Sonoco Products Company ( SON) Q4 2011 Earnings Call February 09, 2012 08:30 AM ET Executives Roger Schrum - IR Barry Saunders - CFO, VP Harris DeLoach - Chairman and CEO Jack Sanders - President and COO Analysts George Staphos - Merrill Lynch Philip Ng - Jefferies Ghansham Panjabi - Robert W. Baird Phil Gresh - JPMorgan Chris Manuel - Wells Fargo Mark Wilde - Deutsche Bank Alex Ovshey - Goldman Sachs Presentation Operator
Previous Statements by SON
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I’ll briefly remind you that today’s call may contain a number of forward-looking statements that are based on current expectations, estimates, and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. Additional information about factors that could cause different results and information about the use by the company of non-GAAP financial measures is available in today’s news release and on the company’s website.With that introduction, I‘ll now turn it over to Barry. Barry Saunders Thank you, Roger. Before getting into the numbers, I will mention that as a result of the Tegrant acquisition, we have reevaluated our segment reporting which is very prescribed by generally accepted accounting principles. And we've concluded that we will change our segments beginning with this fourth quarter. If you have access to the quarterly update slides, you see on chart three that we will have four segments going forward, Consumer Packaging; Paper and Industrial Converted Products; Packaging Services; and Protective Packaging. The most significant change from our previous structure is that given the significant sub-Tegrant we’ve added Protective Packaging as a recordable segment, which includes our Legacy Protective Packaging business and of course Tegrant as well. Prior to this change, we also had a group of businesses, which was referred to with all-other Sonoco that was not considered a segment. But after pulling out our Legacy Protective Packaging business and putting it into Protective Packaging, we’ve determined that our Wheels business can be aggregated with the other businesses in the new Paper and Industrial Converted Products segment and our injection molded plastics business could become part of the Consumer Packaging segment, which already included our other plastics businesses. Moving on to slide 4, you can see that this morning we reported earnings under generally accepted accounting principles for the quarter of $0.29 per diluted share and base EPS of $0.46 per share. The difference between GAAP and base is due to pre-tax restructuring expenses of $13 million or $0.10 per share after tax. These related primarily to additional charges of previously announced actions, including several plant closures.
Acquisition related costs of $9.3 million were related to $6.3 million of fees most of which were directly related to the Tegrant acquisition and $3 million associated with the impact of purchase accounting on the inventory step-up. Under U.S. GAAP, inventory at the time of acquisition is written up to fair value with selling costs, so very little is earned by the purchaser on the acquired inventory. Given this is a one-time cost and distorts the operational run rate, as we have previously disclosed, we have excluded this impact from base earning, but the after-tax impact of the fees and inventory write-off was $0.06 per share.We had a $3 million write-off of a deferred tax asset related to a legal entity in Canada association with the decision to close a plant and transfer some of the business into the U.S. But we also had 4 million in insurance recovery, or $0.03 after tax, related to fixed assets that were destroyed by a fire in 2010, and we’ve excluded this from base earnings. So base ETFs of $0.46 per share is in the middle of the range we communicated with our preliminary earnings release two weeks ago, but short of the guidance we had originally provided for the quarter of $0.59 to $0.63, prior to our preliminary release. The shortfall, as compared to the original guidance was due to a significant falloff in activity in the industrial businesses in the latter part of the quarter, and the higher effective tax rate. The results were also below last year's $0.59. I will now walk through our base P&L summary found on slide 5, but before I go any further through the numbers, I will mention that the 2011 fourth quarter included six fewer accounting days than that of 2010, simply offsetting the six additional days we had in the first quarter of this year. Read the rest of this transcript for free on seekingalpha.com