UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2014

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, South Carolina 29550

Telephone: 843/383-7000

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  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨(do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock at July 17, 2014:

Common stock, no par value: 101,736,119

SONOCO PRODUCTS COMPANY

INDEX

PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements:	3
	Condensed Consolidated Balance Sheets - June 29, 2014 (unaudited) and December 31, 2013 (unaudited)	3
	Condensed Consolidated Statements of Income – Three and Six Months Ended June 29, 2014 (unaudited) and June 30, 2013 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 29, 2014 (unaudited) and June 30, 2013 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows – Six Months Ended June 29, 2014 (unaudited) and June 30, 2013 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements	7
	Report of Independent Registered Public Accounting Firm	25
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	38
Item 4.	Controls and Procedures.	38
PART II. OTHER INFORMATION		39
Item 1.	Legal Proceedings.	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	41
Item 6.	Exhibits.	41

2

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements.

SONOCO PRODUCTS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(Dollars and shares in thousands)

	June 29, 2014			December 31, 2013*
Assets
Current Assets
Cash and cash equivalents	$	199,780		$	217,567
Trade accounts receivable, net of allowances	705,465			614,053
Other receivables	37,265			38,995
Inventories:
Finished and in process	155,358			158,256
Materials and supplies	268,382			252,531
Prepaid expenses	54,479			57,666
Deferred income taxes	41,727			39,406
	1,462,456			1,378,474
Property, Plant and Equipment, Net	1,028,814			1,021,920
Goodwill	1,100,978			1,099,207
Other Intangible Assets, Net	233,418			243,920
Long-term Deferred Income Taxes	40,581			67,364
Other Assets	172,702			168,406
Total Assets	$	4,038,949		$	3,979,291
Liabilities and Equity
Current Liabilities
Payable to suppliers	$	520,532		$	491,809
Accrued expenses and other	319,931			331,566
Notes payable and current portion of long-term debt	90,067			35,201
Accrued taxes	5,050			8,649
	935,580			867,225
Long-term Debt, Net of Current Portion	947,081			946,257
Pension and Other Postretirement Benefits	228,013			263,718
Deferred Income Taxes	123,805			128,006
Other Liabilities	47,011			48,760
Commitments and Contingencies
Sonoco Shareholders’ Equity
Common stock, no par value
Authorized 300,000 shares 101,760 and 102,147 shares issued and outstanding at June 29, 2014 and December 31, 2013, respectively	7,175			7,175
Capital in excess of stated value	441,605			457,190
Accumulated other comprehensive loss	(360,046		)	(358,520		)
Retained earnings	1,653,954			1,604,892
Total Sonoco Shareholders’ Equity	1,742,688			1,710,737
Noncontrolling Interests	14,771			14,588
Total Equity	1,757,459			1,725,325
Total Liabilities and Equity	$	4,038,949		$	3,979,291

* The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

See accompanying Notes to Condensed Consolidated Financial Statements

3

SONOCO PRODUCTS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Dollars and shares in thousands except per share data)

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Net sales	$	1,247,380		$	1,226,256		$	2,433,006		$	2,405,469
Cost of sales	1,015,643			1,003,692			1,988,966			1,977,189
Gross profit	231,737			222,564			444,040			428,280
Selling, general and administrative expenses	126,455			121,848			250,205			241,859
Restructuring/Asset impairment charges	3,671			8,678			5,663			12,967
Income before interest and income taxes	101,611			92,038			188,172			173,454
Interest expense	13,670			15,136			26,954			30,281
Interest income	535			729			1,176			1,606
Income before income taxes	88,476			77,631			162,394			144,779
Provision for income taxes	29,993			26,409			53,162			47,661
Income before equity in earnings of affiliates	58,483			51,222			109,232			97,118
Equity in earnings of affiliates, net of tax	3,126			3,824			4,602			5,721
Net income	$	61,609		$	55,046		$	113,834		$	102,839
Net (income)/loss attributable to noncontrolling interests	(125		)	(58		)	(48		)	288
Net income attributable to Sonoco	$	61,484		$	54,988		$	113,786		$	103,127
Weighted average common shares outstanding:
Basic	102,461			102,640			102,614			102,461
Diluted	103,446			102,977			103,590			102,988
Per common share:
Net income attributable to Sonoco:
Basic	$	0.60		$	0.54		$	1.11		$	1.01
Diluted	$	0.59		$	0.53		$	1.10		$	1.00
Cash dividends	$	0.32		$	0.31		$	0.63		$	0.61

See accompanying Notes to Condensed Consolidated Financial Statements

4

SONOCO PRODUCTS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME (unaudited)

(Dollars in thousands)

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Net income	$	61,609		$	55,046		$	113,834		$	102,839
Other comprehensive income/(loss):
Foreign currency translation adjustments	8,523			(21,090		)	1,164			(40,699		)
Changes in defined benefit plans, net of tax	(8,173		)	6,239			(3,999		)	12,725
Changes in derivative financial instruments, net of tax	1,073			(1,770		)	1,309			2,890
Other comprehensive income/(loss)	1,423			(16,621		)	(1,526		)	(25,084		)
Comprehensive income	63,032			38,425			112,308			77,755
Net (income)/loss attributable to noncontrolling interests	(125		)	(58		)	(48		)	288
Other comprehensive (income)/loss attributable to noncontrolling interests	(254		)	332			(135		)	626
Comprehensive income attributable to Sonoco	$	62,653		$	38,699		$	112,125		$	78,669

See accompanying Notes to Condensed Consolidated Financial Statements

5

SONOCO PRODUCTS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(Dollars in thousands)

	Six Months Ended
	June 29, 2014			June 30, 2013
Cash Flows from Operating Activities:
Net income	$	113,834		$	102,839
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairment	791			6,850
Depreciation, depletion and amortization	95,516			98,254
Share-based compensation expense	9,245			5,030
Equity in earnings of affiliates	(4,602		)	(5,721		)
Cash dividends from affiliated companies	3,527			3,660
Gain on disposition of assets	(940		)	(1,100		)
Pension and postretirement plan expense	19,431			31,366
Pension and postretirement plan contributions	(53,592		)	(24,812		)
Tax effect of share-based compensation exercises	2,030			3,989
Excess tax benefit of share-based compensation	(2,130		)	(1,749		)
Net increase in deferred taxes	5,584			14,874
Change in assets and liabilities, net of effects from acquisitions, dispositions, and foreign currency adjustments:
Trade accounts receivable	(84,127		)	(64,135		)
Inventories	(10,666		)	(14,717		)
Payable to suppliers	21,039			68,500
Prepaid expenses	(10,624		)	(6,400		)
Accrued expenses	10,066			(14,685		)
Income taxes payable and other income tax items	10,584			33,184
Fox River environmental reserves	(14,934		)	(1,428		)
Other assets and liabilities	(4,498		)	10,681
Net cash provided by operating activities	105,534			244,480
Cash Flows from Investing Activities:
Purchase of property, plant and equipment	(85,886		)	(98,978		)
Cost of acquisitions, exclusive of cash	(10,964		)	—
Proceeds from the sale of assets	3,588			8,017
Investment in affiliates and other, net	138			(3,571		)
Net cash used in investing activities	(93,124		)	(94,532		)
Cash Flows from Financing Activities:
Proceeds from issuance of debt	26,946			8,630
Principal repayment of debt	(23,411		)	(137,987		)
Net increase/(decrease) in commercial paper	51,000			(152,000		)
Net increase/(decrease) in outstanding checks	3,915			(1,283		)
Excess tax benefit of share-based compensation	2,130			1,749
Cash dividends	(64,353		)	(61,721		)
Shares acquired	(29,739		)	(1,961		)
Shares issued	2,508			9,940
Net cash used in financing activities	(31,004		)	(334,633		)
Effects of Exchange Rate Changes on Cash	807			(9,038		)
Net Decrease in Cash and Cash Equivalents	(17,787		)	(193,723		)
Cash and cash equivalents at beginning of period	217,567			373,084
Cash and cash equivalents at end of period	$	199,780		$	179,361

See accompanying Notes to Condensed Consolidated Financial Statements

6

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

Note 1: Basis of Interim Presentation

In the opinion of the management of Sonoco Products Company (the “Company” or “Sonoco”), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments, unless otherwise stated) necessary to state fairly the consolidated financial position, results of operations and cash flows for the interim periods reported herein. Operating results for the three and six months ended June 29, 2014, are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Effective January 1, 2014, the Company began reporting Sonoco Alloyd, the Company’s retail packaging business and previously part of the Protective Solutions segment, as part of the Display and Packaging segment. Prior period results for the affected segments have been retrospectively revised to reflect this change.

Results for the three and six-month periods ended June 29, 2014, include an out-of-period adjustment to record a valuation allowance on deferred tax assets primarily related to the pension plan of a foreign subsidiary. This valuation allowance should have been established in prior years when the deferred tax assets were recognized. The cumulative adjustment made to correct this error resulted in a reduction of reported long-term deferred income tax assets of $11,771, with a corresponding increase in accumulated other comprehensive loss through a decrease in current period comprehensive income. The effect of this error was not considered material to any of the Company's previously issued financial statements or to the current year consolidated financial statements.

With respect to the unaudited condensed consolidated financial information of the Company for the three- and six-month periods ended June 29, 2014 and June 30, 2013 included in this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated July 29, 2014 appearing herein, states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial information because that report is not a “report” or a “part” of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.

Note 2: New Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09, "Revenue From Contracts With Customers." ASU 2014-09 changes the definitions/criteria used to determine when revenue should be recognized from being based on risks and rewards to being based on control. It also changes the manner in which variable consideration 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. ASU 2014-09 is effective for reporting periods beginning after December 15, 2016. Due to the nature of the Company's business and its standard terms of sale, there is likely to be little practical difference for Sonoco between the current transfer of risks and rewards model and the new transfer of control model. In addition, few of the Company's sales, if any, contain an element of variable consideration or have payment terms exceeding one year. Accordingly, we do not expect the implementation of ASU 2014-09 to have a material impact on Sonoco's financial statements.

In July 2013, the FASB issued ASU 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." ASU 2013-11 clarified guidance and eliminated diversity in practice on the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. This new guidance became effective for reporting periods beginning on or after December 15, 2013; accordingly, the Company implemented ASU 2013-11 effective January 1, 2014. The impact on the Company's condensed consolidated financial statements from applying this new guidance was immaterial.

During the three- and six-month periods ended June 29, 2014, there have been no other newly issued nor newly applicable accounting pronouncements that have had, or are expected to have, a material impact on the Company’s financial statements. Further, at June 29, 2014, there were no other pronouncements pending adoption that are expected to have a material impact on the Company’s financial statements. 

7

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

Note 3: Acquisitions

The Company completed the acquisition of Dalton Paper Products, Inc., a manufacturer of tubes and cores, on May 2, 2014 for a net cash cost of $11,286. The acquisition consists of a single manufacturing facility located in Dalton, Georgia, and is expected to generate annual sales of approximately $20,000 for the Paper and Industrial Converted Products segment. In connection with this acquisition, the Company recorded net tangible assets of $6,894, identifiable intangible assets of $3,380, and goodwill of $1,012. The goodwill is not expected to be deductible for income tax purposes.

The Company has accounted for this acquisition as a purchase and, accordingly, has included their results of operations in consolidated net income from the date of acquisition. Pro forma results have not been provided, as the acquisition was not material to the Company's financial statements individually, or in the aggregate.

The Company also received cash totaling $322 during the second quarter of 2014 in connection with the final working capital settlement related to its 2013 acquisition of Imagelinx, a global brand artwork management business in the United Kingdom.

Note 4: Shareholders' Equity

Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Numerator:
Net income attributable to Sonoco	$	61,484	$	54,988	$	113,786	$	103,127
Denominator:
Weighted average common shares outstanding:
Basic	102,461,000		102,640,000		102,614,000		102,461,000
Dilutive effect of stock-based compensation	985,000		337,000		976,000		527,000
Diluted	103,446,000		102,977,000		103,590,000		102,988,000
Reported net income attributable to Sonoco per common share:
Basic	$	0.60	$	0.54	$	1.11	$	1.01
Diluted	$	0.59	$	0.53	$	1.10	$	1.00

Certain stock appreciation rights to purchase shares of the Company's common stock are not dilutive because the exercise price is greater than the market price of the stock at the end of the reporting period. The average number of stock appreciation rights that were not dilutive and therefore not included in the computation of diluted earnings per share was 640,717 and 642,272 during the three- and six-month periods ended June 29, 2014, respectively, and 1,149,157 and 1,665,709 for the three- and six-month periods ended June 30, 2013. No adjustments were made to reported net income attributable to Sonoco in the computations of earnings per share.

Stock Repurchases

The Company’s Board of Directors has authorized the repurchase of up to 5,000,000 shares of the Company’s common stock. A total of 132,500 shares were repurchased under this authorization in 2013. During the six months ended June 29, 2014, an additional 649,237 shares were purchased at a cost of $27,103; accordingly, at June 29, 2014, a total of 4,218,263 shares remain available for repurchase.

The Company frequently repurchases shares of its common stock to satisfy employee tax withholding obligations in association with certain share-based compensation awards. These repurchases, which are not part of a publicly announced plan or program, totaled 62,883 shares in the first six months of 2014 at a cost of $2,636, and 63,757 shares in the first six months of 2013 at a cost of $1,961.

8

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

Dividend Declarations

On April 16, 2014 , the Board of Directors declared a regular quarterly dividend of $0.32 per share. This dividend was paid on June 10, 2014 to all shareholders of record as of May 16, 2014.

On July 16, 2014, the Board of Directors declared a regular quarterly dividend of $0.32 per share. This dividend is payable September 10, 2014 to all shareholders of record as of August 15, 2014.

Note 5: Restructuring and Asset Impairment

The Company has engaged in a number of restructuring actions over the past several years. Actions initiated in 2014 and 2013 are reported as “2014 Actions” and “2013 Actions,” respectively. Actions initiated prior to 2013, all of which were substantially complete at June 29, 2014, are reported as “2012 and Earlier Actions.”

Following are the total restructuring and asset impairment charges/(credits), net of adjustments, recognized by the Company during the periods presented: 

	2014						2013
	Second Quarter			Six Months			Second Quarter			Six Months
Restructuring/Asset impairment:
2014 Actions	$	2,929		$	4,328		$	—		$	—
2013 Actions	690			1,965			8,486			9,802
2012 and Earlier Actions	52			(630		)	192			3,165
Restructuring/Asset impairment charges	$	3,671		$	5,663		$	8,678		$	12,967
Income tax benefit	(977		)	(1,388		)	(2,913		)	(4,196		)
Cost attributable to noncontrolling interests, net of tax	(13		)	(15		)	(27		)	(54		)
Total impact of restructuring/asset impairment      charges, net of tax	$	2,681		$	4,260		$	5,738		$	8,717

Pre-tax restructuring and asset impairment charges are included in “Restructuring/Asset impairment charges” in the Condensed Consolidated Statements of Income.

The Company expects to recognize future additional charges totaling approximately $1,300 in connection with announced restructuring actions, when recognizable in accordance with GAAP, and believes that the majority of these charges will be incurred and paid by the end of 2014. The Company continually evaluates its cost structure, including its manufacturing capacity, and additional restructuring actions may be undertaken.

2014 Actions

During 2014, the Company announced the closure of two recycling facilities - one in the United States and one in Brazil, a tube and core plant in Canada (parts of the Paper and Industrial Converted Products segment), and a molded foam plant in the United States (part of the Protective Solutions segment). In addition, the Company continued its manufacturing rationalization efforts in its blow-molding business (part of the Consumer Packaging segment), and realigned its cost structure, resulting in the elimination of approximately 53 positions.

Below is a summary of 2014 Actions and related expenses by segment and by type incurred and estimated to be incurred through completion. 

9

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

2014 Actions	Second Quarter 2014			Total Incurred to Date			Estimated Total Cost
Severance and Termination Benefits
Consumer Packaging	$	38		$	688		$	738
Paper and Industrial Converted Products	2,317			2,582			2,583
Protective Solutions	$	188		$	188		$	188
Asset Impairment / Disposal of Assets
Paper and Industrial Converted Products	$	220		$	693		$	693
Other Costs
Consumer Packaging	$	9		$	20		$	70
Paper and Industrial Converted Products	(28		)	(28		)	72
Protective Solutions	$	185		$	185		$	285
Total Charges and Adjustments	$	2,929		$	4,328		$	4,629

The following table sets forth the activity in the 2014 Actions restructuring accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets: 

2014 Actions	Severance and Termination Benefits			Asset Impairment/ Disposal of Assets			Other Costs		Total
Accrual Activity 2014 Year to Date
Liability at December 31, 2013	$	—		$	—		$	—	$	—
2014 charges	3,458			693			177		4,328
Cash receipts/(payments)	(1,819		)	150			81		(1,588		)
Asset write downs/disposals	—			(843		)	—		(843		)
Foreign currency translation	(6		)	—			1		(5		)
Liability at June 29, 2014	$	1,633		$	—		$	259	$	1,892

The Company expects to pay the majority of the remaining 2014 Actions restructuring costs by the end of 2014 using cash generated from operations.

2013 Actions

During 2013, the Company announced the closures of a thermoforming plant in Ireland and a rigid paper packaging plant in the United States (parts of the Consumer Packaging segment), a small tube and core operation in Europe (part of the Paper and Industrial Converted Products segment), and a fulfillment service center in the United States (part of the Display and Packaging segment). The Company also sold a small corrugated box operation in the United States (part of the Protective Solutions segment) and realigned its cost structure, resulting in the elimination of approximately 120 positions.

Below is a summary of 2013 Actions and related expenses by segment and by type incurred and estimated to be incurred through completion.

10

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

	2014						2013				Total Incurred to Date			Estimated Total Cost
2013 Actions	Second Quarter			Six Months			Second Quarter		Six Months
Severance and Termination Benefits
Consumer Packaging	(251		)	$	111		$	1,070	$	1,505	$	5,020		$	5,020
Display and Packaging	153			318			514		514		1,347			1,347
Paper and Industrial Converted Products	258			868			409		909		4,215			4,215
Protective Solutions	(223		)	(215		)	88		128		376			376
Asset Impairment / Disposal of Assets
Consumer Packaging	—			—			5,231		5,231		5,926			5,926
Display and Packaging	—			—			—		—		165			165
Paper and Industrial Converted Products	(55		)	(597		)	163		414		(105		)	(105		)
Protective Solutions	191			185			414		414		847			847
Other Costs
Consumer Packaging	399			885			552		552		1,906			2,006
Display and Packaging	18			108			6		12		205			305
Paper and Industrial Converted Products	158			211			6		96		659			759
Protective Solutions	42			91			33		27		225			325
Total Charges and Adjustments	$	690		$	1,965		$	8,486	$	9,802	$	20,786		$	21,186

The following table sets forth the activity in the 2013 Actions restructuring accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets:

2013 Actions	Severance and Termination Benefits			Asset Impairment/ Disposal of Assets			Other Costs			Total
Accrual Activity 2014 Year to Date
Liability at December 31, 2013	$	3,258		$	—		$	—		$	3,258
2014 charges	1,674			315			1,370			3,359
Adjustments	(592		)	(727		)	(75		)	(1,394		)
Cash receipts/(payments)	(2,457		)	855			(1,295		)	(2,897		)
Asset write downs/disposals	—			(443		)	—			(443		)
Foreign currency translation	(4		)	—			—			(4		)
Liability at June 29, 2014	$	1,879		$	—		$	—		$	1,879

Included in "Asset Impairment/Disposal of Assets" above is a gain from the sale of a previously closed facility in New Zealand. “Other costs” consist 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 remaining 2013 Actions restructuring costs by the end of 2014 using cash generated from operations.

2012 and Earlier Actions

2012 and Earlier Actions are comprised of a number of plant closures and workforce reductions initiated prior to 2013. Charges for these actions in both 2014 and 2013 relate primarily to the cost of plant closures including severance, equipment removal, plant security, property taxes and insurance. Offsetting these charges in the first quarter of 2014 were gains from the sales of a former blow-molding facility in Canada and a former rigid paper facility in the United States, closed in 2012 and 2011, respectively.

The Company expects to recognize future pretax charges of approximately $700 associated with 2012 and Earlier Actions.

11

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

Below is a summary of expenses/(income) incurred by segment for 2012 and Earlier Actions for the three- and six--month periods ended June 29, 2014 and June 30, 2013. 

	2014						2013
2012 and Earlier Actions	Second Quarter			Six Months			Second Quarter			Six Months
Consumer Packaging	$	(369	)	$	(1,218	)	$	(661	)	$	147
Display and Packaging	—			(8		)	90			218
Paper and Industrial Converted Products	421			596			726			1,889
Protective Solutions	—			—			37			911
Total Charges/(Income) and Adjustments	$	52		$	(630	)	$	192		$	3,165

The accrual for 2012 and Earlier Actions totaled $3,186 and $4,547 at June 29, 2014 and December 31, 2013, respectively, and is included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets. The accrual relates primarily to a pension withdrawal liability associated with a former paper mill in the United States and unpaid severance. The Company expects the majority of both the liability and the future costs associated with 2012 and Earlier Actions to be paid in 2014 using cash generated from operations.

Note 6: Accumulated Other Comprehensive Loss

The following table summarizes the components of accumulated other comprehensive loss and the changes in the balances of each component of accumulated other comprehensive loss, net of tax as applicable, for the six months ended June 29, 2014 and June 30, 2013:

	Gains and Losses on Cash Flow Hedges			Defined Benefit Pension Items			Foreign Currency Items			Accumulated Other Comprehensive Loss
Balance at December 31, 2013	$	(262	)	$	(333,106	)	$	(25,152	)	$	(358,520	)
Other comprehensive income/(loss) before reclassifications	2,194			(12,138		)	1,164			(8,780		)
Amounts reclassified from accumulated other comprehensive loss to net income	(899		)	8,139			—			7,240
Amounts reclassified from accumulated other comprehensive loss to fixed assets	14			—			—			14
Net current-period other comprehensive income/(loss)	1,309			(3,999		)	1,164			(1,526		)
Balance at June 29, 2014	$	1,047		$	(337,105	)	$	(23,988	)	$	(360,046	)
Balance at December 31, 2012	$	(6,727	)	$	(472,333	)	$	3,234		$	(475,826	)
Other comprehensive income/(loss) before reclassifications	2,092			(2,360		)	(40,699		)	(40,967		)
Amounts reclassified from accumulated other comprehensive loss to net income	709			15,085			—			15,794
Amounts reclassified from accumulated other comprehensive loss to fixed assets	89			—			—			89
Net current-period other comprehensive income/(loss)	2,890			12,725			(40,699		)	(25,084		)
Balance at June 30, 2013	$	(3,837	)	$	(459,608	)	$	(37,465	)	$	(500,910	)

12

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

The following table summarizes the effects on net income of significant amounts classified out of each component of accumulated other comprehensive loss for the three and six months ended June 29, 2014 and June 30, 2013: 

	Amount Reclassified from Accumulated Other Comprehensive Loss
	Three Months Ended						Six Months Ended
Details about Accumulated Other Comprehensive Loss Components	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013			Affected Line Item in  the Condensed Consolidated  Statements of Net Income
Gains and losses on cash flow hedges
Foreign exchange contracts	$	(911	)	$	1,798		$	(1,910	)	$	2,242		Net sales
Foreign exchange contracts	249			(647		)	2,111			(1,050		)	Cost of sales
Commodity contracts	408			(733		)	1,125			(2,389		)	Cost of sales
	(254		)	418			1,326			(1,197		)	Total before tax
	28			(118		)	(427		)	488			Tax (provision)/benefit
	$	(226	)	$	300		$	899		$	(709	)	Net of tax
Defined benefit pension items
Amortization of defined benefit pension items(a)	$	(4,961	)	$	(9,306	)	$	(9,614	)	$	(16,950	)	Cost of sales
Amortization of defined benefit pension items(a)	(1,654		)	(3,102		)	(3,204		)	(5,650		)	Selling, general and  administrative
	(6,615		)	(12,408		)	(12,818		)	(22,600		)	Total before tax
	2,630			3,838			4,679			7,515			Tax benefit
	$	(3,985	)	$	(8,570	)	$	(8,139	)	$	(15,085	)	Net of tax
Total reclassifications for the period	$	(4,211	)	$	(8,270	)	$	(7,240	)	$	(15,794	)	Net of tax

(a) See Note 10 for additional details.

At June 29, 2014, the Company had commodity contracts outstanding to fix the costs of certain anticipated purchases of natural gas and aluminum, and foreign currency contracts to hedge certain anticipated foreign currency denominated sales and purchases. These contracts, which have maturities ranging from July 2014 to December 2015, qualify as cash flow hedges under U.S. GAAP. The amounts included in accumulated other comprehensive loss related to these cash flow hedges were net gains of $1,505 ($1,047 after tax) at June 29, 2014, and losses of $427 ($262 after tax) at December 31, 2013.

The cumulative tax (provision)/benefit on Cash Flow Hedges included in Accumulated Other Comprehensive Loss was $(458) at June 29, 2014, and $165 at December 31, 2013. During the three- and six-month periods ended June 29, 2014, the tax benefit on Cash Flow Hedges changed by $(528) and $(623), respectively.

The cumulative tax benefit on Defined Benefit Pension Items was $175,237 at June 29, 2014, and $189,668 at December 31, 2013. During the three- and six-month periods ended June 29, 2014, the tax benefit on Defined Benefit Pension Items decreased by $(12,382) and $(14,431), respectively.

During the three- and six-month periods ended June 29, 2014, changes in noncontrolling interests included foreign currency translation adjustments of $254 and $135, respectively.

13

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

Note 7: Goodwill and Other Intangible Assets

Goodwill

A summary of the changes in goodwill by segment for the six months ended June 29, 2014 is as follows:

	Consumer Packaging			Display and Packaging		Paper and Industrial Converted Products		Protective Solutions		Total
Goodwill at December 31, 2013	$	418,765		$	204,629	$	254,648	$	221,165	$	1,099,207
Acquisitions	—			—		1,012		—		1,012
Foreign currency translation	464			—		350		—		814
Other	(55		)	—		—		—		(55		)
Goodwill at June 29, 2014	$	419,174		$	204,629	$	256,010	$	221,165	$	1,100,978

The Company recorded $1,012 of goodwill in connection with the May 2014 acquisition of Dalton Paper Products, a tube and core business located in Dalton, Georgia.

The Company assesses 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. As part of this testing, the Company analyzes certain qualitative and quantitative factors in determining goodwill impairment. For most of its reporting units, only a qualitative analysis is required for management to reach a conclusion that it is not more likely than not that goodwill has been impaired.

For any reporting unit where management is not able to reach this conclusion based on its qualitative assessment, a more detailed analysis (i.e., step 1 analysis) is performed. In this analysis, the fair values of the reporting units are estimated utilizing both an income approach and a market approach. A number of significant management assumptions and estimates were reflected in the Company's forecast of future results and cash flows, such as: sales volumes and prices, profit margins, income taxes, capital expenditures and changes in working capital requirements. Changes in these assumptions, along with the discount rate could materially impact the estimated fair values.

When the Company estimates the fair value of a reporting unit, it does so using a discounted cash flow model based on projections of future years' operating results and associated cash flows, together with 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 projections incorporate management's best estimates of the expected future results, which include expectations related to new business, and, where applicable, improved operating margins. Management’s projections related to revenue growth and/or margin 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 discount rate management believes is commensurate with the risks inherent in the cash flows.

The Company completed its most recent annual goodwill impairment testing during the third quarter of 2013. Based on the results of its qualitative and quantitative assessments, the Company concluded that there was no impairment of goodwill for any of its reporting units. Because the Company’s assessments, whether qualitative or quantitative, incorporate management’s expectations for the future, including forecasted growth rates 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.

Although no reporting units failed the qualitative or quantitative assessments noted above, in management’s opinion, the reporting units with significant goodwill having the greatest risk of future impairment if actual results in the future are not as expected are Plastics – Blowmolding and Plastics – Thermoforming. Total goodwill associated with these reporting units was approximately $126,500 and $53,200, respectively, at June 29, 2014. Although management believes that goodwill of the Display and Packaging reporting unit is not currently at risk for impairment, a large portion of sales in this unit is concentrated in one customer and will be up for negotiation over the next few years. Management

14

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

expects to retain this business; however, if a significant amount is lost and not replaced, it is possible that a goodwill impairment charge may be incurred. Total goodwill associated with this reporting unit was approximately $196,700 at June 29, 2014.

There were no triggering events between the most recent annual impairment test and June 29, 2014. However, the Plastics – Blowmolding business referenced above experienced some short-term performance issues during the first quarter of 2014, but began to perform more in line with management's expectations during the second quarter. The goodwill for this unit could become impaired should the business not exhibit the sustained improvements expected or if management’s outlook changes.

Other Intangible Assets

A summary of other intangible assets as of June 29, 2014 and December 31, 2013 is as follows:     

	June 29, 2014			December 31, 2013
Other Intangible Assets, gross
Patents	$	2,220		$	2,221
Customer lists	342,019			339,911
Trade names	21,216			21,232
Proprietary technology	17,845			17,866
Land use rights	323			323
Other	4,787			4,731
Other Intangible Assets, gross	$	388,410		$	386,284
Accumulated Amortization	$	(154,992	)	$	(142,364	)
Other Intangible Assets, net	$	233,418		$	243,920

Other intangible assets are amortized on a straight-line basis over their respective useful lives, which generally range from three to forty years. The Company has no intangibles with indefinite lives.

The Company recorded $3,380 of identifiable intangibles in connection with the acquisition of a small tubes and cores business in May 2014. These intangibles, primarily related to customer lists, will be amortized over a period of ten years.

Aggregate amortization expense was $6,960 and $7,141 for the three months ended June 29, 2014 and June 30, 2013, respectively, and $13,823 and $14,316 for the six months endedJune 29, 2014 and June 30, 2013, respectively. Amortization expense on other intangible assets is expected to approximate $27,900 in 2014, $26,800 in 2015, $26,500 in 2016, $26,100 in 2017 and $25,800 in 2018.

Note 8: Financial Instruments and Derivatives

The following table sets forth the carrying amounts and fair values of the Company’s significant financial instruments for which the carrying amount differs from the fair value. 

	June 29, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, net of current portion	$	947,081	$	1,059,236	$	946,257	$	999,247

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 determined 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.

Cash Flow Hedges

At June 29, 2014 and December 31, 2013, the Company had derivative financial instruments outstanding to hedge anticipated transactions and certain asset and liability related cash flows. To the extent considered effective, the changes

15

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

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. The Company has determined all hedges to be highly effective and as a result no material ineffectiveness has been recorded.

Commodity Cash Flow Hedges

The Company has entered into certain derivative contracts to manage the cost of anticipated purchases of natural gas and aluminum. At June 29, 2014, natural gas swaps covering approximately 6.8 million MMBTUs were outstanding. These contracts represent approximately 75% and 75% of anticipated U.S. and Canadian usage for the remainder of 2014 and 2015, respectively. Additionally, the Company had swap contracts covering 2,363 metric tons of aluminum representing approximately 34% of anticipated usage for the remainder of 2014. The fair values of the Company’s commodity cash flow hedges were in a gain position of $1,349 and a loss position of $(330) at June 29, 2014 and December 31, 2013, respectively. The amount of the gain included in accumulated other comprehensive loss at June 29, 2014, that is expected to be reclassified to the income statement during the next twelve months is $1,008.

Foreign Currency Cash Flow Hedges

The Company has entered into forward contracts to hedge certain anticipated foreign currency denominated sales and purchases forecast to occur in 2014. The net positions of these contracts at June 29, 2014 were as follows (in thousands): 

Currency	Action	Quantity
Colombian peso	purchase	7,473,788
Mexican peso	purchase	131,927
Canadian dollar	purchase	25,776
British pound	purchase	3,842
Turkish lira	purchase	3,363
Polish zloty	purchase	1,332
New Zealand dollar	sell	(1,636	)
Australian dollar	sell	(3,038	)
Euro	sell	(4,439	)
Russian ruble	sell	(21,384	)

The fair value of these foreign currency cash flow hedges netted to a gain position of $200 at June 29, 2014 and a net loss at $(97) at December 31, 2013. During the second three months of 2014, certain foreign currency cash flow hedges related to construction in progress were settled as the related capital expenditures were made. Losses from these hedges totaling $14 were reclassified from accumulated other comprehensive loss and included in the carrying value of the assets acquired. During the next twelve months, a gain of $1,197 is expected to be reclassified from Accumulated Other Comprehensive Loss to the income statement.

Other Derivatives

The Company routinely enters into forward contracts or swaps to economically hedge the currency exposure of intercompany debt and existing foreign currency denominated 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 June 29, 2014, were as follows (in thousands): 

Currency	Action	Quantity
Colombian peso	purchase	17,018,056
Mexican peso	purchase	324,705
Canadian dollar	purchase	15,322
Euro	sell	(3,550	)
Thai baht	sell	(194,489	)

16

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

The fair value of the Company’s other derivatives was $225 and $415 at June 29, 2014 and December 31, 2013, respectively.

 The following table sets forth the location and fair values of the Company’s derivative instruments at June 29, 2014 and December 31, 2013: 

Description	Balance Sheet Location	June 29, 2014			December 31, 2013
Derivatives designated as hedging instruments:
Commodity Contracts	Prepaid expenses	$	1,232		$	535
Commodity Contracts	Other assets	$	357		$	363
Commodity Contracts	Accrued expenses and other	$	(189	)	$	(1,228	)
Commodity Contracts	Other liabilities	$	(51	)	$	—
Foreign Exchange Contracts	Prepaid expenses	$	827		$	896
Foreign Exchange Contracts	Accrued expenses and other	$	(627	)	$	(993	)
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts	Prepaid expenses	$	468		$	468
Foreign Exchange Contracts	Accrued expenses and other	$	(243	)	$	(53	)

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 agreements.

The following tables set forth the effect of the Company’s derivative instruments on financial performance for the three months ended June 29, 2014 and June 30, 2013: 

Description	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)			Location of Gain  or (Loss)  Recognized in Income on Derivative (Ineffective Portion)	Amount of Gain  or (Loss) Recognized in Income on Derivative (Ineffective  Portion)
Derivatives in Cash Flow Hedging Relationships:
Three months ended June 29, 2014
Foreign Exchange Contracts	$	1,251		Net sales	$	(911	)	Net sales	$	—
				Cost of sales	$	249
Commodity Contracts	$	93		Cost of sales	$	408		Cost of sales	$	(24	)
Three months ended June 30, 2013
Foreign Exchange Contracts	$	267		Net sales	$	1,798		Net sales	$	—
				Cost of sales	$	(647	)
Commodity Contracts	$	(2,666	)	Cost of sales	$	(733	)	Cost of sales	$	66

Description	Location of Gain or (Loss) Recognized in Income Statement	Gain or (Loss) Recognized
Derivatives not Designated as Hedging Instruments:
Three months ended June 29, 2014
Foreign Exchange Contracts	Cost of sales	$	(473	)
	Selling, general and administrative	$	97
Three months ended June 30, 2013
Foreign Exchange Contracts	Cost of sales	$	(975	)
	Selling, general and administrative	$	(129	)

17

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

The following tables set forth the effect of the Company’s derivative instruments on financial performance for the six months endedJune 29, 2014 and June 30, 2013: 

Description	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI Into Income (Effective Portion)			Location of Gain  or (Loss)  Recognized in Income on Derivative (Ineffective Portion)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective  Portion)
Derivatives in Cash Flow Hedging Relationships:
Six months ended June 29, 2014
Foreign Exchange Contracts	$	475		Net sales	$	(1,910	)	Net sales	$	—
				Cost of sales	$	2,111
Commodity Contracts	$	2,769		Cost of sales	$	1,125		Cost of sales	$	(44	)
Six months ended June 30, 2013
Foreign Exchange Contracts	$	4,523		Net sales	$	2,242		Net sales	$	—
				Cost of sales	$	(1,050	)
Commodity Contracts	$	(928	)	Cost of sales	$	(2,389	)	Cost of sales	$	(61	)

Description	Location of Gain or (Loss) Recognized in Income Statement	Gain or (Loss) Recognized
Derivatives not Designated as Hedging Instruments:
Six months ended June 29, 2014
Foreign Exchange Contracts	Cost of sales	$	(436	)
	Selling, general and administrative	$	153
Six months ended June 30, 2013
Foreign Exchange Contracts	Cost of sales	$	(1,171	)
	Selling, general and administrative	$	(140	)

18

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

Note 9: Fair Value Measurements

Fair value is defined as an 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. 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.

The following table sets forth information regarding the Company’s financial assets and financial liabilities, excluding retirement and postretirement plan assets, measured at fair value on a recurring basis:

Description	June 29, 2014			Level 1		Level 2			Level 3
Hedge derivatives, net:
Commodity contracts	$	1,349		$	—	$	1,349		$	—
Foreign exchange contracts	200			—		200			—
Non-hedge derivatives, net:
Foreign exchange contracts	225			—		225			—
Deferred compensation plan assets	905			905		—			—
Description	December 31, 2013			Level 1		Level 2			Level 3
Hedge derivatives, net:
Commodity contracts	$	(330	)	$	—	$	(330	)	$	—
Foreign exchange contracts	(97		)	—		(97		)	—
Non-hedge derivatives, net:
Foreign exchange contracts	415			—		415			—
Deferred compensation plan assets	859			859		—			—

As discussed in Note 8, the Company uses derivatives to mitigate 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 classified under Level 2 because such measurements are estimated 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 by 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 financial assets or liabilities is measured at fair value using significant unobservable inputs. There were no transfers in or out of Level 1 or Level 2 fair value measurements during the three- and six-month periods ended June 29, 2014.

19

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

Note 10: Employee Benefit Plans

Retirement Plans and Retiree Health and Life Insurance Plans

The Company provides non-contributory defined benefit pension plans for a majority of its employees in the United States and certain of its employees in Mexico and Belgium. Effective December 31, 2003, the Company froze participation for newly hired salaried and non-union hourly U.S. employees in its qualified defined benefit pension plan. At that time, the Company adopted a defined contribution plan, the Sonoco Investment and Retirement Plan (SIRP), which covers its non-union U.S. employees hired on or after January 1, 2004. The Company also sponsors contributory defined benefit pension plans covering the majority of its employees in the United Kingdom, Canada, and the Netherlands.

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. Remaining active participants in the U.S. qualified plan will become participants of the SIRP effective January 1, 2019.

The Company also 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 components of net periodic benefit cost include the following:

	Three Months Ended						Six Months Ended
	June 29, 2014			June 30, 2013			June 29, 2014			June 30, 2013
Retirement Plans
Service cost	$	5,625		$	6,354		$	10,792		$	12,489
Interest cost	18,411			16,828			36,308			33,432
Expected return on plan assets	(23,299		)	(21,570		)	(46,052		)	(42,962		)
Amortization of net transition obligation	102			110			201			220
Amortization of prior service cost	166			180			329			283
Amortization of net actuarial loss	6,794			10,967			13,096			21,680
Effect of settlement loss	—			1,893			—			1,893
Net periodic benefit cost	$	7,799		$	14,762		$	14,674		$	27,035
Retiree Health and Life Insurance Plans
Service cost	$	185		$	224		$	358		$	446
Interest cost	253			247			510			491
Expected return on plan assets	(402		)	(377		)	(789		)	(748		)
Amortization of prior service credit	(344		)	(741		)	(681		)	(1,474		)
Amortization of net actuarial loss	(103		)	(1		)	(127		)	(2		)
Net periodic benefit income	$	(411	)	$	(648	)	$	(729	)	$	(1,287	)

During the second quarter of 2013 the Company recognized a $1,893 settlement loss associated with settling the retirement liabilities of approximately 100 participants in one of its Canadian pension plans. Approximately 75% of the loss is included in “Cost of sales” in the Condensed Consolidated Statements of Income with the remainder in “Selling, general and administrative expenses.”

The Company made aggregate contributions of $41,543 and $15,522 to its defined benefit retirement and retiree health and life insurance plans during the six months ended June 29, 2014 and June 30, 2013, respectively. The Company anticipates that it will make additional aggregate contributions of approximately $12,000 to its defined benefit retirement and retiree health and life insurance plans in 2014.

Sonoco Investment and Retirement Plan (SIRP)

The Company recognized SIRP expense totaling $2,930 and $3,537 for the quarters ended June 29, 2014 and June 30, 2013, respectively, and $5,486 and $5,618 for the six month periods ended June 29, 2014 and June 30, 2013, respectively. Contributions to the SIRP, funded annually in the first quarter, totaled $12,049 during the six months ended June 29, 2014, and $9,290 during the six months ended June 30, 2013. No additional SIRP contributions are expected during the remainder of 2014. 

20

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

Note 11: Income Taxes

The Company’s effective tax rate for the three- and six-month periods ending June 29, 2014, was 33.9% and 32.7%, respectively, and its effective tax rate for the three- and six-month periods ending June 30, 2013, was 34.0% and 32.9%, respectively. The rates for both years were favorable to the U.S. statutory rate primarily due to the favorable effect of international operations that are subject to tax rates generally lower than the U.S. rate and the favorable effect of the manufacturer’s deduction. 

The Company and/or its subsidiaries file federal, state and local income tax returns in the United States and various foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, or non-U.S., income tax examinations by tax authorities for years before 2009. With respect to state and local income taxes, the Company is no longer subject to examination prior to 2008, with few exceptions.

The Company’s liability for uncertain tax positions has not changed significantly since December 31, 2013. 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 Company’s effective tax rate may fluctuate significantly on a quarterly basis.

Note 12: Segment Reporting

The Company reports its financial results in four reportable segments: Consumer Packaging, Display and Packaging, Paper and Industrial Converted Products, and Protective Solutions. Effective January 1, 2014, the Company began reporting Sonoco Alloyd, the Company’s retail packaging business and previously part of the Protective Solutions segment, as part of the Display and Packaging segment. This change reflects the evolving integration of these businesses, which enables them to better leverage the Company’s capabilities, products and services to provide complete solutions to our retail merchandising customers. Prior period results for the affected segments have been recast to reflect this change.

The Consumer Packaging segment includes the following products and services: round and shaped rigid containers and trays (both composite and thermoformed plastic); blow-molded plastic bottles and jars; extruded and injection-molded plastic products; printed flexible packaging; global brand artwork management; and metal and peelable membrane ends and closures.

The Display and Packaging segment includes the following products and services: designing, manufacturing, assembling, packing and distributing temporary, semipermanent 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 following products: custom-engineered, paperboard-based and expanded foam protective packaging and components; and temperature-assured packaging.

21

SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share data)

(unaudited)

The following table sets forth net sales, intersegment sales and operating profit for the Company’s reportable segments. “Segment operating profit” is defined as the segment’s portion of “Income before interest and income taxes” excluding restructuring charges, asset impairment charges, acquisition-related costs, and certain other items, if any, the exclusion of which the Company believes improves comparability and analysis of the financial performance of the business. General corporate expenses have been allocated as operating costs to each of the Company’s reportable segments.

SEGMENT FINANCIAL INFORMATION

	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
Net sales:
Consumer Packaging	$	473,666	$	475,013	$	938,591	$	938,313
Display and Packaging	162,515		157,516		315,537		302,091
Paper and Industrial Converted Products	490,016		473,217		945,626		927,424
Protective Solutions	121,183		120,510		233,252		237,641
Consolidated	$	1,247,380	$	1,226,256	$	2,433,006	$	2,405,469
Intersegment sales:
Consumer Packaging	$	875	$	1,446	$	1,908	$	2,806
Display and Packaging	397		519		780		1,174
Paper and Industrial Converted Products	26,653		25,017		52,998		48,472
Protective Solutions	820		727		1,386		1,400
Consolidated	$	28,745	$	27,709	$	57,072	$	53,852
Income before interest and income taxes:
Segment operating profit: