UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2005

Commission File Number 1-5277

BEMIS COMPANY, INC.

(Exact name of Registrant as specified in its charter)

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

222 South 9th Street, Suite 2300, Minneapolis, Minnesota 55402-4099
(Address of principal executive offices)

Registrant’s telephone number, including area code: (612) 376-3000

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

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

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ý NO o

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Large Accelerated Filer ý Accelerated Filer o Non-Accelerated Filer o

Indicate by check mark whether the Registrant is a shell company. YES o NO ý

The aggregate market value of the voting stock held by nonaffiliates of the Registrant on June 30, 2005, based on a closing price of $26.54 per share as reported on the New York Stock Exchange, was $2,844,236,000.

As of March 9, 2006, the Registrant had 104,817,986 shares of Common Stock issued and outstanding.

Documents Incorporated by Reference

Proxy Statement - Annual Meeting of Stockholders May 4, 2006 - Part III

PART I - ITEMS 1, 2, 3, and 4

ITEM 1 - BUSINESS

Bemis Company, Inc., a Missouri corporation (the “Registrant” or “Company”), continues a business formed in 1858. The Company was incorporated in 1885 as Bemis Bro. Bag Company with the name changed to Bemis Company, Inc. in 1965. The Company is a principal manufacturer of flexible packaging products and pressure sensitive materials selling to customers throughout the United States, Canada, South America, and Europe with a growing presence in Asia Pacific and Mexico. In 2005, approximately 82 percent of the Company’s sales were derived from the Flexible Packaging segment and approximately 18 percent were derived from the Pressure Sensitive Materials segment.

The Company’s products are sold to customers primarily in the food industry. Other customers include companies in the following types of businesses: chemical, agribusiness, medical, pharmaceutical, personal care, batteries, electronics, automotive, construction, graphic industries, and other consumer goods. Further information about the Company’s operations in its business segments is available at Note 13 to the Consolidated Financial Statements included in Item 8 of this Form 10-K Annual Report.

As of December 31, 2005, the Company had approximately 15,900 employees, about 10,600 of whom were classified as production employees. Many of the North American production employees are covered by collective bargaining contracts involving four different international unions, one independent union, and 19 individual contracts with terms ranging from one to six years. During 2005, two contracts covering approximately 200 employees at two different locations in the United States were successfully negotiated. One U.S. contract covering approximately 45 employees and one Canadian contract covering approximately 92 employees expired with negotiations continuing into 2006. In addition to those two contracts, two other domestic labor agreements covering approximately 300 employees are scheduled to expire in 2006. Many of the non-North American production employees as well as some of the non-North American salaried workforce are covered by collective bargaining contracts involving six different unions with terms ranging from one to two years.

Working capital elements fluctuate throughout the year in relation to the level of customer volume and other marketplace conditions. Customer and vendor payment terms are split approximately equally between net 30 days and discountable terms. Discounts are generally one percent for payment within ten days. Inventory levels 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 significant factor in the industries in which the Company operates as most orders placed with the Company are for delivery within 60 days or less. The business of each of the segments is not seasonal to any significant extent.

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

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

Flexible Packaging Segment

The flexible packaging segment manufactures a broad range of consumer and industrial packaging. Multilayer flexible polymer film structures and laminates are sold for food, medical, and personal care products as well as non-food applications utilizing vacuum or modified atmosphere packaging. Additional products include blown and cast stretchfilm products, carton sealing tapes and application equipment, custom thermoformed plastic packaging, multiwall and single-ply paper bags, printed paper 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 and hygiene, disposable diapers, printed shrink overwrap for the food and beverage industry, agribusiness, minerals, and medical device packaging.

Pressure Sensitive Materials Segment

The pressure sensitive materials segment manufactures pressure sensitive materials that are sold into label markets, graphic markets, and technical markets.

Products for label markets include narrow-web rolls of pressure sensitive paper, film, and metalized film printing stocks used in high-speed printing and die-cutting of primary package labeling, secondary or promotional decoration, and for high-speed, high-volume data processing (EDP) stocks, bar code labels, and numerous laser printing applications. Primary markets include food and consumer goods products, inventory control labeling, shipping labels, postage stamps, and laser/ink jet printed labels.

Products for graphic markets include pressure sensitive papers and films used for decorative signage through computer-aided plotters, digital and screen printers, and photographic overlaminate and mounting materials including optically clear films with built-in UV inhibitors. Offset printers, sign makers, and photo labs use these products on short-run and/or digital printing technology to create labels, signs, or vehicle graphics. Primary markets are indoor and outdoor signage, photograph and digital print overlaminates, and vehicle graphics.

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

Marketing, Distribution, and Competition

While the Company’s sales are made through a variety of distribution methods, more than 90 percent of each segment’s sales are made by the Company’s direct sales force. Sales offices and plants are located throughout the United States, Canada, United Kingdom, Continental Europe, Scandinavia, Asia Pacific, South America, and Mexico to provide prompt and economical service to more than 30,000 customers. The Company’s technically trained sales force is supported by product development engineers, design technicians, and a customer service organization.

No single customer accounts for ten percent or more of the Company’s total sales. Furthermore, the loss of one or a few major customers would not have a material adverse effect on the Company’s operating results. Nevertheless, business arrangements with large customers require a large portion of the manufacturing capacity at a few individual manufacturing sites. Any change in the business arrangement would typically occur over a period of time, which would allow for an orderly transition for both the Company’s manufacturing site and the customer.

The major markets in which the Company sells its products are highly competitive. Areas of competition include service, innovation, quality, and price. This competition is significant as to both the size and the number of competing firms. Major competitors in the Flexible Packaging segment include Alcan Packaging, Amcor Limited, Exopack Company, Hood Packaging Corporation, Intertape Polymer Group Inc., Pliant Corporation, Printpack, Inc., Sealed Air Corporation, Smurfit-Stone Container Corporation, Sonoco Products Company, and Wihuri OY. In the Pressure Sensitive 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., Technicote Inc., UPM-Kymmene Corporation, and Wausau Coated Products Inc.

The Company considers itself to be a significant factor in the market niches it serves; however, due to the diversity of the Flexible Packaging and Pressure Sensitive Materials segments, the Company’s precise competitive position in these markets is not reasonably determinable. Advertising is limited primarily to business and trade publications emphasizing the Company’s product features and related technical capabilities and the individual problem-solving approach 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 industry sources and the Company is not dependent on any one supplier for its raw materials. While temporary industry-wide shortages of raw materials may occur, such as was experienced during the 2005 hurricane season, the Company’s raw materials supply was not significantly impacted or interrupted. Currently, raw materials are readily available.

Research and Development Expense

Research and development expenditures were as follows:

(in thousands)	2005		2004		2003
Flexible Packaging	$	18,920	$	16,923	$	17,060
Pressure Sensitive Materials	4,608		4,215		4,394
Total	$	23,528	$	21,138	$	21,454

Environmental Control

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

Available Information

The Company is a large accelerated filer (as defined in Exchange Act Rule 12b-2) and is also an electronic filer. Electronically filed reports (Forms 4, 8-K, 10-K, 10-Q, S-3, S-8, etc.) can be accessed at the Securities and Exchange Commission (SEC) website (http://www.sec.gov) or by visiting the SEC’s Public Reference Room located at 100 F St., N.E., Washington, DC 20549 (call 1-202-551-8090 or 1-800-732-0330 for hours of operation). Electronically filed reports can also be accessed through the Company’s own website (http://www.bemis.com), under Investor Relations/SEC Filings or by writing for free information, including SEC filings, to Investor Relations, Bemis Company, Inc.: before May 5, 2006, 222 South Ninth Street, Suite 2300, Minneapolis, Minnesota 55402-4099, or calling (612) 376-3000; after May 4, 2006, One Neenah Center, 4^th Floor, P.O. Box 669, Neenah, Wisconsin 54957-0669, or calling (920) 727-4100. In addition, the Company’s Board Committee charters and the Company’s code of business conduct and ethics can be electronically accessed at the Company’s website under Company Overview or, free of charge, by writing directly to the Company, Attention: Corporate Secretary. The Company has adopted a Financial 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, a provision of the Financial Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, controller and other persons performing similar functions on the Investor Relations section of its website (www.bemis.com) promptly following the date of such amendment or waiver.

Explanation of Terms Describing the Company’s Products

Barrier laminate – A multilayer plastic film made by laminating two or more films together with the use of glue or a molten plastic to achieve a barrier for the planned package contents.

Barrier products – Products that provide protection and extend the shelf life of the contents of the package. These products provide this protection by combining different types of plastics and chemicals into a multilayered plastic package. These products protect the contents from such things as moisture, sunlight, odor, or other elements.

Blown film – A plastic film that is extruded through a round die in the form of a tube and then expanded by a column of air in the manufacturing process.

Cast film – A plastic film that is extruded through a straight slot die as a flat sheet during its manufacturing process.

Coextruded film – A multiple layer extruded plastic film.

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

Decorative products – Pressure sensitive materials used for decorative signage, promotional items, and displays and advertisements.

Flexible polymer film – A non-rigid plastic film.

Flexographic printing – The most common flexible packaging printing process in North America using a raised rubber or alternative material image mounted on a printing cylinder.

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

Labelstock – Base material for pressure sensitive labels.

Modified atmosphere packaging – A package in which the atmosphere 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 or more layers of paper.

Paper products – Products that consist primarily of multiwall and single ply paper bags and printed paper roll stock.

Polyolefin shrink film – A packaging film consisting of polyethylene and/or polypropylene resins extruded via the blown process. The film can be irradiated in a second process to cross link the molecules for added strength, durability, and toughness. The product is characterized by thin gauge, high gloss, sparkle, transparency, and good sealing properties.

Pressure sensitive material – A material with adhesive such that upon contact with another material it will stick.

Roll label products – Pressure sensitive materials made up and sold in roll form.

Rotogravure printing – A high quality, long run printing process utilizing a metal cylinder.

Sheet products – Pressure sensitive materials cut into sheets and sold in sheet form.

Stretch film – A plastic film used to wrap pallets in the shipping process, which has significant ability to stretch.

Technical products – Technically engineered pressure sensitive materials used primarily for fastening and mounting functions.

Thermoformed plastic packaging – A package formed by applying heat to a film to shape it into a tray or cavity and then placing a flat 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 minimum pension liability may cause a significant reduction in net worth.

Statement of Financial Accounting Standards No. 87, Employers’ Accounting for Pensions, requires balance sheet recognition of a minimum liability if the fair value of plan assets is less than the accumulated benefit obligation (ABO) at the end of the year. The fair value of our largest U.S. pension plan’s assets exceeded the ABO at December 31, 2005; therefore, no recognition of minimum liability was required for this plan. However, if the fair value of our largest U.S. pension plan’s assets at a future reporting date decreases or if the discount rate used to calculate the ABO as of that date decreases, we may be required to write off our prepaid pension assets and record a liability equal to the excess of ABO over the fair value of the assets. The resulting non-cash after-tax charge would not reduce reported earnings. It would be recorded directly as a decrease in the Accumulated Other Comprehensive Income component of stockholders’ equity. While we cannot estimate the future minimum liability with any certainty at this time, we believe that if an adjustment is required, the adjustment would significantly reduce our net worth. We have identified pension assumptions as critical accounting estimates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Judgments—Accounting for 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 down of goodwill and/or other intangible assets would have a material adverse effect on our reported results of operations and net worth.

On January 1, 2002, we adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (FAS No. 142). We no longer amortize goodwill, but we review our goodwill balance for impairment at least once a year using the business valuation methods required by FAS No. 142. These methods include the use of a weighted-average cost of capital to calculate the present value of the 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 other intangible assets to be impaired, resulting in a non-cash charge against results of operations to write down these assets for the amount of the impairment. If a significant write down is required, the charge would have a material adverse effect on our reported results of operations and net worth. We have identified the valuation of intangibles as a critical accounting estimate. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Judgments—Intangible assets and goodwill” included in Item 7 of this Annual Report on Form 10-K.

Foreign operations—Conditions in foreign countries and changes in foreign exchange rates may reduce our reported results of operations.

We have operations in North America, South America, Europe, and Asia. In 2005, approximately 34 percent of our sales were generated by entities operating outside of the United States. Fluctuations in currencies can cause transaction and translation losses. In addition, our revenues and net income may be adversely affected by economic conditions, political situations, and changing laws and regulations in foreign countries, as to which we have no control.

Interest rates—An increase in interest rates could reduce our reported results of operations.

At December 31, 2005, our variable rate borrowings approximated $521 million. Fluctuations in interest rates can increase borrowing costs and have an adverse impact on results of operations. In September 2001, we entered into interest rate swap agreements with three U.S. banks, which increased our exposure to variable rates. Accordingly, increases in short-term interest rates will directly impact the amount of interest we pay. For each one percent increase in variable interest rates, our annual interest expense on $844.1 million of total debt outstanding as of December 31, 2005 would increase by $5.2 million.

A downgrade in our credit rating could increase our borrowing costs and negatively affect our ability to access capital.

In addition to using cash provided by operations, we regularly issue commercial paper to meet our short-term liquidity needs. Our credit ratings are important to our ability to issue commercial paper at favorable rates of interest. In conjunction with our Dixie Toga acquisition in January 2005, while Standard & Poor’s confirmed the continuation of its ratings of “A” and “A-1” for our long-term senior unsecured debt and commercial paper, respectively, Moody’s Investors Service reduced our long-term senior unsecured rating to “Baa1” from “A2”, and our short-term rating to “Prime-2” from “Prime-1”. A downgrade in our credit rating could increase the cost of borrowing by increasing the spread over prevailing market rates that we pay for our commercial paper or the fees associated with our bank credit facility. In addition, our bank credit facility has covenants that include limits on the sale of businesses, minimum net worth calculations, and a maximum ratio of debt to total capitalization. If for any reason our existing credit arrangements were no longer available to us, we would expect to meet our financial liquidity needs by accessing the bank market, which would further increase our borrowing costs.

Raw materials—Raw material cost increases or shortages could adversely affect our results of operations.

As a manufacturer, our sales and profitability are dependent upon the availability and cost of raw materials, which are subject to price fluctuations, and the ability to control or pass on fluctuating costs of raw materials. Inflationary and other increases in the costs of raw materials have occurred in the past and are expected to recur, and our performance depends in part on our ability to reflect changes in costs in selling prices for our products. For example, during 2003, a sizable increase in the cost to us for polyethylene resin followed quickly by a decrease in that cost delayed our ability to adjust our selling prices, which negatively impacted our 2003 operating margins. More recently, operating profit during the first quarter of 2005 was negatively impacted as our selling prices did not keep pace with the rapidly increasing cost of polymer resins, adhesives, and coatings that occurred during the latter part of the fourth quarter of 2004 and the early part of the first quarter of 2005. In the past, we have been generally successful in managing increased raw material costs and increasing selling prices when necessary. Past performance may or may not be replicable in the future.

Patents and proprietary technology—Our success is dependent on our ability to develop and successfully introduce new products and to acquire and retain intellectual property rights.

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

Industry investigations—We are included in investigations of the labelstock industry by the U.S. Department of Justice and of the paper and forest products sector by the European Commission, and several lawsuits have been filed against us related to alleged unlawful competitive activities in the industry.

In April 2003, we were notified by the U.S. Department of Justice’s Antitrust Division that it expected to initiate a criminal investigation into competitive practices in the labelstock industry, and in August 2003, the U.S. Department of Justice issued a subpoena to us in connection with the investigation. In May 2004, the European Commission, seeking evidence of unlawful anticompetitive activities, initiated inspections and obtained documents from our pressure sensitive materials facility in Belgium. We are cooperating with these investigations. We and one of our subsidiaries are named defendants in lawsuits in the United States seeking treble damages and other relief for alleged unlawful competitive practices, which were filed after the announcement of the U.S. Department of Justice investigation. We are unable to predict the outcome of these matters although the effect could be material to the results of operations and/or cash flows of the period in which the matter is resolved.

Acquisitions—We may not be able to successfully integrate the businesses that we acquire.

We have made numerous acquisitions in the past and are actively seeking new acquisitions that we believe will provide meaningful opportunities to grow our business and improve profitability. Since the beginning of 2003, we have completed three acquisitions to enhance the breadth of our product offerings and expand the market and geographic participation of our business segments, which included our acquisition on January 5, 2005 of majority ownership of Dixie Toga S.A., one of the largest packaging companies in South America. Acquired businesses may not achieve the levels of revenue, profit, productivity, or otherwise perform as we expect. Acquisitions involve special risks, including, without limitation, the potential assumption of unanticipated liabilities and contingencies as well as difficulties in integrating acquired businesses. While we believe that our acquisitions will improve our competitiveness and profitability, we can give no assurance that acquisitions will be successful or accretive to earnings.

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

Other factors that may influence our earnings include: legal and administrative cases and proceedings (whether civil, such as environmental and product related, or criminal), settlements, judgments, and investigations; developments or assertions by or against us relating to intellectual property rights and intellectual property licenses; adoption of new, or change in, accounting policies or practices and the application of such policies and practices; changes in business mix; customer and supplier business reorganizations or combinations; increase in cost of debt; ability to retain adequate levels of insurance coverage at acceptable rates; fluctuations in pension and employee benefit costs; loss of significant contract(s); risks and uncertainties relating to investment in development activities and new facilities; timely development and successful market acceptance of new products; pricing of competitive products; disruptions in transportation networks; increased participation in potentially less stable emerging markets; reliability of utility services; impact of computer viruses; general or specific economic conditions and the ability and willingness of purchasers to substitute other products for

the products that we manufacture; financial condition and inventory strategies of customers and suppliers; credit risks; changes in customer order patterns; increased competition; changes in government regulations and the impact of changes in the world political environment, including the ability to estimate the impact of foreign currency exchange rates on financial results; the impact of epidemiological events on the economy and on our customers and suppliers; and acts of war, terrorism, weather, and other natural disasters.

ITEM 1B – UNRESOLVED STAFF COMMENTS

None.

ITEM 2 - PROPERTIES

Properties utilized by the Company at December 31, 2005, were as follows:

Flexible Packaging Segment

This segment has 53 manufacturing plants located in 14 states and ten non-USA countries, of which 46 are owned directly by the Company or its subsidiaries, six are leased from outside parties, and one is leased from the Company’s Mexican joint venture partner on a month-to-month basis. Initial lease terms generally provide for minimum terms of five to 25 years and have one or more renewal options. The initial term of leases in effect at December 31, 2005, expire between 2006 and 2014. In addition a flexible packaging operating location leased adjacent vacant land in 1999 for an initial lease term of 42 years.

Pressure Sensitive Materials Segment

This segment has eight manufacturing plants located in four states and two non-USA countries, of which seven are owned directly by the Company or its subsidiaries and one is leased from an outside party. The initial term, excluding renewal options, of the lease in effect as of December 31, 2005, expires in 2006.

Corporate and General

The Company considers its plants and other physical properties to be suitable, adequate, and of sufficient productive capacity to meet the requirements of its business. The manufacturing plants operate at varying levels of utilization depending on the type of operation and market conditions. The executive offices of the Company, which are leased, are located in Minneapolis, Minnesota. During 2006, the Company’s executive offices will be relocated to Neenah, Wisconsin, to bring the executive team closer to the Company’s largest operations.

ITEM 3 - LEGAL PROCEEDINGS

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

The Indiana Department of Environmental Management has issued a Notice of Violation to the Company regarding various permitting and air emissions violations at its Terre Haute, Indiana facility. The Company is cooperating with the Indiana agency and is seeking to resolve all open issues raised by the Notice of Violation. Any settlement or other resolution of these matters may include a penalty. While the Company cannot reasonably estimate the amount of any such penalty, management believes that it would not have a material adverse effect upon the Company’s financial condition or results of operations.

The Company is a potentially responsible party (PRP) in twelve superfund sites around the United States. The Company expects its future liability relative to these sites to be insignificant, individually and in the aggregate. The Company has reserved an amount that it believes to be adequate to cover its exposure.

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

The City of São Paulo disagreed and assessed Dixie Toga the city services tax for the years 1991-1995. The assessments for those years were estimated to be approximately $40.0 million at the date the Company acquired Dixie Toga. Dixie Toga challenged the assessments and ultimately litigated the issue. A lower court decision in 2002 cancelled all of the assessments for 1991-1995. The City of São Paulo, the State of São Paulo, and Dixie Toga have each appealed parts of the lower court decision. The City continues to assert the applicability of the city services tax and has issued assessments for the subsequent years 1996-2001. The assessments for those years for tax and penalties (exclusive of interest) were estimated to be approximately $26.0 million at the date of acquisition. In the event of an adverse resolution, these estimated amounts for all assessments could be increased for interest, monetary adjustments, and corrections.

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

The Company first disclosed in a Form 8-K filed with the Securities and Exchange Commission on April 23, 2003, that the Department of Justice expected to initiate a criminal investigation into competitive practices in the labelstock industry and the Company further discussed the investigation and disclosed that it expected to receive a subpoena in its Form 10-Q filed for the quarter ended June 30, 2003. In a Form 8-K filed with the Securities and Exchange Commission on August 15, 2003, the Company disclosed that it had received a subpoena from the U.S. Department of Justice in connection with the Department’s criminal investigation into competitive practices in the labelstock industry. The Company has responded to the subpoena and will continue to cooperate fully with the requests of the U.S. Department of Justice.

The Company and its wholly-owned subsidiary, Morgan Adhesives Company, have been named as defendants in fourteen civil lawsuits. Six of these lawsuits purport to represent a nationwide class of labelstock purchasers, and each alleges a conspiracy to fix prices within the self-adhesive labelstock industry. On November 5, 2003, the Judicial Panel on MultiDistrict Litigation issued a decision consolidating all of the federal class actions for pretrial purposes in the United States District Court for the Middle District of Pennsylvania, before the Honorable Chief Judge Vanaskie. Judge Vanaskie entered an order which called for discovery to be taken on the issues relating to class certification and briefing on plaintiffs’ motion for class certification to be completed in December 2005. At this time, a discovery cut-off and a trial date have not been set. The Company has also been named in three lawsuits filed in the California Superior Court in San Francisco. These three lawsuits, which have been consolidated, seek to represent a class of all California indirect purchasers of labelstock and each alleged a conspiracy to fix prices within the self-adhesive labelstock industry. Finally, the Company has been named in one lawsuit in Vermont seeking to represent a class of all Vermont indirect purchasers of labelstock, one lawsuit in Nebraska seeking to represent a class of all Nebraska indirect purchasers of labelstock, one lawsuit in Kansas seeking to represent a class of all Kansas indirect purchasers of labelstock, and one lawsuit in Tennessee seeking to represent a class of purchasers of labelstock in various jurisdictions, all alleging a conspiracy to fix prices within the self-adhesive labelstock industry. The Company intends to vigorously defend these lawsuits.

In a Form 8-K filed with the Securities and Exchange Commission on May 25, 2004, the Company disclosed that representatives from the European Commission had commenced a search of business records and interviews of certain Company personnel at its self-adhesive labelstock operation in Soignies, Belgium to investigate possible violations of European competition law in connection with an investigation of potential anticompetitive activities in the European paper and forestry products sector. A formal request for information was received by the Company on October 28, 2005. The Company continues to cooperate fully with the European Commission.

Given the ongoing status of the U.S. Department of Justice investigation, the related class-action civil lawsuits, and the European Commission investigation, the Company is unable to predict the outcome of these matters although the effect could be material to the results of operations and/or cash flows of the period in which the matter is resolved. The Company is currently not otherwise subject to any pending litigation 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 TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of 2005.

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

ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock is traded on the New York Stock Exchange under the symbol BMS. On December 31, 2005, there were 4,359 registered holders of record of our common stock. Dividends paid 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
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

2004
Dividend paid per common share	$	0.16	$	0.16	$	0.16	$	0.16
Common stock price per share
High	$	26.42	$	28.65	$	28.45	$	29.49
Low	$	23.24	$	25.22	$	24.83	$	24.74

2003
Dividend paid per common share	$	0.14	$	0.14	$	0.14	$	0.14
Common stock price per share
High	$	25.58	$	24.15	$	24.33	$	25.03
Low	$	19.66	$	20.86	$	21.39	$	21.77

On August 4, 2005, the Company announced the adoption of a plan under Rule 10b5-1 of the Securities Exchange Act of 1934 to facilitate the repurchase of up to 600,000 shares of its common stock in order to offset the dilutive effect of the Company’s stock used in annual incentive plans. This plan was completed with the purchase of 600,000 shares of common stock during the five-day period beginning August 8, 2005. Excluding this five-day period, the Company also purchased, in open market transactions, an additional 1,269,700 shares and 10 shares of its common stock during the third quarter and fourth quarter of 2005, respectively. As of December 31, 2005, under authority granted by the Board of Directors in 2000, the Company may repurchase an additional 2,824,886 shares of its common stock.

	(a)	(b)	(c)	(d)
	Total Number	Average	Total Number of Shares Purchased	Maximum Number of Shares
	of Shares	Price Paid	as Part of Publicly Announced	That May Yet Be Purchased
Period	Purchased	per Share	Plans or Programs	Under the Plans or Programs
October 2005	10	26.30		2,824,886

ITEM 6 - SELECTED FINANCIAL DATA

FIVE-YEAR CONSOLIDATED REVIEW

(dollars in millions, except per share amounts)

Years Ended December 31,	2005			2004			2003			2002			2001
Operating Data
Net sales	$	3,474.0		$	2,834.4		$	2,635.0		$	2,369.0		$	2,293.1
Cost of products sold and other expenses	2,798.3			2,525.2			2,383.2			2,086.5			2,035.4
Interest expense	38.7			15.5			12.6			15.5			30.3
Income before income taxes	276.4			293.7			239.2			267.0			227.4
Provision for income taxes	113.9			113.7			92.1			101.5			87.1
Net income	162.5			180.0			147.1			165.5			140.3
Net income as a percent of net sales	4.7		%	6.3		%	5.6		%	7.0		%	6.1		%

Common Share Data
Basic earnings per share	$	1.53		$	1.68		$	1.39		$	1.56		$	1.33
Diluted earnings per share	1.51			1.67			1.37			1.54			1.32
Dividends per share	0.72			0.64			0.56			0.52			0.50
Book value per share	12.81			12.23			10.72			9.06			8.38
Stock price/earnings ratio range	16-21		x	14-18		x	15-19		x	13-19		x	11-20		x
Weighted-average shares outstanding for computation of diluted earnings per share	107,818,708			107,941,738			107,733,383			107,492,974			106,243,596
Common shares outstanding at December 31,	105,305,975			106,947,128			106,242,046			105,887,476			105,739,858

Capital Structure and Other Data
Current ratio	2.1		x	2.3		x	2.4		x	2.2		x	2.5		x
Working capital	$	513.5		$	498.6		$	436.3		$	395.8		$	348.7
Total assets	2,964.6			2,486.7			2,292.9			2,256.7			1,923.0
Short-term debt	54.0			5.7			6.5			5.2			5.7
Long-term debt	790.1			533.9			583.4			718.3			595.2
Stockholders’ equity	1,349.4			1,307.9			1,138.7			959.0			886.1
Return on average stockholders’ equity	12.2		%	14.7		%	14.0		%	17.9		%	16.7		%
Return on average total capital	8.5		%	9.7		%	8.4		%	10.3		%	10.0		%
Depreciation and amortization	$	150.8		$	130.8		$	128.2		$	119.2		$	124.1
Capital expenditures	187.0			134.5			106.5			91.0			117.5
Number of common stockholders	4,359			4,465			4,484			4,542			4,747
Number of employees	15,903			11,907			11,505			11,837			11,012

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis

Three years ended December 31, 2005

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

Three-year review of results

(dollars in millions)	2005				2004				2003
Net sales	$	3,474.0	100.0	%	$	2,834.4	100.0	%	$	2,635.0	100.0	%
Cost of products sold	2,798.3		80.6		2,238.7		79.0		2,101.5		79.8
Gross margin	675.7		19.4		595.7		21.0		533.5		20.2
Selling, general, and administrative expenses	330.9		9.5		285.0		10.1		256.7		9.7
All other expenses	68.4		1.9		17.0		0.6		37.6		1.4
Income before income taxes	276.4		8.0		293.7		10.3		239.2		9.1
Provision for income taxes	113.9		3.3		113.7		4.0		92.1		3.5
Net income	$	162.5	4.7	%	$	180.0	6.3	%	147.1		5.6	%
Effective income tax rate			41.2	%			38.7	%			38.5	%

Presentation of Non-GAAP Information

Some of the information presented below reflects adjustments to “As reported” results to exclude certain amounts related to the Company’s restructuring initiative and certain non-recurring gains and costs. This adjusted information should not be construed as an alternative to the reported results determined in accordance with accounting principles generally accepted in the United States of America (GAAP). It is provided solely to assist in an investor’s understanding of the impact of the Company’s restructuring initiative and certain non-recurring gains and costs on the comparability of the Company’s operations. A reconciliation of the GAAP amounts to the Non-GAAP amounts follows:

	Twelve Months Ended December 31,
(dollars in millions except per share amounts)	2005			2004			2003

Reconciliation by Segment of GAAP to Non-GAAP Operating Profit and Operating Profit as a Percentage of Net Sales
Flexible Packaging
Net Sales	$	2,855.8		$	2,249.6		$	2,101.0

Operating Profit as reported	332.7			308.3			263.7

Non-GAAP adjustments:
Restructuring and related charges (income)	0.6			(0.7		)	13.9
(Gain) on sale of certain manufacturing assets				(5.6		)
Operating Profit as adjusted	$	333.3		$	302.0		$	277.6

Operating Profit as a percentage of Net Sales
As reported	11.7		%	13.7		%	12.6		%
As adjusted	11.7		%	13.4		%	13.2		%

Pressure Sensitive Materials
Net Sales as reported	$	618.1		$	584.8		$	534.1
Year-end change; thirteenth month (1)	(17.2		)
Net sales as adjusted	$	600.9		$	584.8		$	534.1

Operating Profit as reported	$	41.3		$	33.9		$	16.3

Non-GAAP adjustments:
Restructuring and related charges (income)	(1.5		)	3.1			2.7
Year-end change; thirteenth month (1)	(0.5		)
Operating Profit as adjusted	$	39.3		$	37.0		$	19.0

Operating Profit as a percentage of Net Sales
As reported	6.7		%	5.8		%	3.1		%
As adjusted	6.5		%	6.3		%	3.6		%

Reconciliation of GAAP to Non-GAAP Earnings per Share
Diluted earnings per share as reported	$	1.507		$	1.667		$	1.366

Non-GAAP adjustments per share:
Restructuring and related charges (income)	(0.005		)	0.014			0.095
(Gain) on sale of certain manufacturing assets				(0.032		)
Year-end change; thirteenth month (1)	(0.003		)
Additional income tax on repatriated earnings	0.056
Diluted earnings per share as adjusted	$	1.555		$	1.649		$	1.461

(1) During 2005, several of the Company’s European subsidiaries conformed their fiscal year end from November 30 to December 31 thereby including thirteen months of operation for these subsidiaries.

Overview

Bemis Company, Inc. is a leading global manufacturer of flexible packaging and pressure sensitive materials supplying a variety of markets. Generally about 60 percent of our total company net sales are to customers in the food industry. Sales of our flexible packaging products are widely diversified among food categories and can be found in nearly every aisle of the grocery store. Other markets into which we sell our flexible packaging products include medical devices, personal care, and lawn and garden. Our emphasis on supplying packaging to the food industry provides a more stable market environment for our flexible packaging business segment, which accounts for about 82 percent of our net sales. The remaining 18 percent of our net sales is from the pressure sensitive materials business segment which, while diversified in end use products, is less focused on food industry applications and more exposed to economically sensitive end markets. In recent years we have actively expanded our global reach with acquisitions and capital additions, growing net sales in non-U.S. markets from 23 percent in 2003 to 34 percent in 2005.

Market Conditions

During 2004 and 2005, higher petrochemical feedstock costs significantly increased the price of polymer resins and adhesives, the primary raw materials for our business segments. Our business model has been developed to accommodate such cost increases by periodically adjusting selling prices to reflect increased costs. As raw material prices increase, the time lag between cost increases and selling price increases results in reduced operating margins. During the first half of 2005, this negative impact on operating profit was magnified by production volume fluctuations due to a shift in customer order patterns and a highly competitive environment. During the second half of 2005, the plastics industry was challenged to find alternative sources of raw materials as the petrochemical industry suffered facility damage, production disruptions and transportation shortages due to the impact of the 2005 Gulf Coast hurricanes. Bemis successfully managed raw material supplies in this challenging environment and remained a reliable supplier to our customers.

Restructuring and Related Charges

During the third quarter of 2003, we initiated a restructuring program in which three flexible packaging plants were closed. This program eliminated less efficient capacity and consolidated production of monolayer blown film into fewer, more efficient facilities. While most of the restructuring activities were completed as of December 31, 2003 resulting in a net charge of $13.9 million for 2003, gains and losses related to the sale of these closed facilities resulted in a net gain of $0.7 million during 2004 and a loss of $0.6 million during 2005.

During the fourth quarter of 2003, we initiated a restructuring program for our pressure sensitive materials business segment to reduce capacity and fixed costs associated with our label materials product line. The majority of the restructuring activities were completed by the second quarter of 2004. Restructuring charges totaled $2.7 million in the fourth quarter of 2003, $3.1 million in 2004 and a net gain of $1.5 million in 2005.

On January 25, 2006, we announced a $40 million facility consolidation project intended to reduce fixed costs and shift production to lower cost facilities. Of this total charge, approximately $25 million is expected to be expensed during the first half of 2006. These restructuring costs include the estimated cost of plant shutdowns, corporate headquarters relocation, employee severance, equipment relocation and other exit activities. We estimate the savings resulting from the restructuring events to be approximately $17 million annually, a portion of which will be realized in the second half of 2006.

Acquisitions

Our acquisitions strategy is growth oriented, focused on the identification of businesses that offer unique packaging technologies, access to new markets or product lines, or critical mass. Since the beginning of 2003, we have completed three acquisitions to enhance the breadth of our product offerings and expand the market and geographic participation of our business segments. These three acquisitions have added approximately $500 million of net sales, all of which is from non-U.S. manufacturing plants. These plants are focused on serving the needs of the geographic regions in which they reside.

On January 5, 2005, we acquired majority ownership of Dixie Toga S.A., one of the largest packaging companies in South America with 2004 annual revenues totaling about $325 million. The acquisition included the outstanding voting common stock of Dixie Toga in addition to 43 percent of the outstanding nonvoting preferred stock. The initial cash purchase price was approximately $250 million. This acquisition significantly increases our exposure to the growing South American packaging market and provides a strong platform from which to introduce our propriety film products to a new region. Since 1998, Bemis and Dixie Toga have operated a joint venture in Brazil, known as Itap Bemis Ltda., and have established a successful working relationship.

Results of Operations

Consolidated Overview

(dollars in millions, except per share amounts)	2005		2004		2003
Net sales	$	3,474.0	$	2,834.4	$	2,635.0
Operating profit	374.0		342.2		280.1
Net income	162.5		180.0		147.1
Diluted earnings per share	1.51		1.67		1.37

2005 versus 2004

For the year ended December 31, 2005, net sales increased 22.6 percent. Acquisitions accounted for 16.5 percent of the increase in sales while currency translation was insignificant to net sales growth in 2005. The remaining 6.1 percent increase in net sales reflects the impact of increased prices and a shift in product mix in all market categories. Price increases during 2005 were driven by increased raw material costs. Unit volume was flat compared to 2004.

Operating profit increased 9.3 percent in 2005 reflecting the profits contributed by the Dixie Toga acquisition. Operating profit in 2004 includes a $5.6 million gain on the sale of an in-house rotogravure graphics plant. In addition, restructuring and related activities included in operating profit accounted for a $0.9 million gain in 2005 and a $2.4 million expense in 2004. Excluding the impact of the gain on the sale of the plant and any restructuring and related activities, operating profit would have been $372.6 million in 2005 compared to $339.0 million in 2004. Operating profit in 2005 was negatively impacted by higher raw material costs and a related shift in customer order patterns in the first half of the year.

Diluted earnings per share were $1.51 for 2005, which included a $0.056 per share of tax charges related to the repatriation of international subsidiary earnings under the American Jobs Creation Act of 2004. For 2004, diluted earnings per share totaled $1.67, which included restructuring and related charges of about $0.014 per share and a gain of $0.032 per share on the sale of certain plant assets.

2004 versus 2003

Net sales in 2004 increased 7.6 percent from net sales of $2.64 billion in 2003. Acquisitions accounted for 1.1 percent of the net sales growth, while currency translation accounted for about 2.3 percent. The remaining 4.2 percent sales growth primarily reflects the solid increase in flexible packaging sales volumes during 2004.

Operating profit increased 22.2 percent in 2004. Operating profit in 2004 includes a $5.6 million gain on the sale of an in-house rotogravure graphics plant. In addition, restructuring and related activities included in operating profit accounted for a $2.4 million expense in 2004 and a $16.7 million expense in 2003. Excluding the impact of the gain on the sale of the plant and any restructuring and related activities, operating profit would have been $339.0 million in 2004 compared to $296.7 million in 2003. Cost savings in 2004 resulting from the completed restructuring programs were partially offset by increased pension expense. Sales mix improvements resulted in increased operating profit during 2004. During 2003, competitive pricing pressures for flexible packaging products sold into industrial markets and for pressure sensitive label materials, in addition to increases in certain resin costs, contributed to lower margins.

For 2004, diluted earnings per share totaled $1.67, including restructuring and related charges of about $0.014 per share and a gain of $0.032 per share on the sale of certain plant assets. Diluted earnings per share for 2003 totaled $1.37, including $0.095 of restructuring and related charges.

Flexible Packaging Business Segment

Our flexible packaging business segment provides packaging to a variety of end markets, including meat and cheese, confectionery and snack, frozen foods, lawn and garden, health and hygiene, beverages, medical devices, bakery and dry foods. These markets are generally less affected by economic cycles and grow through product innovation and geographical expansion.

The most significant raw materials used in this business segment are polymer resins, which we use to develop and manufacture single layer and multilayer film products. During periods of unusual raw material cost volatility, selling price changes may lag behind changes in our raw material costs. Resin costs increased dramatically in 2004 and 2005. These raw material costs were reflected in increased selling prices throughout each year, however the magnitude and frequency of the cost increases negatively impacted operating profit.

In July 2003, we announced a restructuring effort to reduce fixed costs, take out monolayer film capacity and direct production volume to more efficient facilities. We closed three flexible packaging manufacturing facilities in the third quarter of 2003, recording restructuring and related charges of $13.9 million during 2003. The net restructuring gain of $0.7 million in 2004 and the net restructuring charge of $0.6 million in 2005, both classified as other costs (income), net, relate primarily to the sale of closed facilities.

(dollars in millions)	2005			2004			2003
Net sales	$	2,855.8		$	2,249.6		$	2,100.9
Operating profit	332.7			308.3			263.8
Operating profit as a percentage of net sales	11.7		%	13.7		%	12.6		%

2005 versus 2004

Our flexible packaging business segment recorded a 27.0 percent increase in net sales in 2005. Acquisitions increased 2005 sales by 20.8 percent. The remaining 6.2 percent increase is attributable to price and mix across all market categories. Unit sales volume was even with 2004 as increases in demand for packaging in markets such as meat and cheese, health and hygiene, cereal and other dry foods, coffee, unitizing films for cans and bottles, and medical devices were offset by lower unit sales for markets such as confectionery and snack, frozen foods, bakery and pet products.

Operating profit as a percentage of net sales decreased in 2005. During the fourth quarter of 2004, we recorded a gain of $5.6 million from the sale of a manufacturing facility in Florence, Kentucky that supported internal rotogravure graphics capabilities. Excluding the impact of the gain on the sale of that facility as well as restructuring and related activities, operating profit as a percentage of net sales would have been 11.7 percent in 2005 and 13.4 percent in 2004. Savings resulting from the restructuring program were significantly offset by increased pension costs and incentive compensation costs in 2004.

2004 versus 2003

Net sales increased 7.1 percent in 2004, primarily driven by increased unit sales volume. Strong unit sales in markets for meat and cheese, confectionery and snack foods, frozen foods, personal care products, cereal products and unitizing film for cans and bottles were partially offset by lower unit sales to bakery, pet product and industrial markets. Price increases and a shift in product mix

increased sales by about 1.1 percent in 2004, as customers balanced price increases with changes in product mix. Acquisitions accounted for an increase of 0.8 percent and currency translation accounted for 1.8 percent of the improvement from 2003.

During the fourth quarter of 2004, we recorded a gain of $5.6 million from the sale of a manufacturing facility in Florence, Kentucky that supported internal rotogravure graphics capabilities. Excluding the impact of the gain on the sale of that facility as well as restructuring and related activities, operating profit as a percentage of net sales would have been 13.4 percent in 2004 compared to 13.2 percent in 2003. Savings resulting from the restructuring program were significantly offset by increased pension costs and incentive compensation costs in 2004.

Pressure Sensitive Materials Business Segment

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

Paper and adhesive are the primary raw materials used in our pressure sensitive materials business segment. For the last several years, general economic conditions have had a greater influence on selling prices and operating performance than raw material costs. During 2004, the increased cost of petrochemical products caused an associated increase in the cost of adhesive materials in addition to a concern about availability of adhesive from suppliers. In response to these cost increases, we increased selling prices and secured alternative supplies of raw materials in case of shortages. We focused on margin expansion by introducing new product innovations and quality initiatives during the year. In addition, recent restructuring activities resulted in better capacity utilization in label products.

In October of 2003, we announced the restructuring of our label products capacity. We closed two facilities to reduce fixed costs and improve capacity utilization in our label products line. Restructuring and related charges of $2.7 million were recorded in 2003, of which $2.3 million represented severance and other similar charges and was recorded as other costs (income), net. The remaining $0.4 million related to accelerated depreciation of assets and related charges and was recorded as an element of costs of products sold. During 2004, restructuring and related charges totaling $3.1 million primarily reflected the cost of closing a label products plant in Nevada. Of this total, $1.8 million represented equipment relocation and was recorded as other costs (income), net, with the remaining costs associated with accelerated depreciation charged to costs of products sold. During 2005, a net gain of $1.5 million was recorded for the sale of previously closed facilities and property.

During 2005, we changed the year-end for several of our pressure sensitive materials European subsidiaries from November 30 to December 31. This resulted in a 13-month reporting period in 2005 for this subsidiary, increasing net sales by $17.2 million, but the impact on operating profit was minimal.

(dollars in millions)	2005			2004			2003
Net sales	$	618.2		$	584.8		$	534.2
Operating profit	41.3			33.9			16.3
Operating profit as a percentage of net sales	6.7		%	5.8		%	3.1		%

2005 versus 2004

Our pressure sensitive materials business segment reported a net sales increase of 5.7 percent in 2005. Excluding the impact of the thirteenth month of net sales from the European subsidiary, net sales would have increased 2.7 percent. This increase was driven by unit sales volume growth in label products during the year, partially offset by unit sales volume decreases in the other pressure sensitive product categories. Price increases were offset by a negative sales mix change in 2005, and currency had no impact on net sales for the year.

Operating profit increased in 2005. Excluding the impact of restructuring and related activities, operating profit would have been $39.3 million, or 6.4 percent of net sales in 2005 compared to $37.0 million, or 6.3 percent of net sales in 2004. Currency translation did not impact operating profit in 2005. Improved profit levels in 2005 reflect improved sales mix and focused cost control measures.

2004 versus 2003

A November 2003 acquisition of a European graphic products business increased net sales in 2004 by 2.6 percent and currency translation provided a 4.2 percent increase. About 44 percent of the sales from this business segment are from our manufacturing operations in Belgium, which benefited from the strengthening of the European currencies during 2004. Stronger unit sales of technical products more than offset slightly lower unit sales of label and graphic products compared to 2003. Price and mix provided a combined improvement to net sales during the year of about 1.0 percent. Operating profit more than doubled in 2004 compared to 2003. Excluding the impact of restructuring and related activities, operating profit would have been $37.0 million or 6.3 percent of net sales in 2004 compared to $19.0 million or 3.6 percent of net sales in 2003. Currency translation contributed $2.2 million to operating profit in 2004. Improved profit levels in 2004 reflect improved sales mix, focused cost control measures, and the savings associated with restructuring activities, partially offset by increased pension expense.

Consolidated Gross Margin

(dollars in millions)	2005			2004			2003
Gross margin	$	675.6		$	595.7		$	533.5
Gross margin as a percentage of net sales	19.4		%	21.0		%	20.2		%

Part I
Item 1.	Business
Item 1A.	Risk Factors
Item 1B.	Unresolved Staff Comments

Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders

Part II
Item 5.	Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk

Item 8.	Financial Statements and Supplementary Data
	Management’s Responsibility Statement
	Report of Independent Registered Public Accounting Firm
	Consolidated Statement of Income
	Consolidated Balance Sheet
	Consolidated Statement of Cash Flows
	Consolidated Statement of Stockholders’ Equity
	Notes to Consolidated Financial Statements

Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.	Controls and Procedures
Item 9B.	Other Information

Part III
Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13.	Certain Relationships and Related Transactions
Item 14.	Principal Accountant Fees and Services

Part IV
Item 15.	Exhibits and Financial Statement Schedules

Signatures
Exhibit Index.

Schedule II – Valuation and Qualifying Accounts and Reserves
Report of Independent Registered Public Accounting Firm on Financial Statement Schedule

Exhibit 21 – Subsidiaries of the Registrant
Exhibit 23 – Consent of PricewaterhouseCoopers LLP

Exhibit 31.1 – Certification of Jeffrey H. Curler, Chief Executive Officer of the Company, pursuant to Rule 13a-14(a)/15d-14(a), dated March 10, 2006

Exhibit 31.2 – Certification of Gene C. Wulf, Chief Financial Officer of the Company, pursuant to Rule 13a-14(a)/15d-14(a), dated March 10, 2006

Exhibit 32 – Certification of Jeffrey H. Curler, Chief Executive Officer of the Company, and Gene C. Wulf, Chief Financial Officer of the Company, pursuant to Section 1350, dated March 10, 2006

Environmental Control

Available Information

Explanation of Terms Describing the Company’s Products

Management’s Discussion and Analysis

Three years ended December 31, 2005

Three-year review of results

Overview

Market Conditions

Restructuring and Related Charges

Acquisitions

Results of Operations

Consolidated Overview

Flexible Packaging Business Segment

Pressure Sensitive Materials Business Segment

Consolidated Gross Margin

Consolidated Selling, General and Administrative Expenses