S O N O C O 2 0 1 8 A N N U A L R E P O R T
120
Years
of
Sonoco
Strong
A B O U T T H E C O V E R
STRENGTH TAKES MANY FORMS.
This year, Sonoco showed the strength to rise from
a literal disaster: a hurricane that caused the worst
flooding to impact our business in our company’s
120-year history. The damage was significant, but
the recovery was remarkable. Through the hard
work of hundreds of people, we were able to
resume full operations several weeks earlier than
scheduled.
Meanwhile, 2018 tested Sonoco through
accelerating inflation, tariffs, the threat of escalating
trade wars, and the impact of economic and social
change around the world. Despite these
considerable headwinds, our Company
produced extremely strong results
in 2018, including record top-line,
bottom-line and cash flow results,
while further strengthening our
balance sheet. For the second
consecutive year, Sonoco was
selected for Fortune’s World’s Most
Admired Companies
in the packaging/contain-
ers sector, and named first in
its industry.
Forward-looking Statements
Statements included in this Report 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. Additional
This is what we mean when we say we’re Sonoco
information about “forward-looking statements” is available
Strong. And as we reflect on how our Company
has developed and strengthened over the past
120 years, we plan to build an even stronger
company over the next 120.
on page 3 of the enclosed Form 10-K.
Pursuant to the requirements of Regulation G, the Company
has provided definitions of non-GAAP measures discussed
in this report along with reconciliations of those measures to
the most closely related GAAP measure on page 19 of the
enclosed Form 10-K and on the Company’s website at
www.sonoco.com.
F I N A N C I A L H I G H L I G H T S
Comparative Highlights
Comparative Highlights
Dollars and shares in thousands except per share data. Years ended December 31.
Net sales
Net sales
Gross profit11
Gross profit
2018
2017
$5,390,938
$5,390,938
$5,036,650
$5,036,650
1,041,006
1,041,006
958,652
958,652
Net income attributable to Sonoco
Net income attributable to Sonoco
313,560
313,560
175,345
175,345
Total assets
Total assets
Return on net assets22
Return on net assets
Return on total equity
Diluted earnings per share:
Diluted earnings per share:
GAAP net income
GAAP net income
Base earnings
Base earnings33
Ending common stock market price
Ending common stock market price
Number of employees
Number of employees
4,583,465
4,583,465
4,557,721
4,557,721
10.3%
12.6%
3.103.10
3.373.37
53.1353.13
23,000
23,000
7.1%
10.5%
1.741.74
2.792.79
53.1453.14
21,000
21,000
64,000
64,000
Number of common shareholder accounts
Number of common shareholder accounts
86,000
86,000
1 Gross profit: Net sales minus cost of sales
2 Return on net assets: Net income plus after-tax net interest, divided by the sum of
average total assets, minus average cash, minus average current liabilities, plus
average short-term debt
3 Net income adjusted for certain items further detailed on page 19 of the Form 10-K
Net Sales
billions of dollars
Net Income Attributable to Sonoco
millions of dollars
GAAP Diluted Earnings per Share
dollars
5.02
4.96
4.78
5.04
5.39
286.4
250.1
225.9
313.6
175.3
2.81
2.44
2.19
3.10
1.74
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Table of Contents
Table of Contents
1 Financial Highlights
2 Sonoco at a Glance
4 Letter to Shareholders
9 Consumer Strategy
12
Industrial Strategy
13 Conitex Acquisition
14 Sonoco Strong
15 People, Culture and Values
16 Board of Directors
18 Corporate Officers
Form 10-K
19 Shareholder Return Comparison
20 Selected Eleven-year Financial Data
22
Investor Information
23 General Information
1
SONOCO2018ANNUALREPORT
S O N O C O A T A G L A N C E
Founded in 1899, Sonoco is a global provider of a variety of
Founded in 1899,
consumer packaging, industrial products, protective packaging
and displays and packaging supply chain services.
Consumer Packaging
Consumer Packaging
Net Sales
billions of dollars
1.96
2.12
2.04
2.12
2.36
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
Consumer Packaging
Operating Profit
millions of dollars
239
246
256
225
203
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
Products
and Services
Round and shaped rigid
paperboard containers,
fiber and plastic caulk/
adhesive tubes;
aluminum, steel and
peelable membrane
easy-open closures for
composite and metal cans;
thermoformed plastic cups, trays and
bowls; injection-molded containers, high-barrier films, lidding
films, modified atmosphere packaging, printed flexible packaging,
rotogravure cylinder engraving, global brand management, labels
Markets
Fresh and natural food, stacked chips, snacks and nuts, coffee, hard-
baked goods, processed foods, confection, powdered beverages, pet
treats, frozen and refrigerated food, dairy, adhesives and sealants
Display and Packaging
Display and Packaging
Net Sales
millions of dollars
667
606
520
508
592
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
Display and Packaging
Operating Profit
millions of dollars
14.9
13.3
10.7
11.1
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
2.6
8
1
0
2
Products
and Services
Point-of-purchase displays,
retail packaging, including
blister packaging; custom
packaging; fulfillment,
primary package filling,
supply chain management;
paperboard specialties
Markets
Electronics, snacks and
nuts, home and garden,
pet treats, medical/
pharmaceutical, confection,
personal care, food,
cosmetics and fragrances,
office supplies, toys
2
SONOCO2018ANNUALREPORT S O N O C O A T A G L A N C E
With annualized net sales of approximately $5.4 billion,
With annualized net sales of approximately $5.4 billion,
Sonoco has 23,000 employees working in more than 300 operations
in 36 countries, serving many of the world’s best-known brands.
Paper and Industrial Converted Products
Paper and Industrial Converted
Products Net Sales
billions of dollars
1.90
1.73
1.69
1.87
1.91
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1
0
2
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1
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2
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1
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1
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1
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Paper and Industrial Converted
Products Operating Profit
millions of dollars
166
135
136
162
211
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1
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2
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1
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2
6
1
0
2
7
1
0
2
8
1
0
2
Products
and Services
Recycled paperboard,
chipboard, tubeboard,
lightweight corestock,
boxboard, linerboard,
edgeboard, corrugating
medium, specialty
paper grades; paper-
board tubes, cores and
cones; adhesives, molded
plugs, reels; flexible intermediate bulk containers and
bulk bags; collection, processing and recycling of old corrugated containers,
paper, plastics, metal, glass and other recyclable materials
Markets
Converted paperboard, construction, home goods, recycling, plastic,
films, paper mills, shipping and storage, tape and label, textiles, wire
and cable, adhesives
Protective Solutions
Protective Solutions
Net Sales
millions of dollars
485
506
526
539
528
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1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
Protective Solutions
Operating Profit
millions of dollars
52
46
42
43
34
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
Products
and Services
Custom-engineered,
paperboard-based
and expanded foam
protective packaging
and components;
temperature-
assured pack-
aging solutions
Markets
Appliances and electronics, automotive, frozen and refrigerated
foods, medical/pharmaceutical, home goods, office furnishings,
promotional and palletized distribution, fitness equipment, HVAC
3
SONOCO2018ANNUALREPORT T O O U R S H A R E H O L D E R S
2018 WAS A YEAR
THAT TESTED THE
STRENGTH AND
RESOLVE OF OUR
COMPANY both
figuratively and literally.
We faced hurricanes,
accelerating inflation,
tariffs, the threat of
escalating trade wars,
and the impact of
economic and social change
in countries around the world.
Rob Tiede, President and
Rob Tiede, President and
Chief Executive Officer
Chief Executive Officer
are confident in the
foundational work we
have done in this area
and believe it will help
move us forward in new
and better ways.
During 2018, Sonoco
returned $176.0 million
in cash to shareholders,
primarily through
dividends. Over the past
five years, Sonoco has
Despite those considerable headwinds, our Company
returned $951.2 million to shareholders in the form of
produced extremely strong results in 2018, including
dividends and share repurchases. Following a tradition of
record top-line, bottom-line and cash flow results, while
raising our dividend that dates back to 1925, we raised
further strengthening our balance sheet. We believe this
our common stock dividend in 2018 by 5.1% to $1.64
performance serves to demonstrate how Sonoco’s strong,
per share, on an annualized basis. And we provided a
diversified portfolio has allowed us to weather storms on
3.1% total return to shareholders, which significantly
multiple fronts, while continuing to produce consistent
outperformed the Dow Jones Container and Packaging
earnings improvement and delivering value to our
Index, which declined 18.9% over the same period.
shareholders over the past several years.
2018 RESULTS
The shifting consumer and industrial landscape, driven
2018 net sales were a record $5.39 billion, up $354.3 million
by various forms of disruption, both technological and
compared with $5.04 billion in 2017. Sales grew 7.0% for
societal, sharpened our focus on better understanding
the year due to acquisitions; higher selling prices
consumer trends, better understanding the needs of our
implemented to recover rising material, freight and
customers, and better leveraging data to drive decision
operating costs; and modest volume/mix growth.
making. We also began rethinking how we realize and
capture value based on the products
and services we deliver to our
customers to help them succeed.
Dividends and
Stock Repurchases
millions of dollars
Altogether, this led to a very systematic
approach to Getting It Right: the right
216.6
253.1
products, the right markets, the right
145.9
176.0
159.5
GAAP net income attributable to
Sonoco was a record $313.6 million
or $3.10 per diluted share, compared
with $175.3 million or $1.74 per diluted
share in 2017. GAAP earnings in 2018
included after-tax charges totaling
$27.1 million, or $0.27 per diluted share,
largely related to restructuring and
processes, the right geographies, the
right technologies, and the right
structure. While not complete, we
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dividends
stock repurchases
asset impairment charges, acquisition
SONOCO2018ANNUALREPORT
T O O U R S H A R E H O L D E R S
Base Earnings per Diluted Share
dollars
costs and the effect of income tax rate
changes on deferred tax items. GAAP
earnings in 2017 were impacted
$1.05 per diluted share, after tax, due
primarily to the impact of the U.S. Jobs
2.41
2.51
2.72
2.79
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3.37
BUSINESS SEGMENT
PERFORMANCE
Overall performance in our
Consumer Packaging segment
was choppy in 2018, with a solid
and Tax Cut Act, as well as restructuring expenses,
performance in our Global Rigid Paper Containers
acquisition costs and other one-time items.
business more than offset by weak results in our Rigid
Plastic and Flexible packaging businesses. Acquisitions
Base earnings in 2018 were a record $340.6 million, or
helped drive a 11.1% increase in sales to $2.36 billion.
$3.37 per diluted share, compared with $281.8 million,
In a continued focus to capture growth in
or $2.79 per diluted share, in 2017, a 20.9% and 20.7%
the fast-growing fresh category in the
increase, respectively. 2018 gross profit was a record
perimeter of the store, we acquired
$1,041.0 million, compared with $958.7 million in 2017.
Highland Packaging Solutions, a
Gross profit as a percentage of sales was 19.3%,
Plant City, Fla.-based manufacturer
compared with 19.0% in 2017. GAAP selling, general
of thermoformed packaging for fresh
and administrative expenses increased $55.5 million,
fruits, vegetables and eggs. We also
driven by acquisitions and increased management
acquired a rigid paper container
incentives. Base operating profit for 2018 increased
operation in Spain.
6.4% to $491.8 million, due primarily to a positive price/
cost relationship and acquisitions.
Consumer Packaging operating profit
Cash Flow From
Operations and
Free Cash Flow
millions of dollars
589.9
348.3
260.2
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1
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2
8
1
0
11.5 2
cash flow from operations
free cash flow
declined 12% to $224.5 million, largely driven by
For 2018, cash generated from operations was a record
volume declines in Global Plastics and the negative
$589.9 million, compared with $348.3 million in 2017, an
impact of changes in mix of products in Rigid Paper
increase of $241.6 million. In addition to the $138.3 million
Containers. These volume declines led to manufacturing
increase in GAAP net income, operational cash flow also
inefficiencies. We are in the process of refocusing certain
benefited from lower pension and benefit plan expenses
operations and are optimistic that we will be able to
and contributions, while working capital provided
improve manufacturing performance and better leverage
$27.7 million in 2018 compared to consuming
the fixed-cost profile.
$55.6 million in 2017. Capital expenditures
and cash dividends were $168.3 million,
net of $24 million in asset sales, and
$161.4 million, respectively, during 2018.
This compares with $183.6 million and
$153.1 million, respectively, in 2017.
Free cash flow, after dividends, for
2018 was $260.2 million, compared
with $11.5 million in the prior year.
2018 Sales by
Operating Segment
percent of sales
We continue to see demand growth, especially
Paper and Industrial
Converted Products
35.4
Display
and Packaging
11
Consumer
Packaging
43.8
Protective
Solutions
9.8
in emerging markets, for Rigid Paper
Containers. To capture this demand, we
have implemented aggressive growth
plans for 2019, with new operations
starting up in South Africa, Brazil and
Southeast Asia, along with other
growth projects in the United States
and Europe.
5
SONOCO2018ANNUALREPORT
T O O U R S H A R E H O L D E R S
Our Paper and Industrial Converted Products segment
BETTER PACKAGING. BETTER LIFE.
had a very strong performance, growing net sales by
OUR PURPOSE DRIVES OUR COMMITMENT
2.4% to $1.91 billion, due primarily to acquisitions. In
TO A MORE SUSTAINABLE WORLD
October, we purchased the remaining 70% interest
Sonoco is committed to creating sustainable products,
in the Conitex Sonoco joint venture from Texpack, Inc.
services and programs for our customers, employees
Conitex is a vertically integrated manufacturer of
and the communities that support our corporate purpose
paper-based cones and tubes used in the textile
of Better Packaging. Better Life. We believe sustainable
industry, with two-thirds of its sales in Asia. We continue
packaging provides a key resource in solving the global
to see growth opportunities in our industrial products
food waste crisis by offering superior food protection,
segment, especially in Asia, as well as integration
extending shelf-life and expanding access to fresh foods.
opportunities to drive productivity and margin
In 2018, we committed to achieving more sustainable use
improvement. Segment operating profit reached a
and increased recyclability of our packaging.
record $211.1 million, up 31% from 2017, due primarily to
a positive price/cost relationship as we benefited from
OUR 2025 SUSTAINABILITY COMMITMENTS
strong global paper markets and commercial excellence
initiatives. Higher operating costs only partially offset
these positive factors.
We are extremely pleased with the turnaround in our
Display and Packaging segment as sales grew 16.5%
and operating profit reached $13.3 million, up from
$2.6 million in 2017. The earnings improvement was
largely due to increased volumes, both domestically
and internationally, which were offset by continued
losses at a new retail packaging fulfillment center near
Atlanta, which we exited in the third quarter.
Protective Solutions sales declined 2% to $527.7 million,
while operating profit rose slightly to $42.9 million. Our
temperature-assured packaging business performed
very well due to volume growth; however, our consumer
and automotive molded foam business continues to be
challenged with sluggish volume, which impacted
manufacturing efficiency and productivity.
• We will increase, by weight, the amount
we recycle, or cause to be recycled, from 75% to
85%, relative to the volume of product we put into
the global marketplace
• We are committed to increasing the use
of post-consumer recycled resins in our plastic
packaging from 19% to 25%
• We will ensure that approximately 75%
of our global rigid plastic packaging is capable
of making the relevant on-package recyclable claim
• We will not utilize resin additives that
purport to degrade in landfills or waterways by
simply breaking up into smaller pieces
• We will ensure all of our production
facilities utilizing plastic pellets have systems to
prevent environmental discharges of pellets into the
waterways.
6
SONOCO2018ANNUALREPORT T O O U R S H A R E H O L D E R S
Mission:
Become the acknowledged leader in high-quality,
innovative, sustainable packaging solutions that
“Satisfy the Customer”
Guiding Principle
Be a GREAT company for our
stakeholders through an
unwavering belief that “People
Build Businesses” by doing the
right thing
Differentiating
Capabilities
INNOVATION
• • Capture consumer and market
insights to drive creativity
• • Leverage i6® to create growth
and capture value
• • Embrace our material diversity
to create the best solutions
OPERATIONAL EXCELLENCE
• • Utilize SPS to optimize
efficiency, productivity and
quality
• • Leverage automation and
robotics to reduce unit cost to
produce
Financial
Priorities
• • Target average annual
double-digit total return to
shareholders
• • Sales of $6 to $8 billion –
Organic volume growth
above packaging industry
average
• • Base EBITDA margin
to 16%
• • Return on invested
capital in top quartile of
packaging industry –
RONAE = 11% to 12%
• • Maintain investment
grade credit rating
Business Priorities
• • Maximize sustainable cash
flow from operations
• • Grow consumer packaging
businesses globally and
industrial businesses in
emerging markets
• • Create the optimal structure to
serve the correct customers
• • Optimize the portfolio
Key Focus Areas
Key Focus Areas
Safety
Create a zero-injury
Create a zero-injury
environment
environment
Customer Satisfaction
• • Value-creating solutions
Value-creating solutions
• • On time and to
On time and to
specification
specification
• • Voice of Customer
Voice of Customer
Commercial Excellence
• • Realizing our value to
Realizing our value to
customers
customers
• • Share/Profit optimization
Share/Profit optimization
Operational Excellence
• • Reduce unit cost to
Reduce unit cost to
produce (Sonoco
produce (Sonoco
Performance System)
Performance System)
• • Optimal supply chain
Optimal supply chain
Maximize Cash Flow
and Deployment
• • Working capital management
Working capital management
• • Optimize capital investments
Optimize capital investments
• • Grow dividends
Grow dividends
• • Acquisitions
Acquisitions
• • Share repurchases
Share repurchases
People
• • Talented
Talented
• • Engaged
Engaged
• • Aligned
Aligned
7
SONOCO2018ANNUALREPORT T O O U R S H A R E H O L D E R S
BUILDING A FOUNDATION
FOR THE NEXT 120 YEARS
Sonoco celebrates our 120th anni-
versary this year, and we remain
confident that our people, products
Gross Profit
millions of dollars
912
943
946
959
1,041
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2
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2
growth in cash flow from operations
and free cash flow by managing
working capital, which will allow us
to continue to invest in growing our
business and returning cash to
and portfolio have us well-positioned to compete in an
shareholders through consistently growing dividends.
environment that is changing rapidly—one that is driven
by shifts in technology, commerce, consumer behavior,
Looking to 2019, we remain confident in our strategy of
demographics, public policy and emerging markets.
capitalizing on the growth of trends around fresh and
natural products, convenience, on-the-go snacking,
Our strategy moving forward is based on three areas of
portion control and e-commerce. By combining
focus: driving profitable growth, improving margins and
commercial excellence with operational excellence, we
consistently growing cash flow from operations and free
believe we can improve operating performance and
cash flow. We will drive profitable growth by analyzing
margins in our Consumer Packaging segment, particularly
macro-economic trends, while conducting a rigorous
in our Rigid Plastic and Flexible packaging businesses.
review of our own capabilities and operations, then
In our Paper and Industrial Converted Products segment,
aligning what we learn to help us develop new products,
we will continue to build upon the success we achieved
new markets and new customers.
in 2018 by expanding our already successful operating
and commercial excellence initiatives around the globe.
In addition, we are working to improve margins by
The turnaround in our Display and Packaging segment is
implementing new processes and systems, including
expected to continue, and we will continue to aggressively
commercial excellence initiatives, which are allowing us
pursue targeted growth opportunities and cost reduction
to better capture the value our products and services
actions in our Protective Solutions segment. Finally, we
deliver. New operational excellence systems are focused
will continue to simplify our structure, processes and
on reducing the unit cost to produce in our plants; along
portfolio to ensure we drive consistent earnings growth
with driving procurement productivity and organizational
and improve returns to our shareholders.
efficiency, which help reduce operating costs and offset
inflation. Finally, we are focused on driving consistent
We are excited as we build the foundation for Sonoco’s
next 120 years, and we thank you for entrusting us with
your investment.
Comparative
Total Shareholder Return
percent
Sonoco
Dow Jones U.S. Packaging and Container Index
223.0 212.5
R
A
E
Y
3.11
R
A
E
Y
3
42.4
15.6
R
A
E
Y
5
48.4
26.9
R
A
E
Y
0
1
(18.5)
8
Robert C. Tiede
President and Chief Executive Officer
March 4, 2019
SONOCO2018ANNUALREPORT
C O N S U M E R S T R A T E G Y
The strength of Sonoco’s consumer growth strategy hinges on our
The strength of Sonoco’s consumer growth strategy
responsiveness to key consumer macro-trends, such as shifting demographics,
digital disruption, health and wellness and social consciousness.
Above: Sonoco now provides APASS
Above: Sonoco now provides APASS
services directly to vendors, sellers and
services directly to vendors, sellers and
manufacturers, partnering with brands to
manufacturers, partnering with brands to
design and certify packaging that meets
design and certify packaging that meets
Amazon’s unique requirements and helps
Amazon’s unique requirements and helps
companies protect and sell products more
companies protect and sell products more
cost effectively.
cost effectively.
Right: Millennial nostalgia drives popularity
Right: Millennial nostalgia drives popularity
and commercial success for many consumer
and commercial success for many consumer
products, including Planters
products, including Planters
Cheez Balls, marketed
Cheez Balls, marketed
in Sonoco’s “Resealable
in Sonoco’s “Resealable
canister so you can pretend
canister so you can pretend
like you aren’t going to open
like you aren’t going to open
it again 2 seconds later.”
it again 2 seconds later.”
IN A RAPIDLY CHANGING RETAIL LAND-
SCAPE, the key to organic growth is to anticipate shifts
in consumer buying behavior. As our customers continu-
ally evolve to meet changing consumer needs, we’re the
nimble packaging partner they rely on to adapt to new
behavioral trends.
DEMOGRAPHIC SHIFTS
Consumer profiles are changing. As Baby Boomers age,
we’re responding with simple solutions like packaging
that is easy to open for those with arthritis or other age-
related conditions that impede strength and flexibility.
Meanwhile, the Millennial generation is searching for
products and packaging that support convenience,
speed and on-the-go solutions as they lead a fast-
paced lifestyle and balance careers with personal and
9
SONOCO2018ANNUALREPORT C O N S U M E R S T R A T E G Y
Our PET recycling programs convert
Our PET recycling programs
old bottles, clamshells and other products
into new clamshell packaging.
In response to this trend,
Sonoco has worked with
Amazon to achieve
Amazon Packaging
Support and Supplier
Network (APASS) certif-
ication. Our design and
testing experience is
especially tailored to help
companies meet Amazon
Prep-Free Packaging,
Ships in Own Container,
Frustration Free
Packaging and Over
Box packaging needs for
medium to heavy bulky
goods that require ship-
ping through e-commerce
channels.
family lives. We’ve responded with peel-and-reseal,
cook-in-package, on-the-go and portion-control
HEALTH AND WELLNESS
With the increased choices that
packaging that helps brands support their customers
e-commerce and global competition
in navigating fast-paced lives.
DIGITAL DISRUPTION
This fast-paced living has dramatically changed the
bring, consumers are increasingly
discerning about healthiness and
freshness. As they search for prod-
ucts with simpler ingredients and
modern shopping experience, with digital shopping
more transparency in labeling and
providing the convenience of easy comparison shop-
communication, packaging must
ping and having a product delivered to the doorstep.
preserve taste, freshness and
In the U.S. alone, e-commerce is a roughly $500 billion
appearance. That’s why we offer a
industry. This means that the consumer’s new
portfolio of transparent packaging
“moment of truth” is opening a box, and the package
solutions that reinforce on-package
inside, in their own home—and protecting a product
claims like natural, organic and
during shipping protects a brand’s reputation.
fresh, while building consumer
Moving forward, global e-commerce
sales are expected to increase 246%
by 2021, to $4.5 trillion.
trust through
transparency
and authenticity.
Right:
Right:
Recloseable
Recloseable
pouches
pouches
help brands
help brands
provide
provide
convenience
convenience
and freshness
and freshness
for on-the-go
for on-the-go
consumers.
consumers.
10
SONOCO2018ANNUALREPORT C O N S U M E R S T R A T E G Y
on Barron’s 100 Most Sustainable
Sonoco was ranked 48thth on Barron’s 100 Most Sustainable
Sonoco was ranked 48
Companies for 2019. Barron’s has compiled this list twice, and Sonoco
Companies for 2019.
is the only packaging company to appear in both of Barron’s rankings.
9
How Sonoco reduces its environmental impact
Sonoco utilizes
Sonoco utilizes
Sonoco recyles,
Sonoco’s Paper
Sonoco’s Paper
Since 2009,
Sonoco has
Sonoco has
1in5
PET bottles
recycled in
California are
converted in
Sonoco plants
22%
recycled content
recycled content
in its resin raw
in its resin raw
material supply
material supply
chain—
chain—
19%
post-consumer
post-consumer
or causes to be
Mills produce
Mills produce
Sonoco has
helped more than
helped more than
recycled, the
equivalent by
weight of
75%
of the product
it places in the
marketplace.
100%
uncoated
uncoated
recycled paper-
recycled paper-
board with
board with
~85%
post-consumer
post-consumer
fiber.
fiber.
reduced
greenhouse gas
emissions by
and water use by
21%
42%
70
customer
customer
facilities achieve
facilities achieve
Zero Waste-to-
Zero Waste-to-
Landfill status
Landfill status
SOCIAL CONSCIOUSNESS
Sustainability is increasingly impor-
business by implementing new PET recycling
programs to recycle approximately 20 million
tant for consumers and for brands—
pounds of PET annually in our clamshell packaging.
in fact, 86% of U.S. consumers now
expect companies to act on social
While we offer several 100% recyclable packaging
and environmental issues. As both
options, they won’t always meet the needs of complex
a supplier and a recycler, we feel
products. That’s why we’re delving deeper into the
the weight of this responsibility.
total environmental impact to develop plant-based
compostable packaging, reduce food waste through
Packaging increasingly comes under
scrutiny as both consumers and
efficient and effective packaging solutions, and even
partner with a company called Harvest CROO, which
brands search for the best ways to
is exploring automated harvesting to significantly
reduce environmental impact. Top of
reduce food waste up-channel. And Sonoco Recycling
everyone’s mind is recycling. Sonoco
has helped more than 70 customer facilities achieve
Our hinged and
Our hinged and
lidded container
lidded container
portfolio offers
portfolio offers
a variety of
a variety of
rigid plastics
rigid plastics
and flexible
and flexible
lidding solutions
lidding solutions
to promote
to promote
operational
operational
efficiency
efficiency
and product
and product
freshness.
freshness.
has been recycling for a century in
Zero-Waste-to-Landfill status.
order to support our industrial busi-
nesses, and our paper mills produce
Ultimately, Sonoco anticipates, monitors
100% uncoated recycled paper-
and responds to consumer trends to be
board with about 85% post-con-
a true collaborator with our brand
sumer fiber. Moving forward, we’re
customers. Our goal is to address the big
bringing this internal sourcing and
recycling model to our consumer
picture through a multifaceted approach
toward Better Packaging. Better Life.
11
SONOCO2018ANNUALREPORT I N D U S T R I A L S T R A T E G Y
While our industrial businesses can certainly be
While our industrial businesses can certainly be
considered mature, it doesn’t mean we don’t continue to evolve
considered mature,
and bring new ideas and innovations to the industry and our customers.
OUR NEW TRUCORE™ T2™ TECHNOLOGY
GREATLY IMPROVES TORQUE RESIS-
TANCE, while minimizing or eliminating chewout
and spin-out, thereby protecting people and product
quality while dramatically reducing downtime. As one
customer said, “We’ve had cores chew out for 25
In the world of Spandex yarns, time is money.
In the world of Spandex yarns, time is money.
Anything you can do to increase efficiency, through-
Anything you can do to increase efficiency, through-
put and productivity goes straight to our customer’s
put and productivity goes straight to our customer’s
bottom line. When you can improve sustainability,
bottom line. When you can improve sustainability,
it’s even better—and EcoSPAN™ cores do just that.
it’s even better—and EcoSPAN™ cores do just that.
years. We honestly didn’t think there was a solution.
products, creating a much more
When we switched to TruCore tubes from Sonoco,
efficient transfer environment and
25 years of problems were gone, just like that.”
improving operational productivity
and through-put.
The TruCore portfolio also delivers improved straight-
ness and dimensional stability, which improves line
And while traditional Spandex cores
speeds, production efficiency and product quality.
can’t be reclaimed and reused, simply
But our innovation in Tubes and
Cores doesn’t end there. Our
new EcoSPAN™ product uses a
patented, aqueous coating that
gives us the unique capability to cus-
ending up in a landfill, EcoSPAN
cores eliminate the need for addi-
tional film materials on the outer
surface, which makes the core
repulpable. This new recyclable
option is a game-changer for this
tomize the friction performance of the core
market—better for the environment
surface to match the unique requirements of Spandex
and better for our world.
12
SONOCO2018ANNUALREPORT C O N I T E X A C Q U I S I T I O N
We continue to see growth opportunities in our
We continue to see growth opportunities
industrial business, especially as we look to emerging markets
in China and other parts of Asia.
TO HELP US PENETRATE EMERGING
tions in 10 countries, including four
MARKETS IN ASIA, WE ACQUIRED FULL
OWNERSHIP OF CONITEX SONOCO, a joint
venture founded roughly 20 years ago to serve the global
textile industry. Conitex Sonoco is an important addition
to our industrial portfolio, and a key part of our strat-
paper mills and seven cone and tube
converting operations.
With the addition of the new paper
mills, Sonoco will have global
egy to significantly increase our manufacturing
production capacity of more than
capability and more than double our current
two million tons of URB (uncoated
annual sales in the region. We’ve gained
approximately 1,250 employees
across 13 manufacturing loca-
Conitex Sonoco is the world’s largest
Conitex Sonoco is the world’s largest
manufacturer of cones and tubes for the
manufacturer of cones and tubes for the
spun yarn industry, producing approximately
spun yarn industry, producing approximately
1.4 billion units annually.
1.4 billion units annually.
recycled board) annually, which
makes us the clear leader of core
board production and technology.
We see a number of growth
and synergy opportunities as
a result of this acquisition,
including the integration of
Conitex’s paper production
into the Sonoco network.
13
SONOCO2018ANNUALREPORT
S O N O C O S T R O N G
Sonoco experienced one of the worst natural disasters to ever impact our
Sonoco experienced one of the worst natural disasters to ever impact our
operations when Hurricane Florence delivered unprecedented flooding that completely
operations
shut down our largest manufacturing operation in our hometown of Hartsville, S.C.
THE TRUE MEASURE OF
THE HUMAN SPIRIT IS
ON DISPLAY when you see
the selfless actions of individuals
in times of crisis. When Hurricane
Florence made landfall in the
Carolinas on September 14, the
storm dumped 11 inches of rain
at Sonoco headquarters in
Hartsville, S.C., and eventually
brought substantial flooding to
our largest manufacturing facility.
However, Florence was no
match for the determination and
commitment of Sonoco associates.
Contractors and hundreds of
associates worked around the
clock to bring operations back
online weeks ahead of schedule.
Above: Dramatic pictures
Above: Dramatic pictures
showed the extent of the flooding
showed the extent of the flooding
after Hurricane Florence passed
after Hurricane Florence passed
over South Carolina.
over South Carolina.
Right: Zach Simmons, a winder
Right: Zach Simmons, a winder
helper on the No. 9 Machine,
helper on the No. 9 Machine,
at the Hartsville Mill Complex.
at the Hartsville Mill Complex.
Far right: After 11 inches of
Far right: After 11 inches of
rain, plus more than 25 inches
rain, plus more than 25 inches
of water moving down from
of water moving down from
North Carolina, over 500 motors
North Carolina, over 500 motors
were underwater.
were underwater.
14
SONOCO2018ANNUALREPORT
P E O P L E , C U L T U R E A N D V A L U E S
At Sonoco, we believe ‘people build businesses by doing the right thing.’
At Sonoco, we believe ‘people build businesses by doing the right thing.’
Our associates support many initiatives in the communities where they live and work,
including those focused on education, health and wellness, and arts and culture.
PAWS MENTORING
PROGRAM
In 2018, Sonoco Cares partnered
with West Hartsville Elementary
to launch the PAWS (Positive
Advocates Working with Students)
mentor program to provide positive,
professional role models for stu-
dents, supporting child develop-
ment in the areas of language,
cognitive and social skills. Regular
interaction with students enables
mentors to support development,
integrate learning, and as a result,
potentially improve student aca-
demic and behavioral outcomes.
BE THE ONE DIVERSITY
AND UNITY SUMMIT
In late 2018, the Sonoco Diversity
and Unity Council hosted the Be
The One Summit. Sonoco employ-
ees came together to discuss diver-
sity initiatives and ways to develop
a culture of inclusivity in their own
workplaces. After all, diversity and
inclusion lead to more innovation,
more opportunities for all, better
access to talent and better busi-
ness performance. Diverse views
make for better decisions and
drive a high-performance culture.
EDVENTURE
In both 2017 and 2018, Sonoco
committed $50,000 to EdVenture
Hartsville, a children’s museum
offering programs that enhance
learning through hands-on activity.
Above: Sonoco associates
Above: Sonoco associates
regularly mentor 30
regularly mentor 30
students each week
students each week
at West Hartsville
at West Hartsville
Elementary School.
Elementary School.
Left: Programs at
Left: Programs at
EdVenture are dedicated
EdVenture are dedicated
to creating lifelong
to creating lifelong
learners through museum
learners through museum
experiences, afterschool
experiences, afterschool
programming and camps.
programming and camps.
15
SONOCO2018ANNUALREPORT
B O A R D O F D I R E C T O R S
Harris E. DeLoach Jr., 74
Executive Chairman since March 2013.
Formerly Chairman of the Board and
Chief Executive Officer 2010-13 and
Chairman of the Board, President and
Chief Executive Officer 2005-10.
Served on the Board since 1998.
Member of the Executive committee.
Retiring April of 2019.
Harry A. Cockrell, 69
Managing Director of Pacific Tiger
Group Limited (a Hong Kong-based
privately held investment enterprise
with a wide range of businesses and
assets across the Asia/Pacific region)
since 2005. Formerly an investment
committee member of Asian
Infrastructure Fund. Served on the
Board since 2013. Member of the
Employee and Public Responsibility
and Financial Policy committees.
Dr. Pamela L. Davies, 62
President of Queens University of
Charlotte, Charlotte, N.C., since 2002.
Formerly Dean of the McColl School of
Business at Queens University of
Charlotte 2000-02. Served on the Board
since 2004. Chair of the Employee and
Public Responsibility committee and
member of the Executive Compensation,
and Corporate Governance and
Nominating committees.
Theresa J. Drew, 61
Managing Partner of the Carolinas
practice of Deloitte, Charlotte, N.C., since
2011. Formerly managing partner of
Deloitte’s San Diego practice 2001-2010
and various roles In the Phoenix office of
Deloitte 1979-2000. Board member
since 2018. Member of the Employee
and Public responsibility and Financial
Policy committees.
Philippe Guillemot, 59
Group Chief Executive Officer of Elior
Group (catering and support services
industry), Paris, France, since 2017.
Formerly chief operating officer of
Alcatel-Lucent SA, Boulogne-
Billancourt, France, from 2013-16.
Served on the Board since 2017.
Member of the Audit and Employee
and Public Responsibility committees.
John R. Haley, 57
Chief Executive Officer, Gosiger, Inc.
(privately owned distributor of computer-
controlled machine tools and factory
automation systems), Dayton, Ohio,
since 2010. Served on the Board since
2011. Chair of the Financial Policy
committee and member of the
Executive and Employee and Public
Responsibility committees. Serves as
Chairman-elect.
16
SONOCO2018ANNUALREPORT B O A R D O F D I R E C T O R S
Blythe J. McGarvie, 62
Taught accounting at Harvard Business
School in the full-time MBA program
2012-14. Served as Chief Executive
Officer of Leadership for International
Finance, LLC (an advisory firm offering
tailor-made consulting services and
leadership seminars) from 2003-12.
Elected to the Board in 2014. Member
of the Audit, Compensation, and
Financial Policy committees.
James M. Micali, 71
Member and limited partner of Azalea
Fund III since 2008, and Azalea Fund IV
since 2014, of Azalea Capital, LLC
(private equity firm) in Greenville, S.C.
Formerly “of Counsel” with Ogletree
Deakins LLC (law firm) in Greenville,
S.C., 2008-11; Chairman and President,
Michelin North America, Inc. 1996-2008.
Served on the Board since 2003. Lead
Director since February 2012. Chair
of the Corporate Governance and
Nominating committee and member of
the Executive, Executive Compensation,
and Financial Policy committees.
Marc D. Oken, 72
Founder and partner of Falfurrias
Capital Partners (private equity firm),
Charlotte, N.C., since 2006. Formerly
held executive officer positions at Bank
of America Corporation 1989-2006,
most recently as Chief Financial Officer;
partner at Price Waterhouse 1976-89; a
fellow with the Securities and Exchange
Commission 1981-83. Served on the
Board since 2006. Chair of the Executive
Compensation committee and member
of the Audit, Corporate Governance and
Nominating, and Executive committees.
Robert C. Tiede, 60
President and Chief Executive Officer
since April 2018. Previously Executive
Vice President and Chief Operating
Officer from 2017 to 2018; Senior Vice
President, Global Consumer Packaging
and Services, Protective Solutions and
Reels from 2015 to 2017; Senior Vice
President, Global Consumer Packaging
and Services from 2013 to 2015. Served
on the board since 2018. Member of
the Executive committee.
Sundaram Nagarajan, 56
Executive Vice President of Automotive
OEM of Illinois Tool Works, Inc. (ITW)
(a Fortune 200 global diversified
industrial manufacturer of value-added
consumables and specialty equipment
with related service businesses)
Glenview, Ill., since 2014. Formerly
Executive Vice President of Welding
2010-14. Elected to the Board in 2015.
Member of the Audit, Compensation,
and Employee and Public Responsibility
committees.
Thomas E. Whiddon, 66
Retired. Former Advisory Director of
Berkshire Partners, LLC (private equity
firm), Boston, Mass., 2005-13. Executive
Vice President, Logistics and Tech-
nology of Lowe’s Companies, Inc. 2000-
03; Executive Vice President and Chief
Financial Officer of Lowe’s 1996-2000.
Served on the Board since 2001. Chair
of the Audit committee and member of
the Corporate Governance and
Nominating, Executive Compensation,
and Financial Policy committees.
17
Standing, from left: Tom Whiddon,
Standing, from left: Tom Whiddon,
Sundaram Nagarajan, Theresa
Sundaram Nagarajan, Theresa
Drew, Harry Cockrell, Harris
Drew, Harry Cockrell, Harris
DeLoach, Pamela Davies, Jim
DeLoach, Pamela Davies, Jim
Micali, Rob Tiede, Philippe
Micali, Rob Tiede, Philippe
Guillemot, John Haley, Marc
Guillemot, John Haley, Marc
Oken. Seated, from left: Rich
Oken. Seated, from left: Rich
Kyle, Blythe McGarvie.
Kyle, Blythe McGarvie.
Richard G. Kyle, 53
President and Chief Executive Officer
of The Timken Company (a manu-
facturer of bearings, transmissions,
gear-boxes, motors, lubrication systems
and chain), North Canton, Ohio, since
2014. Formerly Chief Operating Officer
of Bearings and Power Transmissions
Group 2013-14. Elected to the Board in
2015. Member of the Audit, Executive
Compensation, and Financial Policy
committees.
SONOCO2018ANNUALREPORT C O R P O R A T E O F F I C E R S
EXECUTIVE COMMITTEE
Robert C. Tiede, 60
President and CEO since April 2018.
Previously Executive Vice President
and Chief Operating Officer 2017-18.
Joined Sonoco in 2004.
Julie Albrecht, 51
Vice President and Chief Financial Officer
since March 2019. Previously Corporate
Vice President, Treasurer/Assistant
CFO 2017-19. Joined Sonoco in 2017.
R. Howard Coker, 56
Senior Vice President, Global Paper/
Industrial Converted Products since
January 2019. Previously Senior Vice
President, Rigid Paper Containers
and Paper/Engineered Carriers
International 2017-18. Joined Sonoco
in 1985.
Rodger D. Fuller, 57
Senior Vice President, Global Consumer
Packaging, Display and Packaging and
Protective Solutions since January 2019.
Previously Senior Vice President, Paper/
Engineered Carriers U.S./Canada and
Display and Packaging 2017-18. Joined
Sonoco in 1985.
Kevin P. Mahoney, 63
Senior Vice President, Corporate
Planning since 2011. Previously Vice
President, Corporate Planning 2000-11.
Joined Sonoco in 1987.
Roger P. Schrum, 63
Vice President, Investor Relations and
Corporate Affairs since 2009. Previously
Staff Vice President, Investor Relations
and Corporate Affairs 2005-09. Joined
Sonoco in 2005.
John M. Florence, 40
Vice President, General Counsel
and Secretary since 2016. Previously
Corporate Attorney 2015-16. Joined
Sonoco in 2015.
Marcy J. Thompson, 57
Vice President, Marketing and
Innovation since 2013. Previously Vice
President, Rigid Paper N.A. 2011-13.
Joined Sonoco in 2006.
From left: Marcy Thompson,
From left: Marcy Thompson,
Howard Coker, Rob Tiede, Rodger
Howard Coker, Rob Tiede, Rodger
Fuller, Julie Albrecht, John Florence,
Fuller, Julie Albrecht, John Florence,
Kevin Mahoney, Roger Schrum
Kevin Mahoney, Roger Schrum
OTHER CORPORATE OFFICERS
James A. Harrell III, 57
Vice President, Tubes and Cores, U.S.
and Canada since 2015. Previously
Vice President, Global Tubes and Cores
Operations 2015. Joined Sonoco in 1985.
Adam Wood, 50
Vice President, Paper and Industrial
Converted Products, EMEA, Asia, Australia
and New Zealand since 2015. Previously
Vice President, Global Tubes and Cores
2015. Joined Sonoco in 2003.
RETIRING APRIL 1, 2019
Allan H. McLeland
Vice President, Human
Resources
Barry L. Saunders
Senior Vice President
and former CFO
18
SONOCO2018ANNUALREPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended December 31, 2018
or
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from
to
Commission File No. 001-11261
SONOCO PRODUCTS COMPANY
Incorporated under the laws
of South Carolina
I.R.S. Employer Identification
No. 57-0248420
1 N. Second St.
Hartsville, SC 29550
Telephone: 843/383-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
No par value common stock
Name of exchange on which registered
New York Stock Exchange, LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the
registrant was required to submit such files). Yes È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer È Accelerated filer ‘ Non-accelerated filer ‘ Smaller reporting company ‘Emerging growth company ‘
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ‘ No È
The aggregate market value of voting common stock held by nonaffiliates of the registrant (based on the New York Stock
Exchange closing price) on June 29, 2018, which was the last business day of the registrant’s most recently completed second fiscal
quarter, was $5,137,386,083. Registrant does not (and did not at June 29, 2018) have any non-voting common stock outstanding.
As of February 15, 2019, there were 99,911,654 shares of no par value common stock outstanding.
Documents Incorporated by Reference
Portions of the Proxy Statement for the annual meeting of shareholders to be held on April 17, 2019, which statement shall be
filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates, are
incorporated by reference in Part III.
T A B L E O F C O N T E N T S
Page
Part I
5
Business ............................................................................................................................... ......................................
Item 1.
8
Item 1A. Risk Factors ............................................................................................................................... ................................
Item 1B. Unresolved Staff Comments ............................................................................................................................... .... 16
Properties ............................................................................................................................... .................................... 16
Item 2.
Item 3.
Legal Proceedings ............................................................................................................................... ..................... 16
Mine Safety Disclosures ............................................................................................................................... ............ 16
Item 4.
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities............................................................................................................................... ..................................... 17
Selected Financial Data ............................................................................................................................... ............ 18
Item 6.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ......................... 18
Item 7A. Quantitative and Qualitative Disclosures about Market Risk .............................................................................. 36
Financial Statements and Supplementary Data ................................................................................................... 36
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....................... 37
Item 9A. Controls and Procedures ............................................................................................................................... .......... 37
Item 9B. Other Information ............................................................................................................................... ....................... 37
Part III
Item 10. Directors, Executive Officers and Corporate Governance.................................................................................. 38
Item 11. Executive Compensation ............................................................................................................................... .......... 38
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .... 38
Item 13. Certain Relationships and Related Transactions, and Director Independence ............................................... 39
Item 14. Principal Accountant Fees and Services ............................................................................................................... 39
Part IV
Item 15. Exhibits and Financial Statement Schedules ........................................................................................................ 40
Form 10-K Summary ............................................................................................................................... ................ 40
Item 16.
2
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K S O N O C O P R O D U C T S C O M P A N Y
Forward-looking statements
Statements included in this Annual Report on Form 10-K
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
“estimate,” “project,” “intend,” “expect,” “believe,”
“consider,” “plan,” “strategy,” “opportunity,”
“commitment,” “target,” “anticipate,” “objective,” “goal,”
“guidance,” “outlook,” “forecast,” “future,” “re-envision,”
“assume,” “will,” “would,” “can,” “could,” “may,” “might,”
“aspires,” “potential,” or the negative thereof, and similar
expressions identify forward-looking statements. Forward-
looking statements include, but are not limited to, state-
ments regarding:
‰ availability and supply of raw materials, and offsetting
high raw material costs, including the impact of potential
changes in tariffs;
‰ improved productivity and cost containment;
‰ improving margins and leveraging strong cash flow and
financial position;
‰ effects of acquisitions and dispositions;
‰ realization of synergies resulting from acquisitions;
‰ costs, timing and effects of restructuring activities;
‰ adequacy and anticipated amounts and uses of cash
flows;
‰ expected amounts of capital spending;
‰ refinancing and repayment of debt;
‰ financial strategies and the results expected of them;
‰ financial results for future periods;
‰ producing improvements in earnings;
‰ profitable sales growth and rates of growth;
‰ market leadership;
‰ research and development spending;
‰ expected impact and costs of resolution of legal proceed-
ings;
‰ extent of, and adequacy of provisions for, environmental
liabilities;
‰ adequacy of income tax provisions, realization of
deferred tax assets, outcomes of uncertain tax issues and
tax rates;
‰ goodwill impairment charges and fair values of reporting
units;
‰ future asset impairment charges and fair values of
assets;
‰ anticipated contributions to pension and postretirement
benefit plans, fair values of plan assets, long-term rates of
return on plan assets, and projected benefit obligations
and payments;
‰ expected impact of implementation of new accounting
pronouncements;
‰ creation of long-term value and returns for shareholders;
‰ continued payment of dividends; and
‰ planned stock repurchases.
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:
‰ availability and pricing of raw materials, energy and
transportation, including the impact of potential changes in
tariffs, and the Company’s ability to pass raw material,
energy and transportation price increases and surcharges
through to customers or otherwise manage these com-
modity pricing risks;
‰ costs of labor;
‰ work stoppages due to labor disputes;
‰ success of new product development, introduction and
sales;
‰ consumer demand for products and changing consumer
preferences;
‰ ability to be the low-cost global leader in customer-
preferred packaging solutions within targeted segments;
‰ competitive pressures, including new product develop-
ment, industry overcapacity, customer and supplier con-
solidation, and changes in competitors’ pricing for
products;
‰ ability to maintain or increase productivity levels, contain
or reduce costs, and maintain positive price/cost relation-
ships;
‰ ability to negotiate or retain contracts with customers,
including in segments with concentration of sales volume;
‰ ability to improve margins and leverage cash flows and
financial position;
‰ continued strength of our paperboard-based tubes and
cores and composite can operations;
‰ ability to manage the mix of business to take advantage
of growing markets while reducing cyclical effects of some
of the Company’s existing businesses on operating
results;
‰ ability to maintain innovative technological market leader-
ship and a reputation for quality;
‰ ability to attract and retain talented and qualified employ-
ees, managers and executives;
‰ ability to profitably maintain and grow existing domestic
and international business and market share;
‰ ability to expand geographically and win profitable new
business;
‰ ability to identify and successfully close suitable acquis-
itions at the levels needed to meet growth targets, and
successfully integrate newly acquired businesses into the
Company’s operations;
‰ the costs, timing and results of restructuring activities;
‰ availability of credit to us, our customers and suppliers in
needed amounts and on reasonable terms;
‰ effects of our indebtedness on our cash flow and busi-
ness activities;
‰ fluctuations in interest rates and our borrowing costs;
‰ fluctuations in obligations and earnings of pension and
postretirement benefit plans;
‰ accuracy of assumptions underlying projections of bene-
fit plan obligations and payments, valuation of plan assets,
and projections of long-term rates of return;
‰ cost of employee and retiree medical, health and life
insurance benefits;
S O N O C O 2 0 1 8 A N N U A L R E P O R T
3
SONOCO2018ANNUALREPORT I FORM10-K ‰ resolution of income tax contingencies;
‰ foreign currency exchange rate fluctuations, interest rate
and commodity price risk and the effectiveness of related
hedges;
‰ changes in U.S. and foreign tariffs, tax rates, and tax
laws, regulations, interpretations and implementation
thereof;
‰ challenges and assessments from tax authorities result-
ing from differences in interpretation of tax laws, including
income, sales and use, property, value added, employ-
ment, and other taxes;
‰ accuracy in valuation of deferred tax assets;
‰ accuracy of assumptions underlying projections related
to goodwill impairment testing, and accuracy of manage-
ment’s assessment of goodwill impairment;
‰ accuracy of assumptions underlying fair value measure-
ments, accuracy of management’s assessments of fair
value and fluctuations in fair value;
‰ ability to maintain effective internal controls over financial
reporting;
‰ liability for and anticipated costs of resolution of legal
proceedings;
‰ liability for and anticipated costs of environmental
remediation actions;
‰ effects of environmental laws and regulations;
‰ operational disruptions at our major facilities;
‰ failure or disruptions in our information technologies;
‰ failures of third party transportation providers to deliver
our products to our customers or to deliver raw materials
to us;
‰ substantially lower than normal crop yields;
‰ loss of consumer or investor confidence;
‰ ability to protect our intellectual property rights;
‰ changes in laws and regulations relating to packaging for
food products and foods packaged therein, other actions
and public concerns about products packaged in our
containers, or chemicals or substances used in raw
materials or in the manufacturing process;
‰ changing climate, climate change regulations and green-
house gas effects;
‰ actions of domestic or foreign government agencies and
other changes in laws and regulations affecting the
Company and increased costs of compliance;
‰ international, national and local economic and market
conditions and levels of unemployment; and
‰ economic disruptions resulting from terrorist activities
and natural disasters.
More information about the risks, uncertainties and assump-
tions that may cause actual results to differ materially from
those expressed or forecasted in forward-looking statements is
provided in this Annual Report on Form 10-K under Item 1A—
“Risk Factors” and throughout other sections of this report and
in other reports filed with the Securities and Exchange
Commission. In light of these various risks, uncertainties and
assumptions, the forward-looking events discussed in this
Annual Report on Form 10-K might not occur.
The Company undertakes no obligation to publicly update or
revise forward-looking statements, whether as a result of new
information, future events or otherwise. You are, however,
advised to review any further disclosures we make on related
subjects, and about new or additional risks, uncertainties and
assumptions, in our future filings with the Securities and
Exchange Commission on Forms 10-K, 10-Q and 8-K.
References to our website address
References to our website address and domain names
throughout this Annual Report on Form 10-K are for
informational purposes only, or to fulfill specific disclosure
requirements of the Securities and Exchange Commis-
sion’s rules or the New York Stock Exchange Listing
Standards. These references are not intended to, and do
not, incorporate the contents of our websites by reference
into this Annual Report on Form 10-K.
4
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K P A R T I
Item 1. Business
(a) General development of business –
The Company is a South Carolina corporation founded
in Hartsville, South Carolina, in 1899 as the Southern
Novelty Company. The name was subsequently changed
to Sonoco Products Company (“the Company” or
“Sonoco”). Sonoco is a manufacturer of industrial and
consumer packaging products and a provider of pack-
aging services, with 312 locations in 36 countries.
Information about the Company’s acquisitions, dis-
positions, joint ventures and restructuring activities is pro-
vided in Notes 4 and 5 to the Consolidated Financial
Statements included in Item 8 of this Annual Report on
Form 10-K.
(b) Financial information about segments –
The Company reports its financial results in four report-
able segments – Consumer Packaging, Paper and
Industrial Converted Products, Display and Packaging,
and Protective Solutions. Information about the Compa-
ny’s reportable segments is provided in Note 18 to the
Consolidated Financial Statements included in Item 8 of
this Annual Report on Form 10-K.
(c) Narrative description of business –
Products and Services –
The following discussion outlines the principal products
produced and services provided by the Company.
Consumer Packaging
The Consumer Packaging segment accounted for
approximately 44%, 42% and 43% of the Company’s
consolidated net sales in the years ended December 31,
2018, 2017 and 2016, respectively. The operations in this
segment consist of 86 plants throughout the world. The
products, services and markets of the Consumer Pack-
aging segment are as follow:
Products and Services
Round composite cans,
shaped rigid paperboard
containers; fiber and plastic
caulk/adhesive tubes; alumi-
num, steel and peelable
membrane easy-open clo-
sures for composite and
metal cans; thermoformed
rigid plastic trays, cups and
bowls; injection molded
containers, spools and parts;
high-barrier flexible and form-
ing plastic packaging films,
modified atmosphere pack-
aging, lidding films, printed
flexible packaging; roto-
gravure cylinder engraving,
global brand management
Markets
Stacked chips, snacks,
nuts, cookies, crackers,
other hard-baked goods,
candy, gum, frozen con-
centrate, powdered and
liquid beverages, pow-
dered infant formula, cof-
fee, refrigerated dough,
frozen foods and entrees,
processed foods, fresh
fruits, vegetables,
fresh-cut produce, salads,
fresh-baked goods, eggs,
seafood, poultry, soup,
pasta, dairy, sauces, dips,
condiments, pet food,
meats, cheeses, labels
In 2018, Sonoco’s rigid packaging – paper-based
products – was the Company’s largest revenue-producing
group of products and services, representing approx-
imately 21% of consolidated net sales in the year ended
December 31, 2018. This group comprised 22% and 23%
of consolidated net sales in 2017 and 2016, respectively.
Display and Packaging
The Display and Packaging segment accounted for
approximately 11%, 10% and 11% of the Company’s
consolidated net sales in the years ended December 31,
2018, 2017 and 2016, respectively. The operations in this
segment consist of 23 plants around the world including
the United States, Poland, Mexico and Brazil. The prod-
ucts, services and markets of the Display and Packaging
segment are as follow:
Products and Services
Point-of-purchase displays;
custom packaging; retail
packaging, including printed
backer cards, thermoformed
blisters and heat sealing
equipment; fulfillment; pri-
mary package filling; supply
chain management; paper-
board specialties
Markets
Miscellaneous foods and
beverages, candy, elec-
tronics, personal care,
baby care, cosmetics,
fragrances, hosiery, office
supplies, toys, home and
garden, medical,
over-the-counter drugs,
sporting goods, hospitality
industry, advertising
Paper and Industrial Converted Products
The Paper and Industrial Converted Products segment
accounted for approximately 35%, 37% and 35% of the
Company’s consolidated net sales in the years ended
December 31, 2018, 2017 and 2016, respectively. This
segment serves its markets through 179 plants on five
continents. Sonoco’s paper operations provide the pri-
mary raw material for the Company’s fiber-based pack-
aging. Sonoco uses approximately 62% of the paper it
manufactures, and the remainder is sold to third parties.
This vertical integration strategy is supported by 23 paper
mills with 33 paper machines and 23 recycling facilities
throughout the world. In 2018, Sonoco had the capacity
to manufacture approximately 2.0 million tons of recycled
paperboard. The products, services and markets of the
Paper and Industrial Converted Products segment are as
follow:
Markets
Converted paperboard
products, spiral winders,
construction, plastic films,
flowable products, metal,
paper mills, shipping and
storage, tape and labels,
textiles, wire and cable,
adhesives, municipal,
residential, customers’
manufacturing and dis-
tribution facilities
Products and Services
Recycled paperboard, chip-
board, tubeboard, light-
weight corestock, boxboard,
linerboard, corrugating
medium, edgeboard, spe-
cialty paper grades, adhe-
sives; paperboard tubes and
cores, molded plugs, reels;
collection, processing and
recycling of old corrugated
containers, paper, plastics,
metal, glass and other
recyclable materials; flexible
intermediate bulk containers
and bulk bags
S O N O C O 2 0 1 8 A N N U A L R E P O R T
5
SONOCO2018ANNUALREPORT I FORM10-K In 2018, Sonoco’s tubes and cores products were the
Company’s second largest revenue-producing group of
products, representing approximately 20% of consolidated
net sales in the year ended December 31, 2018. This
group comprised 22% of consolidated net sales in both
2017 and 2016, respectively.
Protective Solutions
The Protective Solutions segment accounted for
approximately 10%, 11%, and 11% of the Company’s
consolidated net sales in the years ended December 31,
2018, 2017 and 2016, respectively. The operations in this
segment consist of 30 plants throughout the world. The
products, services and markets of the Protective Solutions
segment are as follow:
Products and Services
Custom-engineered,
paperboard-based and
expanded foam protective
packaging and components;
temperature-assured pack-
aging
Markets
Consumer electronics,
automotive, appliances,
medical devices,
temperature-sensitive
pharmaceuticals and food,
heating and air condition-
ing, office furnishings, fit-
ness equipment,
promotional and palletized
distribution
Product distribution – Each of the Company’s operat-
ing units has its own sales staff, and maintains direct sales
relationships with its customers. For those customers that
buy from more than one business unit, the Company often
assigns a single representative or team of specialists to
handle that customer’s needs. Some of the units have
service staff at the manufacturing facility that interact
directly with customers. The Paper and Industrial Con-
verted Products segment and certain operations within the
Consumer Packaging segment have customer service
centers located in Hartsville, South Carolina, which are the
main contact points between their North American busi-
ness units and their customers. Divisional sales personnel
also provide sales management, marketing and product
development assistance as needed. Typically, product
distribution is directly from the manufacturing plant to the
customer, but in some cases, product is warehoused in a
mutually advantageous location to be shipped to the cus-
tomer as needed.
Raw materials – The principal raw materials used by
the Company are recovered paper, paperboard, steel,
aluminum and plastic resins. Raw materials are purchased
from a number of outside sources. The Company consid-
ers the supply and availability of raw materials to be
adequate to meet its needs.
Patents, trademarks and related contracts – Most
inventions and product and process innovations are gen-
erated by Sonoco’s development, marketing and engineer-
ing staffs, and are important to the Company’s internal
growth. Patents have been granted on many inventions
created by Sonoco staff in the United States and in many
other countries. Additionally, patents and trade secrets
were acquired as part of several acquisitions over the past
two years, including the acquisitions of the remaining
70 percent interest in Conitex Sonoco (BVI), Ltd., Highland
Packaging Solutions, Clear Lam Packaging, Inc. and
Packaging Holdings, Inc. and subsidiaries, includ-
ing Peninsula Packaging LLC. These patents are managed
globally by a Sonoco intellectual capital management team
through the Company’s subsidiary, Sonoco Development,
Inc. (SDI). SDI globally manages patents, trade secrets,
confidentiality agreements and license agreements. Some
patents have been licensed to other manufacturers.
Sonoco also licenses a few patents from outside compa-
nies and universities. U.S. patents expire after about 20
years, and patents on new innovations replace many of
the abandoned or expired patents. A second intellectual
capital subsidiary of Sonoco, SPC Resources, Inc., glob-
ally manages Sonoco’s trademarks, service marks, copy-
rights and Internet domain names. Most of Sonoco’s
products are marketed worldwide under trademarks such
as Sonoco®, SmartSeal®, Sonotube®, Sealclick®, Sono-
post® and UltraSeal®. Sonoco’s registered web domain
names such as www.sonoco.com and
www.sonotube.com provide information about Sonoco, its
people and its products. Trademarks and domain names
are licensed to outside companies where appropriate.
Seasonality – The Company’s operations are not
seasonal to any significant degree, although the Consumer
Packaging and Display and Packaging segments normally
report slightly higher sales and operating profits in the
second half of the year, when compared with the first half.
Working capital practices – The Company is not
required to carry any significant amounts of inventory to
meet customer requirements or to assure itself continuous
allotment of goods.
Dependence on customers – On an aggregate basis
during 2018, the five largest customers in the Paper and
Industrial Converted Products segment, the Consumer
Packaging segment and the Protective Solutions segment
accounted for approximately 7%, 23% and 28%,
respectively, of each segment’s net sales. The depend-
ence on a few customers in the Display and Packaging
segment is more significant, as the five largest customers
in this segment accounted for approximately 64% of that
segment’s sales.
Sales to the Company’s largest customer represented
4.2% of consolidated revenues in 2018. This concen-
tration of sales volume resulted in a corresponding
concentration of credit, representing approximately 4% of
the Company’s consolidated trade accounts receivable at
December 31, 2018. The Company’s next largest
customer comprised 3.7% of consolidated revenues in
2018.
Backlog – Most customer orders are manufactured
with a lead time of three weeks or less. Therefore, the
amount of backlog orders at December 31, 2018, was not
material. The Company expects all backlog orders at
December 31, 2018, to be shipped during 2019.
Competition – The Company sells its products in
highly competitive markets, which include paper, textile,
film, food, chemical, packaging, construction, and wire
and cable. All of these markets are influenced by the over-
all rate of economic activity and their behavior is principally
driven by supply and demand. Because we operate in
highly competitive markets, we regularly bid for new and
continuing business. Losses and/or awards of business
from our largest customers, customer changes to alter-
native forms of packaging, and the repricing of business,
can have a significant effect on our operating results. The
Company manufactures and sells many of its products
globally. The Company, having operated internationally
6
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K since 1923, considers its ability to serve its customers
worldwide in a timely and consistent manner a competitive
advantage. The Company also believes that its techno-
logical leadership, reputation for quality, and vertical
integration are competitive advantages. Expansion of the
Company’s product lines and global presence is driven by
the rapidly changing needs of its major customers, who
demand high-quality, state-of-the-art, environmentally
compatible packaging, wherever they choose to do busi-
ness. It is important to be a low-cost producer in order to
compete effectively. The Company is constantly focused
on productivity improvements and other cost-reduction
initiatives utilizing the latest in technology.
Compliance with Environmental Laws – Information
regarding compliance with environmental laws is provided
in Item 7 – Management’s Discussion and Analysis of
Financial Condition and Results of Operations under the
caption “Risk Management,” and in Note 16 to the Con-
solidated Financial Statements included in Item 8 of this
Annual Report on Form 10-K.
Number of Employees – Sonoco had approximately
23,000 employees worldwide as of December 31, 2018.
(d) Financial information about geographic areas –
Financial information about geographic areas is pro-
vided in Note 18 to the Consolidated Financial Statements
included in Item 8 of this Annual Report on Form 10-K,
and in the information about market risk in Item 7 – Man-
agement’s Discussion and Analysis of Financial Condition
and Results of Operations under the caption “Risk
Management” of this Annual Report on Form 10-K.
(e) Available information –
The Company electronically files with the Securities and
Exchange Commission (SEC) its annual reports on Form
10-K, its quarterly reports on Form 10-Q, its periodic
reports on Form 8-K, and amendments to those reports
filed or furnished pursuant to Section 13(a) of the Secu-
rities Exchange Act of 1934 (the “1934 Act”), and proxy
materials pursuant to Section 14 of the 1934 Act. The
SEC maintains a site on the Internet, www.sec.gov, that
contains reports, proxy and information statements, and
other information regarding issuers that file electronically
with the SEC. Sonoco also makes its filings available, free
of charge, through its website, www.sonoco.com, as soon
as reasonably practical after the electronic filing of such
material with the SEC.
Executive Officers of the Registrant –
Name
Age
Position and business experience for the past five years
Executive Committee
Robert C. Tiede
Julie C. Albrecht
R. Howard Coker
John M. Florence
Rodger D. Fuller
60
51
56
40
57
President and CEO since April 2018. Previously Vice President and Chief
Operating Officer 2017-2018; Senior Vice President, Global Consumer
Packaging & Services, Protective Solutions & Reels 2015-2017; Senior
Vice President, Global Consumer Packaging and Services 2013-2015; Vice
President, Global Flexible & Packaging Services 2009-2013. Joined
Sonoco in 2004.
Vice President, Treasurer / CFO-Elect since December 2018. Previously
Corporate Vice President, Treasurer/Assistant CFO 2017-2018; Vice
President, Finance and Investor Relations & Treasurer for Esterline Tech-
nologies Corporation, 2015-2017; Finance Director, Customer Service
Aircraft Systems for United Technologies, 2012-2015. Joined Sonoco in
2017.
Senior Vice President, Global Paper and Industrial Converted Products
since January 2019. Previously Senior Vice President, Rigid Paper
Containers and Paper/Engineered Carriers International 2017-2018; Group
Vice President, Global Rigid Paper & Closures and Paper & Industrial
Converted Products, EMEA, Asia, Australia and New Zealand 2015-2017;
Vice President, Global Rigid Paper & Closures 2015; Group Vice President,
Global Rigid Paper & Plastics 2013-2015; Vice President, Global Rigid
Paper & Closures 2011-2013. Joined Sonoco in 1985. Mr. Coker is the
brother-in-law of John R. Haley, one of Sonoco’s directors.
Vice President, General Counsel and Secretary since November 2016.
Previously Corporate Attorney 2015-2016. Joined Sonoco in 2015. Pre-
viously an attorney at Haynsworth Sinkler Boyd, P.A. 2005-2015.
Mr. Florence is the son-in-law of Harris E. DeLoach, Jr., our Executive
Chairman.
Senior Vice President, Global Consumer Packaging, Display and Pack-
aging and Protective Solutions since January 2019. Previously Senior Vice
President, Paper/Engineered Carriers U.S./Canada and Display & Pack-
aging 2017-2018; Group Vice President, Paper & Industrial Converted
Products, Americas 2015-2017; Vice President, Global Primary Materials
Group 2015; Group Vice President, Paper & Industrial Converting N.A.
2013-2015; Vice President, Global Rigid Plastics & Corporate Customers
2011-2013. Joined Sonoco in 1985.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
7
SONOCO2018ANNUALREPORT I FORM10-K Name
Kevin P. Mahoney
Allan H. McLeland
Barry L. Saunders
Roger P. Schrum
Marcy J. Thompson
Other Corporate Officers
James A. Harrell III
Adam Wood
Age
Position and business experience for the past five years
63
52
59
63
57
57
50
Senior Vice President, Corporate Planning since February 2011. Previously
Vice President, Corporate Planning 2000-2011. Joined Sonoco in 1987.
(Retiring effective April 1, 2019.) Vice President, Human Resources since
January 2011. Previously Staff Vice President, Human Resources,
Industrial 2010-2011. Joined Sonoco in 1993.
(Retiring as Chief Financial Officer effective March 1, 2019.) Senior Vice
President and CFO since May 2015. Previously Vice President and Chief
Financial Officer 2011-2015; Vice President, Corporate Controller and
Chief Accounting Officer 2008-2011. Joined Sonoco in 1989.
Vice President, Investor Relations & Corporate Affairs since February 2009.
Previously Staff Vice President, Investor Relations & Corporate Affairs
2005-2009. Joined Sonoco in 2005.
Vice President, Marketing and Innovation since July 2013. Previously Vice
President, Rigid Paper N.A. 2011-2013; Division Vice President & General
Manager, Sonoco Recycling 2009-2011. Joined Sonoco in 2006.
Vice President, Tubes & Cores, U.S. and Canada since December 2015.
Previously Vice President, Global Tubes & Cores Operations February-
December 2015; Vice President, Tubes & Cores N.A. 2012-2015; Vice
President, Industrial Converting Division N.A. 2010-2012. Joined Sonoco in
1985.
Vice President, Paper & Industrial Converted Products, EMEA, Asia,
Australia and New Zealand since December 2015. Previously Vice Presi-
dent, Global Tubes & Cores February-December 2015; Vice President,
Industrial Europe 2014-2015; Division VP/GM, Industrial Europe 2011-
2014. Joined Sonoco in 2003.
Item 1A. Risk factors
We are subject to risks and uncertainties that could
adversely affect our business, consolidated financial con-
dition, results of operations and cash flows, and the trad-
ing price of our securities. These factors could also cause
our actual results to materially differ from the results con-
templated by forward-looking statements we make in this
report, in our other filings with the Securities and
Exchange Commission, and in our public announcements.
You should consider the risk factors described below, as
well as other factors described elsewhere in this report
and in our other filings with the Securities and Exchange
Commission, in evaluating us, our business, and any
investment in our securities. Although these are the most
significant risk factors of which we are currently aware,
they are not the only risk factors to which we are subject.
Additional risk factors not currently known to us, or that
we currently deem immaterial, could also adversely affect
our business operations and financial results.
Changes in domestic and global economic
conditions may have a negative impact on our
business operations and financial results.
Although our business is diversified across various
markets and customers, because of the nature of our
products and services, general economic downturns in the
United States and globally can adversely affect our busi-
ness operations and financial results. Current global eco-
nomic challenges, including the difficulties of the United
States and other countries in dealing with their rising debt
levels, and currency fluctuations are likely to continue to
put pressure on the economy, and on us. Following years
of historic lows, interest rates have begun to rise as the
general economy improves, and there is a risk that interest
rates could continue to rise and return to historic norms.
Such an increase in rates would put additional pressure on
consumers and the economy in general. As evidenced in
recent years, tightening of credit availability and/or finan-
cial difficulties, leading to declines in consumer and busi-
ness confidence and spending, affect us, our customers,
suppliers and distributors. When such conditions exist,
customers may delay, decrease or cancel purchases from
us, and may also delay payment or fail to pay us alto-
gether. Suppliers may have difficulty filling our orders and
distributors may have difficulty getting our products to
market, which may affect our ability to meet customer
demands, and result in loss of business. Weakened global
economic conditions may also result in unfavorable
changes in our product price/mix and lower profit margins.
All of these factors may have a material adverse effect on
us.
Our international operations subject us to various
risks that could adversely affect our business
operations and financial results.
We have operations throughout North and South Amer-
ica, Europe, Australia and Asia, with 312 facilities in 36
countries. In 2018, approximately 35% of consolidated
sales came from operations and sales outside of the
United States, and we expect to continue to expand our
international operations in the future. Management of
global operations is extremely complex, and operations in
foreign countries are subject to local statutory and regu-
latory requirements, differing legal environments and other
additional risks that may not exist, or be as significant, in
the United States. These additional risks may adversely
affect our business operations and financial results, and
include, without limitation:
‰ foreign currency exchange rate fluctuations and foreign
currency exchange controls;
‰ hyperinflation and currency devaluation;
8
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K ‰ possible limitations on conversion of foreign currencies
into dollars or payment of dividends and other payments
by non-U.S. subsidiaries;
‰ tariffs, non-tariff barriers, duties, taxes or government
royalties, including the imposition or increase of with-
holding and other taxes on remittances and other pay-
ments by non-U.S. subsidiaries;
‰ our interpretation of our rights and responsibilities under
local statutory and regulatory rules for sales taxes, VAT
and similar taxes, statutory accounting requirements,
licenses and permits, etc. may prove to be incorrect or
unsupportable resulting in fines, penalties, and/or other
liabilities related to non-compliance, damage to our
reputation, unanticipated operational restrictions and/or
other consequences as a result of the Company’s actions,
or inaction, taken to perform our responsibilities or protect
our rights;
‰ changes in tax laws, or the interpretation of such laws,
affecting taxable income, tax deductions, or other attrib-
utes relating to our non-U.S. earnings or operations;
‰ inconsistent product regulation or policy changes by
foreign agencies or governments;
‰ difficulties in enforcement of contractual obligations and
intellectual property rights;
‰ high social benefit costs for labor, including more
expansive rights of foreign unions and work councils, and
costs associated with restructuring activities;
‰ national and regional labor strikes;
‰ difficulties in staffing and managing international oper-
ations;
‰ geographic, language and cultural differences between
personnel in different areas of the world;
‰ differences in local business practices;
‰ foreign governments’ restrictive trade policies, and cus-
toms, import/export and other trade compliance regu-
lations;
‰ compliance with and changes in applicable foreign laws;
‰ compliance with U.S. laws, including those affecting
trade and foreign investment and the Foreign Corrupt
Practices Act;
‰ loss or non-renewal of treaties between foreign govern-
ments and the U.S.;
‰ product boycotts, including with respect to products of
our multi-national customers;
‰ increased costs of maintaining international manufactur-
ing facilities and undertaking international marketing pro-
grams;
‰ difficulty in collecting international accounts receivable
and potentially longer payment cycles;
‰ the potential for nationalization or expropriation of our
enterprises or facilities without appropriate compensation;
and
‰ political, social, legal and economic instability, civil
unrest, war, catastrophic events, acts of terrorism, and
widespread outbreaks of infectious diseases.
Global economic conditions and/or disruptions in the
credit markets could adversely affect our business,
financial condition or results of operations.
The Company has extensive international operations,
and is dependent on customers and suppliers that operate
in local economies around the world. In addition, the
Company accesses global credit markets as part of its
capital allocation strategy. Adverse global macroeconomic
conditions could negatively impact our ability to access
credit, or the price at which funding could be obtained.
Likewise, uncertainty about, or a decline in global or
regional economic conditions, could have a significant
impact on the financial stability of our suppliers and cus-
tomers, and could negatively impact demand for our
products. Potential effects include financial instability,
inability to obtain credit to finance operations, and
insolvency.
The vote by the United Kingdom to leave the
European Union could adversely affect us.
In 2016, the U.K. voted to leave the European Union
(E.U.) (referred to as Brexit), and in 2017, the U.K. gave
the notice that commences the formal Brexit process, and
the U.K. is currently scheduled to exit the E.U. at the end
of March 2019. Brexit could cause disruptions to and
create uncertainty surrounding our U.K. businesses,
including affecting relationships with existing and future
customers, suppliers and employees. The effects of Brexit
will depend on any agreements the U.K. makes to retain
access to E.U. markets either during a transitional period
or more permanently. The measures could potentially dis-
rupt the markets we serve and the tax jurisdictions in
which we operate and adversely change tax benefits or
liabilities in these or other jurisdictions. In addition, Brexit
could lead to legal uncertainty and potentially divergent
national laws and regulations as the U.K. determines
which E.U. laws to replace or replicate. Although the
Brexit decision could have broad-reaching effects beyond
just in the U.K. itself, annual revenue in 2018 for our U.K.
businesses alone totaled $120 million.
We are subject to governmental export and import
control laws and regulations in certain jurisdictions
where we do business that could subject us to
liability or impair our ability to compete in these
markets.
Certain of our products are subject to export control
laws and regulations and may be exported only with an
export license or through an applicable export license
exception. If we fail to comply with export licensing, cus-
toms regulations, economic sanctions or other laws, we
could be subject to substantial civil or criminal penalties,
including economic sanctions against us, incarceration for
responsible employees and managers, and the possible
loss of export or import privileges. In addition, if our
distributors fail to obtain appropriate import, export or
re-export licenses or permits, we may also be materially
adversely affected through reputational harm and penal-
ties. Obtaining the necessary export license for a particular
sale may be time consuming and expensive and could
result in the delay or loss of sales opportunities.
Furthermore, export control laws and economic sanc-
tions prohibit the shipment of certain products to embar-
goed or sanctioned countries, governments and persons.
While we train our employees to comply with these regu-
lations, we cannot guarantee that a violation will not occur.
A prohibited shipment could have negative consequences,
including government investigations, penalties, fines, civil
and criminal sanctions and reputational harm. Any change
in export or import regulations, economic sanctions or
related legislation, shift in the enforcement or scope of
existing regulations, or change in the countries, govern-
ments, persons or technologies targeted by such regu-
lations, could decrease our ability to export or sell our
S O N O C O 2 0 1 8 A N N U A L R E P O R T
9
SONOCO2018ANNUALREPORT I FORM10-K products internationally. Any limitation on our ability to
export or sell our products could materially adversely
affect our business.
Raw materials, energy and other price increases or
shortages may reduce our net income.
As a manufacturer, our sales and profitability are
dependent on the availability and cost of raw materials,
labor and other inputs. Most of the raw materials we use
are purchased from third parties. Principal examples are
recovered paper, steel, aluminum and resin. Prices and
availability of these raw materials are subject to substantial
fluctuations that are beyond our control due to factors
such as changing economic conditions, currency and
commodity price fluctuations, resource availability, trans-
portation costs, weather conditions and natural disasters,
political unrest and instability, and other factors impacting
supply and demand pressures. Increases in costs can
have an adverse effect on our business and financial
results. Our performance depends, in part, on our ability to
pass on cost increases to our customers by raising selling
prices and/or offset the impact by improving productivity.
Although many of our long-term contracts and
non-contractual pricing arrangements with customers
permit limited price adjustments to reflect increased raw
material costs, such adjustments may not occur quickly
enough, or be sufficient to prevent a materially adverse
effect on net income and cash flow. Furthermore, we may
not be able to improve productivity or realize sufficient
savings from our cost reduction initiatives to offset the
impact of increased costs.
Some of our manufacturing operations require the use
of substantial amounts of electricity and natural gas, which
may be subject to significant price increases as the result
of changes in overall supply and demand and the impacts
of legislation and regulatory action. We forecast and mon-
itor energy usage, and, from time to time, use commodity
futures or swaps in an attempt to reduce the impact of
energy price increases. However, we cannot guarantee
success in these efforts, and we could suffer adverse
effects to net income and cash flow should we be unable
to either offset or pass higher energy costs through to our
customers in a timely manner or at all.
Supply shortages or disruptions in our supply chains
could affect our ability to obtain timely delivery of materi-
als, equipment and supplies from our suppliers, and, in
turn, adversely affect our ability to supply products to our
customers. Such disruptions could have a material
adverse effect on our business and financial results.
We depend on third parties for transportation
services.
We rely primarily on third parties for transportation of
the products we manufacture and/or distribute, as well as
for delivery of our raw materials. In particular, a significant
portion of the goods we manufacture and raw materials
we use are transported by railroad or trucks, which are
highly regulated. If any of our third-party transportation
providers were to fail to deliver the goods that we manu-
facture or distribute in a timely manner, we might be
unable to sell those products at full value, or at all. Sim-
ilarly, if any of these providers were to fail to deliver raw
materials to us in a timely manner, we might be unable to
manufacture our products in response to customer
demand. In addition, if any of these third parties were to
cease operations or cease doing business with us, we
might be unable to replace them at reasonable cost. Any
failure of a third-party transportation provider to deliver
raw materials or finished products in a timely manner
could harm our reputation, negatively impact our customer
relationships and have a material adverse effect on our
financial condition and results of operations.
We may not be able to identify suitable acquisition
candidates, which could limit our potential for
growth.
We have made numerous acquisitions in recent years,
and expect to actively seek new acquisitions that
management believes will provide meaningful oppor-
tunities for growth. However, we may not be able to
identify suitable acquisition candidates or complete acquis-
itions on acceptable terms and conditions. Other compa-
nies in our industries have similar investment and
acquisition strategies to ours, and competition for acquis-
itions may intensify. If we are unable to identify acquisition
candidates that meet our criteria, our potential for growth
may be restricted.
We may encounter difficulties in integrating
acquisitions, which could have an adverse impact on
our financial condition and operating results.
As noted in the risk factors above, we have invested a
substantial amount of capital in acquisitions, joint ventures
and strategic investments and we expect that we will con-
tinue to do so in the foreseeable future. We are continually
evaluating acquisitions and strategic investments that are
significant to our business both in the United States and
internationally. Acquisitions, joint ventures and strategic
investments involve numerous risks. Acquired businesses
may not achieve the expected levels of revenue, profit-
ability or productivity, or otherwise perform as expected,
and acquisitions may involve significant cash
expenditures, debt incurrence, operating losses, and
expenses that could have a material adverse effect on our
financial condition and operating results. Acquisitions also
involve special risks, including, without limitation, the
potential assumption of unanticipated liabilities and con-
tingencies, and the challenges of effectively integrating
acquired businesses.
Other risks and challenges associated with acquisitions
include, without limitation:
‰ demands on management related to increase in size of
our businesses and additional responsibilities of manage-
ment;
‰ diversion of management’s attention;
‰ disruptions to our ongoing businesses;
‰ inaccurate estimates of fair value in accounting for
acquisitions and amortization of acquired intangible
assets, which could reduce future reported earnings;
‰ difficulties in assimilation and retention of employees;
‰ difficulties in integration of departments, systems, tech-
nologies, books and records, controls (including internal
financial and disclosure controls), procedures, and poli-
cies;
‰ potential loss of major customers and suppliers;
‰ challenges associated with operating in new geographic
regions;
‰ difficulties in maintaining uniform standards, controls,
procedures and policies;
10
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K ‰ potential failure to identify material problems and
liabilities during due diligence review of acquisition targets;
and
‰ potential failure to obtain sufficient indemnification rights
to fully offset possible liabilities associated with acquired
businesses.
While management believes that acquisitions will
improve our competitiveness and profitability, no assur-
ance can be given that acquisitions will be successful or
accretive to earnings. If actual performance in an acquis-
ition falls significantly short of the projected results, or the
assessment of the relevant facts and circumstances was
inaccurate or changes, it is possible that a noncash
impairment charge of any related goodwill would be
required, and our results of operations and financial con-
dition could be adversely affected.
In connection with acquisitions or divestitures, we
may become subject to liabilities and legal claims.
In connection with any acquisitions or divestitures, we
may become subject to liabilities or legal claims, including
but not limited to third party liability and other tort claims;
claims for breach of contract; employment-related claims;
environmental, health and safety liabilities, conditions or
damage; permitting, regulatory or other legal compliance
issues; or tax liabilities. If we become subject to any of
these liabilities or claims, and they are not adequately
covered by insurance or an enforceable indemnity or sim-
ilar agreement from a creditworthy counterparty, we may
be responsible for significant out-of-pocket expenditures.
These liabilities, if they materialize, could have a material
adverse effect on our business, financial condition and
results of operations.
We may encounter difficulties restructuring
operations or closing or disposing of facilities.
We are continuously seeking the most cost-effective
means and structure to serve our customers and to
respond to changes in our markets. Accordingly, from
time to time, we have, and are likely to again, close higher-
cost facilities, sell non-core assets and otherwise
restructure operations in an effort to improve cost com-
petitiveness and profitability. As a result, restructuring and
divestiture costs have been, and are expected to be, a
recurring component of our operating costs, the magni-
tude of which could vary significantly from year to year
depending on the scope of such activities. Divestitures
and restructuring may also result in significant financial
charges for the write-off or impairment of assets, including
goodwill and other intangible assets. Furthermore, such
activities may divert the attention of management, disrupt
our ordinary operations, or result in a reduction in the
volume of products produced and sold. There is no guar-
antee that any such activities will achieve our goals, and if
we cannot successfully manage the associated risks, our
financial position and results of operations could be
adversely affected.
We face intense competition, and failure to compete
effectively can have an adverse effect on our
operating results.
We sell our products in highly competitive markets. We
regularly bid for new and continuing business, and being a
responsive, high-quality, low-cost producer is a key
component of effective competition. The loss of business
from our larger customers, customer changes to alter-
native forms of packaging, or renewal of business with
less favorable terms can have a significant adverse effect
on our operating results.
Continuing consolidation of our customer base and
suppliers may intensify pricing pressure.
Like us, many of our larger customers have acquired
companies with similar or complementary product lines,
and many of our customers have been acquired. Addition-
ally, many of our suppliers of raw materials are consolidat-
ing. This consolidation of customers and suppliers has
increased the concentration of our business with our larg-
est customers, and in some cases, increased pricing
pressures. Similarly, consolidation of our larger suppliers
has resulted in increased pricing pressures from our
suppliers. Further consolidation of customers and suppli-
ers could intensify pricing pressure and reduce our net
sales and operating results.
The loss of a key customer, or a reduction in its
production requirements, could have a significant
adverse impact on our sales and profitability.
Each of our segments has large customers, and the
loss of any of these could have a significant adverse effect
on the segment’s sales and, depending on the magnitude
of the loss, our results of operations and financial con-
dition. Although a majority of our master customer con-
tracts are long-term, they are terminable under certain
circumstances, such as our failure to meet quality, pricing,
or volume requirements, and the contracts themselves
often do not require a specific level of purchasing. There is
no assurance that existing customer relationships will be
renewed at the same level of production, or at all, at the
end of the contract term. Furthermore, although no single
customer accounted for more than 10% of our net sales in
2018 or 2017, the loss of any of our major customers, a
reduction in their purchasing levels or an adverse change
in the terms of supply agreements with these customers
could reduce our net sales and net income. Continued
consolidation of our customers could exacerbate any such
loss. For more information on concentration of sales vol-
ume in our reportable segments, see Item1(c),
“Dependence on Customers.”
We may not be able to develop new products
acceptable to the market.
For many of our businesses, organic growth depends
on product innovation, new product development and
timely response to constantly changing consumer
demands and preferences. Sales of our products and serv-
ices depend heavily on the volume of sales made by our
customers to consumers. Consumer preferences for
products and packaging formats are constantly changing
based on, among other factors, cost, convenience, and
health, environmental and social concerns and percep-
tions. Our failure, or the failure of our customers, to
develop new or better products in response to changing
consumer preferences in a timely manner may hinder our
growth potential and affect our competitive position, and
adversely affect our business and results of operations.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
11
SONOCO2018ANNUALREPORT I FORM10-K We are subject to costs and liabilities related to
environmental, health and safety, and corporate
social responsibility laws and regulations that could
adversely affect operating results.
We must comply with extensive laws, rules and regu-
lations in the United States and in each of the countries in
which we do business regarding the environment, health
and safety, and corporate social responsibility. Com-
pliance with these laws and regulations can require sig-
nificant expenditures of financial and employee resources.
Federal, state, provincial, foreign and local environ-
mental requirements, including the Comprehensive Envi-
ronmental Response, Compensation and Liability Act
(CERCLA), and particularly those relating to air, soil and
water quality, handling, discharge, storage and disposal of
a variety of substances, and climate change are significant
factors in our business and generally increase our costs of
operations. We may be found to have environmental
liability for the costs of remediating soil or water that is, or
was, contaminated by us or a third party at various sites
that we now own, use or operate, or previously, owned,
used or operated. Legal proceedings may result in the
imposition of fines or penalties, as well as mandated
remediation programs, that require substantial, and in
some instances, unplanned capital expenditures.
We have incurred in the past, and may incur in the
future, fines, penalties and legal costs relating to environ-
mental matters, and costs relating to the damage of natu-
ral resources, lost property values and toxic tort claims.
We have made expenditures to comply with environmental
regulations and expect to make additional expenditures in
the future. As of December 31, 2018, approximately
$20.1 million was reserved for environmental liabilities.
Such reserves are established when it is considered prob-
able that we have some liability. However, because the
extent of potential environmental damage, and the extent
of our liability for the damage, is usually difficult to assess
and may only be ascertained over a long period of time,
our actual liability in such cases may end up being sub-
stantially higher than the currently reserved amount.
Accordingly, additional charges could be incurred that
would have a material adverse effect on our operating
results and financial position.
Many of our products come into contact with the food
and beverages packaged within, and therefore we are
subject to risks and liabilities related to health and safety
matters in connection with those products. Accordingly,
our products must comply with various laws and regu-
lations for food and beverages applicable to our custom-
ers. Changes in such laws and regulations could
negatively impact customers’ demand for our products as
they comply with such changes and/or require us to make
changes to our products. Such changes to our products
could include modifications to the coatings and com-
pounds we use, possibly resulting in the incurrence of
additional costs. Additionally, because many of our prod-
ucts are used to package consumer goods, we are sub-
ject to a variety of risks that could influence consumer
behavior and negatively impact demand for our products,
including changes in consumer preferences driven by vari-
ous health-related concerns and perceptions.
Disclosure regulations relating to the use of “conflict
minerals” sourced from the Democratic Republic of the
Congo and adjoining countries could affect the sourcing,
availability and cost of materials used in the manufacture
of some of our products. We also incur costs associated
with supply chain due diligence, and, if applicable, poten-
tial changes to products, processes or sources of supply
as a result of such due diligence. Because our supply
chain is complex, we may also face reputation risk with
our customers and other stakeholders if we are unable
sufficiently to verify the origins of all such minerals used in
our products.
Changes to laws and regulations dealing with environ-
mental, health and safety, and corporate social responsi-
bility issues are made or proposed with some frequency,
and some of the proposals, if adopted, might, directly or
indirectly, result in a material reduction in the operating
results of one or more of our operating units. However,
any such changes are uncertain, and we cannot predict
the amount of additional capital expenditures or operating
expenses that could be necessary for compliance.
Product liability claims and other legal proceedings
could adversely affect our operations and financial
performance.
We produce products and provide services related to
other parties’ products. While we have built extensive
operational processes intended to ensure that the design
and manufacture of our products meet rigorous quality
standards, there can be no assurance that we or our
customers will not experience operational process failures
that could result in potential product, safety, regulatory or
environmental claims and associated litigation. We are
also subject to a variety of legal proceedings and legal
compliance risks in our areas of operation around the
globe. Any such claims, whether with or without merit,
could be time consuming and expensive to defend and
could divert management’s attention and resources. In
accordance with customary practice, we maintain
insurance against some, but not all, of these potential
claims; however, in the future, we may not be able to
maintain such insurance at acceptable premium cost lev-
els. In addition, the levels of insurance we maintain may
not be adequate to fully cover any and all losses or
liabilities. If any significant judgment or claim is not fully
insured or indemnified against, it could have a material
adverse impact on our business, financial condition and
results of operations.
We and the industries in which we operate are at times
being reviewed or investigated by regulators and other
governmental authorities, which could lead to enforcement
actions, fines and penalties or the assertion of private liti-
gation claims and damages. Simply responding to actual
or threatened litigation or government investigations of our
compliance with regulatory standards may require sig-
nificant expenditures of time and other resources. While
we believe that we have adopted appropriate risk
management and compliance programs, the global and
diverse nature of our operations means that legal and
compliance risks will continue to exist and legal proceed-
ings and other contingencies, the outcome of which can-
not be predicted with certainty, will arise from time to time
that could adversely affect our business, results of oper-
ations and financial condition.
Changes in pension plan assets or liabilities may
reduce operating results and shareholders’ equity.
We sponsor various defined benefit plans worldwide,
and have an aggregate projected benefit obligation for
12
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K these plans of approximately $1.7 billion as of
December 31, 2018. The difference between defined
benefit plan obligations and assets (the funded status of
the plans) significantly affects the net periodic benefit
costs and the ongoing funding requirements of the plans.
Among other factors, changes in discount rates and
lower-than-expected investment returns could sub-
stantially increase our future plan funding requirements
and have a negative impact on our results of operations
and cash flows. As of December 31, 2018, these plans
hold a total of approximately $1.3 billion in assets funding
a portion of the projected benefit obligations of the plans,
which consist primarily of common collective trusts,
mutual funds, common stocks and debt securities and
also include alternative investments such as interests in
real estate funds and hedge funds. If the performance of
these assets does not meet our assumptions, or discount
rates decline, the underfunding of the plans may increase
and we may have to contribute additional funds to these
plans, and our pension expense may increase, which
could adversely affect operating results and shareholders’
equity.
We, or our customers, may not be able to obtain
necessary credit or, if so, on reasonable terms.
We have $1.0 billion of fixed-rate debt outstanding. We
also operate a $350 million commercial paper program,
supported by a $500 million credit facility committed by a
syndicate of eight banks until July 2022. If we were pre-
vented from issuing commercial paper, we have the con-
tractual right to draw funds directly on the underlying bank
credit facility. We believe that the lenders have the ability
to meet their obligations under the facility. However, if
these obligations were not met, we may be forced to seek
more costly or cumbersome forms of credit. Should such
credit be unavailable for an extended time, it would sig-
nificantly affect our ability to operate our business and
execute our plans. In addition, our customers may experi-
ence liquidity problems as a result of a negative change in
the economic environment, including the ability to obtain
credit, that could limit their ability to purchase our prod-
ucts and services or satisfy their existing obligations.
Our credit ratings are important to our ability to issue
commercial paper at favorable rates of interest. A down-
grade in our credit rating could increase our cost of bor-
rowing.
Certain of our debt agreements impose restrictions with
respect to the maintenance of financial ratios and the
disposition of assets. The most restrictive covenants cur-
rently require us to maintain a minimum level of interest
coverage, and a minimum level of net worth. Although we
were substantially above these minimum levels at
December 31, 2018, these restrictive covenants could
adversely affect our ability to engage in certain business
activities that would otherwise be in our best long-term
interests.
Our indebtedness could adversely affect our cash
flow, increase our vulnerability to economic
conditions, and limit or restrict our business
activities.
In addition to interest payments, from time to time a
significant portion of our cash flow may need to be used to
service our indebtedness, and, therefore, may not be
available for use in our business. Our ability to generate
cash flow is subject to general economic, financial, com-
petitive, legislative, regulatory, and other factors that may
be beyond our control. Our indebtedness could have a
significant impact on us, including, but not limited to:
‰ increasing our vulnerability to general adverse economic
and industry conditions;
‰ requiring us to dedicate a significant portion of our cash
flow from operations to payments on our indebtedness,
thereby reducing the amount of our cash flow available to
fund working capital, acquisitions and capital
expenditures, and for other general corporate purposes;
‰ limiting our flexibility in planning for, or reacting to,
changes in our business and our industry;
‰ restricting us from making strategic acquisitions or
exploiting business opportunities; and
‰ limiting our ability to borrow additional funds.
We may incur additional debt in the future, which
could increase the risks associated with our leverage.
We are continually evaluating and pursuing acquisition
opportunities and may incur additional indebtedness to
finance any such acquisitions and to fund any resulting
increased operating needs. As new debt is added to our
current debt levels, the related risks we face could
increase. While we will have to effect any new financing in
compliance with the agreements governing our then exist-
ing indebtedness, changes in our debt levels and or debt
structure may impact our credit rating and costs to bor-
row, as well as constrain our future financial flexibility in the
event of a deterioration in our financial operating perform-
ance or financial condition.
Currency exchange rate fluctuations may reduce
operating results and shareholders’ equity.
Fluctuations in currency exchange rates can cause
translation, transaction and other losses that can
unpredictably and adversely affect our consolidated
operating results. Our reporting currency is the U.S. dollar.
However, as a result of operating globally, a portion of our
consolidated net sales, costs, assets and liabilities, are
denominated in currencies other than the U.S. dollar. In
our consolidated financial statements, we translate the
local currency financial results of our foreign operations
into U.S. dollars based on their respective exchange rates.
Depending on the direction, changes in those rates will
either increase or decrease operating results and balances
as reported in U.S. dollars. Although we monitor our
exposures and, from time to time, may use forward cur-
rency contracts to hedge certain forecasted currency
transactions or foreign currency denominated assets and
liabilities, this does not insulate us completely from foreign
currency fluctuations and exposes us to counterparty risk
of nonperformance.
Adverse weather and climate changes may result in
lower sales.
We manufacture packaging products for foods as well
as products used in construction and industrial manu-
facturing. Varying weather conditions can impact crop
growing seasons and related farming conditions that can
then impact the timing or amount of demand for food
packaged in our containers. In addition, poor or extreme
weather conditions can temporarily impact the level of
construction and industrial activity and also impact the
efficiency of our manufacturing operations. Such dis-
S O N O C O 2 0 1 8 A N N U A L R E P O R T
13
SONOCO2018ANNUALREPORT I FORM10-K ruptions could have a material adverse effect on our
results of operations.
We rely on our information technology and its failure
or disruption could disrupt our operations,
compromise customer, employee, vendor and other
data, and adversely affect our results of operations.
We rely on the successful and uninterrupted functioning
of our information technologies to securely manage oper-
ations and various business functions, and we rely on
various technologies to process, store and report
information about our business, and to interact with cus-
tomers, vendors and employees around the world. As with
all large systems, our information technology systems may
be susceptible to damage, disruption or shutdown due to
power outages, failures during the process of upgrading or
replacing software, hardware failures, computer viruses,
cyber attacks, catastrophic events, telecommunications
failures, user errors, unauthorized access, and malicious
or accidental destruction of information or functionality.
We also maintain and have access to sensitive, con-
fidential or personal data or information that is subject to
privacy and security laws, regulations and customer con-
trols. Despite our efforts to protect such sensitive, con-
fidential or personal data or information, our facilities and
systems and those of our customers and third-party serv-
ice providers may be vulnerable to security breaches,
misplaced or lost data, and programming and/or user
errors that could lead to the compromising of sensitive,
confidential or personal data or information.
Information system damages, disruptions, shutdowns
or compromises could result in production downtimes and
operational disruptions, transaction errors, loss of
customers and business opportunities, legal liability, regu-
latory fines, penalties or intervention, reputational damage,
reimbursement or compensatory payments, and other
costs, any of which could have a material adverse effect
on our business, financial position and results of oper-
ations. Although we attempt to mitigate these risks by
employing a number of measures, our systems, networks,
products, and services remain potentially vulnerable to
advanced and persistent threats.
We have a significant amount of goodwill and other
intangible assets and a write down would negatively
impact operating results and shareholders’ equity.
At December 31, 2018, the carrying value of our
goodwill and intangible assets was approximately
$1.7 billion. We are required to evaluate our goodwill
amounts annually, or more frequently when evidence of
potential impairment exists. The impairment test requires
us to analyze a number of factors and make estimates that
require judgment. As a result of this testing, we have in the
past recognized goodwill impairment charges, and we
have identified one reporting unit that currently is at risk of
a significant future impairment charge if actual results fall
short of expectations. Future changes in the cost of capi-
tal, expected cash flows, changes in our business strat-
egy, and external market conditions, among other factors,
could require us to record an impairment charge for
goodwill, which could lead to decreased assets and
reduced net income. If a significant write down were
required, the charge could have a material adverse effect
on our operating results and shareholders’ equity.
Our ability to attract, develop and retain talented
executives, managers and employees is critical to
our success.
Our ability to attract, develop and retain talented
employees, including executives and other key managers,
is important to our business. The experience and industry
contacts of our management team and other key person-
nel significantly benefit us, and we need expertise like
theirs to carry out our business strategies and plans. We
also rely on the specialized knowledge and experience of
certain key technical employees. The loss of these key
officers and employees, or the failure to attract and
develop talented new executives, managers and employ-
ees, could have a materially adverse effect on our busi-
ness. Effective succession planning is also important to
our long-term success, and failure to ensure effective
transfer of knowledge and smooth transitions involving key
officers and employees could hinder our strategic planning
and execution.
Full realization of our deferred tax assets may be
affected by a number of factors.
We have deferred tax assets, including U.S. and foreign
operating loss carryforwards, capital loss carryforwards,
employee and retiree benefit items, and other accruals not
yet deductible for tax purposes. We have established
valuation allowances to reduce those deferred tax assets
to an amount that we believe is more likely than not to be
realized prior to expiration of such deferred tax assets. Our
ability to use these deferred tax assets depends in part
upon our having future taxable income during the periods
in which these temporary differences reverse or our ability
to carry back any losses created by the deduction of these
temporary differences. We expect to realize these assets
over an extended period. However, if we were unable to
generate sufficient future taxable income in the U.S. and
certain foreign jurisdictions, or if there were a significant
change in the time period within which the underlying
temporary differences became taxable or deductible, we
could be required to increase our valuation allowances
against our deferred tax assets, which would increase our
effective tax rate which could have a material adverse
effect on our reported results of operations.
Our annual effective tax rate and the amount of taxes
we pay can change materially as a result of changes
in U.S. and foreign tax laws, changes in the mix of
our U.S. and foreign earnings, adjustments to our
estimates for the potential outcome of any uncertain
tax issues, and audits by federal, state and foreign
tax authorities.
As a large multinational corporation, we are subject to
U.S. federal, state and local, and many foreign tax laws
and regulations, all of which are complex and subject to
varying interpretations. Changes in these laws or regu-
lations, or any change in the position of taxing authorities
regarding their application, administration or interpretation,
could have a material adverse effect on our business,
consolidated financial condition or results of our oper-
ations.
Due to widely varying tax rates in the taxing juris-
dictions applicable to our business, a change in income
generation to higher taxing jurisdictions or away from
lower taxing jurisdictions may also have an adverse effect
on our financial condition and results of operations.
14
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K We make estimates of the potential outcome of
uncertain tax issues based on our assessment of relevant
risks and facts and circumstances existing at the time, and
we use these assessments to determine the adequacy of
our provision for income taxes and other tax-related
accounts. These estimates are highly judgmental.
Although we believe we adequately provide for any
reasonably foreseeable outcome related to these matters,
future results may include favorable or unfavorable
adjustments to estimated tax liabilities, which may cause
our effective tax rate to fluctuate significantly.
In addition, our income tax returns are subject to regu-
lar examination by domestic and foreign tax authorities.
These taxing authorities may disagree with the positions
we have taken or intend to take regarding the tax treat-
ment or characterization of any of our transactions. If any
tax authorities were to successfully challenge the tax
treatment or characterization of any of our transactions, it
could have a material adverse effect on our business,
consolidated financial condition or results of our oper-
ations. Furthermore, regardless of whether any such chal-
lenge is resolved in our favor, the final resolution of such
matter could be expensive and time consuming to defend
and/or settle. Future changes in tax law could significantly
impact our provision for income taxes, the amount of
taxes payable, and our deferred tax asset and liability
balances.
As further discussed in Note 14 to our December 31,
2018 financial statements included in Item 8 of this Form
10-K, the IRS has previously notified us that it disagrees
with our characterization of a distribution, and subsequent
repayment, of an intercompany note in 2012 and 2013. If
the IRS were to prevail, we could be required to make an
adjustment to income for the affected years and pay a
significant amount of additional taxes, which could have a
material adverse effect on our results of operations and
financial condition.
Challenges to, or the loss of, our intellectual property
rights could have an adverse impact on our ability to
compete effectively.
Our ability to compete effectively depends, in part, on
our ability to protect and maintain the proprietary nature of
our owned and licensed intellectual property. We own a
large number of patents on our products, aspects of our
products, methods of use and/or methods of manufactur-
ing, and we own, or have licenses to use, all of the
material trademark and trade name rights used in con-
nection with the packaging, marketing and distribution of
our major products. We also rely on trade secrets,
know-how and other unpatented proprietary technology.
We attempt to protect and restrict access to our
intellectual property and proprietary information by relying
on the patent, trademark, copyright and trade secret laws
of the U.S. and other countries, as well as non-disclosure
agreements. However, it may be possible for a third party
to obtain our information without our authorization,
independently develop similar technologies, or breach a
non-disclosure agreement entered into with us. Fur-
thermore, many of the countries in which we operate do
not have intellectual property laws that protect proprietary
rights as fully as do laws in the U.S. The use of our
intellectual property by someone else without our author-
ization could reduce or eliminate certain of our competitive
advantages, cause us to lose sales or otherwise harm our
business. The costs associated with protecting our
intellectual property rights could also adversely impact our
business.
In addition, we are from time to time subject to claims
from third parties suggesting that we may be infringing on
their intellectual property rights. If we were held liable for
infringement, we could be required to pay damages,
obtain licenses or cease making or selling certain prod-
ucts.
Intellectual property litigation, which could result in
substantial cost to us and divert the attention of manage-
ment, may be necessary to protect our trade secrets or
proprietary technology or for us to defend against claimed
infringement of the rights of others and to determine the
scope and validity of others’ proprietary rights. We may
not prevail in any such litigation, and if we are
unsuccessful, we may not be able to obtain any necessary
licenses on reasonable terms or at all. Failure to protect
our patents, trademarks and other intellectual property
rights may have a material adverse effect on our business,
consolidated financial condition or results of operations.
If we fail to continue to maintain effective internal
control over financial reporting at a reasonable
assurance level, we may not be able to accurately
report our financial results, and may be required to
restate previously published financial information,
which could have a material adverse effect on our
operations, investor confidence in our business and
the trading prices of our securities.
Effective internal controls are necessary to provide reli-
able financial reports and to assist in the effective pre-
vention of fraud. Any inability to provide reliable financial
reports or prevent fraud could harm our business. We are
required to assess the effectiveness of our internal control
over financial reporting annually, as required by Sec-
tion 404 of the Sarbanes-Oxley Act. We need to maintain
our processes and systems and adapt them as our busi-
ness grows and changes. This continuous process of
maintaining and adapting our internal controls and comply-
ing with Section 404 is expensive, time-consuming and
requires significant management attention. As we grow
our businesses and acquire other businesses, our internal
controls will become increasingly complex and we may
require significantly more resources. The integration of
acquired businesses into our internal control over financial
reporting has required, and will continue to require, sig-
nificant time and resources from our management and
other personnel and will increase our compliance
costs. Additionally, maintaining effectiveness of our
internal control over financial reporting is made more chal-
lenging by the fact that we have over 190 subsidiaries and
joint ventures in 36 countries around the world. As
described in Item 9A of this Form 10-K, management has
concluded that our internal controls over financial report-
ing were effective as of December 31, 2018. There is no
assurance that, in the future, material weaknesses will not
be identified that would cause management to change its
current conclusion as to the effectiveness of our internal
controls. If we fail to maintain the adequacy of our internal
controls, as such standards are modified, supplemented
or amended from time to time, we could be subject to
regulatory scrutiny, civil or criminal penalties or litigation. In
addition, failure to maintain adequate internal controls
could result in financial statements that do not accurately
S O N O C O 2 0 1 8 A N N U A L R E P O R T
15
SONOCO2018ANNUALREPORT I FORM10-K reflect our financial condition, and we may be required to
restate previously published financial information, which
could have a material adverse effect on our operations,
investor confidence in our business and the trading prices
of our securities.
Item 1B. Unresolved staff comments
There are no unresolved written comments from the
SEC staff regarding the Company’s periodic or current
1934 Act reports.
Several of our operations are conducted by joint
ventures that we cannot operate solely for our
benefit.
Several of our operations are conducted through joint
ventures. In joint ventures, we share ownership and, in
some instances, management of a company with one or
more parties who may or may not have the same goals,
strategies, priorities or resources as we do. In general,
joint ventures are intended to be operated for the benefit
of all co-owners, rather than for our exclusive benefit.
Operating a business as a joint venture often requires
additional organizational formalities as well as time-
consuming procedures for sharing information, accounting
and making decisions. In certain cases, our joint venture
partners must agree in order for the applicable joint ven-
ture to take certain actions, including acquisitions, the sale
of assets, budget approvals, borrowing money and grant-
ing liens on joint venture property. Our inability to take
unilateral action that we believe is in our best interests may
have an adverse effect on the financial performance of the
joint venture and the return on our investment. In joint
ventures, we believe our relationship with our co-owners is
an important factor to the success of the joint venture, and
if a co-owner changes, our relationship may be adversely
affected. In addition, the benefits from a successful joint
venture are shared among the co-owners, so that we do
not receive all the benefits from our successful joint ven-
tures. Finally, we may be required on a legal or practical
basis or both, to accept liability for obligations of a joint
venture beyond our economic interest, including in cases
where our co-owner becomes bankrupt or is otherwise
unable to meet its commitments.
Material disruptions in our business operations could
negatively affect our financial results.
Although we take measures to minimize the risks of
disruption at our facilities, we may nonetheless from time
to time encounter an unforeseen material operational dis-
ruption in one of our major facilities, which could neg-
atively impact production and our financial results. Such a
disruption could occur as a result of any number of events
including but not limited to a major equipment failure, labor
stoppages, transportation failures affecting the supply and
shipment of materials, disruptions at our suppliers, fire,
severe weather conditions, natural disasters and dis-
ruptions in utility services. These types of disruptions
could materially adversely affect our earnings to varying
degrees depending upon the facility, the duration of the
disruption, our ability to shift business to another facility or
find alternative sources of materials or energy. Any losses
due to these events may not be covered by our existing
insurance policies or may be subject to certain deduc-
tibles.
Item 2. Properties
The Company’s corporate offices are owned and oper-
ated in Hartsville, South Carolina. There are 103 owned
and 62 leased facilities used by operations in the Paper
and Industrial Converted Products segment, 34 owned
and 52 leased facilities used by operations in the
Consumer Packaging segment, 7 owned and 16 leased
facilities used by operations in the Display and Packaging
segment, and 9 owned and 21 leased facilities used by the
Protective Solutions segment. Europe, the most significant
foreign geographic region in which the Company operates,
has 62 manufacturing locations.
Item 3. Legal proceedings
The Company has been named as a potentially respon-
sible party (PRP) at several environmentally contaminated
sites not owned by the Company. All of the sites are also
the responsibility of other parties. The Company’s liability,
if any, is shared with such other parties, but the Compa-
ny’s share has not been finally determined in most cases.
In some cases, the Company has cost-sharing agree-
ments with other PRPs relating to the sharing of legal
defense costs and cleanup costs for a particular site. The
Company has assumed, for accrual purposes, that the
other parties to these cost-sharing agreements will per-
form as agreed. Final resolution of some of the sites is
years away, and actual costs to be incurred for these
matters in future periods is likely to vary from current esti-
mates because of the inherent uncertainties in evaluating
environmental exposures. Accordingly, the ultimate cost to
the Company with respect to such sites, beyond what has
been accrued as of December 31, 2018, cannot be
determined.
As of December 31, 2018 and 2017, the Company had
accrued $20.1 million and $20.3 million, respectively,
related to environmental contingencies. The Company
periodically reevaluates the assumptions used in determin-
ing the appropriate reserves for environmental matters as
additional information becomes available and makes
appropriate adjustments when warranted.
For further information about legal proceedings, see
Note 16 to the Company’s Consolidated Financial State-
ments under Item 8 of this Annual Report on Form 10-K.
Other legal matters
Additional information regarding legal proceedings is
provided in Note 16 to the Consolidated Financial State-
ments of this Annual Report on Form 10-K.
Item 4. Mine safety disclosures
Not applicable.
16
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K P A R T I
I
Item 5. Market for registrant’s common equity,
related stockholder matters and issuer purchases
of equity securities
The Company’s common stock is traded on the New
York Stock Exchange under the stock symbol “SON.” As
of December 31, 2018, there were approximately 86,000
shareholder accounts. Information required by Item 201(d)
of Regulation S-K can be found in Part III, Item 12 of this
Annual Report on Form 10-K.
The Company made the following purchases of its securities during the fourth quarter of 2018:
Issuer purchases of equity securities
Period
10/01/18 – 11/04/18
11/05/18 – 12/02/18
12/03/18 – 12/31/18
Total
(a) Total Number of
Shares Purchased1
(b) Average Price
Paid per Share
125,282
10,181
803
136,266
$55.60
$55.39
$55.85
$55.58
(c) Total Number of
Shares Purchased
as Part of Publicly
Announced Plans or
Programs2
(d) Maximum
Number of Shares
that May Yet be
Purchased under the
Plans or Programs2
—
—
—
—
2,969,611
2,969,611
2,969,611
2,969,611
1 A total of 136,266 common shares were repurchased in the fourth quarter of 2018 related to shares withheld to sat-
isfy employee tax withholding obligations in association with the exercise of certain share-based compensation
awards. These shares were not repurchased as part of a publicly announced plan or program.
2 On February 10, 2016, the Board of Directors authorized the repurchase of up to 5,000,000 shares of the Company’s
common stock. No shares were repurchased under this authorization during 2018 or 2017. During 2016, a total of
2,030,389 shares were repurchased at a cost of $100 million. Accordingly, at December 31, 2018, a total of
2,969,611 shares remain available for repurchase under this authorization.
The Company did not make any unregistered sales of its securities during 2018.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
17
SONOCO2018ANNUALREPORT I FORM10-K Item 6. Selected financial data
The following table sets forth the Company’s selected consolidated financial information for the past five years. The
information presented below should be read together with Management’s Discussion and Analysis of Financial Condition
and Results of Operations included in Item 7 of this Annual Report on Form 10-K and the Company’s historical Con-
solidated Financial Statements and the Notes thereto included in Item 8 of this Annual Report on Form 10-K. The
selected statement of income data and balance sheet data are derived from the Company’s Consolidated Financial
Statements.
(Dollars and shares in thousands
except per share data)
Operating Results
Net sales
Cost of sales and operating expenses
Restructuring/Asset impairment charges
Gain on disposition of business
Non-operating pension costs
Interest expense
Interest income
Income before income taxes
Provision for income taxes
Equity in earnings of affiliates, net of tax
Net income
Net (income) attributable to noncontrolling
interests
Years ended December 31
2018
2017
2016
2015
2014
$5,390,938
4,913,238
40,071
—
941
63,147
(4,990)
$5,036,650
4,585,822
38,419
—
45,110
57,220
(4,475)
$4,782,877
4,339,643
42,883
(104,292)
11,809
54,170
(2,613)
$4,964,369
4,512,927
50,637
—
18,261
56,973
(2,375)
$5,016,994
4,610,300
22,792
—
5,804
55,140
(2,749)
378,531
75,008
(11,216)
314,739
314,554
146,589
(9,482)
441,277
164,631
(11,235)
327,946
87,738
(10,416)
325,707
108,758
(9,886)
177,447
287,881
250,624
226,835
(1,179)
(2,102)
(1,447)
(488)
(919)
Net income attributable to Sonoco
$ 313,560
$ 175,345
$ 286,434
$ 250,136
$ 225,916
Per common share
Net income attributable to Sonoco:
Basic
Diluted
Cash dividends
Weighted average common shares outstanding:
Basic
Diluted
Actual common shares outstanding at
December 31
Financial Position
Net working capital
Property, plant and equipment, net
Total assets
Long-term debt
Total debt
Total equity
Current ratio
Total debt to total capital1
$
$
3.12
3.10
1.62
$
1.75
1.74
1.54
$
2.83
2.81
1.46
$
2.46
2.44
1.37
2.21
2.19
1.27
100,539
101,016
100,237
100,852
101,093
101,782
101,482
102,392
102,215
103,172
99,829
99,414
99,193
100,944
100,603
$ 436,342
1,233,821
4,583,465
1,189,717
1,385,162
1,772,278
1.4
43.9%
$ 563,666
1,169,377
4,557,721
1,288,002
1,447,329
1,730,060
1.6
45.6%
$ 546,152
1,060,017
3,923,203
1,020,698
1,052,743
1,554,705
1.7
40.4%
$ 384,862
1,112,036
4,013,685
1,015,270
1,128,367
1,532,873
1.4
42.4%
$ 461,596
1,148,607
4,186,706
1,193,680
1,245,960
1,503,847
1.5
45.3%
1 Calculated as total debt divided by the sum of total debt and total equity.
Item 7. Management’s discussion and analysis of
financial condition and results of operations
General overview
Sonoco is a leading manufacturer of consumer,
industrial and protective packaging products and provider
of packaging services with 312 locations in 36 countries.
The Company’s operations are reported in four segments,
Consumer Packaging, Display and Packaging, Paper and
Industrial Converted Products, and Protective Solutions.
Generally, the Company serves two broad end-use
markets, consumer and industrial, which, period to period,
can exhibit different economic characteristics from each
other. Geographically, approximately 65% of sales were
generated in the United States, 20% in Europe, 5% in
Asia, 5% in Canada and 5% in other regions.
The Company is a market-share leader in many of its
product lines, particularly in tubes, cores and composite
containers. Competition in most of the Company’s busi-
nesses is intense. Demand for the Company’s products
and services is primarily driven by the overall level of con-
sumer consumption of non-durable goods; however, cer-
tain product and service groups are tied more directly to
durable goods, such as appliances, automobiles and
construction. The businesses that supply and/or service
consumer product companies have tended to be, on a
relative basis, more recession resistant than those that
service industrial markets.
18
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K Financially, the Company’s objective is to deliver aver-
age annual double-digit total returns to shareholders over
time. To meet that target, the Company focuses on three
major areas: driving profitable sales growth, improving
margins and leveraging the Company’s strong cash flow
and financial position. Operationally, the Company’s goal
is to be the acknowledged leader in high-quality,
innovative, value-creating packaging solutions within tar-
geted customer market segments.
Over the next two to three years, the Company aspires
to achieve operating profit before depreciation and amor-
tization (OPBDA) margins of 16% per year and annual
sales of approximately $6 billion. (See “Use of Non-GAAP
financial measures” below). The Company believes it will
achieve these goals by focusing on the following: organic
sales growth, including new product development and
expansion in emerging international markets; strategic
portfolio optimization; and margin enhancement through
more effective customer relationship management, organ-
izational design, indirect spend management, and
improved manufacturing productivity, supply chain and
back office support processes.
Use of non-GAAP financial measures
To assess and communicate the financial performance
of the Company, Sonoco management uses, both
internally and externally, certain financial performance
measures that are not in conformity with generally
accepted accounting principles (“non-GAAP” financial
measures). These non-GAAP financial measures reflect
the Company’s GAAP operating results adjusted to
remove amounts, including the associated tax effects,
relating to restructuring initiatives, asset impairment
charges, environmental charges, acquisition-related costs,
gains or losses from the disposition of businesses, excess
property insurance recoveries, pension settlement
charges, certain income tax events and other items, if any,
including other income tax-related adjustments and/or
events, the exclusion of which management believes
improves the period-to-period comparability and analysis
of the underlying financial performance of the business.
The adjusted non-GAAP results are identified using the
term “base,” for example, “base earnings.”
The Company’s base financial performance measures
are not in accordance with, nor an alternative for, meas-
ures conforming to generally accepted accounting princi-
ples and may be different from non-GAAP measures used
by other companies. In addition, these non-GAAP meas-
ures are not based on any comprehensive set of account-
ing rules or principles. Sonoco continues to provide all
information required by GAAP, but it believes that evaluat-
ing its ongoing operating results may not be as useful if an
investor or other user is limited to reviewing only GAAP
financial measures. The Company uses the non-GAAP
“base” performance measures presented herein for
internal planning and forecasting purposes, to evaluate its
ongoing operations, and to evaluate the ultimate perform-
ance of management and each business unit against 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 meas-
ures are based on subjective determinations of manage-
ment regarding the nature and classification of events and
circumstances that the investor may find material and view
differently. To compensate for these limitations, manage-
ment believes that it is useful in understanding and analyz-
ing the results of the business to review both GAAP
information which includes all of the items impacting finan-
cial results and the non-GAAP measures that exclude
certain elements, as described above.
Restructuring and restructuring-related asset impair-
ment charges are a recurring item as Sonoco’s restructur-
ing programs usually require several years to fully
implement and the Company is continually seeking to take
actions that could enhance its efficiency. Although recur-
ring, 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 sev-
erance and termination benefits in the countries in which
the restructuring actions occur. Similarly, non-operating
pension expense is a recurring item. However, this
expense is subject to significant fluctuations from period to
period due to changes in actuarial assumptions, global
financial markets (including stock market returns and
interest rate changes), plan changes, settlements, curtail-
ments, and other changes in facts and circumstances.
Reconciliations of GAAP to base results are presented
on pages 23 and 24 in conjunction with management’s
discussion and analysis of the Company’s results of oper-
ations. Whenever reviewing a non-GAAP financial meas-
ure, readers are encouraged to review the related
reconciliation to fully understand how it differs from the
related GAAP measure. Reconciliations are not provided
for non-GAAP measures related to future years due to the
likely occurrence of one or more of the following, the tim-
ing and magnitude of which management is unable to reli-
ably 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 tax effect 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.
2018 overview and 2019 outlook
The Company produced strong top-line, bottom-line
and cash flow results in 2018 despite low growth rates in
many of the Company’s served markets, accelerating
inflation, tariffs and disappointing performances in our
plastics and flexible packaging businesses. Year-over-year
growth in consolidated operating profit of 6.1% was
S O N O C O 2 0 1 8 A N N U A L R E P O R T
19
SONOCO2018ANNUALREPORT I FORM10-K largely driven by a $49.5 million, or 30.7%, increase in the
operating profit of Paper and Industrial Converted Prod-
ucts and was also aided by a strong turnaround in our
Display and Packaging segment. These gains were parti-
ally offset by a $31.3 million, or 12.2%, decline in operat-
ing profits for our Consumer Packaging segment.
Operating profit for our Protective Solutions segment was
relatively flat year over year. On a company-wide basis,
gains from a positive overall price/cost relationship (the
relationship of the change in sales prices to the change in
costs of materials, energy and freight) and the added
operating profit from acquisitions were only partially offset
by higher labor, maintenance and other operating costs.
As a result, consolidated gross profit margin for 2018
improved modestly to 19.3% compared to 19.0% in 2017.
Net Income Attributable to Sonoco (GAAP earnings) for
2018 increased $138.2 million, or 78.8%, year over year.
This increase is largely due to prior-year pension settle-
ment charges totaling $20.2 million, after-tax, a prior-year
$51.3 million net tax charge related to the enactment of
the U.S. Tax Cuts and Jobs Act (“Tax Act”), and a 2018
valuation allowance release triggered by certain provisions
of the Tax Act. The remainder is largely due to higher 2018
operating income together with the lower US statutory tax
rate established by the Tax Act. Base earnings, which
exclude the previously mentioned prior-year charges, the
valuation allowance release, as well as certain other items
of income and expense, as more fully described within this
Item under “Use of Non-GAAP financial measures” and
reconciled within this Item under “Reconciliations of GAAP
to Non-GAAP financial measures,” improved $58.8 million,
or 20.9%, year over year.
Management’s focus in 2018 was on driving synergies
with acquired businesses, accelerating organic growth,
improving manufacturing productivity, using the Compa-
ny’s strong financial position to make strategic acquis-
itions and improving operating efficiency and financial
performance of the Company’s contract packaging serv-
ices center near Atlanta, Georgia. Management expected
overall volume in 2018 to increase approximately 2%,
overall price/cost to be positive and that manufacturing
productivity would more than offset increases in labor and
other costs. Actual 2018 volume increased slightly more
than one percent as gains in Display and Packaging were
partially offset by declines in Consumer Products and
Paper and Industrial Converted Products. The 2018 per-
formance of businesses acquired in 2017 fell short of
expectations due to a combination of volume shortfalls,
production inefficiencies and negative price / cost. The
volume shortfalls and production inefficiencies in these
businesses were significant drivers leading to an overall
flat year for manufacturing productivity. However, price/
cost was positive in almost all of the Company’s other
businesses, and was extremely positive in the Paper and
Industrial Converted Products segment and the Company
as a whole. Despite continued improvements at its
Atlanta-area packaging center, the Company determined
that it could not achieve acceptable margins under the
associated single-customer contract and negotiated an
early termination of that contract and exited the facility late
in the third quarter of 2018. In October, the Company
acquired both the remaining 70 percent interest in its
Conitex-Sonoco tube and core/paper joint venture and a
composite can operation from Texpack, Inc. This trans-
action brings the joint venture operations under the sole
control of the Company and expands its exposure to the
Asia paper and industrial products market. In April, the
Company acquired Highland Packaging Solutions, a
manufacturer of thermoformed plastic packaging for fresh
produce and dairy products. Highland expands the
Company’s footprint in its targeted “perimeter of the store”
market. These transactions are described in greater detail
below.
Pension and postretirement benefit expenses for the
year were approximately $44 million lower in 2018 than
2017, due primarily to settlement charges related to lump
sum payments and purchases of annuities for certain plan
participants in 2017. Excluding these charges, total benefit
plan expense was approximately $12 million lower in 2018
than in 2017. This decrease was primarily due to higher
expected returns on plan assets due to a higher asset
base as of December 31, 2017. Total net contributions in
2018 to the Company’s domestic and international pen-
sion and postretirement plans were approximately
$25 million. The aggregate net unfunded position of the
Company’s various defined benefit plans increased from
$332 million at the end of 2017, to $369 million at the end
of 2018. This increase was driven by normal service and
interest cost and a negative actual return on plan assets
during 2018, partially offset by the impact of contributions
and slightly higher discount rates on plan liabilities at
December 31, 2018.
The effective tax rate on GAAP earnings was 19.8%,
compared with 46.6% in 2017, and the effective tax rate
on base earnings was 23.7%, compared with 31.1% in
2017. The year-over-year decrease in both GAAP and
base effective tax rates was driven primarily by the Tax
Act, including the decrease in the U.S. Federal income tax
rate from 35% to 21%. The year-over-year variance in the
GAAP tax rate is also driven by Tax Act changes, including
the 2018 benefit from the release of a valuation allowance
on foreign tax credits of $16.1 million and the exceptionally
high 2017 rate, which included approximately
$51.2 million of one-time tax charges related to the Tax
Act.
The Company generated $589.9 million in cash from
operations during 2018, compared with $348.3 million in
2017. The majority of the year-over-year increase is attrib-
utable to higher net income, lower pension and post-
retirement contributions and a beneficial difference in the
changes in working capital, partially offset by an
unfavorable difference in the change in income tax
accruals. Cash flow from operations is expected to be
approximately $600 million in 2019.
Outlook
In 2019, management’s focus will be on generating
profitable growth, improving margins, driving free cash
flow, and portfolio optimization, including the potential for
both targeted acquisitions and divestitures, which, in turn,
are expected to impact margins and prospects for profit-
able growth. Key to management’s objectives for the year
will be further development of the Company’s previously
implemented commercial and operational excellence ini-
tiatives aimed at improving margins by more-fully realizing
the value of our products and services, reducing our unit
costs and better leveraging our fixed support costs.
Management is targeting an overall organic volume
increase in 2019 of approximately 1.0%. Although the
Company has projected that overall price/cost will be pos-
20
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K itive in 2019, duplicating the degree of price/cost
improvement seen in 2018 is considered unlikely. Con-
tinued volatility in key raw material prices would make full
recovery of any related cost increases more challenging.
And, although manufacturing productivity is expected to
offset a significant portion of the projected increases in
labor and other costs, not realizing the targeted organic
volume gains would make fully achieving management’s
productivity objectives more difficult. Operating results in
2019 will include a full year of revenue and operating profit
from Highland and Conitex.
The Company projects the non-operating component
of pension and post-retirement benefits expense to be
approximately $19 million higher, while the operating
component is projected to be $3 million lower. The net
anticipated increase of $16 million is primarily due to lower
expected returns on plan assets due to a lower asset base
and a 25 basis point decrease in the 2019 expected rate
of return assumption. Total contributions in 2019 to the
Company’s domestic and international pension and post-
retirement plans are expected to be approximately
$31.0 million.
In consideration of the above factors, management is
projecting that reported net sales will increase nearly 5%
and overall margins for gross profit, base operating profit
and base operating profit before depreciation and amor-
tization will improve modestly over 2018 levels.
Absent additional borrowings in 2019 from any acquis-
ition activity, net interest expense is expected to decrease
approximately $3 million due to lower average annual debt
balances as the Company would expect to use a portion
of its free cash flow to pay down existing debt. The con-
solidated effective tax rate on base earnings is expected
to be between 25.5% and 26.5% in 2019 compared with
23.7% in 2018. The anticipated year-over-year increase is
due to discrete items that benefited the 2018 rate that are
not expected to recur in 2019.
The Company does not provide projected GAAP earn-
ings results 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.
Acquisitions and dispositions
Acquisitions
The Company completed three acquisitions during
2018 at a cost of $278.8 million, net of cash acquired. On
October 1, 2018, the Company completed the acquisition
of the remaining 70 percent interest in Conitex Sonoco
(BVI), Ltd. (“Conitex Sonoco”) from Texpack Investments,
Inc. (“Texpack”) for total consideration of $134.8 million,
including net cash payments of $127.8 million and debt
assumed of $7.1 million. Final consideration was subject
to a post-closing adjustment for the change in working
capital to the date of closing. This adjustment was settled
in February 2019 and required an additional cash payment
of approximately $0.1 million. The Conitex Sonoco joint
venture was formed in 1998 with Texpack, a Spanish-
based global provider of paperboard and paper-based
packaging products. Conitex Sonoco produces uncoated
recycled paperboard and tubes and cones for the global
spun yarn industry, as well as adhesives, flexible inter-
mediate bulk containers and corrugated pallets. Conitex
Sonoco has approximately 1,250 employees across 13
manufacturing locations in 10 countries, including four
paper mills and seven cone and tube converting oper-
ations and two other production facilities. The acquisition
of Conitex Sonoco is expected to add approximately
$260 million of annual sales in the Company’s Paper and
Industrial Converted Products segment. Also on
October 1, 2018, the Company acquired from Texpack
Group Holdings B.V. a rigid paper facility in Spain
(“Compositub”) for $10.0 million in cash. Final consid-
eration was subject to a post-closing adjustment for the
change in working capital to the date of closing. This
adjustment was settled in February 2019 for an additional
cash payment to the seller of $0.4 million. Both the Con-
itex Sonoco and Compositub acquisitions were funded
with existing cash on hand. On April 12, 2018, the Com-
pany completed the acquisition of Highland Packaging
Solutions (“Highland”). Total consideration for this acquis-
ition was $148.5 million, including net cash paid at closing
of $141.0, along with a contingent purchase liability of
$7.5 million. The contingent purchase liability is based
upon a sales metric which the Company expects to meet
and is payable in two installments. The first installment of
$5.0 million is to be paid one year after the closing date
and the second installment of $2.5 million is to be paid
two years after the closing date. The liability for these two
payments has been recognized in full on the Company’s
Consolidated Balance Sheet at December 31, 2018, with
the first installment included in “Accrued expenses and
other” and the second in “Other Liabilities.” Highland
manufactures thermoformed plastic packaging for fresh
produce and dairy products from a single production
facility in Plant City, Florida, providing total packaging sol-
utions for customers that include sophisticated engineered
containers, flexographic printed labels, and inventory
management through distribution warehouses in the
Southeast and West Coast of the United States. The
Company financed the acquisition with proceeds from a
new $100.0 million term loan, along with proceeds from
existing credit facilities. This loan was repaid in full before
the end of 2018. The acquisition of Highland is expected
to add approximately $110 million of annual sales in the
Company’s Consumer Packaging segment.
The Company completed two acquisitions during 2017
at a cost of $383.7 million, net of cash acquired. On
March 14, 2017, the Company completed the acquisition
of Packaging Holdings, Inc. and subsidiaries, including
Peninsula Packaging LLC (“Packaging Holdings”), for
$218.8 million, net of cash acquired. Packaging Holdings
manufactures thermoformed packaging for a wide range
of whole fresh fruits, pre-cut fruits and produce, prepared
salad mixes, as well as baked goods in retail supermarkets
from five manufacturing facilities, including four in the
United States and one in Mexico. The Company financed
the transaction with a combination of cash and borrow-
ings, including a $150.0 million three-year term loan. On
July 24, 2017, the Company completed the acquisition of
Clear Lam Packaging, Inc. (“Clear Lam”) for $165.0 million,
net of cash acquired. Final consideration was subject to
an adjustment for working capital, which was completed in
2018 resulting in $1.6 million of cash being returned to the
Company. Clear Lam manufactures high barrier flexible
S O N O C O 2 0 1 8 A N N U A L R E P O R T
21
SONOCO2018ANNUALREPORT I FORM10-K and forming films used to package a variety of products
for consumer packaged goods companies, retailers and
other industrial manufacturers, with a focus on structures
used for perishable foods. It has production facilities in Elk
Grove Village, Illinois, and Nanjing, China. The Company
financed a portion of the transaction with $100 million in
borrowings from a $250 million five-year term loan with the
remaining purchase price funded from available short-term
credit facilities.
The Company completed four acquisitions during 2016
at a cost of $88.6 million, net of cash acquired. On
June 24, 2016, the Company completed an acquisition in
its Paper and Industrial Converted Products segment of a
small tube and core business in Australia for $0.9 million in
cash. On August 30, 2016, the Company completed the
acquisition in its Protective Solutions segment of the
temperature-controlled cargo container assets, licenses,
trademarks, and manufacturing rights from AAR Corpo-
ration. Total consideration for this business was
$6.0 million consisting of a current cash payment of
$3.0 million, non-contingent deferred cash consideration
of $2.0 million, and contingent consideration valued at
$1.0 million. Also in the Protective Solutions segment,
Laminar Medica (“Laminar”), a privately held specialty
medical products company based in the U.K., was
acquired on September 19, 2016 for $17.2 million, net of
cash acquired. On November 1, 2016, the Company
completed the acquisition in its Consumer Packaging
segment of Plastic Packaging Inc. (“PPI”), a privately held
Hickory, NC-based flexible packaging company for
$67.6 million, net of cash acquired. Founded in 1957, PPI
specializes in short-run, customized flexible packaging for
consumer brands in markets including: food products (i.e.
frozen foods, baked goods, seafood), pet products (i.e.
dry food, bird seed, litter), confection (i.e. seasonal promo-
tions, heat-sealed chocolate packaging, hard and soft
candy), and health and personal care (i.e. nutraceuticals,
diapers, tissues/wipes).
Dispositions
On November 7, 2016, the Company completed the sale
of its rigid plastics blow molding operations to Amcor Rigid
Plastics USA, LLC and Amcor Packaging Canada, Inc. for
approximately $280 million, with the Company receiving net
cash proceeds of $271.8 million. In conjunction with the
sale, the Company recognized a gain on the disposition, net
of associated fees, of $104.3 million. The Company’s rigid
plastics blow molding operations included seven manu-
facturing facilities in the U.S. and Canada with approx-
imately 850 employees producing containers serving the
personal care and food and beverage markets. The dis-
position of these operations negatively impacted 2017 over
2016 sales comparisons by approximately $175 million. The
decision to sell the blow molding operations was made to
focus on, and provide resources to further enhance, the
Company’s targeted growth businesses, including flexible
packaging, thermoformed rigid plastics, and temperature-
assurance packaging. This sale did not notably affect
operating margin percentages for the Company’s
Consumer Packaging segment, nor did it represent a
strategic shift for the Company having a major effect on the
entity’s operations and financial results.
See Note 4 to the Consolidated Financial Statements
for further information about acquisition and disposition
activities.
Restructuring and asset impairment charges
Due to its geographic footprint (312 locations in 36
countries) and the cost-competitive nature of its busi-
nesses, the Company is constantly seeking the most cost-
effective means and structure to serve its customers and
to respond to fundamental changes in its markets. As
such, restructuring costs have been and are expected to
be a recurring component of the Company’s operating
costs. The amount of these costs can vary significantly
from year to year depending upon the scope and location
of the restructuring activities.
The following table recaps the impact of restructuring
and asset impairment charges on the Company’s net
income for the periods presented (dollars in thousands):
Exit costs:
2018 Actions
2017 Actions
2016 and Earlier Actions
Asset impairments:
Total restructuring/asset
impairment charges
Income tax benefit
Impact of noncontrolling
interests, net of tax
Total impact of restructuring/
asset impairment charges,
net of tax
Year ended December 31
2018
2017
2016
$ 27,638
7,176
(92)
5,349
$
— $
14,646
3,756
20,017
—
—
35,761
7,122
$ 40,071
(10,038)
$ 38,419
(13,064)
$42,883
(7,520)
(191)
(71)
(161)
$ 29,842
$ 25,284
$35,202
During 2018, the Company announced the closure of a
flexible packaging plant in North Carolina, a global brand
management facility in Canada, a thermoformed pack-
aging plant in California (all part of the Consumer Pack-
aging segment), five tube and core plants – one in
Alabama, one in Canada, one in Indonesia, one in Russia,
and one in Norway (all part of the Paper and Industrial
Converted Products segment), and a protective packaging
plant in North Carolina (part of the Protective Solutions
segment). Restructuring actions in the Display and Pack-
aging segment included charges associated with exiting a
single-customer contract at a packaging center near
Atlanta, Georgia. In addition the Company continued to
realign its cost structure, resulting in the elimination of
approximately 120 positions.
During 2017, the Company announced the closure of
an expanded foam protective packaging plant in the
United States (part of the Protective Solutions segment),
five tubes and cores plants – three in the United States,
one in Belgium, and one in China (all part of the Paper and
Industrial Converted Products segment), and a packaging
services center in Mexico (part of the Display and Pack-
aging segment). Asset impairment charges recorded in
2017 included a $17.8 million charge in the fourth quarter
of 2017 recognized as a result of the Company’s decision
to shut down its #9 boiler in the Hartsville, South Carolina
manufacturing complex. In addition, the Company recog-
nized severance charges throughout 2017 related to the
elimination of approximately 185 positions in conjunction
with the Company’s ongoing organizational effectiveness
efforts.
During 2016, the Company announced the closure of
four tubes and cores plants – one in the United States,
22
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K one in Canada, one in Ecuador, and one in Switzerland (all
part of the Paper and Industrial Converted Products
segment). The Company closed a packaging services
center in Mexico and a fulfillment service center in Brazil
(both part of the Display and Packaging segment). The
Company also began manufacturing rationalization efforts
in its Reels division (part of the Paper and Industrial Con-
verted Products segment), and completed the sales of a
paper mill in France (part of the Paper and Industrial
Converted Products segment) and a retail security pack-
aging plant in Puerto Rico (part of the Display and Pack-
aging segment). In addition, the Company continued to
realign its cost structure, resulting in the elimination of
approximately 180 positions.
The Company expects to recognize future additional
costs totaling approximately $1.8 million in connection
with previously announced restructuring actions. The
Company believes that the majority of these charges will
be incurred and paid by the end of 2019. The Company
regularly evaluates its cost structure, including its manu-
facturing capacity, and additional restructuring actions are
likely to be undertaken. Restructuring and asset impair-
ment 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 termi-
nation benefits in the countries in which the Company
operates.
See Note 5 to the Consolidated Financial Statements
for further information about restructuring activities and
asset impairment charges.
Reconciliations of GAAP to non-GAAP financial measures
The following tables reconcile the Company’s non-GAAP financial measures to their most directly comparable GAAP
financial measures for each of the years presented:
For the year ended December 31, 2018
Restructuring/
Asset
Impairment
$40,071
—
—
Acquisition
Related
Costs
$14,446
—
—
Dollars and shares in thousands,
except per share data
Operating profit
Non-operating pension costs
Interest expense, net
Income before income taxes
Provision for income taxes
Income before equity in earnings of affiliates
Equity in earnings of affiliates, net of tax
Net income
Less: Net (income) attributable to noncontrolling
interests, net of tax
Net income attributable to Sonoco
Per diluted common share
GAAP
$437,629
941
58,157
$378,531
75,008
$303,523
11,216
$314,739
$40,071
10,038
$30,033
—
$30,033
(1,179)
(191)
$313,560
$29,842
$
3.10
$
0.30
Other
Adjustments(1)
$
(326)
(742)
—
$
416
17,539
$(17,123)
—
Base
$491,820
199
58,157
$433,464
102,700
$330,764
11,216
$(17,123)
$341,980
—
(1,370)
$(17,123)
$340,610
$
(0.17)
$
3.37
(1) Primarily the release of a valuation allowance and other non-base tax adjustments totaling a net benefit of approx-
imately $17,434.
Dollars and shares in thousands,
except per share data
Operating profit
Non-operating pension costs
Interest expense, net
Income before income taxes
Provision for income taxes
Income before equity in earnings of affiliates
Equity in earnings of affiliates, net of tax
Net income
Less: Net (income) attributable to noncontrolling
interests, net of tax
Net income attributable to Sonoco
Per diluted common share
GAAP
$412,409
45,110
52,745
$314,554
146,589
$167,965
9,482
$177,447
$38,419
13,064
$25,355
—
$25,355
For the year ended December 31, 2017
Restructuring/
Asset
Impairment
$38,419
—
—
Acquisition
Related
Costs
$13,790
—
—
Other
Adjustments(2)
$ (2,279)
(32,761)
—
Base
$462,339
12,349
52,745
$397,245
123,371
$273,874
10,063
$283,937
$ 30,482
(40,123)
$ 70,605
581
$ 71,186
(2,102)
(71)
$175,345
$25,284
$
1.74
$
0.25
—
(2,173)
$ 71,186
$281,764
$
0.71
$
2.79
$14,446
115
$14,331
—
$14,331
—
$14,331
$
0.14
$13,790
3,841
$ 9,949
—
$ 9,949
—
$ 9,949
$
0.10
(2) Consists of the following: pension settlement charges of $32,761 ($20,241 after tax), partially offset by insurance set-
tlement gains; tax charges of approximately $76,933 related to a one-time transition tax on certain accumulated for-
eign earnings offset by approximately $25,668 related to an increase in net deferred tax assets, both of which are
related to implementation of the U.S. Tax Cuts and Jobs Act; and other net tax charges totaling $492.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
23
SONOCO2018ANNUALREPORT I FORM10-K Dollars and shares in thousands,
except per share data
Operating profit
Non-operating pension costs
Interest expense, net
Income before income taxes
Provision for income taxes
Income before equity in earnings of affiliates
Equity in earnings of affiliates, net of tax
Net income
Less: Net (income)/loss attributable to
noncontrolling interests, net of tax
For the year ended December 31, 2016
Restructuring/
Asset
Impairment
$42,883
—
—
Acquisition
Related
Costs
$4,569
—
—
GAAP
$504,643
11,809
51,557
$441,277
164,631
$276,646
11,235
$287,881
$42,883
7,520
$35,363
—
$35,363
Other
Adjustments(3)
$(103,360)
—
—
$(103,360)
(55,803)
$ (47,557)
—
Base
$448,735
11,809
51,557
$385,369
117,770
$267,599
11,235
$ (47,557)
$278,834
—
(1,608)
$ (47,557)
$277,226
$
(0.47)
$
2.72
$4,569
1,422
$3,147
—
$3,147
—
$3,147
$ 0.03
Net income attributable to Sonoco
$286,434
$35,202
Per diluted common share
$
2.81
$
0.35
(1,447)
(161)
(3) Consists of the following: gain from the sale of the rigid plastics blow molding operations totaling $104,292 ($49,341
after tax); $850 increase ($522 after tax) in reserves for Fox River environmental claims; $1,203 net tax loss due pri-
marily to changes in rates and valuation allowances for foreign entities; and other charges totaling $82 ($59 after tax).
Results of operations – 2018 versus 2017
Net income attributable to Sonoco (GAAP earnings)
was $313.6 million ($3.10 per diluted share) in 2018,
compared with $175.3 million ($1.74 per diluted share) in
2017. 2018 earnings reflect net after-tax charges totaling
$27.1 million, consisting of restructuring/asset impairment
charges and acquisition-related expenses which were
partially offset by the tax benefit related to the Tax Act.
Net income in 2017 was negatively impacted by a net
after-tax expense of $106.4 million consisting of pension
settlement charges, tax charges related to the Tax Act,
restructuring/asset impairment charges, and acquisition-
related expenses. These charges were partially offset by
insurance settlement gains.
Base earnings in 2018 were $340.6 million ($3.37 per
diluted share), compared with $281.8 million ($2.79 per
diluted share) in 2017.
Both GAAP and base earnings in 2018 benefited from a
positive price/cost relationship, operating profit from busi-
nesses acquired during the year and lower income tax
rates related to the Tax Act. These year-over-year favor-
able factors were partially offset by higher management
incentives, overhead and other operating costs. Changes
in foreign currency translation had little effect on earnings
year over year.
The effective tax rate on GAAP earnings was 19.8% in
2018, compared with 46.6% in 2017, and the effective tax
rate on base earnings was 23.7%, compared with 31.1%
in 2017. The GAAP effective tax rate benefited from the
$16.1 million release of a valuation allowance on foreign
tax credits, as well as the absence of the 2017 one-time
$77 million charge to record the Tax Act’s one-time tran-
sition tax on certain accumulated foreign earnings. The
decrease in the base tax rate was due to the decrease in
the U.S. Federal tax rate from 35% to 21%, partially offset
by the new “GILTI” tax, both of which are a result of the
Tax Act. The 2018 base rate also benefited from an
unusually large tax benefit from the payment of equity
compensation awards, including the exercise of stock
appreciation rights.
Consolidated net sales for 2018 were $5.4 billion, a
$354 million, or 7.0%, increase from 2017. The compo-
nents of the sales change were:
($ in millions)
Volume/mix
Selling price
Acquisitions and divestitures, net
Foreign currency translation and other, net
Total sales increase
$ 55
63
241
(4)
$354
Sales volume/mix was up approximately 1% driven by
increases in the Display and Packaging Segment. Higher
selling prices year-over-year were implemented to recover
rising material prices, mostly resins. This led to year-over-
year increases in all of the Company’s segments, except
the Paper and Industrial Converted Products segment
where market prices for the segment’s primary raw
material, old corrugated containers (“OCC”), declined from
2017 to 2018. The Company’s 2018 acquisitions added
more than $241 million to comparable year-over-year
sales. Finally, foreign exchange rate changes increased
year-over-year sales as almost all of the foreign currencies
in which the Company conducts business strengthened
slightly in relation to the U.S. Dollar.
Total domestic sales were $3.5 billion, up 6.9% from
2017 levels. International sales were $1.9 billion, up 7.2%
from 2017 with most of the increase driven by growth in
the Company’s industrial businesses.
Costs and expenses/margins
Cost of sales was up $271.9 million in 2018, or 6.7%,
from the prior year primarily due to additional volume from
acquired businesses. Positive price/cost relationship and
modest productivity improvements resulted in gross profit
margins increasing to 19.3% in 2018 from 19.0% in the
prior year.
Selling, general and administrative expenses increased
$55.5 million, or 10.9%, and were 10.4% of sales com-
pared to 10.1% of sales in 2017. The current year increase
in selling, general and administrative expenses is largely
24
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K attributable to selling, general, and administrative
expenses associated with acquired businesses along with
higher management incentives and general wage inflation.
Additionally, acquisition-related costs increased
$0.7 million from last year to $14.4 million.
GAAP operating profit was 8.1% of sales in 2018
compared to 8.2% in 2017. Base operating profit declined
slightly to 9.1% of sales in 2018 compared to 9.2% in
2017. Both GAAP and base operating profit were essen-
tially flat year over year. The year-over-year increase in
gross profit margin discussed above was offset by selling,
general and administrative expenses discussed above.
Restructuring and restructuring-related asset impair-
ment charges totaled $40.1 million and $38.4 million in
2018 and 2017, respectively. Additional information
regarding restructuring actions and impairments is pro-
vided in Note 5 to the Company’s Consolidated Financial
Statements.
Aggregate pension and postretirement plan expenses
decreased $43.6 million in 2018 to a total of $34.9 million,
compared with $78.5 million in 2017. In February 2017,
the Company initiated a program to settle a portion of its
pension liability related to terminated vested participants in
the U.S. qualified retirement plans through either a single,
lump-sum payment or the purchase of an annuity. During
the course of the program, the Company successfully set-
tled approximately 47% of the projected benefit obligation
of the terminated vested plan participants. As a result of
these and other smaller settlements, the Company recog-
nized non-cash settlement charges totaling $32.8 million
in 2017; similar charges were only $0.7 million in 2018.
The settlement charges are reflected in non-operating
pension costs, and account for the majority of the year-
over-year decrease in pension and postretirement plan
expenses. The remainder of pension and postretirement
plan expenses are reflected in the Company’s Con-
solidated Statements of Income with approximately 75% in
cost of sales and 25% in selling, general and admin-
istrative expenses. See Note 13 to the Consolidated
Financial Statements for further information on employee
benefit plans.
Net interest expense totaled $58.2 million for the year
ended December 31, 2018, compared with $52.7 million
in 2017. The increase was primarily due to the impact of
higher interest rates.
Reportable segments
The Company reports its financial results in four report-
able segments – Consumer Packaging, Display and Pack-
aging, Paper and Industrial Converted Products, and
Protective Solutions.
Consolidated operating profits, reported as “Operating
Profit” on the Consolidated Statements of Income, are
comprised of the following:
($ in millions)
2018
2017 % Change
Segment operating profit
Consumer Packaging
Display and Packaging
Paper and Industrial
Converted Products
Protective Solutions
Restructuring/Asset impairment
charges
Acquisition-related costs
Other non-operational
(charges)/income, net
Consolidated operating profit*
*Due to rounding, amounts
above may not foot
$224.5
13.3
$255.8
2.6
(12.2)%
411.5%
211.1
42.9
161.6
42.4
(40.1)
(14.5)
(38.4)
(13.8)
30.6%
1.2%
4.4%
5.1%
0.4
2.3
(82.6)%
$437.6
$412.4
6.1%
Segment results viewed by Company management to
evaluate segment performance do not include restructur-
ing charges, asset impairment charges, acquisition-related
charges, gains or losses from the sale of businesses,
pension settlement charges, specifically identified tax
adjustments, and certain other items, if any, the exclusion
of which the Company believes improves comparability
and analysis. Accordingly, the term “segment operating
profits” is defined as the segment’s portion of “Income
before interest and income taxes” excluding those items.
General corporate expenses, with the exception of
restructuring charges, asset impairment charges,
acquisition-related charges, net interest expense and
income taxes, have been allocated as operating costs to
each of the Company’s reportable segments.
See Note 18 to the Company’s Consolidated Financial
Statements for more information on reportable segments.
Consumer Packaging
($ in millions)
2018
2017
% Change
Trade sales
Segment operating profits
Depreciation, depletion and
amortization
Capital spending
$2,360.0
224.5
$2,123.5
255.8
11.1%
(12.2)%
116.8
66.7
98.9
63.6
18.2%
4.8%
Sales increased year over year due to the April 12,
2018 acquisition of Highland Packaging, the October 1,
2018 acquisition of a composite can plant in Spain, and
the full-year impact of the March 14, 2017 acquisition of
Packaging Holdings and the July 24, 2017 acquisition of
Clear Lam. Higher selling prices in most of the segment’s
businesses, driven largely by raw material price increases,
were partially reduced by lower demand in Global Plastics.
Foreign currency translation added approximately
$14 million to segment trade sales year over year due to a
weaker U.S. dollar. Domestic sales were approximately
$1,676 million, up 12.9%, or $191 million, from 2017,
while international sales were approximately $684 million,
up 7.2%, or $46 million, from 2017.
Segment operating profits decreased by $31.3 million
year over year and operating profit margins of 9.5% were
down 253 basis points from 2017. The decreases in
S O N O C O 2 0 1 8 A N N U A L R E P O R T
25
SONOCO2018ANNUALREPORT I FORM10-K segment operating profits and operating profit margins
were largely driven by volume declines in Global Plastics
and the negative impact of changes in mix of products in
Global Rigid Paper Containers. These volume declines led
to manufacturing inefficiencies. The Company is in the
process of refocusing certain operations and is optimistic
that it will improve manufacturing performance and better
leverage the fixed cost profile. The negative impact of
volume declines and manufacturing inefficiencies was
partially offset by the positive impact of price cost and
increases from acquired businesses.
Capital spending in the segment included numerous
productivity projects and expansion of manufacturing
capabilities in North America (primarily flexible packaging
and plastics) and in Europe (primarily rigid paper
containers).
Display and Packaging
($ in millions)
2018
2017 % Change
Trade sales
Segment operating profits
Depreciation, depletion and
amortization
Capital spending
$592.3
13.3
$508.2
2.6
16.5%
405.0%
18.0
19.8
17.1
23.9
5.4%
(17.0)%
Domestic trade sales in the segment increased
$41 million, or 16.5%, to $290 million, while international
trade sales increased $43 million, or 16.6%, to
$302 million. The increase in domestic trade sales resulted
from increased volume at our new retail packaging fulfill-
ment center in Atlanta, Georgia, offset by lower volume in
retail security packaging. The increase in international
sales reflects the increases in activity at the Company’s
packaging center in Poland as well as the positive impact
of approximately $13 million from foreign currency trans-
lation as a result of a stronger Polish zloty relative to the
U.S. dollar year over year. The increase in segment operat-
ing profit was largely due to increased volumes both
domestically and internationally. These increases were
offset by continued losses at the new retail packaging
fulfillment center in Atlanta, Georgia. Despite continued
improvements at this packaging center, the Company
determined that it could not achieve acceptable margins
under the single-customer contract associated with this
facility and in the third quarter of 2018 exited the contract.
Capital spending in the segment was driven by
customer development and productivity related projects,
coupled with capacity expansion in Europe.
Paper and Industrial Converted Products
($ in millions)
2018
2017
% Change
Trade sales
Segment operating profits
Depreciation, depletion and
amortization
Capital spending
$1,911.0
211.1
$1,866.2
161.6
74.4
91.4
74.9
61.4
2.4%
30.7%
(0.6)%
48.8%
The main driver of the year-over-year increase in sales
was the acquisition of the remaining 70 percent interest in
the Conitex Sonoco joint venture on October 1, 2018.
Conitex Sonoco’s sales for the last three months of 2018
were approximately $62 million. This increase was offset
by volume declines in many of our tubes and cores busi-
nesses as well as an overall decline in sales price as mar-
ket prices for OCC on the whole were down from the
previous year. Total domestic sales in the segment
decreased $19 million, or 1.7%, to $1,109 million while
international sales increased $64 million, or 8.7%, to
$802 million.
Segment operating profit increased year over year,
driven by a positive price/cost relationship as the Com-
pany benefited from a strong global paper market and
global commercial excellence initiatives. The positive
price/cost relationship was partially offset by higher man-
agement incentives as well as wage and other fixed cost
inflation.
Although conditions improved for the corrugating
medium operation in 2018, the Company continues to
evaluate strategic alternatives for this operation.
Significant capital spending in the segment included
the modification of several paper machines in North Amer-
ica, numerous productivity projects, and IT investments.
Protective Solutions
($ in millions)
2018
2017 % Change
Trade sales
Segment operating profits
Depreciation, depletion and
amortization
Capital spending
$527.7
42.9
$538.8
42.4
(2.1)%
1.3%
27.0
5.9
26.8
19.0
.5%
(69.1)%
Sales declined slightly year over year, impacted mostly
by volume declines in automotive components, consumer
electronics and appliances offset by volume gains in
temperature-assured packaging and price increases.
Segment operating profit increased year over year due
to a positive price/cost relationship and manufacturing
productivity.
Domestic sales were $415 million in 2018 down
$11 million, or 3%, from 2017. International sales were flat
at $113 million.
Capital spending in the segment included numerous
productivity initiatives as well as customer-related projects
in our expanded foam protective packaging and
temperature-assured packaging businesses.
Financial position, liquidity and capital
resources
Cash flow
Operating activities
Cash flow from operations totaled $589.9 million in
2018 and $348.3 million in 2017. The year-over-year cash
flow increase of $241.6 million is attributable to the
$137.3 million increase in GAAP Net Income, which was
discussed above under Results of Operations, as well as
the factors discussed here. Lower pension and
postretirement expenses and decreased pension and
postretirement cash contributions resulted in a combined
year-over-year increase in operating cash flows of
$39.6 million. Working capital provided $27.7 million in
2018 compared to consuming $55.6 million in 2017; this
$83.3 million additional cash provision was largely driven
by changes in accounts receivable. Accounts receivable,
26
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K net of acquisitions, grew in 2017 due to a combination of
extended customer terms, changes in mix of sales, and
the timing of collections from certain customers. Con-
versely, in 2018, Accounts Receivable, net of acquisitions,
decreased due to improved collection efforts throughout
the year. Additionally, inventory consumed more cash in
2017 due to pre-buying certain raw materials at the end of
2017 in anticipation of price increases.
Non-cash asset impairment charges were $14.2 million
lower year over year, due largely to the fourth quarter
2017 impairment of a power generating facility at the
Company’s Hartsville manufacturing complex, which was
closed down in the first quarter of 2018 after being ren-
dered obsolete by the Company’s new biomass facility.
Similar charges did not repeat in 2018. The net benefit
from changes in deferred income tax and income tax
payable balances was $78.1 million lower in 2018 com-
pared with the previous year. The year-over-year decrease
is attributable to the significant changes in 2017 asso-
ciated with the Tax Act. These changes included recording
a liability for the new transition tax on certain accumulated
foreign earnings, partially offset by a reduction in the
Company’s net deferred tax liabilities which were reduced
as a result of the decrease in the federal tax rate from 35%
to 21%. While the Company continued to refine income
tax assets and liabilities during 2018, changes in 2018
were not as significant as in 2017. Non-cash share-based
compensation expenses were $2.8 million lower year over
year as expenses recognized in association with our
performance-based awards decreased, reflecting assump-
tions about actual performance against targeted perform-
ance metrics over the vesting period of the awards. Net
losses on disposition of assets totaled $8.6 million in 2018
compared with $2.0 million in 2017, a year-over-year
change of $6.6 million, driven by the loss on the exit from
a contract to operate a packaging center in Atlanta. The
Company’s 2018 acquisition of Conitex resulted in a fair
value assessment loss of $4.8 million on the Company’s
previously-held minority interest. Changes in accrued
expenses reflect a $19.2 million provision of cash in 2018
compared with a $14.6 million use of cash in 2017. The
greater provision in 2018 is primarily due to the higher
year-over-year management incentives and other accrued
expenses. Additionally, the 2017 provision was lower than
normal due to a non-recurring payment of an environ-
mental settlement in 2017. Changes in other assets and
liabilities used $18.9 million less cash in 2018 compared to
2017. This year-over-year decreased consumption is
largely attributable to the collection of various other
receivables outstanding at the end of 2017. Similar levels
of miscellaneous receivable items were not outstanding at
the end of 2018. Cash paid for income taxes was
$6.5 million higher year over year, which was due primarily
to the timing of payments and the transition tax imposed
by the Tax Act which is payable over a period of eight
years.
Cash flow from operations totaled $348.3 million in
2017 and $398.7 million in 2016, a year-over-year
decrease of $50.4 million. The $110.4 million decline in
GAAP Net Income reflects the non-recurrence of the 2016
gain on the sale of the Company’s rigid plastics blow
molding operations of $108.7 million, the cash impact of
which was reported as an investing activity. 2017 net
income also reflects higher pension and postretirement
expenses and increased pension and postretirement cash
contributions resulting in a combined year-over-year
decrease in operating cash flows of $28.6 million. Working
capital consumed $5.0 million more cash in 2017 than in
2016. Changes in inventory used $16.1 million of cash in
2017 versus $11.5 million in 2016, a higher year-over-year
use of cash of $4.6 million, primarily attributable to
pre-buying of certain raw materials at the end of 2017 in
anticipation of upcoming price increases. The combined
changes in accounts receivable and accounts payable
balances consumed approximately $39 million of cash
from operations in both 2017 and 2016. The increases in
year-end accounts receivable balances over the
respective prior years were due to a combination of fac-
tors including the timing of collections from certain
customers, changes in terms and sales mix by customer,
and changes in selling prices. Non-cash asset impairment
charges were $12.9 million higher year over year, due
largely to the fourth quarter 2017 impairment of a power
generating facility at the Company’s Hartsville manufactur-
ing complex, which was determined to have been ren-
dered obsolete by the Company’s new biomass facility
and closed in the first quarter of 2018. The net benefit
from changes in deferred income tax and income tax
payable balances was $25.1 million greater in 2017
compared with the previous year. The year-over-year
increase is attributable to the Tax Act, including the
recording of a liability for the new transition tax on certain
accumulated foreign earnings, partially offset by a reduc-
tion in the Company’s net deferred tax liabilities which
were reduced as a result of the decrease in the federal tax
rate from 35% to 21%. Non-cash share-based compensa-
tion expenses were $5.8 million lower year over year as
expenses recognized in association with our performance-
based awards decreased, reflecting assumptions about
actual performance against targeted performance metrics
over the vesting period of the awards. Net losses on dis-
position of assets totaled $2.0 million in 2017 compared
with $14.2 million in 2016, a year-over-year change of
$12.1 million, driven by the loss on the disposition of a
paperboard mill in France in 2016. Changes in accrued
expenses reflect a $14.6 million use of cash in 2017
compared with an $11.7 million use of cash in 2016. The
year-over-year change of $2.9 million was primarily driven
by the final settlement of Fox River-related environmental
claims in January 2017 and lower management incentive
accruals. Changes in other assets and liabilities used
$37.1 million of additional cash in 2017 compared to
2016, driven by $16.0 million in timing differences related
to certain non-income tax payments, $7.0 million related
to the timing of costs and associated reimbursements
related to the relocation of a facility, and a net change of
$5.7 million in the incremental costs of obtaining contracts
with certain customers. Cash paid for income taxes was
$37.8 million lower year over year due primarily to the
payment in 2016 of taxes arising from the gain on the sale
of the rigid plastics blow molding operations.
Investing activities
Cash used by investing activities was $444.1 million in
2018, compared with $564.6 million in 2017. The decline
in year-over-year use of cash is due in part to decreased
year-over-year acquisition activity. The Company’s various
2018 acquisitions consumed $277.2 million, whereas
acquisition spending in 2017 was higher at $383.7 million.
Also contributing to the year-over-year decrease in cash
S O N O C O 2 0 1 8 A N N U A L R E P O R T
27
SONOCO2018ANNUALREPORT I FORM10-K used by investing activities is an increase in proceeds from
the sale of assets. Proceeds in 2018 totaled $24.3 million
and included $17.2 million from the September 2018 sale
of equipment relating to a single-customer contract pack-
aging operation near Atlanta, Georgia, less a contract
termination fee. Proceeds from disposals in 2017 totaled
$5.3 million. Capital spending was $192.6 million in 2018,
compared with $188.9 million in 2017, a decrease of
$3.7 million. Capital spending is expected to total approx-
imately $205 million in 2019.
Cash used in investing activities was $564.6 million in
2017, compared with $3.1 million in 2016. The higher
year-over-year use of cash is due to a net $275.1 million
decrease in proceeds from the sale of assets. Proceeds in
2016 included $271.8 million from the November 2016
sale of the Company’s rigid plastics blow molding oper-
ations, partially offset by cash paid for the disposal of a
paper operation in France. Acquisition spending, net of
cash acquired, was $295.1 million higher year-over-year
as 2017 included the acquisitions of Packing Holdings and
Clear Lam, each of which was more meaningful than the
acquisition activity in 2016. Capital spending was
$188.9 million in 2017, compared with $186.7 million in
2016, an increase of $2.2 million.
Financing activities
Net cash used by financing activities increased
$476.9 million year over year as financing activities used
$273.7 million of cash in 2018, compared with a provision
of cash totaling $203.2 million in 2017. The year-over-year
change was driven primarily by lower net borrowings in
2018 compared to 2017. In both years borrowings were
used mostly to provide capital for acquisitions; however,
2018 acquisition activity was less than in 2017 and a
greater portion of 2018 activity was funded by cash on
hand. Outstanding debt was $1,385.2 million at
December 31, 2018 compared with at $1,447.3 million at
December 31, 2017. Cash dividends increased 5.4% to
$161.4 million in 2018 compared to $153.1 million in
2017, reflecting a $0.02 per share increase in the quarterly
dividend payment approved by the Board of Directors in
April 2018. On December 31, 2018, the Company paid
$35.0 million to purchase a joint venture partner’s
non-controlling interest in an Asian joint venture.
Net cash provided by financing activities totaled
$203.2 million in 2017 compared with a use of
$315.7 million in 2016, an increased provision of cash of
$518.9 million. This increase was driven primarily by
increased net borrowings which totaled $355.2 million in
2017 compared to net repayments of $65.1 million in
2016. Additionally, in 2016 the Company used
$106.7 million of cash to repurchase 2.2 million shares of
the Company’s common stock under an announced
buy-back program. The Company did not repurchase
shares under this program in 2017. Outstanding debt was
$1,447.3 million at December 31, 2017 compared with
$1,128.4 million at at December 31, 2016. These balances
reflect net borrowings of $355.2 million during the 12
months ending December 31, 2017. Cash dividends
increased 4.6% to $153.1 million compared to
$146.4 million in 2016, reflecting a $0.02 per share
increase in the quarterly dividend payment approved by
the Board of Directors in April 2017.
Current assets decreased year over year by
$44.4 million to $1,519.3 million at December 31, 2018,
and current liabilities increased by $83.0 million to
$1,083 million, resulting in a decrease in the Company’s
current ratio to 1.4 at December 31, 2018 from 1.6 at
December 31, 2017. The decrease in current assets was
largely due to the use of cash on hand to fund the Conitex
acquisition and decreases in working capital both of which
were partially offset by an increase from current assets
related to acquired businesses. The slight increase in cur-
rent liabilities was mostly due current liabilities associated
with acquired businesses.
Contractual obligations
The following table summarizes contractual obligations at December 31, 2018:
($ in millions)
Debt obligations
Interest payments1
Operating leases
Transition tax under Tax Act2
Income tax contingencies3
Purchase obligations4
Total
2019
2020-2021
2022-2023 Beyond 2023 Uncertain
Payments Due In
$1,385.2
821.7
263.4
61.8
15.1
164.5
$195.4
46.4
$ 48.2
—
—
81.1
$457.4
90.8
$ 74.2
12.9
—
67.0
$702.3
$126.0
69.3
$ 48.7
18.5
—
16.4
$278.9
$
$ 606.3
615.2
92.3
30.4
—
—
$1,344.2
$ —
—
—
—
15.1
—
$15.1
Total contractual obligations5
$2,711.7
$371.1
1
Includes interest payments on outstanding fixed-rate, long-term debt obligations, as well as financing fees on the
backstop line of credit.
2 The Company recognized a transition tax of $80.6 million on certain accumulated foreign earnings in order to comply
with the Tax Act. The liability for this tax is payable in installments through 2025.
3 Due to the nature of this obligation, the Company is unable to estimate the timing of the cash outflows. Includes
gross unrecognized tax benefits of $14.4 million, plus accrued interest associated with the unrecognized tax benefit
of $2.0 million, adjusted for the deferred tax benefit associated with the future deduction of unrecognized tax benefits
and the accrued interest of $0.9 million and $0.4 million, respectively.
Includes only long-term contractual commitments. (Does not include short-term obligations for the purchase of goods
and services used in the ordinary course of business.)
4
5 Excludes potential cash funding requirements of the Company’s retirement plans and retiree health and life insurance
plans.
28
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K Capital resources
The Company’s cash balances are held in numerous
locations throughout the world. At December 31, 2018
and 2017, approximately $102.3 million and
$238.4 million, respectively, of the Company’s reported
cash and cash equivalents balances of $120.4 million and
$254.9 million, respectively, were held outside of the
United States by its foreign subsidiaries. Cash held outside
of the United States is available to meet local liquidity
needs, or for capital expenditures, acquisitions, and other
offshore growth opportunities. As the Company enjoys
ample domestic liquidity through a combination of operat-
ing cash flow generation and access to bank and capital
markets borrowings, we have generally considered our
foreign unremitted earnings to be indefinitely invested out-
side the United States and currently have no plans to
repatriate such earnings, other than excess cash balances
that can be repatriated at minimal tax cost. Accordingly,
as of December 31, 2018, the Company is not providing
for taxes on these amounts for financial reporting pur-
poses. Computation of the potential deferred tax liability
associated with unremitted earnings deemed to be indef-
initely reinvested is not practicable.
The Company’s total debt at December 31, 2018, was
$1,385 million, a year-over-year decrease of $62 million
driven primarily by the $88 million repayment of the
$250 million term loan used to finance the Clear Lam and
Packaging Holdings acquisitions which was partially offset
by an increase in foreign debt. The Company had
$120 million of commercial paper outstanding at
December 31, 2018 and $124 million at December 31,
2017.
The Company operates a $350 million commercial
paper program, supported by a $500 million five-year
revolving credit facility. In July 2017, the Company entered
into a new credit agreement with a syndicate of eight
banks for that revolving facility, together with a
$250 million five-year term loan. The revolving bank credit
facility is committed through July 2022. If circumstances
were to prevent the Company from issuing commercial
paper, it has the contractual right to draw funds directly on
the underlying revolving bank credit facility. Borrowings
under the credit agreement may be prepaid at any time at
the discretion of the Company and the term loan has
amortization payments totaling $12.5 million per year.
During 2018, the Company prepaid an additional
$75 million of the term loan. On April 12, 2018, the Com-
pany entered into a new $100 million, 364-day term loan
facility in conjunction with the purchase of Highland Pack-
aging. The Company subsequently repaid this loan in its
entirety over the second and third quarters of 2018 using
cash generated from operations.
The Company uses a notional pooling arrangement
with an international bank to help manage global liquidity
requirements. Under this pooling arrangement, the Com-
pany and its participating subsidiaries may maintain either
a cash deposit or borrowing position through local cur-
rency accounts with the bank, so long as the aggregate
position of the global pool is a notionally calculated net
cash deposit. Because it maintains a security interest in
the cash deposits, and has the right to offset the cash
deposits against the borrowings, the bank provides the
Company and its participating subsidiaries favorable inter-
est terms on both.
Acquisitions and internal investments are key elements
of the Company’s growth strategy. The Company believes
that cash on hand, cash generated from operations and
borrowing capacity will enable it to support this strategy.
Although the Company believes that it has excess borrow-
ing capacity beyond its current lines, there can be no
assurance that such financing would be available or, if so,
at terms that are acceptable to the Company.
The net underfunded position of the Company’s various
U.S and international defined benefit pension and post-
retirement plans was approximately $369 million at the
end of 2018. During 2018, the Company contributed
approximately $25 million to its benefit plans. The Com-
pany anticipates that benefit plan contributions in 2019 will
total approximately $31 million. Future funding require-
ments will depend largely on actual investment returns and
future actuarial assumptions. Participation in the U.S.
qualified defined benefit pension plan is frozen for salaried
and non-union hourly U.S. employees hired on or after
January 1, 2004. In February 2009, the plan was further
amended to freeze service credit earned effective
December 31, 2018. This change is expected to moder-
ately reduce the volatility of long-term funding exposure
and expenses.
Total equity increased $42 million during 2018 as net
income of $315 million was partially offset by an other
comprehensive loss of $77 million, dividends of
$163 million, purchase of a noncontrolling interest of
$35 million, stock-based compensation of $11 million and
share repurchases of $15 million. The primary compo-
nents of other comprehensive loss were a $55 million
translation loss from the impact of a stronger U.S. dollar
on the Company’s foreign investments and additional
actuarial losses totaling $20 million, net of tax, in the
Company’s various defined benefit plans resulting primarily
from lower than expected market performance of plan
assets in 2018. Total equity increased $175 million during
2017 as net income of $177 million and other compre-
hensive income totaling $146 million were partially offset
by dividends of $155 million, stock-based compensation
of $13 million and share repurchases of $6 million. The
primary components of other comprehensive gain were an
$89 million translation gain from the impact of a weaker
U.S. dollar on the Company’s foreign investments and
additional actuarial gains totaling $60 million, net of tax, in
the Company’s various defined benefit plans resulting
primarily from higher than expected market performance
of plan assets in 2017.
On February 10, 2016, the Company’s Board of Direc-
tors authorized the repurchase of up to 5 million shares of
the Company’s common stock. During 2016, a total of
2.03 million shares were repurchased under this author-
ization at a cost of $100 million. No shares were
repurchased under this authorization during 2017 or 2018.
Accordingly, at December 31, 2018 a total of 2.97 million
shares remain available for repurchase under this author-
ization.
Although the ultimate determination of whether to pay
dividends is within the sole discretion of the Board of
Directors, the Company plans to increase dividends as
earnings grow. Dividends per common share were $1.62
in 2018, $1.54 in 2017 and $1.46 in 2016. On Febru-
ary 13, 2019, the Company declared a regular quarterly
dividend of $0.41 per common share payable on March 8,
2019, to shareholders of record on February 27, 2019.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
29
SONOCO2018ANNUALREPORT I FORM10-K Off-balance sheet arrangements
The Company had no material off-balance sheet
arrangements at December 31, 2018.
Risk management
As a result of operating globally, the Company is
exposed to changes in foreign exchange rates. The
exposure is well diversified, as the Company’s facilities are
spread throughout the world, and the Company generally
sells in the same countries where it produces. The Com-
pany monitors these exposures and may use traditional
currency swaps and forward exchange contracts to hedge
a portion of forecasted transactions that are denominated
in foreign currencies, foreign currency assets and liabilities
or net investment in foreign subsidiaries. The Company’s
foreign operations are exposed to political and cultural
risks, but the risks are mitigated by diversification and the
relative stability of the countries in which the Company has
significant operations.
Prior to July 1, 2015, the Company used Venezuela’s
official exchange rate to report the results of its operations
in Venezuela. As a result of significant inflationary
increases, and to avoid distortion of its consolidated
results from translation of its Venezuelan operations, effec-
tive July 1, 2015, the Company began translating its
Venezuelan operating results and all monetary assets and
liabilities in Venezuela using an alternative rate (currently
known as the DICOM rate). At December 31, 2018, the
carrying value of the Company’s net investment in its
Venezuelan operations was approximately $2.0 million. In
addition, at December 31, 2018, the Company’s Accumu-
lated Other Comprehensive Loss included a cumulative
translation loss of $3.8 million related to its Venezuela
operations which would need to be reclassified to net
income in the event of a complete exit of the business or a
deconsolidation of these operations.
The Company is a purchaser of various raw material
inputs such as recovered paper, energy, steel, aluminum
and plastic resin. The Company generally does not engage
in significant hedging activities for these purchases, other
than for energy and, from time to time, aluminum, because
there is usually a high correlation between the primary
input costs and the ultimate selling price of its products.
Inputs are generally purchased at market or at fixed prices
that are established with individual suppliers as part of the
purchase process for quantities expected to be consumed
in the ordinary course of business. On occasion, where
the correlation between selling price and input price is less
direct, the Company may enter into derivative contracts
such as futures or swaps to manage the effect of price
fluctuations.
In addition, the Company may, from time to time, use
traditional, unleveraged interest-rate swaps to manage its
mix of fixed and variable rate debt and to control its
exposure to interest rate movements within select ranges.
At December 31, 2018, the Company had derivative
contracts outstanding to hedge the price on a portion of
anticipated commodity and energy purchases as well as to
hedge certain foreign exchange risks for various periods
through December 2019. These contracts included swaps
to hedge the purchase price of approximately 7.0 mil-
lion MMBTUs of natural gas in the U.S. and Canada repre-
senting approximately 71% and 31% of anticipated natural
gas usage for 2019 and 2020. Additionally, the Company
had swap contracts covering 4,082 metric tons of alumi-
num representing approximately 51% of anticipated usage
for 2019. The aluminum hedges relate to fixed-price cus-
tomer contracts. At December 31, 2018, the Company
had a number of foreign currency contracts in place for
both designated and undesignated hedges of either
anticipated foreign currency denominated transactions or
existing financial assets and liabilities. At December 31,
2018, the total notional amount of these contracts, in U.S.
dollar terms, was $147 million, of which $65 million related
to the Canadian dollar, $40 million to the Mexican peso,
$19 million to the Polish Zloty and $23 million to all other
currencies.
The total fair market value of the Company’s derivatives
was a net unfavorable position of $3.1 million and
$1.3 million at at December 31, 2018, and December 31,
2017, respectively. Derivatives are marked to fair value
using published market prices, if available, or using esti-
mated values based on current price quotes and a dis-
counted cash flow model. See Note 10 to the
Consolidated Financial Statements for more information on
financial instruments.
The Company is subject to various federal, state and
local environmental laws and regulations concerning,
among other matters, solid waste disposal, wastewater
effluent and air emissions. Although the costs of com-
pliance have not been significant due to the nature of the
materials and processes used in manufacturing oper-
ations, such laws also make generators of hazardous
wastes and their legal successors financially responsible
for the cleanup of sites contaminated by those wastes.
The Company has been named a potentially responsible
party at several environmentally contaminated sites. These
regulatory actions and a small number of private party
lawsuits are believed to represent the Company’s largest
potential environmental liabilities. The Company has
accrued $20.1 million at December 31, 2018, compared
with $20.3 million at December 31, 2017, with respect to
these sites. See “Environmental Charges,” Item 3 – Legal
Proceedings and Note 16 to the Consolidated Financial
Statements for more information on environmental mat-
ters.
Results of operations – 2017 versus 2016
Consolidated net sales for 2017 were $5.0 billion, a
$254 million, or 5.3%, increase from 2016. The compo-
nents of the sales change were:
($ in millions)
Volume/mix
Selling price
Acquisitions and divestitures, net
Foreign currency translation and other, net
Total sales increase
$ (19)
182
69
22
$254
Sales volume/mix was essentially flat as organic volume
growth and a favorable change in product mix in a number
of our businesses mostly offset volume declines in rigid
paper containers and automotive components. For the
most part, price changes for the Company’s products
were driven by changes in the underlying raw materials
costs. In 2017, many of the Company’s primary raw
materials saw increases in their market prices; especially
OCC which saw an average increase of more than 50%
year over year. This increase most directly affected the
30
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K Paper and Industrial Converted Products segment while
the increase in other raw materials, mainly resins, most
directly affected the Consumer Packaging segment. While
the full-year average OCC price was up year over year,
prices during the year were volatile with periods of sharp
increases and decreases resulting in significant margin
swings. However, the Company was able to achieve an
overall positive price cost relationship. While the Compa-
ny’s 2017 and 2016 acquisitions added more than
$259 million to comparable year-over-year sales, the
impact was mostly offset by sales decreases of
$191 million related to dispositions, the most significant of
which was the 2016 sale of the Company’s rigid plastics
blow molding operations. Finally, foreign exchange rate
changes increased year-over-year sales as almost all of
the foreign currencies in which the Company conducts
business strengthened slightly in relation to the U.S. dollar.
Total domestic sales were $3.3 billion, up 4.9% from
2016 levels. International sales were $1.8 billion, up 6.1%
from 2016 with most of the increase driven by growth in
the Company’s industrial businesses and the impact of
foreign currency translation.
Costs and expenses/margins
Cost of sales was up $241.4 million in 2017, or 6.3%,
from the prior year primarily due to raw material price
increases and additional volume from acquired busi-
nesses, net of disposed businesses. Despite the positive
price/cost relationship and modest productivity improve-
ments, an unfavorable mix of sales and higher labor and
other costs resulted in gross profit margins declining to
19.0% in 2017 from 19.8% in the prior year.
Selling, general and administrative expenses increased
$4.8 million, or 0.9%, and were 10.1% of sales compared
to 10.5% of sales in 2016. Acquisition-related costs
increased $9.2 million from 2016 to $13.8 million. Absent
this item, selling, general and administrative expenses
were essentially flat year over year.
Restructuring and restructuring-related asset impair-
ment charges totaled $38.4 million and $42.9 million in
2017 and 2016, respectively. Additional information
regarding restructuring actions and impairments is pro-
vided in Note 5 to the Company’s Consolidated Financial
Statements.
GAAP operating profit was 8.2% of sales in 2017
compared to 10.6% in 2016. The largest contributor to
this decline was the 2016 gain on the sale of the Compa-
ny’s rigid plastics blow molding business. Base operating
profit declined to 9.2% of sales in 2017 compared to 9.4%
in 2016. The year-over-year decrease in gross profit mar-
gin discussed above contributed to the declines in both
GAAP operating profit and Base operating profit.
Non-operating pension costs increased $33.3 million in
2017 to a total of $45.1 million, compared with
$11.8 million in 2016. In February 2017, the Company ini-
tiated a program to settle a portion of its pension liability
related to terminated vested participants in the U.S. quali-
fied retirement plans through either a single, lump-sum
payment or the purchase of an annuity. During the course
of the program, the Company successfully settled approx-
imately 47% of the projected benefit obligation of the
terminated vested plan participants. As a result of these
and other smaller settlements, the Company recognized
non-cash settlement charges totaling $32.8 million in
2017.
Research and development costs, all of which were
charged to expense, were $21 million in 2017 and
$22.5 million in 2016.
Net interest expense totaled $52.7 million for the year
ended December 31, 2017, compared with $51.6 million
in 2016. The increase was due primarily to higher average
debt levels as the Company used debt to fund acquis-
itions.
Reportable segments
The Company reports its financial results in four report-
able segments – Consumer Packaging, Display and Pack-
aging, Paper and Industrial Converted Products, and
Protective Solutions.
Consolidated operating profits, reported as “Operating
profit” on the Consolidated Statements of Income, are
comprised of the following:
($ in millions)
2017
2016 % Change
Segment operating profit
Consumer Packaging
Display and Packaging
Paper and Industrial
Converted Products
Protective Solutions
Restructuring/Asset impairment
charges
Acquisition-related costs
Other non-operational gains,
$255.8
2.6
$245.6
14.9
4.2%
(82.6)%
161.6
42.4
136.5
51.8
18.4%
(18.1)%
(38.4)
(13.8)
(42.9)
(4.6)
(10.5)%
200.0%
net
2.3
103.4
Consolidated operating profits
$412.5
$504.7
(97.8)%
(18.3)%
Consumer Packaging
($ in millions)
2017
2016
% Change
Trade sales
Segment operating profits
Depreciation, depletion and
amortization
Capital spending
$2,123.5
255.8
$2,043.1
245.6
3.9%
4.1%
98.9
63.6
88.9
86.4
11.3%
(26.3)%
Sales increased year over year due to the March 14,
2017 acquisition of Packaging Holdings, the July 24, 2017
acquisition of Clear Lam and the full year impact of the
November 1, 2016 acquisition of PPI. These increases
were substantially offset by the reduction in year-over-year
sales due to the November 2016 disposition of the
Company’s rigid plastic blow molding operations. Higher
selling prices in most of the segment’s businesses, driven
largely by raw material price increases, were mostly offset
by volume declines in Rigid Paper Containers North Amer-
ica and Europe as well as Flexible Packaging. Foreign
currency translation added approximately $5 million to
segment trade sales year over year due to a weaker U.S.
dollar. Domestic sales were approximately $1,461 million,
up 6.8%, or $93 million, from 2016, while international
sales were approximately $663 million, down 1.9%, or
$13 million, from 2016.
Segment operating profits increased by $10.0 million
year over year and operating profit margins of 12.0% were
unchanged from 2016. The increase in segment operating
profits was largely driven by solid gains in manufacturing
productivity and the positive impact of the relationship
between selling prices and costs. These benefits were
S O N O C O 2 0 1 8 A N N U A L R E P O R T
31
SONOCO2018ANNUALREPORT I FORM10-K partially offset by volume declines in global composite
cans and flexible packaging as well as inflation. Material
purchasing and logistics savings were key drivers of the
positive price/cost relationship. At an operating profit level,
the negative impact of divestitures somewhat exceeded
the benefit of acquisitions largely due to timing.
Capital spending in the segment included numerous
productivity projects and expansion of manufacturing
capabilities in North America primarily in flexible packaging
and plastics, and expansion of manufacturing capabilities
in Europe in rigid paper containers.
Display and Packaging
($ in millions)
2017
2016 % Change
Trade sales
Segment operating profits
Depreciation, depletion and
amortization
Capital spending
$508.2
2.6
$520.4
14.9
(2.3)%
(82.4)%
17.1
23.9
16.7
11.5
2.2%
107.1%
Domestic trade sales in the segment increased
$3.2 million, or 1.3%, to $249 million, while international
trade sales decreased $15 million, or 5.6%, to
$259 million. The increase in domestic trade sales resulted
from increased volume at our new retail packaging fulfill-
ment center in Atlanta, Georgia, offset by lower volume in
retail security packaging and the impact of the July 2016
sale of our retail security packaging facility in Juncos,
Puerto Rico. The decrease in international sales reflects
the Company’s exit from a packaging center fulfillment
contract with a customer resulting in the transition of the
operation of certain facilities in Mexico and Brazil back to
the customer during the first half of 2016. This decline in
sales was somewhat offset by the positive impact of
approximately $10 million from foreign currency translation
as a result of a stronger Polish zloty relative to the U.S.
dollar year over year.
The decrease in segment operating profit was largely
due to inefficiencies and higher than expected operating
costs associated with the ramp up of production at the
new pack center in Atlanta. Higher than anticipated pro-
duction requirements, primarily in response to multiple
hurricanes, exceeded the new facility’s capability to oper-
ate efficiently with the installed equipment and a relatively
inexperienced workforce that has also incurred a higher
than expected turnover rate.
Capital spending in the segment was driven by a sig-
nificant customer development project in North America
coupled with expansion of manufacturing capabilities in
Europe.
Paper and Industrial Converted Products
($ in millions)
2017
2016
% Change
Trade sales
Segment operating profits
Depreciation, depletion and
amortization
Capital spending
$1,866.2
161.6
$1,693.5
136.5
10.2%
18.4%
74.9
61.4
74.7
60.6
0.1%
1.4%
On average, market costs for recovered paper in the
U.S. were higher year over year resulting in higher average
selling prices in all of the segment’s domestic businesses.
Selling prices were also higher in Brazil and the Andean
region, primarily due to overall inflation, and were up in
Europe due to the pass through of higher material costs in
that market. Total volume/mix gains were modest in the
segment as gains in Europe, which were due to a
combination of market share gains and regional
expansion, and volume increases in US and Canadian
Paper were mostly offset by volume declines in other busi-
nesses, particularly US and Canadian Tubes and Cores
and Recycling. Changes in foreign exchange rates had lit-
tle impact on reported sales in the segment. Total domes-
tic sales in the segment increased $103 million, or 10.1%,
to $1,128 million while international sales increased
$70 million, or 10.4%, to $739 million.
Segment operating profit increased year over year,
driven by a positive price/cost relationship as the Com-
pany was able to favorably navigate dramatic movements
in Old Corrugated Containers (OCC) market prices.
Improved market conditions resulted in a strong turn-
around in the Company’s corrugating medium operation in
2017. Operating profit was also benefited by increases in
volume and positive changes in the mix of products sold,
mostly in Europe and Sonoco Reels, and modest pro-
ductivity gains. These favorable factors were partially off-
set by wage and other fixed cost inflation.
Although conditions improved for the corrugating
medium operation in 2017, and the Company’s outlook for
the operation is for continued improvement in 2018, the
Company continues to evaluate strategic alternatives for
this operation.
Significant capital spending in the segment included
the modification of several paper machines in North Amer-
ica, numerous productivity projects, and IT investments.
Protective Solutions
($ in millions)
2017
2016 % Change
Trade sales
Segment operating profits
Depreciation, depletion and
amortization
Capital spending
$538.8
42.4
$525.9
51.8
2.4%
(18.2)%
26.8
19.0
24.8
12.9
7.9%
48.0%
Sales increased year over year due to the acquisitions
of Laminar Medica and AAR Corporation, each of which
was acquired in the second half of 2016. Higher sales
prices were offset by volume declines, mostly in automo-
tive components.
Segment operating profit decreased year over year due
to volume declines and associated productivity losses. A
negative price/cost relationship and increases in labor,
overhead and other costs also negatively impacted profits
year over year.
Domestic sales were $426 million in 2017 down
$10 million, or 2%, from 2016. International sales
increased to $113 million up $23 million, or 26%. The
increase in international sales was driven by prior-year
acquisitions.
Capital spending in the segment included significant
customer development projects to support our
temperature-assured packaging business.
32
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K Critical accounting policies and estimates
Management’s discussion and analysis of the Compa-
ny’s financial condition and results of operations are based
upon the Company’s Consolidated Financial Statements,
which have been prepared in accordance with accounting
principles generally accepted in the United States (U.S.
GAAP). The preparation of financial statements in con-
formity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and
expenses during the reporting period. The Company eval-
uates these estimates and assumptions on an ongoing
basis, including but not limited to those related to
inventories, bad debts, derivatives, income taxes, share-
based compensation, goodwill, intangible assets,
restructuring, pension and other postretirement benefits,
environmental liabilities, and contingencies and litigation.
Estimates and assumptions are based on historical and
other factors believed to be reasonable under the circum-
stances. The results of these estimates may form the basis
of the carrying value of certain assets and liabilities and
may not be readily apparent from other sources. Actual
results could differ from those estimates. The impact of
and any associated risks related to estimates, assump-
tions and accounting policies are discussed in Manage-
ment’s Discussion and Analysis of Financial Condition and
Results of Operations, as well as in the Notes to the
Consolidated Financial Statements, if applicable, where
such estimates, assumptions and accounting policies
affect the Company’s reported and expected financial
results.
The Company believes the accounting policies dis-
cussed in the Notes to the Consolidated Financial State-
ments included in Item 8 of this Annual Report on Form
10-K are critical to understanding the results of its oper-
ations. The following discussion represents those policies
that involve the more significant judgments and estimates
used in the preparation of the Company’s Consolidated
Financial Statements.
Business combinations
The Company’s acquisitions of businesses are
accounted for in accordance with ASC 805, “Business
Combinations.” The Company recognizes the identifiable
assets acquired, the liabilities assumed, and any non-
controlling interests in an acquired business at their fair
values as of the date of acquisition. Goodwill is measured
as the excess of consideration transferred, also measured
at fair value, over the net of the acquisition date fair values
of the identifiable assets acquired and liabilities assumed.
The acquisition method of accounting requires us to make
significant estimates and assumptions regarding the fair
values of the elements of a business combination as of the
date of acquisition, including the fair values of identifiable
intangible assets, deferred tax asset valuation allowances,
liabilities including those related to debt, pensions and
other postretirement plans, uncertain tax positions, con-
tingent consideration and contingencies. This method also
requires us to refine these estimates over a measurement
period not to exceed one year to reflect new information
obtained about facts and circumstances that existed as of
the acquisition date that, if known, would have affected
the measurement of the amounts recognized as of that
date. If we are required to adjust provisional amounts that
we have recorded for the fair values of assets and liabilities
in connection with acquisitions, these adjustments could
have a material impact on our financial condition and
results of operations.
Significant estimates and assumptions in estimating the
fair value of acquired customer relationships, technology,
and other identifiable intangible assets include future cash
flows that we expect to generate from the acquired
assets. If the subsequent actual results and updated pro-
jections of the underlying business activity change com-
pared with the assumptions and projections used to
develop these values, we could record impairment
charges. In addition, we have estimated the economic
lives of certain acquired assets and these lives are used to
calculate depreciation and amortization expense. If our
estimates of the economic lives change, depreciation or
amortization expenses could be increased or decreased,
or the acquired asset could be impaired.
Impairment of long-lived, intangible and other assets
Assumptions and estimates used in the evaluation of
potential impairment can result in adjustments affecting
the carrying values of long-lived, intangible and other
assets and the recognition of impairment expense in the
Company’s Consolidated Financial Statements. The
Company evaluates its long-lived assets (property, plant
and equipment), definite-lived intangible assets and other
assets (including notes receivable and equity investments)
for impairment whenever indicators of impairment exist, or
when it commits to sell the asset. If the sum of the undis-
counted expected future cash flows from a long-lived
asset or definite-lived intangible asset group is less than
the carrying value of that asset group, an asset impairment
charge is recognized. Key assumptions and estimates
used in the cash flow model generally include price levels,
sales growth, profit margins and asset life. The amount of
an impairment charge, if any, is calculated as the excess
of the asset’s carrying value over its fair value, generally
represented by the discounted future cash flows from that
asset or, in the case of assets the Company evaluates for
sale, as estimated proceeds less costs to sell. The Com-
pany takes into consideration historical data and experi-
ence together with all other relevant information available
when estimating the fair values of its assets. However, fair
values that could be realized in actual transactions may
differ from the estimates used to evaluate impairment. In
addition, changes in the assumptions and estimates may
result in a different conclusion regarding impairment.
Impairment of goodwill
The Company assesses its goodwill for impairment
annually and from time to time when warranted by the
facts and circumstances surrounding individual reporting
units or the Company as a whole. If the carrying value of a
reporting unit exceeds the implied fair value of that report-
ing unit, an impairment charge to goodwill is recognized
for the excess. The Company’s reporting units are the
same as, or one level below, its operating segments, as
determined in accordance with ASC 350.
The Company completed its most recent annual good-
will impairment testing during the third quarter of 2018.
For testing purposes, the Company’s assessment of each
reporting unit’s estimated fair value and likelihood of
impairment included both a quantitative and qualitative
evaluation. The quantitative tests, described further below,
S O N O C O 2 0 1 8 A N N U A L R E P O R T
33
SONOCO2018ANNUALREPORT I FORM10-K considered factors such as current year operating perform-
ance as compared to prior projections and implied fair
values from comparable trading and transaction multiples.
The qualitative evaluations considered factors such as the
macroeconomic environment, Company stock price and
market capitalization movement, business strategy
changes, and significant customer wins and losses.
When performing a quantitative analysis, the Company
estimates the fair value of its reporting units using a dis-
counted cash flow model based on projections of future
years’ operating results and associated cash flows, vali-
dated by observed comparable trading and transaction
multiples. The Company’s model discounts projected
future cash flows, forecasted over a ten-year period, with
an estimated residual growth rate. The Company’s projec-
tions incorporate management’s estimates of the most-
likely expected future results, including significant
assumptions and estimates related to, among other
things: sales volumes and prices, new business, profit
margins, income taxes, capital expenditures, changes in
working capital requirements and operating margins and
application of a discount rate. Projected future cash flows
are discounted to present value using an assumed dis-
count rate that management believes is appropriate for the
reporting unit.
The Company’s assessments, whether qualitative or
quantitative, incorporate management’s expectations for
the future, including forecasted growth rates and/or mar-
gin improvements. Therefore, should there be changes in
the relevant facts and circumstances and/or expectations,
management’s conclusion regarding goodwill impairment
may change as well. Management’s projections related to
revenue growth and/or margin improvements are based
on a combination of factors, including expectations for
volume growth with existing customers and customer
retention, product expansion, changes in price/cost rela-
tionships, productivity gains, fixed cost leverage, and sta-
bility or improvement in general economic conditions.
In considering the level of uncertainty regarding the
potential for goodwill impairment, management has con-
cluded that any such impairment would, in most cases,
likely be the result of adverse changes in more than one
assumption. Management considers the assumptions
used to be its best estimates across a range of possible
outcomes based on available evidence at the time of the
assessment. Other than in Display and Packaging, which
is discussed below, there is no specific singular event or
single change in circumstances management has identi-
fied that it believes could reasonably result in a change to
expected future results in any of its reporting units suffi-
cient to result in goodwill impairment. In management’s
opinion, a change of such magnitude would more likely be
the result of changes to some combination of the factors
identified above, a general deterioration in competitive
position, introduction of a superior technology, significant
unexpected changes in customer preferences, an inability
to pass through significant raw material cost increases,
and other such items as identified in “Item 1A. Risk Fac-
tors” on pages 8-16 of the Company’s 2018 Annual
Report on Form 10-K.
Although no reporting units failed the annual impair-
ment test noted above, in management’s opinion, the
goodwill of the Display and Packaging reporting unit is at
risk of impairment in the near term if operating perform-
ance does not improve in line with management’s expect-
ations, or if there is a negative change in the long-term
outlook for the business or in other factors such as the
discount rate. The Display and Packaging reporting unit
designs, manufactures, assembles, packs and distributes
temporary, semi-permanent and permanent
point-of-purchase displays; provides supply chain
management services, including contract packing, fulfill-
ment and scalable service centers; and manufactures
retail packaging, including printed backer cards, thermo-
formed blisters and heat sealing equipment. The current
goodwill impairment analysis incorporates management’s
expectations for moderate sales growth and mild
improvements to profit margin percentages which reflects
the estimated benefits of future productivity initiatives. A
large portion of expected sales in this reporting unit is
concentrated in several major customers and if the busi-
ness with any of these customers is lost or significantly
declines, or other projected synergies and productivity
gains are not realized, a goodwill impairment charge could
be incurred. Total goodwill associated with this reporting
unit was approximately $203 million at December 31,
2018. Based on the latest annual impairment test, the
estimated fair value of the Display and Packaging reporting
unit is approximately equal to its carrying value.
In its 2018 annual goodwill impairment analysis, pro-
jected future cash flows for Display and Packaging were
discounted at 10.2%. Based on the discounted cash flow
model and holding other valuation assumptions constant,
if Display and Packaging projected operating profits
across all future periods are reduced approximately 10%,
or the discount rate is increased by one hundred basis
points, the Company estimates a pre-tax goodwill impair-
ment charge of approximately $25 million would be
incurred.
During the time subsequent to the annual evaluation,
and at December 31, 2018, the Company considered
whether any events and/or changes in circumstances had
resulted in the likelihood that the goodwill of any of its
reporting units may have been impaired. It is manage-
ment’s opinion that no such events have occurred.
Income taxes
The Company follows ASC 740, Accounting for Income
Taxes, which requires a reduction of the carrying amounts
of deferred tax assets by recording a valuation allowance
if, based on the available evidence, it is more likely than
not such assets will not be realized. Deferred tax assets
generally represent expenses that have been recognized
for financial reporting purposes, but for which the corre-
sponding tax deductions will occur in future periods. The
valuation of deferred tax assets requires judgment in
assessing the likely future tax consequences of events that
have been recognized in our financial statements or tax
returns and future profitability. Our accounting for deferred
tax consequences represents our best estimate of those
future events. Changes in our current estimates, due to
unanticipated events or otherwise, could have a material
impact on our financial condition and results of operations.
For those tax positions where it is more likely than not
that a tax benefit will be sustained, the Company has
recorded the largest amount of tax benefit with a greater
than 50% likelihood of being realized upon ultimate
settlement with a taxing authority having full knowledge of
all relevant information. For those positions not meeting
the more-likely-than-not standard, no tax benefit has been
34
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K recognized in the financial statements. Associated interest
has also been recognized, where applicable.
As previously disclosed, the Company received a draft
Notice of Proposed Adjustment (“NOPA”) from the Internal
Revenue Service (IRS) in February 2017 proposing an
adjustment to income for the 2013 tax year based on the
IRS’s recharacterization of a distribution of an inter-
company note made in 2012, and the subsequent repay-
ment of the note over the course of 2013, as if it were a
cash distribution made in 2013. In March 2017, the
Company received a draft NOPA proposing penalties of
$18 million associated with the IRS’s recharacterization,
as well as an Information Document Request (“IDR”)
requesting the Company’s analysis of why such penalties
should not apply. The Company responded to this IDR in
April 2017. On October 5, 2017, the Company received
two revised draft NOPAs proposing the same adjustments
and penalties as in the prior NOPAs. On November 14,
2017, the Company received two final NOPAs proposing
the same adjustments and penalties as in the prior
NOPAs. On November 20, 2017, the Company received a
Revenue Agents Report (“RAR”) that included the same
adjustments and penalties as in the prior NOPAs. At the
time of the distribution in 2012, it was characterized as a
dividend to the extent of earnings and profits, with the
remainder as a tax free return of basis and taxable capital
gain. As the IRS proposes to recharacterize the dis-
tribution, the entire distribution would be characterized as
a dividend. The incremental tax liability associated with the
income adjustment proposed in the RAR would be approx-
imately $89 million, excluding interest and the previously
referenced penalties. On January 22, 2018, the Company
filed a protest to the proposed deficiency with the IRS. The
Company received a rebuttal of its protest from the IRS on
July 10, 2018, and the matter has now been referred to
the Appeals Division of the IRS. The Company strongly
believes the position of the IRS with regard to this matter
is inconsistent with applicable tax laws and existing Treas-
ury regulations, and that the Company’s previously
reported income tax provision for the year in question is
appropriate. However, there can be no assurance that this
matter will be resolved in the Company’s favor. Regardless
of whether the matter is resolved in the Company’s favor,
the final resolution of this matter could be expensive and
time consuming to defend and/or settle. While the Com-
pany believes that the amount of tax originally paid with
respect to this distribution is correct, and accordingly has
not provided additional reserve for tax uncertainty, there is
still a possibility that an adverse outcome of the matter
could have a material effect on its results of operations
and financial condition.
The estimate for the potential outcome of any uncertain
tax issue is highly judgmental. The Company believes it
has adequately provided for any reasonably foreseeable
outcome related to these matters. However, future results
may include favorable or unfavorable adjustments to esti-
mated tax liabilities in the period the assessments are
made or resolved or when statutes of limitations on poten-
tial assessments expire. Additionally, the jurisdictions in
which earnings or deductions are realized may differ from
current estimates. As a result, the eventual resolution of
these matters could have a different impact on the effec-
tive rate than currently reflected or expected.
Stock-based compensation plans
The Company utilizes share-based compensation in the
form of stock appreciation rights, restricted stock units
and other share-based awards. Certain awards are in the
form of contingent stock units where the ultimate number
of units are performance based. The amount of share-
based compensation expense associated with these
performance-based awards are based on estimates
regarding future performance using measures defined in
the plans. In 2018, the performance measures consisted
of Earnings per Share and Return on Net Assets
Employed. Changes in estimates regarding the future
achievement of these performance measures may result in
significant fluctuations from period to period in the amount
of share-based compensation expense reflected in the
Company’s Consolidated Financial Statements.
The Company uses an option-pricing model to
determine the grant date fair value of its stock apprecia-
tion rights. Inputs to the model include a number of sub-
jective assumptions. Management routinely assesses the
assumptions and methodologies used to calculate esti-
mated fair value of share-based compensation per share.
Circumstances may change and additional data may
become available over time that results in changes to
these assumptions and methodologies, which could mate-
rially impact fair value determinations.
Pension and postretirement benefit plans
The Company has significant pension and postretire-
ment benefit liabilities and costs that are measured using
actuarial valuations. The actuarial valuations employ key
assumptions that can have a significant effect on the
calculated amounts. The key assumptions used at
December 31, 2018, in determining the projected benefit
obligation and the accumulated benefit obligation for U.S.
retirement and retiree health and life insurance plans
include: discount rates of 4.34% and 4.14% for the active
and inactive qualified retirement plans, respectively, 4.16%
for the non-qualified retirement plans, and 4.02% for the
retiree health and life insurance plan. The rate of compen-
sation increase for the retiree health and life insurance plan
was 3.06%. The key assumptions used to determine 2018
net periodic benefit cost for U.S. retirement and retiree
health and life insurance plans include: discount rates of
3.69% and 3.49% for the active and inactive qualified
retirement plans, respectively, 3.50% for the non-qualified
retirement plans, and 3.36% for the retiree health and life
insurance plan; an expected long-term rate of return on
plan assets of 7.00% and 6.75% for the active and
inactive qualified retirement plans, respectively; and rates
of compensation increases ranging from 3.28% to 4.02%.
During 2018, the Company recorded total pension and
postretirement benefit expenses of approximately
$34.9 million, compared with $78.5 million during 2017.
The 2018 amount reflects $92.2 million of expected
returns on plan assets at an average assumed rate of
6.38% and interest cost of $55.4 million at a weighted-
average discount rate of 3.43%. The 2017 amount reflects
$82.8 million of expected returns on plan assets at an
average assumed rate of 6.3% and interest cost of
$56.3 million at a weighted-average discount rate of
3.34%. The expense recognized in 2017 also includes
$32.8 million of pension settlement charges, which are
discussed in more detail below. During 2018, the Com-
pany made contributions to its pension and postretirement
S O N O C O 2 0 1 8 A N N U A L R E P O R T
35
SONOCO2018ANNUALREPORT I FORM10-K plans of $25.4 million. In the prior year, the Company
made contributions to its pension and postretirement
plans totaling $108.6 million, including a voluntary
$50 million contribution to its U.S. active qualified retire-
ment plan. Contributions vary from year to year depending
on various factors, the most significant being the market
value of assets and interest rates. Cumulative net actuarial
losses were approximately $639 million at December 31,
2018, and are primarily the result of low discount rates.
Actuarial losses/gains outside of the 10% corridor defined
by U.S. GAAP are amortized over the average remaining
service life of the plan’s active participants or the average
remaining life expectancy of the plan’s inactive partic-
ipants if all, or almost all, of the plan’s participants are
inactive.
In February 2017, the Company initiated a program to
settle a portion of the projected benefit obligation (PBO)
relating to terminated vested participants in the U.S. quali-
fied retirement plans through either a single, lump-sum
payment or the purchase of an annuity. The terminated
vested population comprised approximately 15% of the
beginning of year PBO of these plans. The Company
successfully settled approximately 47% of the PBO for the
terminated vested plan participants. As a result of these
and other smaller settlements, the Company recognized
non-cash settlement charges of $32.8 million in 2017. All
settlement payments were funded from plan assets and
did not require the Company to make any additional cash
contributions in 2017. The Company recognized settle-
ment charges of $0.7 million in 2018 primarily resulting
from payments made to certain participants of the
Company’s Canadian pension plan who elected a lump
sum distribution upon retirement. The Company does not
expect to recognize any additional settlement charges in
2019.
The Company projects total benefit plan expense to be
approximately $16 million higher in 2019 than in 2018. The
increase is primarily due to lower expected returns on plan
assets due to a lower asset base resulting from the weak
market performance in 2018 and a 25 basis point reduc-
tion in the Company’s expected long-term rate of return
assumption. Partially offsetting this unfavorable impact, is
the impact of higher discount rates on year-over-year
benefit plan expense.
Plan benefits under the U.S. qualified retirement plan
were frozen effective December 31, 2018 for all active,
non-union participants. As of January 1, 2019, these par-
ticipants became eligible for annual contributions under a
noncontributory defined contribution program called the
“Sonoco Retirement Contribution.”
The Company adjusts its discount rates at the end of
each fiscal year based on yield curves of high-quality debt
instruments over durations that match the expected bene-
fit payouts of each plan. The expected rate of return
assumption is derived by taking into consideration the
targeted plan asset allocation, projected future returns by
asset class and active investment management. A third-
party asset return model was used to develop an
expected range of returns on plan investments over a 12-
to 15-year period, with the expected rate of return
selected from a best estimate range within the total range
of projected results. The Company periodically
re-balances its plan asset portfolio in order to maintain the
targeted allocation levels. The rate of compensation
increase assumption is generally based on salary and
incentive compensation increases. A key assumption for
the U.S. retiree health and life insurance plan is a medical
cost trend rate beginning at 6.5% for post-age 65 partic-
ipants and trending down to an ultimate rate of 4.5% in
2026. The ultimate trend rate of 4.5% represents the
Company’s best estimate of the long-term average annual
medical cost increase over the duration of the plan’s
liabilities. It provides for real growth in medical costs in
excess of the overall inflation level.
Other assumptions and estimates impacting the pro-
jected liabilities of these plans include inflation, participant
withdrawal and mortality rates and retirement ages. The
Company annually reevaluates assumptions used in
projecting the pension and postretirement liabilities and
associated expense. These judgments, assumptions and
estimates may affect the carrying value of pension and
postretirement plan net assets and liabilities and pension
and postretirement plan expenses in the Company’s
Consolidated Financial Statements.
The sensitivity to changes in the critical assumptions for
the Company’s U.S. plans as of December 31, 2018, is as
follows:
Assumption
($ in millions)
Discount rate
Expected return
on assets
Percentage
Point
Change
Projected Benefit
Obligation
Higher/(Lower)
-.25 pts
-.25 pts
$39.8
N/A
Annual
Expense
Higher/
(Lower)
$3.4
$2.8
See Note 13 to the Consolidated Financial Statements
for additional information on the Company’s pension and
postretirement plans.
Recent accounting pronouncements
Information regarding recent accounting pronounce-
ments is provided in Note 2 to the Consolidated Financial
Statements included in Item 8 of this Annual Report on
Form 10-K.
Item 7A. Quantitative and qualitative disclosures
about market risk
Information regarding market risk is provided in this
Annual Report on Form 10-K under the following items
and captions: “Our international operations subject us to
various risks that could adversely affect our business
operations and financial results” and “Currency exchange
rate fluctuations may reduce operating results and share-
holders’ equity” in Item 1A-Risk Factors; “Risk Manage-
ment” in Item 7 – Management’s Discussion and Analysis
of Financial Condition and Results of Operations; and in
Note 10 to the Consolidated Financial Statements in
Item 8 – Financial Statements and Supplementary Data.
Item 8. Financial statements and supplementary
data
The Consolidated Financial Statements and Notes to
the Consolidated Financial Statements are provided on
pages F-1 through F-40 of this report. Selected quarterly
financial data is provided in Note 18 to the Consolidated
Financial Statements included in this Annual Report on
Form 10-K.
36
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and shareholders of Sonoco Products Company
Opinions on the financial statements and internal control over financial reporting
We have audited the accompanying consolidated balance sheets of Sonoco Products Company and its subsidiaries (the
“Company”) as of December 31, 2018 and 2017, and the related consolidated statements of income, comprehensive income,
changes in total equity and cash flows for each of the three years in the period ended December 31, 2018, including the related
notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the
“consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of
December 31, 2018, based on criteria established in InternalControl—IntegratedFramework(2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial posi-
tion of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2018, based on criteria established in InternalControl—IntegratedFramework(2013) issued by the COSO.
Basis for opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal con-
trol over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in
Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opin-
ions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstate-
ment of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audits provide a reasonable basis for our opinions.
As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Highland
Packaging Solutions (“Highland”), Conitex Sonoco (BVI), Ltd. (“Conitex Sonoco”) and Compositub from its assessment of internal
control over financial reporting as of December 31, 2018 because they were acquired by the Company in purchase business
combinations during 2018. We have also excluded Highland, Conitex Sonoco and Compositub from our audit of internal control
over financial reporting. Highland, Conitex Sonoco and Compositub are wholly-owned subsidiaries whose total assets and total
revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 6.2% and
2.6%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2018.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reli-
ability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, pro-
jections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Charlotte, North Carolina
February 28, 2019
We have served as the Company’s auditor since 1967.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-1
SONOCO2018ANNUALREPORT I FORM10-K Consolidated Balance Sheets
Sonoco Products Company
(Dollars and shares in thousands)
At December 31
Assets
Current Assets
Cash and cash equivalents
Trade accounts receivable, net of allowances of $11,692 in 2018 and $9,913 in 2017
Other receivables
Inventories
Finished and in process
Materials and supplies
Prepaid expenses
Property, Plant and Equipment, Net
Goodwill
Other Intangible Assets, Net
Long-term Deferred Income Taxes
Other Assets
Total Assets
Liabilities and Equity
Current Liabilities
Payable to suppliers
Accrued expenses and other
Accrued wages and other compensation
Notes payable and current portion of long-term debt
Accrued taxes
Long-term Debt
Pension and Other Postretirement Benefits
Deferred Income Taxes
Other Liabilities
Commitments and Contingencies
Sonoco Shareholders’ Equity
Serial preferred stock, no par value
Authorized 30,000 shares
0 shares issued and outstanding as of December 31, 2018 and 2017
Common shares, no par value
Authorized 300,000 shares
99,829 and 99,414 shares issued and outstanding at December 31, 2018 and 2017,
respectively
Capital in excess of stated value
Accumulated other comprehensive loss
Retained earnings
Total Sonoco Shareholders’ Equity
Noncontrolling Interests
Total Equity
Total Liabilities and Equity
The Notes beginning on page F-6 are an integral part of these financial statements.
2018
2017
$ 120,389
737,420
111,915
$ 254,912
725,251
64,561
174,115
319,649
55,784
1,519,272
1,233,821
1,309,167
352,037
47,297
121,871
196,204
277,859
44,849
1,563,636
1,169,377
1,241,875
331,295
62,053
189,485
$4,583,465
$4,557,721
$ 556,011
237,197
85,761
195,445
8,516
1,082,930
1,189,717
374,419
64,273
99,848
$ 548,309
217,018
66,337
159,327
8,979
999,970
1,288,002
355,187
74,073
110,429
7,175
304,709
(740,913)
2,188,115
1,759,086
13,192
7,175
330,157
(666,272)
2,036,006
1,707,066
22,994
1,772,278
1,730,060
$4,583,465
$4,557,721
F-2
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K Consolidated Statements of Income
Sonoco Products Company
(Dollars and shares in thousands except per share data)
Years ended December 31
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Restructuring/Asset impairment charges
Gain on disposition of business, net
Operating profit
Non-operating pension costs
Interest expense
Interest income
Income before income taxes
Provision for income taxes
Income before equity in earnings of affiliates
Equity in earnings of affiliates, net of tax
Net income
Net (income) attributable to noncontrolling interests
Net income attributable to Sonoco
Weighted average common shares outstanding:
Basic
Assuming exercise of awards
Diluted
Per common share
Net income attributable to Sonoco:
Basic
Diluted
2018
2017
2016
$5,390,938
4,349,932
$5,036,650
4,077,998
$4,782,877
3,836,594
1,041,006
563,306
40,071
—
437,629
941
63,147
4,990
378,531
75,008
303,523
11,216
958,652
507,824
38,419
—
412,409
45,110
57,220
4,475
314,554
146,589
167,965
9,482
946,283
503,049
42,883
104,292
504,643
11,809
54,170
2,613
441,277
164,631
276,646
11,235
314,739
(1,179)
177,447
(2,102)
287,881
(1,447)
$ 313,560
$ 175,345
$ 286,434
100,539
477
101,016
100,237
615
100,852
101,093
689
101,782
$
$
3.12
3.10
$
$
1.75
1.74
$
$
2.83
2.81
Consolidated Statements of Comprehensive Income
Sonoco Products Company
(Dollars in thousands)
Years ended December 31
Net income
Other comprehensive income/(loss):
Foreign currency translation adjustments
Changes in defined benefit plans, net of tax
Change in derivative financial instruments, net of tax
Other comprehensive income/(loss)
Comprehensive income/(loss)
Net (income) attributable to noncontrolling interests
Other comprehensive loss/(income) attributable to noncontrolling interests
Comprehensive income attributable to Sonoco
The Notes beginning on page F-6 are an integral part of these financial statements.
2018
2017
2016
$314,739
$177,447
$287,881
(54,763)
(20,244)
(1,614)
89,108
59,924
(2,580)
(32,405)
(9,577)
7,091
(76,621)
146,452
(34,891)
238,118
(1,179)
2,156
323,899
(2,102)
(1,105)
252,990
(1,447)
(956)
$239,095
$320,692
$250,587
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-3
SONOCO2018ANNUALREPORT I FORM10-K Consolidated Statements of Changes in Total Equity
Sonoco Products Company
(Dollars and shares in
thousands)
January 1, 2016
Net income
Other comprehensive
income/(loss):
Translation loss
Defined benefit plan
adjustment1
Derivative financial
instruments1
Other comprehensive loss
Dividends
Issuance of stock awards
Shares repurchased
Stock-based compensation
December 31, 2016
Net income
Other comprehensive
income/(loss):
Translation gain
Defined benefit plan
adjustment1
Derivative financial
instruments1
Other comprehensive income
Dividends
Issuance of stock awards
Shares repurchased
Stock-based compensation
Impact of new accounting
pronouncements
Noncontrolling interest from
acquisition
December 31, 2017
Net income
Other comprehensive income/
(loss):
Translation loss
Defined benefit plan
adjustment1
Derivative financial
instruments1
Other comprehensive loss
Dividends
Issuance of stock awards
Shares repurchased
Stock-based compensation
Impact of new accounting
pronouncements
Purchase of Sonoco Asia
noncontrolling interest
Noncontrolling interest from
acquisition
Total
Equity
$1,532,873
287,881
(32,405)
(9,577)
7,091
(34,891)
(147,748)
4,040
(106,739)
19,289
$1,554,705
177,447
89,108
59,924
(2,580)
146,452
(154,773)
1,636
(6,335)
13,488
—
(2,560)
$1,730,060
314,739
(54,763)
(20,244)
(1,614)
(76,621)
(163,348)
1,688
(14,561)
10,730
1,721
(35,000)
2,870
Common Shares
Outstanding Amount
Capital in
Excess of
Stated
Value
Accumulated
Other
Comprehensive
Loss
100,944
$7,175
$ 404,460
$(702,533)
Retained
Earnings
Non-
controlling
Interests
$1,803,827
286,434
$19,944
1,447
(33,361)
(9,577)
7,091
(35,847)
956
956
(147,748)
428
(2,179)
4,040
(106,739)
19,289
99,193
$7,175
$ 321,050
$(738,380)
$1,942,513
175,345
$22,347
2,102
88,003
59,924
(2,580)
145,347
(154,773)
341
(120)
1,636
(6,335)
13,488
318
(73,239)
72,921
99,414
7,175
330,157
(666,272)
2,036,006
313,560
1,105
1,105
(2,560)
22,994
1,179
(2,156)
(52,607)
(20,244)
(1,614)
(74,465)
(2,156)
(163,348)
682
(267)
1,688
(14,561)
10,730
(23,305)
—
(176)
1,897
(11,695)
2,870
December 31, 2018
$1,772,278
99,829
$7,175
$ 304,709
$(740,913)
$2,188,115
$13,192
1 net of tax
The Notes beginning on page F-6 are an integral part of these financial statements.
F-4
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K Consolidated Statements of Cash Flows
Sonoco Products Company
(Dollars in thousands)
Years ended December 31
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairment
Depreciation, depletion and amortization
Loss on adjustment of Fox River environmental reserves
Share-based compensation expense
Equity in earnings of affiliates
Cash dividends from affiliated companies
Loss on remeasurement of previously held interest in Conitex Sonoco
Loss on disposition of assets, net
Gain on disposition of business
Pension and postretirement plan expense
Pension and postretirement plan contributions
Tax effect of share-based compensation exercises
Excess tax benefit of share-based compensation
Net (decrease)/increase in deferred taxes
Change in assets and liabilities, net of effects from acquisitions, dispositions and
foreign currency adjustments
Trade accounts receivable
Inventories
Payable to suppliers
Prepaid expenses
Accrued expenses
Income taxes payable and other income tax items
Fox River environmental reserves
Other assets and liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Purchase of property, plant and equipment
Cost of acquisitions, net of cash acquired
Cash paid for disposition of assets
Proceeds from the sale of assets
Other
Net cash used by investing activities
Cash Flows from Financing Activities
Proceeds from issuance of debt
Principal repayment of debt
Net increase/(decrease) in commercial paper borrowings
Net increase/(decrease) in outstanding checks
Cash dividends – common
Excess tax benefit of share-based compensation
Purchase of Sonoco Asia noncontrolling interest
Shares acquired
Net cash provided/(used) by financing activities
Effects of Exchange Rate Changes on Cash
(Decrease)/Increase in Cash and Cash Equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental Cash Flow Disclosures
Interest paid, net of amounts capitalized
Income taxes paid, net of refunds
The Notes beginning on page F-6 are an integral part of these financial statements.
2018
2017
2016
$ 314,739
$ 177,447
$ 287,881
5,794
236,245
—
10,730
(11,216)
7,570
4,784
8,635
—
34,885
(25,373)
—
—
(9,420)
38,193
(6,150)
(4,380)
(5,093)
19,153
(19,014)
—
(10,184)
20,017
217,625
—
13,488
(9,482)
6,967
—
2,039
7,122
205,182
850
19,289
(11,235)
10,231
—
14,173
— (108,699)
45,281
(46,716)
2,654
(2,695)
2,591
78,506
(108,579)
—
—
(20,553)
(43,773)
(16,067)
4,226
(110)
(14,606)
70,180
—
(29,071)
(44,672)
(11,515)
5,550
5,125
(11,742)
21,913
(1,043)
9,154
589,898
348,254
398,679
(192,574)
(277,177)
—
24,288
1,335
(188,913)
(383,725)
—
5,271
2,791
(186,741)
(88,632)
(8,436)
280,373
294
(444,128)
(564,576)
(3,142)
226,885
(281,262)
(4,000)
(4,282)
(161,434)
—
(35,000)
(14,561)
448,511
(217,320)
124,000
7,518
(153,137)
—
—
(6,335)
241,180
(306,305)
—
(163)
(146,364)
2,695
—
(106,739)
(273,654)
203,237
(315,696)
(6,639)
10,771
(5,049)
(134,523)
254,912
(2,314)
257,226
74,792
182,434
$ 120,389
$ 254,912
$ 257,226
$ 63,147
$ 103,442
$ 57,170
$ 96,962
$ 53,411
$ 134,777
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-5
SONOCO2018ANNUALREPORT I FORM10-K N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Sonoco Products Company (dollars in thousands except per share data)
1. Summary of significant accounting policies
Basis of presentation
The Consolidated Financial Statements include the
accounts of Sonoco Products Company and its majority-
owned subsidiaries (the “Company” or “Sonoco”) after
elimination of intercompany accounts and transactions.
Investments in affiliated companies in which the Com-
pany shares control over the financial and operating deci-
sions, but in which the Company is not the primary
beneficiary, are accounted for by the equity method of
accounting. Income applicable to these equity investments
is reflected in “Equity in earnings of affiliates, net of tax” in
the Consolidated Statements of Income. The aggregate
carrying value of equity investments is reported in “Other
Assets” in the Company’s Consolidated Balance Sheets
and totaled $55,516 and $107,722 at December 31, 2018
and 2017, respectively. The year-over-year reduction is
primarily the result of the Company’s October 1, 2018,
acquisition of the remaining 70% interest in Conitex
Sonoco (BVI), Ltd. (see Note 4 for additional information).
Affiliated companies over which the Company exercised a
significant influence at December 31, 2018, included:
Entity
RTS Packaging JVCO
Cascades Conversion, Inc.
Cascades Sonoco, Inc.
Showa Products Company Ltd.
Papertech Energía, S.L.
Weidenhammer New Packaging, LLC
Ownership Interest
Percentage at
December 31, 2018
35.0%
50.0%
50.0%
20.0%
25.0%
40.0%
Also included in the investment totals above is the
Company’s 19.5% ownership in a small tubes and cores
business in Chile and its 12.19% ownership in a small
paper recycling business in Finland. These investments
are accounted for under the cost method as the Company
does not have the ability to exercise significant influence
over them.
Estimates and assumptions
The preparation of financial statements in conformity
with accounting principles generally accepted in the
United States of America (U.S. GAAP) requires manage-
ment to make estimates and assumptions that affect the
reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of rev-
enues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue recognition
Beginning in 2018, the Company records revenue
when control is transferred to the customer, which is either
upon shipment or over time in cases where the Company
is entitled to payment with margin for products produced
that are customer specific without alternative use. The
Company recognizes over time revenue under the input
method as goods are produced. Revenue that is recog-
nized at a point in time is recognized when the customer
obtains control of the goods. Customers obtain control
either when goods are delivered to the customer facility, if
the Company is responsible for arranging transportation,
or when picked up by the customer’s designated carrier.
The Company commonly enters into Master Supply
Arrangements (MSA) with customers to provide goods
and/or services over specific time periods. Customers
submit purchase orders with quantities and prices to cre-
ate a contract for accounting purposes. Shipping and
handling expenses are considered a fulfillment cost, and
included in “Cost of Sales,” and freight charged to
customers is included in “Net Sales” in the Company’s
Consolidated Statements of Income.
Prior to 2018, the Company recorded revenue when
title and risk of ownership passed to the customer, and
when persuasive evidence of an arrangement existed,
delivery had occurred or services had been rendered, the
sales price to the customer was fixed or determinable and
when collectibility was reasonably assured. Certain judg-
ments, such as provisions for estimates of sales returns
and allowances, were required in the application of the
Company’s revenue policy and, therefore, were included
in the results of operations in its Consolidated Financial
Statements. Shipping and handling expenses were
included in “Cost of sales,” and freight charged to
customers was included in “Net sales” in the Company’s
Consolidated Statements of Income for the years ended
December 31, 2017 and 2016.
The Company has rebate agreements with certain
customers. These rebates are recorded as reductions of
sales and are accrued using sales data and rebate percen-
tages specific to each customer agreement. Accrued
customer rebates are included in “Accrued expenses and
other” in the Company’s Consolidated Balance Sheets.
Payment terms under the Company’s arrangements
are short term in nature, generally no longer than 120
days. The Company does provide prompt payment dis-
counts to certain customers if invoices are paid within a
predetermined period. Prompt payment discounts are
treated as a reduction of revenue and are determinable
within a short period after the originating sale.
Accounts receivable and allowance for doubtful
accounts
The Company’s trade accounts receivable are
non-interest bearing and are recorded at the invoiced
amounts. The allowance for doubtful accounts represents
the Company’s best estimate of the amount of probable
credit losses in existing accounts receivable. Provisions
are made to the allowance for doubtful accounts at such
time that collection of all or part of a trade account receiv-
able is in question. The allowance for doubtful accounts is
monitored on a regular basis and adjustments are made
as needed to ensure that the account properly reflects the
Company’s best estimate of uncollectible trade accounts
receivable. Account balances are charged off against the
allowance for doubtful accounts when the Company
determines that the receivable will not be recovered.
Sales to the Company’s largest customer accounted
for approximately 4% of the Company’s net sales in 2018,
4% in 2017 and 5% in 2016, primarily in the Display and
Packaging and Consumer Packaging segments. Receiv-
F-6
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K ables from this customer accounted for approximately 4%
of the Company’s total trade accounts receivable at
December 31, 2018 and 4% at December 31, 2017. The
Company’s next largest customer comprised approx-
imately 4% of the Company’s net sales in 2018, 3% in
2017 and 4% in 2016.
Certain of the Company’s customers sponsor and
actively promote multi-vendor supply chain finance
arrangements and, in a limited number of cases, the
Company has agreed to participate. Accordingly, approx-
imately 9% and 7% of consolidated annual sales were set-
tled under these arrangements in 2018 and 2017,
respectively.
Research and development
Research and development costs are charged to
expense as incurred and include salaries and other directly
related expenses. Research and development costs total-
ing approximately $23,200 in 2018, $21,000 in 2017 and
$22,500 in 2016 are included in “Selling, general and
administrative expenses” in the Company’s Consolidated
Statements of Income.
Restructuring and asset impairment
Costs associated with exit or disposal activities are
recognized when the liability is incurred. If assets become
impaired as a result of a restructuring action, the assets
are written down to fair value, less estimated costs to sell,
if applicable. A number of significant estimates and
assumptions are involved in the determination of fair value.
The Company considers historical experience and all
available information at the time the estimates are made;
however, the amounts that are ultimately realized upon the
sale of divested assets may differ from the estimated fair
values reflected in the Company’s Consolidated Financial
Statements.
Cash and cash equivalents
Cash equivalents are composed of highly liquid invest-
ments with an original maturity to the Company of gen-
erally three months or less when purchased. Cash
equivalents are recorded at cost, which approximates
market.
Inventories
Inventories are stated at the lower of cost or net realiz-
able value. The last-in, first-out (LIFO) method is used for
the valuation of certain of the Company’s domestic
inventories, primarily metal, internally manufactured paper
and paper purchased from third parties.
The LIFO method of accounting was used to determine
the carrying costs of approximately 14% and 14% of total
inventories at December 31, 2018 and 2017, respectively.
The remaining inventories are determined on the first-in,
first-out (FIFO) method.
If the FIFO method of accounting had been used for all
inventories, total inventory would have been higher by
$18,854 and $17,632 at December 31, 2018 and 2017,
respectively.
Property, plant and equipment
Plant assets represent the original cost of land, build-
ings and equipment, less depreciation, computed under
the straight-line method over the estimated useful lives of
the assets, and are reviewed for impairment whenever
events indicate the carrying value may not be recoverable.
Equipment lives generally range from 3 to 11 years, and
buildings from 15 to 40 years.
Timber resources are stated at cost. Depletion is
charged to operations based on the estimated number of
units of timber cut during the year.
Goodwill and other intangible assets
The Company assesses its goodwill for impairment
annually and from time to time when warranted by the
facts and circumstances surrounding individual reporting
units or the Company as a whole. In performing the
impairment test, the Company compares the fair value of
the reporting unit with its carrying amount and recognizes
an impairment charge for the amount by which the carry-
ing amount exceeds the reporting unit’s fair value. This
quantitative test considers factors such as the amount by
which estimated fair value exceeds current carrying value,
current year operating performance as compared to prior
projections, and implied fair values from comparable trad-
ing and transaction multiples.
Calculated reporting unit estimated fair values reflect a
number of significant management assumptions and esti-
mates including the Company’s forecast of sales volumes
and prices, profit margins, income taxes, capital
expenditures and changes in working capital require-
ments. Changes in these assumptions and/or discount
rates could materially impact the estimated fair values.
When the Company estimates the fair value of a report-
ing unit, it does so using a discounted cash flow model
based on projections of future years’ operating results and
associated cash flows, corroborated by comparable trad-
ing and transaction multiples. The Company’s projections
incorporate management’s best estimates of the expected
future results, which include expectations related to new
and retained business and future operating margins. Pro-
jected future cash flows are then discounted to present
value using a discount rate management believes is
commensurate with the risks inherent in the cash flows.
If the fair value of a reporting unit exceeds the carrying
value of the reporting unit’s assets, including goodwill,
there is no impairment. If not, and the carrying value of the
reporting unit’s goodwill exceeds the fair value of that
goodwill, an impairment charge is recognized for the
excess. Goodwill is not amortized.
Intangible assets are amortized, usually on a straight-
line basis, over their respective useful lives, which gen-
erally range from 3 to 40 years. The Company evaluates
its intangible assets for impairment whenever indicators of
impairment exist. The Company has no intangibles with
indefinite lives.
Income taxes
The Company provides for income taxes using the
asset and liability method. Under this method, deferred tax
assets and liabilities are determined based on differences
between financial reporting requirements and tax laws.
Assets and liabilities are measured using the enacted tax
rates and laws that will be in effect when the differences
are expected to reverse.
The Company recognizes liabilities for uncertain income
tax positions based on our estimate of whether it is more
likely than not that additional taxes will be required and we
report related interest and penalties as income taxes.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-7
SONOCO2018ANNUALREPORT I FORM10-K Derivatives
The Company uses derivatives to mitigate the effect of
fluctuations in some of its raw material and energy costs,
foreign currencies, and, from time to time, interest rates.
The Company purchases commodities such as recovered
paper, metal, resins and energy generally at market or at
fixed prices that are established with the vendor as part of
the purchase process for quantities expected to be con-
sumed in the ordinary course of business. The Company
may enter into commodity futures or swaps to manage the
effect of price fluctuations. The Company may use foreign
currency forward contracts and other risk management
instruments to manage exposure to changes in foreign
currency cash flows and the translation of monetary
assets and liabilities on the Company’s consolidated
financial statements. The Company is exposed to interest-
rate fluctuations as a result of using debt as a source of
financing for its operations. The Company may from time
to time use traditional, unleveraged interest rate swaps to
adjust its mix of fixed and variable rate debt to manage its
exposure to interest rate movements.
The Company records its derivatives as assets or
liabilities on the balance sheet at fair value using published
market prices or estimated values based on current price
and/or rate quotes and discounted estimated cash flows.
Changes in the fair value of derivatives are recognized
either in net income or in other comprehensive income,
depending on the designated purpose of the derivative.
Amounts in accumulated other comprehensive income are
reclassified into earnings in the same period or periods
during which the hedged forecasted transaction affects
earnings. It is the Company’s policy not to speculate in
derivative instruments.
Business combinations
The Company’s acquisitions of businesses are
accounted for in accordance with ASC 805, “Business
Combinations.” The Company recognizes the identifiable
assets acquired, the liabilities assumed, and any non-
controlling interests in an acquired business at their fair
values as of the date of acquisition. Goodwill is measured as
the excess of consideration transferred, also measured at
fair value, over the net of the acquisition date fair values of
the identifiable assets acquired and liabilities assumed. The
acquisition method of accounting requires us to make sig-
nificant estimates and assumptions regarding the fair values
of the elements of a business combination as of the date of
acquisition, including the fair values of identifiable intangible
assets, deferred tax asset valuation allowances, liabilities
including those related to debt, pensions and other post-
retirement plans, uncertain tax positions, contingent
consideration and contingencies. This method also requires
us to refine these estimates over a measurement period not
to exceed one year to reflect new information obtained
about facts and circumstances that existed as of the
acquisition date that, if known, would have affected the
measurement of the amounts recognized as of that date. If
we are required to adjust provisional amounts that we have
recorded for the fair values of assets and liabilities in con-
nection with acquisitions, these adjustments could have a
material impact on our financial condition and results of
operations.
Significant estimates and assumptions in estimating the
fair value of acquired customer relationships, technology,
and other identifiable intangible assets include future cash
flows that we expect to generate from the acquired
assets. If the subsequent actual results and updated pro-
jections of the underlying business activity change com-
pared with the assumptions and projections used to
develop these values, we could record impairment
charges. In addition, we have estimated the economic
lives of certain acquired assets and these lives are used to
calculate depreciation and amortization expense. If our
estimates of the economic lives change, depreciation or
amortization expenses could be increased or decreased,
or the acquired asset could be impaired.
Reportable segments
The Company identifies its reportable segments by
evaluating the level of detail reviewed by the chief operat-
ing decision maker, gross profit margins, nature of prod-
ucts sold, nature of the production processes, type and
class of customer, methods used to distribute products,
and nature of the regulatory environment. Of these factors,
the Company believes that the most significant in
determining the aggregation of operating segments are
the nature of the products and the type of customers
served.
Contingencies
Pursuant to U.S. GAAP for accounting for con-
tingencies, accruals for estimated losses are recorded at
the time information becomes available indicating that
losses are probable and that the amounts are reasonably
estimable. Amounts so accrued are not discounted.
2. New accounting pronouncements
In December 2018, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2018-16 “Derivatives and Hedging: Inclusion of
the Secured Overnight Financing Rate (SOFR) Overnight
Index Swap (OIS) Rate as a Benchmark Interest Rate for
Hedge Accounting Purposes,” which allows the use of the
SOFR and OIS rate as benchmark rates after the Federal
Reserve started publishing such daily rate on April 3,
2018. This update is effective for fiscal years beginning
after December 15, 2018, and interim periods within those
fiscal years. The adoption is not expected to have a
material effect on the consolidated financial statements.
In August 2018, FASB issued ASU 2018-15,
“Intangibles – Goodwill and Other Internal-Use Software:
Customer’s Accounting for Implementation Costs Incurred
in a Cloud Computing Arrangement that is a Service
Contract,” which provides guidance on capitalizing
implementation cost associated with arrangements that
contain a license. The Company adopted this ASU using
the prospective method effective October 1, 2018. The
adoption of the standard did not have a material effect on
the Company’s consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02,
“Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income,” which allows a
reclassification from accumulated other comprehensive
income to retained earnings for stranded tax effects result-
ing from the Tax Cuts and Jobs Act. This update is effec-
tive for fiscal years beginning after December 15, 2018,
and interim periods within those years, with early adoption
permitted. The Company elected to early adopt this stan-
dard in the fourth quarter of 2017 using specific identi-
fication, and as a result reclassified $73,239 from
F-8
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K “Accumulated other comprehensive income” to “Retained
earnings.” This reclassification related only to the change
in the statutory tax rate and affected only the Company’s
Consolidated Balance Sheet at December 31, 2017, and
Consolidated Statement of Changes in Total Equity for the
year ended December 31, 2017.
In August 2017, the FASB issued ASU 2017-12,
“Derivatives and Hedging: Targeted Improvements to
Accounting for Hedging Activities,” which expands and
refines hedge accounting for both financial and
non-financial risk components, aligns the recognition and
presentation of the effects of hedging instruments and
hedge items in the financial statements, and includes cer-
tain targeted improvements to ease the application of
current guidance related to the assessment of hedge
effectiveness. The update to the standard is effective for
periods beginning after December 15, 2018, with early
adoption permitted in any interim period after issuance of
this update. The Company implemented this ASU effective
January 1, 2018, and recorded a cumulative adjustment to
retained earnings of $176 as of that date in order to
remove previously recognized ineffectiveness losses on
contracts outstanding as of the date of adoption
In May 2017, the FASB issued ASU 2017-09, “Scope
of Modification Accounting,” which provides guidance
about which changes to the terms or conditions of a
share-based payment award require an entity to apply
modification accounting under Topic 718. Under the new
guidance, modification accounting to a share-based
payment award will not be applied if all of the following are
the same immediately before and after the change: the
award’s fair value (or calculated value or intrinsic value, if
those measurement methods are used); the award’s vest-
ing conditions; and the award’s classification as an equity
or liability instrument. While the new guidance does not
change the accounting for modifications, it is intended to
reduce diversity in practice and result in fewer changes to
the terms of an award being accounted for as mod-
ifications. This update is effective for annual periods,
beginning after December 31, 2017, with early adoption
permitted in any interim period after issuance of this
update. The Company elected to early adopt the standard
in the fourth quarter 2017. The adoption did not have a
material effect on the consolidated financial statements.
In March 2017, the FASB issued ASU 2017-07,
“Improving the Presentation of Net Periodic Pension Cost
and Net Periodic Postretirement Benefit Cost,” which
requires an employer to report service cost in the same
line item as other compensation costs arising from
employees during the period. The other components of
net benefit cost as defined are required to be presented
separately from the service cost component and outside a
subtotal of income from operations, if one is presented, or
disclosed. This update also allows only the service cost
component to be eligible for capitalization when applicable
and is effective for periods beginning after December 15,
2017. The amendments are to be applied retrospectively
for the presentation of the components of net benefit cost
in the income statement and prospectively for the capital-
ization of the service cost component. The Company
implemented this ASU effective January 1, 2018, modify-
ing its income statement presentation of the components
of net benefit cost accordingly, including the retrospective
application to previously reported results. As a result of the
retrospective application, the amounts previously reported
in “Cost of sales” and “Selling, general and administrative
expenses” for the year ended December 31, 2017, were
reduced by $9,262 and $35,848, respectively, and
“Operating profit” increased by $45,110, in order to con-
form to the current presentation. The comparable changes
for the year ended December 31, 2016, were $8,857,
$2,952, and $11,809, for “Cost of sales,” “Selling, general
and administrative expenses,” and “Operating profit,”
respectively. No change was required to the Company’s
policy regarding the capitalization of such costs.
In January 2017, the FASB issued ASU 2017-04,
“Simplifying the Test for Goodwill Impairment,” eliminating
the requirement to determine the fair value of individual
assets and liabilities of a reporting unit to measure good-
will impairment. Under ASU 2017-04, goodwill impairment
testing is performed by comparing the fair value of the
reporting unit with its carrying amount and recognizing an
impairment charge for the amount by which the carrying
amount exceeds the reporting unit’s fair value. The new
standard is effective for annual and interim goodwill
impairment tests in fiscal years beginning after
December 15, 2019, with early adoption permitted, and
should be applied on a prospective basis. The Company
elected early adoption of the standard effective January 1,
2018. Any future goodwill impairment, should it occur, will
be determined in accordance with this ASU.
In October 2016, the FASB issued ASU 2016-16,
“Intra-Entity Transfers of Assets Other Than Inventory,”
which requires an entity to recognize the income tax
consequences of an intra-entity transfer of an asset upon
transfer of an asset other than inventory, eliminating the
current recognition exception. Prior to this ASU, GAAP
prohibited the recognition of current and deferred income
taxes for intra-entity asset transfers until the asset was
sold to an outside party. The recognition prohibition was
an exception to the principle of comprehensive recognition
of current and deferred income taxes in GAAP. This guid-
ance became effective for the Company on January 1,
2018, and did not have a material effect on its con-
solidated financial statements.
In August 2016, the FASB issued ASU 2016-15,
“Classification of Certain Cash Receipts and Cash
Payments,” providing clarification on eight cash flow
classification issues, including 1) debt prepayment or debt
extinguishment costs, 2) settlement of relatively insignif-
icant debt instruments, 3) contingent consideration pay-
ments, 4) insurance claim settlements, 5) life insurance
settlements, 6) distributions received from equity method
investees, 7) beneficial interests in securitization trans-
actions, and 8) separately identifiable cash flows. This
guidance, which applies to both interim and annual peri-
ods, became effective for the Company on January 1,
2018. As a result of the retrospective application,
insurance proceeds totaling $1,104 received during the
year ended December 31, 2017 that were previously
reported in “Cash Flows from Operating Activities” were
reclassified to “Cash Flows from Investing Activities.”
Otherwise, adoption of the standard did not have a
material effect on the Company’s consolidated financial
statements, as the Company either did not realize any
cash flows from these types of activities, such amounts
were immaterial, or the prescribed guidance did not differ
from its current practice.
In March 2016, the FASB issued ASU 2016-08,
“Revenue from Contracts with Customers, Principal versus
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-9
SONOCO2018ANNUALREPORT I FORM10-K Agent Considerations (Reporting Revenue Gross versus
Net),” which provides guidance on recording revenue on a
gross basis versus a net basis based on the determination
of whether an entity is a principal or an agent when
another party is involved in providing goods or services to
a customer. The amendments in this update affect the
guidance in ASU No. 2014-09 and are effective in the
same time frame as ASU 2014-09 as discussed below.
In February 2016, the FASB issued ASU 2016-02,
“Leases” (“ASU 2016-02”). This standard requires lessees
to record right of use (“ROU”) assets and liabilities on the
balance sheet for all leases with terms longer than 12
months and to disclose key information about leasing
arrangements to increase transparency and comparability
among organizations. Long-term leases will be classified
as either finance or operating, with classification affecting
the pattern of expense recognition in the income state-
ment. The Company plans to adopt ASU 2016-02 as of
January 1, 2019, using the modified retrospective optional
approach prescribed by ASU 2018-11, which allows for
comparative periods to continue to be presented as pre-
viously reported under the previous accounting standard
(ASC 840). The Company will elect the package of prac-
tical expedients permitted under the transition guidance
within the new standard upon adoption and will make an
accounting policy election to keep leases with a term of 12
months or less off of the balance sheet in accordance with
ASU 2016-02’s short-term lease exemption provision. The
Company is also electing the hindsight practical expedient
to determine the reasonably certain lease term for existing
leases and will elect to combine lease and non-lease
components. In preparation for adoption of this ASU, the
Company has begun implementing internal controls and
key system functionality to enable the preparation of
compliant financial information. The adoption of ASU
2016-02 will have a material impact on the Company’s
Consolidated Balance Sheet as it is expected to add addi-
tional ROU assets and liabilities of between $325,000 and
$350,000 as of January 1, 2019. The Company does not
believe that ASU 2016-02 will have a material effect on its
Consolidated Statements of Income. The adoption of ASU
2016-02 requires certain changes to the presentation of
cash flows, but the Company does not believe it will have
a notable impact on the Company’s liquidity. Additionally,
the Company does not believe that ASU 2016-02 will have
an impact on compliance with debt covenants under its
current agreements.
adoption of this ASU are the acceleration of revenue recog-
nition compared to prior standards for arrangements
under which the Company is producing customer-specific
products without alternative use and would be entitled to
payment for work completed, including a reasonable mar-
gin, and the recognition of material customer contract
rights for certain agreed-upon future price concessions.
Other than the pronouncements discussed above,
there have been no other newly issued nor newly appli-
cable accounting pronouncements that have had, or are
expected to have, a material impact on the Company’s
financial statements. Further, at December 31, 2018, there
were no other pronouncements pending adoption that are
expected to have a material impact on the Company’s
consolidated financial statements.
3. Changes in accounting policy
Except for the changes below, the Company has con-
sistently applied the accounting policies to all periods
presented in these consolidated financial statements.
The Company adopted ASC 606, “Revenue from Con-
tracts with Customers,” effective January 1, 2018. As a
result, the Company has changed its accounting policy for
revenue recognition as detailed in Note 15.
The Company applied ASC 606 using the cumulative
effect method by recognizing the cumulative effect of ini-
tially applying ASC 606 as an adjustment to the opening
balance of equity at January 1, 2018. Therefore, the
comparative information has not been adjusted and con-
tinues to be reported under ASC 605. The details of the
significant changes and quantitative impact of the changes
are set out below.
December 31,
2017
As Reported Adjustments
January 1,
2018
Adjusted
Assets
Current Assets
Trade accounts
receivable, net of
allowances
Other receivables
Inventories:
Finished and in
process
Total Assets
Liabilities and Equity
$ 725,251
64,561
$ 3,636
41,351
$ 728,887
105,912
196,204
4,557,721
(37,447)
7,540
158,757
4,565,261
In May 2014, the FASB issued ASU 2014-09, “Revenue
Current Liabilities
From Contracts With Customers,” which changes the
definitions/criteria used to determine when revenue should
be recognized from being based on risks and rewards to
being based on control. Among other changes, ASU
2014-09 changes the manner in which variable consid-
eration is recognized, requires recognition of the time
value of money when payment terms exceed one year,
provides clarification on accounting for contract costs, and
expands disclosure requirements. The Company adopted
ASU 2014-09 in the first quarter of 2018 following the
modified retrospective transition method and, as such,
recorded a cumulative adjustment of $1,721 to beginning
retained earnings for the period. The most significant
impacts to the Company’s financial statements from the
Accrued expenses
and other
Deferred Income Taxes
Sonoco Shareholders’
Equity
Retained earnings
Total Sonoco
Shareholders’
Equity
Total Equity
Total Liabilities and
283,355
74,073
5,215
604
288,570
74,677
2,036,006
1,721
2,037,727
1,707,066
1,730,060
1,721
1,721
1,708,787
1,731,781
Equity
$4,557,721
$ 7,540
$4,565,261
F-10
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K The following table summarizes the impact of the adop-
tion of ASC 606 on the Company’s Consolidated Balance
Sheet as of December 31, 2018:
The following table summarizes the impact of the adop-
tion of ASC 606 on the Company’s Consolidated State-
ment of Comprehensive Income for the year ended
December 31, 2018:
December 31,
2018
As Reported Adjustments
Balances
without
adoption
of ASC
606
$ 737,420
111,915
$ (2,913) $ 734,507
69,176
(42,739)
Assets
Current Assets
Trade accounts
receivable, net of
allowances
Other receivables
Inventories:
Finished and in
process
174,115
38,000
212,115
Long-term Deferred
Income Taxes
Total Assets
Liabilities and Equity
Current Liabilities
Accrued expenses
47,297
4,583,465
362
(7,290)
47,659
4,576,175
and other
237,197
(6,258)
230,939
December 31,
2018
As Reported Adjustments
Balances
without
Adoption of
ASC 606
$314,739
$689
$315,428
(54,763)
(76,621)
73
73
(54,690)
(76,548)
238,118
762
238,880
(1,179)
762
(417)
$239,095
$762
$239,857
Net income
Other comprehensive
income/(loss):
Foreign currency
translation
adjustments
Other comprehensive
(loss)/income
Comprehensive
income
Net (income)
attributable to
noncontrolling
interest
Comprehensive income
attributable to
Sonoco
2,188,115
(1,032)
2,187,083
1,759,086
1,772,278
(1,032)
(1,032)
1,758,054
1,771,246
The following table summarizes the impact of the adop-
tion of ASC 606 on the Company’s Consolidated State-
ment of Cash Flows for the year ended December 31,
2018:
Sonoco Shareholders’
Equity
Retained earnings
Total Sonoco
Shareholders’
Equity
Total Equity
Total Liabilities and
Equity
$4,583,465
$ (7,290) $4,576,175
The following table summarizes the impact of the adop-
tion of ASC 606 on the Company’s Consolidated State-
ment of Income for the year ended December 31, 2018:
December 31,
2018
As Reported Adjustments
Net sales
Cost of sales
Gross profit
Operating Profit
Income before income
taxes
Provision for income
taxes
Income before equity in
earnings of affiliates
Net income
Net income attributable
$5,390,938
4,349,932
1,041,006
437,629
378,531
75,008
303,523
314,739
$ 378
(553)
931
931
931
242
689
689
Balances
without
Adoption of
ASC 606
$5,391,316
4,349,379
1,041,937
438,560
379,462
75,250
304,212
315,428
to Sonoco
$ 313,560
$ 689
$ 314,249
Net income
Net (decrease)/increase
in deferred taxes
Adjustments to
reconcile net income
to net cash provided
by operating activities
Trade accounts
receivable
Inventories
Other assets and
liabilities
Accrued expenses
Income taxes
payable and
other income tax
items
Net cash provided by
operating activities
December 31,
2018
As Reported Adjustments
Balances
without
Adoption of
Topic 606
$314,739
$
689
$315,428
(9,420)
(2,391)
(11,811)
38,193
(6,150)
(10,184)
19,153
(648)
(553)
1,313
(1,043)
37,545
(6,703)
(8,871)
18,110
(19,014)
2,633
(16,381)
$589,898
$ —
$589,898
4. Acquisitions and dispositions
Acquisitions
On October 1, 2018, the Company completed the
acquisition of the remaining 70 percent interest in Conitex
Sonoco (BVI), Ltd. (“Conitex Sonoco”) from Texpack
Investments, Inc. (“Texpack”) for total consideration of
$134,847, including net cash payments of $127,782 and
debt assumed of $7,065. Final consideration was subject
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-11
SONOCO2018ANNUALREPORT I FORM10-K to a post-closing adjustment for the change in working
capital to the date of closing. This adjustment was settled
in February 2019 for an additional cash payment to the
seller of $84. The Conitex Sonoco joint venture was
formed in 1998 with Texpack, a Spanish-based global
provider of paperboard and paper-based packaging prod-
ucts. Conitex Sonoco produces uncoated recycled paper-
board and tubes and cones for the global spun yarn
industry, as well as adhesives, flexible intermediate bulk
containers and corrugated pallets. Conitex Sonoco has
approximately 1,250 employees across 13 manufacturing
locations in 10 countries (principally in Asia), including four
paper mills and seven cone and tube converting oper-
ations and two other production facilities. Also on
October 1, 2018, the Company acquired a rigid paper
facility in Spain (“Compositub”) from Texpack Group Hold-
ings B.V. for a cash payment of $9,956. Final consid-
eration was subject to a post-closing adjustment for the
change in working capital to the date of closing. This
adjustment was settled in February 2019 for an additional
cash payment to the seller of $371.
Immediately prior to the acquisition, the fair value of the
Company’s 30 percent interest in Conitex Sonoco was
determined to be $52,543 with a carrying value of
$57,327. As the carrying value of the investment
exceeded its acquisition-date fair value, the investment
was written down to fair value resulting in a charge of
$4,784 in “Selling, general and administrative expenses”
on the Company’s Consolidated Statements of Income for
the year ended December 31, 2018. Additionally, foreign
currency translation losses related to the Company’s
investment in Conitex Sonoco were reclassified out of
accumulated other comprehensive loss resulting in a
charge of $897 in “Selling, general and administrative
expenses” on the Company’s Consolidated Statements of
Income for the year ended December 31, 2018.
The allocation of the purchase price of Conitex Sonoco
and Compositub to the tangible and intangible assets
acquired and liabilities assumed was based on the
Company’s preliminary estimates of their fair value based
on information currently available. Management is continu-
ing to finalize its valuation of certain assets and liabilities,
including, but not limited to: property, plant and equip-
ment; income taxes; other intangible assets and accrued
expenses, and will conclude its valuation no later than one
year from the acquisition date. The provisional fair values
of the assets acquired and liabilities assumed in con-
nection with the acquisitions of Conitex Sonoco and
Compositub are as follows:
Conitex Sonoco Compositub
Trade accounts receivable
Inventories
Property, plant and equipment
Goodwill
Other intangible assets
Trade accounts payable
Short-term debt
Deferred income taxes, net
Noncontrolling interests
Other net tangible assets /
(liabilities)
Net assets
$ 50,937
29,025
97,261
29,722
21,850
(23,429)
(7,065)
(11,744)
(2,655)
(3,577)
$180,325
$ 2,173
750
3,430
2,512
2,512
(1,273)
—
—
—
(148)
$ 9,956
Factors comprising goodwill, $2,000 of which is
expected to be deductible for income tax purposes,
include increased access to certain markets as well as the
value of the assembled workforce. The financial results of
Conitex Sonoco and Compositub are included in the
Company’s Paper and Industrial Converted Products
segment and Consumer Packaging segment, respectively.
On April 12, 2018, the Company completed the acquis-
ition of Highland Packaging Solutions (“Highland”). Total
consideration for this acquisition was $148,539, including
net cash paid of $141,039, along with a contingent pur-
chase liability of $7,500. The contingent purchase liability
is based upon a sales metric which the Company expects
to meet and is payable in two installments. The first
installment of $5,000 is to be paid one year after the clos-
ing date and the second installment of $2,500 is to be
paid two years after the closing date. The liability for these
two payments has been recognized in full on the Compa-
ny’s Consolidated Balance Sheet at December 31, 2018,
with the first installment included in “Accrued expenses
and other” and the second in “Other Liabilities.” Highland
manufactures thermoformed plastic packaging for fresh
produce and dairy products from a single production
facility in Plant City, Florida, providing total packaging sol-
utions for customers that include sophisticated engineered
containers, flexographic printed labels, and inventory
management through distribution warehouses in the
Southeast and West Coast of the United States.
The fair values of the assets acquired and liabilities
assumed in connection with the Highland acquisition are
as follows:
Trade accounts receivable
Inventories
Property, plant and equipment
Goodwill
Other intangible assets
Trade accounts payable
Other net tangible assets /(liabilities)
Net assets
$
6,072
27,225
29,586
46,787
45,524
(6,006)
(649)
$148,539
Subsequent to acquiring Highland, the Company con-
tinued to finalize its valuations of certain assets and
liabilities based on new information obtained about facts
and circumstances that existed as of the acquisition date,
including, but not limited to: property, plant and equip-
ment; other intangible assets; and accrued expenses.
Factors comprising goodwill, all of which is expected to be
deductible for income tax purposes, include increased
access to certain markets as well as the value of the
assembled workforce. Highland’s financial results are
included in the Company’s Consumer Packaging segment
and the business operates within the Company’s global
plastics division.
The Company does not believe that the results of the
acquired Highland, Conitex Sonoco, or Compositub busi-
nesses were material to the years presented, individually
or in the aggregate, and are therefore not subject to the
supplemental pro-forma information required by ASC 805.
Accordingly, this information is not presented herein.
The Company completed two acquisitions during 2017
at a net cash cost of $383,725. On July 24, 2017, the
Company completed the acquisition of Clear Lam Pack-
aging, Inc. (“Clear Lam”) for $164,951, net of cash
F-12
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K acquired. Final consideration was subject to an adjust-
ment for working capital, which resulted in cash of $1,600
being returned to the Company in 2018. Clear Lam manu-
factures high barrier flexible and forming films used to
package a variety of products for consumer packaged
goods companies, retailers and other industrial manu-
facturers, with a focus on structures used for perishable
foods. It has production facilities in Elk Grove Village, Illi-
nois, and Nanjing, China. Clear Lam’s financial results are
included in the Company’s Consumer Packaging seg-
ment. The Company finalized its valuations of the assets
and liabilities acquired in the Clear Lam acquisition during
2018 based on information obtained about facts and cir-
cumstances that existed as of the acquisition date. As a
result, measurement period adjustments were made to the
previously disclosed provisional fair values of the assets
acquired and liabilities assumed in connection with the
acquisition of Clear Lam that decreased net property,
plant and equipment by $1,168, decreased other
intangible assets by $1,300, increased other long-term
liabilities by $1,385, increased goodwill by $1,568, and
increased other net tangible assets by $685.
On March 14, 2017, the Company completed the
acquisition of Packaging Holdings, Inc. and subsidiaries,
including Peninsula Packaging LLC (“Packaging
Holdings”), for $218,774, net of cash acquired. Packaging
Holdings manufactures thermoformed packaging for a
wide range of whole fresh fruits, pre-cut fruits and pro-
duce, prepared salad mixes, as well as baked goods in
retail supermarkets from five manufacturing facilities,
including four in the United States and one in Mex-
ico. Packaging Holding’s financial results are included in
the Company’s Consumer Packaging segment and the
business operates as the Peninsula brand of thermo-
formed packaging products within the Company’s global
plastics division. The Company finalized its valuations of
the assets and liabilities acquired in the Packaging Hold-
ings acquisition during 2018 based on information
obtained about facts and circumstances that existed as of
the acquisition date. As a result, measurement period
adjustments were made to the previously disclosed provi-
sional fair values of the assets acquired and liabilities
assumed in connection with the acquisition of Packaging
Holdings that increased inventory by $2,381, decreased
deferred tax assets by $6,916, increased long-term debt
by $664, and increased goodwill by $5,199 The adjust-
ments were primarily related to a reduction in the Compa-
ny’s valuation of acquired tax loss carryforwards, and the
fair values of spare parts inventories and capital lease
obligations.
Although neither of the acquisitions completed during
2017 were considered individually material, they were
considered material on a combined basis. The following
table presents the Company’s estimated pro forma con-
solidated results for 2017 and 2016, assuming both
acquisitions had occurred on January 1, 2016. This pro
forma information is presented for informational purposes
only and is not necessarily indicative of the results of
operations that would have been achieved if the acquis-
itions had been completed as of the beginning of 2016,
nor are they necessarily indicative of future consolidated
results.
Pro Forma Supplemental
Information
Consolidated
Net sales
Net income attributable to Sonoco
Earnings per share:
Pro forma basic
Pro forma diluted
(unaudited)
2017
2016
$5,143,066
$ 178,205
$5,080,492
$ 271,749
$
$
1.78
1.77
$
$
2.69
2.67
The pro forma information above does not project the
Company’s expected results of any future period and
gives no effect for any future synergistic benefits that may
result from consolidating these subsidiaries or costs from
integrating their operations with those of the Company.
Pro forma information for both 2017 and 2016 includes
adjustments to depreciation, amortization, interest
expense, and income taxes. Acquisition-related costs
of $4,345 and non-recurring expenses related to fair value
adjustments to acquisition-date inventory of $5,750 were
recognized in 2017 in connection with the acquisitions of
Packaging Holdings and Clear Lam. These costs are
excluded from 2017 pro forma net income and reflected
as though having been incurred on January 1, 2016.
The following table presents the aggregate, unaudited
financial results for Packaging Holdings and Clear Lam
from their respective dates of acquisition:
Aggregate Supplemental Information
Packaging Holdings and Clear Lam
Actual net sales
Actual net income
(unaudited)
2017
$215,227
3,886
$
The Company completed four acquisitions during 2016
at a net cash cost of $88,632. On November 1, 2016, the
Company completed the acquisition of Plastic Packaging
Inc. (“PPI”), a privately held Hickory, N.C.-based flexible
packaging company for $67,568, net of cash acquired.
Founded in 1957, PPI, which is part of the Company’s
Consumer Packaging segment, specializes in short-run,
customized flexible packaging for consumer brands in
markets including food products, pet products, con-
fection, and health and personal care. PPI operates two
manufacturing facilities in North Carolina with approx-
imately 170 employees. In conjunction with this acquis-
ition, the Company recorded net tangible assets of
$22,756, identifiable intangibles of $18,900, and goodwill
of $25,912, none of which was tax deductible. Factors
comprising goodwill include the ability to leverage product
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-13
SONOCO2018ANNUALREPORT I FORM10-K offerings across a broader customer base and the value of
the assembled workforce.
On September 19, 2016, the Company completed the
acquisition of Laminar Medica (“Laminar”) in the United
Kingdom and Czech Republic, from Clinimed (Holdings)
Limited, a privately held specialty medical products com-
pany based in the U.K. for $17,201, net of cash acquired.
In conjunction with this acquisition, which is accounted for
as part of the Company’s Protective Solutions segment,
the Company recorded net tangible assets of $2,739,
identifiable intangibles of $5,654, and goodwill of $8,808
none of which was tax deductible. Factors comprising
goodwill include increased access to certain markets as
well as the value of the assembled workforce.
On August 30, 2016, the Company completed the
acquisition of the temperature-controlled cargo container
assets, licenses, trademarks, and manufacturing rights
from AAR Corporation. Total consideration for this busi-
ness was $6,000, including cash paid of $3,000,
non-contingent deferred payments of $2,000, and a con-
tingent purchase liability totaling $1,000. The
non-contingent deferred payments were due in two
installments, $1,000 that was paid 12 months from the
closing date, and $1,000 that was paid 24 months from
the closing date. The contingent purchase liability is based
upon a highly attainable metric which the Company
expects to be met. The contingent liability is payable in
two installments, $500 due 36 months from the closing
date and $500 due 48 months from the closing date. In
relation to this acquisition, which is accounted for as part
of the Protective Solutions segment, the Company
recorded net tangible assets of $200, identifiable
intangibles of $4,100, and goodwill of $1,700. All of the
goodwill was tax deductible.
On June 24, 2016, the Company completed the acquis-
ition of a small tube and core business in Australia. The
all-cash purchase price of the business was $863. In con-
junction with this acquisition, which is part of the Paper
and Industrial Converted Products segment, the Company
recorded net tangible assets of $149, identifiable
intangibles of $297, and goodwill of $417, none of which
was tax deductible.
Acquisition-related costs of $14,446, $13,790 and
$4,569 were incurred in 2018, 2017 and 2016,
respectively. These costs, consisting primarily of legal and
professional fees, are included in “Selling, general and
administrative expenses” in the Company’s Consolidated
Statements of Income. Acquisition-related costs incurred
in 2018 also include the previously discussed charge
related to the acquisition-date fair value remeasurement of
the Company’s 30 percent investment in Conitex Sonoco
and the foreign currency translation losses related to this
investment.
The Company has accounted for these acquisitions as
business combinations under the acquisition method of
accounting, in accordance with the business combinations
subtopic of the Accounting Standards Codification and,
accordingly, has included their results of operations in the
Company’s consolidated statements of net income from
the respective dates of acquisition.
Dispositions
On November 7, 2016 the Company completed the sale
of its rigid plastics blow molding operations to Amcor Rigid
Plastics USA, LLC and Amcor Packaging Canada, Inc.
These operations manufactured containers serving the
personal care and food and beverage markets and con-
sisted of seven manufacturing facilities (six in the U.S. and
one in Canada), with approximately 850 employees. The
selling price was approximately $280,000, with the Com-
pany receiving net cash proceeds of $271,817 at closing
with another $7,775 held in escrow pending resolution of a
contingency. In conjunction with the sale, the Company
wrote off the following assets and liabilities: trade accounts
receivable of $35,031; inventory of $14,700; trade accounts
payable of $18,494; property, plant and equipment of
$41,210; other net tangible liabilities totaling $499; goodwill
of $76,435; and identifiable intangibles (primarily customer
lists) of $14,735. Disposal-related costs totaled $4,407,
resulting in the recognition of a gain on the disposition of
$104,292. During 2017, the contingency was resolved with
no additional proceeds being released to the Company and
no additional gain on sale being recorded. The decision to
sell the blow molding operations was made in order to allow
the Company to focus on, and provide resources to further
enhance, its targeted growth businesses, including flexible
packaging, thermoformed rigid plastics, and temperature-
assurance packaging. The sale did not represent a strategic
shift for the Company that will have a major effect on the
entity’s operations and financial results. Consequently, the
sale did not meet the criteria for reporting as a discontinued
operation. There were no dispositions in 2018 or 2017.
5. Restructuring and asset impairment
The Company has engaged in a number of restructur-
ing actions over the past several years. Actions initiated in
2018 and 2017 are reported as “2018 Actions” and “2017
Actions,” respectively. Actions initiated prior to 2017, all of
which were substantially complete at December 31, 2018,
are reported as “2016 and Earlier Actions.”
Following are the total restructuring and asset impair-
ment charges, net of adjustments, recognized during the
periods presented:
Year Ended December 31
2018
2017
2016
Restructuring/Asset
impairment:
2018 Actions
2017 Actions
2016 and Earlier Actions
Other asset impairments
$ 32,293
7,870
(92)
—
$
— $
15,329
4,505
18,585
—
—
40,266
2,617
Restructuring/Asset
impairment charges
Income tax benefit
Restructuring benefit
attributable to
noncontrolling interests,
net of tax
Total impact of restructuring/
asset impairment charges,
net of tax
$ 40,071
(10,038)
$ 38,419
(13,064)
$42,883
(7,520)
(191)
(71)
(161)
$ 29,842
$ 25,284
$35,202
Pretax restructuring and asset impairment charges are
included in “Restructuring/Asset impairment charges” in
the Consolidated Statements of Income.
The Company expects to recognize future additional
costs totaling approximately $1,800 in connection with
previously announced restructuring actions. The Company
F-14
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K believes that the majority of these charges will be incurred
and paid by the end of 2019. The Company continually
evaluates its cost structure, including its manufacturing
capacity, and additional restructuring actions are likely to
be undertaken.
The following table sets forth the activity in the 2018
Actions restructuring accrual included in “Accrued
expenses and other” on the Company’s Consolidated
Balance Sheets:
2018 actions
During 2018, the Company announced the closure of a
flexible packaging plant in North Carolina, a global brand
management facility in Canada, and a thermoformed
packaging plant in California (all part of the Consumer
Packaging segment), five tube and core plants – one in
Alabama, one in Canada, one in Indonesia, one in Russia,
and one in Norway (all part of the Paper and Industrial
Converted Products segment), and a protective packaging
plant in North Carolina (part of the Protective Solutions
segment). Restructuring actions in the Display and Pack-
aging segment included charges associated with exiting a
single-customer contract at a packaging center near
Atlanta, Georgia. In addition the Company continued to
realign its cost structure, resulting in the elimination of
approximately 120 positions.
Below is a summary of 2018 Actions and related
expenses by type incurred and estimated to be incurred
through completion.
2018 Actions
Severance and Termination Benefits
Consumer Packaging
Display and Packaging
Paper and Industrial Converted
Products
Protective Solutions
Corporate
Asset Impairment/Disposal of
Assets
Consumer Packaging
Display and Packaging
Paper and Industrial Converted
Products
Protective Solutions
Other Costs
Consumer Packaging
Display and Packaging
Paper and Industrial Converted
Products
Protective Solutions
Corporate
Year Ended
December 31,
2018
Estimated
Total Cost
$ 4,700
1,939
$ 4,700
1,939
3,111
1,075
243
2,688
4,625
118
(243)
2,390
9,850
1,761
46
(10)
3,211
1,075
243
2,688
4,625
118
(243)
2,990
9,950
2,461
46
(10)
2018 Actions
Accrual Activity
Liability,
December 31,
2017
2018 charges
Cash (payments)/
receipts
Asset write downs/
disposals
Foreign currency
translation
Liability,
December 31,
2018
Severance
and
Termination
Benefits
Asset
Impairment/
Disposal
of Assets
Other
Costs
Total
$
— $
— $
— $
11,068
7,188
14,037
—
32,293
(7,858)
24,300
(13,853)
2,589
—
(31,488)
— (31,488)
(16)
—
(5)
(21)
$ 3,194
$
— $
179 $ 3,373
Included in “Asset Impairment/Disposal of Assets”
above are losses totaling $4,516 from the disposition of
certain assets as a result of exiting a single-customer
contract associated with a packaging center near Atlanta,
Georgia. The Company received proceeds of $22,163 in
conjunction with the sale of fixed assets with a net book
value of $24,869, and wrote off inventory with a book
value of $1,810. Also included in “Asset Impairment/
Disposal of Assets” is a net gain of $272 resulting from the
sale of a building and land relating to the closure of a pro-
tective packaging plant in North Carolina. The Company
received proceeds of $2,019 from the sale and wrote off
fixed assets of $1,747. Additional disposals of fixed assets
and inventory totaling $1,924 and $117, respectively, were
recognized in 2018 relating to the closure of a thermo-
formed packaging plant in Hollister, California.
“Other costs” include a contract termination fee of
$9,600 relating to exiting the single-customer contract
referred to above as well as costs related to plant closures
including equipment removal, utilities, plant security, prop-
erty taxes and insurance.
The Company expects to pay the majority of the remain-
ing 2018 Actions restructuring costs by the end of 2019
using cash generated from operations.
2017 actions
Total Charges and Adjustments
$32,293
$33,793
During 2017, the Company announced the closure of
an expanded foam protective packaging plant in the
United States (part of the Protective Solutions segment),
five tubes and cores plants – three in the United States,
one in Belgium, and one in China (all part of the Paper and
Industrial Converted Products segment), and a packaging
services center in Mexico (part of the Display and Pack-
aging segment). In addition, approximately 185 positions
were eliminated throughout 2017 in conjunction with the
Company’s ongoing organizational effectiveness efforts.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-15
SONOCO2018ANNUALREPORT I FORM10-K Below is a summary of 2017 Actions and related
expenses by type incurred and estimated to be incurred
through completion.
Year Ended
December 31,
2018
2017
Total
Incurred to
Date
Estimated
Total Cost
2017 Actions
Severance and
Termination Benefits
Consumer Packaging $ 3,819 $ 4,191 $ 8,010
Display and Packaging
794
Paper and Industrial
741
53
$ 8,010
794
Converted Products
Protective Solutions
Corporate
Asset Impairment/
Disposal of Assets
Consumer Packaging
Display and Packaging
Paper and Industrial
Converted Products
Protective Solutions
Other Costs
Consumer Packaging
Display and Packaging
Paper and Industrial
Converted Products
Protective Solutions
Corporate
Total Charges and
Adjustments
40
172
—
107
377
4,018
1,398
452
4,058
1,570
452
4,058
1,570
452
351
—
458
377
458
377
(1,320)
93
(95)
871
(1,415)
964
(1,415)
964
1,399
1,979
879
789
2,278
2,768
817
334
—
1,001
742
(9)
1,818
1,076
(9)
2,278
2,868
1,818
1,176
(9)
Included in “Asset Impairment/Disposal of Assets” in
2017 above is a loss of $1,238 primarily related to the
impairment of fixed assets resulting from the closure of an
expanded foam protective packaging plant in North Caro-
lina, and a net gain of $111 relating primarily to the sale of
two vacated buildings. The Company received proceeds
of $636 from the sale of these buildings and wrote-off
assets of $525.
Included in “Asset Impairment/Disposal of Assets” in
2018 above are gains totaling $1,429 related to the sales
of the land and buildings associated with two previously
closed tube and core facilities and a recovered paper
facility. The Company received proceeds of $2,006 from
these sales and wrote off assets with a book value totaling
$577. In addition impairments of fixed assets totaling $620
were recognized from restructuring actions initiated in
2017.
“Other Costs” in 2018 consists of a one-time building
lease contract termination fee of $1,931 relating to the
closure of a packaging services center in Mexico as well
as costs related to plant closures including equipment
removal, utilities, plant security, property taxes and
insurance. “Other costs” in 2017 consists primarily of
costs related to plant closures including equipment
removal, utilities, plant security, property taxes and
insurance.
The Company expects to pay the majority of the remain-
ing 2017 Actions restructuring costs by the end of 2019
using cash generated from operations.
$ 7,870 $15,329 $23,199
$23,399
2016 and earlier actions
The following table sets forth the activity in the 2017
Actions restructuring accrual included in “Accrued
expenses and other” on the Company’s Consolidated
Balance Sheets:
2017 Actions
Accrual Activity
Liability,
December 31,
2016
2017 charges
Cash receipts/
(payments)
Asset write downs/
disposals
Foreign currency
translation
Liability,
December 31,
2017
2018 charges
Adjustments
Cash (payments)/
receipts
Asset write downs/
disposals
Foreign currency
translation
Liability,
December 31,
2018
Severance
and
Termination
Benefits
Asset
Impairment/
Disposal
of Assets
Other
Costs
Total
$
—
10,800
$ — $ — $
—
3,402 15,329
1,127
(6,951)
636
(3,187)
(9,502)
—
40
(1,763)
— (1,763)
—
(2)
38
$ 3,889
4,084
—
$ — $
(743)
—
213 $ 4,102
7,870
—
4,529
—
(6,610)
2,014
(2,892)
(7,488)
—
(1,271)
— (1,271)
(27)
—
25
(2)
$ 1,336
$ — $ 1,875 $ 3,211
2016 and Earlier Actions are comprised of a number of
plant closures and workforce reductions initiated prior to
2017. Below is a summary of 2016 and Earlier Actions and
related expenses by type incurred.
2016 and Earlier Actions
2018
2017
2016
Year Ended December 31,
Severance and Termination
Benefits
Consumer Packaging
Display and Packaging
Paper and Industrial
Converted Products
Protective Solutions
Corporate
Asset Impairment/Disposal of
Assets
Consumer Packaging
Display and Packaging
Paper and Industrial
Converted Products
Protective Solutions
Other Costs
Consumer Packaging
Display and Packaging
Paper and Industrial
Converted Products
Protective Solutions
$ 121
(23)
$ 1,087
34
$ 5,554
4,401
(26)
—
—
743
—
20
5,881
678
1,531
— (1,377)
90
—
1,352
3,047
(252)
—
308
(28)
13,490
3
(19)
—
52
55
1,620
394
1,435
179
1,680
492
1,820
337
Total Charges and Adjustments
$ (92) $ 4,505
$40,266
F-16
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K The following table sets forth the activity in the 2016
and Earlier Actions restructuring accrual included in
“Accrued expenses and other” on the Company’s Con-
solidated Balance Sheets:
2016 and Earlier
Actions
Accrual Activity
Liability, December 31,
2016
2017 charges
Adjustments
Cash receipts/
(payments)
Asset write downs/
disposals
Foreign currency
translation
Liability, December 31,
2017
2018 charges
Adjustments
Cash receipts/
(payments)
Asset write downs/
disposals
Foreign currency
translation
Severance
and
Termination
Benefits
Asset
Impairment/
Disposal
of Assets
Other
Costs Total
$ 7,166
2,480
(596)
$ — $
(1,007)
—
640 $ 7,806
4,141 5,614
(1,109)
(513)
(7,236)
2,921
(3,222)
(7,537)
—
(1,914)
(253)
(2,167)
279
—
158
437
$ 2,093
72
—
$ — $
(252)
—
951 $ 3,044
(92)
—
88
—
(1,376)
252
(796)
(1,920)
—
(26)
—
—
—
(18)
(44)
Liability, December 31,
2018
$
763
$ — $
225 $
988
Included in “Asset Impairment/Disposal of Assets” in
2017 is a gain of $2,022 from the sale of the land and
building of a rigid paper plant in Manchester, England. The
Company received proceeds from the sale of $2,741 and
wrote off assets of $719.
“Other Costs” in both 2018 and 2017 consist primarily
of costs related to plant closures including equipment
removal, utilities, plant security, property taxes and
insurance.
“Adjustments” in 2017 relate primarily to revisions to
reserves for remaining severance payments and future
building rental costs.
The Company expects to recognize future pretax
charges of approximately $100 associated with 2016 and
Earlier Actions, and expects to pay the majority of the
remaining 2016 and Earlier Actions restructuring costs by
the end of 2019 using cash generated from operations.
Other asset impairments
During the fourth quarter of 2017, the Company recog-
nized the impairment of a power generating facility at its
Hartsville manufacturing complex. The facility, which is
part of the Paper and Industrial Converted Products
segment, was determined to have been rendered obsolete
by the Company’s new biomass facility and was closed
during the first quarter of 2018. As a result, the Company
recognized a pretax asset impairment charge of $17,822
in December 2017.
As a result of the continued devaluation of the Ven-
ezuelan Bolivar in 2017, the Company recognized impair-
ment charges against inventories and certain long-term
nonmonetary assets totaling $338. The assets were
deemed to be impaired as the U.S. dollar value of the
projected cash flows from these assets was no longer suffi-
cient to recover their U.S. dollar carrying values. In addi-
tion, the Company has recognized foreign exchange
remeasurement losses on net monetary assets of $425.
During the Company’s 2016 annual goodwill impair-
ment testing, management concluded that goodwill asso-
ciated with the Paper and Industrial Converted Products –
Brazil reporting unit had become impaired as a result of
the continued deterioration of economic conditions in
Brazil. Accordingly, an impairment charge totaling $2,617,
the entire amount of goodwill associated with this report-
ing unit, was recognized during the third quarter of 2016.
No other impairments were identified during this most
recently completed annual goodwill impairment testing.
These asset impairment charges are included in
“Restructuring/Asset impairment charges” in the Compa-
ny’s Consolidated Statements of Income.
6. Book overdrafts and cash pooling
At December 31, 2018 and 2017, outstanding checks
totaling $13,205 and $17,343, respectively, were included
in “Payable to suppliers” on the Company’s Consolidated
Balance Sheets. In addition, outstanding payroll checks of
$114 and $259 as of December 31, 2018 and 2017,
respectively, were included in “Accrued wages and other
compensation” on the Company’s Consolidated Balance
Sheets.
The Company uses a notional pooling arrangement
with an international bank to help manage global liquidity
requirements. Under this pooling arrangement, the Com-
pany and its participating subsidiaries may maintain either
cash deposit or borrowing positions through local cur-
rency accounts with the bank, so long as the aggregate
position of the global pool is a notionally calculated net
cash deposit. Because it maintains a security interest in
the cash deposits, and has the right to offset the cash
deposits against the borrowings, the bank provides the
Company and its participating subsidiaries favorable inter-
est terms on both. The Company’s Consolidated Balance
Sheets reflect a net cash deposit under this pooling
arrangement of $2,562 and $3,328 as of December 31,
2018 and 2017, respectively.
7. Property, plant and equipment
Details of the Company’s property, plant and equip-
ment at December 31 are as follows:
Land
Timber resources
Buildings
Machinery and equipment
Construction in progress
2018
2017
$
110,698
41,862
535,433
2,977,156
159,661
$
87,878
41,664
502,046
2,871,622
143,403
3,824,810
3,646,613
Accumulated depreciation and
depletion
(2,590,989)
(2,477,236)
Property, plant and equipment, net
$ 1,233,821
$ 1,169,377
Estimated costs for completion of capital additions
under construction totaled approximately $111,300 at
December 31, 2018.
Depreciation and depletion expense amounted to
$188,533 in 2018, $178,049 in 2017 and $173,295 in 2016.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-17
SONOCO2018ANNUALREPORT I FORM10-K The Company has certain properties and equipment
that are leased under noncancelable operating leases.
Future minimum rentals under noncancelable operating
leases with terms of more than one year are as follows:
2019 – $48,200; 2020 – $41,700; 2021 – $32,500; 2022 –
$27,300; 2023 – $21,400 and thereafter – $92,300. Total
rental expense under operating leases was approximately
$80,300 in 2018, $68,900 in 2017 and $71,800 in 2016.
8. Goodwill and other intangible assets
Goodwill
The changes in the carrying amount of goodwill by segment for the year ended December 31, 2018, are as follows:
Balance as of January 1, 2018
Acquisitions
Other
Foreign currency translation
Consumer
Packaging
$572,716
49,298
6,766
(11,448)
Display
and
Packaging
$203,414
—
—
—
Paper and
Industrial
Converted
Products
$233,778
29,722
—
(6,553)
Protective
Solutions
$231,967
—
(493)
Total
$1,241,875
79,020
6,766
(18,494)
Balance as of December 31, 2018
$617,332
$203,414
$256,947
$231,474
$1,309,167
Acquisitions in 2018 resulted in the addition of $79,020
of goodwill, including $46,786 in connection with the April
2018 acquisition of Highland, $2,512 in connection with
the October 2018 acquisition of Compositub, and $29,722
in connection with the October 2018 acquisition of the
remaining 70% interest in the Conitex Sonoco joint ven-
ture. In addition, the Company recorded adjustments in
2018 related to the provisional goodwill amounts recorded
for prior year acquisitions. These are shown as “Other” in
the table above. See Note 4 for additional information.
The Company assesses goodwill for impairment annu-
ally and from time to time when warranted by the facts and
circumstances surrounding individual reporting units or the
Company as a whole. The Company completed its most
recent annual goodwill impairment testing during the third
quarter of 2018. As part of this testing, the Company ana-
lyzed certain qualitative and quantitative factors in
determining goodwill impairment. Goodwill is tested for
impairment using either a qualitative evaluation or a quanti-
tative test. The qualitative evaluation considers factors
such as the macroeconomic environment, Company stock
price and market capitalization movement, business strat-
egy changes, and significant customer wins and losses.
The quantitative test considers factors such as the amount
by which estimated fair value exceeds current carrying
value, current year operating performance as compared to
prior projections, and implied fair values from comparable
trading and transaction multiples. When calculated, report-
ing unit estimated fair values reflect a number of significant
management assumptions and estimates including the
Company’s forecast of sales volumes and prices, profit
margins, income taxes, capital expenditures and changes
in working capital requirements. Changes in these
assumptions and/or discount rates could materially impact
the estimated fair values. When the Company estimates
the fair value of a reporting unit, it does so using a dis-
counted cash flow model based on projections of future
years’ operating results and associated cash flows,
together with comparable trading and transaction multi-
ples. The Company’s projections incorporate manage-
ment’s best estimates of the expected future results,
which include expectations related to new business, and,
where applicable, improved operating margins. Manage-
ment’s projections related to revenue growth and/or mar-
gin improvements arise from a combination of factors,
including expectations for volume growth with existing
customers, product expansion, improved price/cost,
productivity gains, fixed cost leverage, improvement in
general economic conditions, increased operational
capacity, and customer retention. Projected future cash
flows are then discounted to present value using a dis-
count rate management believes is commensurate with
the risks inherent in the cash flows for each reporting unit.
Because the Company’s assessments incorporate man-
agement’s expectations for the future, including fore-
casted growth and/or margin improvements, if there are
changes in the relevant facts and circumstances and/or
expectations, management’s assessment regarding
goodwill impairment may change as well. In considering
the level of uncertainty regarding the potential for goodwill
impairment, management has concluded that any such
impairment would likely be the result of adverse changes
in more than one assumption. Other than in Display and
Packaging (discussed below), there is no specific singular
event or single change in circumstances the Company has
identified that it believes could reasonably result in a
change to expected future results in any of its reporting
units sufficient to result in goodwill impairment.
Based on its assessments, the Company concluded
that there was no impairment of goodwill for any of its
reporting units. The assessments reflected a number of
significant management assumptions and estimates
including the Company’s forecast of sales volumes and
prices, profit margins, income taxes, capital expenditures
and changes in working capital requirements. Changes in
these assumptions and/or discount rates could materially
impact the Company’s conclusions.
Although no reporting units failed the annual impair-
ment test noted above, in management’s opinion, the
goodwill of the Display and Packaging reporting unit is at
risk of impairment in the near term if operating perform-
ance does not improve in line with management’s expect-
ations, or if there is a negative change in the long-term
outlook for the business or in other factors such as the
F-18
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K discount rate. The current goodwill impairment analysis
incorporates management’s expectations for moderate
sales growth and mild improvements to profit margin
percentages which reflects the estimated benefits of future
productivity initiatives. A large portion of expected sales in
this reporting unit is concentrated in several major
customers and if the business with any of these customers
is lost or significantly declines, or other projected syner-
gies and productivity gains are not realized, a goodwill
impairment charge could be incurred. Total goodwill asso-
ciated with this reporting unit was $203,414 at
December 31, 2018. Based on the latest annual impair-
ment test, the estimated fair value of the Display and
Packaging reporting unit is approximately equal to its
carrying value.
During the time subsequent to the annual evaluation,
and at December 31, 2018, the Company considered
whether any events and/or changes in circumstances had
resulted in the likelihood that the goodwill of any of its
reporting units may have been impaired. It is manage-
ment’s opinion that no such events have occurred.
Other intangible assets
Details at December 31 are as follows:
Other Intangible Assets, Gross:
Patents
Customer lists
Trade names
Proprietary technology
Land use rights
Other
2018
2017
$ 22,509
548,038
31,174
28,748
282
2,093
$ 21,957
497,634
25,148
20,779
298
1,740
Other Intangible Assets, Gross
$ 632,844
$ 567,556
Accumulated Amortization:
Patents
Customer lists
Trade names
Proprietary technology
Land use rights
Other
$
(9,539) $
(246,946)
(7,413)
(15,400)
(48)
(1,461)
(7,187)
(210,212)
(4,427)
(13,192)
(47)
(1,196)
Accumulated Amortization
$(280,807) $(236,261)
Other Intangible Assets, Net
$ 352,037
$ 331,295
The acquisitions of Highland in April 2018 and Composi-
tub in October 2018 resulted in the addition of
$45,524 and $2,512, respectively, of intangible assets,
mostly related to customer lists. The October 2018 acquis-
ition of the remaining 70% ownership of the Conitex
Sonoco joint venture resulted in the addition of $21,850 of
intangible assets, $9,650 related to customer lists, $8,000
to trademarks, and $4,200 to proprietary technology. In
addition, measurement period adjustments were made in
2018 to the provisional fair values of the intangible assets
acquired in the July 2017 acquisition of Clear Lam which
resulted in the reduction of $1,300 of intangible assets, all
of which related to customer lists. See Note 4 for addi-
tional information. In the third quarter of 2018 the Com-
pany purchased certain intangible assets in Australia,
primarily customer lists, for a total of $2,071. These newly
acquired intangible assets will be amortized over an
expected average useful life of 12 years.
Aggregate amortization expense on intangible assets
was $47,177, $38,165 and $31,887 for the years ended
December 31, 2018, 2017 and 2016, respectively. Amor-
tization expense on intangible assets is expected to
approximate $50,400 in 2019, $48,000 in 2020, $46,400
in 2021, $43,700 in 2022 and $37,300 in 2023.
9. Debt
Debt at December 31 was as follows:
5.75% debentures due November
2040
$ 599,208
$ 599,171
2018
2017
4.375% debentures due November
2021
9.2% debentures due August 2021
1.00% Euro loan due May 2021
Term loan due July 2022
Commercial paper, average rate of
249,116
4,315
169,976
158,949
248,803
4,294
177,218
246,328
2.15% in 2018 and 1.24% in 2017
120,000
124,000
Other foreign denominated debt,
average rate of 3.7% in 2018 and
3.8% in 2017
Other notes
Total debt
Less current portion and short-term
notes
Long-term debt
57,867
25,731
21,735
25,780
1,385,162
1,447,329
195,445
159,327
$1,189,717
$1,288,002
On April 12, 2018, the Company entered into a
$100,000 term loan with Bank of America, N.A. The full
amount was drawn from this facility on April 12, 2018, and
the proceeds, along with proceeds from existing credit
facilities, were used to fund the acquisition of Highland
Packaging. The loan had a 364-day term and the Com-
pany had a one-time option to extend the term for an addi-
tional 364 days at its sole discretion. Interest was
assessed at the London Interbank Offered Rate (LIBOR)
plus a margin based on a pricing grid that used the
Company’s credit ratings. There was no required amor-
tization and repayment could be accelerated at any time at
the discretion of the Company. The entire $100,000 of the
borrowings from this term loan had been repaid as of the
end of 2018.
On March 13, 2017, the Company entered into a
$150,000 unsecured three-year floating-rate assignable
loan agreement. The proceeds from this term loan were
used to fund the acquisition of Packaging Holdings.
On July 20, 2017, the Company entered into a Credit
Agreement in connection with a new $750,000 bank credit
facility with a syndicate of eight banks replacing an exist-
ing credit facility entered into on October 2, 2014, and
reflecting substantially the same terms and conditions.
Included in the new facility are a $500,000 five-year revolv-
ing credit facility and a $250,000 five-year term loan.
Based on the pricing grid in the Credit Agreement and the
Company’s current credit ratings, the borrowing has an
all-in drawn margin of 112.5 basis points above the Lon-
don Interbank Offered Rate (LIBOR). Borrowings under the
Credit Agreement are pre-payable at any time at the dis-
cretion of the Company and the term loan has annual
amortization payments totaling $12,500. During 2018, the
Company prepaid an additional $75,000 of the term loan.
The $500,000 revolving credit facility supports the
Company’s $350,000 commercial paper program. If cir-
cumstances were to prevent the Company from issuing
commercial paper, it has the contractual right to draw
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-19
SONOCO2018ANNUALREPORT I FORM10-K funds directly on the underlying bank credit facility. The
Company had $120,000 of outstanding commercial paper
at December 31, 2018 and $124,000 at December 31,
2017.
Proceeds from the $250,000 term loan were used to
repay the $150,000 term loan entered into on March 13,
2017, and the remaining $100,000 was used to partially
fund the Clear Lam acquisition.
In addition to the $500,000 committed revolving bank
credit facility, the Company had approximately $225,000
available under unused short-term lines of credit at
December 31, 2018. These short-term lines of credit are
for general Company purposes, with interest at mutually
agreed-upon rates.
Certain of the Company’s debt agreements impose
restrictions with respect to the maintenance of financial
ratios and the disposition of assets. The most restrictive
covenants currently require the Company to maintain a
minimum level of interest coverage, and a minimum level
of net worth, as defined. As of December 31, 2018, the
Company had substantial tolerance above the minimum
levels required under these covenants.
The principal requirements of debt maturing in the next
five years are: 2019 – $195,445; 2020 – $16,763; 2021 –
$440,658; 2022 – $124,197 and 2023 – $1,781.
10. Financial instruments and derivatives
The following table sets forth the carrying amounts and
fair values of the Company’s significant financial instru-
ments where the carrying amount differs from the fair
value.
related cash flows. To the extent considered effective, the
changes in fair value of these contracts are recorded in
other comprehensive income and reclassified to income or
expense in the period in which the hedged item impacts
earnings.
Commodity cash flow hedges
The Company has entered into certain derivative con-
tracts to manage some of the cost of anticipated pur-
chases of natural gas and aluminum. At December 31,
2018, natural gas swaps covering approximately
7.0 million MMBTUs were outstanding. These contracts
represent approximately 71% and 31% of anticipated U.S.
and Canadian usage for 2019 and 2020, respectively.
Additionally, the Company had swap contracts covering
4,082 metric tons of aluminum representing approximately
51% of anticipated usage for 2019. The total fair values of
the Company’s commodity cash flow hedges were in a net
loss positions totaling $(1,571) and $(1,713) at
December 31, 2018 and December 31, 2017,
respectively. The amount of the loss included in accumu-
lated other comprehensive loss at December 31, 2018,
expected to be reclassified to the income statement dur-
ing the next twelve months is $(1,500).
Foreign currency cash flow hedges
The Company has entered into forward contracts to
hedge certain anticipated foreign currency denominated
sales and purchases forecasted to occur in 2019. The net
positions of these contracts at December 31, 2018, were
as follows:
December 31, 2018
December 31, 2017
Currency
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Long-term
debt
$1,189,717 $1,270,521 $1,288,002 $1,426,862
The carrying value of cash and cash equivalents, short-
term debt and long-term variable-rate debt approximates
fair value. The fair value of long-term debt is based on
recent trade information in the financial markets of the
Company’s public debt or is determined by discounting
future cash flows using interest rates available to the
Company for issues with similar terms and maturities. It is
considered a Level 2 fair value measurement.
Adoption of accounting standards update 2017-12
The Company elected to early adopt Accounting Stan-
dards Update (ASU) 2017-12, “Derivatives and Hedging:
Targeted Improvements to Accounting for Hedging
Activities,” as of January 1, 2018. The impact of the adop-
tion of ASU 2017-12 was the recognition of a $176
increase in the Company’s beginning retained earnings
with an offsetting change in accumulated other compre-
hensive loss in order to remove previously recognized
ineffectiveness losses on contracts outstanding as of the
date of adoption. See Note 2 for additional information.
Cash flow hedges
At December 31, 2018 and 2017, the Company had
derivative financial instruments outstanding to hedge
anticipated transactions and certain asset and liability
F-20
S O N O C O 2 0 1 8 A N N U A L R E P O R T
Colombian peso
Mexican peso
Polish zloty
Canadian dollar
Czech koruna
Turkish lira
British pound
New Zealand dollar
Australian dollar
Swedish krona
Euro
Russian ruble
Action
Quantity
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Sell
Sell
Sell
Sell
Sell
16,977,636
444,428
70,788
62,753
45,255
6,603
1,937
(334)
(388)
(3,380)
(19,010)
(126,867)
The fair values of the Company’s foreign currency cash
flow hedges related to forecasted sales and purchases
netted to a loss position of $(1,624) at December 31, 2018
and a gain position of $950 at December 31, 2017.
Losses of $(1,624) are expected to be reclassified from
accumulated other comprehensive loss to the income
statement during the next twelve months. In addition, the
Company has entered into forward contracts to hedge
certain foreign currency cash flow transactions related to
construction in progress. As of December 31, 2018 and
December 31, 2017, the net position of these contacts
was $(88) and $330 respectively. Losses totaling $(305)
and a gain totaling $64 were reclassified from accumu-
lated other comprehensive loss and netted against the
carrying value of the capitalized expenditures during the
years ended December 31, 2018 and December 31,
2017, respectively. Losses of $(88) are expected to be
reclassified from accumulated other comprehensive loss
SONOCO2018ANNUALREPORT I FORM10-K and included in the carrying value of the related fixed
assets acquired during the next twelve months.
The following table sets forth the location and fair val-
ues of the Company’s derivative instruments:
Other derivatives
The Company routinely enters into forward contracts or
swaps to economically hedge the currency exposure of
intercompany debt and existing foreign currency denomi-
nated receivables and payables. The Company does not
apply hedge accounting treatment under ASC 815 for
these instruments. As such, changes in fair value are
recorded directly to income and expense in the periods
that they occur. The net positions of these contracts at
December 31, 2018, were as follows:
Currency
Colombian peso
Mexican peso
Canadian dollar
Saudi riyal
South African rand
Action
Quantity
Purchase
Purchase
Purchase
Sell
Sell
9,275,694
386,972
22,097
(4,131)
(18,784)
The fair value of the Company’s other derivatives was
$166 and $(581) at December 31, 2018 and 2017,
respectively.
Fair Value at
December 31
Balance Sheet
Location
2018
2017
Description
Derivatives designated as
hedging instruments:
Commodity Contracts
Commodity Contracts Other assets
Commodity Contracts
Prepaid expenses $
Accrued expenses
and other
Commodity Contracts Other liabilities
Foreign Exchange
282 $
149
$ — $ —
$(1,843) $(1,417)
(10) $ (445)
$
Contracts
Foreign Exchange
Contracts
Derivatives not designated as
hedging instruments:
Foreign Exchange
Contracts
Foreign Exchange
Contracts
Prepaid expenses $
Accrued expenses
and other
770 $ 2,232
$(2,482) $(1,282)
Prepaid expenses $
Accrued expenses
and other
727 $
90
$ (561) $ (671)
While certain of the Company’s derivative contract
arrangements with its counterparties provide for the ability
to settle contracts on a net basis, the Company reports its
derivative positions on a gross basis. There are no
collateral arrangements or requirements in these agree-
ments.
The following table sets forth the effect of the Company’s derivative instruments on financial performance for the
twelve months ended December 31, 2018, excluding the gains on foreign currency cash flow hedges that were
reclassified from accumulated other comprehensive loss to the carrying value of the capitalized expenditures:
Description
Derivatives in Cash Flow Hedging Relationships:
Foreign Exchange Contracts
Commodity Contracts
Amount of Gain or
(Loss) Recognized
in OCI on
Derivatives
Location of Gain or
(Loss) Reclassified
from Accumulated
OCI Into Income
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
Into Income
$(2,354)
$
258
Net sales
Cost of sales
Cost of sales
$(203)
$ (20)
$ 115
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts
Location of Gain or
(Loss) Recognized
in Income
Statement
Gain or (Loss)
Recognized
Cost of sales
Selling, general and
administrative
$ —
$ 41
Description
Total amount of income and expense line items
presented in the Condensed Consolidated
Statements of Income
The effects of cash flow hedging:
Gain or (loss) on cash flow hedging relationships in
subtopic 815-20:
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated
other comprehensive income into net income
Commodity contract:
Amount of gain or (loss) reclassified from accumulated
other comprehensive income into net income
Revenue
Cost of Sales
$ (203)
$ 95
$ (203)
$ —
$ (20)
$115
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-21
SONOCO2018ANNUALREPORT I FORM10-K The following table sets forth the effect of the Company’s derivative instruments on financial performance for the
twelve months ended December 31, 2017, excluding the gains on foreign currency cash flow hedges that were
reclassified from accumulated other comprehensive loss to the carrying value of the capitalized expenditures:
Description
Derivatives in Cash Flow Hedging Relationships:
Foreign Exchange Contracts
Commodity Contracts
Amount of Gain or
(Loss) Recognized
in OCI on
Derivatives
Location of Gain or
(Loss) Reclassified
from Accumulated
OCI Into Income
Amount of Gain
or (Loss)
Reclassified from
Accumulated OCI
Into Income
$ 5,947
$ (3,062)
Net sales
Cost of sales
Cost of sales
$11,738
$ (6,764)
$ 1,667
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts
Location of Gain or
(Loss) Recognized
in Income
Statement
Gain or (Loss)
Recognized
Cost of sales
Selling, general
and administrative
$
—
$ (2,138)
Description
Revenue
Cost of Sales
Total amount of income and expense line items
presented in the Condensed Consolidated
Statements of Income
The effects of cash flow hedging:
Gain or (loss) on cash flow hedging relationships in
subtopic 815-20:
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated
$11,738
$(5,097)
other comprehensive income into net income
$11,738
$(6,764)
Commodity contract:
Amount of gain or (loss) reclassified from accumulated
other comprehensive income into net income
$
—
$ 1,667
11. Fair value measurements
Fair value is defined as exit price, representing the amount that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the measurement date. Fair value is a market-based
measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.
A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:
Level 1 – Observable inputs such as quoted market prices in active markets;
Level 2 –
Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3 – Unobservable inputs for which there is little or no market data, which require the reporting entity to develop
its own assumptions.
F-22
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K The following tables set forth information regarding the Company’s financial assets and financial liabilities that are
measured at fair value on a recurring basis:
Total postretirement benefit plan assets
$1,329,751
$995,168
$824
$333,759
Description
Hedge derivatives, net:
Commodity contracts
Foreign exchange contracts
Non-hedge derivatives, net:
Foreign exchange contracts
Deferred compensation plan assets
Postretirement benefit plan assets:
Common Collective Trust(a)
Mutual funds(b)
Fixed income securities(c)
Short-term investments(d)
Hedge fund of funds(e)
Real estate funds(f)
Cash and accrued income
Description
Hedge derivatives, net:
Commodity contracts
Foreign exchange contracts
Non-hedge derivatives, net:
Foreign exchange contracts
Deferred compensation plan assets
Postretirement benefit plan assets:
Common Collective Trust(a)
Mutual funds(b)
Fixed income securities(c)
Short-term investments(d)
Hedge fund of funds(e)
Real estate funds(f)
Cash and accrued income
December 31,
2018
Assets
measured at
NAV(g)
Level 1
Level 2
Level 3
$
(1,571)
(1,712)
$
166
260
$ 862,565
157,088
175,543
1,166
71,354
61,249
786
—
—
—
—
$862,565
—
—
71,354
61,249
—
$ — $ (1,571)
(1,712)
—
—
260
166
—
$ — $
—
—
38
—
—
786
—
157,088
175,543
1,128
—
—
—
December 31,
2017
Assets
measured
at NAV(g)
Level 1
Level 2
Level 3
$
(1,713)
950
$
— $ — $ (1,713)
950
—
—
(581)
268
—
—
—
268
(581)
—
$1,010,274
214,555
167,992
2,239
69,500
56,690
640
$1,010,274
—
—
69,500
56,690
—
$ — $
—
— 214,555
— 167,992
1,187
—
—
—
1,052
—
—
640
$—
—
—
—
$—
—
—
—
—
—
—
$—
$—
—
—
—
$—
—
—
—
—
—
—
$—
Total postretirement benefit plan assets
$1,521,890
$1,136,464
$1,692
$383,734
a. Common collective trust investments consist of domestic and international large and mid capitalization equities,
including emerging markets and funds invested in both short-term and long-term bonds. Underlying investments are
generally valued at closing prices from national exchanges. Commingled funds, private securities, and limited
partnerships are valued at unit values or net asset values provided by the investment managers.
b. Mutual fund investments are comprised of equity securities of corporations with large capitalizations and also include
funds invested in corporate equities in international and emerging markets and funds invested in long-term bonds,
which are valued at closing prices from national exchanges.
c. Fixed income securities include funds that invest primarily in government securities and long-term bonds. Underlying
investments are generally valued at closing prices from national exchanges, fixed income pricing models, and
independent financial analysts. Fixed income commingled funds are valued at unit values provided by the investment
managers.
d. Short-term investments include several money market funds used for managing overall liquidity. Underlying invest-
ments are generally valued at closing prices from national exchanges. Commingled funds are valued at unit values
provided by the investment managers.
e. The hedge fund of funds category includes investments in funds representing a variety of strategies intended to
diversify risks and reduce volatility. It includes event-driven credit and equity investments targeted at economic policy
decisions, long and short positions in U.S. and international equities, arbitrage investments and emerging market
equity investments. Investments are valued at unit values or net asset values provided by the investment managers.
f. This category includes investments in real estate funds (including office, industrial, residential and retail) primarily
throughout the United States. Underlying real estate securities are generally valued at closing prices from national
exchanges. Commingled funds, private securities, and limited partnerships are valued at unit values or net asset
values provided by the investment managers.
g. Certain assets that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical
expedient have not been classified in the fair value hierarchy.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-23
SONOCO2018ANNUALREPORT I FORM10-K The Company’s pension plan assets comprise more
than 99% of its total postretirement benefit plan assets.
The assets of the Company’s various pension plans and
retiree health and life insurance plans are largely invested
in the same funds and investments and in similar pro-
portions and, as such, are not shown separately, but are
combined in the tables above. Postretirement benefit plan
assets are netted against postretirement benefit obliga-
tions to determine the funded status of each plan. The
funded status is recognized in the Company’s Con-
solidated Balance Sheets as shown in Note 13.
As discussed in Note 10, the Company uses derivatives
to mitigate some of the effect of raw material and energy
cost fluctuations, foreign currency fluctuations and, from
time to time, interest rate movements. Fair value
measurements for the Company’s derivatives are classi-
fied under Level 2 because such measurements are esti-
mated based on observable inputs such as interest rates,
yield curves, spot and future commodity prices and spot
and future exchange rates.
Certain deferred compensation plan liabilities are
funded and the assets invested in various exchange
traded mutual funds. These assets are measured using
quoted prices in accessible active markets for identical
assets.
The Company does not currently have any nonfinancial
assets or liabilities that are recognized or disclosed at fair
value on a recurring basis. None of the Company’s finan-
cial assets or liabilities is measured at fair value using sig-
nificant unobservable inputs. There were no transfers in or
out of Level 1 or Level 2 fair value measurements during
the years ended December 31, 2018 or 2017. For addi-
tional fair value information on the Company’s financial
instruments, see Note 10.
12. Share-based compensation plans
The Company provides share-based compensation to
certain employees and non-employee directors in the form
of stock appreciation rights, restricted stock units and
other share-based awards. Beginning in 2014, share-
based awards were issued pursuant to the Sonoco Prod-
ucts Company 2014 Long-Term Incentive Plan (the “2014
Plan”), which became effective upon approval by the
shareholders on April 16, 2014. Awards issued from 2012
through 2013 were issued pursuant to the Sonoco Prod-
ucts Company 2012 Long-Term Incentive Plan (the “2012
Plan”) and awards issued from 2009 through 2011 were
issued pursuant to the Sonoco Products Company 2008
Long-Term Incentive Plan (the “2008 Plan”). Awards
issued prior to 2009 were issued pursuant to the 1991
Key Employee Stock Plan (the “1991 Plan”) or the 1996
Non-Employee Directors Stock Plan (the “1996 Plan”).
The maximum number of shares of common stock that
may be issued under the 2014 Plan was originally set at
10,381,533 shares, which includes all shares then remain-
ing under the 2012 Plan and an additional 4,500,000
shares authorized under the 2014 Plan. Awards granted
under all previous plans which are forfeited, expire or are
canceled without delivery of shares, or which result in for-
feiture of shares back to the Company, will be added to
the total shares available under the 2014 Plan. At
December 31, 2018, a total of 6,038,715 shares remain
available for future grant under the 2014 Plan. The Com-
pany issues new shares for stock appreciation right
exercises and stock unit conversions. The Company’s
F-24
S O N O C O 2 0 1 8 A N N U A L R E P O R T
stock-based awards to non-employee directors have not
been material.
Accounting for share-based compensation
Total compensation cost for share-based payment
arrangements was $10,730, $13,488 and $19,289, for
2018, 2017 and 2016, respectively. The related tax benefit
recognized in net income was $2,678, $5,058, and
$7,040, for the same years, respectively. Share-based
compensation expense is included in “Selling, general and
administrative expenses” in the Consolidated Statements
of Income.
An “excess” tax benefit is created when the tax
deduction for an exercised stock appreciation right,
exercised stock option or converted stock unit exceeds
the compensation cost that has been recognized in
income. As discussed in Note 2 to these Consolidated
Financial Statements, ASU 2016-09 required that excess
tax benefits be recognized on the income statement
beginning in 2017. Previously, these excess tax benefits
were not recognized on the income statement, but rather
on the consolidated balance sheet within the line item
“Capital in excess of stated value.” The additional net
excess tax benefit realized was $3,528, $2,453 and
$2,695 for 2018, 2017 and 2016, respectively.
Stock appreciation rights
Stock appreciation rights (SARs) granted vest over
three years and expense is recognized following the
graded-vesting method, which results in front-loaded
expense being recognized during the early years of the
required service period. Unvested SARs are cancelable
upon termination of employment, except in the case of
death, disability, or involuntary (or good reason) termi-
nation within two years of a change in control.
Since 2006, the Company has granted SARs annually
on a discretionary basis to key employees. These SARs
are granted at market (have an exercise price equal to the
closing market price on the date of the grant) and can be
settled only in stock. The SARs granted in and since 2015
vest over three years, with one-third vesting on each anni-
versary date of the grant, and have 10-year terms. As of
December 31, 2018, unrecognized compensation cost
related to nonvested SARs totaled $2,185. This cost will
be recognized over the remaining weighted-average vest-
ing period of approximately 24 months. Noncash stock-
based compensation associated with SARs totaled
$2,415, $3,719, and $2,878 for 2018, 2017, and 2016,
respectively.
The aggregate intrinsic value of SARS exercised during
2018, 2017, and 2016 was $9,029, $3,786, and $9,510,
respectively. The weighted-average grant date fair value of
SARs granted was $6.55, $7.29 and $5.04 per share in
2018, 2017 and 2016, respectively. The Company com-
puted the estimated fair values of all SARs using the
Black-Scholes option-pricing model applying the assump-
tions set forth in the following table:
2018
2017
2016
Expected dividend yield
Expected stock price volatility
Risk-free interest rate
Expected life of SARs
3.1%
3.5%
2.7%
16.2% 17.2% 18.5%
1.3%
2.0%
6 years
6 years
2.8%
6 years
SONOCO2018ANNUALREPORT I FORM10-K The assumptions employed in the calculation of the fair
value of SARs were determined as follows:
Š Expected dividend yield – the Company’s annual divi-
dend divided by the stock price at the time of grant.
Š Expected stock price volatility – based on historical vola-
tility of the Company’s common stock measured weekly
for a time period equal to the expected life.
Š Risk-free interest rate – based on U.S. Treasury yields in
effect at the time of grant for maturities equal to the
expected life.
Š Expected life – calculated using the simplified method as
prescribed in U.S. GAAP, where the expected life is equal
to the sum of the vesting period and the contractual term
divided by two.
end of the fourth year and the remaining 50% at the end of
the fifth year. Regardless of grant date, upon vesting,
PCSUs are convertible into common shares on a
one-for-one basis. Except in the event of the participant’s
death, disability, or retirement, if a participant is not
employed by the Company at the end of the performance
period, no PCSU’s will vest. However, in the event of the
participant’s death, disability or retirement prior to full vest-
ing, shares will be issued on a pro rata basis up through
the time the participant’s employment or service ceases.
In the event of a change in control, as defined under the
2014 Plan, all unvested PCSUs will vest at target on a pro
rata basis if the change in control occurs during the three-
year performance period.
The activity related to the Company’s SARs is as fol-
The activity related to performance contingent
lows:
restricted stock units is as follows:
Nonvested
Vested
Total
Weighted-
average
Exercise
Price
1,212,022
(434,023)
636,045
915,990
434,023
—
— (629,537)
2,128,012
—
636,045
(629,537)
$44.53
$50.83
$40.61
(294,442)
(7,720)
(302,162)
$48.51
1,119,602
712,756
1,832,358
$47.41
— 712,756
712,756
$46.65
Outstanding,
December 31,
2017
Vested
Granted
Exercised
Forfeited/
Expired
Outstanding,
December 31,
2018
Exercisable,
December 31,
2018
The weighted average remaining contractual life for
SARs outstanding and exercisable at December 31, 2018
was 7.1 years and 4.8 years, respectively. The aggregate
intrinsic value for SARs outstanding and exercisable at
December 31, 2018 was $10,905 and $6,088,
respectively. At December 31, 2018, the fair market value
of the Company’s stock used to calculate intrinsic value
was $53.13 per share.
Performance-based stock awards
The Company grants performance contingent restricted
stock units (PCSUs) annually on a discretionary basis to
executive officers and certain key management employ-
ees. The ultimate number of PCSUs awarded is depend-
ent upon the degree to which performance, relative to
defined targets related to earnings and return on net
assets employed, are achieved over a three-year perform-
ance cycle. PCSUs granted vest at the end of the three-
year performance period if the respective performance
targets are met. No units will be awarded if the perform-
ance targets are not met. For PCSUs granted in 2014 and
earlier, units awarded vested at the end of the three-year
performance period if the respective performance targets
were met. In the event performance targets were not met,
a minimum number of outstanding units were awarded
and vested at the end of the performance period, 50% of
the remaining number of threshold shares vested at the
Average
Grant
Date
Fair Value
per Share
Nonvested Vested
Total
Outstanding,
December 31, 2017
Granted
Performance
334,619 486,424 821,043 $37.12
— 133,226 $46.33
133,226
adjustments
40,812
(132,534) 132,534
— 40,812 $57.21
—
— (299,973) (299,973) $36.13
(52,671) $44.37
(6,080)
(46,591)
Vested
Converted
Cancelled
Dividend
equivalents
—
9,382
9,382 $52.88
Outstanding,
December 31, 2018
329,532 322,287 651,819 $40.21
2018 PCSU. As of December 31, 2018, the 2018
PCSUs to be awarded are estimated to range from 0 to
258,904 units and are tied to the three-year performance
period ending December 31, 2020.
2017PCSU. As of December 31, 2018, the 2017
PCSUs to be awarded are estimated to range from 0 to
204,744 units and are tied to the three-year performance
period ending December 31, 2019.
2016PCSU. The performance cycle for the 2016
PCSUs was completed on December 31, 2018. Out-
standing stock units of 132,534 units were determined to
have been earned. The fair value of these units was
$7,042 as of December 31, 2018.
2015PCSU. The performance cycle for the 2015
PCSUs was completed on December 31, 2017. Out-
standing stock units of 135,695 units were determined to
have been earned, all of which qualified for vesting on
December 31, 2017. The fair value of these units was
$7,211 as of December 31, 2017.
2014PCSU. The performance cycle for the 2014
PCSUs was completed on December 31, 2016. Out-
standing stock units of 247,554 units were determined to
have been earned, all of which qualified for vesting on
December 31, 2016. The fair value of these units was
$13,046 as of December 31, 2016.
2012 PCSU. The performance cycle for the 2012
PCSUs was completed on December 31, 2014. Based on
the performance achieved and the terms of the award,
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-25
SONOCO2018ANNUALREPORT I FORM10-K 143,519 stock units qualified for vesting on December 31,
2014 with a fair value of $6,272. A total of 4,387 units
vested on December 31, 2015, and 4,140 units vested on
December 31, 2016. The fair value of the stock units vest-
ing in 2015 and 2016 was $179 and $218, respectively.
The weighted-average grant-date fair value of PCSUs
granted was $46.33, $50.11, and $36.33 per share in
2018, 2017 and 2016, respectively. Noncash stock-based
compensation associated with PCSUs totaled $4,725,
$3,896 and $10,568 for 2018, 2017 and 2016,
respectively. As of December 31, 2018, there was approx-
imately $8,587 of total unrecognized compensation cost
related to nonvested PCSUs. This cost is expected to be
recognized over a weighted-average period of 22 months.
Restricted stock awards
During 2018, 2017 and 2016, the Company granted
awards of restricted stocks units (RSUs) to executive offi-
cers and certain key management employees. These
awards vest over a three-year period with one-third vest-
ing on each anniversary date of the grant. Participants
must be actively employed by the Company on the vesting
date for shares to be issued, except in the event of the
participant’s death, disability, or involuntary (or good rea-
son) termination within two years of a change in control
prior to full vesting, in which case shares will immediately
vest. Once vested, these awards do not expire.
Prior to 2015, the Company from time to time granted
RSUs to certain of its executive officers and directors.
These awards normally vested over a five-year period with
one-third vesting on each of the third, fourth and fifth anni-
versaries of the grant, but in some circumstances vested
over a shorter period. A participant must be actively
employed by, or serving as a director of, the Company on
the vesting date for shares to be issued. However, certain
award agreements provided that in the event of the partic-
ipant’s death, disability or retirement prior to full vesting,
shares would be issued on a pro rata basis up through the
time the participant’s employment or service ceases.
Officers and directors can elect to defer receipt of
RSUs, but key management employees are required to
take receipt of stock issued. The weighted-average grant-
date fair value of RSUs granted was $48.36, $51.68 and
$38.40 per share in 2018, 2017 and 2016,
respectively. The fair value of shares vesting during the
year was $6,900, $2,790, and $1,291 for 2018, 2017 and
2016, respectively.
Noncash stock-based compensation associated with
restricted stock grants totaled $2,138, $3,554 and $3,122
for 2018, 2017 and 2016, respectively. As of December 31,
2018, there was $3,743 of total unrecognized compensa-
tion cost related to nonvested restricted stock units. This
cost is expected to be recognized over a weighted-average
period of 42 months.
The activity related to restricted stock units is as fol-
lows:
Average
Grant
Date Fair
Value
Per Share
Nonvested Vested
Total
Outstanding,
December 31, 2017
Granted
Vested
Converted
Cancelled
Dividend
225,807 199,630 425,437
— 111,988
111,988
—
(141,281) 141,281
$38.41
$48.36
— (196,915)(196,915) $38.26
— (39,301) $46.00
(39,301)
equivalents
1,168
7,418
8,586
$52.37
Outstanding,
December 31, 2018
158,381 151,414 309,795
$41.26
Deferred compensation plans
Certain officers of the Company receive a portion of
their compensation, either current or deferred, in the form
of stock units. Units are granted as of the day the cash
compensation would have otherwise been paid using the
closing price of the Company’s common stock on that
day. Deferrals into stock equivalent units are converted
into phantom stock equivalents as if Sonoco shares were
actually purchased. The units immediately vest and earn
dividend equivalents. Units are distributed in the form of
common stock upon retirement over a period elected by
the employee.
Non-employee directors may elect to defer a portion of
their cash retainer or other fees (except chair retainers)
into phantom stock equivalent units as if Sonoco shares
were actually purchased. The deferred stock equivalent
units accrue dividend equivalents, and are issued in
shares of Sonoco common stock six months following
termination of Board service. Directors must elect to
receive these deferred distributions in one, three or five
annual installments.
The activity related to deferred compensation for equity
award units granted to both employees and non-employee
directors combined is as follows:
Outstanding, December 31, 2017
Deferred
Converted
Dividend equivalents
Outstanding, December 31, 2018
Total
365,048
37,127
(23,217)
11,396
390,354
Deferred compensation for employees and directors of
$1,452, $2,850, and $2,721, which will be settled in
Company stock at retirement, was deferred during 2018,
2017, and 2016, respectively.
F-26
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K 13. Employee benefit plans
Retirement plans and retiree health and life insurance
plans
The Company provides non-contributory defined bene-
fit pension plans for certain of its employees in the United
States, Mexico, Belgium, Germany, Greece, France, and
Turkey. The Company also sponsors contributory defined
benefit pension plans covering certain of its employees in
the United Kingdom, Canada and the Netherlands, and
provides postretirement healthcare and life insurance
benefits to a limited number of its retirees and their
dependents in the United States and Canada, based on
certain age and/or service eligibility requirements.
The Company froze participation in its U.S. qualified
defined benefit pension plan for newly hired salaried and
non-union hourly employees effective December 31, 2003.
To replace this benefit, the Company provides non-union
U.S. employees hired on or after January 1, 2004, with an
annual contribution, called the Sonoco Retirement Con-
tribution (SRC), to their participant accounts in the Sonoco
Retirement and Savings Plan. Also eligible for the SRC are
former participants of the U.S. qualified defined benefit
pension plan who elected to transfer out of that plan under
a one-time option effective January 1, 2010.
On February 4, 2009, the U.S. qualified defined benefit
pension plan was amended to freeze plan benefits for all
active participants effective December 31, 2018. Remain-
ing active participants in the U.S. qualified plan became
eligible for SRC contributions effective January 1, 2019.
The components of net periodic benefit cost include
the following:
Retirement Plans
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of net actuarial loss
Effect of settlement loss
Effect of curtailment loss
2018
2017
2016
$ 18,652 $ 18,543 $ 19,508
59,719
55,873
(85,466)
(81,212)
809
910
39,009
39,209
—
32,761
—
—
54,970
(91,021)
916
37,391
730
256
Net periodic benefit cost
$ 21,894 $ 66,084 $ 33,579
Retiree Health and Life
Insurance Plans
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service
credit
Amortization of net actuarial gain
$
297 $
452
(1,135)
313 $
463
(1,636)
309
482
(1,579)
(498)
(1,120)
(499)
(759)
(498)
(667)
Net periodic benefit income
$ (2,004) $ (2,118) $ (1,953)
The following tables set forth the Plans’ obligations and
assets at December 31:
Retirement Plans
Retiree Health and
Life Insurance Plans
2018
2017
2018
2017
Change in
Benefit
Obligation
Benefit obligation
at January 1
Service cost
Interest cost
Plan participant
contributions
Plan amendments
Actuarial loss/
(gain)
Benefits paid
Impact of foreign
exchange rates
Effect of
settlements
Effect of
curtailments
Acquisitions
Benefit obligation
at
December 31
Change in Plan
Assets
Fair value of plan
assets at
January 1
Actual return on
plan assets
Company
contributions
Plan participant
contributions
Benefits paid
Impact of foreign
exchange rates
Effect of
settlements
Expenses paid
Acquisitions
Fair value of plan
assets at
December 31
Funded Status of
$1,837,938 $1,777,424 $15,691
297
452
18,652
54,970
18,543
55,873
$17,568
313
463
429
155
391
639
620
—
744
—
(115,153)
(93,053)
99,402
(81,547)
(398)
(2,569)
(1,249)
(2,183)
(21,636)
29,753
(45)
(2,210)
(62,540)
(253)
4,438
—
—
—
—
—
35
—
—
—
$1,684,277 $1,837,938 $14,048
$15,691
Retirement Plans
Retiree Health and
Life Insurance Plans
2018
2017
2018
2017
$1,494,713 $1,325,389 $ 27,177 $23,848
(78,447)
198,071
(915)
3,986
24,524
93,662
(13,302)
851
429
(93,053)
443
(81,547)
620
(2,569)
744
(2,183)
(22,380)
29,460
(2,210)
(6,670)
1,926
(62,540)
(8,225)
—
—
—
(92)
—
—
—
(69)
—
$1,318,832 $1,494,713 $ 10,919 $27,177
the Plans
$ (365,445) $ (343,225) $ (3,129) $11,486
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-27
SONOCO2018ANNUALREPORT I FORM10-K The negative contribution reported in 2018 for the
Company’s Retiree Health and Life Insurance Plans
reflects $14,025 of cash withdrawn from a collectively
bargained VEBA in 2018 pursuant to an IRS private letter
ruling dated April 1, 2018, permitting the Company to
amend the VEBA to provide benefits to active,
non-collectively bargained employees in addition to retired
collectively bargained employees.
Items not yet recognized as a component of net peri-
odic pension cost that are included in Accumulated Other
Comprehensive Loss (Income) as of December 31, 2018
and 2017, are as follows:
Retirement Plans
Retiree Health and
Life Insurance Plans
2018
2017
2018
2017
Retirement Plans
Retiree Health and
Life Insurance Plans
Net actuarial loss/
(gain)
$646,254 $625,831 $(6,964) $ (9,822)
Prior service cost/
2018
2017
2018
2017
(credit)
5,514
3,780
(777)
(1,275)
$651,768 $629,611 $(7,741) $(11,097)
$ 18,520 $ 24,380 $ — $12,851
(820)
(545)
(12,935)
(371,030)
(13,220)
(354,385)
(983)
(2,146)
Total Recognized
Amounts in the
Consolidated
Balance Sheets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net (liability)/asset
$(365,445) $(343,225) $(3,129) $11,486
The amounts recognized in Other Comprehensive Loss/(Income) include the following:
Adjustments arising during the period:
Net actuarial loss/(gain)
Prior service cost/(credit)
Net settlements/curtailments
Reversal of amortization:
Net actuarial (loss)/gain
Prior service (cost)/credit
Retirement Plans
Retiree Health and
Life Insurance Plans
2018
2017
2016
2018
2017
2016
$ 58,544
2,906
(986)
$(10,732) $ 56,060
1,069
—
639
(32761)
$1,738
—
—
$(3,525) $(1,449)
—
—
—
—
(37,391)
(916)
(39,209)
(910)
(39,009)
(809)
1,120
498
759
499
667
498
Total recognized in other comprehensive loss/(income)
$ 22,157
$(82,973) $ 17,311
$3,356
$(2,267) $ (284)
Total recognized in net periodic benefit cost and other
comprehensive loss/(income)
$ 44,051
$(16,889) $ 50,890
$1,352
$(4,385) $(2,237)
Of the amounts included in Accumulated Other Com-
prehensive Loss/(Income) as of December 31, 2018, the
portions the Company expects to recognize as compo-
nents of net periodic benefit cost in 2019 are as follows:
Net actuarial loss/(gain)
Prior service cost/(credit)
Retirement
Plans
Retiree Health and
Life Insurance Plans
$36,192
879
$37,071
$ (780)
(498)
$(1,278)
The accumulated benefit obligation for all defined benefit
plans was $1,668,396 and $1,810,462 at December 31,
2018 and 2017, respectively.
The projected benefit obligation (PBO), accumulated
benefit obligation (ABO) and fair value of plan assets for
pension plans with accumulated benefit obligations in
excess of plan assets were, $1,397,040, $1,391,129 and
$1,013,173, respectively, as of December 31, 2018, and
$1,554,395, $1,538,350 and $1,186,789, respectively, as
of December 31, 2017.
The following table sets forth the Company’s projected
benefit payments for the next ten years:
Year
2019
2020
2021
2022
2023
2022-2026
Retirement Plans
Retiree Health and
Life Insurance Plans
$ 93,875
$ 95,990
$ 94,006
$ 95,628
$ 97,657
$509,790
$1,491
$1,383
$1,360
$1,299
$1,239
$5,480
F-28
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K Assumptions
The following tables set forth the major actuarial
assumptions used in determining the PBO, ABO and net
periodic cost:
Year at which the Rate Reaches
the Ultimate Trend Rate
2018
2017
Pre-age 65 Post-age 65
2026
2026
2026
2026
Weighted-average
assumptions used to
determine benefit
obligations at
December 31
Discount Rate 2018
2017
Rate of Compensation
Increase 2018
2017
Weighted-average
assumptions used to
determine net periodic
benefit cost for years
ended December 31
Discount Rate 2018
2017
2016
Expected Long-term
Rate of Return 2018
2017
2016
Rate of Compensation
Increase 2018
2017
2016
U.S.
Retirement
Plans
U.S. Retiree
Health and
Life Insurance
Plans
4.24%
3.59%
—%
3.40%
4.02%
3.36%
3.06%
3.28%
Foreign
Plans
3.11%
2.78%
3.65%
3.62%
U.S.
Retirement
Plans
U.S. Retiree
Health and
Life Insurance
Plans
3.59%
4.12%
4.36%
6.87%
6.86%
7.47%
3.40%
3.60%
3.69%
3.36%
3.70%
3.78%
6.95%
6.98%
7.31%
3.28%
3.32%
3.36%
Foreign
Plans
2.78%
2.95%
3.71%
4.84%
4.52%
4.75%
3.62%
3.65%
3.52%
The Company adjusts its discount rates at the end of
each fiscal year based on yield curves of high-quality debt
instruments over durations that match the expected bene-
fit payouts of each plan. The expected long-term rate of
return assumption is based on the Company’s current and
expected future portfolio mix by asset class, and expected
nominal returns of these asset classes using an economic
“building block” approach. Expectations for inflation and
real interest rates are developed and various risk pre-
miums are assigned to each asset class based primarily
on historical performance. The expected long-term rate of
return also gives consideration to the expected level of
outperformance to be achieved on that portion of the
Company’s investment portfolio under active manage-
ment. The assumed rate of compensation increase reflects
historical experience and management’s expectations
regarding future salary and incentive increases.
Medical trends
Increasing the assumed trend rate for healthcare costs
by one percentage point would increase the accumulated
postretirement benefit obligation (the APBO) and total serv-
ice and interest cost component approximately $128 and
$11, respectively. Decreasing the assumed trend rate for
healthcare costs by one percentage point would decrease
the APBO and total service and interest cost component
approximately $119 and $10, respectively. Based on
amendments to the U.S. plan approved in 1999, which
became effective in 2003, cost increases borne by the
Company are limited to the Urban CPI, as defined.
Plan settlements, changes and amendments
The Company recognized settlement charges totaling
$730 in 2018 resulting primarily from payments made to
certain participants of the Company’s Canadian pension
plan who elected a lump sum distribution option upon
retirement.
In February 2017, the Company initiated a program to
settle a portion of the projected benefit obligation (PBO)
relating to terminated vested participants in the U.S. quali-
fied retirement plans through either a single, lump-sum
payment or the purchase of an annuity. The terminated
vested population comprised approximately 15% of the
beginning of year PBO of these plans. The Company
successfully settled approximately 47% of the PBO for the
terminated vested plan participants. As a result of these
and other smaller settlements, the Company recognized
non-cash settlement charges of $32,761 in 2017. All
settlement payments were funded from plan assets and
did not require the Company to make any additional cash
contributions.
Retirement plan assets
The following table sets forth the weighted-average
asset allocations of the Company’s retirement plans at
2018 and 2017, by asset category.
Asset Category
Equity securities
Debt securities
Alternative
Cash and short-term
investments
U.S.
48.3%
51.7%
38.4%
37.1%
13.3%
11.2%
U.K.
Canada
38.9%
44.7%
60.5%
54.7%
—%
—%
55.4%
71.7%
44.0%
27.9%
—%
—%
—%
—%
0.6%
0.6%
0.6%
0.4%
100.0% 100.0% 100.0%
100.0% 100.0% 100.0%
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
The U.S. Retiree Health and Life Insurance Plan makes
up approximately 96% of the Retiree Health liability. There-
fore, the following information relates to the U.S. plan only.
Total
Healthcare Cost Trend Rate
Pre-age 65 Post-age 65
2018
2017
6.50%
6.75%
6.50%
6.75%
Ultimate Trend Rate
Pre-age 65 Post-age 65
2018
2017
4.50%
4.50%
4.50%
4.50%
The Company employs a total-return investment
approach whereby a mix of equities and fixed income
investments are used to maximize the long-term return of
plan assets for a desired level of risk. Alternative assets
such as real estate funds, private equity funds and hedge
funds are used to enhance expected long-term returns
while improving portfolio diversification. Risk tolerance is
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-29
SONOCO2018ANNUALREPORT I FORM10-K established through consideration of plan liabilities, plan
funded status and corporate financial condition. Invest-
ment risk is measured and monitored on an ongoing basis
through periodic investment portfolio reviews and periodic
asset/liability studies.
At December 31, 2018, postretirement benefit plan
assets totaled $1,329,751, of which $995,207 were
assets of the U.S. Defined Benefit Plans.
U.S. defined benefit plans
The equity investments consist of direct ownership and
funds and are diversified among U.S. and non-U.S. stocks
of small to large capitalizations. Following the December
2010 amendment that split the U.S. qualified defined
benefit pension plan into the Active Plan and the Inactive
Plan effective January 1, 2011, the Company completed
separate asset/liability studies for both plans during 2011
and adopted revised investment guidelines for each. The
revised guidelines establish a dynamic de-risking frame-
work that will gradually shift the allocation of assets to
long-duration domestic fixed income from equity and other
asset categories, as the relative funding ratio of each plan
increases over time. The current target allocation
(midpoint) for the Inactive Plan investment portfolio is:
Equity Securities – 49%, Debt Securities – 40%, Alter-
native – 11% and Cash – 0%. The current target allocation
(midpoint) for the Active Plan investment portfolio is: Equity
Securities – 57%, Debt Securities – 30%, Alternative –
13% and Cash – 0%.
United Kingdom defined benefit plan
The equity investments consist of direct ownership and
funds and are diversified among U.K. and international
stocks of small and large capitalizations. The current tar-
get allocation (midpoint) for the investment portfolio is:
Equity Securities – 48%, Debt Securities – 52%, Alter-
native – 0% and Cash – 0%.
Canada defined benefit plan
The equity investments consist of direct ownership and
funds and are diversified among Canadian and interna-
tional stocks of primarily large capitalizations and short to
intermediate duration corporate and government bonds.
The current target allocation (midpoint) for the investment
portfolio is: Equity Securities – 53%, Debt Securities –
45%, Alternative – 0% and Cash – 2%.
Retiree health and life insurance plan assets
The following table sets forth the weighted-average
asset allocations by asset category of the Company’s
retiree health and life insurance plan.
Asset Category
Equity securities
Debt securities
Alternative
Cash
Total
2018
2017
48.3% 63.6%
38.4% 30.8%
5.4%
13.3%
0.2%
—%
100.0% 100.0%
Contributions
Based on current actuarial estimates, the Company
anticipates that the total contributions to its retirement
plans and retiree health and life insurance plans, excluding
contributions to the Sonoco Savings Plan, will be approx-
imately $31,000 in 2019. No assurances can be made,
however, about funding requirements beyond 2019, as
they will depend largely on actual investment returns and
future actuarial assumptions.
Sonoco Savings and Retirement Plan
The Sonoco Savings and Retirement Plan is a defined
contribution retirement plan provided for certain of the
Company’s U.S. employees. The plan is comprised of
both an elective and non-elective component.
The elective component of the plan, which is designed
to meet the requirements of section 401(k) of the Internal
Revenue Code, allows participants to set aside a portion
of their wages and salaries for retirement and encourages
saving by matching a portion of their contributions with
contributions from the Company. The plan provides for
participant contributions of 1% to 100% of gross pay.
Since January 1, 2010, the Company has matched 50%
on the first 4% of compensation contributed by the partic-
ipant as pretax contributions which are immediately fully
vested. The Company’s expenses related to the plan for
2018, 2017 and 2016 were approximately $12,500,
$11,200 and $11,400, respectively.
The non-elective component of the plan, the Sonoco
Retirement Contribution (SRC), is available to certain
employees who are not currently active participants in the
Company’s U.S. qualified defined benefit pension plan.
The SRC provides for an annual Company contribution of
4% of all eligible pay plus 4% of eligible pay in excess of
the Social Security wage base to eligible participant
accounts. Participants are fully vested after three years of
service or upon reaching age 55, if earlier. The Company’s
expenses related to the plan for 2018, 2017 and 2016
were approximately $14,995, $14,540 and $13,655,
respectively. Cash contributions to the SRC totaled
$14,151, $14,066 and $13,352 in 2018, 2017 and 2016,
respectively.
Other plans
The Company also provides retirement and postretire-
ment benefits to certain other non-U.S. employees
through various Company-sponsored and local govern-
ment sponsored defined contribution arrangements. For
the most part, the liabilities related to these arrangements
are funded in the period they arise. The Company’s
expenses for these plans were not material for all years
presented.
F-30
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K The Company has total federal net operating loss carry-
forwards of approximately $67,700 remaining at
December 31, 2018. These losses are limited based upon
future taxable earnings of the respective entities and
expire between 2030 and 2037. U.S. foreign tax credit
carryforwards of approximately $71,800 exist at
December 31, 2018 and expire in 2027. Foreign sub-
sidiary loss carryforwards of approximately $226,700
remain at December 31, 2018. Their use is limited to
future taxable earnings of the respective foreign sub-
sidiaries or filing groups. Approximately $207,500 of these
loss carryforwards do not have an expiration date. Of the
remaining foreign subsidiary loss carryforwards, approx-
imately $8,800 expire within the next five years and
approximately $10,400 expire between 2024 and 2037.
Foreign subsidiary capital loss carryforwards of approx-
imately $15,700 exist at December 31, 2018 and do not
have an expiration date. Their use is limited to future capi-
tal gains of the respective foreign subsidiaries.
Approximately $10,500 in tax value of state loss carry-
forwards and $17,300 of state credit carryforwards remain
at December 31, 2018. These state loss and credit carry-
forwards are limited based upon future taxable earnings of
the respective entities and expire between 2019 and
2038. State loss and credit carryforwards are reflected at
their “tax” value, as opposed to the amount of expected
gross deduction due to the vastly different apportionment
and statutory tax rates applicable to the various entities
and states in which they file.
14. Income taxes
The provision for taxes on income for the years ended
December 31 consists of the following:
Pretax income
Domestic
Foreign
2018
2017
2016
$225,442
153,089
$168,180
146,374
$318,702
122,575
Total pretax income
$378,531
$314,554
$441,277
Current
Federal
State
Foreign
$ 37,345
6,164
38,648
$120,398
5,623
40,328
$110,567
10,808
40,788
Total current
$ 82,157
$166,349
$162,163
Deferred
Federal
State
Foreign
$ (5,571) $ (16,797) $
(738) $
(840)
3,499
(6,462)
(861)
(869)
4,198
Total deferred
$ (7,149) $ (19,760) $
2,468
Total taxes
$ 75,008
$146,589
$164,631
Deferred tax liabilities/(assets) are comprised of the
following at December 31:
Property, plant and equipment
Intangibles
2018
2017
$ 102,007
178,883
$ 83,584
174,395
Gross deferred tax liabilities
$ 280,890
$ 257,979
Retiree health benefits
Foreign loss carryforwards
U.S. Federal loss and credit
carryforwards
Capital loss carryforwards
Employee benefits
Accrued liabilities and other
$
(2,989) $
(57,581)
595
(59,975)
(86,655)
(2,757)
(114,872)
(102,349)
(17,977)
—
(115,771)
(100,031)
Gross deferred tax assets
$(367,203) $(293,159)
Valuation allowance on deferred tax
assets
$ 103,289
$ 47,200
Total deferred taxes, net
$ 16,976
$ 12,020
A reconciliation of the U.S. federal statutory tax rate to the actual consolidated tax expense is as follows:
Statutory tax rate
State income taxes, net of federal tax benefit
Valuation allowance
Tax examinations including change in reserve for uncertain tax
positions
Adjustments to prior year deferred taxes
Foreign earnings taxed at other than U.S. rates
Disposition of business
Effect of tax rate changes
Deduction related to qualified production activities
Transition tax
Tax credits
Global intangible low-taxed income (GILTI)
Foreign-derived intangible income
Other, net
2018
2017
2016
$ 79,491
7,534
(14,902)
21.0% $110,094
4,780
(3,333)
2.0%
(3.9)%
35.0% $154,447
7,477
639
1.5%
(1.1)%
35.0%
1.7%
0.1%
(3,076)
(1,899)
8,224
—
(6,218)
341
3,647
(10,083)
12,878
(1,174)
245
(0.8)%
(0.5)%
2.2%
—%
(1.6)%
0.1%
1.0%
(2.7)%
3.4%
(0.3)%
0.1%
4,895
(1,415)
(16,233)
537
(22,183)
(5,384)
76,933
(1,197)
—
—
(905)
1.6%
(0.4)%
(5.2)%
0.2%
(7.1)%
(1.7)%
24.5%
(0.4)%
—%
—
(0.3)%
732
(2,401)
(15,930)
22,810
2,517
(5,215)
—
(1,100)
—
—
655
0.2%
(0.5)%
(3.6)%
5.2%
0.6%
(1.2)%
—%
(0.2)%
—%
—
0.1%
Total taxes
$ 75,008
19.8% $146,589
46.6% $164,631
37.3%
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-31
SONOCO2018ANNUALREPORT I FORM10-K On December 22, 2017, the Tax Cuts and Jobs Act
(“Tax Act”) was signed into law making significant changes
to the Internal Revenue Code. Changes provided by the
Tax Act included a corporate tax rate decrease from 35%
to 21% effective for tax years beginning after
December 31, 2017, a change in methodology for taxation
of earnings from non-US operations, and a one-time tran-
sition tax on certain accumulated foreign earnings as of
December 31, 2017. As a result of the Tax Act, the SEC
staff issued Staff Accounting Bulletin No. 118 (“SAB 118”)
to address the application of U.S. GAAP in situations
where a registrant does not have the necessary
information available, prepared, or analyzed (including
computations) in reasonable detail to complete the
accounting for certain income tax effects of the Tax Act.
As explained below, the Company has finalized the provi-
sional tax impacts related to the one-time transition tax
and the revaluation of deferred tax assets and liabilities,
recognized the additional impact in its consolidated finan-
cial statements for the year ended December 31, 2018,
and finalized its indefinite reinvestment assertion.
The Company has recorded $4,152 of additional bene-
fit related to applying the decrease in the corporate tax
rate to deferred income taxes and $3,647 of additional
income tax expense related to the one-time transition tax.
The total amount of the one-time transition tax on certain
accumulated foreign earnings was $80,580. Under the
provisions of the Tax Act, the transition tax is payable in
installments over a period of 8 years. The first installment
was paid in 2018 with the filing of the Company’s 2017
federal income tax return. The second installment, due
during 2019, has been paid using the Company’s regular
2018 estimated federal tax installments and the liability is
further reduced by the deemed overpayment of federal
income taxes. The remaining obligation of $61,777 is
included in “Other Liabilities” in the Company’s Con-
solidated Balance Sheet at December 31, 2018.
The change in “Tax examinations including change in
reserve for uncertain tax positions” is shown net of asso-
ciated deferred taxes and accrued interest. Included in the
change are net increases in reserves for uncertain tax
positions of approximately $1,700, $2,600 and $3,000 for
uncertain items arising in 2018, 2017 and 2016,
respectively, combined with adjustments related to prior
year items, primarily decreases related to lapses of stat-
utes of limitations in international, federal and state juris-
dictions as well as overall changes in facts and judgment.
These adjustments decreased the reserve by a total of
approximately $(2,900), $(2,300) and $(2,300) in 2018,
2017 and 2016, respectively.
In many of the countries in which the Company oper-
ates, earnings are taxed at rates different than in the U.S.
This difference is reflected in “Foreign earnings taxed at
other than U.S. rates” along with other items, if any, that
impacted taxes on foreign earnings in the periods pre-
sented.
The effect on tax expense for “Disposition of business”
in 2016 relates to the sale of the Company’s rigid plastic
blow molding operations, its retail security packaging
operation in Juncos, Puerto Rico, and its paper mill in
France. The above adjustment reflects the recognition of
tax gains in excess of book gains due to basis differences,
and losses on which no future tax benefit will be recog-
nized.
The benefits included in “Adjustments to prior year
deferred taxes” for each of the years presented consist
primarily of adjustments to deferred tax assets and
liabilities arising from changes in estimates. The benefits
included in the “Effect of tax rate changes enacted during
the year” for 2018 includes adjustments to the 2017 bene-
fits related to the revaluation of deferred tax assets and
liabilities due to the enactment of the Tax Act as well as
changes in state, local and foreign tax rates. The 2017
benefit relates primarily to changes made as a result of the
Tax Act.
The benefits included in “Valuation allowance” include a
benefit of $16,100 related to the revaluation of the valu-
ation allowance on foreign tax credits due to the Tax Act.
Of the $10,083 of tax credits for 2018, $8,319 directly
offsets the $12,878 of GILTI tax, resulting in a net GILTI
tax of $4,559.
The Company maintains its assertion that its undis-
tributed foreign earnings are indefinitely reinvested and,
accordingly, has not recorded any deferred income tax
liabilities that would be due if those earnings were repa-
triated. As of December 31, 2018, these undistributed
earnings total $868,395. While the majority of these earn-
ings have already been taxed in the U.S., a portion would
be subject to foreign withholding and U.S. income taxes
and credits if distributed. The tax cost is not practical to
determine.
Reserve for uncertain tax positions
The following table sets forth the reconciliation of the
gross amounts of unrecognized tax benefits at the begin-
ning and ending of the periods indicated:
Gross Unrecognized Tax
Benefits at January 1
2018
2017
2016
$17,100
$17,700
$17,200
Increases in prior years’
unrecognized tax
benefits
Decreases in prior years’
unrecognized tax
benefits
Increases in current year’s
unrecognized tax
benefits
Decreases in unrecognized
tax benefits from the
lapse of statutes of
limitations
Settlements
—
700
1,400
(700)
(2,400)
(3,500)
1,200
1,600
3,000
(2,600)
(600)
(300)
(200)
(100)
(300)
Gross Unrecognized Tax
Benefits at December 31
$14,400
$17,100
$17,700
Of the unrecognized tax benefit balances at
December 31, 2018 and December 31, 2017, approx-
imately $13,500 and $15,500, respectively, would have an
impact on the effective tax rate if ultimately recognized.
Interest and/or penalties related to income taxes are
reported as part of income tax expense. The Company
had approximately $2,100 and $2,300 accrued for interest
related to uncertain tax positions at December 31, 2018
and December 31, 2017, respectively. Tax expense for the
year ended December 31, 2018, includes approximately
$200 of interest benefit, which is comprised of an interest
F-32
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K benefit of approximately $700 related to the adjustment of
prior years’ items and interest expense of $500 on
unrecognized tax benefits. The amounts listed above for
accrued interest and interest expense do not reflect the
benefit of a federal tax deduction which would be available
if the interest were ultimately paid.
The Company and/or its subsidiaries file federal, state
and local income tax returns in the United States and vari-
ous foreign jurisdictions. With few exceptions, the Com-
pany is no longer subject to income tax examinations by
tax authorities for years before 2012.
The Company believes that it is reasonably possible
that the amount reserved for uncertain tax positions at
December 31, 2018 will decrease by approximately
$2,600 over the next twelve months. This change includes
the anticipated increase in reserves related to existing
positions offset by settlements of issues currently under
examination and the release of existing reserves due to the
expiration of the statute of limitations. Although the
Company’s estimate for the potential outcome for any
uncertain tax issue is highly judgmental, management
believes that any reasonably foreseeable outcomes related
to these matters have been adequately provided for.
However, future results may include favorable or
unfavorable adjustments to estimated tax liabilities in the
period the assessments are made or resolved or when
statutes of limitation on potential assessments expire.
Additionally, the jurisdictions in which earnings or
deductions are realized may differ from current estimates.
As a result, the effective tax rate may fluctuate significantly
on a quarterly basis. The Company has operations in
many countries outside of the United States and the taxes
paid on those earnings are subject to varying rates. The
Company is not dependent upon the favorable benefit of
any one jurisdiction to an extent that loss of those benefits
would have a material effect on the Company’s overall
effective tax rate.
As previously disclosed, the Company received a draft
Notice of Proposed Adjustment (“NOPA”) from the Internal
Revenue Service (IRS) in February 2017 proposing an
adjustment to income for the 2013 tax year based on the
IRS’s recharacterization of a distribution of an inter-
company note made in 2012, and the subsequent repay-
ment of the note over the course of 2013, as if it were a
cash distribution made in 2013. In March 2017, the
Company received a draft NOPA proposing penalties of
$18,000 associated with the IRS’s recharacterization, as
well as an Information Document Request (“IDR”) request-
ing the Company’s analysis of why such penalties should
not apply. The Company responded to this IDR in April
2017. On October 5, 2017, the Company received two
revised draft NOPAs proposing the same adjustments and
penalties as in the prior NOPAs. On November 14, 2017,
the Company received two final NOPAs proposing the
same adjustments and penalties as in the prior draft
NOPAs. On November 20, 2017, the Company received a
Revenue Agent’s Report (“RAR”) that included the same
adjustments and penalties as in the prior NOPAs. At the
time of the distribution in 2012, it was characterized as a
dividend to the extent of earnings and profits, with the
remainder as a tax free return of basis and taxable capital
gain. As the IRS proposes to recharacterize the dis-
tribution, the entire distribution would be characterized as
a dividend. The incremental tax liability associated with the
income adjustment proposed in the RAR would be approx-
imately $89,000, excluding interest and the previously
referenced penalties. On January 22, 2018, the Company
filed a protest to the proposed deficiency with the IRS. The
Company received a rebuttal of its protest from the IRS on
July 10, 2018, and the matter has now been referred to
the Appeals Division of the IRS. The Company strongly
believes the position of the IRS with regard to this matter
is inconsistent with applicable tax laws and existing Treas-
ury regulations, and that the Company’s previously
reported income tax provision for the year in question is
appropriate. However, there can be no assurance that this
matter will be resolved in the Company’s favor. Regardless
of whether the matter is resolved in the Company’s favor,
the final resolution of this matter could be expensive and
time consuming to defend and/or settle. While the Com-
pany believes that the amount of tax originally paid with
respect to this distribution is correct, and accordingly has
not provided additional reserve for tax uncertainty, there is
still a possibility that an adverse outcome of the matter
could have a material effect on its results of operations
and financial condition.
In January 2018, the FASB released guidance on
accounting for the global intangible low-taxed income
(“GILTI”) provisions of the Tax Act. The GILTI provisions
impose a tax on foreign income in excess of a deemed
return on tangible assets of foreign corporations. The
guidance indicates that, subject to an accounting policy
election, it will be acceptable to either recognize deferred
taxes for temporary differences expected to reverse as
GILTI or treat the effects of such a reversal as a current
tax item if and when incurred. The Company has elected
the current method, and will recognize GILTI tax liability as
a current tax item in future periods when incurred.
15. Revenue recognition
The Company adopted ASC 606, “Revenue from Con-
tracts with Customers,” as of January 1, 2018. The impact
of the adoption was the recognition of a $1,721 increase
in the Company’s beginning retained earnings. See impact
of adoption in Note 3 and additional discussion in Note 2
to these consolidated financial statements.
The Company records revenue when control is trans-
ferred to the customer, which is either upon shipment or
over time in cases where the Company is entitled to
payment with margin for products produced that are cus-
tomer specific without alternative use. The Company
recognizes over time revenue under the input method as
goods are produced. Revenue that is recognized at a
point in time is recognized when the customer obtains
control of the goods. Customers obtain control either
when goods are delivered to the customer facility, if the
Company is responsible for arranging transportation, or
when picked up by the customer’s designated carrier. The
Company commonly enters into Master Supply Arrange-
ments (MSA) with customers to provide goods and/or
services over specific time periods. Customers submit
purchase orders with quantities and prices to create a
contract for accounting purposes. Shipping and handling
expenses are included in “Cost of Sales,” and freight
charged to customers is included in “Net Sales” in the
Company’s Consolidated Statements of Income.
The Company has rebate agreements with certain
customers. These rebates are recorded as reductions of
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-33
SONOCO2018ANNUALREPORT I FORM10-K sales and are accrued using sales data and rebate percen-
tages specific to each customer agreement. Accrued
customer rebates are included in “Accrued expenses and
other” in the Company’s Consolidated Balance Sheets.
Payment terms under the Company’s arrangements
are short term in nature, generally no longer than 120
days. The Company does provide prompt payment dis-
counts to certain customers if invoices are paid within a
predetermined period. Prompt payment discounts are
treated as a reduction of revenue and are determinable
within a short period after the originating sale.
The following table sets forth information about con-
tract assets and liabilities from contracts with customers.
The balances of the contract assets and liabilities are
located in “Other receivables” and “Accrued expenses and
other” on the Consolidated Balance Sheets.
Contract Assets
Contract Liabilities
December 31,
2018
January 1, 2018
As Adjusted
48,786
(18,533)
45,877
(17,736)
Significant changes in the contract assets and liabilities
balances during the period were as follows:
December 31,
2018
January 1, 2018
As Adjusted
Contract
Asset
Contract
Liability
Contract
Asset
Contract
Liability
45,877
(17,736) $
— (12,521)
— (19,730)
— 1,652
— 17,281
—
—
—
—
—
—
an unconditional right to payment. Contract liabilities repre-
sent revenue deferred due to pricing mechanisms utilized
by the Company in certain multi-year arrangements, vol-
ume rebates, and receipts of advanced payments. For
multi-year arrangements with pricing mechanisms, the
Company will generally defer revenue during the initial term
of the arrangement, and will release the deferral over the
back half of the contract term. The Company’s reportable
segments are aligned by product nature as disclosed in
Note 18.
The following table sets forth information about revenue
disaggregated by primary geographic regions, and timing
of revenue recognition for the year-ended December 31,
2018. The table also includes a reconciliation of dis-
aggregated revenue with reportable segments.
Consumer
Packaging
Display and
Packaging
Paper and
Industrial
Converted
Products
Protective
Solutions
Year Ended
Primary
geographical
markets:
United
States
Europe
Canada
Asia
Other
1,676,204
418,129
115,183
69,242
81,241
290,295
294,156
—
—
7,858
1,108,735 415,135
25,664
—
3,548
83,330
354,705
131,025
178,509
137,979
Total
2,359,999
592,309
1,910,953 527,677
Timing of
revenue
recognition:
Products
transferred
at a point
in time
Products
transferred
over time
1,440,662
248,034
1,808,997 444,624
919,337
344,275
101,956
83,053
48,786
—
—
—
Total
2,359,999
592,309
1,910,953 527,677
(45,877)
—
—
—
—
—
— 45,877
(5,215)
—
—
—
16. Commitments and contingencies
Pursuant to U.S. GAAP, accruals for estimated losses
are recorded at the time information becomes available
indicating that losses are probable and that the amounts
are reasonably estimable. As is the case with other
companies in similar industries, the Company faces
exposure from actual or potential claims and legal
proceedings from a variety of sources. Some of these
exposures, as discussed below, have the potential to be
material.
Beginning balance
Revenue deferred or
rebates accrued
Recognized as revenue
Rebates paid to
customers
Increases due to rights to
consideration for
customer specific
goods produced, but
not billed during the
period
Transferred to receivables
from contract assets
recognized at the
beginning of the period
Increase as a result of
cumulative catch-up
arising from changes in
the estimate of
completion, excluding
amounts transferred to
receivables during the
period
Impairment of contract
asset
Ending balance
$ 48,786 $(18,533) $45,877 $(17,736)
Environmental matters
Contract assets and liabilities are generally short in
duration given the nature of products produced by the
Company. Contract assets represents goods produced
without alternative use for which the Company is entitled
to payment with margin prior to shipment. Upon shipment,
the Company is entitled to bill the customer, and therefore
amounts included in contract assets will be reduced with
the recording of an account receivable as they represent
The Company is subject to a variety of environmental
and pollution control laws and regulations in all juris-
dictions in which it operates.
Spartanburg
In connection with its acquisition of Tegrant in
November 2011, the Company identified potential
environmental contamination at a site in Spartanburg,
South Carolina. The total remediation cost of the Spartan-
F-34
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K burg site was estimated to be $17,400 at the time of the
acquisition and an accrual in this amount was recorded on
Tegrant’s opening balance sheet. Since the acquisition,
the Company has spent a total of $1,453 on remediation
of the Spartanburg site. During previous years, the Com-
pany has increased its reserves for this site by a total of
$17 in order to reflect its best estimate of what it is likely to
pay in order to complete the remediation. At
December 31, 2018 and 2017, the Company’s accrual for
environmental contingencies related to the Spartanburg
site totaled $15,964 and $16,504, respectively. The
Company cannot currently estimate its potential liability,
damages or range of potential loss, if any, beyond the
amounts accrued with respect to this exposure. However,
the Company does not believe that the resolution of this
matter has a reasonable possibility of having a material
adverse effect on the Company’s financial statements.
Other environmental matters
The Company has been named as a potentially respon-
sible party at several other environmentally contaminated
sites. All of the sites are also the responsibility of other
parties. The potential remediation liabilities are shared with
such other parties, and, in most cases, the Company’s
share, if any, cannot be reasonably estimated at the cur-
rent time. However, the Company does not believe that
the resolution of these matters has a reasonable possibility
of having a material adverse effect on the Company’s
financial statements.
Summary
As of December 31, 2018 and 2017, the Company
(and its subsidiaries) had accrued $20,100 and $20,306,
respectively, related to environmental contingencies.
These accruals are included in “Accrued expenses and
other” on the Company’s Consolidated Balance Sheets.
Other legal and regulatory matters
As described more fully in Note 14 to these Con-
solidated Financial Statements, the Company has received
a final Revenue Agent’s Report (“RAR”) from the IRS
proposing an adjustment to income for the 2013 tax year.
The incremental tax liability associated with the proposed
adjustment would be approximately $89,000, excluding
interest and penalties. On January 22, 2018, the Company
filed a protest to the proposed deficiency with the IRS. The
Company received a rebuttal of its protest from the IRS on
July 10, 2018, and the matter has now been referred to
the Appeals Division of the IRS. The Company strongly
believes the position of the IRS with regard to this matter
is inconsistent with applicable tax laws and existing Treas-
ury regulations, and that the Company’s previously
reported income tax provision for the year in question is
appropriate. However, there can be no assurance that this
matter will be resolved in the Company’s favor. Regardless
of whether the matter is resolved in the Company’s favor,
the final resolution of this matter could be expensive and
time consuming to defend and/or settle. While the Com-
pany believes that the amount of tax originally paid with
respect to this distribution is correct, and accordingly has
not provided additional reserve for tax uncertainty, there is
still a possibility that an adverse outcome of the matter
could have a material effect on its results of operations
and financial condition.
In addition to those described above, the Company is
subject to other various legal proceedings, claims and liti-
gation arising in the normal course of business. While the
outcome of these matters could differ from management’s
expectations, the Company does not believe that the reso-
lution of these matters has a reasonable possibility of
having a material adverse effect on the Company’s finan-
cial statements.
Commitments
As of December 31, 2018, the Company had long-term
obligations to purchase electricity and steam, which it
uses in its production processes, as well as long-term
purchase commitments for certain raw materials, princi-
pally old corrugated containers. These purchase commit-
ments require the Company to make total payments of
approximately $164,500, as follows: $81,100 in 2019;
$55,700 in 2020; $11,300 in 2021, $8,200 in 2022 and a
total of $8,200 from 2023 through 2027.
17. Shareholders’ equity and earnings per share
Stock repurchases
The Company occasionally repurchases shares of its
common stock to satisfy employee tax withholding obliga-
tions in association with the exercise of stock appreciation
rights and performance-based stock awards. These
repurchases, which are not part of a publicly announced
plan or program, totaled 266,652 shares during 2018,
119,349 shares during 2017, and 148,129 shares during
2016, at a cost of $14,561, $6,335 and $6,739,
respectively.
On February 10, 2016, the Company’s Board of Direc-
tors authorized the repurchase of up to 5,000,000 shares
of the Company’s common stock. During 2016, a total of
2,030,389 shares were repurchased under this author-
ization at a cost of $100,000. No shares were
repurchased during 2017 and 2018. Accordingly, at
December 31, 2018, a total of 2,969,611 shares remain
available for repurchase under this authorization.
Earnings per share
The following table sets forth the computation of basic
and diluted earnings per share (in thousands, except per
share data):
2018
2017
2016
Numerator:
Net income attributable
to Sonoco
Denominator:
Weighted average
common shares
outstanding
Dilutive effect of stock-
based compensation
Diluted outstanding
shares
Per common share:
Net income attributable
to Sonoco:
Basic
Diluted
$313,560
$175,345
$286,434
100,539
100,237
101,093
477
615
689
101,016
100,852
101,782
$
$
3.12
3.10
$
$
1.75
1.74
$
$
2.83
2.81
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-35
SONOCO2018ANNUALREPORT I FORM10-K No adjustments were made to reported net income in
During the third quarter of 2017, the Company
the computation of earnings per share.
The Company paid dividends totaling $1.62, $1.54,
and $1.46 per share in 2018, 2017 and 2016,
respectively.
Potentially dilutive securities are calculated in accord-
ance with the treasury stock method, which assumes the
proceeds from the exercise of all dilutive stock apprecia-
tion rights (SARs) are used to repurchase the Company’s
common stock. Certain SARs are not dilutive because
either the exercise price is greater than the average mar-
ket price of the stock during the reporting period or
assumed repurchases from proceeds from the exercise of
the SARs were antidilutive.
The average number of shares that were not dilutive
and therefore not included in the computation of diluted
income per share was as follows for the years ended
December 31, 2018, 2017 and 2016 (in thousands):
Anti-dilutive stock appreciation rights
786
487
357
2018
2017
2016
These stock appreciation rights may become dilutive in
future periods if the market price of the Company’s
common stock appreciates.
Noncontrolling interests
In 1994, the Company entered into a joint venture
agreement with two partners in Asia for the manufacturing
and marketing of products in the Asian markets. Prior to
December 31, 2018, the Company owned a controlling
interest of 79.25% of the joint venture and consolidated
the net assets of the Asia joint venture. On December 31,
2018, the Company acquired the 19.08% ownership inter-
est of PFE Hong Kong Limited, one of the joint venture
partners, for $35,000 in cash, bringing the Company’s
total ownership in the Asia joint venture to 98.33%. As a
result of the purchase, the Company wrote off the
$11,695 book value of the noncontrolling interest and
recorded a $23,305 reduction in Capital in Excess of
Stated Value. One of the Company’s directors, Harry A.
Cockrell, is a principal shareholder of PFE Hong Kong
Limited.
On October 1, 2018, the Company completed the
acquisition of the remaining 70% interest in Conitex
Sonoco (see Note 4). The acquisition of Conitex Sonoco
included joint ventures in Indonesia and China in which the
Company owns a controlling interest. The noncontrolling
interests relating to these joint ventures were recorded on
the opening balance sheet at their fair value of $2,655.
recorded a $1,341 noncontrolling interest related to the
creation of a joint venture for the manufacture of tubes
and cores from a facility in Saudi Arabia. The Company
owns a 51% share in the joint venture and the assets have
been consolidated.
18. Segment reporting
The Company reports its financial results in four report-
able segments – Consumer Packaging, Display and Pack-
aging, Paper and Industrial Converted Products, and
Protective Solutions.
The Consumer Packaging segment includes the follow-
ing products and services: round and shaped rigid
containers and trays (both composite and thermoformed
plastic); extruded and injection-molded plastic products;
printed flexible packaging; global brand artwork manage-
ment; and metal and peelable membrane ends and clo-
sures. This segment also included blow-molded plastic
bottles and jars through November 7, 2016, when the
Company completed the sale of its rigid plastics blow
molding operations.
The Display and Packaging segment includes the follow-
ing products and services: designing, manufacturing,
assembling, packing and distributing temporary, semi-
permanent and permanent point-of-purchase displays;
supply chain management services, including contract
packing, fulfillment and scalable service centers; retail
packaging, including printed backer cards, thermoformed
blisters and heat sealing equipment; and paper amenities,
such as coasters and glass covers.
The Paper and Industrial Converted Products segment
includes the following products: paperboard tubes and
cores; fiber-based construction tubes and forms; wooden,
metal and composite wire and cable reels and spools; and
recycled paperboard, linerboard, corrugating medium,
recovered paper and material recycling services.
The Protective Solutions segment includes the follow-
ing products: custom-engineered paperboard-based and
expanded foam protective packaging and components;
and temperature-assurance packaging.
Restructuring charges, asset impairment charges,
gains from the disposition of businesses, insurance
settlement gains, acquisition-related costs, pension
settlement charges, interest expense and interest income
are included in income before income taxes under
“Corporate.”
F-36
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K The following table sets forth financial information about each of the Company’s business segments:
Years ended December 31
Consumer
Packaging
Display
and
Packaging
Paper and
Industrial
Converted
Products
Protective
Solutions Corporate Consolidated
3,293
5,557
5,509
$2,363,292
2,129,022
2,048,621
$
Total Revenue
2018
2017
2016
Intersegment Sales1
2018
2017
2016
Sales to Unaffiliated Customers
2018
2017
2016
Income Before Income Taxes2
2018
2017
2016
Identifiable Assets3
2018
2017
2016
Depreciation, Depletion and Amortization4
2018
2017
2016
Capital Expenditures
2018
2017
2016
$
$2,359,999
2,123,465
2,043,112
$ 224,505
255,759
245,573
$1,993,417
1,890,516
1,447,886
$ 116,841
98,882
88,875
66,659
63,617
86,369
$595,855
511,099
522,955
$2,042,732
2,007,321
1,793,512
$529,324
540,665
527,450
$
3,546
2,863
2,542
$ 131,779
141,141
100,059
$
1,647
1,896
1,551
$592,309
508,236
520,413
$1,910,953
1,866,180
1,693,453
$527,677
538,769
525,899
$
$
$
— $5,531,203
5,188,107
—
4,892,538
—
— $ 140,265
151,457
—
109,661
—
— $5,390,938
5,036,650
—
4,782,877
—
$ 13,291
2,632
14,922
$ 211,122
161,591
136,487
$ 42,902
42,357
51,753
$(113,289)
(147,785)
(7,458)
$ 378,531
314,554
441,277
$440,972
480,892
446,906
$1,472,148
1,346,391
1,164,365
$535,443
552,425
573,949
$ 141,485
287,497
290,097
$4,583,465
4,557,721
3,923,203
$
$
$ 18,020
17,090
16,716
$ 19,849
23,908
11,542
74,434
74,850
74,742
91,423
61,443
60,601
$ 26,950
26,803
24,849
$
5,879
19,031
12,860
$
$
— $ 236,245
217,625
—
205,182
—
8,764
20,914
15,369
$ 192,574
188,913
186,741
1
2
Intersegment sales are recorded at a market-related transfer price.
Included in Corporate are interest income, interest expense, restructuring, asset impairment charges, gains from the
sale of a business, property insurance settlement gains, non-operating pension costs, and other non-operational
income and expenses associated with the following segments:
2018
2017
2016
Consumer
Packaging
$ 18,391
9,990
(80,500)
Display
and
Packaging
$19,046
2,082
7,883
Paper and
Industrial
Converted
Products
$11,773
24,281
27,567
Protective
Solutions Corporate
$ 4,391
88,377
(67)
$1,529
3,071
1,018
Total
$ 55,130
127,801
(44,099)
3
The remaining amounts reported as Corporate consist of interest expense, interest income, non-operating pension
costs, and other non-operational income and expenses not associated with a particular segment.
Identifiable assets are those assets used by each segment in its operations. Corporate assets consist primarily of
cash and cash equivalents, investments in affiliates, headquarters facilities, deferred income taxes and prepaid
expenses.
4 Depreciation, depletion and amortization incurred at Corporate are allocated to the reportable segments.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-37
SONOCO2018ANNUALREPORT I FORM10-K Sales are attributed to countries/regions based upon
the plant location from which products are shipped. Long-
lived assets are comprised of property, plant and equip-
ment, goodwill, intangible assets and investment in
affiliates (see Notes 7 and 8).
Geographic regions
Sales to unaffiliated customers and long-lived assets by
geographic region are as follows:
2018
2017
2016
Sales to Unaffiliated
Customers
United States
Europe
Canada
All other
$3,490,369
1,092,654
246,208
561,707
$3,263,975
981,178
245,992
545,505
$3,112,016
951,783
268,556
450,522
Total
$5,390,938
$5,036,650
$4,782,877
Long-lived Assets
United States
Europe
Canada
All other
$1,953,391
641,600
113,782
241,767
$1,962,196
659,615
120,062
108,395
$1,671,168
599,698
111,452
101,828
Total
$2,950,540
$2,850,268
$2,484,146
19. Accumulated other comprehensive loss
The following table summarizes the components of accumulated other comprehensive loss and the changes in
accumulated other comprehensive loss, net of tax as applicable, for the years ended December 31, 2018 and 2017:
Balance at December 31, 2016
$(286,498) $(453,821)
$ 1,939
$(738,380)
Foreign
Currency
Items
Defined
Benefit
Pension
Items
Gains and
Losses on Cash
Flow Hedges
Accumulated
Other
Comprehensive
Loss
Other comprehensive income/(loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss to net income
Amounts reclassified from accumulated other
comprehensive loss to fixed assets
Other comprehensive income/(loss)
Balance at December 31, 2017
Other comprehensive income/(loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss to net income
Amounts reclassified from accumulated other
comprehensive loss to fixed assets
Other comprehensive income/(loss)
Amounts reclassified from accumulated other
comprehensive loss to retained earnings
88,003
9,840
2,266
100,109
49,849
(4,675)
45,174
—
88,003
59,689
$(198,495) $(467,136)
64
(2,345)
$ (641)
64
145,347
$(666,272)
—
—
(53,504)
(50,232)
(1,380)
(105,116)
897
29,988
71
—
—
(52,607)
(20,244)
(305)
(1,614)
30,956
(305)
(74,465)
—
—
(176)
(176)
Balance at December 31, 2018
$(251,102) $(487,380)
$(2,431)
$(740,913)
“Other comprehensive income/(loss) before reclassifications” during 2017, includes $5,071 of “Defined Benefit Pen-
sion Items” related to the release of a portion of the valuation allowance on deferred tax assets related to the pension
plan of a foreign subsidiary.
F-38
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K The following table summarizes the amounts reclassified from accumulated other comprehensive loss and the
affected line items in the consolidated statements of net income for the years ended December 31, 2018 and 2017:
Details about Accumulated Other
Comprehensive Loss Components
Foreign currency items
Amounts reclassified to net
income
Defined benefit pension items
Effect of settlement loss(a)
Effect of curtailment loss(a)
Amortization of defined benefit
pension items
Gains and losses on cash flow hedges
Foreign exchange contracts
Foreign exchange contracts
Commodity contracts
Amount Reclassified from
Accumulated Other
Comprehensive Loss
Twelve
Months Ended
December 31,
2018
Twelve
Months Ended
December 31,
2017
$
(897)
(897)
(730)
(256)
(36,689)
(37,675)
7,687
(29,988)
(203)
(20)
115
(108)
37
(71)
$
—
—
(32,761)
—
(38,861)
(71,622)
21,773
(49,849)
11,738
(6,764)
1,667
6,641
(1,966)
4,675
Affected Line Item in the Consolidated
Statements of Net Income
Selling, general and administrative
expenses
Non-operating pension cost
Non-operating pension cost
Non-operating pension cost
Provision for income taxes
Net income
Net Sales
Cost of sales
Cost of sales
Income before income taxes
Provision for income taxes
Net income
Total reclassifications for the period
$(30,956)
$(45,174)
Net income
(a) See Note 13 for additional details.
The following table summarizes the tax (expense) benefit amounts for the other comprehensive loss components for
the years ended December 31, 2018 and 2017:
For the year ended December 31,
2018
For the year ended
December 31, 2017
Foreign currency items
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income
Gains and losses on foreign currency items:
Defined benefit pension items:
Other comprehensive income/(loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income
Net other comprehensive income/(loss) from
defined benefit pension items
Gains and losses on cash flow hedges:
Other comprehensive income/(loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income
Amounts reclassified from accumulated other
comprehensive income/(loss) to fixed assets
Net other comprehensive income/(loss) from cash
flow hedges
Other comprehensive income/(loss)
Before
Tax
Amount
$ (53,504) $
Tax
(Expense)
Benefit
After Tax
Amount
— $ (53,504) $
Before
Tax
Amount
Tax
(Expense)
Benefit
After Tax
Amount
88,003 $
— $
88,003
897
(52,607)
—
897
— (52,607)
—
88,003
—
—
—
88,003
(63,259)
13,027
(50,232)
13,118
(3,278)
9,840
37,675
(7,687)
29,988
71,622
(21,773)
49,849
(25,584)
5,340
(20,244)
84,740
(25,051)
59,689
(2,096)
716
(1,380)
3,355
(1,089)
2,266
108
(305)
(37)
—
71
(6,641)
1,966
(4,675)
(305)
64
—
64
(2,293)
(2,345)
$(80,484) $ 6,019 $(74,465) $169,521 $(24,174) $145,347
(1,614)
(3,222)
679
877
S O N O C O 2 0 1 8 A N N U A L R E P O R T
F-39
SONOCO2018ANNUALREPORT I FORM10-K The change in defined benefit plans includes pretax changes of $(71) and $(836) during the years ended
December 31, 2018 and 2017, related to one of the Company’s equity method investments.
20. Selected quarterly financial data
The following table sets forth selected quarterly financial data of the Company:
(unaudited)
2018
Net sales
Gross profit
Restructuring/Asset impairment charges
Net income attributable to Sonoco
Per common share:
Net income attributable to Sonoco:
- basic
- diluted
Cash dividends
- common
Market price
- high
- low
2017
Net sales
Gross profit
Restructuring/Asset impairment charges
Net income attributable to Sonoco
Per common share:
Net income attributable to Sonoco:
- basic
- diluted
Cash dividends
- common
Market price
- high
- low
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter*
$1,304,187
250,602
3,063
74,055
$1,366,373
276,460
3,567
89,412
$1,364,762
259,636
22,061
72,415
$1,355,616
254,308
11,380
77,678
$
$
$
0.74
0.73
0.39
$
$
$
0.89
0.88
0.41
$
$
$
0.72
0.72
0.41
$
$
$
55.43
46.55
53.80
46.94
58.69
51.18
0.78
0.77
0.41
58.31
50.30
$1,172,324
222,979
4,111
53,733
$1,240,674
238,385
7,897
43,125
$1,324,634
252,879
511
72,812
$1,299,018
242,420
25,900
5,675
0.54
0.53
0.37
55.58
51.87
0.43
0.43
0.39
54.00
49.66
$
0.73
0.72
0.39
53.77
47.10
.06
.06
0.39
55.77
50.39
* Net income attributable to Sonoco in the fourth quarter of 2017 includes an additional tax provision of $51,265 result-
ing from new U.S. tax reform legislation
F-40
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K Item 9. Changes in and disagreements with
accountants on accounting and financial
disclosure
None.
Item 9A. Controls and procedures
Disclosure Controls and Procedures
Our management, under the supervision and with the
participation of our Chief Executive Officer (“CEO”) and
Chief Financial Officer (“CFO”), conducted an evaluation of
our disclosure controls and procedures as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Our disclosure controls
and procedures are designed to ensure that information
disclosed in the reports that we file or submit is recorded,
processed, summarized and reported within the relevant
time periods specified in SEC rules and forms. For this
purpose, disclosure controls and procedures include,
without limitation, controls and procedures designed to
ensure that information that is required to be disclosed in
the reports we file or submit under the Exchange Act is
accumulated and communicated to the Company’s
management, including the CEO and CFO, as appropriate,
to allow timely decisions regarding required disclosures.
Based on this evaluation, our CEO and CFO concluded
that such controls and procedures, as of December 31,
2018, the end of the period covered by this Annual Report
on Form 10-K, were effective.
Management’s report on internal control over
financial reporting
Our management is responsible for establishing and
maintaining adequate internal control over financial report-
ing, as such term is defined in Exchange Act Rule
13a-15(f). Our internal control over financial reporting is a
process designed by, or under the supervision of, our
CEO and CFO to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance
with generally accepted accounting principles. Under the
supervision and with the participation of our management,
including our CEO and CFO, we conducted an evaluation
of the effectiveness of our internal control over financial
reporting as of December 31, 2018, the end of the period
covered by this report based on the framework in Internal
Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”).
Based on our evaluation under the framework in
Internal Control – Integrated Framework (2013), our
management concluded that our internal control over
financial reporting was effective as of December 31, 2018.
In conducting management’s evaluation as described
above, Highland Packaging Solutions, acquired April 12,
2018, as well as Conitex Sonoco (BVI), Ltd (“Conitex
Sonoco”) and Compositub, each acquired October 1,
2018, were excluded. The operations of Highland Pack-
aging Solutions, Conitex Sonoco and Compositub,
excluded from management’s assessment of internal con-
trol over financial reporting, collectively represent approx-
imately 2.6% of the Company’s consolidated revenues
and approximately 6.2% of total assets as of
December 31, 2018.
PricewaterhouseCoopers LLP, an independent regis-
tered public accounting firm, has audited the effectiveness
of our internal control over financial reporting as of
December 31, 2018 as stated in their report, which
appears at the beginning of Item 8 of this Annual Report
on Form 10-K.
Changes in internal control over financial reporting
There have been no changes in the Company’s internal
control over financial reporting during the three months
ended December 31, 2018, that have materially affected,
or that are reasonably likely to materially affect, our internal
control over financial reporting.
Limitations on the effectiveness of controls
The Company’s management, including the CEO and
CFO, does not expect that the Company’s disclosure
controls and procedures or internal control over financial
reporting will prevent all error and all fraud. Internal control
over financial reporting, no matter how well designed and
operated, can provide only reasonable, not absolute,
assurance that the objectives will be met. Because of the
inherent limitations in internal control over financial report-
ing, no evaluation of controls can provide absolute assur-
ance that all control issues and instances of fraud, if any,
within the Company have been detected. These inherent
limitations include the realities that judgments in decision
making can be faulty and that breakdowns can occur
because of simple error or mistake. Controls can also be
circumvented by the individual acts of some persons, by
collusion of two or more people, or by management over-
ride of the controls. The design of any system of controls
is based in part on certain assumptions about the like-
lihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals
under all potential future conditions. Over time, controls
may become inadequate because of changes in con-
ditions or deterioration in the degree of compliance with
policies or procedures. Because of the inherent limitations
in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected timely.
Item 9B. Other information
Not applicable.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
37
SONOCO2018ANNUALREPORT I FORM10-K P A R T I
I
I
Item 10. Directors, executive officers and
corporate governance
The information set forth in the Company’s definitive
Proxy Statement for the annual meeting of shareholders to
be held on April 17, 2019 (the Proxy Statement), under the
captions “Proposal 1: Election of Directors,” “Information
Concerning Directors Whose Terms Continue,” and
“Section 16(a) Beneficial Ownership Reporting
Compliance,” is incorporated herein by reference.
Information about executive officers of the Company is set
forth in Item 1 of this Annual Report on Form 10-K under
the caption “Executive Officers of the Registrant.”
Code of Ethics – The Company has adopted a code of
ethics (as defined in Item 406 of Regulation S-K) that
applies to its principal executive officer, principal financial
officer, principal accounting officer, and other senior
executive and senior financial officers. This code of ethics
is available through the Company’s website,
www.sonoco.com, and is available in print to any share-
holder who requests it. Any waivers or amendments to the
provisions of this code of ethics will be posted to this
website within four business days after the waiver or
amendment.
Audit Committee Members – The Company has a
separately designated standing audit committee estab-
lished in accordance with Section 3(a)(58)(A) of the Secu-
rities Exchange Act of 1934. The audit committee is
comprised of the following members: Thomas E. Whiddon,
Chairman; Sundaram Nagajaran; Philippe Guillemot; Marc
D. Oken; Blythe J. McGarvie; and Richard G. Kyle.
Audit Committee Financial Expert – The Company’s
Board of Directors has determined that the Company has
at least three “audit committee financial experts,” as that
term is defined by Item 407(d)(5) of Regulation S-K
promulgated by the Securities and Exchange Commission,
serving on its audit committee. Thomas E. Whiddon,
Blythe J. McGarvie, and Marc D. Oken meet the terms of
the definition and are independent based on the criteria in
the New York Stock Exchange Listing Standards. Pur-
suant to the terms of Item 407(d)(5) of Regulation S-K, a
person who is determined to be an “audit committee
financial expert” will not be deemed an expert for any
purpose as a result of being designated or identified as an
Equity compensation plan information
“audit committee financial expert” pursuant to Item 407,
and such designation or identification does not impose on
such person any duties, obligations or liability that are
greater than the duties, obligations and liability imposed
on such person as a member of the audit committee and
Board of Directors in the absence of such designation or
identification. Further, the designation or identification of a
person as an “audit committee financial expert” pursuant
to Item 407 does not affect the duties, obligations or
liability of any other member of the audit committee or
Board of Directors.
The Company’s Corporate Governance Guidelines,
Audit Committee Charter, Corporate Governance and
Nominating Committee Charter and Executive Compensa-
tion Committee Charter are available through the Compa-
ny’s website, www.sonoco.com. This information is
available in print to any shareholder who requests it.
Item 11. Executive compensation
The information set forth in the Proxy Statement under
the caption “Compensation Committee Interlocks and
Insider Participation,” under the caption “Executive
Compensation,” and under the caption “Director Compen-
sation” is incorporated herein by reference. The
information set forth in the Proxy Statement under the
caption “Compensation Committee Report” is also
incorporated herein by reference, but pursuant to the
Instructions to Item 407(e)(5) of Regulation S-K, such
report shall not be deemed to be “soliciting material” or
subject to Regulation 14A, and shall be deemed to be
“furnished” and not “filed” and will not be deemed
incorporated by reference into any filing under the Secu-
rities Act of 1933 or the Securities Exchange Act of 1934
as a result of being so furnished.
Item 12. Security ownership of certain
beneficial owners and management and related
stockholder matters
The information set forth in the Proxy Statement under
the caption “Security Ownership of Certain Beneficial
Owners,” and under the caption “Security Ownership of
Management” is incorporated herein by reference.
The following table sets forth aggregated information about all of the Company’s compensation plans (including
individual compensation arrangements) under which equity securities of the Company are authorized for issuance as of
December 31, 2018:
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))1
(c)
3,184,326
—
3,184,326
$47.41
—
$47.41
6,038,715
—
6,038,715
Plan category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
38
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K 1 The Sonoco Products Company 2014 Long-term Incentive Plan was adopted at the Company’s 2014 Annual Meet-
ing of Shareholders. The maximum number of shares of common stock that may be issued under this plan was set at
10,381,533 shares, which included all shares remaining under the 2012 Plan and an additional 4,500,000 shares
authorized under the 2014 Plan. Awards granted under all previous plans which are forfeited, expire or are cancelled
without delivery of shares, or which result in forfeiture of shares back to the Company, will be added to the total
shares available under the 2014 Plan. At December 31, 2018, a total of 6,038,715 shares remain available for future
grant under the 2014 Plan.
The weighted-average exercise price of $47.41 relates
to stock appreciation rights, which account for 1,832,358
of the 3,184,326 securities issuable upon exercise. The
remaining 1,351,968 securities relate to deferred compen-
sation stock units, performance-contingent restricted
stock units and restricted stock unit awards that have no
exercise price requirement.
Item 13. Certain relationships and related
transactions, and director independence
The information set forth in the Proxy Statement under
the captions “Related Party Transactions” and “Corporate
Governance – Director Independence Policies” is
incorporated herein by reference. Each current member of
the Audit, Corporate Governance and Nominating and
Executive Compensation Committees is independent as
defined in the listing standards of the New York Stock
Exchange.
Item 14. Principal accountant fees and services
The information set forth in the Proxy Statement under
the caption “Independent Registered Public Accounting
Firm” is incorporated herein by reference.
S O N O C O 2 0 1 8 A N N U A L R E P O R T
39
SONOCO2018ANNUALREPORT I FORM10-K P A R T I V
Item 15. Exhibits and financial statement schedules
(a)
1 Financial Statements – The following financial statements are provided under Item 8 – Financial
Statements and Supplementary Data of this Annual Report on Form 10-K:
– Report of Independent Registered Public Accounting Firm
– Consolidated Balance Sheets as of December 31, 2018 and 2017
– Consolidated Statements of Income for the years ended December 31, 2018, 2017 and 2016
– Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017
and 2016
– Consolidated Statements of Changes in Total Equity for the years ended December 31, 2018, 2017
and 2016
– Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016
– Notes to Consolidated Financial Statements
2 Financial Statement Schedules
Schedule II – Valuation and Qualifying Accounts for the Years Ended December 31, 2018, 2017 and
2016
Column A
Description
2018
Allowance for Doubtful Accounts
LIFO Reserve
Valuation Allowance on Deferred Tax Assets
2017
Allowance for Doubtful Accounts
LIFO Reserve
Valuation Allowance on Deferred Tax Assets
2016
Allowance for Doubtful Accounts
LIFO Reserve
Valuation Allowance on Deferred Tax Assets
Column B
Column C – Additions
Column D
Column E
Balance at
Beginning
of Year
Charged to
Costs and
Expenses
Charged to
Other
Deductions
$ 9,913
17,632
47,199
$10,884
17,319
49,797
$11,069
18,894
49,464
$ 3,471
1,2223
(11,187)
$ 1,439
3133
6,967
$ 1,566
(1575)3
3,273
$ (425)1
—
70,9934
$
$
2431
—
(2,365)4
(86)1
—
(306)4
$1,2672
—
3,7165
$2,6532
—
7,2005
$ 16652
—
2,6345
Balance
at End
of Year
$ 11,692
18,854
103,289
$ 9,913
17,632
47,199
$ 10,884
17,319
49,797
1
2
3
4
5
Includes translation adjustments and other insignificant adjustments.
Includes amounts written off.
Includes adjustments based on pricing and inventory levels.
Includes translation adjustments and increases to deferred tax assets which were previously fully reserved.
Includes utilization of capital loss carryforwards, net operating loss carryforwards and other deferred tax assets.
All other schedules not included have been omitted because they are not required, are not applicable or the required
information is given in the financial statements or notes thereto.
3 The exhibits listed on the Exhibit Index to this Form 10-K are incorporated herein by reference.
Item 16. Form 10-K summary
The Company has chosen not to provide a Form 10-K summary.
40
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K Exhibit Index
3-1
3-2
4-1
4-2
4-3
4-4
10-1
10-2
10-3
10-4
10-5
10-6
10-7
10-8
10-9
10-10
10-11
10-12
10-13
10-14
Restated Articles of Incorporation, as amended through June 7, 2017 (incorporated by reference to the Registrant’s
Form 10-K for the year ended December 31, 2017)
By-Laws of Sonoco Products Company; as amended October 1, 2018 (incorporated by reference to the Registrant’s
Form 8-K filed October 1, 2018)
Indenture, dated as of June 15, 1991, between Registrant and The Bank of New York, as Trustee (incorporated by
reference to the Registrant’s Form S-4 (File Number 333-119863))
Form of Second Supplemental Indenture, dated as of November 1, 2010, between the Registrant and The Bank of
New York Mellon Trust Company, N.A., as Trustee (including form of 5.75% Notes due 2040)(incorporated by
reference to Registrant’s Form 8-K filed October 28, 2010)
Form of Third Supplemental Indenture (including form of 4.375% Notes due 2021), between Sonoco Products
Company and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Registrant’s
Form 8-K filed October 27, 2011)
Form of Fourth Supplemental Indenture (including form of 5.75% Notes due 2040), between Sonoco Products
Company and the Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Registrant’s
Form 8-K filed October 27, 2011)
1991 Sonoco Products Company Key Employee Stock Plan, as amended (incorporated by reference to the
Registrant’s Form 10-Q for the quarter ended September 30, 2007)
Sonoco Products Company 1996 Non-employee Directors’ Stock Plan, as amended (incorporated by reference to
the Registrant’s Form 10-Q for the quarter ended September 30, 2007)
Sonoco Retirement and Savings Plan (formerly the Sonoco Savings Plan), as amended (incorporated by reference to
the Registrant’s Form 10-K for the year ended December 31, 2012).
Sonoco Products Company 2008 Long-term Incentive Plan (incorporated by reference to the Company’s Proxy
Statement for the Annual Meeting of Shareholders on April 16, 2008)
Sonoco Products Company 2012 Long-term Incentive Plan (incorporated by reference to the Company’s Proxy
Statement for the Annual Meeting of Shareholders on April 18, 2012)
Sonoco Products Company 2014 Long-term Incentive Plan (incorporated by reference to the Company’s Proxy
Statement for the Annual Meeting of Shareholders on April 16, 2014)
Deferred Compensation Plan for Key Employees of Sonoco Products Company (a.k.a. Deferred Compensation Plan
for Corporate Officers of Sonoco Products Company), as amended (incorporated by reference to the Registrant’s
Form 10-Q for the quarter ended September 28, 2008)
Deferred Compensation Plan for Outside Directors of Sonoco Products Company, as amended (incorporated by
reference to the Registrant’s Form 10-Q for the quarter ended September 28, 2008)
Sonoco Products Company Amended and Restated Trust Agreement for Executives, as of October 15, 2008
(incorporated by reference to the Registrant’s Form 10-Q for the quarter ended September 28, 2008)
Sonoco Products Company Amended and Restated Directors Deferral Trust Agreement, as of October 15, 2008
(incorporated by reference to the Registrant’s Form 10-Q for the quarter ended September 28, 2008)
Omnibus Benefit Restoration Plan of Sonoco Products Company, amended and restated as of January 1, 2015
(incorporated by reference to the Registrant’s Form 10-K for the year ended December 31, 2014, filed on March 2,
2015)
Performance-based Annual Incentive Plan for Executive Officers (incorporated by reference to the Registrant’s Proxy
Statement for the April 19, 2000, Annual Meeting of Shareholders)
Form of Executive Bonus Life Agreement between the Company and certain executive officers (incorporated by
reference to the Registrant’s Form 10-Q for the quarter ended September 26, 2004)
Description of Stock Appreciation Rights and Performance Contingent Restricted Stock Units granted to executive
officers of the Registrant on February 12, 2014 (incorporated by reference to Registrant’s Form 8-K filed
February 18, 2014)
S O N O C O 2 0 1 8 A N N U A L R E P O R T
41
SONOCO2018ANNUALREPORT I FORM10-K 10-15
10-16
10-17
10-18
10-19
10-20
10-21
10-22
Description of Stock Appreciation Rights, Restricted Stock Units and Performance Contingent Restricted Stock
Units granted to executive officers of the Registrant on February 11, 2015 (incorporated by reference to Registrant’s
Form 8-K filed February 17, 2015)
Description of Stock Appreciation Rights, Restricted Stock Units and Performance Contingent Restricted Stock
Units granted to executive officers of the Registrant on February 10, 2016 (incorporated by reference to Registrant’s
Form 8-K filed February 16, 2016)
Description of Stock Appreciation Rights, Restricted Stock Units and Performance Contingent Restricted Stock
Units granted to executive officers of the Registrant on February 8, 2017 (incorporated by reference to Registrant’s
Form 8-K filed February 14, 2017)
Description of Stock Appreciation Rights, Restricted Stock Units and Performance Contingent Restricted Stock
Units granted to executive officers of the Registrant on February 14, 2018 (incorporated by reference to Registrant’s
Form 8-K filed February 20, 2018)
Description of Stock Appreciation Rights, Restricted Stock Units and Performance Contingent Restricted Stock
Units granted to executive officers of the Registrant on February 13, 2019 (incorporated by reference to Registrant’s
Form 8-K filed February 19, 2019)
Unsecured Five-Year Fixed Rate Assignable Loan Agreement, dated May 25, 2016 (incorporated by reference to
Registrant’s Form 10-Q for the quarter ended July 3, 2016)
Three-year Term Loan Agreement dated March 13, 2017 between the Registrant and Bank of America, N.A.
(incorporated by reference to the Registrant’s Form 10-Q for the quarter ended April 2, 2017)
Credit Facility, effective July 20, 2017 (incorporated by reference to Registrant’s Form 10-Q for the quarter ended
July 2, 2017)
10-23
Term Loan Agreement between Sonoco Products Company and Bank of America, N.A. dated April 12, 2018
21
23
31
32
99
101
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm with respect to Registrant’s Form 10-K
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and 17 C.F.R. 240.13a-14(a)
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 and 17 C.F.R. 240.13a-14(b)
Proxy Statement, filed in conjunction with annual shareholders’ meeting scheduled for April 17, 2019 (to be filed
within 120 days after December 31, 2018)
The following materials from Sonoco Products Company’s Annual Report on Form 10-K for the year ended
December 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets
at December 31, 2018 and 2017, (ii) Consolidated Statements of Income for the years ended December 31, 2018,
2017 and 2016, (iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2018,
2017 and 2016, (iv) Consolidated Statements of Changes in Total Equity for the years ended December 31, 2018,
2017 and 2016, (v) Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and
2016, and (vi) Notes to the Consolidated Financial Statements.
42
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 28th day of February
2019.
SONOCO PRODUCTS COMPANY
/s/ R.C. Tiede
R.C. Tiede
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the follow-
ing persons on behalf of the Registrant and in the capacities indicated on this 28th day of February 2019.
/s/ Barry L. Saunders
Barry L. Saunders
Senior Vice President and Chief Financial Officer
(principal financial officer)
/s/ James W. Kirkland
James W. Kirkland
Corporate Controller
(principal accounting officer)
S O N O C O 2 0 1 8 A N N U A L R E P O R T
43
SONOCO2018ANNUALREPORT I FORM10-K /s/ H.E. DeLoach, Jr.
S I G N A T U R E S ( C O N T I N U E D )
Director (Executive Chairman)
H.E. DeLoach, Jr.
/s/ R.C. Tiede
R.C. Tiede
/s/ H.E. DeLoach, Jr.
/s/ H.A. Cockrell
H.E. DeLoach, Jr.
H.A. Cockrell
/s/ R.C. Tiede
/s/ P.L. Davies
R.C. Tiede
P.L. Davies
/s/ H.A. Cockrell
/s/ T.J. Drew
H.A. Cockrell
T.J. Drew
/s/ P.L. Davies
/s/ P. Guillemot
P.L. Davies
P. Guillemot
/s/ T.J. Drew
/s/ J.R. Haley
T.J. Drew
J.R. Haley
/s/ P. Guillemot
/s/ R.G. Kyle
P. Guillemot
R.G. Kyle
/s/ J.R. Haley
/s/ B.J. McGarvie
J.R. Haley
B.J. McGarvie
/s/ R.G. Kyle
/s/ J.M. Micali
R.G. Kyle
J.M. Micali
/s/ B.J. McGarvie
/s/ S. Nagarajan
B.J. McGarvie
S. Nagarajan
/s/ J.M. Micali
/s/ M.D. Oken
J.M. Micali
M.D. Oken
/s/ S. Nagarajan
/s/ T.E. Whiddon
S. Nagarajan
T.E. Whiddon
/s/ M.D. Oken
M.D. Oken
/s/ T.E. Whiddon
T.E. Whiddon
President, Chief Executive Officer and Director
Director (Executive Chairman)
Director
President, Chief Executive Officer and Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
44
44
S O N O C O 2 0 1 8 A N N U A L R E P O R T
S O N O C O 2 0 1 8 A N N U A L R E P O R T
SONOCO2018ANNUALREPORT I FORM10-K S H A R E H O L D E R R E T U R N C O M P A R I S O N
The graph below matches Sonoco Products Company’s cumulative 5-year
The graph below
total shareholder return on common stock with the cumulative total returns
of the S&P 500 index and the Dow Jones U.S. Containers & Packaging index.
The graph tracks the performance of a $100 investment in our
The graph tracks the performance of a $100 investment
common stock and in each index (with the reinvestment of all dividends)
from 12/31/2013 to 12/31/2018.
Comparison of 5-Year Cumulative
Total Return*
among Sonoco Products Company,
the S&P 500 Index and the Dow Jones
U.S. Containers and Packaging Index
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
Sonoco Products Company
S&P 500
Dow Jones U.S. Containers & Packaging
Sonoco Products Company
S&P 500
Dow Jones U.S. Containers & Packaging
12/13
100.00
100.00
100.00
12/14
108.03
113.69
114.71
12/15
104.24
115.26
109.77
12/16
138.58
129.05
130.69
12/17
144.01
157.22
155.55
12/18
148.43
150.33
126.85
*$100 invested on 12/31/13 in stock or
*$100 invested on 12/31/13 in stock or
index, including reinvestment of dividends.
index, including reinvestment of dividends.
Fiscal year ending December 31.
Fiscal year ending December 31.
©2019 Standard & Poor’s, a division of S&P
©2019 Standard & Poor’s, a division of S&P
Global. All rights reserved.
Global. All rights reserved.
©2019 S&P Dow Jones Indices LLC, a division
©2019 S&P Dow Jones Indices LLC, a division
of S&P Global. All rights reserved.
of S&P Global. All rights reserved.
The stock price performance included in this
The stock price performance included in this
graph is not necessarily indicative of future
graph is not necessarily indicative of future
stock price performance.
stock price performance.
19
SONOCO2018ANNUALREPORT
S E L E C T E D E L E V E N - Y E A R F I N A N C I A L D A T A ( u n a u d i
t e d )
Dollars and shares in thousands except per share
Years ended December 31
Operating Results
Net sales
Cost of sales and operating expenses
Restructuring/Asset impairment charges
Gain on disposition of business
Loss from the early extinguishment of debt
Non-operating pension costs
Interest expense
Interest income
Income before income taxes
Provision for income taxes
Income before equity in earnings of affiliates
Equity in earnings of affiliates, net of tax1
Net income
Less: Net (income)/loss attributable to noncontrolling interests2
Net income attributable to Sonoco
Per common share:
Net income attributable to Sonoco:
Basic
Diluted
Cash dividends
Weighted average common shares outstanding:
Basic
Diluted
Actual common shares outstanding at December 31
Financial Position
Net working capital
Property, plant and equipment, net
Total assets
Long-term debt
Total debt
Total equity
Current ratio
Total debt to total capital3
Other Data
Depreciation, depletion and amortization expense
Cash dividends—common
Market price per common share (ending)
Return on total equity
Return on net sales
* As restated/revised
2018
2017
2016
2015
*2014
*2013
*2012
*2011
*2010
*2009
2008
$5,390,938
4,913,238
40,071
$5,036,650
4,585,822
38,419
$ 4,782,877
4,339,643
42,883
104,292
$4,964,369
4,512,927
50,637
941
63,147
4,990
378,531
75,008
303,523
11,216
314,739
(1,179)
313,560
$3.12
3.10
1.62
100,539
101,016
99,829
$ 436,342
1,233,821
4,583,465
1,189,717
1,385,162
1,772,278
1.4
43.9%
$ 236,245
161,434
53.13
17.6%
5.8%
45,110
57,220
4,475
314,554
146,589
167,965
9,482
177,447
(2,102)
175,345
$1.75
1.74
1.54
100,237
100,852
99,414
$ 563,666
1,169,377
4,557,721
1,288,002
1,447,329
1,730,060
1.6
45.6%
$
217,625
153,137
53.14
10.5%
3.5%
11,809
54,170
2,613
441,277
164,631
276,646
11,235
287,881
(1,447)
286,434
$2.83
2.81
1.46
101,093
101,782
99,193
$ 546,152
1,060,017
3,923,203
1,020,698
1,052,743
1,554,705
1.7
40.4%
$ 205,182
146,364
52.70
18.3%
6.0%
18,261
56,973
2,375
327,946
87,738
240,208
10,416
250,624
(488)
250,136
$2.46
2.44
1.37
101,482
102,392
100,944
$ 384,862
1,112,036
4,013,685
1,015,270
1,128,637
1,532,873
1.4
42.4%
$
213,161
138,032
40.87
16.5%
5.0%
$5,016,994
4,610,300
22,792
$4,861,657
4,464,021
25,038
$ 4,813,571
$4,498,932
4,419,585
32,858
4,133,788
36,826
$ 4,124,121
3,739,404
23,999
$ 3,597,331
$ 4,122,385
3,263,752
26,801
3,775,092
100,061
5,804
55,140
2,749
325,707
108,758
216,949
9,886
226,835
(919)
225,916
$2.21
2.19
1.27
102,215
103,172
100,603
23,163
59,913
3,187
292,709
93,631
199,078
12,029
211,107
(1,282)
209,825
$2.05
2.03
1.23
102,577
103,248
102,147
18,137
64,114
4,129
283,006
100,402
182,604
12,805
195,409
(110)
195,299
$1.92
1.90
1.19
101,804
102,573
100,847
5,838
41,832
3,758
284,406
77,634
206,772
12,061
218,833
(527)
218,306
$2.16
2.14
1.15
101,071
102,173
100,211
1,148,607
4,186,706
1,193,680
1,245,960
1,503,847
1.5
45.3%
1,021,920
3,967,322
939,056
974,257
1,706,049
1.6
36.3%
1,034,906
4,152,390
1,091,454
1,365,062
1,487,539
1.4
47.9%
1,013,622
3,971,362
1,224,290
1,277,956
1,412,692
1.6
47.5%
48,617
22,541
37,413
2,307
254,454
63,575
190,879
11,505
202,384
(421)
201,963
$1.99
1.97
1.11
101,599
102,543
100,510
$ 376,867
944,136
3,272,398
599,904
616,853
1,503,114
1.5
29.1%
53,992
40,992
2,427
214,221
66,445
147,776
7,742
155,518
(3,663)
151,855
$1.50
1.50
1.08
100,780
101,029
100,149
(2,341)
53,401
6,204
202,376
54,797
147,579
9,679
157,258
7,350
164,608
$1.64
1.63
1.07
100,321
100,986
99,732
926,829
3,061,265
461,055
579,108
1,381,003
1.2
29.5%
973,442
3,084,426
654,807
687,785
1,174,518
1.3
36.9%
$ 461,596
$ 498,105
$ 453,145
$ 467,958
$ 190,934
$
231,794
$ 198,718
$
197,671
$ 200,403
$
179,871
$ 169,665
$
173,587
$
183,034
128,793
43.70
13.4%
4.5%
124,845
41.72
13.4%
4.3%
119,771
29.73
13.2%
4.1%
114,958
32.96
14.3%
4.9%
111,756
33.67
14.0%
4.9%
107,887
29.25
12.0%
4.2%
106,558
23.16
11.6%
4.0%
1 2017, 2012, 2011, 2010 and 2009 data include non-operational restructuring and other charges of $581, $22, $17, $671 and $908, respectively.
2 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010, 2009 and 2008 data include restructuring charges/(income) of $(191), $(71), $(161),
$(93), $(52), $2, $116, $200, $138, $3,787 and $(4,107), respectively.
3 Calculated as total debt divided by the sum of total debt and total equity.
20
SONOCO2018ANNUALREPORT
Years ended December 31
2018
2017
2016
2015
*2014
*2013
*2012
*2011
*2010
*2009
2008
S E L E C T E D E L E V E N - Y E A R F I N A N C I A L D A T A ( u n a u d i
t e d )
Operating Results
Net sales
Cost of sales and operating expenses
Restructuring/Asset impairment charges
Gain on disposition of business
Loss from the early extinguishment of debt
Non-operating pension costs
Interest expense
Interest income
Income before income taxes
Provision for income taxes
Income before equity in earnings of affiliates
Equity in earnings of affiliates, net of tax1
Net income
Net income attributable to Sonoco
Per common share:
Net income attributable to Sonoco:
Basic
Diluted
Cash dividends
Basic
Diluted
Weighted average common shares outstanding:
Actual common shares outstanding at December 31
Less: Net (income)/loss attributable to noncontrolling interests2
Financial Position
Net working capital
Property, plant and equipment, net
Total assets
Long-term debt
Total debt
Total equity
Current ratio
Other Data
Total debt to total capital3
$5,390,938
4,913,238
40,071
$5,036,650
4,585,822
38,419
$ 4,782,877
$4,964,369
4,339,643
42,883
104,292
4,512,927
50,637
941
63,147
4,990
378,531
75,008
303,523
11,216
314,739
(1,179)
313,560
$3.12
3.10
1.62
100,539
101,016
99,829
45,110
57,220
4,475
314,554
146,589
167,965
9,482
177,447
(2,102)
175,345
$1.75
1.74
1.54
100,237
100,852
99,414
11,809
54,170
2,613
441,277
164,631
276,646
11,235
287,881
(1,447)
286,434
$2.83
2.81
1.46
101,093
101,782
99,193
18,261
56,973
2,375
327,946
87,738
240,208
10,416
250,624
(488)
250,136
$2.46
2.44
1.37
101,482
102,392
100,944
$ 436,342
$ 563,666
$ 546,152
$ 384,862
1,233,821
4,583,465
1,189,717
1,385,162
1,772,278
1.4
43.9%
1,169,377
4,557,721
1,288,002
1,447,329
1,730,060
1.6
45.6%
1,060,017
3,923,203
1,020,698
1,052,743
1,554,705
1.7
40.4%
1,112,036
4,013,685
1,015,270
1,128,637
1,532,873
1.4
42.4%
Depreciation, depletion and amortization expense
$ 236,245
$
217,625
$ 205,182
$
213,161
Cash dividends—common
Market price per common share (ending)
Return on total equity
Return on net sales
161,434
53.13
17.6%
5.8%
153,137
53.14
10.5%
3.5%
146,364
52.70
18.3%
6.0%
138,032
40.87
16.5%
5.0%
$5,016,994
4,610,300
22,792
$4,861,657
4,464,021
25,038
$ 4,813,571
4,419,585
32,858
$4,498,932
4,133,788
36,826
$ 4,124,121
3,739,404
23,999
$ 3,597,331
3,263,752
26,801
$ 4,122,385
3,775,092
100,061
5,804
55,140
2,749
325,707
108,758
216,949
9,886
226,835
(919)
225,916
$2.21
2.19
1.27
102,215
103,172
100,603
$ 461,596
1,148,607
4,186,706
1,193,680
1,245,960
1,503,847
1.5
45.3%
$ 198,718
128,793
43.70
13.4%
4.5%
23,163
59,913
3,187
292,709
93,631
199,078
12,029
211,107
(1,282)
209,825
$2.05
2.03
1.23
102,577
103,248
102,147
$ 498,105
1,021,920
3,967,322
939,056
974,257
1,706,049
1.6
36.3%
$
197,671
124,845
41.72
13.4%
4.3%
18,137
64,114
4,129
283,006
100,402
182,604
12,805
195,409
(110)
195,299
$1.92
1.90
1.19
101,804
102,573
100,847
$ 453,145
1,034,906
4,152,390
1,091,454
1,365,062
1,487,539
1.4
47.9%
$ 200,403
119,771
29.73
13.2%
4.1%
5,838
41,832
3,758
284,406
77,634
206,772
12,061
218,833
(527)
218,306
$2.16
2.14
1.15
101,071
102,173
100,211
$ 467,958
1,013,622
3,971,362
1,224,290
1,277,956
1,412,692
1.6
47.5%
$
179,871
114,958
32.96
14.3%
4.9%
48,617
22,541
37,413
2,307
254,454
63,575
190,879
11,505
202,384
(421)
201,963
$1.99
1.97
1.11
101,599
102,543
100,510
$ 376,867
944,136
3,272,398
599,904
616,853
1,503,114
1.5
29.1%
$ 169,665
111,756
33.67
14.0%
4.9%
53,992
40,992
2,427
214,221
66,445
147,776
7,742
155,518
(3,663)
151,855
$1.50
1.50
1.08
100,780
101,029
100,149
(2,341)
53,401
6,204
202,376
54,797
147,579
9,679
157,258
7,350
164,608
$1.64
1.63
1.07
100,321
100,986
99,732
$ 190,934
926,829
3,061,265
461,055
579,108
1,381,003
1.2
29.5%
$
173,587
107,887
29.25
12.0%
4.2%
$
231,794
973,442
3,084,426
654,807
687,785
1,174,518
1.3
36.9%
$
183,034
106,558
23.16
11.6%
4.0%
21
SONOCO2018ANNUALREPORT
I N V E S T O R I N F O R M A T I O N
Sonoco (NYSE: SON) offers its shareholders a wide
Sonoco (NYSE: SON)
range of services and several ways to access important
Company information.
Transfer Agent and Registrar
Shareholder inquiries, certificates for transfer, address
changes and dividend reinvestment transactions should
be sent to:
Continental Stock Transfer & Trust Company
1 State Street Plaza–30th floor
New York, NY 10004-1561
Domestic: 866 509 5584
International shareholders: +212 981 1705
Email: sonoco@continentalstock.com
Website: continentalstock.com
Shareholder Services
Elizabeth Kremer
Sonoco–A09
1 North Second Street
Hartsville, SC 29550-3305
+843 383 7924
elizabeth.kremer@sonoco.com
Electronic Payment of Dividends
Shareholders may elect to have their dividends
deposited directly into their bank accounts by contacting
Continental Stock Transfer & Trust Company at
sonoco@continentalstock.com.
Shareholder Investment Program
This program allows participants to purchase Sonoco
stock and reinvest dividends directly without contacting
a broker. For more information and a prospectus, go to
sonoco.com or continentalstock.com.
Duplicate Annual Reports
To eliminate duplicate report mailings, contact Continental
Stock Transfer & Trust Company at sonoco@
continentalstock.com.
Availability of Form 10-K and Exhibits
Sonoco has filed with the Securities and Exchange
Commission its Annual Report on Form 10-K for the
fiscal year ended December 31, 2018.
A copy of the Form 10-K, including the financial
statements and financial schedules and a list of exhibits,
forms a part of this 2018 Annual Report to shareholders.
The exhibits to the Form 10-K are not included with this
Annual Report, but will be delivered without charge to
any shareholder upon receipt of a written request.
Requests for the exhibits should be directed to:
Sonoco–A09
1 North Second Street
Hartsville, SC 29550-3305
Dividend Reinvestment Plan
Enrolling in Sonoco’s Dividend Reinvestment Plan
(“Plan”) provides a simple, economical and convenient
way for you to invest in Sonoco common shares. To
be eligible for participation, you must own at least one
share of the common stock in registered form. Benefits
of enrolling include:
• Provides a convenient way to sell or transfer your
shares
• Protects your “certificated” shares against possible
loss or theft, which also protects you from the
additional expense to replace those certificates
• Allows for reinvestment of your cash dividend.
Dividends are reinvested in Sonoco common stock
and additional shares purchased with these dividends
are credited to your account
• Allows you to invest as little as $50 per month
to purchase additional shares
To enroll in the Plan or to receive more information,
please contact the Plan administrator, Continental
Stock Transfer & Trust Company, by visiting
continentalstock.com or by calling toll free 866 509
5584. International callers should dial +212 981 1705.
You can also reach the Plan administrator by writing to:
Continental Stock Transfer & Trust Company
Dividend Reinvestment Department
1 State Street Plaza–30th Floor
New York, NY 10004-1561
22
SONOCO2018ANNUALREPORT
G E N E R A L I N F O R M A T I O N
Equal Opportunity Employer
Sonoco believes a diverse workforce is required
to compete successfully in today’s global marketplace.
The Company provides equal employment
opportunities in its global operations without regard
to race, color, age, gender, religion, sexual orientation,
national origin or physical disability.
References to Website Addresses
and Social Media Platforms
References to Sonoco’s website address and social
media platforms, and Continental Stock Transfer &
Trust Company’s website address, are for informational
purposes only, and are not intended to, and do not,
incorporate those websites or social media platforms,
or their contents by reference, into this annual report.
Sonoco on the Internet
Sonoco’s website, sonoco.com, provides a variety of
information about the Company. The site features a
newsroom for press releases, photos, financial reports
and presentations, proxy statements, various SEC
filings, events, sustainability activity and more.
Information about Sonoco’s products, technologies,
awards and activities is also available on Facebook
(facebook.com/sonoco.products), LinkedIn (linkedin.
com/companies/sonoco), Twitter (twitter.com/sonoco_
products) and YouTube (youtube.com/sonocoproducts).
Sonoco Publications
Annual reports, current and past, can be found
on sonoco.com. Paper copies are also available without
charge from:
Sonoco – A09
1 North Second Street
Hartsville, SC 29550-3305
Address
Corporate Headquarters and Investor Relations
1 North Second Street
Hartsville, SC 29550-3305
Main: +843 383 7000
Investor Relations: +843 383 7862
Toll-free: 800 377 2692
Fax: +843 383 7008
Email: corporate.communications@sonoco.com
Annual Meeting
The annual meeting of shareholders will be held at
11 a.m. Eastern Time on Wednesday,
April 17, 2019, at:
The Center Theater
212 North Fifth Street
Hartsville, SC 29550-4136
A live audiocast will be available, with a replay archived
for six months. Instructions for listening to this audiocast
will be available at sonoco.com, approximately one week
prior to the event.
Legal Counsel
John M. Florence
Sonoco – A43
1 North Second Street
Hartsville, SC 29550-3305
john.florence@sonoco.com
Independent Registered
Public Accounting Firm
PricewaterhouseCoopers LLP
Hearst Tower
214 North Tryon Street, Suite 3600
Charlotte, NC 28202-2137
Intellectual Capital Management
Sonoco Development, Inc., manages the Company’s
intellectual assets, including patents, licenses and
agreements. Company trademarks, domain names
and patents are managed by SPC Resources, Inc.
The address for both companies is:
125 West Home Avenue
Hartsville, SC 29550-4123
Paper in Sonoco’s Annual Report
was manufactured with electricity
in the form of renewable energy and
came from well-managed forests or
other controlled sources certified in
accordance with the international
standards of the Forest Stewardship
Council® (FSC®).
Sonoco
1 North Second Street
Hartsville, SC 29550-3305
843 383 7000
sonoco.com