Sonoco Reports Fourth Quarter Earnings Even With Last Year And Record 12 Months


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Sonoco Reports Fourth Quarter Earnings Even With Last Year And Record 12 Months

HARTSVILLE, S.C., Jan. 27 /PRNewswire/ -- Excluding one-time transactions, Sonoco (NYSE: SON) reported earnings per diluted share of $.44 for the fourth quarter of 1998, compared with $.44 in 1997, meeting previously announced Company expectations, it was announced today by Peter C. Browning, president and chief executive officer. Including one-time gains, charges and dispositions, fourth quarter earnings per diluted share were $.31, versus a loss of $1.20 for the same period last year.

On a comparable basis, excluding divested businesses, sales for the 1998 fourth quarter were $640.0 million, versus $638.2 million in the fourth quarter of 1997 from ongoing operations. Reported sales for the fourth quarter were $640.0 million, versus $736.4 million in the fourth quarter of 1997. On a comparable basis, net income for the 1998 fourth quarter was $45.3 million, versus $47.9 million in the same period of 1997. Reported net income for the fourth quarter 1998 was $31.8 million, versus a loss of $126.6 million for the same period in 1997.

For the full year 1998 on a comparable basis, excluding one-time transactions, the Company reported record earnings per diluted share of $1.72, versus $1.65 in 1997. Including one-time transactions, the Company reported record earnings per diluted share of $1.73, versus $.00 in 1997. On a comparable basis, the Company had 1998 sales of $2.6 billion, versus $2.5 billion in 1997. Reported sales for 1998 were $2.6 billion, versus $2.8 billion in 1997. On a comparable basis, net income for 1998, before preferred dividends, was $178.9 million, versus $177.1 million in 1997. Reported net income for 1998 before preferred dividends was $180.2 million, versus $2.6 million in 1997.

A supplemental schedule is attached restating segmental sales and earnings to exclude all one-time gains and losses, one-time adjustments and divestitures. All numbers will be discussed on a comparable basis for the balance of this release.

Segment Review

Consumer Packaging

The consumer packaging segment includes composite cans; plastic and fibre cartridges; capseals; high density film; packaging services; folding cartons; and flexible packaging.

Fourth quarter sales for the consumer packaging segment were $292.9 million, compared with $292.6 million for the same period in 1997. Operating profits for this segment during the fourth quarter were $38.2 million, compared with $33.3 million in the fourth quarter of 1997.

Positive volume trends returned to the Company's global consumer-based composite can business in the fourth quarter, up 4.0 % over the same period in 1997, primarily reflecting improvement in the frozen concentrate and snack food sectors. The composite can business also enjoyed improved operations at its Jackson, Tenn. facilities, and converted another major self-manufacturer of composite cans during the fourth quarter.

"As anticipated, our composite can business in the consumer segment is seeing improved results in virtually all of its markets following several quarters of having been adversely affected by a convergence of operating anomalies," said Browning. "Our consumer segment also is being helped by continuing growth in our flexible packaging operations, improved results in our high density film business, and improved productivity measures" he added.

Industrial Packaging

The industrial packaging segment includes tubes; cores; cones; molded plugs and related products and services; injection molded and extruded plastics; paper manufacturing; recovered paper operations; protective packaging; reels for wire and cable packaging; adhesives; converting machinery; and forest products.

Fourth quarter sales for the industrial segment were $347.1 million, compared with $345.6 million in the fourth quarter of 1997. Operating profit in this segment for the fourth quarter 1998 was $44.7 million, compared with $55.0 million in the same period of 1997.

Volume in the Company's global-based engineered carriers business (tubes, cores and cones) was even year-over-year for the fourth quarter, reflecting the general slowing of global industrial production and the direct and indirect effects of Asia on European and domestic demand.

Paperboard volume for the fourth quarter 1998 was up slightly over the same period in 1997, primarily reflecting additional production from the Richmond, Va., paper mill that has been undergoing a major rebuild program.

Earnings from the global engineered carriers and paperboard operations were adversely impacted in the fourth quarter by lower prices for converted products, less favorable product mix, and lower profits in the Company's recovered paper operations, compared with 1997's exceptionally strong fourth quarter. Segment results were also hurt by inefficiencies associated with the Richmond paper mill startup.

"Our engineered carriers business in the industrial sector reflects the slowing of the overall industrial economy which continues to be impacted domestically and in Europe by Asian economic issues. This year's first quarter should see improved year-over-year comparisons for our recovered paper operations following particularly difficult 1998 fourth quarter comparisons. The sector should also benefit in the first quarter from improved production and margins at our Richmond, Virginia, paper mill. Nonetheless, the 1999 first quarter is expected to be our most difficult quarterly comparison during 1999," Browning stated.

Corporate

Results for the fourth quarter 1998 included the previously announced one- time charges of $.18 per diluted share related to reductions in administrative costs and plant closings, and an asset impairment charge related to the Conitex-Sonoco joint venture in the global cone market of $.10 per diluted share. Partially offsetting these charges was a gain of $.15 per diluted share from completion of the previously announced sale of the intermediate bulk container portion of its industrial containers business to Greif Bros. Corporation. Sonoco previously completed in March 1998 the sale of the fibre and plastic drum portion of its industrial container business to Greif Bros. At that time, the Company received most of the approximate $218 million all- cash proceeds from the fully completed sale. During the year 1998, the Company repurchased approximately 5.2 million shares of Sonoco stock. No shares were repurchased during the fourth quarter. The Company has approximately 600,000 shares remaining under previous stock repurchase authorizations. "The Company has taken a number of actions during 1998 as part of its four- point strategy to strengthen its ability to generate sustainable earnings growth through the year 2000 and beyond by growing its top line, improving productivity, enhancing capital effectiveness and capitalizing on its historical strengths related to people, culture and values," said Browning. He cited such examples as ten new plant openings, including five in the United States and five internationally; new acquisitions in Germany, France and Canada; completion of a paper supply agreement in the United Kingdom; and commencement of the global paper cone and open-end spinning carrier joint venture with Conitex. Other actions included five plant closings and 640 position reductions, or 4% of the Company's total workforce; stock repurchases and debt extinguishments; operational structural changes, including the sales of its North American labels and fibre and plastic drum businesses; an agreement to supply corrugating medium to Georgia-Pacific on a fixed fee basis rather than the previous more volatile equity arrangement; and the sale of a nonpackaging- related saw mill business.

Mr. Browning also highlighted productivity improvements that totaled $30 million during 1998 and pointed out that Sonoco recently announced a 100-share option, or equivalent, program for its 16,500 global employees in celebration of the Company's 100th anniversary intended to incent all employees on the same basis as shareholders.

"While we expect 1999 earnings to increase 5% to 10%, reflecting current uncertainties related to global and domestic general economic conditions, we believe the initiatives cited above and others to follow will position the Company for long-term, sustainable growth," concluded Browning.

Sonoco, founded in 1899, is a $2.5 billion manufacturer of industrial and consumer packaging products with approximately 275 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,
                         1998          1997          1998           1997

    Net sales         $640,012      $736,428      $2,557,917     $2,847,831
    Cost of sales      492,873       568,213       1,968,200      2,208,092
    Selling, general and
     administrative
     expenses          105,491        76,921         301,610        297,439
    (Gain)loss on sale of
      divested assets,
      net              (14,994)      226,358        (100,354)       226,358
    Income (loss) before
     interest and
     taxes              56,642      (135,064)        388,461        115,942
    Interest expense    14,289        14,774          54,779         57,194
    Interest income     (1,634)       (1,634)         (5,916)        (4,971)
    Income (loss) before
     income taxes       43,987      (148,204)        339,598         63,719
    Provision (benefit)
     for income taxes   14,242       (21,754)        153,989         60,111
    Income (loss) before equity in earnings of affiliates/
     Minority interest in
     subsidiaries       29,745      (126,450)        185,609          3,608
    Equity in earnings of affiliates/Minority
     interest in
     subsidiaries        2,076          (105)          6,387           (991)
    Net income (loss)
     before extraordinary
     loss               31,821      (126,555)        191,996          2,617
    Extraordinary loss      --            --         (11,753)            --
    Net income (loss)   31,821      (126,555)        180,243          2,617
    Preferred dividends     --            --              --         (3,061)
    Net income (loss)
     available to common
     shareholders   $   31,821     $(126,555)      $ 180,243       $   (444)

    Average common shares
     outstanding *     102,829       105,320         104,275        107,350

    Diluted earnings
     per share*     $     0.31     $   (1.20)      $    1.73       $   0.00
    Dividends per
     common share*  $     0.18     $   0.164       $   0.704       $  0.641


    *Prior year's figures have been restated to reflect the 10% stock dividend
    paid on June 10, 1998.


    FINANCIAL SEGMENT INFORMATION (Unaudited)
    (Dollars in thousands)

                               THREE MONTHS ENDED        TWELVE MONTHS ENDED
                             Dec. 31,     Dec. 31,     Dec. 31,      Dec. 31,
                               1998        1997          1998          1997
    Net Sales
     Industrial Packaging    $347,096    $ 409,821    $1,425,012    $1,588,607
     Consumer Packaging       292,916      326,607     1,132,905     1,259,224

     Consolidated            $640,012    $ 736,428    $2,557,917    $2,847,831

    Operating Profit
     Industrial Packaging    $  7,266    $  57,091    $  162,560    $  217,775
     Consumer Packaging        34,382       34,203       125,547       124,525
    Gain(loss) on sale of
     divested assets, net      14,994     (226,358)      100,354     (226,358)
    Interest, net             (12,655)     (13,140)      (48,863)     (52,223)

    Consolidated             $ 43,987    $(148,204)   $  339,598    $  63,719

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                                    (Dollars in thousands)

                                       Dec. 31,          Dec. 31,
                                        1998               1997
    Assets
    Current Assets:
     Cash and cash equivalents        $ 57,249          $  53,600
     Trade receivables                 297,670            289,991
     Other receivables                  54,396             12,463
     Inventories                       216,894            210,098
     Prepaid expenses and
      deferred taxes                    29,465             88,306
     Net assets held for sale            5,294            218,582
                                       660,968            873,040
    Property, plant and
     equipment, net                  1,013,843            939,542
    Cost in excess of fair
     value of assets
     purchased, net                    170,361            144,097
    Other assets                       237,809            203,253
                                  $  2,082,981         $2,159,932


    Liabilities and Shareholders' Equity
    Current Liabilities:
     Payable to suppliers
      and others                  $    323,683         $  290,606
     Notes payable and current
      portion of long-term debt         96,806             99,690
     Taxes on income                    15,578             43,848
                                       436,067            434,144
    Long-term debt                     686,826            696,669
    Postretirement benefits other
     than pensions                      43,689             83,161
    Deferred income taxes and other     94,807             97,139
    Shareholders' equity               821,592            848,819
                                  $  2,082,981         $2,159,932


             SUPPLEMENTARY COMPARATIVE FINANCIAL DATA (Unaudited)
                               (Dollars in thousands)

    FOR COMPARATIVE PURPOSES ONLY*

                               THREE MONTHS ENDED        TWELVE MONTHS ENDED
                             Dec. 31,     Dec. 31,     Dec. 31,      Dec. 31,
                              1998         1997          1998          1997
    Net Sales
     Industrial Packaging    $347,096     $345,596    $1,425,012    $1,381,355
     Consumer Packaging       292,916      292,607     1,132,905     1,157,834

     Consolidated            $640,012     $638,203    $2,557,917    $2,539,189

     Operating Profit
      Industrial Packaging   $ 44,748     $ 55,036    $  200,042    $  203,289
      Consumer Packaging       38,238       33,252       129,403       121,109
      Interest, net           (12,655)     (13,140)      (48,863)     (52,223)

      Consolidated           $ 70,331     $ 75,148    $  280,582    $  272,175

* Fourth quarter and year-to-date results exclude the impact of previously announced one-time charges related to headcount reductions and asset write- offs as a result of five plant closings and workforce reductions in administrative areas. The total pretax cost of these actions was $30.4 million ($18.7 million after-tax). Also excluded is an $10.9 million pretax asset impairment charge resulting from the December 7 formation of a joint venture in the paper cone business.

In the second quarter of 1998, the Company completed the sale of the fibre and plastic drums portion of the Industrial Packaging segment's industrial containers operations resulting in a one-time pretax gain of $104.6 million. Also in the second quarter of 1998, the Company completed the sale of the North American labels operation resulting in an additional pretax charge of $19.2 million. In the fourth quarter, the Company sold the remaining portion of the industrial container business, intermediate bulk containers, resulting in a $15 million gain. These gains are also excluded from the pro forma numbers above. Fourth quarter and year-to-date 1997 exclude the impact of the $226.4 million pretax ($174.5 million after-tax) asset impairment charge related to the sale of the Company's North American labels operations. The sale was completed early in the second quarter of 1998.

For comparative purposes, sales and operating profits in 1997 have also been adjusted to reflect operations sold or contributed to joint ventures. These operations include: the North America labels and Industrial Containers business; the fibre partitions operations which became a part of a joint venture with Rock-Tenn in the third quarter of 1997; and the Hamilton Hybar operations that were sold to the Cascades Sonoco joint venture in May. Also excluded from 1997 results are sales from the corrugating medium machine in Hartsville. Beginning in August 1998, the Company began operating that machine on a fixed management fee basis and no sales are reported under this new arrangement.

Although, not reflected in the segment data above, the comparable fourth quarter 1998 earnings of $.44 per diluted share and full year earnings of $1.72 per diluted share reported in this release, also exclude the extraordinary loss of $11.8 million after-tax from the early redemption of debentures.
SOURCE Sonoco
Company News On-Call: http: //www.prnewswire.com/comp/805487.html or fax, 800-758-5804, ext. 805487
CONTACT: Allan V. Cecil, Vice President, Sonoco, 843-383-7524