1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 0-516
SONOCO PRODUCTS COMPANY
-----------------
Incorporated under the laws I.R.S. Employer Identification
of South Carolina No. 57-0248420
Post Office Box 160
Hartsville, South Carolina 29551-0160
Telephone: 803-383-7000
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
------------------- ------------------------------------
No par value common stock NASDAQ
Series A Cumulative Preferred Stock NASDAQ
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of voting stock held by nonaffiliates of the
registrant (based on the NASDAQ National Market System closing price) on
March 6, 1994, was $2,084,687,112.
As of March 6, 1994, there were 86,861,963 shares of no par value common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended
December 31, 1993, are incorporated by reference in Parts I, II and IV;
portions of the Proxy Statement for the annual meeting of shareholders to be
held on April 20, 1994, are incorporated by reference in Part III.
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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PART I
ITEM 1. BUSINESS
The Company
The Company, a South Carolina corporation founded in Hartsville, South
Carolina, in 1899, is a major multinational manufacturer of
paperboard-based and plastic-based packaging products. The Company is
also vertically integrated into paperboard production and
recovered-paper collection. The paperboard utilized in the Company's
packaging products is produced substantially from recovered paper.
The Company operates an extensive network of plants in the United
States and has subsidiaries in Europe, Canada, Mexico, South America,
Australia and Asia, and affiliates in the United Kingdom, Canada,
Japan and France. The Company's business is organized by global
product lines in order to leverage its U.S. customer base, to take
advantage of synergies from its worldwide operations and to serve its
customers worldwide on a timely basis and with consistent quality.
The Company serves a wide variety of industrial and consumer markets.
Industrial markets, which represented approximately 58% of the
Company's sales in 1993, include paper manufacturers, chemical and
pharmaceutical producers, textile manufacturers, automotive
manufacturers, and the building and construction industry. Consumer
markets, which represented approximately 42% of the Company's sales in
1993, include food and beverage processors, the personal and health
care industries, grocery store chains, household good manufacturers
and consumer electronics. The Company believes that it is a leading
producer in most markets served. One of the Company's strategic goals
is to increase the proportion of consumer markets product sales in
order to change the business mix between industrial and consumer
markets to 50/50.
The Company's operations are divided into four segments (three
domestic and one international) for financial reporting purposes.
Domestic segments include Converted Products, Paper and Miscellaneous.
The Financial Reporting For Business Segments Table as shown in the
Company's 1993 Annual Report to Shareholders, which is included as
Exhibit 13, presents selected financial data by major lines of
business or segments for each of the past three fiscal years. This
table is hereby incorporated by reference and should be read in
conjunction with the Management's Discussion and Analysis of the 1993
Annual Report to Shareholders, which is also hereby incorporated by
reference.
Acquisitions/Dispositions
Acquisitions and business combinations have been, and are expected to
continue to be, an important part of the Company's strategy for
growth. Significant acquisitions during the past five years include
the 1989 merger of the Company's plastic bottle operations with those
of Graham Container Corporation and Graham Engineering Corporation to
form a partnership, Sonoco Graham Company. The Company subsequently
sold its 40% interest in Sonoco Graham Company to the other partners
in 1991. Also in 1989, the Company acquired Hilex Poly Co., Inc. This
company operated two plants and manufactured plastic bags for the
grocery and retail markets. In 1990, as part of the Company's
restructuring program, one of these plants, the Los Angeles operation,
was closed. During 1990, the Company acquired Lhomme S.A. in France,
which was the leading French manufacturer of paperboard, tubes and
cores. In January 1992, the Company purchased the Trent Valley paper
mill in Trenton, Ontario, Canada. This purchase provided Sonoco with a
modern machine that allows for the production of higher grades of
paper. In January 1993, the Company purchased all of the outstanding
stock of Crellin Holding, Inc., an international manufacturer,
designer and marketer of molded plastic products.
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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Acquisitions/Dispositions, Continued
In January 1993, the Company also completed the acquisition of the
OPV/Durener Group, Germany's second largest manufacturer of tubes and
cores. In October 1993, the Company acquired Engraph, Inc. following
the successful conclusion of a cash-tender offer and merger
transaction. Engraph markets pressure-sensitive labels and package
inserts, flexible packaging, screen process printing and paperboard
cartons and specialties. Engraph, with approximately 1,600 employees,
has 17 plants in the United States, one in Mexico and one in Puerto
Rico. The acquisition of Engraph is an important strategic step in
the Company's long-range goal to achieve a 50/50 mix in its industrial
and consumer market sales. The availability of Engraph's product
lines to the Company's existing customers is expected to provide new
opportunities for expanding Engraph's consumer markets-based products,
both domestically and internationally.
Competition
The Company believes it has several competitive advantages in the
industrial and consumer Converted Products markets it serves. First,
the Company sells many products within the Converted Products segment
globally. As a result, the Company believes it has the capability to
respond effectively to customers seeking national or international
supply agreements. Secondly, the Company believes its technological
leadership, reputation for quality and vertical integration has
enabled the Company to coordinate its product development and global
expansion with the rapidly changing needs of its major customers, who
demand high-quality, state-of-the-art, environmentally compatible
packaging. Thirdly, the Company and its customers have developed
international standards to reduce costs and increase quality.
Finally, the Company believes that its strategy of vertical
integration, via the Paper segment, increases its control over the
availability and quality of raw materials used in its products. With
the 1993 acquisition of Engraph, the Company entered into a major new
business that expands the Company's opportunities for growth in new
packaging fields.
Having operated internationally for more than 70 years, the
International segment has been important in the Company's ability to
serve and retain many of its customers that have international
packaging requirements. The Company considers its ability to serve
its customers worldwide in a timely, consistent and cost-effective
manner a competitive advantage. The Company expects its international
activities to provide an increasing portion of its future growth.
The Company is the largest United States producer of high-density,
high-molecular weight plastic carry-out grocery bags and maintains
approximately a 40% share of the market. The Company sponsors
recycling programs for the plastic carrier bag industry and has
relationships with what it believes to be approximately one-half of
all participating U.S. supermarkets offering a bag recycling
program. Other similar products produced by the Company include roll
bags for produce and bakery requirements, plastic bags for convenience
stores and high-volume retail outlets and agricultural film.
The Company's products are sold in highly competitive market
environments. Within each of these markets, supply and demand are the
major factors controlling the market environment. Additionally, and to
a lesser degree, these markets are influenced by the overall rate of
economic activity. Throughout the year, the Company remained highly
competitive within each of the markets served. None of the Company's
segments are seasonal to any significant degree.
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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ITEM 1. BUSINESS, Continued
Raw Materials
The principal raw materials used by the Company are plastic resins,
metal, pulpwood, recovered paper and paper. With the exception of
pulpwood, recovered paper and paper, the Company's raw materials and
supplies are purchased from a number of outside sources; however, the
supply is considered adequate to meet the Company's requirements.
Company-owned timberlands, timber-cutting rights and suppliers are
believed to be sufficient to assure the future availability of
pulpwood. Recovered paper used in the manufacture of paperboard is
purchased either directly from suppliers near manufacturing operations
or through the Company's subsidiary, Paper Stock Dealers, Inc.
Although the Company considers the supply of raw materials to be
adequate to meet its needs, the majority of raw materials are subject
to some price volatility.
Backlog
Most customer orders are manufactured with a lead time not to exceed
approximately three weeks. Long-term contracts, primarily for
composite cans, exist for approximately 16% of trade sales (no one
contract exceeds 3%). These contracts, which are for a specific
duration, generally include price escalation provisions for raw
materials, labor and overhead costs. There are no significant
long-term purchase contracts as the Company considers the supply of
raw materials adequate to meet its needs.
Patents, Trademarks and Related Contracts
No segment of the business is materially dependent upon the existence
of patents, trademarks or related contracts.
Research and Development
The Company has 132 employees engaged in new product development and
technical support for existing product lines. Company sponsored
spending in this area was $12.9 million, $11.7 million and $9.9
million in 1993, 1992 and 1991, respectively. Spending focused on
projects related to Sonoco's primary businesses and reflects a
commitment to ensure that the Company is the technology leader in
markets served. Customer-sponsored spending has been immaterial for
the past three years.
Environmental Protection
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. The Company has been named as a potentially
responsible party at five sites in the Northeast. These sites are
believed to represent the Company's largest potential environmental
problems. The Company has presently accrued $3.1 million as of
December 31, 1993, with respect to these sites. Due to the complexity
of determining clean-up costs associated with the sites, an estimate
of the ultimate cost to the Company cannot be determined; however,
costs will be accrued once reasonable estimates are determined.
Employees
The number of employees at December 31, 1993, was 16,472.
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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ITEM 1. BUSINESS, Continued
Financial Information about Foreign and Domestic Operations and Export
Sales
The Company has subsidiaries and affiliates operating in 24 countries.
The primary operations of the international subsidiaries are similar
in products and markets served to our domestic businesses. The
Management's Discussion and Analysis, the Financial Reporting for
Business Segments, and Note 15 to the Financial Statements of the
Annual Report to Shareholders are hereby incorporated by reference.
United States export sales are immaterial.
ITEM 2. PROPERTIES
The main plant and corporate offices are located in Hartsville, South
Carolina. The Company has 170 branch or manufacturing operations in
the United States, 26 in Canada and 66 in 22 other international
countries. There are 119 manufacturing operations in the converting
segment, 33 in the paper segment, 92 in the international segment, and
18 in the miscellaneous segment at December 31, 1993.
One hundred and one (101) domestic plants are owned in fee simple;
sixty-five (65) are leased for terms up to ten years with options to
renew for additional terms and four (4) have lease purchase
agreements.
The Company believes that its properties are suitable and adequate for
current needs and that the total productive capacity is adequately
utilized.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, 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. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market and Market Prices of Common Stock
Sonoco Products Company common stock is traded on the NASDAQ National Market
System. The Comparative Highlights in the 1993 Annual Report to Shareholders
(Exhibit 13 of this report) shows, by quarter, the high and low price on
this market for the latest two years, and is hereby incorporated by
reference.
Approximate Number of Security Holders
There were approximately 33,000 shareholder accounts as of March 9, 1994.
Dividends
The Comparative Highlights in the 1993 Annual Report to Shareholders is
hereby incorporated by reference. There are certain restrictions with
respect to the maintenance of financial ratios and the disposition of
assets in several of the Company's loan agreements which may limit the
Company's ability to pay cash dividends. The most restrictive covenant
currently requires that tangible net worth at the end of each fiscal
quarter be greater than $200 million through April 3, 1994, and $365 million
thereafter. The Company is prohibited from paying cash dividends if these
requirements are not met. Additionally, the terms of the Company's Series A
Cumulative Convertible Preferred Stock prohibits payment of dividends on any
junior class of stock, including the Company's Common Stock, unless full
cumulative dividends on the Series A Cumulative Convertible Preferred Stock
have been paid or declared and set aside for payment for all past Dividend
payment periods.
ITEM 6. SELECTED FINANCIAL DATA
The Selected Eleven-Year Financial Data in the 1993 Annual Report to
Shareholders provides the required data, and is hereby incorporated by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information presented under Management's Discussion and Analysis
of the 1993 Annual Report to Shareholders is hereby incorporated by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Accountants.
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REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Shareholders and Directors
Sonoco Products Company:
We have audited the consolidated financial statements of Sonoco Products
Company as of December 31, 1993 and 1992, and for each of the three years in
the period ended December 31, 1993, which financial statements are included on
pages 28 through 37 of the 1993 Annual Report to Shareholders of Sonoco
Products Company and incorporated by reference herein. We have also audited the
financial statement schedules listed in Item 14 of this form 10-K. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules 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, 1993 and 1992, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
In addition, in our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required to be
included therein.
As discussed in Notes 12 and 13 to the consolidated financial statements, the
Company changed its method of accounting for postretirement benefits other than
pensions and income taxes in 1992.
/s/ Coopers & Lybrand
-------------------------
COOPERS & LYBRAND
Charlotte, North Carolina
January 28, 1994
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA, Continued
Consolidated Financial Statements
The consolidated financial statements and notes to consolidated
financial statements for Sonoco Products Company included in the 1993
Annual Report to Shareholders (Exhibit 13 of this Report) are hereby
incorporated by reference.
Supplementary Financial Data
The Comparative Highlights in the 1993 Annual Report to Shareholders is
hereby incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On July 15, 1992, the Company filed an 8-K pertaining to the Company's
change in certifying accountant of Sonoco U.K. Ltd. Inc., a
significant wholly owned subsidiary of Sonoco Products Company. The
Company disengaged Wheawill and Sudworth and retained Coopers & Lybrand
as independent accountants for Sonoco U.K. Ltd. Inc.
The Form 8-K is incorporated herein by reference.
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of Directors
The Directors of Sonoco Products Company and Compliance with the
Securities Exchange Act of 1934 are shown on pages 6 through 12 and
page 25, respectively, of the Definitive Proxy Statement (included as
Exhibit 99-1 of this report) and are hereby incorporated by reference.
Identification of Executive Officers
Year First
Elected Business Experience
Name Age Position Officer During Last Five Years
---- --- -------- ------- ----------------------
C. W. Coker 60 Chairman of the 1961 Present position since 1990,
Board and Chief previously having served as
Executive Officer President since 1970.
R. C. King, Jr. 59 President and 1979 Present position since 1990,
Chief Operating previously having served as
Officer Senior Vice President since
1987.
T. C. Coxe, III 63 Senior Executive 1977 Present position since 1993,
Vice President previously having served as
Executive Vice President since
1985.
L. Benatar 63 Senior Vice 1993 Present position since 1993.
President Chairman and Chief Executive
Officer of Engraph, Inc. since 1981.
P. C. Browning 52 Executive Vice 1993 Present position since 1993,
President - Global previously having served as
Industrial Products Chairman and Chief Executive
and Paper Divisions Officer - National Gypsum
Company since 1990, and President
and Chief Executive Officer - Gold
Bond Division of National Gypsum
Company since 1989.
C. W. Claypool 58 Vice President - 1987 Present position since 1987.
Paper Division
P. C. Coggeshall, Jr. 50 Vice President - 1979 Present position since 1991,
Administration previously having served as
Group Vice President - Industrial
Products Division since 1986.
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, Continued
Identification of Executive Officers, Continued
Year First
Elected Business Experience
Name Age Position Officer During Last Five Years
---- --- -------- ------- ----------------------
H. E. DeLoach, Jr. 49 Group Vice 1986 Present position since 1993,
President previously having served as
Vice President - Film, Plastics
and Special Products since early
1993, and Vice President - High
Density Film Products since 1989.
R. C. Eimers, Ph.D. 46 Vice President - 1988 Present position since 1988.
Human Resources
F. T. Hill, Jr. 41 Vice President - 1987 Present position since January
Finance 1994, previously having served as
Vice President - Industrial
Products North America since 1990,
and Vice President - Finance since
1989.
R. E. Holley 51 Vice President - 1987 Present position since 1993,
High Density previously having served as
Film Products Vice President - Total Quality
Management since 1990, and
Vice President - Industrial
Products Division since 1987.
J. R. Kelley 39 Vice President - 1994 Present position since January
Industrial Products 1994, previously having served
Division - North America as Division Vice President -
Industrial Container since 1990, and
Area Manufacturing Manager -
Consumer Products Division
since 1988.
H. J. Moran 61 Group Vice President - 1987 Present position since 1993,
Consumer previously having served as
Packaging Group Vice President and General Manager -
Consumer Packaging since 1990, and
Division Vice President and General
Manager - Consumer Products
Divison since 1985.
E. P. Norman, Jr. 57 Vice President - 1989 Present position since 1989.
Technology
J. L. Coker 53 Corporate Secretary 1969 Present position since 1969.
C. J. Hupfer 47 Treasurer 1988 Present position since 1988.
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, Continued
Family Relationships
C. W. Coker and F. L. H. Coker are brothers and the first cousins of J. L.
Coker and P. C. Coggeshall, Jr.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation - Directors and Officers as shown on pages 14 -
20 and 22 of the Proxy Statement included as Exhibit 99-1 of this
report is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The security ownership of management as shown on page 13 of the Proxy
Statement, Exhibit 99-1 of this report, is hereby incorporated by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with management as shown on page 23 of the Proxy
Statement included as Exhibit 99-1 of this report is hereby
incorporated by reference.
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Data incorporated by reference from the
1993 Annual Report to Shareholders
(included as Exhibit 13 of this report):
Comparative Highlights (Selected Quarterly
Financial Data)
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Shareholders' Information (Selected Financial Data)
Consolidated Balance Sheets as of
December 31, 1993 and 1992
Consolidated Statements of Income for
the years ended December 31, 1993, 1992 and 1991
Consolidated Statements of Changes
Shareholders' Equity for the years ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows
for the years ended December 31, 1993,
1992 and 1991
Notes to Consolidated Financial Statements
In response to Item 9 of this Form 10-K Annual Report, the Company's Current
Report on Form 8-K filed on July 20, 1992 and Form 8-K/A filed on July 28, 1992
is incorporated by reference.
Data submitted herewith:
Report of Independent Accountants
Financial Statement Schedules:
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation,
Depletion and Amortization of
Property, Plant and Equipment
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
Continued
Financial Statement Schedules Continued:
Schedule VIII - Valuation and Qualifying
Accounts
Schedule IX - Short-Term Borrowings
Schedule X - Supplementary Income
Statement Information
All other schedules are omitted because they
are not required, are not applicable or the
required information is given in the
financial statements or notes thereto.
Exhibits:
3 Articles of Incorporation and By-laws *
4 Instruments Defining the Rights of
Securities Holders, including Indentures *
11 Computation of Earnings Per Share
13 1993 Annual Report to Shareholders
21 Subsidiaries and Affiliates of the
Registrant
23 Consents of Independent Accountants
99-1 Proxy Statement, filed in conjunction
with annual shareholders' meeting
scheduled for April 20, 1994
99-2 Form 11-K Annual Report - 1983 and
1991 Sonoco Products Company Key
Employee Stock Option Plans
99-3 Form 11-K Annual Report - Sonoco
Products Company Employee Savings and
Stock Ownership Plan
99-4 Form 11-K Annual Report -
Sonoco Products Company
Engraph, Inc. Retirement Plus Plan
*Incorporated by reference to the Registrant's Form S-3 (File No.
33-50501)
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K,
Continued
Reports on Form 8-K
The Company filed a Current Report on Form 8-K on October 1, 1993, pertaining
to the acquisition of Engraph, Inc. The items included in the Form 8-K were
Item 5 (Other Events) describing the Agreement and Plan of Merger and Item 7
(Financial Statements, Pro Forma Financial Information and Exhibits).
The Company filed a Current Report on Form 8-K on October 29, 1993, and a Form
8-K/A on November 4, 1993, pertaining to the acquisition of Engraph, Inc. The
items included in the Form 8-K and Form 8-K/A were Item 2 (Acquisition or
Disposition of Assets) and Item 7 (Financial Statements, Pro Forma Financial
Information and Exhibits).
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
for the years ended December 31, 1993, 1992 and 1991
(DOLLARS IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- ---------- -------- ---------- -------- --------
BALANCE AT BALANCE
BEGINNING ADDITIONS RETIRE- OTHER AT END
CLASSIFICATION OF PERIOD AT COST MENTS(A) CHANGES(B) OF PERIOD
-------------- ---------- --------- ----------- ---------- ---------
Year ended December 31, 1993
Land $ 19,151 $ 66 $ (113) $ 6,590 $ 25,694
Timber resources 24,420 929 25,349
Buildings 226,758 15,549 (11,416) 37,042 267,933
Machinery and
equipment 820,553 83,095 (61,590) 93,189 935,247
Construction in
progress 44,118 15,957 (870) 2,268 61,473
---------- -------- -------- -------- ----------
$1,135,000 $115,596 $(73,989) $139,089 $1,315,696
========== ======== ======== ======== ==========
Year ended December 31, 1992
Land $ 20,153 $ 816 $ (133) $ (1,685) $ 19,151
Timber resources 22,522 1,898 24,420
Buildings 210,912 17,633 (5,402) 3,615 226,758
Machinery and
equipment 771,101 72,185 (32,247) 9,514 820,553
Construction in
progress 27,446 16,773 (732) 631 44,118
---------- -------- -------- -------- ----------
$1,052,134 $109,305 $(38,514) $ 12,075 $1,135,000
========== ======== ======== ======== ==========
Year ended December 31, 1991
Land $ 18,951 $ 952 $ (28) $ 278 $ 20,153
Timber resources 15,402 7,120 22,522
Buildings 190,005 20,831 (2,447) 2,523 210,912
Machinery and
equipment 743,393 69,978 (48,102) 5,832 771,101
Construction in
progress 35,950 (8,324) (180) 27,446
---------- -------- -------- -------- ----------
$1,003,701 $ 90,557 $(50,577) $ 8,453 $1,052,134
========== ======== ======== ======== ==========
(A) Includes fixed assets written off as part of the 1992 and 1990
restructuring reserve.
(B) Primarily relates to acquisitions and translation adjustments for
foreign subsidiary assets.
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SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
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SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
for the years ended December 31, 1993, 1992 and 1991
(DOLLARS IN THOUSANDS)
--------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- -------- -------- --------- -------- --------
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND RETIRE- OTHER AT END
CLASSIFICATION OF PERIOD EXPENSES MENTS (A) CHARGES(B) OF PERIOD
- -------------- --------- --------- ---------- ---------- ---------
Year ended December 31, 1993
Timber resources $ 12,624 $ 1,175 $ $ $ 13,799
Buildings 66,674 11,109 (1,351) 2,273 78,705
Machinery and equipment 441,684 75,437 (28,718) (2,365) 486,038
-------- ------- -------- ------- --------
$520,982 $87,721 $(30,069) $ (92) $578,542
======== ======= ======== ====== ========
Year ended December 31, 1992
Timber resources $ 10,927 $ 1,697 $ $ $ 12,624
Buildings 59,367 8,543 (1,724) 488 66,674
Machinery and equipment 401,053 69,215 (24,343) (4,241) 441,684
-------- ------- -------- ------- --------
$471,347 $79,455 $(26,067) $(3,753) $520,982
======== ======= ======== ======= ========
Year ended December 31, 1991
Timber resources $ 10,132 $ 998 $ (203) $ $ 10,927
Buildings 53,363 7,529 (871) (654) 59,367
Machinery and equipment 377,615 64,584 (39,017) (2,129) 401,053
-------- ------- -------- ------- --------
$441,110 $73,111 $(40,091) $(2,783) $471,347
======== ======= ======== ======= ========
(A) Includes accumulated depreciation on fixed assets reserved for write off
as part of the 1992 and 1990 restructuring reserve.
(B) Includes translation adjustment of accumulated depreciation for foreign
subsidiary companies.
IV-5
17
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
-------------------------------
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- ---------- ---------- ------------ ----------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD
- ----------- --------- --------- ---------- ----------
1993
Restructuring Reserve $39,130 $ $12,016 $27,114
======= ======= ======= =======
Goodwill Amortization $22,040 $ 8,024(2) $ 5,661 $24,403
======= ======= ======= =======
Allowance for Doubtful
Accounts $ 3,511 $ 5,537(2) $ 2,534 $ 6,514
======= ======= ======= =======
1992
Restructuring Reserve $ 9,871 $42,000 $12,741 $39,130
======= ======= ======= =======
Goodwill Amortization $19,333 $ 3,854 $ 1,147 $22,040
======= ======= ======= =======
Allowance for Doubtful
Accounts $ 3,671 $ 1,737 $ 1,897 $ 3,511
======= ======= ======= =======
1991
Restructuring Reserve $18,115 $ $ 8,244 $ 9,871
======= ======= ======= =======
Goodwill Amortization $18,657 $ 3,450 $ 2,774 $19,333
======= ======= ======= =======
Allowance for Doubtful
Accounts $ 2,508 $ 2,496 $ 1,333 $ 3,671
======= ======= ======= =======
(1) Includes amounts written off, translation adjustments and payments.
(2) Increase in additions charged to costs and expenses in 1993 is related
to acquisitions.
IV-6
18
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
----------------------
SCHEDULE IX - SHORT-TERM BORROWINGS
for the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
- -------------------------- ---------------- ----------- -------------- ------------ ------------
Weighted Average Weighted
Average Maximum Amount Average
Interest Amount Out- Outstanding Interest Rate
Category of Aggregate Balance at Rate at End standing During During the During the
Short-Term Borrowings (1) End of Period of Period the Period Period (2) Period(3)
- ------------------------- ---------------- ----------- --------------- ------------ -------------
Year Ended December 31, 1993
Notes Payable - Banks $56,666 6% $64,426 $52,631 7%
Year Ended December 31, 1992
Notes Payable - Banks $61,799 9% $75,118 $66,871 10%
Year Ended December 31, 1991
Notes Payable - Banks $43,503 11% $48,762 $40,452 12%
(1) Represents borrowings consisting primarily of foreign denominated debt,
under revolving lines of credit and term notes, excluding commercial paper
borrowings which are classified as long-term.
(2) Based on daily loan balances outstanding during the year.
(3) Based on actual interest rates in effect during the year weighted by the
loan balances outstanding.
IV-7
19
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
----------------------
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
for the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Column A COLUMN B
----------- -----------------------------------------
Description CHARGED TO COSTS AND EXPENSES
----------- -----------------------------------------
1993 1992 1991
------- ------- -------
Maintenance and repairs $96,854 $94,075 $86,845
======= ======= =======
Amounts for depreciation and amortization of intangible assets, pre-operating
costs and similar deferrals, taxes other than payroll and income taxes,
royalties and advertising costs are not presented as such amounts are less than
1% of total sales.
IV-8
20
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
-------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on this 29th day of March
1994.
SONOCO PRODUCTS COMPANY
/s/ C. W. Coker
----------------------------
C. W. Coker
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report is signed below by the following persons on behalf of the Registrant and
in the capacities indicated on this 29th day of March 1994.
/s/ F. T. Hill, Jr.
-------------------
F. T. Hill, Jr.
Vice President - Finance
(Principal Accounting Officer)
IV-9
21
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDARES
----------------------------
SIGNATURES, Continued
/s/ C. W. Coker Chief Executive Officer and
- ----------------------------- Director (Principal Executive
C. W. Coker Officer)
/s/ R. C. King, Jr. President and Chief Operating
- --------------------------- Officer and Director
R. C. King, Jr.
/s/ T. C. Coxe, III Senior Executive Vice President and
- --------------------------- Director (Principal Financial Officer)
T. C. Coxe, III
/s/ L. Benatar Director
- ---------------------
L. Benatar
/s/ C. J. Bradshaw Director
- ---------------------------
C. J. Bradshaw
Director
- ---------------------------
R. J. Brown
/s/ F. L. H. Coker Director
- -------------------------
F. L. H. Coker
Director
- ---------------------------
J. L. Coker
/s/ A. T. Dickson Director
- ---------------------------
A. T. Dickson
Director
- ---------------------------
R. E. Elberson
/s/ J. C. Fort Director
- ---------------------------
J. C. Fort
/s/ P. Fulton Director
- ---------------------------
P. Fulton
/s/ E. H. Lawton, Jr. Director
- ---------------------------
E. H. Lawton, Jr.
/s/ H. L. McColl, Jr. Director
- ---------------------------
H. L. McColl, Jr.
/s/ E. C. Wall, Jr. Director
- ---------------------------
E. C. Wall, Jr.
IV-10
1
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
---------------------------------
EXHIBIT (11)
COMPUTATION OF EARNINGS PER SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
YEARS ENDED DECEMBER 31
-----------------------
1993(A) 1992 1991
------- ---- ----
Primary earnings
Net income available to common shareholders $ 117,570 $ 43,359 $ 94,805
============= ============= ==============
Common shares
Weighted average number of
shares outstanding 87,315,677 86,732,210 86,304,578
Assuming exercise of options (at
yearly average) reduced by
the number of shares that could
have been purchased with proceeds
from exercise of such options 857,331 810,786 470,983
------------- ------------- --------------
Weighted average number of shares
outstanding as adjusted 88,173,008 87,542,996 86,775,561
============= ============= ==============
Primary earnings per common share
Net income available to common shareholders $ 1.33 $ .50 $ 1.09
============= ============= ==============
Assuming full dilution
Net income available to common shareholders $ 117,570 $ 43,359 $ 94,805
============= ============= ==============
Common shares
Weighted average number of
shares outstanding 87,315,677 86,732,210 86,304,578
Assuming exercise of options (at the
higher of the end-of-year price or
the yearly average) reduced by
the number of shares that could
have been purchased with proceeds
from exercise of such options 857,331 1,090,620 470,983
------------- ------------- --------------
Weighted average number of shares
outstanding as adjusted 88,173,008 87,822,830 86,775,561
============= ============= ==============
Earnings per common share assuming full dilution
Net income available to common shareholders $ 1.33 $ .49 $ $1.09
============= ============= ==============
(A)The Company issued 3,450,000 shares of Series A Cumulative Convertible
Preferred Stock in October 1993. The convertible preferred stock and the
related dividend had an anti-dilutive effect on earnings per share in 1993
and are therefore excluded from the above computation.
1
COMPARATIVE HIGHLIGHTS (UNAUDITED)
Sunoco Products Company
First Second Third Fourth
(Dollars in thousands except per share) Quarter* Quarter* Quarter* Quarter Year
- ------------------------------------------------------------------------------------------------------------------------------------
1993
Net Sales.......................................................... $466,938 $478,508 $462,324 $539,454 $1,947,224
Gross Profit....................................................... 101,716 107,435 100,561 111,841 421,553
Net income available to common shareholders........................ 26,908 31,808 28,504 30,350 117,570
Per common share
- ----------------
Net income available to common shareholders..................... .31 .36 .33 .35 1.35
Dividends - common.............................................. .125 .135 .135 .135 .53
Book value per common share..................................... 7.04
Market price - high............................................. 24-7/8 24-3/4 24 22-1/2 24-7/8
- low.............................................. 21-7/8 21-3/4 20-1/2 19-3/4 19-3/4
- ------------------------------------------------------------------------------------------------------------------------------------
1992 * *
Net Sales.......................................................... $429,793 $461,574 $462,603 $484,056 $1,838,026
Gross Profit....................................................... 85,775 100,582 98,448 101,969 386,774
Income before cumulative effect of changes in
accounting principles............................................ 22,128 28,854 27,156 3,113 81,251
Cumulative effect of changes in accounting for
postretirement benefits and income taxes......................... (37,892) (37,892)
Net income (loss).................................................. (15,764) 28,854 27,156 3,113 43,359
Per common share
- ----------------
Income before cumulative effect of changes in
accounting principles......................................... .26 .33 .31 .04 .94
Cumulative effect of changes in accounting for
postretirement benefits and income taxes...................... (.44) (.44)
Net income (loss)................................................ (.18) .33 .31 .04 .50
Dividends - common............................................... .115 .125 .125 .125 .49
Book value per common share...................................... 6.45
Market price - high.............................................. 21-3/8 21 24-3/8 25-1/4 25-1/4
- low............................................... 17-5/8 18-3/8 19 21-1/2 17-5/8
Per share amounts reflect the two-for-one stock split on June 10, 1993.
* First, second and third quarters restated to reflect the reclassification of
certain costs.
** First quarter 1992 includes a $38,000 after-tax charge, or $.44 per share,
to comply with the accounting changes required by FAS 106 and FAS 109,
described in Notes 12 and 13 to the Financial Statements. Fourth quarter
1992 includes a $25,000 after-tax, or $.29 per share, restructuring charge
described in Note 4, to the Financial Statements.
1993 - THE YEAR IN REVIEW
JANUARY
- - Completed acquisition of
the OPV/Durener Group,
Germany's second largest
manufacturer of tubes and
cores.
- - Purchased Crellin Holding,
Inc., a major manufacturer
of molded plastics.
MARCH
- - Sold the European
operations of the
High Density Film
Products Division.
APRIL
- - Announced a two-for-
one split of Sonoco
common stock effective
June 10, 1993.
- - Robert Brown elected to
Sonoco's Board of Directors.
- - Sold Edgeboard operations.
MAY
- - Completed purchase of
the Jefferson Smurfit
composite can operation
in Mexico.
- - Sold liquid packaging
operations to Liqui-Box
Corporation.
SEPTEMBER
- - Began producing
Engineered Cushion Fibre
(ECF) protective packaging
in the United States
and Singapore.
- - Made tender offer to
purchase Engraph, Inc.
OCTOBER
- - Acquired Engraph, Inc.
after a successful tender
offer. Acquisition valued at
approximately $300 million,
net of debt assumed.
- - Leo Benatar, Chairman and
CEO of Engraph, joined
Sonoco and was named to
the Board of Directors.
- - Peter Browning, former
Chairman and CEO of
National Gypsum, joined
Sonoco as Executive Vice
- President responsible for
the global operation of the
Industrial Products and
Paper businesses.
- - Completed successful
offering of $172 million in
convertible preferred stock
and $175 million in long-
term notes.
DECEMBER
- - Completed the year with a
10% decrease in the
Sonoco Personal Injury
Rate, which was a record
low .98.
- - Posted best annual sales
and earnings in the 95-year
history of Sonoco.
2
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations 1993-1992
Consolidated net sales for 1993 were $1.95 billion compared with $1.84
billion in 1992, an increase of 5.9%. The sales gain included acquisitions and
base business growth offset by operations sold as part of the 1992
restructuring and exchange rate changes in 1993. The acquisitions of Engraph,
Crellin, OPV/Durener and a composite can plant in Mexico added $154 million in
sales in 1993. Edgeboard, European plastic bags, liquid packaging, packaging
tapes and U.K. reel operations were sold, reducing sales in 1993 by $38.6
million compared with 1992. The exchange rate losses associated with the
stronger dollar in 1993 were $35 million, or 1.9% of 1992 sales.
Net income for 1993 was $117.6 million, or $1.35 per share, compared
with a restated 1992 income of $106.3 million, or $1.23 per share. The $1.23
per share in 1992 has been restated to exclude the 1992 cumulative effect of
FAS 106 and FAS 109, as well as the restructuring reserve (all of which had a
total negative impact of $.73 per share). The 1993 earnings represent a 10.7%
increase over restated 1992 earnings. The 1993 profit included a non-operating
gain of $.04 per share, as described in Note 3 to the financial statements.
On a consolidated basis, the gross profit margin in 1993 increased to 21.6%
from 21% in 1992. While some of our major industrial packaging operations felt
the impact of poor business conditions, our consumer businesses performed well.
The increase also reflects restructuring actions the Company has taken and
investments made over the past couple of years. Further information on sales
and profits is included in the segment discussion below. Acquisitions had a
significant impact on 1993 earnings, which is expected to continue in the
future. The aggregate cost of these acquisitions, net of debt assumed, was $393
million. With the additional goodwill ($292 million) and preferred stock and
debt financing, dilution of approximately $.04 per share is expected in 1994,
declining in 1995, with no dilution anticipated in 1996.
Capital expenditures in 1993 of $115.6 million include projects to expand
capacity and improve productivity and quality. Research and development costs
charged to expense in 1993 were $12.9 million as compared with $11.7 million in
1992.
Sonoco's effective tax rate in 1993 was 39% compared with 39.5% in 1992.
CONVERTED PRODUCTS SEGMENT. The converted products segment consists of
businesses that manufacture fibre and plastic tubes, cores and cones--used
primarily as industrial carriers; composite canisters--used to package a
variety of products including frozen concentrates, snack foods, nuts, solid
shortening, refrigerated dough, biscuits and pastries, powdered beverages,
coffee, paints, cleansers and other products; caulking cartridges--used for
packaging adhesives and sealants; fibre drums, plastic drums, intermediate bulk
containers--used for packaging a wide variety of products for bulk packaging;
protective packaging products like solid fibre partitions, Sonopost(R) corner
posts and Engineered Cushion Fibre; injection molded plastic products,
pressure-sensitive labels and package inserts, screen printing for fleet
graphics and vending machines, paperboard cartons, flexible packaging and
specialties. Converted products is the largest of Sonoco's business segments
representing approximately 60% of the Company's consolidated sales and profits.
Trade sales for this segment in 1993 were $1.19 billion compared with $1.07
billion in 1992, an increase of 11.2%. This increase is primarily due to the
acquisition of Engraph and Crellin. Demand in our industrial businesses was
down, reflecting the depressed state of many of the major markets served.
Selling price pressures were intense due to competition and customer profit
pressures in these markets. The economic improvement experienced in the fourth
quarter of 1993, and expected to continue in 1994, should improve the sales
growth outlook for our industrial businesses in 1994. Our consumer businesses
also experienced selling price pressure and low growth in 1993.
The overall operating profit for the converting segment was $122.5 million
compared with $94.4 million in 1992. The 1992 results included a restructuring
charge of $9.7 million. Profits in the converting segment increased due to
acquisitions, lower material costs and the benefits of the restructuring
actions taken in 1992.
Capital spending rose to $37.9 million in 1993 from $33.8 million in 1992.
Major projects included actions to expand capacity and improve productivity and
quality.
PAPER SEGMENT. The paper segment consists of 21 U.S. cylinder board
(Graph)
NET SALES BY SEGMENT
(Millions $)
3
MANAGEMENT'S DISCUSSION AND ANALYSIS
machines, one Fourdrinier paper machine and Paper Stock Dealers, Inc.,
a recovered paper collection and processing subsidiary.
The Fourdrinier paper machine, located in Hartsville, S.C., has an
annual capacity of approximately 176,000 tons. This machine produces
corrugated medium sold under contract to Georgia-Pacific Corporation.
Sonoco's U.S. cylinder board capacity is approximately 750,000 tons a year.
Most of the board produced on these machines is sold to Sonoco's paper
converting operations with about 18% of the capacity going to external
customers.
Paper Stock Dealers has more than 20 collection facilities purchasing
and processing recovered paper for use by Sonoco paper mills and for sale to
external customers. Sonoco annually recycles more than a million tons of
recovered paper and much of this is provided through this subsidiary and
mill-site collections.
Total domestic paper sales, including both internal and external, for
1993 were $278.9 million, a decrease of 1.3%, compared with $282.6 million for
1992. Lower prices in corrugated medium (which began to rise late in 1993
indicating a strengthening in the domestic market) coupled with flat
industrial products sales and lower fibre drum sales were the primary factors
affecting this segment.
Operating profits for 1993 were $57.9 million, 11.5% below the $65.4
million in 1992. The decline in profits is due to lower volume and reduced
prices in corrugated medium; lower external cylinder board volume and prices
slightly below 1992 levels; and higher costs in several areas.
Capital spending of $20.5 million in 1993 compared with $15.6 million in
1992. Projects were primarily focused on process improvements and productivity
enhancements on cylinder board machines.
INTERNATIONAL SEGMENT. The international segment includes all of Sonoco's
non-U.S. operations, the largest of which are in the United Kingdom, Canada,
France, Mexico, Australia and Germany. These operations are similar to the U.S.
operations in products and markets served.
Trade sales in the international segment totaled $404.1 million in 1993
compared with $444.7 million in 1992. Unfavorable exchange rates and the
disposition of several business units that were a part of the 1992
restructuring program, accounted for $35 million and $37 million, respectively,
of the sales decline. Sales were also negatively impacted by depressed paper
markets in Canada, Mexico and Europe. Partially offsetting these were
additional sales from acquisitions completed during 1993 and increased sales in
the Asia Pacific region.
Operating profits in the international segment totaled $11.9 million as
compared with a loss in 1992 of $12.4 million. Included in the 1992 results is
a $31.8 million restructuring charge. Excluding this charge, profits in 1993
were $7.5 million lower than 1992. Although Canada, Mexico and Australia had
profit improvements in their converting operations, these improvements were
more than offset by inefficiencies in consolidating businesses in Europe,
exchange rate losses, and lower paper volume and prices due to several weak
economies.
Capital spending in this segment was $41.2 million compared with $48.3
million in 1992. Major projects include the start-up of a tape core operation
in Italy and a project in Canada to generate power for internal use.
MISCELLANEOUS SEGMENT. The miscellaneous segment is made up of several
operations, the largest being High Density Film Products, producers of plastic
bags for the grocery and retail industries, agricultural mulch film and other
products. Also included is Baker Reels, a national manufacturer of nailed wood
and metal reels for the wire and cable industries.
Trade sales were $244 million in 1993, or 14.5% more than the $213 million
in 1992. Volume increased in both operations. In addition, selling prices were
increased in our reels business in response to higher lumber cost.
Operating profits for the miscellaneous segment were $34.9 million in 1993
compared with $23.5 million in 1992. The improved profit in this segment is due
to increased volume and excellent cost control.
Capital spending in this segment was $9.1 million compared with $5.5
million in 1992. Major projects included capacity expansion at several High
Density Film Products plants.
(Graph)
Identifiable Assets By Segment
(Millions $)
4
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 1993 was $31.2 million compared with $30.4
million in 1992. In 1993, the benefit of declining global short-term interest
rates was more than offset by higher average debt levels as a result of
acquisitions. Corporate operating profit in 1993 includes a non-operating gain
of $5.8 million described in Note 3.
Results of Operations 1992-1991
Consolidated net sales for 1992 were $1.84 billion, an increase of 8.2%
compared with 1991 sales of $1.70 billion. This sales increase was due to
strong demand at some of our operations, selling price increases and the
effect of several small acquisitions. Net income for 1992 was $43.4 million,
or $.50 per share, compared with $94.8 million, or $1.10 per share, in 1991.
Results in 1991 included a $.05 per share gain from the sale of Sonoco's 40%
interest in Sonoco Graham.
Income in 1992 was reduced by a charge to comply with adoption of
accounting standards FAS 106 ("Employers' Accounting for Postretirement
Benefits Other Than Pensions") and FAS 109 ("Accounting for Income Taxes").
The net impact of these two accounting changes was a non-cash, after-tax charge
of $38 million, or $.44 per share, retroactive to the beginning of 1992.
Adoption of FAS 106 also resulted in an incremental, annual retiree benefit
expense of approximately $3 million after-tax, or $.03 per share, which was
retroactively charged over all four quarters in 1992. The accounting changes
are described more fully in Notes 12 and 13. In addition to accounting changes,
income was reduced by a one-time, after-tax charge of $25 million, or $.29 per
share, that was taken in the fourth quarter to cover costs associated with
restructuring several of the Company's operations, primarily at foreign
locations. The restructuring included closing, consolidating or relocating
several plants worldwide.
Earnings adjusted for the accounting changes and restructuring charge would
have been $109 million, or $1.26 per share, in 1992, an increase of 20% over
the comparable $1.05 per share from operations reported in 1991.
On a consolidated basis, the gross profit margin in 1992 increased to 21%
from 20.5% in 1991. This performance reflected the rebound of our operations
from the worldwide economic conditions that negatively impacted performance
during 1991. These results also reflected actions the Company had taken and
investments made over the past two years to enhance competitiveness in our
markets.
Capital expenditures in 1992 were $109.3 million. This spending included
projects undertaken as part of our continuous improvement efforts to increase
quality, reduce costs and improve safety throughout the Company.
Research and development costs charged to expense increased in 1992 to
$11.7 million compared with $9.9 million in 1991. This increased spending
focused on projects related to Sonoco's primary businesses and reflects our
commitment to ensure the Company is the technology leader in our markets.
Also during 1992, the Company invested approximately $10 million in outside
consultants to assist us on a variety of projects. This investment began to
pay off during the year and will show continued results. This level of
investment did not continue in 1993.
Sonoco's effective tax rate in 1992 was 39.5% compared with 40.8% in
1991.
CONVERTED PRODUCTS SEGMENT. Trade sales in this segment totaled $1.07
billion in 1992, an increase of 4.9% over the $1.02 billion in 1991. Sales
increased in all of our traditional businesses due primarily to improved demand
and selling prices in some markets coupled with two smaller acquisitions
completed during the first quarter of 1992.
Operating profits in this segment were $94.4 million compared with $92.8
million in 1991. Included in the 1992 operating profits is a $9.7 million
restructuring charge for the consolidation and relocation of several plants. In
addition, the incremental cost of adopting FAS 106 to this segment was $2.8
million. Excluding these charges, operating profits would have been $106.9
million. The profit improvement was due to improved demand, increased selling
prices and the acquisitions during the year.
Capital spending in this segment was $33.8 million in 1992 compared with
$25.5 million in 1991. Major projects included the completion of a new corner
post plant and a new industrial carrier research and development facility, as
well as other projects to enhance productivity and improve quality.
(Graph)
Operating Income by Segment
(millions $)
5
MANAGEMENT'S DISCUSSION AND ANALYSIS
PAPER SEGMENT. Total segment sales, including both internal and
external paper sales, were $282.6 million in 1992, a 5% increase over the
$269.1 million in 1991. Internal consumption of Sonoco's cylinder board
remained about the same as 1991.
Corrugated medium volume increased 6.6% in 1992, reflecting an increase
in demand from Georgia-Pacific. Selling prices, which had been down because of
adverse market conditions, increased about 2% in 1992.
Operating profits in this segment were $65.4 million compared with
$56.6 million in 1991 due primarily to increased selling prices and lower
recovered paper cost.
Capital spending of $15.6 million was invested to improve processes and
productivity on several of the cylinder board machines as paper operations
worked to focus certain mills on specific grades of board.
INTERNATIONAL SEGMENT. Trade sales in the international segment were
$444.7 million in 1992, an 18.3% increase over the $375.9 million in 1991. This
sales increase is due primarily to the acquisition of the Trent Valley paper
mill in Canada during the first quarter of 1992, as well as the impact of
full-year sales from several 1991 acquisitions--Sonoco Containers Inc., Rolex
and Coretech-Sonoco Limited.
Operating losses in the international segment totaled $12.4 million in
1992, compared with profits of $14.4 million in 1991. Included in the 1992
results is a $31.8 million restructuring charge for the closing and
consolidation of several plants, as well as elimination of some operations that
drained profits. Excluding the restructuring charge, profits for this segment
would have been $19.4 million. The profit increase was attributed to increased
volume due to acquisitions in Canada and improved operating performance in the
European and South American regions. Profits in this segment were adversely
impacted by consulting costs in support of efforts to position the Company for
longer-term international growth.
Capital spending for 1992 was $48.3 million compared with $40.7 million
in 1991. Major projects included significant reinvestment in Mexico to
enhance tube and core quality, a new tube and core plant in Malaysia and a new
partitions plant in Mexico. It also included a new research and development
facility in France.
MISCELLANEOUS SEGMENT. Trade sales in 1992 were $213 million compared
with $197.9 million in 1991. The sales increase is due primarily to the
increased volume in the plastic bag operations. Operating profits for 1992
were $23.5 million compared with $21.1 million in 1991. Selling prices for
plastic bags declined in 1992 due to competitive pressures. However, the
selling price decline was more than offset by volume increases, high-capacity
utilization and improved productivity.
Capital spending in this segment was $5.5 million in 1992 compared with
$9.7 million in 1991. Spending was primarily focused on projects to improve
processes and quality in the plastic bag operations. During 1992, Baker Reels
acquired a West Coast reel manufacturer.
CORPORATE. Interest expense in 1992 was $30.4 million compared with
$28.2 million in 1991. In 1992, the benefit of declining short-term interest
rates was more than offset by slightly higher average debt levels and a higher
average ratio of fixed-to-floating rate debt as compared to 1991. The $8.5
million pretax gain from the sale of Sonoco Graham was included under Corporate
in 1991.
Corporate capital expenditures were $6.1 million in 1992 compared with
$1.9 million in 1991, representing a return to normal spending levels and
includes several projects delayed in 1991 due to cost containment efforts.
Financial Position, Liquidity and Capital Resources
Sonoco's financial position remained strong in 1993 and 1992. The debt
to total capital ratio was 38% at December 31, 1993, compared with 35.1% and
30.6% at December 31, 1992 and 1991, respectively. Debt increased $200 million
to $515.8 million at December 31, 1993, primarily due to increased spending
on acquisitions, partially offset by $42.5 million in proceeds from asset
dispositions and $33.7 million from the early repayment of the 10.9% Sonoco
Graham note. Debt increased $32.8 million in 1992 to $316 million, due to
increased capital spending and acquisitions. Capital spending, including
acquisitions, was $508.5 million in 1993 compared with $144.3 million in 1992
and $102 million in 1991.
In September 1993, the Company entered into a $375 million term-loan
agreement (the "bridge facility") in order to obtain the financing required for
the acquisition of the outstanding shares of Engraph, Inc., to repay certain
existing facilities, and to pay related expenses. As of December 31, 1993, the
commitment under the bridge facility had been terminated and all advances had
been repaid primarily from the proceeds of the debt and convertible preferred
stock as described later.
In October 1993, the Company filed a shelf registration with the
Securities and Exchange Commission for the future issuance of
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Graph)
CAPITAL SPENDING BY SEGMENT
(millions $)
up to an additional $225 million of debt securities, thereby increasing the
amount of registered debt securities available for issuance to $325 million
(including $100 million previously filed under the June 1991 registration),
referred to collectively as the "registered debt securities." The Company
issued $100 million of 5.875% notes, due November 1, 2003, of its registered
debt securities in October. The net proceeds were used to reduce the bridge
facility.
The Company issued $75 million of 5.49% notes, due April 15, 2000, of its
registered debt securities directly to an institutional investor (the "direct
placement") on November 18, 1993. Approximately $41 million of the proceeds of
the direct placement were used to prepay the outstanding balance of 9.3%
privately placed notes due 1994 through 1998 (including a make-whole premium of
$3.2 million), with the balance used for repayment of other indebtedness. The
Company has $150 million of registered debt securities available for issuance
at December 31, 1993.
The Company also filed a registration statement with the Securities and
Exchange Commission for the issuance of up to 3,450,000 shares of $2.25 Series
A Cumulative Convertible Preferred Stock in October 1993. The sale of these
securities at $50.00 per share, convertible to the Company's common stock at a
price of $25.31, was completed in October, providing $172.5 million in funds
before fees. The net proceeds from this issue were used to reduce the bridge
facility.
In 1993, the Company increased the authorized commercial paper program from
$200 million to $250 million and increased the 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. Capital spending for 1994 is expected
to be approximately $121 million.
Acquisitions are expected to continue to be an important part of the
Company's strategy for growth. The Company would expect to acquire additional
companies with market and technology positions that provide meaningful
opportunities when consistent with its overall goals and strategies.
Net working capital was $210 million at December 31, 1993, as compared with
$152 million and $164 million at December 31, 1992 and 1991, respectively.
Working capital increased in 1993 primarily as a result of working capital
acquired through acquisitions. Working capital decreased in 1992 primarily
because of an increase in the restructuring reserve. The ratio of current
assets to current liabilities was 1.7 at December 31, 1993, as compared with
1.5 and 1.6 at December 31, 1992 and 1991, respectively. Excluding
restructuring accruals, the ratio was approximately 1.9 in 1993 and 1.7 in 1992
and 1991.
Shareholders' equity of $788.4 million in 1993, which includes $172.5
million for the issuance of preferred stock, compares with $561.9 million in
1992. The book value per common share in 1993 was $7.04 compared with $6.45 per
common share in 1992. This increase was attributable to higher net income in
1993 as compared with 1992. Return on common equity was 19.9% in 1993 compared
with 13.7% in 1992 (excluding the cumulative effect of accounting changes) and
17.8% in 1991. Excluding the impact of the restructuring costs and accounting
changes, return on equity was 18.2% in 1992.
On April 21, 1993, the Board of Directors authorized a two-for-one split of
common stock and increased the dividend, after giving effect to the stock
split, to $.135 per share from the $.125 per share that had been paid since the
second quarter of 1992. The Company plans to increase dividends as earnings
justify.
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. The Company has
been named as a potentially responsible party at five sites in the Northeast.
These sites are believed to represent the Company's largest potential
environmental problems. The Company has presently accrued $3.1 million as of
December 31, 1993, with respect to these sites. Due to the complexity of
determining clean-up costs associated with the sites, an estimate of the
ultimate cost to the Company cannot be determined; however, costs will be
accrued once reasonable estimates are determined.
During 1993, 1992 and 1991, inflation had an immaterial effect on the
Company's operations.
7
SELECTED ELEVEN-YEAR FINANCIAL DATA (UNAUDITED)
Sonoco Products Company
(Dollars and shares in thousands except per share data) 1993 1992** 1991
- -------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . $1,947,224 $1,838,026 $1,697,058
Cost of sales and operating expenses. . . . . . . . . . . . 1,734,980 1,641,075 1,528,543
Interest expense . . . . . . . . . . . . . . . . . . . . . 31,154 30,364 28,186
Interest income . . . . . . . . . . . . . . . . . . . . . . (6,017) (6,416) (6,870)
Unusual items* . . . . . . . . . . . . . . . . . . . . . . (5,800) 42,000 (8,525)
-------------------------------------------
Income from operations before income taxes. . . . . . . . . 192,907 131,003 155,724
Taxes on income . . . . . . . . . . . . . . . . . . . . . . 75,200 51,800 63,600
Equity in earnings of affiliates. . . . . . . . . . . . . . 1,127 2,048 2,681
-------------------------------------------
Net income before discontinued operations and cumulative
effect of changes in accounting principles. . . . . . . . 118,834 81,251 94,805
Loss from discontinued operations, net of tax . . . . . . .
Cumulative effect of changes in accounting principles
(FAS 106 and FAS 109) . . . . . . . . . . . . . . . . . . (37,892)
-------------------------------------------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . 118,834 43,359 94,805
Preferred dividends . . . . . . . . . . . . . . . . . . . . (1,264)
-------------------------------------------
Net income available to common shareholders . . . . . . . . 117,570 43,359 94,805
Returns before cumulative effect of changes
in accounting principles
Return on weighted-average common shareholders' equity 19.9% 13.7% 17.8%
Return on net sales . . . . . . . . . . . . . . . . . . 6.1% 4.4% 5.6%
Per common share:(1)
Net income before discontinued operations and
cumulative effect of changes in
accounting principles . . . . . . . . . . . . . . . . . 1.35 .94 1.10
Loss from discontinued operations, net of tax . . . . . .
Cumulative effect of changes in accounting principles . . (.44)
Net income available to common shareholders . . . . . . . 1.35 .50 1.10
Dividends declared - common . . . . . . . . . . . . . . . .53 .49 .46
Average common shares outstanding(1). . . . . . . . . . . . 87,316 86,732 86,304
Actual common shares outstanding at December 31(1). . . . . 87,447 87,144 86,490
-------------------------------------------
FINANCIAL POSITION
Net working capital . . . . . . . . . . . . . . . . . . . . 209,932 152,478 163,860
Property, plant and equipment . . . . . . . . . . . . . . . 737,154 614,018 580,787
Total assets. . . . . . . . . . . . . . . . . . . . . . . . 1,707,125 1,246,531 1,135,940
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . 455,262 240,982 227,528
Shareholders' equity. . . . . . . . . . . . . . . . . . . . 788,364 561,890 562,306
Current ratio . . . . . . . . . . . . . . . . . . . . . . . 1.7 1.5 1.6
Total debt to total capital . . . . . . . . . . . . . . . . 38.0% 35.1% 30.6%
Book value per common share(1). . . . . . . . . . . . . . . 7.04 6.45 6.50
-------------------------------------------
OTHER DATA
Depreciation, depletion and amortization expense. . . . . . 95,745 83,309 76,561
Dividends declared - common . . . . . . . . . . . . . . . . 46,333 42,443 39,703
Market price per common share (ending)(1) . . . . . . . . . 22.00 23.88 17.25
* See Note 3 to Consolidated Financial Statements.
**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 (see Note 4 to
Consolidated Financial Statements). Also includes acquisition consolidation
charges of $10 million pretax, or $5,600 after-tax in 1987.
(1) Prior years' data adjusted for stock splits.
8
1990** 1989 1988 1987** 1986 1985 1984 1983
------------------------------------------------------------------------------------------------------------------------------
$1,669,142 $1,655,830 $1,599,751 $1,312,052 $963,796 $869,598 $740,869 $668,628
1,481,271 1,470,877 1,413,912 1,174,777 858,680 773,910 661,457 601,098
28,073 29,440 25,175 18,593 8,552 8,686 4,420 5,104
(2,196) (2,573) (1,517) (1,045) (602) (1,782) (1,006) (708)
75,000 10,000
------------------------------------------------------------------------------------------------------------------------------
86,994 158,086 162,181 109,727 97,166 88,784 75,998 63,134
43,934 60,906 67,029 48,714 44,435 41,871 35,282 28,085
7,308 6,381 1,125 469 1,945 2,496 1,819 2,225
------------------------------------------------------------------------------------------------------------------------------
50,368 103,561 96,277 61,482 54,676 49,409 42,535 37,274
(3,740)
------------------------------------------------------------------------------------------------------------------------------
50,368 103,561 96,277 61,482 54,676 49,409 42,535 33,534
------------------------------------------------------------------------------------------------------------------------------
50,368 103,561 96,277 61,482 54,676 49,409 42,535 33,534
9.6% 21.3% 23.0% 17.0% 17.4% 17.7% 16.9% 16.2%
3.0% 6.3% 6.0% 4.7% 5.7% 5.7% 5.7% 5.6%
.58 1.18 1.10 .70 .63 .57 .49 .43
(.04)
.58 1.18 1.10 .70 .63 .57 .49 .39
.45 .41 .32 .25 .21 .18 .16 .14
87,110 87,794 87,632 87,730 87,612 87,450 87,264 87,166
86,100 87,454 87,722 87,532 87,636 87,580 87,330 87,210
------------------------------------------------------------------------------------------------------------------------------
184,066 193,035 188,085 143,972 104,614 105,070 90,430 79,098
562,591 494,290 533,427 482,357 267,353 245,990 201,211 199,712
1,113,594 995,132 977,459 877,625 559,459 500,833 408,205 383,203
279,135 226,240 275,535 263,489 58,440 73,383 31,469 42,140
512,828 511,574 454,486 379,912 332,890 295,743 260,640 236,609
1.7 2.1 2.0 1.8 1.9 2.1 2.2 2.2
34.7% 30.4% 36.8% 38.6% 17.7% 19.9% 12.4% 16.7%
5.96 5.85 5.18 4.34 3.80 3.38 2.99 2.72
------------------------------------------------------------------------------------------------------------------------------
72,152 67,263 69,055 57,086 35,654 31,182 27,324 25,806
39,216 35,583 28,046 21,942 17,963 15,746 13,634 11,987
16.25 18.50 17.13 10.63 9.50 7.69 4.91 5.53
9
CONSOLIDATED BALANCE SHEETS
Sonoco Products Company
December 31
-------------------------------------------
(Dollars and shares in thousands) 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 25,858 $ 38,068
Trade accounts receivables, net of
allowances for doubtful amounts of
$6,514 and $3,511, respectively . . . . . . . . . . . . . . . . . . . 232,628 202,837
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,989 18,794
Inventories
Finished and in process . . . . . . . . . . . . . . . . . . . . . . . 83,660 67,714
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . 102,465 91,864
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,750 28,670
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 14,760 17,000
-----------------------------------------
513,110 464,947
Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . 737,154 614,018
Cost in Excess of Fair Value of Assets Purchased . . . . . . . . . . . . . 339,653 59,003
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,208 108,563
-----------------------------------------
$1,707,125 $1,246,531
=========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Payable to suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . $ 129,389 $ 109,777
Accrued expenses and other . . . . . . . . . . . . . . . . . . . . . . . 60,407 53,774
Accrued wages and other compensation . . . . . . . . . . . . . . . . . . 22,633 16,039
Restructuring reserve . . . . . . . . . . . . . . . . . . . . . . . . . 27,114 39,130
Notes payable and current portion of long-term debt . . . . . . . . . . 60,564 75,028
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,071 18,721
-----------------------------------------
303,178 312,469
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455,262 240,982
Postretirement Benefit Obligation . . . . . . . . . . . . . . . . . . . . . 99,165 97,993
Deferred Income Taxes and Other . . . . . . . . . . . . . . . . . . . . . . 61,156 33,197
Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . .
Shareholders' Equity
Serial preferred stock, no par value
Authorized 30,000 shares
Issued 3,450 shares . . . . . . . . . . . . . . . . . . . . . . . . . 172,500
Common shares, no par value
Authorized 150,000 shares
Issued 91,841 shares . . . . . . . . . . . . . . . . . . . . . . . . . 7,175 7,175
Capital in excess of stated value . . . . . . . . . . . . . . . . . . . 62,277 61,608
Translation of foreign currencies . . . . . . . . . . . . . . . . . . . (39,016) (19,952)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 623,500 552,263
Treasury shares at cost (1993--4,394 shares; 1992--4,697 shares) . . . . . (38,072) (39,204)
-----------------------------------------
788,364 561,890
-----------------------------------------
$1,707,125 $1,246,531
=========================================
Shares reflect the two-for-one stock split on June 10, 1993.
The Notes are an integral part of these financial statements.
10
CONSOLIDATED STATEMENTS OF INCOME
Sonoco Products Company
YEARS ENDED DECEMBER 31
--------------------------------------------------
(Dollars and shares in thousands except per share) 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,947,224 $1,838,026 $1,697,058
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . 1,525,671 1,451,252 1,348,489
Selling, general and
administrative expenses. . . . . . . . . . . . . . . . . . . . 209,309 189,823 180,054
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 31,154 30,364 28,186
Interest income . . . . . . . . . . . . . . . . . . . . . . . . (6,017) (6,416) (6,870)
Unusual items . . . . . . . . . . . . . . . . . . . . . . . . . (5,800) 42,000 (8,525)
----------------------------------------------
Income from operations before income
taxes and cumulative effect of
changes in accounting principles . . . . . . . . . . . . . . . 192,907 131,003 155,724
Taxes on income. . . . . . . . . . . . . . . . . . . . . . . . . 75,200 51,800 63,600
----------------------------------------------
Income from operations before
equity in earnings of affiliates and
cumulative effect of changes in
accounting principles. . . . . . . . . . . . . . . . . . . . . 117,707 79,203 92,124
Equity in earnings of affiliates . . . . . . . . . . . . . . . . 1,127 2,048 2,681
----------------------------------------------
Income before cumulative effect of
changes in accounting principles . . . . . . . . . . . . . . . 118,834 81,251 94,805
Cumulative effect of changes in accounting for postretirement
benefits (Note 12) and income taxes (Note 13). . . . . . . . . (37,892)
----------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,834 43,359 94,805
Preferred dividends. . . . . . . . . . . . . . . . . . . . . . . (1,264)
----------------------------------------------
Net income available to common shareholders. . . . . . . . . . . $ 117,570 $ 43,359 $ 94,805
===============================================
Per common share
- ----------------
Income before cumulative effect of
changes in accounting principles . . . . . . . . . . . . . . . $ 1.35 $ .94 $ 1.10
Cumulative effect of changes in
accounting for postretirement
benefits and income taxes. . . . . . . . . . . . . . . . . . . (.44)
----------------------------------------------
Net income available to common shareholders. . . . . . . . . . . $ 1.35 $ .50 $ 1.10
==============================================
Dividends - common . . . . . . . . . . . . . . . . . . . . . . . $ .53 $ .49 $ .46
Average common shares outstanding. . . . . . . . . . . . . . . . 87,316 86,732 86,304
Shares and per-share data reflect the two-for-one stock split on June 10, 1993
The Notes are an integral part of these financial statements.
11
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Sonoco Products Company
Common Shares Preferred Capital in Translation Treasury
------------------- Stock Excess of of Foreign Retained Shares
(Dollars and shares in thousands except per share) Outstanding Amount Amount Stated Value Currencies Earnings Amount
- ------------------------------------------------------------------------------------------------------------------------------------
JANUARY 1, 1991 . . . . . . . . . . 86,100 $7,175 $ $ 50,643 $2,583 $496,245 $(43,818)
Net income . . . . . . . . . . . 94,805
Dividends, $.46
per share . . . . . . . . . . . (39,703)
Translation loss. . . . . . . . . (10,812)
Issuance of treasury
shares under
Stock option plan . . . . . . 352 1,795 2,761
Employee stock
ownership plan . . . . . . 244 2,383 1,925
Treasury shares
acquired . . . . . . . . . . . (206) (3,676)
-------------------------------------------------------------------------------
DECEMBER 31, 1991 . . . . . . . . . 86,490 7,175 54,821 (8,229) 551,347 (42,808)
Net income. . . . . . . . . . . . 43,359
Dividends, $.49
per share . . . . . . . . . . . (42,443)
Translation loss. . . . . . . . . (11,723)
Issuance of treasury
shares under
Stock option plan . . . . . . 682 3,894 4,864
Employee stock
ownership plan . . . . . . 224 2,893 1,854
Treasury shares
acquired . . . . . . . . . . . (252) (3,114)
-------------------------------------------------------------------------------
DECEMBER 31, 1992 . . . . . . . . . 87,144 7,175 61,608 (19,952) 552,263 (39,204)
Net income . . . . . . . . . . . 118,834
Dividends
Preferred . . . . . . . . . . . (1,264)
Common, $.53
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 . . . . . . 208 1,388 1,493
Employee stock
ownership plan . . . . . . 235 3,249 2,001
Treasury shares
acquired . . . . . . . . . . . (140) (2,362)
-------------------------------------------------------------------------------
DECEMBER 31, 1993 . . . . . . . . . 87,447 $7,175 $172,500 $ 62,277 $(39,016) $623,500 $(38,072)
===============================================================================
Shares and per share data reflect the two-for-one stock split on June 10, 1993.
The Notes are an integral part of these financial statements.
12
CONSOLIDATED STATEMENTS OF CASH FLOWS
Sonoco Products Company
Years ended December 31
---------------------------------------------
(Dollars in thousands) 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $118,834 $ 43,359 $94,805
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation, depletion and amortization . . . . . . . . . 95,745 83,309 76,561
Cumulative effect of changes in accounting principles. . . 37,892
Restructuring charge . . . . . . . . . . . . . . . . . . . 39,130
Loss on assets retired . . . . . . . . . . . . . . . . . . 836 2,941 5,987
Equity in earnings of affiliates, net of dividends . . . . (975) (1,893) (2,532)
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . 22,361 (13,619) (328)
Gain on sale of investment in affiliate. . . . . . . . . . (15,299) (8,525)
Changes in assets and liabilities, net of
effects from acquisitions, dispositions
and foreign currency adjustments
Accounts receivable. . . . . . . . . . . . . . . . . . 860 (13,178) (8,917)
Inventories. . . . . . . . . . . . . . . . . . . . . . 5,545 (3,719) 5,555
Prepaid expenses . . . . . . . . . . . . . . . . . . . (1,411) 831 2,675
Payables and taxes . . . . . . . . . . . . . . . . . . (45,881) (7,930) (3,644)
Other assets and liabilities . . . . . . . . . . . . . (17,771) (9,711) (5,155)
---------------------------------------------
Net cash provided by operating activities. . . . . . . . . . . 162,844 157,412 156,482
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment. . . . . . . . . . . (115,596) (109,305) (90,557)
Cost of acquisitions, exclusive of cash. . . . . . . . . . . . (392,950) (34,964) (11,413)
Proceeds from the sale of assets . . . . . . . . . . . . . . . 42,467 6,626 21,735
Proceeds from collection of a note receivable. . . . . . . . . 33,672
---------------------------------------------
Net cash used by investing activities. . . . . . . . . . . . . (432,407) (137,643) (80,235)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt . . . . . . . . . . . . . . . . 662,800 168,072 199,256
Principal repayment of debt. . . . . . . . . . . . . . . . . . (523,817) (132,163) (241,882)
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . (46,333) (42,443) (39,703)
Treasury shares acquired . . . . . . . . . . . . . . . . . . . (2,362) (3,114) (3,676)
Treasury shares issued . . . . . . . . . . . . . . . . . . . . 2,428 7,781 3,935
Preferred shares issued. . . . . . . . . . . . . . . . . . . . 172,500
---------------------------------------------
Net cash provided (used) by financing activities . . . . . . . 265,216 (1,867) (82,070)
EFFECTS OF EXCHANGE RATE CHANGES ON CASH . . . . . . . . . . . (7,863) (8,456) (5,482)
---------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12,210) 9,446 (11,305)
Cash and cash equivalents at beginning of year . . . . . . . . 38,068 28,622 39,927
---------------------------------------------
Cash and cash equivalents at end of year . . . . . . . . . . . $ 25,858 $38,068 $28,622
=============================================
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . $ 31,504 $29,265 $23,431
Income taxes paid. . . . . . . . . . . . . . . . . . . . . . $ 75,374 $65,224 $61,798
Excluded from the consolidated statements of cash flows was the effect of
certain non-cash activities. The Company assumed $75,000 and $16,300 of debt
obligations in 1993 and 1991, respectively, in conjunction with acquisitions.
The Company also received a note for $33,700 in conjunction with the sale of
the Sonoco Graham Company in 1991.
The Notes are an integral part of these financial statements.
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
(Dollars in thousands except per share)
The following notes are an integral part of the consolidated financial
statements. The accounting principles followed by the Company appear in bold
type.
1 PRINCIPLES OF CONSOLIDATION.
The consolidated financial statements include the accounts of Sonoco Products
Company and its United States and international 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.
2 ACQUISITIONS/DISPOSITIONS.
During the first quarter of 1993, the Company completed several acquisitions
totaling approximately $100,000. The most notable was the acquisition of all
the outstanding stock of Crellin Holding, Inc., an international manufacturer,
designer and marketer of molded plastics products.
In October 1993, the Company acquired Engraph, Inc. following the
successful conclusion of a cash tender offer and merger transaction. The tender
offer of approximately $300,000 reflects a price of $15.63 per share for each
of Engraph's outstanding shares of common stock. Engraph's markets include
labels and package inserts, flexible packaging, screen process printing and
paperboard cartons and specialties.
Debt assumed in connection with the above acquisitions was approximately
$75,000. 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. The aggregate excess purchase price over
the fair value of assets purchased was $292,000 and is being amortized over 40
years.
Pro forma sales for the twelve months ended December 31, 1993 and 1992,
giving effect to the acquisitions described above as though they occurred
January 1, 1992, would have been approximately $2,100,000 for both years. Pro
forma net income for the same period would have been approximately $105,000 and
$72,000, or $1.21 and $.83 per share. Net income for 1992 includes a $25,000
after-tax restructuring charge but excludes the $37,892 cumulative effect of
changes in accounting principles.
Also during 1993, the Company disposed of several operations whose
businesses were not consistent with the long-term strategic direction of the
Company. These dispositions were provided for as a part of the 1992
restructuring plan as discussed in Note 4. Operations sold in 1993 included
the European bag, the bag-in-box liquid packaging, the Edgeboard and packaging
tapes operations. The net proceeds from these sales were approximately
$42,000.
3 UNUSUAL ITEMS.
Included in 1993 and 1991 were gains on the sale of Sonoco Graham. The 1993
gain from the early payment of a note issued in connection with the sale was
partially offset by charges for refinancing debt related to the Engraph
acquisition and various other unusual items. The 1992 unusual items represent
restructuring reserves, which are discussed more fully in Note 4.
4 RESTRUCTURING CHARGES IN 1992 AND 1990.
During the fourth quarter of 1992, the Company recorded a charge to earnings
for costs associated with the restructuring, closing, consolidating and
relocating of various plants, principally at foreign locations. The
restructuring reduced income before taxes, net income and earnings per share by
$42,000, $25,000 and $.29, respectively.
During the third quarter of 1990, the Company restructured several
operations to improve its cost and competitive position associated primarily
with domestic operations. The restructuring reduced income before taxes, net
income and earnings per share by $75,000, $54,650 and $.63, respectively.
5 CASH AND CASH EQUIVALENTS.
Cash equivalents are composed of all highly liquid investments with an original
maturity of three months or less.
At December 31, 1993 and 1992, $18,751 and $25,005, respectively, of
outstanding checks were included in Payables to Suppliers.
6 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 44% of total
inventories in 1993 and 40% in 1992. 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 $7,885 in 1993 and $10,061 in 1992.
7 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 $87,721 in 1993; $79,455 in
1992 and $73,111 in 1991.
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
(Dollars in thousands except per share)
Note 7: PROPERTY, PLANT AND EQUIPMENT - CONTINUED
Details of property, plant and equipment at December 31 are as follows:
1993 1992
- ----------------------------------------------------------
Land . . . . . . . . . . . . $ 25,694 $ 19,151
Timber resources . . . . . . 25,349 24,420
Buildings . . . . . . . . . . 267,933 226,758
Machinery & equipment . . . . 935,247 820,553
Construction in progress . . 61,473 44,118
--------------------------
1,315,696 1,135,000
Accumulated depreciation
and depletion . . . . . . . (578,542) (520,982)
--------------------------
$ 737,154 $ 614,018
==========================
Estimated costs for completion of authorized capital additions under
construction totaled approximately $63,000 at December 31, 1993.
Certain operating properties and equipment are leased under non-cancellable
operating leases. Total rental expense under operating leases was $26,400,
$23,400 and $23,700 in 1993, 1992 and 1991, respectively. Future minimum
rentals under non-cancellable operating leases with terms of more than one year
are as follows: 1994 - $15,400; 1995 - $14,000; 1996 - $11,400; 1997 - $8,500;
1998 - $7,300; 1999 and thereafter - $12,700.
8 COST IN EXCESS OF FAIR VALUE OF ASSETS PURCHASED.
Goodwill arising from business acquisitions ($292,000 in 1993) is amortized on
the straight-line basis over periods ranging from 20 to 40 years. Amortization
expense amounted to $8,024 in 1993; $3,854 in 1992 and $3,450 in 1991.
Accumulated amortization at December 31, 1993 and 1992 was $24,403 and $22,040,
respectively.
9 DEBT.
Debt at December 31 was as follows:
1993 1992
- -----------------------------------------------------------------
Commercial paper, average rate
of 3.2% in 1993 and 3.7% in 1992 $146,500 $ 80,000
9.2% notes due August 2021 . . . . . 99,920 99,917
5.875% notes due November 2003 . . . 99,339
5.49% notes due April 2000 . . . . . 75,000
Private placement notes payable,
interest at 9.3% . . . . . . . . . . 42,860
Foreign denominated debt, average
rate of 6.8% at December 31, 1993
and 9.8% at December 31, 1992 . . . 70,618 78,001
Other notes . . . . . . . . . . . . . 24,449 15,232
----------------------
Total debt . . . . . . . . . . . . . 515,826 316,010
Less current portion and
short-term notes . . . . . . . . . . 60,564 75,028
----------------------
Long-term debt . . . . . . . . . . . $455,262 $240,982
======================
The Company sold $100,000 of 5.875% notes due November 2003 and $75,000 of
5.49% notes due April 2000 in October 1993 and November 1993, respectively. Net
proceeds were used primarily for the Engraph acquisition and to repay other
indebtedness, including the 9.3% privately placed notes due 1994 through 1998
and the related make-whole premium of $3.2 million.
In 1993, the Company increased the authorized commercial paper program from
$200 million to $250 million and increased the fully committed bank lines of
credit supporting the program by a like amount. These bank lines expire in
1998. Accordingly, commercial paper borrowings are classified as long-term
debt.
The Company has entered into various agreements with banks for managing
exposure to interest rates. The differential to be paid or received is accrued
as interest rates change. All of the Company's interest rate swap agreements
mature in 1994.
The estimated fair value of debt, including the impact of interest rate
swaps, is $539,200 at December 31, 1993. This estimate 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.
The approximate principal requirements of debt maturing in the next five
Note 9: Debt - continued
years are: 1994 - $60,600; 1995 - $2,400; 1996 - $5,400; 1997 - $1,400; and
1998 - $1,600. 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 1998.
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 $200,000 through April 3, 1994, and
$365,000 thereafter.
In addition to the Committed availability under the commercial paper
program, unused lines of credit for general Company Purposes at December 31,
1993, were approximately $48,000 with interest at mutually agreed upon rates.
10 STOCK OPTIONS.
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, 1993, 2,594,000 shares were reserved for future grants.
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
(Dollars in thousands except per share)
Note 10: STOCK OPTIONS - CONTINUED
Information with respect to the Company's stock option plans follows:
Option Option
Shares Price Range
- ---------------------------------------------------------
1991
Outstanding at beginning
of year . . . . . . . . . 2,776,250 $ 5.02-$17.38
Granted . . . . . . . . . 826,900 $16.88-$18.25
Exercised . . . . . . . . (410,132) $ 5.02-$17.00
Cancelled . . . . . . . . (70,150) $15.25-$17.63
---------
Outstanding at end
of year . . . . . . . . . 3,122,868 $ 5.02-$18.25
1992
Granted . . . . . . . . . 862,350 $18.75
Exercised . . . . . . . . (683,234) $ 5.02-$17.63
Cancelled . . . . . . . . (48,400) $10.50-$18.75
---------
Outstanding at end
of year . . . . . . . . . 3,253,584 $ 5.02-$18.75
1993
Granted . . . . . . . . . 957,300 $20.75-$24.13
Assumed - Engraph . . . . 623,156 $ 3.73-$18.40
Exercised . . . . . . . . (208,274) $ 5.02-$18.75
Cancelled . . . . . . . . (5,900) $24.13
---------
Outstanding at end
of year . . . . . . . . . 4,619,866 $ 3.73-$24.13
=========
Options exercisable at
December 31, 1993 . . . . 3,507,893
Number of shares and share price restated to reflect the two-for-one stock
split on June 10, 1993.
11 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's subsidiaries in the United Kingdom have contributory pension
plans covering about 70% of the groups' 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 THAT ARE INTENDED TO REMAIN A LEVEL PERCENTAGE OF SALARY.
Net pension cost for the domestic and United Kingdom plans included the
following components:
Combined Plans
---------------------------------
1993 1992 1991
- ------------------------------------------------------------------
Service cost-benefits earned
during year . . . . . . . . . $ 9,555 $ 9,074 $ 9,334
Interest cost on projected
benefit obligation . . . . . . 23,881 22,196 20,559
Actual return on plan
assets . . . . . . . . . . . . (32,165) (19,510) (49,456)
Net amortization and
deferral . . . . . . . . . . . 2,031 (9,581) 25,819
---------------------------------
$ 3,302 $ 2,179 $ 6,256
=================================
Note 11 RETIREMENT BENEFIT PLANS- Continued
The following table sets forth the funded status of the plans at December 31:
Over-Funded Plan Under-Funded Plan
---------------------------------------------
1993 1992 1993 1992
- -----------------------------------------------------------------------------
Projected benefit obligation
Vested benefits . . . . . . $271,733 $196,641 $ $
Non-vested benefits . . . . 9,757 7,862 14,473 12,548
-----------------------------------------------
Accumulated benefit
obligation . . . . . . . . 281,490 204,503 14,473 12,548
Effect of assumed increase
in compensation levels . . 35,768 39,060 1,369 1,048
-----------------------------------------------
Projected benefit
obligation . . . . . . . . 317,258 243,563 15,842 13,596
Plan assets at fair value . . 341,669 300,365 12,502 10,446
-----------------------------------------------
Plan assets in excess of
(less than) projected
benefit obligation . . . . . 24,411 56,802 (3,340) (3,150)
Unrecognized net loss
(gain) . . . . . . . . . . . 26,729 (14,178) 1,142 1,356
Unrecognized prior service
cost . . . . . . . . . . . . 3,333 2,527 2,235 555
Unrecognized net transition
(asset) obligation from
initial application of
FAS 87 . . . . . . . . . . . (6,150) (6,426) 1,599 1,826
Adjustment required to
recognize minimum
liability . . . . . . . . . (3,607) (2,382)
-----------------------------------------------
Prepaid (accrued) pension
cost . . . . . . . . . . . . $ 48,323 $ 38,725 $ (1,971) $ (1,795)
===============================================
Prepaid pension costs of $7,011 and $8,189 were included in Prepaid
Expenses in 1993 and 1992, respectively. In addition, $41,312 and $30,536 were
included in Other Assets in 1993 and 1992, respectively.
A weighted-average discount rate of 7%, and a 4% rate of increase in future
compensation levels, were used in determining the actual present value of the
projected benefit obligations in 1993. A 9% discount rate, and 6% rate of
compensation increase, were used in 1992 and 1991. The expected long-term rate
of return on assets was 9.5% for all years presented.
The Company's other international subsidiaries have pension plans covering
most of its employees. The cost for these plans is considered immaterial.
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, made entirely in Company stock for
1993, 1992 and 1991, were $5,250, $4,747 and $4,308, respectively.
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
(Dollars in thousands except per share)
12 POSTRETIREMENT BENEFITS OTHER THAN PENSIONS.
Postretirement medical and life insurance benefits are offered to substantially
all U.S. employees. In 1992, the Company adopted Statement of Financial
Accounting Standard 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (FAS 106). This standard requires accrual for
postretirement benefits other than pensions over an employee's career, rather
than expensing these costs when paid, as had been the Company's practice prior
to 1992. The cost of these benefits included as expense for 1991 was $5,442.
The Company elected to immediately recognize the cumulative effect of the
change in accounting for postretirement benefits of $93,500 pretax, or $58,000
after-tax, which represents the accumulated postretirement benefit obligation
(APBO) existing at January 1, 1992. Also, adoption of FAS 106 resulted in an
incremental annual retiree benefit expense of $4,500 pretax, or $2,700
after-tax, which represents the difference between pay-as-you-go amounts and
estimated 1992 non-pension retirement benefits. THE COMPANY CONTINUES TO FUND
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:
1993 1992
- ----------------------------------------------------------------
Service cost-benefits earned
during year . . . . . . . . . $ 2,482 $ 2,283
Interest cost on APBO . . . . . . 8,196 8,239
Actual return on plan assets . . (1,063) (304)
---------------------
Net periodic postretirement
benefit cost . . . . . . . . $ 9,615 $10,218
=====================
The following sets forth the accrued obligation included in the
accompanying December 31 balance sheet applicable to each employee group for
non-pension retirement benefits:
1993 1992
- ------------------------------------------------------------------
Accumulated postretirement
benefit obligation
Retired employees . . . . . . . . $ 57,610 $56,048
Active employees-fully eligible . 18,514 13,446
Active employees-not yet eligible 50,460 28,499
----------------------
Accumulated benefit obligation . . . 126,584 97,993
Plan assets at fair value . . . . . . 10,776 4,748
----------------------
Accumulated benefit obligation
greater than plan assets . . . . . 115,808 93,245
Unrecognized net loss from
changes in assumptions . . . . . . (28,964)
Unrecognized prior service cost . . . 1,545
----------------------
Accrued postretirement
benefit cost . . . . . . . . . . . $ 88,389 $93,245
======================
Prepaid postretirement medical costs of $10,776 and $4,748 were included in
Other Assets in 1993 and 1992, respectively.
The discount rate used in determining the APBO was 7% in 1993 and 9% in
1992. The assumed health-care cost-trend rate used in measuring the APBO was
12% in 1993 declining to 6.5% in the year 2010. Increasing the assumed trend
rate for health-care costs by one percentage point would result in an increase
in the APBO of approximately $10,000 at December 31, 1993, and an increase of
$1,000 in the related 1993 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 commingled 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% in 1993.
13 INCOME TAXES.
The Company adopted Statement of Financial Accounting Standard 109, "Accounting
for Income Taxes" (FAS 109), effective January 1, 1992. The cumulative effect,
which was recorded in 1992, increased earnings by $20,100.
The provision (benefit) for taxes on income for the years ending December
31 consists of the following:
1993 1992 1991
- -----------------------------------------------------------------
Pretax income
Domestic . . . . . . . $189,122 $160,637 $153,500
Foreign . . . . . . . 3,785 (29,634) 2,224
---------------------------------------
Total . . . . . . . . $192,907 $131,003 $155,724
=======================================
Current
Federal . . . . . . . $ 43,998 $ 50,642 $ 48,620
State . . . . . . . . 7,320 8,731 8,434
Foreign . . . . . . . 1,521 6,046 6,874
---------------------------------------
Total current . . . . 52,839 65,419 63,928
---------------------------------------
Deferred
Federal . . . . . . . 14,005 (455) 3,206
State . . . . . . . . 2,924 (96) 692
Foreign . . . . . . . 5,432 (13,068) (4,226)
---------------------------------------
Total deferred . . . 22,361 (13,619) (328)
---------------------------------------
Total taxes . . . . . . $ 75,200 $ 51,800 $ 63,600
=======================================
Deferred income tax expense (benefit) results from temporary differences in
the recognition of revenue and expense for tax and financial statement
purposes. The source of these differences and the tax effect of each are as
follows:
1993 1992 1991
- -------------------------------------------------------------
Restructuring charge . $ 8,711 $(15,065) $10,220
Sale of an affiliate . 6,409 (14,810)
Depreciation expense . 1,163 700 5,253
Benefit plan costs . . 7,379 2,643 3,773
Other items, net . . . (1,301) (1,897) (4,764)
-----------------------------------
Total deferred . . . $22,361 $(13,619) $ (328)
===================================
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
(Dollars in thousands except per share)
NOTE 13: INCOME TAXES - CONTINUED
Deferred tax liabilities (assets) are comprised of
the following at December 31:
1993 1992
- ------------------------------------------------------------
Depreciation . . . . . . . . . . . $ 62,975 $ 45,811
Employee benefits . . . . . . . . . 15,410 13,281
Other . . . . . . . . . . . . . . . 9,762 5,129
-------------------
Gross deferred tax liabilities . . 88,147 64,221
-------------------
Restructuring . . . . . . . . . . . (5,403) (18,046)
Retiree health benefits . . . . . . (23,910) (27,084)
Loss carry-forwards
(foreign and domestic) . . . . . . (11,684) (5,879)
Employee benefits . . . . . . . . . (11,494) (8,400)
Other . . . . . . . . . . . . . . . (7,303) (10,741)
-------------------
Gross deferred tax assets . . . . (59,794) (70,150)
Valuation allowance on deferred
tax assets . . . . . . . . . . . 4,899 5,879
-------------------
Total deferred taxes, net . . . . $ 33,252 $ (50)
===================
The net decrease in the valuation allowance in 1993 resulted from the
disposal of a European entity; this decrease was partially offset by the
inclusion of current net operating losses from various foreign subsidiaries.
Approximately $12,000 of net operating losses remain available in various
foreign subsidiaries at December 31, 1993. Their use is limited to future
taxable earnings of those foreign subsidiaries. No benefit has been recognized
in the financial statements for any of these loss carry-forwards.
The principal differences between the effective tax rate and the federal
statutory rate are as follows:
1993 1992 1991
- --------------------------------------------------------------------------------
Statutory tax rate. . . $67,517 35.0% $44,587 34.0% $52,946 34.0%
State income taxes,
net of federal tax
benefit . . . . . . . 7,039 3.6 4,983 3.8 6,023 3.9
Net effect of foreign
income at lower rates
and foreign losses
with no tax benefit. . 2,155 1.1 2,360 1.8 2,853 1.8
Goodwill . . . . . . . 1,694 .9 524 .4 487 .3
Company owned
life insurance (1,570) (.8)
Other, net . . . . . . (1,635) (.8) (654) (.5) 1,291 .8
---------------------------------------------------
Total taxes . . . . . $75,200 39.0% $51,800 39.5% $63,600 40.8%
===================================================
Undistributed earnings of international subsidiaries totaled $36,634 at
December 31, 1993. There have been no United States income taxes provided on
the undistributed earnings since the Company considers the 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 tax due.
14 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. The Company has been named as a
potentially responsible party at five sites in the Northeast. As of December
31, 1993, the Company has $3,100 accrued for these contingencies. This compares
with $1,900 accrued as of December 31, 1992. 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.
15 INTERNATIONAL OPERATIONS.
Following are operating profits, net assets and dividends received by the
Company from international operations. Restructuring costs of $31,800 are
included in 1992 results.
1993 1992
- -----------------------------------------------------------
Operating profits (loss) . . . . $ 11,923 $ (12,398)
Net assets . . . . . . . . . . . 185,723 229,641
Dividends . . . . . . . . . . . . 2,087 1,473
Following are sales to unaffiliated customers, operating profit and total
assets for Europe. Restructuring costs of $28,200 are included in 1992
results.
1993 1992 1991
- -----------------------------------------------------------
Sales to unaffiliated
customers . . . . . . $180,044 $226,127 $215,677
Operating (loss) profit (890) (20,325) 7,375
Total assets . . . . . 171,073 222,164 218,354
16 STOCKHOLDERS' EQUITY.
On April 21, 1993, the Board of Directors approved a two-for-one stock split
effective June 10, 1993. All references in these financial statements to
dividends paid, numbers of common shares, stock prices and earnings per share
amounts have been restated to give retroactive effect to the stock split.
On October 26, 1993, the Company issued 3,450,000 shares of $2.25 Series A
Cumulative Convertible Preferred Stock for $172,500, or $50.00 per share. These
securities are convertible into the Company's common stock at a price of $25.31
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 accrue and are cumulative from the date of
original issuance and are payable quarterly commencing on February 1, 1994.
Fully diluted earnings per share is not presented as it approximates
primary earnings per share.
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sonoco Products Company
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).
Converted
(Dollars in thousands) Products Paper International Misc. Corporate Consolidated
- ----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUE
1993 . . . . . . . . . $1,200,225 $278,904 $406,914 $266,261 $2,152,304
1992 . . . . . . . . . 1,078,611 282,583 447,029 233,324 2,041,547
1991 . . . . . . . . . 1,027,715 269,077 376,119 219,170 1,892,081
INTERSEGMENT SALES
1993 . . . . . . . . . $ 6,333 $173,640 $ 2,825 $ 22,282 $ 205,080
1992 . . . . . . . . . 5,294 175,629 2,280 20,318 203,521
1991 . . . . . . . . . 4,271 169,266 255 21,231 195,023
SALES TO UNAFFILIATED CUSTOMERS
1993 . . . . . . . . . $1,193,892 $105,264 $404,089 $243,979 $1,947,224
1992 . . . . . . . . . 1,073,317 106,954 444,749 213,006 1,838,026
1991 . . . . . . . . . 1,023,444 99,811 375,864 197,939 1,697,058
OPERATING PROFIT*
1993 . . . . . . . . . $ 122,538 $ 57,867 $ 11,923 $ 34,888 $ (34,309) $ 192,907
1992 . . . . . . . . . 94,397 65,437 (12,398) 23,509 (39,942) 131,003
1991 . . . . . . . . . 92,848 56,579 14,406 21,138 (29,247) 155,724
IDENTIFIABLE ASSETS
1993 . . . . . . . . . $ 884,280 $140,406 $349,144 $133,776 $199,519 $1,707,125
1992 . . . . . . . . . 392,511 130,486 390,644 136,808 196,082 1,246,531
1991 . . . . . . . . . 378,929 125,124 351,032 139,492 141,363 1,135,940
DEPRECIATION, DEPLETION AND AMORTIZATION
1993 . . . . . . . . . $ 36,923 $ 12,974 $ 26,135 $ 14,437 $ 5,276 $ 95,745
1992 . . . . . . . . . 27,447 12,746 23,897 15,020 4,199 83,309
1991 . . . . . . . . . 26,140 12,456 20,124 13,818 4,023 76,561
CAPITAL EXPENDITURES
1993 . . . . . . . . . $ 37,891 $ 20,450 $ 41,209 $ 9,078 $ 6,968 $ 115,596
1992 . . . . . . . . . 33,824 15,581 48,317 5,459 6,124 109,305
1991 . . . . . . . . . 25,516 12,705 40,656 9,735 1,945 90,557
Intersegment sales are recorded at a market-related transfer price.
*Interest income, interest expense and unallocated corporate expenses are
excluded from the operating profits by segment and are shown under corporate.
In addition, 1993 and 1991 corporate operating profit includes $5,800 and
$8,525, respectively, for unusual items, as described in Note 3 to the
financial statements.
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 facility and prepaid expenses.
Identifiable assets in the converted products segment more than doubled in 1993
as a result of the acquisitions. The decrease in 1993 in the international
segment is due to dispositions and exchange rate changes.
See Note 4 regarding restructuring charges in 1992. These costs have been
allocated to the appropriate segments.
19
SHAREHOLDERS' INFORMATION
CORPORATE OFFICES.
North Second Street
Hartsville, SC 29550
(803) 383-7000
Fax:(803) 339-6078
INDEPENDENT ACCOUNTANTS.
Coopers & Lybrand
NationsBank Corporate Center
100 North Tryon Street, Suite 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 RELATIONS
Sonoco Products Company
Treasurer
P.O. Box 160
Hartsville, SC 29551
(803) 383-7277
CORPORATE COMMUNICATION.
Sonoco Products Company
Corporate Communication - A09
P.O. Box 160
Hartsville, SC 29551
(803) 383-7437
ANNUAL MEETING OF SONOCO
SHAREHOLDERS. The annual meeting of
shareholders will be held at the Center
Theater on Fifth Street in Hartsville, SC,
at 11 a.m., Wednesday, April 20, 1994.
COMMON STOCK. Sonoco Products
Company common stock is traded
on the national over-the-counter
securities market. NASDAQ Symbol:
SONO.
FORM 10-K AVAILABLE. A copy of
the Company's annual report filed with
the Securities and Exchange Commission
on Form 10-K may be obtained by
shareholders without charge after April
1, 1994, by writing to :
Sonoco Products Company
Treasurer
P.O. Box 160
Hartsville, SC 29551
DIVIDEND REINVESTMENT. A dividend
reinvestment plan is available to
registered 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
Stockholders 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.
DIVIDENDS DECLARED - COMMON
(millions $)
(Graph)
MARKET VS. BOOK VALUE PER COMMON SHARE
($)
(Graph)
MARKET PRICE OF STOCK AT YEAR END
($)
(Graph)
20
Visual Aids Contained in Annual Report Pages Incorporated By Reference
Exhibit 13
Page Number Chart or Picture Described
- ----------- --------------------------
2 Graph reflecting net sales by operating segment for 5 years.
2 Picture of a wooden reel produced by Sonoco.
3 Graph reflecting identifiable assets by segment for 5 years.
3 Picture of a filter tube produced by Sonoco.
4 Graph reflecting operating income by segment for 5 years.
4 Picture of a SonoLoc(R) tube produced by Sonoco.
5 Picture of a dough can produced by Sonoco.
6 Graph reflecting capital spending by segment for 5 years.
6 Picture of a paper core produced by Sonoco.
19 Graph reflecting dividends declared on common stock for 5 years.
19 Graph reflecting market verses book value per common share for 10 years.
19 Graph reflecting market price of stock at year end for 5 years.
19 Picture of a toner cartridge produced by Sonoco.
19 Picture of a paper tube produced by Sonoco.
1
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
------------------------
EXHIBIT (21)
SUBSIDIARIES AND AFFILIATES OF THE REGISTRANT
A. Subsidiaries of Sonoco Products Company, pursuant to Regulation S-K
601, as of December 31, 1993 are:
1. KMI Continental Fibre Drum, Inc., 100%-owned domestic
subsidiary incorporated in the State of Delaware.
a. Sonoco Fibre Drum, Inc., 100%-owned domestic
subsidiary, incorporated in the State of Delaware.
2. Paper Stock Dealers, Inc., 100%-owned domestic subsidiary,
incorporated in the State of North Carolina.
3. Sonoco Plastic Drum, Inc., 100%-owned domestic subsidiary,
incorporated in the State of Illinois.
a. Sonoco Plastic Drum Southwest Division, Inc., a
100%-owned domestic subsidiary, incorporated in the
State of Texas.
b. Sonoco Plastic Drum Southeast Division, Inc., a
100%-owned domestic subsidiary, incorporated in the
State of Kentucky.
4. Southern Plug & Manufacturing Co. Inc., 100%-owned domestic
subsidiary, incorporated in the State of Louisiana.
a. Pelican Plug, 100%-owned domestic subsidiary,
incorporated in the State of Louisiana.
b. Boltz Manufacturing, 100%-owned domestic subsidiary,
incorporated in the State of Louisiana.
c. Memphis Wood Products, 100%-owned domestic
subsidiary, incorporated in the State of Tennessee.
5. Grupo Sonoco, S.A. de C.V., 100%-owned Mexican subsidiary.
a. Sonoco de Mexico, S.A. de C.V., 100%-owned Mexican
subsidiary.
b. Manufacturas Gargo, S.A. de C.V., 100%-owned Mexican
subsidiary.
c. Fibro Tambor, S.A. de C.V., 100%-owned Mexican
subsidiary.
1. Direccion Ejecutiva, S.A. de C.V.,
100%-owned Mexican subsidiary.
d. Especialidades Cilindricas de Carton, S.A.
de C.V., 100%-owned Mexican subsidiary.
e. Inmobliaria Sonomex Direccion, S.A. de C.V.,
100%-owned Mexican subsidiary.
f. Direccion Integral Industries, S.A., 100%-
owned Mexican subsidiary.
g. Sonoco Envases, S.A. de C.V., a 100%-owned
Mexican subsidiary.
2
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDARIES
---------------------
SUBSIDIARIES AND AFFILIATES OF THE REGISTRANT, Continued
6. Inversiones Sm C.A., 45%-owned Venezuelan subsidiary,
(45%-owned by Sonoco International).
a. Sonoco de Venezuela, C.A., 45%-owned Venezuelan
subsidiary, (45% owned by Sonoco International).
b. A Manufacturas de Envases de Fibra, C.A., 45%-owned
Venezuelan subsidiary (45%-owned by Sonoco
International).
7. SPC Management, Inc., 100%-owned domestic subsidiary,
incorporated in the State of Delaware.
a. SPC Capital Management, Inc., 100%-owned domestic
subsidiary, incorporated in the State of Delaware.
b. SPC Resources, Inc., 100%-owned domestic subsidiary,
incorporated in the State of Delaware.
8. Sonoco-Crellin, Inc., a 100%-owned domestic subsidiary,
incorporated in the State of Delaware.
a. Crellin International, Inc., a 100%-owned domestic
subsidiary, incorporated in the State of Delaware,
holder of securities in:
1. Crellin, Inc., a 100%-owned domestic
subsidiary, incorporated in the State of New
York.
a. Crellin Europe B.V., a 100%-owned Dutch
subsidiary.
1. Crellin B.V., 100%-owned Dutch
subsidiary.
2. Sebro Plastics, Inc., a 100%-owned domestic
subsidiary, incorporated in the State of
Michigan.
3. Injecto Mold, a 100%-owned domestic
subsidiary, incorporated in the State of
Illinois.
9. Engraph, Inc., a 100%-owned domestic subsidiary, incorporated
in the State of Delaware.
a. Engraph Puerto Rico, Inc., a 100%-owned domestic
subsidiary, incorporated in the State of Delaware.
1. Ramallo Escribano & Co., a 50%-owned Puerto
Rican partnership.
b. E L R, Inc., a 100%-owned domestic subsidiary,
incorporated in the State of Delaware.
1. Screen Graphics, Inc., a 100%-owned domestic
subsidiary, incorporated in the State of
Tennessee.
2. Graphic Resources, Inc., a 100%-owned domestic
subsidiary, incorporated in the State of Kentucky.
c. Polaris, Inc., a 100%-owned domestic subsidiary,
incorporated in the State of New Jersey.
d. Engraph Mexico S.A. de C.V., a 100%-owned Mexican
subsidiary.
3
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
-----------------------------
SUBSIDIARIES AND AFFILIATES OF THE REGISTRANT, Continued
10. Polysack A/S, Inc., a 100%-owned domestic subsidiary,
incorporated in the State of South Carolina.
11. Sonoco International, Inc., 100%-owned domestic subsidiary,
incorporated in the State of Delaware, holder of securities
in:
a. Sonoco Containers, Inc., a 100%-owned Canadian
subsidiary.
b. Sonoco Limited, 100%-owned Canadian subsidiary.
1. Coretech Sonoco Holdings Limited, 50%-owned
Canadian subsidiary.
a. Coretech Sonoco Limited, a 50%-owned
Canadian subsidiary.
b. Roll Packaging Technology, Inc.,
50%-owned Canadian subsidiary.
2. Montreal Recycled Paperboard, 50%-owned
Canadian subsidiary.
3. Ontario Inc., a 50%-owned Canadian subsidiary.
a. Fibre Resource Recovery Corp,
50%-owned Canadian subsidiary.
4. SW, Inc., a 60%-owned Canadian subsidiary.
a. Cascades Conversion Inc., a
30%-owned Canadian subsidiary.
c. Sonoco Colombiana, S.A., 100%-owned Colombian
subsidiary.
d. Sonoco of Puerto Rico, Inc., 100%-owned domestic
subsidiary, incorporated in the State of South
Carolina.
e. Sonoco U.K. Ltd. Inc., 100%-owned subsidiary
incorporated in the State of Delaware, holder of
securities in:
1. Sonoco Products Company U.K. Limited,
100%-owned U.K. subsidiary.
a. Sonoco Holdings Limited, 100%-owned
English subsidiary. The subsidiaries
and affiliate of Sonoco Holdings
Limited include:
1. Sonoco Board Mills, Ltd.
2. Sonoco Limited (a U.K.
corporation).
4
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
--------------------------
SUBSIDIARIES AND AFFILIATES OF THE REGISTRANT, Continued
3. Sonoco U.K. Leasing Limited.
4. Sonoco Europe Limited (a U.K.
corporation).
5. Sonoco Polysack, Ltd. (a U.K.
corporation).
6. CMB Sonoco Composites Ltd., 51%-
owned English subsidiary.
a. CMB Sonoco France, a 51%-
owned French subsidiary.
7. T.P.T. Board Mills Limited, 100%-
owned U.K. subsidiary.
8. T.P.T. Limited, 100%-owned U.K.
subsidiary.
9. Capseals Limited, 100%-owned U.K.
subsidiary.
2. Sonoco Packaging, Ltd., 100%-owned U.K.
subsidiary. Subsidiaries of Sonoco Packaging,
Limited, all of which are 100%-owned U.K.
companies, include:
a. Sonoco Capseals Liners, Ltd.
b. Sonoco Packaging Tapes, Ltd.
c. Sonoco Reels.
1. Unit Reels and Drums Limited.
d. Grove Paper Mill Limited.
e. Capseals Liners Limited.
f. Healthfield Reels Limited.
g. Nathaniel Lloyd & Co. Limited.
h. Cap Liners Limited.
e. Sonoco Espana, S.A., 100%-owned Spanish subsidiary.
f. Sonoco Nederland B.V., 99.8%-owned Dutch subsidiary.
g. Sonoco Deutschland Holdings GmbH, 100%-owned German
subsidiary.
5
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
-------------------------
SUBSIDIARIES AND AFFILIATES OF THE REGISTRANT, Continued
1. Sonoco Deutschland GmbH, 100%-owned German subsidiary.
2. Sonoco Plastics GmbH, 100%-owned German
subsidiary.
3. Sonoco IPD GmbH, 100%-owned German subsidiary.
a. Sonoco MBS GmbH, 100%-owned German
subsidiary.
b. OPV Oberrhein GmbH, 100%-owned German
subsidiary.
c. Sonoco MBS GmbH and Company, 100%-owned
German partnership.
d. OPV Textilhul GmbH, 100%-owned German
partnership.
4. Caprex AG, 100%-owned Swiss subsidiary.
h. Sonoco Norge A/S, 100%-owned Norwegian
subsidiary.
i. Sonoco Europe, S.A., 100%-owned Belgian
subsidiary.
j. Sonoco Australia Pty., Ltd., 100%-owned
Australian subsidiary.
k. Sonoco Singapore Pte., Ltd., 100%-owned
Singapore subsidiary.
a. Sonoco Malaysia, SDN BHD, 70%-owned
Maylasian subsidiary.
l. Sonoco New Zealand Pty., Ltd., 100%-owned
New Zealand subsidiary.
m. Sonoco Asia, 70%-owned British Virgin Islands
subsidiary.
1. Sonoco Taiwan, 70%-owned Republic of
China subsidiary.
2. Sonoco Thailand, 49%-owned Thai
subsidiary.
n. Colombiana P.M., Inc., 100%-owned Delaware
Corporation.
1. Andina de Cartones Especiales, S.A.,
100%-owned Colombian subsidiary.
6
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES AND AFFILIATES OF THE REGISTRANT, Continued
o. Sonoco Societe en Nom Collectis, 100%-owned French
partnership with the following subsidiaries and
affiliate:
1. Sonoco Holdings, 100%-owned French subsidiary.
a. Lhomme S.A., 100%-owned French subsidiary.
1. Euro Core, 100%-owned Belgian
subsidiary
2. Sonoco Tubnor SA, 100%-owned
French subsidiary.
3. Papeteries Du Rhin, 47%-owned
French affiliate.
4. Pages, S.A., 100%-owned French
subsidiary.
p. Cascades-Sonoco, Inc., 30%-owned Canadian subsidiary.
q. Sonoco Italia, 100%-owned Italian subsidiary.
B. Affiliate companies are:
1. Showa Products Company, Ltd., Japanese company 20%-owned by
Sonoco Products Company. Showa's subsidiary and affiliate are:
a. Hiyoshimaru Shiko Company, Ltd., 55.6%-owned Japanese
subsidiary.
b. Cosmos-Showa Products Company, Ltd., 33.2%-owned
Republic of China affiliate.
1
EXHIBIT 23-1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference into the registration statements
of Sonoco Products Company on Form S-8 (filed September 1, 1981, September 5,
1985, June 3, 1988, November 27, 1989, February 5, 1992 and November 22, 1993)
and Form S-3 (filed June 6, 1991, File No. 33-40538; filed October 4, 1993,
File No. 33-50501; filed October 4, 1993, File No. 33-50503) of our report,
which includes an explanatory paragraph indicating that the Company changed its
method of accounting for postretirement benefits other than pensions and income
taxes in 1992, dated January 28, 1994, on our audits of the consolidated
financial statements and financial statement schedules of Sonoco Products
Company as of December 31, 1993 and 1992, and for each of the three years in
the period ended December 31, 1993, which report is included in this Annual
Report on Form 10-K.
/s/ Coopers & Lybrand
---------------------
COOPERS & LYBRAND
Charlotte, North Carolina
March 29, 1994
2
EXHIBIT 23-2
Arthur Andersen & Co.
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated June 28, 1993 related to our audit of the financial statments of the
Engraph, Inc, Retirement Plus Plan for the year ended December 31, 1992 and to
all references to our firm included in Form 11-K (an exhibit to Sonoco Products
Company's Annual Report on Form 10-K).
/s/ Arthur Andersen & Co.
--------------------------
Arthur Andersen & Co.
Atlanta, Georgia
March 25, 1994
1
EXHIBIT (99-1)
[LOGO]
SONOCO PRODUCTS COMPANY
POST OFFICE BOX 160
ONE NORTH SECOND STREET
HARTSVILLE, SOUTH CAROLINA 29551-0160 U.S.A.
March 18, 1994
TO OUR SHAREHOLDERS:
As a shareholder of Sonoco Products Company, you are cordially invited to
attend the Annual Shareholders' Meeting to be held at the Center Theater, 212
North Fifth Street, Hartsville, South Carolina, 29550, on Wednesday, April 20,
1994, at 11:00 A.M.
The accompanying Notice of Meeting and Proxy Statement cover the details of
matters to be presented at the meeting which consists of the election of
directors, a proposal to amend the Restated Articles of Incorporation (including
related amendments to the By-Laws) and the election of independent auditors.
A copy of the 1993 Annual Report, which reviews the Company's past year's
events, is enclosed unless you have signed a statement indicating that you have
access to another copy at your address.
Whether or not you plan to attend the meeting, you are urged to participate
by completing and returning your proxy in the enclosed business reply envelope.
If you later find you can be present or for any reason desire to revoke your
proxy, you can do so at any time before the voting. Your vote is important and
will be greatly appreciated.
/s/ Charles W. Coker
Charles W. Coker
Chairman and
Chief Executive Officer
2
SONOCO PRODUCTS COMPANY
POST OFFICE BOX 160
ONE NORTH SECOND STREET
HARTSVILLE, SOUTH CAROLINA 29551-0160
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TIME.......................... 11:00 A.M. on Wednesday, April 20, 1994.
PLACE......................... The Center Theater, 212 North Fifth Street, Hartsville, South
Carolina, 29550.
PURPOSES...................... (1) To elect six members of the Board of Directors, five for
the next three years and one for the next year to complete an
unexpired term.
(2) To act upon a proposal to amend the Restated Articles of
Incorporation and the By-Laws to (a) delete the present
fifteen person maximum number of directors the Company
can have, (b) give directors the ability to set the size
of the Board of Directors, as well as to create and fill
vacancies on the Board of Directors, (c) require that
nominations for directors to be elected at any Annual
Meeting of Shareholders, other than incumbent directors,
be made in writing at least sixty days prior to the
Annual Meeting, and (d) recognize that the holders of the
Company's $2.25 Cumulative Convertible Preferred Stock
have been given the right to elect two directors during
any period in which payment of dividends on the Preferred
Stock is in arrears, and make it clear that any such
directors are in addition to the directors elected by the
Common Shareholders.
(3) To elect independent auditors.
(4) To transact such other business as may properly come
before the meeting or any adjournments thereof.
RECORD DATE................... Holders of Common Stock of record at the close of business
March 4, 1994, are entitled to vote at the meeting.
ANNUAL REPORT................. The Annual Report of the Company for the year 1993 is
enclosed unless you have signed a statement indicating that
you have access to another copy at your address.
3
PROXY VOTING.................. It is important that your shares be represented and voted at
the meeting. Please MARK, SIGN, DATE, and RETURN PROMPTLY the
enclosed proxy card in the envelope furnished. Any proxy so
given can be revoked in the manner described in the
accompanying Proxy Statement at any time prior to its
exercise at the meeting.
James L. Coker, Secretary
March 18, 1994
4
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS OF
SONOCO PRODUCTS COMPANY
APRIL 20, 1994
GENERAL INFORMATION
The solicitation of the enclosed proxy is made by the Board of Directors of
Sonoco Products Company, whose principal address is Post Office Box 160, One
North Second Street, Hartsville, South Carolina, 29551-0160, for use at the
Annual Meeting of Shareholders, to be held at 11:00 A.M. on Wednesday, April 20,
1994, and at any adjournments thereof.
Any shareholder who executes and delivers a proxy has the right to revoke
it at any time before it is voted. The proxy can be revoked by giving notice of
revocation at the Annual Meeting, or by delivery to the Secretary of the
Company, Post Office Box 160, One North Second Street, Hartsville, South
Carolina, 29551-0160, of an instrument which by its terms revokes the proxy, or
by delivery to the Secretary of a duly executed proxy bearing a later date. Any
shareholder who desires to do so can attend the meeting and vote in person in
which case the proxy will not be used.
The Annual Report to shareholders, including financial statements for the
year ended December 31, 1993, is enclosed unless you have signed a statement
indicating that you have access to another copy at your address. The Annual
Report, Proxy Statement and Proxy were first mailed to shareholders on or about
March 18, 1994.
The expense of the solicitation of proxies will be borne by the Company.
Solicitations will be made by the use of the mails and, if necessary, officers
and regular employees of the Company can make solicitations of proxies by
telephone or telefacsimile or by personal calls. It is contemplated that
brokerage houses, nominees and fiduciaries will forward the proxy soliciting
material to the beneficial owners of the stock held of record by such persons
and that the Company will reimburse them for their charges and expenses in
connection therewith.
The Company has authorized two classes of stock consisting of 150,000,000
authorized shares of no par value Common Stock, of which 86,861,963 shares are
outstanding and 30,000,000 authorized shares of no par value Preferred Stock of
which 3,450,000 shares of $2.25 Cumulative Convertible Preferred Stock are
outstanding. Each share of the Company's Common Stock will be entitled to one
vote on each matter submitted at the Annual Meeting. Only shareholders of record
of the Company's Common Stock at the close of business on March 4, 1994, will be
entitled to vote at the meeting. The shareholders of the Company's $2.25
Cumulative Convertible Preferred Stock, issued in November, 1993, will not be
entitled to vote at the Annual Meeting.
A majority of the shares entitled to be voted at the Annual Meeting
constitutes a quorum. If a share is represented for any purpose at the Annual
Meeting by the presence of the registered owner or a person holding a valid
proxy for the registered owner, it is deemed to be present for purposes of
establishing a quorum. Therefore, valid proxies which are marked "Abstain" or
"Withhold" and shares that are not voted, including
5
proxies submitted by brokers that are the record owners of shares (so-called
"broker non-votes"), will be included in determining the number of votes present
or represented at the Annual Meeting.
If a quorum is present at the meeting, directors will be elected by a
plurality of the votes cast by shares present and entitled to vote at the
meeting. Votes that are withheld or that are not voted in the election of
directors will have no effect on the outcome of election of directors.
Cumulative voting is not permitted.
Approval of the amendments to Article 9(a) of the Restated Articles of
Incorporation and to Article III, Sections 1 and 2 of the By-Laws requires the
affirmative vote of two-thirds of the outstanding shares. Accordingly, proxies
marked "Abstain" and shares that are not voted will have the same effect as
votes against the amendments.
Approval of the amendment to Article III, Section 5 of the By-Laws requires
the affirmative vote of a majority of the outstanding shares. Accordingly,
proxies marked "Abstain" and shares that are not voted will have the same effect
as a vote against the amendment.
Shares represented by all properly executed proxies, delivered pursuant to
this solicitation, will be voted at the Annual Meeting or any adjournments
thereof. Where the proxy card specifies a choice with respect to any matters to
be voted upon, the shares will be voted in accordance with the specifications so
made. Where the proxy card does not specify a choice with respect to an item,
the proxy will be voted FOR such item.
There is no person known by the management of the Company to own of record
or beneficially more than 5% of the outstanding voting shares of the Company.
6
ELECTION OF DIRECTORS
At this Annual Meeting six directors are to be elected. Five shall hold
office for the next three years, their terms expiring at the Annual
Shareholders' Meeting in 1997, and one shall hold office for the next year, his
term expiring at the Annual Shareholders' Meeting in 1995, or until their
successors are duly elected and qualified. It is the intention that the persons
named on the enclosed form of proxy will vote such proxy FOR the election of the
six persons named herein (or if any of the persons nominated is unexpectedly
unavailable, for such substitutions as the Board of Directors may designate)
unless authority is withheld for all or any of the nominees. Proxies will not be
voted for a greater number of persons than the number of nominees named. Each
nominee has been recommended for election by the Board of Directors.
INFORMATION CONCERNING NOMINEES
NOMINEES TO BE ELECTED FOR THREE-YEAR TERMS:
NAME, AGE, PRINCIPAL OCCUPATION FOR LAST FIVE SERVED AS A
YEARS AND DIRECTORSHIPS IN PUBLIC CORPORATIONS DIRECTOR SINCE
---------------------------------------------------------- --------------
- ----------------- *C. W. COKER (60). Mr. Coker is Chairman and Chief 1962
- ----------------- Executive Officer of the Company, a position held since
- ----------------- 1990. He was President of the Company from 1970 to 1990.
- ----------------- He is a director of NationsBank Corporation, Springs
- ----------------- Industries, Inc., Sara Lee Corporation and Carolina Power
- ----------------- and Light Company.
- -----------------
- -----------------
- ----------------- A. T. DICKSON (62). Mr. Dickson is President and Director 1981
- ----------------- of Ruddick Corporation (a diversified holding company),
- ----------------- Charlotte, North Carolina, a position held since 1968. He
- ----------------- is a director of Lance, Inc., NationsBank Corporation,
- ----------------- Royal Group, Inc. and Bassett Furniture Industries, Inc.
- -----------------
- -----------------
- -----------------
- ---------------
* C. W. Coker and F. L. H. Coker are brothers and are first cousins of J. L.
Coker.
7
NAME, AGE, PRINCIPAL OCCUPATION FOR LAST FIVE SERVED AS A
YEARS AND DIRECTORSHIPS IN PUBLIC CORPORATIONS DIRECTOR SINCE
---------------------------------------------------------- --------------
- ----------------- R. E. ELBERSON (65). Mr. Elberson is a retired executive 1985
- ----------------- and director of Sara Lee Corporation (manufacturer and
- ----------------- marketer of consumer products), Chicago, Illinois. He
- ----------------- served as Vice Chairman of Sara Lee Corporation from 1986
- ----------------- to 1989 and as President and Chief Operating Officer from
- ----------------- 1983 to 1986. Mr. Elberson is a director of W. W.
- ----------------- Grainger, Inc.
- -----------------
- ----------------- J. C. FORT (67). Mr. Fort is President and Director of 1969
- ----------------- Trust Company of South Carolina, Inc. (insurance brokers),
- ----------------- Hartsville, South Carolina. Until his retirement from the
- ----------------- Company in 1987, Mr. Fort served as Senior Vice President,
- ----------------- a position held since 1986. He served as Senior Vice
- ----------------- President -- International Group from 1983 to 1986.
- -----------------
- -----------------
- ----------------- R. C. KING, JR. (59). Mr. King is President and Chief 1991
- ----------------- Operating Officer of the Company, a position held since
- ----------------- 1990. He was Senior Vice President from 1987 to 1990. Mr.
- ----------------- King is a director of United Dominion Industries.
- -----------------
- -----------------
- -----------------
- -----------------
8
NOMINEE TO BE ELECTED FOR ONE-YEAR TERM:
NAME, AGE, PRINCIPAL OCCUPATION FOR LAST FIVE SERVED AS A
YEARS AND DIRECTORSHIPS IN PUBLIC CORPORATIONS DIRECTOR SINCE
---------------------------------------------------------- --------------
- ----------------- LEO BENATAR (63). Mr. Benatar is Senior Vice President of 1993
- ----------------- the Company, a position held since 1993, and Chairman and
- ----------------- Chief Executive Officer of Engraph, Inc. (printer and
- ----------------- fabricator of roll labels, decals, specialty paperboard
- ----------------- items and flexible packaging), Atlanta, Georgia, a
- ----------------- position held since 1981. Engraph, Inc. became a wholly
- ----------------- owned subsidiary of the Company as a result of a merger of
- ----------------- the two companies on October 21, 1993. He was President of
Mead Packaging, a division of the Mead Corporation, from
1972 to 1981. Mr. Benatar is a director of Interstate
Bakeries Corporation, Mohawk Industries, Inc. and
Riverwood International Corporation, and is Deputy
Chairman of the Federal Reserve Bank of Atlanta.
All nominees previously have been elected to the Board of Directors by the
Common Shareholders, except Mr. Benatar, who was elected by the Board of
Directors at their October 20, 1993, meeting to fill the vacancy on the Board
created by the resignation on February 3, 1993, of Mr. P. J. Rizzo. Mr. Benatar
is recommended by the Nominating Committee of the Board of Directors for
election by the Common Shareholders to fill the unexpired term of Mr. Rizzo,
which will expire at the Annual Meeting of Shareholders in 1995.
The Nominating Committee recommends to the Board of Directors nominees to
fill vacancies on the Board as they occur and recommends candidates for election
as directors at Annual Meetings of Shareholders. The committee will consider
persons recommended to be nominees by shareholders upon submission in writing to
the Nominating Committee of the Company of the names of such persons, together
with their qualifications for service and evidence of their willingness to
serve. If the amendment to Article 9(a) of the Company's Restated Articles of
Incorporation is adopted at the Annual Meeting, nominations for any person who
is not then a director of the Company, whether made by the Nominating Committee
or any shareholder, will be required to be submitted to the Secretary not less
than sixty days prior to the Annual Meeting for which such nominations are made.
9
INFORMATION CONCERNING DIRECTORS WHOSE TERMS WILL CONTINUE:
Members of the Board of Directors whose terms of office will continue until
the Annual Shareholders' Meeting in 1995 are:
NAME, AGE, PRINCIPAL OCCUPATION FOR LAST FIVE SERVED AS A
YEARS AND DIRECTORSHIPS IN PUBLIC CORPORATIONS DIRECTOR SINCE
---------------------------------------------------------- --------------
- ----------------- *F. L. H. COKER (58). Mr. Coker is retired. He was 1964
- ----------------- President and Director of Sea Corporation of Myrtle Beach,
- ----------------- Inc. (private investments), Myrtle Beach, South Carolina,
- ----------------- from 1983 to 1989. Until his retirement from the Company
- ----------------- in 1979, Mr. Coker was Senior Vice President, a position
- ----------------- held since 1976.
- -----------------
- -----------------
- ----------------- T. C. COXE, III (63). Mr. Coxe is Senior Executive Vice 1982
- ----------------- President of the Company, a position held since 1993. He
- ----------------- was Executive Vice President from 1985 to 1993. He is a
- ----------------- director of South Carolina National Corporation and The
- ----------------- South Carolina National Bank.
- -----------------
- -----------------
- -----------------
- ----------------- E. H. LAWTON, JR. (64). Mr. Lawton is President and 1968
- ----------------- Director of Hartsville Oil Mill (vegetable oils
- ----------------- processor), Darlington, South Carolina, a position held
- ----------------- since 1962. He is a director of NationsBank of South
- ----------------- Carolina, N.A.
- -----------------
- -----------------
- -----------------
- ---------------
* C. W. Coker and F. L. H. Coker are brothers and are first cousins of J. L.
Coker.
10
NAME, AGE, PRINCIPAL OCCUPATION FOR LAST FIVE SERVED AS A
YEARS AND DIRECTORSHIPS IN PUBLIC CORPORATIONS DIRECTOR SINCE
---------------------------------------------------------- --------------
- ----------------- E. C. WALL, JR. (56). Mr. Wall is President and Director 1976
- ----------------- of Canal Industries (forest products), Conway, South
- ----------------- Carolina, a position held since 1969. He is a director of
- ----------------- Ruddick Corporation, SCANA Corporation and Blue Cross-Blue
- ----------------- Shield of South Carolina.
- -----------------
- -----------------
- -----------------
Members of the Board of Directors whose terms of office will continue until
the Annual Shareholders' Meeting in 1996 are:
NAME, AGE, PRINCIPAL OCCUPATION FOR LAST FIVE SERVED AS A
YEARS AND DIRECTORSHIPS IN PUBLIC CORPORATIONS DIRECTOR SINCE
---------------------------------------------------------- --------------
- ----------------- C. J. BRADSHAW (57). Mr. Bradshaw is President and 1986
- ----------------- Director of Bradshaw Investments, Inc. (private
- ----------------- investments), Georgetown, South Carolina, a position held
- ----------------- since 1986. He served as President and Chief Operating
- ----------------- Officer of Transworld Corporation, New York, New York,
- ----------------- from 1984 to 1986 and Chairman of the Board and Chief
- ----------------- Executive Officer of Spartan Food Systems, Inc.,
- ----------------- Spartanburg, South Carolina, from 1961 to 1986. Mr.
Bradshaw is a director of South Carolina National
Corporation and The South Carolina National Bank.
- ----------------- R. J. BROWN (59). Mr. Brown is Founder, Chairman and Chief 1993
- ----------------- Executive Officer of B&C Associates, Inc. (a management
- ----------------- consulting, marketing research and public relations firm),
- ----------------- High Point, North Carolina, a position held since 1973. He
- ----------------- is a director of First Union Corporation and Pacific
- ----------------- Financial Group.
- -----------------
- -----------------
11
NAME, AGE, PRINCIPAL OCCUPATION FOR LAST FIVE SERVED AS A
YEARS AND DIRECTORSHIPS IN PUBLIC CORPORATIONS DIRECTOR SINCE
---------------------------------------------------------- --------------
- ----------------- *J. L. COKER (53). Mr. Coker is Secretary of the Company, 1969
- ----------------- a position held since 1969. He is President of JLC
- ----------------- Enterprises (private investments), Stonington,
- ----------------- Connecticut, a position held since 1979. He was President
- ----------------- of Sonoco Limited, Canada, from 1972 to 1979.
- -----------------
- -----------------
- -----------------
- ----------------- PAUL FULTON (59). Mr. Fulton is Dean of The Kenan-Flagler 1989
- ----------------- Business School, The University of North Carolina, Chapel
- ----------------- Hill, North Carolina, a position he assumed on January 1,
- ----------------- 1994. He was President of Sara Lee Corporation
- ----------------- (manufacturer and marketer of consumer products), Chicago,
- ----------------- Illinois, from 1988 through 1993. He served as Executive
- ----------------- Vice President from 1987 to 1988 and as Senior Vice
- ----------------- President of Sara Lee Corporation and President of the
Hanes Group of Sara Lee Corporation from 1981 to 1986. Mr.
Fulton is a director of NationsBank Corporation and
Bassett Furniture Industries Inc.
- ----------------- H. L. MCCOLL, JR. (58). Mr. McColl is Chairman of the 1972
- ----------------- Board and Chief Executive Officer and Director of
- ----------------- NationsBank Corporation, Charlotte, North Carolina, and
- ----------------- Chief Executive Officer of each of its subsidiary banks.
- ----------------- He served as Chairman of the Board of NationsBank
- ----------------- Corporation (formerly NCNB Corporation) from 1983 until
- ----------------- December 31, 1991, and was reappointed Chairman on
- ----------------- December 31, 1992. He is a director of CSX Corporation,
Ruddick Corporation, Jefferson-Pilot Corporation and
Jefferson-Pilot Life Insurance Company.
- ---------------
* C. W. Coker and F. L. H. Coker are brothers and are first cousins of J. L.
Coker.
12
BOARD COMMITTEES
During 1993 the Board of Directors held four regularly scheduled meetings
and three special meetings to review significant developments affecting the
Company and to act on matters requiring Board approval. To assist it in the
discharge of its responsibilities, the Board has established four committees:
COMMITTEE CURRENT NUMBER OF
NAME PURPOSE MEMBERS 1993 MEETINGS
- ----------------- --------------------------------------- ----------------- --------------
Audit Committee Responsible for the scope of both E. C. Wall, Jr. -- 2
internal and external audit programs in Chairman
order to fully protect assets of the R. J. Brown
Company. F. L. H. Coker
J. L. Coker
A. T. Dickson
J. C. Fort
Executive Responsible for establishing and A. T. Dickson -- 4
Compensation maintaining officer-level salaries and Chairman
Committee administering executive compensation C. J. Bradshaw
plans. R. E. Elberson
Paul Fulton
E. C. Wall, Jr.
Nominating Responsible for recommending to the F. L. H. Coker -- 2
Committee directors qualified candidates to fill Chairman
vacancies on the Board. R. E. Elberson
J. C. Fort
E. H. Lawton, Jr.
H. L. McColl, Jr.
Finance Responsible for evaluating the H. L. McColl, Jr. -- 3
Committee Company's financial status, advising Chairman
corporate management and the full Board C. J. Bradshaw
on financial matters, and reviewing the R. J. Brown
Company's long-term financial J. L. Coker
requirements and plans. Paul Fulton
E. H. Lawton, Jr.
All directors attended 75% or more of the aggregate number of meetings of
the Board and committees.
13
SECURITY OWNERSHIP OF MANAGEMENT AS OF DECEMBER 31, 1993
COMMON STOCK
BENEFICIALLY OWNED
---------------------------
NAME POSITION NUMBER(1) PERCENTAGE(2)
- ------------------ ------------------------------------------------ --------- -------------
Leo Benatar Senior Vice President and Director 135,606
C. J. Bradshaw Director 20,846
R. J. Brown Director 400
F. L. H. Coker Director 1,148,565 1.3
J. L. Coker Secretary and Director 142,801
A. T. Dickson Director 59,616
R. E. Elberson Director 17,000
J. C. Fort Director 1,154,911 1.3
Paul Fulton Director 5,400
E. H. Lawton, Jr. Director 712,899
H. L. McColl, Jr. Director 15,432
E. C. Wall, Jr. Director 81,610
C. W. Coker Chairman & Chief Executive Officer and Director 1,375,504 1.6
R. C. King, Jr. President & Chief Operating Officer and Director 252,514
T. C. Coxe, III Senior Executive Vice President and Director 296,393
H. E. DeLoach, Jr. Group Vice President 1,753,956(3) 2.0
H. J. Moran Group Vice President 124,403
All Executive Officers and Directors (26 persons) 8,243,527(4) 9.4
- ---------------
(1) Shareholdings represent the number of shares beneficially owned directly or
indirectly by each named director and executive officer as of December 31,
1993. The number includes shares subject to currently exercisable options
granted by the Company under the 1983 Key Employee Stock Option Plan and
the 1991 Key Employee Stock Plan for the following directors and named
executive officers: C. W. Coker -- 345,500, R. C. King, Jr. -- 184,550, T.
C. Coxe, III -- 78,940, H. E. DeLoach, Jr. -- 71,600, H. J.
Moran -- 106,800, and Leo Benatar -- 111,232.
Also included are shares held in the Company's Dividend Reinvestment Plan
(6,616), the Employee Savings and Stock Ownership Plan (42,533), and share
equivalents in deferred compensation plans (16,174).
(2) Percentages not shown are less than 1%.
(3) Includes 1,584,778 shares of Common Stock owned by an estate for which Mr.
DeLoach is executor. Mr. DeLoach disclaims beneficial ownership of such
shares.
(4) Includes 1,687,442 shares of Common Stock which the executive officers have
a right to acquire pursuant to options granted by the Company.
14
EXECUTIVE COMPENSATION COMMITTEE'S REPORT TO SHAREHOLDERS
The Executive Compensation Committee of the Board of Directors (the
"Committee") is responsible for setting the remuneration levels for executives
of the Company. It also oversees the Company's various executive compensation
plans, as well as the overall management compensation program. The Committee
periodically evaluates the Company's executive compensation program in terms of
appropriateness, including competitive positioning relative to other companies'
practices. The Committee obtains independent and impartial advice from external
compensation consulting firms in order to maintain objectivity in executing its
responsibilities. The Committee met four times during 1993, and had met once in
1994 as of the printing of this report.
PHILOSOPHY
The executive compensation program has been designed to attract, motivate,
reward, and retain senior management by providing competitive total compensation
opportunities based on performance, teamwork, and the creation of shareholder
value. It is a basic program consisting of salary, annual cash bonus awards,
annual stock option awards, perquisites, and employee benefits.
In order to determine competitive compensation levels, the Company
participates in a number of surveys conducted by independent consulting firms,
and from time to time contracts with these firms to perform customized studies
of companies in our industry groups and/or with companies showing similar
long-term financial performance results. In these surveys executive compensation
levels are developed by looking at large numbers of similar positions across
American industry. The results reflect adjustments based upon Company revenues.
Companies in the Dow Jones Containers and Packaging Group also are included, as
available, among the companies whose survey data is used in our studies. This
group, which includes the Company, was used in the five year shareholder return
performance graph that appears on Page 20.
The total compensation package for executives is structured to be
competitive with the median total pay practices for executives of other large
corporations. The base salary ranges are targeted to be at the median of
surveyed market rates. Incentive compensation, consisting of the annual cash
bonus plan and the annual stock option awards, is targeted to provide median
market compensation for expected Company performance, and is leveraged upward to
motivate and reward executives for exceptional performance. Executive
perquisites are limited and provide a lower benefit than the market median. The
benefits program for executives provides an overall level that is slightly
higher than the market median. This benefits program, in particular the
retirement and life insurance plans, is designed to enhance retention of
executives until normal retirement age.
Following is a discussion of the elements of the executive compensation
program, along with a description of the decisions and actions taken by the
Committee with regard to 1993 compensation. Also included is a specific
discussion of the decisions regarding Mr. Coker's compensation for performing
the duties of Chairman and Chief Executive Officer ("CEO"). The tables and
accompanying narrative and footnotes which follow this report reflect the
decisions covered by the discussions below.
15
SALARY
The Company's salary ranges and resulting salaries are based on a relative
valuing of the duties and responsibilities of each position, as well as the
annual revenues of the Company or applicable business unit. The Company reviews
the base salaries of all salaried employees on an annual basis. Merit salary
increases are awarded from a table which considers each individual's performance
rating and position in his or her salary range. The Committee used the identical
process and table to determine salary adjustments for each of the executive
officers, including Mr. Coker, whose most recent increase was effective June 1,
1993.
ANNUAL BONUS AWARDS
The Company has a bonus plan which for 1993 provided for cash incentive
opportunities based upon achievement of pre-determined annual financial
performance goals, as well as attainment of key individual strategic and
operational objectives. The purpose of this plan was to link a significant
portion of executive pay to both the Company's operating performance for the
year and critical issues affecting the long-term health of the Company.
Financial performance goals were weighted from 80% to 86% of the total
bonus opportunity. For executives with total corporate responsibility, the
plan's financial goals were based on corporate earnings per share from ongoing
operations. For executives with business unit responsibility, one half of the
bonus opportunity available for financial performance was based on corporate
earnings per share and the remainder was based on business unit profit before
interest and taxes. Consistent with prior years, unusual non-recurring items,
such as gains resulting from the sale of businesses and restructuring charges,
were excluded in determining operating performance.
The key strategic and operational objectives for 1993, which were weighted
from 14% to 20% of the total bonus opportunity, varied by individual and were in
areas such as employee safety, customer satisfaction, business development,
strategic acquisitions, technology innovation, management succession and
employee development, process improvement, total quality management, and
environmental protection.
On February 2, 1994, the Committee reviewed and approved the 1993 annual
bonus awards for executive officers. Initial bonus amounts were assigned to each
executive officer based on the scoring of financial goal attainment and
subjective evaluations of how well the personalized objectives were met. In some
cases the Committee used additional discretion based on its assessment of
individual performance and internal equity in the determination of final bonus
amounts. Mr. Coker's earned award under the plan reflected both the Company's
financial performance, based on earnings per share from ongoing operations in
accordance with the predetermined bonus plan formula, and the Committee's
assessment of how well he met his key strategic and operational objectives for
the year.
STOCK OPTIONS
In 1993 Mr. Coker, the executive officers, and other key management
employees received options to purchase shares of Common Stock under a plan which
previously had been approved by the Company's shareholders. The price of these
options was set at the prevailing market price on the date the options were
awarded. Accordingly, these options will be valuable to the recipients only if
the market price of the
16
Company's stock increases. The size of each option award, including Mr. Coker's,
in conjunction with annual cash bonus opportunity, reflects median competitive
incentive compensation opportunities as reported by independent consulting
firms.
OTHER
On October 21, 1993, Engraph, Inc., a publicly traded company, merged with
the Company. In conjunction with this merger, the Company assumed all
outstanding Engraph, Inc. stock options for sixty-five additional individuals,
one of whom became an executive officer of the Company. As a part of this
assumption, these option holders were awarded rights that would preserve their
gains in Engraph, Inc. options on the merger date.
Beginning in 1994, tax law changes restrict a publicly traded company's
right to deduct certain types of compensation payments to the CEO or to any of
the four other named executives for amounts in excess of one million dollars.
The Company previously adopted a deferred compensation plan and shareholders
have approved a stock option program which, under present tax laws and
regulations, affords the Company sufficient opportunity to ensure complete tax
deductability of all applicable compensation payments.
Tax law changes further limit the amounts that the Company can award to
employees participating in the Employee Savings and Stock Ownership Plan, and
reduce the amount of retirement income that executives can receive from
tax-qualified retirement plans. As a result of that legislation, the Company
adopted a non-qualified benefits restoration plan to keep employees whole with
respect to benefits now limited by tax law under the Company's qualified
employee benefit plans.
A. T. Dickson, Chairman C. J. Bradshaw R. E. Elberson J. C. Fort
P. Fulton E. C. Wall, Jr.
17
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION(1) ------------
------------------- NUMBER OF ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(2) COMPENSATION(3)
- ----------------------------------------- ---- -------- -------- ------------ ---------------
C. W. Coker 1993 $575,834 $451,567 62,000 $ 184,233
Chairman and Chief 1992 541,831 460,556 80,000 178,813
Executive Officer 1991 506,250 170,000 62,500 145,160
R. C. King, Jr. 1993 431,157 298,696 40,600 76,592
President and Chief 1992 401,581 356,848 60,000 86,856
Operating Officer 1991 374,232 125,773 25,000 84,919
T. C. Coxe, III 1993 316,668 200,999 26,600 48,975
Senior Executive 1992 297,759 211,409 36,000 47,059
Vice President and 1991 281,246 83,124 28,100 104,418
Executive Vice President
H. E. DeLoach, Jr. 1993 220,351 172,690 12,600 25,398
Group Vice President and 1992 206,460 110,487 16,000 22,010
Vice President - 1991 196,429 49,285 13,000 22,142
Film, Plastics and
Special Products
H. J. Moran 1993 209,411 140,724 12,600 27,731
Group Vice President and 1992 192,304 125,000 16,000 25,812
Vice President - 1991 180,166 90,444 13,000 49,838
Consumer Products
- ---------------
(1) None of the executive officers received perquisites or personal benefits
which totaled the lesser of $50,000 or 10% of their respective salary plus
bonus payments.
(2) All amounts reflect a two-for-one stock split effective June 10, 1993.
18
(3) All other compensation for 1993 consisted of the following:
COMPANY CONTRIBUTIONS AND
SPLIT-DOLLAR ABOVE MARKET DEFERRED ACCRUALS TO DEFINED CONTRIBUTION
NAME LIFE INSURANCE COMPENSATION ACCRUALS RETIREMENT PLANS(2)
- ------------------- -------------- --------------------- --------------------------------
C. W. Coker $141,020(1) $33,213 $ 10,000
R. C. King, Jr. 46,696 19,896 10,000
T. C. Coxe, III 14,506 24,469 10,000
H. E. DeLoach, Jr. 6,518 8,955 9,925
H. J. Moran 17,731 -0- 10,000
- ----------
(1) Includes additional insurance which was purchased for Mr. Coker in
exchange for cancellation of previously-granted stock options that had a
market price gain of $497,875 at the time of the transaction.
(2) Comprised of contributions to the Company's Employee Savings and Stock
Ownership Plan (ESSOP) and accruals to individual accounts in the
Company's non-qualified benefits restoration plan, as described on Page
15, in order to keep employees whole with respect to certain ESSOP
benefits that were limited by tax law.
OPTION EXERCISES AND YEAR-END VALUES TABLE
AGGREGATED OPTION EXERCISES IN 1993 AND 1993 YEAR END VALUES
NUMBER OF SHARES
UNDERLYING
NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED
SECURITIES AS OF IN-THE-MONEY OPTIONS
UNDERLYING DECEMBER 31, 1993(2) AS OF DECEMBER 31, 1993(3)
OPTIONS VALUE --------------------------- ---------------------------
NAME EXERCISED REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- --------- ----------- ----------- ------------- ----------- -------------
C. W. Coker -0- $ -0- 283,500 62,000 $ 1,410,188 $ -0-
R. C. King, Jr. -0- -0- 143,950 40,600 775,516 -0-
T. C. Coxe, III 36,000 108,000 52,340 26,600 735,386 -0-
H. E. DeLoach, Jr. 11,000 88,000 59,000 12,600 258,875 -0-
H. J. Moran 16,000 280,750 94,200 12,600 720,600 -0-
- ---------------
(1) The difference between the exercise price paid and the value of the acquired
shares based on the closing price of the Company's stock on the exercise
date.
(2) Reflects a two-for-one stock split effective June 10, 1993.
(3) Based on $22.00 per share, the December 31, 1993, closing price.
19
OPTION GRANTS TABLE
1993 STOCK OPTION GRANTS
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AND
- --------------------------------------------------------------------------------- RESULTING COMPANY STOCK PRICE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR 10 YEAR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES PRICE (PER EXPIRATION ---------------------------------
NAME GRANTED(1) IN 1993 SHARE) DATE 5% ($39.297) 10% ($62.574)
- -------------------- ---------- ----------- ----------- ---------- -------------- --------------
C. W. Coker 62,000 6.5 $24.125 2/3/2003 $ 940,664 $ 2,383,838
R. C. King, Jr. 40,600 4.2 24.125 2/3/2003 615,983 1,561,029
T. C. Coxe, III 26,600 2.8 24.125 2/3/2003 403,575 1,022,743
H. E. DeLoach, Jr. 12,600 1.3 24.125 2/3/2003 191,167 484,457
H. J. Moran 12,600 1.3 24.125 2/3/2003 191,167 484,457
Comparable gain in shareholder value for the 87,167,880 shares outstanding as of
February 3, 1993, the grant date. 1,322,511,075 3,351,517,818
- ---------------
(1) These options were granted on February 3, 1993, at the closing market price,
became exercisable on February 3, 1994, and were granted for a period of
ten years, subject to earlier expiration in certain events related to
termination of employment. The exercise price and tax obligations can be
paid by cash or the delivery of previously-owned shares. Tax obligations
also can be paid by an offset of the underlying shares.
(2) The amounts in these columns are the result of calculations set by the
Securities and Exchange Commission and are based on hypothetical 5% and 10%
stock price appreciation over ten years. They are not intended to forecast
possible future appreciation, if any, of the price of the Company's stock.
All amounts have been adjusted to reflect a two-for-one stock split effective
June 10, 1993.
20
PENSION TABLE
Executive officers participate in a non-contributory defined benefit
program which provides for a maximum annual lifetime retirement benefit equal to
60% of final average compensation computed as a straight life annuity based on
the highest three of the last seven calendar years. In order to receive the full
benefit, the executive must have at least fifteen years of applicable service
and retire no earlier than age sixty-five. Qualified spouses receive survivor
benefits at a rate of 75% of the benefit paid to the executives. The total
benefit provided by the Company is offset by 100% of primary U.S. Social
Security.
AGE 65 RETIREMENT
YEARS OF SERVICE
FINAL AVERAGE -------------------------------------------------------------------------
COMPENSATION(1) 10 15 20 25 30 35+
- --------------- -------- -------- -------- -------- -------- --------
$ 300,000 $120,000 $180,000 $180,000 $180,000 $180,000 $180,000
400,000 160,000 240,000 240,000 240,000 240,000 240,000
500,000 200,000 300,000 300,000 300,000 300,000 300,000
600,000 240,000 360,000 360,000 360,000 360,000 360,000
700,000 280,000 420,000 420,000 420,000 420,000 420,000
800,000 320,000 480,000 480,000 480,000 480,000 480,000
900,000 360,000 540,000 540,000 540,000 540,000 540,000
1,000,000 400,000 600,000 600,000 600,000 600,000 600,000
1,100,000 440,000 660,000 660,000 660,000 660,000 660,000
1,200,000 480,000 720,000 720,000 720,000 720,000 720,000
1,300,000 520,000 780,000 780,000 780,000 780,000 780,000
- ---------------
(1) Covered final average compensation includes salary, bonus, and cash awards
from the Company's former long-term incentive plan. Age, years of service,
and final average compensation, if computed as of December 31, 1993, for
the named officers are as follows:
FINAL
YEARS OF AVERAGE
NAME AGE SERVICE COMPENSATION
- ------------------- --- -------- ------------
C. W. Coker 60 36 $919,612
R. C. King, Jr. 59 37 632,365
T. C. Coxe, III 63 41 498,580
H. E. DeLoach, Jr. 49 8 325,531
H. J. Moran 61 11 296,436
21
COMPARATIVE COMPANY PERFORMANCE
The following line graph compares cumulative total shareholder return for
the Company with the S&P 500 Stock Index, and a recognized industry index, the
Dow Jones Containers and Packaging Group (which includes the Company), from
December 31, 1988, through December 31, 1993.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (*)
AMONG SONOCO PRODUCTS COMPANY, THE S&P 500 STOCK INDEX,
AND THE DOW JONES CONTAINERS & PACKAGING GROUP (**)
DOW JONES
CONTAINERS &
MEASUREMENT PERIOD S&P 500 STOCK PACKAGING SONOCO PROD-
(FISCAL YEAR COVERED) INDEX GROUP UCTS COMPANY
1988 100 100 100
1989 132 108 111
1990 127 93 100
1991 166 146 109
1992 179 160 154
1993 197 153 145
ASSUMES $100 INVESTED ON DECEMBER 31, 1988, IN SONOCO PRODUCTS COMPANY COMMON
STOCK, THE S&P 500 STOCK INDEX, AND THE DOW JONES CONTAINERS & PACKAGING GROUP.
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
** FISCAL YEAR ENDING DECEMBER 31
22
DIRECTOR'S COMPENSATION
Employee directors receive no additional compensation for their services as
members of the Board of Directors. Effective July 1, 1992, non-employee
directors were paid an $8,500 quarterly retainer fee and a $1,000 attendance fee
for special meetings. On July 1, 1993, the quarterly retainer fee was increased
to $9,000.
Directors are able to defer part or all of their fees. Directors can choose
to earn market rate interest credits on their deferrals or have their deferrals
treated as if invested in equivalent units of Sonoco Products Company Common
Stock. In the latter account they earn dividend equivalent credits which are
reinvested in stock equivalent units. The directors can choose a fixed period,
commencing the January following termination from the Board of Directors, over
which the account balances will be paid in annual installments.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. A. T. Dickson, C. J. Bradshaw, R. E. Elberson, and E. C. Wall, Jr.
served on the Company's Executive Compensation Committee during the year ended
December 31, 1993. Mr. J. C. Fort, a former employee of the Company, who served
as Senior Vice President -- International Group from 1983 to 1986, and Senior
Vice President from 1986 until his retirement in 1987, resigned from the
Executive Compensation Committee on October 20, 1993, prior to the meeting of
the committee on that date. Mr. Paul Fulton was appointed to the committee on
January 1, 1994.
Mr. A. T. Dickson and Mr. Paul Fulton, directors of NationsBank
Corporation, and Mr. C. J. Bradshaw, a director of The South Carolina National
Bank and South Carolina National Corporation, are members of the Executive
Compensation Committee. On October 8, 1987, the Company entered into a
seven-year $50,000,000 interest rate swap agreement with NCNB National Bank, now
NationsBank of North Carolina, N.A., to exchange a floating interest rate
payment for a fixed rate payment. On October 1, 1993, NationsBank of North
Carolina, N.A., also extended to the Company, as a backstop facility for its
commercial paper program and general corporate purposes, a five-year committed
line of credit for $75,000,000. The South Carolina National Bank has extended a
similar line for $65,000,000. These committed lines of credit from NationsBank
of North Carolina, N.A., and The South Carolina National Bank have been in place
since 1987 and have been renewed and increased or decreased according to the
Company's needs. Additionally, NationsBank of North Carolina, N.A., has extended
other lines of credit to the Company as support for letters of credit,
overdrafts and other corporate needs. NationsBank of North Carolina, N.A., also
provides treasury management services to the Company and investment management
services through its trust department. The Company pays fees to NationsBank of
North Carolina, N.A., for these services and for the availability of the lines
of credit, as well as interest on borrowed funds. All transactions were handled
on a competitive basis. Management is convinced that the rates and provisions
were as favorable to the Company as otherwise could have been obtained.
Mr. H. L. McColl, Jr., an executive officer of NationsBank Corporation, is
a member of the Company's Board but is not a member of the Company's Executive
Compensation Committee. Mr. C. W. Coker, Chairman and Chief Executive Officer of
the Company, is a member of NationsBank Corporation's Compensation Committee.
23
TRANSACTIONS WITH MANAGEMENT
Mr. H. L. McColl, Jr. is Chairman, Chief Executive Officer and Director of
NationsBank Corporation. Mr. C. W. Coker, Mr. A. T. Dickson and Mr. Paul Fulton
are directors of NationsBank Corporation. Mr. C.J. Bradshaw and Mr. T. C. Coxe,
III are directors of The South Carolina National Bank and South Carolina
National Corporation. See the "Compensation Committee Interlocks and Insider
Participation" section above.
During 1993 the Company purchased lumber from a company of which Mr. E. C.
Wall, Jr., a director of the Company, is Chairman of the Board and more than a
10% beneficial owner. The aggregate purchase price of the lumber was $837,293.
The Company also purchased timber during the year from a trust of which Mr. T.
C. Coxe, III, a director and executive officer of the Company, is trustee and
more than a 10% beneficial owner. The aggregate purchase price of the timber was
approximately $282,000. Management of the Company believes the prices and terms
were comparable to those the Company could have obtained from unaffiliated third
parties.
AMENDMENTS TO THE RESTATED ARTICLES OF INCORPORATION AND THE BY-LAWS
The Board of Directors recommends to the shareholders of the Company the
approval of certain amendments to the Company's Restated Articles of
Incorporation and the By-Laws. The amendments would delete the present fifteen
person maximum number of directors the Company can have, would give the
directors the ability to set the size of the Board of Directors, as well as to
create and fill vacancies on the Board of Directors, and would require that
nominations for directors to be elected at any Annual Meeting of Shareholders,
other than incumbent directors, be made in writing at least sixty days prior to
the Annual Meeting.
The proposed amendments also recognize that the holders of the Company's
$2.25 Cumulative Convertible Preferred Stock have been given the right to elect
two directors during any period in which payment of dividends on the Preferred
Stock is in arrears and make it clear that any such directors are in addition to
the directors elected by the Common Shareholders.
Although the proposed amendments would give the Board of Directors the
ability to change the size of the Board, under South Carolina corporate law, the
directors are prohibited from increasing or decreasing by more than 30% the
number of directors last approved by the shareholders; only the shareholders can
approve a greater increase or decrease. Furthermore, any persons elected by the
Board to fill vacancies on the Board of Directors, whether such vacancies arise
by reason of resignation, death, increase in number of directors, or otherwise,
can serve only until the next Annual Meeting of Shareholders.
The proposed amendments relating to size of the Board of Directors and
giving directors the ability to fill vacancies between Annual Meetings are
intended to give the Board greater flexibility in controlling its size. For
example, it is often an important negotiating point in an acquisition to be able
to offer associates of the target company one or more Board seats. The
additional flexibility also would give the directors the ability to add persons
who offer special talents to the Board or who are able to add other dimensions
to the Board. To be able to offer seats, however, the seats must be available.
The current Restated Articles of Incorporation and
24
the By-Laws fix the maximum number of directors at fifteen and do not give the
Board the ability to increase the number of directors by creating and filling a
vacancy. Similarly, vacancies can occur from time to time which do not need to
be filled. The proposed amendments would allow the Board to reduce its size
rather than fill a vacancy.
The proposed amendment relating to advance notice of nominations to the
Board is intended to provide for an orderly nomination process and to give the
Board time to determine the credentials of nominees and to take a position with
respect thereto.
The proposed amendments may have the impact of making a change in control
of the Company somewhat more difficult to effect, but the increased difficulty
is most likely to relate primarily to timing and not to the ultimate ability to
effect a change in the composition of the Board.
The full text of the proposed amendments to the Restated Articles of
Incorporation and the By-Laws is set forth below.
The Restated Articles of Incorporation of Sonoco Products Company are to be
amended by replacing Article 9(a) thereof with the following language:
(a) Board of Directors. Notwithstanding anything in Item 7 of the
Restated Articles of Incorporation, the number of directors of the
corporation shall be (i) the number fixed from time to time by the Board of
Directors, which shall not be less than nine, plus (ii) any directors
elected exclusively by the holders of Preferred Stock as provided in these
articles. Except for any director elected exclusively by the holders of
Preferred Stock, the directors shall continue to be divided into three
classes of as nearly equal size as possible. Each class shall be elected to
serve a term of three years. At each Annual Meeting of Shareholders,
directors shall be elected to fill any vacancies in any class of the Board
of Directors. Directors so elected shall serve until the Annual Meeting of
Shareholders in the year in which their terms expire. No person who is not
then already a director of the corporation shall be eligible to be elected
as a director at the Annual Meeting of Shareholders unless such person
shall have been nominated in writing, with such notice delivered to the
Secretary of the corporation, not less than sixty days prior to such Annual
Meeting.
Article III, Section 1 of the By-Laws is to be amended to read as follows:
1. THE MANAGEMENT of all the affairs, property and the business of the
corporation shall be vested in a Board of Directors. The number of
directors of the corporation shall be (i) the number fixed from time to
time by the Board of Directors, which number shall not be less than nine,
plus (ii) any directors elected exclusively by the holders of Preferred
Stock as provided in the corporation's Restated Articles of Incorporation.
Directors shall be shareholders, each owning not less than one hundred
(100) shares of the voting stock of the corporation. The directors need not
be residents of the State of South Carolina.
Article III, Section 2 of the By-Laws is to be amended to read as follows:
2. THE BOARD OF DIRECTORS shall be divided into three classes of as
nearly equal size as possible in accordance with the provisions of the
Restated Articles of Incorporation, as amended.
25
Article III, Section 5 of the By-Laws is to be amended to provide that any
increase in the number of directors can be filled by the Board of Directors, and
thereby to read as follows:
5. ALL VACANCIES OCCURRING IN THE BOARD OF DIRECTORS whether caused by
resignation, death, increase in number of directors, or otherwise, can be
filled by a majority vote of the remaining directors attending a regular or
special meeting.
The Board of Directors urges you to vote FOR the amendments.
ELECTION OF INDEPENDENT AUDITORS
Independent auditors are to be elected by the shareholders for the calendar
year 1994. The firm of Coopers & Lybrand, Certified Public Accountants, has
audited the books and records of the Company for many years, and the Audit
Committee of the Board of Directors recommends continuing the services of this
firm. Representatives of Coopers & Lybrand will be present and available to
answer any questions that may arise at the Annual Meeting and may make a
statement if they so desire.
The Board of Directors recommends that you vote FOR the election of Coopers
& Lybrand as independent auditors for the Company for the current year.
COMPLIANCE WITH THE SECURITIES EXCHANGE ACT OF 1934
As required by Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors, its executive officers and certain individuals are required
to report periodically their ownership of the Company's Common Stock and any
changes in ownership to the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.
The Company failed to file on a timely basis one report for Mr. Leo
Benatar's shares in Engraph, Inc.'s Retirement Plus Plan 401(k). Mr. Benatar is
Senior Vice President and a director of the Company. This information should
have been filed on 1993's year-end Form 5, due February 14, 1994, but was
reported on February 28, 1994, on Form 5.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
A shareholder proposal to be presented at the next Annual Meeting must be
received by the Company not later than November 4, 1994, in order to be included
in the Proxy Statement and Proxy.
26
OTHER MATTERS
As of the date of this statement management knows of no business which will
be presented for consideration at the meeting other than that stated in the
notice of the meeting. As to other business, if any, that may properly come
before the meeting, it is intended that proxies in the accompanying form will be
voted in respect thereof in accordance with the best judgment of the person or
persons voting the proxies.
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE MARK, SIGN, DATE, AND
RETURN YOUR PROXY AS PROMPTLY AS POSSIBLE. PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THE ACCOMPANYING PROXY.
James L. Coker, Secretary
March 18, 1994
1
EXHIBIT (99-2)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
____________________
FORM 11-K
____________________
ANNUAL REPORT
PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
____________________
SONOCO PRODUCTS COMPANY
1983 KEY EMPLOYEE STOCK OPTION PLAN
AND
SONOCO PRODUCTS COMPANY
1991 KEY EMPLOYEE STOCK PLAN
SONOCO PRODUCTS COMPANY
NORTH SECOND STREET
HARTSVILLE, SOUTH CAROLINA 29550
2
SONOCO PRODUCTS COMPANY
KEY EMPLOYEE STOCK OPTION PLAN
____________________
The Financial Statements and Notes to Consolidated Financial Statements of
Sonoco Products Company represent the financial statements of the Plans and
are hereby incorporated by reference in this Form 11-K Annual Report.
1
EXHIBIT (99-3)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
___________________
FORM 11-K
_________________
ANNUAL REPORT
PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
_________________
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
SONOCO PRODUCTS COMPANY
NORTH SECOND STREET
HARTSVILLE, SOUTH CAROLINA 29550
2
EXHIBIT (99-3)
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Financial Statements: Page(s)
-------
Report of Independent Accountants 3
Statements of Net Assets Available
for Plan Benefits as of December 31,
1993 and 1992 4
Statements of Changes in Net Assets
Available for Plan Benefits for the years
ended December 31, 1993, 1992 and 1991 5-6
Notes to Financial Statements 7-11
Supplemental Schedules:
Assets Held For Investment as of
December 31, 1993 12
Reportable Transactions for the
year ended December 31, 1993 13-14
3
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Administrative Committee of the
Sonoco Products Company Employee Savings
and Stock Ownership Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the Sonoco Products Company Employee Savings and Stock Ownership
Plan as of December 31, 1993 and 1992, and the related statements of changes in
net assets available for plan benefits for each of the three years in the
period ended December 31, 1993. These financial statements are the
responsibility of the Administrative Committee. 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 the Administrative Committee, as well as 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 net assets available for plan benefits of the Sonoco
Products Company Employee Savings and Stock Ownership Plan as of December 31,
1993 and 1992, and the changes in net assets available for plan benefits for
each of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment and reportable transactions as of and for the year ended
December 31, 1993, are presented for purposes of complying with the Department
of Labor's Rules and Regulations for Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 and are not a required part of
the basic financial statements. The supplemental schedules have been subjected
to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated, in all material respects, in
relation to the basic financial statements taken as a whole.
Charlotte, North Carolina /s/ COOPERS & LYBRAND
March 23, 1994 ---------------------
COOPERS & LYBRAND
4
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
-----------------------------
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
as of December 31, 1993 and 1992
(Dollars in thousands)
1993
----------------------------------------------------------------
Sonoco
Stock Balanced Growth Equity Income
Fund Fund Fund Fund Fund Total
------- ------- ------- ------- -------- --------
ASSETS
------
Investments $37,191 $ 7,673 $13,652 $ 9,608 $100,996 $169,120
Contributions receivable - Sonoco 454 454
Employee loans receivable 8,207 8,207
Other
------- ------- ------- ------- -------- --------
$37,645 $ 7,673 $13,652 $ 9,608 $109,203 $177,781
======= ======= ======= ======= ======== ========
LIABILITIES AND NET ASSETS
--------------------------
AVAILABLE FOR PLAN BENEFITS
---------------------------
Accounts Payable, trustee $ $ $ $ $ 96 $ 96
Net assets available for plan
benefits 37,645 7,673 13,652 9,608 109,107 177,685
------- ------- ------- ------- -------- --------
$37,645 $ 7,673 $13,652 $ 9,608 $109,203 $177,781
======= ======= ======= ======= ======== ========
1992
----------------------------------------------------------------
Sonoco
Stock Balanced Growth Equity Income
Fund Fund Fund Fund Fund Total
------- ------- ------- ------- -------- --------
ASSETS
------
Investments $31,833 $ 4,974 $ 7,061 $10,127 $100,340 $154,335
Contributions receivable - Sonoco 407 407
Employee loans receivable 6,473 6,473
Other
------- ------- ------- ------- -------- --------
$32,240 $ 4,974 $ 7,061 $10,127 $106,813 $161,215
======= ======= ======= ======= ======== ========
LIABILITIES AND NET ASSETS
--------------------------
AVAILABLE FOR PLAN BENEFITS
---------------------------
Accounts Payable, trustee $ $ $ $ $ 113 $ 113
Net assets available for plan
benefits 32,240 4,974 7,061 10,127 106,700 161,102
------- ------- ------- ------- -------- --------
$32,240 $ 4,974 $ 7,061 $10,127 $106,813 $161,215
======= ======= ======= ======= ======== ========
The accompanying Notes are an integral part of the financial statements.
5
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
---------------------
EXHIBIT(99-3)
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the years ended December 31, 1993 and 1992
(Dollars in thousands)
1993
-----------------------------------------------------------------
Sonoco
Stock Balanced Growth Equity Income
Fund Fund Fund Fund Fund Total
-------- ------- ------- ------- -------- --------
Investment income
Net appreciation
(depreciation) $(2,841) $ 419 $ 938 $ (87) $ $ (1,571)
Interest and
dividends 1,043 628 1,073 766 5,125 8,635
------- ------ ------ ------- ------- --------
(1,798) 1,047 2,011 679 5,125 7,064
Investment
expenses (93) (13) (20) (67) (260) (453)
------- ------ ------ ------- ------- --------
Net investment
income (loss) (1,891) 1,034 1,991 612 4,865 6,611
Contributions:
Sonoco Products
Company 5,250 5,250
Employees 1,218 1,062 1,491 1,105 8,503 13,379
Fund transfers 2,050 681 3,351 (1,740) (4,342)
Withdrawals and
terminations (1,222) (78) (242) (496) (6,619) (8,657)
------- ------ ------ ------- -------- --------
Increase in net assets
available for plan
benefits 5,405 2,699 6,591 (519) 2,407 16,583
Net assets available
for plan benefits:
Beginning of year 32,240 4,974 7,061 10,127 106,700 161,102
------- ------ ------ ------- ------- --------
End of year $37,645 $7,673 $13,652 $ 9,608 $109,107 $177,685
======= ====== ====== ======= ======= ========
1992
-----------------------------------------------------------------
Sonoco
Stock Balanced Growth Equity Income
Fund Fund Fund Fund Fund Total
-------- ------- ------- ------- -------- --------
Investment income
Net appreciation
(depreciation) $ 8,055 $ (58) $ (547) $ 212 $ $ 7,662
Interest and
dividends 611 366 898 429 8,100 10,404
------- ------ ------ ------- ------- --------
8,666 308 351 641 8,100 18,066
Investment
expenses (17) (6) (8) (62) (273) (366)
------- ------ ------- ------- -------- --------
Net investment
income (loss) 8,649 302 343 579 7,827 17,700
Contributions:
Sonoco Products
Company 4,747 4,747
Employees 953 879 705 950 8,452 11,939
Fund transfers (362) 3,929 6,247 (1,134) (8,680)
Withdrawals and
terminations (1,123) (136) (234) (636) (7,683) (9,812)
------- ------ ------- ------- -------- --------
Increase in net assets
available for plan
benefits 12,864 4,974 7,061 (241) (84) 24,574
Net assets available
for plan benefits:
Beginning of year 19,376 10,368 106,784 136,528
------- ------ ------ ------- ------- --------
End of year $32,240 $4,974 $ 7,061 $10,127 $106,700 $161,102
======= ====== ====== ======= ======= ========
The accompanying Notes are an integral part of the financial statements.
6
SONOCO PRODUCTS COMPANY AND CONSOLIDATED SUBSIDIARIES
---------------------
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, continued
as of December 31, 1991
(Dollars in thousands)
1991
------------------------------------------------------
Stock Equity Income
Fund Fund Fund Total
--------- ------- -------- --------
Investment income
Net appreciation $ 777 $ 1,714 $ $ 2,491
Interest and dividends 471 397 9,764 10,632
------- ------- -------- --------
1,248 2,111 9,764 13,123
Investment
expenses (30) (136) (166)
------- ------- -------- --------
Net investment
income (loss) 1,248 2,081 9,628 12,957
Contributions:
Sonoco Products
Company 4,309 4,309
Employees 1,381 921 8,981 11,283
Fund transfers (68) 443 (375)
Withdrawals and
terminations (1,594) (885) (9,041) (11,520)
------- ------- -------- --------
Increase in net assets
available for plan
benefits 5,276 2,560 9,193 17,029
Net assets available
for plan benefits:
Beginning of year 14,100 7,808 97,591 119,499
------- ------- -------- --------
End of year $19,376 $10,368 $106,784 $136,528
======= ======= ======== ========
The accompanying Notes are an integral part of the financial statements.
7
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
CONTRIBUTIONS - Contributions from Sonoco Products Company (the
"Company") are recorded in the year and in the amount authorized by
the Company's Board of Directors. The receivable from Sonoco Products
Company represents amounts authorized at year-end, but not yet
received by the Plan. Contributions from employees of Sonoco Products
Company are recorded in the year in which the employee contributions
are withheld.
INVESTMENT VALUATION - Investments in the Income Fund are valued
principally at contract value. Investments in the Aetna Equity Fund
are valued at fair value as determined by Aetna Life Insurance
Company. Investments in the Sonoco Products Company Common Stock Fund
are valued at quoted market prices. Investments in the Growth Fund and
the Balanced Fund are valued at fair value as determined by Fidelity
Institutional Retirement Services Company, Inc.
NET APPRECIATION OR DEPRECIATION - The Plan presents in the Statements
of Changes in Net Assets Available for Plan Benefits the net
appreciation or depreciation in the fair value of its investments that
consists of the realized gains or losses and the unrealized
appreciation or depreciation on those investments.
2. Description of Plan
The Plan is a defined contribution plan covering substantially all
U.S. full-time non-union employees (to exclude the recent acquisitions
of Engraph and Crellin) with one year of service. Participants may
elect to defer up to 16% of gross pay through payroll deductions.
Contributions may be pre-tax, after-tax or a combination thereof. The
maximum annual pre-tax contribution for any participant is $8,994.
Total annual contributions, including employer matching contributions,
are limited to $30,000 or 25% of gross pay whichever is less. The
Company provides employer matching contributions of Company stock or
cash to be used to purchase Company stock in amounts to be determined
annually by the Company's Board of Directors. The Company may elect
to provide additional contributions at the discretion of its Board.
Participants vest in Company contributions and earnings thereon at a
rate of 20% per year beginning after two years of service, becoming
fully vested after six years of service or at retirement, death, upon
reaching age 55 or permanent disability, if earlier. Participants are
fully vested in their own contributions and earnings thereon at all
times. Under the Plan, participants may elect to have their account
balances invested in 5% increments in an equity fund, a Company stock
fund, a growth fund, a balanced fund or an interest income fund.
8
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
2. Description of Plan, Continued
Upon termination of service, a participant may elect to receive a
lump-sum distribution in either cash or Company stock, or in five
equal annual installments of cash, or receive a distribution quarterly
of an amount no less than $1,000.
Participants may borrow against their account balances. The minimum
amount of any loan is $1,000 and the maximum is $50,000 or 50% of a
participant's total vested balance, whichever is less. Principal and
interest is due not less than quarterly over no more than five years
for a personal loan or twenty years for a residential loan. Interest
is determined based on the prime rate plus 1%.
Forfeitures of account balances reduce Company contributions.
Participants should refer to the Plan agreement for a more complete
description of the Plan.
3. Investments:
The Income Fund invests in guaranteed insurance contracts.
These contracts are credited or charged for guaranteed investment
earnings, benefit withdrawals or investment expenses. The fund
contracts have no material restrictions as to withdrawal amounts by
participants except as otherwise provided by the plan. The Equity
fund invests in the Aetna Growth and Income Equity Account which
consists of common stocks and securities that are convertible to
common stock together with all income and accretion thereon. The
Growth Fund invests in the Fidelity Magellan Fund which holds common
stocks and securities convertible to common stocks with the goal of
capital appreciation. The Balanced Fund invests in the Fidelity
Balanced Fund which holds a broadly diversified portfolio of
securities including common stocks, preferred stocks, and bonds with
the goal of generating income. Also, employees may elect to invest in
the Sonoco Stock Fund which consists solely of investments in Sonoco
Products Company common stock.
Allocation of contributions to investment funds, in 5% increments, is
based on each participant's election. The number of participants in
each fund is summarized as follows:
DECEMBER 31
----------------------------
1993 1992 1991
----- ----- ------
Income Fund 4,909 4,867 4,928
Sonoco Stock Fund 1,599 1,203 1,016
Equity Fund 1,199 1,107 1,025
Growth Fund 1,262 880
Balanced Fund 765 540
9
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
3. Investments, continued
A summary of the Plan's investments by account type as of December 31,
1993 and 1992 is as follows:
1993
-------------------------------------
(DOLLARS IN THOUSANDS)
UNIT/SHARES MARKET VALUE COST
----------- ------------ ----------
Income Fund:
- -----------
Aetna Life Insurance Company
Participating Accumulation Fund, 5.82% $ 150 $ 150
Bankers Trust Guaranteed
Insurance Contract, 4.99% 10,235,704 10,236 10,236
Bankers Trust Guaranteed
Insurance Contract, 3.66% 4,062,286 4,062 4,062
J. P. Morgan Guaranteed
Insurance Contract, 7.00% 13,864,922 13,866 13,866
Lincoln National Life
Guaranteed Insurance Contract, 6.74% 10,649,232 10,649 10,649
Lincoln National Life
Guaranteed Insurance Contract, 5.67% 5,252,457 5,252 5,252
Metropolitan Life Guaranteed
Insurance Contract, 6.75% 10,650,194 10,650 10,650
John Hancock Mutual Life
Guaranteed Insurance Contract, 7.25% 14,546,386 14,546 14,546
Provident Life Contract
Guaranteed Insurance Contract, 5.40% 10,605,316 10,605 10,605
Prudential Insurance Company
Guaranteed Insurance Contract, 4.85% 10,390,828 10,391 10,391
State Mutual Guaranteed Insurance
Contract, 4.55% 5,202,706 5,203 5,203
Sun Mutual Life Guaranteed
Insurance Contract, 6.23% 5,385,892 5,386 5,386
-------- --------
100,996 100,996
Equity Fund:
- ------------
Aetna Growth and Income Equity Account
(unit value $1.06) 9,763,240 9,608 9,075
Growth Fund:
- ------------
Fidelity Magellan Fund
(market value $70.85) 175,609 13,652 13,252
10
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
3. Investments, continued
1993
------------------------------------
(DOLLARS IN THOUSANDS)
UNIT/SHARES MARKET VALUE COST
----------- ------------ ------
Balanced Fund:
- --------------
Fidelity Balanced Fund
(market value $13.39) 590,172 7,673 7,337
Sonoco Stock Fund:
- ------------------
Sonoco Common Stock*
(market value per share $22.00) 1,690,500 37,191 29,393
-------- --------
$169,120 $160,053
======== ========
1992
------------------------------------
(Dollars in thousands)
Unit/Shares Market Value Cost
----------- ------------ -------
Income Fund:
- ------------
Aetna Life Insurance Company
Participating Accumulation
Fund, 7.57% $ 58,868 $ 58,868
J. P. Morgan Guaranteed
Insurance Contract, 7.00% 13,784,445 13,785 13,785
John Hancock Mutual Life
Guaranteed Insurance
Contract, 7.25% 14,750,966 14,751 14,751
Provident Life Contract
Guaranteed Insurance
Contract, 5.40% 7,891,544 7,892 7,892
Sun Mutual Life Guaranteed
Insurance Contract, 6.23% 5,044,072 5,044 5,044
------- -------
100,340 100,340
Equity Fund:
- ------------
Aetna Growth and Income
Equity Account
(unit value - $8.72) 1,159,404 10,127 8,859
Growth Fund:
- ------------
Fidelity Magellan Fund
(market value $63.01) 112,062 7,061 7,595
Balanced Fund:
- --------------
Fidelity Balanced Fund
(market value $12.29) 404,719 4,974 5,030
Sonoco Stock Fund:
- ------------------
Sonoco Common Stock*
(market value per share $23.88) 1,333,320 31,833 20,941
-------- --------
$154,335 $142,765
======== ========
*Shares and share price restated to reflect the two-for-one stock split
effective June 10, 1993.
11
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
3. Investments, Continued
The Plan's investments appreciated (depreciated) in value as follows:
Year ended December 31
----------------------------------
(Dollars in thousands)
1993 1992 1991
------ ------ ------
Equity Fund $ (87) $ 212 $1,714
Sonoco Stock Fund (2,841) 8,055 777
Growth Fund 938 (547)
Balanced Fund 419 (58)
------- ----- ------
$(1,571) $7,662 $2,491
======= ====== ======
4. Employee Loans Receivable:
Employee loans must be repaid over a period not longer than five years
from the date of the loan except loans for purposes related to
acquiring, building, or substantially rehabilitating a primary
residence may be repaid during a period of up to twenty years.
Interest is charged at a fixed rate for the full term of the loan
based on the prime rate plus 1% (7% at December 31, 1993). Approximate
minimum repayments of employee loans receivable due in 1994 are
$1,589,151.
5. Tax Status
The Company has requested an updated determination letter from the
Internal Revenue Service under which the Plan would qualify
for favorable tax treatment under Sections 401(k), 401(a) and
4975(e)(7) of the Internal Revenue Code and therefore be exempt from
federal income taxes under provisions of Section 501(a).
A participant must pay regular income tax plus a 10% excise tax for
withdrawal of any portion of his accumulated pre-tax account balance,
or the portion of his after-tax account balance representing Company
contributions or earnings prior to retirement, disability or attaining
age 59-1/2. The 10% excise tax is waived if withdrawal is to cover
uninsured medical bills that are otherwise deductible for tax
purposes. Withdrawal of the pre-tax account balance, or the portion of
the after-tax account balance representing Company contributions or
earnings, after retirement, disability or attaining age 59-1/2 is
subject to regular income tax.
6. Contributions
For fiscal years ended December 31, 1993, 1992 and 1991, the amount of
employer contributions made entirely in Company stock under the Plan
were $5,249,796; $4,746,522; and $4,308,987, respectively.
12
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
ITEM 27(A) ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1993
-------------------------
IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT COST MARKET VALUE
- ----------------- ------------------------- ---- ------------
(DOLLARS IN THOUSANDS)
Aetna Life Insurance Company Participating Accumulation Fund $ 150 $ 150
J. P. Morgan Guaranteed Insurance Contract 13,866 13,866
John Hancock Mutual Life Guaranteed Insurance Contract 14,546 14,546
Provident Life Guaranteed Insurance Contract 10,605 10,605
Sun Mutual Life Guaranteed Insurance Contract 5,386 5,386
Aetna Life Insurance Company Growth and Income Equity Account 9,075 9,608
Fidelity Institutional Retirement Services Fidelity Magellan Growth Fund 13,252 13,652
Fidelity Institutional Retirement Services Fidelity Balanced Fund 7,337 7,673
Sonoco Products Company Common Stock - 1,690,500 shares 29,393 37,191
Bankers Trust Guaranteed Insurance Contract 10,236 10,236
Bankers Trust Guaranteed Insurance Contract 4,062 4,062
Lincoln National Life of Georgia Guaranteed Insurance Contract 10,649 10,649
Lincoln National Life of Georgia Guaranteed Insurance Contract 5,252 5,252
Metropolitan Life Guaranteed Insurance Contract 10,650 10,650
Prudential Insurance Company Guaranteed Insurance Contract 10,391 10,391
State Mutual Life Guaranteed Insurance Contract 5,203 5,203
--------- ---------
Total Investments $160,053 $169,120
========= =========
13
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
ITEM 27(d) REPORTABLE TRANSACTIONS
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, 1993
------------------------------
Realized
Identity of Party Involved and Purchase Selling Cost Net Gain
Description of Assets Transactions Price (A) Price (A) of Asset (Loss)
- ------------------------------ ------------ --------- --------- -------- --------
Any single transaction within
the Plan year in securities
involving an amount in excess
of 5% of the current value
of Plan assets.
Aetna Life Insurance Company
Deposit Contracts 1 sale $19,717 $19,717
1 sale 19,778 19,778
1 sale 19,667 19,667
W B DTF Short-Term Investment Fund 1 purchase $ 9,888
1 purchase 20,419
1 sale 9,953 9,953
1 sale 11,693 11,693
1 sale 8,587 8,587
Lincoln National Life 1 purchase 10,000
Metropolitan Life Contract 1 purchase 10,000
Bankers Trust Contract 93-529 1 purchase 10,000
Prudential Insurance Company 1 purchase 8,735
Bankers Trust Contract #93551 1 purchase 8,294
(A) Fair value at date of transaction is equal to purchase or sale price.
14
SONOCO PRODUCTS COMPANY
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
ITEM 27(d) REPORTABLE TRANSACTIONS
(DOLLARS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31, 1993
---------------------------
REALIZED
IDENTITY OF PARTY INVOLVED AND PURCHASE SELLING COST NET GAIN
DESCRIPTION OF ASSETS TRANSACTIONS PRICE (B) PRICE (B) OF ASSET (LOSS)
- ------------------------------ ------------ --------- ---------- -------- --------
Any series of transactions within
the Plan year in securities, of the
same issue or by the same broker,
when aggregated, involves an
amount in excess of 5% of the
current value of Plan assets - (Note A).
Aetna Life Insurance Company
Deposit Contracts 2 purchases, 5 sales $ 583 $59,316 $59,316
W B DTF Short-Term Investment Fund 241 purchases, 204 sales 39,950 39,765 39,765
Provident Life Contract 12 purchases, 14 sales 6,432 4,270 4,270
Lincoln National Life 1 purchase 10,000
Metropolitan Life Contract 1 purchase 10,000
Bankers Trust Contract 93-529 2 purchases, 2 sales 10,311 520 520
Prudential Insurance Co. 45 purchases, 42 sales 18,658 8,597 8,597
Bankers Trust Contract 93551 1 purchase, 10 sales 8,294 4,433 4,433
Sonoco Products Co. 73 purchases, 20 sales 9,586 1,049 805 $ 244
(A) Purchases and sales transactions made on various occasions during the Plan
year are aggregated here.
(B) Fair value at date of transaction is equal to purchase or sale price.
1
EXHIBIT 99-4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1993
SONOCO PRODUCTS COMPANY
ENGRAPH, INC. RETIREMENT PLUS PLAN
SONOCO PRODUCTS COMPANY
NORTH SECOND STREET
HARTSVILLE, SOUTH CAROLINA 29550
2
EXHIBIT 99-4
C O N T E N T S
---------------
Pages
-----
Reports of Independent Accountants 3 - 4
Financial Statements:
Statements of Net Assets Available
for Plan Benefits 5 - 6
Statements of Changes in Net Assets
Available for Plan Benefits 7 - 8
Notes to Financial Statements 9 - 13
Supplemental Schedules:
Item 27a - Schedule of Assets Held
for Investment Purposes 15
Item 27d - Schedule of Reportable
Transactions 16
3
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Plan Administrator of the
Engraph, Inc. Retirement Plus Plan:
We have audited the accompanying statement of net assets available for plan
benefits of the Engraph, Inc. Retirement Plus Plan (the "Plan") as of December
31, 1993, and the related statement of changes in net assets available for plan
benefits for the year then ended. These financial statements are the
responsibility of the plan sponsor. Our responsibility is to express an
opinion on these financial statements based on our audit. The financial
statements of Engraph, Inc. Retirement Plus Plan for the year ended December
31, 1992, were audited by other auditors, whose report dated June 28, 1993,
expressed an unqualified opinion on those statements.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the
Engraph, Inc. Retirement Plus Plan as of December 31, 1993, and the changes in
net assets available for plan benefits for the year then ended in conformity
with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes and reportable transactions as of and for the year
ended December 31, 1993 are presented for purposes of complying with the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974 and are not a required part
of the basic financial statements. The supplemental schedules have been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Coopers and Lybrand
-----------------------
Coopers & Lybrand
Charlotte, North Carolina
March 11, 1994
3
4
ARTHUR ANDERSEN & CO.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
Engraph, Inc. Retirement Plus Plan:
We have audited the accompanying statement of net assets available for benefits
of the ENGRAPH, INC. RETIREMENT PLUS PLAN as of December 31, 1992 and the
related statements of changes in net assets available for benefits for the year
then ended. These financial statements are the responsibility of the plan
sponsor. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Engraph,
Inc. Retirement Plus Plan as of December 31, 1992 and the changes in its net
assets available for benefits for the year then ended in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen & Co.
-------------------------
Arthur Andersen & Co.
Atlanta, Georgia
June 28, 1993
4
5
Exhibit 99-4
ENGRAPH INC. RETIREMENT PLUS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1993 and 1992
--------------------------
Company Stock Fund Money Market Fund Equity Fund
------------------ ----------------- ----------------
1993 1992 1993 1992 1993 1992
---- ---- ---- ---- ---- ----
Assets:
Investments, at current value:
Sonoco Products Company common stock (Note 1) $13,750,000 $ $ $ $ $
Engraph, Inc. common stock (Note 1) 11,600,959
Equity fund 8,026,351 3,420,320
Investment contract fund
Short-term investment fund 389,638 284,644 2,137,418 2,560,504 41,447
Employee loans receivable
----------- ----------- ---------- ---------- ---------- ----------
14,139,638 11,885,603 2,137,418 2,560,504 8,026,351 3,461,767
----------- ----------- ---------- ---------- ---------- ----------
Other assets:
Contributions receivable, Company 853,365 529,921 106,321 171,512 344,904 205,287
Contributions receivable, employee 61,374 38,917 6,508 20,891 18,085 21,965
Other employer contributions receivable 2,504 3,774 82 1,567 384 123
Accrued income 18,329 627 6,443 8,392
----------- ----------- ---------- ---------- ---------- ----------
935,572 573,239 119,354 202,362 363,373 227,375
----------- ----------- ---------- ---------- ---------- ----------
Total assets 15,075,210 12,458,842 2,256,772 2,762,866 8,389,724 3,689,142
----------- ----------- ---------- ---------- ---------- ----------
Liabilities:
Accounts payable 16,518 2,187 3,247 3,101 15,427 7,690
Accrued forfeitures 14,412 6,214 3,575 654 9,275 1,761
----------- ----------- ---------- ---------- ---------- ----------
Total liabilities 30,930 8,401 6,822 3,755 24,702 9,451
----------- ----------- ---------- ---------- ---------- ----------
Net assets available for plan benefits $15,044,280 $12,450,441 $2,249,950 $2,759,111 $8,365,022 $3,679,691
=========== =========== ========== ========== ========== ==========
Investment
Contract Fund
----------------
1993 1992
---- ----
Assets:
Investments, at current value:
Sonoco Products Company common stock (Note 1) $ $
Engraph, Inc. common stock (Note 1)
Equity fund
Investment contract fund 8,686,061 5,932,325
Short-term investment fund 51,170
Employee loans receivable
---------- ----------
8,686,061 5,983,495
---------- ----------
Other assets:
Contributions receivable, Company 331,488 320,500
Contributions receivable, employee 6,835 31,315
Other employer contributions receivable 23,289 24,780
Accrued income
---------- ----------
361,612 376,595
---------- ----------
Total assets 9,047,673 6,360,090
---------- ----------
Liabilities:
Accounts payable 7,448 5,594
Accrued forfeitures 20,012
---------- ----------
Total liabilities 27,460 5,594
---------- ----------
Net assets available for plan benefits $9,020,213 $6,354,496
========== ==========
6
ENGRAPH, INC. RETIREMENT PLUS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, Continued
-------
Loan Fund PPFC Fund Total
---------------- ---------------- ------------------
1993 1992 1993 1992 1993 1992
---- ---- ---- ---- ---- ----
Assets:
Investments, at current value:
Sonoco Products Company common stock (Note 1) $ $ $ $ $13,750,000 $
Engraph, Inc. common stock (Note 1) 11,600,959
Equity fund 8,026,351 3,420,320
Investment contract fund 8,686,061 5,932,325
Short-term investment fund 1,527,122 2,527,056 4,464,887
Employee loans receivable 1,142,838 936,532 1,142,838 936,532
---------- -------- ---------- ----------- ----------
1,142,838 936,532 1,527,122 34,132,306 26,355,023
---------- ----------- -----------
Other assets:
Contributions receivable, Company 1,636,078 1,227,220
Contributions receivable, employee 92,802 113,088
Other employer contributions receivable 26,259 30,244
Accrued income 4,943 24,772 13,962
---------- ----------- -----------
4,943 1,779,911 1,384,514
---------- -------- ---------- ----------- -----------
Total assets 1,142,838 936,532 1,532,065 35,912,217 27,739,537
---------- ----------- -----------
Liabilities:
Accounts payable 1,491 42,640 20,063
Accrued forfeitures 47,274 8,629
---------- ----------- -----------
Total liabilities 1,491 89,914 28,692
---------- -------- ---------- ---------- ----------- -----------
Net assets available for plan benefits $1,142,838 $936,532 $ -0- $1,530,574 $35,822,303 $27,710,845
========== ======== ========== ========== =========== ===========
The accompanying notes are an integral part of the financial statements.
7
ENGRAPH, INC. RETIREMENT PLUS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
for the years ended December 31, 1993 and 1992
----------------------------------
Company Stock Fund Money Market Fund Equity Fund
------------------ ----------------- -----------------
1993 1992 1993 1992 1993 1992
---- ---- ---- ---- ---- ----
Investment income:
Net appreciation (depreciation) $ 4,379,180 $ 2,695,568 $ $ $ 608,862 $ 324,985
Dividends 94,844 113,498
Interest 100,668 10,568 101,437 103,537 93,947 742
Interest on loans 36,296 36,345 9,795 12,035 11,234 14,559
----------- ----------- ---------- ---------- ---------- ----------
4,610,988 2,855,979 111,232 115,572 714,043 340,286
Fees and other expenses (26,780) (7,283) (14,366) (12,249) (50,955) (29,655)
----------- ----------- ---------- ---------- ---------- ----------
Net investment income 4,584,208 2,848,696 96,866 103,323 663,088 310,631
----------- ----------- ---------- ---------- ---------- ----------
Contributions:
Employee 866,174 647,168 241,637 286,542 415,588 310,441
Company Match 608,754 476,684
Company Basic 707,640 444,568 106,321 188,578 344,904 214,835
Other employer contributions and transfers 2,504 7,414 82 1,568 384 1,798
Rollover 15,513 36,388 31,501 17,453 40,546
----------- ----------- ---------- ---------- ---------- ----------
2,200,585 1,612,222 348,040 508,189 778,329 567,620
----------- ----------- ---------- ---------- ---------- ----------
Participant withdrawals, at market value (607,572) (526,308) (238,814) (203,003) (226,371) (208,625)
----------- ----------- ---------- ---------- ---------- ----------
Forfeitures (43,690) (34,234) (9,291) (14,970) (25,739) (16,980)
----------- ----------- ---------- ---------- ---------- ----------
Interfund transfers, net (3,539,692) (151,012) (705,962) (160,615) 3,496,024 252,258
----------- ----------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets
available for plan benefits 2,593,839 3,749,364 (509,161) 232,924 4,685,331 904,904
Net assets available for plan benefits at
beginning of year 12,450,441 8,701,077 2,759,111 2,526,187 3,679,691 2,774,787
----------- ----------- ---------- ---------- ---------- ----------
Net assets available for plan benefits at
end of year $15,044,280 $12,450,441 $2,249,950 $2,759,111 $8,365,022 $3,679,691
=========== =========== ========== ========== ========== ==========
Investment
Contract Fund
-----------------
1993 1992
---- ----
Investment income:
Net appreciation (depreciation) $ 319,288 $ 391,705
Dividends
Interest 103,264 1,692
Interest on loans 17,865 19,291
---------- ----------
440,417 412,688
Fees and other expenses (28,114) (25,521)
---------- ----------
Net investment income 412,303 387,167
---------- ----------
Contributions:
Employee 452,444 480,852
Company Match
Company Basic 331,488 340,272
Other employer contributions and transfers 23,289 24,780
Rollover 1,323 31,542
---------- ----------
808,544 877,446
---------- ----------
Participant withdrawals, at market value (556,858) (334,805)
---------- ----------
Forfeitures (45,681) (15,750)
--------- ----------
Interfund transfers, net 2,047,409 14,842
---------- ----------
Increase (decrease) in net assets
available for plan benefits 2,665,717 928,900
Net assets available for plan benefits at
beginning of year 6,354,496 5,425,596
---------- ----------
Net assets available for plan benefits at
end of year $9,020,213 $6,354,496
========== ==========
8
ENGRAPH, INC. RETIREMENT PLUS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS, Continued
---------
Loan Fund PPFC Fund Total
-------------------- ------------------ -----------------
1993 1992 1993 1992 1993 1992
---- ---- ---- ---- ---- ----
Investment income:
Net appreciation (depreciation) $ $ $ $ 51,896 $ 5,307,330 $3,464,154
Dividends 6,833 94,844 120,331
Interest 160 31,777 399,476 148,316
Interest on loans 1,811 75,190 84,041
----------- ---------- ---------- -----------
160 92,317 5,876,840 3,816,842
Fees and other expenses 1,491 (4,499) (118,724) (79,207)
----------- ---------- ---------- -----------
Net investment income 1,651 87,818 5,758,116 3,737,635
----------- ---------- ---------- -----------
Contributions:
Employee 1,975,843 1,725,003
Company Match 608,754 476,684
Company Basic 787 1,490,353 1,189,040
Other employer contributions and transfers 26,259 35,560
Rollover 34,289 139,977
---------- ----------- -----------
787 4,135,498 3,566,264
---------- ----------- -----------
Participant withdrawals, at market value (28,140) (90,964) (1,657,755) (1,363,705)
---------- ----------- -----------
Forfeitures (1,892) (124,401) (83,826)
----------- ----------
Interfund transfers, net 206,306 20,647 (1,504,085) 23,880
---------- --------- ----------- ---------- ----------- -----------
Increase (decrease) in net assets
available for plan benefits 206,306 20,647 (1,530,574) 19,629 8,111,458 5,856,368
Net assets available for plan benefits at
beginning of year 936,532 915,885 1,530,574 1,510,945 27,710,845 21,854,477
---------- --------- ----------- ---------- ----------- -----------
Net assets available for plan benefits
at end of year $1,142,838 $ 936,532 $ -0- $1,530,574 $35,822,303 $27,710,845
========== ========= =========== ========== =========== ===========
The accompanying notes are an integral part of the financial statements.
9
ENGRAPH, INC., RETIREMENT PLUS PLAN
NOTES TO FINANCIAL STATEMENTS
--------
1. Description of the Plan:
The Engraph, Inc. Retirement Plus Plan (the "Plan") is a contributory
defined contribution plan. All employees of Engraph, Inc. (the
"Employer" and plan sponsor) who have completed one year of service
are eligible to participate in the Plan except those employees of any
identifiable division of the Employer whom the chief executive officer
of the Employer has not declared eligible for participation.
Participants may make pretax and after tax contributions, as allowed
by Section 401(k) of the Internal Revenue code, of 1% to 6% of their
annual wages and salaries. The Employer provides matching
contributions based on a percentage of the Employee's pretax
contribution that varies with the Employer's return on equity. The
Employer further provides a Company Basic contribution for all
eligible participants based on a percentage of annual compensation.
Employer contributions to each participant's Company Match account
and Company Basic contribution account are discretionary. The Plan is
subject to the provisions of the Employee Retirement Security Act of
1974.
In October 1993, Sonoco Products Company (the "Parent") acquired
Engraph, Inc. following the successful conclusion of a cash tender
offer and merger transaction. The Plan's trustee tendered all shares
of Engraph, Inc. common stock included in the Plan to Sonoco Products
Company. Each member was permitted to direct the Plan administrator
to transfer the proceeds among one or more individual funds.
Employer contributions to each participant's Company Match account are
based on a sliding scale of 30% to 100% of each employee's pretax
contributions based on the Employer's return on equity during the
preceding year. At a 12% or lower return on equity, the Employer's
contributions are 30% of the employee's pretax contributions,
increasing to a maximum 100% Employer contribution at a 20% return on
equity.
Employer contributions to the Company Match account are invested in
the Company stock fund. Dividends paid by the Parent on shares of
Sonoco Products Company common stock are reinvested in Sonoco Products
Company common stock. Prior to the acquisition of Engraph, Inc. by
Sonoco Products Company, a similar dividend reinvestment policy was in
effect for Engraph, Inc. common stock.
10
Exhibit 99-4
ENGRAPH, INC., RETIREMENT PLUS PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
--------
1. Description of the Plan, continued:
The Plan is comprised of five separate investment funds plus a loan
fund. The Company Stock Fund invests in Sonoco Products Company
common stock. Prior to October 1993, the Company Stock Fund invested
in Engraph, Inc. common stock. The Money Market Fund invests in such
investments as savings certificates, certificates of deposit, and
money market funds so as to conserve capital and earn dependable
investment income consistent with short- to intermediate-term
securities. The Equity Fund invests in publicly traded common stocks
and similar equity securities of other companies so as to provide
capital appreciation and earn investment income. The Investment
Contract Fund invests in investment contracts issued by one or more
insurance companies or other financial institutions that provide a
fixed rate of return. At age 55, the participants' accounts, with the
exception of the Company Match account, are automatically invested in
the Investment Contract Fund unless the participant makes a timely
written election to the plan administrator to change the investment of
his accounts. Participants may borrow from the funds subject to
provisions of the Plan, and such amounts are reflected in the Loan
Fund. The PPFC Fund was established to hold the Engraph, Inc. common
stock allocated to participants employed by a division sold in 1991
during the period of time in which it was being liquidated. On
January 1, 1993, all such common stock had been liquidated into
short-term investment funds and was reallocated to the other investment
funds in accordance with participants' directions (see Note 5).
Participants may elect to contribute to and transfer the investments
in their participants' accounts to any combination of the Company
Stock Fund, the Money Market Fund, the Equity Fund, and the Investment
Contract Fund but are restricted in the frequency of such elections.
As of December 31, 1993 and 1992, the number of participants with
investments in the six separate funds was as follows:
Company Money Investment
Stock Market Equity Contract Loan PPFC
Fund Fund Fund Fund Fund Fund Total
------- ------ ------ ---------- ---- ---- -----
1993 1,159 453 761 945 371 -- 1,862
1992 1,174 595 548 843 354 155 1,682
Participants are fully vested at all times to the extent of their
employee contributions and related Company Match contributions and
income earned thereon. Participants become fully vested in their
rights to Company Basic contributions upon completion of five years of
vested service.
10
11
ENGRAPH, INC., RETIREMENT PLUS PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
--------
1. Description of the Plan, continued:
Upon retirement, participants may elect to receive payment of amounts
in their participant equity account in a lump sum, in equal monthly
installments over five to fifteen years, or in any combination
thereof.
Participants may borrow against their account balances. The minimum
amount of any loan is $1,000 and the maximum is $50,000 or 50% of a
participant's total vested balance, whichever is less. Principal and
interest is due not less than quarterly over no more than four years
for a personal loan. Interest is determined based on the prime rate
plus 1%.
The Employer expects to continue the Plan indefinitely. However,
should the Plan be terminated, the plan equity at the termination date
would be distributed to participants based on amounts which have been
allocated to their participants' accounts. As of December 31, 1993
and 1992, approximately $665,000 and $346,000, respectively, were
allocated to accounts of persons who have withdrawn from participation
in the Plan.
Participants should refer to the Plan documents and amendments for a
more complete description of the Plan.
2. Summary of Significant Accounting Policies:
BASIS OF ACCOUNTING - The accompanying financial statements have been
prepared in accordance with generally accepted accounting principles.
CONTRIBUTIONS - Employee contributions are accrued and
reflected as receivables in the period in which amounts for such
contributions are withheld as payroll deductions. Employer
contributions to the Company Match account are accrued based upon
employee pretax contributions in accordance with the Plan and are
reflected as receivables until such contributions in cash or in shares
of Sonoco Products Company (Engraph, Inc. common stock prior to
October 1993) are received. Employer contributions to the Company
Match account were made at 34% and 30% of employee pretax
contributions in 1993 and 1992, respectively, and will be made at 50%
of employee pretax contributions in 1994. Employer contributions to
the Company Basic contribution account are accrued based on eligible
compensation in accordance with the Plan and are reflected as
receivables until such contributions are received. Effective January
1, 1993 participants at Screen Graphics, Inc. (an Employer subsidiary)
were granted eligibility to receive Employer contributions to the
Company Basic contribution account.
INVESTMENTS - Investments are stated at current value, as determined
by Frank Russell Trust Company, the "Trustee" of the Plan, based on
quoted market prices.
12
ENGRAPH, INC., RETIREMENT PLUS PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
--------
2. Summary of Significant Accounting Policies, continued:
The Plan presents in the statement of changes in net assets available
for plan benefits the net appreciation (depreciation) in the fair
value of its investments which consists of the realized gains or
losses and the unrealized appreciation (depreciation) on those
investments.
Dividend income is recorded on the ex-dividend date. Income from
other investments is recorded as earned.
ADMINISTRATIVE EXPENSES - All recordkeeping expenses for the
administration of the Plan are paid by the Employer. All trust and
custodial expenses and investment management fees are paid by the
Plan.
3. Investments:
A summary of the Plan's investments by account type as of December 31
is as follows:
1993
---------------------------------------------------
Shares or Market
Units Cost Value
---------- ---- ------
Sonoco Products Company
common stock 625,000 $13,721,875 $13,750,000
Equity fund 650,748 6,567,345 8,026,351
Investment contract fund 565,981 7,425,574 8,686,061
Short-term investment fund,
money market 2,527,056 2,527,056 2,527,056
Employee loans receivable 1,142,838 -0- 1,142,838
----------- -----------
$30,241,850 $34,132,306
=========== ===========
13
ENGRAPH, INC., RETIREMENT PLUS PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
--------
3. Investments, continued:
1992
-----------------------------------------------------
Shares or Market
Units Cost Value
--------- ---- ------
Engraph, Inc. common stock 1,008,779 $ 6,304,984 $11,600,959
Equity fund 7,917 2,595,472 3,420,320
Investment contract fund 40,756 4,974,933 5,932,325
Short-term investment
fund, money market 4,464,887 4,464,887 4,464,887
Employee loans receivable 936,532 -0- 936,532
----------- -----------
$18,340,276 $26,355,023
=========== ===========
4. Tax Status:
The plan administrator has received a favorable determination letter
from the Internal Revenue Service stating that the Plan, as amended
and restated effective April 29, 1992, is in compliance with Section
401 of the Internal Revenue Code. Accordingly, no provision for
federal income taxes has been made in the accompanying financial
statements, and in the opinion of the Employer, none is required.
Employee pretax contributions from payroll deductions, employer
contributions, and investment income from the Plan are not taxable to
the participants until withdrawals are made.
5. Plan Amendments:
The Plan was amended effective October 1, 1991 to provide a separate
fund, the PPFC Fund. The PPFC Fund held the Engraph, Inc. common
stock for participants employed by the Package Products Flexible
division sold in 1991. The PPFC Fund enabled the Trustee to liquidate
the stock in an orderly manner. On January 1, 1993, the liquidated
funds were reallocated to other investment funds in accordance with
participants' directions. The accrued plan balances of the Package
Products Flexible employees will be maintained in the Plan until such
time as the acquiring company receives a favorable determination
letter for its defined contribution plan from the Internal Revenue
Service. Once the favorable determination is received, a
trust-to-trust transfer of assets will take place for the Package
Products Flexible participants.
The Plan was amended effective November 18, 1993 to provide that any
matching contributions made for the quarter ending December 31, 1993
and subsequent matching contributions, be invested in shares of Sonoco
Products Company common stock.
14
SUPPLEMENTAL SCHEDULES
15
ENGRAPH, INC. RETIREMENT PLUS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
for the year ended December 31, 1993
--------
Employer Identification Number 56-0481457
Plan Number 003
Shares or Market
Units Cost Value
--------- ---- ------
Sonoco Products Company
common stock 625,000 $13,721,875 $13,750,000
Equity fund 650,748 6,567,345 8,026,351
Investment contract fund 565,981 7,425,574 8,686,061
Short-term investment fund,
money market 2,527,056 2,527,056 2,527,056
Employee loans receivable 1,142,838 -0- 1,142,838
----------- -----------
$30,241,850 $34,132,306
=========== ===========
16
Exhibit 99-4
ENGRAPH, INC. RETIREMENT PLUS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
for the year ended December 31, 1993
-------------------
Employer Identification Number 56-0481457
Plan Number 003
Represents a transaction or a series of transactions of securities of the same
issue or by the same broker in excess of 5% of the current value of plan assets
as of the beginning of the year.
Purchases and
Other Additions Sales and Other Reductions
--------------------------- ----------------------------------------------------------
Number of Number of Realized
Transactions Amount Transactions Proceeds Cost Gain
------------ ------ ------------ -------- ----- --------
Sonoco Products Company common
stock 2 $13,721,875 $ $ $
Engraph, Inc. common stock 16 1,007,777 1 16,837,167 7,229,502 9,607,665
Common trust fund, short-term
investments 141 23,972,778 112 24,775,117 24,775,117
Common trust fund, equity 21 3,754,271 12 295,205 226,516 68,689
Common trust fund, investment
contracts 22 2,453,354 13 760,595 642,426 118,169
