New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 141 requires that the purchase method be used for business combinations initiated after June 30, 2001. SFAS No. 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment. The provisions of SFAS No. 142 are effective for fiscal years beginning after December 15, 2001, and any business combination initiated after June 30, 2001. In January of 2002, the Company will adopt the reporting requirements of SFAS No. 142 and has already applied its requirements to the purchase of Duralam, Inc. which was completed on September 7, 2001. Based upon the Company’s assessment of recorded goodwill and intangible assets, had the standard been in effect January 1, 2001, the Company estimates that the full year 2001 impact would have been approximately $0.17 of additional diluted earnings per share. In lieu of amortization, the Company will be required to perform an initial impairment review of its goodwill in 2002 and an annual impairment review thereafter. The Company expects to complete this initial review by June 30, 2002.

In July 2001, the FASB also issued SFAS No. 143, “Accounting for Asset Retirement Obligations” which provides accounting requirements for retirement obligations associated with tangible long-lived assets. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. Management believes the adoption of SFAS No. 143 will not have a material impact on the Company’s financial position or results of operations.

In October 2001, the FASB issued SFAS No. 144, “Accounting for Impairment of Long-Lived Assets”. SFAS No. 144, effective for financial statements for fiscal years beginning after December 15, 2001, addresses issues relating to the implementation of SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of”, and develops a single accounting model for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. Based on management’s assessment, the adoption of SFAS No. 144 will not have a material impact on the Company’s financial position or results of operations.

Effective January 1, 2001, the Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS Nos. 137 and 138. This new accounting standard requires that all derivative instruments be recorded on the balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships. The effect of adopting this standard was not material to the Company’s consolidated financial statements. Upon adoption, the Company recorded the immaterial impact as interest expense.

Market Prices and Dividends

The Bemis quarterly dividend was increased by 4.2 percent in the first quarter of 2001 to 25 cents per share from 24 cents. This followed first quarter increases of 4.3 percent in 2000 to 24 cents per share from 23 cents, and 4.5 percent in 1999 to 23 cents per share from 22 cents in 1998.

Common dividends for 2001 were $1.00 per share, up from 96 cents in 2000 and 92 cents in 1999. The 2001 dividend payout ratio was 37.9 percent compared to 39.3 percent in 2000 and 42.2 percent in 1999. Based on the market price of $33.56 per share at the end of 2000, the dividend yield was 3.0 percent.

Stockholders’ equity per common share (book value per share) increased to $16.76 per share in 2001, up from $15.18 per share in 2000 and $13.91 per share in 1999. Trading volume in Bemis common stock was 43.8 million shares in 2001.

In January 2002, the Board of Directors increased the quarterly cash dividend on common stock to 26 cents per share from 25 cents, a 4.0 percent increase.

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Critical Accounting Policies and Estimates

Management’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgements, including those related to customer incentives, product returns, doubtful accounts, inventories, investments, intangible assets, income taxes, financing operations, retirement benefits, and contingencies and litigation. Management bases its estimates and judgements on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies affect its more significant judgements and estimates used in the preparation of its consolidated financial statements.

• Revenue recognition, including customer based programs and incentives

• Estimating valuation allowances and accrued liabilities, specifically sales returns and allowances, the allowance for doubtful accounts, reserves for old, excess, or potentially obsolete inventory, and litigation and environmental accruals

• The determination of actuarially determined liabilities related to pension plans, other postretirement benefit obligations, and self-insurance reserves

• Accounting for income taxes

• Valuation and useful lives of long-lived and intangible assets and goodwill

• Determining functional currencies for the purpose of consolidating our international operations

The Company recognizes sales and costs of sales at the time title transfers to the customer which is generally when product is shipped. Approximately one percent of sales may be recognized prior to shipment as a result of customers’ request necessitated by the customers’ changing business conditions. The Company records estimated reductions to revenue for customer programs and incentive offerings including special pricing agreements, promotions, and other volume-based incentives. If market conditions were to decline, the Company may take actions to increase customer incentive offerings, possibly resulting in a reduction of gross profit margins at the time the incentive is offered.

Management estimates sales returns and allowances by analyzing historical returns and credits and known problems to calculate appropriate reserves for future credits. Management estimates the allowance for doubtful accounts by analyzing accounts receivable balances by age, applying historical trend rates to the most recent 12 months’ sales, less actual write-offs to date. When it is deemed probable that a customer account is uncollectible, that balance is added to the calculated reserve. Actual results could differ from these estimates under different assumptions.

Management’s current estimated ranges of liabilities related to the pending litigation and environmental claims are based on management’s best estimate of future costs. While the final resolution of the litigation and environmental contingencies could result in amounts different than current accruals, and therefore have an impact on the Company’s consolidated financial results in a future reporting period, management believes the ultimate outcome will not have a significant effect on the Company’s consolidated results of operations, financial position or cash flows.

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Pension and other postretirement benefit obligations are actuarially determined. This calculation includes assumptions related to the discount rate, projected salary increases, and the expected return on assets. The Company is self-insured in North America for most workers compensation, general liability and automotive liability losses subject to per occurrence and aggregate annual liability limitations. The Company is also self-insured for health care claims for eligible participating employees subject to certain deductibles and limitations. The Company determines its liabilities for claims incurred but not reported on an actuarial basis. A change in these assumptions could cause actual results to differ from those reported.

Judgment by management is required in determining the provision for income taxes and deferred tax assets and liabilities. As part of the process of preparing the Company’s consolidated financial statements, management is required to estimate income taxes in each of the jurisdictions in which the Company operates. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the Company’s consolidated balance sheet. Management must then assess the likelihood that deferred tax assets will be recovered from future taxable income and to the extent management believes that recovery is not likely, a valuation allowance must be established.

Management periodically reviews its long-lived assets, intangible assets, and goodwill for impairment and assesses whether significant events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. An impairment loss is recognized when the carrying amount of an asset exceeds the anticipated future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded, if any, is calculated by the excess of the asset’s carrying value over its fair value. Management also periodically reassesses the estimated remaining useful lives of its long-lived assets. Changes to estimated useful lives would impact the amount of depreciation and amortization expense recorded in earnings.

In 2002, SFAS No. 142, “Goodwill and Other Intangible Assets” became effective and as a result, the Company will cease to amortize goodwill in 2002. Had this standard been in effect on January 1, 2001, the Company estimates the impact of not amortizing historical goodwill to be an after-tax benefit of approximately $9.3 million, or $0.17 per diluted share for the year ended December 31, 2001. In lieu of amortization, the Company will be required to perform an initial impairment review of its goodwill in 2002 and an annual impairment review thereafter. The Company expects to complete this initial review by June 30, 2002.

In preparing the consolidated financial statements, the Company is required to translate the financial statements of its foreign subsidiaries from the currency in which they keep their accounting records, generally the local currency, into United States dollars. Assets and liabilities of these operations are translated at the exchange rates in effect at each fiscal year end. The translation adjustments related to assets and liabilities that arise from the use of differing exchange rates from period to period are included in accumulated other comprehensive income in shareholders’ equity. Income statement accounts are translated at the average rates of exchange prevailing during the year. The different exchange rates from period to period impact the amount of reported income from the Company’s international operations.

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Forward-Looking Statements

This Annual Report contains certain estimates, predictions, and other “forward-looking statements” (as defined in the Private Securities Litigation Reform Act of 1995, and within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934). 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 future goals or aspirations, which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward-looking statements. Such statements are based on information available to management as of the time of such statements and relate to, among other things, expectations of the business environment in which the Company operates, projections of future performance, perceived opportunities in the market, and statements regarding the Company’s mission and vision. Forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results, performance, or achievements of the Company to differ materially from anticipated future results, performance, or achievements expressed or implied by such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Factors that could cause actual results to differ from those expected include, but are not limited to, general economic conditions such as inflation, interest rates, and foreign currency exchange rates; results from acquisitions may differ from what the Company anticipates; competitive conditions within the Company’s markets, including the acceptance of new and existing products offered by the Company; price changes for raw materials and the ability of the Company to pass these price changes on to its customers or otherwise manage commodity price fluctuation risks; the presence of adequate cash available for investment in the Company’s business in order to maintain desired debt levels; unanticipated consequences of the European Monetary Union’s conversion to the euro; changes in governmental regulation, especially in the areas of environmental, health and safety matters, and foreign investment; unexpected outcomes in the Company’s current and future litigation proceedings; and changes in the Company’s labor relations. These and other risks, uncertainties, and assumptions identified from time to time in the Company’s filings with the Securities and Exchange Commission, including without limitation, its Annual Report on Form 10-K and its quarterly reports on Form 10-Q, could cause the Company’s actual future results to differ materially from those projected in the forward-looking statements. In addition, the Company’s actual future results could differ materially from those projected in the forward-looking statement as a result of changes in the assumptions used in making such forward-looking statements.

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