HARTSVILLE, S.C. - Sonoco (NYSE:SON), one of the largest diversified global packaging companies, today reported financial results for its first quarter ending March 29, 2015.

First Quarter Highlights

• First quarter 2015 GAAP earnings per diluted share were $.86, compared with $.50 in 2014.
• Favorable disposition of a significant portion of Fox River-related environmental claims/litigation together with a gain on the sale of two metal ends and closures plants, partially offset by costs related to acquisition and restructuring activities, added $.30 to first quarter diluted earnings per share. First quarter 2014 GAAP results included after-tax charges of $.02 per diluted share related to restructuring.
• Base net income attributable to Sonoco (base earnings) for first quarter 2015 was $.56per diluted share, compared with $.52 in 2014. (See base earnings definition and reconciliation later in this release.) Sonoco previously provided first quarter base earnings guidance of $.56 to $.61 per diluted share.
• First quarter 2015 net sales grew 1.5 percent to $1.20 billion up from $1.19 billion in 2014.
• Cash flow from operations was $57 million in the first quarter of 2015, compared with $45 million in 2014. Free cash flow for the first quarter was $15 million, compared with a negative $22 million in 2014. (See free cash flow definition later in this release.)

Second Quarter and 2015 Guidance

• Base earnings for the second quarter of 2015 are estimated to be in the range of $.64 to $.69 per diluted share. Base earnings in the second quarter of 2014 were $.63 per diluted share.
• Full-year 2015 base earnings are expected to remain in the previously announced range of $2.60 to $2.70 per diluted share.
• Free cash flow in 2015 is projected to be approximately $140 million, which reflects the Company's recent announcement to increase cash dividends to shareholders by 9.4 percent in 2015.

First Quarter Review

Commenting on the Company's first quarter results, Sonoco President and Chief Executive Officer Jack Sanders said, "To begin with, we are very pleased to conclude what we believe was the most significant portion of the Fox River environmental litigation. The time period for appeal of the court-approved settlement we reached last year with the government and certain other named parties expired last week. As a result, in the first quarter we reversed $32.5 million of reserves we had established for these claims. There are still remaining Fox River claims in litigation, but we are hopeful we will see a similarly positive resolution.

"We are also pleased with the overall first-quarter performance of our diversified portfolio of businesses. Solid results in our Consumer Packaging and Protective Solutions segments helped drive a 7.6 percent year-over-year improvement in base earnings per share as they more than offset lower results in our Paper and Industrial Converted and Display and Packaging segments. Overall, the Company profited from the accretive benefit of acquisitions, solid productivity improvement, a positive overall price/cost relationship and benefits from Company-owned life insurance. Partially offsetting these positive factors were higher labor, maintenance and other operating costs, along with increased pension expense and the negative impacts of foreign currency exchange rates.

"Operating profits from our Consumer Packaging segment increased 12 percent over the prior-year quarter due to improved results in global composite cans, global plastics and flexible packaging. Overall, the segment benefited from a positive price/cost relationship, acquisitions and productivity improvements. These factors were partially negated by higher labor, maintenance and other operating costs, increased pension expense, foreign currency exchange rates and an unfavorable change in the LIFO inventory reserve. The benefit from volume improvements in global plastics and flexible packaging was more than offset by lower volume and negative mix in composite cans in North America. Results in the Display and Packaging segment met our expectations for the quarter, reflecting year-over-year volume declines from the closure of a domestic contract packaging operation.

"Segment operating profits in Paper and Industrial Converted Products declined nearly 7 percent as solid productivity improvements were negated by general inflation, increased pension expense and the negative impact of foreign exchange. While the segment overall experienced a slightly positive price/cost relationship, significantly lower than expected market prices for recovered fiber, plastics and metals had a meaningfully negative impact to the Company's recycling operations. Our Protective Solutions segment produced a greater than 80 percent improvement in operating profits in the quarter as strong volume, a positive price/cost relationship and productivity improvements more than offset higher labor, maintenance and other operating costs.

"In addition, subsequent to quarter end, we were able to successfully complete the purchase of a majority interest in Graffo Paranaense de Embalagens S/A (Graffo), a closely held flexible packaging business located in Brazil. We believe that given Graffo's strong technical capabilities and established relationships with both large global consumer product companies and growing local companies, together we will be able to grow our business in this important emerging market."

GAAP net income attributable to Sonoco in the first quarter was $87.9 million, or $.86 per diluted share, compared with $52.3 million, or $.50 per diluted share, in 2014. Base earnings in the first quarter were $57.1 million, or $.56 per diluted share, compared with $53.9 million, or $.52 per diluted share, in 2014. Base earnings and base earnings per diluted share are non-GAAP financial measures adjusted to remove restructuring related items, 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 an after-tax benefit of $19.9 million, or $.19 per diluted share, from the reversal of reserves related to Fox River environmental litigation, an after-tax benefit of $16.8 million, or $.16 per diluted share, from the sale of two metal ends and closures plants, after-tax restructuring charges of $4.9 million, or $.04 per diluted share, and after-tax acquisition related expenses of $1.1 million, or $.01 per diluted share. First quarter 2014 base earnings excluded $1.6 million, or $.02 per diluted share, in after-tax restructuring charges. 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 $1.20 billion, up $18 million or 1.5 percent from last year's quarter. Acquisitions contributed nearly $72 million to first quarter sales while exchange rate changes and divestitures had the effect of reducing reported sales by $57 million compared to the prior year first quarter.

Gross profits were $223.4 million in the first quarter, up 5 percent, compared with $212.3 million in the same period in 2014. Gross profit as a percent of sales improved to 18.6 percent, compared with 17.9 percent in the same period in 2014. This improvement was due primarily to manufacturing and other productivity gains and an overall positive price/cost relationship, which were partially offset by wage inflation, increased operating costs and higher pension expense. Excluding acquisitions, divestitures and the reversal of environmental reserves, the Company's first quarter selling, general and administrative expenses decreased 2.0 percent as lower management incentive costs, benefits from Company-owned life insurance and the impact of exchange rates were partially offset by wage inflation and higher pension costs.

Cash generated from operations in the first quarter was $57 million, compared with $45 million in the same period in 2014. Free cash flow for the first quarter was $15 million, compared with a negative $22 million in 2014. Both operating cash flow and free cash flow improved modestly this quarter due primarily to higher GAAP net income, excluding the net non-cash benefit of the reversal of Fox River environmental reserves, together with reduced domestic pension contributions and less significant increases in working capital during the quarter. Net capital expenditures and cash dividends were $10 million and $32 million, respectively, during the quarter, compared with $35 million and $32 million, respectively, during the same period in 2014. Current year capital expenditures include new composite can production facilities under development in Malaysia, Poland and China. Also during the quarter, the Company received cash of $29.1 million from the sale of two metal ends and closures plants, which is reflected in net capital expenditures. (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 2015, total debt was approximately $1.3 billion, compared to $1.3 billion at December 31, 2014. The Company had no commercial paper outstanding and the debt-to-total capital ratio was 45.2 percent at March 29, 2015, compared with 45.1 percent at the end of 2014. Cash and cash equivalents were $201 million at March 29, 2015, compared with $161 million at year end 2014.

Corporate

Net interest expense for the first quarter of 2015 increased to $13.2 million, compared with $12.6 million during the same period in 2014. The increase was due to higher year-over-year debt levels. The 2015 first quarter effective tax rates on GAAP and base earnings were 23.8 percent and 31.9 percent, compared with a 31.3 percent and 31.1 percent rate for GAAP and base earnings, respectively, in the prior year's quarter. The main driver in the year-over-year decrease in the GAAP income tax rate is the tax benefit associated with the loss on stock of the underlying subsidiary associated with the sale of the two metal ends and closures plants.

Second Quarter and Full-Year 2015 Outlook

Sonoco expects second quarter 2015 base earnings to be in the range of $.64 to $.69 per diluted share. The Company's second quarter 2014 base earnings were $.63 per diluted share. Annual 2015 base earnings per diluted share are expected to be in the range of $2.60 to $2.70. The Company's 2015 guidance anticipates a 32 percent effective tax rate for the year. Free cash flow is expected to be approximately $140 million in 2015, compared to $120 million in 2014, and is $10 million lower than previous guidance due to the Company's recently announced 9.4 percent increase in the per-share dividend which is expected to be paid to shareholders in 2015.

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, "Despite slow seasonal starts over the past several years, Sonoco's balanced portfolio of businesses has demonstrated the ability to rebound over the course of the year to produce targeted results. While we expect to face some headwinds over the remainder of the year from higher pension costs and a stronger U.S. dollar, we believe economic conditions will continue to improve along with consumer confidence and that our businesses will be able to respond accordingly. As announced last quarter, we have begun implementing a series of actions focused on improving our cost competitiveness by optimizing our supply chain, enhancing productivity, and streamlining our corporate and business unit structures. Entering the second quarter, we anticipate seeing continued improvement in operations due to these ongoing efforts while customer orders appear to be running in line with the volume expectations reflected in our guidance.

"Finally, we remain firmly committed to our Grow and Optimize strategy. In 2015 and beyond this means we are focused on achieving higher than market average growth; improving operating margins; continued successful integration of Weidenhammer and Graffo; maximizing free cash flow; optimizing our portfolio through simplification and improved efficiency, and targeting capital deployment to grow our business and return cash to shareholders."

Segment Review

Sonoco reports its financial results in four operating segments: Consumer Packaging, Display and Packaging, Paper and Industrial Converted Products, and Protective Solutions. Segment operating results do not include restructuring and asset impairment charges, acquisition 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 2015 sales for the segment were $520 million, compared with $465 million in 2014. Segment operating profit was $54.0 million in the first quarter, compared with $48.2 million in the same quarter of 2014.

Segment sales grew 12 percent during the quarter due primarily to $67 million in sales added by the Weidenhammer acquisition, partially offset by the divestiture of two metal ends and closures plants and the negative impact of foreign exchange. Segment operating profit increased 12 percent benefiting from the previously mentioned acquisition and divestiture, along with a positive price/cost relationship due to lower resin costs in global plastics, and manufacturing productivity improvements. These positive factors were partially offset by higher operating expenses, increased pension expense and an unfavorable adjustment to the LIFO inventory reserve due to price and mix changes. Volume improvement in global plastics and flexible packaging was more than offset by lower volume and mix in North America composite cans.

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 2015 sales for this segment were $143 million, compared with $153 million in 2014. Segment operating profit was $3.9 million in the quarter, compared with $5.4 million in 2014.

Sales declined 7 percent for the quarter due to the negative impact of foreign exchange. Absent the impact of foreign exchange sales grew 3 percent as lost volume stemming from the closure of a domestic contract packaging operation was more than offset by volume increases in domestic point-of-purchase display businesses. The 27 percent decline in operating profit was driven primarily by the negative impact of foreign exchange and a customer electing to exit the domestic contract packaging market, slightly offset by point-of-purchase display volume increases.

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 2015 sales for the segment were $422 million,down 7 percent, from $456 million in 2014. Segment operating profit was $27.8 million in the first quarter, compared with $29.8 million in 2014.

Segment sales declined 7 percent during the quarter due to the negative impact from foreign exchange, lower global volume and declining selling prices stemming from reduced recovered fiber prices. Operating profit declined 7 percent as solid productivity improvements were negated by general inflationary costs, increased pension expense and the negative impact of foreign exchange. While the segment overall experienced a slightly positive price/cost relationship, significantly lower than expected market prices for recovered fiber, plastics and metals had a meaningfully negative impact to the Company's recycling operations. Additionally, in our paper business, percentage operating margins improved from prior quarter levels resulting in a $2 million increase in the segment's intercompany deferred profit reserve. As a result, first quarter 2015 segment profitability does not fully reflect the improved run rate in paper operations.

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 2015 sales were $118 million, compared with $112 million in 2014. Operating profit was $9.7 million, compared with $5.3 million in the first quarter of 2014.

This segment's 5 percent increase in sales was due to improved volume in temperature-assured packaging, molded foam automotive components and paper-based packaging. Operating profits gained 83 percent due to volume gains, a positive price/cost relationship, and manufacturing productivity improvements.