Company Increases Earnings Guidance for Full Year 2006
HARTSVILLE, S.C., April 19 /PRNewswire-FirstCall/ -- Sonoco (NYSE:
SON), the global packaging company, today reported earnings per diluted
share for the first quarter of 2006 of $.44, compared with $.37 for the
same period in 2005, it was announced by Harris E. DeLoach, Jr., chairman,
president and chief executive officer. Base earnings per diluted share for
the first quarter of 2006, a non-GAAP financial measure that excludes
certain items, were $.46, compared with $.40 for the same period of 2005.
(A reconciliation of base earnings per share to reported earnings per share
is provided on page 5 of this news release.) Base earnings for the first
quarter excluded after-tax restructuring charges of $1.4 million ($.02 per
diluted share) and $3.1 million ($.03 per diluted share) in 2006 and 2005,
respectively, related to previously announced restructuring actions. A
favorable adjustment to certain state taxes increased reported and base
earnings per diluted share by nearly $.03 during the first quarter of 2006.
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Net sales for the first quarter of 2006 were $819 million, compared
with $814 million for the same period in 2005. "While our consolidated
sales increased less than 1 percent in the first quarter of 2006 over the
same period last year, our Consumer Packaging segment reported nearly an 8
percent increase in sales due to higher volumes from composite cans. Sales
were also favorably impacted by stronger volume and higher prices in
protective packaging and wires and cable reels. However, these sales
increases were offset by lower volumes from North American and European
tubes and cores, a year-over-year reduction in point-of-purchase display
and fulfillment work for Sonoco CorrFlex and lower selling prices for
recovered paper," said DeLoach.
Net income for the first quarter of 2006 was $45.1 million, up
approximately 22 percent, compared with $37 million for the first quarter
of 2005. Included in 2006 results were approximately $1.1 million after tax
($.01 per diluted share) related to the expensing of stock options in
accordance with Statement of Financial Accounting Standards No. 123
(revised 2004), 'Share-based Payment'. Base earnings totaled $46.5 million
for the first quarter of 2006, compared with $40.1 million for the same
period in 2005. (A reconciliation of base earnings to reported net income
is provided later in this news release.)
"First quarter 2006 earnings were strong due primarily to manufacturing
productivity improvements. Despite continued pressure from higher prices
for raw materials other than old corrugated containers (OCC), we continued
to maintain a positive price/cost relationship in the first quarter of
2006, which helped offset significant year-over-year increases in energy
and freight costs. In addition, a favorable adjustment to certain state
taxes reduced our income tax expense, adding nearly $.03 to our earnings
per diluted share," said DeLoach.
Cash generated from operations increased to $69 million for the first
quarter of 2006 compared to $22.6 million for the same period in 2005
primarily due to the Company's working capital initiative and improved
earnings. Capital expenditures and cash dividends totaled $27.8 million and
$23.1 million, respectively, in the first quarter of 2006. In addition,
$70.2 million was used during the first quarter of 2006 to repurchase 2.1
million shares of Sonoco common stock. The stock repurchase program was
completed in early April with an additional 0.4 million shares repurchased
for $12.4 million. The program was completed under an existing
authorization to repurchase approximately 5.29 million shares.
Revised 2006 Outlook
"Our strategy of achieving a greater balance of sales and earnings
between consumer and industrial markets is continuing to benefit our
performance. Assuming no significant change in Companywide volumes or
pricing, the Company expects second quarter earnings to be in the range of
$.44 to $.47 per diluted share, excluding any restructuring charges, which
cannot be estimated at this time. Furthermore, as a result of the strong
performance in the first quarter and based on current conditions, we expect
to report base earnings per diluted share for the full year 2006 in the
upper end of the range of $1.96 to $1.99 per diluted share, including
approximately $.02 per diluted share related to the expensing of stock
options, excluding any restructuring charges and assuming no significant
reduction in pricing due to changing general economic conditions," DeLoach
concluded. Sonoco had previously provided 2006 base earnings guidance in
the upper end of the range of $1.90 to $1.94 per diluted share.
Segment Review
Consumer Packaging
The Consumer Packaging segment includes the following products: round
and shaped rigid packaging, both composite and plastic; printed flexible
packaging; and metal and plastic ends and closures.
First quarter 2006 sales for the Consumer Packaging segment were $298
million, compared with $277 million for the same period in 2005. Operating
profit for this segment was $25.8 million in the first quarter of 2006,
compared with $22.3 million in the first quarter of 2005.
Sales in the Consumer Packaging segment were up year-over-year in the
first quarter of 2006, primarily reflecting increased volume in composite
cans. The earnings impact of this higher volume was offset by an
unfavorable change in the mix of products sold in this segment. The
increase in operating profit was due primarily to manufacturing and
purchasing productivity improvements, which were partially offset by higher
costs for freight and labor. The businesses in this segment were able to
maintain a neutral price/cost relationship despite the significant
year-over-year increase in material costs.
Tubes and Cores/Paper
Effective December 31, 2005, the Company changed the name of the
Engineered Carriers and Paper segment to Tubes and Cores/Paper because the
term "tubes and cores" is more generally understood than "engineered
carriers" in the marketplace for the primary products offered by the
businesses in this segment. There has been no change in the businesses
included in this segment. Its products and services include:
high-performance paper and composite paperboard tubes and cores,
fiber-based construction tubes and forms, recycled paperboard, linerboard,
recovered paper and supply chain packaging services.
First quarter 2006 sales for the Tubes and Cores/Paper segment were
$338 million, compared with $353 million for the same period in 2005.
Operating profit for the Tubes and Cores/Paper segment for the first
quarter of 2006 was $27.5 million, compared with $25.2 million for the
first quarter of 2005.
First quarter 2006 sales in this segment decreased primarily due to
lower tubes and cores volume in North America and Europe along with
decreased selling prices in Europe and domestic recovered paper operations.
The increase in operating profit was primarily due to lower costs from
manufacturing productivity improvements, as a result of previously
announced plant closings and continuing plant manufacturing initiatives.
Lower volumes in North American and European tubes and cores along with
higher energy, freight and labor costs also negatively impacted the
earnings in this segment. North American paper mill operations reported
capacity utilization rates of over 99 percent in the first quarter of 2006,
versus 94 percent in the same period in 2005.
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.
First quarter 2006 sales for the Packaging Services segment were $97
million, compared with $105 million for the same quarter of 2005. Operating
profit for this segment was $9.1 million in the first quarter of 2006,
compared with $10.6 million for the same period in 2005.
First quarter 2006 sales in the Packaging Services segment declined
primarily due to a year-over-year reduction in point-of-purchase and
fulfillment work in Sonoco CorrFlex as well as the loss of sales from a
single-plant folding carton operation, which was sold at the end of 2005.
Operating profits declined in the segment due primarily to lower volumes,
which were only partially offset by productivity improvements.
All Other Sonoco
All Other Sonoco includes the following products: wooden, metal and
composite reels for wire and cable; molded and extruded plastics; custom-
designed protective packaging; and paper amenities such as coasters and
glass covers.
First quarter 2006 sales for All Other Sonoco were $85 million,
compared with $80 million for the first quarter of 2005. Operating profit
for the first quarter of 2006 for All Other Sonoco was $12.4 million,
compared with $9.4 million in the same period in 2005.
First quarter 2006 sales in All Other Sonoco increased over the same
period in 2005, primarily due to volume and price increases in wire and
cable reels and protective packaging. The increase in operating profit was
due primarily to productivity improvements, a favorable price/cost
relationship and higher volume.
Corporate
Depreciation and amortization expense for the first quarter of 2006 was
$38.2 million, compared with $38.6 million in first quarter of 2005. Net
interest expense for the first quarter of 2006 increased to $10.9 million,
compared with $9.4 million during the same period in 2005 due to an
increase in interest rates. The effect of the increase in rates has been
partially offset by a decrease in debt balances.
The effective tax rate for the Company for the first quarter of 2006
was 31.2 percent, compared with 36.1 percent for the same period in 2005.
The year-over-year decrease in the effective tax rate was due to a
favorable adjustment to certain state taxes. The Company is currently not
anticipating similar adjustments during the remainder of the year.
Conference Call and Annual Meeting Webcast
Sonoco will host its regular quarterly conference call today,
Wednesday, April 19, 2006, at 2 p.m. Eastern time, to review its financial
results for the first quarter of 2006. The conference call can be accessed
in a "listen only" mode via the Internet at http://www.sonoco.com, under
the "Latest News" section. The call will be archived on the Investor
Information section of the Sonoco Web site for 12 months. A telephonic
replay of the call will also be available at +888/286-8010, access code
25023735, after 4:30 p.m. Eastern time, April 19, 2006, until April 29,
2006.
Sonoco also will conduct a live webcast of its Annual Shareholders'
Meeting on Wednesday, April 19, 2006, which will include a "state of the
company" presentation by Mr. DeLoach. The live webcast will be available in
"listen-only" mode on the Internet beginning at 10:55 a.m. Eastern time,
with the meeting beginning at 11 a.m. The live webcast of the annual
meeting can be accessed at http://www.sonoco.com, under the "Latest News"
section. The annual meeting webcast will be archived on the Investor
Information section on Sonoco's Web site for 12 months.
About Sonoco
Founded in 1899, Sonoco is a $3.5 billion global manufacturer of
industrial and consumer packaging products and provider of packaging
services, with more than 300 operations in 35 countries, serving customers
in 85 nations. Additional information about Sonoco is available at
http://www.sonoco.com.
Forward-looking Statements and Other Information
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," "plan," "anticipate," "objective," "goal,"
"guidance," "outlook," 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; expected earnings; producing improvements in
earnings; continued payment of dividends; and stock repurchases. 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, discussion 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. Such 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; fluctuations in 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; currency stability and the rate of growth in
foreign markets; use of financial instruments to hedge foreign exchange,
interest rate and commodity price risk; actions of government agencies; and
loss of consumer confidence and economic disruption 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 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, the Company's investor relations
department and the Company's Web site, http://www.sonoco.com.
Definition and Reconciliation of Non-GAAP Financial Measures
The following provides definitions of the non-GAAP financial measures
contained in this press release together with the most directly comparable
financial measures calculated in accordance with GAAP, and a reconciliation
of the differences between the non-GAAP financial measures discussed and
the most directly comparable financial measures calculated in accordance
with GAAP:
Base Earnings Per Share
Base Earnings Per Share is a non-GAAP financial measure of earnings per
share, which excludes the impact of restructuring charges and of
non-recurring or infrequent and unusual items. The following table sets
forth the reconciliation of GAAP Diluted Earnings Per Share to Base
Earnings Per Share:
Three Months Ended
(Unaudited) March 26, 2006 March 27, 2005
Diluted Earnings Per Share,
as reported (GAAP) $ 0.44 $ 0.37
Adjusted for:
Restructuring charges,
net of tax 0.02 0.03
Base Earnings Per Share (Non-GAAP) $ 0.46 $ 0.40
Base Earnings
Base Earnings is a non-GAAP financial measure of net income, which
excludes the impact of restructuring charges and of non-recurring or
infrequent and unusual items. The following table sets forth the
reconciliation of GAAP Net Income to Base Earnings ($ in millions):
Three Months Ended
(Unaudited) March 26, 2006 March 27, 2005
Net Income, as reported (GAAP) $ 45.1 $ 37.0
Adjusted for:
Restructuring charges,
net of tax 1.4 3.1
Base Earnings (Non-GAAP) $ 46.5 $ 40.1
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars and shares in thousands except per share)
THREE MONTHS ENDED
March 26, March 27,
2006 2005
Sales $818,769 $814,438
Cost of sales 662,593 666,122
Selling, general and administrative expenses 81,337 80,797
Restructuring charges 2,355 5,042
Income before interest and taxes 72,484 62,477
Interest expense 12,118 11,061
Interest income (1,265) (1,666)
Income before income taxes 61,631 53,082
Provision for income taxes 19,236 19,179
Income before equity in earnings of affiliates/
minority interest in subsidiaries 42,395 33,903
Equity in earnings of affiliates/minority
interest in subsidiaries 2,749 3,086
Net income $ 45,144 $ 36,989
Average shares outstanding - diluted 101,929 100,449
Diluted earnings per share $ .44 $ .37
Dividends per common share $ .23 $ .22
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
March 26, December 31,
2006 2005
Assets
Current Assets:
Cash and cash equivalents $ 66,136 $ 59,608
Trade accounts receivables 430,408 413,209
Other receivables 31,054 45,225
Inventories 321,249 318,316
Prepaid expenses and deferred taxes 48,525 49,142
897,372 885,500
Property, plant and equipment, net 957,792 943,951
Goodwill 589,709 573,903
Other intangible assets 74,447 73,037
Other assets 496,932 505,349
$ 3,016,252 $ 2,981,740
Liabilities and Shareholders' Equity
Current Liabilities:
Payable to suppliers and others $ 505,081 $ 495,860
Notes payable and current portion
of long-term debt 127,696 124,530
Accrued taxes 9,639 96
642,416 620,486
Long-term debt 685,869 657,075
Pension and other postretirement
benefits 176,622 173,939
Deferred income taxes and other 260,088 266,926
Shareholders' equity 1,251,257 1,263,314
$ 3,016,252 $ 2,981,740
Prior year data has been reclassified to conform to the current year
presentation.
FINANCIAL SEGMENT INFORMATION (Unaudited)
(Dollars in thousands)
THREE MONTHS ENDED
March 26, March 27,
2006 2005
Net Sales
Consumer Packaging $ 298,301 $ 276,855
Tubes and Cores/Paper 338,488 353,155
Packaging Services 96,667 104,738
All Other Sonoco 85,313 79,690
Consolidated $ 818,769 $ 814,438
Income before income taxes
Operating Profit - Consumer Packaging $ 25,824 $ 22,332
Operating Profit - Tubes and Cores/Paper 27,518 25,236
Operating Profit - Packaging Services 9,128 10,599
Operating Profit - All Other Sonoco 12,369 9,352
Restructuring charges (2,355) (5,042)
Interest, net (10,853) (9,395)
Consolidated $ 61,631 $ 53,082
SOURCE Sonoco
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http://www.sonoco.com/
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CONTACT:
Allan V. Cecil, Vice President, Sonoco,
+1-843-383-7524, or allan.cecil@sonoco.com
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