Bemis Company reported third quarter 2016 diluted earnings per share from continuing operations of $0.72.
Excluding the effect of restructuring and acquisition-related costs detailed in the attached schedule, “Reconciliation of Non-GAAP Earnings Per Share,” adjusted diluted earnings per share from continuing operations would have been $0.75 in 2016 and $0.67 in 2015, an increase of 11.9 percent. The net impact of currency translation on earnings was nominal, as compared to the prior third quarter.
“Our key financial metrics improved this quarter,” said William F. Austen, Bemis Company's President and Chief Executive Officer. “Adjusted EPS increased nearly 12 percent over the prior year. We increased operating margins and delivered our highest total company EBITDA since 2014. Cash from operations improved sequentially, in line with our plan.” Austen continued, “We still have room for improvement.
In our U.S. business, we planned for volume growth but disappointed ourselves with flat unit volumes this quarter. In our Global business, we continue to work on improving operational efficiencies at our expanded Oshkosh healthcare packaging facility and on executing our restructuring program in Latin America.” Austen further commented, “I remain confident in the long-term health of our business and remain committed to creating long-term shareholder value.”
Business segment results
U.S. Packaging
U.S. Packaging net sales of $657.6 million for the third quarter of 2016 represented a decrease of 4.7 percent compared to the same period of 2015. Unit volumes were approximately the same as the prior third quarter. The decrease in net sales was driven by mix of products sold and the contractual pass through of lower raw material costs.
U.S. Packaging operating profit increased to $100.8 million in the third quarter of 2016, or 15.3 percent of net sales, compared to $100.0 million, or 14.5 percent of net sales, in 2015. This margin increase primarily reflects operational improvements attributable to manufacturing efficiencies from the Company’s asset recapitalization program.
Global Packaging
Global Packaging net sales for the third quarter of 2016 of $369.6 million represent an increase of 12.6 percent compared to the same period of 2015. Currency translation reduced net sales by 6.0 percent. Acquisitions increased net sales by 9.9 percent. Excluding the impact of currency translation and acquisitions, net sales increased by 8.7 percent, reflecting increased sales price and mix. Unit volumes were approximately the same as the prior third quarter.
Global Packaging operating profit for the third quarter was $31.8 million, compared to $29.9 million for the same period in 2015. Excluding restructuring and acquisition-related costs, segment adjusted operating profit would have been $36.2 million, or 9.8 percent of net sales, which compares to 9.7 percent of net sales in 2015.
(See attached schedule: “Reconciliation of Non-GAAP Operating Profit.”) The net impact of currency translation on operating profit was nominal, as compared to the prior third quarter. Operating profit during the quarter reflects the impact of positive sales price and mix, partially offset by continued operational inefficiencies at one of the Company's healthcare packaging facilities.
Cash flow and Capital structure
Cash flow from operations for the nine months ended September 30, 2016 was $348.4 million, compared to $412.0 million in the prior year. Prior year cash flow reflects the initial benefits of programs implemented to drive improvements in working capital.
Total company net debt to adjusted EBITDA was 2.4 times at September 30, 2016. Net debt is defined as total debt less cash, and adjusted EBITDA is defined as the last twelve months total company adjusted operating income plus depreciation and amortization.
On September 15, 2016, the Company issued $300 million of notes due in 2026 with a fixed interest rate of 3.1%, the proceeds of which were used to repay outstanding commercial paper and for general corporate purposes.
Capital expenditures totaled $129.0 million for the nine months ended September 30, 2016, reflecting continued investment in new capacity to support growth initiatives and productivity improvements.
During the third quarter, Bemis repurchased 1.0 million shares, for $51.1 million. At September 30, 2016, the remaining Board authorization for the repurchase of Bemis common stock was 21.4 million shares.