Sonoco Products Company
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 19, 2007
SONOCO PRODUCTS COMPANY
Commission File No. 0-516
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Incorporated under the laws
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I.R.S. Employer Identification |
of South Carolina
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No. 57-0248420 |
1 N. Second St.
Hartsville, South Carolina 29550
Telephone: 843/383-7000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 2 Financial Information
Item 2.02 Results of Operations and Financial Condition.
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On October 19, 2007, Sonoco Products Company issued a news release reporting the financial
results of the Company for the quarter ended September 30, 2007. A copy of that release is
attached as an exhibit hereto. |
Section 9 Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
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(d) Exhibit 99 Registrants 2007 Third Quarter Earnings Release |
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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SONOCO PRODUCTS COMPANY |
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Date: October 19, 2007
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By:
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/s/ C.J. Hupfer |
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C.J. Hupfer
Senior Vice President and Chief Financial Officer |
3
EXHIBIT INDEX
99 Registrants 2007 Third Quarter Earnings Release
4
Exhibit 99
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NEWS RELEASE |
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# R
October 19, 2007 |
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Contact: |
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Roger Schrum |
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+843/339-6018 |
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roger.schrum@sonoco.com |
Sonoco Reports Third Quarter 2007 Financial Results
Hartsville, S.C. Sonoco (NYSE: SON), one of the largest diversified global packaging companies,
today reported third quarter 2007 earnings of $.63 per diluted share, compared with $.60 per
diluted share reported in the third quarter of 2006. Results for the third quarter of 2007
benefited from a significantly lower effective tax rate, partially offset by restructuring and
asset impairment charges.
Base earnings for the third quarter of 2007 were $.64 per diluted share, compared with the $.61 per
diluted share reported in the same period in 2006. Base earnings is a non-GAAP financial measure
that excludes restructuring charges, asset impairment charges, environmental charges, and certain
other non-recurring or infrequent and unusual items, as applicable. After-tax restructuring, asset
impairment and environmental charges totaling $.13 per diluted share were excluded from base
earnings in the 2007 quarter, while 2006 base earnings excluded $.01 per diluted share of
restructuring charges. Also excluded from third quarter 2007 base earnings was a $.12 per diluted
share income tax benefit related to unusual items which are not
expected to recur.
Third quarter 2007 base earnings had an effective tax rate of 20.9 percent, compared with 28.7
percent in 2006. Additional information about base earnings and base earnings per share along with
reconciliations to the most closely applicable GAAP financial measure is provided later in this
release.
Third quarter base earnings exceeded the high end of our revised guidance due to the lower than
expected effective tax rate, said Harris E. DeLoach, Jr., chairman, president and chief executive
officer. Results from operations were in line with our revised projections and reflected slightly
lower year-over-year volumes stemming from slowing activity in most of our served markets and
higher raw material and other costs.
Net sales for the third quarter of 2007 were $1.03 billion, up 11 percent, compared with the $932
million reported in the same period in 2006. The improvement in sales during the third quarter was
the result of acquisitions in our Consumer Packaging and Tubes and Cores/Paper segments, the
favorable impact of foreign currency rates and higher selling prices aimed at recovering higher raw
material costs, said DeLoach. Slightly lower overall volumes in Consumer Packaging and Tubes and
Cores/Paper segments, which were more notable in North America, partially offset these gains.
Net income for the third quarter of 2007 was $64.5 million, an increase of 6 percent compared with
$61.1 million for the same period in 2006. Third quarter 2007 results benefited significantly from
a lower effective tax rate driven primarily by the release of reserves upon expiration of their
related statutory assessment periods. This benefit was partially offset by $12.1 million in
after-tax restructuring and asset impairment charges and an additional environmental reserve. These
charges consisted primarily of asset impairment at the Companys metal ends plant in Brazil and
rigid plastics plant in Wisconsin and costs related to previously initiated
-more-
1 North Second Street
Hartsville, S.C. 29550 USA
843/383-7794
www.sonoco.com
Sonoco Reports 2007 Third Quarter Financial Results page 2
restructuring activities. In the third quarter of 2006, after-tax restructuring charges totaled
approximately $.6 million.
Base earnings for the quarter increased to $64.8 million compared with $61.7 million in the prior
year period. Current quarter base earnings reflect the benefit of a lower effective tax rate, as
mentioned above.
While the Company realized productivity improvements in many of our businesses and benefited from
the impact of acquisitions, the year-over-year improvement in base earnings was primarily
attributable to the lower effective tax rate, said DeLoach. Partially offsetting these favorable
factors were the slight declines in volumes, an unfavorable shift in the mix of certain business
and a negative selling price/material cost relationship resulting from higher raw material costs,
primarily in old corrugated containers (OCC).
Cash generated from operations for the third quarter of 2007 was $131 million, compared with $166
million for the same period in 2006. The decrease was due primarily to a smaller quarterly
improvement in overall working capital. Our working capital program continues to deliver benefits
and is on track to meet our goals for the year, following the significant improvement realized last
year, added DeLoach. Capital expenditures and cash dividends totaled $49.4 million and $26.4
million, respectively, in the third quarter of 2007. In addition, Sonoco repurchased 1.5 million
shares of common stock in August 2007 for approximately $51.4 million. Effective October 15, 2007,
Sonocos Board of Directors increased the standing authorization to buy back the Companys common
stock to a total of five million shares.
For the nine-month period ending September 30, 2007, net sales increased 12 percent to $2.98
billion, compared with $2.67 billion in the same period in 2006. Net income for the nine-month
period of 2007 was $160 million ($1.56 per diluted share), compared with $155.6 million ($1.54 per
diluted share) in the same period of 2006. As a result of the Companys accounting calendar, the
nine-month period of 2007 included six more days than the same period in 2006. Year-to-date 2007
earnings were negatively impacted by after-tax asset impairment and restructuring-related charges
of $19.1 million ($.20 per diluted share) and $12.4 million ($.12 per diluted share) resulting from
an increase in the environmental reserve at a subsidiarys paper operation. These unfavorable
factors were partially offset by the recovery from a third party of $5.5 million ($.04 per diluted
share) in certain benefit costs and by a lower effective tax rate. Year-to-date earnings in 2006
included $3.5 million ($.03 per diluted share) of restructuring charges.
Base earnings were $179.7 million ($1.76 per diluted share) in the first nine months of 2007, up 13
percent, compared with $159.1 million ($1.57 per diluted share) in the same period of 2006. This
increase in base earnings was due to productivity improvements, a slightly favorable selling
price/material cost relationship, acquisitions and a lower effective tax rate primarily resulting
from the third quarter release of tax reserves. Partially offsetting these improvements was the
impact of inflation on energy, freight and labor costs.
For the nine-month period ending September 30, 2007, cash generated from operations was $258
million, compared with $324 million in the same period in 2006. Capital expenditures and cash
dividends totaled $135.3 million and $76.6 million, respectively for the 2007 nine-month period.
Additionally, the Company repurchased a total of three million shares of Sonoco common stock for
$108.1 million during February and August of 2007. Cash used for acquisitions totaled $215 million,
primarily associated with the purchase of Matrix Packaging, Inc.
-more-
Sonoco Reports 2007 Third Quarter Financial Results page 3
Overview and Full-Year Outlook
We remain cautious about the remainder of 2007 as we continue to believe that general economic
conditions will remain challenging, especially in North America. As a result we are taking actions
to improve our operations and streamline our cost structure even more, said DeLoach. We are
raising our full-year
guidance to $2.28 to $2.31 to reflect the favorable effect of the third quarter tax adjustments and
expect fourth quarter base earnings to be in the range of $.52 to $.55 per diluted share. The
guidance assumes an effective tax rate of approximately 34 percent in the fourth quarter. In
addition, the fourth quarter will have six fewer days than last years fourth quarter.
Segment Review
The Company uses a non-GAAP financial measure when discussing the operational results of its
segments. Base Operating Profit at the segment level is defined as the segments portion of
consolidated Income Before Income Taxes, excluding restructuring charges, impairment charges,
environmental charges, net interest expense and certain non-recurring or infrequent and unusual
items. A reconciliation of Base Operating Profit for the Companys three reportable segments and
All Other Sonoco to GAAP Income Before Income Taxes is provided later in this release.
Consumer Packaging
Sonocos Consumer Packaging segment includes the following products: round and shaped rigid
packaging (both composite and plastic); printed flexible packaging; and metal and peelable membrane
ends and closures.
Third quarter 2007 sales for the Consumer Packaging segment increased 12 percent to $369 million,
compared with $329 million in the third quarter of 2006. Base operating profit for this segment was
$23.7 million in the third quarter of 2007, compared with $28.0 million in the same period in 2006.
Sales in the Consumer Packaging segment were up year-over-year in the third quarter due to
acquisitions and the favorable impact of foreign currency translation, partially offset by slight
volume declines in rigid paper containers, flexible packaging, and ends and closures. Price
declines in flexible packaging, resulting from recent bids and competitive pressure, had a negative
impact on sales in the segment, but were mostly offset by increased prices in rigid packaging and
ends and closures. Base operating profit declined in the third quarter due to the reduced volumes
and a negative price/cost relationship in flexible packaging and rigid paper containers, and a
legal settlement of a product claim. Partially offsetting these negative items were productivity
improvements and the impact of acquisitions.
Tubes and Cores/Paper
The Tubes and Cores/Paper segment includes the following products: high-performance paper and
composite paperboard tubes and cores; fiber-based construction tubes and forms; recycled
paperboard, linerboard, recovered paper and other recycled materials.
Third quarter 2007 sales for the Tubes and Cores/Paper segment were $434 million, up 12 percent,
compared with $387 million in the same period in 2006. Third quarter base operating profit for this
segment increased to $43.4 million, compared with $42.8 million in the same period in 2006.
Sales rose on higher selling prices, acquisitions and the favorable impact of foreign currency
translation. Base operating profit benefited from productivity improvements and acquisitions,
partially offset by volume declines, primarily in North American tubes and cores, an unfavorable
shift in the mix of certain businesses and higher raw material costs.
-more-
Sonoco Reports 2007 Third Quarter Financial Results page 4
Packaging Services
The Packaging Services segment includes the following products and services: designing,
manufacturing, assembling, packing and distributing temporary, semipermanent and permanent
point-of-purchase displays; brand artwork management; and supply chain management services
including contract packing, fulfillment and scalable service centers.
Third quarter 2007 sales for the Packaging Services segment increased 9 percent to $132 million,
compared with $122 million in the same period in 2006. Base operating profit for this segment was
$10.9 million, up 16 percent, over the $9.4 million earned in the third quarter of 2006.
Sales in the Packaging Services segment benefited from higher volume in both point-of-purchase
displays and service center operations along with the impact of favorable foreign currency
translation. Base operating profit for the third quarter increased due to volume and productivity
improvements, partially offset by lower sales prices for point-of-purchase displays, related to the
outcome of recent bidding activity.
All Other Sonoco
All Other Sonoco includes businesses that are not aggregated in a reportable segment and include
the following products: wooden, metal and composite wire and cable reels, molded and extruded
plastics, custom-designed protective packaging and paper amenities such as coasters and glass
covers.
Third quarter 2007 sales in All Other Sonoco were $94 million, just slightly better than the $93
million reported in the same period in 2006. Base operating profit for the third quarter was $13.5
million, up 7 percent, compared with $12.6 million reported in the same period in 2006.
Sales in All Other Sonoco were up slightly during the third quarter as a result of higher selling
prices and favorable foreign currency rates which were largely offset by modestly lower volume in
wire and cable reels and molded and extruded plastics. Base operating profit in All Other Sonoco
increased due to productivity improvements and a positive price/cost relationship, partially offset
by increased operating costs.
Corporate
Depreciation and amortization expense for the third quarter of 2007 was $48.1 million, compared
with $44.3 million in the same period in 2006. Net interest expense for the third quarter of 2007
increased to $14.1 million, compared with $10.7 million during the same period in 2006. The
increase was due to higher debt levels and, to a lesser extent, higher effective interest rates for
commercial paper during the second half of the quarter.
Rather than income tax expense, the Company reported a net income tax benefit of $2.0 million for
the third quarter of 2007 primarily due to the release of reserves as discussed previously.
Year-to-date, the Companys effective tax rate was 20.8 percent compared with 31.2 percent in the
same period in 2006. The year-over-year decrease in the effective tax rate was due primarily to the
release of tax reserves and improved international results.
-more-
Sonoco Reports 2007 Third Quarter Financial Results page 5
Conference Call Webcast
Sonoco will host its regular quarterly conference call today, Friday, October 19, 2007, at 11 a.m.
Eastern time, to review third quarter 2007 financial results. The live conference call can be
accessed in a listen only mode via the Internet at http://www.sonoco.com/, under the Latest News section. A telephonic replay of
the call will be available starting at 2 p.m. Eastern time to U.S. callers at 877/660-6853 and
international callers at +201/612-7415. The replay passcode for both U.S. and international calls
is account number 286 and conference ID number 256043. The archived telephone call will be
available through October 29, 2007. The call also will be archived on the Investor Information
section of Sonocos Web site through February 1, 2008.
About Sonoco
Founded in 1899, Sonoco is a $3.7 billion global manufacturer of industrial and consumer products
and provider of packaging services, with more than 330 operations in 35 countries, serving
customers in some 85 nations. For more information on the Company, visit our Web site at
http://www.sonoco.com/.
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 and Exchange Act of 1934, as amended. The words estimate, project, intend,
expect, believe, consider, plan, anticipate, objective, goal, guidance and similar
expressions identify forward-looking statements. Forward-looking statements include, but are not
limited to, statements regarding offsetting high raw material costs, improved productivity and cost
containment, adequacy of income tax provisions, refinancing of debt, adequacy of cash flows,
anticipated amounts and uses of cash flows, effects of acquisitions and dispositions, adequacy of
provisions for environmental liabilities, financial strategies and the results expected from them,
continued payments of dividends, stock repurchases and producing improvements in earnings.
These forward-looking statements are based on current expectations, estimates and projections about
our industry, managements beliefs and assumptions made by management. Such information includes,
without limitation, discussions as to guidance and other estimates, expectations, beliefs, plans,
strategies and objectives concerning our future financial and operating performance. These
statements are not guarantees of future performance and are subject to 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 and uncertainties include, without limitation:
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availability and pricing of raw materials; |
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success of new product development and introduction; |
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ability to maintain or increase productivity levels and contain or reduce costs; |
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international, national and local economic and market conditions; |
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fluctuations of obligations and earnings of pension and postretirement benefit plans; |
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ability to maintain market share; |
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pricing pressures and demand for products; |
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continued strength of our paperboard-based tubes and cores and composite can operations; |
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anticipated results of restructuring activities; |
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resolution of income tax contingencies; |
-more-
Sonoco Reports 2007 Third Quarter Financial Results page 6
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ability to successfully integrate newly acquired businesses into the Companys
operations; |
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currency stability and the rate of growth in foreign markets; |
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use of financial instruments to hedge foreign currency, interest rate and commodity
price risk; |
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liability for and anticipated costs of environmental remediation; |
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actions of government agencies and changes in laws and regulations affecting the
Company; |
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loss of consumer confidence; and |
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economic disruptions resulting from terrorist activities. |
The Company undertakes no obligation to publicly update or revise forward-looking statements,
whether as a result of new information, future events or otherwise.
Additional information concerning some of the factors that could cause materially different results
is included in the Companys 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 Commissions
public reference facilities and its Web site, http://www.sec.gov/, the Companys investor relations
department and the Companys Web site, http://www.sonoco.com.
References to our Web Site Address
References to our Web site address and domain names throughout this release are for informational
purposes only, or to fulfill specific disclosure requirements of the Securities and Exchange
Commissions rules or the New York Stock Exchange Listing Standards. These references are not
intended to, and do not, incorporate the contents of our Web sites by reference into this release.
Definition and Reconciliation of Non-GAAP Financial Measures
The Companys results determined in accordance with U.S. generally accepted accounting principles
(GAAP) are referred to as as reported results. Some of the information presented in the press
release reflects the Companys as reported results adjusted to exclude certain amounts related to
the Companys restructuring initiatives and certain non-recurring or infrequent and unusual
expenses. These adjustments result in the non-GAAP financial measures referred to in this press
release as Base Earnings, Base Earnings per Diluted Share and Base Operating Profit.
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. Accordingly, 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 budget all the
way up through the evaluation of the Chief Executive Officers 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.
-more-
Sonoco Reports 2007 Third Quarter Financial Results page 7
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 Sonocos 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 that includes the impact of restructuring charges and certain unusual
items, and the non-GAAP measures that exclude them. Whenever Sonoco uses a non-GAAP financial
measure, it provides a reconciliation of the non-GAAP financial measure to the most closely
applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial
measures and the reconciliation of these non-GAAP financial measures to their most directly
comparable GAAP financial measures as detailed below.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars and shares in thousands except per share)
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THREE MONTHS ENDED |
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NINE MONTHS ENDED |
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September 30, |
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September 24, |
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September 30, |
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September 24, |
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2007 |
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2006 |
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2007 |
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2006 |
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Sales |
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$ |
1,029,764 |
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$ |
931,522 |
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$ |
2,979,874 |
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$ |
2,667,301 |
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Cost of sales |
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842,485 |
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749,954 |
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2,417,357 |
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2,155,531 |
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Selling, general and administrative expenses |
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96,881 |
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88,777 |
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306,390 |
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258,777 |
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Restructuring/Asset Impairment Charges |
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17,401 |
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1,064 |
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27,496 |
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5,983 |
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Income before interest and taxes |
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$ |
72,997 |
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$ |
91,727 |
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$ |
228,631 |
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$ |
247,010 |
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Interest expense |
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16,188 |
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12,542 |
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45,261 |
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38,659 |
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Interest income |
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(2,134 |
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(1,801 |
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(6,959 |
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(4,548 |
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Income before income taxes |
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58,943 |
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80,986 |
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190,329 |
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212,899 |
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Provision for income taxes |
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(2,029 |
) |
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23,191 |
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39,541 |
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66,487 |
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Income before equity in earnings of affiliates/
minority interest in subsidiaries |
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60,972 |
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57,795 |
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150,788 |
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146,412 |
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Equity in earnings of affiliates/minority
interest in subsidiaries |
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3,561 |
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3,296 |
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9,200 |
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9,165 |
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Net income |
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$ |
64,533 |
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$ |
61,091 |
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$ |
159,988 |
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$ |
155,577 |
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Average shares outstanding diluted |
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101,859 |
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101,011 |
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102,243 |
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101,176 |
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Diluted earnings per share |
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$ |
0.63 |
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$ |
0.60 |
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$ |
1.56 |
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$ |
1.54 |
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Dividends per common share |
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$ |
0.26 |
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$ |
0.24 |
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$ |
0.76 |
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$ |
0.71 |
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FINANCIAL SEGMENT INFORMATION (Unaudited)
(Dollars in thousands)
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THREE MONTHS ENDED |
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NINE MONTHS ENDED |
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September 30, |
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September 24, |
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September 30, |
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September 24, |
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2007 |
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2006 |
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2007 |
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2006 |
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Net Sales |
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Consumer Packaging |
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$ |
369,472 |
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$ |
328,649 |
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$ |
1,051,178 |
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$ |
954,488 |
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Tubes and Cores/Paper |
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433,686 |
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387,477 |
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1,268,300 |
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1,112,626 |
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Packaging Services |
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132,445 |
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122,014 |
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377,787 |
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325,579 |
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All Other Sonoco |
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94,161 |
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93,382 |
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282,609 |
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274,608 |
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Consolidated |
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$ |
1,029,764 |
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$ |
931,522 |
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$ |
2,979,874 |
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$ |
2,667,301 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Packaging Operating Profit |
|
$ |
23,696 |
|
|
$ |
27,998 |
|
|
$ |
75,781 |
|
|
$ |
80,154 |
|
Tubes and Cores/Paper Operating Profit |
|
|
42,339 |
|
|
|
42,817 |
|
|
|
106,036 |
|
|
|
107,557 |
|
Packaging Services Operating Profit |
|
|
10,924 |
|
|
|
9,424 |
|
|
|
33,869 |
|
|
|
27,122 |
|
All Other Sonoco Operating Profit |
|
|
13,439 |
|
|
|
12,552 |
|
|
|
40,441 |
|
|
|
38,160 |
|
Restructuring/Asset Impairment Charges |
|
|
(17,401 |
) |
|
|
(1,064 |
) |
|
|
(27,496 |
) |
|
|
(5,983 |
) |
Interest, net |
|
|
(14,054 |
) |
|
|
(10,741 |
) |
|
|
(38,302 |
) |
|
|
(34,111 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
58,943 |
|
|
$ |
80,986 |
|
|
$ |
190,329 |
|
|
$ |
212,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
80,854 |
|
|
$ |
86,498 |
|
Trade accounts receivable |
|
|
549,385 |
|
|
|
459,022 |
|
Other receivables |
|
|
36,619 |
|
|
|
33,287 |
|
Inventories |
|
|
338,776 |
|
|
|
303,848 |
|
Prepaid expenses and deferred taxes |
|
|
107,393 |
|
|
|
60,143 |
|
|
|
|
|
|
|
|
|
|
|
1,113,027 |
|
|
|
942,798 |
|
Property, plant and equipment, net |
|
|
1,096,047 |
|
|
|
1,019,594 |
|
Goodwill |
|
|
817,878 |
|
|
|
667,288 |
|
Other intangible assets |
|
|
141,575 |
|
|
|
95,885 |
|
Other assets |
|
|
192,301 |
|
|
|
191,113 |
|
|
|
|
|
|
|
|
|
|
$ |
3,360,828 |
|
|
$ |
2,916,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Payable to suppliers and others |
|
$ |
675,001 |
|
|
$ |
601,243 |
|
Notes payable and current portion of long-term debt |
|
|
59,269 |
|
|
|
51,903 |
|
Accrued taxes |
|
|
8,386 |
|
|
|
6,678 |
|
|
|
|
|
|
|
|
|
|
$ |
742,656 |
|
|
$ |
659,824 |
|
Long-term debt |
|
|
916,275 |
|
|
|
712,089 |
|
Pension and other postretirement benefits |
|
|
226,142 |
|
|
|
209,363 |
|
Deferred income taxes and other |
|
|
142,453 |
|
|
|
116,334 |
|
Shareholders equity |
|
|
1,333,302 |
|
|
|
1,219,068 |
|
|
|
|
|
|
|
|
|
|
$ |
3,360,828 |
|
|
$ |
2,916,678 |
|
|
|
|
|
|
|
|
Definition and Reconciliation of Non-GAAP Financial Measures
The Companys results determined in accordance with U.S. generally accepted accounting principles (GAAP) are referred to as as reported results. Some of the information presented in the press release reflects the
Companys as reported results adjusted to exclude amounts related to restructuring initiatives, asset impairment charges, environmental charges and certain non-recurring or infrequent and unusual items. These adjustments
result in the non-GAAP financial measures referred to in this press release as Base Earnings, Base Earnings per Diluted Share and Base Operating Profit.
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. Accordingly, 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 budget all the way up through the evaluation of the Chief Executive Officers 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 Sonocos 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 that includes the impact of restructuring and asset impairment charges, other non-recurring or infrequent and unusual items, and the non-GAAP measures that exclude them. Whenever Sonoco uses a non-GAAP
financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the
reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures as detailed below.
Reconciliation of GAAP1 to Non-GAAP Financial Measures (Unaudited)
(Dollars in millions, except per share data)
|
|
|
|
|
|
|
|
|
Base Earnings Per Diluted Share2 |
|
THREE MONTHS ENDED |
|
|
|
September 30, |
|
|
September 24, |
|
(Unaudited) |
|
2007 |
|
|
2006 |
|
|
Diluted Earnings Per Share, as reported (GAAP) |
|
$ |
0.63 |
|
|
$ |
0.60 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
Restructuring charges, net of tax 4 |
|
|
0.02 |
|
|
|
0.01 |
|
Asset Impairment, net of tax |
|
|
0.10 |
|
|
|
|
|
Environmental reserve, net of tax |
|
|
0.01 |
|
|
|
|
|
Release of tax reserves |
|
|
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
Base Earnings Per Share (Non-GAAP) |
|
$ |
0.64 |
|
|
$ |
0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NINE MONTHS ENDED |
|
|
|
September 30, |
|
|
September 24, |
|
(Unaudited) |
|
2007 |
|
|
2006 |
|
|
Diluted Earnings Per Share, as reported (GAAP) |
|
$ |
1.56 |
|
|
$ |
1.54 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
Restructuring charges, net of tax 4 |
|
|
0.10 |
|
|
|
0.03 |
|
Asset Impairment, net of tax |
|
|
0.10 |
|
|
|
|
|
Environmental reserve, net of tax |
|
|
0.12 |
|
|
|
|
|
Release of tax reserves |
|
|
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
Base Earnings Per Share (Non-GAAP) |
|
$ |
1.76 |
|
|
$ |
1.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
Earnings3 |
|
THREE MONTHS ENDED |
|
|
|
September 30, |
|
|
September 24, |
|
(Unaudited) |
|
2007 |
|
|
2006 |
|
|
Net Income, as reported (GAAP) |
|
$ |
64.5 |
|
|
$ |
61.1 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
Restructuring charges, net of tax 4 |
|
|
1.6 |
|
|
|
0.6 |
|
Asset Impairment, net of tax |
|
|
9.9 |
|
|
|
|
|
Environmental reserve, net of tax |
|
|
0.6 |
|
|
|
|
|
Release of tax reserves |
|
|
(11.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
Base Earnings (Non-GAAP) |
|
$ |
64.8 |
|
|
$ |
61.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NINE MONTHS ENDED |
|
|
|
September 30, |
|
|
September 24, |
|
(Unaudited) |
|
2007 |
|
|
2006 |
|
|
Net Income, as reported (GAAP) |
|
$ |
160.0 |
|
|
$ |
155.6 |
|
Adjusted for: |
|
|
|
|
|
|
|
|
Restructuring charges, net of tax 4 |
|
|
9.2 |
|
|
|
3.5 |
|
Asset Impairment, net of tax |
|
|
9.9 |
|
|
|
|
|
Environmental reserve, net of tax |
|
|
12.4 |
|
|
|
|
|
Release of tax reserves |
|
|
(11.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
Base Earnings (Non-GAAP) |
|
$ |
179.7 |
|
|
$ |
159.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Operating Profit5 |
|
Three Months Ended |
|
|
|
September 30, |
|
|
September 24, |
|
(Unaudited) |
|
2007 |
|
|
2006 |
|
|
Consumer Packaging Base Operating Profit |
|
$ |
23.7 |
|
|
$ |
28.0 |
|
Tubes and Cores/Paper Base Operating Profit |
|
|
43.4 |
|
|
|
42.8 |
|
Packaging Services Base Operating Profit |
|
|
10.9 |
|
|
|
9.4 |
|
All Other Sonoco Base Operating Profit |
|
|
13.5 |
|
|
|
12.6 |
|
|
|
|
|
|
|
|
Base Operating Profit |
|
|
91.5 |
|
|
|
92.8 |
|
|
Restructuring charges 4 |
|
|
(2.3 |
) |
|
|
(1.1 |
) |
Asset Impairment |
|
|
(15.1 |
) |
|
|
|
|
Environmental reserve |
|
|
(1.1 |
) |
|
|
|
|
Interest, net |
|
|
(14.1 |
) |
|
|
(10.7 |
) |
|
|
|
|
|
|
|
Income before income taxes (GAAP) |
|
$ |
58.9 |
|
|
$ |
81.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NINE MONTHS ENDED |
|
|
|
September 30, |
|
|
September 24, |
|
(Unaudited) |
|
2007 |
|
|
2006 |
|
|
Consumer Packaging Base Operating Profit |
|
$ |
75.8 |
|
|
$ |
80.1 |
|
Tubes and Cores/Paper Base Operating Profit |
|
|
127.1 |
|
|
|
107.6 |
|
Packaging Services Base Operating Profit |
|
|
33.9 |
|
|
|
27.1 |
|
All Other Sonoco Base Operating Profit |
|
|
40.4 |
|
|
|
38.2 |
|
|
|
|
|
|
|
|
Base Operating Profit |
|
$ |
277.2 |
|
|
$ |
253.0 |
|
|
|
|
|
|
|
|
|
Restructuring charges 4 |
|
|
(12.4 |
) |
|
|
(6.0 |
) |
Asset Impairment |
|
|
(15.1 |
) |
|
|
|
|
Environmental reserve |
|
|
(21.1 |
) |
|
|
|
|
Interest, net |
|
|
(38.3 |
) |
|
|
(34.1 |
) |
|
|
|
|
|
|
|
Income before income taxes (GAAP) |
|
$ |
190.3 |
|
|
$ |
212.9 |
|
|
|
|
|
|
|
|
1Generally Accepted Accounting Principles
2 Base Earnings Per Diluted Share is a non-GAAP financial measure of diluted earnings per share which excludes the impact of restructuring and asset impairment charges and certain other non-recurring or
infrequent and unusual items. Management believes that these exclusions result in a measure of operating income that reflects the core profitability of our business and can be used by management to assess operating
performance.
3Base Earnings is a non-GAAP financial measure of net income, which excludes the impact of restructuring and asset impairment charges and certain other non-recurring or infrequent and unusual items. Management
believes that these exclusions result in a measure of operating income that reflects the core profitability of our business and can be used by management to assess operating performance.
4 Restructuring charges are a recurring item as Sonocos restructuring programs usually require several years to fully implement and the Company is continually seeking to take actions that could enhance its
efficiency. Accordingly, 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.
5Base Operating Profit is a non-GAAP financial measure of income before taxes, which excludes net interest expense, the impact of restructuring and asset impairment charges and certain other non-recurring or
infrequent and unusual items. Management believes that these exclusions result in a measure of operating income that reflects the core profitability of our business and can be used by management to assess operating
performance.