Sonoco Reports Fourth-Quarter and Full-Year 2020 Results
Sonoco (NYSE: SON) reported a fourth-quarter 2020 GAAP loss of $(0.12) per diluted share, down from $0.44 in 2019, and full-year GAAP earnings of $2.05 per share, compared to $2.88 in 2019. The fourth quarter included net after-tax charges of $0.94 per share, primarily from asset impairments and the sale of its Europe contract packaging business for $120 million. Net sales rose 5.2% to $1.38 billion, while full-year sales declined to $5.24 billion. Guidance for Q1 2021 estimates earnings between $0.80 and $0.90 per share, with full-year 2021 earnings projected between $3.40 and $3.60 per share.
- Fourth-quarter base earnings increased to $0.82 per diluted share from $0.75 in 2019.
- Cash flow from operations reached $705.6 million, up from $425.9 million in 2019.
- Record free cash flow of $349.3 million, compared to $74.3 million in the prior year.
- Fourth-quarter net sales rose to $1.38 billion, a 5.2% increase from last year.
- Fourth-quarter GAAP loss was $(0.12) per share, compared to a profit of $0.44 per share in 2019.
- Full-year GAAP earnings fell to $2.05 per share from $2.88 in 2019.
- Full-year 2020 net sales decreased by $136.8 million from 2019.
Provides 2021 Base EPS and Cash Flow Guidance
HARTSVILLE, S.C., Feb. 11, 2021 (GLOBE NEWSWIRE) -- Sonoco (NYSE: SON), one of the largest diversified global packaging companies, today reported financial results for its fourth quarter and full year, both ending December 31, 2020.
Fourth-Quarter and Full-Year Highlights
- Fourth-quarter 2020 GAAP loss per diluted share was
$(0.12) , compared with GAAP earnings per diluted share of$0.44 in 2019. Full-year 2020 GAAP earnings per diluted share were$2.05 , compared to$2.88 in 2019. - 2020 fourth-quarter results include net after-tax charges of
$0.94 per diluted share. The main components of these charges were$0.56 related to non-cash asset impairments and$0.17 from the loss on the divestiture of the Company's Europe contract packaging business. Additionally, the net charges include restructuring, non-operating pension and acquisition/divestiture costs. Prior-year results included net after-tax charges of$0.31 per diluted share mostly due to asset impairments, restructuring actions, non-operating pension costs and acquisition costs. - Base net income attributable to Sonoco (base earnings) for the quarter was
$0.82 per diluted share, compared with$0.75 in 2019. Full-year 2020 base earnings per diluted share were$3.41 , compared to$3.53 in 2019. (See base earnings definition, explanation and reconciliation to GAAP earnings later in this release.) Sonoco previously provided fourth-quarter and full-year 2020 base earnings guidance of$0.70 t o$0.80 and$3.29 t o$3.39 per diluted share, respectively. - Fourth-quarter 2020 net sales were
$1.38 billion , up from$1.31 billion in 2019. Full-year 2020 net sales were$5.24 billion , compared to$5.37 billion in 2019. - Full-year cash flow from operations was
$705.6 million in 2020, compared with$425.9 million in 2019. Free cash flow in 2020 was$349.3 million , compared with$74.3 million in 2019. (See free cash flow definition and reconciliation to cash flow from operations later in this release.) - On November 30, 2020, Sonoco sold its Europe contract packaging business, part of the Display and Packaging segment, for
$120 million in cash, net of working capital and other adjustments.
First-Quarter and Full-Year 2021 Guidance
- Base earnings for the first quarter of 2021 are estimated to be in the range of
$0.80 t o$0.90 per diluted share, compared to$0.94 per diluted share in the first quarter of 2020. - Full-year 2021 base earnings are expected to be in the range of
$3.40 t o$3.60 per diluted share. - Full-year 2021 cash flow from operations and free cash flow are expected to be between
$570 million to$600 million and$270 million to$300 million , respectively. See details later in this release which include a change to the definition of free cash flow. - The Company will change its operating and reporting structure in 2021 and will begin to report its results in two segments, Consumer Packaging and Industrial Paper Packaging. The Company's remaining businesses which will primarily consist of our healthcare and protective packaging businesses will be reported as "All Other" in our future earnings releases and financial statements. The Company has determined this reporting structure appropriately represents the management of its business portfolio going forward.
Note: First-quarter and full-year 2021 GAAP guidance are not provided in this release due to the likely occurrence of one or more of the following, the timing and magnitude of which we are unable to reliably forecast: gains or losses on the sale of businesses or other assets, restructuring actions, asset impairment charges, acquisition/divestiture costs, certain income tax related events and other items. These items could have a significant impact on the Company's future GAAP financial results.
CEO Comments
Commenting on the Company’s full-year and fourth-quarter results, Sonoco President and Chief Executive Officer Howard Coker said, "2020 was both a test of our resolve as a Company and a testament to the strength of our people. Despite the impact of the pandemic-induced global recession, we quickly refocused operations on accelerating production of food packaging to meet consumers' growing preference for at-home eating, while making adjustments in our industrial-related and protective packaging businesses in response to demand swings. We developed vitally needed temperature-assured packaging to begin shipping life-saving vaccines and therapeutic drugs to combat the spread of the coronavirus, and we further improved our portfolio by acquiring Can Packaging, a French designer and manufacturer of sustainable paper packaging and related equipment, while divesting our lower-margin Europe contract packaging business.
"In the fourth quarter, our businesses performed well as we exceeded the high end of our base earnings guidance and volume/mix drove a 4 percent improvement in sales growth. Some of this is the impact of two additional days in the current-year quarter, but a strong volume/mix improvement, nonetheless. Our Consumer Packaging segment achieved a 47 percent improvement in operating profit for the quarter, reflecting continued strong food packaging demand, while our Paper and Industrial Converted Products segment reported another sequential improvement in operating profit, although year-over-year results were off by 28 percent. In our Protective Solutions segment, we achieved a 42 percent improvement in operating profit driven by strong customer demand, while our Display and Packaging segment's results were modestly lower due to the divestiture of our Europe contract packaging business. Overall, the Company's bottom line results benefited from strong productivity and positive sales volume/mix. These positive factors were partially offset by a negative price/cost relationship, stemming from higher year-over-year recovered paper costs which primarily impacted our Paper and Industrial Converted Products segment, and increased interest expense.
"Finally, we achieved record cash flow from operations and free cash flow in 2020 reflecting our solid earnings performance and disciplined focus on managing working capital. Sonoco maintains a strong liquidity position and repaid
Fourth-Quarter Review
Net sales for the fourth quarter were
The GAAP net loss attributable to Sonoco in the fourth quarter was
Fourth-quarter GAAP results include after-tax charges of
Gross profits were
Segment Review
Sonoco reports its financial results in four 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/divestiture costs, 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 paperboard and thermoformed plastic); extruded and injection-molded plastic products; printed flexible packaging; global brand artwork management; and metal and peelable membrane ends and closures.
Fourth-quarter 2020 sales for the segment were
Fourth-quarter 2020 segment sales increased 10.1 percent compared to the prior-year's quarter driven by an almost 6 percent improvement in volume/mix, and sales added from the December 2019 acquisition of Thermoformed Engineered Quality (TEQ) and the August 2020 acquisition of Can Packaging. These increases were partially offset by lower selling prices. Sales in Global Rigid Paper Containers increased more than 12 percent, the vast majority of which was driven by higher volume due to consumers' growing preference for at-home meals. Flexible Packaging experienced almost 3 percent improvement in volume/mix also driven by strong demand for at-home meals which was partially offset by lower sales in the confection market due to pandemic-reduced convenience store foot traffic. Global Rigid Plastics sales increased from the acquisition of TEQ, partially offset by lower selling prices, while volume gains in food packaging were offset by lower industrial product volumes and a negative mix of business. Segment operating profit increased 47.3 percent compared to the prior-year quarter as strong productivity gains, improved volume/mix and the impact of acquisitions more than offset a negative price/cost relationship. Overall, segment operating margin increased by 281 basis points to 11.1 percent driven by the previously mentioned productivity gains.
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; retail packaging, including printed backer cards, thermoformed blisters and heat sealing equipment; and paper amenities, such as coasters and glass covers.
Fourth-quarter 2020 sales for this segment were
Sales declined 20.0 percent compared to the prior year’s quarter mostly due to the divestiture of our Europe contract packaging business, along with lower seasonal retail point-of-purchase display activity stemming from the impact of the pandemic on in-store promotions.
Segment operating profit declined
Paper and Industrial Converted Products
The Paper and Industrial Converted Products segment includes the following products: paperboard tubes, cores and cones; fiber-based construction tubes; wooden, metal and composite wire and cable reels and spools; and recycled paperboard, corrugating medium, recovered paper and material recycling services.
Fourth-quarter 2020 sales for the segment were
Segment sales increased 3.6 percent from the prior-year's quarter driven by an almost 2 percent improvement in volume/mix and higher selling prices. Global paperboard and corrugated medium demand improved slightly during the quarter offset by reduced recycled pulp international sales. Globally tube, core and cone volume/mix improved slightly in the quarter as demand growth in Europe, Asia, and Brazil, was only partially offset by a decline in demand in the U.S. and Canada.
Segment operating profit declined 28.0 percent from the prior year's quarter as strong productivity improvements and positive volume/mix were more than offset by a negative price/cost relationship stemming from increased recovered paper prices and higher operating costs. Segment operating margin declined 310 basis points to 7.1 percent.
Protective Solutions
The Protective Solutions segment includes the following products: custom-engineered, paperboard-based and molded foam protective packaging and components; and temperature-assured packaging.
Fourth-quarter 2020 sales were
Segment sales increased 17.1 percent from the prior-year's quarter due primarily to a nearly 16 percent improvement in volume/mix stemming from strong demand for temperature-assured, fiber-based and molded foam protective packaging. Segment operating profit improved 42.5 percent due to strong volume/mix and productivity improvements partially offset by a negative price/cost relationship and higher operating costs. Segment operating margin was 11.0 percent for the quarter, up from 9.0 percent in the prior year.
Corporate/Tax
Net interest expense for the fourth quarter of 2020 increased to
2020 Full-Year Results
2020 net sales were
GAAP net income attributable to Sonoco for 2020 was
Base earnings in 2020 were
2020 Cash Flow and Free Cash Flow
For 2020, cash generated from operations was
Net capital expenditures and cash dividends were
Free cash flow for 2020 was
As of December 31, 2020, total debt was
Full-Year 2021 and First Quarter Outlook
The ultimate impact of the COVID-19 pandemic on Sonoco's full-year 2021 results remains uncertain. In providing guidance, the Company is assuming that global business activity will begin to return to pre-pandemic levels after mid-2021. As a result, the Company is projecting full-year 2021 base earnings to be in the range of
Sonoco expects first-quarter 2021 base earnings to be in the range of
Full-year 2021 operating cash flow and free cash flow are expected to be in a range of
The Company’s 2021 cash flow guidance includes several key assumptions including no change in working capital balances during the year and
In addition, the Company is moving forward with the previously announced termination of the Sonoco Pension Plan for Inactive Participants. Following completion of a limited lump sum offering early in the second quarter of 2021, the Company expects to settle all remaining liabilities under this plan through the purchase of annuities in mid-2021. The Company anticipates making additional contributions to this plan of approximately
Although the Company believes the assumptions reflected in the range of guidance are reasonable, given uncertainty regarding the future performance of the overall economy, continued effects of the pandemic, and potential changes in raw material prices, other costs, and to the Company's effective tax rate, as well as other risks and uncertainties, including those described below, actual results could vary substantially.
As previously mentioned, Sonoco will change its operating and reporting structure in 2021 to reflect how it will manage business operations and resources going forward. This will lead to reported results being presented in two reportable segments: Consumer Packaging and Industrial Paper Packaging. Remaining businesses will be presented in an All Other group. The Protective Solutions and Display and Packaging segments will be eliminated and their businesses moved into the remaining two segments and All Other. Changes to the Consumer Packaging segment will include moving the TEQ healthcare packaging and Industrial Plastics business units to All Other. Industrial Paper Packaging will be relatively unchanged except that the Company's fiber protective packaging business unit will be added from the former Protective Solutions reporting segment. Finally, All Other will include our healthcare and protective packaging businesses, including TEQ, Sonoco ThermoSafe, consumer and automotive molded foam as well as Alloyd retail security and the U.S. Display and Packaging business units.
Commenting on the Company’s 2021 outlook, Coker said, "Entering 2021, we feel good about how our balanced mix of consumer- and industrial-related businesses are progressing despite the uncertain COVID-impacted economic outlook. The positive momentum we experienced at the end of 2020 seems to be continuing into the first quarter. Our Consumer Packaging segment, which is primarily focused on food packaging, should continue to benefit from consumers' at-home eating habits. Demand in our Industrial Paper Packaging served markets continues to show sequential improvement, although we continue to face a negative price/cost relationship due to escalating year-over-year recovered paper, freight and other operating costs. In All Other, we expect solid demand in our pharmaceutical and industrial markets. We are still in the early days of providing qualified cold-chain shipping solutions for FDA-approved COVID vaccines and therapeutics to the broader public, but we expect demand to expand as last-mile distribution systems become more organized.
"We're proud of how our people have grown comfortable operating in uncomfortable times. We remain confident that Sonoco is well-positioned for when the grip of the pandemic weakens and we'll continue to invest to reinforce the long-term potential of our core businesses, while remaining committed to returning value to our shareholders."
Conference Call Webcast
Management will host a conference call and webcast to further discuss these results beginning at 11 a.m. ET today. The live conference call and a corresponding presentation can be accessed via the Internet at www.sonoco.com, under the Investor Relations section, or at http://investor.sonoco.com. A telephonic replay of the call will be available starting at 2 p.m. ET, to U.S. callers at 855-859-2056 and international callers at +404-537-3406. The replay passcode for both U.S. and international calls is 2547419. The archived call will be available through February 21, 2021. The webcast call also will be archived in the Investor Relations section of Sonoco’s website.
About Sonoco
Founded in 1899, Sonoco (NYSE: SON) 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 approximately
Forward-looking Statements
Statements included 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, ” “assume,” “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, including the impact of potential changes in tariffs; potential impacts of the COVID-19 coronavirus on business, operations, and financial conditions; 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 and business 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; expected impact and costs of resolution of legal proceedings; extent of, and adequacy of provisions for, environmental liabilities and sustainability commitments; 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; expected impact of implementation of new accounting pronouncements; 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, including the impact of potential changes in tariffs and escalating trade wars, 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;
- impacts arising as a result of the COVID-19 Coronavirus global pandemic on our results of operations, financial condition, value of assets, liquidity, prospects, growth, and on the industries in which we operate and that we serve, resulting from, without limitation, recent and ongoing financial market volatility, potential governmental actions, changes in consumer behaviors and demand, changes in customer requirements, disruptions of the Company’s suppliers and supply chain, availability of labor and personnel, necessary modifications to operations and business, and uncertainties about the extent and duration of the pandemic;
- costs of labor;
- work stoppages due to labor disputes;
- success of new product development, introduction and sales;
- success of implementation of new manufacturing technologies and installation of manufacturing equipment, including the startup of new facilities and lines;
- 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, customer and supplier consolidation, and changes in competitors' pricing for products;
- financial conditions of customers and suppliers;
- ability to maintain or increase productivity levels, contain or reduce costs, and maintain positive price/cost relationships;
- ability to negotiate or retain contracts with customers, including in segments with concentration of sales volume;
- inventory management strategies of customers;
- timing of introduction of new products or product innovations by customers;
- collection of receivables from customers;
- ability to improve margins and leverage cash flows and financial position;
- 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 attract and retain talented and qualified employees, managers and executives;
- 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 interest rates and our borrowing costs;
- 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;
- timing of funding pension and postretirement benefit plan obligations;
- 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 tariffs, tax rates, and tax laws, regulations and interpretations thereof;
- the adoption of new, or changes in, accounting standards or interpretations;
- challenges and assessments from tax authorities resulting from differences in interpretation of tax laws, including income, sales and use, property, value added, employment, and other taxes;
- 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;
- ability to maintain effective internal controls over financial reporting;
- liability for and anticipated costs of resolution of legal proceedings;
- 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;
- failures of third party transportation providers to deliver our products to our customers or to deliver raw materials to us;
- substantially lower than normal crop yields;
- loss of consumer or investor confidence;
- ability to protect our intellectual property rights;
- changes in laws and regulations relating to packaging for food products and foods packaged therein, other actions and public concerns about products packaged in our containers, or chemicals or substances used in raw materials or in the manufacturing process;
- changing consumer attitudes toward plastic packaging;
- ability to meet sustainability targets and challenges in implementation;
- changing climate, climate change regulations and greenhouse gas effects;
- actions of domestic or foreign government agencies and changes in laws and regulations affecting the Company and increased costs of compliance;
- international, national and local economic and market conditions and levels of unemployment;
- economic disruptions resulting from terrorist activities and natural disasters; and
- accelerating inflation.
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 Securities and Exchange Commission. Such reports are available from the Securities and Exchange Commission’s public reference facilities and its website, www.sec.gov, and from the Company’s investor relations department and the Company’s website, www.sonoco.com.
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, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||||||||||
| Net sales | $ | 1,376,348 | $ | 1,308,850 | $ | 5,237,443 | $ | 5,374,207 | ||||||||||||
| Cost of sales | 1,101,592 | 1,061,963 | 4,191,104 | 4,316,378 | ||||||||||||||||
| Gross profit | 274,756 | 246,887 | 1,046,339 | 1,057,829 | ||||||||||||||||
| Selling, general and administrative expenses | 157,063 | 135,771 | 528,439 | 530,867 | ||||||||||||||||
| Restructuring/Asset impairment charges | 85,947 | 29,238 | 145,580 | 59,880 | ||||||||||||||||
| Loss on disposition of a business | 14,516 | — | 14,516 | — | ||||||||||||||||
| Operating Profit | 17,230 | 81,878 | 357,804 | 467,082 | ||||||||||||||||
| Non-operating pension costs | 7,510 | 5,912 | 30,142 | 24,713 | ||||||||||||||||
| Net interest expense | 18,759 | 15,510 | 72,070 | 61,603 | ||||||||||||||||
| (Loss)/Income before income taxes | (9,039 | ) | 60,456 | 255,592 | 380,766 | |||||||||||||||
| Provision for income taxes | 3,693 | 16,056 | 53,030 | 93,269 | ||||||||||||||||
| (Loss)/Income before equity in earnings of affiliates | (12,732 | ) | 44,400 | 202,562 | 287,497 | |||||||||||||||
| Equity in earnings of affiliates, net of tax | 1,449 | 931 | 4,679 | 5,171 | ||||||||||||||||
| Net (loss)/income | (11,283 | ) | 45,331 | 207,241 | 292,668 | |||||||||||||||
| Net (income)/loss attributable to noncontrolling interests | (359 | ) | (432 | ) | 222 | (883 | ) | |||||||||||||
| Net (loss)/ income attributable to Sonoco | $ | (11,642 | ) | $ | 44,899 | $ | 207,463 | $ | 291,785 | |||||||||||
| Weighted average common shares outstanding – diluted | 100,948 | 101,325 | 101,209 | 101,176 | ||||||||||||||||
| Diluted earnings per common share | $ | (0.12 | ) | $ | 0.44 | $ | 2.05 | $ | 2.88 | |||||||||||
| Dividends per common share | $ | 0.43 | $ | 0.43 | $ | 1.72 | $ | 1.70 | ||||||||||||
| FINANCIAL SEGMENT INFORMATION (Unaudited) | |||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||
| Net sales | |||||||||||||||||||||
| Consumer Packaging | $ | 616,133 | $ | 559,552 | $ | 2,402,907 | $ | 2,333,386 | |||||||||||||
| Display and Packaging | 109,416 | 136,722 | 475,685 | 554,125 | |||||||||||||||||
| Paper and Industrial Converted Products | 509,084 | 491,545 | 1,877,818 | 1,974,739 | |||||||||||||||||
| Protective Solutions | 141,715 | 121,031 | 481,033 | 511,957 | |||||||||||||||||
| Consolidated | $ | 1,376,348 | $ | 1,308,850 | $ | 5,237,443 | $ | 5,374,207 | |||||||||||||
| Income before interest and income taxes: | |||||||||||||||||||||
| Segment operating profit: | |||||||||||||||||||||
| Consumer Packaging | $ | 68,650 | $ | 46,615 | $ | 290,477 | $ | 228,416 | |||||||||||||
| Display and Packaging | 5,755 | 6,467 | 30,603 | 27,723 | |||||||||||||||||
| Paper and Industrial Converted Products | 35,987 | 50,009 | 154,330 | 219,052 | |||||||||||||||||
| Protective Solutions | 15,588 | 10,939 | 51,579 | 50,201 | |||||||||||||||||
| Restructuring/Asset impairment charges | (85,947 | ) | (29,238 | ) | (145,580 | ) | (59,880 | ) | |||||||||||||
| Loss on disposition of business | (14,516 | ) | — | (14,516 | ) | — | |||||||||||||||
| Other, net | (8,287 | ) | (2,914 | ) | (9,089 | ) | 1,570 | ||||||||||||||
| Consolidated | $ | 17,230 | $ | 81,878 | $ | 357,804 | $ | 467,082 | |||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| Twelve Months Ended | ||||||||||||||||
| December 31, 2020 | December 31, 2019 | |||||||||||||||
| Net income | $ | 207,241 | $ | 292,668 | ||||||||||||
| Asset impairment charges/losses on disposition of assets | 97,490 | 25,772 | ||||||||||||||
| Depreciation, depletion and amortization | 255,359 | 239,140 | ||||||||||||||
| Gain on adjustment of environmental reserve | — | (10,675 | ) | |||||||||||||
| Pension and postretirement plan contributions, net of non-cash expense | 17,562 | (178,493 | ) | |||||||||||||
| Changes in working capital | 51,465 | 36,863 | ||||||||||||||
| Changes in tax accounts | (11,972 | ) | 10,757 | |||||||||||||
| Other operating activity | 88,476 | 9,818 | ||||||||||||||
| Net cash provided by operating activities | 705,621 | 425,850 | ||||||||||||||
| Purchase of property, plant and equipment, net | (183,663 | ) | (181,320 | ) | ||||||||||||
| Cost of acquisitions, net of cash acquired | (49,261 | ) | (298,380 | ) | ||||||||||||
| Proceeds from the sale of business | 105,913 | — | ||||||||||||||
| Net debt (repayments)/ borrowings | (14,195 | ) | 267,261 | |||||||||||||
| Cash dividends | (172,626 | ) | (170,253 | ) | ||||||||||||
| Other, including effects of exchange rates on cash | 27,776 | (18,264 | ) | |||||||||||||
| Net increase in cash and cash equivalents | 419,565 | 24,894 | ||||||||||||||
| Cash and cash equivalents at beginning of period | $ | 145,283 | $ | 120,389 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 564,848 | $ | 145,283 | ||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||
| December 31, 2020 | December 31, 2019 | |||||||||||||||
| Assets | ||||||||||||||||
| Current Assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 564,848 | $ | 145,283 | ||||||||||||
| Trade accounts receivable, net of allowances | 658,808 | 698,149 | ||||||||||||||
| Other receivables | 103,636 | 113,754 | ||||||||||||||
| Inventories | 450,691 | 503,808 | ||||||||||||||
| Prepaid expenses and deferred income taxes | 52,564 | 60,202 | ||||||||||||||
| 1,830,547 | 1,521,196 | |||||||||||||||
| Property, plant and equipment, net | 1,244,110 | 1,286,842 | ||||||||||||||
| Goodwill | 1,389,255 | 1,429,346 | ||||||||||||||
| Other intangible assets, net | 321,934 | 388,292 | ||||||||||||||
| Other assets | 491,413 | 500,613 | ||||||||||||||
| $ | 5,277,259 | $ | 5,126,289 | |||||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||||
| Current Liabilities: | ||||||||||||||||
| Payable to suppliers and other payables | $ | 1,048,428 | $ | 904,878 | ||||||||||||
| Notes payable and current portion of long-term debt | 455,784 | 488,234 | ||||||||||||||
| Income taxes payable | 7,415 | 11,380 | ||||||||||||||
| 1,511,627 | 1,404,492 | |||||||||||||||
| Long-term debt, net of current portion | 1,244,440 | 1,193,135 | ||||||||||||||
| Pension and other postretirement benefits | 171,518 | 304,798 | ||||||||||||||
| Deferred income taxes and other | 439,146 | 408,159 | ||||||||||||||
| Total equity | 1,910,528 | 1,815,705 | ||||||||||||||
| $ | 5,277,259 | $ | 5,126,289 | |||||||||||||
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, non-operating pension costs, environmental charges, acquisition/divestiture-related costs, gains and losses on dispositions of businesses, excess insurance recoveries, certain income tax related events and other items, if any, the exclusion of which management believes improves comparability and analysis of the ongoing operating 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, except with respect to guidance, 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. First-quarter and full-year 2021 GAAP guidance are not provided in this release due to the likely occurrence of one or more of the following, the timing and magnitude of which we are unable to reliably forecast: possible gains or losses on the sale of businesses or other assets, restructuring costs and restructuring-related impairment charges, acquisition related costs, and the income tax effects of these items and/or other income tax-related events. These items could have a significant impact on the Company's future GAAP financial results.
| Non-GAAP Adjustments | |||||||||||||||||||||||||
| Three Months Ended December 31, 2020 | GAAP | Restructuring / Asset Impairment Charges(1) | Acquisition Related Costs(2) | Other Adjustments(3) | Base | ||||||||||||||||||||
| Operating profit | $ | 17,230 | $ | 85,947 | $ | 3,613 | $ | 19,190 | $ | 125,980 | |||||||||||||||
| Non-operating pension costs | 7,510 | — | — | (7,510 | ) | — | |||||||||||||||||||
| Interest expense, net | 18,759 | — | — | — | 18,759 | ||||||||||||||||||||
| (Loss)/Income before income taxes | (9,039 | ) | 85,947 | 3,613 | 26,700 | 107,221 | |||||||||||||||||||
| Provision for income taxes | 3,693 | 17,847 | 901 | 2,788 | 25,229 | ||||||||||||||||||||
| (Loss)/Income before equity in earnings of affiliates | (12,732 | ) | 68,100 | 2,712 | 23,912 | 81,992 | |||||||||||||||||||
| Equity in earnings of affiliates, net of taxes | 1,449 | — | — | — | 1,449 | ||||||||||||||||||||
| Net (loss)/income | (11,283 | ) | 68,100 | 2,712 | 23,912 | 83,441 | |||||||||||||||||||
| Net (income) attributable to noncontrolling interests | (359 | ) | (34 | ) | — | — | (393 | ) | |||||||||||||||||
| Net (loss)/income attributable to Sonoco | $ | (11,642 | ) | $ | 68,066 | $ | 2,712 | $ | 23,912 | $ | 83,048 | ||||||||||||||
| Per Diluted Share* | $ | (0.12 | ) | $ | 0.67 | $ | 0.03 | $ | 0.24 | $ | 0.82 | ||||||||||||||
| *Due to rounding individual items may not sum across | |||||||||||||||||||||||||
| Non-GAAP Adjustments | |||||||||||||||||||||||||
| Three Months Ended December 31, 2019 | GAAP | Restructuring / Asset Impairment Charges(1) | Acquisition Related Costs(2) | Other Adjustments(4) | Base | ||||||||||||||||||||
| Operating profit | 81,878 | 29,238 | 2,914 | — | 114,030 | ||||||||||||||||||||
| Non-operating pension costs | 5,912 | — | — | (5,912 | ) | — | |||||||||||||||||||
| Interest expense, net | 15,510 | — | — | — | 15,510 | ||||||||||||||||||||
| Income before income taxes | 60,456 | 29,238 | 2,914 | 5,912 | 98,520 | ||||||||||||||||||||
| Provision for income taxes | 16,056 | 7,770 | 115 | (1,120 | ) | 22,821 | |||||||||||||||||||
| Income before equity in earnings of affiliates | 44,400 | 21,468 | 2,799 | 7,032 | 75,699 | ||||||||||||||||||||
| Equity in earnings of affiliates, net of taxes | 931 | — | — | — | 931 | ||||||||||||||||||||
| Net income | 45,331 | 21,468 | 2,799 | 7,032 | 76,630 | ||||||||||||||||||||
| Net (income) attributable to noncontrolling interests | (432 | ) | 207 | — | — | (225 | ) | ||||||||||||||||||
| Net income attributable to Sonoco | $ | 44,899 | $ | 21,675 | $ | 2,799 | $ | 7,032 | $ | 76,405 | |||||||||||||||
| Per Diluted Share* | $ | 0.44 | $ | 0.21 | $ | 0.03 | $ | 0.07 | $ | 0.75 | |||||||||||||||
| *Due to rounding individual items may not sum across | |||||||||||||||||||||||||
| (1) Restructuring/Asset impairment charges are a recurring item as Sonoco’s restructuring actions 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. Additionally, 2020 includes net asset impairment charges totaling | ||||||||||
| (2) Includes costs related to acquisitions and potential acquisitions. | ||||||||||
| (3) Includes the pre-tax loss on the divestiture of the Company's contract packaging business in Europe of | ||||||||||
| (4) Primarily non-operating pension expense. | ||||||||||
| Non-GAAP Adjustments | |||||||||||||||||||||||||
| Twelve Months Ended December 31, 2020 | GAAP | Restructuring / Asset Impairment Charges(1) | Acquisition Related Costs(2) | Other Adjustments(3) | Base | ||||||||||||||||||||
| Operating profit | 357,804 | 145,580 | 4,671 | 18,934 | 526,989 | ||||||||||||||||||||
| Non-operating pension costs | 30,142 | — | — | (30,142 | ) | — | |||||||||||||||||||
| Interest expense, net | 72,070 | — | — | — | 72,070 | ||||||||||||||||||||
| Income before income taxes | 255,592 | 145,580 | 4,671 | 49,076 | 454,919 | ||||||||||||||||||||
| Provision for income taxes | 53,030 | 32,868 | 1,236 | 27,126 | 114,260 | ||||||||||||||||||||
| Income before equity in earnings of affiliates | 202,562 | 112,712 | 3,435 | 21,950 | 340,659 | ||||||||||||||||||||
| Equity in earnings of affiliates, net of taxes | 4,679 | — | — | — | 4,679 | ||||||||||||||||||||
| Net income | 207,241 | 112,712 | 3,435 | 21,950 | 345,338 | ||||||||||||||||||||
| Net (income) attributable to noncontrolling interests | 222 | (60 | ) | — | — | 162 | |||||||||||||||||||
| Net income attributable to Sonoco | $ | 207,463 | $ | 112,652 | $ | 3,435 | $ | 21,950 | $ | 345,500 | |||||||||||||||
| Per Diluted Share* | $ | 2.05 | $ | 1.11 | $ | 0.03 | $ | 0.22 | $ | 3.41 | |||||||||||||||
| *Due to rounding individual items may not sum across | Non-GAAP Adjustments | ||||||||||||||||||||||||
| Twelve Months Ended December 31, 2019 | GAAP | Restructuring / Asset Impairment Charges(1) | Acquisition Related Costs(2) | Other Adjustments(4) | Base | ||||||||||||||||||||
| Operating profit | 467,082 | 59,880 | 8,429 | (9,999 | ) | 525,392 | |||||||||||||||||||
| Non-operating pension costs | 24,713 | (24,713 | ) | — | |||||||||||||||||||||
| Interest expense, net | 61,603 | — | — | — | 61,603 | ||||||||||||||||||||
| Income before income taxes | 380,766 | 59,880 | 8,429 | 14,714 | 463,789 | ||||||||||||||||||||
| Provision for income taxes | 93,269 | 15,520 | 1,147 | 994 | 110,930 | ||||||||||||||||||||
| Income before equity in earnings of affiliates | 287,497 | 44,360 | 7,282 | 13,720 | 352,859 | ||||||||||||||||||||
| Equity in earnings of affiliates, net of taxes | 5,171 | — | — | — | 5,171 | ||||||||||||||||||||
| Net income | 292,668 | 44,360 | 7,282 | 13,720 | 358,030 | ||||||||||||||||||||
| Net (income) attributable to noncontrolling interests | (883 | ) | 51 | — | — | (832 | ) | ||||||||||||||||||
| Net income attributable to Sonoco | $ | 291,785 | $ | 44,411 | $ | 7,282 | $ | 13,720 | $ | 357,198 | |||||||||||||||
| Per Diluted Share* | $ | 2.88 | $ | 0.44 | $ | 0.07 | $ | 0.14 | $ | 3.53 | |||||||||||||||
| *Due to rounding individual items may not sum across | |||||||||||||||||||||||||
| (1) Restructuring/Asset impairment charges are a recurring item as Sonoco’s restructuring actions 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. Additionally, 2020 includes net asset impairment charges totaling | |||||||||||||||||||||||||
| (2) Includes costs related to acquisitions and potential acquisitions. | |||||||||||||||||||||||||
| (3) Includes the pre-tax loss on the divestiture of the Company's contract packaging business in Europe of | |||||||||||||||||||||||||
| (4) Primarily the gain related to the release of an environmental reserve and non-operating pension expense. | |||||||||||||||||||||||||
| Twelve Months Ended | |||||||||||||||
| Actual | Actual | ||||||||||||||
| FREE CASH FLOW* | December 31, 2020 | December 31, 2019 | |||||||||||||
| Net cash provided by operating activities | $ | 705,621 | $ | 425,850 | |||||||||||
| Purchase of property, plant and equipment, net | (183,663 | ) | (181,320 | ) | |||||||||||
| Free Cash Flow Before Dividends | $ | 521,958 | $ | 244,530 | |||||||||||
| Cash dividends | (172,626 | ) | (170,253 | ) | |||||||||||
| Free Cash Flow | $ | 349,332 | $ | 74,277 | |||||||||||
| Twelve Months Ended | |||||||||||||||
| Estimated Low End | Estimated High End | ||||||||||||||
| FREE CASH FLOW* | December 31, 2021 | December 31, 2021 | |||||||||||||
| Net cash provided by operating activities | $ | 570,000 | $ | 600,000 | |||||||||||
| Purchase of property, plant and equipment | (300,000 | ) | (300,000 | ) | |||||||||||
| Free Cash Flow | $ | 270,000 | $ | 300,000 | |||||||||||
| * Free Cash Flow is a non-GAAP measure that does not imply the amount of residual cash flow available for discretionary expenditures, as it excludes mandatory debt service requirements and other non-discretionary expenditures. In 2020, free cash flow was defined as cash flow from operations minus net capital expenditures and cash dividends. Net capital expenditures are defined as capital expenditures minus proceeds from, and/or plus costs incurred in, the disposition of capital assets. Beginning in 2021, the Company defines Free Cash Flow as cash from operating activities less net capital expenditures. | |||||||||||||||
FAQ
What were Sonoco's fourth-quarter earnings per share for 2020?
How did Sonoco's 2020 full-year earnings compare to 2019?
What is Sonoco's sales outlook for 2021?
What was the impact of the Europe contract packaging business divestiture on Sonoco?
What were Sonoco's cash flow results for 2020?
