SONOCO PRODUCTS COMPANY
Statements included in this Quarterly Report on Form 10-Q 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. In addition, the
Company and its representatives may from time to time make other oral or written
statements that are also "forward-looking statements." Words such as "estimate,"
"project," "intend," "expect," "believe," "consider," "plan," "strategy,"
"opportunity," "commitment," "target," "anticipate," "objective," "goal,"
"guidance," "outlook," "forecast," "future," "re-envision," "assume," "will,"
"would," "can," "could," "may," "might," "aspires," "potential," or the negative
thereof, and similar expressions identify forward-looking statements.
Forward-looking statements include, but are not limited to, statements
regarding:
•availability and supply of raw materials, and offsetting high raw material
costs, including the impact of potential changes in tariffs;
•potential impacts of the COVID-19 Coronavirus on business, operations and
financial condition;
•improved productivity and cost containment;
•improving margins and leveraging strong cash flow and financial position;
•effects of acquisitions and divestitures;
•realization of synergies resulting from acquisitions;
•costs, timing and effects of restructuring activities;
•adequacy and anticipated amounts and uses of cash flows;
•expected amounts of capital spending;
•refinancing and repayment of debt;
•financial and business strategies and the results expected of them;
•financial results for future periods;
•producing improvements in earnings;
•profitable sales growth and rates of growth;
•consumer and customer actions in connection with the COVID-19 pandemic;
•market leadership;
•research and development spending;
•expected impact and costs of resolution of legal proceedings;
•extent of, and adequacy of provisions for, environmental liabilities;
•sustainability commitments;
•adequacy of income tax provisions, realization of deferred tax assets, outcomes
of uncertain tax issues and tax rates;
•goodwill impairment charges and fair values of reporting units;
•future asset impairment charges and fair values of assets;
•anticipated contributions to pension and postretirement benefit plans, fair
values of plan assets, long-term rates of return on plan assets, and projected
benefit obligations and payments;
•expected impact of implementation of new accounting pronouncements;
•creation of long-term value and returns for shareholders;
•continued payment of dividends; and
•planned 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, discussions
as to guidance and other estimates, perceived opportunities, expectations,
beliefs, plans, strategies, goals 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,
uncertainties and assumptions include, without limitation:
•availability and pricing of raw materials, energy and transportation, including
the impact of potential changes in tariffs and escalating trade wars, and the
Company's ability to pass raw material, energy and transportation price
increases and surcharges through to customers or otherwise manage these
commodity pricing risks;
•impacts arising as a result of the COVID-19 Coronavirus global pandemic on our
results of operations, financial condition, value of assets, liquidity,
prospects, growth, and on the industries in which we operate and that we
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SONOCO PRODUCTS COMPANY
serve, resulting from, without limitation, recent and ongoing financial market
volatility, potential governmental actions, changes in consumer behaviors and
demand, changes in customer requirements, disruptions of the Company's suppliers
and supply chain, availability of labor and personnel, necessary modifications
to operations and business, and uncertainties about the extent and duration of
the pandemic;
•costs of labor;
•work stoppages due to labor disputes;
•success of new product development, introduction and sales;
•success of implementation of new manufacturing technologies and installation of
manufacturing equipment, including the startup of new facilities and lines;
•consumer demand for products and changing consumer preferences;
•ability to be the low-cost global leader in customer-preferred packaging
solutions within targeted segments;
•competitive pressures, including new product development, industry
overcapacity, customer and supplier consolidation, and changes in competitors'
pricing for products;
•financial conditions of customers and suppliers;
•ability to maintain or increase productivity levels, contain or reduce costs,
and maintain positive price/cost relationships;
•ability to negotiate or retain contracts with customers, including in segments
with concentration of sales volume;
•inventory management strategies of customers;
•timing of introduction of new products or product innovations by customers;
•collection of receivables from customers;
•ability to improve margins and leverage cash flows and financial position;
•ability to manage the mix of business to take advantage of growing markets
while reducing cyclical effects of some of the Company's existing businesses on
operating results;
•ability to maintain innovative technological market leadership and a reputation
for quality;
•ability to attract and retain talented and qualified employees, managers and
executives;
•ability to profitably maintain and grow existing domestic and international
business and market share;
•ability to expand geographically and win profitable new business;
•ability to identify and successfully close suitable acquisitions at the levels
needed to meet growth targets, and successfully integrate newly acquired
businesses into the Company's operations;
•the costs, timing and results of restructuring activities;
•availability of credit to us, our customers and suppliers in needed amounts and
on reasonable terms;
•effects of our indebtedness on our cash flow and business activities;
•fluctuations in interest rates and our borrowing costs;
•fluctuations in obligations and earnings of pension and postretirement benefit
plans;
•accuracy of assumptions underlying projections of benefit plan obligations and
payments, valuation of plan assets, and projections of long-term rates of
return;
•timing of funding pension and postretirement benefit plan obligations;
•cost of employee and retiree medical, health and life insurance benefits;
•resolution of income tax contingencies;
•foreign currency exchange rate fluctuations, interest rate and commodity price
risk and the effectiveness of related hedges;
•changes in U.S. and foreign tariffs, tax rates, and tax laws, regulations and
interpretations thereof;
•the adoption of new, or changes in, accounting standards or interpretations;
•challenges and assessments from tax authorities resulting from differences in
interpretation of tax laws, including income, sales and use, property, value
added, employment, and other taxes;
•accuracy in valuation of deferred tax assets;
•accuracy of assumptions underlying projections related to goodwill impairment
testing, and accuracy of management's assessment of goodwill impairment;
•accuracy of assumptions underlying fair value measurements, accuracy of
management's assessments of fair value and fluctuations in fair value;
•ability to maintain effective internal controls over financial reporting;
•liability for and anticipated costs of resolution of legal proceedings;
•liability for and anticipated costs of environmental remediation actions;
•effects of environmental laws and regulations;
•operational disruptions at our major facilities;
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SONOCO PRODUCTS COMPANY
•failure or disruptions in our information technologies;
•failures of third party transportation providers to deliver our products to our
customers or to deliver raw materials to us;
•substantially lower than normal crop yields;
•loss of consumer or investor confidence;
•ability to protect our intellectual property rights;
•changes in laws and regulations relating to packaging for food products and
foods packaged therein, other actions and public concerns about products
packaged in our containers, or chemicals or substances used in raw materials or
in the manufacturing process;
•changing consumer attitudes toward plastic packaging;
•ability to meet sustainability targets and challenges in implementation;
•changing climate, climate change regulations and greenhouse gas effects;
•actions of domestic or foreign government agencies and changes in laws and
regulations affecting the Company and increased costs of compliance;
•international, national and local economic and market conditions and levels of
unemployment;
•economic disruptions resulting from terrorist activities and natural disasters;
and
•accelerating inflation.
More information about the risks, uncertainties and assumptions that may cause
actual results to differ materially from those expressed or forecasted in
forward-looking statements is provided in the Company's Annual Report on Form
10-K under Item 1A-"Risk Factors" and throughout other sections of that report
and in other reports filed with the Securities and Exchange Commission . In light
of these various risks, uncertainties and assumptions, the forward-looking
events discussed in this report might not occur.
The Company undertakes no obligation to publicly update or revise
forward-looking statements, whether as a result of new information, future
events or otherwise. You are, however, advised to review any further disclosures
we make on related subjects, and about new or additional risks, uncertainties
and assumptions, in our future filings with the Securities and Exchange
Commission on Forms 10-K, 10-Q and 8-K.
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SONOCO PRODUCTS COMPANY
COMPANY OVERVIEW
Sonoco is a leading provider of consumer packaging, industrial products,
protective packaging and packaging supply chain services, with over 300
locations in 34 countries.
As previously disclosed, Sonoco changed its operating and reporting structure in
January 2021 and, as a result, realigned certain of its reportable segments
effective January 1, 2021 . The revised structure consists of two reportable
segments, Consumer Packaging and Industrial Paper Packaging , with all remaining
businesses reported as "All Other." The Company's former Protective Solutions
and Display and Packaging segments have been eliminated and the underlying
businesses and their results have been grouped into All Other or, in certain
cases, subsumed into the remaining two segments. Changes to the Consumer
Packaging segment include moving the Plastics - Healthcare packaging and
industrial plastics business units to All Other. The Industrial Paper Packaging
segment, previously called Paper and Industrial Converted Products, remains
unchanged except that it now includes the Company's fiber protective packaging
business unit which was previously included in the Protective Solutions segment.
All Other includes our healthcare and protective packaging businesses, including
Plastics - Healthcare, Sonoco ThermoSafe, consumer and automotive molded foam,
retail packaging, and paper amenities. Prior to the divestiture of the Company's
global display and packaging operations in two separate transactions, one on
November 30, 2020 (Display and Packaging - Europe ) and one on April 4, 2021
(Display and Packaging - US), these businesses were also included in All Other.
Sonoco competes in multiple product categories, with the majority of the
Company's revenues arising from products and services sold to consumer and
industrial products companies for use in the packaging of their products for
sale or shipment. The Company also manufactures uncoated recycled paperboard,
for both internal use and open market sale. Each of the Company's operating
units has its own sales staff and maintains direct sales relationships with its
customers.
COVID-19
Impact on Operating Results
Around the world, Sonoco is an essential provider of consumer, industrial and
medical packaging. Sonoco associates are deemed "Essential Critical
Infrastructure Workers " under the guidance of the U.S. Department of Homeland
Security and have received similar designations by the vast majority of other
governmental agencies in the 34 countries where the Company operates. As areas
around the world have begun to reopen their economies, the Company has seen
improved demand for many of its products and services. However, recent
indications of a resurgence of the virus in certain regions of the world have
raised concerns about the re-imposition of restrictions on business activity and
a negative effect on consumer behavior that alone, or together, could impede
economic recovery. Sonoco is following these developments closely and will
respond with appropriate changes to active production capacity and
cost-management initiatives. An extended period of disruption to our served
markets or global supply chains could materially and adversely affect our
results of operations, access to sources of liquidity and overall financial
condition. In addition, an extended global recession caused by the pandemic
would have an adverse impact on the Company's operations and financial
condition.
Despite a COVID-19 driven increase in consumer demand for certain food and
household products, until recently the overall impact of the pandemic on
consolidated sales has been negative. However, for the most part, within both
our Consumer Packaging and Industrial Paper Packaging businesses volume in the
second quarter of 2021 was better than pre-pandemic levels. Consumer-related
sales are expected to remain above pre-pandemic levels despite more normalized
demand for food packaging as consumers moderate at-home eating patterns, while
certain COVID-impacted markets, such as confectionery and food service, are
expected to improve in conjunction with the economic recovery. We also expect
further recovery in our industrial-served markets supported by the historically
high backlogs for uncoated recycled paperboard in the U.S. and Canada and demand
for global tubes, cores and cones strengthening to pre-pandemic levels. Although
overall third-quarter volume within each segment is expected to remain fairly
steady or somewhat improve compared to the second quarter, operating profits are
expected to face pressure from escalating raw material and non-material
inflation.
We expect third-quarter operating profit and profit margin in our Consumer
Packaging segment to be in line with the second quarter, but somewhat lower than
the prior year. Although, on a sequential basis, sales volume in our
industrial-related businesses is expected to show continued improvement,
operating profit and profit margin are expected to be somewhat lower than in the
second quarter. Both our Consumer Packaging and Industrial Paper Packaging
segments are expected to face a negative price/cost relationship in the third
quarter of 2021 due to rising recycled fiber and resin prices as well as higher
freight costs. During the third quarter, the businesses in All Other are
expected to continue to see an overall improvement in business activity as the
economy continues to recover from the effects of the pandemic. However, most of
them are also expected to experience higher raw material and freight costs that
may be only partially recovered
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SONOCO PRODUCTS COMPANY by higher selling prices. On a consolidated basis, the impact of negative price/cost together with general inflation and higher medical, management incentive and other costs are expected to offset a large part of the third-quarter benefits from the on-going economic recovery.
Financial Flexibility and LiquiditySonoco has a strong, investment-grade balance sheet and substantial liquidity available in the form of cash, cash equivalents and revolving credit facilities, as well as the ability to issue commercial paper and to access liquidity in the banking and debt capital markets. Significant second-quarter actions affecting the Company's liquidity position included: •OnApril 5, 2021 , the Company received cash proceeds totaling$79.7 million from the sale of its display and packaging business inthe United States . •OnMay 10, 2021 , the Company paid$150 million in connection with an accelerated share repurchase agreement to repurchase shares of its common stock. •OnMay 25, 2021 , the Company repurchased$63.2 million of its outstanding 5.75% notes, dueNovember 2040 , for a total cash cost of$82.0 million . •OnMay 25, 2021 , upon maturity, the Company paid$177.8 million to retire its 1% Euro loan. •OnJune 30, 2021 , the Company entered into a new five-year$750 million , unsecured revolving credit facility which replaced an existing$500 million facility. Consistent with prior facilities, the new revolving credit facility supports the Company's$500 million commercial paper program. Following these actions, atJuly 4, 2021 , the Company had$264 million in cash on hand and committed capacity of$750 million under its revolving credit facility, of which$622 million was available for draw down net of commercial paper balances of$128 million . Scheduled debt maturities over the next twelve months are approximately$404 million . The Company believes cash on hand and available credit, combined with expected net cash flows generated from operating and investing activities, will provide ample liquidity to cover debt maturities and other cash flow needs of the Company over the course of the next twelve months. Health, Safety and Business Continuity The health and safety ofSonoco's associates, contractors, suppliers and the general public continue to be a top priority. Safety measures implemented at the beginning of the COVID-19 pandemic - conducting health screenings for personnel entering our operations, routinely cleaning high-touch surfaces, following social distancing protocols, prohibiting all non-critical business travel, and utilizing remote working where linked to maintaining the safety of essential, in-person workers - continue to be in place. In addition,Sonoco has proactively engaged local government health agencies and medical providers to provide access to COVID-19 vaccine opportunities when available under local regulations. Planning for return to routine operations and responses to changing health information continues.Sonoco routinely provides emails and leadership communications to keep its associates up to date on Company and health authority information, guidelines, protocols and policies, including those set by theWorld Health Organization and theU.S. Centers for Disease Control and Prevention . OurGlobal Task Force that was activated at the beginning of the pandemic continues to meet to monitor and adjust business continuity plans to ensure our operations are as prepared as possible to be able to continue producing and shipping products to our customers without disruption.Sonoco has a diverse global supply chain and to date has not experienced significant raw material or other supply disruptions as a result of the COVID-19 pandemic. Second Quarter 2021 Compared with Second Quarter 2020 RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES Measures calculated and presented in accordance with generally accepted accounting principles are referred to as GAAP financial measures. The following tables reconcile the Company's non-GAAP financial measures to their most directly comparable GAAP financial measures in the Company's Condensed Consolidated Statements of Income for each of the periods presented. These non-GAAP financial measures (referred to as "Base") are the GAAP measures adjusted to exclude amounts (dependent upon the applicable period), including the associated tax effects, relating to restructuring initiatives, asset impairment charges, non-operating pension costs/income, environmental reserve charges/releases, 42 --------------------------------------------------------------------------------SONOCO PRODUCTS COMPANY acquisition and divestiture-related transaction costs, gains/losses from the divestiture of businesses, excess property insurance recoveries, and certain other items, if any, including other income tax-related adjustments and/or events, the exclusion of which the Company believes improves the comparability and analysis of the underlying financial performance of the business. More information about the Company's use of non-GAAP financial measures is provided in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 under Item 7 - "Management's discussion and analysis of financial condition and results of operations," under the heading "Use of non-GAAP financial measures."
For the three months ended
Restructuring/Asset Other
Dollars in thousands, except per share data GAAP Impairments(1) Adjustments(1) Base
Operating profit $ 135,291 $ (1,445) $ (5,236) $ 128,610
Non-operating pension costs 555,009 - (555,009) -
Interest expense, net 14,794 - 2,165 16,959
Loss from the early extinguishment of debt 20,184 - (20,184) -
(Loss)/income before income taxes (454,696) (1,445) 567,792 111,651
Provision for income taxes (118,151) 715 146,939 29,503
(Loss)/income before equity in earnings of
affiliates (336,545) (2,160) 420,853 82,148
Equity in earnings of affiliates, net of
tax 2,306 - - 2,306
Net (loss)/income (334,239) (2,160) 420,853 84,454
Net loss attributable to noncontrolling
interests 169 - - 169
Net (loss)/income attributable to Sonoco (334,070) (2,160) 420,853 84,623
Diluted weighted average common shares
outstanding(2): 100,082 - 543 100,625
Per diluted common share* $ (3.34) $ (0.02) $ 4.18 $ 0.84
*Due to rounding individual items may not
sum across
(1 ) See table in Results of Operations - Overview below for details related to
the after-tax impact of major components
(2) Due to the magnitude of non-base losses in the second quarter 2021, the
Company reported a GAAP Net Loss Attributable to Sonoco . In instances where a
company has a net loss, GAAP requires that the company shall not consider any
unexercised share awards or other like instruments dilutive for purposes of
calculating weighted average shares outstanding. Accordingly, the Company did
not consider any unexercised share awards dilutive in calculating weighted
average shares outstanding for GAAP purposes in the table above, which resulted
in Basic Weighted Average Common Shares Outstanding and Diluted Weighted Average
Common Shares Outstanding being the same. However, the Company also presents
Base Net Income Attributable to Sonoco , which excludes the net non-base items.
In order to maintain consistency in the computation of Base Diluted EPS,
unexercised stock instruments that meet GAAP requirements for dilution were
considered dilutive to the same extent they would be if GAAP Net Income
Attributable to Sonoco were equal to Base Net Income Attributable to Sonoco .
For the three months ended June 28, 2020
Dollars in thousands, except per share Restructuring/Asset Other
data GAAP Impairments(1) Adjustments(1) Base
Operating profit $ 103,727 $ 22,885 $ (56) $ 126,556
Non-operating pension costs 7,600 - (7,600) -
Interest expense, net 18,685 - - 18,685
Income before income taxes 77,442 22,885 7,544 107,871
Provision for income taxes 23,230 6,224 (717) 28,737
Income before equity in earnings of
affiliates 54,212 16,661 8,261 79,134
Equity in earnings of affiliates, net of
tax 778 - - 778
Net income 54,990 16,661 8,261 79,912
Net loss/(income) attributable to
noncontrolling interests 221 (5) - 216
Net income attributable to Sonoco $ 55,211 $ 16,656 $ 8,261 $ 80,128
Per diluted common share* $ 0.55 $ 0.16 $ 0.08 $ 0.79
*Due to rounding individual items may not
sum across
(1) See table in Results of Operations - Overview below for details related to the after-tax impact of major components
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SONOCO PRODUCTS COMPANY
RESULTS OF OPERATIONS
The following discussion provides a review of results for the three months ended
July 4, 2021 versus the three months ended June 28, 2020 .
OVERVIEW
Net sales for the second quarter of 2021 increased 11.0 percent to $1,383
million , compared with $1,245 million in the same period last year. This
improvement reflects increases from volume/mix as well as higher selling prices,
mostly implemented to offset inflation, and a favorable impact of foreign
exchange rate changes from the prior year. These positive factors were partially
offset by the April 4, 2021 and November 30, 2020 divestitures of the Company's
United States and European display and packaging businesses, respectively. These
divested sales were somewhat offset by sales added from the acquisition of Can
Packaging in August 2020 and the TuboTec acquisition in March 2021 .
Net (loss)/income attributable to Sonoco for the second quarter of 2021
decreased to $(334.1) million , or $(3.34) per diluted share, compared to $55.2
million , or $0.55 per diluted share, for the same period of 2020. The net loss
in the current quarter includes after-tax, non-base charges totaling $418.7
million , while results for the second quarter of 2020 included net after-tax,
non-base charges totaling $24.9 million . These non-base charges consisted of the
following:
Three Months Ended
($ in millions) July 4, 2021 June 28, 2020
Pension settlement charges $ 406.5 $ -
Loss on early extinguishment of debt 15.0 -
Other non-operating pension costs 6.1 5.5
Gain on sale of previously closed facilities (5.0) -
Euro derivative gain related to Euro loan repayment (3.3) -
Refund of foreign VAT and applicable interest (3.1) -
All other net restructuring and asset impairment charges 2.8 16.7
All other including acquisition and divestiture-related costs (0.3) 2.7
Total non-base charges, after tax $ 418.7 $ 24.9
Adjusted for these items, base net income attributable toSonoco (Base earnings) for the second quarter of 2021 increased 5.6 percent to$84.6 million , or$0.84 per diluted share, from$80.1 million , or$0.79 per diluted share, in 2020. This increase reflects an increase in Base operating profit together with a decrease in Base net interest expense, an increase in equity in earnings of affiliates, and a slightly lower Base effective tax rate. Despite the 11% increase in net sales, second-quarter Base operating profit was up only 1.6 percent from last year's second quarter as increases from volume/mix and productivity were mostly offset by an overall negative price/cost relationship and earnings lost from the previously mentioned divestitures of the Company'sUnited States and European display and packaging businesses, net of earnings added from the acquisitions ofCan Packaging inAugust 2020 and TuboTec inMarch 2021 . OPERATING REVENUE Net sales for the second quarter of 2021 increased$137 million , or 11.0 percent, from the prior-year quarter. The components of the sales change were: ($ in millions) Volume/mix $ 95 Selling prices 89 Acquisitions and divestitures, net (80) Foreign currency translation and other, net 33 Total sales increase $ 137 44
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SONOCO PRODUCTS COMPANY
COSTS AND EXPENSES
Cost of goods sold increased $122.6 million , or 12.3 percent, in the second
quarter of 2021 compared with the same period last year. The increase was driven
primarily by material inflation and higher volumes which were partially offset
by divestitures, net of acquisitions. Gross profit was $262.7 million for the
three months ended July 4, 2021 and $14.7 million higher than the prior-year
period. However, gross profit as a percent of sales decreased to 19.0 percent
from 19.9 percent in the prior-year quarter as sales prices increases were not
able to fully recover higher material and other operational costs.
GAAP selling, general and administrative expenses ("SG&A") for the quarter
increased $7.4 million , or 6.1 percent, year over year. These expenses are
presented net of other income/expense items. This increase was largely driven by
a higher, more-normal, level of management incentive expense compared to the
prior year's quarter. as well as higher medical costs as employees returned to
normalized levels of engagement in routine care and elective procedures after
the prior-year's pandemic-related avoidance of these activities. Additionally,
the second quarter of 2021 experienced higher property insurance expense as well
as strategic information technology spending. These increases were partially
offset by gains in the current year's quarter related to hedges entered into to
mitigate foreign currency risk related to the Euro-denominated loan repaid in
the quarter, as well as a foreign VAT refund.
As noted in the segment discussions below, recovery from the COVID-19 pandemic
is expected to continue driving higher demand in some of our businesses, while
lowering demand in others. As a result, the Company will continue, wherever
practical, to minimize costs at manufacturing locations expected to experience
sustained declines in volume and to pursue reductions in overall selling,
general and administrative costs.
Restructuring costs and asset impairment (income)/charges totaled $(1.9) million
for the second quarter of 2021 compared with $22.9 million in the same period
last year. The year-over-year decrease was driven largely by gains of $5.5
million related to the sales of buildings at previously closed facilities as
well as lower overall restructuring activity. Additional information regarding
restructuring and asset impairment charges is provided in Note 5 to the
Company's Condensed Consolidated Financial Statements included in Part I, Item 1
of this Quarterly Report on Form 10-Q.
Non -operating pension costs were $547.4 million higher in the second quarter of
2021 compared to the same period last year due primarily to the $547.3 million
non-cash settlement charge recognized in the second quarter of 2021 upon
settling the liabilities associated with the Sonoco Pension Plan for Inactive
Participants. Additional information regarding pension settlement charges is
provided in Note 11 to the Company's Condensed Consolidated Financial Statements
included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Additionally, in the second-quarter of 2021 the Company executed a cash tender
offer in which it retired a portion of its 5.75% notes due November 2040 ,
recognizing a loss on early extinguishment of debt totaling $20.2 million .
GAAP net interest expense for the second quarter of 2021 decreased to $14.8
million , compared with $18.7 million during the second quarter of 2020, due
primarily to lower average debt balances quarter over quarter as well as
non-base interest income related to a foreign VAT refund received in the second
quarter of 2021.
The 2021 second-quarter effective tax rates on GAAP loss and Base earnings were
26.0 percent and 26.4 percent, respectively, compared with 30.0 percent and 26.6
percent, respectively, in the prior year's quarter. The higher effective tax
rate on GAAP income in the second quarter of 2020 reflects the cost of an IRS
audit settlement reached in that period.
REPORTABLE SEGMENTS
The Company changed its operating and reporting structure in January 2021 and,
as a result, realigned certain reportable segments effective January 1, 2021 .
The revised structure consists of two reportable segments, Consumer Packaging
and Industrial Paper Packaging , with all remaining businesses reported as "All
Other." Additional information regarding segment realignment is provided in Note
15 to the Company's Condensed Consolidated Financial Statements included in Part
I, Item 1 of this Quarterly Report on Form 10-Q.
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SONOCO PRODUCTS COMPANY The following table recaps net sales attributable to each of the Company's segments for the second quarters of 2021 and 2020 ($ in thousands):
Three Months Ended
%
July 4, 2021 June 28, 2020 Change
Net sales:
Consumer Packaging $ 597,803 $ 573,166 4.3 %
Industrial Paper Packaging 608,532 455,026 33.7 %
All Other 176,419 217,293 (18.8) %
Consolidated $ 1,382,754 $ 1,245,485 11.0 %
The following table recaps operating profit attributable to each of the
Company's segments during the second quarters of 2021 and 2020 ($ in thousands):
Three Months Ended
%
July 4, 2021 June 28, 2020 Change
Operating profit:
Segment operating profit:
Consumer Packaging $ 59,813 $ 84,449 (29.2) %
Industrial Paper Packaging 57,885 33,235 74.2 %
All Other 10,912 8,872 23.0 %
Restructuring/Asset impairment income/(charges) 1,445 (22,885)
Other non-base income, net 5,236 56
Consolidated $ 135,291 $ 103,727 30.4 %
Segment results viewed by Company management to evaluate segment performance do
not include restructuring charges, asset impairment charges, acquisition-related
costs, environmental reserve charges or releases, or certain other items, if
any, the exclusion of which the Company believes improves the comparability and
analysis of the ongoing operating performance of the business. Accordingly, the
term "segment operating profit" is a non-GAAP measure and is defined as the
segment's portion of "operating profit" excluding those items. All other general
corporate expenses have been allocated as operating costs to each of the
Company's reportable segments.
The following table recaps restructuring/asset impairment (income)/charges attributable to each of the Company's segments during the second quarter of 2021 and 2020 ($ in thousands):
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