | (3.3     | )          |
| Minority  interest in net income      |       | 6.0      |       | 3.7      |       | 3.5      |       |
| Income taxes                          |       | 96.3     |       | 104.3    |       | 109.5    |       |
| Effective tax  rate                   |       | 36.7     | %          | 36.5     | %          | 38.3     | %          |

 

# **Research and Development**

# ** **

Ourefforts to introduce new products continue at a steady pace and are an integralpart of our daily plant operations.  Ourresearch and development engineers work directly on commercial productionequipment, bringing new products to market without the use of pilotequipment.  We believe this approachsignificantly improves the efficiency, effectiveness, and relevance of ourresearch and development activities and results in earlier commercialization ofnew products.  Expenditures that are notdistinctly identifiable as research and development costs are included in costsof products sold.

 

# **Interest Expense**

# ** **

Interestexpense decreased by $10.9 million during 2008, reflecting lower levels of debtoutstanding and lower average interest rates. The percentage of variable rate debt included in total debt is 55percent in 2008, 64 percent in 2007, and 59 percent in 2006.  The effective interest rate was 4.8 percentin 2008, 5.9 percent in 2007, and 5.9 percent in 2006.

 

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# **Other Costs (Income), Net**

 

In2008, other costs (income) included $33.5 million of financial income, about 40percent of which relates to interest income on cash held at non-U.S.locations.  The use of cash on hand fordebt reduction during the fourth quarter of 2008 is expected to result in lowerinterest income during 2009.  The remainderof the financial income is generated from fiscal incentives for certain flexiblepackaging locations and is considered as a part of flexible packaging operatingprofit.  These fiscal incentives areassociated with net sales in South America and are expected to continue to growat a modest pace over the next few years in conjunction with sales growth inthat region.  Transaction losses onforeign currency totaling $6.8 million offset financial income in 2008.  Of this total, $6.1 million of transaction losseswere recorded during the fourth quarter as dramatic changes in currency exchangerates occurred as a result of the global financial crisis.

 

In2007, other costs (income) included $28.3 million of financial income, abouthalf of which related to interest income on cash held at non-U.S.locations.  In 2006, other costs (income)included $18.3 million of restructuring and related charges, which were morethan offset by financial income of $18.0 million and a $4.5 million favorableresolution of a litigated foreign excise tax liability.

 

**MinorityInterest in Net Income**

 

Minorityinterest in net income is primarily associated with the accounting for theoutstanding preferred shares of Dixie Toga, our Brazilian flexible packagingsubsidiary.

 

# **Income Taxes**

# ** **

The difference between ouroverall tax rate of 36.7 percent in 2008, 36.5 percent in 2007, and 38.3percent in 2006 and the U.S. statutory rate of 35 percent in each of the threeyears presented principally relates to state and local income taxes net offederal income tax benefits. The lower effective tax rates in 2008 and 2007 as comparedto 2006 reflect benefits related to dividends from a foreign subsidiary, theincreasing impact of U.S. tax incentives for manufacturing companies, and achange in the geographic mix of pretax income.

 

# **Liquidity and CapitalResources**

# ** **

## ***Sources of Liquidity***

## ** **

Inthe second half of 2008, global financial markets experienced a liquiditycrisis.  This crisis resulted in asubstantial reduction in available funding for commercial banks and corporatedebt issuers.  Governments around theworld have responded with funding support for their regional financial systems.Despite this government intervention, capital market financing has become lessavailable and more expensive.  We usecommercial paper to finance our daily operations.  Our strong balance sheet and short-termA-1/P-2 credit ratings have preserved our ability to access the commercialpaper market at a reasonable cost.  Ifthe commercial paper market becomes unavailable to us, we would expect to useour revolving bank credit facilities to finance our operations until thecommercial paper market is restored or alternative financing can be arranged.

 

## ***Debt to Total Capitalization***

## ** **

Debtto total capitalization (which includes total debt, long-term deferred taxliabilities and equity) was 32.0 percent at December 31, 2008, compared to32.9 percent at December 31, 2007 and 33.0 percent at December 31,2006.  Improvement in this ratio wasdriven by debt repayments, partially offset by reductions to stockholders’equity for pension and currency translation effects.  Total debt was $686.6 million, $843.3million, and $789.8 million at year-end 2008, 2007 and 2006, respectively.

 

## ***Credit Rating***

## ** **

## **Our capital structure and financial practiceshave earned Bemis Company long-term credit ratings of “A” from Standard &Poor’s and “Baa1” from Moody’s Investors Service, and a credit rating of “A-1”and “Prime-2” for our commercial paper program from Standard & Poor’sand Moody’s Investor Service, respectively. These credit ratings are important to our ability to issue commercialpaper at favorable rates of interest.**

## ** **

## ***Net Cash Flow from Operations***

## ** **

Netcash provided by operations was $293.6 million for the year ended December 31,2008, compared to $406.2 million in 2007 and $349.0 million in 2006.  During 2008, cash flow was negativelyimpacted by lower operating profit and higher levels of working capitalcompared to 2007.  Working capitalincreases during 2008 reflect the impact of higher raw material costs oninventory and increased selling prices on accounts receivable.  Net cash provided by operations in the yearended December 31, 2006, was reduced by voluntary pension contributions toour U.S. pension plans of $24.0 million. Contributions of $2.3 million and $1.1 million were made to our U.S.pension plans in 2008 and 2007, respectively. We expect to contribute approximately $30 million to our U.S. pensionplans in 2009.  We expect to fund thiscontribution with cash provided by operations.

 

***Available Financing***

 

Inaddition to using cash provided by operations, we issue commercial paper tomeet our short-term liquidity needs.  Atyear-end, our commercial paper debt outstanding was $330.8 million.  Based upon our current credit rating, weenjoy ready access to the commercial paper markets.  During the fourth quarter of 2008, the globalfinancial crisis threatened to eliminate liquidity in the commercial papermarket.  While not anticipated, if thesemarkets were to become illiquid or if a credit rating downgrade limited ourability to issue commercial paper, we would draw upon our existing back-upcredit facility.  Under the terms of ourrevolving credit agreements, we have the capacity to borrow up to $625 million,of which $425 million matures April 28, 2013, and $200 million matures April 28,2009. These facilities are primarily used to support our issuance of commercialpaper.  Our revolving credit facilitiesare supported by a group of major U.S. and international banks.  Covenants imposed by these revolving creditfacilities include limits on the sale of businesses, minimum net worthcalculations, and a maximum ratio of debt to total capitalization.  The revolving credit agreements include acombined $100 million multicurrency limit to support the financing needs of ourinternational subsidiaries.  In addition,we have arrangements in place to issue up to $100 million of ExtendableCommercial Notes (ECNs), which are short-term instruments whose 

 

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maturity can be extended to 390 days from thedate of issuance.  As of December 31,2008, the ECN market was unavailable due to unfavorable market conditions.  If these revolving credit facilities and ECNswere no longer available to us, we would expect to meet our financial liquidityneeds by accessing the bank market, which would increase our borrowingcosts.  Borrowings under the creditagreement are subject to a variable interest rate.

 

Commercialpaper outstanding at December 31, 2008, has been classified as long-termdebt in accordance with our intention and ability to refinance such obligationson a long-term basis.  The relatedback-up credit agreement expires on April 28, 2013.

 

OnAugust 15, 2008, notes totaling $250 million matured and were repaid usingproceeds from the issuance of commercial paper.  On December 31, 2008, our revolvingcredit facilities supported total commercial paper outstanding of $330.8million, industrial revenue bond outstanding of $8.0 million, and multicurrencyloans outstanding of $5.8 million.  As aresult, we had the capacity to borrow an additional $280.4 million under thecredit facility as of December 31, 2008. Of this available liquidity, $200 million of revolving credit facilitiesmature on April 28, 2009.  Whilecash flows from operations are expected to provide sufficient liquidity to meetour cash obligations projected for 2009, we will continue to evaluate the needto refinance this excess revolving credit capacity in light of existing capitalmarket conditions and updated liquidity needs.

 

## ***Liquidity Outlook***

## ** **

Managementexpects cash flow from operations and available liquidity described above to besufficient to support operations going forward. Our liquidity has not been materially impacted by the current creditenvironment or the recent economic slowdown, and we do not expect that it willbe materially impacted in the near future. There can be no assurance, however, that the cost or availability offuture borrowings will not be impacted by ongoing capital marketdisruptions.  In addition, substantialincreases in raw material costs could increase our short term liquidity needs.

 

## ***Uses of Liquidity***

## ** **

## **Capital Expenditures**

## ** **

Capitalexpenditures were $120.5 million during 2008, compared to $178.9 million in2007, and $158.8 million in 2006. Capital expenditures during the years presented supported multiyearinvestments for new facilities and equipment for the medical and pharmaceuticalmarkets, a platform for rigid polyester packaging products, additionalconverting equipment in our Malaysian operation, proprietary film productioncapacity for European markets, and a new enterprise resource planningsystem.  Capital expenditures for 2009are estimated to be approximately $105 million. Over the long-term, we expect average annual capital expenditures to beapproximately equivalent to total annual depreciation and amortizationexpenses.  We expect to fund 2009 capitalexpenditures with cash provided by operating activities.

 

## **Dividends**

## ** **

Weincreased our quarterly cash dividend by 4.8 percent during the first quarterof 2008 to 22 cents per share from 21 cents per share.  This follows increases of 10.5 percent in2007 and 5.6 percent in 2006.  In February 2009,the Board of Directors approved the 26th consecutive annual increase in the quarterlycash dividend on common stock to 22.5 cents per share, a 2.3 percent increase.

 

## **Share Repurchases**

## ** **

During2008, we purchased 1.0 million shares of common stock in the open market.  During 2007, we purchased 5.15 million sharesof common stock, of which 4.0 million shares were repurchased in conjunctionwith an accelerated share repurchase program. The remaining 1.15 million shares were purchased in the open market.  During 2006, we purchased 0.6 million sharesof common stock in the open market.  Asof December 31, 2008, we were authorized to purchase up to 4.1 millionadditional shares of common stock for the treasury.

 

***Contractual Obligations***

 

Thefollowing table provides a summary of contractual obligations including ourdebt payment obligations, capital lease obligations, operating leaseobligations, and certain other purchase obligations as of December 31,2008.

 

# **Contractual Payments Due byPeriod**

# ** **

| ** **                      | ** ** | ** ** | ** ** | **Less than** | ** ** | **1 to 3** | ** ** | **3 to 5** | ** ** | **More than** | ** ** |
|---------------------------------|------------|------------|------------|--------------------|------------|----------------------|------------|----------------------|------------|--------------------|------------|
| **(in millions)**          | ** ** | **Total**  | ** ** | **1 year**    | ** ** | **years**            | ** ** | **years**            | ** ** | **5 years**   | ** ** |
| Debt payments  (1)              |       | $          | 686.6      |               | $          | 26.6                 |       | $                    | 21.1       |               | $          | 638.9 |   | $ | 0.0 |   |
| Interest expense  (2)           |       | 91.9       |       | 26.8               |       | 49.8                 |       | 15.3                 |       | 0.0                |       |
| Capital leases  (3)             |       | 0.1        |       | 0.1                |       | 0.0                  |       | 0.0                  |       | 0.0                |       |
| Operating leases  (4)           |       | 25.6       |       | 6.8                |       | 8.6                  |       | 4.5                  |       | 5.8                |       |
| Purchase  obligations (5)       |       | 149.1      |       | 146.8              |       | 1.4                  |       | 0.1                  |       | 0.8                |       |
| Postretirement  obligations (6) |       | 53.0       |       | 4.4                |       | 15.9                 |       | 12.6                 |       | 20.1               |       |
|                                 |            |            |            |                    |            |                      |            |                      |            |                    |            |  |  |  |  |  |

 

Pursuantto the application of FIN 48, the Company has accrued income tax liabilitiesassociated with uncertain tax positions. These liabilities have been excluded from the table above due to thehigh degree of uncertainty as to amounts and timing regarding futurepayments.  See Note 10 of theConsolidated Financial Statements for additional information.

 

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(1)   These amounts are included in our Consolidated Balance Sheet.  A portion of this debt is commercial paperbacked by a bank credit facility that expires on April 28, 2013.

 

(2)   A portion of the interest expense disclosed is subject to variableinterest rates.  The amounts disclosedabove assume that variable interest rates are equal to rates at December 31,2008.

 

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(3)   Amount noted also includes estimated interest costs.  The present value of these obligations,excluding interest, is included on our Consolidated Balance Sheet.  See Note 11 to the Consolidated FinancialStatements for additional information about our capital lease obligations.

 

(4)   We enter into operating leases in the normal course of business.  Substantially all lease agreements have fixedpayment terms based on the passage of time. Some lease agreements provide us with the options to renew thelease.  Our future operating leaseobligations would change if we exercised these renewal options and if weentered into additional operating lease agreements.

 

(5)   Purchase obligations represent contracts or commitments for the purchaseof raw materials, utilities, capital equipment and various other goods andservices.

 

(6)   Postretirement obligations represent contracts or commitments forpostretirement healthcare benefits and benefit payments for the unfunded BemisSupplemental Retirement Plan.  See Note 6to the Consolidated Financial Statements for additional information about ourpostretirement benefit obligations.

 

## **Interest Rate Swaps**

## ** **

Asof December 31, 2007, our long-term unsecured notes included $250 milliondue in August 2008.  In September 2001,we entered into interest rate swap agreements with two U.S. banks, whichincreased our exposure to variable rates. We generally prefer variable rate debt since it has been our experiencethat borrowing at variable rates is less expensive than borrowing at fixedrates over the long term.  These interestrate swap agreements, which expired on the date the related notes matured in August 2008,reduced the interest cost of the notes from 6.5 percent to about 6.0 percent in2008 and 6.0 percent in 2007.  Sincethese variable rates are based upon six-month London Interbank Offered Rates(LIBOR), calculated in arrears, at the semiannual interest payment dates of thecorresponding notes, increases in short-term interest rates will directlyimpact the amount of interest we pay.

 

Accountingprinciples generally accepted in the U.S. (GAAP) require that the fair value ofthese swaps, which were designated as hedges of our fixed rate unsecured notesoutstanding, be recorded as an asset or liability of the Company.  The fair value of these swaps was recorded asan asset of $3.3 million at December 31, 2007.  An offsetting increase was recorded in thefair value of the related long-term notes outstanding.  This fair value adjustment did not impact theactual balance of outstanding principal on the notes, nor did it impact theincome statement or related cash flows.

 

## **Market Risks and Foreign Currency Exposures**

## ** **

Weenter into contractual arrangements (derivatives) in the ordinary course ofbusiness to manage foreign currency exposure and interest rate risks.  We do not enter into derivative transactionsfor trading purposes.  Our use ofderivative instruments is subject to internal policies that provide guidelinesfor control, counterparty risk, and ongoing reporting.  These derivative instruments are designed toreduce the income statement volatility associated with movement in foreignexchange rates, establish rates for future issuance of public notes, and toachieve greater exposure to variable interest rates.

 

Interestexpense on our outstanding debt is substantially subject to short-term interestrates.  As such, increases in short-terminterest rates will directly impact the amount of interest we pay.  For each one percent increase in variableinterest rates, the annual interest expense on $380.7 million of variable ratedebt outstanding would increase by $3.8 million.

 

Ourinternational operations enter into forward foreign currency exchange contractsto manage foreign currency exchange rate exposures associated with certainforeign currency denominated receivables and payables.  At December 31, 2008 and 2007, we hadoutstanding forward exchange contracts with notional amounts aggregating $1.9million and $5.0 million, respectively. Forward exchange contracts generally have maturities of less than sixmonths.  Counterparties to the forwardexchange contracts are major financial institutions.  Credit loss from counterparty nonperformanceis not anticipated.  We have notdesignated these derivative instruments as hedging instruments.  The net settlement amount (fair value)related to the active forward foreign currency exchange contracts isinsignificant and recorded on the balance sheet within current liabilities andas an element of other costs (income), net, which offsets the related transactionsgains and losses on the related foreign denominated asset or liability.

 

Our business in Brazil holdsU.S. dollar denominated debt which creates exposure to changes in currencyrates when compared to its functional currency of the Brazilian real.  In order to hedge this exposure, we enterinto currency swaps with maturities that match the underlying debt, effectivelyconverting a portion of the U.S. denominated debt to the local currency.  We have not designated these derivativeinstruments as hedging instruments.  At December 31,2008 and 2007, we had outstanding currency swap contracts with notional amountsaggregating $24.6 million and $49.6 million, respectively.  The net settlement amounts (fair value)related to active swap contracts is recorded on the balance sheet as part ofthe underlying debt and as an expense element of other costs (income), net,which offsets the related transaction gains or losses and were not significantat December 31, 2008 and 2007.

 

Theoperating results of our international operations are recorded in localcurrency and translated into U.S. dollars for consolidation purposes.  The impact of foreign currency translation onnet sales was an increase of $60.5 million in 2008 and $123.2 million in2007.  Operating profit improved byapproximately $5.9 million in 2008 and $9.6 million in 2007 as a result of thepositive effect of foreign currency translation.

 

Stockholders’equity includes adjustments to other comprehensive income for changes incurrency translation for consolidated balance sheet accounts.  The impact of currency translation during2008 was a reduction in stockholders’ equity totaling $183.2 million.

 

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Themajority of our pension liabilities are funded with assets that are invested inequity and fixed income securities whose market values are readily availablefrom published market sources.  During2008, the market value of these assets declined in conjunction with the globaleconomic downturn.  This decline inmarket value is the principal reason that pension expense in 2009 is expectedto increase by approximately $9.7 million. As of December 31, 2008, the unfunded portion of our pensionliabilities increased by $164.1 million compared to the balance as of December 31,2007.  The after-tax impact of thisincreased liability is a charge to other comprehensive income of $99.5 million,which is reflected as reduction in stockholders’ equity at December 31,2008.

 

# **Critical Accounting Estimatesand Judgments**

# ** **

Ourdiscussion and analysis of our financial condition and results of operations isbased upon our consolidated financial statements, which have been prepared inaccordance with GAAP.  The preparation ofthese financial statements requires us to make estimates and assumptions thataffect the reported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of expenses during the reporting period.  On an ongoing basis, management evaluates itsestimates and judgments, including those related to retirement benefits,intangible assets, goodwill, and expected future performance ofoperations.  Our estimates and judgmentsare based upon historical experience and on various other factors that arebelieved to be reasonable under the circumstances. Actual results may differfrom these estimates under different assumptions or conditions.

 

Webelieve the following are critical accounting estimates used in the preparationof our consolidated financial statements.

 

·      The calculation of annual pension costs and related assets andliabilities; and

·      The valuation and useful lives of intangible assets and goodwill.

 

### **Accounting for pensioncosts**

### ** **

Weaccount for our defined benefit pension plans in accordance with FAS No. 87,*Employers’ Accounting for Pensions*,as amended by FAS No. 158, *Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans*,which requires that amounts recognized in financial statements be determined onan actuarial basis.  FAS No. 158requires us to recognize the overfunded or underfunded status of the pensionplans on our balance sheet.  A substantialportion of our pension amounts relate to our defined benefit plans in theUnited States.

 

Netperiodic pension costs recorded in 2008 was $10.5 million, compared to pensioncost of $15.2 million in 2007 and $17.7 million in 2006.  Effective January 1, 2006, our U.S.defined benefit pension plans were amended for approximately two-thirds of theparticipant population.  For thoseemployees impacted, future pension benefits were replaced with a definedcontribution plan which is subject to achievement of certain financialperformance goals of the Company.  As aresult, future pension liability is no longer adjusted for additional years ofservice for those employees impacted by the amendment and the related servicecost and pension expense have decreased.

 

Oneelement used in determining annual pension income and expense in accordancewith accounting rules is the expected return on plan assets.  As of January 1, 2008, in conjunctionwith a change in the allocation of the U.S. pension assets to equity investmentsfrom 80 percent to 70 percent of total assets, we reduced our expectedlong-term rate of return on plan assets to 8.50 percent.  For the years 2006 and 2007, we maintained atarget allocation to equity investments of 80 percent of total assets and hadassumed that the expected long-term rate of return on plan assets would be 8.75percent.

 

Todevelop the expected long-term rate of return on assets assumption, weconsidered compound historical returns and future expectations based upon ourtarget asset allocation.  Usinghistorical long-term investment periods of 10, 15, 20 and 25 years ending December 31,2008, our pension plan assets have earned annualized rates of return of 0.5percent, 6.4 percent, 7.7 percent, and 8.9 percent, respectively.  This is a substantial decline from theannualized long-term investment returns as of December 31, 2007 of 6.3percent, 9.0 percent, 9.8 percent and 10.5 percent.  This decline reflects substantially lowerinvestment market values on U.S. pension assets during 2008.  Considering these long-term results, wefurther reduced our expected return on assets assumption to 8.25 percent as of January 1,2009.  Using our target asset allocationof plan assets of 70 percent equity securities and 30 percent fixed incomesecurities, our outside actuaries have used their independent economic model tocalculate a range of expected long-term rates of return and have determined ourassumptions to be reasonable.

 

Thisassumed long-term rate of return on assets is applied to a calculated value ofplan assets, which recognizes changes in the fair value of plan assets in asystematic manner over approximately three years.  This process calculates the expected returnon plan assets that is included in pension income or expense.  The difference between this expected returnand the actual return on plan assets is generally deferred and recognized oversubsequent periods.  The net deferral ofasset gains and losses affects the calculated value of pension plan assets and,ultimately, future pension income and expense.

 

Atthe end of each year, we determine the discount rate to be used to calculatethe present value of pension plan liabilities. This discount rate is an estimate of the current interest rate at whichthe pension liabilities could be effectively settled at the end of theyear.  In estimating this rate, we lookto changes in rates of return on high quality, fixed income investments thatreceive one of the two highest ratings given by a recognized ratingsagency.  At December 31, 2008, forour U.S. defined benefit pension plans we determined this rate to be 6.00percent, a decrease of one quarter of one percent from the 6.25 percent rateused at December 31, 2007.

 

17

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#### **Table of Contents**

 

#### **Pension assumptions sensitivityanalysis**

#### ** **

Basedupon current assumptions of 6.00 percent for the discount rate and 8.25 percentfor the expected rate of return on pension plan assets, we expect pensionexpense before the effect of income taxes for 2009 to be in a range of $18million to $23 million.  The followingcharts depict the sensitivity of estimated 2009 pension expense to incrementalchanges in the discount rate and the expected long-term rate of return onassets.

 
| ** **                                 | ** ** | **Total increase (decrease)** | ** ** | ** **                                  | ** **   | **Total increase (decrease)** | ** ** |
|--------------------------------------------|------------|-----------------------------------------|------------|---------------------------------------------|--------------|-----------------------------------------|------------|
| ** **                                 | ** ** | **to pension expense**        | ** ** | ** **                                  | ** **   | **to pension expense**        | ** ** |
| **(dollars in millions)**        | ** ** | **from current assumptions**  | ** ** | ** **                                  | ** **   | **from current assumptions**  | ** ** |
| **Discount  rate**                         | ** ** | ** **                              | ** ** | **Rate of Return on Plan Assets**           | ** **   | ** **                              | ** ** |
| 5.25 percent                               |       | $                                       | 3.6        |                                        | 7.50 percent |                                    | $          | 3.4 |   |
| 5.50 percent                               |       | 2.4                                     |       | 7.75 percent                                |         | 2.2                                     |       |
| 5.75 percent                               |       | 1.1                                     |       | 8.00 percent                                |         | 1.1                                     |       |
| **6.00 percent – Current Assumption** | ** ** | **0.0**                                 | ** ** | **8.25 percent – Current  Assumption** | ** **   | **0.0**                                 | ** ** |
| 6.25 percent                               |       | (1.1                                    | )          | 8.50 percent                                |         | (1.1                                    | )          |
| 6.50 percent                               |       | (2.2                                    | )          | 8.75 percent                                |         | (2.2                                    | )          |
| 6.75 percent                               |       | (3.4                                    | )          | 9.00 percent                                |         | (3.4                                    | )          |
|                                            |            |                                         |            |                                             |              |                                         |            |  |  |

 

Inaccordance with FAS No. 158, the amount by which the fair value of planassets differs from the projected benefit obligation of a pension plan must berecorded on the Consolidated Balance Sheet as an asset, in the case of anoverfunded plan, or as a liability, in the case of an underfunded plan.  The gains or losses and prior service costsor credits that arise but are not recognized as components of pension cost arerecorded as a component of other comprehensive income.  The following chart depicts the sensitivityof the total pension adjustment to other comprehensive income to changes in theassumed discount rate.

 
| ** **                                 | ** ** | **Total increase (decrease) in Accumulated Other Comprehensive** | ** ** |
|--------------------------------------------|------------|------------------------------------------------------------------------------------------------|------------|
| **(dollars in millions)**        | ** ** | **Income, net of taxes, from current assumptions**               | ** ** |
| **Discount  rate**                         |       |                                                                                           |       |
| 5.25 percent                               |       | $                                                                                              | (45.5      | ) |
| 5.50 percent                               |       | (29.7                                                                                          | )          |
| 5.75 percent                               |       | (14.5                                                                                          | )          |
| **6.00 percent – Current Assumption** | ** ** | **0.0**                                                                                        | ** ** |
| 6.25 percent                               |       | 13.7                                                                                           |       |
| 6.50 percent                               |       | 26.9                                                                                           |       |
| 6.75 percent                               |       | 39.6                                                                                           |       |
|                                            |            |                                                                                                |            |  |

 

### **Intangible assets andgoodwill**

### ** **

Thepurchase price of each new acquisition is allocated to tangible assets,identifiable intangible assets, liabilities assumed, and goodwill.  Determining the portion of the purchase priceallocated to identifiable intangible assets and goodwill requires us to makesignificant estimates.  The amount of thepurchase price allocated to intangible assets is generally determined byestimating the future cash flows of each asset and discounting the net cashflows back to their present values.  Thediscount rate used is determined at the time of the acquisition in accordancewith accepted valuation methods.

 

Goodwillrepresents the excess of the aggregate purchase price over the fair value ofnet assets acquired, including intangible assets.  We review our goodwill for impairmentannually and assess whether significant events or changes in the businesscircumstances indicate that the carrying value of the goodwill may not berecoverable. The test for impairment requires us to make estimates about fairvalue, most of which are based on projected future cash flows.  Our estimates associated with the goodwillimpairment tests are considered critical due to the amount of goodwill recordedon our consolidated balance sheet and the judgment required in determining fairvalue amounts, including projected future cash flows.  Goodwill was $595.5 million as of December 31,2008.

 

Intangibleassets consist primarily of purchased technology, customer relationships,patents, trademarks, and tradenames and are amortized using the straight-linemethod over their estimated useful lives, which range from one to 30 years,when purchased.  We review these intangibleassets for impairment as changes in circumstances or the occurrence of eventssuggest that the remaining value is not recoverable.  The test for impairment requires us to makeestimates about fair value, most of which are based on projected future cashflows.  These estimates and projectionsrequire judgments as to future events, condition and amounts of future cashflows.

 

# **New Accounting Pronouncements**

# ** **

In December 2008, theFinancial Accounting Standards Board (FASB) issued Staff Position (FSP) No. FAS132(R)-1, *Employers’ Disclosures about Postretirement BenefitPlan Assets* (FSP FAS 132(R)), which provides guidance on an employer’sdisclosures about plan assets of a defined benefit pension or otherpostretirement plan.  This FSP iseffective for fiscal years ending after December 15, 2009.  We are currently evaluating the impact ofadopting FSP FAS 132(R) on our defined benefit pension and otherpostretirement plan note disclosures.

 

InJune 2008, the FASB issued FSP No. EITF 03-6-1, *DeterminingWhether Instruments Granted in Share-Based Payment Transactions AreParticipating Securities* (FSP EITF 03-6-1), which clarified thatunvested share-based payment awards that contain nonforfeitable rights toreceive dividends or dividend equivalents (whether paid or unpaid) areparticipating securities, and thus, should be included in the two-class methodof computing earnings per share (EPS). As discussed in Note 7, nonforfeitable dividend equivalent payments aremade during the grant period on outstanding, unvested performance units.  This FSP is effective for fiscal yearsbeginning 

 

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after December 15, 2008, and interimperiods within those years, and requires that all prior period EPS data beadjusted retroactively.  We are currentlyevaluating the impact of adopting FSP EITF 03-6-1 on our calculation anddisclosure of basic and diluted EPS.

 

InApril 2008, the FASB issued FSP No. FAS 142-3, *Determinationof the Useful Life of Intangible Assets* (FSP FAS 142-3), whichamends the factors that should be considered in developing renewal or extensionassumptions used to determine the useful life of a recognized intangible assetunder Statement of Financial Accounting Standards (FAS) No. 142, *Goodwill and Other Intangible Assets*. This FSP is effectivefor fiscal years beginning after December 15, 2008.  As this guidance applies only to assets wemay acquire in the future, we are not able to predict the impact, if any, onour consolidated financial statements.

 

In March 2008, the FASBissued FAS No. 161, *The Disclosures aboutDerivative Instruments and Hedging Activities*(FAS 161), whichrequires enhanced disclosures about (a) how and why an entity uses derivativeinstruments, (b) how derivative instruments and related hedged items areaccounted for under FAS 133, *Accounting for DerivativeInstruments and Hedging Activities,* and (c) how derivativeinstruments and related hedged items affect an entity’s financial position,financial performance, and cash flows. This Statement is effective for fiscal years and interim periodsbeginning after November 15, 2008. For the Company, FAS No. 161 will be effective at the beginning ofits 2009 fiscal year and will result in additional disclosures in notes to theCompany’s consolidated financial statements.

 

In December 2007, theFASB issued FAS No. 160, *Noncontrolling Interest inConsolidated Financial Statements, an amendment of ARB No. 51*(FAS 160), which amends ARB No. 51 to establish accounting and reportingstandards for the noncontrolling interest in a subsidiary and for thedeconsolidation of a subsidiary.  Thestandard is effective for the Company on January 1, 2009.  We are currently evaluating the impact ofadopting FAS 160 on our consolidated statements of financial position, resultsof operations, and cash flows.

 

In December 2007, theFASB issued FAS No. 141 (Revised 2007), *BusinessCombinations*(FAS 141(R)). FAS 141(R) establishes principles and requirements for how anacquirer in a business combination recognizes and measures in its financialstatements, the identifiable assets acquired, the liabilities assumed, and anynon-controlling interest in the acquiree. The statement also provides guidancefor recognizing and measuring the goodwill acquired in the business combinationand determines what information to disclose to enable users of the financialstatements to evaluate the nature and financial effects of businesscombinations.  The new standard alsorequires the expensing of acquisition-related costs as incurred.  FAS 141(R) is effective on a prospectivebasis for financial statements issued for fiscal years beginning after December 15,2008.  Accordingly, any businesscombination we enter into and/or close after December 31, 2008, will besubject to this new standard.  Beginning January 1,2009, the Company will expense all acquisition-related costs as incurred aswell as any capitalized costs related to business combinations that were inprocess, but not completed by the effective date of FAS 141(R).

 

In February 2007, theFASB issued FAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities-Including an amendment of FASBStatement No. 115* (FAS 159), which permits entities to choose tomeasure many financial instruments and certain other items at fair value.  The objective is to improve financialreporting by providing entities with the opportunity to mitigate volatility inreported earnings caused by measuring related assets and liabilitiesdifferently without having to apply complex hedge accounting provisions.  The standard was effective for the Company onJanuary 1, 2008 and, as permitted, the Company has not elected the “fairvalue option” for its financial assets and financial liabilities.

 

In September 2006, theFASB issued FAS No. 157, *Fair Value Measurements*(FAS 157), which defines fair value, establishes a framework for measuring fairvalue in generally accepted accounting principles (GAAP), and expandsdisclosures about fair value measurements. FAS 157 will apply whenever another standard requires (or permits)assets or liabilities to be measured at fair value.  The standard does not expand the use of fairvalue to any new circumstances.  In early2008, the FASB issued FSP No. FAS 157-2, which delays by one year theeffective date of FAS 157 for all non-financial assets and non-financialliabilities, except those that are recognized or disclosed at fair value in thefinancial statements on at least an annual basis.  The Company adopted FAS 157 on January 1,2008, as required, with no effect on the measurement of the Company’s financialassets and financial liabilities or on its consolidated financial position andresults of operations.  We are continuingto evaluate the impact the standard will have on the determination of fairvalue related to non-financial assets and non-financial liabilities in yearsafter 2008.

 

# **Forward-looking Statements**

# ** **

ThisAnnual Report contains certain estimates, predictions, and other “forward-lookingstatements” (as defined in the Private Securities Litigation Reform Act of1995, 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, asamended).  Forward-looking statements aregenerally 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 futuregoals or aspirations, which are predictions of or indicate future events andtrends and which do not relate to historical matters.  Such statements are based on informationavailable to management as of the time of such statements and relate to, amongother things, expectations of the business environment in which we operate,projections of future performance (financial and otherwise), including those ofacquired companies, perceived opportunities in the market and statementsregarding our mission and vision.  Forward-lookingstatements involve known and unknown risks, uncertainties and other factors,which may cause actual results, performance or achievements to differmaterially from anticipated future results, performance or achievementsexpressed or implied by such forward-looking statements.  We undertake no obligation to publicly updateor revise any forward-looking statement, whether as a result of newinformation, future events, or otherwise.

 

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Factors that could causeactual results to differ from those expected include, but are not limited to,general economic conditions caused by inflation, interest rates, consumer confidence,rates of unemployment and foreign currency exchange rates; investmentperformance of assets in our pension plans; competitive conditions within ourmarkets, including the acceptance of our new and existing products; threats orchallenges to our patented or proprietary technologies; raw material costs andavailability, particularly for polymer resins and adhesives; the magnitude andvolatility of price changes for raw materials and our ability to pass theseprice changes on to our customers in selling prices or otherwise managecommodity price fluctuation risks; changes in the availability of financing;the presence of adequate cash available for investment in our business in orderto maintain desired debt levels; unexpected costs or manufacturing issuesrelated to the implementation of a new enterprise resource system; changes ingovernmental regulation, especially in the areas of environmental, health andsafety matters, and foreign investment; unexpected outcomes in our current andfuture litigation proceedings and any related proceedings or civil lawsuits;unexpected outcomes in our current and future domestic and international taxproceedings; changes in our labor relations; and the impact of changes in theworld political environment including threatened or actual armed conflict.  These and other risks, uncertainties, andassumptions identified from time to time in our filings with the Securities andExchange Commission, including without limitation, those described under Item1A “Risk Factors” of this Annual Report on Form 10-K and our quarterlyreports on Form 10-Q, could cause actual future results to differmaterially from those projected in the forward-looking statements.  In addition, actual future results coulddiffer materially from those projected in the forward-looking statement as aresult of changes in the assumptions used in making such forward-lookingstatement.

 

**ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

The information required bythis Item 7A is included in Note 14 to the Consolidated Financial Statementsincluded in Item 8 of this Annual Report on Form 10-K, and under thecaption “Market Risks and Foreign Currency Exposures” which is part ofManagement’s Discussion and Analysis included in Item 7 of this Annual Reporton Form 10-K.  Based on asensitivity analysis (assuming a 10 percent adverse change in market rates) ofour foreign exchange, currency swaps, and interest rate derivatives and otherfinancial instruments, changes in exchange rates or interest rates would notmaterially affect our financial position and liquidity.  The effect on our results of operations wouldbe substantially offset by the impact of the hedged items.

 

**ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

 

**Management’s Responsibility Statement**

 

The management of BemisCompany, Inc. is responsible for the integrity, objectivity, and accuracyof the financial statements of the Company. The financial statements are prepared by the Company in accordance withaccounting principles generally accepted in the United States of America, andusing management’s best estimates and judgments, where appropriate.  The financial information presentedthroughout this Annual Report on Form 10-K is consistent with that in thefinancial statements.

 

The management of BemisCompany, Inc. is responsible for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in ExchangeAct Rule 13a-15(f).  Under thedirection, supervision, and participation of the Chief Executive Officer andthe Chief Financial Officer, the Company’s management conducted an evaluationof the effectiveness of internal control over financial reporting based on theframework in *Internal Control - IntegratedFramework*issued by the Committee of Sponsoring Organizations of theTreadway Commission (COSO-Framework). Based on the results of this evaluation management has concluded thatinternal control over financial reporting was effective as of December 31,2008.  Item 9A of this Annual Report on Form 10-Kcontains management’s favorable assessment of internal controls over financialreporting based on their review and evaluation utilizing the COSO-Frameworkcriteria.

 

The Audit Committee of theBoard of Directors, which is composed solely of outside directors, meetsquarterly with management, the Internal Audit Director, the Director of GlobalFinancial Compliance, and independent accountants to review the work of eachand to satisfy itself that the respective parties are properly dischargingtheir responsibilities. PricewaterhouseCoopers LLP, the Director of Global Financial Compliance,and the Internal Audit Director have had and continue to have unrestrictedaccess to the Audit Committee, without the presence of Company management.

 

| Henry  J. Theisen           |       | Gene  C. Wulf               |       | Stanley  A. Jaffy   |
|-----------------------------|------------|-----------------------------|------------|---------------------|
| President  and              |       | Senior  Vice President and  |       | Vice  President and |
| **Chief Executive Officer** | ** ** | **Chief Financial Officer** | ** ** | **Controller**      |

 

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### **Reportof Independent Registered Public Accounting Firm**

### ** **

Tothe Board of Directors of Bemis Company, Inc.:

 

Inour opinion, the accompanying consolidated balance sheets and the relatedconsolidated statements of income, of stockholders’ equity and of cash flowpresent fairly, in all material respects, the financial position of BemisCompany, Inc. and its subsidiaries at December 31, 2008 and 2007, andthe results of their operations and their cash flows for each of the threeyears in the period ended December 31, 2008 in conformity with accountingprinciples generally accepted in the United States of America.  Also in our opinion, the Company maintained,in all material respects, effective internal control over financial reportingas of December 31, 2008, based on criteria established in *Internal Control - Integrated Framework* issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO).  The Company’s management is responsible forthese financial statements, for maintaining effective internal control overfinancial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting, included in “Management’s Report on InternalControl over Financial Reporting” appearing under Item 9A in this AnnualReport.  Our responsibility is to expressopinions on these financial statements and on the Company’s internal controlover financial reporting based on our integrated audits.  We conducted our audits in accordance withthe standards of the Public Company Accounting Oversight Board (UnitedStates).  Those standards require that weplan and perform the audits to obtain reasonable assurance about whether thefinancial statements are free of material misstatement and whether effectiveinternal control over financial reporting was maintained in all materialrespects.  Our audits of the financialstatements included examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, and evaluatingthe overall financial statement presentation. Our audit of internal control over financial reporting includedobtaining an understanding of internal control over financial reporting,assessing the risk that a material weakness exists, and testing and evaluatingthe design and operating effectiveness of internal control based on theassessed risk.  Our audits also includedperforming such other procedures as we considered necessary in thecircumstances. We believe that our audits provide a reasonable basis for ouropinions.

 

Asdescribed in Note 5 to the consolidated financial statements, effective December 31,2006, the Company adopted the provisions of Financial Accounting StandardsBoard (FASB) Statement No, 158, *Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans. *As described in Note 10 to theconsolidated financial statements, effective January 1, 2007, the Companyadopted the provisions of FASB Interpretation No. 48 (FIN 48), *Accounting for Uncertainty in Income Taxes.*

 

Acompany’s internal control over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordancewith generally accepted accounting principles. A company’s internal control over financial reporting includes thosepolicies and procedures that (i) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of thecompany; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Becauseof its inherent limitations, internal control over financial reporting may notprevent or detect misstatements.  Also,projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures maydeteriorate.

 
| PricewaterhouseCoopers  LLP |   |
|-----------------------------|--------|
| Minneapolis,  Minnesota     |   |
| February 27,  2009     |   |

 

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**BEMIS COMPANY, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENT OF INCOME**

***(in thousands, except per share amounts)***

 
| **For the years ended December 31,** | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|---------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                                     |       | $          | 3,779,373  |       | $          | 3,649,281  |       | $ | 3,639,363 |   |
|                                                          |       |       |       |       |       |       |       |
| Costs and expenses:                                           |       |       |       |       |       |       |       |
| Cost of products  sold                                        |       | 3,131,341  |       | 2,973,329  |       | 2,942,650  |       |
| Selling,  general, and administrative expenses                |       | 342,737    |       | 341,551    |       | 336,409    |       |
| Research and  development                                     |       | 25,010     |       | 25,983     |       | 25,024     |       |
| Interest expense                                              |       | 39,413     |       | 50,268     |       | 49,252     |       |
| Other costs  (income), net                                    |       | (27,653    | )          | (31,455    | )          | (3,308     | )          |
| Minority  interest in net income                              |       | 6,011      |       | 3,751      |       | 3,540      |       |
|                                                          |       |       |       |       |       |       |       |
| Income before  income taxes                                   |       | 262,514    |       | 285,854    |       | 285,796    |       |
|                                                          |       |       |       |       |       |       |       |
| Provision for  income taxes                                   |       | 96,300     |       | 104,300    |       | 109,500    |       |
|                                                          |       |       |       |       |       |       |       |
| Net income                                                    |       | $          | 166,214    |       | $          | 181,554    |       | $ | 176,296 |   |
|                                                          |       |       |       |       |       |       |       |
| Basic earnings  per share of common stock                     |       | $          | 1.67       |       | $          | 1.76       |       | $ | 1.68 |   |
|                                                          |       |       |       |       |       |       |       |
| Diluted earnings  per share of common stock                   |       | $          | 1.65       |       | $          | 1.74       |       | $ | 1.65 |   |

* *

*See accompanying notes to consolidated financial statements.*

 

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**BEMISCOMPANY, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEET**

***(dollars in thousands, except per share amounts)***

 
| **As of December 31,**                                     | ** ** | **2008**  | ** ** | **2007**  | ** ** |
|---------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
| ** **                                                                |       |      |       |      |       |
| **ASSETS**                                                                |       |      |       |      |       |
| Current assets:                                                           |       |      |       |      |       |
| Cash and cash  equivalents                                                |       | $         | 43,454     |      | $          | 147,409 |   |
| Accounts  receivable, net                                                 |       | 426,888   |       | 448,200   |       |
| Inventories                                                               |       | 435,667   |       | 478,727   |       |
| Prepaid expenses                                                          |       | 76,649    |       | 62,607    |       |
| Total current  assets                                                     |       | 982,658   |       | 1,136,943 |       |
|                                                                      |       |      |       |      |       |
| Property and  equipment:                                                  |       |      |       |      |       |
| Land and land  improvements                                               |       | 43,662    |       | 52,129    |       |
| Buildings and  leasehold improvements                                     |       | 466,863   |       | 482,005   |       |
| Machinery and  equipment                                                  |       | 1,499,621 |       | 1,609,424 |       |
| Total property  and equipment                                             |       | 2,010,146 |       | 2,143,558 |       |
| Less accumulated  depreciation                                            |       | (874,664  | )          | (895,102  | )          |
| Net property and  equipment                                               |       | 1,135,482 |       | 1,248,456 |       |
|                                                                      |       |      |       |      |       |
| Other long-term  assets:                                                  |       |      |       |      |       |
| Goodwill                                                                  |       | 595,466   |       | 642,507   |       |
| Other intangible  assets                                                  |       | 80,773    |       | 103,756   |       |
| Deferred charges  and other assets                                        |       | 27,935    |       | 59,734    |       |
| Total other  long-term assets                                             |       | 704,174   |       | 805,997   |       |
| TOTAL ASSETS                                                              |       | $         | 2,822,314  |      | $          | 3,191,396 |   |
|                                                                      |       |      |       |      |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                             |       |      |       |      |       |
| Current  liabilities:                                                     |       |      |       |      |       |
| Current portion  of long-term debt                                        |       | $         | 18,651     |      | $          | 1,758 |   |
| Short-term  borrowings                                                    |       | 7,954     |       | 66,047    |       |
| Accounts payable                                                          |       | 323,142   |       | 384,673   |       |
| Accrued  liabilities:                                                     |       |      |       |      |       |
| Salaries and  wages                                                       |       | 63,227    |       | 70,248    |       |
| Income taxes                                                              |       | 561       |       | 2,168     |       |
| Other                                                                     |       | 8,246     |       | 9,656     |       |
| Total current  liabilities                                                |       | 421,781   |       | 534,550   |       |
|                                                                      |       |      |       |      |       |
| Long-term debt,  less current portion                                     |       | 659,984   |       | 775,456   |       |
| Deferred taxes                                                            |       | 111,832   |       | 155,871   |       |
| Other  liabilities and deferred credits                                   |       | 246,174   |       | 124,261   |       |
| Total  liabilities                                                        |       | 1,439,771 |       | 1,590,138 |       |
|                                                                      |       |      |       |      |       |
| Minority  interest                                                        |       | 36,012    |       | 38,926    |       |
|                                                                      |       |      |       |      |       |
| Commitments and  contingencies                                            |       |      |       |      |       |
|                                                                      |       |      |       |      |       |
| Stockholders’  equity:                                               |       |      |       |      |       |
| Common stock,  $.10 par value:                                            |       |      |       |      |       |
| Authorized —  500,000,000 shares                                     |       |      |       |      |       |
| Issued —  117,130,962 and 116,941,126 shares                         |       | 11,713    |       | 11,694    |       |
| Capital in  excess of par value                                           |       | 345,982   |       | 327,387   |       |
| Retained earnings                                                         |       | 1,599,178 |       | 1,523,659 |       |
| Accumulated  other comprehensive (loss) income                            |       | (112,001  | )          | 171,162   |       |
| Common stock  held in treasury, 17,422,771 and 16,422,771 shares, at cost |       | (498,341  | )          | (471,570  | )          |
| Total  stockholders’ equity                                          |       | 1,346,531 |       | 1,562,332 |       |
|                                                                      |       |      |       |      |       |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY                          |       | $         | 2,822,314  |      | $          | 3,191,396 |   |

 

*Seeaccompanying notes to consolidated financial statements.*

 

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**BEMIS COMPANY, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENT OF CASHFLOWS**

***(in thousands)***

 
| **For the years ended December 31,**                      | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash flows from  operating activities:                                             |       |     |       |     |       |     |       |
| Net income                                                                         |       | $        | 166,214    |     | $          | 181,554  |       | $ | 176,296 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |     |       |     |       |     |       |
| Depreciation and  amortization                                                     |       | 162,004  |       | 158,546  |       | 152,375  |       |
| Minority  interest in net income                                                   |       | 6,011    |       | 3,751    |       | 3,540    |       |
| Excess tax  benefit from share-based payment arrangements                          |       | (209     | )          | (5,773   | )          | (926     | )          |
| Share-based  compensation                                                          |       | 18,058   |       | 16,849   |       | 11,694   |       |
| Deferred income  taxes                                                             |       | 15,666   |       | 5,803    |       | (7,930   | )          |
| Income of  unconsolidated affiliated companies                                     |       | (919     | )          | (933     | )          | (32      | )          |
| (Gain) loss on  sale of property and equipment                                     |       | 967      |       | (2,055   | )          | 896      |       |
| Non-cash  restructuring related activities                                         |       |     |       | 2,483    |       | 13,145   |       |
| Changes in  operating assets and liabilities, net of acquisitions:                 |       |     |       |     |       |     |       |
| Accounts  receivable                                                               |       | (25,015  | )          | 32,007   |       | 9,709    |       |
| Inventories                                                                        |       | 8,584    |       | 11,705   |       | (31,387  | )          |
| Prepaid expenses                                                                   |       | (20,607  | )          | 5,350    |       | (23,505  | )          |
| Accounts payable                                                                   |       | (26,717  | )          | (21,672  | )          | 36,720   |       |
| Accrued salaries  and wages                                                        |       | (3,222   | )          | (27,218  | )          | 15,694   |       |
| Accrued income  taxes                                                              |       | 616      |       | 5,310    |       | (438     | )          |
| Accrued other  taxes                                                               |       | 349      |       | 1,370    |       | (1,730   | )          |
| Changes in other  liabilities and deferred credits                                 |       | (12,341  | )          | (8,014   | )          | 2,329    |       |
| Changes in  deferred charges and other assets                                      |       | 4,111    |       | 47,165   |       | (7,491   | )          |
| Net cash  provided by operating activities                                         |       | 293,550  |       | 406,228  |       | 348,959  |       |
|                                                                               |       |     |       |     |       |     |       |
| Cash flows from  investing activities:                                             |       |     |       |     |       |     |       |
| Additions to  property and equipment                                               |       | (120,513 | )          | (178,852 | )          | (158,837 | )          |
| Business  acquisitions, net of cash acquired                                       |       |     |       |     |       | (10,800  | )          |
| Proceeds from  sales of property, equipment, and other assets                      |       | 2,429    |       | 7,405    |       | 1,373    |       |
| Proceeds from  sale of restructuring related assets                                |       |     |       | 3,639    |       | 2,116    |       |
| Net cash used in  investing activities                                             |       | (118,084 | )          | (167,808 | )          | (166,148 | )          |
|                                                                               |       |     |       |     |       |     |       |
| Cash flows from  financing activities:                                             |       |     |       |     |       |     |       |
| Proceeds from  issuance of long-term debt                                          |       | 16,334   |       | 25,061   |       | 76,177   |       |
| Repayment of  long-term debt                                                       |       | (267,327 | )          | (60,546  | )          | (118,036 | )          |
| Net borrowing  (repayment) of commercial paper                                     |       | 169,295  |       | 80,800   |       | (31,254  | )          |
| Net borrowing  (repayment) of short-term debt                                      |       | (62,956  | )          | (9,977   | )          | 7,364    |       |
| Cash dividends  paid to stockholders                                               |       | (90,695  | )          | (89,809  | )          | (82,139  | )          |
| Common stock  purchased for the treasury                                           |       | (26,771  | )          | (153,953 | )          | (17,804  | )          |
| Excess tax  benefit from share-based payment arrangements                          |       | 209      |       | 5,773    |       | 926      |       |
| Stock incentive  programs and related withholdings                                 |       | (2,196   | )          | (14,745  | )          | 51       |       |
| Net cash used by  financing activities                                             |       | (264,107 | )          | (217,396 | )          | (164,715 | )          |
|                                                                               |       |     |       |     |       |     |       |
| Effect of  exchange rates on cash and cash equivalents                             |       | (15,314  | )          | 14,225   |       | 2,939    |       |
|                                                                               |       |     |       |     |       |     |       |
| Net (decrease)  increase in cash and cash equivalents                              |       | (103,955 | )          | 35,249   |       | 21,035   |       |
| Cash and cash  equivalents balance at beginning of year                            |       | 147,409  |       | 112,160  |       | 91,125   |       |
|                                                                               |       |     |       |     |       |     |       |
| Cash and cash  equivalents balance at end of year                                  |       | $        | 43,454     |     | $          | 147,409  |       | $ | 112,160 |   |
|                                                                               |       |     |       |     |       |     |       |
| Supplemental  disclosure of cash flow information:                                 |       |     |       |     |       |     |       |
| Business  acquisitions, net of divestures and cash:                                |       |     |       |     |       |     |       |
| Working capital  acquired (net)                                                    |       |     |       |     |       | $        | (147       | ) |
| Goodwill and  intangible assets (divested) or acquired, net                        |       |     |       |     |       | 8,398    |       |
| Long-term debt,  deferred taxes, and other liabilities                             |       |     |       |     |       | 2,549    |       |
| Cash used for  acquisitions                                                        |       |     |       |     |       | $        | 10,800     |   |
|                                                                               |       |     |       |     |       |     |       |
| Interest paid  during the year                                                     |       | $        | 39,909     |     | $          | 48,132   |       | $ | 46,396 |   |
| Income taxes  paid during the year                                                 |       | $        | 76,905     |     | $          | 83,621   |       | $ | 116,520 |   |

 

*Seeaccompanying notes to consolidated financial statements*

 

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**BEMIS COMPANY, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENT OFSTOCKHOLDERS’ EQUITY**

***(dollars in thousands, except per share amounts)***

 
| ** **                                                         | ** ** | ** ** | ** ** | ** **          | ** ** | ** **   | ** ** | **Accumulated**        | ** ** | ** **           | ** ** | ** **             | ** ** |
|--------------------------------------------------------------------|------------|------------|------------|---------------------|------------|--------------|------------|------------------------|------------|----------------------|------------|------------------------|------------|
| ** **                                                         | ** ** | ** ** | ** ** | **Capital In** | ** ** | ** **   | ** ** | **Other**              | ** ** | **Common**           | ** ** | **Total**              | ** ** |
| ** **                                                         | ** ** | **Common** | ** ** | **Excess of**  | ** ** | **Retained** | ** ** | **Comprehensive**      | ** ** | **Stock Held**  | ** ** | **Stockholders’** | ** ** |
| ** **                                                         | ** ** | **Stock**  | ** ** | **Par Value**  | ** ** | **Earnings** | ** ** | **Income (Loss)** | ** ** | **In Treasury** | ** ** | **Equity**             | ** ** |
| Balance at  December 31, 2005                                      |       | $          | 11,598     |                | $          | 267,274      |       | $                      | 1,337,590  |                 | $          | 32,706                 |       | $ | (299,813 | ) | $ | 1,349,355 |   |
| * *                                                           |       |       |       |                |       |         |       |                   |       |                 |       |                   |       |
| Net income                                                         |       |       |       |                |       | 176,296      |       |                   |       |                 |       | 176,296                |       |
| Unrecognized gain  reclassified to earnings, net of tax $(337)     |       |       |       |                |       |         |       | (526                   | )          |                 |       | (526                   | )          |
| Translation  adjustment                                            |       |       |       |                |       |         |       | 60,850                 |       |                 |       | 60,850                 |       |
| Pension liability  adjustment, net of tax effect $(15,988)         |       |       |       |                |       |         |       | 24,794                 |       |                 |       | 24,794                 |       |
| Total  comprehensive income                                        |       |       |       |                |       |         |       |                   |       |                 |       | 261,414                |       |
| Adjustment to  initially apply FAS No. 158, net of tax $55,076     |       |       |       |                |       |         |       | (88,726                | )          |                 |       | (88,726                | )          |
| Cash dividends  paid on common stock $0.76 per share               |       |       |       |                |       | (82,139      | )          |                   |       |                 |       | (82,139                | )          |
| Stock incentive  programs and related tax effects (135,601 shares) |       | 13         |       | 2,914               |       |         |       |                   |       |                 |       | 2,927                  |       |
| Impact of  adopting FAS No. 123(R)                                 |       |       |       | 35,295              |       |         |       |                   |       |                 |       | 35,295                 |       |
| Share-based compensation                                           |       |       |       | 11,694              |       |         |       |                   |       |                 |       | 11,694                 |       |
| Purchase of  600,000 shares of common stock                        |       |       |       |                |       |         |       |                   |       | (17,804              | )          | (17,804                | )          |
| Balance at  December 31, 2006                                      |       | 11,611     |       | 317,177             |       | 1,431,747    |       | 29,098                 |       | (317,617             | )          | 1,472,016              |       |
|                                                               |       |       |       |                |       |         |       |                   |       |                 |       |                   |       |
| Net income                                                         |       |       |       |                |       | 181,554      |       |                   |       |                 |       | 181,554                |       |
| Unrecognized gain  reclassified to earnings, net of tax $(337)     |       |       |       |                |       |         |       | (527                   | )          |                 |       | (527                   | )          |
| Translation  adjustment                                            |       |       |       |                |       |         |       | 122,387                |       |                 |       | 122,387                |       |
| Pension liability  adjustment, net of tax effect ($11,942)         |       |       |       |                |       |         |       | 20,204                 |       |                 |       | 20,204                 |       |
| Total comprehensive  income                                        |       |       |       |                |       |         |       |                   |       |                 |       | 323,618                |       |
| Adjustment to  initially apply FIN No. 48                          |       |       |       |                |       | 167          |       |                   |       |                 |       | 167                    |       |
| Cash dividends  paid on common stock $0.84 per share               |       |       |       |                |       | (89,809      | )          |                   |       |                 |       | (89,809                | )          |
| Stock incentive  programs and related tax effects (826,779 shares) |       | 83         |       | (14,745             | )          |         |       |                   |       |                 |       | (14,662                | )          |
| Excess tax  benefit from share-based compensation arrangements     |       |       |       | 6,908               |       |         |       |                   |       |                 |       | 6,908                  |       |
| Share-based  compensation                                          |       |       |       | 18,047              |       |         |       |                   |       |                 |       | 18,047                 |       |
| Purchase of  5,150,000 shares of common stock                      |       |       |       |                |       |         |       |                   |       | (153,953             | )          | (153,953               | )          |
| Balance at  December 31, 2007                                      |       | 11,694     |       | 327,387             |       | 1,523,659    |       | 171,162                |       | (471,570             | )          | 1,562,332              |       |
|                                                               |       |       |       |                |       |         |       |                   |       |                 |       |                   |       |
| Net income                                                         |       |       |       |                |       | 166,214      |       |                   |       |                 |       | 166,214                |       |
| Unrecognized gain  reclassified to earnings, net of tax $(305)     |       |       |       |                |       |         |       | (527                   | )          |                 |       | (527                   | )          |
| Translation adjustment                                             |       |       |       |                |       |         |       | (183,175               | )          |                 |       | (183,175               | )          |
| Pension liability  adjustment, net of tax effect ($57,616)         |       |       |       |                |       |         |       | (99,461                | )          |                 |       | (99,461                | )          |
| Total  comprehensive income                                        |       |       |       |                |       |         |       |                   |       |                 |       | (116,949               | )          |
| Cash dividends  paid on common stock $0.88 per share               |       |       |       |                |       | (90,695      | )          |                   |       |                 |       | (90,695                | )          |
| Stock incentive  programs and related tax effects (189,836 shares) |       | 19         |       | (2,196              | )          |         |       |                   |       |                 |       | (2,177                 | )          |
| Excess tax  benefit from share-based compensation arrangements     |       |       |       | 960                 |       |         |       |                   |       |                 |       | 960                    |       |
| Share-based  compensation                                          |       |       |       | 19,831              |       |         |       |                   |       |                 |       | 19,831                 |       |
| Purchase of 1,000,000  shares of common stock                      |       |       |       |                |       |         |       |                   |       | (26,771              | )          | (26,771                | )          |
| Balance at  December 31, 2008                                      |       | $          | 11,713     |                | $          | 345,982      |       | $                      | 1,599,178  |                 | $          | (112,001               | )          | $ | (498,341 | ) | $ | 1,346,531 |   |

 

*See accompanying notes to consolidated financial statements.*

 

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**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

 

### **Note 1** — BUSINESSDESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES

### ** **

***Description of the business: ***Bemis Company, Inc.,a Missouri corporation, was founded in 1858 and incorporated in 1885 as BemisBro. Bag Company.  In 1965 the name waschanged to Bemis Company, Inc. (the Company).  Based in Neenah, Wisconsin, the Companyemploys approximately 15,400 individuals and has 57 manufacturing facilitieslocated in the United States and ten other countries.  The Company manufactures and sells flexiblepackaging products and pressure sensitive materials throughout the Americas,Europe, and Asia Pacific.

 

TheCompany’s business activities are organized around its two business segments,Flexible Packaging, which accounted for approximately 83 percent of 2008 netsales, and Pressure Sensitive Materials, which accounted for the remaining netsales.  The Company’s flexible packagingbusiness has a strong technical base in polymer chemistry, film extrusion,coating, laminating, printing, and converting. The Company’s pressure sensitive materials business specializes in adhesivetechnologies.  The primary markets forthe Company’s products are in the food industry, which accounted forapproximately 60 percent of 2008 net sales. The Company’s flexible packaging products are widely diversified amongfood categories and can be found in nearly every aisle of the grocerystore.  Other markets include chemical,agribusiness, medical, pharmaceutical, personal care products, electronics,automotive, construction, graphic industries, and other consumer goods.  All markets are considered to be highlycompetitive as to price, innovation, quality, and service.

 

***Principles of consolidation: ***The consolidatedfinancial statements include the accounts of the Company and its majority ownedsubsidiaries.  All intercompanytransactions and accounts have been eliminated. Joint ventures which are not majority controlled are accounted for bythe equity method of accounting with earnings of $919,000, $933,000, and$32,000 in 2008, 2007, and 2006, respectively, included in other costs(income), net, on the accompanying consolidated statement of income.  Investments in joint ventures are included indeferred charges and other assets on the accompanying consolidated balancesheet.  Certain prior year amounts havebeen restated to conform to current year presentation.

 

***Estimates and assumptions required:***  The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesof America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period.  Actual results coulddiffer from those estimates.

 

***Translation of foreign currencies:***** **The Company considers thelocal currency to be the reporting currency for all foreign subsidiaries.  Assets and liabilities are translated at theexchange rate as of the balance sheet date. All revenue and expense accounts are translated at average exchangerates in effect during the year.  Translationgains or losses are recorded in the foreign currency translation component inaccumulated other comprehensive income (loss) in stockholders’ equity.  Foreign currency transaction gains (losses)of $(6,755,000) $2,445,000, and $(849,000), in 2008, 2007, and 2006,respectively, are included as a component of other costs (income), net.

 

***Revenue recognition:***** **Sales and related costs of sales are recognized upon shipment ofproducts or when all of the conditions of the Securities and ExchangeCommission’s Staff Accounting Bulletin No. 104 are fulfilled.  All costs associated with revenue, includingcustomer volume discounts, are recognized at the time of sale.  Customer volume discounts are accrued inaccordance with EITF No. 01-9, *Accounting for ConsiderationGiven by a Vendor to a Customer* and recorded as a reduction tosales.  Shipping and handling costs areclassified as a component of costs of sales while amounts billed to customersfor shipping and handling are classified as a component of sales.  The Company accrues for estimated warrantycosts when specific issues are identified and the amounts are determinable.

 

***Environmental cost:***** **The Company is involved in a number of environmental related disputesand claims.  The Company accruesenvironmental costs when it is probable that these costs will be incurred andcan be reasonably estimated.  At December 31,2008 and 2007, reserves were $401,000 and $588,000, respectively.  Adjustments to the reserve accounts and costswhich were directly expensed for environmental remediation matters resulted incharges to the income statements for 2008, 2007, and 2006 of $306,000, $111,000,and $128,000, net of third party reimbursements totaling $0, $0, and $102,000,for 2008, 2007, and 2006, respectively.

 

***Earnings per share: ***Basic earningsper common share is computed by dividing net income by the weighted-averagenumber of common shares outstanding during the year.  Diluted earnings per share is computed bydividing net income by the weighted-average number of common shares outstandingduring the year and dilutive shares relating to stock incentive plans.  The following table presents informationnecessary to compute basic and diluted earnings per common share:

 
| **(in thousands, except per share amounts)**            | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Weighted average  common shares outstanding — basic                         |       | 99,777   |       | 102,992  |       | 104,865  |       |
| Dilutive shares                                                                  |       | 1,192    |       | 1,122    |       | 1,902    |       |
| Weighted average  common and common equivalent shares outstanding — diluted |       | 100,969  |       | 104,114  |       | 106,767  |       |
| Net income for  basic and diluted earnings per share computation                 |       | $        | 166,214    |     | $          | 181,554  |       | $ | 176,296 |   |
| Earnings per  common share — basic                                          |       | $        | 1.67       |     | $          | 1.76     |       | $ | 1.68 |   |
| Earnings per  common share — diluted                                        |       | $        | 1.65       |     | $          | 1.74     |       | $ | 1.65 |   |

 

Certainoptions outstanding at December 31, 2008 (410,720 shares) were notincluded in the computation of diluted earnings per share above because theywould not have had a dilutive effect.

 

***Research and development: ***Research anddevelopment expenditures are expensed as incurred.

 

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***Taxes on undistributed earnings:***** **No provision is made for U.S.income taxes on earnings of non-U.S. subsidiary companies which the Companycontrols but does not include in the consolidated federal income tax return asit is management’s practice and intent to indefinitely reinvest the earnings.

 

***Cash and cash equivalents:***** **The Company considers all highly liquid temporary investments with amaturity of three months or less when purchased to be cash equivalents.  Cash equivalents include certificates ofdeposit that can be readily liquidated without penalty at the Company’s option.  Cash equivalents are carried at cost whichapproximates fair market value.

 

***Accounts receivable:***** **Trade accounts receivable are stated at the amount the Company expectsto collect, which is net of an allowance for doubtful accounts for estimatedlosses resulting from the inability of its customers to make requiredpayments.  The following factors areconsidered when determining the collectibility of specific customeraccounts:  customer creditworthiness,past transaction history with the customer, and changes in customer paymentterms or practices.  In addition, overallhistorical collection experience, current economic industry trends, and areview of the current status of trade accounts receivable are considered whendetermining the required allowance for doubtful accounts.  Based on management’s assessment, the Companyprovides for estimated uncollectible amounts through a charge to earnings and acredit to valuation allowance.  Balancesthat remain outstanding after the Company has used reasonable collectionefforts are written off through a charge to the valuation allowance and acredit to accounts receivable.  Accountsreceivable are presented net of an allowance for doubtful accounts of$16,262,000 and $19,311,000 at December 31, 2008 and 2007, respectively.

 

***Inventory valuation:*** Inventories are valued at the lower of cost,as determined by the first-in, first-out (FIFO) method, or market.  Inventories are summarized at December 31,as follows:

 
| **(in thousands)**             | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------|------------|----------|------------|----------|------------|
| Raw materials  and supplies         |       | $        | 161,451    |     | $          | 169,687 |   |
| Work in process  and finished goods |       | 293,132  |       | 328,758  |       |
| Total  inventories, gross           |       | 454,583  |       | 498,445  |       |
| Less inventory  write-downs         |       | (18,916  | )          | (19,718  | )          |
| Total  inventories, net             |       | $        | 435,667    |     | $          | 478,727 |   |

 

***Property and equipment: ***Property andequipment are stated at cost. Maintenance and repairs that do not improve efficiency or extendeconomic life are expensed as incurred. Plant and equipment are depreciated for financial reporting purposesprincipally using the straight-line method over the estimated useful lives ofassets as follows:  land improvements,15-30 years; buildings, 15-45 years; leasehold and building improvements, thelesser of the lease term or 8-20 years; and machinery and equipment, 3-16years.  For tax purposes, the Companygenerally uses accelerated methods of depreciation.  The tax effect of the difference between bookand tax depreciation has been provided as deferred income taxes.  Depreciation expense was $152,962,000, $149,852,000,and $144,058,000 for 2008, 2007, and 2006, respectively.  On sale or retirement, the asset cost andrelated accumulated depreciation are removed from the accounts and any relatedgain or loss is reflected in income. Interest costs which are capitalized during the construction of majorcapital projects totaled $2,557,000 in 2008, $4,220,000 in 2007, and $2,871,000in 2006.

 

TheCompany reviews its long-lived assets for impairment when events or changes incircumstances indicate that the carrying amount of the assets may not berecoverable.  If impairment indicatorsare present and the estimated future undiscounted cash flows are less than thecarrying value of the assets, the carrying values are reduced to the estimatedfair value.

 

TheCompany capitalizes direct costs (internal and external) of materials andservices used in the development and purchase of internal-use software.  Amounts capitalized are amortized on astraight-line basis over a period of three to seven years and are reported as acomponent of machinery and equipment within property and equipment.

 

TheCompany is in the process of configuring and developing a new EnterpriseResource Planning (ERP) system.  Certaincosts incurred during the application development stage are being capitalizedin accordance with Statement of Position (SOP) 98-1, *Accountingfor Costs of Computer Software Developed or Obtained for Internal Use*.  These costs will be amortized over thesystem’s estimated useful life and amortization will begin as the ERP system isplaced in service.

 

***Goodwill:***** **Goodwillrepresents the excess of cost over the fair value of net assets acquired inbusiness combinations.  Effective January 1,2002, the Company adopted the reporting requirements of Statement of FinancialAccounting Standards (FAS) No. 141, *Business Combinations,*and FAS No. 142, *Goodwill and OtherIntangible Assets,* and as required, has applied its requirements toacquisitions made after June 30, 2001. In accordance with FAS No. 142, goodwill and indefinite-livedintangible assets are no longer amortized, but are reviewed at least annuallyfor impairment.  The Company testsgoodwill and indefinite-lived intangible assets for impairment on an annualbasis, or whenever there is an impairment indicator, using a fair-value basedapproach.

 

***Intangible assets: ***Contractual orseparable intangible assets that have finite useful lives are being amortizedagainst income using the straight-line method over their estimated usefullives, with original periods ranging from one to 30 years. The straight-linemethod of amortization reflects an appropriate allocation of the costs of theintangible assets to earnings in proportion to the amount of economic benefitsobtained by the Company in each reporting period.  The Company tests finite-lived intangibleassets for impairment whenever there is an impairment indicator.  Intangible assets are tested for impairmentby comparing anticipated undiscounted future cash flows from operations to netbook value.

 

***Financial instruments:***** **The Company recognizes all derivative instruments on the balance sheetat fair value.  Derivatives that are nothedges are adjusted to fair value through income.  If the derivative is a hedge, depending onthe nature of the hedge, changes in the fair

 

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value of derivatives areeither offset against the change in fair value of the hedged assets,liabilities, or firm commitments through earnings or recognized in stockholders’equity through other comprehensive income until the hedged item isrecognized.  Gains or losses, if any,related to the ineffective portion of any hedge are recognized through earningsin the current period.  Note 14 containsexpanded details relating to specific derivative instruments included on theCompany’s balance sheet, such as forward foreign currency exchange contracts,currency swap contracts, and interest rate swap arrangements.

 

***Treasury stock:***** **Repurchased common stock is stated at cost andis presented as a separate reduction of stockholders’ equity.  At December 31, 2008, 4.1 million commonshares can be repurchased, at management’s discretion, under authority grantedby the Company’s Board of Directors in 2008.

 

***Preferred stock purchase rights:***  On July 29,1999, the Company’s Board of Directors adopted a Shareholder Rights Plan bydeclaring a dividend of one preferred share purchase right for each outstandingshare of common stock.  Under certaincircumstances, a right may be exercised to purchase one four-hundredth of ashare of Series A Junior Preferred Stock for $60, subject toadjustment.  The rights becomeexercisable if, subject to certain exceptions, a person or group acquiresbeneficial ownership of 15 percent or more of the Company’s outstanding commonstock or announces an offer which would result in such person acquiringbeneficial ownership of 15 percent or more of the Company’s outstanding commonstock.  If a person or group acquiresbeneficial ownership of 15 percent or more of the Company’s outstanding commonstock, subject to certain exceptions, each right will entitle its holder to buyfrom the Company, common stock of the Company having a market value of twicethe exercise price of the right.  The rightsexpire August 23, 2009, and may be redeemed by the Company for $.001 perright at any time before a person becomes a beneficial owner of 15 percent ormore of the Company’s outstanding common stock. The Company’s Board of Directors has designated 600,000 shares of Series AJunior Preferred Stock with a par value of $1 per share that relate to theShareholder Rights Plan.  At December 31,2008, none of these shares were issued or outstanding.

 

**Note 2 —NEW ACCOUNTING PRONOUNCEMENTS**

InDecember 2008, the Financial Accounting Standards Board (FASB) issuedStaff Position (FSP) No. FAS 132(R)-1, *Employers’ Disclosuresabout Postretirement Benefit Plan Assets* (FSP FAS 132(R)), whichprovides guidance on an employer’s disclosures about plan assets of a definedbenefit pension or other postretirement plan. This FSP is effective for fiscal years ending after December 15,2009.  We are currently evaluating theimpact of adopting FSP FAS 132(R) on our defined benefit pension and otherpostretirement plan note disclosures.

 

InJune 2008, the FASB issued FSP No. EITF 03-6-1, *DeterminingWhether Instruments Granted in Share-Based Payment Transactions AreParticipating Securities* (FSP EITF 03-6-1), which clarified thatunvested share-based payment awards that contain nonforfeitable rights toreceive dividends or dividend equivalents (whether paid or unpaid) areparticipating securities, and thus, should be included in the two-class methodof computing earnings per share (EPS). As discussed in Note 7, nonforfeitable dividend equivalent payments aremade during the grant period on outstanding, unvested performance units.  This FSP is effective for fiscal yearsbeginning after December 15, 2008, and interim periods within those years,and requires that all prior period EPS data be adjusted retroactively.  We are currently evaluating the impact ofadopting FSP EITF 03-6-1 on our calculation and disclosure of basic and dilutedEPS.

 

InApril 2008, the FASB issued FSP No. FAS 142-3, *Determinationof the Useful Life of Intangible Assets* (FSP FAS 142-3), whichamends the factors that should be considered in developing renewal or extensionassumptions used to determine the useful life of a recognized intangible assetunder Statement of Financial Accounting Standards (FAS) No. 142, *Goodwill and Other Intangible Assets*. This FSP is effectivefor fiscal years beginning after December 15, 2008.  As this guidance applies only to assets wemay acquire in the future, we are not able to predict the impact, if any, onour consolidated financial statements.

 

InMarch 2008, the FASB issued FAS No. 161, *TheDisclosures about Derivative Instruments and Hedging Activities*(FAS161), which requires enhanced disclosures about (a) how and why an entityuses derivative instruments, (b) how derivative instruments and relatedhedged items are accounted for under FAS 133, *Accountingfor Derivative Instruments and Hedging Activities,* and (c) howderivative instruments and related hedged items affect an entity’s financialposition, financial performance, and cash flows.  This Statement is effective for fiscal yearsand interim periods beginning after November 15, 2008.  For the Company, FAS No. 161 will beeffective at the beginning of its 2009 fiscal year and will result inadditional disclosures in notes to the Company’s consolidated financialstatements.

 

InDecember 2007, the FASB issued FAS No. 160, *NoncontrollingInterest in Consolidated Financial Statements, an amendment of ARB No. 51*(FAS 160), which amends ARB No. 51 to establish accounting and reportingstandards for the noncontrolling interest in a subsidiary and for thedeconsolidation of a subsidiary.  Thestandard is effective for the Company on January 1, 2009.  We are currently evaluating the impact ofadopting FAS 160 on our consolidated statements of financial position, resultsof operations, and cash flows.

 

InDecember 2007, the FASB issued FAS No. 141 (Revised 2007), *Business Combinations*(FAS 141(R)).  FAS 141(R) establishes principles andrequirements for how an acquirer in a business combination recognizes andmeasures in its financial statements, the identifiable assets acquired, theliabilities assumed, and any non-controlling interest in the acquiree. Thestatement also provides guidance for recognizing and measuring the goodwillacquired in the business combination and determines what information todisclose to enable users of the financial statements to evaluate the nature andfinancial effects of business combinations. The new standard also requires the expensing of acquisition-relatedcosts as incurred.  FAS 141(R) iseffective on a prospective basis for financial statements issued for fiscalyears beginning after December 15, 2008. Accordingly, any business combination we enter into and/or close after December 31,2008, will be subject to this new standard.  Beginning January 1, 2009, the Company will expense allacquisition-related costs as incurred as well as any capitalized costs relatedto business combinations that were in process, but not completed by theeffective date of FAS 141(R).

 

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InFebruary 2007, the FASB issued FAS No. 159, *The FairValue Option for Financial Assets and Financial Liabilities-Including anamendment of FASB Statement No. 115* (FAS 159), which permitsentities to choose to measure many financial instruments and certain otheritems at fair value.  The objective is toimprove financial reporting by providing entities with the opportunity tomitigate volatility in reported earnings caused by measuring related assets andliabilities differently without having to apply complex hedge accountingprovisions.  The standard was effectivefor the Company on January 1, 2008 and, as permitted, the Company has notelected the “fair value option” for its financial assets and financialliabilities.

 

InSeptember 2006, the FASB issued FAS No. 157, *Fair ValueMeasurements* (FAS 157), which defines fair value, establishes aframework for measuring fair value in generally accepted accounting principles(GAAP), and expands disclosures about fair value measurements.  FAS 157 will apply whenever another standardrequires (or permits) assets or liabilities to be measured at fair value.  The standard does not expand the use of fairvalue to any new circumstances.  In early2008, the FASB issued FSP No. FAS 157-2, which delays by one year theeffective date of FAS 157 for all non-financial assets and non-financialliabilities, except those that are recognized or disclosed at fair value in thefinancial statements on at least an annual basis.  The Company adopted FAS 157 on January 1,2008, as required, with no effect on the measurement of the Company’s financialassets and financial liabilities or on its consolidated financial position andresults of operations.  We are continuingto evaluate the impact the standard will have on the determination of fairvalue related to non-financial assets and non-financial liabilities in yearsafter 2008.

 

**Note 3 —FINANCIAL ASSETS AND FINANCIAL LIABILITIES MEASURED AT FAIR VALUE**

Thefair values of the Company’s financial assets and financial liabilities listedbelow reflect the amounts that would be received to sell the assets or paid totransfer the liabilities in an orderly transaction between market participantsat the measurement date (exit price). The fair values are based on inputs other than quoted prices that areobservable for the asset or liability. These inputs include foreign currency exchange rates and interestrates.  The financial assets andfinancial liabilities are primarily valued using standard calculations / modelsthat use as their basis readily observable market parameters.  Industry standard data providers are theprimary source for forward and spot rate information for both interest ratesand currency rates, with resulting valuations periodically validated throughthird-party or counterparty quotes.

 
| ** **                                                | ** ** | ** **                      | ** ** | **Significant Other** | ** ** |
|-----------------------------------------------------------|------------|---------------------------------|------------|----------------------------|------------|
| ** **                                                | ** ** | **Balance at**             | ** ** | **Observable Inputs** | ** ** |
| **(in thousands)**                                   | ** ** | **December 31, 2008** | ** ** | **(Level 2)**         | ** ** |
| Currency swaps —  net asset position                 |       | $                               | 4,944      |                       | $          | 4,944 |   |
| Forward exchange  contracts — net liability position |       | $                               | (112       | )                          | $          | (112 | ) |

** **

**Note 4 —GOODWILL AND OTHER INTANGIBLE ASSETS**

 

Changesin the carrying amount of goodwill attributable to each reportable businesssegment follow:

 
| ** **                                  | ** ** | **Flexible Packaging** | ** ** | **Pressure Sensitive** | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|------------|------------|
| **(in thousands)**                     | ** ** | **Segment**                 | ** ** | **Materials Segment**  | ** ** | **Total**  | ** ** |
| Reported balance  at December 31, 2006 |       | $                           | 550,748    |                        | $          | 52,943     |       | $ | 603,691 |   |
|                                        |       |                        |       |                        |       |       |       |
| Currency  translation and other adjustments |       | 38,841                      |       | (25                         | )          | 38,816     |       |
| Reported balance  at December 31, 2007 |       | 589,589                     |       | 52,918                      |       | 642,507    |       |
|                                        |       |                        |       |                        |       |       |       |
| Currency  translation and other adjustments |       | (46,611                     | )          | (430                        | )          | (47,041    | )          |
| Reported balance  at December 31, 2008 |       | $                           | 542,978    |                        | $          | 52,488     |       | $ | 595,466 |   |

 

Thecomponents of amortized intangible assets follow:

 
| ** **                 | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|----------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **(in thousands)**    | ** ** | **Gross Carrying**         | ** ** | **Accumulated**                 | ** ** | **Gross Carrying** | ** ** | **Accumulated** | ** ** |
| **Intangible Assets** | ** ** | **Amount**                      | ** ** | **Amortization**                | ** ** | **Amount** | ** ** | **Amortization** | ** ** |
| Contract based             |       | $                               | 15,447     |                            | $          | (10,268 | ) | $ | 15,447 |   | $ | (9,168 | ) |
| Technology based           |       | 51,422                          |       | (21,623                         | )          | 52,673 |   | (19,383 | ) |
| Marketing  related         |       | 20,435                          |       | (7,768                          | )          | 25,230 |   | (8,125 | ) |
| Customer based             |       | 54,688                          |       | (21,560                         | )          | 69,444 |   | (22,362 | ) |
| Reported balance           |       | $                               | 141,992    |                            | $          | (61,219 | ) | $ | 162,794 |   | $ | (59,038 | ) |

 

Amortizationexpense for intangible assets during 2008, 2007, and 2006 was $9.7 million,$9.6 million, and $9.2 million, respectively. Estimated annual amortization expense is $9.7 million for 2009 and 2010,$9.5 million for 2011, $8.0 million for 2012, and $6.9 million for 2013.  The Company completed its annual impairmenttests in the fourth quarter of 2008 with no indications of impairment ofgoodwill found.

 

**Note 5 —PENSION PLANS**

Totalmultiemployer plan, defined contribution, and defined benefit pension expensein 2008, 2007, and 2006 was $16,909,000, $26,311,000, and $28,942,000,respectively.  In addition to theseplans, the Company also sponsors a 401(k) savings plan for substantiallyall U.S. employees.  The Companycontributes $0.50 for every pre-tax $1.00 an employee contributes on the firsttwo percent of eligible compensation plus $0.25 for every pre-tax $1.00 anemployee contributes on the next six percent of eligible compensation.  Company contributions are invested in Companystock and are fully vested after three years of service.  Total Company contributions for 2008, 2007,and 2006 were $6,417,000, $5,993,000, and $5,830,000, respectively.

 

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Effective January 1, 2006, our U.S.defined benefit pension plans were amended for approximately two-thirds of theparticipant population.  For thoseemployees impacted, future pension benefits were replaced with the BemisInvestment Profit Sharing Plan (BIPSP), a defined contribution plan which issubject to achievement of certain financial performance goals of theCompany.  Total contribution expense forBIPSP and previously existing defined contribution plans was $5,661,000 in2008, $10,394,000 in 2007, and $10,551,000 in 2006.  Multiemployer plans cover employees at twodifferent manufacturing locations and provide for contributions to a unionadministered defined benefit pension plan. Amounts charged to pension cost and contributed to the multiemployerplans in 2008, 2007, and 2006 totaled $780,000, $749,000, and $740,000,respectively.

 

TheCompany’s defined benefit pension plans continue to cover a substantial numberof U.S. employees, and the non-U.S. defined benefit plans cover selectemployees at various international locations. The benefits under the plans are based on years of service and salarylevels.  Certain plans covering hourlyemployees provide benefits of stated amounts for each year of service.  In addition, the Company also sponsors anunfunded supplemental retirement plan to provide senior management withbenefits in excess of limits under the federal tax law and increased benefits toreflect a service adjustment factor.

 

EffectiveDecember 31, 2006, the Company adopted Statement of Financial AccountingStandards No. 158, *Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans — AnAmendment of FASB Statements No. 87, 88, 106, and 132 (R) *(FAS158).  As a result of the adoption of FAS158, the Company has recorded a cumulative effect adjustment as a component ofaccumulated other comprehensive income within stockholders’ equity (also seeNote 6).  The Company’s disclosures forthe fiscal year ended 2006 also reflected the revised accounting and disclosurerequirements of FAS 158.  Reported itemsfor fiscal year 2005 were not affected.

 

Theadoption of FAS 158 on December 31, 2006, resulted in incrementaladjustments to the following individual line items in the consolidated balancesheet:

 
| ** **                                       | ** ** | **Before**              | ** ** | ** **      | ** ** | **After**               | ** ** |
|--------------------------------------------------|------------|-------------------------|------------|-----------------|------------|-------------------------|------------|
| ** **                                       | ** ** | **Application of** | ** ** | ** **      | ** ** | **Application of** | ** ** |
| **(in thousands)**                          | ** ** | **FAS 158**        | ** ** | **Adjustments** | ** ** | **FAS 158**        | ** ** |
| Deferred charges  and other assets               |       | $                       | 188,748    |            | $          | (125,224                | )          | $ | 63,524 |   |
| Total assets                                     |       | 3,164,233               |       | (125,224        | )          | 3,039,009               |       |
| Deferred taxes                                   |       | 189,244                 |       | (55,076         | )          | 134,168                 |       |
| Other  liabilities and deferred credits          |       | 107,396                 |       | 18,578          |       | 125,974                 |       |
| Total  stockholders’ equity                 |       | 1,560,742               |       | (88,726         | )          | 1,472,016               |       |
| Total  liabilities and stockholders’ equity |       | 3,164,233               |       | (125,224        | )          | 3,039,009               |       |
|                                                  |            |                         |            |                 |            |                         |            |  |  |  |

 

Netperiodic pension cost for defined benefit plans included the followingcomponents for the years ended December 31, 2008, 2007, and 2006:

 
| **(in thousands)**                             | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|-----------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Service cost -  benefits earned during the year     |       | $        | 13,109     |     | $          | 13,868   |       | $ | 14,572 |   |
| Interest cost on  projected benefit obligation      |       | 34,217   |       | 32,497   |       | 30,726   |       |
| Expected return  on plan assets                     |       | (44,233  | )          | (45,274  | )          | (41,626  | )          |
| Settlement  (gain) loss                             |       | 29       |       | 3,726    |       |     |       |
| Curtailment                                         |       |     |       |     |       | 667      |       |
| Amortization of  unrecognized transition obligation |       | 261      |       | 240      |       | 158      |       |
| Amortization of  prior service cost                 |       | 2,355    |       | 2,290    |       | 2,352    |       |
| Recognized  actuarial net (gain) or loss            |       | 4,730    |       | 7,820    |       | 10,802   |       |
| Net periodic  pension (income) cost                 |       | $        | 10,468     |     | $          | 15,167   |       | $ | 17,651 |   |

 

Changesin benefit obligations and plan assets, and a reconciliation of the fundedstatus at December 31, 2008 and 2007, are as follows:

 
| ** **                                                        | ** ** | **U.S. Pension Plans** | ** ** | **Non-U.S. Pension Plans** | ** ** |
|-------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------------|------------|
| **(in thousands)**                                           | ** ** | **2008**                         | ** ** | **2007**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| **Change  in Benefit Obligation:**                                | ** ** | ** **                       | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Benefit  obligation at the beginning of the year                  |       | $                                | 500,152    |                                 | $          | 510,663 |   | $ | 68,009 |   | $ | 75,046 |   |
| Service cost                                                      |       | 9,844                            |       | 10,346                               |       | 3,265 |   | 3,522 |   |
| Interest cost                                                     |       | 30,507                           |       | 28,633                               |       | 3,710 |   | 3,864 |   |
| Participant  contributions                                        |       |                             |       |                                 |       | 634 |   | 652 |   |
| Plan amendments                                                   |       | 76                               |       | 114                                  |       |   |   | 418 |   |
| Plan  curtailments                                                |       |                             |       |                                 |       |   |   | (418 | ) |
| Plan settlements                                                  |       |                             |       |                                 |       |   |   | (1,139 | ) |
| Acquisitions                                                      |       |                             |       |                                 |       | 2,555 |   |   |   |
| Benefits paid                                                     |       | (23,077                          | )          | (22,386                              | )          | (2,559 | ) | (13,533 | ) |
| Actuarial (gain)  or loss                                         |       | 277                              |       | (27,218                              | )          | (4,916 | ) | (6,117 | ) |
| Foreign currency  exchange rate changes                           |       |                             |       |                                 |       | (11,402 | ) | 5,714 |   |
| Benefit  obligation at the end of the year                        |       | $                                | 517,779    |                                 | $          | 500,152 |   | $ | 59,296 |   | $ | 68,009 |   |
|                                                              |       |                             |       |                                 |       |   |   |   |   |
| Accumulated  benefit obligation at the end of the year            |       | $                                | 480,525    |                                 | $          | 448,679 |   | $ | 47,421 |   | $ | 54,534 |   |
|                                                              |       |                             |       |                                 |       |   |   |   |   |
| **Change in Plan Assets:**                         | ** ** | ** **                       | ** ** | ** **                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Fair value of  plan assets at the beginning of the year           |       | $                                | 481,889    |                                 | $          | 484,567 |   | $ | 53,937 |   | $ | 56,541 |   |
| Actual return on  plan assets                                     |       | (123,041                         | )          | 18,594                               |       | (2,834 | ) | 2,258 |   |
| Employer  contributions                                           |       | 2,271                            |       | 1,114                                |       | 3,450 |   | 3,973 |   |
| Participant  contributions                                        |       |                             |       |                                 |       | 635 |   | 652 |   |
| Plan settlements                                                  |       |                             |       |                                 |       | (29 | ) |   |   |
| Benefits paid                                                     |       | (23,076                          | )          | (22,386                              | )          | (2,559 | ) | (13,533 | ) |
| Foreign currency  exchange rate changes                           |       |                             |       |                                 |       | (10,027 | ) | 4,046 |   |
| Fair value of  plan assets at the end of the year                 |       | $                                | 338,043    |                                 | $          | 481,889 |   | $ | 42,573 |   | $ | 53,937 |   |
|                                                              |       |                             |       |                                 |       |   |   |   |   |
| **Funded  (unfunded) status at year end:**                        |       | $                                | (179,736   | )                                    | $          | (18,263 | ) | $ | (16,724 | ) | $ | (14,072 | ) |
| ** **                                                        |       |                             |       |                                 |       |   |   |   |   |
| **Amount  recognized in consolidated balance sheet consists of:** |       |                             |       |                                 |       |   |   |   |   |
| Prepaid benefit  cost, non-current                                |       | $                                |       |                                 | $          | 21,407 |   | $ |   |   | $ | 124 |   |
| Accrued benefit  liability, current                               |       | (3,383                           | )          | (1,944                               | )          | (276 | ) | (162 | ) |
| Accrued benefit  liability, non-current                           |       | (176,353                         | )          | (37,726                              | )          | (16,448 | ) | (14,034 | ) |
| Sub-total                                                         |       | (179,736                         | )          | (18,263                              | )          | (16,724 | ) | (14,072 | ) |
| Deferred tax  asset                                               |       | 104,371                          |       | 47,248                               |       | 2,506 |   | 2,726 |   |
| Accumulated  other comprehensive income                           |       | 180,173                          |       | 79,934                               |       | 4,327 |   | 4,611 |   |
| Net amount  recognized in consolidated balance sheet              |       | $                                | 104,808    |                                 | $          | 108,919 |   | $ | (9,891 | ) | $ | (6,735 | ) |
|                                                                   |            |                                  |            |                                      |            |  |  |  |  |  |  |  |  |  |

 

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Accumulated other comprehensive income related to pension benefit plansis as follows:

 
| ** **                                                  | ** ** | **U.S. Pension Plans** | ** ** | **Non-U.S. Pension Plans** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------------|------------|
| **(in thousands)**                                     | ** ** | **2008**                         | ** ** | **2007**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| Unrecognized net  actuarial losses                          |       | $                                | 274,230    |                                 | $          | 114,655 |   | $ | 3,412 |   | $ | 3,317 |   |
| Unrecognized net  prior service costs (benefits)            |       | 10,314                           |       | 12,527                               |       | 709 |   | 889 |   |
| Unrecognized net  transition costs                          |       |                             |       |                                 |       | 2,712 |   | 3,131 |   |
| Tax expense  (benefit)                                      |       | (104,371                         | )          | (47,248                              | )          | (2,506 | ) | (2,726 | ) |
| Accumulated  other comprehensive loss (income), end of year |       | $                                | 180,173    |                                 | $          | 79,934 |   | $ | 4,327 |   | $ | 4,611 |   |

 

Estimated amounts in accumulated other comprehensive income expected tobe reclassified to net period cost during 2009 are as follows:

 
| ** **                          | ** ** | ** **                       | ** ** | **Non-U.S.**           | ** ** |
|-------------------------------------|------------|----------------------------------|------------|------------------------|------------|
| ** **                          | ** ** | **U.S. Pension Plans** | ** ** | **Pension Plans** | ** ** |
| **(in thousands)**             | ** ** | **2008**                         | ** ** | **2008**               | ** ** |
| Net actuarial  losses               |       | $                                | 10,569     |                   | $          | 24 |   |
| Net prior  service costs (benefits) |       | 2,304                            |       | 60                     |       |
| Net transition  costs               |       |                             |       | 248                    |       |
| Total                               |       | $                                | 12,873     |                   | $          | 332 |   |

 

Theaccumulated benefit obligation for all defined benefit pension plans was$527,946,000 and $503,214,000 at December 31, 2008, and 2007,respectively.

 

Presentedbelow are the projected benefit obligation, accumulated benefit obligation, andfair value of plan assets for pension plans with projected benefit obligationsin excess of plan assets and pension plans with accumulated benefit obligationsin excess of plan assets as of December 31, 2008 and 2007.

 
| ** **                      | ** ** | **Projected Benefit Obligation**                                     | ** ** | **Accumulated Benefit Obligation**                                   | ** ** |
|---------------------------------|------------|--------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                      | ** ** | **Exceeds the Fair Value of Plan’s Assets** | ** ** | **Exceeds the Fair Value of Plan’s Assets** | ** ** |
| ** **                      | ** ** | **U.S. Plans**                                                            | ** ** | **Non-U.S. Plans**                                                        | ** ** | **U.S. Plans** | ** ** | **Non-U.S. Plans** | ** ** |
| **(in thousands)**         | ** ** | **2008**                                                                       | ** ** | **2007**                                                                       | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** |
| Projected  benefit obligation   |       | $                                                                              | 517,779    |                                                                           | $          | 39,670 |   | $ | 59,296 |   | $ | 68,009 |   | $ | 517,779 |   | $ | 39,670 |   | $ | 34,769 |   | $ | 33,074 |   |
| Accumulated  benefit obligation |       | 480,525                                                                        |       | 33,747                                                                         |       | 47,421 |   | 54,534 |   | 480,525 |   | 33,747 |   | 25,210 |   | 23,096 |   |
| Fair value of  plan assets      |       | 338,043                                                                        |       |                                                                           |       | 42,573 |   | 53,812 |   | 338,043 |   |   |   | 19,821 |   | 19,987 |   |
|                                 |            |                                                                                |            |                                                                                |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

TheCompany’s general funding policy is to make contributions as required byapplicable regulations and when beneficial to the Company for tax and planningpurposes.  The employer contributions forthe years ended December 31, 2008 and 2007, were $5,722,000 and$5,087,000, respectively.  The expectedcash contribution for 2009 is $36,567,000 which is expected to satisfy planfunding requirements and regulatory funding requirements.

 

Foreach of the years ended December 31, 2008 and 2007, the U.S. pension plansrepresented approximately 89 percent of the Company’s total plan assets andapproximately 89 percent of the Company’s total projected benefitobligation.  Considering the significanceof the U.S. pension plans in comparison with the Company’s total pension plans,we separately present and discuss the critical pension assumptions related tothe U.S. pension plans and the non-U.S. pension plans.

 

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TheCompany’s actuarial valuation date is December 31.  The weighted-average discount rates and ratesof increase in future compensation levels used in determining the actuarialpresent value of the projected benefit obligation for the years ended December 31are as follows:

 
| ** **                                      | ** ** | **U.S. Pension Plans** | ** ** | **Non-U.S. Pension Plans** | ** ** |
|-------------------------------------------------|------------|----------------------------------|------------|--------------------------------------|------------|
| ** **                                      | ** ** | **2008**                         | ** ** | **2007**                             | ** ** | **2008** | ** ** | **2007** | ** ** |
| Weighted-average  discount rate                 |       | 6.00                             | %          | 6.25                                 | %          | 5.80 | % | 5.62 | % |
| Rate of increase  in future compensation levels |       | 4.25                             | %          | 4.75                                 | %          | 3.90 | % | 4.06 | % |

 

Theweighted-average discount rates, expected returns on plan assets, and rates ofincrease in future compensation levels used to determine the net benefit costfor the years ended December 31 are as follows:

 
| ** **                                      | ** ** | **U.S. Pension Plans** | ** ** | **Non-U.S. Pension Plans** | ** ** |
|-------------------------------------------------|------------|----------------------------------|------------|--------------------------------------|------------|
| ** **                                      | ** ** | **2008**                         | ** ** | **2007**                             | ** ** | **2006** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Weighted-average  discount rate                 |       | 6.25                             | %          | 5.75                                 | %          | 5.50 | % | 5.60 | % | 4.81 | % | 4.53 | % |
| Expected return  on plan assets                 |       | 8.50                             | %          | 8.75                                 | %          | 8.75 | % | 6.18 | % | 6.44 | % | 6.56 | % |
| Rate of increase  in future compensation levels |       | 4.75                             | %          | 4.75                                 | %          | 4.75 | % | 3.98 | % | 3.83 | % | 4.12 | % |

 

Theweighted-average plan asset allocation at December 31, 2008, and 2007, andtarget allocation for 2009, are as follows:

 
| ** **              | ** ** | **U.S. Pension Plans** | ** ** | **Non-U.S. Pension Plans** | ** ** |
|-------------------------|------------|----------------------------------|------------|--------------------------------------|------------|
| ** **              | ** ** | **2009**                         | ** ** | **Percentage**                       | ** ** | **2009** | ** ** | **Percentage** | ** ** |
| ** **              | ** ** | **Target**                       | ** ** | **of Plan Assets**         | ** ** | **Target** | ** ** | **of Plan Assets** | ** ** |
| **Asset Category** | ** ** | **Allocation**                   | ** ** | **2008**                             | ** ** | **2007** | ** ** | **Allocation** | ** ** | **2008** | ** ** | **2007** | ** ** |
| Equity  Securities      |       | 70                               | %          | 58                                   | %          | 76 | % | 27 | % | 28 | % | 41 | % |
| Debt Securities         |       | 30                               | %          | 42                                   | %          | 20 | % | 27 | % | 25 | % | 24 | % |
| Other                   |       |                             |       |                                 |       | 4 | % | 46 | % | 47 | % | 35 | % |
| Total                   |       | 100                              | %          | 100                                  | %          | 100 | % | 100 | % | 100 | % | 100 | % |

 

The following benefit payments, which reflect expected future service,as appropriate, are expected to be paid:

 
| **(in thousands)** | ** ** | **U.S. Pension Plans** | ** ** | **Non-U.S. Pension Plans** | ** ** |
|-------------------------|------------|----------------------------------|------------|--------------------------------------|------------|
| 2009                    |       | $                                | 26,867     |                                 | $          | 1,005 |   |
| 2010                    |       | 28,740                           |       | 3,206                                |       |
| 2011                    |       | 36,063                           |       | 3,050                                |       |
| 2012                    |       | 32,826                           |       | 1,339                                |       |
| 2013                    |       | 34,173                           |       | 3,726                                |       |
| Years 2014-2018         |       | 179,858                          |       | 24,814                               |       |
|                         |            |                                  |            |                                      |            |  |  |

 

Asof January 1, 2009, we have assumed that the expected long-term annualrate of return on plan assets will be 8.25 percent.  This is a decrease from the 8.50 percentlevel assumed for 2008.  To develop theexpected long-term rate of return on assets assumption, we consideredhistorical returns and future expectations. Using historical long-term investment periods of 10, 15, 20, and 25years ending December 31, 2008, our pension plan assets have earnedannualized rates of return of 0.5 percent, 6.4 percent, 7.7 percent, and 8.9percent, respectively.  Using our targetasset allocation for plan assets of 70 percent equity securities and 30 percentfixed income securities, our outside actuaries have used their independenteconomic model to calculate a range of expected long-term rates of return andhave determined our assumptions to be reasonable.

 

Atthe end of each year, we determine the discount rate to be used to calculatethe present value of pension plan liabilities. This discount rate is an estimate of the current interest rate at whichpension liabilities could be effectively settled at the end of the year.  In estimating this rate, we look to rates ofreturn on high quality, fixed income investments that receive one of the twohighest ratings given by a recognized ratings agency.  For the years ended December 31, 2008and 2007, we determined this rate to be 6.00 percent and 6.25 percent,respectively.

 

Forour non-U.S. pension plans we follow similar methodologies in determining theappropriate expected rates of return on assets and discount rates, to be usedin our actuarial calculations for the pension plans offered in each individualcountry.  We tailor each of theseassumptions in accordance with the historical market performance and prevailingmarket expectations for each respective country.  As a result, each pension plan contains uniqueassumptions, which reflect the general market environment within eachrespective country, and are often quite different from the correspondingassumptions applied to our U.S. pension plans.

 

**Note 6 —POSTRETIREMENT BENEFITS OTHER THAN PENSIONS**

 

TheCompany sponsors several defined postretirement benefit plans that cover amajority of salaried and a portion of nonunion hourly employees.  These plans provide health care benefits and,in some instances, provide life insurance benefits.  Except for one closed-group plan, which isnoncontributory, postretirement health care plans are contributory, withretiree contributions adjusted annually. Life insurance plans are noncontributory.

 

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Net periodicpostretirement benefit costs included the following components for the yearsended December 31, 2008, 2007, and 2006.

 
| **(in thousands)**                                         | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|-----------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Service cost -  benefits earned during the year                 |       | $        | 221        |     | $          | 904      |       | $ | 1,107 |   |
| Interest cost on  accumulated postretirement benefit obligation |       | 688      |       | 1,178    |       | 1,569    |       |
| Amortization of  prior service cost                             |       | (455     | )          | 215      |       | 691      |       |
| Recognized  actuarial net (gain) or loss                        |       | (501     | )          | (62      | )          | 16       |       |
| Net periodic  postretirement benefit (income) cost              |       | $        | (47        | )        | $          | 2,235    |       | $ | 3,383 |   |

 

Changesin benefit obligation and plan assets, and a reconciliation of the fundedstatus at December 31, 2008 and 2007, are as follows:

 
| **(in thousands)**                                           | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------------------------------|------------|----------|------------|----------|------------|
| **Change  in Benefit Obligation**                                 |       |     |       |     |       |
| Benefit  obligation at the beginning of the year                  |       | $        | 11,510     |     | $          | 21,054 |   |
| Service cost                                                      |       | 221      |       | 904      |       |
| Interest cost                                                     |       | 688      |       | 1,178    |       |
| Participant  contributions                                        |       | 439      |       | 439      |       |
| Plan amendments                                                   |       |     |       | (5,888   | )          |
| Actuarial (gain)  or loss                                         |       | (737     | )          | (4,759   | )          |
| Benefits paid                                                     |       | (1,470   | )          | (1,418   | )          |
| Benefit  obligation at the end of the year                        |       | $        | 10,651     |     | $          | 11,510 |   |
| ** **                                                        |       |     |       |     |       |
| **Change  in Plan Assets**                                        |       |     |       |     |       |
| Fair value of  plan assets at the beginning of the year           |       | $        | 0          |     | $          | 0 |   |
| Employee contributions                                            |       | 439      |       | 439      |       |
| Employer  contribution                                            |       | 1,031    |       | 979      |       |
| Benefits paid                                                     |       | (1,470   | )          | (1,418   | )          |
| Fair value of  plan assets at the end of the year                 |       | $        | 0          |     | $          | 0 |   |
| ** **                                                        |       |     |       |     |       |
| **Funded  (unfunded) status at year end:**                        |       | $        | (10,651    | )        | $          | (11,510 | ) |
| ** **                                                        |       |     |       |     |       |
| **Amount  recognized in consolidated balance sheet consists of:** |       |     |       |     |       |
| Prepaid benefit  cost, non-current                                |       | $        | 0          |     | $          | 0 |   |
| Accrued benefit  liability, current                               |       | (977     | )          | (1,020   | )          |
| Accrued benefit  liability, non-current                           |       | (9,674   | )          | (10,490  | )          |
| Deferred tax                                                      |       | (4,255   | )          | (4,391   | )          |
| Accumulated  other comprehensive income                           |       | (7,346   | )          | (7,429   | )          |
| Net amount  recognized in consolidated balance sheet              |       | $        | (22,252    | )        | $          | (23,330 | ) |
|                                                                   |            |          |            |          |            |  |  |  |  |  |  |

 

Accumulated other comprehensive income related to other postretirmentbenefit plans is as follows:

 
| **(in thousands)**                                     | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------------------------|------------|----------|------------|----------|------------|
| Unrecognized net  actuarial losses (gains)                  |       | $        | (7,788     | )        | $          | (7,553 | ) |
| Unrecognized net  prior service costs (benefits)            |       | (3,813   | )          | (4,267   | )          |
| Tax expense  (benefit)                                      |       | 4,255    |       | 4,391    |       |
| Accumulated  other comprehensive loss (income), end of year |       | $        | (7,346     | )        | $          | (7,429 | ) |

 

Estimated amounts in accumulated other comprehensive income expected tobe reclassified to net period cost during 2009 are as follows:

 
| **(in thousands)**             | ** ** | **2008** | ** ** |
|-------------------------------------|------------|----------|------------|
| Net actuarial  (gains) losses       |       | $        | (524       | ) |
| Net prior  service costs (benefits) |       | (455     | )          |
| Total                               |       | $        | (979       | ) |

 

The following benefit payments, which reflect expected future service,as appropriate, are expected to be paid:

 
| **(in thousands)** | ** ** | **Benefit Payments** | ** ** |
|-------------------------|------------|---------------------------|------------|
| 2009                    |       | $                         | 977        |   |
| 2010                    |       | 955                       |       |
| 2011                    |       | 1,003                     |       |
| 2012                    |       | 1,003                     |       |
| 2013                    |       | 1,015                     |       |
| 2014-2018               |       | 4,874                     |       |
|                         |            |                           |            |  |

 

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Theemployer contributions for the years ended December 31, 2008 and 2007,were $1,031,000 and $979,000, respectively. The expected contribution for 2009 is $978,000 which is expected tosatisfy plan funding requirements.

 

Thehealth care cost trend rate assumption affects the amounts reported.  For measurement purposes, the assumed annualrate of increase in the per capita cost of covered health care benefits was 8.0percent for 2008 and was 7.0 percent for 2007; each year’s estimated rate wasassumed to decrease gradually to 5.0 percent and remain at that levelthereafter.  The annual incrementaldecrease was assumed to be one-half percent for 2008 and one percent for2007.  A one-percentage point change inassumed health care trends would have the following effects:

 
| **(in thousands)**                                                | ** ** | **One Percentage  Point Increase** | ** ** | **One Percentage  Point Decrease** | ** ** |
|------------------------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| Effect on total  of service and interest cost components for 2008      |       | $                                            | 19         |                                         | $          | (17 | ) |
| Effect on  postretirement benefit obligation at December 31, 2008 |       | $                                            | 239        |                                         | $          | (217 | ) |

 

TheCompany’s actuarial valuation date is December 31.  The weighted-average discount rates used todetermine the actuarial present value of the net postretirement projectedbenefit obligation for the years ended December 31, 2008 and 2007 are 6.00percent and 6.25 percent, respectively. The weighted-average discount rates used to determine the netpostretirement benefit cost was 6.25 percent, 5.75 percent, and 5.75 percentfor the years ended December 31, 2008, 2007, and 2006, respectively.

 

**Note 7 —STOCK OPTION AND INCENTIVE PLANS**

Since1987, the Company’s stock option and stock award plans have provided for theissuance of up to 19,800,000 shares of common stock to key employees.  As of December 31, 2008, 2007, and 2006,respectively, 5,915,585, 6,146,961, and 7,389,928, shares were available forfuture grants under these plans.  Sharesforfeited by the employee become available for future grants.

 

Stockoption awards have not been granted since 2003 and all stock optionsoutstanding at December 31, 2008, are fully vested.  The fair value of each stock option grant wasestimated on the date of grant using the Black-Scholes option-pricingmodel.  Stock options were granted atprices equal to fair market value on the date of the grant and are exercisable,upon vesting, over varying periods up to ten years from the date of grant.  Options for directors vest immediately, whileoptions for Company employees generally vest over three years (one-third peryear).  Details of the stock option plansat December 31, 2008, 2007, and 2006, are:

 
| ** **                             | ** ** | **Aggregate** | ** ** | ** **         | ** ** | **Per Share**    | ** **     | **Weighted-Average**    | ** ** |
|----------------------------------------|------------|---------------|------------|--------------------|------------|-----------------------|----------------|-------------------------|------------|
| ** **                             | ** ** | **Intrinsic** | ** ** | **Number of** | ** ** | **Option Price** | ** **     | **Exercise Price** | ** ** |
| ** **                             | ** ** | **Value**     | ** ** | **Shares**         | ** ** | **Range**             | ** **     | **Per Share**      | ** ** |
| Outstanding at  December 31, 2005 |       |          |       | 2,153,378          |       | $15.86 -$26.95        |           | $                       | 19.72      |   |
|                                   |       |          |       |               |       |                  |           |                    |       |
| Exercised in  2006                     |       | $             | 1,870,000  |               | (132,200   | )                     | $16.16 -$22.04 |                    | $          | 16.64 |   |
| Outstanding at  December 31, 2006 |       | $             | 28,269,000 |               | 2,021,178  |                  | $15.86 -$26.95 |                    | $          | 19.92 |   |
| Exercisable at  December 31, 2006 |       | $             | 27,884,000 |               | 1,979,178  |                  | $15.86 -$26.95 |                    | $          | 19.82 |   |
|                                   |       |          |       |               |       |                  |           |                    |       |
| Exercised in  2007                     |       | $             | 3,494,000  |               | (337,096   | )                     | $18.67 -$22.52 |                    | $          | 22.10 |   |
| Outstanding at  December 31, 2007 |       | $             | 13,238,000 |               | 1,684,082  |                  | $15.86 -$26.95 |                    | $          | 19.49 |   |
| Exercisable at  December 31, 2007 |       | $             | 13,238,000 |               | 1,684,082  |                  | $15.86 -$26.95 |                    | $          | 19.49 |   |
|                                   |       |          |       |               |       |                  |           |                    |       |
| Exercised in  2008                     |       | $             | 2,385,000  |               | (287,346   | )                     | $15.88 -$18.81 |                    | $          | 18.45 |   |
| Forfeited in  2008                     |       | $             | 46,000     |               | (7,398     | )                     | $ 18.81   |                    | $          | 18.81 |   |
| Outstanding at  December 31, 2008 |       | $             | 5,467,000  |               | 1,389,338  |                  | $15.86 -$26.95 |                    | $          | 19.75 |   |
| Exercisable at  December 31, 2008 |       | $             | 5,467,000  |               | 1,389,338  |                  | $15.86 -$26.95 |                    | $          | 19.75 |   |

 

The following table summarizes information about outstanding andexercisable stock options at December 31, 2008.

 
| ** **               | ** ** | **Options Outstanding and Exercisable** | ** ** |
|--------------------------|------------|--------------------------------------------------------|------------|
| ** **               | ** ** | **Number**                                             | ** ** | **Weighted-Average** | ** ** | ** ** | ** ** |
| **Range of**        | ** ** | **Outstanding**                                        | ** ** | **Remaining** | ** ** | **Weighted-Average** | ** ** |
| **Exercise Prices** | ** ** | **at 12/31/08**                                   | ** ** | **Contractual Life** | ** ** | **Exercise Price** | ** ** |
| $15.86 - $18.81          |       | 964,868                                                |       | 1.3 years |   | $ | 17.56 |   |
| $22.04 - $26.95          |       | 424,470                                                |       | 3.6 years |   | $ | 24.71 |   |
|                     |       | 1,389,338                                              |       | 2.0 years |   | $ | 19.75 |   |

 

In1994, 2001, and in 2006, the Company adopted Stock Incentive Plans for certain key employees.  The 1994, 2001, and 2007 (adopted in 2006)Plans provide for the issuance of up to 4,000,000, 5,000,000, and 6,000,000grants, respectively.  Each Plan expires10 years after its inception, at which point no further stock options or performanceunits may be granted.  Since 1994,3,932,910, 3,677,162, and 1,474,343 grants of either stock options orperformance units (commonly referred to as restricted stock) have been madeunder the 1994, 2001, and 2007 Plans, respectively.  Distribution of the performance units is madein the form of shares of the Company’s common stock on a one for onebasis.  Distribution of the shares willnormally be made not less than three years, nor more than six years, from thedate of the performance unit grant.  Allperformance units granted under the plan are subject to restrictions as tocontinuous employment, except in the case of death, permanent disability, orretirement.  In addition, cash paymentsare made during the grant period on outstanding performance units equal to thedividend on Bemis common stock.  The costof the award is based on the fair market value of the stock on the date ofgrant.  The cost of the awards is chargedto income over the requisite service period.

 

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Totalcompensation expense related to Stock Incentive Plans was $18,058,000 in 2008,$16,849,000 in 2007, and $11,694,000 in 2006.

 

Asof December 31, 2008, the unrecorded compensation cost for performanceunits is $40,445,000 and will be recognized over the remaining vesting periodfor each grant which ranges between January 1, 2009 and October 5,2013.  The remaining weighted-averagelife of all performance units outstanding is 2.3 years.  Prior to the adoption of FAS 123(R) theCompany maintained liability balances of $37,629,000 related to the portion ofperformance units for which compensation expense had been previouslyrecognized.  As these awards areconsidered equity-based awards under FAS 123(R), the Company has reclassifiedthis balance from a liability classification to a component of additionalpaid-in capital.

 

Thefollowing table summarizes annual restricted stock unit activity for the threeyears ended December 31, 2008:

 
| ** **                                                   | ** ** | **2008**  | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|--------------------------------------------------------------|------------|-----------|------------|------------|------------|------------|------------|
| Outstanding  shares granted at the beginning of the year     |       | 3,296,583 |       | 3,200,437  |       | 3,069,163  |       |
| Shares Granted                                               |       | 318,441   |       | 1,302,800  |       | 346,143    |       |
| Shares Paid                                                  |       | (182,943  | )          | (1,146,821 | )          | (142,869   | )          |
| Shares Canceled                                              |       | (89,667   | )          | (59,833    | )          | (72,000    | )          |
| Outstanding  shares granted at the end of the year           |       | 3,342,414 |       | 3,296,583  |       | 3,200,437  |       |
|                                                         |       |      |       |       |       |       |       |
| Aggregate  intrinsic value at year end of outstanding awards |       | $         | 79,148,000 |       | $          | 90,260,000 |       | $ | 108,751,000 |   |
|                                                              |            |           |            |            |            |            |            |  |  |  |

 

**Note 8 —LONG-TERM DEBT**

Debtconsisted of the following at December 31,

 
| **(dollars in thousands)**                                                  | ** ** | **2008** | ** ** | **2007** | ** ** |
|---------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Commercial paper  payable through 2009 at a weighted-average interest rate of 2.9%    |       | $        | 330,795    |     | $          | 161,500 |   |
| Notes payable in  2008 at an interest rate of 6.5%                                    |       |     |       | 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    |       |
| Industrial  revenue bond payable through 2012 at an interest rate of 1.6%             |       | 8,000    |       | 8,000    |       |
| Debt of  subsidiary companies payable through 2012 at interest rates of 5.4% to 11.3% |       | 39,775   |       | 54,221   |       |
| Obligations  under capital leases                                                     |       | 65       |       | 146      |       |
|                                                                                  |       |     |       |     |       |
| Total debt                                                                            |       | 678,635  |       | 777,214  |       |
| Less current  portion                                                                 |       | 18,651   |       | 1,758    |       |
| Total long-term  debt                                                                 |       | $        | 659,984    |     | $          | 775,456 |   |

 

Thecommercial paper and the $250 million note payable, which matured in 2008, havebeen classified as long-term debt, to the extent of available long-term backupcredit agreements, in accordance with the Company’s intent and ability torefinance such obligations on a long-term basis.  The weighted-average interest rate ofcommercial paper outstanding at December 31, 2008, was 2.9 percent.  The maximum outstanding during 2008 was$476,052,000, and the average outstanding during 2008 was $290,211,536.  The weighted-average interest rate during2008 was 3.2 percent.

 

Theindustrial revenue bond has a variable interest rate which is determined weeklyby a “Remarketing Agent” based on similar debt then available.  The interest rate at December 31, 2008,was 1.6 percent and the weighted-average interest rate during 2008 was 2.6percent.  Long-term debt maturing inyears 2009 through 2013 is $18,651,000, $20,763,000, $368,000, $308,058,000,and $330,795,000, respectively.  TheCompany is in compliance with all debt covenant agreements.

 

Underthe terms of our revolving credit agreements, we have the capacity to borrow upto $625 million, of which $425 million matures April 28, 2013, and $200million matures April 28, 2009. These facilities are primarily used to support our issuance ofcommercial paper.  The revolving creditagreements include a combined $100 million multicurrency limit to support tofinancing needs of our international subsidiaries.  In addition, we have arrangements in place toissue up to $100 million of Extendable Commercial Notes (ECNs), which areshort-term instruments whose maturity can be extended to 390 days from the dateof issuance.  As of December 31,2008, the ECN market was unavailable due to unfavorable market conditions.

 

TheCompany entered into two interest rate swap agreements with a total notionalamount of $250.0 million in the third quarter of 2001, effectively converting aportion of the Company’s fixed interest rate exposure to a variable rate basisto hedge against the risk of higher borrowing costs in a declining interestrate environment.  During 2008 theseswaps matured and were net settled, concurrent with the repayment of theunderlying $250.0 million debt.  TheCompany does not enter into interest rate swap contracts for speculative ortrading purposes.  The differential to bepaid or received on the interest rate swap agreements is accrued and recognizedas an adjustment to interest expense as interest rates change.  The interest rate swap agreements as of December 31,2007, were designated as hedges of the fair value of the Company’s fixed ratelong-term debt obligation of $250.0 million, 6.5 percent notes due August 15,2008.

 

Thevariable rate for each of the interest rate swaps was based on the six-monthLondon Interbank Offered Rate (LIBOR), set in arrears, plus a fixedspread.  The variable rates were resetsemi-annually at each net settlement date. The net settlement benefit to the 

 

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Company,which is recorded as a reduction in interest expense, was $5.7 million, $1.3million, and $0.4 million in 2008, 2007, and 2006, respectively.  At December 31, 2007, the fair value ofthese interest rate swaps was $3.3 million in the Company’s favor, asdetermined by the respective counterparties using discounted cash flow or otherappropriate methodologies, and is included with deferred charges and otherassets with a corresponding increase in long-term debt.

 

**Note 9 —RESTRUCTURING OF OPERATIONS**

InJanuary 2006, the Company committed to a plan to close five flexiblepackaging plants:  Peoria, Illinois;Denmark and Neenah, Wisconsin; Georgetown, Ontario, Canada; and Epernon,France.  The closure of these plants,together with related support staff and capacity reductions within the flexiblepackaging business segment, has reduced fixed costs and improved capacityutilization elsewhere in the Company. During 2006, the Company incurred charges of $11.6 million for employeeseverance, $12.3 million for accelerated depreciation, and $5.1 million forother related costs.  The restructuringeffort is complete.

 

Alsoin January 2006, the Company committed to a plan to close a pressuresensitive materials plant located in Hopkins, Minnesota.  The closure of this plant, together withrelated support staff and capacity reductions within the pressure sensitivematerials business segment, has reduced fixed costs and improved capacityutilization.  During 2006, the Companyincurred charges of $0.5 million for employee severance and $0.5 million forother related costs.  The restructuringeffort is complete.

 

During2006, a total of $18.3 million has been charged to other costs (income) and$12.9 million has been charged to cost of products sold within the consolidatedstatement of income.  During 2007, atotal of $0.3 million restructuring income has been recorded as a component ofother costs (income) and $0.3 million has been charged to cost of products soldwithin the consolidated statement of income. Included in the amount recorded in other costs (income) was a $1.5million charge associated with corporate restructuring and related costs, whichwas more than offset by net restructuring income of $1.8 million related to ourflexible packing operations.

 

**Note 10 —INCOME TAXES**

 
| **(dollars in thousands)**                      | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|-----------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| U.S. income  before income taxes                          |       | $        | 180,719    |     | $          | 206,544  |       | $ | 214,311 |   |
| Non-U.S. income  before income taxes                      |       | 81,795   |       | 79,310   |       | 71,485   |       |
| Income before  income taxes                               |       | $        | 262,514    |     | $          | 285,854  |       | $ | 285,796 |   |
|                                                      |       |     |       |     |       |     |       |
| Income tax  expense consists of the following components: |       |     |       |     |       |     |       |
| Current tax  expense:                                     |       |     |       |     |       |     |       |
| U.S. federal                                              |       | $        | 42,963     |     | $          | 59,538   |       | $ | 71,754 |   |
| Foreign                                                   |       | 28,579   |       | 29,588   |       | 31,374   |       |
| State and local                                           |       | 9,092    |       | 9,371    |       | 14,302   |       |
| Total current  tax expense                                |       | 80,634   |       | 98,497   |       | 117,430  |       |
| Deferred tax  expense:                                    |       |     |       |     |       |     |       |
| U.S. federal                                              |       | 17,171   |       | 4,711    |       | (6,266   | )          |
| Foreign                                                   |       | (803     | )          | (744     | )          | (796     | )          |
| State                                                     |       | (702     | )          | 1,836    |       | (868     | )          |
| Total deferred  tax expense                               |       | 15,666   |       | 5,803    |       | (7,930   | )          |
| Total income tax  expense                                 |       | $        | 96,300     |     | $          | 104,300  |       | $ | 109,500 |   |

 

 The tax effects of temporarydifferences that give rise to the deferred tax assets and deferred taxliabilities are presented below.

 
| **(dollars in thousands)**                                                                                  | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Deferred  Tax Assets:**                                                                                             |       |     |       |     |       |     |       |
| Accounts  receivable, principally due to allowances for returns and doubtful accounts                                 |       | $        | 5,900      |     | $          | 5,759    |       | $ | 6,317 |   |
| Inventories,  principally due to additional costs inventoried for tax purposes                                        |       | 15,884   |       | 14,898   |       | 15,699   |       |
| Employee compensation  and benefits accrued for financial reporting purposes                                          |       | 106,673  |       | 45,006   |       | 54,402   |       |
| Foreign net  operating losses                                                                                         |       | 11,587   |       | 12,308   |       | 12,596   |       |
| Other                                                                                                                 |       | 5,042    |       | 4,377    |       | 8,003    |       |
| Total deferred  tax assets                                                                                            |       | 145,086  |       | 82,348   |       | 97,017   |       |
| Less valuation  allowance                                                                                             |       | (9,242   | )          | (7,059   | )          | (6,701   | )          |
| Total deferred  tax assets, after valuation allowance                                                                 |       | $        | 135,844    |     | $          | 75,289   |       | $ | 90,316 |   |
| ** **                                                                                                            |       |     |       |     |       |     |       |
| **Deferred  Tax Liabilities:**                                                                                        |       |     |       |     |       |     |       |
| Plant and  equipment, principally due to differences in depreciation, capitalized interest,  and capitalized overhead |       | $        | 141,222    |     | $          | 128,471  |       | $ | 127,817 |   |
| Goodwill and  intangible assets, principally due to differences in amortization                                       |       | 63,866   |       | 55,228   |       | 50,980   |       |
| Other                                                                                                                 |       | 465      |       | 6,419    |       | 8,532    |       |
| Total deferred  tax liabilities                                                                                       |       | 205,553  |       | 190,118  |       | 187,329  |       |
|                                                                                                                  |       |     |       |     |       |     |       |
| Deferred tax  liabilities, net                                                                                        |       | $        | 69,709     |     | $          | 114,829  |       | $ | 97,013 |   |

 

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The net deferred tax liabilities are reflected in the balance sheet asfollows:

 
| **(dollars in thousands)**               | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Deferred tax  assets (included in prepaid expense) |       | $        | 42,123     |     | $          | 41,042   |       | $ | 37,155 |   |
| Deferred tax  liabilities                          |       | 111,832  |       | 155,871  |       | 134,168  |       |
| Net deferred tax  liabilities                      |       | $        | 69,709     |     | $          | 114,829  |       | $ | 97,013 |   |

 

TheCompany’s effective tax rate differs from the federal statutory rate due to thefollowing items:

 
| ** **                                                                                  | ** ** | **2008**   | ** ** | **2007**            | ** ** | **2006**   | ** ** |
|---------------------------------------------------------------------------------------------|------------|------------|------------|---------------------|------------|------------|------------|
| ** **                                                                                  | ** ** | ** ** | ** ** | **% of**       | ** ** | ** ** | ** ** | **% of** | ** ** | ** ** | ** ** | **% of** | ** ** |
| ** **                                                                                  | ** ** | ** ** | ** ** | **Income**          | ** ** | ** ** | ** ** | **Income** | ** ** | ** ** | ** ** | **Income** | ** ** |
| **(dollars in thousands)**                                                        | ** ** | **Amount** | ** ** | **Before Tax** | ** ** | **Amount** | ** ** | **Before Tax** | ** ** | **Amount** | ** ** | **Before Tax** | ** ** |
| Computed  “expected” tax expense on income before taxes at federal statutory rate |       | $          | 91,880     |                | 35.0       | %          | $          | 100,049 |   | 35.0 | % | $ | 100,029 |   | 35.0 | % |
| Increase  (decrease) in taxes resulting from:                                               |       |       |       |                |       |       |       |   |   |   |   |   |   |
| State and local  income taxes net of federal income tax benefit                             |       | 5,454      |       | 2.1                 |       | 7,285      |       | 2.5 |   | 8,732 |   | 3.1 |   |
| Foreign tax rate  differential                                                              |       | (3,635     | )          | (1.4                | )          | (1,464     | )          | (0.5 | ) | 3,930 |   | 1.4 |   |
| Minority  interest                                                                          |       | 2,104      |       | 0.8                 |       | 1,313      |       | 0.5 |   | 1,239 |   | 0.4 |   |
| Manufacturing  tax benefits                                                                 |       | (2,345     | )          | (0.9                | )          | (4,200     | )          | (1.5 | ) | (3,146 | ) | (1.1 | ) |
| Other                                                                                       |       | 2,842      |       | 1.1                 |       | 1,317      |       | 0.5 |   | (1,284 | ) | (0.5 | ) |
| Actual income  tax expense                                                                  |       | $          | 96,300     |                | 36.7       | %          | $          | 104,300 |   | 36.5 | % | $ | 109,500 |   | 38.3 | % |
|                                                                                             |            |            |            |                     |            |            |            |  |  |  |  |  |  |  |  |  |  |

 

Asof December 31, 2008, the Company had foreign net operating losscarryovers of approximately $34.1 million that are available to offset futuretaxable income.  Approximately $16.7million of the carryover expires over the period 2014-2018.  The balance of the loss carryovers has noexpiration.  FAS No. 109, *Accounting for Income Taxes,*requires thata valuation allowance be established when it is more likely than not that allor a portion of deferred tax assets will not be realized.  The Company’s management determined that avaluation allowance of $9.2 million against deferred tax assets primarilyassociated with the foreign net operating loss carryover was necessary at December 31,2008.

 

Provisionhas not been made for U.S. or additional foreign taxes on $163.7 million ofundistributed earnings of foreign subsidiaries because those earnings areconsidered to be indefinitely reinvested in the operations of thosesubsidiaries.  It is not practical toestimate the amount of tax that might be payable on the eventual remittance ofsuch earnings.

 

TheCompany adopted FAS Interpretation (FIN) No. 48,*Accounting for Uncertainty in Income Taxes, an Interpretation of FASBStatement No. 109* (FIN 48), on January 1, 2007. TheCompany recognized no material adjustments as a result of the implementation ofthis policy.

 

Asof December 31, 2007, the Company had approximately $9.1 million of totalunrecognized tax benefits. Of this total, approximately $6.4 millionrepresented the amount of unrecognized tax benefits that would impact theeffective income tax rate if recognized in any future periods. As of December 31,2008, the Company had approximately $11.9 million of total unrecognized taxbenefits. Of this total, approximately $8.0 million represented the amount ofunrecognized tax benefits that would impact the effective income tax rate ifrecognized in any future periods.

 

Areconciliation of the beginning and ending amount of unrecognized tax benefits,in millions, is as follows:

 
| ** **                                                    | ** ** | **2008** | ** ** | **2007** | ** ** |
|---------------------------------------------------------------|------------|----------|------------|----------|------------|
| Balance at  January 1,                                   |       | $        | 9.1        |     | $          | 13.9 |   |
| Additions based  on tax positions related to the current year |       | 2.0      |       | 1.0      |       |
| Additions for  tax positions of prior years                   |       | 3.8      |       | 2.5      |       |
| Reductions for  tax positions of prior years                  |       | (1.6     | )          | (0.3     | )          |
| Reductions due  to a lapse of the statute of limitations      |       | (0.6     | )          | (0.4     | )          |
| Settlements                                                   |       | (0.8     | )          | (7.6     | )          |
|                                                          |       |     |       |     |       |
| Balance at  December 31,                                 |       | $        | 11.9       |     | $          | 9.1 |   |

 

TheCompany does not expect significant changes to the balance of unrecognized taxbenefits within the next 12 months.

 

TheCompany recognizes interest and penalties related to unrecognized tax benefitsas components of income tax expense. The Company had approximately $1.3 millionaccrued for interest and penalties at December 31, 2007. As of December 31,2008, the Company had approximately $1.4 million accrued for interest andpenalties.

 

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The Company and its subsidiaries are subject to U.S.federal and state income tax as well as income tax in multiple internationaljurisdictions.  The Company’s U.S.federal income tax returns for the years prior to 2006 have been audited andcompletely settled.  With few exceptions,the Company is no longer subject to examinations by tax authorities for yearsprior to 2003 in the significant jurisdictions in which it operates.

 

**Note 11 —LEASES**

TheCompany has operating leases for manufacturing plants, land, warehouses,machinery and equipment, and administrative offices that expire at varioustimes over the next 33 years.  Under mostleasing arrangements, the Company pays the property taxes, insurance,maintenance, and other expenses related to the leased property.  Total rental expense under operating leaseswas approximately $11,542,000 in 2008, $10,378,000 in 2007, and $10,870,000 in2006.

 

TheCompany has capitalized leases for machinery and equipment that expire atvarious times over the next two years. The present values of minimum future obligations shown in the followingchart are calculated based on an interest rate of approximately 4.7 percent,which is the lessor’s implicit rate of return. Interest expense on the outstanding obligations under capital leases wasapproximately $5,000 in 2008, $16,000 in 2007, and $15,000 in 2006.

 

Minimumfuture obligations on leases in effect at December 31, 2008, are:

 
| ** **                                | ** ** | **Capital** | ** ** | **Operating** | ** ** |
|-------------------------------------------|------------|-------------|------------|---------------|------------|
| **(in thousands)**                   | ** ** | **Leases**  | ** ** | **Leases**    | ** ** |
| 2009                                      |       | $           | 67         |          | $          | 6,682 |   |
| 2010                                      |       | 1           |       | 5,009         |       |
| 2011                                      |       | 0           |       | 3,632         |       |
| 2012                                      |       | 0           |       | 2,488         |       |
| 2013                                      |       | 0           |       | 2,036         |       |
| Thereafter                                |       | 0           |       | 5,801         |       |
| Total minimum  obligations                |       | 68          |       | $             | 25,648     |   |
| Less amount  representing interest        |       | 3           |       |          |       |
| Present value of  net minimum obligations |       | 65          |       |          |       |
| Less current  portion                     |       | 64          |       |          |       |
| Long-term  obligations                    |       | $           | 1          |          |       |   |

 

**Note 12 —SEGMENTS OF BUSINESS**

TheCompany’s business activities are organized around and aggregated into its twoprincipal business segments, Flexible Packaging and Pressure SensitiveMaterials.  Both internal and externalreporting conform to this organizational structure, with no significantdifferences in accounting policies applied. Minor intersegment sales are generally priced to reflect nominalmarkups.  The Company evaluates theperformance of its segments and allocates resources to them based primarily onoperating profit, which is defined as profit before general corporate expense,interest expense, income taxes, and minority interest.   While there are similarities in selectedtechnology and manufacturing processes utilized between the Company’s businesssegments, notable differences exist in products, application and distributionof products, and customer base.

 

Productsproduced within the Flexible Packaging business segment service packagingapplications for markets such as food, medical devices, personal care,agribusiness, chemicals, pet food, and tissue. Products produced within the Pressure Sensitive Materials businesssegment include film, paper, and metalized plastic film printing stocks usedfor primary package labeling, promotional decoration, bar code inventorycontrol labels, and laser printing for administrative office and promotionalapplications.  This segment also includesmicro-thin film adhesives used in delicate electronic parts assembly andgraphic films for decorative signage.

 

Asummary of the Company’s business activities reported by its two businesssegments follows:

 
| **BUSINESS SEGMENTS (in millions)** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Net  Sales:**                                    |       |     |       |     |       |     |       |
| Flexible  Packaging                                |       | $        | 3,154.4    |     | $          | 3,002.5  |       | $ | 3,000.6 |   |
| Pressure  Sensitive Materials                      |       | 632.2    |       | 653.0    |       | 643.3    |       |
| **Intersegment  Sales:**                           |       |     |       |     |       |     |       |
| Flexible  Packaging                                |       | (1.2     | )          | (0.7     | )          | (0.5     | )          |
| Pressure  Sensitive Materials                      |       | (6.0     | )          | (5.5     | )          | (4.0     | )          |
| Net Sales to  Unaffiliated Customers               |       | $        | 3,779.4    |     | $          | 3,649.3  |       | $ | 3,639.4 |   |
| ** **                                         |       |     |       |     |       |     |       |
| **Operating  Profit and Pretax Profit:**           |       |     |       |     |       |     |       |
| Flexible  Packaging                                |       | $        | 315.9      |     | $          | 346.6    |       | $ | 335.1 |   |
| Pressure  Sensitive Materials                      |       | 34.3     |       | 40.3     |       | 50.1     |       |
| Total operating  profit (1)                        |       | 350.2    |       | 386.9    |       | 385.2    |       |
| General  corporate expenses                        |       | (42.3    | )          | (46.9    | )          | (46.6    | )          |
| Interest expense                                   |       | (39.4    | )          | (50.3    | )          | (49.3    | )          |
| Minority  interest in net income                   |       | (6.0     | )          | (3.8     | )          | (3.5     | )          |
| Income before  income taxes                        |       | $        | 262.5      |     | $          | 285.9    |       | $ | 285.8 |   |
| ** **                                         |       |     |       |     |       |     |       |
| **Identifiable  Assets:**                          |       |     |       |     |       |     |       |
| Flexible  Packaging                                |       | $        | 2,343.8    |     | $          | 2,672.7  |       | $ | 2,579.5 |   |
| Pressure  Sensitive Materials                      |       | 339.0    |       | 358.0    |       | 339.9    |       |
| Total  identifiable assets (2)                     |       | 2,682.8  |       | 3,030.7  |       | 2,919.4  |       |
| Corporate assets  (3)                              |       | 139.5    |       | 160.7    |       | 119.6    |       |
| Total                                              |       | $        | 2,822.3    |     | $          | 3,191.4  |       | $ | 3,039.0 |   |
| ** **                                         |       |     |       |     |       |     |       |
| **Depreciation  and Amortization:**                |       |     |       |     |       |     |       |
| Flexible  Packaging                                |       | $        | 147.2      |     | $          | 144.2    |       | $ | 138.4 |   |
| Pressure  Sensitive Materials                      |       | 13.7     |       | 13.4     |       | 13.1     |       |
| Corporate                                          |       | 1.1      |       | 0.9      |       | 0.9      |       |
| Total                                              |       | $        | 162.0      |     | $          | 158.5    |       | $ | 152.4 |   |
| ** **                                         |       |     |       |     |       |     |       |
| **Expenditures  for Property and Equipment:**      |       |     |       |     |       |     |       |
| Flexible  Packaging                                |       | $        | 86.3       |     | $          | 139.3    |       | $ | 122.4 |   |
| Pressure  Sensitive Materials                      |       | 11.9     |       | 16.0     |       | 10.2     |       |
| Corporate                                          |       | 22.3     |       | 23.6     |       | 26.2     |       |
| Total                                              |       | $        | 120.5      |     | $          | 178.9    |       | $ | 158.8 |   |

 

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| **OPERATIONS BY GEOGRAPHIC AREA (in millions)** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Net  Sales to Unaffiliated Customers: (4)**                            |       |     |       |     |       |     |       |
| United States                                                            |       | $        | 2,429.4    |     | $          | 2,352.2  |       | $ | 2,400.5 |   |
| Canada                                                                   |       | 12.3     |       | 15.6     |       | 64.8     |       |
| Europe                                                                   |       | 656.5    |       | 647.6    |       | 595.9    |       |
| South America                                                            |       | 582.4    |       | 539.9    |       | 491.3    |       |
| Other                                                                    |       | 98.8     |       | 94.0     |       | 86.9     |       |
| Total                                                                    |       | $        | 3,779.4    |     | $          | 3,649.3  |       | $ | 3,639.4 |   |
| ** **                                                               |       |     |       |     |       |     |       |
| **Identifiable  Assets: (2)**                                            |       |     |       |     |       |     |       |
| United States                                                            |       | $        | 1,622.4    |     | $          | 1,677.7  |       | $ | 1,706.6 |   |
| Canada                                                                   |       | 2.5      |       | 5.7      |       | 21.2     |       |
| Europe                                                                   |       | 383.8    |       | 441.7    |       | 419.0    |       |
| South America                                                            |       | 603.5    |       | 830.1    |       | 696.1    |       |
| Other                                                                    |       | 70.2     |       | 75.5     |       | 76.5     |       |
| Total                                                                    |       | $        | 2,682.4    |     | $          | 3,030.7  |       | $ | 2,919.4 |   |

 

----

| (1) |   | Operating  profit is defined as profit before general corporate expense, interest  expense, income taxes, and minority interest.                                                                            |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) |   | Identifiable  assets by business segment include only those assets that are specifically  identified with each segment’s operations.                                                                   |
| (3) |   | Corporate  assets are principally prepaid expenses, prepaid income taxes, prepaid  pension benefit costs, fair value of the interest rate swap agreements, and  corporate tangible and intangible property. |
| (4) |   | Net  sales are attributed to countries based on location of the Company’s  manufacturing or selling operation.                                                                                         |

** **

**Note 13 —COMMITMENTS AND CONTINGENCIES**

The Company is involved in a number oflawsuits incidental to its business, including environmental relatedlitigation.  Although it is difficult to predict the ultimate outcome ofthese cases, management believes, except as discussed below, that any ultimateliability would not have a material adverse effect upon the Company’sconsolidated financial condition or results of operations.

 

The Company is a potentially responsible party (PRP) pursuant to theComprehensive Environmental Response, Compensation and Liability Act of 1980(commonly known as “Superfund”) and similar state laws in proceedingsassociated with seventeen sites around the United States.  During 2008, the Company was identified as aPRP in four new sites.  In addition, twosites previously considered closed have been re-opened for potential furtherremediation.  These proceedings wereinstituted by the United States Environmental Protection Agency and certainstate environmental agencies at various times beginning in 1983.  Superfund and similar state laws createliability for investigation and remediation in response to releases of hazardoussubstances in the environment. Under these statutes, joint and severalliability may be imposed on waste generators, site owners and operators, andothers regardless of fault.  Althoughthese regulations could require the Company to remove or mitigate the effectson the environment at various sites, perform remediation work at such sites,or pay damages for loss of use and non-use values, we expect the Company’sliability in these proceedings to be limited to monetary damages. The Companyexpects its future liability relative to these sites to be insignificant,individually and in the aggregate.  The Company has reserved an amountthat it believes to be adequate to cover its exposure.

 

Dixie Toga S.A., acquired by the Company on January 5, 2005, isinvolved in a tax dispute with the City of São Paulo, Brazil.  The Cityimposes a tax on the rendering of printing services.  The City hasassessed this city services tax on the production and sale of printed labelsand packaging products.  Dixie Toga, along with a number of otherpackaging companies, disagree and contend that the city services tax is notapplicable to its products and that the products are subject only to the statevalue added tax (VAT).  Under Brazilian law, state VAT and city servicestax are mutually exclusive and the same transaction can be subject to only oneof those taxes.  Based on a ruling from the State of São Paulo, advicefrom legal counsel, and long standing business practice, Dixie Toga appealedthe city services tax and instead continued to collect and pay only the stateVAT.

 

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TheCity of São Paulo disagreed and assessed Dixie Toga the city services tax forthe years 1991-1995.  The assessments forthose years are estimated to be approximately $47.0 million at the date theCompany acquired Dixie Toga, translated to U.S. dollars at the December 31,2008 exchange rate.  Dixie Togachallenged the assessments and ultimately litigated the issue in two annulmentactions filed on November 24, 1998 and August 16, 1999 in the LowerTax Court in the city of São Paulo.  Adecision by the Lower Tax Court in the city of São Paulo in 2002 cancelled allof the assessments for the years 1991-1995. The City of São Paulo, the State of São Paulo, and Dixie Toga have eachappealed parts of the lower court decision. In the event of an adverse resolution, the estimated amount for theseyears could be substantially increased for additional interest, monetaryadjustments and costs from the date of acquisition.

 

TheCity has also asserted the applicability of the city services tax for thesubsequent years 1996-2001 and has issued assessments for those years for DixieToga and for Itap Bemis Ltda., a Dixie Toga subsidiary.  The assessments for those years were upheldat the administrative level and are being challenged by the companies.  The assessments at the date of acquisitionfor these years for tax and penalties (exclusive of interest and monetaryadjustments) are estimated to be approximately $7.1 million for Itap Bemis and$22.8 million for Dixie Toga, translated to U.S. dollars at the December 31,2008 exchange rate.  In the event of anadverse resolution, the estimated amounts for these years could be increased by$27.1 million for Itap Bemis and $77.9 million for Dixie Toga for interest,monetary adjustments and costs.

 

The1996-2001 assessments for Dixie Toga are currently being challenged in thecourts.  In pursuing its challengethrough the courts, taxpayers are generally required, in accordance with courtprocedures, to pledge assets as security for its lawsuits.  Under certain circumstances, taxpayers mayavoid the requirement to pledge assets. Dixie Toga has secured a court injunction that avoids the currentrequirement to pledge assets as security for its lawsuit related to the1996-2001 assessments.

 

TheCompany strongly disagrees with the City’s position and intends to vigorouslychallenge any assessments by the City of São Paulo.  The Company is unableat this time to predict the ultimate outcome of the controversy and as such hasnot recorded any liability related to this matter.  An adverse resolutioncould be material to the consolidated results of operations and/or cash flowsof the period in which the matter is resolved.

 

OnSeptember 18, 2007, the Secretariat of Economic Law (SDE), a governmentalagency in Brazil, initiated an investigation into possible anti-competitivepractices in the Brazilian flexible packaging industry against a number ofBrazilian companies including a Dixie Toga subsidiary.  The investigationrelates to periods prior to the Company’s acquisition of control of Dixie Togaand its subsidiaries.  Given the preliminary nature of the proceedings theCompany is unable at the present time to predict the outcome of this matter.

 

TheCompany and its subsidiary, Morgan Adhesives Company, have been named asdefendants in thirteen civil lawsuits related to an investigation that wasinitiated and subsequently closed by the U.S. Department of Justice without anyfurther action.  Six of these lawsuits purport to represent anationwide class of labelstock purchasers, and each alleges a conspiracy to fixprices within the self-adhesive labelstock industry.  The first of these lawsuitswas filed on May 27, 2003.  In theselawsuits, the plaintiffs seek actual damages for the period of the allegedconspiracy (January 1, 1996 through July 25, 2003) trebled, plus anaward of attorneys’ fees and costs.  On November 5,2003, the Judicial Panel on MultiDistrict Litigation issued a decisionconsolidating all of the federal class actions for pretrial purposes in theUnited States District Court for the Middle District of Pennsylvania, beforethe Honorable Chief Judge Vanaskie.  On November 20, 2007, the Courtgranted plaintiffs’ motion for class certification.  On March 6,2008, the Third Circuit Court of Appeals denied Defendant’s petition for leaveto appeal the district court’s decision granting class certification.  On June 24, 2008, the Court in theconsolidated federal class actions issued a decision dismissing the Companyfrom those actions.  On January 27,2009, the defendants filed a motion to decertify the class based on new caselaw in the Third Circuit.  At this time, a discovery cut-off has been setfor December 21, 2009.  However, notrial date has been set.  The Company and Morgan Adhesives Companyhave also been named in three lawsuits filed in the California Superior Courtin San Francisco. These three lawsuits, which have been consolidated, seek torepresent a class of all California indirect purchasers of labelstock and eachalleges a conspiracy to fix prices within the self-adhesive labelstockindustry.  Finally, the Company has been named in one lawsuit in Vermont, seekingto represent a class of all Vermont indirect purchasers of labelstock, onelawsuit in Nebraska seeking to represent a class of all Nebraska indirectpurchasers of labelstock, one lawsuit in Kansas seeking to represent a class ofall Kansas indirect purchasers of labelstock, and one lawsuit in Tennessee,seeking to represent a class of purchasers of labelstock in variousjurisdictions, all alleging a conspiracy to fix prices within theself-adhesive labelstock industry.  The Company and Morgan Adhesives Companyintend to vigorously defend the state class actions, and Morgan AdhesivesCompany intends to vigorously defend the federal class actions.

 

Given the ongoing status ofthe class-action civil lawsuits, the Company is unable to predict the outcomeof these matters although the effect could be material to the results ofoperations and/or cash flows of the period in which the matter isresolved.  The Company is currently not otherwise subject to any pendinglitigation other than routine litigation arising in the ordinary course ofbusiness, none of which is expected to have a material adverse effect on thebusiness, results of operations, financial position, or liquidity of theCompany.

 

**Note 14 —FINANCIAL INSTRUMENTS**

The Company enters intoforward exchange contracts to manage foreign currency exchange rate exposuresassociated with certain foreign currency denominated receivables andpayables.  Forward exchange contractsgenerally have maturities of less than six months and relate primarily to majorWestern European currencies for our European operations, and the U.S. dollarfor our Brazilian operations.  TheCompany has not designated these derivative instruments as hedging instruments.  At December 31, 2008 and 2007, theCompany had outstanding forward exchange contracts with notional amountsaggregating $1,902,000 and $4,971,000, respectively.  The net settlement amount (fair value)related to active forward exchange contracts is recorded on the balance sheetas part of accounts payable and as an expense element of other costs (income),net, which offsets the related transaction gains or losses and was notsignificant at December 31, 2008 and 2007.

 

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Fluctuations in foreign currency exchange rates expose the Company tochanges in the fair value of U.S. dollar denominated debt held at our DixieToga business in Brazil.  To hedge thisexposure, Dixie Toga enters into currency swaps, with maturities that match theunderlying debt, effectively converting a portion of Dixie Toga’s U.S.denominated debt to their functional currency, which is the Brazilianreal.  Dixie Toga and the Company havenot designated these derivative instruments as hedging instruments.  At December 31, 2008 and 2007, theCompany had outstanding currency swap contracts with notional amountsaggregating $24,587,000 and $49,621,000 respectively.  The net settlement amount (fair value)related to active swap contracts is recorded on the balance sheet as either acurrent or long-term asset or liability and as an expense element of other costs (income), net, which offsetsthe related transaction gains or losses and was not significant at December 31,2008 and 2007.

 

The Company is exposed tochanges in the fair value of its fixed-rate debt resulting from interest ratefluctuations.  To hedge this exposure,the Company entered into two interest rate swap agreements with a total notionalamount of $250 million in the third quarter of 2001, effectively converting aportion of the Company’s fixed interest rate exposure to a variable rate basisto hedge against the risk of higher borrowing costs in a declining interestrate environment.  During 2008, theseswaps matured and were net settled, concurrent with the repayment of theunderlying $250.0 million debt.  Theinterest rate swaps were accounted for as a fair value hedge.  The terms of the interest rate swapagreements were specifically designed to conform to the applicable terms of thehedged items and with the requirements of paragraph 68 of FAS No. 133 tosupport the assumption of no ineffectiveness (changes in fair value of the debtand the swaps exactly offset).  The fairvalue of these interest rate swaps was recorded within long-term debt.  Changes in the payment of interest resultingfrom the interest rate swaps were recorded as an offset to interestexpense.  See Note 8 for furtherdiscussion of the interest rate swaps.

 

In connection with the issue of seven-year, $300 million notes in March 2005,we entered into a forward starting swap on February 3, 2005, in order tolock in an interest rate in advance of the pricing date for the notes.   On March 14, 2005, in connection withthe pricing of the notes, we terminated the swap and recorded the resultinggain of $6.1 million (pre-tax) on the balance sheet as a component of othercomprehensive income.  This gain is beingamortized as a component of interest expense over the term of the notes.

 

The Company’s non-derivativefinancial instruments included cash and cash equivalents, accounts receivable,accounts payable, short-term borrowings, and long-term debt.  At December 31, 2008 and 2007, thecarrying value of these financial instruments, excluding long-term debt,approximates fair value because of the short-term maturities of theseinstruments.  The fair value of theCompany’s long-term debt, including current maturities but excludingcapitalized leases, is estimated to be $700,945,000 and $779,541,000 at December 31,2008 and 2007, respectively, using discounted cash flow analyses and based onthe incremental borrowing rates currently available to the Company for similardebt with similar terms and maturity.

 

The Company is exposed tocredit loss in the event of non-performance by counterparties in interest rateswaps and forward exchange contracts. Collateral is generally not required of the counterparties or of theCompany.  In the unlikely event acounterparty fails to meet the contractual terms of an interest rate swap orforeign exchange forward contract, the Company’s risk is limited to the fairvalue of the instrument.  The Companyactively monitors its exposure to credit risk through the use of creditapprovals and credit limits, and by selecting major international banks andfinancial institutions as counterparties. The Company has not had any historical instances of non-performance byany counterparties, nor does it anticipate any future instances of non-performance.  Concentrations of credit risk with respect totrade accounts receivable are limited due to the large number of entitiescomprising the Company’s customer base and their dispersion across manydifferent industries and countries. As of December 31, 2008 and 2007, theCompany had no significant concentrations of credit risk.

 

**Note 15 —QUARTERLY FINANCIAL INFORMATION — UNAUDITED**

 
| ** **                                                           | ** ** | **Quarter Ended** | ** ** |
|----------------------------------------------------------------------|------------|------------------------|------------|
| **(in millions, except per share amounts)** | ** ** | **March 31**      | ** ** | **June 30** | ** ** | **September 30** | ** ** | **December 31** | ** ** | **Total** | ** ** |
| 2008                                                                 |       |                   |       |   |   |   |   |   |   |   |   |
| Net sales                                                            |       | $                      | 947.3      |   | $ | 980.0 |   | $ | 984.2 |   | $ | 867.9 |   | $ | 3,779.4 |   |
| Gross profit                                                         |       | 163.0                  |       | 172.5 |   | 165.9 |   | 146.6 |   | 648.0 |   |
| Net income                                                           |       | 42.3                   |       | 46.4 |   | 44.3 |   | 33.2 |   | 166.2 |   |
| Basic earnings  per common share                                     |       | 0.42                   |       | 0.47 |   | 0.44 |   | 0.33 |   | 1.67 |   |
| Diluted earnings  per common share                                   |       | 0.42                   |       | 0.46 |   | 0.44 |   | 0.33 |   | 1.65 |   |
|                                                                 |       |                   |       |   |   |   |   |   |   |   |   |
| 2007                                                                 |       |                   |       |   |   |   |   |   |   |   |   |
| Net sales                                                            |       | $                      | 909.1      |   | $ | 921.8 |   | $ | 905.7 |   | $ | 912.7 |   | $ | 3,649.3 |   |
| Gross profit                                                         |       | 177.2                  |       | 176.9 |   | 160.9 |   | 161.0 |   | 676.0 |   |
| Net income                                                           |       | 48.3                   |       | 49.5 |   | 41.1 |   | 42.7 |   | 181.6 |   |
| Basic earnings  per common share                                     |       | 0.46                   |       | 0.47 |   | 0.40 |   | 0.43 |   | 1.76 |   |
| Diluted earnings  per common share                                   |       | 0.45                   |       | 0.47 |   | 0.40 |   | 0.42 |   | 1.74 |   |

 

The summation of quarterlyearnings per share may not equate to the calculation for the full year asquarterly calculations are performed on a discrete basis.

 

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**ITEM 9 — CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS****ON ACCOUNTING AND FINANCIALDISCLOSURE**

 

Not applicable.

 

**ITEM 9A — CONTROLS AND PROCEDURES**

 

**(a) Management’s Conclusion Regarding the Effectiveness of Disclosure Controls andProcedures**

The Company’s management,under the direction, supervision, and involvement of the Chief ExecutiveOfficer and the Chief Financial Officer, has carried out an evaluation, as ofthe end of the period covered by this report, of the effectiveness of thedesign and operation of the disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) under the Securities Exchange Act of1934 (the “Exchange Act”)) of the Company. Based on this evaluation, the Chief Executive Officer and the ChiefFinancial Officer have concluded that disclosure controls and procedures inplace at the Company are effective to ensure that information required to bedisclosed by the Company in the reports that it files or submits under theExchange Act is recorded, processed, summarized, and reported within the timeperiods specified by the Securities and Exchange Commission’s rules andforms.

 

**(b) Management’s Report on Internal Control Over Financial Reporting**

The management of BemisCompany, Inc. is responsible for establishing and maintaining adequateinternal control over financial reporting, as such term is defined in ExchangeAct Rule 13a-15(f).  Under thedirection, supervision, and participation of the Chief Executive Officer andthe Chief Financial Officer, the Company’s management conducted an evaluationof the effectiveness of internal control over financial reporting based on theframework in *Internal Control - IntegratedFramework*issued by the Committee of Sponsoring Organizations of theTreadway Commission (COSO-Framework). Based on the results of this evaluation management has concluded thatinternal control over financial reporting was effective as of December 31,2008.

 

The effectiveness of ourinternal control over financial reporting as of December 31, 2008, hasbeen audited by PricewaterhouseCoopers LLP, an independent registered publicaccounting firm, as stated in their report, which appears on page 20 ofthis Form 10-K.

 

**(c)  Changes in InternalControl Over Financial Reporting**

There was no change in theCompany’s internal control over financial reporting during the most recentfiscal quarter that has materially affected, or is likely to materially affect,the Company’s internal control over financial reporting.

 

**ITEM 9B — OTHER INFORMATION**

Not applicable.

 

**PART  III — ITEMS 10, 11, 12, 13, and 14**

 

**ITEM 10 — DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

 

The information required tobe submitted in response to this item with respect to directors is omittedbecause a definitive proxy statement containing such information will be filedwith the Securities and Exchange Commission pursuant to Regulation 14A within120 days after December 31, 2008, and such information is expresslyincorporated herein by reference.

 

The following sets forth thename, age, and business experience for at least the last five years of theprincipal executive officers of the Company. Each officer, except Mr. Ullem, has been an employee of the Companyfor the last five years and the positions described relate to positions withthe Company.

 
| **Name (Age)**     | ** ** | **Positions Held**                                                    | ** ** | **Period The Position Was Held** |
|-------------------------|------------|----------------------------------------------------------------------------|------------|------------------------------------------------------|
|                    |       |                                                                       |       |                                                 |
| William F.  Austen (50) |       | Vice President — Operations                                           |       | 2004 to present                                      |
|                    |       | President and Chief Executive Officer — Morgan  Adhesives Company (1) |       | 2000 to present                                      |
|                    |       |                                                                       |       |                                                 |
| Jeffrey H.  Curler (58) |       | Executive Chairman and Chairman of the Board                               |       | 2008 to present                                      |
|                    |       | Chief Executive  Officer and Chairman of the Board                         |       | 2007 to 2008                                         |
|                    |       | President, Chief  Executive Officer and Chairman of the Board              |       | 2005 to 2007                                         |
|                    |       | President and  Chief Executive Officer                                     |       | 2000 to 2005                                         |
|                    |       | President and  Chief Operating Officer                                     |       | 1998 to 2000                                         |
|                    |       | President                                                                  |       | 1996 to 1998                                         |
|                    |       | Director                                                                   |       | 1992 to Present                                      |
|                    |       | Executive Vice  President                                                  |       | 1991 to 1995                                         |
|                    |       | Various R&D  and management positions within the Company               |       | 1973 to 1991                                         |

 

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| **Name  (Age)**                    | ** ** | **Positions  Held**                                                                                | ** ** | **Period  The Position Was Held**    |
|------------------------------------|------------|----------------------------------------------------------------------------------------------------|------------|--------------------------------------|
|                               |       |                                                                                               |       |                                 |
| Robert  F. Hawthorne (59)          |       | Vice  President — Operations                                                                  |       | 2007 to present                      |
|                               |       | Vice  President — Operations (Paper Packaging Division and Bemis Clysar, Inc.  (1))      |       | 2005 to 2007                         |
|                               |       | President  — Curwood, Inc. (1)                                                           |       | 2003 to 2005                         |
|                               |       | Various  sales, marketing, and management positions within the Company                             |       | 1985 to 2003                         |
|                               |       |                                                                                               |       |                                 |
| Stanley  A. Jaffy (60)             |       | Vice  President and Controller                                                                     |       | 2002 to present                      |
|                               |       | Vice  President - Tax and Assistant Controller                                                     |       | 1998 to 2002                         |
|                               |       | Various  finance management positions within the Company                                           |       | 1987 to 1998                         |
|                               |       |                                                                                               |       |                                 |
| Melanie  E.R. Miller (45)          |       | Vice  President, Investor Relations and Treasurer                                                  |       | 2005 to present                      |
|                               |       | Vice  President, Investor Relations and Assistant Treasurer                                        |       | 2002 to 2005                         |
|                               |       | Various  finance management positions within the Company                                           |       | 2000 to 2002                         |
|                               |       |                                                                                               |       |                                 |
| James  W. Ransom (49)              |       | Vice  President — Operations                                                                  |       | 2007 to present                      |
|                               |       | President  — Curwood, Inc. (1)                                                           |       | 2005 to present                      |
|                               |       | President  — Banner Packaging, Inc. (1)                                                  |       | 2002 to 2005                         |
|                               |       |                                                                                               |       |                                 |
| Eugene  H. Seashore, Jr. (59) |       | Vice  President — Human Resources                                                             |       | 2000 to present                      |
|                               |       | Various  human resource and management positions within the Company                                |       | 1980 to 2000                         |
|                               |       |                                                                                               |       |                                 |
| James  J. Seifert (52)             |       | Vice  President, General Counsel and Secretary                                                     |       | 2002 to present                      |
|                               |       |                                                                                               |       |                                 |
| Henry  J. Theisen (55)             |       | President  and Chief Executive Officer                                                             |       | 2008 to present                      |
|                               |       | President  and Chief Operating Officer                                                             |       | 2007 to 2008                         |
|                               |       | Director                                                                                           |       | 2006 to present                      |
|                               |       | Executive  Vice President and Chief Operating Officer                                              |       | 2003 to 2007                         |
|                               |       | Vice  President — Operations                                                                  |       | 2002 to 2003                         |
|                               |       | Various  R&D, marketing, and management positions within the Company                           |       | 1976 to 2002                         |
|                               |       |                                                                                               |       |                                 |
| Scott  B. Ullem (42)               |       | Vice  President, Finance                                                                           |       | 2008 to present                      |
|                               |       | Managing  Director, Banc of America Securities LLC                                                 |       | 2005 to 2008                         |
|                               |       | Various  investment banking positions leading to Managing Director, Goldman,  Sachs & Co. |       | 1989 to 1992 & 1994 to 2005 |
|                               |       |                                                                                               |       |                                 |
| Gene  C. Wulf (58)                 |       | Director                                                                                           |       | 2006 to present                      |
|                               |       | Senior  Vice President and Chief Financial Officer                                                 |       | 2005 to present                      |
|                               |       | Vice  President, Chief Financial Officer and Treasurer                                             |       | 2002 to 2005                         |
|                               |       | Vice  President and Controller                                                                     |       | 1998 to 2002                         |
|                               |       | Vice  President and Assistant Controller                                                           |       | 1997 to 1998                         |
|                               |       | Various  financial and management positions within the Company                                     |       | 1975 to 1997                         |

 

----

(1)                Identified operation is a 100 percent ownedsubsidiary or division of the Company.

 

The Company’s annual CEOcertification to the NYSE for the previous year was submitted to the NYSE on May 19,2008.  The Company’s CEO and CFO executedthe certifications required by Section 302 of the Sarbanes-Oxley Act of2002 which are filed as Exhibits 31.1 and 31.2 to this Annual Report on Form 10-K.  No qualifications were taken with respect toany of the certifications.

 

**ITEM 11 — EXECUTIVE COMPENSATION**

 

The information required tobe submitted in response to this item is omitted because a definitive proxystatement containing such information will be filed with the Securities andExchange Commission pursuant to Regulation 14A within 120 days after December 31,2008, and such information is expressly incorporated herein by reference.

 

**ITEM 12 — SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS****AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

 

The information required tobe submitted in response to this item is omitted because a definitive proxystatement containing such information will be filed with the Securities andExchange Commission pursuant to Regulation 14A within 120 days after December 31,2008, and such information is expressly incorporated herein by reference.

 

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**ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE**

 

The information required tobe submitted in response to this item is omitted because a definitive proxystatement containing such information will be filed with the Securities andExchange Commission pursuant to Regulation 14A within 120 days after December 31,2008, and such information is expressly incorporated herein by reference.

 

**ITEM 14 — PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

The information required tobe submitted in response to this item is omitted because a definitive proxystatement containing such information will be filed with the Securities andExchange Commission pursuant to Regulation 14A within 120 days after December 31,2008, and such information is expressly incorporated herein by reference.

 

**PART  IV — ITEM 15**

 

**ITEM 15 — EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**

 

(a)           The following documents are filed aspart of Item 8 of this Annual Report on Form 10-K:

 
| ** **                                                                  | ** ** | ** **                                                                                                                                         | ** ** | **Pages in  Form 10-K** |
|-----------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|
| (1)   **Financial Statements**                                         |       |                                                                                                                                               |
|                                                                        |       | Management’s Responsibility Statement                                                                                                         |       |                              | 20 |
|                                                                        |       | Report of Independent Registered Public Accounting  Firm                                                                                           |       |                              | 21 |
|                                                                        |       | Consolidated Statement of Income for each of the Three  Years Ended December 31, 2008                                                         |       |                              | 22 |
|                                                                        |       | Consolidated  Balance Sheet at December 31, 2008 and 2007                                                                                     |       |                              | 23 |
|                                                                        |       | Consolidated Statement of Cash Flows for each of the  Three Years Ended December 31, 2008                                                     |       |                              | 24 |
|                                                                        |       | Consolidated Statement of Stockholders’ Equity for each  of the Three Years Ended December 31, 2008                                      |       |                              | 25 |
|                                                                        |       | Notes to Consolidated Financial Statements                                                                                                         |       |                              | 26-41 |
|                                                                        |       |                                                                                                                                               |       |                              |   |
| (2)   **Financial Statement Schedule for Years 2008,  2007, and 2006** |       |                                                                                                                                               |       |
|                                                                        |       | Schedule II -  Valuation and Qualifying Accounts and Reserves                                                                                      |       |                              | 47 |
|                                                                        |       | Report of  Independent Registered Public Accounting Firm on Financial Statement Schedule  for each of the Three Years Ended December 31, 2008 |       |                              | 47 |

 

All other schedules are omitted because they are notapplicable or the required information is shown in the financial statements ornotes thereto.

 

(3) **Exhibits**

The Exhibit Index is incorporated herein by reference.

 

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**SIGNATURES**

 

Pursuantto the requirements of Section 13 of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
|   | BEMIS COMPANY, INC. |
|--------|---------------------|

 

 
| By     | /s/ Gene C. Wulf                     |   | By                                | /s/ Stanley A. Jaffy |
|--------|--------------------------------------|--------|-----------------------------------|----------------------|
|   | Gene  C. Wulf, Senior Vice President |   | Stanley  A. Jaffy, Vice President |
|   | and Chief Financial Officer          |   | and Controller                    |
|   | Date February 27, 2009          |   | Date February 27, 2009       |
|        |                                      |        |                                   |                      |  |  |  |  |

 

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the Registrant and inthe capacities and on the dates indicated.

 
| /s/ Gene C. Wulf                          |   | /s/ Stanley A. Jaffy                          |
|-------------------------------------------|--------|-----------------------------------------------|
| Gene  C. Wulf, Senior Vice President      |   | Stanley  A. Jaffy, Vice President             |
| and Chief Financial Officer               |   | and Controller (principal accounting officer) |
| Date February 27, 2009               |   | Date February 27, 2009                   |
|                                      |   |                                          |
|                                      |   |                                          |
| /s/ Jeffrey H. Curler                     |   | /s/ William J. Bolton                         |
| Jeffrey  H. Curler, Chairman of the Board |   | William  J. Bolton, Director                  |
| and Executive Chairman                    |   | Date February 27, 2009                   |
| Date February 27, 2009               |   |                                          |
|                                      |   |                                          |
| /s/ David S. Haffner                      |   | /s/ Barbara L. Johnson                        |
| David  S. Haffner, Director               |   | Barbara  L. Johnson, Director                 |
| Date February 27, 2009               |   | Date February 27, 2009                   |
|                                      |   |                                          |
|                                      |   |                                          |
| /s/ Timothy M. Manganello                 |   | /s/ Roger D. O’Shaughnessy               |
| Timothy  M. Manganello, Director          |   | Roger  D. O’Shaughnessy, Director        |
| Date February 27, 2009               |   | Date February 27, 2009                   |
|                                      |   |                                          |
|                                      |   |                                          |
| /s/ Paul S. Peercy                        |   | /s/ Edward N. Perry                           |
| Paul  S. Peercy, Director                 |   | Edward  N. Perry, Director                    |
| Date February 27, 2009               |   | Date February 27, 2009                   |
|                                      |   |                                          |
|                                      |   |                                          |
| /s/ William J. Scholle                    |   | /s/ Henry J. Theisen                          |
| William  J. Scholle, Director             |   | Henry  J. Theisen, Director, President        |
| Date February 27, 2009               |   | and Chief Executive Officer                   |
|                                      |   | Date February 27, 2009                   |
|                                      |   |                                          |
|                                      |   |                                          |
| /s/ Holly Van Deursen                     |   | /s/ Philip G. Weaver                          |
| Holly  Van Deursen, Director              |   | Philip  G. Weaver, Director                   |
| Date February 27, 2009               |   | Date February 27, 2009                   |
|                                      |   |                                          |
|                                      |   |                                          |
| /s/ Gene C. Wulf, Director                |   | /s/ Jeffrey H. Curler                         |
| Gene  C. Wulf, Director                   |   | Jeffrey  H. Curler, Director                  |
| Date February 27, 2009               |   | Date February 27, 2009                   |

 

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**Exhibit Index**

 
| **Exhibit** | ** ** | **Description** | ** **                                                                                                                                                               | **Form of Filing** |
|-------------|------------|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
|        | 3(a)       |            | Restated  Articles of Incorporation of the Registrant, as amended. (1)                                                                                                   |                    | Incorporated by Reference |
|        | 3(b)       |            | By-Laws  of the Registrant, as amended through May 6, 2004. (1)                                                                                                     |                    | Incorporated by Reference |
|        | 4(a)       |            | Form of  Indenture dated as of June 15, 1995, between the Registrant and U.S.  Bank Trust                                                                      |                    |   |
|        |       |            | National  Association (formerly known as First Trust National Association), as Trustee.  (2)                                                                             |                    | Incorporated by Reference |
|        | 4(b)       |            | Certificate  of Bemis Company, Inc. regarding Rights Agreement. (3)                                                                                                 |                    | Incorporated by Reference |
|        | 4(c)       |            | Rights  Agreement, dated as of July 29, 1999, between the Registrant and Wells  Fargo                                                                               |                    |   |
|        |       |            | Bank  Minnesota, National Association (formerly known as Norwest Bank Minnesota,  National Association). (4)                                                             |                    | Incorporated by Reference |
|        | 10(a)      |            | Bemis  Company, Inc. 2001 Stock Incentive Plan, Amended and                                                                                                         |                    |   |
|        |       |            | Restated  as of January 1, 2008.*                                                                                                                                   |                    | Filed Electronically |
|        | 10(b)      |            | Bemis  Company, Inc. 1994 Stock Incentive Plan, Amended and                                                                                                         |                    |   |
|        |       |            | Restated  as of August 4, 1999.* (5)                                                                                                                                |                    | Incorporated by Reference |
|        | 10(c)      |            | Bemis  Company, Inc. Form of Management Contract with Principal Executive  Officers.* (6)                                                                      |                    | Incorporated by Reference |
|        | 10(d)      |            | Bemis  Retirement Plan, Amended and Restated as of December 31, 2005.* (7)                                                                                          |                    | Incorporated by Reference |
|        | 10(e)      |            | Bemis  Company, Inc. Supplemental Retirement Plan, Amended and Restated as of  January 1, 2008.*                                                               |                    | Filed Electronically |
|        | 10(f)      |            | Bemis  Company, Inc. Supplemental Retirement Plan for Senior Officers, Amended and  Restated as of January 1, 2008.*                                           |                    | Filed Electronically |
|        | 10(g)      |            | Bemis  Company, Inc. Long Term Deferred Compensation Plan, Amended and Restated  as of August 4, 1999.* (5)                                                    |                    | Incorporated by Reference |
|        | 10(h)      |            | Bemis  Executive Officer Incentive Plan as of October 29, 1999.* (8)                                                                                                |                    | Incorporated by Reference |
|        | 10(i)      |            | Bemis  Company, Inc. 1997 Executive Officer Performance Plan.* (9)                                                                                                  |                    | Incorporated by Reference |
|        | 10(j)      |            | Credit  Agreement dated as of August 14, 2008, among the Registrant, the various  banks listed therein, and JPMorgan Chase Bank, NA, as Administrative Agent.  (10) |                    | Incorporated by Reference |
|        | 10(k)      |            | Bemis  Supplemental BIPSP, as Established Effective January 1, 2006.*                                                                                               |                    | Filed Electronically |
|        | 10(l)      |            | Bemis  Investment Incentive Plan, Amended and Restated Effective as of  January 1, 2006.* (7)                                                                       |                    | Incorporated by Reference |
|        | 10(m)      |            | Bemis  Company, Inc. 2007 Stock Incentive Plan, Amended and Restated as of  January 1, 2008.*                                                                  |                    | Filed Electronically |
|        | 10(n)      |            | Amended  and Restated Long-Term Credit Agreement dated as of April 29, 2008,  among the Registrant,                                                                 |                    |   |
|        |       |            | the  various banks listed therein, and JPMorgan Chase Bank, as Administrative  Agent. (11)                                                                               |                    | Incorporated by Reference |
|        | 10(o)      |            | Amended  and Restated 364-Day Credit Agreement dated as of April 29, 2008, among  the Registrant,                                                                   |                    |   |
|        |       |            | the  various banks listed therein, and JPMorgan Chase Bank, as Administrative  Agent. (11)                                                                               |                    | Incorporated by Reference |
|        | 10(p)      |            | Bemis  Deferred Compensation Plan, as amended Effective January 1, 2009.*                                                                                           |                    | Filed Electronically |
|        | 14         |            | Financial  Code of Ethics. (3)                                                                                                                                           |                    | Incorporated by Reference |
|        | 21         |            | Subsidiaries  of the Registrant.                                                                                                                                         |                    | Filed Electronically |
|        | 23         |            | Consent  of PricewaterhouseCoopers LLP.                                                                                                                                  |                    | Filed Electronically |
|        | 31.1       |            | Rule 13a-14(a)/15d-14(a) Certification  of CEO.                                                                                                                |                    | Filed Electronically |
|        | 31.2       |            | Rule 13a-14(a)/15d-14(a) Certification  of CFO.                                                                                                                |                    | Filed Electronically |
|        | 32         |            | Section 1350  Certification of CEO and CFO.                                                                                                                         |                    | Filed Electronically |

 

----

| *      |   | Management  contract, compensatory plan or arrangement filed pursuant to Rule 601(b)(10)(iii)(A) of  Regulation S-K under the Securities Exchange Act of 1934.                            |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                |
| (1)    |   | Incorporated  by reference to the Registrant’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 2004 (File No. 1-5277).                                            |
| (2)    |   | Incorporated  by reference to the Registrant’s Current Report on Form 8-K dated  June 30, 1995 (File No. 1-5277).                                                               |
| (3)    |   | Incorporated  by reference to the Registrant’s Annual Report on Form 10-K for the year  ended December 31, 2003 (File No. 1-5277).                                              |
| (4)    |   | Incorporated  by reference to Exhibit 1 to the Registrant’s Registration Statement on  Form 8-A filed on August 4, 1999 (File No. 1-5277).                                 |
| (5)    |   | Incorporated  by reference to the Registrant’s Quarterly Report on Form 10-Q for the  quarter ended June 30, 1999 (File No. 1-5277).                                            |
| (6)    |   | Incorporated  by reference to the Registrant’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 2005 (File No. 1-5277).                                       |
| (7)    |   | Incorporated  by reference to the Registrant’s Annual Report on Form 10-K for the year  ended December 31, 2005 (File No. 1-5277).                                              |
| (8)    |   | Incorporated  by reference to the Registrant’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 1999 (File No. 1-5277).                                       |
| (9)    |   | Incorporated  by reference to Exhibit B to the Registrant’s Definitive Proxy Statement  filed with the Securities and Exchange Commission on March 21, 2005  (File No. 1-5277). |
| (10)   |   | Incorporated  by reference to the Registrant’s Quarterly Report on Form 10-Q for the  quarter ended September 30, 2008 (File No. 1-5277).                                       |
| (11)   |   | Incorporated  by reference to the Registrant’s Quarterly Report on Form 10-Q for the  quarter ended March 31, 2008 (File No. 1-5277).                                           |

 

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SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS ANDRESERVES

*(in thousands)*

 
| **Year Ended  December 31,**        | ** ** | **Balance at  Beginning  of Year** | ** ** | **Additions  Charged to  Profit & Loss** | ** ** | **Writeoffs** | ** ** | **Foreign  Currency  Impact** | ** ** | **Other**  | ** ** | **Balance  at Close  of Year** | ** ** |
|-----------------------------------------------|------------|----------------------------------------------|------------|-------------------------------------------------------------|------------|---------------|------------|-------------------------------|------------|------------|------------|------------------------------------------|------------|
| ** **                                    | ** ** | ** **                                   | ** ** | ** **                                                  | ** ** | ** **    | ** ** | ** **                    | ** ** | ** ** | ** ** | ** **                               | ** ** |
| RESERVES FOR DOUBTFUL ACCOUNTS AND ALLOWANCES | ** ** | ** **                                   | ** ** | ** **                                                  | ** ** | ** **    | ** ** |
| 2008                                          |       | $                                            | 19,311     |                                                        | $          | 17,073        |       | $                             | (15,317    | )(1)       | $          | (1,534                                   | )          | (3,271 | )(4) | $ | 16,262 |   |
| 2007                                          |       | $                                            | 20,287     |                                                        | $          | 7,385         |       | $                             | (9,252     | )(2)       | $          | 891                                      |       |   |   | $ | 19,311 |   |
| 2006                                          |       | $                                            | 19,120     |                                                        | $          | 12,599        |       | $                             | (11,947    | )(3)       | $          | 515                                      |       |   |   | $ | 20,287 |   |
|                                          |       |                                         |       |                                                        |       |          |       |                          |       |       |       |                                     |       |   |   |   |   |   |
| RESERVES FOR  INVENTORY                       |       |                                         |       |                                                        |       |          |       |                          |       |       |       | ** **                               | ** ** |
| 2008                                          |       | $                                            | 19,718     |                                                        | $          | 4,858         |       | $                             | (4,681     | )          | $          | (979                                     | )          |   |   | $ | 18,916 | ** ** |
| 2007                                          |       | $                                            | 19,203     |                                                        | $          | 4,907         |       | $                             | (4,703     | )          | $          | 311                                      |       |   |   | $ | 19,718 | ** ** |
| 2006                                          |       | $                                            | 16,438     |                                                        | $          | 5,101         |       | $                             | (2,659     | )          | $          | 323                                      |       |   |   | $ | 19,203 | ** ** |

 

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(1) Netof $220 collections on accounts previously written off.

(2) Netof $396 collections on accounts previously written off.

(3) Netof $245 collections on accounts previously written off.

(4) Customerrebates accrual reclassified to accounts payable.

 

**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANACIAL STATEMENTSCHEDULE**

## **To the Board of Directors of Bemis Company, Inc.:**

## ** **

Our audits of theconsolidated financial statements and of the effectiveness of internal controlover financial reporting referred to in our report dated February 27, 2009appearing in Item 8 of this Form 10-K also included an audit of thefinancial statement schedule listed in Item 15(a)(2) of this Form 10-K.  In our opinion, this financial statementschedule presents fairly, in all material respects, the information set forththerein when read in conjunction with the related consolidated financialstatements.

 

PricewaterhouseCoopers LLP

Minneapolis, Minnesota

February 27, 2009

 

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