Incorporated under the laws | I.R.S. Employer Identification | |
of South Carolina | No. 57-0248420 |
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
SONOCO PRODUCTS COMPANY | ||||||
Date: July 16, 2015 | By: | /s/ Barry L. Saunders | ||||
Barry L. Saunders | ||||||
Senior Vice President and Chief Financial Officer |
99 | Registrant’s Release of Preliminary 2015 Second Quarter Earnings |
• | Second quarter 2015 GAAP earnings per diluted share are estimated to be $.61. Second quarter 2015 GAAP results include $.07 per diluted share in after-tax charges related to plant consolidations, global restructuring activities and other costs. This was partially offset by approximately $.02 per diluted share in after-tax gains associated with a reversal of reserves and tax adjustments, partially offset by acquisition costs. |
• | Base net income attributable to Sonoco (base earnings) for second quarter 2015 is estimated to be $.66 per diluted share. (See base earnings definition and reconciliation later in this release.) Sonoco previously provided second quarter base earnings guidance of $.64 to $.69 per diluted share. |
• | Second quarter 2015 net sales are estimated to be $1.25 billion. |
• | Cash flow from operations was $115 million. Free cash flow for the second quarter was $35 million. (See free cash flow definition later in this release.) |
• | Base earnings are expected to be in the range of $.65 to $.70 per diluted share for the third quarter. The Company has updated full-year 2015 guidance to $2.48 to $2.58 per diluted share, which is lower than previous guidance due to the above mentioned issue in Mexico along with higher than expected pension expense, a delay in achieving certain acquisition synergies and changing market conditions. The Company’s previous guidance for the year was $2.60 to $2.70 per diluted share. |
• | Free cash flow in 2015 remains unchanged at approximately $140 million. |
• | availability and pricing of raw materials, energy and transportation |
• | effects on the consolidated financial statements of adjustments based on the review of financial results for the contract packaging center in Mexico |
• | success of new product development and introduction |
• | ability to maintain or increase productivity levels and contain or reduce costs |
• | ability to manage the mix of business to take advantage of growing markets while reducing cyclical effects of some of the Company’s existing business on operating results |
• | international, national and local economic and market conditions |
• | availability of credit to us, our customers and/or suppliers in needed amounts and/or on reasonable terms |
• | fluctuations in obligations and earnings of pension and postretirement benefit plans |
• | pricing pressures, demand for products and ability to maintain market share |
• | continued strength of our paperboard-based tubes and cores, and composite can operations |
• | anticipated results of restructuring activities |
• | resolution of income tax contingencies |
• | ability to successfully integrate newly acquired businesses into the Company’s operations |
• | ability to win new business and/or identify and successfully close suitable acquisitions at the levels needed to meet growth targets |
• | disputes with suppliers and customers |
• | rate of growth in foreign markets |
• | foreign currency, interest rate and commodity price risk and the effectiveness of related hedges |
• | liability for and anticipated costs of environmental remediation actions |
• | 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 |
• | accuracy in valuation of deferred tax assets |
• | actions of government agencies and changes in laws and regulations affecting the Company |
• | loss of consumer or investor confidence |
• | economic disruptions resulting from terrorist activities |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | |||||||||||||
(Dollars and shares in thousands except per share) | |||||||||||||
PRELIMINARY (*) | |||||||||||||
THREE MONTHS ENDED | SIX MONTHS ENDED | ||||||||||||
June 28, 2015 | June 28, 2015 | ||||||||||||
Net sales | $ | 1,249,477 | $ | 2,455,722 | |||||||||
Cost of sales | 1,008,797 | 1,994,651 | |||||||||||
Gross profit | 240,680 | 461,071 | |||||||||||
Selling, general and administrative expenses | 132,862 | 229,527 | |||||||||||
Restructuring/Asset impairment charges | 10,445 | 10,086 | |||||||||||
Income before interest and income taxes | $ | 97,373 | $ | 221,458 | |||||||||
Net interest expense | 13,601 | 26,822 | |||||||||||
Income before income taxes and equity in earnings of affiliates | 83,772 | 194,636 | |||||||||||
Provision for income taxes | 23,978 | 51,069 | |||||||||||
Income before equity in earnings of affiliates | 59,794 | 143,567 | |||||||||||
Equity in earnings of affiliates, net of tax | 3,269 | 4,315 | |||||||||||
Net income | 63,063 | 147,882 | |||||||||||
Net loss attributable to noncontrolling interests | (250 | ) | (158 | ) | |||||||||
Net income attributable to Sonoco | $ | 62,813 | $ | 147,724 | |||||||||
Weighted average common shares outstanding – diluted | 102,444 | 102,365 | |||||||||||
Diluted earnings per common share | $ | 0.61 | $ | 1.44 | |||||||||
Dividends per common share | $ | 0.35 | $ | 0.67 | |||||||||
FINANCIAL SEGMENT INFORMATION (Unaudited) | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||
PRELIMINARY (*) | |||||||||||||||||
THREE MONTHS ENDED | SIX MONTHS ENDED | ||||||||||||||||
June 28, 2015 | June 29, 2014 | June 28, 2015 | June 29, 2014 | ||||||||||||||
Net sales | |||||||||||||||||
Consumer Packaging | $ | 531,114 | $ | 473,666 | $ | 1,050,991 | $ | 938,591 | |||||||||
Paper and Industrial Converted Products | 448,876 | 490,016 | 871,187 | 945,626 | |||||||||||||
Protective Solutions | 126,996 | 121,183 | 245,075 | 233,252 | |||||||||||||
Display and Packaging | 142,491 | * | 288,469 | * | |||||||||||||
Consolidated | $ | 1,249,477 | * | $ | 2,455,722 | * | |||||||||||
Income before interest and income taxes: | |||||||||||||||||
Segment operating profit: | |||||||||||||||||
Consumer Packaging | $ | 56,795 | $ | 42,831 | $ | 110,825 | $ | 91,014 | |||||||||
Paper and Industrial Converted Products | 38,140 | 46,543 | 65,936 | 76,293 | |||||||||||||
Protective Solutions | 13,399 | 9,640 | 23,084 | 14,927 | |||||||||||||
Display and Packaging | 1,187 | * | 2,025 | * | |||||||||||||
Restructuring/Asset impairment charges | (10,445 | ) | (3,671 | ) | (10,086 | ) | (5,663 | ) | |||||||||
Other non-base income/(charges) | (1,703 | ) | (1,246 | ) | 29,674 | (1,270 | ) | ||||||||||
Consolidated | $ | 97,373 | * | $ | 221,458 | * | |||||||||||
(*) Certain prior year results have been omitted from presentation due to the investigation of financial results for a contract packaging center in Mexico which will likely result in a correction to the Company’s consolidated financial statements dating back to 2012. | |||||||||||||||||
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. |
PRELIMINARY (*) | |||||||||||||||||
Non-GAAP Adjustments | |||||||||||||||||
Three Months Ended June 28, 2015 | GAAP | Restructuring / Asset Impairment Charges(1) | Other Adjustments(2) | Base | |||||||||||||
Net sales | $ | 1,249,477 | $ | — | $ | — | $ | 1,249,477 | |||||||||
Cost of sales | 1,008,797 | — | — | 1,008,797 | |||||||||||||
Gross profit | 240,680 | — | — | 240,680 | |||||||||||||
Selling, general and administrative expenses | 132,862 | — | (1,703 | ) | 131,159 | ||||||||||||
Restructuring/Asset impairment charges | 10,445 | (10,445 | ) | — | — | ||||||||||||
Income before interest and income taxes | 97,373 | 10,445 | 1,703 | 109,521 | |||||||||||||
Interest expense, net | 13,601 | — | — | 13,601 | |||||||||||||
Income before income taxes | 83,772 | 10,445 | 1,703 | 95,920 | |||||||||||||
Provision for income taxes | 23,978 | 3,683 | 3,282 | 30,943 | |||||||||||||
Income before equity in earnings of affiliates | 59,794 | 6,762 | (1,579 | ) | 64,977 | ||||||||||||
Equity in earnings of affiliates, net of taxes | 3,269 | — | — | 3,269 | |||||||||||||
Net income | 63,063 | 6,762 | (1,579 | ) | 68,246 | ||||||||||||
Net (income) attributable to noncontrolling interests | (250 | ) | (55 | ) | — | (305 | ) | ||||||||||
Net income attributable to Sonoco | $ | 62,813 | $ | 6,707 | $ | (1,579 | ) | $ | 67,941 | ||||||||
Per Diluted Share | $ | 0.61 | $ | 0.07 | $ | (0.02 | ) | $ | 0.66 | ||||||||
(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 acquisition-related costs; and the release of reserves related to the partial settlement of the Fox River environmental claims. Also included are income tax gains related to releases of a valuation allowance on deferred income tax NOL in the Company's Tubes and Cores business. | |||||||||||||||||
(*) Certain prior year results have been omitted from presentation due to the investigation of financial results for a contract packaging center in Mexico which will likely result in a correction to the Company’s consolidated financial statements dating back to 2012. |
PRELIMINARY (*) | |||||||||||||||||
Non-GAAP Adjustments | |||||||||||||||||
Six Months Ended June 28, 2015 | GAAP | Restructuring / Asset Impairment Charges(1,2) | Other Adjustments(3) | Base | |||||||||||||
Net sales | $ | 2,455,722 | $ | — | $ | — | $ | 2,455,722 | |||||||||
Cost of sales | 1,994,651 | — | — | 1,994,651 | |||||||||||||
Gross profit | 461,071 | — | — | 461,071 | |||||||||||||
Selling, general and administrative expenses | 229,527 | — | 29,674 | 259,201 | |||||||||||||
Restructuring/Asset impairment charges | 10,086 | (10,086 | ) | — | — | ||||||||||||
Income before interest and income taxes | 221,458 | 10,086 | (29,674 | ) | 201,870 | ||||||||||||
Interest expense, net | 26,822 | — | — | 26,822 | |||||||||||||
Income before income taxes | 194,636 | 10,086 | (29,674 | ) | 175,048 | ||||||||||||
Provision for income taxes | 51,069 | 15,276 | (9,232 | ) | 57,113 | ||||||||||||
Income before equity in earnings of affiliates | 143,567 | (5,190 | ) | (20,442 | ) | 117,935 | |||||||||||
Equity in earnings of affiliates, net of taxes | 4,315 | — | — | 4,315 | |||||||||||||
Net income | 147,882 | (5,190 | ) | (20,442 | ) | 122,250 | |||||||||||
Net (income) attributable to noncontrolling interests | (158 | ) | (70 | ) | — | (228 | ) | ||||||||||
Net income attributable to Sonoco | $ | 147,724 | $ | (5,260 | ) | $ | (20,442 | ) | $ | 122,022 | |||||||
Per Diluted Share | $ | 1.44 | $ | (0.05 | ) | $ | (0.20 | ) | $ | 1.19 | |||||||
(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 Restructuring/Asset impairment charges are disposal and income tax gains related to the sale of two of the Company's metal end and closures plants. | |||||||||||||||||
(3) Other adjustments consist primarily of acquisition-related costs; and the release of reserves related to the partial settlement of the Fox River environmental claims. Also included are income tax gains related to releases of a valuation allowance on deferred income tax NOL in the Company's Tubes and Cores business. | |||||||||||||||||
(*) Certain prior year results have been omitted from presentation due to the investigation of financial results for a contract packaging center in Mexico which will likely result in a correction to the Company’s consolidated financial statements dating back to 2012. |
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