Sonoco Products Company
Reconciliation of Non-GAAP Financial Measures
In accordance with the SEC's Regulation G, the following provides definitions of the non-GAAP financial measures used by the company, 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 disclosed and the most directly comparable financial measures calculated in accordance with GAAP.
Definition and Reconciliation of Non-GAAP Financial Measures
The Company's results determined in accordance with U.S. generally accepted accounting principles (GAAP) are referred to as "as reported" or "GAAP" results. Some of the information presented in this press release reflects the Company's "as reported" or "GAAP" results adjusted to exclude amounts, including the associated tax effects, related relating to restructuring initiatives, asset impairment charges, non-operating pension costs or income, environmental reserve charges/releases, acquisition/divestiture-related costs, gains and or losses on dispositions of businesses, excess insurance recoveries, and certain income tax related events and other items, if any, including other income tax-related adjustments and/or events, the exclusion of which management believes improves comparability and analysis of the ongoing operating performance of the business. These adjustments, which are referred to as "non-base", result in 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 by GAAP, but it believes that evaluating its ongoing operating results may not be as useful if an investor or other user is limited to reviewing only GAAP financial measures. Sonoco uses these non-GAAP financial measures for internal planning and forecasting purposes, to evaluate its ongoing operations, and to evaluate the ultimate performance of each business unit against budget plan/forecast 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, nor does it suggest that investors should, consider these non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Sonoco presents these non-GAAP financial measures to provide users information to evaluate Sonoco's operating results in a manner similar to how management evaluates business performance. Material limitations associated with the use of such measures are that they do not reflect all period costs included in operating expenses and may not reflect financial results that are comparable to financial results of other companies that present similar costs differently. Furthermore, the calculations of these non-GAAP measures are based on subjective determinations of management regarding the nature and classification of events and circumstances that the investor may find material and view differently.
To compensate for these limitations, management believes that it is useful in understanding and analyzing the results of the business to review both GAAP information which includes all of the items impacting financial results and the non-GAAP measures that exclude certain elements, as described above. Whenever Sonoco uses a non- GAAP financial measure, except with respect to guidance, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable directly comparable GAAP financial measure. Whenever reviewing a non- GAAP financial measure, investors are encouraged to fully review and consider the related reconciliation as detailed below. Second-quarter and full-year 2021 GAAP guidance are is not provided in this release due to the likely occurrence of one or more of the following, the timing and magnitude of which we are unable to reliably forecast: possible gains or losses on the sale of businesses or other assets, restructuring costs and restructuring-
related impairment charges, acquisition related costs, and the income tax effects of these items and/or other income tax-related events. These items could have a significant impact on the Company's future GAAP financial results.
Reconciliation of GAAP to Non-GAAP Financial Measures
For the three months ended July 4, 2021
Dollars and shares in thousands, except per share data
Non-GAAP Adjustments | |||||||||||
Restructuring / | |||||||||||
Asset Impairment | Other | ||||||||||
GAAP | Charges(1) | Adjustments(2) | 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 | ||||||||
(Benefit)/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 taxes | 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 (3): | 100,082 | - | 543 | 100,625 | |||||||
Per Diluted Share* | |||||||||||
$ | (3.34) | $ | (0.02) | $ | 4.18 | $ | 0.84 | ||||
*Due to rounding individual items may not sum across | |||||||||||
Effective tax rate | 26.0% | 26.4% |
Reconciliation of GAAP to Non-GAAP Financial Measures
For the three months ended June 28, 2020
Dollars and shares in thousands, except per share data
Non-GAAP Adjustments | |||||||||||
Restructuring / | |||||||||||
Asset Impairment | Other | ||||||||||
GAAP | Charges(1) | Adjustments(4) | 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 | 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 taxes | 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 Share* | $ | 0.55 | $ | 0.16 | $ | 0.08 | $ | 0.79 | |||
*Due to rounding individual items may not sum across | |||||||||||
Effective tax rate | 30.0% | 26.6% |
- Restructuring/asset impairment charges are a recurring item as Sonoco's restructuring programs usually require several years to fully implement and the Company is continually seeking to take actions that could enhance its efficiency. Although recurring, these charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity and the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the restructuring actions occur. In the second quarter of 2021 gains totaling approximately $5,500 were recognized related to the sale of previously closed facilities in the Company's tubes and core business. These were partially offset by net restructuring and asset impairment charges, mostly related to severance and asset write-offs, totaling approximately $4,000.
- Includes non-operating pension costs, which include $547,000 of settlement charges, losses from early extinguishment of debt, and costs related to actual/potential acquisitions and divestitures, partially offset by a foreign VAT refund, including applicable interest, and a hedge gain related to a Euro-denominated loan repayment.
- 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 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.
- Consists of non-operating pension costs, costs related to actual and potential acquisitions and divestitures, the anticipated impact of the settlement of a U.S. Tax Audit, and tax benefits related primarily to a tax rate change.
Reconciliation of GAAP to Non-GAAP Financial Measures
For the six months ended July 4, 2021
Dollars and shares in thousands, except per share data
Non-GAAP Adjustments | |||||||||||
Restructuring / | Other | ||||||||||
Asset Impairment | |||||||||||
GAAP | Charges(1) | Adjustments(2) | Base | ||||||||
Operating profit | $ | 255,600 | $ | 5,401 | $ | 7,276 | $ | 268,277 | |||
Non-operating pension costs | 562,293 | - | (562,293) | - | |||||||
Interest expense, net | 32,525 | - | 2,165 | 34,690 | |||||||
Loss from the early extinguishment of debt | 20,184 | - | (20,184) | - | |||||||
(Loss)/Income before income taxes | (359,402) | 5,401 | 587,588 | 233,587 | |||||||
(Benefit)/Provision for income taxes | (94,106) | 2,341 | 152,572 | 60,807 | |||||||
(Loss)/Income before equity in earnings of affiliates | (265,296) | 3,060 | 435,016 | 172,780 | |||||||
Equity in earnings of affiliates, net of taxes | 3,350 | - | - | 3,350 | |||||||
Net (loss)/income | (261,946) | 3,060 | 435,016 | 176,130 | |||||||
Net loss attributable to noncontrolling interests | 172 | - | - | 172 | |||||||
Net (loss)/income attributable to Sonoco | $ | (261,774) | $ | 3,060 | $ | 435,016 | $ | 176,302 | |||
Diluted weighted average common shares | 100,571 | - | 498 | 101,069 | |||||||
outstanding (3): | |||||||||||
Per Diluted Share* | $ | (2.60) | $ | 0.03 | $ | 4.30 | $ | 1.74 | |||
*Due to rounding individual items may not sum across | |||||||||||
Effective tax rate | 26.2% | 26.0% |
Reconciliation of GAAP to Non-GAAP Financial Measures
For the six months ended June 28, 2020
Dollars and shares in thousands, except per share data
Non-GAAP Adjustments | |||||||||||
Restructuring / | Other | ||||||||||
Asset Impairment | |||||||||||
GAAP | Charges(1) | Adjustments(4) | Base | ||||||||
Operating profit | $ | 233,830 | $ | 35,484 | $ | 1,154 | $ | 270,468 | |||
Non-operating pension costs | 15,179 | - | (15,179) | - | |||||||
Interest expense, net | 34,730 | - | - | 34,730 | |||||||
Income before income taxes | 183,921 | 35,484 | 16,333 | 235,738 | |||||||
Provision for income taxes | 49,986 | 9,353 | 2,683 | 62,022 | |||||||
Income before equity in earnings of affiliates | 133,935 | 26,131 | 13,650 | 173,716 | |||||||
Equity in earnings of affiliates, net of taxes | 1,291 | - | - | 1,291 | |||||||
Net income | 135,226 | 26,131 | 13,650 | 175,007 | |||||||
Net (income) attributable to noncontrolling interests | 430 | (17) | - | 413 | |||||||
Net income attributable to Sonoco | $ | 135,656 | $ | 26,114 | $ | 13,650 | $ | 175,420 | |||
Per Diluted Share* | |||||||||||
$ | 1.34 | $ | 0.26 | $ | 0.14 | $ | 1.73 | ||||
*Due to rounding individual items may not sum across | |||||||||||
Effective tax rate | 27.2% | 26.3% |
- Restructuring/Asset impairment charges are a recurring item as Sonoco's restructuring programs usually require several years to fully implement and the Company is continually seeking to take actions that could enhance its efficiency. Although recurring, these charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity and the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the restructuring actions occur. In the first six months of 2021 restructuring and asset impairment charges, mostly related to asset write-offs and severance, totaled approximately $10,900. These were partially offset by gains totaling approximately $5,500 related to the sale of previously closed facilities in the Company's tubes and core business.
- Includes non-operating pension costs, which include $547,000 of settlement charges and losses from early extinguishment of debt. Additionally, includes acquisition/divestiture-related costs, the loss on the disposition of the Company's U.S. display and packaging business, which were partially offset by a hedge gain related to a Euro-denominated loan repayment, a foreign VAT refund, including applicable interest, and life insurance gains.
- 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 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.
- Consists of non-operating pension costs, costs related to actual and potential acquisitions and divestitures, the anticipated impact of the settlement of a U.S. Tax Audit, and tax benefits related primarily to a tax rate change.
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Sonoco Products Co. published this content on 22 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 July 2021 11:07:11 UTC.