Sonoco (NYSE) Reports Record Fourth Quarter and 12 Months Earnings; Fourth Quarter Produces Second Consecutive Double Digit EPS Increase


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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.

Segment Review

Consumer Packaging

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.

Industrial Packaging

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.

Corporate

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.

Cautionary statements

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.

SOURCE Sonoco
Web site: http: //www.sonoco.com
Company News On-Call: http: //www.prnewswire.com/comp/805487.html or fax, 800-758-5804, ext. 805487
CONTACT: Allan V. Cecil, Vice President of Sonoco, 843-383-7524, or allan.cecil@sonoco.com