Sonoco (NYSE: SON), one of the largest diversified global consumer and industrial packaging companies, today reported results for its third quarter ending October 2, 2011.

Third Quarter Highlights

• Third quarter 2011 GAAP earnings per diluted share were $.76, compared with $.57 in 2010, including a $.10-per-diluted-share gain stemming from a net release of valuation allowances on deferred tax assets, partially offset by restructuring charges and acquisition expenses.
• Base net income attributable to Sonoco (base earnings) for third quarter 2011 was $.66 per diluted share, compared with $.65 in 2010. (See base earnings definition and reconciliation later in this release.)
• Third quarter 2011 net sales were $1.12 billion, up 7 percent, compared with $1.05 billion in the third quarter of 2010.
• Base earnings guidance for fourth quarter 2011 is estimated at $.59 to $.63 per diluted share and $2.41 to $2.45 per diluted share for full-year 2011.

Third Quarter Review

Commenting on the Company's third quarter results, Chairman and Chief Executive Officer Harris E. DeLoach, Jr. said, "Despite slowing global economic conditions, our third quarter base earnings were essentially flat with last year and up 10 percent from the second quarter of 2011. Compared to the prior year third quarter, volume declined slightly, particularly in our more economic-sensitive industrial businesses, and we continued to see a negative mix in many of our businesses. Even though we faced raw material, energy and freight cost headwinds, the price/cost relationship for the quarter was only slightly negative. We were helped by productivity improvements, although not up to our historic levels, and lower selling and administrative costs.

"Our Consumer Packaging segment's operating profits were 35 percent higher, when compared to the second quarter and slightly better than last year's third quarter. Improved productivity, volume gains and cost reduction efforts offset a negative price/cost relationship. In our Packaging Services segment, results were up year over year; however, results were down sequentially from the second quarter as improved point-of-purchase display volume and fulfillment activities could not offset previously announced lost contract packaging business.

"Our industrial-focused businesses had mixed results, as our Tubes and Cores/Paper segment's third quarter operating profits were down 10 percent year over year and 9 percent sequentially. Results for the quarter were impacted by lower global volume for tubes and cores along with an unfavorable mix of business. These negative factors were partially offset by productivity improvements. All Other Sonoco, which primarily includes industrial-related businesses, showed a 6 percent improvement in operating profits year over year and a 7 percent improvement sequentially, due primarily to productivity."

Third quarter GAAP net income attributable to Sonoco was $77.2 million, or $.76 per diluted share, in 2011, compared with $59.0 million, or $.57 per diluted share, in 2010. Base earnings were $67.1 million, or $.66 per diluted share, in the third quarter of 2011, compared with $67.1 million, or $.65 per diluted share, in 2010. Base earnings and base earnings per diluted share are non-GAAP financial measures adjusted to remove restructuring charges, asset impairment charges and other items, if any, the exclusion of which the Company believes improves comparability and analysis of the underlying financial performance of the business.

Items excluded from base earnings in the 2011 third quarter include: a net $18.8 million, or $.18 per share, reduction in tax expense resulting from valuation allowance adjustments on deferred tax assets; restructuring expenses of $7.2 million, after tax, or $.07 per share, primarily due to the closures of a tubes and cores plant and a plastics facility; and acquisition-related costs of $1.5 million, after tax, or $.01 per share. Excluded from base earnings in the third quarter of 2010 were impairment and restructuring charges of $6.9 million, after tax, or $.07 per share, primarily related to impairment charges in the Company's Flexible Packaging unit, and $1.1 million, after tax, or $.01 per share, in acquisition-related costs.

Net sales for the third quarter were $1.12 billion, compared with $1.05 billion in the same period in 2010. This 7 percent increase was due to higher selling prices and favorable foreign currency translation, partially offset by a negative mix of business. The impact of higher selling prices was realized primarily in the Tubes and Cores/Paper and Consumer Packaging segments, principally driven by higher recovered paper and resin prices.

The Company's gross profit margin in the third quarter of 2011 was 16.6 percent of sales, compared with 19.0 percent in the same period in 2010. The decline was primarily due to lower volume, a negative shift in the mix of business and higher labor and other costs. The Company's selling and administrative costs declined 12 percent year over year, primarily due to lower management incentive and pension costs, a gain from life insurance proceeds, cost controls and the net impact of foreign exchange.

Cash generated from operations in the third quarter was $100 million, compared with $145 million generated in the same period in 2010. Capital expenditures and cash dividends were $44 million and $29 million, respectively, during the third quarter, compared with $42 million and $28 million, respectively, during the third quarter of 2010.

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SOURCE: Sonoco