Sonoco (NYSE) Reports Record Fourth Quarter and 12 Months Earnings; Fourth Quarter Produces Second Consecutive Double Digit EPS Increase
HARTSVILLE, S.C., Jan. 26 /PRNewswire/ -- Sonoco today reported record earnings per diluted share of $.50 for the fourth quarter of 1999, compared with $.44 in 1998, excluding one-time transactions*. This represents a 13.3% increase and the second consecutive quarter of double-digit earnings per share increases, it was announced by Peter C. Browning, president and chief executive officer. Including 1998's one-time transactions, reported earnings per diluted share for the prior year quarter were $.31.
Sales for the fourth quarter of 1999 were $754.5 million, up 21.1% over $623.2 million in the same period last year, excluding sales from businesses divested in 1998. This year's fourth quarter sales included approximately $50 million from 1999 acquisitions. Last year's fourth quarter included $16.8 million in sales from divested units or operations contributed to joint ventures. Net income for 1999's fourth quarter was $51.2 million, a 13% increase over $45.3 million in the same period of 1998, excluding $13.5 million of one-time transactions in the same quarter of 1998.
*One-time transactions in 1999 include the first quarter gain of $3.5 million (pre and after-tax) from the sale of the Company's labels business in the United Kingdom. One-time transactions in 1998 include a net gain on divestiture of businesses totaling $100.4 million pre-tax ($41.6 million after-tax). $15.0 million of this gain was for the sale of the intermediate bulk operation which occurred in the fourth quarter of 1998. One-time transactions during 1998 also included an extraordinary loss of $11.8 million (net of a $7.5 million income tax benefit) from the early extinguishment of debt, recorded in the second quarter, and one-time charges during the fourth quarter of $41.3 million pre-tax ($28.5 million after tax).
For the full year 1999, excluding one-time transactions in both years, the Company achieved record earnings per diluted share of $1.79, compared with $1.72 in 1998, a 4.5% increase. Including one-time transactions, the Company reported record earnings per diluted share of $1.83, versus $1.73 in 1998. On a comparable basis, excluding results from divested units (Harlands and Intermediate Bulk Containers) or those now part of unconsolidated joint ventures (Cone operations and corrugated medium), the Company had 1999 sales of $2.54 billion, a 7.4% increase over $2.36 billion in 1998. On a comparable basis, net income for 1999 was $184.3 million, a 3.0% increase over $178.9 million in 1998. Including one-time transactions, reported net income for 1999 was $187.8 million, compared with $180.2 million in 1998.
"Our fourth quarter results were extremely strong, reflecting significant increases in volume throughout our major businesses and continuing the exceptional third quarter productivity improvements. These factors helped offset a negative price/cost relationship for the fourth quarter. However, selling price realization continued to improve steadily throughout the quarter," said Browning. He noted that price increases for Europe, which started later than in North America, have not yet fully closed the price/cost gap, but did show significant improvement in the quarter.
"With healthy volume continuing in most of our businesses in January to date, coupled with ongoing productivity realization and pricing gains not yet fully realized, we believe the Company has good momentum going into the year 2000. In December, we publicly said that we anticipated an 8% to 10% improvement in earnings for the year 2000, assuming that the flexible acquisition from Graphic Packaging would be earnings neutral for the first 12 months. In light of our current momentum, including the successful integration to date of the flexible acquisition, we believe we are more likely to achieve earnings results at the higher end of our guidance," added Browning.
The consumer packaging segment includes composite cans; flexible packaging (printed flexibles, high density bag and film products, container seals); and specialty packaging and services (folding cartons, paper glass covers and coasters, graphics management, packaging services).
Fourth quarter 1999 sales for the consumer segment were $369.3 million, compared with $284.5 million from ongoing operations in the same period last year, a 29.8% increase. Operating profit for this segment was $41.7 million, a 4.7% increase over $39.9 million in the fourth quarter of 1998.
Sales for the consumer segment for the year 1999 were $1.2 billion, a 10.6% increase over $1.1 billion from ongoing operations in 1998. Operating profit in this segment for 1999 was $144.6 million, a 10.5% increase over $130.9 million in 1998.
The increase in fourth quarter sales in the consumer segment resulted primarily from acquisitions and increased volume in composite cans, with unit volume growth up approximately 10% over last year's fourth quarter, excluding the unit volume impact of the acquisition of Crown Cork & Seal's composite can business. Sales were positively impacted by the Crown acquisition and the acquisition of the flexible packaging business of Graphic Packaging Corporation. The increase in operating profit primarily reflects improved volume in the Company's North American and European composite cans and increased productivity which more than offset a negative price/cost relationship in the Company's high density bag and film products. This business experienced approximately a 50% increase in resin prices during the last 12 months and was some $6 million short in the fourth quarter of covering the resin price increase.
In the domestic composite can business, sales of cans for snacks, nuts, dough and caulk were up strongly, while sales volume declined in concentrate lines. The increase in dough sales reflects the acquisition from Crown Cork & Seal. European composite can sales increased significantly, resulting from new snack food products and growth of existing snack products. Composite can sales also increased in Mexico where a new plant opened in the second quarter of 1999 to serve the powdered infant formula market.
The industrial packaging segment includes engineered carriers/paper (paper and plastic tubes and cores, paper manufacturing and recovered paper operations) and protective packaging (designed interior packaging and protective reels).
Fourth quarter 1999 sales in the industrial packaging segment were $385.2 million, a 13.7% increase over $338.7 million from ongoing operations in the same period of 1998. Operating profit in this segment was $51.3 million, a 15.2% increase over $44.5 million, excluding one-time transactions, in the same period in 1998. The increase was due primarily to strong unit volume growth for engineered carriers in all regions of the world and productivity improvement.
Sales for the year 1999 in this segment were $1.4 billion, a 4.8% increase over $1.3 billion from ongoing operations in 1998. Operating profit for 1999 was $188.7 million, a decrease from $193.2 million in 1998. The year-over- year decrease resulted primarily from the lag time between OCC cost increases and recovery through selling price increases and low volume in the first quarter due to the direct and indirect adverse effects of the "Asian Flu." These factors put temporary pressure on operating margins in the segment.
As previously reported, the Company stated its intention to buyback at least enough shares to prevent dilution related to stock options. Therefore, in December, the Company repurchased 590,000 shares of its common stock under previous authorization at an average price of $21.75 per share. The Company intends to request an additional authorization from its Board of Directors that would enable it to continue this program.
Sonoco founded in 1899, is a $2.5 billion manufacturer of industrial and consumer packaging products with over 270 operations in 32 countries serving customers in some 85 nations.
Statements included herein that are not historical in nature are intended to be, and are hereby identified as, "forward-looking statements" for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are based on current expectations, estimates and projections about the company's industry, management's beliefs and certain assumptions made by management. Such information includes, without limitation, discussions as to estimates, expectations, beliefs, plans, strategies and objectives concerning the company's future financial and operating performance.
These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed or forecasted in such forward-looking statements. Such risks and uncertainties include, without limitation: availability and pricing of raw materials; success of new product development and introduction; ability to maintain or increase productivity levels; international, national and local economic and market conditions; ability to maintain market share; pricing pressures and demand for products; continued strength of the company's paperboard-based tube, core and composite can operations; and currency stability and the rate of growth in foreign markets. Additional information concerning some of the factors that could cause materially different results is included in the company's reports on Forms 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission. Such reports are available from the Securities and Exchange Commission's public reference facilities and its Internet website or from the company's investor relations department.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars and shares in thousands except per share) THREE MONTHS ENDED TWELVE MONTHS ENDED Dec. 31, Dec. 31, Dec. 31, Dec. 31, 1999 1998 1999 1998
Sales $754,474 $640,012 $2,546,734 $2,557,917
Cost of sales 585,002 492,873 1,953,605 1,968,200 Selling, general and administrative expenses 76,475 105,491 259,917 301,610 Gain on assets held for sale -- (14,994) (3,500) (100,354) Income before interest and taxes 92,997 56,642 336,712 388,461 Interest expense (15,236) (14,289) (52,466) (54,779) Interest income 1,274 1,634 5,314 5,916 Income before income taxes 79,035 43,987 289,560 339,598 Provision for income taxes 29,877 14,242 108,585 153,989 Income before equity in earnings of affiliates/ Minority interest in subsidiaries 49,158 29,745 180,975 185,609 Equity in earnings of affiliates/Minority interest in subsidiaries 2,069 2,076 6,830 6,387 Net income before extraordinary loss 51,227 31,821 187,805 191,996 Extraordinary loss -- -- -- (11,753) Net income $51,227 $31,821 $187,805 $180,243 Average shares outstanding - diluted 102,559 102,829 102,780 104,275 Diluted earnings per share $ .50 $ .31 $1.83 $1.73 Dividends per common share $ .19 $ .18 $.75 $.704 CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) Dec. 31, 1999 Dec. 31, 1998 Assets Current Assets: Cash and cash equivalents $36,510 $57,249 Receivables 373,441 352,147 Inventories 248,364 217,261 Prepaid expenses and deferred taxes 62,475 29,465 Net assets held for sale -- 5,294 720,790 661,416 Property, plant and equipment, net 1,033,472 1,013,843 Cost in excess of fair value of assets purchased, net 254,580 170,361 Other assets 286,853 237,363 $2,295,695 $2,082,983 Liabilities and Shareholders' Equity Current Liabilities: Payable to suppliers and others $330,709 $ 323,685 Notes payable and current portion of long-term debt 76,576 96,806 Taxes on income -- 15,578 407,285 436,069 Long-term debt 827,561 686,826 Postretirement benefits other than pensions 36,278 43,689 Deferred income taxes and other 123,351 94,807 Shareholders' equity 901,220 821,592 $2,295,695 $2,082,983 Actual Results FINANCIAL SEGMENT INFORMATION (Unaudited) (Dollars in thousands) THREE MONTHS ENDED TWELVE MONTHS ENDED Dec. 31, Dec. 31, Dec. 31, Dec. 31, 1999 1998 1999 1998 Net Sales
Industrial Packaging $ 385,198 $338,701 $1,371,925 $1,309,091
Consumer Packaging 369,276 284,462 1,166,136 1,054,673 Other** --- 16,849 8,673 194,153 Consolidated $ 754,474 $ 640,012 $2,546,734 $2,557,917 Operating Profit Industrial Packaging $ 51,253 $7,266 $188,704 $161,269 Consumer Packaging 41,744 34,382 144,508 126,838 92,997 41,648 333,212 288,107 Net gain on assets held for sale --- 14,994 3,500 100,354 Interest, net (13,962) (12,655) (47,152) (48,863) Consolidated $79,035 $43,987 $289,560 $ 339,598 Comparative Results* FINANCIAL SEGMENT INFORMATION (Unaudited) (Dollars in thousands) THREE MONTHS ENDED TWELVE MONTHS ENDED Dec. 31, Dec. 31, Dec. 31, Dec. 31, 1999 1998 1999 1998 Net Sales
Industrial Packaging $ 385,198 $338,701 $1,371,925 $1,309,091
Consumer Packaging 369,276 284,462 1,166,136 1,054,673 Net Sales from ongoing businesses 754,474 623,163 2,538,061 2,363,764 Other** --- 16,849 8,673 194,153 Consolidated $ 754,474 $ 640,012 $2,546,734 $2,557,917 Operating Profit Industrial Packaging $51,253 $44,473 $188,704 $193,156 Consumer Packaging 41,744 39,887 144,625 130,850 Operating profit from ongoing businesses 92,997 84,360 333,329 324,006 Other** --- (1,375) (117) 5,438 Interest, net (13,962) (12,655) (47,152) (48,863) Profit before gain on sale 79,035 70,330 286,060 280,581 Net gain on assets held for sale --- 14,994 3,500 100,354 Consolidated $79,035 $ 85,324 $289,560 $ 380,935 * Industrial Packaging's 1998 results exclude one-time pre-tax charges of ($37,481). Consumer Packaging's 1998 results exclude one-time pre-tax charges of ($3,856). ** Includes net sales and operating profits of divested businesses and entities previously consolidated which have been contributed to joint ventures and are no longer included in Sonoco's operating profits from ongoing operations. Sonoco's share of joint venture profits is reflected in Equity in Earnings of Affiliates on the Consolidated Statements of Operations.
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CONTACT: Allan V. Cecil, Vice President of Sonoco, 843-383-7524, or email@example.com