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Sonoco Reports Third Quarter 2023 Results

HARTSVILLE, S.C., Oct. 31, 2023 (GLOBE NEWSWIRE) -- Sonoco Products Company (“Sonoco” or the “Company”) (NYSE: SON), one of the largest sustainable global packaging companies, today reported financial results for its third quarter ended October 1, 2023.

Summary

  • Sonoco achieved fully diluted earnings per share of $1.32 and Adjusted earnings per share (diluted) of $1.46
  • Generated sequential growth in Sales, Net Income, and Adjusted EBITDA and improved Net Income Margin and Adjusted EBITDA Margin to 7.6% and 16.4%, respectively.
  • Continued near record results in the flexible packaging and the rigid paper container businesses in the Consumer Packaging (“Consumer”) and Industrial Paper Packaging (“Industrial”) segments
  • Inflationary pricing pressures continue to impact year-over-year demand in the Consumer segment
  • Generated $617 million of operating cash flow in the first nine months of 2023 due to strong GAAP Net Income and disciplined working capital management
  • Raised full-year Adjusted EPS and Adjusted EBITDA guidance based on improved productivity and cost controls
  • Lowered full-year operating cash flow and free cash flow guidance based on lowered operating cash flow and lower capital expenses
  • Closed the previously announced acquisitions of the remaining equity interest in RTS Packaging LLC (“RTS Packaging”) and a paper mill in Chattanooga, Tennessee and integration is well underway
 
Third Quarter 2023Consolidated Financial Results
(Dollars in millions except per share data)
    
  Three Months Ended  
 GAAP ResultsOctober 1, 2023 October 2, 2022 Change
      
 Net sales$1,710  $1,890  (10)%
 Operating profit$163  $182  (10)%
 Net income attributable to Sonoco$131  $122  7%
 EPS (diluted)$1.32  $1.24  6%
      
      
  Three Months Ended  
 Non-GAAP Results(1)October 1, 2023 October 2, 2022 Change
      
 Adjusted operating profit$213  $225  (6)%
 Adjusted EBITDA$280  $288  (3)%
 Adjusted net income attributable to Sonoco (“Adjusted Earnings”)$145  $158  (8)%
 Adjusted EPS (diluted)$1.46  $1.60  (9)%
      

(1) See the Company’s definitions of non-GAAP financial measures, explanations as to why they are used, and reconciliations to the most directly comparable GAAP financial measures later in this release.

  • Net sales decreased to $1.7 billion driven by lower volumes and average selling prices.  
  • GAAP operating profit decreased to $163 million due to lower overall volume and mix and price/cost, partially offset by higher productivity.
  • Achieved net income margin of 7.6% and Adjusted EBITDA margin of 16.4%.
  • Effective tax rates on GAAP and Adjusted Earnings were 23.6% and 22.7%, respectively, compared with 23.7% and 23.1%, respectively, from the third quarter of the prior year.
  • GAAP net income increased to $131 million for GAAP EPS (diluted) of $1.32.
  • Adjusted Earnings decreased to $145 million for Adjusted EPS (diluted) of $1.46.
  • Adjusted operating profit and Adjusted EBITDA declined to $213 million and $280 million, respectively, due to lower overall volume and mix and price/cost, partially offset by higher productivity.

“Our third-quarter results benefited from seasonally higher demand as well as better than expected productivity and cost management from our global team,” said Sonoco’s President and CEO, Howard Coker. “Consumer volumes were lower year over year, but were sequentially higher across the segment with the exception of metal aerosol cans, which were below our forecasts on persistent end market demand softness. In the Industrial segment, volumes were generally as expected. We closed the RTS Packaging and Chattanooga mill acquisitions, and integration has progressed to plan. Despite the continued weak macroeconomic backdrop, we achieved strong profit margin and operating cash flow in the quarter.”

Third Quarter 2023 Segment Results
(Dollars in millions except per share data)

Sonoco reports its financial results in two reportable segments: Consumer and Industrial, with all remaining businesses reported as All Other.

  Three Months Ended   
 Consumer PackagingOctober 1, 2023 October 2, 2022 Change 
       
 Net sales$938  $1,031  (9)%
 Segment operating profit$112  $128  (12)%
 Segment operating profit margin 12%  12%   
 Segment Adjusted EBITDA1$144  $157  (9)%
 Segment Adjusted EBITDA margin1 15%  15%   
            
  • Consumer net sales were $938 million as volumes were primarily impacted by inflationary pricing pressures within retail along with unfavorable pricing.
  • Consumer results benefited from strong productivity and performance in the flexible packaging, rigid paper and metal packaging businesses, but this was more than offset by lower volumes and broadly negative price/cost.
     
  Three Months Ended   
 Industrial Paper PackagingOctober 1, 2023 October 2, 2022 Change 
       
 Net sales$580  $661  (12)%
 Segment operating profit$75  $82  (8)%
 Segment operating profit margin 13%  12%   
 Segment Adjusted EBITDA1$105  $109  (4)%
 Segment Adjusted EBITDA margin1 18%  16%   
            
  • Industrial net sales decreased 12% to $580 million due to volume and mix weakness in global demand for paper and converted paper products as well as the absence of sales related to businesses divested earlier in the year, which was partially offset by the benefit related to the acquisition of RTS Packaging and the Chattanooga paper mill during the quarter.
  • Strong execution in commercial and operational excellence resulted in operating profit margin of 13% and Adjusted EBITDA margin of 18%.
    
  Three Months Ended  
 All OtherOctober 1, 2023 October 2, 2022 Change
      
 Net sales$192  $198  (3)%
 Operating profit$26  $15  66%
 Operating profit margin 14%  8%  
 Adjusted EBITDA1$32  $22  47%
 Adjusted EBITDA margin1 17%  11%  
           
  • Net sales declined 3% as strategic pricing actions were more than offset by volume and mix declines.
  • Operating profit and Adjusted EBITDA improved by 66% and 47%, respectively, primarily due to positive strategic pricing and strong productivity more than offsetting lower volumes.

1Segment and All Other Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. See the Company’s reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures later in this release.

Balance Sheet and Cash Flow Highlights

  • Cash and cash equivalents were $258 million as of October 1, 2023, compared to $227 million as of December 31, 2022.
  • Total debt was $3,255 million as of October 1, 2023, an increase of $33 million from December 31, 2022.
  • On October 1, 2023, the Company had available liquidity of $1,158 million, including the undrawn availability under its revolving credit facilities.
  • Cash flow from operating activities for the first nine months of 2023 was $617 million, compared to $322 million in the same period of 2022.
  • Capital expenditures, net of proceeds from sales of fixed assets, for the first nine months of 2023 were $182 million, compared to $231 million in the same period last year. Capital expenditures were $255 million and net proceeds from the sale of our timberland properties were $73 million for the first nine months of 2023.
  • Free cash flow for the first nine months of 2023 was $435 million. See the Company’s definition of free cash flow, the explanation as to why it is used, and the reconciliation to net cash provided by operating activities later in this release.
  • Dividends paid during the nine months ended October 1, 2023 increased to $147 million compared to $139 million for the same period of the prior year.

Guidance(1)         
Fourth Quarter 2023

  • Adjusted EPS(2): $1.01 to $1.16

Full Year 2023

  • Adjusted EPS(2): $5.25 to $5.40
  • Cash flow from operating activities: $850 million to $900 million
  • Free cash flow(3): $600 million to $690 million
  • Adjusted EBITDA: $1.05 billion to $1.08 billion

Sonoco’s President and CEO, Howard Coker, “For the fourth quarter, we expect seasonally lower demand volumes and unfavorable index-based pricing impacts. We are raising full year Adjusted EPS and Adjusted Earnings guidance based on year-to-date results and our fourth quarter guidance. Additionally, we are expecting full year operating cash flow to be $850 - $900 million and free cash flow to be $600 - $690 million based on lower operating cash flow and lower capital expenses. We remain focused on supporting our customers, managing expenses, and continuous improvement programs as we exit the year.”

(1) Although the Company believes the assumptions reflected in the range of guidance are reasonable, given the uncertainty regarding the future performance of the overall economy, the effects of inflation, the continued challenges in global supply chains, potential changes in raw material prices, other costs, and the Company’s effective tax rate, as well as other risks and uncertainties, including those described below, actual results could vary substantially. Further information can be found in the section entitled “Forward-looking Statements” in this release.

(2) Fourth quarter and full-year 2023 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 without unreasonable efforts: restructuring costs and restructuring-related impairment charges, acquisition/divestiture-related costs, gains or losses on the sale of businesses or other, 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. Accordingly, a quantitative reconciliation of Adjusted EPS guidance has been omitted in reliance on the exception provided by Item 10 of Regulation S-K.

(3) See reconciliation of projected cash flow from operating activities to projected free cash flow later in this release.

Conference Call Webcast
Management will host a conference call and webcast to further discuss these results beginning at 8:30 am EDT, Wednesday, November 1, 2023. The live conference call and a corresponding presentation can be accessed via the Company’s Investor Relations website at https://investor.sonoco.com. To listen via telephone, please register in advance at https://register.vevent.com/register/BIe853f98da6424ee88b9a95e5c4b84e7c. Upon registration, all telephone participants will receive the dial-in number along with a unique PIN number that can be used to access the call. A replay of the conference call and webcast will be archived on the Company’s Investor Relations website for at least 30 days.

Contact Information:
Lisa Weeks
Vice President of Investor Relations & Communications
lisa.weeks@sonoco.com
843-383-7524

About Sonoco
Founded in 1899, Sonoco (NYSE:SON) is a global provider of packaging products. With net sales of approximately $7.3 billion in 2022, the Company has approximately 22,000 employees working in more than 320 operations around the world, serving some of the world’s best-known brands. With our corporate purpose of Better Packaging. Better Life., Sonoco is committed to creating sustainable products, and a better world, for our customers, employees and communities. The Company ranked first in the Packaging sector on Fortune’s World’s Most Admired Companies for 2022 and was also included in Barron’s 100 Most Sustainable Companies for the fourth consecutive year. For more information on the Company, visit our website at 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 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 “anticipate,” “assume,” “believe,” “committed,” “consider,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “intend,” “likely,” “may,” “might,” “objective,” “outlook,” “plan,” “potential,” “project,” “seek,” “strategy,” “will,” or the negative thereof, and similar expressions identify forward-looking statements.

Forward-looking statements in this communication include statements regarding, but not limited to: the Company’s future operating and financial performance, including fourth quarter and full-year 2023 outlook; the Company’s ability to support its customers and manage expenses; opportunities for operational improvements; pricing, customer demand and volume outlook; expected benefits from and integration efforts related to acquisitions and divestitures; the effectiveness of the Company’s strategy; the effects of the macroeconomic environment and inflation on the Company and its customers; and outcomes of certain tax issues and tax rates.

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, those related to: the Company’s ability to achieve the benefits it expects from acquisitions and divestitures; the Company’s ability to execute on its strategy, including with respect to acquisitions (and integrations thereof), divestitures, cost management, restructuring and capital expenditures, and achieve the benefits it expects therefrom; the operation of new manufacturing capabilities; the Company’s ability to achieve anticipated cost and energy savings; the 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 pricing risks; the costs of labor; the effects of inflation, fluctuations in consumer demand, volume softness, customer destocking and other macroeconomic factors on the Company and the industries in which it operates and that it serves; the Company’s ability to meet its goals relating to sustainability and reduction of greenhouse gas emissions; the Company’s ability to return cash to shareholders and create long-term value; and the other risks, uncertainties and assumptions discussed in the Company’s filings with the Securities and Exchange Commission, including its most recent reports on Forms 10-K and 10-Q, particularly under the heading “Risk Factors.” The Company undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed herein might not occur.

References to our Website Address

References to our website address and domain names throughout this release are for informational purposes only, or to fulfill specific disclosure requirements of the Securities and Exchange Commission’s rules or the New York Stock Exchange Listing Standards. These references are not intended to, and do not, incorporate the contents of our website by reference into this release.

 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars and shares in thousands except per share)
      
 Three Months Ended Nine Months Ended
 October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022
        
Net sales$1,710,419  $1,890,216  $5,145,492  $5,574,530 
Cost of sales 1,346,163   1,523,070   4,049,490   4,448,818 
Gross profit 364,256   367,146   1,096,002   1,125,712 
Selling, general, and administrative expenses 182,672   164,552   541,421   533,875 
Restructuring/Asset impairment charges 18,110   20,652   52,981   43,357 
(Loss)/Gain on divestiture of business and other assets (537)     78,844    
Operating profit 162,937   181,942   580,444   548,480 
Other income, net 36,943      36,943    
Non-operating pension costs 3,424   1,249   10,424   4,251 
Net interest expense 29,674   25,566   94,684   67,792 
Income before income taxes 166,782   155,127   512,279   476,437 
Provision for income taxes 39,351   36,824   127,003   116,712 
Income before equity in earnings of affiliates 127,431   118,303   385,276   359,725 
Equity in earnings of affiliates, net of tax 3,627   4,199   8,795   10,151 
Net income 131,058   122,502   394,071   369,876 
Net income attributable to noncontrolling interests (309)  (273)  (354)  (642)
Net income attributable to Sonoco$130,749  $122,229  $393,717  $369,234 
        
Weighted average common shares outstanding – diluted 98,912   98,762   98,800   98,669 
        
Diluted earnings per common share$1.32  $1.24  $3.98  $3.74 
Dividends per common share$0.51  $0.49  $1.51  $1.43 
                


 
FINANCIAL SEGMENT INFORMATION (Unaudited)
(Dollars in thousands)
   
  Three Months Ended Nine Months Ended
  October 1, 2023 October 2, 2022 October 1, 2023 October 2, 2022
Net sales:       
 Consumer Packaging$938,407  $1,030,549  $2,771,290  $2,888,630 
 Industrial Paper Packaging 580,035   661,452   1,781,033   2,087,981 
 All Other 191,977   198,215   593,169   597,919 
 Net sales$1,710,419  $1,890,216  $5,145,492  $5,574,530 
         
        
Operating profit:       
 Consumer Packaging$112,038  $127,859  $299,083  $440,889 
 Industrial Paper Packaging 75,006   81,859   256,413   248,721 
 All Other 25,502   15,373   81,409   46,426 
 Corporate       
 Restructuring/Asset impairment charges (18,110)  (20,652)  (52,981)  (43,357)
 Amortization of acquisition intangibles (21,379)  (20,690)  (63,082)  (60,361)
 Other operating income/(charges), net (10,120)  (1,807)  59,602   (83,838)
 Operating profit$162,937  $181,942  $580,444  $548,480 
         


 
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Dollars in thousands)
  
 Nine Months Ended
 October 1, 2023 October 2, 2022
    
Net income$394,071  $369,876 
Net (gains)/losses on asset impairments, disposition of assets and divestiture of business and other assets (87,770)  13,679 
Depreciation, depletion and amortization 249,387   231,095 
Pension and postretirement plan (contributions), net of non-cash expense 2,368   (26,597)
Changes in working capital 67,335   (317,010)
Changes in tax accounts (4,902)  42,748 
Other operating activity (3,612)  8,264 
Net cash provided by operating activities 616,877   322,055 
    
Purchases of property, plant and equipment, net (182,137)  (230,732)
Proceeds from the sale of business, net 31,147    
Cost of acquisitions, net of cash acquired (313,362)  (1,337,704)
Net debt (repayments)/ borrowings 27,088   1,445,194 
Cash dividends (147,477)  (139,289)
Payments for share repurchases (10,605)  (4,056)
Other, including effects of exchange rates on cash 8,971   (29,734)
Purchase of noncontrolling interest    (14,474)
Net increase in cash and cash equivalents 30,502   11,260 
Cash and cash equivalents at beginning of period 227,438   170,978 
Cash and cash equivalents at end of period$257,940  $182,238 
    


 
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
  October 1, 2023 December 31, 2022
Assets   
Current Assets:   
 Cash and cash equivalents$257,940  $227,438 
 Trade accounts receivable, net of allowances 964,054   862,712 
 Other receivables 100,772   99,492 
 Inventories 826,032   1,095,558 
 Prepaid expenses 91,090   76,054 
   2,239,888   2,361,254 
Property, plant and equipment, net 1,826,230   1,710,399 
Right of use asset-operating leases 311,642   296,781 
Goodwill 1,762,411   1,675,311 
Other intangible assets, net 873,518   741,598 
Other assets 256,310   267,597 
  $7,269,999  $7,052,940 
Liabilities and Shareholders’ Equity   
Current Liabilities:   
 Payable to suppliers and other payables$1,116,485  $1,224,556 
 Notes payable and current portion of long-term debt 42,279   502,440 
 Accrued taxes 26,435   16,905 
   1,185,199   1,743,901 
Long-term debt, net of current portion 3,212,454   2,719,783 
Noncurrent operating lease liabilities 262,667   250,994 
Pension and other postretirement benefits 131,668   120,084 
Deferred income taxes and other 138,856   145,381 
Total equity 2,339,155   2,072,797 
  $7,269,999  $7,052,940 
  

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. The Company uses certain financial performance measures, both internally and externally, that are not in conformity with GAAP (“non-GAAP financial measures”) to assess and communicate the financial performance of the Company. These non-GAAP financial measures reflect the Company’s GAAP operating results adjusted to remove amounts (including the associated tax effects) relating to:

  • restructuring/asset impairment charges1;
  • acquisition, integration, and divestiture-related costs;
  • gains or losses from the divestiture of businesses and other assets;
  • losses from the early extinguishment of debt;
  • non-operating pension costs;
  • amortization expense on acquisition intangibles;
  • changes in last-in, first-out (“LIFO”) inventory reserves;
  • certain income tax events and adjustments;
  • derivative gains/losses;
  • other non-operating income and losses; and
  • certain other items, if any.

1 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, 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.

The Company’s management believes the exclusion of these items improves the period-to-period comparability and analysis of the underlying financial performance of the business. Non-GAAP figures previously identified by the term “Base” are now identified using the term “Adjusted,” for example “Adjusted Operating Profit,” “Adjusted Net Income,” and “Adjusted EPS.”

In addition to the “Adjusted” results described above, the Company also uses Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is defined as net income excluding the following: interest expense; interest income; provision for income taxes; depreciation, depletion and amortization expense; non-operating pension costs; net income attributable to noncontrolling interests; restructuring/asset impairment charges; changes in LIFO inventory reserves; gains/losses from the divestiture of businesses and other assets; acquisition, integration and divestiture-related costs; derivative gains/losses; and other non-GAAP adjustments, if any, that may arise from time to time. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net sales.

The Company’s non-GAAP financial measures are not calculated in accordance with, nor are they an alternative for, measures conforming to generally accepted accounting principles, and they may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles.

The Company presents these non-GAAP financial measures to provide investors with information to evaluate Sonoco’s operating results in a manner similar to how management evaluates business performance. The Company consistently applies its non-GAAP financial measures presented herein and uses them for internal planning and forecasting purposes, to evaluate its ongoing operations, and to evaluate the ultimate performance of management and each business unit against plans/forecasts. In addition, these same non-GAAP financial measures are used in determining incentive compensation for the entire management team and in providing earnings guidance to the investing community.

Material limitations associated with the use of such measures include that they do not reflect all period costs included in operating expenses and may not be comparable with similarly named financial measures of other companies. Furthermore, the calculations of these non-GAAP financial 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 any limitations in such non-GAAP financial measures, management believes that it is useful in evaluating the Company’s results to review both GAAP information, which includes all of the items impacting financial results, and the related non-GAAP financial measures that exclude certain elements, as described above. Further, Sonoco management does not, nor does it suggest that investors should, consider any non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Whenever reviewing a non-GAAP financial measure, investors are encouraged to review the related reconciliation to understand how it differs from the most directly comparable GAAP measure.

Whenever Sonoco uses a non-GAAP financial measure it provides a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. Investors are encouraged to review and consider these reconciliations. See “Guidance” above for more information regarding the Company’s guidance.   

Adjusted Operating Profit, Adjusted Income Before Income Taxes, Adjusted Provision for Income Taxes, Adjusted Net Income Attributable to Sonoco and Adjusted Diluted EPS

The following tables reconcile the Company’s non-GAAP financial measures to their most directly comparable GAAP financial measures for each of the periods presented:

 For the three-month period ended October 1, 2023
Dollars in thousands, except per share dataOperating Profit
 Income Before Income Taxes
 Provision for Income Taxes
 Net Income Attributable to Sonoco
 Diluted EPS
As Reported$162,937  $166,782  $39,351  $130,749  $1.32 
Acquisition, integration and divestiture-related costs 12,472   12,472   1,979   10,493   0.10 
Changes in LIFO inventory reserves (3,186)  (3,186)  (816)  (2,370)  (0.02)
Amortization of acquisition intangibles 21,379   21,379   5,197   16,182   0.16 
Restructuring/Asset impairment charges 18,110   18,110   4,385   13,974   0.14 
Loss on divestiture of business and other assets 537   537   125   412    
Other income, net    (36,943)  (8,929)  (28,014)  (0.28)
Non-operating pension costs    3,424   852   2,572   0.03 
Net gain from derivatives (3,310)  (3,310)  (830)  (2,480)  (0.03)
Other adjustments 3,607   3,607   252   3,355   0.04 
Total adjustments$49,609  $16,090  $2,215  $14,124  $0.14 
Adjusted$212,546  $182,872  $41,566  $144,873  $1.46 
                    
Due to rounding, individual items may not sum appropriately.
 


 For the three-month period ended October 2, 2022
Dollars in thousands, except per share dataOperating Profit
 Income Before Income Taxes
 Provision for Income Taxes
 Net Income Attributable to Sonoco
 Diluted EPS
As Reported$181,942  $155,127  $36,824  $122,229  $1.24 
Acquisition, integration and divestiture-related costs 2,022   2,022   765   1,257   0.01 
Changes in LIFO inventory reserves (302)  (302)     (302)   
Amortization of acquisition intangibles 20,690   20,690   4,938   15,752   0.16 
Restructuring/Asset impairment charges 20,652   20,652   4,862   15,976   0.16 
Non-operating pension costs    1,249   340   909   0.01 
Net loss from derivatives 1,478   1,478   378   1,100   0.01 
Other adjustments (1,391)  (1,391)  (2,015)  624   0.01 
Total adjustments$43,149  $44,398  $9,268  $35,316  $0.36 
Adjusted$225,091  $199,525  $46,092  $157,545  $1.60 
                    
Due to rounding, individual items may not sum appropriately.
     


 For the nine-month period ended October 1, 2023
Dollars in thousands, except per share dataOperating Profit
 Income Before Income Taxes
 Provision for Income Taxes
 Net Income Attributable to Sonoco
 Diluted EPS
As Reported$580,444  $512,279  $127,003  $393,717  $3.98 
Acquisition, integration and divestiture-related costs 22,192   22,192   4,249   17,943   0.18 
Changes in LIFO inventory reserves (10,186)  (10,186)  (2,564)  (7,622)  (0.08)
Amortization of acquisition intangibles 63,082   63,082   15,312   47,770   0.48 
Restructuring/Asset impairment charges 52,981   52,981   12,344   40,658   0.41 
Gain on divestiture of business and other assets (78,844)  (78,844)  (18,823)  (60,021)  (0.61)
Other income, net    (36,943)  (8,929)  (28,014)  (0.28)
Non-operating pension costs    10,424   2,589   7,835   0.08 
Net gain from derivatives (1,513)  (1,513)  (381)  (1,132)  (0.01)
Other adjustments 8,750   8,750   1,423   7,327   0.09 
Total adjustments$56,462  $29,943  $5,220  $24,744  $0.26 
Adjusted$636,906  $542,222  $132,223  $418,461  $4.24 
            
Due to rounding, individual items may not sum appropriately.
    


 For the nine-month period ended October 2, 2022
Dollars in thousands, except per share dataOperating Profit
 Income Before Income Taxes
 Provision for Income Taxes
 Net Income Attributable to Sonoco
 Diluted EPS
As Reported$548,480  $476,437  $116,712  $369,234  $3.74 
Acquisition, integration and divestiture-related costs 62,655   62,655   15,529   47,126   0.48 
Changes in LIFO inventory reserves 25,088   25,088   6,396   18,692   0.19 
Amortization of acquisition intangibles 60,361   60,361   14,666   45,695   0.46 
Restructuring/Asset impairment charges 43,357   43,357   7,339   36,304   0.37 
Non-operating pension costs    4,251   1,184   3,067   0.03 
Net gain from derivatives (2,316)  (2,316)  (578)  (1,738)  (0.02)
Other adjustments (1,589)  (1,725)  2,605   (4,330)  (0.04)
Total adjustments$187,556  $191,671  $47,141  $144,816  $1.47 
Adjusted$736,036  $668,108  $163,853  $514,050  $5.21 
                    
Due to rounding, individual items may not sum appropriately.
 


   
Adjusted EBITDA and Adjusted EBITDA Margin  
 Three Months Ended
Dollars in thousandsOctober 1, 2023
 October 2, 2022
   
Net income attributable to Sonoco$130,749  $122,229 
Adjustments:  
Interest expense 32,847   26,714 
Interest income (3,173)  (1,148)
Provision for income taxes 39,351   36,824 
Depreciation, depletion, and amortization 85,570   79,151 
Non-operating pension costs 3,424   1,249 
Net income attributable to noncontrolling interests 309   273 
Restructuring/Asset impairment charges 18,110   20,652 
Changes in LIFO inventory reserves (3,186)  (302)
Loss on divestiture of business and other assets 537    
Acquisition, integration and divestiture-related costs 12,472   2,022 
Other income, net (36,943)   
Net (gain)/loss from derivatives (3,310)  1,478 
Other non-GAAP adjustments 3,607   (1,391)
Adjusted EBITDA$280,364  $287,751 
   
Net Sales$1,710,419  $1,890,216 
Net Income Margin 7.6%  6.5%
Adjusted EBITDA Margin 16.4%  15.2%
        

Segment results viewed by the Company’s management to evaluate segment performance do not include restructuring/asset impairment charges, amortization of acquisition intangibles, acquisition, integration, and divestiture-related costs, changes in LIFO inventory reserves, gains/losses from the sale of businesses and other assets, 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 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 and All Other.

The Company does not calculate net income by segment; therefore, Segment Adjusted EBITDA is reconciled to the closest GAAP measure of segment profitability, Segment Operating Profit, which is the measure of segment profit or loss in accordance with Accounting Standards Codification 280 - Segment Reporting, as prescribed by the Financial Accounting Standards Board.

      
Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation     
For the Three Months Ended October 1, 2023     
Dollars in thousandsConsumer Packaging segment
 Industrial Paper Packaging segment
 All Other
 Corporate
 Total
Segment and Total Operating Profit$112,038  $75,006  $25,502  $(49,609) $162,937 
Adjustments:     
Depreciation, depletion and amortization1 31,401   26,558   6,232   21,379   85,570 
Equity in earnings of affiliates, net of tax 284   3,343         3,627 
Restructuring/Asset impairment charges2          18,110   18,110 
Changes in LIFO inventory reserves3          (3,186)  (3,186)
Acquisition, integration and divestiture-related costs4          12,472   12,472 
Loss from divestiture of business and other assets          537   537 
Net gains from derivatives5          (3,310)  (3,310)
Other non-GAAP adjustments          3,607   3,607 
Segment Adjusted EBITDA$143,723  $104,907  $31,734  $  $280,364 
      
Net Sales$938,407  $580,035  $191,977    
Segment Operating Profit Margin 11.9%  12.9%  13.3%   
Segment Adjusted EBITDA Margin 15.3%  18.1%  16.5%   
               

1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer segment of $14,197, the Industrial segment of $3,414, and All Other of $3,768.
2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer segment of $8,288, the Industrial segment of $6,430, and All Other of $1,766.
3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer segment of $(3,325) and the Industrial segment of $139.
4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer segment of $410 and the Industrial segment of $5,046.
5 Included in Corporate are net gains on derivatives associated with the Consumer segment of $(468), the Industrial segment of $(2,178), and All Other of $(664).

      
Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation     
For the Three Months Ended October 2, 2022     
Dollars in thousandsConsumer Packaging segment
 Industrial Paper Packaging segment
 All Other
 Corporate
 Total
Segment and Total Operating Profit$127,859  $81,859  $15,373  $(43,149) $181,942 
Adjustments:     
Depreciation, depletion, and amortization1 29,102   23,164   6,195   20,690   79,151 
Equity in earnings of affiliates, net of tax 359   3,840         4,199 
Restructuring/Asset impairment charges2          20,652   20,652 
Changes in LIFO inventory reserves3          (302)  (302)
Acquisition, integration and divestiture-related costs4          2,022   2,022 
Net losses from derivatives5          1,478   1,478 
Other non-GAAP adjustments          (1,391)  (1,391)
Segment Adjusted EBITDA$157,320  $108,863  $21,568  $  $287,751 
      
Net Sales$1,030,549  $661,452  $198,215    
Segment Operating Profit Margin 12.4%  12.4%  7.8%   
Segment Adjusted EBITDA Margin 15.3%  16.5%  10.9%   
               

1 Included in Corporate is amortization of acquisition intangibles associated with the Consumer segment of $14,326, the Industrial segment of $1,973, and All Other of $4,392.
2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer segment of $4,350, the Industrial segment of $7,674, and All Other of $18.
3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer segment of $(1,653) and the Industrial segment of $1,351.
4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer segment of $855 and the Industrial segment of $800.
5 Included in Corporate are net losses on derivatives associated with the Consumer segment of $203, the Industrial segment of $986, and All Other of $289.

   
Adjusted EBITDA and Adjusted EBITDA Margin  
 Nine Months Ended
Dollars in thousandsOctober 1, 2023
 October 2, 2022
   
Net income attributable to Sonoco$393,717  $369,233 
Adjustments:  
Interest expense 101,363   71,242 
Interest income (6,679)  (3,450)
Provision for income taxes 127,003   116,712 
Depreciation, depletion, and amortization 249,387   231,095 
Non-operating pension costs 10,424   4,251 
Net income attributable to noncontrolling interests 354   642 
Restructuring/Asset impairment charges 52,981   43,357 
Changes in LIFO inventory reserves (10,186)  25,088 
Gain from divestiture of business and other assets (78,844)   
Acquisition, integration and divestiture-related costs 22,192   62,655 
Other income, net (36,943)   
Net gain from derivatives (1,514)  (2,316)
Other non-GAAP adjustments 8,750   (1,589)
Adjusted EBITDA$832,005  $916,920 
   
Net Sales$5,145,492  $5,574,530 
Net Income Margin 7.7%  6.6%
Adjusted EBITDA Margin 16.2%  16.4%
        

The following tables reconcile Segment and Total Operating Profit, the closest GAAP measure of profitability, to Segment Adjusted EBITDA.

      
Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation     
For the Nine Months Ended October 1, 2023     
Dollars in thousandsConsumer Packaging segment
 Industrial Paper Packaging segment
 All Other
 Corporate
 Total
Segment and Total Operating Profit$299,083  $256,413  $81,409  $(56,461) $580,444 
Adjustments:     
Depreciation, depletion and amortization1 91,395   76,444   18,466   63,082   249,387 
Equity in earnings of affiliates, net of tax 493   8,302         8,795 
Restructuring/Asset impairment charges2          52,981   52,981 
Changes in LIFO inventory reserves3          (10,186)  (10,186)
Acquisition, integration and divestiture-related costs4          22,192   22,192 
Gains from divestiture of business and other assets5          (78,844)  (78,844)
Net gains from derivatives6          (1,514)  (1,514)
Other non-GAAP adjustments          8,750   8,750 
Segment Adjusted EBITDA$390,971  $341,159  $99,875  $  $832,005 
      
Net Sales$2,771,290  $1,781,033  $593,169    
Segment Operating Profit Margin 10.8%  14.4%  13.7%   
Segment Adjusted EBITDA Margin 14.1%  19.2%  16.8%   
               

1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer segment of $42,829, the Industrial segment of $8,913, and All Other of $11,340.
2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer segment of $11,792, the Industrial segment of $32,961, and All Other of $5,875.
3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer segment of $(9,428) and the Industrial segment of $(758).
4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer segment of $1,302 and the Industrial segment of $5,394.
5 Included in Corporate are gains from the divestiture of business and other assets associated with the sale of the Company’s timberland properties in the amount of $(60,945), the sale of its S3 business of in the amount of $(11,065), and the sale of its U.S. BulkSak businesses of $(6,834).
6 Included in Corporate are gains on derivatives associated with the Consumer segment of $(194), the Industrial segment of $(1,045), and All Other of $(275).

      
Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation     
For the Nine Months Ended October 2, 2022     
Dollars in thousandsConsumer Packaging segment
 Industrial Paper Packaging segment
 All Other
 Corporate
 Total
Segment and Total Operating Profit$440,889  $248,721  $46,426  $(187,556) $548,480 
Adjustments:     
Depreciation, depletion, and amortization1 83,161   68,941   18,631   60,361   231,094 
Equity in earnings of affiliates, net of tax 368   9,783         10,151 
Restructuring/Asset impairment charges2          43,357   43,357 
Changes in LIFO inventory reserves3          25,088   25,088 
Acquisition, integration and divestiture-related costs4          62,655   62,655 
Net gains from derivatives5          (2,316)  (2,316)
Other non-GAAP adjustments          (1,589)  (1,589)
Segment Adjusted EBITDA$524,418  $327,445  $65,057  $  $916,920 
      
Net Sales$2,888,630  $2,087,981  $597,919    
Segment Operating Profit Margin 15.3%  11.9%  7.8%   
Segment Adjusted EBITDA Margin 18.2%  15.7%  10.9%   
               

1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer segment of $40,938, the Industrial segment of $6,098, and All Other of $13,325.
2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer segment of $9,459, the Industrial segment of $19,194, and All Other of $(399).
3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer segment of $22,589 and the Industrial segment of $2,499.
4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer segment of $38,039 and the Industrial segment of $1,866.
5 Included in Corporate are net gains on derivatives associated with the Consumer segment of $(347), the Industrial segment of $(1,477), and All Other of $(492).

Free Cash Flow

The Company uses the non-GAAP financial measure of “free cash flow,” which it defines as cash flow from operations minus net capital expenditures. Net capital expenditures are defined as capital expenditures minus proceeds from the disposition of capital assets. Free cash flow may not represent the amount of cash flow available for general discretionary use because it excludes non-discretionary expenditures, such as mandatory debt repayments and required settlements of recorded and/or contingent liabilities not reflected in cash flow from operations.

  
 Nine Months Ended
FREE CASH FLOWOctober 1, 2023 October 2, 2022
    
Net cash provided by operating activities$616,877  $322,055 
Purchase of property, plant and equipment, net (182,137)  (230,732)
Free Cash Flow$434,740  $91,323 
    
    
 Year Ended
 Estimated Low End Estimated High End
FREE CASH FLOWDecember 31, 2023 December 31, 2023
Net cash provided by operating activities$850,000  $900,000 
Purchase of property, plant and equipment, net (250,000)  (210,000)
Free Cash Flow$600,000  $690,000 
    

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