HARTSVILLE, S.C., Oct. 18 /PRNewswire-FirstCall/ -- Sonoco (NYSE: SON),
the global packaging company, today reported earnings per diluted share for
the third quarter of 2006 of $.60, an increase of 30 percent, compared with
$.46 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 third quarter of 2006, a non-GAAP measure that
excludes restructuring charges and certain non-recurring items, as
applicable, were $.61, compared with $.48 per diluted share for the same
period of 2005, an increase of 27 percent. (Additional information about
base earnings and base earnings per share along with reconciliation to
reported earnings and reported earnings per share is provided later in this
news release.) Base earnings for the third quarter excluded after-tax
restructuring charges of $0.6 million ($.01 per diluted share) and $2.5
million ($.02 per diluted share) in 2006 and 2005, respectively, related to
previously announced restructuring actions.
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Net sales for the third quarter of 2006 were $932 million, compared
with $881 million for the same period in 2005. According to DeLoach, "Sales
increased nearly six percent during the third quarter of 2006, with gains
in each of the Company's three business segments and in other businesses
reported in All Other Sonoco. Overall, growth in sales during the quarter
was due primarily to higher selling prices, higher overall volume and the
favorable effect of foreign currency translation."
Net income for the third quarter of 2006 was $61.1 million, a 33
percent increase, compared with $45.9 million for the third quarter of
2005. Base earnings, a non-GAAP measure that excludes restructuring charges
and certain non-recurring items, as applicable, totaled $61.7 million for
the third quarter of 2006, compared with $48.4 million for the same period
in 2005, a 28 percent increase.
"The increase in year-over-year base earnings in the third quarter of
2006 reflected a continued favorable selling price/material cost
relationship and the impact of productivity improvements, which were
partially offset by higher energy, freight and labor costs throughout the
Company. The impact of higher volume had little impact on overall earnings
due to the unfavorable shifts in the mix within certain businesses," said
DeLoach. "Our results were also favorably impacted by the recognition of
certain tax benefits, resulting in an effective tax rate of 28.6 percent,
which was lower than we had expected. Therefore, earnings are above the
upper end of the guidance levels we had established."
Cash generated from operations for the third quarter of 2006 was
approximately $150 million, compared with approximately $92 million for the
same period in 2005. The increase was due primarily to improved earnings
and to the Company's working capital improvement initiatives. Capital
expenditures and cash dividends totaled $28.4 million and $23.8 million,
respectively, in the third quarter of 2006.
For the first nine months of 2006, net sales increased 3.6 percent to
$2.7 billion, compared with $2.6 billion for the first nine months of 2005.
Net income for the first nine months of 2006 was $155.6 million ($1.54 per
diluted share), up 26 percent, compared with $123.1 million ($1.23 per
diluted share) for the same period in 2005. Included in results for the
first nine months of 2006 were after-tax charges of approximately $2.3
million ($.02 per diluted share) related to the expensing of stock options
in accordance with Statement of Financial Accounting Standards No. 123(R),
"Share-based Payments." Earnings for the first nine months of 2006 and 2005
were negatively impacted by after-tax restructuring costs of $3.5 million
($.03 per diluted share) and $11.1 million ($.11 per diluted share),
respectively.
Base earnings were $159.1 million ($1.57 per diluted share) in the
first nine months of 2006, up 19 percent, compared with $134.2 million
($1.34 per diluted share) during the same period in 2005. The increase in
base earnings in the first nine months of 2006 was due primarily to
productivity improvements and a positive selling price/material cost
relationship, partially offset by increased costs for energy, freight and
labor, along with an unfavorable shift in the mix of business. In addition,
a favorable adjustment to certain state taxes increased reported and base
earnings per diluted share by $.04 earlier in the year and the recognition
of tax benefits, primarily from the expiration of assessment statutes,
added $.06 during the current quarter.
For the first nine months of 2006, cash flows from operations totaled
approximately $331 million, compared with approximately $161 million for
the same period in 2005. Capital expenditures and cash dividends totaled
$87.5 million and $70.7 million, respectively, for the first nine months of
2006. Additionally, the Company repurchased 2.5 million shares of Sonoco
common stock for approximately $83 million earlier in 2006.
Fourth Quarter Outlook
The Company recently announced a further cost reduction action,
principally internationally focused and mainly centered in Europe, where,
earlier this week, Sonoco completed the previously announced acquisition of
the remaining 35.5 percent interest of the Sonoco-Alcore, S.a.r.l., joint
venture from Ahlstrom Corporation. Significant savings resulting from the
restructuring program are not expected until 2007 and the Company cannot
estimate the amount of restructuring charges expected to occur during the
fourth quarter. Excluding any such charges and assuming no significant
change in Companywide volumes and/or price due to a change in general
economic condition, Sonoco expects fourth quarter 2006 base earnings to be
in the range of $.53 to $.55 per diluted share. Furthermore, the Company
increased its full-year 2006 base earnings guidance to be in the range of
$2.11 to $2.13 per diluted share, including approximately $.03 per diluted
share related to expensing of stock options, excluding any restructuring
charges or additions to environmental reserves and assuming no significant
changes to general economic conditions. The Company's earnings guidance
reflects an expected effective tax rate of approximately 35 percent during
the upcoming quarter.
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.
Third quarter 2006 sales for the Consumer Packaging segment were $329
million, up 4 percent, compared with $315 million in the third quarter of
2005. Operating profit for this segment was $28 million, up 12 percent,
compared with $24.9 million in the same period in 2005.
The Consumer Packaging segment's 2006 third quarter sales increased as
a result of higher selling prices plus the favorable impact of foreign
currency translation. Higher volumes in North American composite can
operations were offset by lower volumes in European composite cans and
flexible packaging. Operating profit improved during the third quarter of
2006 due primarily to a positive selling price/material cost relationship
and productivity improvements, which more than offset the impact of
increased costs for labor, freight and energy.
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
and recovered paper.
Third quarter 2006 sales for the Tubes and Cores/Paper segment were
$387 million, up 5 percent, compared with $368 million in the same period
in 2005. Operating profit for the segment for the third quarter of 2006 was
$42.8 million, up 34 percent, compared with $32 million in the same period
in 2005.
Sales in the Tubes and Cores/Paper segment were up year-over-year in
the third quarter of 2006 due to higher volumes in North American tubes and
cores and global paper operations; higher selling prices in North American
and European tubes and cores; and the favorable impact of foreign currency
translation. Operating profit increased during the third quarter of 2006
due primarily to a positive selling price/material cost relationship,
productivity improvements and strong volumes in global paper operations,
partially offset by the impact of increased costs for labor, freight and
energy.
Packaging Services
The Packaging Services segment includes the following products and
services: point-of-purchase displays, packaging fulfillment, contract
packing, brand artwork management and supply chain management.
Third quarter 2006 sales for the Packaging Services segment were $122
million, up 6 percent, compared with $115 million in the same period in
2005. Operating profit for this segment was $9.4 million, compared with
$11.9 million in the same period in 2005.
Third quarter 2006 sales in the Packaging Services segment increased
due primarily to higher service volumes and prices in Service Center
operations, partially offset by the loss of sales from a single-plant
folding carton operation that was sold at the end of 2005. The higher sales
did not result in increased earnings due to the pass-through nature of some
of the service center contracts. In addition, an unfavorable shift in the
mix of business resulted in lower profits during the quarter in comparison
to the same period of last year.
All Other Sonoco
All Other Sonoco includes businesses which are not aggregated in a
reportable segment and include the following products: wooden, metal and
composite reels for wire and cable packaging; molded and extruded plastics;
custom-designed protective packaging; and paper amenities such as coasters
and glass covers.
Third quarter 2006 sales for All Other Sonoco were $93 million, up 13
percent, compared with $83 million in the same period in 2005. Operating
profit for this segment in the third quarter of 2006 was $12.6 million, up
35 percent, compared with $9.3 million in the same period in 2005.
Third quarter 2006 sales for All Other Sonoco increased primarily due
to higher volumes and prices in protective packaging and extruded and
molded plastics, along with higher volumes in wire and cable reels.
Operating profit increased during the third quarter of 2006 due to a
favorable selling price/material cost relationship, productivity
improvements and higher volumes.
Corporate
Depreciation and amortization expense for the third quarter of 2006 was
$42.2 million, compared with $40.8 million in the third quarter of 2005.
Net interest expense for the third quarter decreased to $10.7 million,
compared with $11.9 million for the same period in 2005. The decrease was
due to lower average debt balances, which more than offset higher interest
rates.
The effective tax rate for the Company in the third quarter 2006 was
28.6 percent, compared with 30.9 percent in the same period in 2005. The
effective tax rate for the third quarter of 2006 was lower than the same
period in 2005 due to the previously discussed tax benefits recognized in
both periods, which were higher in 2006.
Conference Call Webcast
Sonoco will host its regular quarterly conference call today,
Wednesday, October 18, 2006, at 2 p.m. Eastern time, to review its
financial results for the third quarter of 2006. The conference call can be
accessed in a "listen only" mode via the Internet at http://www.sonoco.com,
under the "News" section. The call will be archived on the Investor
Information section of the Sonoco Web site for 30 days. A telephonic replay
of the call will be available after 4:30 p.m. Eastern time on October 18,
2006, to U.S. callers at 888/286-8010 and for international callers at
+617/801-6888, access code 90902522. The call also will be archived on the
investor information section of Sonoco's Web site for 90 days.
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
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," "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, management's 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:
* 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 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;
* Currency stability and the rate of growth in foreign markets;
* Use of financial instruments to hedge foreign currency, interest rate
and commodity price risk;
* Liability for remediation of environmental problems;
* Actions of government agencies;
* Loss of consumer 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.
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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars and shares in thousands except per share)
THREE MONTHS ENDED NINE MONTHS ENDED
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
2006 2005 2006 2005
Sales $931,522 $881,058 $2,667,301 $2,573,666
Cost of sales 749,954 717,666 2,155,531 2,101,214
Selling, general and
administrative expenses 88,777 85,274 258,777 254,929
Restructuring charges 1,064 4,275 5,983 18,460
Income before interest
and taxes 91,727 73,843 247,010 199,063
Interest expense 12,542 13,864 38,659 37,509
Interest income (1,801) (1,942) (4,548) (5,380)
Income before
income taxes 80,986 61,921 212,899 166,934
Provision for
income taxes 23,191 19,109 66,487 54,589
Income before equity in
earnings of affiliates/
minority interest in
subsidiaries 57,795 42,812 146,412 112,345
Equity in earnings of
affiliates/minority
interest in subsidiaries 3,296 3,101 9,165 10,733
Net income $61,091 $45,913 $155,577 $123,078
Average shares
outstanding - diluted 101,011 100,413 101,176 100,260
Diluted earnings
per share $.60 $.46 $1.54 $1.23
Dividends per
common share $.24 $.23 $.71 $.68
FINANCIAL SEGMENT INFORMATION (Unaudited)
(Dollars in thousands)
THREE MONTHS ENDED NINE MONTHS ENDED
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
2006 2005 2006 2005
Net Sales
Consumer Packaging $328,649 $315,140 $954,488 $904,364
Tubes and Cores/Paper 387,477 368,358 1,112,626 1,089,439
Packaging Services 122,014 114,976 325,579 331,353
All Other Sonoco 93,382 82,584 274,608 248,510
Consolidated $931,522 $881,058 $2,667,301 $2,573,666
Income before Income Taxes:
Consumer Packaging -
Operating Profit $27,998 $24,935 $80,154 $71,808
Tubes and Cores/Paper -
Operating Profit 42,817 32,043 107,557 83,800
Packaging Services -
Operating Profit 9,424 11,856 27,122 33,193
All Other Sonoco -
Operating Profit 12,552 9,284 38,160 28,722
Restructuring charges (1,064) (4,275) (5,983) (18,460)
Interest, net (10,741) (11,922) (34,111) (32,129)
Consolidated $80,986 $61,921 $212,899 $166,934
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
September 24, December 31,
2006 2005
Assets
Current Assets:
Cash and cash equivalents $117,925 $59,608
Trade accounts receivables 471,502 413,209
Other receivables 29,493 45,225
Inventories 304,908 318,316
Prepaid expenses and deferred taxes 51,912 49,142
975,740 885,500
Property, plant and equipment, net 952,725 943,951
Goodwill 601,327 573,903
Other intangible assets 73,615 73,037
Other assets 475,785 505,349
$3,079,192 $2,981,740
Liabilities and Shareholders' Equity
Current Liabilities:
Payable to suppliers and others $575,480 $495,860
Notes payable and current portion
of long-term debt 105,069 124,530
Accrued taxes 5,361 96
685,910 620,486
Long-term debt 625,624 657,075
Pension and other postretirement benefits 183,894 173,939
Deferred income taxes and other 246,216 266,926
Shareholders' equity 1,337,548 1,263,314
$3,079,192 $2,981,740
Presentation of Non-GAAP Information
Some of the information presented in this press release reflects
adjustments to "as reported" results, pursuant to U.S. generally accepted
accounting principles ("GAAP"), for the periods presented to exclude
certain amounts related to the Company's restructuring initiative. These
adjustments result in the creation the non-GAAP financial measures referred
to in this press release as "Base Earnings" and "Base Earnings per Diluted
Share."
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 in
accordance with GAAP, but it believes that evaluating its ongoing operating
results may not be as useful if an investor or other user is limited in
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 plan all the way up through the
evaluation of the Chief Executive Officer's 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 itself, nor does it suggest that investors
should, consider such non-GAAP financial measures in isolation from, or as
a substitute for, financial information prepared in accordance with GAAP.
Sonoco presents such non-GAAP financial measures in reporting its financial
results to provide investors with an additional tool to evaluate Sonoco's
operating results in a manner that focuses on how it views its business
performance from period to period. Material limitations associated with the
use of such measures are that they do not reflect all period costs included
in operating expenses associated with these actions and may not be
comparable to other companies with similar actions that present such costs
differently. Furthermore, their calculation is based on subjective
determinations of management regarding the nature and classification of
events and circumstances that the investor may find material. To compensate
for these limitations, management believes that it is useful for itself and
investors to review both GAAP information that includes the impact of
restructuring charges and certain unusual items, and the non-GAAP measures
that exclude such information in order to understand and analyze the
results of the business. Whenever Sonoco uses such 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 above.
Reconciliation of GAAP(1) to Non-GAAP Financial Measures
(Dollars in millions, except per share data)
Base Earnings Per Diluted Share (EPS)(2) Three Months Ended
Unaudited Sept. 24, 2006 Sept. 25, 2005
Diluted earnings per share, as
reported (GAAP) $.60 $.46
Adjusted for:
Restructuring charges, net of tax(4) .01 .02
Base earnings per diluted share (Non-GAAP) $.61 $.48
Nine Months Ended
Unaudited Sept. 24, 2006 Sept. 25, 2005
Diluted earnings per share, as
reported (GAAP) $1.54 $1.23
Adjusted for:
Restructuring charges, net of tax(4) .03 .11
Base earnings per diluted share (Non-GAAP) $1.57 $1.34
Base Earnings(3)
Three Months Ended
Unaudited Sept. 24, 2006 Sept. 25, 2005
Net income, as reported (GAAP) $61.1 $45.9
Adjusted for:
Restructuring charges, net of tax(4) .6 2.5
Base earnings (Non-GAAP) $61.7 $48.4
Nine Months Ended
Unaudited Sept. 24, 2006 Sept. 25, 2005
Net income, as reported (GAAP) $155.6 $123.1
Adjusted for:
Restructuring charges, net of tax(4) 3.5 11.1
Base earnings (Non-GAAP) $159.1 $134.2
(1) Generally Accepted Accounting Principles
(2) Base earnings per diluted share (EPS) a non-GAAP financial measure of
earnings per share, which excludes the impact of restructuring
charges. Management believes it is useful to exclude restructuring-
related charges because they are not expenses considered by
management in assessing the core profitability of our business.
(3) Base earnings is a non-GAAP financial measure of net income, which
excludes the impact of restructuring charges. Management believes it
is useful to exclude restructuring-related charges because they are
not expenses considered by management in assessing the core
profitability of our business.
(4) These restructuring charges are recurring as Sonoco's restructuring
programs usually require several years to fully implement and Sonoco
continually considers restructuring actions in order to enhance its
efficiency. Accordingly, they are subject to significant
fluctuations from period to period due to 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.
SOURCE Sonoco
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http://www.sonoco.com
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AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
Allan V. Cecil, Vice President, Sonoco,
+1-843-383-7524, or allan.cecil@sonoco.com
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