HARTSVILLE, S.C., Feb 02, 2005 /PRNewswire-FirstCall via COMTEX/ -- Sonoco (NYSE: SON), the
global packaging company, today reported earnings per diluted share for the
fourth quarter of 2004 of $.35, versus $.75 for the same period in 2003, it
was announced by Harris E. DeLoach, Jr., president and chief executive
officer.
(Logo: http://www.newscom.com/cgi-bin/prnh/19991006/SNCLOGO )
Results for the fourth quarter of 2004 included after-tax restructuring
costs of $7.7 million ($.08 per diluted share) related to previously announced
restructuring actions. Results for the fourth quarter of 2003 included after-
tax restructuring costs of $12.6 million ($.13 per diluted share) and the
$49.4 million ($.51 per diluted share) gain recognized from the sale of the
Company's High Density Film business.
Earnings for the fourth quarter of 2004 were favorably impacted by higher
volume, including the impact of acquisitions, and productivity leading to
improved margins. The Company also benefited from a $1.8 million after-tax
reduction ($.02 per diluted share) in expenses related to the adoption of new
accounting guidance on the Medicare Prescription Drug Improvement and
Modernization Act of 2003 as well as the benefit of approximately $3.5 million
($.04 per diluted share) of favorable tax adjustments. Partially offsetting
these favorable impacts was a $7.3 million before- and after-tax charge
($.07 per diluted share) related to an adjustment at the Company's wholly
owned subsidiary in Spain. The charge for this adjustment resulted primarily
from underreporting of expenses in that subsidiary over a six-year period. The
impact of the underreported expenses was not material to the reported results
of any of the prior periods affected.
Net sales for the fourth quarter of 2004 were $885 million, versus
$730 million for the same period in 2003. "Sales for the fourth quarter of
2004 were up approximately 21.2 percent over the same period in 2003,
principally reflecting increased volume and higher average prices for domestic
engineered carriers and paperboard, recovered paper, rigid paper and plastic
containers, molded and extruded plastics, easy-open closures and wire and
cable reels; the acquisition of CorrFlex Graphics, LLC; the formation of the
joint venture between the European engineered carriers and coreboard
operations of Sonoco and Ahlstrom Corporation; and, to a lesser extent, the
favorable impact of foreign exchange translation," stated DeLoach.
Income from continuing operations for the fourth quarter of 2004 was
$35 million, versus $19 million in the fourth quarter of 2003. "The increase
in year-over-year income from continuing operations for the fourth quarter of
2004 was primarily the result of increased volumes in the Engineered Carriers
and Paper and the Consumer Packaging segments; productivity initiatives; the
acquisition in May 2004 of the CorrFlex Graphics, LLC point-of-purchase
business; and the specific items detailed above," said DeLoach.
"In addition to the above mentioned accounting adjustment in Spain and
restructuring costs, earnings were negatively impacted by start-up costs
associated with the Company's new multi-line, easy-open closure operation in
Brazil and new rigid plastic container plants in California and Wisconsin, as
well as the costs associated with the movement of production between plants,"
DeLoach noted. He explained that Company-wide volumes during the fourth
quarter of 2004 were up 16.4 percent over the same period in 2003. The 2004
fourth quarter volumes included those from the European joint venture with
Ahlstrom as well as those from Sonoco CorrFlex. Excluding volumes from these
businesses, fourth quarter 2004 Company-wide volumes were up 5.6 percent.
Cash generated from operations for the fourth quarter of 2004 was
$113.9 million, compared with $126.3 million for the same period in 2003. The
decrease in cash flow resulted primarily from an increase in net working
capital associated with higher sales and increased material costs in
inventory, as well as increased inventory associated with the start-up of the
Company's new easy-open closure operation in Brazil and new rigid plastic
operations in California and Wisconsin. Cash generated from operations was
used to fund capital expenditures of approximately $33.5 million, to pay
dividends of approximately $21.6 million, to reduce debt by about $22 million
and to make pension contributions totaling approximately $17.4 million.
For the year ended December 31, 2004, net sales were $3.2 billion,
compared with $2.8 billion for the full year 2003. Income from continuing
operations for 2004 was $151.2 million, versus $78.2 million in 2003. Income
from continuing operations for 2004 was positively impacted by the acquisition
of CorrFlex Graphics, LLC; $9.1 million due to the recognition of certain tax
benefits; and a $7 million after-tax reduction in expense resulting from the
new Medicare Prescription Drug program. Income for the full year 2004 was
negatively impacted by after-tax restructuring charges of approximately
$14.4 million, compared with $36.8 million for 2003; before and after-tax
charges of approximately $5.6 million related to prior years for an adjustment
in the Company's wholly owned subsidiary in Spain; after-tax charges of
approximately $2.9 million related to the establishment of reserves for claims
against the Company as a result of a legal judgment; and by a $3.6 million
after-tax charge related to the cost of replacing certain executive life
insurance policies.
Also for the full year 2004, cash generated from operations was
$251.1 million, compared with $331.8 million for 2003. The decrease in cash
flow is primarily attributed to an increase in net working capital associated
with higher sales and increased material costs in inventory, as well as
increased inventory associated with the start-up of the Company's new easy-
open closure operation in Brazil and new rigid plastic operations in
California and Wisconsin. Cash generated from operations in 2004, along with
the issuance of debt, was used to partially fund capital expenditures of
$119.8 million, to pay dividends of $85.1 million and for the $250 million
purchase of CorrFlex Graphics, LLC. Cash generated from operations in 2004
included the impact of $33.4 million for funding benefit plans during the full
year 2004, compared with approximately $25.9 million in 2003.
"In 2004, Sonoco experienced sustained quarterly earnings growth,
resulting in large part from strong sales driven by acquisitions, significant
new product and market development, and geographical expansion; from the
reduction in cost structure resulting from restructuring actions completed
since 2001; significantly higher productivity improvement in virtually all of
the Company's businesses driven in part by increased unit volumes; and from an
improved price/cost relationship, reflecting price increases that offset much
of the run-up in raw material prices. As a result of these and other operating
accomplishments, in conjunction with our continued dividends paid since 1925,
Sonoco's total return to shareholders for 2004 was 24.6 percent, the second
consecutive year of double-digit, year-over-year improvement," said DeLoach.
"At year-end, our United States pension plan was fully funded, and our
debt to capital ratio had been reduced to 40 percent after having increased to
43.1 percent because of the CorrFlex acquisition. We remain focused on paying
down debt and maintaining our A-range credit rating. We expect cash flow from
operations to average approximately $300 million annually over the next
several years. Volumes are improving in all of our businesses, and we have
solid top-line growth plans being executed. Assuming no significant change in
the current rate of volume improvement or in raw material prices, the Company
expects first quarter 2005 earnings to be in the range of $.36 to $.39 per
diluted share, excluding any restructuring charges which cannot be estimated
at this time. As previously announced, we expect to report earnings per
diluted share for the full year 2005 in the range of $1.75 to $1.79, excluding
any restructuring charges which cannot be estimated at this time and assuming
no significant changes in volume or pricing," DeLoach concluded.
Segment Review
Consumer Packaging
The Consumer Packaging segment includes the following products: round and
shaped rigid packaging, both composite and plastic; printed flexible
packaging; and metal and plastic ends and closures.
Fourth quarter 2004 sales for the Consumer Packaging segment were
$311.6 million, versus $279.2 million in the same period of 2003. Operating
profit for this segment was $24.6 million in the fourth quarter 2004, versus
$18.5 million in the fourth quarter of 2003.
Sales in the Consumer Packaging segment were up year-over-year in the
fourth quarter of 2004, reflecting increased volumes in composite cans, rigid
plastic containers and flexible packaging as well as the impact of increased
prices in composite cans and closures. Operating profit for the fourth quarter
2004 increased due to increased volume, productivity improvements and cost
reductions resulting from restructuring actions, partially offset by the
negative impact of start-up costs at two new facilities and a slightly
negative price/cost relationship.
Engineered Carriers and Paper
The Engineered Carriers and Paper segment includes the following products:
high-performance paper and composite engineered carriers; paperboard; and
fiber-based construction tubes and forms.
Fourth quarter 2004 sales for the Engineered Carriers and Paper segment
were $389.4 million, versus $332.7 million in the same period in 2003.
Operating profit for the Engineered Carriers and Paper segment for the fourth
quarter was $24.2 million, versus $26.1 million in the fourth quarter of 2003.
Fourth quarter 2004 sales in this segment increased primarily due to the
favorable impact of increased unit volume growth, the impact of the formation
of the Sonoco-Alcore joint venture and higher selling prices of domestic
engineered carriers, paperboard and recovered paper. Operating profit for this
segment decreased primarily due to the accounting adjustment in Spain of
approximately $7.3 million and a slightly unfavorable price/cost relationship.
These were partially offset by higher volume, productivity improvements and
cost reductions resulting from restructuring actions.
Packaging Services
The Packaging Services segment includes the following services: packaging
fulfillment, product handling, brand management and supply chain management.
This segment also includes the production of folding cartons.
Fourth quarter 2004 sales for the Packaging Services segment were
$100 million, versus $46.8 million in the same quarter of 2003. Operating
profit for this segment was $10.9 million, versus $1.7 million in the same
period of 2003.
Sales and operating profit in the Packaging Services segment were up
primarily due to the acquisition of CorrFlex Graphics, LLC along with
productivity improvements.
All Other Sonoco
All Other Sonoco includes the following products: wooden, metal and
composite reels for wire and cable packaging; molded plastics; custom design
protective packaging; adhesives; machinery manufacturing; and specialty
packaging.
Fourth quarter 2004 sales for All Other Sonoco were $83.9 million, versus
$71.3 million in the fourth quarter of 2003. Operating profits for All Other
Sonoco were $8.4 million in the fourth quarter of 2004, versus $4.5 million in
the same period of 2003.
Fourth quarter sales in All Other Sonoco increased over the same period in
2003 primarily due to volume and price increases in molded and extruded
plastics, wire and cable reels, and protective packaging. Operating profit for
All Other Sonoco in the fourth quarter of 2004 increased primarily because of
higher volumes, productivity improvements and cost reductions resulting from
restructuring actions.
Corporate
Depreciation and amortization expense for the fourth quarter of 2004 was
$49.4 million, compared with $43.3 million in 2003. Net interest expense for
the fourth quarter of 2004 decreased $0.7 million, compared with the same
period in 2003, due primarily to higher interest income.
The effective tax rate for continuing operations for the year ended
December 31, 2004, was 29.8 percent, compared with 34.8 percent for 2003.
Included in the effective tax rate for 2004 is the impact of the recognition
of certain tax benefits totaling $9.1 million due to the Internal Revenue
Service closing its examination of the Company's tax returns for years 1999
through 2001, certain non-deductible foreign restructuring charges, the impact
of the accounting adjustment for Spain, for which no tax benefit has been
accrued and reduced costs associated with the Medicare Prescription Drug,
Improvement and Modernization Act of 2003.
Sonoco, founded in 1899, is a $3.2 billion global manufacturer of
industrial and consumer products and provider of packaging services, with more
than 300 operations in 36 countries, serving customers in some 85 nations.
Additional information about the Company is available at http://www.sonoco.com
Conference Call
Sonoco will host its regular quarterly conference call concerning
financial results for the most recent quarter today, Wednesday, February 2,
2005, at 2:00 p.m. EST. The conference call can be accessed in a "listen only"
mode via the Internet at http://phx.corporate-ir.net/phoenix.zhtml?p=irol-
eventDetails&c=82014&eventID=1002292 . A replay will be available through the
Investor Information section of the Sonoco Website at http://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 2003 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, http://www.sonoco.com .
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars and shares in thousands except per share)
THREE MONTHS ENDED TWELVE MONTHS ENDED
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
Sales $884,998 $729,964 $3,155,433 $2,758,326
Cost of sales 728,484 599,617 2,580,643 2,259,887
Selling, general and
administrative expenses 88,386 79,544 316,403 289,839
Restructuring charges 10,738 16,921 18,982 50,056
Income before interest
and taxes 57,390 33,882 239,405 158,544
Interest expense 13,060 12,549 47,463 52,399
Interest income (1,780) (602) (5,400) (2,188)
Income before income taxes 46,110 21,935 197,342 108,333
Provision for income taxes 17,056 4,557 58,858 37,698
Income before equity in
earnings of affiliates/
minority interest in
subsidiaries 29,054 17,378 138,484 70,635
Equity in earnings of
affiliates/minority
interest in subsidiaries 5,940 1,660 12,745 7,543
Income from continuing
operations 34,994 19,038 151,229 78,178
Income from discontinued
operations (net of income
taxes) - 54,380 - 60,771
Net Income $34,994 $73,418 $151,229 $138,949
Average shares
outstanding -- diluted 99,837 97,368 98,947 97,129
Diluted earnings per share $.35 $.75 $1.53 $1.43
Dividends per common share $.22 $.21 $.87 $.84
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
December 31, December 31,
2004 2003
Assets
Current Assets:
Cash and cash equivalents $117,725 $84,854
Trade accounts receivables 390,024 320,676
Other receivables 37,457 33,066
Inventories 315,011 252,196
Prepaid expenses and deferred taxes 84,055 64,473
944,272 755,265
Property, plant and equipment, net 1,007,295 923,569
Goodwill 570,508 383,954
Other assets 526,492 457,845
$3,048,567 $2,520,633
Liabilities and Shareholders' Equity
Current Liabilities:
Payable to suppliers and others $530,305 $450,642
Notes payable and current portion
of long-term debt 93,754 201,367
Taxes on income 17,293 27,585
641,352 679,594
Long-term debt 813,207 473,220
Pension and other postretirement benefits 148,214 137,494
Deferred income taxes and other 292,915 216,165
Shareholders' equity 1,152,879 1,014,160
$3,048,567 $2,520,633
Prior year data has been reclassified to conform to the current year
presentation.
FINANCIAL SEGMENT INFORMATION (Unaudited)
(Dollars in thousands)
THREE MONTHS ENDED TWELVE MONTHS ENDED
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
Net Sales
Consumer Packaging $311,619 $279,179 $1,132,070 $1,044,382
Engineered Carriers
and Paper 389,414 332,718 1,388,512 1,259,832
Packaging Services 100,024 46,781 321,045 184,620
All Other Sonoco 83,941 71,286 313,806 269,492
Consolidated $884,998 $729,964 $3,155,433 $2,758,326
Income before Income Taxes:
Consumer Packaging --
Operating Profit $24,622 $18,520 $83,111 $78,733
Engineered Carriers and
Paper -- Operating Profit 24,214 26,092 113,032 102,937
Packaging Services --
Operating Profit 10,903 1,709 30,266 7,935
All Other Sonoco --
Operating Profit 8,389 4,482 31,978 18,995
Restructuring charges (10,738) (16,921) (18,982) (50,056)
Interest, net (11,280) (11,947) (42,063) (50,211)
Consolidated $46,110 $21,935 $197,342 $108,333
Prior year 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 operations (net of income taxes)."
SOURCE Sonoco
Allan V. Cecil, Vice President, Sonoco, +1-843-383-7524, or allan.cecil@sonoco.com
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