1
COMPARATIVE HIGHLIGHTS (UNAUDITED)
Sonoco Products Company
YEARS ENDED DECEMBER 31
------------------------- %
(Dollars in thousands, except per share) 1995 1994 INCREASE
Net sales ................................................ $2,706,173 $2,300,127 17.7%
Gross profit ............................................. 599,186 496,700 20.6%
Net income available to common shareholders .............. 156,756 122,086 28.4%
Return on common equity .................................. 22.2% 19.1% 16.2%
Return on total equity (including
preferred stock) ....................................... 18.7% 16.0% 16.9%
Return on net sales ...................................... 6.1% 5.6% 8.9%
Return on net assets ..................................... 10.4% 8.8% 18.2%
Approximate number of employees .......................... 19,000 17,200 10.5%
Approximate number of locations .......................... 270 250 8.0%
Per common share
- ----------------
Net income available to common shareholders:
- Assuming no dilution ............................... 1.72 1.34 28.4%
- Assuming full dilution ............................. 1.64 1.31 25.2%
Cash dividends - common .................................. .58 .53 9.4%
Ending common stock market price ......................... 26.25 20.83 26.0%
Book value per common share .............................. 8.19 7.23 13.3%
Price/earnings ratio ..................................... 16.01 15.90 .7%
=========================================================================================================
SELECTED QUARTERLY FINANCIAL DATA FIRST SECOND THIRD FOURTH
(Dollars in thousands, except per share) QUARTER QUARTER QUARTER QUARTER
1995
Net sales ........................................ $645,142 $691,726 $686,998 $682,307
Gross profit ..................................... 140,339 151,007 149,948 157,892
Net income available to
common shareholders ............................ 35,596 42,172 38,699 40,289
Per common share
- ----------------
Net income available to
common shareholders:
- Assuming no dilution ....................... .39 .46 .43 .44
- Assuming full dilution ..................... .37 .44 .41 .42
Cash dividends - common ........................ .133 .15 .15 .15
Market price - high ............................ 23.21 25.25 28.50 28.75
- low ............................. 19.11 22.74 24.50 23.75
=========================================================================================================
1994
Net sales ........................................ $537,372 $564,391 $591,178 $607,186
Gross profit ..................................... 113,609 121,994 124,710 136,387
Net income available to
common shareholders ............................ 26,159 30,895 30,568 34,464
Per common share
- ----------------
Net income available to
common shareholders:
- Assuming no dilution ....................... .29 .34 .33 .38
- Assuming full dilution ..................... .28 .33 .33 .37
Cash dividends - common ........................ .129 .133 .133 .133
Market price - high ............................ 24.52 21.67 22.86 22.62
- low ............................. 20.48 18.81 19.52 18.81
=========================================================================================================
Per share amounts restated to reflect the 5% common stock dividend on June 9,
1995.
SALES
(billions $)
[GRAPH]
SALES CLIMBED TO AN ALL-TIME HIGH OF $2.71 BILLION IN 1995.
NET INCOME
(millions $)
[GRAPH]
1995 WAS A RECORD YEAR FOR SONOCO. NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
INCREASED 28.4% TO $156.8 MILLION.
EARNINGS PER SHARE-
FULLY DILUTED
($)
[GRAPH]
EARNINGS PER SHARE IMPROVED 25.2% OVER 1994.
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Management's Discussion & Analysis
RESULTS OF OPERATIONS 1995-1994
................................................................................
Consolidated net sales for 1995 were $2.71 billion, a 17.7% increase, compared
with $2.3 billion in 1994.
A major portion of the sales increase in 1995 resulted from selling price
increases. These increases were necessary to recover unprecedented volatility
in raw material costs throughout the world. Volume increased in our
consumer-related businesses, but after a good start, weakened in the second
half of the year in our industrial markets. Several acquisitions increased 1995
sales by $83 million. On a full-year basis, those acquisitions are expected to
add $119 million in sales.
Gross profit margins improved to 22.1% from the 21.6% reported in 1994.
The margin increase reflects a combination of selling price and raw material
cost volatility during 1995. In the early part of the year, costs for primary
raw materials, such as recovered paper, plastic resins, aluminum and steel,
were extremely high, resulting in price increases, where possible. Later in the
year, there were selected price decreases to reflect the falling costs of some
raw materials. On balance, Sonoco was able to improve overall gross margin
percentages slightly. In addition, productivity improvements resulting from
capital expenditures in many operations and technology enhancements were
factors in the gross margin improvement.
Selling, general and administrative costs include company-owned life
insurance (COLI), which is discussed in Note 8 to the Consolidated Financial
Statements. In addition, a major business redesign effort in the Global
Industrial Products and Paper operations, called Process Excellence, resulted
in consulting and other costs totalling $10 million in 1995, or approximately
$.06 per share, assuming full dilution. Excluding the COLI and Process
Excellence costs, selling, general and administrative expenses would have
dropped to 10% of sales in 1995, compared with 10.7% in 1994, reflecting
continued emphasis on cost and headcount levels. The Company expects savings
from Process Excellence to offset any additional costs in 1996 and to result in
gains to income beginning in 1997.
[PHOTO]
Sonoco listed on the New York Stock Exchange in 1995. (l-r) Michael Davis,
stock specialist with Spear, Leeds & Kellogg; Nora Sisk, NYSE representative,
and Trent Hill, Sonoco CFO, discuss the Sonoco listing.
Net income for 1995 was $156.8 million, or $1.64 per share, assuming full
dilution, a 25.2% increase in earnings per share over the $122.1 million, or
$1.31 per share for 1994. The per share numbers reflect full dilution assuming
the conversion of all preferred shares issued to finance the Engraph
acquisition and the assumed exercise of all stock options under the Company's
stock programs. Assuming no dilution, earnings per share for 1995 were $1.72,
compared with $1.34 for 1994, an increase of 28.4%.
Capital expenditures in 1995 increased to $181.4 million, compared with
$126.7 million in 1994. This increased spending included projects to expand
capacity and introduce new technology in many business units. Further details
are included in the Segment Reporting section. The Company expects to increase
capital investment during the next two years to approximately $250 million per
year. These capital spending increases support the Vision 2000 objective of
doubling sales and earnings. A key change in Vision 2000 is a higher proportion
of growth coming from internal opportunities with less reliance on
acquisitions. With the higher internal growth emphasis, capital spending
increases are required to increase capacity and improve cost efficiency to
support that objective. The end result is expected to be higher returns on
invested capital, quicker realization of those returns and lower risk when
compared with acquisition alternatives.
Acquisition spending totaled $107 million in 1995. Acquisitions included a
label producer in New Jersey, a paper mill and three converting operations in
Brazil, a flexible packaging operation, geographic expansion of paper recovery
operations and additional operations in Europe.
[GRAPH]
NET SALES BY SEGMENT
(millions $)
The sales increase in 1995 was
broad based with gains in
all segments.
Research and development costs charged to expense were $12.7 million for
1995.
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27
Management's Discussion & Analysis
compared with $12.1 million in 1994. Sonoco is committed to technology
leadership in its businesses and is enhancing its technical expertise in both
consumer packaging and industrial packaging. The new pressure-sensitive label
and flexible packaging businesses are two areas receiving additional research
and development spending.
The Company's effective tax rate in 1995 was 39.4%, compared with 39.1% in
1994. Tax benefits from the COLI program are included in the tax rates for both
years. Proposed legislation would eliminate the tax-favored status of this
program, if enacted.
Segment Reporting
The following segmental data includes the converted products segment, the
paper segment, the international segment and corporate.
The converted products segment consists of the following domestic
businesses, all of which are described in the Operations Review: the Industrial
Products Division; the Consumer Products Division; Sonoco Flexible Packaging;
Sonoco Engraph; Industrial Container Division; High Density Film Products
Division; Crellin Molded and Extrusion Plastics Division; Fibre Partitions
Division; Protective Packaging Division; and the Baker Reels Division.
Converted products is the largest of Sonoco's business segments,
representing approximately 80% of the Company's consolidated sales and profits.
Trade sales in this segment were $1.96 billion in 1995, compared with $1.74
billion in 1994, an increase of 12.7%. This increase is due to volume increases
in the consumer-related businesses and selling price increases resulting from
increased materials costs. Acquisitions in 1995 added $37 million to sales.
The overall operating profit for the converted products segment was $215.6
million in 1995, compared with $188.5 million in 1994, an increase of 14.3%.
This segment was impacted by consulting fees for the Process Excellence
initiative. This initiative, which is explained in the Operations Review, will
result in significant changes in critical processes that will make the Company
even more efficient and responsive to customers.
Sales in the Industrial Products Division's tube and core businesses
increased approximately 18%, with nearly all product lines showing strength,
especially in the first half of the year. In the second half of 1995, volume
declined in comparison to the previous year, but increased selling prices
boosted the sales of these operations. Selling price increases were implemented
to recover the paperboard cost increases. Late in the year there were some
selling price decreases as paperboard costs declined.
[GRAPH]
IDENTIFIABLE ASSETS BY SEGMENT
(millions $)
Identifiable assets increased
in 1995 in all segments of
the Company.
In the Consumer Products Division, volume gains in the snack, refrigerated
dough, powdered beverage, miscellaneous food and caulk markets offset declines
in the shortening and concentrate markets. The sales increase for the year was
the result of volume gains plus price increases implemented due to rising
materials costs. This division implemented several projects that resulted in
significant productivity gains and is continuing its growth by introducing new
products, expanding current markets and converting self-manufacturers to Sonoco
composite cans.
Growth continued in Sonoco Flexible Packaging. Sales increases resulted
from volume increases, as the plant in Morristown, Tenn., continued to improve
its capacity utilization. In addition, the Company acquired the Edinburgh,
Ind., plant from Hargro, Inc. early in 1995, and sales from this operation
boosted the flexible packaging performance. The Company added new rotogravure
presses at both the Morristown and Edinburgh plants that increased capacity and
productivity.
Sales and earnings continued to grow at double digit rates in the Sonoco
Engraph businesses, reflecting the growth potential of this operation. The
label and package insert business continued to grow in several different
markets. In October, Sonoco acquired Cricket Converters of Hightstown, N.J., a
producer of labels for the pharmaceutical and cosmetic markets. Sonoco Engraph
began consolidation of its various label businesses during the fourth quarter.
Benefits of consolidation include lower costs, increased technology focus and
improved customer responsiveness. Screen process printing showed sales and
earnings increases during the year in the beverage and fleet graphics markets.
The paperboard carton business continued to grow as new equipment was added to
provide more product identification options for customers. The glass cover and
coaster business remained strong.
The Industrial Container Division sales were up during the year. Most of
the sales growth reflected an increase in sales prices due to materials costs
increases in paperboard, steel and plastic resins. Volume was down in the fibre
drum operations, but increased in both the plastic drum and intermediate bulk
container operations. There was pressure on margins in this business due to
competitive pressures, including a trend to increase reuse of plastic
containers in several markets.
The High Density Film Products Division had sales gains in all markets
during 1995, with the gains in the grocery segment resulting from the exit of a
major competitor during 1994. The division installed additional
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Management's Discussion & Analysis
capacity to accommodate this business with much of that capacity coming on
line during 1995. In addition to gains in the grocery market, there were
increases in the convenience store, retail and agricultural film markets. Price
increases were implemented to recover increases in the cost of plastic resins
and ink. The division improved productivity, resulting from installation of new
machinery and full capacity utilization during the year. A second line was
added during the third quarter to produce agricultural film. In 1995, the
division began test markets with several major quick service restaurant chains
to test the use of plastic bags for takeout customers.
The Crellin Molded and Extrusion Plastics Division increased sales
slightly for the year but saw a decrease in profits because of an inability to
recover cost increases for plastic resins. While business did increase in the
automotive and filtration operations, it declined in the textile and wire and
cable markets.
The Fibre Partitions Division had increases in both sales and profits due
to continued progress in converting customers from traditional corrugated
partitions to solid fibre. In addition to the sales increase, there were
several projects to control costs and increase productivity throughout this
division. The Protective Packaging operations also increased both sales and
profits as demand for Sonopost(R) packaging forms remained strong in the major
appliance packaging market. The engineered cushion fibre business also
increased as conversions were made in both the small appliance and computer
peripherals markets.
The Baker Division's reel business saw a decrease in volume resulting from
a slowdown in the cable television and home building markets, but strong
productivity increases and cost control measures helped increase earnings.
Capital spending in this segment rose to $86.5 million from the $77.3
million in 1994. This increase was spread across the segment as new machinery
to add capacity or increase productivity was installed in nearly all the major
converting businesses.
Paper Segment
The paper segment represents all of Sonoco's domestic papermaking and
paper collection facilities. This includes the Company's 21 cylinder board
paper machines and one Fourdrinier machine in the United States. In addition,
this segment includes recovered paper collection sites operated through the
Company's paper mills or by its subsidiary, Paper Stock Dealers, Inc.
The Fourdrinier paper machine, located in Hartsville, S.C., is operated in
partnership with Georgia-Pacific Corporation. The annual capacity of this
machine is 176,000 tons, which is sold by contract to Georgia-Pacific.
[GRAPH]
OPERATING INCOME BY SEGMENT
(millions $)
All segments contributed to the
higher profit performance in 1995.
Operating income by segment has been restated to exclude 1992 Restructuring
Charges.
Sonoco has a capacity of approximately 750,000 tons per year of cylinder
board production in the United States mills. Approximately 80% of the board
produced by Sonoco's paper operations is sold to other Sonoco operations to be
converted into paperboard packaging.
The Company's Recycling and Reclamation operation (which includes the
Paper Stock Dealers subsidiary and the mill collection system) processed
approximately one and one-half million tons of recovered paper during 1995,
with more than half of that used in Sonoco's papermaking operations. In
addition to supplying Sonoco's needs, this group also supplies many large paper
mills in the Southeast. Because of the volatility in recovered paper costs and
supply, Sonoco's recovery system is a key competitive advantage, providing a
security of supply as well as a better control over the cost of this raw
material. The higher prices for recovered paper in the first half of 1995 added
to the overall sales and profits of this segment.
Total domestic paper sales, including both internal and external sales,
were $445.1 million in 1995, compared with $331 million in 1994, an increase of
34.5%. Operating profits for this segment increased 35.6% to $87.5 million in
1995, compared with $64.5 million in 1994.
There were two major factors affecting the performance of this division
during 1995: the volatile cost of recovered paper and the drop in volume during
the second half of the year. Recovered paper costs were at all-time highs
during the first half of 1995, resulting in several paperboard price increases.
At the same time, the higher recovered paper costs increased profits in the
paper collection operations. As prices for recovered paper decreased later in
the year, profits dropped significantly in the paper collection operations. The
domestic paper division operated at 96% capacity for the year. Volume decreases
during the second half of the year resulted in downtime, mostly in the fourth
quarter, reflecting slowing economic conditions.
Capital spending in this segment during 1995 was $37.4 million, compared
with $18.9 million in 1994. This spending included several projects to improve
productivity at mills in Hartsville, S.C.; Sumner, Wash.; Newport, Tenn. and
Holyoke, Mass. The major project to upgrade the capacity, quality and energy
generation in Hartsville was only about one-third completed at the end of 1995.
Three paper collection operations were acquired during the year to expand the
collection base geographically.
International Segment
The international segment includes all of Sonoco's non-U.S. operations.
The largest of
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Management's Discussion & Analysis
these operations are in Canada, the United Kingdom, France, Mexico, Australia,
Germany and a rapidly growing presence in Asia. These operations are similar to
the United States businesses in products and markets served.
Sales in 1995 in this segment were $566.3 million, compared with $431.2
million in 1994, a 31.3% increase. Operating profits increased to $42 million
from $15.7 million in 1994. Acquisitions in 1995 added approximately $42
million to sales.
The increase in sales and profits resulted from the acquisition of the
remaining 50% interest of the CMB/Sonoco joint venture for producing composite
cans in Europe, higher volume in most geographic areas and increased selling
prices to recover significant materials cost increases in the paper and paper
converting operations.
Business was strong in nearly all of the international operations during
1995, though there was some decline in volume in the industrial products and
paper operations in Europe toward the end of 1995.
Other acquisitions during the year included a small tube and paper
producer in France; a 25% interest in Demolli Industria Cartaria SRL, one of
Italy's leading tube makers; three tube manufacturing operations and a paper
mill in Brazil; and a composite can operation in Mexico. In the fourth quarter,
Sonoco Asia signed a joint venture agreement for a paper mill in Shanghai,
China. Internal expansion included increased composite can making capacity in
Venezuela and the start-up of an engineered cushion fibre operation in New
Zealand.
In early 1996, a joint venture to produce composite cans and other
converted paper products in Indonesia was signed. In addition, a new composite
can plant is scheduled to open in Belgium during the first half of 1996.
Capital spending in the international segment was $45 million, compared
with $27.7 million in 1994. The primary projects involved productivity upgrades
in Venezuela and Mexico in the composite can operations and rebuilding a paper
mill in France to improve productivity and quality.
Corporate
Interest income, interest expense and unallocated corporate expenses are
excluded from the operating profits by segment and are shown under Corporate.
Interest expense in 1995 was $44 million, compared with $35.9 million in
1994. This increase resulted primarily from higher debt levels and from
increasing the fixed rate mix of debt with the issuance of $100 million of
6.75% 15-year debentures in November 1995.
General corporate expense increased in 1995, primarily due to the
increased cost of the company-owned life insurance program (COLI). The tax
benefit from this program is reflected in the effective tax rate.
FINANCIAL POSITION, LIQUIDITY AND
CAPITAL RESOURCES 1995-1994
AND 1994-1993
................................................................................
Sonoco's financial position remains strong. At December 31, 1995, the Company's
long-term debt was rated A+ by Standard & Poor's (S&P) and A2 by Moody's.
Commercial paper was rated A1 and P1 by S&P and Moody's, respectively.
Cash provided by operations was $254.6 million in 1995, compared with
$219.5 million in 1994 and $162.8 million in 1993. The 1995 improvement in cash
flow was largely a result of higher net income. Cash provided by operations was
higher in 1994, compared with 1993, due to lower payables in 1993 and the
prepayment of $15 million in taxes that would have otherwise been payable in
1994. Earnings before interest and taxes were 7.2 times interest expense in
1995, compared with 6.9 times in 1994 and 7.2 times in 1993.
The debt to total capital ratio was 39.6% at December 31, 1995,
compared with 38.1% and 38% at December 31, 1994 and 1993, respectively. The
1995 ratio adjusts debt levels for excess cash at year-end related to the
issuance of restricted-purpose bonds. Debt increased $139.4 million to $686.8
million at December 31, 1995, primarily due to funding acquisitions of $107.2
million, as well as increased capital spending and an increase in cash and cash
equivalents. Debt increased $31.6 million to $547.4 million at December 31,
1994, primarily due to the purchase of $29.5 million of Company stock and to
fund $30.4 million in acquisitions. Capital spending was $181.4 million in
1995, compared with $126.7 million in 1994 and $115.6 million in 1993.
In June 1995, the Company issued $35.1 million of 6.125% Industrial
Revenue Bonds (IRBs) due June 1, 2025. As of December 31, 1995, $30.9 million
of the proceeds from the IRBs were being held in trust until qualifying
expenditures took place, explaining most of the increase in cash and cash
equivalents. In November 1995, the Company issued $100 million of 6.75%
Debentures due November 1, 2010, in order to lengthen the maturities of the
Company's indebtedness. The net proceeds from this issue were used to reduce
outstanding commercial paper obligations. During 1995, the Company increased
its authorized commercial paper program from $250 million to $300 million and
has fully committed bank lines of credit supporting the program by a like
amount.
The Company expects internally generated cash flow along with borrowings
under its existing credit facilities to be sufficient to meet operating and
normal capital expenditure requirements in the future. Capital spending for
1996 is expected to be approximately $250 million.
While Vision 2000 focuses on higher internal growth, small tactical
acquisitions will continue to be a part of the Company's
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30
Management's Discussion & Analysis
strategy for growth. The Company expects to acquire additional businesses
with market and technology positions consistent with its overall goals and
strategies.
Net working capital increased to $229.3 million at December 31, 1995, from
$222.1 million in 1994 and $209.9 million in 1993. The current ratio was
1.5 at December 31, 1995, compared with 1.6 and 1.7 at December 31, 1994 and
1993, respectively. Current assets increased in 1995 largely as a result of
business growth and selling price increases implemented during 1995, plus
excess cash, as explained above. Current liabilities increased primarily as a
result of higher notes and taxes payable. Notes payable increased as a result
of using short-term bank lines in place of long-term debt. Taxes payable
increased primarily due to the higher profitability levels and
reclassifications from deferred taxes to taxes payable.
Shareholders' equity increased $86.5 million to $918.7 million at December
31, 1995, as a result of $164.5 million in earnings, reduced by common and
preferred cash dividends of $60.9 million, the repurchase of $18.7 million of
the Company's stock and a translation adjustment of $9.7 million. The
translation adjustment was primarily due to the devaluation of the Mexican
peso. In 1994, shareholders' equity increased $43.9 million to $832.2 million,
primarily from $129.8 million in earnings, offset by common and preferred
dividend payments of $56 million, the repurchase of $29.5 million of the
Company's stock and a translation adjustment of $7.2 million.
In April 1995, the Board of Directors declared a 5% common stock dividend
and increased the dividend payable to common shareholders to $.15 per share
from the $.13 per share that had been paid since the second quarter of 1994.
The Company's policy is to increase dividends as earnings grow. The return on
common equity was 22.2% in 1995, compared with 19.1% in 1994 and 19.9% in 1993.
Assuming the conversion of preferred stock, return on total equity was 18.7% in
1995, compared with 16% in 1994 and 19% in 1993. The book value per common
share was $8.19 in 1995, compared with $7.23 in 1994 and $6.71 in 1993.
The Company is exposed to interest rate fluctuations as a result of using
debt as a major source of financing its operations. When necessary, the Company
will use traditional, unleveraged interest rate swaps to manage its mix of
fixed and variable rate debt to ensure exposure to interest rate movements is
maintained within established ranges. The Company is also subject to risk due
to foreign exchange rate changes as a result of operating globally. The Company
monitors these exposures and can use traditional currency swaps and forward
foreign exchange contracts to hedge a portion of the net investment in foreign
subsidiaries or to hedge firm commitments denominated in foreign currencies.
Use of these financial instruments was not material to the financial statements
as a whole as of December 31, 1995 or 1994.
[GRAPH]
CAPITAL SPENDING BY SEGMENT
(millions $)
In 1995, capital spending increased
in all segments as projects to
expand capacity and introduce
technology were undertaken
In October 1995, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation" (FAS
123). The Company did not elect early adoption of this standard in 1995. The
standard encourages companies to adopt a fair value based method of accounting
for stock compensation plans. However, a company may continue following the
current accounting prescribed by APB Opinion No. 25 and disclose the impact of
fair value accounting on its stock plans. The Company is evaluating the options
allowed under this standard and plans to implement this standard in 1996.
Except for the impact of raw materials prices, as discussed in the segmental
information, inflation did not have a material impact on the Company's
operations in 1995, 1994 or 1993.
The Company is subject to various federal, state and local environmental
laws and regulations concerning, among other matters, wastewater effluent and
air emissions. Compliance costs have not been significant due to the nature of
the materials and processes used in manufacturing operations. Such laws also
make generators of hazardous wastes, and their legal successors, financially
responsible for the clean-up of sites contaminated by those wastes. The Company
has been named a potentially responsible party at several environmentally
contaminated sites primarily located in the Northeast and owned by third
parties. These sites are believed to represent the Company's largest potential
environmental liabilities. The Company has accrued $4.4 million as of December
31, 1995, with respect to these sites. In determining the amounts to accrue
with respect to such sites, the Company has considered: 1) the aggregate
potential clean-up costs in light of the joint and several liability to which
the Company may be subject, 2) the availability of insurance coverage, 3) the
likelihood that insurance coverage may be contested, 4) potential sources of
contribution and/or indemnification, 5) the periods in which claims for
recovery may be realized, 6) the financial condition of third parties from
which recovery is expected, 7) the identification of specific sites for
clean-up, 8) statutory defenses and 9) the status of federal and state
regulatory action. Due to the complexity of determining clean-up costs
associated with the sites, a reliable
7
31
Management's Discussion & Analysis
estimate of the ultimate cost to the Company cannot be determined; however,
costs will be accrued as necessary once reasonable estimates are determined.
Because it appears unlikely that these matters will be completely resolved in
the near future, and because they involve matters in areas of law and policy
that are constantly changing, any opinion the Company has regarding such
matters must necessarily be qualified to reflect the uncertainty. Nevertheless,
it is management's opinion (based on prior experiences with such matters; rough
estimates of counsel, consultants and others; the apparent ability and
obligation of other parties to share clean-up costs; and the Company's present
and estimated future financial position) that such costs, when finally
determined, will not have a material adverse effect on the consolidated
financial position of the Company.
RESULTS OF OPERATIONS 1994-1993
................................................................................
Consolidated net sales for 1994 were $2.3 billion, compared with $1.95 billion
in 1993, an increase of 18.1%. Several factors impact the sales comparison
between 1994 and 1993. Sales in 1994 included a full year of the Engraph
acquisition, completed in October 1993, as well as reductions from operations
closed in 1993. Sales in 1993 also increased because of the elimination of
Sonoco's historical reporting lag of one month for most international
operations, which resulted in 13 months of sales being reported during 1993.
Excluding the above factors, the sales gain in 1994 was 9.5%.
Net income for 1994 was $122.1 million, or $1.31 per share (assuming full
dilution). This included the expected first-year dilution for the Engraph
acquisition. Net income for 1993 of $117.6 million, or $1.26 per share
(assuming full dilution), included a one-time gain of $.04 per share from the
early repayment of the Graham note (see Note 3 to the Financial Statements).
Excluding the dilution, the one-time gain in 1993 and the elimination of the
international reporting lag, base operating income increased by 12%. Additional
information on sales and profits is included in the segment discussions below.
Capital expenditures increased to $126.7 million in 1994, compared with
$115.6 million in 1993. These expenditures were for projects to expand capacity
and introduce new technology.
Segment Reporting
Sonoco changed the segmental reporting in 1994 by combining the
miscellaneous segment with the converted products segment. The Company
determined the operations in both segments were converting businesses and,
given the small size of the miscellaneous segment, separate reporting was no
longer appropriate. The following segmental data includes the converted
products segment, the paper segment, the international segment and corporate.
Converted Products Segment
Trade sales in this segment were $1.74 billion compared with $1.44 billion
in 1993, an increase of 20.8%. The key factors affecting this sales increase
included additional volume in nearly every business, the full-year sales impact
for Engraph, acquired in October 1993, and higher selling prices.
The overall operating profit for the converted products segment was $188.5
million, compared with $157.4 million in 1993, an increase of 19.7%.
Capital spending rose to $77.3 million in this segment, up from $47
million in 1993. Much of this spending was to implement new manufacturing
processes in the tube and core business, to cover start-up plants in the
protective packaging area and to add equipment and facilities in the Engraph
operations.
Paper Segment
Total domestic paper sales, including both internal and external, for
1994 were $331 million, compared with $278.9 million in 1993, an 18.7%
increase. Operating profits increased 11.5% to $64.5 million in 1994 from $57.9
million in 1993.
Capital spending in this segment during 1994 was $18.9 million,
compared with $20.5 million in 1993.
International Segment
Sales in 1994 were $431.2 million, compared with $404.1 million in 1993.
Due to the elimination of a one-month historical reporting lag, 13 months of
sales were included in 1993 for many international operations. Several
businesses were sold in 1993, impacting the year-to-year comparison. Excluding
the above, the sales gain for 1994 was 16.5%. Operating profits increased 31.9%
to $15.7 million in 1994 from $11.9 million in 1993.
Capital spending in the international segment was $27.7 million, compared
with $41.2 million in 1993. The primary projects focused on process
improvements at plants in Mexico, Canada, Germany and France.
Corporate
Interest expense in 1994 was $35.9 million, compared with $31.2 million in
1993, a result of higher average debt levels, primarily due to acquisitions,
offset partially by the impact of a lower average cost of funds. Although
short-term rates were higher in 1994, the Company benefited from the favorable
impact of the prepayment of the 9.3% privately placed notes in November 1993
and the maturing of various fixed-rate instruments in 1994. Interest income was
lower in 1994 due to the early repayment of the Graham note in November 1993.
The repayment of this note resulted in a $5.8 million gain (net of certain
corporate charges), which was included in general corporate expense in 1993.
General corporate expense increased in 1994 due primarily to the pretax cost of
a broad-based, company-owned life insurance program. The tax benefit from this
program was reflected in the effective tax rate.
8
32
SELECTED ELEVEN-YEAR FINANCIAL DATA
Sonoco Products Company
(Dollars and shares in thousands except per share data) 1995 1994 1993* 1992*
Operating Results --------------------------------------------------------------
Net sales ......................................................... $ 2,706,173 $ 2,300,127 $ 1,947,224 $ 1,838,026
Cost of sales and operating expenses .............................. 2,396,284 2,055,734 1,734,980 1,641,075
Interest expense .................................................. 44,004 35,861 31,154 30,364
Interest income ................................................... (4,905) (2,398) (6,017) (6,416)
Unusual items* .................................................... (5,800) 42,000
--------------------------------------------------------------
Income from operations before income taxes ........................ 270,790 210,930 192,907 131,003
Taxes on income ................................................... 106,640 82,500 75,200 51,800
Equity in earnings of affiliates .................................. 369 1,419 1,127 2,048
--------------------------------------------------------------
Income before cumulative effect of changes
in accounting principles ........................................ 164,519 129,849 118,834 81,251
Cumulative effect of changes in accounting principles
(FAS 106 and FAS 109) ........................................... (37,892)
--------------------------------------------------------------
Net income ........................................................ 164,519 129,849 118,834 43,359
Preferred dividends ............................................... (7,763) (7,763) (1,264)
--------------------------------------------------------------
Net income available to common shareholders ....................... 156,756 122,086 117,570 43,359
Returns before cumulative effect of changes
in accounting principles
Return on common equity ....................................... 22.2% 19.1% 19.9% 13.7%
Return on total equity (including preferred stock) ............ 18.7% 16.0% 19.0% 13.7%
Return on net sales ........................................... 6.1% 5.6% 6.1% 4.4%
Per common share
Income before cumulative effect of changes in
accounting principles ......................................... 1.72 1.34 1.28 .89
Cumulative effect of changes in accounting principles ........... (.41)
--------------------------------------------------------------
Net income available to common shareholders:
Assuming no dilution .......................................... 1.72 1.34 1.28 .48
Assuming full dilution ........................................ 1.64 1.31 1.26 .47
Cash dividends declared - common ................................ .58 .53 .51 .47
Average common shares outstanding:
Assuming no dilution .......................................... 91,139 91,445 91,681 91,069
Assuming full dilution ........................................ 100,386 99,473 99,737 92,214
Actual common shares outstanding at December 31 ................... 91,117 91,254 91,819 91,501
==============================================================
Financial Position
Net working capital ............................................... 229,328 222,068 209,932 152,478
Property, plant and equipment ..................................... 865,629 763,109 737,154 614,018
Total assets ...................................................... 2,115,413 1,835,053 1,707,125 1,246,531
Long-term debt .................................................... 591,894 487,959 455,262 240,982
Shareholders' equity .............................................. 918,749 832,218 788,364 561,890
Current ratio ..................................................... 1.5 1.6 1.7 1.5
Total debt to total capital ....................................... 39.6%** 38.1% 38.0% 35.1%
Book value per common share ....................................... 8.19 7.23 6.71 6.14
==============================================================
Other Data
Depreciation, depletion and amortization expense .................. 125,836 112,797 95,745 83,309
Cash dividends declared - common .................................. 53,145 48,287 46,333 42,443
Market price per common share (ending) ............................ 26.25 20.83 20.95 22.74
==============================================================
*Included in 1993 and 1991 were gains on the sale of Sonoco Graham (see Note
3 to the Consolidated Financial Statements). Also includes restructuring
charges of $42,000 pretax, or $25,000 after-tax, in 1992 and $75,000 pretax,
or $54,650 after-tax, in 1990. In 1987, includes acquisition consolidation
charges of $10 million pretax, or $5,600 after-tax.
**Debt levels adjusted for excess cash at year-end related to the issuance of
restricted-purpose bonds.
Prior years' data adjusted for stock splits and stock dividends.
9
33
1991* 1990* 1989 1988 1987* 1986 1985
- -----------------------------------------------------------------------------------------------------------
$ 1,697,058 $ 1,669,142 $ 1,655,830 $ 1,599,751 $ 1,312,052 $ 963,796 $ 869,598
1,528,543 1,481,271 1,470,877 1,413,912 1,174,777 858,680 773,910
28,186 28,073 29,440 25,175 18,593 8,552 8,686
(6,870) (2,196) (2,573) (1,517) (1,045) (602) (1,782)
(8,525) 75,000 10,000
- -----------------------------------------------------------------------------------------------------------
155,724 86,994 158,086 162,181 109,727 97,166 88,784
63,600 43,934 60,906 67,029 48,714 44,435 41,871
2,681 7,308 6,381 1,125 469 1,945 2,496
- -----------------------------------------------------------------------------------------------------------
94,805 50,368 103,561 96,277 61,482 54,676 49,409
- -----------------------------------------------------------------------------------------------------------
94,805 50,368 103,561 96,277 61,482 54,676 49,409
- -----------------------------------------------------------------------------------------------------------
94,805 50,368 103,561 96,277 61,482 54,676 49,409
17.8% 9.6% 21.3% 23.0% 17.0% 17.4% 17.7%
17.8% 9.6% 21.3% 23.0% 17.0% 17.4% 17.7%
5.6% 3.0% 6.3% 6.0% 4.7% 5.7% 5.7%
1.05 .55 1.12 1.05 .67 .59 .54
- -----------------------------------------------------------------------------------------------------------
1.05 .55 1.12 1.05 .67 .59 .54
1.04 .55 1.11 1.04 .66 .59 .54
.44 .43 .39 .30 .24 .20 .17
90,620 91,464 92,184 92,014 92,117 91,993 91,822
91,114 91,963 93,060 92,884 92,645 92,479 92,091
90,815 90,405 91,826 92,108 91,908 92,017 91,960
===========================================================================================================
163,860 184,066 193,035 188,085 143,972 104,614 105,070
580,787 562,591 494,290 533,427 482,357 267,353 245,990
1,135,940 1,113,594 995,132 977,459 877,625 559,459 500,833
227,528 279,135 226,240 275,535 263,489 58,440 73,383
562,306 512,828 511,574 454,486 379,912 332,890 295,743
1.6 1.7 2.1 2.0 1.8 1.9 2.1
30.6% 34.7% 30.4% 36.8% 38.6% 17.7% 19.9%
6.19 5.67 5.57 4.93 4.13 3.62 3.22
===========================================================================================================
76,561 72,152 67,263 69,055 57,086 35,654 31,182
39,703 39,216 35,583 28,046 21,942 17,963 15,746
16.43 15.48 17.62 16.31 10.12 9.05 7.32
===========================================================================================================
10
34
CONSOLIDATED BALANCE SHEETS
Sonoco Products Company
December 31
--------------------------
(Dollars and shares in thousands) 1995 1994
ASSETS --------------------------
CURRENT ASSETS
Cash and cash equivalents ................................................ $ 61,624 $ 28,444
Trade accounts receivable, net of allowances ............................. 314,207 270,439
Other receivables ........................................................ 17,074 20,211
Inventories
Finished and in process................................................. 103,073 86,238
Materials and supplies ................................................. 128,403 121,424
Prepaid expenses ......................................................... 21,277 29,943
Deferred income taxes .................................................... 16,125 14,012
--------------------------
661,783 570,711
PROPERTY, PLANT AND EQUIPMENT, NET ........................................ 865,629 763,109
COST IN EXCESS OF FAIR VALUE OF ASSETS PURCHASED, NET ..................... 411,343 358,965
OTHER ASSETS .............................................................. 176,658 142,268
--------------------------
$ 2,115,413 $ 1,835,053
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to suppliers ..................................................... $ 149,512 $ 158,098
Accrued expenses and other ............................................... 105,750 83,268
Accrued wages and other compensation ..................................... 30,885 30,855
Notes payable and current portion of long-term debt ...................... 94,898 59,421
Taxes on income .......................................................... 51,410 17,001
--------------------------
432,455 348,643
LONG-TERM DEBT ............................................................ 591,894 487,959
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS ............................... 103,898 104,179
DEFERRED INCOME TAXES AND OTHER ........................................... 68,417 62,054
COMMITMENTS AND CONTINGENCIES
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 96,433 shares ................................................... 7,175 7,175
Capital in excess of stated value ........................................ 170,458 60,908
Translation of foreign currencies ........................................ (55,925) (46,252)
Retained earnings ........................................................ 694,681 697,299
Treasury shares at cost (1995--5,316 SHARES; 1994--5,179 shares) ......... (70,140) (59,412)
--------------------------
918,749 832,218
--------------------------
$ 2,115,413 $ 1,835,053
==========================
Shares restated to reflect the 5% stock dividend on June 9, 1995.
The Notes beginning on page 38 are an integral part of these financial
statements.
11
CONSOLIDATED STATEMENTS OF INCOME 35
Sonoco Products Company
Years ended December 31
-----------------------------------------
(Dollars and shares in thousands except per share data) 1995 1994 1993
-----------------------------------------
Net sales ............................................................... $ 2,706,173 $ 2,300,127 $ 1,947,224
Cost of sales ........................................................... 2,106,987 1,803,427 1,525,671
Selling, general and administrative expenses ............................ 289,297 252,307 209,309
Interest expense ........................................................ 44,004 35,861 31,154
Interest income ......................................................... (4,905) (2,398) (6,017)
Unusual items ........................................................... (5,800)
-----------------------------------------
Income before income taxes .............................................. 270,790 210,930 192,907
Taxes on income ......................................................... 106,640 82,500 75,200
-----------------------------------------
Income before equity in earnings of affiliates .......................... 164,150 128,430 117,707
Equity in earnings of affiliates ........................................ 369 1,419 1,127
-----------------------------------------
Net income .............................................................. 164,519 129,849 118,834
Preferred dividends ..................................................... (7,763) (7,763) (1,264)
-----------------------------------------
Net income available to common shareholders ............................. $ 156,756 $ 122,086 $ 117,570
=========================================
Per common share
Net income available to common shareholders:
Assuming no dilution .................................................. $ 1.72 $ 1.34 $ 1.28
Assuming full dilution ................................................ $ 1.64 $ 1.31 $ 1.26
Cash dividends - common ................................................. $ .58 $ .53 $ .51
Average common shares outstanding:
Assuming no dilution .................................................... 91,139 91,445 91,681
Assuming full dilution .................................................. 100,386 99,473 99,737
Shares outstanding and per share data have been restated to reflect the 5%
stock dividend on June 9, 1995.
The Notes beginning on page 38 are an integral part of these financial
statements.
(GRAPH)
NET SALES
(billions $)
Net sales increased 17.7% in 1995
due to price increases, acquisitions and
volume gains in many operations.
(GRAPH)
NET INCOME
(millions $)
Net income has grown at a compound
annual growth rate of 13.4% since 1991.
Adjusted to exclude restructuring charges and
cumulative effect of accounting changes in 1992.
(GRAPH)
EARNINGS PER SHARE - FULLY DILUTED
($)
Earnings per share improved 25.2%
over 1994.
Adjusted to exclude restructuring charges and
cumulative effect of accounting changes in 1992.
Prior years earnings per share restated to reflect
the 5% stock dividend in June 1995.
12
36
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Sonoco Products Company
Common Shares Preferred Capital in Translation Treasury
(Dollars and shares in thousands --------------------- Stock Excess of of Foreign Retained Shares
except per share data) Outstanding Amount Amount Stated Value Currencies Earnings Amount
----------------------------------------------------------------------------------------
January 1, 1993..................... 91,501 $7,175 $ $ 61,608 $(19,952) $552,263 $(39,204)
Net income.......................... 118,834
Cash dividends:
Preferred......................... (1,264)
Common, $.51 per share............ (46,333)
Translation loss.................... (19,064)
Issuance of 3,450
preferred shares.................. 172,500 (3,968)
Issuance of treasury shares under
Stock option plan................. 219 1,388 1,493
Employee stock
ownership plan.................. 247 3,249 2,001
Treasury shares acquired............ (148) (2,362)
-------------------------------------------------------------------------------------
December 31, 1993................... 91,819 7,175 172,500 62,277 (39,016) 623,500 (38,072)
Net income.......................... 129,849
Cash dividends:
Preferred......................... (7,763)
Common, $.53 per share............ (48,287)
Translation loss.................... (7,236)
Issuance of treasury shares under
Stock option plan................. 344 (442) 3,748
Employee stock
ownership plan.................. 156 1,779 1,581
Treasury shares acquired............ (1,335) (29,462)
Other............................... 270 (2,706) 2,793
-------------------------------------------------------------------------------------
December 31, 1994................... 91,254 7,175 172,500 60,908 (46,252) 697,299 (59,412)
Net income.......................... 164,519
Cash dividends:
Preferred......................... (7,763)
Common, $.58 per share............ (53,145)
5% common stock dividend............ 106,213 (106,229)
Translation loss.................... (9,673)
Issuance of treasury shares under
Stock option plan................. 561 5,584 6,286
Treasury shares acquired............ (824) (18,657)
Other............................... 126 (2,247) 1,643
-------------------------------------------------------------------------------------
December 31, 1995................... 91,117 $7,175 $172,500 $170,458 $(55,925) $694,681 $(70,140)
=====================================================================================
Shares outstanding and per share data have been restated to reflect the 5%
common stock dividend on June 9, 1995.
The Notes beginning on page 38 are an integral part of these financial
statements.
13
CONSOLIDATED STATEMENTS OF CASH FLOWS 37
Sonoco Products Company
Years ended December 31
-----------------------------------
(Dollars and shares in thousands) 1995 1994 1993
-----------------------------------
Cash Flows from Operating Activities
Net income ................................................... $ 164,519 $ 129,849 $ 118,834
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation, depletion and amortization .................. 125,836 112,797 95,745
Loss on disposition of assets ............................. 157 2,901 836
Deferred taxes ............................................ (5,347) 5,668 22,361
Gain on sale of investment in affiliate ................... (15,299)
Changes in assets and liabilities, net of
effects from acquisitions, dispositions
and foreign currency adjustments
Accounts receivable ................................... (31,778) (33,127) 860
Inventories ........................................... (12,931) (17,637) 5,545
Prepaid expenses ...................................... 8,319 1,563 (1,411)
Payables and taxes .................................... 27,313 29,536 (45,881)
Other assets and liabilities .......................... (21,538) (12,035) (18,746)
-----------------------------------
Net cash provided by operating activities .................... 254,550 219,515 162,844
Cash Flows from Investing Activities
Purchase of property, plant and equipment .................... (181,432) (126,746) (115,596)
Cost of acquisitions, exclusive of cash ...................... (107,156) (30,370) (392,950)
Proceeds from the sale of assets ............................. 4,557 5,533 42,467
Proceeds from collection of a note receivable ................ 33,672
-----------------------------------
Net cash used by investing activities ........................ (284,031) (151,583) (432,407)
Cash Flows from Financing Activities
Proceeds from issuance of debt ............................... 305,851 96,838 662,800
Principal repayment of debt .................................. (169,807) (81,053) (523,817)
Cash dividends - common and preferred ........................ (60,908) (56,004) (46,333)
Treasury shares acquired ..................................... (18,657) (29,462) (2,362)
Treasury shares issued ....................................... 8,370 3,334 2,428
Preferred shares issued ...................................... 172,500
-----------------------------------
Net cash provided (used) by financing activities ............. 64,849 (66,347) 265,216
Effects of Exchange Rate Changes on Cash ..................... (2,188) 1,001 (7,863)
-----------------------------------
Increase (Decrease) in Cash and Cash Equivalents ............. 33,180 2,586 (12,210)
Cash and cash equivalents at beginning of year ............... 28,444 25,858 38,068
-----------------------------------
Cash and cash equivalents at end of year ..................... $ 61,624 $ 28,444 $ 25,858
===================================
Supplemental Cash Flow Disclosures
Interest paid .............................................. $ 41,851 $ 37,123 $ 31,504
Income taxes paid .......................................... $ 75,635 $ 61,254 $ 75,374
Excluded from the Consolidated Statements of Cash Flows is the effect of
certain non-cash activities. On June 9, 1995, the Company issued a 5% common
stock dividend ($106,213 fair value). The Company assumed approximately $75,000
of debt obligations in 1993 in conjunction with acquisitions.
The Notes beginning on page 38 are an integral part of these financial
statements.
14
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
(Dollars and shares in thousands except per share data)
The following notes are an integral part of the consolidated financial
statements. The accounting principles followed by the Company appear in bold
type.
1. BASIS OF PRESENTATION
................................................................................
THE CONSOLIDATED FINANCIAL STATEMENTS INCLUDE THE ACCOUNTS OF SONOCO
PRODUCTS COMPANY AND ITS SUBSIDIARIES AFTER ELIMINATION OF INTERCOMPANY
ACCOUNTS AND TRANSACTIONS. INVESTMENTS IN AFFILIATED COMPANIES IN WHICH THE
COMPANY OWNS 20% TO 50% OF THE VOTING STOCK ARE INCLUDED ON THE EQUITY METHOD
OF ACCOUNTING.
THE PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES REQUIRES MANAGEMENT TO MAKE ESTIMATES AND
ASSUMPTIONS THAT AFFECT THE REPORTED AMOUNT OF ASSETS AND LIABILITIES AT THE
DATE OF THE FINANCIAL STATEMENTS AND THE REPORTED AMOUNTS OF REVENUES AND
EXPENSES DURING THE REPORTING PERIOD. ACTUAL RESULTS COULD DIFFER FROM THOSE
ESTIMATES.
2. ACQUISITIONS
...............................................................................
Sonoco completed several acquisitions during 1995 which were strategically
important to both U.S. and international operations. The aggregate cost of
these acquisitions was approximately $107,000 in cash. In January 1995, the
Company acquired the remaining 50% interest in the CMB/Sonoco joint venture.
CMB/Sonoco is a producer of composite cans with manufacturing facilities in
Manchester, U.K. and Lieven, France. In March 1995, the Company completed the
purchase of a flexible packaging plant in Edinburgh, Ind., formerly owned by
Hargro Flexible Packaging Corporation. The Edinburgh plant manufactures
packaging for the confection, snack food and pharmaceutical markets. During the
fourth quarter, the Company completed the acquisition of Cricket Converters,
Inc. of Hightstown, N.J. Cricket supplies labels to the pharmaceutical and
health care markets. The Company also purchased three converting operations and
a paper mill in Brazil, a small tube and paper manufacturer in France and three
additional recovered paper collection plants in the U.S.
During 1994, the Company completed several acquisitions with an aggregate
cost of approximately $30,000 and the assumption of $6,000 in debt.
The Company has accounted for each of these acquisitions as a purchase
and, accordingly, has included their results of operations in consolidated net
income from the date of acquisition.
3. UNUSUAL ITEMS
................................................................................
Unusual items in 1993 include a gain from the early repayment of a note
issued in connection with the sale of Sonoco Graham in 1991. This gain was
partially offset by charges for refinancing debt related to the Engraph
acquisition and various other unusual items in 1993.
4. CASH AND CASH EQUIVALENTS
................................................................................
CASH EQUIVALENTS ARE COMPOSED OF HIGHLY LIQUID INVESTMENTS WITH AN
ORIGINAL MATURITY OF THREE MONTHS OR LESS AND ARE RECORDED AT MARKET.
At December 31, 1995 and 1994, outstanding checks of $19,808 and $28,182,
respectively, were included in Payable to suppliers.
At December 31, 1995, $30,892 of cash and cash equivalents represented
proceeds from the issuance of the 6.125% Industrial Revenue Bonds (IRBs) and
was restricted to funding qualified expenditures as provided for by the IRBs.
5. INVENTORIES
................................................................................
INVENTORIES ARE STATED AT THE LOWER OF COST OR MARKET. The last-in,
first-out (LIFO) method was used to determine costs of approximately 38% of
total inventories in 1995 and 43% in 1994. The remaining inventories are
determined on the first-in, first-out (FIFO) method.
If the FIFO method of accounting had been used for all inventories, the
totals would have been higher by $12,084 in 1995 and $9,961 in 1994.
6. PROPERTY, PLANT AND EQUIPMENT
................................................................................
PLANT ASSETS REPRESENT THE ORIGINAL COST OF LAND, BUILDINGS AND
EQUIPMENT LESS DEPRECIATION COMPUTED UNDER THE STRAIGHT-LINE METHOD OVER THE
ESTIMATED USEFUL LIFE OF THE ASSET. Equipment lives range from 5 to 11 years,
buildings from 20 to 30 years.
TIMBER RESOURCES ARE STATED AT COST. DEPLETION IS CHARGED TO OPERATIONS
BASED ON THE NUMBER OF UNITS OF TIMBER CUT DURING THE YEAR.
Depreciation and depletion expense amounted to $110,706 in 1995, $99,767
in 1994 and $87,721 in 1993.
15
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
(Dollars and shares in thousands except per share data)
Details of property, plant and equipment at December 31 are as follows:
1995 1994
--------------------------
Land ........................... $ 35,733 $ 28,179
Timber resources ............... 32,529 31,699
Buildings ...................... 302,383 279,634
Machinery & equipment .......... 1,131,503 1,009,024
Construction in progress ....... 107,099 62,988
--------------------------
1,609,247 1,411,524
Accumulated depreciation
and depletion ................. (743,618) (648,415)
--------------------------
$ 865,629 $ 763,109
==========================
Estimated costs for completion of authorized capital additions under
construction totaled approximately $118,000 at December 31, 1995.
Certain operating properties and equipment are leased under
non-cancellable operating leases. Total rental expense under operating leases
was $31,000, $28,000 and $26,400 in 1995, 1994 and 1993, respectively. Future
minimum rentals under non-cancellable operating leases with terms of more than
one year are as follows: 1996 - $17,100; 1997 - $14,800; 1998 - $11,900; 1999 -
$8,800; 2000 - $6,200; 2001 and thereafter - $11,800.
7. COST IN EXCESS OF FAIR VALUE OF ASSETS PURCHASED
...............................................................................
GOODWILL ARISING FROM BUSINESS ACQUISITIONS ($64,000 in 1995 and $27,000
in 1994) IS AMORTIZED ON THE STRAIGHT-LINE BASIS OVER PERIODS RANGING FROM 20
TO 40 YEARS. THE COMPANY EVALUATES, AT EACH BALANCE SHEET DATE, THE
REALIZABILITY OF GOODWILL FOR EACH SUBSIDIARY HAVING A GOODWILL BALANCE.
Amortization expense amounted to $15,130 in 1995; $13,030 in 1994; and $8,024
in 1993. Accumulated amortization at December 31, 1995 and 1994 was $45,346 and
$34,336, respectively.
8. INVESTMENT IN LIFE INSURANCE
................................................................................
Company-owned life insurance (COLI) policies are recorded net of policy
loans in Other Assets. The net pretax cost of company-owned life insurance,
including interest expense, was $9,171 in 1995 and $5,532 in 1994 and is
included in Selling, general and administrative expenses. The related interest
expense was $34,634 in 1995 and $18,630 in 1994. Tax benefits from the COLI
program amounted to $10,024 and $5,091 in 1995 and 1994, respectively. Proposed
legislation will eliminate the tax-favored status of this program, if enacted.
9. DEBT
................................................................................
Debt at December 31 was as follows:
1995 1994
-------------------
Commercial paper, average rate
of 5.9% in 1995 and 4.2% in 1994......... $134,500 $173,700
9.2% notes due August 2021 ................ 99,926 99,917
6.75% debentures due November 2010 ....... 99,790
5.875% notes due November 2003 ............ 99,471 99,405
5.49% notes due April 2000 ................ 75,000 75,000
6.125% IRBs due June 2025 ................. 34,439
Foreign denominated debt, average
rate of 6.6% at December 31, 1995
and 6.8% at December 31, 1994 ........... 108,970 70,304
Other notes ............................... 34,696 29,054
-------------------
Total debt ................................ 686,792 547,380
Less current portion and
short-term notes ....................... 94,898 59,421
-------------------
Long-term debt ............................ $591,894 $487,959
===================
The Company has authorized a commercial paper program totaling $300
million and has fully committed bank lines of credit supporting the program by
a like amount. These bank lines expire in the year 2000. Accordingly,
commercial paper borrowings are classified as long-term debt.
The approximate principal requirements of debt maturing in the next
five years are: 1996 - $95,000; 1997 - $5,200; 1998 - $4,800; 1999 - $4,800;
and 2000 - $5,800. It is management's intent to extend indefinitely the line of
credit agreements supporting the commercial paper program. Accordingly, no
principal repayments are projected through the year 2000.
Certain of the Company's debt agreements impose restrictions with respect
to the maintenance of financial ratios and the disposition of assets. The most
restrictive covenant currently requires that tangible net worth at the end of
each fiscal quarter be greater than $365,000. In addition to the committed
availability under the commercial paper program, unused short-term lines of
credit for general Company purposes at December 31, 1995, were approximately
$94,500 with interest at mutually agreed upon rates.
10. FINANCIAL INSTRUMENTS
................................................................................
The Company enters into currency swaps and foreign exchange forward
contracts to hedge a portion of the net investment in certain foreign
subsidiaries. Gains and losses on such contracts are recognized in the
cumulative translation adjustments account in Shareholders' Equity. As of
December 31, 1995 and 1994, the notional value of such contracts was
approximately $38,000 and $32,000, respectively. All financial instruments are
executed with credit worthy financial institutions; therefore, the Company
considers the risk of non-performance on these instruments to be remote.
16
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
(Dollars and shares in thousands except per share data)
NOTE 10: FINANCIAL INSTRUMENTS - CONTINUED
The following table sets forth the carrying amounts and fair values of the
Company's significant financial instruments where the carrying amount differs
from the fair value. The carrying amount of cash and cash equivalents,
short-term debt and long-term variable rate debt approximates fair value. The
fair value of long-term debt is based on quoted market prices or by discounting
future cash flows using interest rates available to the Company for issues with
similar terms and average maturities. Foreign currency agreements are valued
based on termination values or quoted market prices of comparable instruments.
December 31, 1995 December 31, 1994
------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
of Asset/ of Asset/ of Asset/ of Asset/
(Liability) (Liability) (Liability) (Liability)
------------------------------------------------
Long-term debt ..... $(591,894) $(622,695) $(487,959) $(468,126)
Foreign currency
agreements...... (2,690) (2,690) 1,309 1,309
11. STOCK PLANS
................................................................................
The Company has stock option plans under which common shares are reserved
for sale to certain employees. Options granted under the plans were at the
market value of the shares at the date of grant. Options are generally
exercisable one year after the date of grant, and expire 10 years after the
date of grant. At December 31, 1995, 1,726,684 shares were reserved for future
grants.
On February 7, 1996, the Board recommended, pending shareholder approval,
the adoption of the 1996 Non-Employee Director's Stock Plan. This plan provides
for the granting of options to non-employee directors beginning with 2,000 per
participant granted in 1996. In 1994, the Company granted one-time awards of
contingent shares to 13 of the Company's executives. Three hundred thirty-six
thousand shares were granted under this plan from shares allocated in the 1991
Key Employee Stock Plan.
Information with respect to the Company's stock option plans follows:
Option Option
Shares Price Range
--------------------------
1993
Outstanding at beginning
of year....................... 3,416,263 $ 4.78-$17.86
Granted .................... 1,005,165 $19.76-$22.98
Assumed - Engraph .......... 654,314 $ 3.55-$17.52
Exercised .................. (218,688) $ 4.78-$17.86
Cancelled .................. (6,195) $ 22.98
---------
Outstanding at end of year ..... 4,850,859 $ 3.55-$22.98
1994
Granted ................... 1,274,920 $ 0.00-$23.93
Exercised ................. (343,734) $ 3.55-$17.86
Cancelled ................. (36,588) $ 4.78-$23.93
---------
Outstanding at end of year .... 5,745,457 $ 0.00-$23.93
1995
Granted ................... 1,083,060 $19.88-$23.57
Exercised ................. (560,664) $ 5.09-$23.93
Cancelled ................. (32,921) $ 5.09-$23.93
---------
Outstanding at end of year .... 6,234,932 $ 0.00-$23.93
=========
Options exercisable at
December 31, 1995......... 4,814,822
All option shares and option prices have been restated to reflect the 5%
stock dividend on June 9, 1995.
12. RETIREMENT BENEFIT PLANS
................................................................................
Non-contributory defined benefit pension plans cover substantially all
U.S. employees. Under the plans, retirement benefits are based either on both
years of service and compensation or on service only. IT IS THE COMPANY'S
POLICY TO FUND THESE PLANS, AT A MINIMUM, IN AMOUNTS REQUIRED UNDER ERISA. Plan
assets consist primarily of common stocks, bonds and real estate.
The Company also maintains a plan to supplement executive benefits
limited through qualified plans. Benefits are based on years of service and
compensation. The plan is partially funded through a grantor trust as defined
under Section 671 of the Internal Revenue Service Code of 1986. The Company
sponsors contributory pension plans covering approximately 75% of the employees
in the United Kingdom and substantially all of the Canadian employees. Pension
benefits are based either on the employee's salary in the year of retirement or
the average of the final three years. THE FUNDING POLICY IS TO CONTRIBUTE
ANNUALLY AT ACTUARIALLY DETERMINED RATES. IT IS THE COMPANY'S INTENT TO
MAINTAIN A WELL-FUNDED PLAN.
Net pension cost for the domestic, United Kingdom and Canadian plans
includes the following components:
Combined Plans
--------------------------------
1995 1994 1993
--------------------------------
Service cost-benefits earned
during year ................. $ 12,532 $ 13,716 $ 9,555
Interest cost on projected
benefit obligation .......... 32,537 27,160 23,881
Actual return on plan
assets ...................... (81,926) (1,205) (32,165)
Net amortization and
deferral .................... 45,007 (33,209) 2,031
--------------------------------
$ 8,150 $ 6,462 $ 3,302
================================
17
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
(Dollars and shares in thousands except per share data)
The following table sets forth the funded status of the plans at December 31:
Over-Funded Under-Funded
Plan Plan
------------------------------------------------
1995 1994 1995 1994
------------------------------------------------
Projected benefit obligation
Vested benefits ............. $ 366,805 $ 273,601 $ $
Non-vested benefits ......... 10,241 8,043 19,332 14,521
------------------------------------------------
Accumulated benefit
obligation .................. 377,046 281,644 19,332 14,521
Effect of assumed increase
in compensation levels ...... 47,203 45,523 1,345 2,442
------------------------------------------------
Projected benefit
obligation .................. 424,249 327,167 20,677 16,963
Plan assets at fair value ..... 461,270 365,802 14,234 12,965
------------------------------------------------
Plan assets in excess of
(less than) projected
benefit obligation .......... 37,021 38,635 (6,443) (3,998)
Unrecognized net loss ......... 43,583 20,376 5,094 1,997
Unrecognized prior service
cost ........................ 3,039 2,192 1,735 1,803
Unrecognized net transition
(asset) obligation .......... (9,207) (2,671) 1,142 1,370
Adjustment required to
recognize minimum liability . (6,625) (2,728)
------------------------------------------------
Prepaid (accrued) pension
cost ....................... $ 74,436 $ 58,532 $ (5,097) $ (1,556)
================================================
Prepaid pension costs of $5,737 and $8,188 were included in Prepaid
expenses in 1995 and 1994, respectively. In addition $68,699 and $50,344 were
included in Other Assets in 1995 and 1994, respectively.
The weighted-average discount rate used in determining the projected
benefit obligations was 7.25% in 1995, 8.5% in 1994, and 7% in 1993. The
assumed compensation increase was 4% in 1995 and 1993, and 5% in 1994. The
expected long-term rate of return on assets was 9.5% for all years presented.
The Company's Employee Savings and Stock Ownership Plan provides that all
eligible employees may contribute 1% to 16% of their gross pay to the Plan
subject to Internal Revenue Service regulations. The Company may make matching
contributions in an amount to be determined annually by the Company's Board of
Directors. The Company's contributions to the plan for 1995, 1994, and 1993,
were $5,570, $5,380 and $5,250, respectively.
13. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
................................................................................
The Company provides health care and life benefits to the majority of its
United States retirees and their eligible dependents. The Company's
subsidiaries in Canada also provide postretirement benefits to eligible
retirees. In accordance with the provisions of Statement of Financial
Accounting Standards 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (FAS 106), the Company accrues for postretirement benefits
other than pensions over an employee's career. THE COMPANY FUNDS BENEFIT COSTS
PRINCIPALLY ON A PAY-AS-YOU-GO BASIS, WITH THE RETIREE PAYING A PORTION OF THE
COSTS. In situations where full-time employees retire from the Company between
age 55 and age 65, most are eligible to receive, at a cost to the retiree equal
to the cost for an active employee, certain health care benefits identical to
those available to active employees. After attaining age 65, an eligible
retiree's health care benefit coverage becomes coordinated with Medicare. For
purposes of projecting future benefit payments, early retiree contributions
were assumed to increase at the health care cost trend.
Non-pension retirement benefit expense includes the following:
1995 1994 1993
-----------------------------
Service cost-benefits
earned during year ........... $ 3,749 $ 5,180 $ 2,482
Interest cost on APBO ............ 8,673 7,110 8,196
Actual return on plan assets ..... (5,441) 459 (874)
Net amortization and deferral .... (312) (5,400) (189)
-----------------------------
Net periodic postretirement
benefit cost ................. $ 6,669 $ 7,349 $ 9,615
=============================
The following sets forth the accrued obligation included in the
accompanying December 31 Consolidated Balance Sheets applicable to each
employee group for non-pension retirement benefits:
1995 1994
----------------------
Accumulated postretirement
benefit obligation (APBO):
Retired employees ................ $ 69,627 $ 50,008
Active employees-fully eligible .. 21,489 17,671
Active employees-not yet eligible 26,128 27,329
----------------------
Accumulated benefit obligation ....... 117,244 95,008
Plan assets at fair value ............ 25,816 17,375
----------------------
Plan assets less than accumulated
benefit obligation ................ (91,428) (77,633)
Unrecognized net loss from
changes in assumptions ............ 22,766 9,552
Unrecognized prior service cost....... (17,980) (22,459)
----------------------
Accrued postretirement
benefit cost ...................... $ (86,642) $ (90,540)
======================
Prepaid postretirement medical costs of $17,256 and $13,639 were included
in Other Assets in 1995 and 1994, respectively. The discount rate used in
determining the APBO was 7.25% in 1995, 8.5% in 1994 and 7% in 1993. The
assumed health care cost trend rate used in measuring the APBO was 10% in 1995
declining to 5% in the year 2005. Increasing the assumed trend rate for health
care costs by one percentage point would result in an increase in the APBO of
approximately $5,100 at December 31, 1995, and an
18
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
(Dollars and shares in thousands except per share data)
increase of $640 in the related 1995 expense. Plan assets are the result
of funding these benefit costs in amounts representing the maximum allowable
under Section 401(h) of the Internal Revenue Code. These assets are combined
with the pension plan assets and consist primarily of common stocks, bonds and
real estate. The expected long-term rate of return on assets was 9.5% for all
years presented.
14. INCOME TAXES
................................................................................
In accordance with Statement of Financial Accounting Standards 109,
"Accounting for Income Taxes" (FAS 109), the provision (benefit) for taxes on
income for the years ending December 31 consists of the following:
----------------------------------
1995 1994 1993
----------------------------------
Pretax income
Domestic ................. $ 233,125 $ 202,363 $ 189,122
Foreign .................. 37,665 8,567 3,785
----------------------------------
Total pretax income .... $ 270,790 $ 210,930 $ 192,907
==================================
Current
Federal .................. $ 86,611 $ 62,800 $ 43,998
State .................... 13,533 10,074 7,320
Foreign .................. 11,843 3,958 1,521
----------------------------------
Total current ......... 111,987 76,832 52,839
----------------------------------
Deferred
Federal .................. (6,065) 4,263 14,005
State .................... (866) 949 2,924
Foreign .................. 1,584 456 5,432
----------------------------------
Total deferred ........ (5,347) 5,668 22,361
----------------------------------
Total taxes ................. $ 106,640 $ 82,500 $ 75,200
==================================
Current deferred income tax (benefit) expense results from temporary
differences in the recognition of revenue and expense for tax and financial
statement purposes. The sources of these differences and the tax effect of each
are as follows:
----------------------------------
1995 1994 1993
----------------------------------
Restructuring charge .......... $ 1,034 $ 2,815 $ 8,711
Sale of an affiliate .......... 6,409
Depreciation expense .......... (2,884) 45 1,163
Benefit plan costs ............ (1,282) 3,125 7,379
Other items, net .............. (2,215) (317) (1,301)
----------------------------------
Total deferred .......... $ (5,347) $ 5,668 $ 22,361
==================================
Cumulative deferred tax liabilities (assets) are comprised of the
following at December 31:
--------------------
1995 1994
--------------------
Depreciation ..................... $ 67,872 $ 70,751
Employee benefits ................ 26,182 21,062
Other ............................ 970 2,179
--------------------
Gross deferred tax liabilities .. 95,024 93,992
--------------------
Restructuring .................... (3,354) (4,193)
Retiree health benefits .......... (31,550) (27,482)
Foreign loss carryforwards ....... (10,960) (11,231)
Capital loss carryforwards ....... (6,047) (6,830)
Employee benefits ................ (15,382) (13,026)
Other ............................ (8,024) (7,199)
--------------------
Gross deferred tax assets ........ (75,317) (69,961)
Valuation allowance on deferred
tax assets .................... 10,960 11,231
--------------------
Total deferred taxes, net ..... $ 30,667 $ 35,262
====================
The net change in the valuation allowance for deferred tax assets is a net
decrease of $271 in 1995, compared with a net increase of $3,220 in 1994. The
change relates to utilization of current net operating losses of certain
foreign subsidiaries and the addition to the reserve for current net operating
losses for which their use is limited to future taxable earnings.
Approximately $28,000 of foreign subsidiary net operating loss
carryforwards remain at December 31, 1995. Their use is limited to future
taxable earnings of the respective foreign subsidiaries. Of these loss
carryforwards approximately $17,300 have no expiration date. The remaining loss
carryforwards expire at various dates in the future.
A reconciliation of the U.S. federal statutory tax rate to the actual
consolidated tax expense is as follows:
---------------------------------------------------------------
1995 1994 1993
---------------------------------------------------------------
Statutory tax rate ..... $ 94,776 35.0% $ 73,825 35.0% $ 67,517 35.0%
State income taxes,
net of federal tax
benefit ................ 8,560 3.2 7,087 3.3 7,039 3.6
Goodwill ............... 3,556 1.3 3,777 1.8 1,694 .9
Company-owned
life insurance ......... (10,024) (3.7) (5,091) (2.4) (1,570) (.8)
Adjustment of prior
years' accrual ......... 6,266 2.3
Other, net ............. 3,506 1.3 2,902 1.4 520 .3
---------------------------------------------------------------
Total taxes ......... $ 106,640 39.4% $ 82,500 39.1% $ 75,200 39.0%
===============================================================
The Internal Revenue Service has examined the Company's federal income tax
returns for all years through 1992, and the years have been closed through
1989. The Company believes that it has made adequate provision for income taxes
that may become payable with respect to open years.
19
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
(Dollars and shares in thousands except per share data)
Undistributed earnings of international subsidiaries totaled $49,192 at
December 31, 1995. There have been no U.S. income taxes provided on the
undistributed earnings since the Company considers these earnings to be
indefinitely reinvested to finance international growth and expansion. If such
amounts were remitted, loaned to the Company or the stock in the foreign
subsidiaries sold, these earnings could become subject to tax; however, the
Company believes United States foreign tax credits would substantially
eliminate any taxes due.
15. COMMITMENTS AND CONTINGENCIES
................................................................................
The Company is a party to various legal proceedings incidental to its
business and is subject to a variety of environmental and pollution control
laws and regulations in all jurisdictions in which it operates. As is the case
with other companies in similar industries, the Company faces exposure from
actual or potential claims and legal proceedings. In 1994, a suit was filed
against the Company in the U.S. District Court for the District of
Massachusetts for alleged patent infringement involving grocery bag packs. The
suit also seeks to have a patent involving plastic bag loading systems owned by
the Company declared invalid. The Company believes this lawsuit is without
merit. The Company is vigorously defending its position and expects to prevail.
The Company has been named as a potentially responsible party at several
environmentally contaminated sites, primarily located in the Northeast, owned
by third parties. These sites represent the Company's largest potential
environmental liabilities. The Company has $4,400 accrued for these
contingencies as of December 31, 1995 and 1994. Due to the complexity of
determining clean-up costs associated with the sites, a reliable estimate of
the ultimate cost to the Company cannot be determined. Further, all of the
sites are also the responsibility of other parties. The Company's liability, if
any, is shared with such other parties, but the Company's share has not been
finally determined in most cases. In some cases, the Company has cost sharing
agreements with other potentially responsible parties with respect to a
particular site. Such agreements relate to the sharing of legal defense costs
or clean-up costs, or both. The Company has assumed, for purposes of estimating
amounts to be accrued, that the other parties to such cost sharing agreements
will perform as agreed. It appears that final resolution of some of the sites
is years away. Accordingly, a reliable estimate of the ultimate cost to the
Company with respect to such sites cannot be determined. However, costs will be
accrued as necessary once reasonable estimates are determined.
Although the level of future expenditures for legal and environmental
matters is impossible to determine with any degree of probability, it is
management's opinion that such costs, when finally determined, will not have a
material adverse effect on the consolidated financial position of the Company.
16. INTERNATIONAL OPERATIONS
................................................................................
The operating profit, net assets and dividends received by the Company
from operations outside the United States are as follows:
---------------------
1995 1994
---------------------
Operating profit ................... $ 41,984 $ 15,675
Net assets ......................... 299,792 245,423
Dividends .......................... 581 502
The aggregate foreign currency transaction gain/loss recognized in net
income was immaterial for 1995, 1994 and 1993. Information regarding the
Company's significant foreign geographic area in Europe is as follows:
------------------------------
1995 1994 1993
------------------------------
Sales to unaffiliated
customers................ $276,029 $184,247 $180,044
Operating profit (loss)..... 8,446 (2,085) (890)
Total assets................ 296,325 258,463 171,073
17.SHAREHOLDERS' EQUITY
................................................................................
On April 19, 1995, the Board of Directors declared a five percent stock
dividend issued on June 9, 1995. All references in the accompanying
Consolidated Financial Statements to numbers of common shares and per share
data have been restated to give retroactive effect to the stock dividend.
In 1993, the Company issued 3,450,000 shares of $2.25 Series A Cumulative
Convertible Preferred Stock for $172,500, or $50 per share. These securities
are convertible into the Company's common stock at a price of $24.11 per share.
This stock is redeemable at the option of the Company, on or after November 8,
1996, at a redemption price of $51.575 per share and decreasing ratably
annually to $50 per share on or after November 1, 2003. Dividends on the
Convertible Preferred Stock, which are paid quarterly, accrue and are
cumulative from the date of original issuance.
20
44
Notes to Consolidated Financial Statements
Sonoco Products Company
18. FINANCIAL REPORTING FOR BUSINESS SEGMENTS
..............................................................................
(Years ended December 31)
The Financial Reporting for Business Segments should be read in conjunction
with the Management's Discussion and Analysis (which describes the segments in
detail) appearing on pages 26-31.
------------------------------------------------------------------------
CONVERTED
(Dollars in thousands) PRODUCTS PAPER INTERNATIONAL CORPORATE CONSOLIDATED
------------------------------------------------------------------------
Total Revenue
1995............................ $1,994,535 $ 445,072 $ 574,890 $ 3,014,497
1994............................ 1,771,441 330,982 438,383 2,540,806
1993............................ 1,466,486 278,904 406,914 2,152,304
Intersegment Sales(1)
1995............................ $ 32,375 $ 267,401 $ 8,548 $ 308,324
1994............................ 29,970 203,569 7,140 240,679
1993............................ 28,615 173,640 2,825 205,080
Sales to Unaffiliated Customers
1995............................ $1,962,160 $ 177,671 $ 566,342 $ 2,706,173
1994............................ 1,741,471 127,413 431,243 2,300,127
1993........................... 1,437,871 105,264 404,089 1,947,224
Operating Profit(2)
1995............................ $ 215,553 $ 87,455 $ 41,984 $ (74,202) $ 270,790
1994............................ 188,517 64,495 15,675 (57,757) 210,930
1993............................ 157,426 57,867 11,923 (34,309) 192,907
Identifiable Assets(3)
1995............................ $1,150,146 $ 193,739 $ 492,916 $ 278,612 $ 2,115,413
1994............................ 1,056,341 157,408 405,604 215,700 1,835,053
1993............................ 1,018,056 140,406 349,144 199,519 1,707,125
Depreciation, Depletion and
Amortization
1995............................ $ 76,767 $ 15,876 $ 27,857 $ 5,336 $ 125,836
1994............................ 69,076 14,471 23,161 6,089 112,797
1993............................ 51,360 12,974 26,135 5,276 95,745
Capital Expenditures
1995............................ $ 86,514 $ 37,402 $ 45,044 $ 12,472 $ 181,432
1994............................ 77,275 18,874 27,727 2,870 126,746
1993............................ 46,969 20,450 41,209 6,968 115,596
(1) Intersegment sales are recorded at a market-related transfer price.
(2) Interest income, interest expense and unallocated corporate expenses are
excluded from the operating profits by segment and are shown under
Corporate. In addition, 1993 Corporate operating profit includes $5,800 for
unusual items, as described in Note 3 to the Consolidated Financial
Statements.
(3) Identifiable assets are those assets used by each segment in its
operations. Corporate assets consist primarily of cash and cash
equivalents, investments in affiliates, headquarters facilities and prepaid
expenses.
21
45
Reports to Consolidated Financial Statements
Report of Management
The management of Sonoco Products Company is responsible for the integrity
and objectivity of the financial statements and other financial information
included in this annual report. These statements have been prepared in
conformity with generally accepted accounting principles.
Sonoco's accounting systems are supported by internal control systems
augmented by written policies, internal audits and the selection and training
of qualified personnel.
The Board of Directors, through its Audit Committee, consisting of
outside directors, is responsible for reviewing and monitoring the Company's
financial reporting and accounting practices. This committee meets periodically
with management, the internal auditors and the independent accountants to
assure each is carrying out its responsibilities.
Coopers & Lybrand L.L.P., independent certified public accountants, have
audited the financial statements, and their report is herein.
F. Trent Hill, Jr.
- ------------------
F. Trent Hill, Jr.
Vice President and
Chief Financial Officer
Report of Independent Certified Public
Accountants
TO THE SHAREHOLDERS AND DIRECTORS OF
SONOCO PRODUCTS COMPANY:
We have audited the accompanying consolidated balance sheets of Sonoco
Products Company as of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Sonoco
Products Company as of December 31, 1995 and 1994, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
- ------------------------
COOPERS & LYBRAND L.L.P.
Charlotte, North Carolina
January 31, 1996
22
46
Board of Directors:
[PHOTO] [PHOTO] [PHOTO]
Leo Benatar Charles J. Bradshaw Robert J. Brown
LEO BENATAR, 66, Chairman - Sonoco Engraph, Atlanta, Ga., 1995 - 1996 and Senior
Vice President, Sonoco Products Company 1993 - 1996. Served on Board since 1993.
- - -
CHARLES J. BRADSHAW, 59, President and Director, Bradshaw Investments, Inc.
(private investments), Georgetown, S.C., since 1986. Served on Board since
1986. Member of the Executive Compensation Committee.
- - -
ROBERT J. BROWN, 61, Founder, Chairman and President of B & C Associates (a
public relations and marketing research firm), High Point, N.C., since 1973.
Served on Board since 1993. Member of the Audit Committee and the Finance
Committee.
- - -
[PHOTO]
Peter C. Browning
PETER C. BROWNING, 54, President and Chief Operating Officer since 1996. Served
on Board since April 1995.
- - -
[PHOTO]
Charles W. Coker
CHARLES W. COKER, 62, Chairman and Chief Executive Officer since 1990. Served
on Board since 1962.
- - -
[PHOTO]
Fitz L. H. Coker
FITZ L. H. COKER, 60, Retired, formerly Senior Vice President, 1976 - 1979.
Served on Board since 1964. Member of the Finance Committee and the Nominating
Committee.
- - -
[PHOTO]
James L. Coker
JAMES L. COKER, 55, President, JLC Enterprises (private investments),
Stonington, Conn., since 1979. Served on Board since 1969. Member of the
Nominating Committee and the Finance Committee.
- - -
[PHOTO]
Thomas C. Coxe, III
THOMAS C. COXE, III, 65, Retired, formerly Senior Executive Vice President
1993-1996. Served on Board since 1982.
- - -
[PHOTO]
Alan T. Dickson
ALAN T. DICKSON, 64, Chairman, Ruddick Corporation (a diversified holding
company), Charlotte, N.C., since February 1994. Formerly President and
Director, Ruddick Corporation, since 1968. Served on Board since 1981. Member
of the Executive Compensation Committee, the Finance Committee and the Audit
Committee.
- - -
[PHOTO]
Robert E. Elberson
ROBERT E. ELBERSON, 67, Retired, formerly Vice Chairman and Director, Sara Lee
Corporation, Chicago, Ill., 1986 - 1989. Served on Board since 1985. Member of
the Executive Compensation Committee and the Nominating Committee.
- - -
[PHOTO]
James C. Fort
JAMES C. FORT, 69, Retired, formerly Senior Vice President, 1979 - 1987.
President and Director of the Trust Company of South Carolina, Inc. (insurance
brokers), Hartsville, S.C., since 1987. Served on Board since 1969. Member of
the Audit Committee and the Nominating Committee.
- - -
[PHOTO]
Paul Fulton
PAUL FULTON, 61, Dean, The Kenan-Flagler Business School, The University of
N.C., Chapel Hill, N.C., since 1993. Formerly President and Director of Sara
Lee Corporation. Served on Board since 1989. Member of the Finance Committee
and the Executive Compensation Committee.
- - -
[PHOTO]
Bernard L. M. Kasriel
BERNARD L. M. KASRIEL, 49, Vice Chairman and COO of Lafarge (a construction
materials group), Paris, France. Served on Board since April 1995. Member of
the Audit Committee and Executive Compensation Committee.
- - -
[PHOTO]
Russell C. King, Jr.
RUSSELL C. KING, JR., 61, Retired, formerly President and Chief Operating
Officer 1990 - 1994. Served on Board since 1991. Member of the Audit Committee
and the Finance Committee.
- - -
[PHOTO]
Edgar H. Lawton, Jr.
EDGAR H. LAWTON, JR., 66, President and Director, Hartsville Oil Mill (a
vegetable oil processor), Darlington, S.C., since 1962. Served on Board since
1968. Member of the Nominating Committee and the Executive Compensation
Committee.
- - -
HUGH L. MCCOLL, JR., 60, Chief Executive Officer, NationsBank Corporation,
Charlotte, N.C., since 1983. Served on Board since 1972. Member of the Finance
Committee and the Nominating Committee.
[PHOTO] [PHOTO] [PHOTO]
Hugh L. McColl, Jr. E. Craig Wall, Jr. Dona Davis Young
- - -
E. CRAIG WALL, JR., 58, President and Director, Canal Industries (a forest
products firm), Conway, S.C., since 1969. Served on Board since 1976. Member of
the Audit Committee and the Finance Committee.
- - -
DONA DAVIS YOUNG, 42, Executive Vice President, Individual Insurance and
General Counsel of Phoenix Home Life Mutual Insurance Company since 1995.
Served on Board since October 1995. Member of the Executive Compensation
Committee and the Audit Committee.
23
47
Executive Officers:
CHARLES W. COKER, 62, Chairman of the Board and Chief Executive Officer since
1990. Previously President and Chief Executive Officer 1976 - 1990; President
1970 - 1976; Executive Vice President 1966-1970. Began full-time employment with
Sonoco in 1958.
- - -
PETER C. BROWNING, 54, President and Chief Operating Officer since February
1996. Previously Executive Vice President - Global Industrial Products & Paper
Divisions 1993 - 1996; Chairman & Chief Executive Officer - National Gypsum
Company 1990 - 1993. Joined Sonoco in 1993.
- - -
THOMAS C. COXE, III, 65, Senior Executive Vice President since 1993. Previously
Executive Vice President 1985 - 1993; Senior Vice President 1979 - 1983; Senior
Vice President - Corporate Development 1977-1979; Vice President - Corporate
Development 1977. Joined Sonoco in 1970. Retired February 1996.
- - -
LEO BENATAR, 66, Senior Vice President since 1993 and Chairman of Sonoco
Engraph since 1995. Previously Chairman and CEO of Engraph, Inc. 1981 - 1993;
President - Mead Packaging 1972 - 1981. Began working with The Mead Corporation
in 1954. Joined Sonoco with the Engraph acquisition in 1993. Retirement
announced for Spring 1996.
- - -
[PHOTO]
Bernard W. Campbell
BERNARD W. CAMPBELL, 46, Vice President - Information Services since February
1996. Previously Staff Vice President - Information Services 1991 - 1996;
Director - Corporate Information Services 1990 - 1991; Director - Software
Support 1988. Joined Sonoco in 1988.
- - -
[PHOTO]
Allan V. Cecil
ALLAN V. CECIL, 54, Vice President, Investor Relations and Corporate
Communications since 1996. Prior to Sonoco was with National Gypsum Company and
Mesa Petroleum Company. Joined Sonoco in January 1996.
- - -
[PHOTO]
C. William Claypool
C. WILLIAM CLAYPOOL, 60, Vice President - Paper Division since 1987. Previously
Division Vice President, General Manager - Paper 1986 - 1987; Division Vice
President 1980 - 1986; Regional General Manager 1977 - 1980. Joined Sonoco in
1977.
- - -
[PHOTO]
Peter C. Coggeshall, Jr.
PETER C. COGGESHALL, JR., 52, Vice President - Administration since 1991.
Previously Group Vice President-Global Paper - 1990 - 1991; Vice
President-Industrial Products Division - 1986 - 1990; Vice President-Paper
Division - 1978 - 1986; Division Vice President/General Manager - Paper Division
1977 - 1978; Division Vice President Operations - General Products Division
1977. Joined Sonoco in 1969.
- - -
[PHOTO]
Harris E. Delolach, Jr.
HARRIS E. DELOACH, JR., 51, Executive Vice President since February 1996.
Previously Group Vice President 1993 - 1996; Vice President - Film, Plastics &
Special Products 1993; Vice President - High Density Film Products Division
1989 - 1993; Vice President Administration & General Counsel 1985 - 1989. Joined
Sonoco in 1985.
- - -
[PHOTO]
Cynthia A. Hartley
CYNTHIA A. HARTLEY, 47, Vice President - Human Resources since 1995. Previously
Vice President - Human Resources with National Gypsum Company, Dames & Moore
and previous experience with Continental Can Corp. Joined Sonoco in 1995.
- - -
[PHOTO]
F. Trent Hill, Jr.
F. TRENT HILL, JR., 43, Vice President and Chief Financial Officer since 1995.
Previously Vice President - Finance 1994 - 1995; Vice President - Industrial
Products North America 1990 - 1994; Vice President - Finance 1987-1989; Vice
President - Corporate Controller 1982 - 1987; Staff Vice President Corporate
Controller 1981 - 1982; Director of Audit & Taxes 1979 - 1981; Internal Audit
Manager 1979. Prior to joining Sonoco in 1979 he worked with Coopers & Lybrand.
- - -
[PHOTO]
Ronald E. Holley
RONALD E. HOLLEY, 53, Vice President - High Density Film Products since 1993.
Previously Vice President - Total Quality Management 1990 - 1993; Vice President
- - Industrial Products Division 1987 - 1990; Division Vice President - Industrial
Products Division 1985 - 1987; Division Vice President Consumer Products
Division 1983. Joined Sonoco in 1964.
- - -
[PHOTO]
Charles J. Hupfer
CHARLES J. HUPFER, 49, Vice President, Treasurer and Corporate Secretary since
1995. Previously Treasurer 1988 - 1995; Director of Tax and Audit 1985 - 1988;
Director - International Finance & Accounting 1980 - 1985; Manager of Corporate
Accounting 1978 - 1980; Manager of Financial Reporting 1975 - 1978. Prior to
joining Sonoco in 1975 he worked with Coopers & Lybrand.
- - -
[PHOTO]
J. Randy Kelley
J. RANDY KELLEY, 41, Vice President Industrial Products Division - North
America since 1994. Previously Division Vice President Industrial Container
1991 - 1993; Area Manufacturing Manager - Consumer Products Division 1988 -
1990; Manager - Special Projects 1986 - 1987; Plant Manager - Consumer Products
Division, Naperville, Ill., 1984 - 1986. Joined Sonoco in 1978.
- - -
[PHOTO]
Raymond L. McGowan, Jr.
RAYMOND L. MCGOWAN, JR., 44, Vice President - Consumer Products Division, U.S.
and Canada since February 1996. Previously Division Vice President & General
Manager - Consumer Products Division, U.S. and Canada 1994 - 1996; Division Vice
President - Sales, Marketing & Technology - Consumer Products Division
1987 - 1992; Division Sales Manager - Consumer Products Division 1987; Division
Marketing Manager 1985. Prior to joining Sonoco in 1983 worked with Container
Corporation of America.
- - -
[PHOTO]
Harry J. Moran
HARRY J. MORAN, 63, Executive Vice President since February 1996. Previously
Group Vice President - Consumer Packaging Group 1993 - 1996; Vice President &
General Manager - Consumer Packaging 1990 - 1993; Division Vice President &
General Manager - Consumer Products Division 1985 - 1990; Division Vice
President - Consumer Products Division 1983 - 1984. Prior to joining Sonoco in
1983 he worked with Container Corporation of America.
- - -
[PHOTO]
Earl P. Norman, Jr.
EARL P. NORMAN, JR., 59, Vice President - Technology since 1989. Previously
Staff Vice President - Business Development & Technology 1985 - 1986; Director -
Business Development & Technology 1985. Prior to joining Sonoco in 1969 worked
with Reynolds Metals Company.
- - -
[PHOTO]
Maurice M. Richardson
MAURICE M. RICHARDSON, 61, Vice President of Sonoco and President of Sonoco
Engraph since February 1996. Previously Chief Executive Officer - Sonoco
Engraph's label, screen printing and paperboard carton businesses 1995 - 1996;
President, Chief Operating Officer of Engraph 1994 - 1995; Executive Vice
President, Chief Operating Officer 1992 - 1994; Group Vice President 1983 -
1992. Prior to working with Engraph was with Mead Packaging. Joined Sonoco
with the Engraph acquisition in 1993.
24
48
Division and Staff Officers/Subsidiary and Affiliate Officers
JIM C. BOWEN, 45, Vice President - Manufacturing North America, Paper Division
since 1994. Previously Director of Manufacturing North America, Paper Division
1993 - 1994. Northeast Regional Manufacturing Manager 1988 - 1993. Production
Manager - Hartsville Cylinder Mill 1983 - 1988. Joined Sonoco in 1972.
- - -
GARY A. CRUTCHFIELD, 46, Division Vice President - Industrial Container
Division since 1994. Previously Division Vice President - Special Products
1989 - 1990; General Manager - Retail & Industrial Film - High Density Film
Division 1988 - 1989; Assistant to Senior Vice President 1987 - 1988; General
Manager - Baker Reels Division 1985 - 1987; Area Manufacturing Manager -
Consumer Products Division 1985. Joined Sonoco in 1974.
- - -
BASIL H. FORD, 51, Staff Vice President since 1995. Previously Vice President
with Engraph. Joined Sonoco with the Engraph acquisition in 1993.
- - -
LARRY O. GANTT, 58, Division Vice President - Global Operations - Consumer
Packaging since 1994. Previously Division Vice President Manufacturing -
Consumer Products Division 1987 - 1994; Division Operations Manager - Consumer
Packaging 1985 - 1987; Manufacturing Manager - Consumer Packaging 1980 - 1985;
Regional and Area Manager - Consumer Packaging 1973 - 1980; Plant Manager -
Consumer Packaging 1967 - 1973. Joined Sonoco in 1963.
- - -
DONALD M. GORE, 46, Division Vice President - Textiles and Specialty -
Industrial Products Division North America since 1994. Previously Vice
President - Sales for Industrial Products Division North America 1987 - 1991;
Director - Sales & Marketing 1983 - 1987; Director - Marketing 1972 - 1983;
Sales Representative 1972. Joined Sonoco in 1972.
- - -
JOHN D. HORTON, 53, Division Vice President - Sales & Marketing - High Density
Film Products since 1988. Previously Sales & Marketing Manager - Polysack
1987 - 1988; National Sales Manager - Consumer Products Division 1978 - 1987;
R&D Manager - Consumer Products Division 1977 - 1978; R&D Project Leader
1975 - 1977; Plant Manager - Consumer Products Division - Alpha, Ohio,
facility 1974 - 1975; Account Representative - Consumer Products Division
1974. Joined Sonoco in 1972.
- - -
KEVIN P. MAHONEY, 40, Staff Vice President - Corporate Planning since February
1996. Previously Director of Corporate Planning 1993 - 1996; Manager of
Financial Planning 1989 - 1993. Prior to joining Sonoco in 1987 he worked with
Arthur Andersen.
- - -
JOHN MIKULA, 54, Division Vice President, Marketing/Customer Service -
Industrial Container Division since October 1994. Previously Manager -
Strategic Planning and New Business Development 1992 - 1994; General Manager
Sonoco Plastic Drum 1986 - 1992. Prior to joining Sonoco in 1986 he worked with
Pepsi and Continental Fibre Drum.
- - -
MARC W. NATHAN, 43, Staff Vice President - Compensation and Benefits since
1994. Previously Director - Compensation and Benefits 1990 - 1994. Prior to
joining Sonoco in 1990 worked with Ryder System, Inc. and Sirota & Alper
Associates.
- - -
JOHN L. NEWSOME, JR., 49, Division Vice President - Paper Mill Core & Film Core
Business Units - Industrial Products since 1994. Previously Division Vice
President - Operations North America - Industrial Products Division 1992 - 1994;
Vice President - Operations - Paper Division 1987 - 1992; Division Vice
President 1984 - 1987; Production Manager - Hartsville Cylinder Mill 1976.
Joined Sonoco in 1969.
- - -
CHARLES F. PATERNO, 39, Division Vice President, Industrial
Products/Paper-Europe since 1996. Previously President-Sonoco Limited
1994 - 1995; General Manager, Specialty Business Unit - IPD 1991 - 1994; General
Manager - Western Region IPD 1989 - 1991; Sales Manager - Northwest IPD
1987 - 1989; Plant Manager - Vancouver, Wash. - IPD 1985 - 1987; Plant Manager -
Camden, Ark. 1984 - 1985. Joined Sonoco in 1983.
- - -
FRANK J. POPELARS, 54, Staff Vice President, Corporate Controller since 1993.
Previously served as Director Administration & Control, Consumer Packaging
Group 1989 - 1993; Assistant Controller, Consumer Products Group 1987 - 1989;
Division Manager, Accounting/MIS 1986 - 1987. Prior to joining Sonoco in 1983
worked with Container Corporation of America.
- - -
CHARLES W. REID, 57, Division Vice President and General Manager - Baker
Division since 1988. Worked with Baker Reels during and prior to Sonoco's 1980
acquisition. Rejoined Sonoco in 1988.
- - -
J. C. RHODES, 57, Division Vice President - Operations Support since 1991.
Previously Division Vice President - Industrial Products Division 1980 - 1991;
General Manager of the Midwest Region Industrial Products Division 1978 - 1980;
Plant Manager - Industrial Products - Akron, Ind., plant 1973-1978. Joined
Sonoco in 1961.
- - -
JUAN ROMAN, 54, Vice President IPD/Paper South America since 1993; General
Manager, Colombia, 1984 - 1992. Joined Sonoco in 1984. Previously with
International Paper, W.R. Grace and Fabricato Colombia.
- - -
JAMES H. SHELLEY, 52, Staff Vice President - Employee Relations & Labor Counsel
since 1980. Previously Director of Industrial Relations & Personnel 1974 - 1980;
Director, Industrial Relations 1974. Joined Sonoco in 1965.
- - -
EDDIE L. SMITH, 44, Division Vice President - Consumer Products, Europe since
1994. Prior to joining Sonoco, he was Managing Director, CMB/Sonoco 1989 - 1993.
He also held the positions of General Manager and Sales and Marketing Manager
with CarnaudMetalbox.
- - -
KARL SVENDSEN, 54, Division Vice President, Operating Resources - Industrial
Container Division since October 1994. Previously General Manufacturing Manager
1981 - 1994; Plant Manager 1981. Prior to joining Sonoco in 1970 worked with
General Dynamics.
- - -
DAVID THORNELY, 51, Managing Director - Sonoco Australasia since 1994.
Previously General Manager - Sonoco Australia 1991 - 1994. Prior to joining
Sonoco was Managing Director, Bunzl Industries Ltd., Australia.
- - -
Subsidiary and Affiliate Officers
CRELLIN INTERNATIONAL
MICHAEL DRANICHAK, 61, President & CEO - Crellin International since 1989.
Previously President - Crellin, Inc. 1984 - 1989; Assistant to the President,
Vice President and President of Crellin Plastics (Albany International)
1969 - 1983; Service Engineer, Designer and Department Manager of several
different production departments 1959 - 1969. Joined Sonoco with the Crellin
acquisition in 1993.
- - -
PAPER STOCK DEALERS, INC.
J. BLAKE BOYD, 43, President-Paper Stock Dealers, Inc. since 1989. Previously
Manager - Paper Stock Procurement 1980 - 1989; Eastern Regional Manager - Paper
Stock Procurement 1976 - 1979. Joined Sonoco in 1976.
- - -
PAPETERIES DU RHIN
PIERRE LHOMME, 73, President-Papeteries Du Rhin since 1986. Previously Chairman
of Lhomme S.A. 1965 - 1990; President of the French Cardboard Federation
1974 - 1980; President of the Chamber of Commerce in Sens 1985 - 1989. Joined
Sonoco in 1990 when Lhomme S.A. was purchased by Sonoco.
- - -
SHOWA MARUTSUTSU
ISAO SATO, 64, Chairman of Showa Marutsutsu Company, Ltd. and Showa Products
Company Ltd. since July 1995 and October 1995, respectively. President of
Showa Products and Showa Marutsutsu since 1964 and 1966, respectively. Joined
Showa Marutsutsu in 1954.
- - -
JUN SATO, 35, President of Showa Marutsutsu and Showa Products since July 1995
and October 1995, respectively. Director of Showa Marutsutsu since 1991. Joined
Showa Marutsutsu in 1986.
- - -
SONOCO ASIA
PERRY D. SMITH, 45, Managing Director - Sonoco Asia, L.L.C. since 1994.
Previously Director, Business Development - Asia Pacific 1992 - 1994; Director,
Marketing - International Division (Asia) 1988 - 1992. Prior to joining Sonoco
in 1988 worked with LTV Aerospace and Defense.
- - -
SONOCO ENGRAPH
MAURICE M. RICHARDSON, 61, President of Sonoco Engraph since 1994.
- - -
WILLIAM J. BIEDENHARN, 43, President, General Manager-Labels, Sonoco Engraph
since 1996. Previously Division Vice President - Industrial Products & Paper
Europe 1993 - 1995; Division Vice President - Global Marketing Industrial
Products Division 1989 - 1993; Consumer Products Division Marketing Manager
1985-1989. Prior to joining Sonoco in 1985 he worked with Owens-Illinois.
- - -
SONOCO LIMITED
RODGER D. FULLER, 34, President - Sonoco Limited since February 1996.
Previously Manager of Manufacturing - Consumer Products Division 1994 - 1996;
Area Manufacturing Manager 1991 - 1994; Plant Manager 1989 - 1990;
miscellaneous manufacturing and administrative positions since joining Sonoco
in 1985.
25
Shareholder Information
Corporate Offices
North Second Street
Hartsville, SC 29550
(803) 383-7000
Fax: (803) 383-7008
Independent Accountants
Coopers & Lybrand L.L.P.
NationsBank Corporate Center
100 North Tryon Street, #3400
Charlotte, NC 28202
Transfer Agent
Wachovia Bank of North Carolina, N.A.
Corporate Trust Department
P.O. Box 3001
Winston-Salem, NC 27102
Legal Counsel
Sinkler & Boyd, P.A.
P.O. Box 11889
Columbia, SC 29211
Shareholder Services
Sonoco Products Company
Treasurer-B01
P.O. Box 160
Hartsville, SC 29551-0160
(803) 383-7277
Investor Relations and
Corporate Communications
Sonoco Products Company
Corporate Communications-A09
P.O. Box 160
Hartsville, SC 29551-0160
(803) 383-7437
Fax: (803) 383-7008
Internet: http://www.sonoco.com
Sonoco News Release
Copies of the Company's recent news releases
are available at no charge via fax by calling
"Company News On-Call" at 1-800-758-5804,
Sonoco code #805487. This program is a service
of PR NewsWire.
Annual Meeting of Sonoco Shareholders
The annual meeting of shareholders will be
held at the Center Theater on Fifth Street in
Hartsville, S.C., at 11 a.m., Wednesday,
April 17, 1996.
Sonoco Shares
Sonoco common (symbol:SON) and preferred
(symbol:SONprA) stock is traded on the New
York Stock Exchange.
[LOGO]
Form 10-K Available
A copy of the Company's annual report on Form
10-K filed with the Securities and Exchange
Commission may be obtained by shareholders
without charge after April 1, 1996, by writing to:
Sonoco Products Company
Corporate Communications - A09
P.O. Box 160
Hartsville, SC 29551-0160
Dividend Reinvestment
A dividend reinvestment plan is available to
record Sonoco shareholders. For more
information write to:
Wachovia Bank of North Carolina, N.A.
Corporate Trust Department
P.O. Box 3001
Winston-Salem, NC 27102
Direct Deposit of Dividends
Sonoco shareholders may request automatic
deposit of cash dividends to checking, savings
or money market accounts that participate in
the Automatic Clearinghouse System. If you
would like this service, please contact:
Wachovia Bank of North Carolina, N.A.
Corporate Trust Department
P.O. Box 3001
Winston-Salem, NC 27102
Share Account Information
Shareholders with inquiries concerning their
accounts may call Wachovia Bank of North
Carolina, N.A. on their toll-free line. The number
is 1-800-633-4236.
[GRAPH]
CASH DIVIDENDS DECLARED - COMMON
(millions $)
The Sonoco quarterly dividend was
increased from $.13 to $.15 per share
beginning in the second quarter of 1995.
Dividends are increased as earnings justify.
[GRAPH]
MARKET VS. BOOK VALUE
PER COMMON SHARE
($)
The market price of the Company's stock increased
26% to $26.25 per share at the end of 1995. The
book value per common share increased to $8.19
in 1995, compared with $7.23 in 1994.
Prior years' data restated to reflect the 5% stock
dividend in June 1995.
[GRAPH]
LONG-TERM DEBT
(millions $)
Long-term debt increased $103.9 million
to $591.9 million in 1995, primarily to
fund acquisitions and internal expansion.