Sonoco Reports Strong First Quarter Results: Raises Full Year 2023 Guidance
HARTSVILLE, S.C., May 01, 2023 (GLOBE NEWSWIRE) -- Sonoco Products Company (“Sonoco” or the “Company”) (NYSE: SON), one of the largest sustainable global packaging companies, today reported financial results for its first quarter ended April 2, 2023.
Highlights
- First-quarter results met the high end of the previously provided quarterly guidance
- Raising full year guidance based on strength of operating model
- Continued progress on strategic priorities including portfolio optimization
- Increased quarterly cash dividend to
$0.51 per share; 40th straight year of annual dividend increases - Released annual Corporate Responsibility Report, which highlighted commitments to ESG initiatives
| First Quarter 2023Consolidated Financial Results | ||||||||
| (Dollars in millions except per share data) | ||||||||
| Three Months Ended | ||||||||
| GAAP Results | April 2, 2023 | April 3, 2022 | Change | |||||
| Net sales | $ | 1,730 | $ | 1,771 | (2 | )% | ||
| Operating profit | $ | 230 | $ | 169 | 36 | % | ||
| Net income attributable to Sonoco | $ | 148 | $ | 115 | 29 | % | ||
| EPS (diluted) | $ | 1.50 | $ | 1.17 | 28 | % | ||
| Three Months Ended | ||||||||
| Non-GAAP Results(1) | April 2, 2023 | April 3, 2022 | Change | |||||
| Adjusted operating profit | $ | 213 | $ | 261 | (18 | )% | ||
| Adjusted EBITDA | $ | 276 | $ | 317 | (13 | )% | ||
| Adjusted net income attributable to Sonoco (“Adjusted Earnings”) | $ | 138 | $ | 183 | (25 | )% | ||
| Adjusted EPS (diluted) | $ | 1.40 | $ | 1.85 | (24 | ) % | ||
(1) See the Company's definitions of non-GAAP financial measures, explanations as to why they are used, and reconciliations to the most directly comparable GAAP financial measures later in this release.
- Net sales decreased
2% year-over-year to$1.7 billion as strong pricing was offset by lower overall volume. - GAAP operating profit increased
36% year-over-year as gains on asset sales and lower acquisition related costs offset lower price cost and lower volume and mix. - Adjusted operating profit and Adjusted EBITDA declined
18% and13% , respectively, due to lower price cost and lower overall volume and mix. - The first-quarter 2023 effective tax rates on GAAP and Adjusted Earnings were
24.3% and24.8% , respectively, compared with23.7% and25.3% , respectively, in the prior year’s first quarter. The increase in the GAAP effective tax rate is primarily attributable to the absence of a tax benefit received in the first-quarter of 2022 associated with the acquisition of Sonoco Metal Packaging. The decrease in the tax rate on Adjusted Earnings was due to a variety of small variances, mostly related to items discrete to the period in which they occurred. - GAAP net income increased
29% and Adjusted Earnings decreased25% from the same period last year. - Diluted GAAP EPS increased
28% while diluted Adjusted EPS decreased24% from the same period last year.
“Sonoco delivered a strong first quarter, highlighted by commercial pricing benefits in industrials, improving productivity, and sales growth across most consumer businesses,” said Sonoco’s President and CEO, Howard Coker. “Our portfolio continues to be resilient in the current volatile economic environment due to the dedicated efforts and execution of the Sonoco team in support of our strategic initiatives.”
First Quarter 2023 Segment Results
(Dollars in millions except per share data)
Sonoco reports its financial results in two reportable segments: Consumer Packaging (“Consumer”) and Industrial Paper Packaging (“Industrial”), with all remaining businesses reported as All Other.
| Three Months Ended | |||||||||
| Consumer Packaging | April 2, 2023 | April 3, 2022 | Change | ||||||
| Net sales | $ | 909 | $ | 868 | 5 | % | |||
| Segment operating profit | $ | 92 | $ | 174 | (47 | )% | |||
| Segment operating profit margin | 10 | % | 20 | % | |||||
| Segment Adjusted EBITDA1 | $ | 122 | $ | 199 | (39 | )% | |||
| Segment Adjusted EBITDA margin1 | 13 | % | 23 | % | |||||
- Consumer segment net sales increased by
5% year-over-year primarily due to continued strong strategic pricing performance and acquisitions. Volume and mix in the segment was lower as compared to the prior year due to softer demand in metal packaging (aerosol) and rigid plastic food packaging. - Consumer segment operating profit and Adjusted EBITDA decreased by
47% and39% , respectively. The decline was largely due to the anticipated unfavorable metal price overlap in metal packaging and volume declines in both metal aerosols and rigid plastics food packaging.
| Three Months Ended | |||||||||
| Industrial Paper Packaging | April 2, 2023 | April 3, 2022 | Change | ||||||
| Net sales | $ | 616 | $ | 699 | (12 | )% | |||
| Segment operating profit | $ | 94 | $ | 73 | 30 | % | |||
| Segment operating profit margin | 15 | % | 10 | % | |||||
| Segment Adjusted EBITDA1 | $ | 121 | $ | 98 | 24 | % | |||
| Segment Adjusted EBITDA margin1 | 20 | % | 14 | % | |||||
- Industrial segment net sales decreased
12% due to general volume and mix declines with specific declines due to the exit of the corrugated medium market, the exit of operations in Russia, the sale of Sonoco Sustainability Solutions and weakness in converted paper. - Industrial segment operating profit and Adjusted EBITDA increased
30% and24% , respectively, primarily due to the price cost benefits of strategic pricing actions and lower material costs. Segment operating profit margin improved to15% in the first quarter of 2023 from10% in the same period last year. Segment Adjusted EBITDA margin improved to20% in the first quarter compared to14% in the same period last year.
| Three Months Ended | |||||||||
| All Other | April 2, 2023 | April 3, 2022 | Change | ||||||
| Net sales | $ | 205 | $ | 204 | — | % | |||
| Operating profit | $ | 27 | $ | 15 | 88 | % | |||
| Operating profit margin | 13 | % | 7 | % | |||||
| Adjusted EBITDA1 | $ | 33 | $ | 21 | 61 | % | |||
| Adjusted EBITDA margin1 | 16 | % | 10 | % | |||||
- Net sales from All Other businesses were essentially flat at
$205 million . Strategic pricing actions were offset by volume and mix declines. - All Other operating profit and Adjusted EBITDA improved by
88% and61% , respectively, from the prior year's first quarter primarily due to positive strategic pricing performance and strong productivity.
1Segment and All Other Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. See the Company's reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures later in this release.
Balance Sheet and Cash Flow Highlights
- Cash and cash equivalents were
$210 million as of April 2, 2023, compared to$227 million on December 31, 2022. - Total debt (long-term, short-term and current portion) was
$3,165 million as of April 2, 2023, a decrease of$57 million from December 31, 2022. - On April 2, 2023, the Company had available liquidity of
$948 million , including the undrawn availability under its global revolving credit facilities. - Cash flow from operating activities for the first three months of 2023 was
$98 million , compared to$1 million in the same period of 2022, an increase of$97 million . - Capital expenditures, net of proceeds from sales of fixed assets, for the first three months of 2023 were
$12 million , compared to$67 million in the same period last year. Capital expenditures were$83 million and net proceeds from the sale of our timberland properties were$71 million for the first three months of 2023. - Free cash flow for the first three months of 2023 was
$86 million . See the Company's definition of free cash flow, the explanation as to why it is used, and the reconciliation to net cash provided by operating activities later in this release. - The Company has continued to provide value to shareholders through cash dividends. Dividends paid during the quarter ended April 2, 2023 increased to
$48 million compared to$44 million for the same quarter of the prior year.
Guidance(1)
Second Quarter 2023
- Adjusted EPS(2):
$1.45 t o$1.55
Full Year 2023
- Adjusted EPS(2):
$5.70 t o$6.00 - Cash flow from operating activities:
$925 million to$975 million - Free cash flow(3):
$620 million to$720 million - Adjusted EBITDA:
$1.1 billion to$1.15 billion
(1) Although the Company believes the assumptions reflected in the range of guidance are reasonable, given the uncertainty regarding the future performance of the overall economy, continued effects of the pandemic on global supply chains, and potential changes in raw material prices, other costs, and the Company's effective tax rate, as well as other risks and uncertainties, including those described below, actual results could vary substantially. Further information can be found in the Forward-looking Statements in this release.
(2) Second quarter and full-year 2023 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 without unreasonable efforts: 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 financial results.
(3) See reconciliation of projected cash flow from operating activities to projected free cash flow later in this release.
Commenting on the Company’s outlook, Coker said, “We are raising the high end of our full year guidance after a good start to the year. We are executing well operationally and expect to maintain solid performance with limited demand recovery in Industrials. Increased demand in Industrials will provide opportunities for better performance beyond our current outlook. As we progress through the year, we remain committed to deploying capital to high return investments for growth and efficiencies, further focusing our portfolio, and delivering continued value to our shareholders”.
Conference Call Webcast
Management will host a conference call and webcast to further discuss these results beginning at 8:30 am EDT Tuesday, May 2, 2023. The live conference call and a corresponding presentation can be accessed via the Company’s Investor Relations website at https://investor.sonoco.com. To listen via telephone, please register in advance at https://register.vevent.com/register/BI46f64ef65ca74390b992879f154cc62c. Upon registration, all telephone participants will receive the dial-in number along with a unique PIN number that can be used to access the call. A replay of the conference call and webcast will be archived on the Company’s Investor Relations website for at least 30 days.
Contact Information:
Lisa Weeks
Vice President of Investor Relations & Communications
lisa.weeks@sonoco.com
843-383-7524
About Sonoco
Founded in 1899, Sonoco (NYSE:SON) is a global provider of packaging products. With 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 “anticipate,” “believe,” “committed,” “consider,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “intend,” “likely,” “may,” “might,” “objective,” “outlook,” “plan,” “potential,” “project,” “strategy,” “will,” or the negative thereof, and similar expressions identify forward-looking statements.
Forward-looking statements in this communication include statements regarding, but not limited to: the Company’s future operating and financial performance, including second quarter and full-year 2023 outlook; the Company’s ability to navigate volatility, expand profits, increase free cash flow, and efficiently deploy capital; the Company’s portfolio strategy and its ability to drive growth and profitability; the Company’s ability to create long-term value and returns for shareholders and to return cash to shareholders; expected accretion and other benefits from acquisitions and the strategic advantages and synergies, technology and process opportunities related thereto; momentum from and the effects of the Company’s strategy and operating model, including portfolio management, sustainability-led and productivity management activities and efforts to simplify the Company’s structure; efforts to improve price/cost through strategic pricing; the effects of the macroeconomic environment, inflation and COVID-19 coronavirus on the Company; and outcomes of certain tax issues and tax rates.
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, those related to: the Company’s ability to achieve the benefits it expects from acquisitions; the Company’s ability to execute on its strategy, including with respect to acquisitions, cost management, restructuring and capital expenditures, and achieve the benefits it expects therefrom; the operation of new manufacturing capabilities; assumptions regarding the Company's ability to achieve anticipated cost and energy savings; the 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 pricing risks; the effects of the COVID-19 pandemic on the Company’s results of operations, financial condition, value of assets, liquidity, prospects and growth, and on the industries in which it operates and that it serves; the costs of labor; the effects of inflation, fluctuations in consumer demand, and other macroeconomic factors on the Company and the industries in which it operates and that it serves; the Company’s ability to meet its goals relating to sustainability and reduction of greenhouse gas emissions; the Company’s ability to return cash to shareholders and create long-term value; and the other risks, uncertainties and assumptions discussed in the Company’s filings with the Securities and Exchange Commission, including its most recent reports on Forms 10-K and 10-Q, particularly under the heading “Risk Factors.” 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.
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 | ||||||
| April 2, 2023 | April 3, 2022 | |||||
| Net sales | $ | 1,729,783 | $ | 1,770,982 | ||
| Cost of sales | 1,355,355 | 1,399,417 | ||||
| Gross profit | 374,428 | 371,565 | ||||
| Selling, general, and administrative expenses | 187,976 | 190,362 | ||||
| Restructuring/Asset impairment charges | 28,814 | 12,142 | ||||
| Gain on divestiture of business and other assets | 72,010 | — | ||||
| Operating profit | 229,648 | 169,061 | ||||
| Non-operating pension costs | 3,658 | 1,324 | ||||
| Net interest expense | 32,670 | 19,065 | ||||
| Income before income taxes | 193,320 | 148,672 | ||||
| Provision for income taxes | 46,912 | 35,289 | ||||
| Income before equity in earnings of affiliates | 146,408 | 113,383 | ||||
| Equity in earnings of affiliates, net of tax | 1,856 | 2,224 | ||||
| Net income | 148,264 | 115,607 | ||||
| Net loss/(income) attributable to noncontrolling interests | 55 | (274 | ) | |||
| Net income attributable to Sonoco | $ | 148,319 | $ | 115,333 | ||
| Weighted average common shares outstanding – diluted | 98,615 | 98,554 | ||||
| Diluted earnings per common share | $ | 1.50 | $ | 1.17 | ||
| Dividends per common share | $ | 0.49 | $ | 0.45 | ||
| FINANCIAL SEGMENT INFORMATION (Unaudited) | |||||||
| (Dollars in thousands) | |||||||
| Three Months Ended | |||||||
| April 2, 2023 | April 3, 2022 | ||||||
| Net sales: | |||||||
| Consumer Packaging | $ | 909,278 | $ | 868,098 | |||
| Industrial Paper Packaging | 615,855 | 699,129 | |||||
| All Other | 204,650 | 203,755 | |||||
| Net sales | $ | 1,729,783 | $ | 1,770,982 | |||
| Operating profit: | |||||||
| Consumer Packaging | $ | 91,821 | $ | 173,609 | |||
| Industrial Paper Packaging | 94,367 | 72,660 | |||||
| All Other | 27,233 | 14,524 | |||||
| Corporate | |||||||
| Restructuring/Asset impairment charges | (28,814 | ) | (12,142 | ) | |||
| Amortization of acquisition intangibles | (21,164 | ) | (18,800 | ) | |||
| Other income/(charges), net | 66,205 | (60,790 | ) | ||||
| Operating profit | $ | 229,648 | $ | 169,061 | |||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) | |||||||
| (Dollars in thousands) | |||||||
| Three Months Ended | |||||||
| April 2, 2023 | April 3, 2022 | ||||||
| Net income | $ | 148,264 | $ | 115,607 | |||
| Net (gains)/losses on asset impairment, disposition of assets and divestiture of a business | (53,064 | ) | 5,701 | ||||
| Depreciation, depletion and amortization | 82,137 | 73,315 | |||||
| Pension and postretirement plan (contributions), net of non-cash expense | (523 | ) | (25,863 | ) | |||
| Changes in working capital | (91,489 | ) | (185,483 | ) | |||
| Changes in tax accounts | 23,618 | 18,399 | |||||
| Other operating activity | (10,941 | ) | (616 | ) | |||
| Net cash provided by operating activities | $ | 98,002 | $ | 1,060 | |||
| Purchases of property, plant and equipment, net | (11,996 | ) | (67,324 | ) | |||
| Proceeds from divestiture of business | 13,839 | — | |||||
| Cost of acquisitions, net of cash acquired | — | (1,348,589 | ) | ||||
| Net debt (repayments)/ borrowings | (62,541 | ) | 1,470,028 | ||||
| Cash dividends paid | (47,731 | ) | (43,747 | ) | |||
| Payments for share repurchases | (10,576 | ) | (3,410 | ) | |||
| Other, including effects of exchange rates on cash | 3,216 | (12,985 | ) | ||||
| Purchase of noncontrolling interest | — | (14,474 | ) | ||||
| Net decrease in cash and cash equivalents | $ | (17,787 | ) | $ | (19,441 | ) | |
| Cash and cash equivalents at beginning of period | 227,438 | 170,978 | |||||
| Cash and cash equivalents at end of period | $ | 209,651 | $ | 151,537 | |||
| CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | ||||||
| (Dollars in thousands) | ||||||
| April 2, 2023 | December 31, 2022 | |||||
| Assets | ||||||
| Current Assets: | ||||||
| Cash and cash equivalents | $ | 209,651 | $ | 227,438 | ||
| Trade accounts receivable, net of allowances | 903,424 | 862,712 | ||||
| Other receivables | 89,554 | 99,492 | ||||
| Inventories | 1,083,005 | 1,095,558 | ||||
| Prepaid expenses | 76,693 | 76,054 | ||||
| $ | 2,362,327 | $ | 2,361,254 | |||
| Property, plant and equipment, net | 1,717,615 | 1,710,399 | ||||
| Right of use asset-operating leases | 289,017 | 296,781 | ||||
| Goodwill | 1,679,547 | 1,675,311 | ||||
| Other intangible assets, net | 717,784 | 741,598 | ||||
| Other assets | 295,144 | 267,597 | ||||
| $ | 7,061,434 | $ | 7,052,940 | |||
| Liabilities and Shareholders’ Equity | ||||||
| Current Liabilities: | ||||||
| Payable to suppliers and other payables | $ | 1,128,678 | $ | 1,224,556 | ||
| Notes payable and current portion of long-term debt | 447,601 | 502,440 | ||||
| Accrued taxes | 33,211 | 16,905 | ||||
| $ | 1,609,490 | $ | 1,743,901 | |||
| Long-term debt, net of current portion | 2,717,891 | 2,719,783 | ||||
| Noncurrent operating lease liabilities | 243,714 | 250,994 | ||||
| Pension and other postretirement benefits | 118,163 | 120,084 | ||||
| Deferred income taxes and other | 166,611 | 145,381 | ||||
| Total equity | 2,205,565 | 2,072,797 | ||||
| $ | 7,061,434 | $ | 7,052,940 | |||
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. The Company uses certain financial performance measures, both internally and externally, that are not in conformity with GAAP (“non-GAAP financial measures”) to assess and communicate the financial performance of the Company. These non-GAAP financial measures reflect the Company’s GAAP operating results adjusted to remove amounts (including the associated tax effects) relating to:
- restructuring/asset impairment charges1;
- acquisition/divestiture-related costs;
- gains or losses from the divestiture of businesses or other assets;
- losses from the early extinguishment of debt;
- non-operating pension costs;
- amortization expense on acquisition intangibles;
- changes in last-in, first-out (“LIFO”) inventory reserves;
- certain income tax events and adjustments; and
- other items, if any.
The Company's management believes the exclusion of these items improves the period-to-period comparability and analysis of the underlying financial performance of the business. Non-GAAP figures previously identified by the term “Base” are now identified using the term “Adjusted,” for example “Adjusted Operating Profit,” “Adjusted Net Income,” and “Adjusted EPS.”
In addition to the “Adjusted” results described above, the Company also uses Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is defined as net income excluding the following: interest expense; interest income; provision for income taxes; depreciation, depletion and amortization expense; non-operating pension costs; net income/(loss) attributable to noncontrolling interests; restructuring/asset impairment charges; changes in LIFO inventory reserves; gains/losses from the divestiture of businesses or other assets; acquisition/divestiture-related costs; derivative (gains)/losses; and other non-GAAP adjustments, if any, that may arise from time to time. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net sales.
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 management does not, nor does it suggest that investors should, consider these non-GAAP measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Material limitations associated with the use of such measures include that they do not reflect all costs included in operating expenses and may not be comparable with similarly named financial measures of other companies. Furthermore, these non-GAAP financial measures are based on subjective determinations of management regarding the nature and classification of events and circumstances.
Sonoco presents these non-GAAP financial measures to provide users with information to evaluate Sonoco’s operating results in a manner similar to how management evaluates business performance. To compensate for any limitations in such non-GAAP financial measures, management believes that it is useful in understanding and analyzing the results of the business to review both GAAP information and the related non-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 performance of each business unit and the performance of its executive officers. In addition, these same non-GAAP measures are used in determining incentive compensation for the Company's management team and in providing earnings guidance to the investing community.
Whenever Sonoco uses a non-GAAP financial measure it provides a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. Investors are encouraged to review and consider these reconciliations. See “Guidance” above for more information regarding the Company's guidance.
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, 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.
Adjusted Operating Profit, Adjusted Income Before Income Taxes, Adjusted Provision for Income Taxes, Adjusted Net Income and Adjusted Diluted EPS
The following tables reconcile the Company's non-GAAP financial measures to their most directly comparable GAAP financial measures for each of the periods presented:
| For the three-month period ended April 2, 2023 | |||||||||||||||
| Dollars in thousands, except per share data | Operating Profit | Income Before Income Taxes | Provision for Income Taxes | Net Income Attributable to Sonoco | Diluted EPS | ||||||||||
| As Reported | $ | 229,648 | $ | 193,320 | $ | 46,912 | $ | 148,319 | $ | 1.50 | |||||
| Acquisition/Divestiture-related costs | 5,188 | 5,188 | 1,280 | 3,908 | 0.04 | ||||||||||
| LIFO Reserve change | (5,425 | ) | (5,425 | ) | (1,354 | ) | (4,071 | ) | (0.04 | ) | |||||
| Amortization of acquisition intangibles | 21,164 | 21,164 | 5,127 | 16,037 | 0.16 | ||||||||||
| Restructuring/Asset impairment charges | 28,814 | 28,814 | 6,634 | 22,014 | 0.22 | ||||||||||
| Gain on divestiture of business and sale of other assets | (72,010 | ) | (72,010 | ) | (17,122 | ) | (54,888 | ) | (0.55 | ) | |||||
| Non-operating pension costs | — | 3,658 | 909 | 2,749 | 0.03 | ||||||||||
| Net loss from other derivatives | 6,085 | 6,085 | 1,518 | 4,567 | 0.05 | ||||||||||
| Other Adjustments | (43 | ) | (43 | ) | 955 | (997 | ) | (0.01 | ) | ||||||
| Total Adjustments | $ | (16,227 | ) | $ | (12,569 | ) | $ | (2,053 | ) | $ | (10,681 | ) | $ | (0.10 | ) |
| Adjusted | $ | 213,421 | $ | 180,751 | $ | 44,859 | $ | 137,638 | $ | 1.40 | |||||
| *Due to rounding individual items may not sum appropriately | |||||||||||||||
| For the three months ended April 3, 2022 | |||||||||||||||
| Dollars in thousands, except per share data | Operating Profit | Income Before Income Taxes | Provision for Income Taxes | Net Income Attributable to Sonoco | Diluted EPS | ||||||||||
| As Reported | $ | 169,061 | $ | 148,672 | $ | 35,289 | $ | 115,333 | $ | 1.17 | |||||
| Acquisition/Divestiture-related costs | 48,352 | 48,352 | 11,756 | 36,596 | 0.37 | ||||||||||
| LIFO Reserve change | 19,050 | 19,050 | 4,833 | 14,217 | 0.14 | ||||||||||
| Amortization of acquisition intangibles | 18,800 | 18,800 | 4,630 | 14,170 | 0.14 | ||||||||||
| Restructuring/Asset impairment charges | 12,142 | 12,142 | 1,635 | 10,568 | 0.11 | ||||||||||
| Non-operating pension costs | — | 1,324 | 383 | 942 | 0.01 | ||||||||||
| Net gain from other derivatives | (6,596 | ) | (6,596 | ) | (1,673 | ) | (4,923 | ) | (0.05 | ) | |||||
| Other Adjustments | (16 | ) | (16 | ) | 4,194 | (4,212 | ) | (0.04 | ) | ||||||
| Total Adjustments | $ | 91,732 | $ | 93,056 | $ | 25,758 | $ | 67,358 | $ | 0.68 | |||||
| Adjusted | $ | 260,793 | $ | 241,728 | $ | 61,047 | $ | 182,691 | $ | 1.85 | |||||
| *Due to rounding individual items may not sum appropriately | |||||||||||||||
Adjusted EBITDA and Adjusted EBITDA Margin
| Three Months Ended | ||||||
| Dollars in thousands | April 2, 2023 | April 3, 2022 | ||||
| Net income attributable to Sonoco | $ | 148,319 | $ | 115,333 | ||
| Adjustments | ||||||
| Interest expense | 34,232 | 20,581 | ||||
| Interest income | (1,562 | ) | (1,516 | ) | ||
| Provision for income taxes | 46,912 | 35,289 | ||||
| Depreciation, depletion, and amortization | 82,137 | 73,315 | ||||
| Non-operating pension costs | 3,658 | 1,324 | ||||
| Net (loss)/income attributable to noncontrolling interests | (55 | ) | 274 | |||
| Restructuring/Asset impairment charges | 28,814 | 12,142 | ||||
| Changes in LIFO inventory reserves | (5,425 | ) | 19,050 | |||
| Gain from divestiture of business and sale of other assets | (72,010 | ) | — | |||
| Acquisition/Divestiture related costs | 5,188 | 48,352 | ||||
| Net loss/(gain) from other derivatives | 6,085 | (6,596 | ) | |||
| Other non-GAAP adjustments | (43 | ) | (16 | ) | ||
| Adjusted EBITDA | $ | 276,250 | $ | 317,532 | ||
| Net Sales | $ | 1,729,783 | $ | 1,770,982 | ||
| Adjusted EBITDA Margin | 16.0 | % | 17.9 | % | ||
Segment results viewed by Company's management to evaluate segment performance do not include restructuring/asset impairment charges, amortization of acquisition intangibles, acquisition/divestiture-related costs, changes in LIFO inventory reserves, gains/losses from the sale of businesses, or certain other items, if any, the exclusion of which the Company believes improves the comparability and analysis of the ongoing operating performance of the business. Accordingly, the term “segment operating profit” is defined as the segment’s portion of “operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments and All Other.
The Company does not calculate net income by segment; therefore, Segment Adjusted EBITDA is reconciled to the closest GAAP measure of segment profitability, Segment Operating Profit, which is the measure of segment profit or loss in accordance with Accounting Standards Codification 280 - Segment Reporting, as prescribed by the Financial Accounting Standards Board.
| Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation | |||||||||||||||
| For the Three Months Ended April 2, 2023 | |||||||||||||||
| Dollars in thousands | Consumer Packaging segment | Industrial Paper Packaging segment | All Other | Corporate | Total | ||||||||||
| Segment and Total Operating Profit | $ | 91,821 | $ | 94,367 | $ | 27,233 | $ | 16,227 | $ | 229,648 | |||||
| Adjustments: | |||||||||||||||
| Depreciation, depletion and amortization1 | 30,038 | 24,878 | 6,057 | 21,164 | 82,137 | ||||||||||
| Equity in earnings of affiliates, net of tax | 75 | 1,781 | — | — | 1,856 | ||||||||||
| Restructuring/Asset impairment charges2 | — | — | — | 28,814 | 28,814 | ||||||||||
| Changes in LIFO inventory reserves3 | — | — | — | (5,425 | ) | (5,425 | ) | ||||||||
| Acquisition/Divestiture-related costs4 | — | — | — | 5,188 | 5,188 | ||||||||||
| Gain from divestiture of business and other assets5 | — | — | — | (72,010 | ) | (72,010 | ) | ||||||||
| Net loss on other derivatives6 | — | — | — | 6,085 | 6,085 | ||||||||||
| Other non-GAAP adjustments | — | — | — | (43 | ) | (43 | ) | ||||||||
| Segment Adjusted EBITDA | $ | 121,934 | $ | 121,026 | $ | 33,290 | $ | — | $ | 276,250 | |||||
| Net Sales | $ | 909,278 | $ | 615,855 | $ | 204,650 | |||||||||
| Segment Operating Profit Margin | 10.1 | % | 15.3 | % | 13.3 | % | |||||||||
| Segment Adjusted EBITDA Margin | 13.4 | % | 19.7 | % | 16.3 | % | |||||||||
1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of
2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer Packaging segment of
3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment of
4 Included in Corporate are Acquisition/Divestiture-related costs associated with the Consumer Packaging segment of
5 Gain from the divestiture of business and other assets includes the sale of the Company's timberland properties (
6 Included in Corporate are net losses on other derivatives associated with the Consumer Packaging segment of
| Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation | |||||||||||||||
| For the Three Months Ended April 3, 2022 | |||||||||||||||
| Dollars in thousands | Consumer Packaging segment | Industrial Paper Packaging segment | All Other | Corporate | Total | ||||||||||
| Segment and Total Operating Profit | $ | 173,609 | $ | 72,660 | $ | 14,524 | $ | (91,732 | ) | $ | 169,061 | ||||
| Adjustments: | |||||||||||||||
| Depreciation, depletion, and amortization1 | 25,736 | 22,624 | 6,155 | 18,800 | 73,315 | ||||||||||
| Equity in earnings of affiliates, net of tax | (38 | ) | 2,262 | — | — | 2,224 | |||||||||
| Restructuring/Asset impairment charges2 | — | — | — | 12,142 | 12,142 | ||||||||||
| Changes in LIFO inventory reserves3 | — | — | — | 19,050 | 19,050 | ||||||||||
| Acquisition/Divestiture related costs4 | — | — | — | 48,352 | 48,352 | ||||||||||
| Net gain on other derivatives5 | — | — | — | (6,596 | ) | (6,596 | ) | ||||||||
| Other non-GAAP adjustments | — | — | — | (16 | ) | (16 | ) | ||||||||
| Segment Adjusted EBITDA | $ | 199,307 | $ | 97,546 | $ | 20,679 | $ | — | $ | 317,532 | |||||
| Net Sales | $ | 868,098 | $ | 699,129 | $ | 203,755 | |||||||||
| Segment Operating Profit Margin | 20.0 | % | 10.4 | % | 7.1 | % | |||||||||
| Segment Adjusted EBITDA Margin | 23.0 | % | 14.0 | % | 10.1 | % | |||||||||
1 Included in Corporate is amortization of acquisition intangibles associated with the Consumer Packaging segment -
2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer Packaging segment of
3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment -
4 Included in Corporate are Acquisition/Divestiture-related costs associated with the Consumer Packaging segment of
5 Included in Corporate are gains on other derivatives associated with the Consumer Packaging segment of
Free Cash Flow
The Company uses the non-GAAP financial measure of “free cash flow,” which it defines as cash flow from operations minus net capital expenditures. Net capital expenditures are defined as capital expenditures minus proceeds from the disposition of capital assets. Free cash flow may not represent the amount of cash flow available for general discretionary use because it excludes non-discretionary expenditures, such as mandatory debt repayments and required settlements of recorded and/or contingent liabilities not reflected in cash flow from operations.
| Three Months Ended | |||||||
| FREE CASH FLOW | April 2, 2023 | April 3, 2022 | |||||
| Net cash provided by operating activities | $ | 98,002 | $ | 1,060 | |||
| Purchase of property, plant and equipment, net | (11,996 | ) | (67,324 | ) | |||
| Free Cash Flow | $ | 86,006 | $ | (66,264 | ) | ||
| Year Ended | |||||||
| Estimated Low End | Estimated High End | ||||||
| FREE CASH FLOW | December 31, 2023 | December 31, 2023 | |||||
| Net cash provided by operating activities | $ | 925,000 | $ | 975,000 | |||
| Purchase of property, plant and equipment, net | (305,000 | ) | (255,000 | ) | |||
| Free Cash Flow | $ | 620,000 | $ | 720,000 | |||
