Sonoco Reports Fourth Quarter, Full-Year 2015 Results
Fourth Quarter Highlights
- Fourth quarter 2015 GAAP earnings per diluted share were
$.55 , compared with$.48 in 2014. - Fourth quarter 2015 GAAP results include
$.09 per diluted share, after tax, in asset impairment and restructuring expenses and other non-base charges, net of gains related to releases of deferred tax valuation allowances, compared with$.13 per diluted share, after-tax, in asset impairment and restructuring charges, acquisition expenses and acquisition inventory step-up costs in the fourth quarter of 2014. - Base net income attributable to Sonoco (base earnings) for fourth quarter 2015 was
$.64 per diluted share, compared with$.61 in 2014. (See base earnings definition and reconciliation later in this release.) Sonoco previously provided fourth quarter base earnings guidance of$.59 to $.64 per diluted share. - Fourth quarter 2015 net sales declined 3.8 percent to
$1.27 billion , due primarily to the negative impact of foreign currency translation. - Cash flow from operations for the fourth quarter was
$146 million , compared with$151 million in 2014. Free cash flow in the quarter was$49 million , compared with$78 million in 2014. (See free cash flow definition later in this release.)
2015 Full-Year Highlights
- Full-year 2015 GAAP earnings per diluted share were
$2.44 , compared with$2.19 in 2014. - Full-year 2015 GAAP results were negatively impacted by
$.07 per diluted share, after-tax, from a combination of the following: a favorable disposition of Fox River-related claims/litigation; gain on the sale of two metal end plants and favorable tax reserve adjustments, which were more than offset by foreign exchange driven asset impairments inVenezuela ; charges for restructuring costs, asset impairment charges, acquisition-related and environmental remediation expenses; and professional fees to investigate and correct the financial misstatements at theIrapuato packaging center. Prior-year results were negatively impacted by$.22 per diluted share, after-tax, primarily composed of restructuring-related charges and acquisition expenses. - Full-year 2015 base earnings were
$2.51 per diluted share, up 4.2 percent from$2.41 per diluted share in 2014. Sonoco previously guided full-year base earnings to be in the range of$2.46 to $2.51 per diluted share. - Net sales for 2015 were
$4.96 billion , down 1 percent from$5.02 billion in 2014. - Cash flow from operations for 2015 was
$453 million , up 8.4 percent from$418 million in 2014. Free cash flow was$155 million , compared to$120 million in 2014.
2016 Guidance and Common Stock Repurchase Program
- Full-year 2016 base earnings are projected to be in the range of
$2.64 and$2.74 per diluted share, with a targeted mid-point of$2.69 per diluted share. - Base earnings for the first quarter of 2016 are projected to be in the range of
$.57 to $.62 per diluted share. Base earnings in the first quarter of 2015 were$.54 per diluted share. As a result of the Company’s accounting calendar, the first quarter of 2016 will contain 94 days, six more than in 2015, and the fourth quarter will contain 90 days, five fewer than in 2015. - 2016 free cash flow is projected to be approximately
$140 million . - Sonoco’s Board of Directors approved repurchasing up to
$100 million in common stock in open market transactions beginning immediately. The Board also restored the Company’s residual share repurchase authorization to its original five million shares.
Fourth Quarter Comments
“Despite diverging global economic conditions and headwinds stemming from the continued strength of the U.S. dollar, Sonoco put up solid results led by record fourth quarter performances in our Consumer Packaging and Protective Solutions segments, partially offset by lower results in our Paper and Industrial Converted Products segment,” said Sonoco President and Chief Executive Officer
“Operating profit in our Consumer Packaging segment improved just over 8 percent and reached a record for the fifth consecutive quarter. This quarter’s improvement was a result of a positive price/cost relationship, acquisition earnings and solid volume growth, partially offset by higher pension and other operating costs, lower manufacturing productivity and unfavorable exchange rate changes. Operating profits in our Display and Packaging segment showed significant improvement due to a positive/price cost relationship, manufacturing productivity improvements and the reimbursement of excess costs by a customer.
“Operating profit in our Paper and Industrial Converted Products segment declined 32.4 percent from the prior-year quarter. More than half of the negative variance for the segment was directly related to the impact of declining market conditions on our one corrugating medium paper machine with the balance essentially stemming from unfavorable exchange rates changes and higher pension expense.
“In our Protective Solutions segment, operating profits grew nearly 12 percent due to continued strong volume growth, a positive price/cost relationship and manufacturing productivity improvements, which more than offset negative mix and higher labor, maintenance and other operating costs.”
Fourth Quarter Summary
GAAP net income attributable to Sonoco in the fourth quarter was
Fourth quarter base earnings exclude
Net sales for the fourth quarter were
Gross profit was
Cash generated from operations in the fourth quarter was
Full-Year 2015 Overview
Net sales for 2015 were
Net income attributable to Sonoco for 2015 was
Base earnings for 2015 were
Current-year gross profit was a record
In 2015, cash generated from operations was
As of
Corporate
Net interest expense for the fourth quarter of 2015 increased to
Board Approves New
Sonoco’s Board of Directors has authorized management, at its discretion, to immediately begin repurchasing up to
“For more than nine decades, Sonoco has consistently returned cash to its shareholders in the form of cash dividends and share repurchases, including nearly
2016 Outlook
Sonoco expects first quarter 2016 base earnings to be in the range of
The Company believes the assumptions reflected in the range of guidance are reasonable. However, given uncertainty regarding the future performance of the overall economy, potential changes in raw material prices and other costs, as well as other risks and uncertainties, including those described below, actual results could vary substantially.
Commenting on the Company’s outlook, Sonoco CEO Sanders said, “As we enter 2016, it is clear the pace of change in our businesses and the markets we serve is accelerating and, while we can’t control the marketplace, we can control our actions to address the challenges and opportunities we face. We remain committed to executing on our ‘Grow and Optimize’ strategy, which is focused on targeted growth of our Consumer Packaging and Protective Solutions businesses and optimizing our Industrial-focused businesses. We are excited about the expected launch of several new innovative products in 2016, as we continue to work closely with our customers through our i6 Innovation Process™ and utilizing the full capabilities of our recently opened
Fourth-Quarter Segment Review
Sonoco reports its financial results in four operating segments: Consumer Packaging, Display and Packaging, Paper and Industrial Converted Products and Protective Solutions. Segment operating results do not include restructuring and asset impairment charges, acquisition expenses, interest income and expense, income taxes or certain other items, if any, the exclusion of which the Company believes improves comparability and analysis.
Consumer Packaging
Sonoco’s Consumer Packaging segment includes the following products and services: round and shaped rigid containers and trays (both composite and thermoformed plastic); blow-molded plastic bottles and jars; extruded and injection-molded plastic products; printed flexible packaging; global brand artwork management; and metal and peelable membrane ends and closures.
Fourth quarter 2015 sales for the segment were
Segment sales during the quarter were up 1.0 percent due to the prior-year acquisition of Weidenhammer and this year’s purchase of a majority interest in a Brazilian flexible packaging business, partially offset by the sale of two metal ends plants. Sales also benefited from solid volume gains in flexible packaging, international composite cans, and injection-molded, thermoformed and blow-molded plastics, which more than offset declines in
Display and Packaging
The Display and Packaging segment includes the following products and services: designing, manufacturing, assembling, packing and distributing temporary, semi-permanent and permanent point-of-purchase displays; supply chain management services, including contract packing, fulfillment and scalable service centers; retail packaging, including printed backer cards, thermoformed blisters and heat-sealing equipment; and paper amenities, such as coasters and glass covers.
Fourth quarter 2015 sales for this segment were
Sales for the quarter declined 8.0 percent as the negative impact of foreign exchange more than offset volume growth in international display and packaging activity and higher selling prices. Quarterly operating profit for the segment improved significantly year over year due to cost recoveries paid by a customer as well as a positive price/cost relationship and improvements in productivity. These positive factors were partially offset by higher labor and other costs, and the negative impact of foreign currency translation.
Paper and Industrial Converted Products
The Paper and Industrial Converted Products segment includes the following products: paperboard tubes and cores; fiber-based construction tubes and forms; wooden, metal and composite wire and cable reels and spools; and recycled paperboard, linerboard, corrugating medium, recovered paper and material recycling services.
Fourth quarter 2015 sales for the segment were
Segment sales declined 9.5 percent due to the negative impact of foreign exchange and lower selling prices related to declining recovered paper costs. Sales were also negatively impacted by lower volume in recycling, corrugating, international paper and reels, partially offset by improved volume in European and Latin American tubes and cores.
Protective Solutions
The Protective Solutions segment includes the following products: custom-engineered, paperboard-based and expanded foam protective packaging and components; and temperature-assured packaging.
Fourth quarter 2015 sales were
The nearly 3 percent increase in fourth-quarter sales was due to higher volume in temperature-assured packaging and paper-based appliance packaging, partially offset by the negative impact of foreign exchange. Operating profit increased nearly 12 percent due to a positive price/cost relationship, volume gains and manufacturing productivity improvements, partially offset by a negative mix of business and higher labor and other operating costs.
Conference Call Webcast
Management will host a conference call and webcast to further discuss these results today,
About Sonoco
Founded in 1899, Sonoco is a global provider of a variety of consumer packaging, industrial products, protective packaging, and displays and packaging supply chain services. With annualized net sales of nearly
Forward-looking Statements
Statements included in herein that are not historical in nature, are intended to be, and are hereby identified as “forward-looking statements” for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended. In addition, the Company and its representatives may from time to time make other oral or written statements that are also “forward-looking statements.” Words such as “estimate,” “project,” “intend,” “expect,” “believe,” “consider,” “plan,” “strategy,” “opportunity,” “commitment,” “target,” “anticipate,” “objective,” “goal,” “guidance,” “outlook,” “forecast,” “future,” "re-envision," “will,” “would,” “can,” “could,” “may,” “might,” “aspires,” “potential,” or the negative thereof, and similar expressions identify forward-looking statements.
Forward-looking statements include, but are not limited to, statements regarding: availability and supply of raw materials, and offsetting high raw material costs; improved productivity and cost containment; improving margins and leveraging strong cash flow and financial position; effects of acquisitions and dispositions; realization of synergies resulting from acquisitions; costs, timing and effects of restructuring activities; adequacy and anticipated amounts and uses of cash flows; expected amounts of capital spending; refinancing and repayment of debt; financial strategies and the results expected of them; financial results for future periods; producing improvements in earnings; profitable sales growth and rates of growth; market leadership; research and development spending; extent of, and adequacy of provisions for, environmental liabilities; adequacy of income tax provisions, realization of deferred tax assets, outcomes of uncertain tax issues and tax rates; goodwill impairment charges and fair values of reporting units; future asset impairment charges and fair values of assets; anticipated contributions to pension and postretirement benefit plans, fair values of plan assets, long-term rates of return on plan assets, and projected benefit obligations and payments; creation of long-term value and returns for shareholders; continued payment of dividends; and planned stock repurchases.
Such forward-looking statements are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management. Such information includes, without limitation, discussions as to guidance and other estimates, perceived opportunities, expectations, beliefs, plans, strategies, goals and objectives concerning our future financial and operating performance. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual results may differ materially from those expressed or forecasted in such forward-looking statements. The risks, uncertainties and assumptions include, without limitation:
- availability and pricing of raw materials, energy and transportation, and the Company's ability to pass raw material, energy and transportation price increases and surcharges through to customers or otherwise manage these commodity pricing risks;
- costs of labor;
- work stoppages due to labor disputes;
- success of new product development, introduction and sales;
- consumer demand for products and changing consumer preferences;
- ability to be the low-cost global leader in customer-preferred packaging solutions within targeted segments;
- competitive pressures, including new product development, industry overcapacity, and changes in competitors’ pricing for products;
- ability to maintain or increase productivity levels, contain or reduce costs, and maintain positive price/cost relationships;
- ability to improve margins and leverage cash flows and financial position;
- continued strength of our paperboard-based tubes and cores and composite can operations;
- ability to manage the mix of business to take advantage of growing markets while reducing cyclical effects of some of the Company’s existing businesses on operating results;
- ability to maintain innovative technological market leadership and a reputation for quality;
- ability to profitably maintain and grow existing domestic and international business and market share;
- ability to expand geographically and win profitable new business;
- ability to identify and successfully close suitable acquisitions at the levels needed to meet growth targets, and successfully integrate newly acquired businesses into the Company’s operations;
- the costs, timing and results of restructuring activities;
- availability of credit to us, our customers and suppliers in needed amounts and on reasonable terms;
- effects of our indebtedness on our cash flow and business activities;
- fluctuations in obligations and earnings of pension and postretirement benefit plans;
- accuracy of assumptions underlying projections of benefit plan obligations and payments, valuation of plan assets, and projections of long-term rates of return;
- cost of employee and retiree medical, health and life insurance benefits;
- resolution of income tax contingencies;
- foreign currency exchange rate fluctuations, interest rate and commodity price risk and the effectiveness of related hedges;
- changes in U.S. and foreign tax rates, and tax laws, regulations and interpretations thereof;
- accuracy in valuation of deferred tax assets;
- accuracy of assumptions underlying projections related to goodwill impairment testing, and accuracy of management’s assessment of goodwill impairment;
- accuracy of assumptions underlying fair value measurements, accuracy of management’s assessments of fair value and fluctuations in fair value;
- liability for and anticipated costs of environmental remediation actions;
- effects of environmental laws and regulations;
- operational disruptions at our major facilities;
- failure or disruptions in our information technologies;
- loss of consumer or investor confidence;
- ability to protect our intellectual property rights;
- actions of domestic or foreign government agencies and changes in laws and regulations affecting the Company;
- international, national and local economic and market conditions and levels of unemployment; and
- economic disruptions resulting from terrorist activities and natural disasters.
The Company undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed herein might not occur.
Additional information concerning some of the factors that could cause materially different results is included in the Company’s reports on forms 10-K, 10-Q and 8-K filed with the
References to our Website Address
References to our website address and domain names throughout this release are for informational purposes only, or to fulfill specific disclosure requirements of the Securities and Exchange Commission’s rules or the New York Stock Exchange Listing Standards. These references are not intended to, and do not, incorporate the contents of our website by reference into this release.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | |||||||||||||||||
(Dollars and shares in thousands except per share) | |||||||||||||||||
THREE MONTHS ENDED | TWELVE MONTHS ENDED | ||||||||||||||||
December 31, 2015 | December 31, 2014 | December 31, 2015 | December 31, 2014 | ||||||||||||||
(As Restated) | (As Restated) | ||||||||||||||||
Net sales | $ | 1,267,135 | $ | 1,316,843 | $ | 4,964,369 | $ | 5,016,994 | |||||||||
Cost of sales | 1,027,792 | 1,070,112 | 4,034,947 | 4,109,108 | |||||||||||||
Gross profit | 239,343 | 246,731 | 929,422 | 907,886 | |||||||||||||
Selling, general and administrative expenses | 138,348 | 146,284 | 496,241 | 506,996 | |||||||||||||
Restructuring/Asset impairment charges | 21,000 | 11,221 | 50,637 | 22,792 | |||||||||||||
Income before interest and income taxes | $ | 79,995 | $ | 89,226 | $ | 382,544 | $ | 378,098 | |||||||||
Net interest expense | 14,089 | 13,695 | 54,598 | 52,391 | |||||||||||||
Income before income taxes and equity in earnings of affiliates | 65,906 | 75,531 | 327,946 | 325,707 | |||||||||||||
Provision for income taxes | 12,719 | 29,436 | 87,738 | 108,758 | |||||||||||||
Income before equity in earnings of affiliates | 53,187 | 46,095 | 240,208 | 216,949 | |||||||||||||
Equity in earnings of affiliates, net of tax | 3,125 | 2,990 | 10,416 | 9,886 | |||||||||||||
Net income | 56,312 | 49,085 | 250,624 | 226,835 | |||||||||||||
Net loss attributable to noncontrolling interests | (249 | ) | (61 | ) | (488 | ) | (919 | ) | |||||||||
Net income attributable to Sonoco | $ | 56,063 | $ | 49,024 | $ | 250,136 | $ | 225,916 | |||||||||
Weighted average common shares outstanding – diluted | 102,412 | 102,457 | 102,392 | 103,172 | |||||||||||||
Diluted earnings per common share | $ | 0.55 | $ | 0.48 | $ | 2.44 | $ | 2.19 | |||||||||
Dividends per common share | $ | 0.35 | $ | 0.32 | $ | 1.37 | $ | 1.27 | |||||||||
FINANCIAL SEGMENT INFORMATION (Unaudited) | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||
THREE MONTHS ENDED | TWELVE MONTHS ENDED | ||||||||||||||||
December 31, 2015 | December 31, 2014 | December 31, 2015 | December 31, 2014 | ||||||||||||||
(As Restated) | (As Restated) | ||||||||||||||||
Net sales | |||||||||||||||||
Consumer Packaging | $ | 550,069 | $ | 544,697 | $ | 2,122,559 | $ | 1,962,897 | |||||||||
Display and Packaging | 155,777 | 169,272 | 606,111 | 666,815 | |||||||||||||
Paper and Industrial Converted Products | 430,846 | 476,081 | 1,729,786 | 1,902,448 | |||||||||||||
Protective Solutions | 130,443 | 126,793 | 505,913 | 484,834 | |||||||||||||
Consolidated | $ | 1,267,135 | $ | 1,316,843 | $ | 4,964,369 | $ | 5,016,994 | |||||||||
Income before interest and income taxes: | |||||||||||||||||
Segment operating profit: | |||||||||||||||||
Consumer Packaging | $ | 64,750 | $ | 59,808 | $ | 231,590 | $ | 200,591 | |||||||||
Display and Packaging | 3,626 | 1,131 | 10,904 | 10,680 | |||||||||||||
Paper and Industrial Converted Products | 25,005 | 36,980 | 124,057 | 162,269 | |||||||||||||
Protective Solutions | 9,813 | 8,799 | 46,013 | 34,003 | |||||||||||||
Restructuring/Asset impairment charges | (21,000 | ) | (11,221 | ) | (50,637 | ) | (22,792 | ) | |||||||||
Other non-base income/(charges) | (2,199 | ) | (6,271 | ) | 20,617 | (6,653 | ) | ||||||||||
Consolidated | $ | 79,995 | $ | 89,226 | $ | 382,544 | $ | 378,098 | |||||||||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||
THREE MONTHS ENDED | TWELVE MONTHS ENDED | ||||||||||||||||
December 31, 2015 | December 31, 2014 | December 31, 2015 | December 31, 2014 | ||||||||||||||
(As Restated) | (As Restated) | ||||||||||||||||
Net income | $ | 56,312 | $ | 49,085 | $ | 250,624 | $ | 226,835 | |||||||||
Asset impairment charges | 9,635 | 4,016 | 24,408 | 8,155 | |||||||||||||
Depreciation, depletion and amortization | 55,945 | 53,990 | 213,161 | 198,718 | |||||||||||||
Fox River environmental reserves | (539 | ) | 651 | (33,878 | ) | (14,349 | ) | ||||||||||
Net pension and postretirement plan expense/(contributions) | 7,871 | 3,132 | 21,299 | (25,509 | ) | ||||||||||||
Changes in working capital | 61,327 | 67,786 | (5,616 | ) | (2,840 | ) | |||||||||||
Other operating activity | (45,013 | ) | (28,142 | ) | (17,068 | ) | 26,905 | ||||||||||
Net cash provided by operating activities | 145,538 | 150,518 | 452,930 | 417,915 | |||||||||||||
Purchase of property, plant and equipment, net | (60,954 | ) | (40,482 | ) | (188,873 | ) | (169,318 | ) | |||||||||
Proceeds from dispositions | - | - | 29,108 | - | |||||||||||||
Cost of acquisitions, exclusive of cash | - | (323,168 | ) | (17,447 | ) | (334,132 | ) | ||||||||||
Net debt (repayments)/proceeds | (66,641 | ) | 208,963 | (114,718 | ) | 245,222 | |||||||||||
Cash dividends | (35,330 | ) | (32,347 | ) | (138,032 | ) | (128,793 | ) | |||||||||
Shares acquired under announced buyback | - | (37,409 | ) | - | (82,422 | ) | |||||||||||
Other, including effects of exchange rates on cash | 6,398 | 3,537 | (1,702 | ) | (4,871 | ) | |||||||||||
Net (decrease)/increase in cash and cash equivalents | (10,989 | ) | (70,388 | ) | 21,266 | (56,399 | ) | ||||||||||
Cash and cash equivalents at beginning of period | 193,423 | 231,556 | 161,168 | 217,567 | |||||||||||||
Cash and cash equivalents at end of period | $ | 182,434 | $ | 161,168 | $ | 182,434 | $ | 161,168 | |||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||
December 31, 2015 | December 31, 2014 | ||||||||||||||||
(As Restated) | |||||||||||||||||
Assets | |||||||||||||||||
Current Assets: | |||||||||||||||||
Cash and cash equivalents | $ | 182,434 | $ | 161,168 | |||||||||||||
Trade accounts receivable, net of allowances | 627,962 | 653,737 | |||||||||||||||
Other receivables | 46,801 | 38,580 | |||||||||||||||
Inventories | 385,483 | 420,276 | |||||||||||||||
Prepaid expenses and deferred income taxes | 64,698 | 100,028 | |||||||||||||||
1,307,378 | 1,373,789 | ||||||||||||||||
Property, plant and equipment, net | 1,112,036 | 1,148,607 | |||||||||||||||
Goodwill | 1,140,461 | 1,177,962 | |||||||||||||||
Other intangible assets, net | 245,095 | 280,935 | |||||||||||||||
Other assets | 215,299 | 212,618 | |||||||||||||||
$ | 4,020,269 | $ | 4,193,911 | ||||||||||||||
Liabilities and Shareholders’ Equity | |||||||||||||||||
Current Liabilities: | |||||||||||||||||
Payable to suppliers and other payables | $ | 802,284 | $ | 851,314 | |||||||||||||
Notes payable and current portion of long-term debt | 113,097 | 52,280 | |||||||||||||||
Income taxes payable | 7,135 | 8,599 | |||||||||||||||
$ | 922,516 | $ | 912,193 | ||||||||||||||
Long-term debt, net of current portion | 1,021,854 | 1,200,885 | |||||||||||||||
Pension and other postretirement benefits | 432,964 | 444,231 | |||||||||||||||
Deferred income taxes and other | 110,062 | 132,755 | |||||||||||||||
Total equity | 1,532,873 | 1,503,847 | |||||||||||||||
$ | 4,020,269 | $ | 4,193,911 |
Definition and Reconciliation of Non-GAAP Financial Measures | ||||||
The Company’s results determined in accordance with U.S. generally accepted accounting principles (GAAP) are referred to as “as reported” or "GAAP" results. Some of the information presented in this press release reflects the Company’s “as reported” or "GAAP" results adjusted to exclude amounts related to restructuring initiatives, asset impairment charges, environmental charges, acquisition costs, excess insurance recoveries, losses from the early extinguishment of debt, and certain other items, if any, the exclusion of which management believes improves comparability and analysis of the underlying financial performance of the business. These adjustments result in the non-GAAP financial measures referred to in this press release as “Base Earnings” and “Base Earnings per Diluted Share.” | ||||||
These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Sonoco continues to provide all information required by GAAP, but it believes that evaluating its ongoing operating results may not be as useful if an investor or other user is limited to reviewing only GAAP financial measures. Sonoco uses these non-GAAP financial measures for internal planning and forecasting purposes, to evaluate its ongoing operations, and to evaluate the ultimate performance of each business unit against budget all the way up through the evaluation of the Chief Executive Officer’s performance by the Board of Directors. In addition, these same non-GAAP measures are used in determining incentive compensation for the entire management team and in providing earnings guidance to the investing community. | ||||||
Sonoco management does not, nor does it suggest that investors should, consider these non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Sonoco presents these non-GAAP financial measures to provide users information to evaluate Sonoco’s operating results in a manner similar to how management evaluates business performance. Material limitations associated with the use of such measures are that they do not reflect all period costs included in operating expenses and may not reflect financial results that are comparable to financial results of other companies that present similar costs differently. Furthermore, the calculations of these non-GAAP measures are based on subjective determinations of management regarding the nature and classification of events and circumstances that the investor may find material and view differently. | ||||||
To compensate for these limitations, management believes that it is useful in understanding and analyzing the results of the business to review both GAAP information which includes all of the items impacting financial results and the non-GAAP measures that exclude certain elements, as described above. Whenever Sonoco uses a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Whenever reviewing a non-GAAP financial measure, investors are encouraged to fully review and consider the related reconciliation as detailed below. |
Non-GAAP Adjustments | ||||||||||||||||||
Three Months Ended December 31, 2015 | GAAP | Restructuring / Asset Impairment Charges(1) |
Other Adjustments(2) |
Base | ||||||||||||||
Net sales | $ | 1,267,135 | $ | - | $ | - | $ | 1,267,135 | ||||||||||
Cost of sales | 1,027,792 | - | - | 1,027,792 | ||||||||||||||
Gross profit | 239,343 | - | - | 239,343 | ||||||||||||||
Selling, general and administrative expenses | 138,348 | - | (2,199 | ) | 136,149 | |||||||||||||
Restructuring/Asset impairment charges | 21,000 | (21,000 | ) | - | - | |||||||||||||
Income before interest and income taxes | 79,995 | 21,000 | 2,199 | 103,194 | ||||||||||||||
Interest expense, net | 14,089 | - | - | 14,089 | ||||||||||||||
Income before income taxes | 65,906 | 21,000 | 2,199 | 89,105 | ||||||||||||||
Provision for income taxes | 12,719 | 5,791 | 7,969 | 26,479 | ||||||||||||||
Income before equity in earnings of affiliates | 53,187 | 15,209 | (5,770 | ) | 62,626 | |||||||||||||
Equity in earnings of affiliates, net of taxes | 3,125 | - | - | 3,125 | ||||||||||||||
Net income | 56,312 | 15,209 | (5,770 | ) | 65,751 | |||||||||||||
Net (income) attributable to noncontrolling interests | (249 | ) | (18 | ) | - | (267 | ) | |||||||||||
Net income attributable to Sonoco | $ | 56,063 | $ | 15,191 | $ | (5,770 | ) | $ | 65,484 | |||||||||
Per Diluted Share | $ | 0.55 | $ | 0.15 | $ | (0.06 | ) | $ | 0.64 | |||||||||
Non-GAAP Adjustments | ||||||||||||||||||
Three Months Ended December 31, 2014 | GAAP | Restructuring / Asset Impairment Charges(1) |
Other Adjustments(2) |
Base | ||||||||||||||
Net sales | $ | 1,316,843 | $ | - | $ | - | $ | 1,316,843 | ||||||||||
Cost of sales | 1,070,112 | - | - | 1,070,112 | ||||||||||||||
Gross profit | 246,731 | - | - | 246,731 | ||||||||||||||
Selling, general and administrative expenses | 146,284 | - | (6,271 | ) | 140,013 | |||||||||||||
Restructuring/Asset impairment charges | 11,221 | (11,221 | ) | - | - | |||||||||||||
Income before interest and income taxes | 89,226 | 11,221 | 6,271 | 106,718 | ||||||||||||||
Interest expense, net | 13,695 | - | - | 13,695 | ||||||||||||||
Income before income taxes | 75,531 | 11,221 | 6,271 | 93,023 | ||||||||||||||
Provision for income taxes | 29,436 | 2,390 | 1,584 | 33,410 | ||||||||||||||
Income before equity in earnings of affiliates | 46,095 | 8,831 | 4,687 | 59,613 | ||||||||||||||
Equity in earnings of affiliates, net of taxes | 2,990 | - | - | 2,990 | ||||||||||||||
Net income | 49,085 | 8,831 | 4,687 | 62,603 | ||||||||||||||
Net (income) attributable to noncontrolling interests | (61 | ) | (26 | ) | - | (87 | ) | |||||||||||
Net income attributable to Sonoco | $ | 49,024 | $ | 8,805 | $ | 4,687 | $ | 62,516 | ||||||||||
Per Diluted Share | $ | 0.48 | $ | 0.09 | $ | 0.05 | $ | 0.61 | ||||||||||
(1) Restructuring/Asset impairment charges are a recurring item as Sonoco’s restructuring programs usually require several years to fully implement and the Company is continually seeking to take actions that could enhance its efficiency. Although recurring, these charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity and the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the restructuring actions occur. | ||||||||||||||||||
(2) Other adjustments consist primarily of income tax gains from the release of valuation allowances against tax loss carryforwards in Spain, Canada, the Netherlands, and the United Kingdom. Also included in other adjustments are legal and financial professional expenses associated with the Company's investigation of financial misstatements in Mexico, excess life insurance charges, and acquisition-related costs. | ||||||||||||||||||
Non-GAAP Adjustments | ||||||||||||||||||
Twelve Months Ended December 31, 2015 | GAAP | Restructuring / Asset Impairment Charges(1,2) |
Other Adjustments(3) |
Base | ||||||||||||||
Net sales | $ | 4,964,369 | $ | - | $ | - | $ | 4,964,369 | ||||||||||
Cost of sales | 4,034,947 | - | - | 4,034,947 | ||||||||||||||
Gross profit | 929,422 | - | - | 929,422 | ||||||||||||||
Selling, general and administrative expenses | 496,241 | - | 20,617 | 516,858 | ||||||||||||||
Restructuring/Asset impairment charges | 50,637 | (50,637 | ) | - | - | |||||||||||||
Income before interest and income taxes | 382,544 | 50,637 | (20,617 | ) | 412,564 | |||||||||||||
Interest expense, net | 54,598 | - | - | 54,598 | ||||||||||||||
Income before income taxes | 327,946 | 50,637 | (20,617 | ) | 357,966 | |||||||||||||
Provision for income taxes | 87,738 | 22,641 | 755 | 111,134 | ||||||||||||||
Income before equity in earnings of affiliates | 240,208 | 27,996 | (21,372 | ) | 246,832 | |||||||||||||
Equity in earnings of affiliates, net of taxes | 10,416 | - | - | 10,416 | ||||||||||||||
Net income | 250,624 | 27,996 | (21,372 | ) | 257,248 | |||||||||||||
Net (income) attributable to noncontrolling interests | (488 | ) | (93 | ) | - | (581 | ) | |||||||||||
Net income attributable to Sonoco | $ | 250,136 | $ | 27,903 | $ | (21,372 | ) | $ | 256,667 | |||||||||
Per Diluted Share | $ | 2.44 | $ | 0.27 | $ | (0.21 | ) | $ | 2.51 | |||||||||
Non-GAAP Adjustments | ||||||||||||||||||
Twelve Months Ended December 31, 2014 | GAAP | Restructuring / Asset Impairment Charges(1) |
Other Adjustments(3) |
Base | ||||||||||||||
Net sales | $ | 5,016,994 | $ | - | $ | - | $ | 5,016,994 | ||||||||||
Cost of sales | 4,109,108 | - | - | 4,109,108 | ||||||||||||||
Gross profit | 907,886 | - | - | 907,886 | ||||||||||||||
Selling, general and administrative expenses | 506,996 | - | (6,653 | ) | 500,343 | |||||||||||||
Restructuring/Asset impairment charges | 22,792 | (22,792 | ) | - | - | |||||||||||||
Income before interest and income taxes | 378,098 | 22,792 | 6,653 | 407,543 | ||||||||||||||
Interest expense, net | 52,391 | - | - | 52,391 | ||||||||||||||
Income before income taxes | 325,707 | 22,792 | 6,653 | 355,152 | ||||||||||||||
Provision for income taxes | 108,758 | 5,732 | 1,509 | 115,999 | ||||||||||||||
Income before equity in earnings of affiliates | 216,949 | 17,060 | 5,144 | 239,153 | ||||||||||||||
Equity in earnings of affiliates, net of taxes | 9,886 | - | - | 9,886 | ||||||||||||||
Net income | 226,835 | 17,060 | 5,144 | 249,039 | ||||||||||||||
Net (income) attributable to noncontrolling interests | (919 | ) | (52 | ) | 533 | (438 | ) | |||||||||||
Net income attributable to Sonoco | $ | 225,916 | $ | 17,008 | $ | 5,677 | $ | 248,601 | ||||||||||
Per Diluted Share | $ | 2.19 | $ | 0.16 | $ | 0.06 | $ | 2.41 | ||||||||||
(1) Restructuring/Asset impairment charges are a recurring item as Sonoco’s restructuring programs usually require several years to fully implement and the Company is continually seeking to take actions that could enhance its efficiency. Although recurring, these charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity and the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the restructuring actions occur. | ||||||||||||||||||
(2) Included in 2015 impairment charges are disposal and income tax gains related to the sale of two of the Company's metal end and closures plants. Additionally, asset impairments related to the devaluation of the Venezuelan Bolivar are included in these amounts. | ||||||||||||||||||
(3) Other adjustments consist primarily of a gain from the release of reserves related to the partial settlement of the Fox River environmental claims, income tax gains from the release of valuation allowances against tax loss carryforwards in Spain, Canada, the Netherlands, and the United Kingdom. Also included in other adjustments are legal and financial professional expenses associated with the Company's investigation of financial misstatements in Mexico, and acquisition-related costs. | ||||||||||||||||||
Contact:Roger Schrum +843-339-6018 roger.schrum@sonoco.com