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.
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.
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.
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.
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