**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

Washington, DC  20549

 

**FORM 10-K**

 

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

**THE SECURITIES EXCHANGE ACT OF1934**

 

For the Fiscal Year Ended December 31,2007

 

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, 4th Floor, P.O. Box 669, Neenah,Wisconsin           54957-0669**

(Address of principal executive offices)

 

Registrant’s telephone number, including areacode:  ** (920) 727-4100**

 

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

 

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

 

Securitiesregistered pursuant 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, or anon-accelerated filer.  Large AcceleratedFiler   x      AcceleratedFiler   o      Non-AcceleratedFiler   o

 

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

 

Theaggregate market value of the voting stock held by nonaffiliates of theRegistrant on June 29, 2007, based on a closing price of $33.18 per shareas reported on the New York Stock Exchange, was $3,467,531,000.

 

Asof February 28, 2008, the Registrant had 99,626,783 shares of Common Stockissued and outstanding.

 

Documents Incorporated byReference

Portions of the Proxy Statement - Annual Meeting of Stockholders May 1,2008 - 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                                                                                                     | 7      |
| Item 4.           | Submission of Matters to a Vote of Security Holders                                                                    | 8      |
|              |                                                                                                                   |   |
| **Part II**  |                                                                                                                   |   |
| Item 5.           | Market For Registrant’s Common Equity, Related  Stockholder Matters                                               |
|              | and Issuer Purchases of Equity Securities                                                                              | 8      |
| Item  6.          | Selected  Financial Data                                                                                               | 9      |
|              |                                                                                                                   |   |
| Item 7.           | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                            | 10     |
| Item 7A.          | Quantitative and Qualitative Disclosures About Market  Risk                                                            | 18     |
|              |                                                                                                                   |   |
| Item 8.           | Financial Statements and Supplementary Data                                                                            | 18     |
|              | Management’s Responsibility Statement                                                                             | 18     |
|              | Report of Independent Registered Public Accounting  Firm                                                               | 19     |
|              | Consolidated Statement of Income                                                                                       | 20     |
|              | Consolidated  Balance Sheet                                                                                            | 21     |
|              | Consolidated Statement of Cash Flows                                                                                   | 22     |
|              | Consolidated Statement of Stockholders’ Equity                                                                    | 23     |
|              | Notes to Consolidated Financial Statements                                                                             | 24     |
|              |                                                                                                                   |   |
| Item 9.           | Changes In and Disagreements With Accountants on Accounting  and Financial Disclosure                                  | 41     |
| Item  9A.         | Controls  and Procedures                                                                                               | 41     |
| Item  9B.         | Other  Information                                                                                                     | 41     |
|              |                                                                                                                   |   |
| **Part III** |                                                                                                                   |   |
| Item 10.          | Directors, Executive Officers and Corporate Governance                                                                 | 41     |
| Item  11.         | Executive  Compensation                                                                                                | 42     |
|              |                                                                                                                   |   |
| Item 12.          | Security Ownership of  Certain Beneficial Owners and Management and Related Stockholder Matters                        | 42     |
|              |                                                                                                                   |   |
| Item 13.          | Certain Relationships and Related Transactions, and Director  Independence                                             | 42     |
| Item 14.          | Principal Accountant Fees and Services                                                                                 | 42     |
|              |                                                                                                                   |   |
| **Part IV**  |                                                                                                                   |   |
| Item 15.          | Exhibits and Financial Statement Schedules                                                                             | 43     |
|              |                                                                                                                   |   |
|              | Signatures                                                                                                             | 44     |
|              | Exhibit Index                                                                                                     | 45     |
|              |                                                                                                                   |   |
|              | Schedule II — Valuation and Qualifying Accounts and  Reserves                                                     | 46     |
|              | Report of Independent Registered Public Accounting  Firm on Financial Statement Schedule                               | 46     |
|              |                                                                                                                   |   |
|              | Exhibit 21  — Subsidiaries of the Registrant                                                                 | 47     |
|              | Exhibit 23  — Consent of PricewaterhouseCoopers LLP                                                          | 49     |
|              |                                                                                                                   |   |
|              | Exhibit 31.1  — Certification of Henry J. Theisen, Chief Executive Officer of the Company,                   |   |
|              | pursuant to Rule 13a-14(a)/15d-14(a), dated  February 28, 2008                                               | 50     |
|              |                                                                                                                   |   |
|              | Exhibit 31.2  — Certification of Gene C. Wulf, Chief Financial Officer of the Company,                       |   |
|              | pursuant to Rule 13a-14(a)/15d-14(a), dated  February 28, 2008                                               | 51     |
|              |                                                                                                                   |   |
|              | 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 28, 2008 | 52     |
|              |                                                                                                                   |   |
|                   |                                                                                                                        |        |  |

 

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** **

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

 

**ITEM 1 — BUSINESS**

 

                Bemis Company, Inc., aMissouri corporation (the “Registrant” or “Company”), continues a businessformed in 1858.  The Company wasincorporated in 1885 as Bemis Bro. Bag Company with the name changed to BemisCompany, Inc. in 1965.  The Companyis a principal manufacturer of flexible packaging products and pressuresensitive materials, selling to customers throughout the United States, Canada,South America, and Europe with a growing presence in Asia Pacific andMexico.  In 2007, approximately 82percent of the Company’s sales were derived from the Flexible Packaging segmentand approximately 18 percent were derived from the Pressure Sensitive Materialssegment.

 

                The Company’s products are soldto customers primarily in the food industry. Other customers include companies in the following types of businesses:chemical, agribusiness, medical, pharmaceutical, personal care, electronics,automotive, construction, graphic industries, and other consumer goods.  Further information about the Company’soperations in its business segments is available at Note 12 to the ConsolidatedFinancial Statements included in Item 8 of this Annual Report on Form 10-K.

 

                As of December 31, 2007,the Company had approximately 15,700 employees, about 10,400 of whom wereclassified as production employees.  Manyof the North American production employees are covered by collective bargainingcontracts involving three different international unions, one independentunion, and 15 individual contracts with terms ranging from one to fiveyears.  During 2007, three contractscovering approximately 300 employees at two different locations in the UnitedStates were successfully negotiated. Four domestic labor agreements covering approximately 1,000 employeesare scheduled to expire in 2008.  Many ofthe non-North American production employees as well as some of the non-NorthAmerican salaried workforce are covered by collective bargaining contractsinvolving 23 different unions with terms ranging from one to two years.

 

                Working capital elementsfluctuate throughout the year in relation to the level of customer volume andother marketplace conditions.  Inventorylevels reflect a reasonable balance between raw material pricing and availability,and the Company’s commitment to promptly fill customer orders.  Manufacturing backlogs are not a significantfactor in the industries in which the Company operates.  The business of each of the segments is notseasonal to any significant extent.

 

                The Company is the owner orlicensee of a number of United States and foreign patents and patentapplications that relate to certain of its products, manufacturing processes,and equipment.  The Company also has a numberof trademarks and trademark registrations in the United States and in foreigncountries.  The Company’s patents,licenses, and trademarks collectively provide a competitive advantage.  However, the loss of any single patent orlicense alone would not have a material adverse effect on the Company’s resultsas a whole or those of either of its segments.

 

                The Company’s businessactivities are organized around its two business segments, Flexible Packagingand Pressure Sensitive Materials.  Bothinternal and external reporting conform to this organizational structure.  A summary of the Company’s businessactivities reported by its two business segments follows.

 

**Flexible Packaging Segment**

 

                The flexible packaging segmentmanufactures a broad range of food, consumer goods, and industrial packaging.  Multilayer flexible polymer film structuresand laminates are sold for food, medical, and personal care products as well asnon-food applications utilizing vacuum or modified atmosphere packaging.  Additional products include blown and caststretchfilm products, carton sealing tapes and application equipment, customthermoformed plastic packaging, multiwall and single-ply paper bags, printedpaper roll stock, and bag closing materials. Markets for our products include processed and fresh meat, liquids,frozen foods, cereals, snacks, cheese, coffee, condiments, candy, pet food,bakery, seed, lawn and garden, tissue, fresh produce, personal care andhygiene, disposable diapers, printed shrink overwrap for the food and beverageindustry, agribusiness, pharmaceutical, minerals, and medical device packaging.

 

**Pressure Sensitive MaterialsSegment**

 

                The pressure sensitive materialssegment manufactures pressure sensitive adhesive coated paper and filmsubstrates sold into label markets, graphic markets, and technical markets.

 

                Products for label marketsinclude narrow-web rolls of pressure sensitive paper, film, and metalized filmprinting stocks used in high-speed printing and die-cutting of primary packagelabeling, secondary or promotional decoration, and for high-speed, high-volumedata processing (EDP) stocks, bar code labels, and numerous laser printingapplications.  Primary markets includefood and consumer goods, inventory control labeling, shipping labels, postagestamps, and laser/ink jet printed labels.

 

                Products for graphic marketsinclude pressure sensitive films used for decorative signage throughcomputer-aided plotters, digital and screen printers, and photographicoverlaminate and mounting materials including optically clear films with built-inUV inhibitors.  Offset printers, signmakers, and photo labs use these products on short-run and/or digital printingtechnology to create signs or vehicle graphics. Primary markets are indoor and outdoor signage, photograph and digitalprint overlaminates, and vehicle graphics.

 

                Products for technical marketsare pressure sensitive materials that are technically engineered forperformance in varied industrial applications. They include micro-thin film adhesives used in delicate electronic partsassembly and pressure sensitives utilizing foam and tape based stocks toperform fastening and mounting functions. Tapes sold to medical markets feature medical-grade adhesives suitablefor direct skin contact.  Primary marketsare electronics, automotive, construction, medical, and pharmaceuticals.

 

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** **

**Marketing, Distribution, andCompetition**

 

                While the Company’s sales aremade through a variety of distribution methods, more than 90 percent of eachsegment’s sales are made by the Company’s direct sales force.  Sales offices and plants are locatedthroughout the United States, Canada, United Kingdom, Continental Europe,Scandinavia, Asia Pacific, South America, and Mexico to provide prompt andeconomical 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.

 

                No single customer accounts forten percent or more of the Company’s total sales.  Furthermore, the loss of one or a few majorcustomers would not have a material adverse effect on the Company’s operatingresults.  Nevertheless, businessarrangements with large customers require a large portion of the manufacturingcapacity 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.

 

                The major markets in which theCompany sells its products are highly competitive.  Areas of competition include service,innovation, quality, and price.  Thiscompetition is significant as to both the size and the number of competingfirms.  Major competitors in the FlexiblePackaging segment include Alcan Packaging, Amcor Limited, Exopack Company, HoodPackaging Corporation, Bryce Corporation, Pliant Corporation, Printpack, Inc.,Sealed Air Corporation, Smurfit-Stone Container Corporation, Sonoco ProductsCompany, and Wihuri OY.  In the PressureSensitive Materials segment major competitors include 3M, Acucote, Inc.,Avery Dennison Corporation, Flexcon Co., Inc., Green Bay Packaging Inc.,Ricoh Company, Ltd., Ritrama Inc., Spinnaker Industries, Inc., TechnicoteInc., UPM-Kymmene Corporation, and Wausau Coated Products Inc.

 

                The Company considers itself tobe a significant factor in the market niches it serves; however, due to thediversity of the Flexible Packaging and Pressure Sensitive Materials segments,the Company’s precise competitive position in these markets is not reasonablydeterminable.  Advertising is limitedprimarily to business and trade publications emphasizing the Company’s productfeatures and related technical capabilities and the individual problem-solvingapproach to customer problems.

 

**Raw Materials**

 

                Plastic resins and films, paper,inks, adhesives, and chemicals constitute the basic major raw materials.  These are purchased from a variety of globalindustry sources and the Company is not dependent on any one supplier for itsraw materials.  While temporaryindustry-wide shortages of raw materials may occur, the Company expects tocontinue to successfully manage raw material supplies without significantsupply interruptions, as demonstrated during the 2005 hurricane season.  Currently, raw materials are readilyavailable.

 

**Research and Development Expense**

 

                Research anddevelopment expenditures were as follows:

 
| **(in thousands)**           | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Flexible Packaging           |       | $        | 19,477     |     | $          | 20,036   |       | $ | 18,920 |   |
| Pressure Sensitive Materials |       | 6,506    |       | 4,988    |       | 4,608    |       |
| Total                        |       | $        | 25,983     |     | $          | 25,024   |       | $ | 23,528 |   |

 

#### **EnvironmentalControl**

 

                Compliance with federal, state,and local provisions which have been enacted or adopted regulating dischargesof materials into the environment or otherwise relating to the protection ofthe environment, is not expected to have a material effect upon the capitalexpenditures, earnings, or competitive position of the Company and itssubsidiaries.

 

#### **AvailableInformation**

 

                The Company is a largeaccelerated filer (as defined in Exchange Act Rule 12b-2) and is also anelectronic filer.  Electronically filedreports (Forms 4, 8-K, 10-K, 10-Q, S-3, S-8, etc.) can be accessed at theSecurities and Exchange Commission (SEC) website (http://www.sec.gov) or byvisiting the SEC’s Public Reference Room located at 100 F St., N.E.,Washington, DC 20549 (call 1-202-551-8090 or 1-800-732-0330 for hours ofoperation). Electronically filed reports can also be accessed through theCompany’s own website (http://www.bemis.com), under Investor Relations/SECFilings or by writing for free information, including SEC filings, to InvestorRelations, Bemis Company, Inc., One Neenah Center, 4th Floor, P.O. Box669, 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.

 

#### **Explanationof Terms Describing the Company’s Products**

 

Barrier laminate — A multilayer plastic film made bylaminating two or more films together with the use of glue or a molten plasticto achieve a barrier for the planned package contents.

Barrier products — Products that provide protection and extendthe shelf life of the contents of the package. These products provide this protection by combining different types ofplastics and chemicals into a multilayered plastic package.  These products protect the contents from suchthings as moisture, light, odor, or other elements.

 

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Blown film — A plastic film that is extruded through an angulardie in the form of a tube and then expanded by a column of air in themanufacturing process.

Cast film — A plastic film that is extruded through a straightslot die as a flat sheet during its manufacturing process.

Coextruded film — A blown or cast film extruded with multiplelayers extruded simultaneously.

Controlled atmosphere packaging — A package which limits theflow of elements, such as oxygen or moisture, into or out of the package.

Decorative products — Pressure sensitivematerials used for decorative signage, promotional items, and displays andadvertisements.

Flexible polymer film — A non-rigid plastic film.

Flexographic printing — The most common flexiblepackaging printing process in North America using a raised rubber or alternativematerial image mounted on a printing cylinder.

In-line overlaminating capability — The ability to add aprotective coating to a printed material during the printing process.

Label products — Pressure sensitive materials made up andsold in roll form.

Labelstock — Pressure sensitive material designed for the labelmarkets.

Modified atmosphere packaging — A package in which theatmosphere inside the package has been modified by a gas such as nitrogen.

Monolayer film — A single layer extruded plastic film.

Multiwall paper bag — A package made from two ormore layers of paper that have not been laminated.

Polyolefin shrink film — A packaging filmconsisting of polyethylene and/or polypropylene resins extruded via the blownprocess.  The film can be irradiated in asecond process to cross link the molecules for added strength, durability, andtoughness.  The product is characterizedby thin gauge, high gloss, sparkle, transparency, and good sealing properties.

Pressure sensitive material — A material coated withadhesive such that upon contact with another material it will stick.

Rotogravure printing — A high quality, long runprinting process utilizing a metal engraved cylinder.

Sheet products — Pressure sensitive materials cut intosheets and sold in sheet form.

Stretch film — A plastic film used to wrap pallets in theshipping process, which has significant ability to stretch.

Technical products — Technically engineered pressure sensitivematerials used primarily for fastening and mounting functions.

Thermoformed plastic packaging — A package formed byapplying heat to a film to shape it into a tray or cavity and then placing aflat film on top of the package after it has been filled.

UV inhibitors — Chemicals which protect against ultraviolet rays.

 

**ITEM 1A — RISK FACTORS**

 

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

 

                Statement of FinancialAccounting Standards (FAS) No. 158, *Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans*, requiresbalance sheet recognition of the funded status of our defined benefit pensionand postretirement benefit plans.  If thefair value of our pension plans’ assets at a future reporting date decreases orif the discount rate used to calculate the projected benefit obligation (PBO)as of that date decreases, we will be required to record the incremental changein the excess of PBO over the fair value of the assets as a reduction ofstockholders’ equity.  The resultingnon-cash after-tax charge would not reduce reported earnings.  It would be recorded directly as a decreasein the Accumulated Other Comprehensive Income component of stockholders’equity.  While we cannot estimate thefuture funded status of our pension liability with any certainty at this time,we believe that if the market value of assets or the discount rate used tocalculate our pension liability materially decreases, the adjustment couldsignificantly reduce our stockholders’ equity. A significant reduction in stockholders’ equity may impact ourcompliance with debt covenants or could cause a downgrade in our credit ratingsthat could also adversely impact our future cost and speed of borrowing andhave an adverse affect on our financial condition, results of operations andliquidity.  We have identified pensionassumptions as critical accounting estimates. See “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Critical Accounting Estimates and Judgments—Accountingfor annual pension costs” and “—Pension assumptions sensitivity analysis”included in Item 7 of this Annual Report on Form 10-K.

 

**Goodwill and other intangible assets—A significant write downof goodwill and/or other intangible assets would have a material adverse effecton our reported results of operations and net worth.**

 

                On January 1,2002, we adopted Statement of Financial Accounting Standards No. 142, Goodwilland Other Intangible Assets (FAS No. 142). We no longer amortize goodwill, but we review our goodwill balance forimpairment at least once a year using the business valuation methods requiredby FAS No. 142.  These methods includethe use of a weighted-average cost of capital to calculate the present value ofthe expected future cash flows of our reporting units.  Future changes in the cost of capital,expected cash flows, or other factors may cause our goodwill and/or otherintangible assets to be impaired, resulting in a non-cash charge againstresults of operations to write down these assets for the amount of theimpairment.  If a significant write downis required, the charge would have a material adverse effect on our reportedresults of operations and net worth.  Wehave identified the valuation of intangibles as a critical accountingestimate.  See “Management’s Discussionand Analysis of Financial Condition and Results of Operations—CriticalAccounting Estimates and Judgments—Intangible assets and goodwill” included inItem 7 of this Annual Report on Form 10-K.

 

**Foreign operations—Conditions in foreign countries andchanges in foreign exchange rates may reduce our reported results ofoperations.**

 

                We have operations in NorthAmerica, South America, Europe, and Asia. In 2007, approximately 36 percent of our sales were generated byentities operating outside of the United States.  Fluctuations in currencies can causetransaction and translation losses.  Inaddition, our revenues and net income may be adversely affected by economicconditions, political situations, and changing laws and regulations in foreigncountries, as to which we have no control.

 

**Interest rates—An increase in interest rates couldreduce our reported results of operations.**

 

                At December 31, 2007, ourvariable rate borrowings approximated $533.9 million.  Fluctuations in interest rates can increaseborrowing costs and have an adverse impact on results of operations.  Accordingly, increases in short-term interestrates will directly 

 

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impactthe amount of interest we pay.  For eachone percent increase in variable interest rates, our annual interest expensewould increase by $5.3 million on the $533.9 million of variable rate debtoutstanding as of December 31, 2007.

 

**Credit Rating—A downgrade in our credit rating couldincrease our borrowing costs and negatively affect our financial condition andresults of operations.**

 

                In addition to using cashprovided by operations, we regularly issue commercial paper to meet ourshort-term liquidity needs.  Our creditratings are important to our ability to issue commercial paper at favorablerates of interest.  A downgrade in ourcredit rating could increase the cost of borrowing by increasing the spreadover prevailing market rates that we pay for our commercial paper or the feesassociated with our bank credit facility. In addition, our bank credit facility has covenants that include limitson the sale of businesses, minimum net worth calculations, and a maximum ratioof debt to total capitalization.  If forany reason our existing credit arrangements were no longer available to us wewould be required to seek alternative sources of financing.  We would expect to meet our financialliquidity needs by accessing the bank market, which would further increase ourborrowing costs.

 

**Raw materials—Raw material cost increases or shortagescould adversely affect our results of operations.**

 

                As a manufacturer, our sales andprofitability are dependent upon the availability and cost of raw materials,which are subject to price fluctuations. Inflationary and other increases in the costs of raw materials haveoccurred in the past and are expected to recur, and our performance depends inpart on our ability to reflect changes in costs in selling prices for ourproducts.  For example, operating profitduring the first quarter of 2005 was negatively impacted as our selling pricesdid not keep pace with the rapidly increasing cost of polymer resins,adhesives, and coatings that occurred during the latter part of the fourthquarter of 2004 and the early part of the first quarter of 2005.  In the past, we have been generallysuccessful in managing increased raw material costs and increasing sellingprices when necessary.  Past performancemay or may not be replicable in the future. Natural disasters such as hurricanes, in addition to terrorist activityand government regulation of environmental emissions, may negatively impact theproduction or delivery capacity of our raw material suppliers in the chemicaland paper industries.  This could resultin increased raw material costs or supply shortages, which may have a negativeimpact on our profitability if we are unable to pass along the increased costsin our selling prices or, in the case of a shortage, secure raw materials fromalternative sources.

 

**Patents and proprietary technology—Our success is dependenton our ability to develop and successfully introduce new products and toacquire and retain intellectual property rights.**

 

                Our ability to develop andsuccessfully market new products and to develop, acquire, and retain necessaryintellectual property rights is essential to our continued success, whichability cannot be assured.

 

**Industry investigations—Several lawsuits have been filedagainst 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.**

 

                In April 2003, we werenotified by the U.S. Department of Justice’s Antitrust Division that itexpected to initiate a criminal investigation into competitive practices in thelabelstock industry, and in August 2003 the U.S. Department of Justiceissued a subpoena to us in connection with the investigation.  In May 2004, the European Commission,seeking evidence of unlawful anticompetitive activities, initiated inspectionsand obtained documents from our pressure sensitive materials facility inBelgium.  We cooperated fully with theseinvestigations, and both investigations were closed by each agency withoutfurther action.  We and one of oursubsidiaries are named defendants in lawsuits in the United States seekingtreble damages and other relief for alleged unlawful competitive practices, whichwere 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 successfullyintegrate the businesses that we acquire.**

 

                We have made numerousacquisitions in the past and are actively seeking new acquisitions that webelieve will provide meaningful opportunities to grow our business and improveprofitability.  Acquired businesses maynot achieve the levels of revenue, profit, productivity, or otherwise performas we expect.  Acquisitions involvespecial risks, including, without limitation, the potential assumption ofunanticipated liabilities and contingencies as well as difficulties inintegrating acquired businesses.  Whilewe believe that our acquisitions will improve our competitiveness andprofitability, we can give no assurance that acquisitions will be successful oraccretive to earnings.

 

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

 

                We depend on informationtechnology to record and process customer’s orders, manufacture and shipproducts in a timely manner, and maintain the financial accuracy of ourbusiness records.  We are in the processof developing and implementing a global Enterprise Resource Planning (ERP)system that will redesign and deploy new processes and a common informationsystem 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 and revenue.

 

                Our information systems couldalso be penetrated by outside parties intent on extracting information,corrupting information, or disrupting business processes.  Such unauthorized access could disrupt ourbusiness and could result in the loss of assets.

 

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** **

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

 

                Other factors that may influenceour earnings include:  legal and administrativecases and proceedings (whether civil, such as environmental or product related,or criminal), 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 in customerorder patterns; employee work stoppages at plants; increased competition;changes in government regulations and the impact of changes in the worldpolitical environment, including the ability to estimate the impact of foreigncurrency exchange rates on financial results; the impact of epidemiologicalevents on the economy and on our customers and suppliers; and acts of war,terrorism, weather, and other natural disasters.

 

**ITEM 1B — UNRESOLVED STAFFCOMMENTS**

 

                None.

 

**ITEM 2 — PROPERTIES**

 

                Properties utilized by theCompany at December 31, 2007, were as follows:

 

**Flexible Packaging Segment**

 

                This segment has 49manufacturing plants located in 13 states and nine non-USA countries, of which45 are owned directly by the Company or its subsidiaries and four are leasedfrom outside parties.  Initial leaseterms generally provide for minimum terms of five to 15 years and have one ormore renewal options.  The initial termof leases in effect at December 31, 2007, expire between 2008 and 2014.

 

**Pressure Sensitive MaterialsSegment**

 

                This segment has sevenmanufacturing plants located in three states and two non-USA countries, all ofwhich are owned directly by the Company or its subsidiaries.

 

**Corporate and General**

 

**               **The Companyconsiders 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.

 

**ITEM 3 — LEGAL PROCEEDINGS**

 

                The Company is involved in anumber of lawsuits incidental to its business, including environmental relatedlitigation.  Although it is difficult topredict the ultimate outcome of these cases, management believes, except asdiscussed below, that any ultimate liability would not have a material adverseeffect upon the Company’s consolidated financial condition or results ofoperations.

 

                The Company is a potentiallyresponsible party (PRP) in twelve superfund sites around the UnitedStates.  The Company expects its futureliability relative to these sites to be insignificant, individually and in theaggregate.  The Company has reserved anamount that it believes to be adequate to cover its exposure.

 

                Dixie Toga S.A., acquired by theCompany on January 5, 2005, is involved in a tax dispute with the City ofSão Paulo, Brazil.  The City imposes atax on the rendering of printing services. The City has assessed this city services tax on the production and saleof printed labels and packaging products. Dixie Toga, along with a number of other packaging companies, disagreeand contend that the city services tax is not applicable to its products andthat the products are subject only to the state value added tax (VAT).  Under Brazilian law, state VAT and cityservices tax are mutually exclusive and the same transaction can be subject toonly one of those taxes.  Based on aruling from the State of São Paulo, advice from legal counsel, and longstanding business practice, Dixie Toga appealed the city services tax andinstead continued to collect and pay only the state VAT.

 

                The City of São Paulo disagreedand assessed Dixie Toga the city services tax for the years 1991-1995.  The assessments for those years are estimatedto be approximately $61.9 million at the date the Company acquired Dixie Toga,translated to U.S. dollars at the 2007 year end exchange rate.  Dixie Toga challenged the assessments and ultimatelylitigated the issue.  A lower courtdecision in 2002 cancelled all of the assessments for 1991-1995.  The City of São Paulo, the State of SãoPaulo, and Dixie Toga have each appealed parts of the lower courtdecision.  The City continues to assert theapplicability of the city services tax and has issued assessments for thesubsequent years 1996-2001.  Theassessments for those years for tax and penalties (exclusive of interest) areestimated to be approximately $39.4 million at the date of acquisition,translated to U.S. dollars at the 2007 year end exchange rate.  In the event of an adverse resolution, theseestimated amounts for all assessments could be substantially increased forinterest, monetary adjustments, and corrections.

 

 

7

----

 

                The Company strongly disagreeswith the City’s position and intends to vigorously challenge any assessments bythe City of São Paulo.  The Company isunable at this time to predict the ultimate outcome of the controversy and assuch has not recorded any liability related to this matter.  An adverse resolution could be material tothe consolidated results of operations and/or cash flows of the period in whichthe matter is resolved.

 

                In 2007, the Secretariat ofEconomic Law (SDE), a governmental agency in Brazil, initiated an investigationinto possible anti-competitive practices in the Brazilian flexible packagingindustry against a number of Brazilian companies including a Dixie Togasubsidiary.  The investigation relates toperiods prior to the Company’s acquisition of control of Dixie Toga and itssubsidiaries.  Given the preliminarynature of the proceedings the Company is unable at the present time to predictthe outcome of this matter.

 

                The Company and its subsidiary,Morgan Adhesives Company, have been named as defendants in thirteen civillawsuits related to an investigation that was initiated and subsequently closedby the U.S. Department of Justice without any further action.  Six ofthese lawsuits purport to represent a nationwide class of labelstockpurchasers, and each alleges a conspiracy to fix prices within theself-adhesive labelstock industry.  On November 5, 2003, the JudicialPanel on 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 JudgeVanaskie.  On November 20, 2007, the Court granted plaintiffs’ motionfor class certification.  Defendants havepetitioned the Third Circuit Court of Appeals to hear an appeal of the districtcourt’s decision granting class certification. At this time, a discovery cut-off and a trial date have not beenset.  The Company has also been named in three lawsuits filed inthe California Superior Court in San Francisco. These three lawsuits, whichhave been consolidated, seek to represent a class of all California indirectpurchasers of labelstock and each alleged a conspiracy to fix prices within theself-adhesive labelstock industry. 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 intends to vigorouslydefend these lawsuits.

 

                Given the ongoing status of theclass-action civil lawsuits, the Company is unable to predict the outcome ofthese 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 of business,none of which is expected to have a material adverse effect on the business,results of operations, financial position, or liquidity of the Company.

 

**ITEM 4 — SUBMISSION OF MATTERS TOA VOTE OF SECURITY HOLDERS**

 

                No matters were submitted to avote of security holders during the fourth quarter of 2007.

 

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

 

**ITEM 5 — MARKET FOR REGISTRANT’SCOMMON EQUITY,****RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

 

                The Company’s common stock is tradedon the New York Stock Exchange under the symbol BMS.  On December 31, 2007, there were 4,111registered 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 31,2007.  As of December 31, 2007,under authority granted by the Board of Directors, the Company may repurchasean additional 5,074,896 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** | ** ** |
|---------------------------------------|------------|-------------------|------------|------------------|------------|-----------------------|------------|----------------------|------------|
| 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 |   |
| 2005                                  |       |              |       |             |       |                  |       |                 |       |
| Dividend paid per common share        |       | $                 | 0.18       |             | $          | 0.18                  |       | $                    | 0.18       |   | $ | 0.18 |   |
| Common stock price per share          |       |              |       |             |       |                  |       |                 |       |
| High                                  |       | $                 | 32.50      |             | $          | 31.99                 |       | $                    | 28.34      |   | $ | 28.20 |   |
| Low                                   |       | $                 | 27.98      |             | $          | 25.99                 |       | $                    | 24.01      |   | $ | 23.20 |   |

 

8

----

Equity compensation plans as of December 31,2007, 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**     | ** ** |
| ** **                                                    | ** ** | **warrants  and rights**        | ** ** | **warrants  and rights**  | ** ** | **reflected  in column (a))**  | ** ** |
| **Plan Category**                                             | ** ** | **(a)**                         | ** ** | **(b)**                   | ** ** | **(c)**                        | ** ** |
| Equity  compensation plans approved by   security holders     |       | 4,970,665                       | (1)        | $                         | 19.49      | (2)                            | 6,146,961  | (3) |
| Equity  compensation plans not approved by   security holders |       | -0-                             |       | N/A                       |       | -0-                            |       |
| Total                                                         |       | 4,970,665                       | (1)        | $                         | 19.49      | (2)                            | 6,146,961  | (3) |

----

(1)   Includes outstanding optionsand restricted stock units.

(2)   Represents weighted-averageexercise price of outstanding options only. Restricted stock units do not have an exercise price.

(3)   May be issued as optionsor restricted stock units.

 

**ITEM 6 — SELECTED FINANCIAL DATA**

 

**FIVE-YEAR CONSOLIDATED REVIEW**

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

 
| **Years  Ended December 31,**                                                 | ** ** | **2007**    | ** ** | **2006**    | ** ** | **2005**    | ** ** | **2004**    | ** ** | **2003**    | ** ** |
|------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|-------------|------------|
| **Operating Data**                                                                 |       |        |       |        |       |        |       |        |       |        |       |
| Net sales                                                                          |       | $           | 3,649.3    |        | $          | 3,639.4     |       | $           | 3,474.0    |        | $          | 2,834.4 |   | $ | 2,635.0 |   |
| Cost  of products sold and other expenses                                          |       | 3,313.1     |       | 3,304.3     |       | 3,158.9     |       | 2,525.2     |       | 2,383.2     |       |
| Interest expense                                                                   |       | 50.3        |       | 49.3        |       | 38.7        |       | 15.5        |       | 12.6        |       |
| Income before income  taxes                                                        |       | 285.9       |       | 285.8       |       | 276.4       |       | 293.7       |       | 239.2       |       |
| Provision for income  taxes                                                        |       | 104.3       |       | 109.5       |       | 113.9       |       | 113.7       |       | 92.1        |       |
| Net income                                                                         |       | 181.6       |       | 176.3       |       | 162.5       |       | 180.0       |       | 147.1       |       |
| Net  income as a percent of net sales                                              |       | 5.0         | %          | 4.8         | %          | 4.7         | %          | 6.3         | %          | 5.6         | %          |
|                                                                               |       |        |       |        |       |        |       |        |       |        |       |
| **Common Share Data**                                                              |       |        |       |        |       |        |       |        |       |        |       |
| Basic earnings per  share                                                          |       | $           | 1.76       |        | $          | 1.68        |       | $           | 1.53       |        | $          | 1.68 |   | $ | 1.39 |   |
| Diluted earnings per  share                                                        |       | 1.74        |       | 1.65        |       | 1.51        |       | 1.67        |       | 1.37        |       |
| Dividends per share                                                                |       | 0.84        |       | 0.76        |       | 0.72        |       | 0.64        |       | 0.56        |       |
| Book value per share                                                               |       | 15.40       |       | 14.04       |       | 12.81       |       | 12.23       |       | 10.72       |       |
| Stock price/earnings  ratio range                                                  |       | 15-21x      |       | 17-21x      |       | 16-21x      |       | 14-18x      |       | 15-19x      |       |
| Weighted-average  shares outstanding for computation of diluted earnings per share |       | 104,114,043 |       | 106,767,114 |       | 107,818,708 |       | 107,941,738 |       | 107,733,383 |       |
| Common  shares outstanding at December 31,                                    |       | 100,518,355 |       | 104,841,576 |       | 105,305,975 |       | 106,947,128 |       | 106,242,046 |       |
|                                                                               |       |        |       |        |       |        |       |        |       |        |       |
| **Capital Structure and Other  Data**                                              |       |        |       |        |       |        |       |        |       |        |       |
| Current ratio                                                                      |       | 2.1x        |       | 2.0x        |       | 2.1x        |       | 2.3x        |       | 2.4x        |       |
| Working capital                                                                    |       | $           | 602.4      |        | $          | 538.3       |       | $           | 513.5      |        | $          | 498.9 |   | $ | 436.3 |   |
| Total assets                                                                       |       | 3,191.4     |       | 3,039.0     |       | 2,964.6     |       | 2,486.7     |       | 2,292.9     |       |
| Short-term debt                                                                    |       | 67.8        |       | 67.6        |       | 54.0        |       | 5.7         |       | 6.5         |       |
| Long-term debt                                                                     |       | 775.5       |       | 722.2       |       | 790.1       |       | 533.9       |       | 583.4       |       |
| Stockholders’ equity                                                          |       | 1,562.3     |       | 1,472.0     |       | 1,349.4     |       | 1,307.9     |       | 1,138.7     |       |
| Return  on average stockholders’ equity                                       |       | 12.0        | %          | 12.5        | %          | 12.2        | %          | 14.7        | %          | 14.0        | %          |
| Return on average total  capital                                                   |       | 8.6         | %          | 8.7         | %          | 8.5         | %          | 9.7         | %          | 8.4         | %          |
| Depreciation and  amortization                                                     |       | $           | 158.5      |        | $          | 152.4       |       | $           | 150.8      |        | $          | 130.8 |   | $ | 128.2 |   |
| Capital expenditures                                                               |       | 178.9       |       | 158.8       |       | 187.0       |       | 134.5       |       | 106.5       |       |
| Number  of common stockholders                                                     |       | 4,111       |       | 4,192       |       | 4,359       |       | 4,465       |       | 4,484       |       |
| Number of employees                                                                |       | 15,678      |       | 15,736      |       | 15,903      |       | 11,907      |       | 11,505      |       |

 

9

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**ITEM 7 — MANAGEMENT’SDISCUSSION AND ANALYSIS OF**

**FINANCIAL CONDITION ANDRESULTS OF OPERATIONS**

 

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

## ** **

## ***Three Years Ended December 31,2007***

## ** **

Management’s Discussion and Analysis should be readin conjunction with the Consolidated Financial Statements and related Notesincluded in Item 8 of this Annual Report on Form 10-K.

 

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

## ** **

| **(dollars in millions)**                      | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                                      |       | $        | 3,649.3    |     | 100.0      | %        | $          | 3,639.4 |   | 100.0 | % | $ | 3,474.0 |   | 100.0 | % |
| Cost of products sold                          |       | 2,973.3  |       | 81.5     |       | 2,942.7  |       | 80.9 |   | 2,798.3 |   | 80.6 |   |
| Gross margin                                   |       | 676.0    |       | 18.5     |       | 696.7    |       | 19.1 |   | 675.7 |   | 19.4 |   |
| Selling,  general, and administrative expenses |       | 341.6    |       | 9.4      |       | 336.4    |       | 9.2 |   | 330.9 |   | 9.5 |   |
| All other expenses                             |       | 48.5     |       | 1.3      |       | 74.5     |       | 2.0 |   | 68.4 |   | 1.9 |   |
| Income before income  taxes                    |       | 285.9    |       | 7.8      |       | 285.8    |       | 7.9 |   | 276.4 |   | 8.0 |   |
| Provision for income  taxes                    |       | 104.3    |       | 2.9      |       | 109.5    |       | 3.1 |   | 113.9 |   | 3.3 |   |
| Net income                                     |       | $        | 181.6      |     | 5.0        | %        | $          | 176.3 |   | 4.8 | % | 162.5 |   | 4.7 | % |
| Effective income tax  rate                     |       |     |       | 36.5     | %          |     |       | 38.3 | % |   |   | 41.2 | % |

 

# **Overview**

# ** **

Bemis Company, Inc. is a leading globalmanufacturer of flexible packaging and pressure sensitive materials supplying avariety of markets.  Generally about 60percent of our total company net sales are to customers in the foodindustry.  Sales of our flexiblepackaging products are widely diversified among food categories and can befound in nearly every aisle of the grocery store.  Other markets into which we sell our flexiblepackaging products include medical devices, personal care, and lawn and garden.  Our emphasis on supplying packaging to thefood industry has historically provided a more stable market environment forour flexible packaging business segment, which accounts for about 82 percent ofour net sales. The remaining 18 percent of our net sales is from the pressuresensitive materials business segment which, while diversified in end useproducts, is less focused on food industry applications and more exposed toeconomically sensitive end markets.

 

## **Market Conditions**

## ** **

                The markets into which ourproducts are sold are highly competitive. Our leading flexible packaging market positions in North and SouthAmerica reflect our focus on expanding our offering of value-added, proprietaryproducts.  We also manufacture productsthat are less unique but for which our technical know-how and economies ofscale offer us a competitive advantage. The primary raw materials for our business segments are polymer resins,films, paper, and adhesives, the cost of which has increased in recent yearswith higher petrochemical prices.  Inthis environment, cost management has become a critical element of ourcompetitive position.

 

                During 2007, consumer budgetswere strained by higher energy costs, higher food prices, and in some cases,increased housing-related costs associated with mortgage market issues.  These pressures appear to have negativelyimpacted consumer demand in food and consumer product markets resulting inreduced customer orders for related packaging.

 

## **Restructuring and RelatedCharges**

## ** **

In January 2006, we announced the plannedclosure of five flexible packaging facilities and one pressure sensitivematerials facility in order to consolidate production capacity and improveoverall cost structure and efficiency. These efforts were substantially complete as of December 31,2006.  Total remaining costs incurred in2007 were substantially 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**

## ** **

In January 2005, we acquired majority ownershipof Dixie Toga S.A., one of the largest packaging companies in SouthAmerica.  The acquisition included theoutstanding voting common stock of Dixie Toga in addition to 43 percent of theoutstanding nonvoting preferred stock. The initial cash purchase price, paid in 2005, was approximately $235million increased by $4.2 million in 2006 related to post closeadjustments.  Subsequently, our SouthAmerican subsidiary has repurchased additional shares of its outstandingpreferred stock in the open market, reducing the total minority interest in oursubsidiary to 14 percent as of December 31, 2005.  In April 2006, we also acquired theremaining shares of our three majority-owned joint ventures in Mexico for $6.8million.

 

# ***Results of Operations***

## ***Consolidated Overview***

## ** **

| **(in  millions, except per share amounts)** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|----------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                                    |       | $        | 3,649.3    |     | $          | 3,639.4  |       | $ | 3,474.0 |   |
| Net income                                   |       | 181.6    |       | 176.3    |       | 162.5    |       |
| Diluted earnings per  share                  |       | 1.74     |       | 1.65     |       | 1.51     |       |
|                                              |            |          |            |          |            |          |            |  |  |  |

 

***2007 versus 2006***

 

For the year ended December 31, 2007, net salesincreased 0.3 percent, reflecting a net sales benefit from currency translationof 3.4 percent, offset by a 3.1 percent decrease in net sales related to lowerunit sales volume.

 

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

 

10

----

***2006  versus2005***

 

For the year ended December 31, 2006, net salesincreased 4.8 percent.  Currencytranslation was a benefit to net sales growth of 1.8 percent.  The remaining 3.0 percent increase in netsales reflects increased sales of higher priced, value-added products in eachof the two business segments.

 

Diluted earnings per share were $1.65 for 2006,including $0.18 per share of restructuring and related charges.  For 2005, diluted earnings per share totaled$1.51, including approximately $0.06 per share of tax charges related to therepatriation of international subsidiary earnings under the American JobsCreation Act of 2004.  The improvement in2006 resulted from a more profitable sales mix, a moderating raw material costenvironment, and successful cost management efforts.

 

# ***Flexible Packaging Business Segment***

# ** **

Our flexible packaging business segment providespackaging to a variety of end markets, including meat and cheese, confectioneryand snack, frozen foods, lawn and garden, health and hygiene, beverages,medical devices, bakery, and dry foods. During 2007, consumer demand forproducts in many of the food markets appeared to be negatively impacted by theincreased budget pressure imposed by higher costs for food, energy, andsub-prime mortgage-related debt service. The resulting lower order volume for related packaging had a negativeimpact on capacity utilization and production efficiencies in our manufacturingplants during the year.

 

The most significant raw materials used in thisbusiness segment are polymer resins, which we use to develop and manufacturesingle layer and multilayer film products. Selling price changes generally lag behind changes in our raw materialcosts.  During 2005, resin costsdramatically increased resulting in double-digit percentage increases for theyear.  The magnitude and frequency ofthese cost increases negatively impacted operating profit.  Compared to 2005, the impact of raw materialcost changes in 2006 and 2007 was more moderate.

 

In January of 2006, we announced a restructuringplan to close five flexible packaging plants in order to consolidate productioncapacity and improve overall cost structure and efficiency throughout thisbusiness segment.  These efforts weresubstantially completed by December 31, 2006.  Restructuring and related charges for theflexible packaging business segment totaled $29.0 million in 2006.  The disposal of facilities closed during the2003 restructuring program resulted in a charge of $0.6 million in 2005.

 
| **(dollars  in millions)**                                               | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                                                                |       | $        | 3,001.8    |     | $          | 3,000.1  |       | $ | 2,855.8 |   |
| Operating  profit (See Note 12 to the Consolidated Financial Statements) |       | 346.6    |       | 335.1    |       | 332.7    |       |
| Operating profit as a  percentage of net sales                           |       | 11.5     | %          | 11.2     | %          | 11.7     | %          |
|                                                                          |            |          |            |          |            |          |            |  |  |  |

 

***2007 versus 2006***

 

Net sales in our flexible packaging business segmentwere virtually unchanged from 2006 to 2007. A benefit from currency translation of 3.1 percent was completely offsetby weak demand across many of our packaging markets. Net sales of packaging formeat and cheese, which represent about 30 percent of our flexible packaging netsales, decreased about 3 percent excluding the impact of currency.  Packaging for bakery products and dry foods,for which consumer demand has been impacted by increased wheat prices,experienced a drop in net sales of about 10 percent from 2006 levels.  Packaging for pet products and industrialproducts also decreased over 9 percent in 2007. Packaging for bakery, dry foods, pet products, and industrial productsrepresents about 17 percent of flexible packaging net sales. Growth in otherflexible packaging markets representing a combined 17 percent of total flexiblepackaging net sales substantially 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.  Newbusiness awarded in 2007 is expected to begin shipping in 2008, and we believethe 2007 growth markets will experience strong sales growth again in 2008.  We also expect general food and consumerproduct markets to provide the stability and defensive characteristics during2008 that we have historically associated with those markets.

 

Operating profit as a percentage of net salesincreased to 11.5 percent in 2007 from 11.2 percent in 2006.  Restructuring and related activities resultedin $1.5 million of operating income in 2007 and a $29.0 million reduction inoperating profit in 2006.  During 2007,operating profit was negatively impacted by the lower unit sales volume notedin the previous paragraph and a steady increase in raw material costs.  Raw material costs are expected to continueto rise throughout 2008.  Our method ofpassing these costs on to customers through increased selling prices normallyoccurs with a several month lag, adding pressure to operating profit levelsduring that period.   Cost managementinitiatives are expected to help offset the impact of inflation during 2008.

 

***2006 versus 2005***

 

Our flexible packaging business segment recorded a5.1 percent increase in net sales in 2006. Currency translation represented a benefit of 2.1 percent.  The remaining 3.0 percent increase isattributable to increased net sales for packaging in markets such as meat andcheese, health and hygiene, coffee, unitizing films for cans and bottles, andmedical devices.  This was partiallyoffset by lower net sales for markets such as confectionery, snack and frozenfoods.

 

Operating profit as a percentage of net salesdecreased to 11.2 percent in 2006 from 11.7 percent in 2005.  During 2006, restructuring and relatedcharges totaling $29.0 million were recorded as a reduction of operatingprofit.  Operating profit in 2006benefited from stronger sales of value-added flexible packaging products.  During 2005, operating profit includes theimpact of restructuring and related charges totaling $0.6 million.

 

11

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

# ** **

The pressure sensitive materials business segmentoffers adhesive products to three markets: prime and variable information labels, which include roll label stockused in a wide variety of label markets; graphic design, used to create signageand decorations; and technical components, which represent pressure sensitivecomponents for industries such as the electronics, automotive, construction andmedical industries.

 

Paper and adhesive are the primary raw materials usedin our pressure sensitive materials business segment.  For the last several years, general economicconditions and competitive pressures have had a greater influence on sellingprices and operating performance than raw material costs.

 

In January of 2006, we announced a restructuringplan which included the closure of one pressure sensitive materials plant inorder to consolidate production capacity and improve overall cost structure andefficiency.  This effort was completed byDecember 31, 2006.  Restructuringand related charges incurred for this business segment totaled $1.0 million in2006.  These costs were primarilyemployee-related costs and were recorded as a component of other costs(income), net.

 

During 2005, a net gain of $1.5 million was recordedfor the sale of previously closed facilities and property.

 

During 2005, we changed the year-end of our pressuresensitive materials European subsidiary from November 30 to December 31.  This resulted in a 13-month reporting periodin 2005 for this subsidiary, increasing 2005 net sales by $17.2 million.  The impact on operating profit wasinsignificant.

 
| **(dollars  in millions)**                                               | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net sales                                                                |       | $        | 647.5      |     | $          | 639.3    |       | $ | 618.1 |   |
| Operating  profit (See Note 12 to the Consolidated Financial Statements) |       | 40.3     |       | 50.1     |       | 41.3     |       |
| Operating profit as a  percentage of net sales                           |       | 6.2      | %          | 7.8      | %          | 6.7      | %          |
|                                                                          |            |          |            |          |            |          |            |  |  |  |

 

***2007 versus 2006***

 

Our pressure sensitive materials business segmentreported a net sales increase of 1.3 percent in 2007, reflecting a benefit fromcurrency translation of 4.5 percent, substantially offset by lower unit salesfor label and technical products. Increased industry capacity for label products dampened unit salesvolume and pricing during 2007, resulting in a 4 percent decrease in net salesof label products, excluding the impact of currency.  Technical product net sales decreased by over8 percent as customers faced economic challenges associated with the housingand medical markets.  Graphic product netsales increased by about 5 percent during 2007.

 

Operating profit as a percent of net sales was lowerin 2007 compared to 2006, reflecting decreased sales of value-added technicalproducts and a lower margin sales mix in our graphic product sales.

 

***2006 versus 2005***

 

Our pressure sensitive materials business segmentreported a net sales increase of 3.4 percent in 2006.  Net sales in 2005 include the impact of thethirteenth month of net sales from the European subsidiary.  The increase in net sales in 2006 was drivenby unit sales volume growth in each of the pressure sensitive materials productlines during the year.  Currency benefitsprovided less than one percent net sales growth in 2006.

 

Operating profit as a percent of sales improved in2006 compared to 2005, reflecting increased sales of value-added graphic andtechnical products.  In addition, theprofitability of the label product line increased with continued improvementsin cost management and production efficiency. Currency translation did not impact operating profit in 2006.

 

# **ConsolidatedGross Margin**

# ** **

| **(dollars  in millions)**                 | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Gross margin                               |       | $        | 676.0      |     | $          | 696.7    |       | $ | 675.6 |   |
| Gross margin as a  percentage of net sales |       | 18.5     | %          | 19.1     | %          | 19.4     | %          |
|                                            |            |          |            |          |            |          |            |  |  |  |

 

Restructuring and related charges reduced grossmargins by $0.3 million in 2007 and $12.9 million in 2006.  The time lag between increases in rawmaterial costs and the implementation of related selling price increasesnegatively impacted gross margins as a percent of net sales in each of theyears presented.  In addition, lowerproduction volume associated with weak consumer demand for products in ourmarkets reduced fixed cost absorption during 2007.  The impact of these cost pressures waspartially offset by ongoing initiatives to improve production efficiency andcost management during the same timeframe. Management expects increased sales volume in 2008 to improve grossmargin as a percentage of net sales by providing increased opportunities torecognize the benefits of capacity improvements and process improvementscompleted during 2007.

 

# **ConsolidatedSelling, General and Administrative Expenses**

# ** **

| **(dollars  in millions)**                               | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|----------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Selling, general and  administrative expenses (SG&A) |       | $        | 341.6      |     | $          | 336.4    |       | $ | 330.9 |   |
| SG&A as a  percentage of net sales                   |       | 9.4      | %          | 9.2      | %          | 9.5      | %          |
|                                                          |            |          |            |          |            |          |            |  |  |  |

 

12

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**Other Expenses**

 
| **(dollars  in millions)**            | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Research and  development (R&D)   |       | $        | 26.0       |     | $          | 25.0     |       | $ | 23.5 |   |
| R&D as a percentage  of net sales |       | 0.7      | %          | 0.7      | %          | 0.7      | %          |
| Interest expense                      |       | $        | 50.3       |     | $          | 49.3     |       | $ | 38.7 |   |
| Other costs (income),  net            |       | (31.5    | )          | (3.3     | )          | 0.1      |       |
| Minority interest in  net income      |       | 3.7      |       | 3.5      |       | 5.9      |       |
| Income taxes                          |       | 104.3    |       | 109.5    |       | 113.9    |       |
| Effective tax rate                    |       | 36.5     | %          | 38.3     | %          | 41.2     | %          |

 

# **Researchand Development**

# ** **

Our efforts to introduce new products continue at asteady pace and are an integral part of our daily plant operations.  Our research and development engineers workdirectly on commercial production equipment, bringing new products to marketwithout the use of pilot equipment.  Webelieve this approach significantly improves the efficiency, effectiveness andrelevance of our research and development activities and results in earliercommercialization of new products. Expenditures that are not distinctly identifiable as research anddevelopment costs are included in costs of products sold.

 

# **InterestExpense**

# ** **

Interest expense increased modestly during 2007 withslightly higher debt levels.  Theincrease in interest expense in 2006 reflects higher interest rates in 2006compared to 2005.  The percentage ofvariable rate debt included in total debt is about 64 percent in 2007, 59percent in 2006, and 62 percent in 2005. The effective interest rate was 5.9 percent in 2007, 5.9 percent in2006, and 4.9 percent in 2005.

 

# **OtherCosts (Income), Net**

# ** **

In 2007, other costs (income) included $28.3 millionof financial income, about half of which relates to interest income on cashheld at non-U.S. locations.  Theremainder of the financial income is generated from fiscal incentives for certainflexible packaging locations and is considered as a part of flexible packagingoperating profit.  These fiscalincentives are associated with net sales in South America and are expected tocontinue to grow at a modest pace over the next few years in conjunction withsales growth in that region.  In 2006,other costs (income) included $18.3 million of restructuring and relatedcharges, which were more than offset by financial income of $18.0 million and a$4.5 million favorable resolution of a litigated foreign excise taxliability.  In 2005, net other costsprimarily reflect interest income offset by currency exchange losses.

 

**Minority Interest in Net Income**

 

Minority interest in net income is primarilyassociated with the accounting for the outstanding preferred shares of DixieToga that were not acquired in connection with the January 2005 businessacquisition. Our ownership in Dixie Toga had increased from approximately 80percent to approximately 86 percent as of December 31, 2005.  In April 2006, we acquired the remainingminority interest in our three Mexican joint ventures which further reducedminority interest in net income.  Therewere no ownership changes in 2007.

 

# **IncomeTaxes**

# ** **

Thedifference between our overall tax rate and the U.S. statutory rate of 35percent in each of the three years presented principally relates to state andlocal income taxes net of federal income tax benefits. Our effective tax ratewas 36.5 percent for 2007, a decrease from our effective tax rate of 38.3percent for 2006 and 41.2 percent in 2005. This lower tax rate reflectsbenefits related to dividends from a foreign subsidiary, the increasing impactof U.S. tax incentives for manufacturing companies, and a change in thegeographic mix of pretax income.  During2005, an additional $6.0 million of tax expense was recorded as a result of therepatriation of international subsidiary earnings under the American JobsCreation Act of 2004, increasing the effective tax rate for 2005 from 39.0percent to 41.2 percent.

 

# **Liquidityand Capital Resources**

# ** **

## ***Debt toTotal Capitalization***

## ** **

Debt to total capitalization (which includes totaldebt, long-term deferred tax liabilities and equity) was 32.9 percent at December 31,2007, compared to 33.0 percent at December 31, 2006 and 35.7 percent at December 31,2005.  Total debt was $843.3 million,$789.8 million, and $844.1 million at year-end 2007, 2006 and 2005,respectively.

 

## ***CreditRating***

## ** **

## **Ourcapital structure and financial practices have earned Bemis Company long-termcredit ratings of “A” from Standard & Poor’s and “Baa1” from Moody’sInvestors Service, and a credit rating of “A-1” and “Prime-2” for ourcommercial paper program from Standard & Poor’s and Moody’s InvestorService, respectively.  Our strongfinancial positions and credit ratings are important to our ability to issuecommercial paper at favorable rates of interest.**

## ** **

## ***Sources ofLiquidity***

## ** **

Cash provided by operations was $406.2 million forthe year ended December 31, 2007, compared to $349.0 million in 2006 and$280.4 million in 2005.  Cash provided byoperations in each of the years ended December 31, 2006 and 2005 wasreduced by voluntary pension contributions to our U.S. pension plans of $24.0million and $35.0 million, respectively. While no contributions were required for our U.S. pension plans in 2007,we continue to monitor the funded status of all pension plans and will evaluatethe benefits of future voluntary contributions subject to available liquidity.

 

In addition to using cash provided by operations, weissue commercial paper to meet our short-term liquidity needs.  At year-end, our commercial paper debtoutstanding was $161.5 million.  Basedupon our current credit rating, we enjoy ready access to the commercial papermarkets.  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.  In September 2004,we renegotiated our back-

 

13

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up credit facility toextend the term to September 2009. This credit facility provides $500 million of available financingsupported by a group of major U.S. and international banks.  Covenants imposed by this bank credit facilityinclude limits on the sale of businesses, minimum net worth calculations, and amaximum ratio of debt to total capitalization. In addition to funds available under this credit facility, we also havethe capability of issuing up to approximately $100 million of ExtendableCommercial Notes (ECNs), which are short-term instruments whose maturity can beextended to 390 days from the date of issuance. If these credit facilities and ECNs were no longer available to us, wewould expect to meet our financial liquidity needs by accessing the bankmarket, which would increase our borrowing costs.

 

The$500 million credit facility includes a $100 million multicurrency limit tosupport the financing needs of our international subsidiaries.  As of December 31, 2007, outstandingmulticurrency borrowings under the credit facility totaled $43.8 million.  Borrowings from the credit agreement maturein September 2009 and are subject to a variable interest rate.

 

Asof December 31, 2007, available capacity on the credit agreement whichmatures in September 2009 was $286.7 million.

 

## ***Long-term Debt***

## ** **

Commercialpaper outstanding at December 31, 2007, 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 September 2, 2009.  In August 2008, public bonds totaling$250 million will mature.  These bondshave also been classified as long-term debt in accordance with our intentionand ability to refinance this debt in the public bond market or with commercialpaper.

 

## ***Uses of Liquidity***

## ** **

## **Capital Expenditures**

## ** **

Capitalexpenditures were $178.9 million during 2007, compared to $158.8 million in2006, and $187.0 million in 2005. 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, and proprietary filmproduction capacity for European markets. With these projects substantially completed, capital expenditures for2008 are estimated to be approximately $125 million.  Over the long-term, we expect average annualcapital expenditures to be approximately equivalent to total annual depreciationand amortization expenses.

 

## **Dividends**

## ** **

Weincreased our quarterly cash dividend by 10.5 percent during the first quarterof 2007 to 21 cents per share from 19 cents per share.  This follows increases of 5.6 percent in 2006and 12.5 percent in 2005.  In February 2008,the Board of Directors approved the 25th consecutive annual increasein the quarterly cash dividend on common stock to 22 cents per share, a 4.8percent increase.

 

## **Share Repurchases**

## ** **

During2007, we purchased 5.15 million shares of common stock, of which 4.0 millionshares were repurchased in conjunction with an accelerated share repurchaseprogram.  The remaining 1.15 millionshares were purchased in the open market. During 2006 and 2005, we purchased 0.6 million and 1.9 million shares ofcommon stock in the open market, respectively. As of December 31, 2007, wewere authorized to purchase up to 5.1 million shares of additional common stockfor 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 31,2007.

 

# **Contractual Payments Due by Period**

# ** **

| ** **                     | ** ** | ** ** | ** ** | **Less  than** | ** ** | **1 to 3** | ** ** | **3 to 5** | ** ** | **More  than** | ** ** |
|--------------------------------|------------|------------|------------|----------------|------------|------------|------------|------------|------------|----------------|------------|
| **(in millions)**              |       | **Total**  | ** ** | **1 year**     | ** ** | **years**  | ** ** | **years**  | ** ** | **5 years**    |       |
| Debt payments (1)              |       | $          | 839.8      |           | $          | 67.7       |       | $          | 463.1      |           | $          | 309.0 |   | $ | 0.0 |   |
| Interest expense (2)           |       | 120.0      |       | 45.2           |       | 55.8       |       | 19.0       |       | 0.0            |       |
| Capital leases (3)             |       | 0.1        |       | 0.1            |       | 0.0        |       | 0.0        |       | 0.0            |       |
| Operating leases (4)           |       | 20.5       |       | 5.2            |       | 6.6        |       | 3.5        |       | 5.2            |       |
| Purchase obligations (5)       |       | 131.3      |       | 130.3          |       | 0.1        |       | 0.0        |       | 0.9            |       |
| Postretirement obligations (6) |       | 53.9       |       | 3.0            |       | 9.6        |       | 17.2       |       | 24.1           |       |
|                                |            |            |            |                |            |            |            |            |            |                |            |  |  |  |  |  |

 

                Pursuant to the application ofFIN 48, the Company has accrued income tax liabilities associated withuncertain tax positions.  Theseliabilities have been excluded from the table above due to the high degree ofuncertainty as to amounts and timing regarding future payments.  See Note 10 of the Consolidated FinancialStatements for additional information.

----

(1)          These amounts are included inour Consolidated Balance Sheet.  Aportion of this debt is commercial paper backed by a bank credit facility thatexpires on September 2, 2009.  Public bonds totaling $250 million that mature in August 2008 areassumed to be refinanced with commercial paper upon maturity.

 

(2)          A portion of the interestexpense disclosed is subject to variable interest rates.   The amounts disclosed above assume thatvariable interest rates are equal to rates at December 31, 2007.

 

(3)          Amount noted also includesestimated interest costs.  The presentvalue of these obligations, excluding interest, is included on our ConsolidatedBalance Sheet.  See Note 11 to theConsolidated Financial Statements for additional information about our capitallease obligations.

 

14

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(4)          We enter into operatingleases in the normal course of business. Substantially all lease agreements have fixed payments terms based onthe passage of time.  Some leaseagreements provide us with the options to renew the lease.  Our future operating lease obligations wouldchange if we exercised these renewal options and if we entered into additionaloperating lease agreements.

 

(5)          Purchase obligationsrepresent contracts or commitments for the purchase of raw materials,utilities, capital equipment and various other goods and services.

 

(6)          Postretirement obligationsrepresent contracts or commitments for postretirement healthcare benefits andbenefit payments for the unfunded Bemis Supplemental Retirement Plan.  See Note 7 to the Consolidated FinancialStatements for additional information about our postretirement benefitobligations.

 

## **Interest Rate Swaps**

## ** **

Ourlong-term unsecured notes include $250 million due in August 2008.  In September 2001, we entered intointerest rate swap agreements with two U.S. banks, which increased our exposureto variable rates.  We generally prefervariable rate debt since it has been our experience that borrowing at variablerates is less expensive than borrowing at fixed rates over the long term.  These interest rate swap agreements, whichexpire in 2008, reduced the interest cost of the $250 million of long-term debtfrom 6.5 percent to about 6.0 percent in 2007. Since these variable rates are based upon six-month London InterbankOffered Rates (LIBOR), calculated in arrears, at the semiannual interestpayment dates of the corresponding notes, increases in short-term interestrates will directly impact the amount of interest we pay.

 

Accountingprinciples generally accepted in the United States of America require that thefair value of these swaps, which have been designated as hedges of our fixedrate unsecured notes outstanding, be recorded as an asset or liability of theCompany.  The fair value of these swapswas recorded as an asset of $3.3 million at December 31, 2007, and anasset of $2.5 million at December 31, 2006.  For each period, an offsetting increase isrecorded in the fair value of the related long-term notes outstanding.  These fair value adjustments do not impactthe actual balance of outstanding principal on the notes, nor do they impactthe income statement or related cash flows. Credit loss from counterparty nonperformance is not anticipated.

 

## **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 bonds, and toachieve greater exposure to variable interest rates.

 

Interestexpense calculated on our outstanding debt is substantially subject toshort-term interest rates.  As such,increases in short-term interest rates will directly impact the amount ofinterest we pay.  For each one percentincrease in variable interest rates, the annual interest expense on $533.9million of variable rate debt outstanding would increase by $5.3 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, 2007 and 2006, we hadoutstanding forward exchange contracts with notional amounts aggregating $5.0million and $3.5 million, respectively. Forward exchange contracts generally have maturities of less than sixmonths.  Counterparties to the forward exchangecontracts are major financial institutions. Credit loss from counterparty nonperformance is not anticipated.  We have not designated these derivativeinstruments as hedging instruments.  Thenet settlement amount (fair value) related to the active forward foreigncurrency exchange contacts is insignificant and recorded on the balance sheetwithin current liabilities and as an element of other costs (income), net,which offsets the related transactions gains and losses on the related foreigndenominated asset or liability.

 

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 $123.2 million in 2007 and $63.3 million in 2006.  Operating profit improved by approximately$9.6 million in 2007 and $7.0 million in 2006 as a result of the positiveeffect of foreign currency translation.

 

## **Long-term Compensation**

## ** **

Ourpractice of awarding long-term compensation has relied primarily on restrictedstock unit programs that are valued at the time of the award and expensed overthe vesting period.  Beginning in 2004,we discontinued the awarding of stock options. Stock options granted prior to 2004 were granted at prices equal to thefair market value on the date of grant and exercisable, upon vesting, overvarying periods up to ten years from the date of grant.  Stock options for Directors vestedimmediately, while options for Company employees generally become vested overthree years (one-third per year). Beginning January 1, 2006, accounting rules require us tofollow a fair value based method of recognizing expense for stock options.  The impact to diluted earnings per share forstock options expense in 2006 was insignificant.  If we had followed this fair value method priorto 2006, the negative impact on diluted earnings per share would have been onecent for the year ended 2005.

 

# **Critical Accounting Estimates and Judgments**

# ** **

Ourdiscussion and analysis of our financial condition and results of operations isbased upon our consolidated financial statements, which have been prepared inaccordance with accounting principles generally accepted in the UnitedStates.  The preparation of thesefinancial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of expenses during the 

 

15

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reportingperiod.  On an ongoing basis, managementevaluates its estimates and judgments, including those related to retirementbenefits, 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 andrelated assets and liabilities; and

 

·                  The valuation and useful lives of intangibleassets and goodwill.

 

### **Accounting for annual pension costs**

### ** **

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.  Asubstantial portion of our pension amounts relate to our defined benefit plansin the United States.

 

Netperiodic pension costs recorded in 2007 was $15.2 million, compared to pensioncost of $17.6 million in 2006 and $28.4 million in 2005.  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 equityinvestments from 80 percent to 70 percent of total assets, we have reduced ourexpected long-term rate of return on plan assets to 8.50 percent.  For the years 2005, 2006, and 2007, wemaintained a target allocation to equity investments of 80 percent of totalassets and had assumed that the expected long-term rate of return on planassets would be 8.75 percent.

 

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 and 20 years, our pensionplan assets have earned rates of return of 6.3 percent, 9.0 percent and 9.8percent, respectively.  Considering theselong-term results, we selected an 8.50 percent long-term rate of return onassets assumption as of January 1, 2008. Using our target asset allocation of plan assets of 70 percent equitysecurities and 30 percent fixed income securities, our outside actuaries haveused their independent economic model to calculate a range of expectedlong-term rates of return and have determined our assumptions 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, 2007, forour U.S. defined benefit pension plans we determined this rate to be 6.25percent, an increase of one half of one percent from the 5.75 percent rate usedat December 31, 2006.

 

**Pension assumptions sensitivity analysis**

 

Basedupon current assumptions of 6.25 percent for the discount rate and 8.50 percentfor the expected rate of return on pension plan assets, we expect pensionexpense before the effect of income taxes for 2008 to be in a range of $10million to $15 million.  The followingcharts depict the sensitivity of estimated 2008 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**           |       |                           |
| 5.50 percent                                |       | $3.5                           |       | 7.75 percent                                |       | $3.6                           |
| 5.75 percent                                |       | 2.3                            |       | 8.00 percent                                |       | 2.4                            |
| 6.00 percent                                | ** ** | 1.1                            | ** ** | 8.25 percent                                | ** ** | 1.2                            |
| **6.25 percent — Current  Assumption** | ** ** | **0.0**                        | ** ** | **8.50 percent — Current  Assumption** | ** ** | **0.0**                        |
| 6.50 percent                                |       | (1.1)                          |       | 8.75 percent                                |       | (1.2)                          |
| 6.75 percent                                |       | (2.11)                         |       | 9.00 percent                                |       | (2.4)                          |
| 7.00 percent                                |       | (2.9)                          |       | 9.25 percent                                |       | (3.6)                          |

 

16

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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**                          |       |                                                             |       |
| 5.50 percent                               |       | $(26.6)                                                          |       |
| 5.75 percent                               |       | (17.3)                                                           |       |
| 6.00 percent                               |       | (8.5)                                                            |       |
| **6.25 percent — Current Assumption** |       | **0.0**                                                          |       |
| 6.50 percent                               |       | 8.1                                                              |       |
| 6.75 percent                               |       | 15.8                                                             |       |
| 7.00 percent                               |       | 23.2                                                             |       |

 

### **Intangible assets and goodwill**

### ** **

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 $642.5 million as of December 31,2007.

 

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 theseintangible assets for impairment as changes in circumstances or the occurrenceof events suggest 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**

# ** **

InDecember 2007, the Financial Accounting Standards Board (FASB) issuedStatement of Financial Accounting Standards (FAS) No. 160, *Noncontrolling Interest in Consolidated Financial Statements, an amendmentof ARB No. 51* (FAS No. 160), which amends ARB 51 toestablish accounting and reporting standards for the noncontrolling interest ina subsidiary and for the deconsolidation of a subsidiary.  The standard is effective for the Company on January 1,2009.  We are currently evaluating theimpact of adopting FAS No. 160 on our consolidated financial position andresults of operations.

 

                In December 2007, the FASBissued FAS No. 141 (Revised 2007), *Business Combinations*(FAS141(R)).  FAS 141(R) establishesprinciples and requirements for how an acquirer in a business combinationrecognizes and measures in its financial statements, the identifiable assetsacquired, the liabilities assumed, and any non-controlling interest in theacquiree. The statement also provides guidance for recognizing and measuringthe goodwill acquired in the business combination and determines whatinformation to disclose to enable users of the financial statements to evaluatethe nature and financial effects of business combinations. FAS 141 (R) is effective on aprospective basis for financial statements issued for fiscal years beginningafter December 15, 2008. Accordingly, any business combination we enterinto after December 31, 2008 will be subject to this new standard.

 

                In February 2007, the FASBissued FAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities-Including an amendment of FASBStatement No. 115* (FAS No. 159), which permits entities tochoose to measure many financial instruments and certain other items at fairvalue.  The objective is to improvefinancial reporting by providing entities with the opportunity to mitigatevolatility in reported earnings caused by measuring related assets andliabilities differently without having to apply complex hedge accountingprovisions.  The standard is effectivefor the Company on January 1, 2008, and its adoption then is not expectedto have a material effect on its consolidated financial position and results ofoperations.

 

                In September 2006, the FASBissued FAS No. 157, *Fair Value Measurements*(FAS No. 157), which defines fair value, establishes a framework formeasuring fair value in generally accepted accounting principles (GAAP), andexpands disclosures about fair value measurements.  FAS No. 157 will apply whenever anotherstandard requires (or permits) assets or liabilities to be measured at fairvalue.  The standard does not expand theuse of fair value to any new circumstances, and is effective for the Company onJanuary 1, 2008.  In early 2008, theFASB issued Staff Position (FSP) FAS157-2, which delays by one year, theeffective date of FAS No. 157 for all non-financial assets andnon-financial liabilities, except those that are recognized or disclosed atfair value in the financial statements on at least an annual basis.  We do not expect the adoption of FAS No. 157in 2008 to have a material effect on the measurement of the Company’s financialassets and liabilities.  We arecontinuing to evaluate the impact the standard will have on the determinationof fair value related to non-financial assets and non-financial liabilities inyears after 2008.

 

17

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# ** **

# **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-looking statements involve known and unknown risks,uncertainties and other factors, which may cause actual results, performance orachievements to differ materially from anticipated future results, performanceor achievements expressed 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.

 

Factors that could cause actual results todiffer from those expected include, but are not limited to, general economicconditions caused by inflation, interest rates, consumer confidence, rates ofunemployment and foreign currency exchange rates; investment performance ofassets in our pension plans; competitive conditions within our markets,including the acceptance of our new and existing products; threats orchallenges to our patented or proprietary technologies; raw material costs,availability, and terms, particularly for polymer resins and adhesives; pricechanges for raw materials and our ability to pass these price changes on to ourcustomers in selling prices or otherwise manage commodity price fluctuationrisks; changes in the availability of financing; the presence of adequate cashavailable for investment in our business in order to maintain desired debtlevels; unexpected costs or manufacturing issues related to the implementationof a new enterprise resource system; changes in governmental regulation,especially in the areas of environmental, health and safety matters, andforeign investment; unexpected outcomes in our current and future litigationproceedings and any related proceedings or civil lawsuits; unexpected outcomesin our current and future domestic and international tax proceedings; changesin our labor relations; and the impact of changes in the world politicalenvironment 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 ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

                The information required by thisItem 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 and interest rate derivatives and other financialinstruments, changes in exchange rates or interest rates would not materiallyaffect our financial position and liquidity. The effect on our results of operations would be substantially offset bythe impact of the hedged items.

 

**ITEM 8 — FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA**

 

**Management’s Responsibility Statement**

 

                The management of Bemis Company, Inc.is responsible for the integrity, objectivity, and accuracy of the financialstatements of the Company.  The financialstatements are prepared by the Company in accordance with accounting principlesgenerally accepted in the United States of America, and using management’s bestestimates and judgments, where appropriate. The financial information presented throughout this Annual Report on Form 10-Kis consistent with that in the financial statements.

 

                The management of Bemis Company, Inc. isresponsible for establishing and maintaining adequate internal control overfinancial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  Under the direction, supervision, andparticipation of the Chief Executive Officer and the Chief Financial Officer,the Company’s management conducted an evaluation of the effectiveness ofinternal control over financial reporting based on the framework in *Internal Control - Integrated Framework*issuedby the Committee of Sponsoring Organizations of the Treadway Commission(COSO-Framework).  Based on the resultsof this evaluation management has concluded that internal control overfinancial reporting was effective as of December 31, 2007.  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 the Boardof Directors, which is composed solely of outside directors, meets quarterlywith management, the Internal Audit Director, the Director of Global FinancialCompliance, and independent accountants to review the work of each and tosatisfy itself that the respective parties are properly discharging theirresponsibilities.  PricewaterhouseCoopersLLP, the Director of Global Financial Compliance, and the Internal Audit Directorhave had and continue to have unrestricted access 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**     |

 

18

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### **Report of Independent Registered Public AccountingFirm**

### ** **

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 flowspresent fairly, in all material respects, the financial position of BemisCompany, Inc. and its subsidiaries at December 31, 2007 and 2006, andthe results of their operations and their cash flows for each of the threeyears in the period ended December 31, 2007 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, 2007, 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, as included in “Management’s Report onInternal Control Over Financial Reporting” appearing under Item 9A in thisAnnual Report.  Our responsibility is toexpress opinions on these financial statements and on the Company’s internalcontrol over 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 10, effective January 1, 2007, the Company adopted theprovisions of FASB Interpretation No. 48 (FIN 48), *Accountingfor 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.

 

 

 

PricewaterhouseCoopersLLP

Minneapolis,Minnesota

February 28,2008

 

19

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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,**     | ** ** | **2007**  | ** ** | **2006**  | ** ** | **2005**  | ** ** |
|------------------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
|                                           |       |      |       |      |       |      |       |
| Net sales                                      |       | $         | 3,649,281  |      | $          | 3,639,363 |       | $ | 3,473,950 |   |
|                                           |       |      |       |      |       |      |       |
| Costs and expenses:                            |       |      |       |      |       |      |       |
| Cost of products  sold                         |       | 2,973,329 |       | 2,942,650 |       | 2,798,326 |       |
| Selling,  general, and administrative expenses |       | 341,551   |       | 336,409   |       | 330,881   |       |
| Research and  development                      |       | 25,983    |       | 25,024    |       | 23,528    |       |
| Interest expense                               |       | 50,268    |       | 49,252    |       | 38,737    |       |
| Other costs  (income), net                     |       | (31,455   | )          | (3,308    | )          | 112       |       |
| Minority  interest in net income               |       | 3,751     |       | 3,540     |       | 5,937     |       |
|                                           |       |      |       |      |       |      |       |
| Income before income taxes                     |       | 285,854   |       | 285,796   |       | 276,429   |       |
|                                           |       |      |       |      |       |      |       |
| Provision for  income taxes                    |       | 104,300   |       | 109,500   |       | 113,900   |       |
|                                           |       |      |       |      |       |      |       |
| Net income                                     |       | $         | 181,554    |      | $          | 176,296   |       | $ | 162,529 |   |
|                                           |       |      |       |      |       |      |       |
| Basic earnings per share of common stock       |       | $         | 1.76       |      | $          | 1.68      |       | $ | 1.53 |   |
|                                           |       |      |       |      |       |      |       |
| Diluted earnings per share of common stock     |       | $         | 1.74       |      | $          | 1.65      |       | $ | 1.51 |   |

 

*See accompanying notes to consolidated financial statements.*

 

20

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**BEMIS COMPANY, INC. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEET**

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

 
| **As of December 31,**                                               | ** ** | **2007**  | ** ** | **2006**  | ** ** |
|---------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
|                                                                      |       |      |       |      |       |
| **ASSETS**                                                                | ** ** |      |       |      |       |
| Current assets:                                                           |       |      |       |      |       |
| Cash and cash  equivalents                                                |       | $         | 147,409    |      | $          | 112,160 |   |
| Accounts  receivable, net                                                 |       | 448,200   |       | 448,382   |       |
| Inventories                                                               |       | 478,727   |       | 467,853   |       |
| Prepaid expenses                                                          |       | 62,607    |       | 65,317    |       |
| Total current  assets                                                     |       | 1,136,943 |       | 1,093,712 |       |
|                                                                      |       |      |       |      |       |
| Property and equipment:                                                   |       |      |       |      |       |
| Land and land  improvements                                               |       | 52,129    |       | 50,590    |       |
| Buildings and  leasehold improvements                                     |       | 482,005   |       | 447,521   |       |
| Machinery and  equipment                                                  |       | 1,609,424 |       | 1,513,531 |       |
| Total property  and equipment                                             |       | 2,143,558 |       | 2,011,642 |       |
| Less accumulated  depreciation                                            |       | (895,102  | )          | (835,683  | )          |
| Net property and  equipment                                               |       | 1,248,456 |       | 1,175,959 |       |
|                                                                      |       |      |       |      |       |
| Other long-term assets:                                                   |       |      |       |      |       |
| Goodwill                                                                  |       | 642,507   |       | 603,691   |       |
| Other intangible  assets                                                  |       | 103,756   |       | 102,123   |       |
| Deferred charges  and other assets                                        |       | 59,734    |       | 63,524    |       |
| Total other  long-term assets                                             |       | 805,997   |       | 769,338   |       |
| TOTAL ASSETS                                                              |       | $         | 3,191,396  |      | $          | 3,039,009 |   |
|                                                                      |       |      |       |      |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                            | ** ** |      |       |      |       |
| Current liabilities:                                                      |       |      |       |      |       |
| Current portion  of long-term debt                                        |       | $         | 1,758      |      | $          | 16,345 |   |
| Short-term  borrowings                                                    |       | 66,047    |       | 51,232    |       |
| Accounts payable                                                          |       | 384,673   |       | 383,351   |       |
| Accrued  liabilities:                                                     |       |      |       |      |       |
| Salaries and  wages                                                       |       | 70,248    |       | 94,220    |       |
| Income taxes                                                              |       | 2,168     |       | 3,141     |       |
| Other                                                                     |       | 9,656     |       | 7,166     |       |
| Total current  liabilities                                                |       | 534,550   |       | 555,455   |       |
|                                                                      |       |      |       |      |       |
| Long-term debt, less current portion                                      |       | 775,456   |       | 722,211   |       |
| Deferred taxes                                                            |       | 155,871   |       | 134,168   |       |
| Other liabilities and deferred credits                                    |       | 124,261   |       | 125,974   |       |
| Total  liabilities                                                        |       | 1,590,138 |       | 1,537,808 |       |
|                                                                      |       |      |       |      |       |
| Minority interest                                                         |       | 38,926    |       | 29,185    |       |
|                                                                      |       |      |       |      |       |
| Commitments and contingencies                                             |       |      |       |      |       |
|                                                                      |       |      |       |      |       |
| Stockholders’ equity:                                                |       |      |       |      |       |
| Common stock,  $.10 par value:                                            |       |      |       |      |       |
| Authorized —  500,000,000 shares                                     |       |      |       |      |       |
| Issued —  116,941,126 and 116,114,347 shares                         |       | 11,694    |       | 11,611    |       |
| Capital in  excess of par value                                           |       | 327,387   |       | 317,177   |       |
| Retained  earnings                                                        |       | 1,523,659 |       | 1,431,747 |       |
| Accumulated  other comprehensive income                                   |       | 171,162   |       | 29,098    |       |
| Common stock  held in treasury, 16,422,771 and 11,272,771 shares, at cost |       | (471,570  | )          | (317,617  | )          |
| Total  stockholders’ equity                                          |       | 1,562,332 |       | 1,472,016 |       |
|                                                                      |       |      |       |      |       |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                           |       | $         | 3,191,396  |      | $          | 3,039,009 |   |

 

*Seeaccompanying notes to consolidated financial statements.*

 

21

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**BEMIS COMPANY, INC. AND SUBSIDIARIES**

**CONSOLIDATED STATEMENT OF CASHFLOWS**

***(in thousands)***

 
| **For the years ended December 31,**                                          | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Cash flows from  operating activities:                                             |       |     |       |     |       |     |       |
| Net income                                                                         |       | $        | 181,554    |     | $          | 176,296  |       | $ | 162,529 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |     |       |     |       |     |       |
| Depreciation and  amortization                                                     |       | 158,546  |       | 152,375  |       | 150,779  |       |
| Minority  interest in net income                                                   |       | 3,751    |       | 3,540    |       | 5,937    |       |
| Excess tax  benefit from share-based payment arrangements                          |       | (5,773   | )          | (926     | )          |     |       |
| Share-based  compensation                                                          |       | 16,849   |       | 11,694   |       | 14,199   |       |
| Deferred income  taxes                                                             |       | 5,803    |       | (7,930   | )          | 2,360    |       |
| Income of  unconsolidated affiliated companies                                     |       | (933     | )          | (32      | )          | (874     | )          |
| (Gain) loss on  sale of property and equipment                                     |       | (2,055   | )          | 896      |       | (667     | )          |
| Non-cash restructuring  related activities                                         |       | 2,483    |       | 13,145   |       | (896     | )          |
| Proceeds from  cash flow hedge                                                     |       |     |       |     |       | 6,079    |       |
| Changes in  operating assets and liabilities, net of acquisitions:                 |       |     |       |     |       |     |       |
| Accounts  receivable                                                               |       | 32,007   |       | 9,709    |       | (13,404  | )          |
| Inventories                                                                        |       | 11,705   |       | (31,387  | )          | (783     | )          |
| Prepaid expenses                                                                   |       | 5,350    |       | (23,505  | )          | 500      |       |
| Accounts payable                                                                   |       | (21,672  | )          | 36,720   |       | (8,967   | )          |
| Accrued salaries  and wages                                                        |       | (27,218  | )          | 15,694   |       | 7,542    |       |
| Accrued income  taxes                                                              |       | 5,310    |       | (438     | )          | (6,105   | )          |
| Accrued other  taxes                                                               |       | 1,370    |       | (1,730   | )          | (3,179   | )          |
| Changes in other  liabilities and deferred credits                                 |       | (8,014   | )          | 2,329    |       | (14,516  | )          |
| Changes in  deferred charges and other investments                                 |       | 47,165   |       | (7,491   | )          | (20,117  | )          |
| Net cash  provided by operating activities                                         |       | 406,228  |       | 348,959  |       | 280,417  |       |
|                                                                               |       |     |       |     |       |     |       |
| Cash flows from  investing activities:                                             |       |     |       |     |       |     |       |
| Additions to  property and equipment                                               |       | (178,852 | )          | (158,837 | )          | (186,965 | )          |
| Business  acquisitions, net of cash acquired                                       |       |     |       | (10,800  | )          | (237,992 | )          |
| Proceeds from  sales of property, equipment, and other assets                      |       | 7,405    |       | 1,373    |       | 1,900    |       |
| Proceeds from  sale of restructuring related assets                                |       | 3,639    |       | 2,116    |       | 2,985    |       |
| Net cash used in  investing activities                                             |       | (167,808 | )          | (166,148 | )          | (420,072 | )          |
|                                                                               |       |     |       |     |       |     |       |
| Cash flows from  financing activities:                                             |       |     |       |     |       |     |       |
| Proceeds from  issuance of long-term debt, net                                     |       |     |       |     |       | 296,548  |       |
| Repayment of  long-term debt                                                       |       | (35,485  | )          | (41,859  | )          | (6,183   | )          |
| Net borrowing (repayment)  of commercial paper                                     |       | 80,800   |       | (31,254  | )          | (48,426  | )          |
| Net borrowing  (repayment) of short-term debt                                      |       | (9,977   | )          | 7,364    |       | 32,859   |       |
| Cash dividends  paid to stockholders                                               |       | (89,809  | )          | (82,139  | )          | (76,634  | )          |
| Common stock  purchased for the treasury                                           |       | (153,953 | )          | (17,804  | )          | (49,469  | )          |
| Excess tax  benefit from share-based payment arrangements                          |       | 5,773    |       | 926      |       |     |       |
| Stock incentive  programs and related withholdings                                 |       | (14,745  | )          | 51       |       | 1,366    |       |
| Net cash  provided (used) by financing activities                                  |       | (217,396 | )          | (164,715 | )          | 150,061  |       |
|                                                                               |       |     |       |     |       |     |       |
| Effect of  exchange rates on cash and cash equivalents                             |       | 14,225   |       | 2,939    |       | (13,179  | )          |
|                                                                               |       |     |       |     |       |     |       |
| Net (decrease)  increase in cash and cash equivalents                              |       | 35,249   |       | 21,035   |       | (2,773   | )          |
| Cash and cash  equivalents balance at beginning of year                            |       | 112,160  |       | 91,125   |       | 93,898   |       |
|                                                                               |       |     |       |     |       |     |       |
| Cash and cash  equivalents balance at end of year                                  |       | $        | 147,409    |     | $          | 112,160  |       | $ | 91,125 |   |
|                                                                               |       |     |       |     |       |     |       |
| Supplemental  disclosure of cash flow information:                                 |       |     |       |     |       |     |       |
| Business acquisitions,  net of divestures and cash:                                |       |     |       |     |       |     |       |
| Working capital  acquired (net)                                                    |       | $        | 0          |     | $          | (147     | )          | $ | 23,672 |   |
| Property  acquired                                                                 |       |     |       |     |       | 157,667  |       |
| Goodwill and  intangible assets (divested) or acquired, net                        |       |     |       | 8,398    |       | 151,952  |       |
| Deferred charges  and other assets acquired                                        |       |     |       |     |       | 28,018   |       |
| Long-term debt,  deferred taxes, and other liabilities                             |       |     |       | 2,549    |       | (123,317 | )          |
| Cash used for  acquisitions                                                        |       | $        | 0          |     | $          | 10,800   |       | $ | 237,992 |   |
|                                                                               |       |     |       |     |       |     |       |
| Interest paid  during the year                                                     |       | $        | 48,132     |     | $          | 46,396   |       | $ | 38,731 |   |
| Income taxes  paid during the year                                                 |       | $        | 83,621     |     | $          | 116,520  |       | $ | 120,496 |   |

 

*Seeaccompanying notes to consolidated financial statements*

 

22

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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, 2004                                  |       | $          | 11,575     |           | $          | 263,266      |       | $                 | 1,251,695  |            | $          | 31,674                 |       | $ | (250,344 | ) | $ | 1,307,866 |   |
|                                                                |       |       |       |           |       |         |       |              |       |            |       |                   |       |
| Net income                                                          |       |       |       |           |       | 162,529      |       |              |       |            |       | 162,529                |       |
| Unrecognized  gain on derivative, net of tax $2,371                 |       |       |       |           |       |         |       | 3,708             |       |            |       | 3,708                  |       |
| Unrecognized  gain reclassified to earnings, net of tax $(266)      |       |       |       |           |       |         |       | (417              | )          |            |       | (417                   | )          |
| Translation  adjustment                                             |       |       |       |           |       |         |       | 4,178             |       |            |       | 4,178                  |       |
| Pension  liability adjustment, net of tax effect $(4,322)           |       |       |       |           |       |         |       | (6,437            | )          |            |       | (6,437                 | )          |
| Total  comprehensive income                                         |       |       |       |           |       |         |       |              |       |            |       | 163,561                |       |
| Cash dividends  paid on common stock $0.72 per share                |       |       |       |           |       | (76,634      | )          |              |       |            |       | (76,634                | )          |
| Stock incentive  programs and related tax effects (228,557 shares)  |       | 23         |       | 4,008          |       |         |       |              |       |            |       | 4,031                  |       |
| Purchase of  1,869,710 shares of common stock                       |       |       |       |           |       |         |       |              |       | (49,469         | )          | (49,469                | )          |
| 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 |   |

 

*See accompanying notes to consolidated financial statements.*

 

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**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

 

### **Note1 — BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES**

### ** **

***Description of the business: ***Bemis Company, Inc., aMissouri 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 15,700 individuals and has 56 manufacturing facilitieslocated in the United States and ten other countries around the world.  The Company is a manufacturer of flexiblepackaging products and pressure sensitive materials selling to customersthroughout the Americas and Europe, with a growing presence in Asia Pacific.

 

The Company’s business activities are organizedaround its two business segments, Flexible Packaging, which accounted forapproximately 82 percent of 2007 net sales, and Pressure Sensitive Materials,which accounted for the remaining net sales. The Company’s flexible packaging business has a strong technical base inpolymer chemistry, film extrusion, coating, laminating, printing, andconverting.  The Company’s pressuresensitive materials business specializes in adhesive technologies.  The primary markets for the Company’sproducts are in the food industry, which accounted for approximately 60 percentof 2007 net sales.  The Company’sflexible packaging products are widely diversified among food categories andcan be found in nearly every aisle of the grocery store.  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 consolidated financialstatements 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 by theequity method of accounting with earnings of $933,000 and $32,000 in 2007 and2006, respectively, included in other costs (income), net, on the accompanyingconsolidated statement of income. Investments in joint ventures are included in deferred charges and otherassets on the accompanying consolidated balance sheet.

 

***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. Translation gains or losses are recorded in the foreign currencytranslation component in accumulated other comprehensive income (loss) instockholders’ equity.  Foreign currencytransaction gains (losses) of $2,445,000, $(849,000), and $(5,434,000), in2007, 2006, and 2005, respectively, are included as a component of other costs(income), net.

 

***Revenue recognition:***** **Sales and related costs ofsales are recognized upon shipment of products or when all of the conditions ofthe Securities and Exchange Commission’s Staff Accounting Bulletin No. 104are fulfilled.  All costs associated withrevenue, including customer volume discounts, are recognized at the time ofsale.  Customer volume discounts areaccrued in accordance with EITF No. 01-9, *Accountingfor Consideration Given by a Vendor to a Customer* and recorded as areduction to sales.  Shipping andhandling costs are classified as a component of costs of sales while amounts billedto customers for shipping and handling are classified as a component ofsales.  The Company accrues for estimatedwarranty costs when specific issues are identified and the amounts aredeterminable.

 

***Environmental cost:***** **The Company is involved in a numberof environmental related disputes and claims. The Company accrues environmental costs when it is probable that thesecosts will be incurred and can be reasonably estimated.  At December 31, 2007 and 2006, reserveswere $588,000 and $830,500, respectively. Adjustments to the reserve accounts and costs which were directlyexpensed for environmental remediation matters resulted in charges to theincome statements for 2007, 2006, and 2005 of $111,000, $128,000, and  $14,000, net of third party reimbursementstotaling $0, $102,000, and $11,000, for 2007, 2006, and 2005, respectively.

 

***Earnings per share: ***Basic earnings per common share is computed bydividing net income by the weighted-average number of common shares outstandingduring the year.  Diluted earnings pershare is computed by dividing net income by the weighted-average number ofcommon shares outstanding during the year and dilutive shares relating to stockincentive plans.  The following tablepresents information necessary to compute basic and diluted earnings per commonshare:

 
| **(in thousands, except per share  amounts)**                                    | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|----------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Weighted average common shares outstanding — basic                          |       | 102,992  |       | 104,865  |       | 106,433  |       |
| Dilutive shares                                                                  |       | 1,122    |       | 1,902    |       | 1,386    |       |
| Weighted average common and common equivalent shares  outstanding — diluted |       | 104,114  |       | 106,767  |       | 107,819  |       |
| Net income for basic and diluted earnings per share  computation                 |       | $        | 181,554    |     | $          | 176,296  |       | $ | 162,529 |   |
| Earnings per common share — basic                                           |       | $        | 1.76       |     | $          | 1.68     |       | $ | 1.53 |   |
| Earnings per common share — diluted                                         |       | $        | 1.74       |     | $          | 1.65     |       | $ | 1.51 |   |

 

                Certain options outstanding at December 31,2005 (2,494 shares) were not included in the computation of diluted earningsper share above because they would not have had a dilutive effect.

*** ***

***Research and development: ***Research and developmentexpenditures 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 Company controlsbut does not include in the consolidated federal income tax return as it ismanagement’s practice and intent to indefinitely reinvest the earnings.

 

***Accounting for stock-based compensation:***** **EffectiveJanuary 1, 2006, the Company adopted Statement of Financial AccountingStandards No. 123(R), *Share-BasedPayment* (FAS 123(R)), which significantly changed accountingpractice with respect to employee stock options.  FAS 123(R) requires that the Company measure the cost ofequity-based service awards based on the grant-date fair value of theaward.  The impact of adopting thisstandard on January 1, 2006, was insignificant to the Company’s results ofoperations since no new stock option awards have been granted since 2003 andall stock options outstanding at December 31, 2005, are fully or partiallyvested.  Prior to adopting FAS123(R), the Company applied the recognition and measurement principles of APB No. 25,*Accounting for Stock Issued to Employees*.  The intrinsic value method is used to accountfor stock-based compensation plans.  Ifcompensation expense had been determined based on the fair value method withthe pro forma compensation expense reflected over the vesting period, netincome and income per share would have been adjusted to the pro forma amountsindicated below:

 
| **(in thousands, except per share  amounts)**                                                             | ** ** | **2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|----------|------------|
| Net income - as reported                                                                                  |       | $        | 162,529    |   |
| Add: Stock-based compensation expense included in  net income, net of related tax effects                 |       | 8,655    |       |
| Deduct: Total stock-based compensation expense under  fair value-based method, net of related tax effects |       | (8,996   | )          |
| Net income - pro forma                                                                                    |       | $        | 162,188    |   |
|                                                                                                      |       |     |       |
| Basic earnings per share - as reported                                                                    |       | $        | 1.53       |   |
| Basic earnings per share - pro forma                                                                      |       | $        | 1.52       |   |
| Diluted earnings per share - as reported                                                                  |       | $        | 1.51       |   |
| Diluted earnings per share - pro forma                                                                    |       | $        | 1.50       |   |

 

Compensation expense for pro forma purposes wasreflected over the vesting period.  Note8 contains the significant assumptions used in determining the underlying fairvalue of options.

 

***Cash and cash equivalents:***** **The Company considers allhighly liquid temporary investments with a maturity of three months or lesswhen purchased to be cash equivalents. Cash equivalents include certificates of deposit that can be readilyliquidated without penalty at the Company’s option.  Cash equivalents are carried at cost whichapproximates market value.

 

***Accounts receivable:***** **Trade accounts receivable arestated at the amount the Company expects to collect, which is net of anallowance for doubtful accounts for estimated losses resulting from theinability of its customers to make required payments.  The following factors are considered whendetermining the collectibility of specific customer accounts:  customer creditworthiness, past transactionhistory with the customer, and changes in customer payment terms orpractices.  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 $19,311,000and $20,287,000 at December 31, 2007 and 2006, 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)**                 | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|
| Raw materials and supplies         |       | $        | 169,687    |     | $          | 169,914 |   |
| Work in process and finished goods |       | 328,758  |       | 316,482  |       |
| Total inventories, gross           |       | 498,445  |       | 486,396  |       |
| Less inventory write-downs         |       | (19,718  | )          | (18,543  | )          |
| Total inventories, net             |       | $        | 478,727    |     | $          | 467,853 |   |

 

***Property and equipment: ***Property and equipment arestated at cost.  Maintenance and repairsthat do not improve efficiency or extend economic life are expensed asincurred.  Plant and equipment are depreciatedfor financial reporting purposes principally using the straight-line methodover the estimated useful lives of assets as follows:  land improvements, 15-30 years; buildings,15-45 years; leasehold and building improvements, 8-20 years; and machinery andequipment, 3-16 years.  For tax purposes,the Company generally 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 $149,852,000,$144,058,000, and $142,599,000 for 2007, 2006, and 2005, 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 $4,220,000 in 2007, $2,871,000 in 2006, and $993,000in 2005.

 

The Company reviews its long-lived assets forimpairment when events or changes in circumstances indicate that the carryingamount of the assets may not be recoverable. If impairment indicators are present and the estimated futureundiscounted cash flows are less than the carrying value of the assets, thecarrying values are reduced to the estimated fair value.

 

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The Company capitalizes direct costs (internal andexternal) of materials and services used in the development and purchase ofinternal-use software.  Amountscapitalized are amortized on a straight-line basis over a period of three toseven years and are reported as a component of machinery and equipment withinproperty and equipment.

 

***Goodwill:***** **Goodwill represents the excess of cost over the fair value of net assetsacquired in business combinations. Effective January 1, 2002, the Company adopted the reportingrequirements of Statement of Financial Accounting Standards (FAS) No. 141,*Business Combinations,* and FAS No. 142,*Goodwill and Other Intangible Assets,*and as required, has applied its requirements to acquisitions made after June 30,2001.  In accordance with FAS No. 142,goodwill and indefinite-lived intangible assets are no longer amortized, butare reviewed at least annually for impairment. The Company tests goodwill and indefinite-lived intangible assets forimpairment on an annual basis, or whenever there is an impairment indicator,using a fair-value based approach.

 

***Intangible assets: ***Contractual or separable intangible assets that havefinite useful lives are being amortized against income using the straight-linemethod over their estimated useful lives, with periods ranging from one to 30years. The straight-line method of amortization reflects an appropriateallocation of the costs of the intangible assets to earnings in proportion tothe amount of economic benefits obtained 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 allderivative instruments on the balance sheet at fair value.  Derivatives that are not hedges are adjustedto fair value through income.  If thederivative is a hedge, depending on the nature of the hedge, changes in thefair value of derivatives are either offset against the change in fair value ofthe hedged assets, liabilities, or firm commitments through earnings orrecognized in stockholders’ equity through other comprehensive income until thehedged item is recognized.  Gains orlosses, if any, related to the ineffective portion of any hedge are recognizedthrough earnings in the current period. Note 14 contains expanded details relating to specific derivativeinstruments included on the Company’s balance sheet, such as forward foreigncurrency exchange contracts and interest rate swap arrangements.

 

***Treasury stock:***** **Repurchased common stock isstated at cost and is presented as a separate reduction of stockholders’equity.  At December 31, 2007, 5.1million common shares can be repurchased, at management’s discretion, underauthority granted by the Company’s Board of Directors in 2007.

 

***Preferred stock purchase rights:***  On July 29, 1999, the Company’s Board ofDirectors adopted a Shareholder Rights Plan by declaring a dividend of onepreferred share purchase right for each outstanding share of common stock.  Under certain circumstances, a right may beexercised to purchase one four-hundredth of a share of Series A JuniorPreferred Stock for $60, subject to adjustment. The rights become exercisable if, subject to certain exceptions, aperson or group acquires beneficial ownership of 15 percent or more of theCompany’s outstanding common stock or announces an offer which would result insuch person acquiring beneficial ownership of 15 percent or more of the Company’soutstanding common stock.  If a person orgroup acquires beneficial ownership of 15 percent or more of the Company’soutstanding common stock, subject to certain exceptions, each right willentitle its holder to buy from the Company, common stock of the Company havinga market value of twice the exercise price of the right.  The rights expire August 23, 2009, andmay be redeemed by the Company for $.001 per right at any time before a personbecomes a beneficial owner of 15 percent or more of the Company’s outstandingcommon stock.  The Company’s Board ofDirectors has designated 600,000 shares of Series A Junior Preferred Stockwith a par value of $1 per share that relate to the Shareholder RightsPlan.  At December 31, 2007, none ofthese shares were issued or outstanding.

 

**Note 2 — NEW ACCOUNTING PRONOUNCEMENTS**

 

In December 2007, the Financial AccountingStandards Board (FASB) issued Statement of Financial Accounting Standards (FAS)No. 160, *Noncontrolling Interest in ConsolidatedFinancial Statements, an amendment of ARB No. 51* (FAS No. 160),which amends ARB 51 to establish accounting and reporting standards for thenoncontrolling interest in a subsidiary and for the deconsolidation of asubsidiary.  The standard is effectivefor the Company on January 1, 2009. We are currently evaluating the impact of adopting FAS No. 160 onour consolidated financial position and results of operations.

 

                In December 2007, the FASBissued FAS No. 141 (Revised 2007), *Business Combinations*(FAS141(R)).  FAS 141(R) establishesprinciples and requirements for how an acquirer in a business combinationrecognizes and measures in its financial statements, the identifiable assetsacquired, the liabilities assumed, and any non-controlling interest in theacquiree. The statement also provides guidance for recognizing and measuringthe goodwill acquired in the business combination and determines whatinformation to disclose to enable users of the financial statements to evaluatethe nature and financial effects of business combinations. FAS 141 (R) is effective on aprospective basis for financial statements issued for fiscal years beginningafter December 15, 2008. Accordingly, any business combination we enterinto after December 31, 2008 will be subject to this new standard.

 

                In February 2007, the FASBissued FAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities-Including an amendment of FASBStatement No. 115* (FAS No. 159), which permits entities tochoose to measure many financial instruments and certain other items at fairvalue.  The objective is to improvefinancial reporting by providing entities with the opportunity to mitigatevolatility in reported earnings caused by measuring related assets andliabilities differently without having to apply complex hedge accountingprovisions.  The standard is effectivefor the Company on January 1, 2008, and its adoption then is not expectedto have a material effect on its consolidated financial position and results ofoperations.

 

                In September 2006, the FASBissued FAS No. 157, *Fair Value Measurements*(FAS No. 157), which defines fair value, establishes a framework formeasuring fair value in generally accepted accounting principles (GAAP), andexpands disclosures about fair value measurements.  FAS No. 157 will apply whenever anotherstandard requires (or permits) assets or liabilities to be measured at fairvalue.  The standard does not expand theuse of fair value to any new circumstances, and is effective for the Company onJanuary 1, 2008.  

 

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Inearly 2008, the FASB issued Staff Position (FSP) FAS157-2, which delays by oneyear, the effective date of FAS No. 157 for all non-financial assets andnon-financial liabilities, except those that are recognized or disclosed atfair value in the financial statements on at least an annual basis.  We do not expect the adoption of FAS No. 157in 2008 to have a material effect on the measurement of the Company’s financialassets and liabilities.  We arecontinuing to evaluate the impact the standard will have on the determinationof fair value related to non-financial assets and non-financial liabilities inyears after 2008.

 

**Note 3 — GOODWILL AND OTHER INTANGIBLE ASSETS**

 

                Changes in the carrying amountof goodwill attributable to each reportable business segment follow:

 
| ** **                                           | ** ** | **Flexible Packaging** | ** ** | **Pressure Sensitive** | ** ** | ** ** | ** ** |
|------------------------------------------------------|------------|------------------------|------------|------------------------|------------|------------|------------|
| **(in thousands)**                                   | ** ** | **Segment**            | ** ** | **Materials Segment**  | ** ** | **Total**  | ** ** |
| Reported balance at December 31, 2005           |       | $                      | 530,711    |                   | $          | 50,708     |       | $ | 581,419 |   |
|                                                 |       |                   |       |                   |       |       |       |
| Business acquisitions and purchase price adjustments |       | 6,497                  |       | 2,168                  |       | 8,665      |       |
| Currency translation adjustment                      |       | 13,540                 |       | 67                     |       | 13,607     |       |
| Reported balance at December 31, 2006           |       | 550,748                |       | 52,943                 |       | 603,691    |       |
|                                                 |       |                   |       |                   |       |       |       |
| Currency translation adjustment                      |       | 38,841                 |       | (25                    | )          | 38,816     |       |
| Reported balance at December 31, 2007           |       | $                      | 589,589    |                   | $          | 52,918     |       | $ | 642,507 |   |

 

                The components of amortizedintangible assets follow:

 
| *** ***                          | ** ** | **December 31, 2007** | ** ** | **December 31, 2006**    | ** ** |
|---------------------------------------|------------|----------------------------|------------|-------------------------------|------------|
| **(in thousands)**Intangible Assets** | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Gross Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** |
| Contract based                        |       | $                          | 15,447     |                          | $          | (9,168 | ) | $ | 15,447 |   | $ | (8,055 | ) |
| Technology based                      |       | 52,673                     |       | (19,383                       | )          | 52,609 |   | (16,548 | ) |
| Marketing related                     |       | 25,230                     |       | (8,125                        | )          | 21,405 |   | (5,441 | ) |
| Customer based                        |       | 69,444                     |       | (22,362                       | )          | 55,933 |   | (13,227 | ) |
| Reported balance                      |       | $                          | 162,794    |                          | $          | (59,038 | ) | $ | 145,394 |   | $ | (43,271 | ) |

 

**               **Amortizationexpense for intangible assets during 2007, 2006, and 2005 was $9.6 million,$9.2 million, and $8.9 million, respectively. Estimated annual amortization expense is $9.0 million for 2008 through2010, $8.7 million for 2011, and $7.8 million for 2012.  The Company completed its annual impairmenttests in the fourth quarter of 2007 with no indications of impairment ofgoodwill found.

 

**Note 4 — BUSINESS ACQUISITIONS**

 

On January 5, 2005, the Company acquiredmajority ownership of Dixie Toga S.A., headquartered in São Paulo, Brazil.  Dixie Toga recorded annual net sales inexcess of $300 million in 2004.  In thistransaction, the Company acquired substantially all of the outstanding votingcommon stock and 43 percent of the outstanding non-voting preferred stock ofDixie Toga for a total cash price of approximately $250 million, which wasinitially financed with commercial paper. During 2005 and 2006, Dixie Toga repurchased additional publicly tradedpreferred shares on the Bovespa Stock Exchange in São Paulo, Brazil, therebyeffectively increasing Bemis’ preferred share ownership to 54 percent at December 31,2006.  The remaining non-voting preferredshares not acquired are traded publicly on the Brazilian Bovespa Exchange.  Dixie Toga is a leading packaging company inSouth America, specializing in flexible packaging, thermoformed and injectionmolded containers, laminated plastic tubes, printed labels, and printed foldingcartons.  Dixie Toga employs nearly 4,000people in South America and operates nine manufacturing plants in Brazil andone in Argentina.

 

                The net cash purchase price of$235.3 million, paid in 2005, has been accounted for under the purchase methodof accounting reflecting the provisions of FAS Nos. 141 and 142 and includesthe allocations as follows:  $249.2million to tangible assets, $40.1 million to intangible assets, $164.4 millionto liabilities assumed, and $110.4 million to tax deductible goodwill.  A contingent contractual post-closingadjustment increased the purchase price and related goodwill by $4.2 million in2006.  Intangible assets acquired have aweighted-average useful life of approximately 18 years and include $0.3 millionfor contract-based intangibles with a useful life of 1 year, $9.3 million formarketing related intangibles with a useful life of 30 years, and $30.5 millionfor customer-based intangibles with a useful life of 15 years.  Results of operations from the date ofacquisition are included in these financial statements.

 

                The Company and Dixie Toga hadoperated a flexible packaging joint venture in Brazil since 1998.  Prior to the acquisition the Company owned 45percent of the joint venture and accounted for it on an equity basis for theyear 2004 and earlier (see description below regarding the 2004 acquisition ofan additional interest in Itap Bemis Ltda.). The pre-existing values for property, intangible assets, and goodwillimbedded in the Company’s equity investment at the date of the Dixie Togaacquisition were $1.7 million, $3.6 million, and $11.4 million,respectively.  These amounts weresubsequently included as components of the Company’s consolidated property,intangible assets, and goodwill.

 

                On February 17, 2005, theCompany acquired certain assets of Rayton Packaging Inc., Calgary, Alberta,Canada for a cash purchase price of $2.7 million.  The net cash purchase price has beenaccounted for under the purchase method of accounting reflecting the provisionsof FAS Nos. 141 and 142 and includes the preliminary allocations asfollows:  $1.2 million to tangibleassets, $0.8 million to intangible assets, and $0.7 million to goodwill.  Intangible assets acquired include $0.4million for customer-based intangibles and $0.4 million for technology-basedintangibles each with a useful life of 10 years.

 

                On May 25, 2004, theCompany and its Mexican partner, Corporacion JMA, S.A. de C.V., acquired theTultitlan, Mexico plant operation of Masterpak, S.A. de C.V. for $30.7million.  Annual sales related to theassets purchased were approximately $35.0 million.  

 

27

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Althoughthe Company’s ownership share was initially only 51 percent, the Company financedits Mexican partner’s portion of the purchase price and as such 100 percent ofresults of operation of this entity were consolidated by the Company at December 31,2005 and 2004.  The total purchase pricewas accounted for under the purchase method of accounting, reflecting theprovisions of FAS Nos. 141 and 142, and includes:  working capital, $9.9 million; property,$19.5 million; intangible assets, deferred charges, and goodwill $2.0 million;and long-term liabilities, $0.7 million. Results of operations from the date of acquisition are included in thesefinancial statements.  During 2005 and2006 the Company acquired the joint venture partner’s interest and now owns 100percent of the entity.  Because theCompany was already consolidating 100 percent of the entity the subsequentacquisition of the remaining joint venture interest had an inconsequentialaccounting impact.

 

                On May 4, 2006, the Companyalso acquired the remaining 49 percent minority interest in MACtac Mexico, S.A.de C.V. and Bolsas Bemis S.A. de C.V. for a total consideration of $6.8million.  The net cash purchase price hasbeen accounted for under the purchase method of accounting reflecting theprovisions of FAS Nos. 141 and 142 and includes an allocation as follows:  $3.1 million to net tangible assets, $0.6million to liabilities assumed, $0.7 million to intangible assets and $3.6million to goodwill.

 

**Note 5 — RESTRUCTURING OF OPERATIONS**

 

***2003 Restructuring Plan***

 

                In July 2003, the Companycommitted to a plan to close three flexible packaging plants:  Murphysboro, Illinois; Union City,California; and Prattville, Alabama.  Theclosure of these plants, together with related support staff and capacity reductionswithin the flexible packaging business segment, has reduced fixed costs andimproved capacity utilization elsewhere in the Company.  During 2005, the Company incurred charges of$0.6 million principally on the sale of an idled facility.  This restructuring effort is complete.

 

                In October 2003, theCompany committed to a plan to close two pressure sensitive materialsplants:  North Las Vegas, Nevada, andBrampton, Ontario, Canada.  The closureof these plants, together with related support staff and capacity reductionswithin the pressure sensitive materials business segment, has reduced fixedcosts and improved capacity utilization elsewhere in this businesssegment.  During 2005, the Companyincurred charges of $0.6 million for employee pension termination costs and$0.2 million for other related costs.  Inaddition during 2005, the Company realized a $2.3 million gain on thedisposition of an idled facility and land. This restructuring effort is complete.

 

                For the year 2005, a total of$1.4 million has been charged to other costs (income) within the consolidatedstatement of income.  In addition during2005, the $2.3 million gain on the disposition of an idled facility and land isincluded in other costs (income) within the consolidated statement of income.  The accrued liability remaining at December 31,2005, was not significant and was paid in 2006.

 

                An analysis of the 2003restructuring and related costs activity follows:

 
| ** **                                 | ** ** | ** **   | ** ** | **Facilities**    | ** ** | ** **        | ** ** | ** **       | ** ** | **Total**             | ** ** |
|--------------------------------------------|------------|--------------|------------|-------------------|------------|-------------------|------------|------------------|------------|-----------------------|------------|
| ** **                                 | ** ** | **Employee** | ** ** | **Consolidation** | ** ** | **Total**         | ** ** | **Accelerated**  | ** ** | **Restructuring**     | ** ** |
| **(in thousands)**                         | ** ** | **Costs**    | ** ** | **or Relocation** | ** ** | **Restructuring** | ** ** | **Depreciation** | ** ** | **and Related Costs** | ** ** |
| Reserve balance  at December 31, 2004 |       | $            | (204       | )                 | $          | (30               | )          | $                | (234       | )                     | $          | 0 |   | $ | (234 | ) |
|                                       |       |         |       |              |       |              |       |             |       |                  |       |
| **2005 Activity**                          |       |         |       |              |       |              |       |             |       |                  |       |
| Total net expense accrued                  |       |         |       |              |       |              |       |             |       |                  |       |
| Flexible  Packaging                        |       | $            | 0          |              | $          | (560              | )          | $                | (560       | )                     | $          | 0 |   | $ | (560 | ) |
| Pressure Sensitive                         |       | (632         | )          | 2,088             |       | 1,456             |       |             |       | 1,456                 |       |
|                                       |       |         |       |              |       |              |       |             |       |                  |       |
| Charges to accrual account                 |       |         |       |              |       |              |       |             |       |                  |       |
| Flexible  Packaging                        |       | 145          |       | 560               |       | 705               |       |             |       | 705                   |       |
| Pressure  Sensitive                        |       | 632          |       | (2,088            | )          | (1,456            | )          |             |       | (1,456                | )          |
| Reserve balance  at December 31, 2005 |       | $            | (59        | )                 | $          | (30               | )          | $                | (89        | )                     | $          | 0 |   | $ | (89 | ) |
|                                       |       |         |       |              |       |              |       |             |       |                  |       |
| **2006 Activity**                          |       |         |       |              |       |              |       |             |       |                  |       |
| Charges to accrual account                 |       |         |       |              |       |              |       |             |       |                  |       |
| Flexible  Packaging                        |       | $            | 59         |              | $          | 0                 |       | $                | 59         |                  |       |   | $ | 59 |   |
| Pressure  Sensitive                        |       | 0            |       | 30                |       | 30                |       |             |       | 30                    |       |
| Reserve balance  at December 31, 2006 |       | $            | 0          |              | $          | 0                 |       | $                | 0          |                  | $          | 0 |   | $ | 0 |   |

 

***2006 Restructuring Plan***

 

                In January 2006, theCompany committed to a plan to close five flexible packaging plants:  Peoria, Illinois; Denmark and Neenah,Wisconsin; Georgetown, Ontario, Canada; and Epernon, France.  The closure of these plants, together withrelated support staff and capacity reductions within the flexible packagingbusiness segment, has reduced fixed costs and improved capacity utilizationelsewhere in the Company.  During 2006,the Company incurred charges of $11.6 million for employee severance, $12.3 millionfor accelerated depreciation, and $5.1 million for other related costs.  The restructuring effort is substantiallycomplete.

 

                Also in January 2006, theCompany committed to a plan to close a pressure sensitive materials plantlocated in Hopkins, Minnesota.  Theclosure of this plant, together with related support staff and capacityreductions within the pressure sensitive materials 

 

28

----

 

businesssegment, has reduced fixed costs and improved capacity utilization.  During 2006, the Company incurred charges of$0.5 million for employee severance and $0.5 million for other relatedcosts.  The restructuring effort iscomplete.

 

                During 2006, a total of $18.3million has been charged to other costs (income) and $12.9 million has beencharged to cost of products sold within the consolidated statement ofincome.  During 2007, a total of $0.3million restructuring income has been recorded as a component of other costs(income) and $0.3 million has been charged to cost of products sold within theconsolidated 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.

 

                An analysis of the 2006restructuring plan and related costs activity follows:

 
| ** **                                | ** ** | ** **   | ** ** | **Facilities**    | ** ** | ** **       | ** ** | **Total**             | ** ** |
|-------------------------------------------|------------|--------------|------------|-------------------|------------|------------------|------------|-----------------------|------------|
| ** **                                | ** ** | **Employee** | ** ** | **Consolidation** | ** ** | **Accelerated**  | ** ** | **Restructuring**     | ** ** |
| **(in thousands)**                        | ** ** | **Costs**    | ** ** | **or Relocation** | ** ** | **Depreciation** | ** ** | **and Related Costs** | ** ** |
| **2006 Activity — Year-To-Date**     |       |         |       |              |       |             |       |                  |       |
| Reserve balance at December 31, 2005 |       | $            | 0          |              | $          | 0                |       | $                     | 0          |   | $ | 0 |   |
| Total net expense accrued                 |       |         |       |              |       |             |       |                  |       |
| Corporate                                 |       |         |       | (1,288            | )          |             |       | (1,288                | )          |
| Flexible  Packaging                       |       | (11,555      | )          | (5,136            | )          | (12,262          | )          | (28,953               | )          |
| Pressure  Sensitive                       |       | (519         | )          | (416              | )          | (47              | )          | (982                  | )          |
| Charges to accrual account                |       |         |       |              |       |             |       |                  |       |
| Corporate                                 |       |         |       | 1,288             |       |             |       | 1,288                 |       |
| Flexible  Packaging                       |       | 11,170       |       | 5,136             |       | 12,262           |       | 28,568                |       |
| Pressure  Sensitive                       |       | 519          |       | 416               |       | 47               |       | 982                   |       |
| Reserve balance at December 31, 2006 |       | $            | (385       | )                 | $          | 0                |       | $                     | 0          |   | $ | (385 | ) |
|                                      |       |         |       |              |       |             |       |                  |       |
| **2007 Activity — Year-To-Date**     |       |         |       |              |       |             |       |                  |       |
| Reserve balance at December 31, 2006 |       | $            | (385       | )                 | $          | 0                |       | $                     | 0          |   | $ | (385 | ) |
| Total net expense accrued                 |       |         |       |              |       |             |       |                  |       |
| Corporate                                 |       |         |       | (1,495            | )          |             |       | (1,495                | )          |
| Flexible  Packaging                       |       | (4,752       | )          | 6,415             |       | (174             | )          | 1,489                 |       |
| Pressure  Sensitive                       |       |         |       |              |       |             |       |                  |       |
| Charges to accrual account                |       |         |       |              |       |             |       |                  |       |
| Corporate                                 |       |         |       | 1,495             |       |             |       | 1,495                 |       |
| Flexible  Packaging                       |       | 5,137        |       | (6,415            | )          | 174              |       | (1,104                | )          |
| Pressure  Sensitive                       |       |         |       |              |       |             |       |                  |       |
| Reserve balance at December 31, 2007 |       | $            | 0          |              | $          | 0                |       | $                     | 0          |   | $ | 0 |   |

 

**Note 6 — PENSION PLANS**

 

Total multiemployer plan, defined contribution, anddefined benefit pension expense in 2007, 2006, and 2005 was $26,311,000, $28,942,000and $30,347,000, respectively.  Inaddition to these plans, the Company also sponsors a 401(k) savings planfor substantially all U.S. employees. The Company contributes $0.50 for every pre-tax $1.00 an employeecontributes on the first two percent of eligible compensation plus $0.25 forevery pre-tax $1.00 an employee contributes on the next six percent of eligiblecompensation.  Company contributions areinvested in Company stock and are fully vested after three years ofservice.  Total Company contributions for2007, 2006, and 2005 were $5,993,000, $5,830,000, and $4,596,000, respectively.

 

Effective January 1,2006, our U.S. defined benefit pension plans were amended for approximatelytwo-thirds of the participant population. For those employees impacted, future pension benefits were replaced withthe Bemis Investment Profit Sharing Plan (BIPSP), a defined contribution planwhich is subject to achievement of certain financial performance goals of theCompany.  Total contribution expense forBIPSP and previously existing defined contribution plans was $10,394,000 in2007, $10,551,000 in 2006, and $1,191,000 in 2005.  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 2007, 2006, and 2005 totaled $749,000, $740,000, and $741,000,respectively.

 

                The Company’s defined benefitpension plans continue to cover a substantial number of U.S. employees, and thenon-US defined benefit plans cover select employees at various internationallocations.  The benefits under the plansare based on years of service and salary levels.  Certain plans covering hourly employeesprovide 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 benefitsto reflect a service adjustment factor.

 

                Effective December 31,2006, the Company adopted Statement of Financial Accounting Standards No. 158,*Employers’ Accounting for Defined BenefitPension and Other Postretirement Plans — An Amendment of FASB Statements No. 87,88, 106, and 132 (R) *(FAS 158). As a result of the adoption of FAS 158, the Company has recorded a cumulativeeffect adjustment as a component of other comprehensive income withinstockholders’ equity (also see Note 7). The Company’s disclosures for the fiscal year ended 2006 also reflectedthe revised accounting and disclosure requirements of FAS 158.  Reported items for fiscal year 2005 were notaffected.

 

29

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                The adoption of FAS 158 on December 31,2006, resulted in incremental adjustments to the following individual lineitems in the consolidated balance sheet:

 
| ** **                                      | ** ** | **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          |       |
|                                                 |            |                    |            |                 |            |                    |            |  |  |  |

 

 

Net periodic pension cost for defined benefit plansincluded the following components for the years ended December 31, 2007,2006, and 2005:

 
| **(in thousands)**                                 | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Service cost - benefits earned during the year     |       | $        | 13,868     |     | $          | 14,572   |       | $ | 20,541 |   |
| Interest cost on projected benefit obligation      |       | 32,497   |       | 30,726   |       | 28,943   |       |
| Expected return on plan assets                     |       | (45,274  | )          | (41,626  | )          | (36,401  | )          |
| Settlement (gain) loss                             |       | 3,726    |       |     |       | 634      |       |
| Curtailment                                        |       |     |       | 667      |       | 1,737    |       |
| Amortization of unrecognized transition obligation |       | 240      |       | 158      |       | 205      |       |
| Amortization of prior service cost                 |       | 2,290    |       | 2,352    |       | 2,600    |       |
| Recognized actuarial net (gain) or loss            |       | 7,820    |       | 10,802   |       | 10,156   |       |
| Net periodic pension (income) cost                 |       | $        | 15,167     |     | $          | 17,651   |       | $ | 28,415 |   |

 

 

                Changes in benefit obligationsand plan assets, and a reconciliation of the funded status at December 31,2007 and 2006, are as follows:

 
| ** **                                                        | ** ** | **U.S. pension plans** | ** ** | **Non-U.S. pension plans** | ** ** |
|-------------------------------------------------------------------|------------|------------------------|------------|----------------------------|------------|
| **(in thousands)**                                                | ** ** | **2007**               | ** ** | **2006**                   | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Change in Benefit Obligation:**                                 | ** ** | ** **             | ** ** | ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| Benefit obligation at the beginning of the year                   |       | $                      | 510,663    |                       | $          | 515,387 |   | $ | 75,046 |   | $ | 62,174 |   |
| Service cost                                                      |       | 10,346                 |       | 11,466                     |       | 3,522 |   | 3,106 |   |
| Interest cost                                                     |       | 28,633                 |       | 27,669                     |       | 3,864 |   | 3,056 |   |
| Participant  contributions                                        |       |                   |       |                       |       | 652 |   | 533 |   |
| Plan amendments                                                   |       | 114                    |       | 1,140                      |       | 418 |   | 517 |   |
| Plan  curtailments                                                |       |                   |       |                       |       | (418 | ) | (534 | ) |
| Plan settlements                                                  |       |                   |       |                       |       | (1,139 | ) |   |   |
| Acquisitions                                                      |       |                   |       |                       |       |   |   | 3,076 |   |
| Benefits paid                                                     |       | (22,386                | )          | (21,874                    | )          | (13,533 | ) | (2,057 | ) |
| Actuarial (gain)  or loss                                         |       | (27,218                | )          | (23,125                    | )          | (6,117 | ) | (1,480 | ) |
| Foreign currency exchange rate changes                            |       |                   |       |                       |       | 5,714 |   | 6,655 |   |
| Benefit obligation at the end of the year                         |       | $500,152               |       | $510,663                   |       | $68,009 |   | $75,046 |   |
|                                                              |       |                   |       |                       |       |   |   |   |   |   |   |   |   |
| Accumulated benefit obligation at the end of the  year            |       | $                      | 448,679    |                       | $          | 460,611 |   | $ | 54,534 |   | $ | 59,296 |   |
|                                                              |       |                   |       |                       |       |   |   |   |   |
| **Change in Plan Assets:**                                        |       |                   |       |                       |       |   |   |   |   |
| Fair value of plan assets at the beginning of the  year           |       | $                      | 484,567    |                       | $          | 435,142 |   | $ | 56,541 |   | $ | 46,025 |   |
| Actual return on  plan assets                                     |       | 18,594                 |       | 46,222                     |       | 2,258 |   | 3,580 |   |
| Employer  contributions                                           |       | 1,114                  |       | 25,077                     |       | 3,973 |   | 3,576 |   |
| Participant  contributions                                        |       |                   |       |                       |       | 652 |   | 533 |   |
| Plan settlements                                                  |       |                   |       |                       |       |   |   |   |   |
| Plan  combinations                                                |       |                   |       |                       |       |   |   | 173 |   |
| Benefits paid                                                     |       | (22,386                | )          | (21,874                    | )          | (13,533 | ) | (2,057 | ) |
| Foreign currency  exchange rate changes                           |       |                   |       |                       |       | 4,046 |   | 4,711 |   |
| Fair value of plan assets at the end of the year                  |       | $                      | 481,889    |                       | $          | 484,567 |   | $ | 53,937 |   | $ | 56,541 |   |
| ** **                                                        | ** ** | ** **             | ** ** | ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Funded (unfunded) status at year end:**                         |       | $                      | (18,263    | )                          | $          | (26,096 | ) | $ | (14,072 | ) | $ | (18,505 | ) |
| ** **                                                        | ** ** | ** **             | ** ** | ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Amount recognized in consolidated balance sheet  consists of:** |       |                   |       |                       |       |   |   |   |   |
| Prepaid benefit  cost, non-current                                |       | $                      | 21,407     |                       | $          | 9,845 |   | $ | 124 |   | $ | 341 |   |
| Accrued benefit  liability, current                               |       | (1,944                 | )          | (1,813                     | )          | (162 | ) |   |   |
| Accrued benefit  liability, non-current                           |       | (37,726                | )          | (34,128                    | )          | (14,034 | ) | (18,846 | ) |
| Sub-total                                                         |       | (18,263                | )          | (26,096                    | )          | (14,072 | ) | (18,505 | ) |
| Deferred tax  asset                                               |       | 47,248                 |       | 54,024                     |       | 2,726 |   | 6,034 |   |
| Accumulated  other comprehensive income                           |       | 79,934                 |       | 87,030                     |       | 4,611 |   | 9,720 |   |
| Net amount recognized in consolidated balance sheet               |       | $                      | 108,919    |                       | $          | 114,958 |   | $ | (6,735 | ) | $ | (2,751 | ) |
|                                                                   |            |                        |            |                            |            |  |  |  |  |  |  |  |  |  |

 

30

----

 

                Accumulated othercomprehensive income related to pension benefit plans is as follows:

 
| ** **                                                  | ** ** | **U.S. pension plans** | ** ** | **Non-U.S. pension plans** | ** ** |
|-------------------------------------------------------------|------------|------------------------|------------|----------------------------|------------|
| **(in thousands)**                                          | ** ** | **2007**               | ** ** | **2006**                   | ** ** | **2007** | ** ** | **2006** | ** ** |
| Unrecognized net actuarial losses                           |       | $                      | 114,655    |                       | $          | 126,379 |   | 3,317 |   | $ | 12,324 |   |
| Unrecognized net prior service costs (benefits)             |       | 12,527                 |       | 14,675                     |       | 889 |   | 409 |   |
| Unrecognized net transition costs                           |       |                   |       |                       |       | 3,131 |   | 3,020 |   |
| Tax expense (benefit)                                       |       | (47,248                | )          | (54,024                    | )          | (2,726 | ) | (6,033 | ) |
| Accumulated  other comprehensive loss (income), end of year |       | $                      | 79,934     |                       | $          | 87,030 |   | $ | 4,611 |   | $ | 9,720 |   |
|                                                             |            |                        |            |                            |            |  |  |  |  |  |  |  |  |

 

                Estimated amountsin accumulated other comprehensive income expected to be reclassified to netperiod cost during 2008 are as follows:

 
| **(in thousands)**                 | ** ** | **U.S.  Pension Plans  2007** | ** ** | **Non-U.S.****Pension  Plans  2007** | ** ** |
|------------------------------------|------------|-------------------------------|------------|--------------------------------------|------------|
| Net actuarial losses               |       | $                             | 4,702      |                                 | $          | 28 |   |
| Net prior service costs (benefits) |       | 2,289                         |       | 72                                   |       |
| Net transition costs               |       |                          |       | 262                                  |       |
| Total                              |       | $                             | 6,991      |                                 | $          | 362 |   |

 

Theaccumulated benefit obligation for all defined benefit pension plans was$503,214,000 and $519,907,000 at December 31, 2007, and 2006,respectively.

 

                Presented below are theprojected benefit obligation, accumulated benefit obligation, and fair value ofplan assets for pension plans with projected benefit obligations in excess ofplan assets and pension plans with accumulated benefit obligations in excess ofplan assets as of December 31, 2007 and 2006.

 
| ** **                      | ** ** | **Projected Benefit Obligation  Exceeds the Fair Value of Plan’s Assets** | ** ** | **Accumulated Benefit Obligation  Exceeds the Fair Value of Plan’s Assets** | ** ** |
|---------------------------------|------------|--------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                      | ** ** | **U.S.  Plans**                                                                | ** ** | **Non-U.S.  Plans**                                                              | ** ** | **U.S.  Plans** | ** ** | **Non-U.S.  Plans** | ** ** |
| **(in thousands)**              | ** ** | **2007**                                                                       | ** ** | **2006**                                                                         | ** ** | **2007** | ** ** | **2006** | ** ** | **2007** | ** ** | **2006** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Projected benefit obligation    |       | $                                                                              | 39,670     |                                                                             | $          | 385,127 |   | $ | 68,008 |   | $ | 71,314 |   | $ | 39,670 |   | $ | 35,205 |   | $ | 33,074 |   | $ | 64,653 |   |
| Accumulated  benefit obligation |       | 33,747                                                                         |       | 335,075                                                                          |       | 54,534 |   | 52,482 |   | 33,747 |   | 28,723 |   | 23,096 |   | 52,482 |   |
| Fair value of plan assets       |       | 0                                                                              |       | 349,186                                                                          |       | 53,812 |   | 53,880 |   | 0 |   | 0 |   | 19,987 |   | 48,910 |   |
|                                 |            |                                                                                |            |                                                                                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

                The Company’s general fundingpolicy is to make contributions as required by applicable regulations and whenbeneficial to the Company for tax and planning purposes.  The employer contributions for the yearsended December 31, 2007 and 2006, were $5,087,000 and $28,653,000,respectively.  The expected cashcontribution for 2008 is $5,884,000 which is expected to satisfy plan funding requirementsand regulatory funding requirements.

 

                For each of the years ended December 31,2007 and 2006, the U.S. pension plans represented approximately 90 percent ofthe Company’s total plan assets and approximately 88 percent of the Company’stotal projected benefit obligation. Considering the significance of the U.S. pension plans in comparisonwith the Company’s total pension plans, we separately present and discuss thecritical pension assumptions related to the U.S. pension plans and the non-U.S.pension plans.

 

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** | ** ** |
|------------------------------------------------|------------|------------------------|------------|----------------------------|------------|
| ** **                                     | ** ** | **2007**               | ** ** | **2006**                   | ** ** | **2007** | ** ** | **2006** | ** ** |
| Weighted-average discount rate                 |       | 6.25                   | %          | 5.75                       | %          | 4.38 | % | 4.87 | % |
| Rate of increase in future compensation levels |       | 4.75                   | %          | 4.75                       | %          | 3.79 | % | 3.83 | % |

 

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** | ** ** |
|-------------------------------------------------|------------|------------------------|------------|----------------------------|------------|
| ** **                                      | ** ** | **2007**               | ** ** | **2006**                   | ** ** | **2005** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Weighted-average discount rate                  |       | 5.75                   | %          | 5.50                       | %          | 5.75 | % | 4.05 | % | 4.53 | % | 5.25 | % |
| Expected return on plan assets                  |       | 8.75                   | %          | 8.75                       | %          | 8.75 | % | 6.05 | % | 6.56 | % | 6.66 | % |
| Rate of increase  in future compensation levels |       | 4.75                   | %          | 4.75                       | %          | 4.75 | % | 3.79 | % | 3.83 | % | 4.14 | % |

 

31

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Theweighted-average plan asset allocation at December 31, 2007, and 2006, andtarget allocation for 2008, are as follows:

 
| ** **         | ** ** | **U.S. pension plans** | ** ** | **Non-U.S. pension plans**     | ** ** |
|--------------------|------------|------------------------|------------|--------------------------------|------------|
| ** **         | ** ** | **2008  Target**       | ** ** | **Percentage  of plan assets** | ** ** | **2008  Target** | ** ** | **Percentage  of plan assets** | ** ** |
| **Asset Category** | ** ** | **Allocation**         | ** ** | **2007**                       | ** ** | **2006** | ** ** | **Allocation** | ** ** | **2007** | ** ** | **2006** | ** ** |
| Equity Securities  |       | 70                     | %          | 76                             | %          | 79 | % | 42 | % | 43 | % | 47 | % |
| Debt Securities    |       | 30                     | %          | 20                             | %          | 20 | % | 25 | % | 23 | % | 25 | % |
| Other              |       |                   |       | 4                              | %          | 1 | % | 33 | % | 34 | % | 28 | % |
| 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** | ** ** |
|--------------------|------------|------------------------|------------|----------------------------|------------|
| 2008               |       | $                      | 24,460     |                       | $          | 1,185 |   |
| 2009               |       | 26,887                 |       | 1,932                      |       |
| 2010               |       | 28,767                 |       | 3,633                      |       |
| 2011               |       | 35,885                 |       | 3,509                      |       |
| 2012               |       | 32,786                 |       | 1,720                      |       |
| Years 2013-2017    |       | 176,702                |       | 27,598                     |       |
|                    |            |                        |            |                            |            |  |  |

 

**               **As of January 1, 2008,we have assumed that the expected long-term rate of return on plan assets willbe 8.50 percent.  This is a decrease fromthe 8.75 percent level assumed for 2007. To develop the expected long-term rate of return on assets assumption,we considered historical returns and future expectations.  Using historical long-term investment periodsof 10, 15, and 20 years, our pension plan assets have earned compound annualrates of return of****6.3 percent,9.0 percent, and 9.8 percent, respectively. Using our target asset allocation for plan assets of 70 percent equitysecurities and 30 percent fixed income securities, our outside actuaries haveused their independent economic model to calculate a range of expectedlong-term rates of return and have determined our assumptions to be reasonable.

 

                At the end of each year, wedetermine the discount rate to be used to calculate the present value ofpension plan liabilities.  This discountrate is an estimate of the current interest rate at which pension liabilitiescould 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, 2007and 2006, we determined this rate to be 6.25 percent and 5.75 percent,respectively.

 

                For our non-U.S. pension planswe follow similar methodologies in determining the appropriate expected ratesof return on assets and discount rates, to be used in our actuarialcalculations for the pension plans offered in each individual country.  We tailor each of these assumptions inaccordance with the historical market performance and prevailing marketexpectations for each respective country. As a result, each pension plan contains unique assumptions, whichreflect the general market environment within each respective country, and areoften quite different from the corresponding assumptions applied to our U.S.pension plans.

 

**Note 7 —POSTRETIREMENT BENEFITS OTHER THAN PENSIONS**

 

                The Company sponsors severaldefined postretirement benefit plans that cover a majority of salaried and aportion of nonunion hourly employees. These plans provide health care benefits and, in some instances, providelife insurance benefits.  Except for oneclosed-group plan, which is noncontributory, postretirement health care plansare contributory, with retiree contributions adjusted annually.  Life insurance plans are noncontributory.

 

                Net periodic postretirementbenefit costs included the following components for the years ended December 31,2007, 2006, and 2005.

 
| **(in thousands)**                                              | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Service cost - benefits earned during the year                  |       | $        | 904        |     | $          | 1,107    |       | $ | 658 |   |
| Interest cost on accumulated postretirement benefit  obligation |       | 1,178    |       | 1,569    |       | 1,157    |       |
| Amortization of prior service cost                              |       | 215      |       | 691      |       | (51      | )          |
| Recognized actuarial net (gain) or loss                         |       | (62      | )          | 16       |       | 37       |       |
| Net periodic postretirement benefit cost                        |       | $        | 2,235      |     | $          | 3,383    |       | $ | 1,801 |   |

 

32

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                Changes in benefit obligationand plan assets, and a reconciliation of the funded status at December 31,2007 and 2006, are as follows:

 
| ** (in thousands)**                                          | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------------------------------------------|------------|----------|------------|----------|------------|
| **Change in Benefit Obligation**                                  |       |     |       |     |       |
| Benefit  obligation at the beginning of the year                  |       | $        | 21,054     |     | $          | 29,299 |   |
| Service cost                                                      |       | 904      |       | 1,107    |       |
| Interest cost                                                     |       | 1,178    |       | 1,569    |       |
| Participant  contributions                                        |       | 439      |       | 1,439    |       |
| Plan amendments                                                   |       | (5,888   | )          | (3,950   | )          |
| Actuarial (gain)  or loss                                         |       | (4,759   | )          | (5,956   | )          |
| Medicare  subsidies received                                      |       |     |       | 80       |       |
| Benefits paid                                                     |       | (1,418   | )          | (2,534   | )          |
| Benefit obligation at the end of the year                         |       | $        | 11,510     |     | $          | 21,054 |   |
|                                                              |       |     |       |     |       |
| **Change in Plan Assets**                                         |       |     |       |     |       |
| Fair value of plan assets  at the beginning of the year           |       | $        | 0          |     | $          | 0 |   |
| Employee contributions                                            |       | 439      |       | 1,439    |       |
| Employer contribution                                             |       | 979      |       | 1,015    |       |
| Medicare subsidies received                                       |       |     |       | 80       |       |
| Benefits paid                                                     |       | (1,418   | )          | (2,534   | )          |
| Fair value of plan assets  at the end of the year                 |       | $        | 0          |     | $          | 0 |   |
|                                                              |       |     |       |     |       |
| **Funded (unfunded) status at  year end:**                        |       | $        | (11,510    | )        | $          | (21,054 | ) |
|                                                              |       |     |       |     |       |
| **Amount recognized in consolidated balance sheet  consists of:** |       |     |       |     |       |
| Prepaid benefit cost,  non-current                                |       | $        | 0          |     | $          | 0 |   |
| Accrued benefit liability,  current                               |       | (1,020   | )          | (1,144   | )          |
| Accrued benefit liability,  non-current                           |       | (10,490  | )          | (19,910  | )          |
| Deferred tax                                                      |       | (4,391   | )          | (391     | )          |
| Accumulated other  comprehensive income                           |       | (7,429   | )          | (629     | )          |
| Net amount recognized in  consolidated balance sheet              |       | $        | 23,330     |     | $          | 22,074 |   |

 

                Accumulated othercomprehensive income related to other postretirment benefit plans is asfollows:

 
| **(in thousands)**                                          | ** ** | **2007** | *** *** | **2006** | ** ** |
|-------------------------------------------------------------|------------|----------|--------------|----------|------------|
| Unrecognized net actuarial losses (gains)                   |       | $        | (7,553       | )        | $          | (2,855 | ) |
| Unrecognized net prior service costs (benefits)             |       | (4,267   | )            | 1,835    |       |
| Tax expense (benefit)                                       |       | 4,391    |         | 391      |       |
| Accumulated other comprehensive loss (income), end  of year |       | $        | (7,429       | )        | $          | (629 | ) |

 

                Estimated amountsin accumulated other comprehensive income expected to be reclassified to netperiod cost during 2008 are as follows:

 
| **(in thousands)**                 | ** ** | **2007** | ** ** |
|------------------------------------|------------|----------|------------|
| Net actuarial (gains) losses       |       | $        | (501       | ) |
| Net prior service costs (benefits) |       | (455     | )          |
| Total                              |       | $        | (956       | ) |

 

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

 
| **(in thousands)** | ** ** | **Benefit Payments** | ** ** |
|--------------------|------------|----------------------|------------|
| 2008               |       | $                    | 1,020      |   |
| 2009               |       | 1,065                |       |
| 2010               |       | 1,052                |       |
| 2011               |       | 1,113                |       |
| 2012               |       | 1,108                |       |
| 2013-2017          |       | 5,423                |       |
|                    |            |                      |            |  |

 

 

Theemployer contributions for the years ended December 31, 2007 and 2006,were $979,000 and $1,015,000, respectively. The expected plan asset contribution for 2008 is $1,020,000 which isexpected to satisfy plan funding requirements.

 

                The health care cost trend rateassumption has a significant effect on the amounts reported.  For measurement purposes, a 7.0 percentannual rate of increase in the per capita cost of covered health care benefitswas assumed for both 2007 and 2006; each year’s estimated rate was assumed todecrease gradually to 5.0 percent in annual one percent increments and remainat that level thereafter.  Aone-percentage point change in assumed health care trends would have thefollowing effects:

 
| **(in thousands)**                                                     | ** ** | **One  Percentage  Point Increase** | ** ** | **One  Percentage  Point Decrease** | ** ** |
|------------------------------------------------------------------------|------------|-------------------------------------|------------|-------------------------------------|------------|
| Effect on total of service and interest cost  components for 2007      |       | $                                   | 266        |                                | $          | (228 | ) |
| Effect on postretirement benefit obligation at  December 31, 2007 |       | $                                   | 296        |                                | $          | (269 | ) |

 

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, 2007 and 2006 are 6.25percent and 5.75 percent, respectively. The weighted-average discount rates used to determine the netpostretirement benefit cost was 5.75 percent for each of the years ended December 31,2007, 2006, and 2005.

 

33

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**Note 8 —STOCK OPTION AND INCENTIVE PLANS**

 

                Since 1987, the Company’s stockoption and stock award plans have provided for the issuance of up to 19,800,000shares of common stock to key employees. As of December 31, 2007, 2006, and 2005, respectively, 6,146,961,7,389,928, and 1,664,071 shares were available for future grants under theseplans.  Shares forfeited by the employeebecome available for future grants.  Nonew stock option awards have been granted since 2003 and all stock optionsoutstanding at December 31, 2007, were fully vested.

 

Optionswere granted at prices equal to fair market value on the date of the grant andare exercisable, upon vesting, over varying periods up to ten years from thedate of grant.  Options for directorsvest immediately, while options for Company employees generally vest over threeyears (one-third per year).  Details ofthe stock option plans at December 31, 2007, 2006, and 2005, are:

 
| ** **                            | ** ** | **Aggregate  Intrinsic  Value** | ** ** | **Number  of  Shares** | ** ** | **Per  Share  Option Price  Range** | ** **    | **Weighted-Average  Exercise Price  Per Share** | ** ** |
|---------------------------------------|------------|---------------------------------|------------|------------------------|------------|-------------------------------------|---------------|-------------------------------------------------|------------|
| Outstanding at December 31, 2004 |       |                            |       | 2,380,380              |       | $                                   | 15.86 -$26.95 |                                            | $          | 19.49 |   |
|                                  |       |                            |       |                   |       |                                |          |                                            |       |
| Exercised in 2005                     |       |                            |       | (237,002               | )          | $                                   | 16.16 -$22.04 |                                            | $          | 17.40 |   |
| Outstanding at December 31, 2005 |       |                            |       | 2,143,378              |       | $                                   | 15.86 -$26.95 |                                            | $          | 19.72 |   |
| Exercisable at December 31, 2005 |       |                            |       | 2,027,983              |       | $                                   | 15.86 -$26.95 |                                            | $          | 19.43 |   |
|                                  |       |                            |       |                   |       |                                |          |                                            |       |
| Exercised in 2006                     |       | $                               | 1,870,000  |                   | (132,200   | )                                   | $             | 16.16 -$22.04                                   |       | $ | 16.64 |   |
| Outstanding at December 31, 2006 |       | $                               | 28,269,000 |                   | 2,011,178  |                                | $             | 15.86 -$26.95                                   |       | $ | 19.92 |   |
| Exercisable at December 31, 2006 |       | $                               | 27,884,000 |                   | 1,969,178  |                                | $             | 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 |       | $                               | 13,216,219 |                   | 1,674,082  |                                | $             | 15.86 -$26.95                                   |       | $ | 19.49 |   |
| Exercisable at December 31, 2007 |       | $                               | 13,216,219 |                   | 1,674,082  |                                | $             | 15.86 -$26.95                                   |       | $ | 19.49 |   |

 

The following table summarizes information about outstanding andexercisable stock options at December 31, 2007.

 
| ** **                    | ** **     | **Options Outstanding**              | ** ** | **Options Exercisable**                           | ** ** |
|-------------------------------|----------------|--------------------------------------|------------|---------------------------------------------------|------------|
| **Range of  Exercise Prices** | ** **     | **Number  Outstanding  at 12/31/07** | ** ** | **Weighted-Average  Remaining  Contractual Life** | ** ** | **Weighted-Average  Exercise Price** | ** ** | **Number  Exercisable  at 12/31/07** | ** ** | **Weighted-Average  Exercise Price** | ** ** |
| $                             | 15.86 - $18.81 |                                 | 1,259,612  |                                              | 2.0 years  |   | $ | 17.77 |   | 1,259,612 |   | $ | 17.77 |   |
| $                             | 22.04 - $26.95 |                                 | 414,470    |                                              | 4.6 years  |   | $ | 24.70 |   | 414,470 |   | $ | 24.70 |   |
|                          |           | 1,674,082                            |       | 2.7 years                                         |       | $ | 19.49 |   | 1,674,082 |   | $ | 19.49 |   |

 

                Stock options havenot been granted since early 2003.  Thefair value of each stock option grant was estimated on the date of grant usingthe Black-Scholes option-pricing model with the following weighted-averageassumptions:  dividend yield 2.3%,expected volatility 29.2%, risk-free interest rate 6.75%, and expected life10.0 years.

 

                In 1994, 2001, and in 2006, theCompany adopted  Stock Incentive Plansfor certain key employees.  The 1994,2001, and 2007 Plans (adopted in 2006) provide for the issuance of up to4,000,000, 5,000,000, and 6,000,000 grants, respectively.  Each Plan expires 10 years after its inception,at which point no further stock options or performance units may begranted.  Since 1994, 3,932,910,3,677,162, and 1,242,967 grants of either stock options or performance units(commonly referred to as restricted stock) have been made under the 1994, 2001,and 2007 Plans, respectively. Distribution of the performance units is made in the form of shares ofthe Company’s common stock on a one for one basis.  Distribution of the shares will normally bemade not less than three years, nor more than six years, from the date of theperformance unit grant.  All performanceunits granted under the plan are subject to restrictions as to continuousemployment, except in the case of death, permanent disability, or retirement.  In addition, cash payments are made duringthe grant period on outstanding performance units equal to the dividend onBemis common stock.  The cost of theaward is based on the fair market value of the stock on the date of grant.  The cost of the awards is charged to incomeover the requisite service period.

 

Totalcompensation expense related to Stock Incentive Plans was $16,849,000 in 2007,$11,694,000 in 2006, and $16,464,000 in 2005.

 

                As of December 31, 2007,the unrecorded compensation cost for performance units is $53,040,000 and willbe recognized over the remaining vesting period for each grant which rangesbetween December 31, 2007 and December 31, 2012.  The remaining weighted-average life of allperformance units outstanding is 2.7 years. Prior to the adoption of FAS 123(R) the Company maintainedliability balances of $37,629,000 related to the portion of performance unitsfor which compensation expense had been previously recognized.  As these awards are considered equity-basedawards under FAS 123(R), the Company has reclassified this balance from aliability classification to a component of additional paid in capital.

 

34

----

 

                The following table summarizesannual restricted stock unit activity for the three years ended December 31,2007:

 
| ** **                                                   | ** ** | **2007**   | ** ** | **2006**  | ** ** | **2005**    | ** ** |
|--------------------------------------------------------------|------------|------------|------------|-----------|------------|-------------|------------|
| Outstanding shares granted at the beginning of the  year     |       | 3,200,437  |       | 3,069,163 |       | 2,886,698   |       |
| Shares Granted                                               |       | 1,302,800  |       | 346,143   |       | 603,537     |       |
| Shares Paid                                                  |       | (1,146,821 | )          | (142,869  | )          | (172,016    | )          |
| Shares Canceled                                              |       | (59,833    | )          | (72,000   | )          | (249,056    | )          |
| Outstanding shares granted at the end of the year            |       | 3,296,583  |       | 3,200,437 |       | 3,069,163   |       |
|                                                         |       |       |       |      |       |        |       |
| Aggregate intrinsic value at year end of outstanding  awards |       | $          | 90,260,000 |      | $          | 108,751,000 |       | $ | 85,538,000 |   |
|                                                              |            |            |            |           |            |             |            |  |  |  |

 

**Note 9 —LONG-TERM DEBT**

 

                Debt consisted of the followingat December 31,

 
| **(dollars in thousands)**                                                            | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Commercial paper payable through 2008 at a  weighted-average interest rate of 5.1%    |       | $        | 161,500    |     | $          | 80,700 |   |
| Notes payable in 2008 at an interest rate of 6.5%                                     |       | 250,000  |       | 250,000  |       |
| Notes payable in 2012 at an interest rate of 4.9%                                     |       | 300,000  |       | 300,000  |       |
| Interest rate swap (fair market value)                                                |       | 3,347    |       | 2,464    |       |
| Industrial revenue bond payable through 2012 at an  interest rate of 3.8%             |       | 8,000    |       | 8,000    |       |
| Debt of subsidiary companies payable through 2012 at  interest rates of 5.2% to 10.5% |       | 54,221   |       | 97,118   |       |
| Obligations under capital leases                                                      |       | 146      |       | 274      |       |
|                                                                                  |       |     |       |     |       |
| Total debt                                                                            |       | 777,214  |       | 738,556  |       |
| Less current portion                                                                  |       | 1,758    |       | 16,345   |       |
| Total long-term debt                                                                  |       | $        | 775,456    |     | $          | 722,211 |   |

 

                The commercial paper and the$250 million note payable due in 2008 have been classified as long-term debt,to the extent of available long-term backup credit agreements, in accordancewith the Company’s intent and ability to refinance such obligations on along-term basis.  The weighted-average interestrate of commercial paper outstanding at December 31, 2007, was 5.1percent.  The maximum outstanding during2007 was $235,710,000, and the average outstanding during 2007 was$154,637,000.  The weighted-averageinterest rate during 2007 was 5.3 percent.

 

                The industrial revenue bond hasa variable interest rate which is determined weekly by a “Remarketing Agent”based on similar debt then available. The interest rate at December 31, 2007, was 3.8 percent and theweighted-average interest rate during 2007 was 3.9 percent.  Debt of subsidiary companies include $43.8million and $10.4 million for European and South American operations,respectively.

 

                Long-term debt maturing in years2008 through 2012 is $1,758,000, $462,461,000, $645,000, $898,000, and$308,105,000, respectively.  The Companyis in compliance with all debt covenant agreements.

 

Underthe terms of a revolving credit agreement with eight banks, the Company mayborrow up to $500.0 million through September 2, 2009, including a $100million multicurrency limit to support the financing needs of our internationalsubsidiaries.  This credit facility isused primarily to support the Company’s issuance of commercial paper.  The Company currently pays a facility fee of0.09 percent annually on the entire amount of the commitment.  As of December 31, 2007, outstandingmulticurrency borrowings under the credit facility totaled $43.8 million.  Borrowings from the credit agreement maturein September 2009 and charge a variable interest rate.

 

                The Company entered into threeinterest rate swap agreements with a total notional amount of $350.0 million inthe third quarter of 2001, effectively converting a portion of the Company’sfixed interest rate exposure to a variable rate basis to hedge against the riskof higher borrowing costs in a declining interest rate environment.  During 2005 one of these swaps terminatedwith the repayment of the underlying $100.0 million debt.  The Company does not enter into interest rateswap contracts for speculative or trading purposes.  The differential to be paid or received onthe interest rate swap agreements is accrued and recognized as an adjustment tointerest expense as interest rates change. The remaining interest rate swap agreements have been designated as hedgesof the fair value of the Company’s fixed rate long-term debt obligation of$250.0 million, 6.5 percent notes due August 15, 2008.

 

                The variable rate for each ofthe interest rate swaps is based on the six-month London Interbank Offered Rate(LIBOR), set in arrears, plus a fixed spread. The variable rates are reset semi-annually at each net settlementdate.  The net settlement benefit to theCompany, which is recorded as a reduction in interest expense, was $1.3million, $0.4 million, and $4.3 million in 2007, 2006, and 2005,respectively.  At December 31, 2007and 2006, the fair value of these interest rate swaps was $3.3 million and $2.5million, respectively, in the Company’s favor, as determined by the respectivecounterparties using discounted cash flow or other appropriate methodologies,and is included with deferred charges and other assets with a correspondingincrease in long-term debt.

 

35

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**Note 10 —INCOME TAXES**

 
| **(dollars in thousands)**                                | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| U.S. income before income taxes                           |       | $        | 206,544    |     | $          | 214,311  |       | $ | 191,183 |   |
| Non-U.S. income before income taxes                       |       | 79,310   |       | 71,485   |       | 85,246   |       |
| Income before income taxes                                |       | $        | 285,854    |     | $          | 285,796  |       | $ | 276,429 |   |
| Income tax expense consists of the following  components: |       |     |       |     |       |     |       |
| Current tax  expense:                                     |       |     |       |     |       |     |       |
| U.S. federal                                              |       | $        | 59,538     |     | $          | 71,754   |       | $ | 66,395 |   |
| Foreign                                                   |       | 29,588   |       | 31,374   |       | 32,902   |       |
| State and local                                           |       | 9,371    |       | 14,302   |       | 12,243   |       |
| Total current  tax expense                                |       | 98,497   |       | 117,430  |       | 111,540  |       |
| Deferred tax  expense:                                    |       |     |       |     |       |     |       |
| U.S. federal                                              |       | 4,711    |       | (6,266   | )          | (2,122   | )          |
| Foreign                                                   |       | (744     | )          | (796     | )          | 2,855    |       |
| State                                                     |       | 1,836    |       | (868     | )          | 1,627    |       |
| Total deferred  tax expense                               |       | 5,803    |       | (7,930   | )          | 2,360    |       |
| Total income tax expense                                  |       | $        | 104,300    |     | $          | 109,500  |       | $ | 113,900 |   |

 

                The tax effects oftemporary differences that give rise to the deferred tax assets and deferredtax liabilities are presented below.

 
| **(dollars in thousands)**                                                                                            | ** ** | **2007**   | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **Deferred Tax Assets:**                                                                                              |       |       |       |       |       |       |       |
| Accounts  receivable, principally due to allowances for returns and doubtful accounts                                 |       | $          | 5,759      |       | $          | 6,317      |       | $ | 3,651 |   |
| Inventories,  principally due to additional costs inventoried for tax purposes                                        |       | 14,898     |       | 15,699     |       | 3,569      |       |
| Employee  compensation and benefits accrued for financial reporting purposes                                          |       | 45,006     |       | 54,402     |       | 18,077     |       |
| Foreign net  operating losses                                                                                         |       | 12,308     |       | 12,596     |       | 10,179     |       |
| Other                                                                                                                 |       | 4,377      |       | 8,003      |       | 880        |       |
| Total deferred tax assets                                                                                             |       | 82,348     |       | 97,017     |       | 36,356     |       |
| Less valuation  allowance                                                                                             |       | (7,059     | )          | (6,701     | )          | (3,167     | )          |
| Total deferred  tax assets, after valuation allowance                                                                 |       | $          | 75,289     |       | $          | 90,316     |       | $ | 33,189 |   |
| **Deferred Tax Liabilities:**                                                                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Plant and  equipment, principally due to differences in depreciation, capitalized interest,  and capitalized overhead |       | $          | 128,471    |       | $          | 127,817    |       | $ | 127,803 |   |
| Goodwill and  intangible assets, principally due to differences in amortization                                       |       | 55,228     |       | 50,980     |       | 42,787     |       |
| Other                                                                                                                 |       | 6,419      |       | 8,532      |       | 6,392      |       |
| Total deferred tax liabilities                                                                                        |       | 190,118    |       | 187,329    |       | 176,982    |       |
|                                                                                                                  |       |       |       |       |       |       |       |
| Deferred tax liabilities, net                                                                                         |       | $          | 114,829    |       | $          | 97,013     |       | $ | 143,793 |   |
|                                                                                                                       |            |            |            |            |            |            |            |  |  |  |  |  |  |  |

 

                The net deferredtax liabilities are reflected in the balance sheet as follows:

 
| **(dollars in thousands)**                        | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Deferred tax assets (included in prepaid expense) |       | $        | 41,042     |     | $          | 37,155   |       | $ | 24,654 |   |
| Deferred tax liabilities                          |       | 155,871  |       | 134,168  |       | 168,447  |       |
| Net deferred tax liabilities                      |       | $        | 114,829    |     | $          | 97,013   |       | $ | 143,793 |   |

 

                The Company’s effective tax ratediffers from the federal statutory rate due to the following items:

 
| **(dollars in thousands)**                                                                  | ** ** | **2007**   | ** ** | **2006**                     | ** ** | **2005**   | ** ** |
|---------------------------------------------------------------------------------------------|------------|------------|------------|------------------------------|------------|------------|------------|
| ** **                                                                                  | ** ** | **Amount** | ** ** | **% of  Income  Before Tax** | ** ** | **Amount** | ** ** | **% of  Income  Before Tax** | ** ** | **Amount** | ** ** | **% of   Income  Before Tax** | ** ** |
| Computed  “expected” tax expense on income before taxes at federal statutory rate |       | $          | 100,049    |                         | 35.0       | %          | $          | 100,029 |   | 35.0 | % | $ | 96,750 |   | 35.0 | % |
| Increase  (decrease) in taxes resulting from:                                               |       |       |       |                         |       |       |       |   |   |   |   |   |   |
| State and local  income taxes net of federal income tax benefit                             |       | 7,285      |       | 2.5                          |       | 8,732      |       | 3.1 |   | 9,016 |   | 3.3 |   |
| Foreign tax rate differential                                                               |       | (1,464     | )          | (0.5                         | )          | 3,930      |       | 1.4 |   | 637 |   | 0.2 |   |
| Minority interest                                                                           |       | 1,313      |       | 0.5                          |       | 1,239      |       | 0.4 |   | 2,078 |   | 0.8 |   |
| Jobs Act repatriation                                                                       |       |       |       |                         |       |       |       |   |   | 6,000 |   | 2.2 |   |
| Manufacturing tax benefits                                                                  |       | (4,200     | )          | (1.5                         | )          | (3,146     | )          | (1.1 | ) | (840 | ) | (0.4 | ) |
| Other                                                                                       |       | 1,317      |       | 0.5                          |       | (1,284     | )          | (0.5 | ) | 259 |   | 0.1 |   |
| Actual income tax expense                                                                   |       | $          | 104,300    |                         | 36.5       | %          | $          | 109,500 |   | 38.3 | % | $ | 113,900 |   | 41.2 | % |

 

36

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Asof December 31, 2007, the Company had foreign net operating losscarryovers of approximately $35.5 million that are available to offset futuretaxable income.  Approximately $13.8million of the carryover expires over the period 2014-2016.  The balance of the loss carryovers have 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 $7.1 million against deferred tax assets primarilyassociated with the foreign net operating loss carryover was necessary at December 31,2007.

 

Provisionhas not been made for U.S. or additional foreign taxes on $170,319,000 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.

 

TheAmerican Jobs Creation Act of 2004 (the Jobs Act) provided U.S. corporationswith a one-time opportunity to repatriate the undistributed earnings ofnon-U.S. subsidiaries at a potentially reduced U.S. tax cost.  During 2005, the Company repatriatedapproximately $105.0 million of foreign earnings to the United States pursuantto the provisions of the Jobs Act.  As aresult, the Company recognized additional tax expense of approximately $6.0million, net of available foreign tax credits, associated with the repatriationplan.

 

TheCompany adopted FASB Interpretation (FIN) No. 48,*Accounting for Uncertainty in Income Taxes, anInterpretation of FASB Statement No. 109* (FIN 48), on January 1,2007. The Company recognized no material adjustments as a result of theimplementation of this policy. As of January 1, 2007, the Company hadapproximately $13.9 million of total unrecognized tax benefits. Of this total,approximately $6.0 million represented the amount of unrecognized tax benefitsthat would impact the effective income tax rate if recognized in any futureperiods. As of December 31, 2007, the Company had approximately $9.1million of total unrecognized tax benefits. Of this total, approximately $6.4million represented the amount of unrecognized tax benefits that would impactthe effective income tax rate if recognized in any future periods.

 

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

 

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

 

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

 

TheCompany recognizes interest and penalties related to income tax matters ascomponents of income tax expense. The Company had approximately $1.2 millionaccrued for interest and penalties at January 1, 2007. As of December 31,2007, the Company had approximately $1.3 million accrued for interest andpenalties.

 

TheCompany and its subsidiaries are subject to U.S. federal and state income taxas well as income tax in multiple international jurisdictions.  The Company’s U.S. federal income tax returnsfor the years prior to 2006 have been audited and completely settled.  With few exceptions, the Company is no longersubject to examinations by tax authorities for years prior to 2002 in thesignificant jurisdictions in which it operate.

 

**Note 11 —LEASES**

                The Company has operating leasesfor manufacturing plants, land, warehouses, machinery and equipment, andadministrative offices that expire at various times over the next 34years.  Under most leasing arrangements,the Company pays the property taxes, insurance, maintenance, and other expensesrelated to the leased property.  Totalrental expense under operating leases was approximately $7,948,000 in 2007,$10,870,000 in 2006, and $13,178,000 in 2005.

 

TheCompany has capitalized leases for a manufacturing site and some machinery andequipment that expire at various times over the next five years.  The present values of minimum futureobligations shown in the following chart are calculated based on an interestrate of approximately 4.6 percent, which is the lessor’s implicit rate ofreturn.  Interest expense on theoutstanding obligations under capital leases was approximately $16,000 in 2007,$15,000 in 2006, and $13,000 in 2005.

 

37

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Minimumfuture obligations on leases in effect at December 31, 2007, are:

 
| ** **                               | ** ** | **Capital** | ** ** | **Operating** | ** ** |
|------------------------------------------|------------|-------------|------------|---------------|------------|
| **(in thousands)**                       | ** ** | **Leases**  | ** ** | **Leases**    | ** ** |
| 2008                                     |       | $           | 113        |          | $          | 5,177 |   |
| 2009                                     |       | 42          |       | 3,649         |       |
| 2010                                     |       | 0           |       | 3,003         |       |
| 2011                                     |       | 0           |       | 2,146         |       |
| 2012                                     |       | 0           |       | 1,380         |       |
| Thereafter                               |       | 0           |       | 5,166         |       |
| Total minimum obligations                |       | 155         |       | $             | 20,521     |   |
| Less amount representing interest        |       | 9           |       |          |       |
| Present value of net minimum obligations |       | 146         |       |          |       |
| Less current  portion                    |       | 106         |       |          |       |
| Long-term  obligations                   |       | $           | 40         |          |       |   |

 

**Note 12 —SEGMENTS OF BUSINESS**

**               **The Company’s businessactivities are organized around and aggregated into its two principal businesssegments, Flexible Packaging and Pressure Sensitive Materials.  Both internal and external reporting conformto this organizational structure, with no significant differences in accountingpolicies applied.  Minor intersegmentsales are generally priced to reflect nominal markups.  The Company evaluates the performance of itssegments and allocates resources to them based primarily on operating profit,which is defined as profit before general corporate expense, interest expense,income taxes, and minority interest.  While there are similarities in selected technology and manufacturingprocesses utilized between the Company’s business segments, notable differencesexist in products, application and distribution of 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)**          | *** *** | **2007**   | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|----------------------------------------------|--------------|------------|------------|------------|------------|------------|------------|
| **Net Sales:**                               |         |       |       |       |       |       |       |
| Flexible  Packaging                          |         | $          | 3,002.5    |       | $          | 3,000.6    |       | $ | 2,856.2 |   |
| Pressure  Sensitive Materials                |         | 653.0      |       | 643.3      |       | 618.5      |       |
| **Intersegment Sales:**                      |         |       |       |       |       |       |       |
| Flexible  Packaging                          |         | (0.7       | )          | (0.5       | )          | (0.4       | )          |
| Pressure  Sensitive Materials                |         | (5.5       | )          | (4.0       | )          | (0.3       | )          |
| Net Sales to  Unaffiliated Customers         |         | $          | 3,649.3    |       | $          | 3,639.4    |       | $ | 3,474.0 |   |
|                                         |         |       |       |       |       |       |       |
| **Operating Profit and Pretax Profit:**      | ** **   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Flexible  Packaging                          |         | $          | 346.6      |       | $          | 335.1      |       | $ | 332.7 |   |
| Pressure  Sensitive Materials                |         | 40.3       |       | 50.1       |       | 41.3       |       |
| Total operating  profit (1)                  |         | 386.9      |       | 385.2      |       | 374.0      |       |
| General  corporate expenses                  |         | (46.9      | )          | (46.6      | )          | (53.0      | )          |
| Interest expense                             |         | (50.3      | )          | (49.3      | )          | (38.7      | )          |
| Minority  interest in net income             |         | (3.8       | )          | (3.5       | )          | (5.9       | )          |
| Income before  income taxes                  |         | $          | 285.9      |       | $          | 285.8      |       | $ | 276.4 |   |
|                                         |         |       |       |       |       |       |       |
| **Identifiable Assets:**                     |         |       |       |       |       |       |       |
| Flexible Packaging                           |         | $          | 2,672.7    |       | $          | 2,579.5    |       | $ | 2,471.2 |   |
| Pressure  Sensitive Materials                |         | 358.0      |       | 339.9      |       | 347.0      |       |
| Total  identifiable assets (2)               |         | 3,030.7    |       | 2,919.4    |       | 2,818.2    |       |
| Corporate assets  (3)                        |         | 160.7      |       | 119.6      |       | 146.4      |       |
| Total                                        |         | $          | 3,191.4    |       | $          | 3,039.0    |       | $ | 2,964.6 |   |
|                                         |         |       |       |       |       |       |       |
| **Depreciation and Amortization:**           |         |       |       |       |       |       |       |
| Flexible  Packaging                          |         | $          | 144.2      |       | $          | 138.4      |       | $ | 135.6 |   |
| Pressure  Sensitive Materials                |         | 13.4       |       | 13.1       |       | 13.9       |       |
| Corporate                                    |         | 0.9        |       | 0.9        |       | 1.3        |       |
| Total                                        |         | $          | 158.5      |       | $          | 152.4      |       | $ | 150.8 |   |
|                                         |         |       |       |       |       |       |       |
| **Expenditures for Property and Equipment:** |         |       |       |       |       |       |       |
| Flexible Packaging                           |         | $          | 139.3      |       | 122.4      |       | $          | 164.5 |   |
| Pressure  Sensitive Materials                |         | 16.0       |       | 10.2       |       | 10.3       |       |
| Corporate                                    |         | 23.6       |       | 26.2       |       | 12.2       |       |
| Total                                        |         | $          | 178.9      |       | $          | 158.8      |       | $ | 187.0 |   |
|                                              |              |            |            |            |            |            |            |  |  |  |  |

 

38

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| ** **                                      | ** **   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------------|--------------|------------|------------|------------|------------|------------|------------|
| **OPERATIONS BY GEOGRAPHIC AREA (in millions)** | *** *** | **2007**   | ** ** | **2006**   | ** ** | **2005**   | ** ** |
| **Net Sales to Unaffiliated Customers:** (4)    |         |       |       |       |       |       |       |
| United States                                   |         | $          | 2,352.2    |       | $          | 2,400.5    |       | $ | 2,281.1 |   |
| Canada                                          |         | 15.6       |       | 64.8       |       | 74.6       |       |
| Europe                                          |         | 647.6      |       | 595.9      |       | 580.9      |       |
| South America                                   |         | 539.9      |       | 491.3      |       | 454.3      |       |
| Other                                           |         | 94.0       |       | 86.9       |       | 83.1       |       |
| Total                                           |         | $          | 3,649.3    |       | $          | 3,639.4    |       | $ | 3,474.0 |   |
|                                            |         |       |       |       |       |       |       |
| **Identifiable Assets:**(2)                     |         |       |       |       |       |       |       |
| United States                                   |         | $          | 1,677.7    |       | $          | 1,706.6    |       | $ | 1,723.2 |   |
| Canada                                          |         | 5.7        |       | 21.2       |       | 31.9       |       |
| Europe                                          |         | 441.7      |       | 419.0      |       | 370.5      |       |
| South America                                   |         | 830.1      |       | 696.1      |       | 622.9      |       |
| Other                                           |         | 75.5       |       | 76.5       |       | 69.7       |       |
| Total                                           |         | $          | 3,030.7    |       | $          | 2,919.4    |       | $ | 2,818.2 |   |

----

(1)                                  Operating profitis defined as profit before general corporate expense, interest expense, incometaxes, and minority interest.

(2)                                  Identifiableassets by business segment include only those assets that are specificallyidentified with each segment’s operations.

(3)                                  Corporate assetsare principally prepaid expenses, prepaid income taxes, prepaid pension benefitcosts, fair value of the interest rate swap agreements, and corporate tangibleand intangible property.

(4)                                  Net sales areattributed to countries based on location of the Company’s manufacturing orselling operation.

 

**Note 13 —COMMITMENTS AND CONTINGENCIES**

                The Company is involved in anumber of lawsuits incidental to its business, including environmental relatedlitigation.  Although it is difficult topredict the ultimate outcome of these cases, management believes, except asdiscussed below, that any ultimate liability would not have a material adverseeffect upon the Company’s consolidated financial condition or results of operations.

 

                The Company is a potentiallyresponsible party (PRP) in twelve superfund sites around the UnitedStates.  The Company expects its futureliability relative to these sites to be insignificant, individually and in the aggregate.  The Company has reserved an amount that itbelieves to be adequate to cover its exposure.

 

                Dixie Toga S.A., acquired by theCompany on January 5, 2005, is involved in a tax dispute with the City ofSão Paulo, Brazil.  The City imposes atax on the rendering of printing services. The City has assessed this city services tax on the production and saleof printed labels and packaging products. Dixie Toga, along with a number of other packaging companies, disagreeand contend that the city services tax is not applicable to its products andthat the products are subject only to the state value added tax (VAT).  Under Brazilian law, state VAT and cityservices tax are mutually exclusive and the same transaction can be subject toonly one of those taxes.  Based on aruling from the State of São Paulo, advice from legal counsel, and longstanding business practice, Dixie Toga appealed the city services tax andinstead continued to collect and pay only the state VAT.

 

                The City of São Paulo disagreedand assessed Dixie Toga the city services tax for the years 1991-1995.  The assessments for those years are estimatedto be approximately $61.9 million at the date the Company acquired Dixie Toga,translated to U.S. dollars at the 2007 year end exchange rate.  Dixie Toga challenged the assessments andultimately litigated the issue.  A lowercourt decision in 2002 cancelled all of the assessments for 1991-1995.  The City of São Paulo, the State of SãoPaulo, and Dixie Toga have each appealed parts of the lower courtdecision.  The City continues to assertthe applicability of the city services tax and has issued assessments for thesubsequent years 1996-2001.  Theassessments for those years for tax and penalties (exclusive of interest) areestimated to be approximately $39.4 million at the date of acquisition,translated to U.S. dollars at the 2007 year end exchange rate.  In the event of an adverse resolution, theseestimated amounts for all assessments could be substantially increased forinterest, monetary adjustments, and corrections.

 

                The Company strongly disagreeswith the City’s position and intends to vigorously challenge any assessments bythe City of São Paulo.  The Company isunable at this time to predict the ultimate outcome of the controversy and assuch has not recorded any liability related to this matter.  An adverse resolution could be material tothe consolidated results of operations and/or cash flows of the period in whichthe matter is resolved.

 

                The Secretariat of Economic Law(SDE), a governmental agency in Brazil, initiated an investigation intopossible anti-competitive practices in the Brazilian flexible packagingindustry against a number of Brazilian companies including a Dixie Togasubsidiary.  The investigation relates toperiods prior to the Company’s acquisition of control of Dixie Toga and itssubsidiaries.  Given the preliminarynature of the proceedings the Company is unable at the present time to predictthe outcome of this matter.

 

                The Company and its subsidiary,Morgan Adhesives Company, have been named as defendants in thirteen civillawsuits related to an investigation that was initiated and subsequently closedby the U.S. Department of Justice without any further action.  Six ofthese lawsuits purport to represent a nationwide class of labelstock purchasers,and each alleges a conspiracy to fix prices within the self-adhesive labelstockindustry.  On November 5, 2003, the Judicial Panel on MultiDistrictLitigation issued a decision consolidating all of the federal class actions forpretrial purposes in the United States District Court for the Middle Districtof Pennsylvania, before the Honorable Chief Judge Vanaskie.  On November 20,2007, the Court granted plaintiffs’ motion for class certification.  Defendants have petitioned the Third CircuitCourt of Appeals to hear an appeal of the district court’s decision grantingclass certification.  At this time, adiscovery cut-off and a trial date have not been set. The Company has also been named in three lawsuits filed in theCalifornia Superior Court in San Francisco. These three lawsuits, which havebeen consolidated, seek to represent a class of all California indirectpurchasers of labelstock and each alleged a conspiracy to fix prices within theself-adhesive labelstock industry. 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 intends to vigorouslydefend these lawsuits.

 

39

----

 

                Given the ongoing status of theclass-action civil lawsuits, the Company is unable to predict the outcome ofthese 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 into forwardexchange 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.  The Companyhas not designated these derivative instruments as hedging instruments.  At December 31, 2007 and 2006, theCompany had outstanding forward exchange contracts with notional amountsaggregating $4,959,000 and $3,540,000, 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, 2007 and 2006.

 

                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 three fixed-to-variable interest rate swaps during thethird quarter of 2001, one of which settled in 2005 when the related long-termdebt matured and was repaid.  Theremaining two interest rate swaps are accounted for as a fair value hedge.  The terms of the interest rate swapagreements have been specifically designed to conform to the applicable termsof the hedged items and with the requirements of paragraph 68 of FAS No. 133to support the assumption of no ineffectiveness (changes in fair value of thedebt and the swaps exactly offset).  Thefair value of these interest rate swaps is recorded within long-term debt.  Changes in the payment of interest resultingfrom the interest rate swaps are recorded as an offset to interestexpense.  See Note 9 for furtherdiscussion of the interest rate swaps.

 

                In connection withthe issue of seven-year, $300 million notes in March 2005, we entered intoa forward starting swap on February 3, 2005, in order to lock in aninterest 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, 2007 and 2006, 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 $779,541,000 and $749,002,000 at December 31,2007 and 2006, 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 to creditloss in the event of non-performance by counterparties in interest rate swapsand 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 credit approvalsand credit limits, and by selecting major international banks and financialinstitutions as counterparties.  TheCompany has not had any historical instances of non-performance by anycounterparties, 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, 2007 and 2006, 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** | ** ** |
| 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 |   |
|                                         |       |              |       |   |   |   |   |   |   |   |   |
| 2006                                         |       |              |       |   |   |   |   |   |   |   |   |
| Net sales                                    |       | $                 | 901.7      |   | $ | 933.8 |   | $ | 903.3 |   | $ | 900.6 |   | $ | 3,639.4 |   |
| Gross profit                                 |       | 167.3             |       | 186.3 |   | 174.1 |   | 169.0 |   | 696.7 |   |
| Net income                                   |       | 37.8              |       | 48.9 |   | 48.0 |   | 41.6 |   | 176.3 |   |
| Basic earnings per common share              |       | 0.36              |       | 0.47 |   | 0.46 |   | 0.40 |   | 1.68 |   |
| Diluted earnings per common share            |       | 0.35              |       | 0.46 |   | 0.45 |   | 0.39 |   | 1.65 |   |

 

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

 

40

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**ITEM 9 - CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS**

**                   ONACCOUNTING AND FINANCIAL DISCLOSURE**

 

                Notapplicable.

 

**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 Executive Officer and the ChiefFinancial Officer, has carried out an evaluation, as of the end of the periodcovered by this report, of the effectiveness of the design and operation of thedisclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) underthe Securities Exchange Act of 1934 (the “Exchange Act”)) of the Company.  Based on this evaluation, the Chief ExecutiveOfficer and the Chief Financial Officer have concluded that disclosure controlsand procedures in place at the Company are effective to ensure that informationrequired to be disclosed by the Company in the reports that it files or submitsunder the Exchange Act is recorded, processed, summarized, and reported withinthe time periods specified by the Securities and Exchange Commission’s rules andforms.

 

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

                The management of Bemis Company, Inc. isresponsible for establishing and maintaining adequate internal control overfinancial reporting, as such term is defined in Exchange Act Rule 13a-15(f).  Under the direction, supervision, andparticipation of the Chief Executive Officer and the Chief Financial Officer,the Company’s management conducted an evaluation of the effectiveness ofinternal control over financial reporting based on the framework in *Internal Control - Integrated Framework*issuedby the Committee of Sponsoring Organizations of the Treadway Commission(COSO-Framework).  Based on the resultsof this evaluation management has concluded that internal control overfinancial reporting was effective as of December 31, 2007.

 

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

                There has been no change in the Company’s internalcontrol over financial reporting during the most recent fiscal quarter that hasmaterially affected, or is likely to materially affect, the Company’s internalcontrol over financial reporting.

 

**ITEM 9B — OTHER INFORMATION**

                Not applicable.

 

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

 

**ITEM 10 — DIRECTORS, EXECUTIVEOFFICERS AND CORPORATE GOVERNANCE**

 

                The information required to besubmitted in response to this item with respect to directors is omitted becausea definitive proxy statement containing such information will be filed with theSecurities and Exchange Commission pursuant to Regulation 14A within 120 daysafter December 31, 2007, and such information is expressly incorporatedherein 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 has been an employee of the Company for the last five yearsand the positions described relate to positions with the Company.

 
| **Name      (Age)                        Positions Held** | ** ** | **Period  The Position Was Held** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|
| William F. Austen (49) Vice President — Operations                                                                                                                                |       | 2004 to present                   |
| President and Chief Executive Officer — Morgan  Adhesives Company (1)                                                                                                             |       | 2000 to present                   |
|                                                                                                                                                                                   |       |                              |
| Jeffrey H. Curler (57) 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                      |
|                                                                                                                                                                                   |       |                              |
| Robert F. Hawthorne (58) 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 (59) 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                      |

 

41

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| Melanie E.R. Miller (44) 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 (48) 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. (58) Vice President — Human Resources    |   | 2000 to present |
| Various human resource and management positions  within the Company        |   | 1980 to 2000    |
|                                                                       |   |            |
| James J. Seifert (51) Vice President, General Counsel and Secretary        |   | 2002 to present |
|                                                                       |   |            |
| Henry J. Theisen (54) 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    |
|                                                                       |   |            |
| Gene C. Wulf (57) 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)                Identifidedoperation is a 100 percent owned subsidiary or division of the Company.

 

                The Company’s annual CEOcertification to the NYSE for the previous year was submitted to the NYSE on May 23,2007.  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 to besubmitted in response to this item is omitted because a definitive proxy statementcontaining such information will be filed with the Securities and ExchangeCommission pursuant to Regulation 14A within 120 days after December 31,2007, and such information is expressly incorporated herein by reference.

 

**ITEM 12 - SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS**

**                     ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERS**

 

                The information required to besubmitted 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 31,2007, and such information is expressly incorporated herein by reference.

 

**ITEM 13 - CERTAIN RELATIONSHIPSAND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**

 

                The information required to besubmitted 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 31,2007, and such information is expressly incorporated herein by reference.

 

**ITEM 14 — PRINCIPAL ACCOUNTANTFEES AND SERVICES**

 

                The information required to besubmitted 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 31,2007, and such information is expressly incorporated herein by reference.

 

42

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**PART  IV — ITEM 15**

 

**ITEM 15 — EXHIBITS AND FINANCIALSTATEMENT 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                                                                                                           | 18         |
|       | Report of Independent Registered Public Accounting  Firm                                                                                             | 19         |
|       | Consolidated Statement of Income for each of the Three  Years Ended December 31, 2007                                                           | 20         |
|       | Consolidated  Balance Sheet at December 31, 2007 and 2006                                                                                       | 21         |
|       | Consolidated Statement of Cash Flows for each of the  Three Years Ended December 31, 2007                                                       | 22         |
|       | Consolidated Statement of Stockholders’ Equity for  each of the Three Years Ended December 31, 2007                                        | 23         |
|       | Notes to Consolidated Financial Statements                                                                                                           | 24-40      |
|       |                                                                                                                                                 |       |
| (2)        | **Financial Statement Schedule for Years 2007, 2006, and 2005**                                                                                      |       |
|       | Schedule II - Valuation and Qualifying Accounts and  Reserves                                                                                        | 46         |
|       | Report  of Independent Registered Public Accounting Firm on Financial Statement  Schedule for each of the Three Years Ended December 31, 2007   | 46         |
|       |                                                                                                                                                 |       |
|       | All other schedules are  omitted because they are not applicable or the required information is shown  in the financial statements or notes thereto. |       |
|       |                                                                                                                                                 |       |               |   |
| (3)        | **Exhibits**                                                                                                                                         |       |               |   |
|       | The Exhibit Index is  incorporated herein by reference.                                                                                         |       |

 

43

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**SIGNATURES**

 

      Pursuant to the requirementsof Section 13 of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

 

                                                                                                                BEMISCOMPANY, 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 28, 2008         |           | Date February 28, 2008      |   |

 

      Pursuant to the requirementsof the Securities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the Registrant and in the capacities and onthe 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 28, 2008              |   | Date February 28, 2008                   |   |
|   |                                     |   |                                          |   |
|   | /s/ Jeffrey H. Curler                    |   | /s/ William J. Bolton                         |   |
|   | Jeffrey H. Curler, Chairman of the Board |   | William J. Bolton, Director                   |   |
|   | and Executive Chairman                   |   | Date February 28, 2008                   |   |
|   | Date February 28, 2008              |   |                                          |   |
|   |                                     |   |                                          |   |
|   | /s/ David S. Haffner                     |   | /s/ Barbara L. Johnson                        |   |
|   | David S. Haffner, Director               |   | Barbara L. Johnson, Director                  |   |
|   | Date February 28, 2008              |   | Date February 28, 2008                   |   |
|   |                                     |   |                                          |   |
|   | /s/ Timothy M. Manganello                |   | /s/ Roger D. O’Shaughnessy               |   |
|   | Timothy M. Manganello, Director          |   | Roger D. O’Shaughnessy, Director         |   |
|   | Date February 28, 2008              |   | Date February 28, 2008                   |   |
|   |                                     |   |                                          |   |
|   | /s/ Paul S. Peercy                       |   | /s/ Edward N. Perry                           |   |
|   | Paul S. Peercy, Director                 |   | Edward N. Perry, Director                     |   |
|   | Date February 28, 2008              |   | Date February 28, 2008                   |   |
|   |                                     |   |                                          |   |
|   | /s/ William J. Scholle                   |   | /s/ Henry J. Theisen                          |   |
|   | William J. Scholle, Director             |   | Henry J. Theisen, Director, President         |   |
|   | Date February 28, 2008              |   | and Chief Executive Officer                   |   |
|   |                                     |   | Date February 28, 2008                   |   |
|   |                                     |   |                                          |   |
|   | /s/ Holly Van Deursen                    |   | /s/ Philip G. Weaver                          |   |
|   | Holly Van Deursen, Director              |   | Philip G. Weaver, Director                    |   |
|   | Date February 28, 2008              |   | Date February 28, 2008                   |   |
|   |                                     |   |                                          |   |
|   | /s/ Gene C. Wulf, Director               |   | /s/ Jeffrey H. Curler                         |   |
|   | Gene C. Wulf, Director                   |   | Jeffrey H. Curler, Director                   |   |
|   | Date February 28, 2008              |   | Date February 28, 2008                   |   |

 

44

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**Exhibit Index**

 
| **Exhibit** | ** ** | **Description**                                                                                     | ** ** | **Form of Filing**   |
|-------------|------------|-----------------------------------------------------------------------------------------------------|------------|---------------------------|
| 2(a)        |       | Dixie  Toga S.A. Stock Purchase Agreement between Bemis Company, Inc. as buyer                 |       |                      |
|        |       | and  the therein listed sellers. (1)                                                                |       | Incorporated by Reference |
| 3(a)        |       | Restated  Articles of Incorporation of the Registrant, as amended. (2)                              |       | Incorporated by Reference |
| 3(b)        |       | By-Laws  of the Registrant, as amended through May 6, 2004. (2)                                |       | 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.  (3)        |       | Incorporated by Reference |
| 4(b)        |       | Certificate  of Bemis Company, Inc. regarding Rights Agreement. (4)                            |       | 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). (5)                                                              |       | Incorporated by Reference |
| 10(a)       |       | Bemis  Company, Inc. 2001 Stock Incentive Plan.* (6)                                           |       | Incorporated by Reference |
| 10(b)       |       | Bemis  Company, Inc. 1994 Stock Incentive Plan, Amended and                                    |       |                      |
|        |       | Restated  as of August 4, 1999.* (7)                                                           |       | Incorporated by Reference |
| 10(c)       |       | Bemis  Company, Inc. Form of Management Contract with Principal Executive  Officers.* (8) |       | Incorporated by Reference |
| 10(d)       |       | Bemis  Retirement Plan, Amended and Restated as of December 31, 2005.* (9)                     |       | Incorporated by Reference |
| 10(e)       |       | Bemis  Company, Inc. Supplemental Retirement Plan, Amended and Restated                        |       |                      |
|        |       | as  of January 1, 2005.* (10)                                                                  |       | Incorporated by Reference |
| 10(f)       |       | Bemis  Company, Inc. Supplemental Retirement Plan for Senior Officers, Amended                 |       |                      |
|        |       | and  Restated as of January 1, 2005.* (10)                                                     |       | Incorporated by Reference |
| 10(g)       |       | Bemis  Company, Inc. Long Term Deferred Compensation Plan,                                     |       |                      |
|        |       | Amended and Restated as of August 4, 1999.* (7)                                                |       | Incorporated by Reference |
| 10(h)       |       | Bemis  Executive Officer Incentive Plan as of October 29, 1999.* (11)                          |       | Incorporated by Reference |
| 10(i)       |       | Bemis  Company, Inc. 1997 Executive Officer Performance Plan.* (12)                            |       | Incorporated by Reference |
| 10(j)       |       | Credit  Agreement dated as of September 2, 2004, among the Registrant, the                     |       |                      |
|        |       | various  banks listed therein, and Bank One, NA, as Administrative Agent. (13)                      |       | Incorporated by Reference |
| 10(k)       |       | Resolution  Amending Bemis Company, Inc. 2001 Stock Incentive Plan.* (4)                       |       | Incorporated by Reference |
| 10(l)       |       | Bemis  Investment Incentive Plan, Amended and Restated Effective as of  January 1, 2006.* (9)  |       | Incorporated by Reference |
| 10(m)       |       | Bemis  Company, Inc. 2007 Stock Incentive Plan.* (14)                                          |       | Incorporated by Reference |
| 14          |       | Financial  Code of Ethics. (4)                                                                      |       | 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      |

----

*                                         Managementcontract, compensatory plan or arrangement filed pursuant to Rule 601(b)(10)(iii)(A) ofRegulation S-K under the Securities Exchange Act of 1934.

 

(1)           Incorporated by reference to theRegistrant’s Current Report on Form 8-K dated January 11, 2005 (File No. 1-5277).

(2)                                  Incorporated byreference to the Registrant’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2004 (File No. 1-5277).

(3)                                  Incorporated byreference to the Registrant’s Current Report on Form 8-K dated June 30,1995 (File No. 1-5277).

(4)                                  Incorporated byreference to the Registrant’s Annual Report on Form 10-K for the yearended December 31, 2003 (File No. 1-5277).

(5)                                  Incorporated byreference to Exhibit 1 to the Registrant’s Registration Statement on Form 8-Afiled on August 4, 1999 (File No. 1-5277).

(6)                                  Incorporated byreference to Exhibit B to the Registrant’s Definitive Proxy Statementfiled with the Securities and Exchange Commission on March 19, 2001 (File No. 1-5277).

(7)                                  Incorporated byreference to the Registrant’s Quarterly Report on Form 10-Q for thequarter ended June 30, 1999 (File No. 1-5277).

(8)                                  Incorporated byreference to the Registrant’s Quarterly Report on Form 10-Q for thequarter ended September 30, 2005 (File No. 1-5277).

(9)                                  Incorporated byreference to the Registrant’s Annual Report on Form 10-K for the yearended December 31, 2005 (File No. 1-5277).

(10)                            Incorporated by reference tothe Registrant’s Annual Report on Form 10-K for the year ended December 31,2006 (File No. 1-5277).

(11)                            Incorporated by reference tothe Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30,1999 (File No. 1-5277).

(12)                            Incorporated by reference to Exhibit Bto the Registrant’s Definitive Proxy Statement filed with the Securities andExchange Commission on March 21, 2005 (File No. 1-5277).

(13)                            Incorporated by reference tothe Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30,2004 (File No. 1-5277).

(14)                            Incorporated by reference to Exhibit Bto the Registrant’s Definitive Proxy Statement filed with the Securities andExchange Commission on March 21, 2006 (File No. 1-5277).

 

45

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SCHEDULE II — VALUATIONAND QUALIFYING ACCOUNTS AND RESERVES

 

*(in thousands)*

 
| ** **                                     | ** **                               | **Balance at** | ** **                               | **Additions**              | ** **                               | ** **    | ** **                               | **Foreign**  | ** **                               | ** ** | ** **                               | **Balance**  | ** ** |
|------------------------------------------------|------------------------------------------|----------------|------------------------------------------|----------------------------|------------------------------------------|---------------|------------------------------------------|--------------|------------------------------------------|------------|------------------------------------------|--------------|------------|
| **Year Ended**                                 | ** **                               | **Beginning**  | ** **                               | **Charged to**             | ** **                               | ** **    | ** **                               | **Currency** | ** **                               | ** ** | ** **                               | **at Close** | ** ** |
| **December 31,**                          | **      ** | **of Year**    | **      ** | **Profit & Loss** | **      ** | **Writeoffs** | **      ** | **Impact**   | **      ** | **Other**  | **      ** | **of Year**  | ** ** |
| RESERVES FOR DOUBTFUL  ACCOUNTS AND ALLOWANCES | ** **                               | ** **     | ** **                               | ** **                 | ** **                               | ** **    | ** **                               | ** **   |
| 2007                                           |                                     | $              | 20,287                                   |                       | $                                        | 7,385         |                                     | $            | (9,252)                                  | (1)        | $                                        | 891          |       |   |   | $ | 19,311 |   |
| 2006                                           |                                     | $              | 19,120                                   |                       | $                                        | 12,599        |                                     | $            | (11,947)                                 | (2)        | $                                        | 515          |       |   |   | $ | 20,287 |   |
| 2005                                           |                                     | $              | 16,935                                   |                       | $                                        | 14,638        |                                     | $            | (14,009)                                 | (3)        | $                                        | (181         | )          | $ | 1,737 | (4) | $ | 19,120 |   |
|                                                |                                          |                |                                          |                            |                                          |               |                                          |              |                                          |            |                                          |              |            |  |  |  |  |  |  |

----

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

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

(3) Netof $478 collections on accounts previously written off.

(4) Acquired with business unit acquisition.

 

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

## **To theBoard of Directors of Bemis Company, Inc:**

## ** **

                Our audits of the consolidatedfinancial statements and of the effectiveness of internal control overfinancial reporting referred to in our report dated February 28, 2008,appearing in the 2007 Annual Report to Shareholders of Bemis Company, Inc.(which report and consolidated financial statements are included in this AnnualReport on Form 10-K) also included an audit of the financial statementschedule 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.

 

PricewaterhouseCoopersLLP

Minneapolis,Minnesota

February 28,2008

 

46

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