UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 FORM 10-Q

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

For the quarterly period ended June 30, 2019

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
No par value common stock	SON	New York Stock Exchange, LLC

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 ☒   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 during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

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	☒	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  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock at July 19, 2019:

Common stock, no par value: 100,076,838

SONOCO PRODUCTS COMPANY

INDEX

PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements:	3
	Condensed Consolidated Balance Sheets - June 30, 2019 (unaudited) and December 31, 2018 (unaudited)	3
	Condensed Consolidated Statements of Income – Three and Six Months Ended June 30, 2019 (unaudited) and July 1, 2018 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2019 (unaudited) and July 1, 2018 (unaudited)	5
	Condensed Consolidated Statements of Changes in Total Equity – Three and Six Months Ended June 30, 2019 (unaudited) and July 1, 2018 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2019 (unaudited) and July 1, 2018 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
	Report of Independent Registered Public Accounting Firm	38
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	54
Item 4.	Controls and Procedures.	54
PART II. OTHER INFORMATION		54
Item 1.	Legal Proceedings.	54
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	55
Item 6.	Exhibits.	55

2

Part I. FINANCIAL INFORMATION 

Item 1. Financial Statements.

SONOCO PRODUCTS COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(Dollars and shares in thousands) 

	June 30, 2019		December 31, 2018*
Assets
Current Assets
Cash and cash equivalents	$	96,295	$	120,389
Trade accounts receivable, net of allowances	784,907		737,420
Other receivables	100,384		111,915
Inventories, net:
Finished and in process	178,795		174,115
Materials and supplies	333,454		319,649
Prepaid expenses	85,185		55,784
	1,579,020		1,519,272
Property, Plant and Equipment, Net	1,233,615		1,233,821
Goodwill	1,310,638		1,309,167
Other Intangible Assets, Net	328,617		352,037
Deferred Income Taxes	48,100		47,297
Right of Use Asset-Operating Leases	304,655		—
Other Assets	140,919		121,871
Total Assets	$	4,945,564	$	4,583,465
Liabilities and Equity
Current Liabilities
Payable to suppliers	$	554,431	$	556,011
Accrued expenses and other	348,609		322,958
Notes payable and current portion of long-term debt	357,222		195,445
Accrued taxes	14,626		8,516
	1,274,888		1,082,930
Long-term Debt, Net of Current Portion	1,188,026		1,189,717
Noncurrent Operating Lease Liabilities	258,549		—
Pension and Other Postretirement Benefits	178,075		374,419
Deferred Income Taxes	116,569		64,273
Other Liabilities	75,837		99,848
Sonoco Shareholders’ Equity
Common stock, no par value
Authorized 300,000 shares 100,075 and 99,829 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	7,175		7,175
Capital in excess of stated value	305,750		304,709
Accumulated other comprehensive loss	(723,846)		(740,913)
Retained earnings	2,251,279		2,188,115
Total Sonoco Shareholders’ Equity	1,840,358		1,759,086
Noncontrolling Interests	13,262		13,192
Total Equity	1,853,620		1,772,278
Total Liabilities and Equity	$	4,945,564	$	4,583,465

* 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 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
Net sales	$	1,359,721	$	1,366,373	$	2,711,426	$	2,670,560
Cost of sales	1,084,385		1,089,913		2,165,969		2,143,498
Gross profit	275,336		276,460		545,457		527,062
Selling, general and administrative expenses	132,213		141,031		274,774		278,472
Restructuring/Asset impairment charges	13,355		3,567		24,027		6,630
Operating profit	129,768		131,862		246,656		241,960
Non-operating pension costs	5,550		513		11,591		222
Interest expense	16,798		16,217		32,830		31,012
Interest income	846		1,090		1,493		2,530
Income before income taxes	108,266		116,222		203,728		213,256
Provision for income taxes	28,491		30,293		51,115		53,649
Income before equity in earnings of affiliates	79,775		85,929		152,613		159,607
Equity in earnings of affiliates, net of tax	1,511		3,716		2,441		4,963
Net income	81,286		89,645		155,054		164,570
Net income attributable to noncontrolling interests	(127)		(233)		(232)		(1,103)
Net income attributable to Sonoco	$	81,159	$	89,412	$	154,822	$	163,467
Weighted average common shares outstanding:
Basic	100,759		100,568		100,700		100,482
Diluted	101,178		101,040		101,129		100,965
Per common share:
Net income attributable to Sonoco:
Basic	$	0.81	$	0.89	$	1.54	$	1.63
Diluted	$	0.80	$	0.88	$	1.53	$	1.62

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 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
Net income	$	81,286	$	89,645	$	155,054	$	164,570
Other comprehensive income/(loss):
Foreign currency translation adjustments	9,745		(64,587)		6,773		(41,604)
Changes in defined benefit plans, net of tax	1,807		9,422		8,963		15,239
Changes in derivative financial instruments, net of tax	(481)		(2,312)		1,383		(1,265)
Other comprehensive income/(loss)	$	11,071	$	(57,477)	$	17,119	$	(27,630)
Comprehensive income	92,357		32,168		$	172,173	$	136,940
Net income attributable to noncontrolling interests	(127)		(233)		(232)		(1,103)
Other comprehensive (income)/loss attributable to noncontrolling interests	(172)		2,107		(52)		1,677
Comprehensive income attributable to Sonoco	$	92,058	$	34,042	$	171,889	$	137,514

See accompanying Notes to Condensed Consolidated Financial Statements

5

SONOCO PRODUCTS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN TOTAL EQUITY (unaudited)

(Dollars in thousands)

	Total Equity		Common Shares			Capital in Excess of Stated Value		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling Interests
			Outstanding	Amount
December 31, 2017	$	1,730,060	99,414	$	7,175	$	330,157	$	(666,272)	$	2,036,006	$	22,994
Net income	74,925									74,055		870
Other comprehensive income:
Translation gain	22,982							22,553				429
Defined benefit plan adjustment, net of tax	5,817							5,817
Derivative financial instruments, net of tax	1,047							1,047
Other comprehensive income:	$	29,846						$	29,417			$	429
Dividends	(39,535)									(39,535)
Issuance of stock awards	479		227			479
Shares repurchased	(4,088)		(78)			(4,088)
Stock-based compensation	3,048					3,048
Impact of new accounting pronouncements	1,721							(176)		1,897
April 1, 2018	$	1,796,456	99,563	$	7,175	$	329,596	$	(637,031)	$	2,072,423	$	24,293
Net income	89,645									89,412		$	233
Other comprehensive income/(loss):
Translation loss:	(64,587)							(62,480)				(2,107)
Defined benefit plan adjustment, net of tax	9,422							9,422
Derivative financial instruments, net of tax	(2,312)							(2,312)
Other comprehensive loss:	$	(57,477)						$	(55,370)			$	(2,107)
Dividends	(41,306)									(41,306)
Issuance of stock awards	329		24			329
Shares repurchased	(471)		(9)			(471)
Stock-based compensation	3,074					3,074
Noncontrolling interest from acquisition	15											15
July 1, 2018	$	1,790,265	99,578	$	7,175	$	332,528	$	(692,401)	$	2,120,529	$	22,434

See accompanying Notes to Condensed Consolidated Financial Statements

6

SONOCO PRODUCTS COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN TOTAL EQUITY (unaudited)

(Dollars in thousands)

	Total Equity		Common Shares			Capital in Excess of Stated Value		Accumulated Other Comprehensive Loss		Retained Earnings		Noncontrolling Interests
			Outstanding	Amount
December 31, 2018	$	1,772,278	99,829	$	7,175	$	304,709	$	(740,913)	$	2,188,115	$	13,192
Net income	73,768									73,663		105
Other comprehensive income/(loss):
Translation loss	(2,972)							(2,852)				(120)
Defined benefit plan adjustment, net of tax	7,156							7,156
Derivative financial instruments, net of tax	1,864							1,864
Other comprehensive income/(loss)	$	6,048						$	6,168			$	(120)
Dividends	(41,534)									(41,534)
Dividends paid to noncontrolling interests	(214)											(214)
Issuance of stock awards	399		340			399
Shares repurchased	(7,395)		(133)			(7,395)
Stock-based compensation	4,560					4,560
Impact of new accounting pronouncements	(6,771)									(6,771)
March 31, 2019	$	1,801,139	100,036	$	7,175	$	302,273	$	(734,745)	$	2,213,473	$	12,963
Net income	81,286									81,159		$	127
Other comprehensive income/(loss):
Translation gain	9,745							9,573				172
Defined benefit plan adjustment, net of tax	1,807							1,807
Derivative financial instruments, net of tax	(481)							(481)
Other comprehensive income	$	11,071						$	10,899			$	172
Dividends	(43,353)									(43,353)
Issuance of stock awards	326		58			326
Shares repurchased	(1,155)		(19)			(1,155)
Stock-based compensation	4,306					4,306
June 30, 2019	$	1,853,620	100,075	$	7,175	$	305,750	$	(723,846)	$	2,251,279	$	13,262

See accompanying Notes to Condensed C