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Sonoco Sees Revenue Bump in Q4

Friday, February 14, 2014

Press release from the issuing company

HARTSVILLE, S.C. - Sonoco (NYSE: SON), one of the largest diversified global packaging companies, today reported financial results for its fourth quarter and full-year 2013.

Fourth Quarter Highlights

  • Fourth quarter 2013 GAAP earnings per diluted share were $.53, compared with $.42 in 2012.
  • Fourth quarter 2013 GAAP results include $.05 per diluted share in after-tax charges related primarily to restructuring activities and previously announced plant closures. Fourth quarter 2012 GAAP results included a net after-tax charge of $.14 per diluted share related to restructuring activities and taxes on the repatriation of offshore cash.
  • Base net income attributable to Sonoco (base earnings) for fourth quarter 2013 was $.58 per diluted share, compared with $.56 in 2012. (See base earnings definition and reconciliation later in this release.) Sonoco previously provided fourth quarter base earnings guidance of $.55 to $.59 per diluted share.
  • Fourth quarter 2013 net sales were $1.22 billion, up 3 percent, compared with $1.18 billion in 2012.
  • Cash flow from operations was $117 million, compared with $111 million in 2012. Free cash flow for the fourth quarter was $58 million, compared with $36 million in 2012. (Free cash flow is defined as cash flow from operations minus net capital expenditures and cash dividends. Net capital expenditures is defined as capital expenditures minus proceeds from the disposal of capital assets.)

Full-Year 2013 Highlights

  • Full-year 2013 GAAP earnings per diluted share were $2.12, up 11 percent, compared with $1.91in 2012.
  • Full-year 2013 GAAP earnings per diluted share include $.18 per diluted share in after-tax restructuring charges primarily related to plant closures. In comparison, 2012 GAAP results included $.30 per diluted share in after-tax restructuring charges and tax items, partially offset by excess insurance settlement gains.
  • Full-year 2013 base earnings were $2.30 per diluted share, up 4 percent, compared with $2.21in 2012.  Sonoco previously provided full-year guidance of $2.27 to $2.31 per diluted share.
  • Net sales reached a record $4.85 billion, compared with $4.79 billion in 2012. 
  • Cash flow from operations was a record $538 million, up 33 percent, compared with $404 million in 2012. Free cash flow was $245 million, up 142 percent, compared with $101 million in 2012.    

2014 Base Earnings Guidance Changed; Business Segments to be Modified

  • Full-year 2014 base earnings are expected to be $2.43 to $2.53 per diluted share and the Company is targeting $2.51 per diluted share. 
  • Base earnings for the first quarter of 2014 are estimated to be $.50 to $.54. Base earnings in the first quarter of 2013 were $.50.
  • Free cash flow in 2014 is projected to be approximately $130 million.
  • Effective Jan. 1, 2014, due to certain operational and related internal reporting changes, Sonoco Alloyd, a retail packaging business that is currently part of the Company's Protective Solutions segment, will be managed and reported as part of Display and Packaging, the Company's consumer-focused retail merchandising segment. As these changes did not take effect until 2014, Sonoco Alloyd is presented in the Protective Solutions segment as of year-end 2013.

Fourth Quarter Review
Commenting on the Company's fourth quarter results, Sonoco President and Chief Executive Officer Jack Sanders said, "Sonoco concluded the final quarter of 2013 with slightly better than expected results compared to the prior year quarter, helped by a lower than expected effective tax rate. That said, the Company did achieve improved volume, particularly in our consumer-focused businesses, along with strong productivity and a positive price/cost relationship. These positive factors were partially offset by higher labor, operating and other costs."

"Operating profits from our Consumer Packaging segment increased 21 percent over the prior year's fourth quarter due to volume gains in most of the businesses in the segment, along with strong productivity and a positive price/cost relationship, partially offset by higher labor and other operating expenses. In addition, operating profits from our Display and Packaging segment improved slightly."

"Fourth quarter operating profits declined 8 percent in our Paper and Industrial Converted Products segment as strong productivity improvements, modest volume growth and insurance proceeds were more than offset by higher labor, maintenance and other operating costs, and an increase in profits deferred on intercompany paper sales. Operating profits in our Protective Solutions segment also declined during the fourth quarter as the benefit of improved productivity was more than offset by a negative price/cost relationship and higher labor and other operating expenses, including costs associated with the start up of new operations."

GAAP net income attributable to Sonoco in the fourth quarter was $54.7 million, or $.53 per diluted share, compared with $42.8 million, or $.42 per diluted share, in 2012. Base earnings in the fourth quarter were $59.9 million, or $.58 per diluted share, compared with $57.1 million, or $.56 per diluted share, in 2012. Base earnings and base earnings per diluted share are non-GAAP financial measures adjusted to remove restructuring charges, asset impairment charges, acquisition expenses and other items, if any, the exclusion of which the Company believes improves comparability and analysis of the underlying financial performance of the business.

Fourth quarter base earnings exclude $.06 per diluted share in after-tax charges related to restructuring activities involving previously announced plant closures offset by $0.01 per diluted share in after-tax gains from insurance settlements. Base earnings in the fourth quarter of 2012 excluded after-tax charges of $.14 per diluted share which included a net income tax charge of $.11per diluted share largely consisting of tax expense related to the repatriation of accumulated offshore cash and $.04 in after-tax restructuring activities, offset by a $.01 per diluted share gain from insurance settlements and a favorable contingent purchase price adjustment. Additional information about base earnings and base earnings per diluted share, along with reconciliation to the most closely applicable GAAP financial measures, is provided later in this release.

Net sales for the fourth quarter were $1.22 billion, compared with $1.18 billion in the same period in 2012. This 3 percent improvement was driven by gains in volume and mix from the Company's Consumer Packaging, Paper and Industrial Converted Products and Protective Solutions segments along with higher selling prices. These improvements were partially offset by the previously announced closure of the Company's European recycling operations.

Gross profits were $221 million in the fourth quarter, up 8 percent, compared with $204 million in the same period in 2012. Gross profit as a percent of sales improved to 18.2 percent, compared with 17.3 percent in the same period in 2012. This improvement was due to strong productivity gains, volume growth and a positive price/cost relationship, partially offset by higher maintenance, labor and other costs. The Company's fourth quarter selling, general and administrative expenses increased 14 percent to $127 million due primarily to wage inflation and higher management incentives, compared with the previous year.

Cash generated from operations in the fourth quarter was $117 million, compared with $111 million in the same period in 2012. Operating cash flow increased during the quarter due to higher GAAP net income and beneficial changes in working capital, partially offset by the impact of federal income tax credits associated with the Company's biomass boiler cogeneration project. Fourth quarter reported cash flows from operations were reduced by $17 million for tax-related operating cash flow benefits received in prior quarters that became a reduction of capital expenditures when the federal income tax credits were earned upon the December 2013 completion of the project.  Including this $17 million, total federal tax credits related to the biomass boiler and reported as a reduction of capital expenditures, were $21.9 million. Net capital expenditures and cash dividends were $27 million and $32 million, respectively, during the quarter, compared with $45 million and$30 million, respectively, during the same period in 2012.

Full Release


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