HARTSVILLE, S.C., Jan. 28 /PRNewswire-FirstCall/ -- Sonoco (NYSE: SON),
the global packaging company, today reported earnings per diluted share for
the fourth quarter of 2003 of $.75, versus $.36 for the same period in 2002.
Earnings for the fourth quarter of 2003 included a net gain on the sale of the
Company's High Density Film business of $.51 per share and restructuring
charges of $.13 per share, compared with restructuring charges of $.02 per
share in the fourth quarter of 2002, it was announced by Harris E. DeLoach,
Jr., president and chief executive officer.
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In late December 2003, the Company completed the sale of its High Density
Film business to Hilex Poly Co., LLC, at a price of approximately $119
million, including approximately $81 million in cash, subject to final
determination of net working capital, and the balance in subordinated notes
and preferred nonvoting membership interests, resulting in a net gain of
approximately $63.1 million ($49.4 million after tax). Operating results of
this business for all periods, as well as the gain in the fourth quarter of
2003, are presented as "income from discontinued operations (net of income
taxes)" in the accompanying condensed consolidated statements of income.
Sales from continuing operations for the fourth quarter of 2003 were
$730.2 million, versus $699.9 million for the same period in 2002. Net income
from continuing operations for the fourth quarter of 2003 was $18.9 million,
versus $30.5 million in the fourth quarter of 2002. Net income from continuing
operations for the fourth quarter of 2003 included after-tax restructuring
charges of approximately $12.6 million in connection with the Company's
announced restructuring actions, as compared with restructuring charges of $2
million after tax during the same period in 2002.
"Net income for the fourth quarter was positively impacted primarily by
the gain on the sale of Sonoco's High Density Film business, lower costs
resulting from productivity initiatives including restructuring and a lower
effective tax rate. Results were negatively impacted principally due to
restructuring charges related to the announcements during the quarter of four
plant closings and additional restructuring costs related to previously
announced restructuring actions. The Company also incurred operating costs not
charged to restructuring relating to the transition of business from its
Fulton, N.Y., flexibles plant to other Sonoco facilities during the fourth
quarter," said DeLoach.
The restructuring is part of Sonoco's previously announced plans to reduce
its overall cost structure by $54 million (pretax). Since the target was
announced, the Company has implemented actions to achieve approximately $48
million in reduced year over year costs. The Company expects to announce in
2004 the closing of an additional five to ten plants which is expected to
result in additional savings of approximately $6 million (pretax) in
annualized fixed cost reductions, excluding the impact of restructuring
charges related to these actions which cannot be estimated at this time," he
said. DeLoach explained that the quarter was also negatively impacted by the
anticipated and previously disclosed higher pension and postretirement costs
of approximately $.05 per share, compared with the fourth quarter of 2002.
"Sales for the fourth quarter were up approximately 4 percent over the
same period last year, primarily reflecting the favorable impact of foreign
exchange translation and slightly higher volumes," DeLoach observed.
"Company-wide volumes during the quarter were up by approximately 1
percent, versus the same period last year. Volume increases in the Company's
industrial packaging segment resulted primarily from higher demand for global
engineered carriers and protective packaging. In the consumer packaging
segment, volumes declined, compared with the fourth quarter of 2002, due to
decreases in flexible packaging, partially offset by improvements in rigid
paper and plastics and closures," stated DeLoach.
Cash generated from operations for the fourth quarter was $122.8 million,
compared with $57.2 million for the same period in 2002. Fourth quarter cash
generated from operations, which included the impact of funding benefit plans
of approximately $20 million, and the $81.1 million in cash from the sale of
the High Density Film business were used to reduce debt by approximately
$107.4 million, for capital expenditures of $32 million and to pay dividends
of $20.3 million. Cash from operations in 2002 included the impact of
approximately $77 million in pension funding.
For the year ended December 31, 2003, earnings per diluted share were
$1.43, versus $1.39 for the year 2002. Earnings for 2003 included a net gain
on the sale of assets of $.51 per share and restructuring charges of $.38 per
share, compared with restructuring charges of $.08 per share in 2002. Net
income from continuing operations for 2003 was $78.2 million vs. $125.5 in the
same period last year. Net income from continuing operations for the year 2003
included after-tax restructuring charges of $36.8 million, compared with
after-tax restructuring charges of $8.1 million during the year 2002. Sales
from continuing operations for 2003 were $2.8 billion, versus $2.7 billion in
the same period last year.
Also for the full twelve months of 2003, cash generated from operations
was $328.4 million, versus $271.4 million for the full year 2002. Cash
generated from operations for the year 2003, which included the impact of
funding benefit plans of $23 million, and the $81.1 million in cash from the
sale of the High Density Film business were used to reduce debt by
approximately $165.1 million, for capital expenditures of $113.6 million and
to pay dividends of $81.1 million. Cash from operations in 2002 included the
impact of approximately $120 million in pension funding.
"Despite operating in a depressed manufacturing economy for the fourth
consecutive year and experiencing continued pricing pressure and increased raw
material costs, additional pension and postretirement expenses of $.19 per
diluted share ($.50 per diluted share increase over the last three years), and
higher energy and healthcare expenses, we made significant progress during
2003 toward positioning the Company for profitable growth going forward. For
example, we continued to generate strong cash flow from operations, initiated
an additional $48 million in structural cost reductions and reduced our
exposure to the more cyclical high density resin markets with the sale of our
High Density Film business, which will also enable us to redeploy the value of
those assets into our higher growth rate businesses. In addition, we are
significantly increasing the number of new products being readied for market
introduction, driven by over 700 global patent applications since 2000," said
DeLoach.
"Our United States pension plan was fully funded at year-end, we have paid
consecutive dividends since 1925 which currently have an annual yield of about
3.5 percent, we have one of only two A-range credit ratings in the packaging
industry, we are the global market leader in engineered carriers and rigid
paper packaging, and our customer list is a "Who's who" of global industrial
and consumer companies," he stated.
"Overall, we believe we have significantly improved our sales and earnings
potential and are well positioned to benefit from any general economic
improvement affecting the markets we serve.
"Looking forward, the Company will work toward achieving its growth
guideline of approximately $4 billion in profitable sales over the next four
years. We expect to do so through acquisitions, joint ventures and organic
growth (consisting of geographical expansion of existing products, the
extension of current technologies and through new product and market
development).
"Any acquisitions, of course, would be expected to meet our criteria of
being complementary to our existing businesses, not being dilutive in the
first year and return our cost of capital within the first three to four
years. To help drive our growth initiatives, we have initiated an executive-
level growth readiness team, reporting to me, to help identify opportunities,
ensure execution and measure our progress," DeLoach explained.
He also noted that the Company expects its cash flow from operations to
average in the annual range of $330 million to $360 million over the next four
years, with capital expenditures expected to average between $125 million and
$150 million annually. The Company expects to contribute about $25 million
annually to its pension and postretirement plans. Furthermore, effective
January 1, 2004, the Company switched to a defined contribution plan for new
employees which, longer term, should make costs more predictable."
"In 2004, we certainly expect to benefit from our cost reductions and
continued productivity improvement and do not anticipate a significant
increase in pension and postretirement expenses. These positive factors are,
however, likely to be partially offset by continued price/cost pressures, the
loss of earnings from the High Density Film business and higher benefit costs.
While we have seen three consecutive months of modestly improved year-over-
year volumes in our industrial packaging segment, we do not expect significant
volume improvements in our industrial packaging segment at least through the
first quarter of 2004. Assuming no significant change in volumes, we expect
earnings for the first quarter of 2004 in the range of $.31 to $.35 per
diluted share, excluding any restructuring charges, which cannot be estimated
at this time. As previously announced, we expect earnings for the full year
2004 in the range of $1.40 to $1.45 per diluted share, excluding any
restructuring charges and assuming no significant changes in volume or
pricing.
Segment Review
Consumer Packaging
The consumer packaging segment includes the following products and
services: round and shaped rigid packaging, both composite and plastic;
printed flexible packaging; metal and plastic ends and closures; specialty
packaging; and packaging services.
Fourth quarter 2003 sales for the consumer packaging segment were $328.4
million, versus $324.2 million in the same period for 2002. Operating profit
for this segment was $20.1 million, versus $22 million in the fourth quarter
of 2002.
Sales in the consumer packaging segment were up year-over-year in the
fourth quarter, primarily due to the impact of favorable foreign exchange
translations, offset negatively by lower volume. Volumes in the consumer
packaging segment were down approximately 1 percent, compared with last year's
fourth quarter. Volume improvements in rigid paper and plastic were more than
offset by decreases in flexible packaging.
Operating profit for the fourth quarter in the consumer packaging segment
declined from the same period last year primarily because of volume shortfalls
and increased pension and postretirement expenses, partially offset by lower
costs resulting from productivity initiatives and restructuring savings.
Industrial Packaging
The industrial packaging segment includes the following products and
services: high-performance paper, plastic and composite engineered carriers;
paperboard; wooden, metal and composite reels for wire and cable packaging;
fiber-based construction tubes and forms; custom designed protective
packaging; and supply chain management capabilities.
Fourth quarter 2003 sales for the industrial packaging segment were $401.8
million, versus $375.7 million in the same period in 2002. Operating profit
for the industrial packaging segment for the fourth quarter 2003 was $30.7
million, versus $36.4 million in the fourth quarter of 2002.
"Fourth quarter sales in the industrial packaging segment increased,
compared with the same period last year, primarily due to volume increases in
the global engineered carrier and protective packaging markets along with the
favorable impact of foreign exchange translation, partially offset by the
impact of lower selling prices in recovered paper operations.
"Volumes in the industrial packaging segment were up approximately 3
percent over last year's fourth quarter. Operating profit for the segment
declined, driven principally by higher energy and pension and postretirement
costs, partially offset by lower costs resulting from productivity initiatives
and restructuring actions," said DeLoach.
Corporate
Depreciation and amortization expense for the fourth quarter of 2003 was $
? million, compared with $38.4 million in 2002. Net interest expense for the
fourth quarter decreased $1 million, compared with the same period in 2002,
primarily due to lower average debt levels.
The effective tax rate for continuing operations for the twelve-month
period ending December 31, 2003, was 34.8 percent, compared with 35.6 percent
for the same period in 2002. The lower effective tax rate in the fourth
quarter was primarily due to restructuring charges and in higher tax rate
jurisdictions.
The Company previously announced that it had identified a possible
impairment on certain operational assets in Asia. Following the completion of
the analysis, it was determined that no impairment currently exists.
Sonoco, founded in 1899, is a $3 billion global manufacturer of industrial
and consumer products and provider of packaging services, with more than 300
operations in 32 countries serving customers in some 85 nations. Additional
information about the Company is available at www.sonoco.com.
Conference Call
Sonoco will host its regular quarterly conference call concerning
financial results for the most recent quarter today, Wednesday, January 28,
2004, at 2:00 p.m. EST. The conference call can be accessed in a "listen only"
mode via the Internet at
www.firstcallevents.com/service/ajwz396398548gf12.html. A replay will be
available through the Investor Information section of the Sonoco Web site at
www.sonoco.com for six months after the conference.
Forward-looking Statements and Other Information
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. The words "estimate," "project," "intend," "expect,"
"believe," "anticipate," "objective," "goal," and similar expressions identify
forward-looking statements. Forward-looking statements include, but are not
limited to, statements regarding offsetting high raw material costs, adequacy
of income tax provisions, refinancing of debt, adequacy of cash flows, effects
of acquisitions and dispositions, adequacy of provisions for environmental
liabilities and financial strategies and the results expected from them, and
producing improvements in earnings. Such forward-looking statements are based
on current expectations, estimates and projections about our 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 our 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; fluctuations
in obligations and earnings of pension and postretirement benefit plans;
ability to maintain market share; pricing pressures and demand for products;
continued strength of our paperboard-based engineered carrier and composite
can operations; anticipated results of restructuring activities; resolution of
income tax contingencies; ability to successfully integrate newly acquired
businesses into the Company's operations; currency stability and the rate of
growth in foreign markets; use of financial instruments to hedge foreign
exchange, interest rate and commodity price risk; actions of government
agencies; and loss of consumer confidence and economic disruptions resulting
from terrorist activities.
Information about the Company's use of non-GAAP financial measures, why
management believes presentation of non-GAAP financial measures provides
useful information to investors about the Company's financial condition and
results of operations, and the purposes for which management uses non-GAAP
financial measures is included in the Company's 2002 Annual Report on Form 10-
K filed with the Securities and Exchange Commission. 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 Web
site, the Company's investor relations department and the Company's Web site,
www.sonoco.com.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars and shares in thousands except per share)
THREE MONTHS ENDED TWELVE MONTHS ENDED
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
Sales $730,205 $699,913 $2,758,326 $2,701,419
Cost of sales 599,857 571,568 2,259,887 2,178,778
Selling, general
and administrative
expenses 79,544 69,914 289,839 276,580
Restructuring charges 16,921 2,944 50,056 10,409
Income before interest
and taxes 33,883 55,487 158,544 235,652
Interest expense (12,549) (13,429) (52,399) (54,196)
Interest income 602 512 2,188 1,650
Income before
income taxes 21,936 42,570 108,333 183,106
Provision for
income taxes 4,654 14,514 37,698 65,075
Income before equity
in earnings of
affiliates/
Minority interest
in subsidiaries 17,282 28,056 70,635 118,031
Equity in earnings of
affiliates/Minority
Interest in
subsidiaries 3,187 2,459 8,998 7,372
Affiliate/Minority
Interest restructuring (1,527) -- (1,455) 65
Net income from
continuing operations 18,942 30,515 78,178 125,468
Income from discontinued
operations (net of
income tax) 54,478 4,323 60,771 9,848
Net Income $73,420 $34,838 $138,949 $135,316
Average shares
outstanding - diluted 97,368 96,904 97,129 97,178
Diluted earnings
per share $ .75 $ .36 $1.43 $1.39
Dividends per
common share $ .21 $ .21 $ .84 $ .83
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
December 31, December 31,
2003 2002
Assets
Current Assets:
Cash and cash equivalents $84,854 $31,405
Trade accounts receivables 320,676 314,429
Other receivables 33,066 32,724
Inventories 252,196 244,554
Prepaid expenses and deferred taxes 60,265 40,155
751,057 663,267
Property, plant and equipment, net 923,569 975,368
Goodwill 383,954 359,418
Other assets 458,079 438,386
$ 2,516,659 $ 2,436,439
Liabilities and Shareholders' Equity
Current Liabilities:
Payable to suppliers and others $444,417 $418,457
Notes payable and current portion of
long-term debt 201,367 134,500
Taxes on income 38,325 5,639
684,109 558,596
Long-term debt 472,128 699,346
Pension and other postretirement benefits 140,990 121,176
Deferred income taxes and other 204,255 189,896
Shareholders' equity 1,015,177 867,425
$ 2,516,659 $ 2,436,439
Prior years' data has been reclassified to conform to the current year
presentation.
FINANCIAL SEGMENT INFORMATION (Unaudited)
(Dollars in thousands)
THREE MONTHS ENDED TWELVE MONTHS ENDED
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
Net Sales
Industrial
Packaging $401,847 $375,694 $1,519,898 $1,465,743
Consumer
Packaging 328,358 324,219 1,238,428 1,235,676
Net Sales $730,205 $699,913 $2,758,326 $2,701,419
Income before
Income Taxes
Operating Profit
- Industrial
Packaging $30,683 $36,426 $123,033 $151,770
Operating Profit
- Consumer
Packaging 20,121 22,005 85,568 94,291
Restructuring/
Impairment charges (16,921) (2,944) (50,057) (10,409)
Interest, net (11,947) (12,917) (50,211) (52,546)
Income before
Income Taxes $21,936 $42,570 $108,333 $183,106
Prior years' net sales data has been reclassified to conform to the
current year presentation.
Does not include the operating results of the High Density Film business,
which are shown on the Condensed Consolidated Statements of Income as "Income
from discontinued operation (net of income taxes)."
SOURCE Sonoco