Sonoco Reports Second Quarter 2021 Results
Sonoco (NYSE: SON) reported a GAAP net loss of $(3.34) per diluted share for Q2 2021, compared to earnings of $0.55 in the same period last year. The loss included $418.7 million in after-tax charges, primarily due to a non-cash pension settlement charge. However, base earnings increased to $0.84 per diluted share from $0.79. Q2 net sales rose 11% to $1.38 billion. The company expects Q3 base earnings between $0.87 and $0.93 and full-year earnings at $3.50 to $3.60 per share, maintaining previous guidance. Sonoco also committed to significant greenhouse gas emissions reductions by 2030.
- Base net income increased to $0.84 per diluted share from $0.79.
- Net sales grew by 11% year-over-year to $1.38 billion.
- Improved balance sheet with a reduction of total debt by approximately $100 million.
- Significant increase in operating profit in the Industrial Paper Packaging segment by 74%.
- GAAP net loss of $(3.34) per diluted share compared to earnings of $0.55 in 2020.
- Total cash flow from operations decreased significantly to $102 million from $282 million the prior year.
- Free cash flow dropped to $9.4 million from $210.4 million year-over-year.
HARTSVILLE, S.C., July 22, 2021 (GLOBE NEWSWIRE) -- Sonoco (NYSE: SON), one of the largest diversified global packaging companies, today reported financial results for its second quarter ended July 4, 2021.
Second Quarter Highlights
- Second quarter 2021 GAAP net loss per diluted share was
$(3.34) , compared with earnings per diluted share of$0.55 in 2020. - Second quarter 2021 GAAP net loss included net after-tax charges of
$418.7 million , due mostly to a non-cash pension settlement charge of$406.5 million related to the Company's settlement of the outstanding pension liabilities of the Sonoco Pension Plan for Inactive Participants (the "Inactive Plan"), and a$15.0 million expense related to the early extinguishment of debt. In the second quarter of 2020, GAAP earnings included net after-tax charges of$24.9 million related mostly to restructuring actions and non-operating pension costs. - Base net income attributable to Sonoco (base earnings) for second quarter 2021 was
$0.84 per diluted share, compared with$0.79 in 2020. (See base earnings definition, explanation and reconciliation to GAAP earnings later in this release.) Sonoco previously provided second quarter 2021 base earnings guidance of$0.82 t o$0.88 per diluted share. - Second quarter 2021 net sales were
$1.38 billion , compared with$1.25 billion in 2020. - Cash flow from operations was
$102.0 million in the first half of 2021, compared to$282.0 million in the first half of 2020. Free cash flow was$9.4 million in the first half of 2021, compared with$210.4 million in the first half of 2020. Free cash flow for the first half of 2021 included pension contributions totaling$133 million made in the second quarter as part of the final settlement of the Inactive Plan's liabilities. (See free cash flow definition and reconciliation to cash flow from operations later in this release.) - On July 8, 2021, the Company committed to reduce absolute scope 1 and 2 greenhouse gas emissions by 25 percent and scope 3 greenhouse gas emissions by 13.5 percent by 2030 in line with the Paris Climate Agreement — to limit global temperatures to warming to well below 2-degree C. These emission reduction goals were validated by the Science Based Targets initiative (SBTi).
2021 Third Quarter and Full-Year Guidance
- Sonoco expects third quarter base earnings per diluted share to be in a range of
$0.87 t o$0.93 and expects full-year base earnings per diluted share to be in a range of$3.50 t o$3.60 . This full-year outlook is unchanged from previous guidance. Third quarter and full-year base earnings per diluted share in 2020 were$0.79 and$3.41 , respectively. - Excluding the
$133 million of cash contributions to the Inactive Plan, full-year 2021 cash provided from operations and free cash flow guidance remains unchanged in a range of$570 million to$600 million and$270 million to$300 million , respectively.
Note: Third-quarter and full-year 2021 GAAP guidance is 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: restructuring costs and restructuring-related impairment charges, acquisition/divestiture-related costs, gains or losses on the sale of businesses or other assets, 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 results.
CEO Comments
Commenting on the Company’s second quarter performance, Howard Coker, President and Chief Executive Officer, said, "As anticipated, we reported a GAAP loss in the second quarter due to pension settlement charges associated with the purchase of group annuity contracts and the distribution of lump-sum payments, which resulted in our pension obligations being reduced by approximately
"Sonoco's balanced mix of consumer and industrial packaging businesses achieved second quarter base earnings results which were well within our guidance range despite unprecedented raw material and non-material inflation and some continued impact of COVID-19 on certain of our served markets. Net sales grew 11 percent in the quarter as volume/mix improved approximately 8 percent due to solid demand recovery in most of our industrial-related businesses. Base earnings benefited from volume/mix growth and productivity improvements, which more than offset a negative price/cost relationship and the impact from the divestiture of our former display and packaging businesses.
"While we expected demand in our Consumer Packaging segment to normalize from the pantry-stocking records set during the second quarter of last year, segment operating profit declined by 29 percent due primarily to a negative price/cost relationship stemming from escalating resin, film, metals, packaging and freight costs. On the other hand, our Industrial Paper Packaging segment benefited from strong global demand, which helped boost segment operating profit by 74 percent compared to last year's second quarter. Our All Other group of businesses, which consists of protective, healthcare, retail and industrial plastics units, also benefited from the economic recovery as operating profit improved 23 percent."
Second Quarter Review
Net sales for the second quarter of 2021 were
GAAP net loss attributable to Sonoco in the second quarter of 2021 was
Gross profit was
Segment Review
Sonoco reports its financial results in two segments: Consumer Packaging and Industrial Paper Packaging, with all remaining businesses reported as All Other. Segment and All Other operating results do not include restructuring and asset impairment charges, acquisition expenses, interest income and expense, income taxes, non-operating pension costs and settlement charges, or certain other items, if any, the exclusion of which the Company believes improves comparability and analysis. Note that in all instances prior period results have been recast to conform to current-year presentation.
Consumer Packaging
Sonoco’s Consumer Packaging segment primarily serves prepared and fresh food markets along with other packaging for direct consumer products and includes the following products and services: round and shaped rigid paper containers; metal and peelable membrane ends and closures; thermoformed plastic trays and containers; printed flexible packaging; and global brand artwork management.
Second quarter 2021 sales for the segment were
Segment sales increased 4.3 percent compared to the prior year's quarter as higher selling prices, mostly implemented to help offset inflation, acquisition sales from Can Packaging and a positive impact from foreign exchange more than offset an approximate 2 percent decrease in volume/mix. Global rigid paper containers volume/mix declined almost 6 percent in the second quarter as food packaging volumes normalized to pre-pandemic levels compared to last year's pantry-packing demand when consumers were primarily eating at home. Flexible packaging volume modestly improved due to a rebound in confectionery and food service-related markets, which was partially offset by a negative mix of business. In this segment's plastics business, volume/mix also improved on higher demand for fresh, prepared and specialty food trays.
Segment operating profit decreased 29.2 percent compared to the prior year's quarter as a negative price/cost relationship stemming from higher raw material and non-material inflation along with lower volume/mix more than offset productivity improvements and profits from the Can Packaging acquisition. As a result, segment operating margin declined to 10.0 percent in the quarter from the record 14.7 percent in the 2020 period.
Industrial Paper Packaging
The Industrial Paper Packaging segment includes the following products: fiber-based tubes, cones, and cores; fiber-based construction tubes; fiber-based protective packaging and components; wooden, metal and composite wire and cable reels and spools; and recycled paperboard, corrugating medium, recovered paper and material recycling services.
Second quarter 2021 sales for the segment were
Segment sales increased 33.7 percent from the prior year's quarter largely due to higher selling prices implemented to offset higher raw material and non-material inflation. In addition, almost half of the segment sales increase, approximately 14 percent, was attributable to improved volume/mix. Global tube and core volume/mix increased sales approximately 13 percent, driven by a global rebound in demand for our products. In addition, global paperboard demand improved approximately 4 percent due to demand from both internal converting and trade markets.
Segment operating profit improved 74.2 percent from the prior year's quarter, driven by positive volume/mix and strong productivity improvements. Segment operating margin improved to 9.5 percent from the prior year quarter's 7.3 percent.
All Other
Businesses grouped as All Other include healthcare, protective and retail packaging and industrial plastic products. These businesses include the following products and services: thermoformed rigid plastic trays and devices; custom-engineered molded foam protective packaging and components; temperature-assured packaging; injection molded and extruded containers, spools and parts; retail packaging, including printed backer cards, thermoformed blisters and heat sealing equipment; and paper amenities.
Second quarter 2021 sales were
Sales declined 18.8 percent compared to last year’s quarter due primarily to the disposition of the display and packaging businesses. Excluding the impact of the display and packaging divestiture, volume/mix increased sales around 32 percent, driven by improvements in molded foam products, industrial plastics, temperature-assured packaging, and retail and healthcare packaging.
Operating profit for the combined businesses increased by 23.0 percent from the prior-year quarter due to the volume/mix gains and strong productivity, partially offset by a negative price/cost relationship stemming from higher resin-based raw material costs along with the impact from the divested display and packaging businesses. Operating margin increased to 6.2 percent in the quarter from 4.1 percent in 2020.
Corporate/Tax
GAAP net interest expense for the second quarter of 2021 decreased to
Year-to-date Results
For the first six months of 2021, net sales were
GAAP net loss attributable to Sonoco for the first half of 2021 was
Base earnings for the first six months of 2021 were
Current year-to-date gross profit was
Cash Flow and Free Cash Flow
Cash generated from operations for the first six months of 2021 was
In addition, changes in net working capital used
Free cash flow for the first six months of 2021 was a provision of
The Company continues to provide value to its shareholders through cash dividends, which were
As of July 4, 2021, total debt was approximately
Third Quarter and Full-Year 2021 Outlook
The Company projects third quarter and full-year 2021 base earnings to be in the range of
As previously mentioned, the Company made
Although the Company believes the assumptions reflected in the range of guidance are reasonable, given the unprecedented uncertainty regarding raw material and non-material inflation as well as the impact of the COVID-19 pandemic on global supply chains along with other risks and uncertainties, including those described further below, actual results could vary substantially.
Commenting on the Company's outlook, Coker said, "As we enter the second half of 2021, we remain confident that our business will continue to benefit from the post-pandemic economic recovery. In our consumer-related businesses, we expect volumes to remain above pre-pandemic levels despite more normalized demand for food packaging as consumers moderate at-home eating patterns, while certain COVID-impacted markets, such as confectionery, food service and construction products should continue to benefit. We also expect further recovery in our industrial-served markets as illustrated by the historically high backlogs for uncoated recycled paperboard in the U.S. and Canada and demand for global tubes, cores and cones strengthening to pre-pandemic levels.
"Our biggest challenge for the rest of 2021 is our continuing battle to manage escalating raw material and non-material inflation. While we currently are behind the price/cost curve in several of our businesses, we are aggressively taking actions to drive productivity, control costs and implement necessary price increases to fully recover all commodity and other cost increases.
"We believe Sonoco is well positioned given our resiliency over the last year and improving trends in our primary served markets. Our strong financial position supports our value-creation strategy to invest in ourselves to drive growth and margin improvement while consistently returning cash 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 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 4595796. The archived call will be available through August 1, 2021. The webcast call also will be archived in the Investor Relations section of Sonoco’s website.
About Sonoco
Founded in 1899, Sonoco is a global provider of consumer, industrial, healthcare and protective packaging. 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,” "committed," “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; 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; consumer and customer actions in connection with the COVID-19 pandemic; market leadership; research and development spending; extent of, and adequacy of provisions for, environmental liabilities; commitments to reduce greenhouse gas emissions; 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, 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, 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;
- ability to meet commitments to reduce greenhouse gas emissions;
- 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, 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 | Six Months Ended | ||||||||||||||||||
| July 4, 2021 | June 28, 2020 | July 4, 2021 | June 28, 2020 | ||||||||||||||||
| Net sales | $ | 1,382,754 | $ | 1,245,485 | $ | 2,736,058 | $ | 2,548,781 | |||||||||||
| Cost of sales | 1,120,101 | 997,502 | 2,195,504 | 2,034,208 | |||||||||||||||
| Gross profit | 262,653 | 247,983 | 540,554 | 514,573 | |||||||||||||||
| Selling, general and administrative expenses | 128,807 | 121,371 | 274,037 | 245,259 | |||||||||||||||
| Restructuring/Asset impairment (income)/charges | (1,445 | ) | 22,885 | 5,401 | 35,484 | ||||||||||||||
| Loss on disposition of assets | — | — | 5,516 | — | |||||||||||||||
| Operating profit | $ | 135,291 | $ | 103,727 | $ | 255,600 | $ | 233,830 | |||||||||||
| Non-operating pension cost | 555,009 | 7,600 | 562,293 | 15,179 | |||||||||||||||
| Net interest expense | 14,794 | 18,685 | 32,525 | 34,730 | |||||||||||||||
| Loss from the early extinguishment of debt | 20,184 | — | 20,184 | — | |||||||||||||||
| (Loss)/Income before income taxes | (454,696 | ) | 77,442 | (359,402 | ) | 183,921 | |||||||||||||
| (Benefit)/Provision for income taxes | (118,151 | ) | 23,230 | (94,106 | ) | 49,986 | |||||||||||||
| (Loss)/Income before equity in earnings of affiliates | (336,545 | ) | 54,212 | (265,296 | ) | 133,935 | |||||||||||||
| Equity in earnings of affiliates, net of tax | 2,306 | 778 | 3,350 | 1,291 | |||||||||||||||
| Net (loss)/income | (334,239 | ) | 54,990 | (261,946 | ) | 135,226 | |||||||||||||
| Net loss attributable to noncontrolling interests | 169 | 221 | 172 | 430 | |||||||||||||||
| Net (loss)/ income attributable to Sonoco | $ | (334,070 | ) | $ | 55,211 | $ | (261,774 | ) | $ | 135,656 | |||||||||
| Weighted average common shares outstanding – diluted | 100,082 | 101,109 | 100,571 | 101,109 | |||||||||||||||
| Diluted (loss)/earnings per common share | $ | (3.34 | ) | $ | 0.55 | $ | (2.60 | ) | $ | 1.34 | |||||||||
| Dividends per common share | $ | 0.45 | $ | 0.43 | $ | 0.90 | $ | 0.86 | |||||||||||
| FINANCIAL SEGMENT INFORMATION (Unaudited) | ||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| July 4, 2021 | June 28, 2020 | July 4, 2021 | June 28, 2020 | |||||||||||||||||
| Net sales | ||||||||||||||||||||
| Consumer Packaging | $ | 597,803 | $ | 573,166 | $ | 1,180,556 | $ | 1,113,735 | ||||||||||||
| Industrial Paper Packaging | 608,532 | 455,026 | 1,173,929 | 957,517 | ||||||||||||||||
| All Other | 176,419 | 217,293 | 381,573 | 477,529 | ||||||||||||||||
| Consolidated | $ | 1,382,754 | $ | 1,245,485 | $ | 2,736,058 | $ | 2,548,781 | ||||||||||||
| Segment operating profit: | ||||||||||||||||||||
| Consumer Packaging | $ | 59,813 | $ | 84,449 | $ | 135,423 | $ | 148,205 | ||||||||||||
| Industrial Paper Packaging | 57,885 | 33,235 | 108,071 | 92,836 | ||||||||||||||||
| All Other | 10,912 | 8,872 | 24,783 | 29,427 | ||||||||||||||||
| Restructuring/Asset impairment gains/(charges) | 1,445 | (22,885 | ) | (5,401 | ) | (35,484 | ) | |||||||||||||
| Other non-base income/(charges), net | 5,236 | 56 | (7,276 | ) | (1,154 | ) | ||||||||||||||
| Consolidated | $ | 135,291 | $ | 103,727 | $ | 255,600 | $ | 233,830 | ||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) | |||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Six Months Ended | |||||||||||||||||||||
| July 4, 2021 | June 28, 2020 | ||||||||||||||||||||
| Net (loss)/income | $ | (261,946 | ) | $ | 135,226 | ||||||||||||||||
| Asset impairment charges/losses on disposition of assets and divestiture of a business | 8,612 | 6,494 | |||||||||||||||||||
| Depreciation, depletion and amortization | 121,792 | 123,447 | |||||||||||||||||||
| Pension and postretirement plan (contributions), net of non-cash expense | 413,945 | (1,970 | ) | ||||||||||||||||||
| Changes in working capital | (47,118 | ) | (27,656 | ) | |||||||||||||||||
| Changes in tax accounts | (146,277 | ) | 28,186 | ||||||||||||||||||
| Other operating activity | 12,945 | 18,264 | |||||||||||||||||||
| Net cash provided by operating activities | $ | 101,953 | $ | 281,991 | |||||||||||||||||
| Purchase of property, plant and equipment, net | (92,526 | ) | (71,572 | ) | |||||||||||||||||
| Proceeds from disposition of a business | 86,071 | — | |||||||||||||||||||
| Cost of acquisitions, net of cash acquired | (2,353 | ) | (3,787 | ) | |||||||||||||||||
| Net debt repayments | (112,864 | ) | 585,169 | ||||||||||||||||||
| Excess cash costs of early extinguishment of debt | (20,111 | ) | — | ||||||||||||||||||
| Cash dividends paid | (90,401 | ) | (86,337 | ) | |||||||||||||||||
| Payments made to repurchase shares | (159,571 | ) | — | ||||||||||||||||||
| Other, including effects of exchange rates on cash | (11,517 | ) | 6,525 | ||||||||||||||||||
| Net (decrease)/increase in cash and cash equivalents | $ | (301,319 | ) | $ | 711,989 | ||||||||||||||||
| Cash and cash equivalents at beginning of period | 564,848 | 145,283 | |||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 263,529 | $ | 857,272 | |||||||||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| July 4, 2021 | December 31, 2020 | ||||||||||||||||||||
| Assets | |||||||||||||||||||||
| Current Assets: | |||||||||||||||||||||
| Cash and cash equivalents | $ | 263,529 | $ | 564,848 | |||||||||||||||||
| Trade accounts receivable, net of allowances | 727,967 | 658,808 | |||||||||||||||||||
| Other receivables | 100,060 | 103,636 | |||||||||||||||||||
| Inventories | 503,932 | 450,691 | |||||||||||||||||||
| Prepaid expenses | 51,354 | 52,564 | |||||||||||||||||||
| $ | 1,646,842 | $ | 1,830,547 | ||||||||||||||||||
| Property, plant and equipment, net | 1,233,065 | 1,244,110 | |||||||||||||||||||
| Right of use asset-operating leases | 271,241 | 296,020 | |||||||||||||||||||
| Goodwill | 1,333,400 | 1,389,255 | |||||||||||||||||||
| Other intangible assets, net | 295,193 | 321,934 | |||||||||||||||||||
| Other assets | 214,301 | 195,393 | |||||||||||||||||||
| $ | 4,994,042 | $ | 5,277,259 | ||||||||||||||||||
| Liabilities and Shareholders’ Equity | |||||||||||||||||||||
| Current Liabilities: | |||||||||||||||||||||
| Payable to suppliers and other payables | $ | 992,224 | $ | 1,048,428 | |||||||||||||||||
| Notes payable and current portion of long-term debt | 404,029 | 455,784 | |||||||||||||||||||
| Income taxes payable | 8,654 | 7,415 | |||||||||||||||||||
| $ | 1,404,907 | $ | 1,511,627 | ||||||||||||||||||
| Long-term debt, net of current portion | 1,194,063 | 1,244,440 | |||||||||||||||||||
| Noncurrent operating lease liabilities | 237,447 | 262,048 | |||||||||||||||||||
| Pension and other postretirement benefits | 165,997 | 171,518 | |||||||||||||||||||
| Deferred income taxes and other | 169,195 | 177,098 | |||||||||||||||||||
| Total equity | 1,822,433 | 1,910,528 | |||||||||||||||||||
| $ | 4,994,042 | $ | 5,277,259 | ||||||||||||||||||
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, including the associated tax effects, relating to restructuring initiatives, asset impairment charges, non-operating pension costs or income, environmental reserve charges/releases, acquisition/divestiture-related costs, gains or losses from the disposition of businesses, excess property insurance recoveries, and certain other items, if any, including other income tax-related adjustments and/or events, the exclusion of which management believes improves comparability and analysis of the ongoing operating performance of the business. These adjustments, which are referred to as "non-base", 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 plan/forecast 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 directly comparable GAAP financial measure. Whenever reviewing a non-GAAP financial measure, investors are encouraged to fully review and consider the related reconciliation as detailed below. Third-quarter 2021 GAAP guidance is 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: restructuring costs and restructuring-related impairment charges, acquisition related costs, possible gains or losses on the sale of businesses or other assets, 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 July 4, 2021 | GAAP | Restructuring / Asset Impairment Charges(1) | Other Adjustments(2) | Base | |||||||||||||||
| Operating profit | $ | 135,291 | $ | (1,445 | ) | $ | (5,236 | ) | $ | 128,610 | |||||||||
| Non-operating pension costs | 555,009 | — | (555,009 | ) | — | ||||||||||||||
| Interest expense, net | 14,794 | — | 2,165 | 16,959 | |||||||||||||||
| Loss from the early extinguishment of debt | 20,184 | — | (20,184 | ) | — | ||||||||||||||
| (Loss)/Income before income taxes | (454,696 | ) | (1,445 | ) | 567,792 | 111,651 | |||||||||||||
| (Benefit)/Provision for income taxes | (118,151 | ) | 715 | 146,939 | 29,503 | ||||||||||||||
| (Loss)/Income before equity in earnings of affiliates | (336,545 | ) | (2,160 | ) | 420,853 | 82,148 | |||||||||||||
| Equity in earnings of affiliates, net of taxes | 2,306 | — | — | 2,306 | |||||||||||||||
| Net (loss)/income | (334,239 | ) | (2,160 | ) | 420,853 | 84,454 | |||||||||||||
| Net loss attributable to noncontrolling interests | 169 | — | — | 169 | |||||||||||||||
| Net (loss)/income attributable to Sonoco | $ | (334,070 | ) | $ | (2,160 | ) | $ | 420,853 | $ | 84,623 | |||||||||
| Diluted weighted average common shares outstanding (3): | 100,082 | — | 543 | 100,625 | |||||||||||||||
| Per Diluted Share* | $ | (3.34 | ) | $ | (0.02 | ) | $ | 4.18 | $ | 0.84 | |||||||||
| *Due to rounding individual items may not sum across | |||||||||||||||||||
| Non-GAAP Adjustments | |||||||||||||||||||
| Three Months Ended June 28, 2020 | GAAP | Restructuring / Asset Impairment Charges(1) | Other Adjustments(4) | Base | |||||||||||||||
| Operating profit | $ | 103,727 | $ | 22,885 | $ | (56 | ) | $ | 126,556 | ||||||||||
| Non-operating pension costs | 7,600 | — | (7,600 | ) | — | ||||||||||||||
| Interest expense, net | 18,685 | — | — | 18,685 | |||||||||||||||
| Income before income taxes | 77,442 | 22,885 | 7,544 | 107,871 | |||||||||||||||
| Provision for income taxes | 23,230 | 6,224 | (717 | ) | 28,737 | ||||||||||||||
| Income before equity in earnings of affiliates | 54,212 | 16,661 | 8,261 | 79,134 | |||||||||||||||
| Equity in earnings of affiliates, net of taxes | 778 | — | — | 778 | |||||||||||||||
| Net income | 54,990 | 16,661 | 8,261 | 79,912 | |||||||||||||||
| Net loss/(income) attributable to noncontrolling interests | 221 | (5 | ) | — | 216 | ||||||||||||||
| Net income attributable to Sonoco | $ | 55,211 | $ | 16,656 | $ | 8,261 | $ | 80,128 | |||||||||||
| Per Diluted Share* | $ | 0.55 | $ | 0.16 | $ | 0.08 | $ | 0.79 | |||||||||||
| *Due to rounding individual items may not sum across | |||||||||||||||||||
| (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. In the second quarter of 2021 gains totaling approximately | |||||||||
| (2) Includes non-operating pension costs, which include | |||||||||
| (3) Due to the magnitude of Non-Base losses in the second quarter 2021, the Company reported a GAAP Net Loss Attributable to Sonoco. In instances where a company has a net loss, GAAP requires that the company shall not consider any unexercised share awards or other like instruments dilutive for purposes of calculating weighted average shares outstanding. Accordingly, the Company did not consider any unexercised share awards dilutive in calculating weighted average shares outstanding for GAAP purposes in the table above, which resulted in Basic Weighted Average Shares Outstanding and Diluted Weighted Average Common Shares Outstanding being the same. However, the Company also presents Base Net Income Attributable to Sonoco, which excludes the net Non-Base items. In order to maintain consistency in the computation of Base Diluted EPS, unexercised stock instruments that meet GAAP requirements for dilution were considered dilutive to the same extent they would be if GAAP Net Income Attributable to Sonoco were equal to Base Net Income Attributable to Sonoco. | |||||||||
| (4) Consists of non-operating pension costs, costs related to actual and potential acquisitions and divestitures, the anticipated impact of the settlement of a U.S. Tax Audit, and tax benefits related primarily to a tax rate change. | |||||||||
| Non-GAAP Adjustments | |||||||||||||||||||
| Six months ended July 4, 2021 | GAAP | Restructuring / Asset Impairment Charges(1) | Other Adjustments(2) | Base | |||||||||||||||
| Operating profit | $ | 255,600 | $ | 5,401 | $ | 7,276 | $ | 268,277 | |||||||||||
| Non-operating pension costs | 562,293 | — | (562,293 | ) | — | ||||||||||||||
| Interest expense, net | 32,525 | — | 2,165 | 34,690 | |||||||||||||||
| Loss from the early extinguishment of debt | 20,184 | — | (20,184 | ) | — | ||||||||||||||
| (Loss)/Income before income taxes | (359,402 | ) | 5,401 | 587,588 | 233,587 | ||||||||||||||
| (Benefit)/Provision for income taxes | (94,106 | ) | 2,341 | 152,572 | 60,807 | ||||||||||||||
| (Loss)/Income before equity in earnings of affiliates | (265,296 | ) | 3,060 | 435,016 | 172,780 | ||||||||||||||
| Equity in earnings of affiliates, net of taxes | 3,350 | — | — | 3,350 | |||||||||||||||
| Net (loss)/income | (261,946 | ) | 3,060 | 435,016 | 176,130 | ||||||||||||||
| Net loss attributable to noncontrolling interests | 172 | — | — | 172 | |||||||||||||||
| Net (loss)/income attributable to Sonoco | $ | (261,774 | ) | $ | 3,060 | $ | 435,016 | $ | 176,302 | ||||||||||
| Diluted weighted average common shares outstanding (3): | 100,571 | — | 498 | 101,069 | |||||||||||||||
| Per Diluted Share* | $ | (2.60 | ) | $ | 0.03 | $ | 4.30 | $ | 1.74 | ||||||||||
| *Due to rounding individual items may not sum across | |||||||||||||||||||
| Non-GAAP Adjustments | |||||||||||||||||||
| Six months ended June 28, 2020 | GAAP | Restructuring / Asset Impairment Charges(1) | Other Adjustments(4) | Base | |||||||||||||||
| Operating profit | $ | 233,830 | $ | 35,484 | $ | 1,154 | $ | 270,468 | |||||||||||
| Non-operating pension costs | 15,179 | — | (15,179 | ) | — | ||||||||||||||
| Interest expense, net | 34,730 | — | — | 34,730 | |||||||||||||||
| Income before income taxes | 183,921 | 35,484 | 16,333 | 235,738 | |||||||||||||||
| Provision for income taxes | 49,986 | 9,353 | 2,683 | 62,022 | |||||||||||||||
| Income before equity in earnings of affiliates | 133,935 | 26,131 | 13,650 | 173,716 | |||||||||||||||
| Equity in earnings of affiliates, net of taxes | 1,291 | — | — | 1,291 | |||||||||||||||
| Net income | 135,226 | 26,131 | 13,650 | 175,007 | |||||||||||||||
| Net (income) attributable to noncontrolling interests | 430 | (17 | ) | — | 413 | ||||||||||||||
| Net income attributable to Sonoco | $ | 135,656 | $ | 26,114 | $ | 13,650 | $ | 175,420 | |||||||||||
| Per Diluted Share* | $ | 1.34 | $ | 0.26 | $ | 0.14 | $ | 1.73 | |||||||||||
| *Due to rounding individual items may not sum across | |||||||||||||||||||
| (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. In the first six months of 2021 restructuring and asset impairment charges, mostly related to asset write-offs and severance, totaled approximately | |||||
| (2) Includes non-operating pension costs, which include | |||||
| (3) Due to the magnitude of Non-Base losses in the second quarter 2021, the Company reported a GAAP Net Loss Attributable to Sonoco. In instances where a company has a net loss, GAAP requires that the company shall not consider any unexercised share awards or other like instruments dilutive for purposes of calculating weighted average shares outstanding. Accordingly, the Company did not consider any unexercised share awards dilutive in calculating weighted average shares outstanding for GAAP purposes in the table above, which resulted in Basic Weighted Average Shares Outstanding and Diluted Weighted Average Common Shares Outstanding being the same. However, the Company also presents Base Net Income Attributable to Sonoco, which excludes the net Non-Base items. In order to maintain consistency in the computation of Base Diluted EPS, unexercised stock instruments that meet GAAP requirements for dilution were considered dilutive to the same extent they would be if GAAP Net Income Attributable to Sonoco were equal to Base Net Income Attributable to Sonoco. | |||||
| (4) Consists of non-operating pension costs, costs related to actual and potential acquisitions and divestitures, the anticipated impact of the settlement of a U.S. Tax Audit, and tax benefits related primarily to a tax rate change. | |||||
| Six Months Ended | ||||||||||||||||||
| FREE CASH FLOW* | July 4, 2021 | June 28, 2020 | ||||||||||||||||
| Net cash provided by operating activities | $ | 101,953 | $ | 281,991 | ||||||||||||||
| Purchase of property, plant and equipment, net | (92,526 | ) | (71,572 | ) | ||||||||||||||
| Free Cash Flow | $ | 9,427 | $ | 210,419 | ||||||||||||||
| Year Ended | ||||||||||||||||||
| Estimated Low End | Estimated High End | Actual | ||||||||||||||||
| FREE CASH FLOW* | December 31, 2021 | December 31, 2021 | December 31, 2020 | |||||||||||||||
| Net Cash provided by operating activities | $ | 437,000 | $ | 467,000 | $ | 705,621 | ||||||||||||
| Add: Pension-settlement-related contribution | 133,000 | 133,000 | — | |||||||||||||||
| Net cash provided by operating activities excluding pension-settlement-related contribution | $ | 570,000 | $ | 600,000 | $ | 705,621 | ||||||||||||
| Purchase of property, plant and equipment, net | (300,000 | ) | (300,000 | ) | (181,161 | ) | ||||||||||||
| Free Cash Flow* | $ | 270,000 | $ | 300,000 | $ | 524,460 | ||||||||||||
| * Free Cash Flow is a non-GAAP measure that does not imply the amount of residual cash flow available for discretionary expenditures, as both it and net cash provided by operating activities do not include mandatory debt service requirements and other non-discretionary expenditures. Note that this is the Company's definition of this metric and may not be comparable to similarly named metrics of other organizations. | ||||||||||||||||||
FAQ
What were Sonoco's earnings per share for Q2 2021?
How did Sonoco's net sales perform in Q2 2021?
What is the full-year earnings outlook for Sonoco in 2021?
How much did Sonoco reduce its total debt by?
What initiatives has Sonoco taken to address greenhouse gas emissions?
