Basis of Interim Presentation

9 Months Ended

Sep. 27, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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 nine months ended September 27, 2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. 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, 2019.

With respect to the unaudited condensed consolidated financial information of the Company for the three- and nine-month periods ended September 27, 2020 and September 29, 2019 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 October 30, 2020 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.

In September 2020, the Company's Board of Directors approved the sale of the Company's European contract packaging business (Sonoco Poland Packaging Services Sp. z.o.o.). As a result, the Company has determined the criteria for classification as held for sale were met. Consequently, the assets and liabilities associated with the European contract packaging business are classified as held for sale on the Company's Condensed Consolidated Balance Sheet as of September 27, 2020.

The decision to sell the European contract packaging business was made as part of the Company's efforts to simplify its operating structure in order to focus on growing its core consumer and industrial packaging businesses. This business includes six contract packaging facilities in three locations and a warehouse, all in Poland, and is reported within the Company's Display and Packaging segment. The sale does not represent a strategic shift for the Company that will have a major effect on the Company’s operations and financial results; consequently, it does not meet the criteria for reporting as a discontinued operation.

In conjunction with the pending sale of the Company's European contract packaging business, the following major classes of assets and liabilities were classified as held for sale on the Company's Condensed Consolidated Balance Sheet as of September 27, 2020:


Assets:
Trade accounts receivable, net of allowances	$	43,411
Inventories	36,278
Other receivables	9,179
Prepaid expenses	2,516
Current assets	91,384
Property, plant and equipment, net	7,766
Goodwill	76,828
Long-term deferred income taxes	1,943
Right of Use Asset - Operating leases	23,337
Other assets	811
Noncurrent assets	110,685
Assets held for sale	$	202,069

Liabilities:
Payable to suppliers	$	54,907
Accrued expenses and other	15,351
Notes payable and current portion of long-term debt	259
Taxes on income	1,198
Current liabilities	71,715
Long-term debt	554
Noncurrent operating lease liabilities	18,824
Other long-term liabilities	2,756
Noncurrent liabilities	22,134
Liabilities held for sale	$	93,849

On October 9, 2020, subsequent to the end of the third quarter, the Company entered into a definitive agreement to sell its European contract packaging business, Sonoco Poland Packaging Services Sp. z.o.o., for $120,000, less indebtedness assumed by the buyer at closing and subject to adjustment for final working capital balances. The transaction, which is subject to regulatory approval, is expected to be completed in the fourth quarter of 2020. In addition to changes in working capital and assumed indebtedness, the cash that is ultimately received will be reduced if the exchange rate between the U.S. dollar and the Polish zloty exceeds a predetermined level.