(Source: Business Wire)
Sonoco (NYSE: SON), one of the largest diversified global packaging
companies, today reported third quarter 2009 earnings of $.47 per
diluted share, compared with $.57 per diluted share reported in the
third quarter of 2008. Results in the current year's quarter were
impacted by higher pension expense and lower Companywide volumes,
particularly in businesses serving recession-impacted industrial markets.
Quarterly Results
Base earnings for the third quarter of 2009 were $.50 per diluted share,
compared with $.60 per diluted share reported in the same period in
2008. Base earnings and base earnings per diluted share are non-GAAP
financial measures that exclude restructuring charges, asset impairment
charges, and certain non-recurring or infrequent and unusual items, as
applicable. Base earnings per diluted share for 2009 include a
year-over-year increase in after-tax pension expense of $.08 per diluted
share. Excluded from base earnings in each of the 2009 and 2008 quarters
were respective after-tax restructuring charges of $.03 per diluted
share. 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.
"We are reporting better than projected results, as base earnings per
diluted share exceeded the top end of our previously announced guidance
of $.43 to $.47. These results reflect record performance in our
Consumer Packaging segment, which for the seventh straight quarter
reported a year-over-year improvement in operating profits," said Harris
E. DeLoach Jr., chairman, president and chief executive officer.
"However, the global recession continues to have a greater impact on our
businesses that serve industrial markets and our Packaging Services
segment, where lower results compared to the prior year more than offset
the gains in our Consumer Packaging segment. On a positive note,
business in our Tubes and Cores/Paper segment has picked up
significantly from first quarter levels."
Net sales were $930.6 million, a decline of 12 percent (8 percent
excluding the impact of foreign currency translation), compared with
$1.06 billion in the same quarter last year. "Sales declined from last
year's levels due to recession-impacted Companywide volumes,
particularly in our industrial-focused businesses, and lower selling
prices due primarily to the pass-through of lower recovered paper
costs," said DeLoach.
Net income attributable to Sonoco for the third quarter of 2009 was
$47.7 million, compared with $57.3 million for the same period in 2008.
Base earnings in 2009 were $50.9 million, compared with $60.6 million
last year. Higher pension expense in 2009 reduced base earnings by $8
million when compared with the same period in 2008. Base earnings
exclude after-tax restructuring charges of $3.2 million and $3.3 million
in 2009 and 2008, respectively. Gross profit margin improved to 18.6
percent of sales, from 17.4 percent in the same period in 2008.
"Despite generally low volumes and higher pension expenses, overall
gross profit margin for the quarter was at the highest level since the
second quarter of 2007," said DeLoach. "This improvement was a result of
our continued focus on managing the selling price/material cost
relationship, driving productivity and reducing fixed and variable costs
throughout the Company."
Third quarter 2009 cash generated from operations was $176 million,
compared with $166 million in 2008. Although quarter-over-quarter
earnings were lower, the impact on operating cash flow was largely
buffered by noncash items, primarily higher current year noncash pension
and postretirement expenses. Operating cash flow improvements due to
current quarter changes in working capital and other assets and
liabilities offset a $25 million non-recurring benefit received in 2008
from insurance settlements related to an environmental claim. Capital
expenditures and cash dividends were $25 million and $27 million,
respectively, compared with $29 million and $27 million, respectively in
last year's third quarter. Repayment of debt totaled $56 million during
the quarter, compared with $37 million last year.
Year-to-Date Results
For the nine-month period ending September 27, 2009, net sales were
$2.60 billion, a decline of 19 percent (13 percent excluding the impact
of foreign currency translation), compared with $3.19 billion in 2008.
Net income attributable to Sonoco was $104.4 million ($1.03 per diluted
share) in 2009, compared with $128.6 million ($1.27 per diluted share)
in 2008. Earnings in 2009 were negatively impacted by after-tax
restructuring charges of $16.6 million ($.17 per diluted share) and
higher year-over-year pension expense. 2008 earnings were negatively
impacted by a $31 million ($.31 per diluted share) after-tax, noncash
impairment charge related to the Company's remaining financial interest
in the 2003 sale of its high density film business and $17.7 million
($.17 per diluted share) in after-tax restructuring charges.
2009 base earnings were $121.0 million ($1.20 per diluted share),
compared with $177.3 million ($1.75 per diluted share) in 2008. Lower
Companywide volumes and increased pension costs of $26 million after-tax
($.25 per diluted share) more than offset a favorable price/cost
relationship and productivity improvements during the period. Gross
profit as a percent of sales was 18.2 percent, compared with 17.7
percent in 2008.
Cash generated from operations was $358 million in 2009, compared with
$310 million in 2008. Capital expenditures and cash dividends paid were
$83 million and $81 million, respectively, in 2009, compared with $92
million and $80 million, respectively, in 2008. Cash used to reduce debt
during 2009 totaled $104 million. The Company's calculation of debt to
total capital declined to 31.0 percent at September 27, 2009, compared
with 37.0 percent at December 31, 2008.
As of the end of the third quarter of 2009, cash and cash equivalents
totaled $194 million, compared with $102 million at December 31, 2008.
At September 27, 2009, no borrowings were outstanding under the
Company's $500 million commercial paper program. The commercial paper
program is fully supported by a bank credit facility provided by a
syndicate of banks that is committed until May 2011.
Fourth Quarter and Updated Full-Year 2009 Outlook
Sonoco expects fourth quarter 2009 base earnings to be in the range of
$.42 to $.47 per diluted share. Base earnings in the fourth quarter of
2008 were $.49 per diluted share. Full-year 2009 base earnings are
projected to be in the range of $1.62 to $1.67 per diluted share,
compared with the Company's previous expectations of $1.55 to $1.65 per
diluted share. As previously reported by the Company, fourth quarter and
full-year guidance include a year-over-year increase in after-tax
pension expense of $.10 and $.35 per diluted share, respectively. The
Company's 2009 fourth quarter earnings guidance reflects an expected tax
rate of approximately 31 percent, which is above the third quarter and
year-to-date effective rates of 25.1 percent and 29 percent,
respectively.
Year-to-date free cash flow (operating cash flow less dividends and
capital expenditures) was $194 million, compared with $138 million
during the same period last year. The Company expects to make an
additional voluntary cash contribution of at least $50 million to its
U.S. pension plan by year end. Excluding this additional pension
contribution, free cash flow for 2009 should exceed $200 million,
compared with $150 million for 2008. The Company's updated earnings and
free cash flow guidance assumes sales demand will remain near the levels
experienced late in the third quarter and ongoing cost-reduction efforts
are successful. Although the Company believes the assumptions reflected
in the range of guidance are reasonable, the outlook, given the current
economic environment, is uncertain.
"While we have seen sequential improvement in results over the past two
quarters, we remain cautious about the impact this lingering global
recession is having on overall demand, particularly in our industrial
markets," said DeLoach. "Because of our focused efforts to adjust our
manufacturing footprint and drive sustainable operating efficiencies, we
believe the Company is better positioned to effectively leverage any
improvement in volumes with greater impact to the bottom line."
Segment Review
The Company uses a non-GAAP financial measure, base operating profit,
when discussing the operational results of its segments. Base operating
profit is defined as the segments' portion of consolidated Income Before
Income Taxes, excluding restructuring and impairment charges, net
interest expense and certain non-recurring or infrequent and unusual
items. A reconciliation of base operating profit to GAAP Income Before
Income Taxes for the Company's three reportable segments and All Other
Sonoco is provided later in this release.
Consumer Packaging
Sonoco's 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 2009 sales for the segment were $395 million, compared
with $399 million in the same period in 2008. Base operating profit for
this segment was a record $42.0 million in the third quarter of 2009,
compared with $28.9 million in the same period in 2008.
Compared to last year, sales in this segment were essentially flat
during the third quarter. Lower volumes and a negative effect of foreign
currency translation of approximately $8 million were essentially offset
by higher selling prices implemented to offset higher manufacturing and
raw materials costs. Base operating profit benefited from a favorable
price/cost relationship and productivity improvements, which together,
more than offset the negative impact of lower volume and higher pension
costs.
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 2009 sales for the segment were $346 million, compared
with $436 million in the same period in 2008. Third quarter base
operating profit for this segment was $21.5 million, compared with $42.0
million in 2008.
The 20 percent decline in segment sales was due to volume declines in
North America and Europe, a negative foreign currency translation effect
of approximately $22 million and lower prices, especially for products
related to recovered paper. Base operating profits were reduced due to
the impact of lower volume and higher pension costs. Further reducing
quarterly results was a negative price/cost variance driven by rising
recovered paper costs.
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 2009 sales for this segment were $117 million, compared
with $135 million in the same period in 2008. Base operating profit for
this segment was $6.0 million, compared with $9.1 million in 2008.
Sales in this segment were affected by lower volumes in the Company's
contract packing operations along with a negative foreign currency
translation effect of approximately $13 million. Base operating profits
decreased primarily due to an unfavorable shift in the mix of business
and higher pension costs.
All Other Sonoco
All Other Sonoco includes businesses that are not aggregated in a
reportable segment and includes 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 2009 sales in All Other Sonoco were $72 million, compared
with $94 million reported in the same period in 2008. Third quarter base
operating profit was $5.4 million in 2009, compared with $11.8 million
in 2008.
Sales in All Other Sonoco declined during the quarter due to lower
volumes and prices in wire and cable reels, molded plastics and
protective packaging. Base operating profit in All Other Sonoco declined
as lower volumes, reduced selling prices and higher pension costs more
than offset productivity improvements and reduced material costs.
Corporate
Net interest expense for the third quarter of 2009 declined to $9.4
million, compared with $10.6 million during the same period in 2008. The
decrease was due to lower debt levels and lower interest rates. The
effective tax rate for the Company for the third quarter of 2009 was
25.1 percent, compared with 28.9 percent in the same period in 2008. The
lower tax rate was primarily a result of favorable tax adjustments
recorded in the quarter related to expirations of statutes of limitation
and changes in the geographic distribution of earnings. Although the
lower tax rate was in line with expectations, it did have a favorable
impact of approximately $.03 per diluted share to base earnings compared
to the prior year quarter.
Conference Call Webcast
Sonoco will host its regular quarterly conference call today, Thursday,
October 22, 2009, at 11 a.m. Eastern time, to review its 2009 third
quarter 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 3 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 332728. The archived telephone call will be
available through October 29, 2009. The webcast call also will be
archived on the Investor Information section of Sonoco's Web site.
About Sonoco
Founded in 1899, Sonoco is a $4.1 billion global manufacturer of
industrial and consumer products and provider of packaging services,
with more than 300 operations in 35 countries, serving customers in some
85 nations. The Company is a proud member of the Dow Jones
Sustainability World Index. 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 Exchange Act of 1934, as amended. The words "estimate,"
"project," "intend," "expect," "believe," "consider," "plan,"
"anticipate," "objective," "goal," "guidance," "outlook," "forecasts,"
"future," "will," "would" 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, producing improvements in
earnings, financial results for future periods, and creation of
long-term value for shareholders.
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,
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 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 and
uncertainties include, without limitation:
availability and pricing of raw materials;
success of new product development and introduction;
ability to maintain or increase productivity levels and contain or
reduce costs;
international, national and local economic and market conditions;
availability of credit to us, our customers and/or our suppliers in
needed amounts and/or on reasonable terms;
fluctuations of obligations and earnings of pension and postretirement
benefit plans;
ability to maintain market share;
pricing pressures and demand for products;
continued strength of our paperboard-based tubes and cores and
composite can operations;
anticipated results of restructuring activities;
resolution of income tax contingencies;
ability to successfully integrate newly acquired businesses into the
Company's operations;
rate of growth in foreign markets;
foreign currency, interest rate and commodity price risk and the
effectiveness of related hedges;
liability for and anticipated costs of environmental remediation
actions;
actions of government agencies and changes in laws and regulations
affecting the Company;
ability to weather the current economic downturn;
loss of consumer or investor confidence; and
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. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed herein might not occur.
Additional information concerning some of the factors that could cause
materially different results is included in the Company's 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 Commission's
public reference facilities and its Web site, http://www.sec.gov/,
and from the Company's investor relations department and the Company's
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 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 Web
site by reference into this release.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)(Dollars and shares in thousands except per share)
THREE MONTHS ENDED NINE MONTHS ENDED
Sept. 27, 2009 Sept. 28, 2008 Sept. 27, 2009 Sept. 28, 2008
Net sales $ 930,560 $ 1,063,250 $ 2,595,420 $ 3,187,813
Cost of sales 757,504 878,514 2,123,217 2,621,994
Gross profit 173,056 184,736 472,203 565,819
Selling, general and administrative expenses 98,085 92,989 277,623 292,039
Restructuring/Asset impairment charges 158 5,530 17,754 77,838
Income before interest and income taxes $ 74,813 $ 86,217 $ 176,826 $ 195,942
Interest expense 10,202 12,682 31,167 40,763
Interest income (801 ) (2,053 ) (2,064 ) (4,809 )
Income before income taxes 65,412 75,588 147,723 159,988
Provision for income taxes 16,436 21,807 42,912 46,671
Income before equity in earnings of affiliates 48,976 53,781 104,811 113,317
Equity in earnings of affiliates, net of tax 2,401 2,970 3,291 7,690
Net income 51,377 56,751 108,102 121,007
Net (income)/Loss attributable to noncontrolling interests (3,706 ) 600 (3,699 ) 7,589
Net income attributable to Sonoco $ 47,671 $ 57,351 $ 104,403 $ 128,596
Weighted average shares outstanding -- diluted 101,105 101,292 100,876 101,060
Diluted earnings per share $ 0.47 $ 0.57 $ 1.03 $ 1.27
Dividends per common share $ 0.27 $ 0.27 $ 0.81 $ 0.80
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