HARTSVILLE, S.C. - Sonoco, one of the largest diversified global packaging companies, today reported financial results for its first quarter ending March 30, 2014.

First Quarter Highlights

• First quarter 2014 GAAP earnings per diluted share were $.50, compared with $.47 in 2013.
• First quarter 2014 GAAP results include $.02 per diluted share in after-tax charges related to previously announced restructuring activities. First quarter 2013 GAAP results included after-tax charges of $.03 per diluted share related to restructuring activities and the impact of devaluation on reported results in Venezuela.
• Base net income attributable to Sonoco (base earnings) for first quarter 2014 was $.52 per diluted share, compared with $.50 in 2013. (See base earnings definition and reconciliation later in this release.) Sonoco previously provided first quarter base earnings guidance of $.50 to $.54 per diluted share.
• Abnormally severe winter weather across much of the U.S. and Canada unfavorably impacted first quarter 2014 base earnings. Absent the weather impact, the Company estimates that results would have been at or slightly above the high end of its previously issued guidance.
• First quarter 2014 net sales were $1.19 billion up slightly from $1.18 billion in 2013.
• Cash flow from operations was $45 million, in line with expectations, compared with $136 million in 2013. Free cash flow for the first quarter was a negative $22 million, compared with $51 million in 2013. The year-over-year changes in operating and free cash flows reflect a more-normal working capital impact as well as higher pension plan contributions. (See free cash flow definition later in this release.)

Second Quarter and 2014 Base Earnings Guidance Updated

• Base earnings for the second quarter of 2014 are estimated to be in the range of $.63 to $.67 per diluted share. Base earnings in the second quarter of 2013 were$.59.
• Full-year 2014 base earnings are expected to be in the range of $2.43 to $2.53 per diluted share and the Company continues to target $2.51 per diluted share.
• Free cash flow in 2014 is projected to be approximately $130 million.

First Quarter Review

Commenting on the Company's first quarter results, Sonoco President and Chief Executive Officer Jack Sanders said, "Severe winter weather significantly disrupted our customers' and our operations in January and February resulting in lost production and sales along with higher operating costs, particularly in our Industrial-related businesses. I'm extremely proud of how our people responded to these challenges as they went to extraordinary lengths to meet the critical needs of our customers. Even with these headwinds, base earnings improved 4 percent in the first quarter as the Company benefited from a positive price/cost relationship, modest productivity improvements and lower pension and interest expenses, partially offset by normal inflation.

"For the fifth consecutive quarter, operating profits from our Consumer Packaging segment increased year-over-year with first quarter results up 14 percent. This improvement came from a positive price/cost relationship, productivity improvements and lower pension expense, partially offset by higher labor and operating costs. In addition, operating profits from our Display and Packaging segment improved more than 50 percent in the quarter due to productivity improvements and modest volume gains.

"Operating profits in our Paper and Industrial Converted Products segment declined 4 percent in the first quarter due to the negative impacts of severe weather on volume and energy costs, as well as higher maintenance, freight and raw material costs. These negative factors were only partially offset by a positive price/cost relationship, modest productivity improvements and lower pension costs. Lower volume and higher costs, partially due to the severe weather, negatively impacted our Protective Solutions segment."

GAAP net income attributable to Sonoco in the first quarter was $52.3 million, or $.50 per diluted share, compared with $48.1 million, or $.47 per diluted share, in 2013. Base earnings in the first quarter were $53.9 million, or $.52 per diluted share, compared with $51.7 million, or $.50 per diluted share, in 2013. 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.

First-quarter base earnings exclude $1.6 million in after-tax charges, or $.02 per diluted share, related to previously announced restructuring activities. Base earnings in the first quarter of 2013 excluded after-tax charges of $3.6 million or $.03 per diluted share, stemming from restructuring activities and the impact of a currency devaluation inVenezuela.  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 first quarter were $1.19 billion, compared with $1.18 billion in last year's quarter, reflecting essentially flat volume for the Company as a whole. The small increase was driven primarily by higher selling prices and sales from two small acquisitions in recycling and graphics management, partially offset by foreign exchange.

Gross profits were $212 million in the first quarter, up 3 percent, compared with $206 million in the same period in 2013. Gross profit as a percent of sales improved to 17.9 percent, compared with 17.4 percent in the same period in 2013. This improvement was due primarily to a positive price/cost relationship, manufacturing productivity improvements and lower pension expense, partially offset by higher maintenance, labor and other costs. The Company's first quarter selling, general and administrative expenses increased 3 percent to $124 million, due primarily to wage inflation and higher management incentive costs compared with the previous year.

Cash generated from operations in the first quarter was $45 million, compared with $136 million in the same period in 2013. Both operating cash flow and free cash flow were lower this quarter as higher GAAP net income was offset by changes in working capital and higher pension contributions. Net capital expenditures and cash dividends were$35 million and $32 million, respectively, during the quarter, compared with $55 million and $30 million, respectively, during the same period in 2013. The decrease in capital expenditures reflects the completion in 2013 of several projects, the most significant of which was the biomass boiler in Hartsville, S.C. The Company also repurchased 208,000 shares of its common stock in the first quarter at a cost of $8.6 million under a previously announced stock buyback plan. (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.)

At the end of the first quarter of 2014, total debt was approximately $985 million, compared to $981 million at December 31, 2013. The Company had no commercial paper outstanding and the debt-to-total capital ratio was 36.1 percent at March 30, 2014, compared with 36.3 percent at the end of 2013. Cash and cash equivalents were $191 million at March 30, 2014, compared with $218 million at year end 2013.

Corporate

Net interest expense for the first quarter of 2014 decreased to $12.6 million, compared with $14.3 million during the same period in 2013. The decrease was due to lower year-over-year debt levels. The 2014 first-quarter effective tax rate on GAAP and base earnings was 31.3 percent and 31.1 percent, respectively, compared with a 31.6 percent rate for both in the prior year's quarter.

Second Quarter and Full-Year 2014 Outlook Updates

Sonoco expects second quarter 2014 base earnings to be in the range of $.63 to $.67 per diluted share. The Company's second quarter 2013 base earnings were $.59 per diluted share. Annual base earnings per diluted share are expected to be in the range of $2.43 to $2.53 in 2014, and the Company is targeting $2.51 per diluted share. The Company's 2014 guidance range reflects an expectation of a 33 percent effective tax rate for the year. Free cash flow is expected to be approximately $130 million in 2014, compared to $245 million in 2013.  The year-over-year reduction reflects expectations for higher income tax payments, an increase in pension and post retirement plan contributions and a greater, but more-normal, use of cash for working capital.

Although the Company believes the assumptions reflected in the range of guidance are reasonable, given uncertainty regarding the future performance of the overall economy and potential changes in raw material prices and other costs, as well as other risks and uncertainties, including those described below, actual results could vary substantially.

Commenting on the Company's outlook, Sanders said, "Much of the negative impact from severe winter weather occurred in January and February. As weather improved in March, we saw a strong rebound in customer orders across most of our businesses and a sharp improvement in operating performance. Entering April, customer orders appear to be running at more normal levels, in line with volume expectations and our second-quarter earnings guidance, which anticipates continued improvement in operations."

Segment Review

Sonoco reports its financial results in four operating segments: Consumer Packaging, Display and Packaging, Paper and Industrial Converted Products, and Protective Solutions. Effective January 1, 2014, Sonoco Alloyd, the Company's retail packaging business and previously part of the Protective Solutions segment, began reporting as part of the Display and Packaging segment. This change reflects the evolving integration occurring between these businesses, enabling them to better leverage the Company's capabilities, products and services to provide complete solutions to our retail merchandising customers. Prior period results for the affected segments have been recast to reflect this change.

Segment operating results do not include restructuring and asset impairment charges, acquisition expenses, interest income and expense, income taxes or certain other items, if any, the exclusion of which the Company believes improves comparability and analysis.

Consumer Packaging

Sonoco's Consumer Packaging segment includes the following products and services: round and shaped rigid containers and trays (both composite and thermoformed plastic); blow-molded plastic bottles and jars; extruded and injection-molded plastic products; printed flexible packaging; global brand artwork management; and metal and peelable membrane ends and closures.

First quarter 2014 sales for the segment were $465 million, compared with $463 million in 2013. Segment operating profit was $48.2 million in the first quarter, compared with$42.3 million in the same quarter of 2013.

Segment sales during the quarter were essentially flat as higher selling prices and sales added from the acquisition of a small graphics management business in the U.K.were partially offset by the negative impact of foreign exchange and slightly lower volume. Segment operating profit increased 14 percent due to a positive price/cost relationship, lower pension expense and productivity improvements that more than offset higher labor and operating costs.

Display and Packaging

The Display and Packaging segment includes the following products and services: designing, manufacturing, assembling, packing and distributing temporary, semi-permanent and permanent point-of-purchase displays; supply chain management services, including contract packing, fulfillment and scalable service centers; retail packaging, including printed backer cards, thermoformed blisters and heat sealing equipment; and paper amenities, such as coasters and glass covers.

First quarter 2014 sales for this segment were $153 million, compared with $145 million in 2013. Segment operating profit was $5.4 million in the quarter, compared with $3.5 million in 2013.

Sales for the quarter were up 6 percent year over year on volume growth in U.S. display and packaging, global pack centers and retail packaging. Quarterly operating profit for the segment grew 53 percent due to manufacturing productivity in retail packaging and volume gains.

Paper and Industrial Converted Products

The Paper and Industrial Converted Products segment includes the following products: paperboard tubes and cores; fiber-based construction tubes; wooden, metal and composite wire and cable reels and spools; and recycled paperboard, linerboard, corrugating medium, recovered paper and material recycling services.

First quarter 2014 sales for the segment were $456 million up slightly from $454 million in 2013. Segment operating profit was $29.8 million in the first quarter, compared with$31.0 million in 2013.

Despite the negative effects of severe winter weather on volume, segment sales were flat during the quarter as higher selling prices and sales from a small recycling acquisition offset the lower volume and a negative impact from foreign exchange. Operating profits declined 4 percent year over year as a positive price/cost relationship, lower pension expense and modest productivity improvements were more than offset by lower volume and higher maintenance, labor and other costs. Severe weather resulted in lost production at several mills that were forced to cancel multiple shifts due to the conditions and/or partially curtail production. In addition, persistently lower-than-normal temperatures across much of the United States and Canada caused a short-term but significant increase in energy costs at many of our facilities.

Protective Solutions

The Protective Solutions segment includes the following products: custom-engineered, paperboard-based and expanded foam protective packaging and components; and temperature-assured packaging.

First quarter 2014 sales were $112 million, compared with $117 million in 2013. Operating profit was $5.3 million, compared with $9.7 million in the first quarter of 2013.

This segment's 4 percent decline in sales was due to lower volume in the industrial protective and temperature-assured businesses and the divestiture of a small box plant. Operating profits declined 46 percent due to lower volume and higher costs, partially due to the severe weather, a negative price/cost relationship and start up costs related to a new facility in Mexico.