Sonoco Products : Non-GAAP Reconciliations for Q4 2021

Sonoco Products Company

Reconciliation of Non-GAAP Financial Measure

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 related to restructuring initiatives, asset impairment charges, non-operating pension costs, environmental charges, acquisition/divestiture-related costs, gains and losses on dispositions of businesses, property insurance recoveries in excess of recorded losses, certain income tax related events and other items, if any, the exclusion of which management believes improves comparability and analysis of the ongoing operating performance of the business. These adjustments result in the non-GAAP financial measures referred to in this press release as "Base Earnings," "Base Earnings per Diluted Share," and "Base Provision for Income Taxes." In addition, as discussed above, starting in 2022 (including full-year and first quarter guidance for 2022) and going forward, the Company will also include adjustments in these non-GAAP financial measures to add back amounts relating to amortization-related expense on acquisition intangibles in order to better align such measures with those of its peers, better reflect the Company's operating performance and increase the usefulness of such measures to the investing community.

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 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 GAAP financial measure. Whenever reviewing a non-GAAP financial measure, investors are encouraged to fully review and consider the related reconciliation as detailed below. First- quarter and full-year 2022 GAAP guidance are 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, amortization expense on acquisition-related intangibles, 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.

					Non-GAAP Adjustments
				Restructuring /			Acquisition
					Asset
					Impairment			Related			Other
Three Months Ended December 31, 2021		GAAP			Charges(1)			Costs(2)		Adjustments(3)			Base
Operating profit	$	104,741	$	5,321	$	5,219	$	9,377	$	124,658
Non-operating pension costs		5,598			-			-			(5,598)			-
Interest expense, net		12,491			-			-			-			12,491
Income before income taxes		86,652			5,321			5,219			14,975			112,167
Provision for income taxes		24,112			2,710			550			(739)			26,633
Income before equity in earnings of affiliates		62,540			2,611			4,669			15,714			85,534
Equity in earnings of affiliates, net of taxes		5,140			-			-			(1,394)			3,746
Net income		67,680			2,611			4,669			14,320			89,280
Net (income) attributable to noncontrolling interests		(2,523)			-			-			2,052			(471)
Net income attributable to Sonoco	$	65,157		$	2,611		$	4,669		$	16,372		$	88,809
Per Diluted Share*	$	0.66	$	0.03	$	0.05	$	0.17	$	0.90
*Due to rounding individual items may not sum
across
					Non-GAAP Adjustments
				Restructuring /
					Asset			Acquisition
					Impairment			Related			Other
Three Months Ended December 31, 2020		GAAP			Charges(1)			Costs(2)		Adjustments(4)			Base
Operating profit	$	17,230			85,947			3,613			19,190	$	125,980
Non-operating pension costs		7,510			-			-			(7,510)			-
Interest expense, net		18,759			-			-			-			18,759
(Loss)/Income before income taxes		(9,039)			85,947			3,613			26,700			107,221
Provision for income taxes		3,693			17,847			901			2,788			25,229
(Loss)/Income before equity in earnings of affiliates		(12,732)			68,100			2,712			23,912			81,992
Equity in earnings of affiliates, net of taxes		1,449			-			-			-			1,449
Net (loss)/income		(11,283)			68,100			2,712			23,912			83,441
Net (income) attributable to noncontrolling interests		(359)			(34)			-			-			(393)
Net (loss)/income attributable to Sonoco	$	(11,642)	$	68,066	$	2,712	$	23,912	$	83,048
Diluted weighted average common shares
	100,948									395			101,343
outstanding(5):
Per Diluted Share*	$	(0.12)	$	0.67	$	0.03	$	0.24	$	0.82

*Due to rounding individual items may not sum across

(1)Restructuring/Asset impairment charges are a recurring item as Sonoco's restructuring actions 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. Additionally, 2020 includes net asset impairment charges totaling $74,878 mostly related to the Company's Plastics - Food business.

1. Includes costs related to potential and actual acquisitions and divestitures.
2. Includes non-operating pension expenses and other one-time charges.
3. Includes the pre-tax loss on the divestiture of the Company's contract packaging business in Europe of $14,516 as well as non-operating pension expenses.
4. Due to the magnitude of certain expenses considered by management to be non-base and included in Other Adjustments. the Company reported a quarter-to-date GAAP Net Loss Attributable to Sonoco. In instances where a company has a net loss, including potential common shares in the denominator of a diluted earnings per-share computation will have an antidilutive effect on the per-share loss. GAAP therefore requires the exclusion of any unexercised share awards or other like instruments for purposes of calculating weighted average shares outstanding. Accordingly, the Company did not include any unexercised share awards or other like instruments 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 and comparability of Base Diluted EPS, dilutive unexercised share awards were included in the calculation to the same extent they would have been had GAAP Net Income Attributable to Sonoco been equal to Base Net Income Attributable to Sonoco.

					Non-GAAP Adjustments
				Restructuring /
					Asset			Acquisition
					Impairment			Related			Other
Twelve Months Ended December 31, 2021		GAAP			Charges(1)			Costs(2)			Adjustments(3)
Operating profit	$	486,853	$	14,210	$	17,722	$	(3,420)
Non-operating pension costs		568,416			-			-			(568,416)
Interest expense, net		59,235			-			-			2,165
Loss from the early extinguishment of debt		20,184			-			-			(20,184)
(Loss)/Income before income taxes
	(160,982)			14,210			17,722			583,015
(Benefit from)/Provision for income taxes		(67,430)			5,363			3,535			165,531
(Loss)/Income before equity in earnings of affiliates		(93,552)			8,847			14,187			417,484
Equity in earnings of affiliates, net of taxes		10,841			-			-			(1,394)
Net (loss)/income
	(82,711)			8,847			14,187			416,090
Net (income) attributable to noncontrolling interests		(2,766)			-			-			2,052
Net (loss)/income attributable to Sonoco	$	(85,477)	$	8,847	$	14,187	$	418,142
Diluted weighted average common shares
outstanding(4):		99,608									469
Per Diluted Share*
$	(0.86)	$	0.09	$	0.14	$	4.18
*Due to rounding individual items may not sum across					Non-GAAP Adjustments
				Restructuring /
					Asset			Acquisition
					Impairment			Related			Other
Twelve Months Ended December 31, 2020		GAAP			Charges(1)			Costs(2)			Adjustments(5)
Operating profit	$	357,804			145,580			4,671			18,934
Non-operating pension costs		30,142									(30,142)
Interest expense, net		72,070			-			-			-
Income before income taxes		255,592			145,580			4,671			49,076
Provision for income taxes		53,030			32,868			1,236			27,126
Income before equity in earnings of affiliates		202,562			112,712			3,435			21,950
Equity in earnings of affiliates, net of taxes		4,679			-			-			-
Net income		207,241			112,712			3,435			21,950
Net loss attributable to noncontrolling interests		222			(60)			-			-
Net income attributable to Sonoco	$	207,463	$	112,652	$	3,435	$	21,950
Per Diluted Share*	$	2.05	$	1.11	$	0.03	$	0.22
*Due to rounding individual items may not sum across

Base

$ 515,365

-

61,400

-

453,965

106,999

346,966

9,447

356,413

(714)

$ 355,699

100,077

$ 3.55

Base

$ 526,989

-

72,070

454,919

114,260

340,659

4,679

345,338

162

$ 345,500

$ 3.41

1. Restructuring/Asset impairment charges are a recurring item as Sonoco's restructuring actions 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. Additionally, 2020 includes net asset impairment charges totaling $100,242 mostly related to the Company's Plastics- Food business.
2. Includes costs related to potential and actual acquisitions and divestitures.
3. Includes non-operating pension expenses related to after-tax pension settlement charges of $410,417 mostly related to the Company's settlement of its US Inactive Plan in the second quarter.
4. Due to the magnitude of certain expenses considered by management to be non-base and included in Other Adjustments. the Company reported a year-to-date GAAP Net Loss Attributable to Sonoco. In instances where a company has a net loss, including potential common shares in the denominator of a diluted earnings per-share computation will have an antidilutive effect on the per-share loss. GAAP therefore requires the exclusion of any unexercised share awards or other like instruments for purposes of calculating weighted average shares outstanding. Accordingly, the Company did not include any unexercised share awards or other like instruments 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 and comparability of Base Diluted EPS, dilutive unexercised share awards were included in the calculation to the same extent they would have been had GAAP Net Income Attributable to Sonoco been equal to Base Net Income Attributable to Sonoco.
5. Includes the pre-tax loss on the divestiture of the Company's contract packaging business in Europe of $14,516 as well as non-operating pension expenses. The tax benefit of $27,126 was driven by the income tax benefit related to the divestiture loss, approximately $17,400.