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SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended April 3, 1994 Commission File No. 0-516
SONOCO PRODUCTS COMPANY
__________
Incorporated under the laws I.R.S. Employer Identification
of South Carolina No. 57-0248420
Post Office Box 160
Hartsville, South Carolina 29551-0160
Telephone: 803-383-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock at April 3, 1994:
Common stock, no par value: 86,890,841
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SONOCO PRODUCTS COMPANY
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets - April 3, 1994 and
December 31, 1993 3
Consolidated Statements of Income -
Three Months Ended April 3, 1994 and
April 4, 1993 4
Consolidated Statements of Cash Flows -
Three Months Ended April 3, 1994 and
April 4, 1993 5 - 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 10
PART II. OTHER INFORMATION 11
SIGNATURE 12
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SONOCO PRODUCTS COMPANY
CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars and shares in thousands)
April 3, December 31,
Assets 1994 1993
------ -------- ------------
Current Assets
Cash and cash equivalents $ 35,499 $ 25,858
Receivables 275,323 255,617
Inventories
Finished and in process 88,108 83,660
Materials and supplies 99,631 102,465
Prepaid expenses 31,920 30,750
Deferred income taxes 14,240 14,760
---------- ----------
544,721 513,110
Property, Plant and Equipment 734,846 737,154
Cost in Excess of Fair Value of Assets Purchased 336,780 339,653
Other Assets 126,775 117,208
---------- ----------
Total Assets $1,743,122 $1,707,125
========== ==========
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities
Payable to suppliers $ 128,197 $ 129,389
Accrued expenses and other 70,524 60,407
Accrued wages and other compensation 14,650 22,633
Restructuring reserve 19,600 27,114
Notes payable and current portion of
long-term debt 53,555 60,564
Taxes on income 17,397 3,071
---------- ----------
303,923 303,178
Long-Term Debt 491,852 455,262
Postretirement Benefit Obligation 100,311 99,165
Deferred Income Taxes and Other 60,096 61,156
Shareholders' Equity
Serial preferred stock, no par value
Authorized 30,000 shares
Issued 3,450 shares 172,500 172,500
Common shares, no par value
Authorized 150,000 shares
Issued 91,841 shares 7,175 7,175
Capital in excess of stated value 63,416 62,277
Translation of foreign currencies (39,961) (39,016)
Retained earnings 637,960 623,500
Treasury shares at cost
(1994 - 4,950 shares; 1993 - 4,394 shares) (54,150) (38,072)
---------- ----------
Total shareholders' equity 786,940 788,364
---------- ----------
Total liabilities and shareholders' equity $1,743,122 $1,707,125
========== ==========
See accompanying Notes to Consolidated Financial Statements
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SONOCO PRODUCTS COMPANY
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars and shares in thousands except per share)
Three Months Ended
------------------------
April 3, April 4,
1994 1993 *
-------- --------
Sales $537,372 $466,938
Cost of sales 423,763 365,222
Selling, general and administrative expenses 59,287 51,175
Interest expense 8,648 7,651
Interest income (319) (1,423)
-------- --------
Income from operations before income taxes 45,993 44,313
Taxes on income 18,000 17,700
-------- --------
Income from operations before equity in
earnings of affiliates 27,993 26,613
Equity in earnings of affiliates 107 295
-------- --------
Net income 28,100 26,908
Preferred dividends (1,941)
-------- --------
Net income available to common shareholders $ 26,159 $ 26,908
======== ========
Per common share
- - ----------------
Net income available to common shareholders $.30 $.31
Dividends - common $.135 $.125
Average common shares outstanding 87,178 87,196
* First quarter of 1993 restated to reflect the reclassification of certain
costs.
See accompanying Notes to Consolidated Financial Statements
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SONOCO PRODUCTS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
April 3, April 4,
1994 1993
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities
- - ------------------------------------
Net income $ 28,100 $ 26,908
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation, depletion and amortization 27,603 21,687
Equity in earnings of affiliates (107) (295)
Deferred taxes (75) 525
Loss on retired assets 674
Changes in assets and liabilities, net of
effects from acquisitions, dispositions
and foreign currency adjustments:
Accounts receivable (20,316) (6,957)
Inventories (1,473) 2,662
Prepaid expenses (1,199) 5,652
Payables and taxes 7,553 (4,366)
Other assets and liabilities (7,245) (1,334)
-------- ---------
Net cash provided by operating activities 33,515 44,482
Cash Flows From Investing Activities
- - ------------------------------------
Purchase of property, plant and equipment (25,479) (21,875)
Cost of acquisitions, exclusive of cash (100,500)
Proceeds from sale of assets 1,636
-------- ---------
Net cash used by investing activities (23,843) (122,375)
Cash Flows From Financing Activities
- - ------------------------------------
Proceeds from issuance of debt 39,018 91,039
Principal repayment of debt (8,926) (14,498)
Cash dividends (13,618) (10,900)
Treasury shares acquired (17,813)
Treasury shares issued 1,533 1,012
-------- ---------
Net cash provided by financing activities 194 66,653
Effects of Exchange Rate Changes on Cash (225) (3,999)
-------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 9,641 (15,239)
Cash and cash equivalents at beginning of period 25,858 38,068
-------- ---------
Cash and cash equivalents at end of period $ 35,499 $ 22,829
======== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
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SONOCO PRODUCTS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited), continued
(Dollars in thousands)
Supplemental Cash Flow Disclosures:
Three Months Ended
------------------------
April 3, April 4,
1994 1993
-------- --------
Interest paid $8,577 $8,019
Income taxes paid 3,628 3,695
See accompanying Notes to Consolidated Financial Statements
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SONOCO PRODUCTS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1: Basis of Interim Presentation
In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to
present fairly the financial position and results of operations for
the interim periods reported hereon. These consolidated financial
statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the
Company's annual report for the fiscal year ended December 31,
1993.
NOTE 2: Dividend Declarations
On April 20, 1994, the Board of Directors increased the quarterly
common stock dividend from $.135 to $.14 per share, payable
June 10 to shareholders of record May 20. The Board also declared
a dividend of $.5625 per share on the $2.25 Series A Cumulative
Convertible Preferred Stock payable August 1, 1994, to shareholders
of record as of July 15, 1994.
NOTE 3: Pending Acquisition
On March 2, 1994, the Company announced the offer made to
purchase M. Harland & Son Limited, one of the United Kingdom's
leading producers of pressure-sensitive roll labels and one of the
world's leading manufacturers of roll-label application equipment.
Headquartered in the United Kingdom, the Harland Group has
estimated annual sales of $32 million. The offer is subject to
approval of each company's board of directors, satisfactory due
diligence by Sonoco and negotiation and execution of a definitive
purchase agreement.
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SONOCO PRODUCTS COMPANY
Management's Discussion and Analysis of Financial Condition and Results of
- - --------------------------------------------------------------------------
Operations (unaudited)
- - ----------
April 1994 Year-to-Date Compared with April 1993 Year-to-Date
-------------------------------------------------------------
Results of Operations
- - ---------------------
Consolidated net sales for the first quarter of 1994 were $537.4 million
compared with $466.9 million reported for the same period last year. Net
income for the quarter was $28.1 million compared with 1993 first quarter's
$26.9 million. First quarter income available to common shareholders after
preferred dividends was $26.2 million in 1994. Earnings per share (EPS) were
$.30 compared with $.31 in last year's first quarter.
Converted Products Segment
Trade sales for the converted products segment were $365.2 million, a 28.6%
increase over 1993's first-quarter sales of $284.1 million. Operating profits
were $35.6 million compared with $29.7 million in 1993. The increase in sales
and profits for this segment reflects the year-to-year impact of the
acquisitions of Engraph and Crellin, as well as increased demand in some
traditional product lines.
Volume has remained strong in the consumer operations. The composite can
operations continued the good performance of recent quarters with strong volume
in nuts, snacks and juice concentrates, offsetting shortfalls in the powdered
beverages and shortening markets. Sales of caulking cartridges, which are tied
closely to housing construction, remained strong.
Engraph, Sonoco's newest acquisition and a producer of pressure-sensitive
labels and coupons, screen process printing, flexible packaging and paperboard
cartons and specialties, had a good first quarter with increased business in
the health-care and personal-care markets in both labels and cartons. The
coupon business has been down since the loss of significant volume in the
tobacco industry. Engraph has been slowly replacing the tobacco coupon
business with increased sales in beverage coupons and extended text labels.
Volume was up in the tube and core business, reflecting increased demand for
paper mill cores, textile tubes and tape cores. Volume was off in textile
cones. Sales of packaging forms increased with the addition of several major
appliance manufacturers as customers. Fibre drum volume declined as sales
shifted in part to plastic drums and intermediate bulk containers, which both
had volume increases during the quarter.
Crellin, a manufacturer of injection molded plastic products, experienced good
growth in most product segments during the quarter, especially textiles, wire,
filtration and automotive.
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SONOCO PRODUCTS COMPANY
Management's Discussion and Analysis of Financial Condition and Results of
- - --------------------------------------------------------------------------
Operations (unaudited), continued
- - ----------
Results of Operations, continued
- - ---------------------
Paper Segment
Total domestic paper sales were $71.3 million compared with $72.1 million in
1993. Operating profits were $13.7 million, down from $14.8 million in 1993.
The decline in sales and profits is primarily the result of lower selling
prices in specialty paperboard grades. A corrugating medium price increase was
implemented late in 1993, but prices in the first quarter of 1994 were still
below first quarter 1993 levels. Another corrugating medium industry price
increase is scheduled for May and should result in improvement in this segment.
Volume was up in cylinder board as internal sales increased with the improving
business in the converting operations.
International Segment
Sales in the international segment were $89.4 million, down from $97.1 million
in 1993. The decrease in sales is due to the disposition of several business
units during 1993, as well as the stronger dollar. Sales from ongoing
operations were ahead of the prior year because of acquisitions and growth in
several geographic areas. Sales were down in international paper operations
due to the closing of two paper mills and lower selling prices. Operating
profits for the international segment were $5.1 million compared with $3.1
million in 1993. Profits were down in the paper operations, but they were
offset by improved profits in the converting operations in certain geographic
areas. Despite the profit increase, European operations continue to be
negatively affected by the consolidation and restructuring of several
operations. Significant effort is being focused on operating efficiencies, and
there should be additional profit improvement as consolidation results begin to
take effect later this year. Also, a major portion of the increase is due to
the elimination of the one-month reporting lag in late 1993.
Miscellaneous Segment
Trade sales for the miscellaneous segment were $56.2 million compared with $57
million in 1993. Operating profits were $5.5 million, down from $7.5 million
reported last year. Lower selling prices for plastic grocery bags were a
factor in the decline of sales and profits in the miscellaneous segment.
Volume was up slightly in this segment with the plastic bag plants operating at
near-capacity levels.
Sonoco's Baker Division, which manufactures reels for the wire and cable
industry, showed a good increase in sales as the CATV business and home
construction have been very strong.
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SONOCO PRODUCTS COMPANY
Management's Discussion and Analysis of Financial Condition and Results of
- - --------------------------------------------------------------------------
Operations (unaudited), continued
- - ----------
Results of Operations, continued
- - ---------------------
Corporate
Interest income, interest expense and unallocated corporate expenses are
excluded from the operating profits by segment and are captured in the
corporate segment. Total expenses, net of income, for the corporate segment
were $13.9 million, up from $10.8 million in 1993. Corporate interest expense
increased, reflecting the debt incurred with the Engraph acquisition. There
was also reduced interest income due to the early payment of the Sonoco Graham
note in November 1993.
Liquidity and Capital Resources
- - -------------------------------
The Company's financial position remained strong through the first quarter.
The debt to capital percentage increased to 39.5% at April 3, 1994, from 38% at
December 31, 1993. Debt increased primarily as a result of purchasing $17.8
million of the Company's common shares during the first quarter of 1994.
The Company expects internally generated cash flow along with borrowings
available under its existing credit facilities to be sufficient to meet
operating and normal capital expenditure requirements, as well as the funds
needed for the pending acquisition of M. Harland & Son Limited described in
Note 3.
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SONOCO PRODUCTS COMPANY
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company's annual meeting was held on April 20, 1994. At this meeting the
following matters were approved by the shareholders:
(1) Directors elected to three-year terms included C. W. Coker, A. T.
Dickson, R. E. Elberson, J. C. Fort, and R. C. King, Jr. Elected to a
one-year term was Leo Benatar.
(2) Coopers & Lybrand, Certified Public Accountants, was re-elected as
the independent auditors of the corporation.
(3) The shareholders of the Company also approved amendments to the
Company's Restated Articles of Incorporation and By Laws to the
following effect:
- Deletes the present fifteen person maximum number of
directors the Company can have,
- Gives the directors the ability to set the size of the Board
of Directors, as well as to create and fill vacancies on the Board
of Directors,
- Requires that nominations for directors to be elected at any
Annual Meeting of Shareholders, other than incumbent directors, be
made in writing at least sixty days prior to the Annual Meeting,
and
- Recognizes that the holders of the Company's $2.25
Cumulative Convertible Preferred Stock have been given the right
to elect two directors during any period in which payment of
dividends on the Preferred Stock is in arrears, and makes it clear
that any such directors are in addition to the directors elected
by the Common Shareholders.
Item 6. Exhibits and Reports on Form 8-K Page
-------------------------------- ----
(a) Exhibit (11) - Computation of Earnings Per Share 13
(b) There were no reports on Form 8-K filed by the Company
for the three months ended April 3, 1994.
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SONOCO PRODUCTS COMPANY
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SONOCO PRODUCTS COMPANY
----------------------------------------
(Registrant)
Date: May 13, 1994 By: /s/ F. T. Hill, Jr.
----------------- -------------------------------------
F. T. Hill, Jr.
Vice President - Finance
(and Principal Accounting
Officer, in his respective
capacities as such)
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Exhibit (11)
SONOCO PRODUCTS COMPANY
Computation of Earnings Per Share* (unaudited)
(Dollars in thousands, except per share)
Three Months Ended
-----------------------
April 3, April 4,
1994 (A) 1993
-------- --------
Primary earnings
- - ----------------
Net income available to common shareholders $ 26,159 $ 26,908
======== ========
Common shares
Weighted average number of shares outstanding 87,177,770 87,196,164
Assuming exercise of options (at average
price) reduced by the number of shares
which could have been purchased with
proceeds from exercise of such options 1,269,834 1,019,981
---------- ----------
Weighted average number of shares
outstanding as adjusted 88,447,604 88,216,145
========== ==========
Primary earnings per common share $.30 $.31
==== ====
Assuming full dilution
- - ----------------------
Net income available to common shareholders $26,159 $26,908
======= =======
Common shares
Weighted average number of shares outstanding 87,177,770 87,196,164
Assuming exercise of options (at the higher
of the end-of-period price or the
average) reduced by the number of shares
which could have been purchased with
proceeds from exercise of such options 1,269,834 1,019,981
---------- ----------
Weighted average number of shares
outstanding as adjusted 88,447,604 88,216,145
========== ==========
Earnings per common share assuming
full dilution $.30 $.31
==== ====
(A) The Company issued 3,450,000 shares of Series A Cumulative Convertible
Preferred Stock in October 1993. The convertible preferred stock and the
related dividend had an anti-dilutive effect on earnings per share in
first quarter 1994 and are therefore excluded from the above computation.
* This calculation is submitted in accordance with Regulation S-K, Item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
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