UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1,September 30, 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, 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, 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 filerýAccelerated filer¨
Non-accelerated filer ¨
Non-accelerated filer
¨(do not check if a smaller reporting company)
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  ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock at July 20, 2018:October 19, 2018:
Common stock, no par value: 99,602,101

99,809,098 



SONOCO PRODUCTS COMPANY
INDEX
 
3
Item 1. 
3
Item 1.
3
Condensed Consolidated Balance Sheets - July 1,September 30, 2018 (unaudited) and December 31, 2017 (unaudited)
3
4
5
6
7
3536
Item 2.
3637
Item 3.
5053
Item 4.
5053
5153
Item 1.
5153
Item 2.
5254
Item 6.
5254



2

Part I. FINANCIAL INFORMATION
 
Item 1. Financial Statements.
SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars and shares in thousands)
 July 1,
2018		 December 31,
2017*		September 30, 2018December 31,
2017* 
Assets    Assets
Current Assets    Current Assets
Cash and cash equivalents $197,691
 $254,912
Cash and cash equivalents $250,424 $254,912 
Trade accounts receivable, net of allowances 768,338
 725,251
Trade accounts receivable, net of allowances 775,054 725,251 
Other receivables 90,954
 64,561
Other receivables 93,470 64,561 
Inventories, net:    Inventories, net:
Finished and in process 162,766
 196,204
Finished and in process 157,920 196,204 
Materials and supplies 308,682
 277,859
Materials and supplies 309,319 277,859 
Prepaid expenses 46,537
 44,849
Prepaid expenses 64,318 44,849 
 1,574,968
 1,563,636
1,650,505 1,563,636 
Property, Plant and Equipment, Net 1,167,665
 1,169,377
Property, Plant and Equipment, Net 1,140,113 1,169,377 
Goodwill 1,287,839
 1,241,875
Goodwill 1,285,368 1,241,875 
Other Intangible Assets, Net 350,415
 331,295
Other Intangible Assets, Net 340,824 331,295 
Deferred Income Taxes 49,479
 62,053
Deferred Income Taxes 50,059 62,053 
Other Assets 192,602
 189,485
Other Assets 191,765 189,485 
Total Assets $4,622,968
 $4,557,721
Total Assets $4,658,634 $4,557,721 
Liabilities and Equity    Liabilities and Equity
Current Liabilities    Current Liabilities
Payable to suppliers $556,519
 $548,309
Payable to suppliers 583,054 $548,309 
Accrued expenses and other 285,096
 283,355
Accrued expenses and other 321,842 283,355 
Notes payable and current portion of long-term debt 177,645
 159,327
Notes payable and current portion of long-term debt 73,899 159,327 
Accrued taxes 10,812
 8,979
Accrued taxes 15,589 8,979 
 1,030,072
 999,970
994,384 999,970 
Long-term Debt, Net of Current Portion 1,274,325
 1,288,002
Long-term Debt, Net of Current Portion 1,312,678 1,288,002 
Pension and Other Postretirement Benefits 340,602
 355,187
Pension and Other Postretirement Benefits 335,379 355,187 
Deferred Income Taxes 79,891
 74,073
Deferred Income Taxes 85,473 74,073 
Other Liabilities 107,813
 110,429
Other Liabilities 97,790 110,429 
Commitments and Contingencies 
 
Sonoco Shareholders’ Equity    Sonoco Shareholders’ Equity
Common stock, no par value    Common stock, no par value
Authorized 300,000 shares
99,578 and 99,414 shares issued and outstanding at
July 1, 2018 and December 31, 2017, respectively		 7,175
 7,175
Authorized 300,000 shares
99,650 and 99,414 shares issued and outstanding
at September 30, 2018 and December 31, 2017, respectively 		Authorized 300,000 shares
99,650 and 99,414 shares issued and outstanding
at September 30, 2018 and December 31, 2017, respectively 		7,175 7,175 
Capital in excess of stated value 332,528
 330,157
Capital in excess of stated value 333,853 330,157 
Accumulated other comprehensive loss (692,401) (666,272)Accumulated other comprehensive loss (681,865)(666,272)
Retained earnings 2,120,529
 2,036,006
Retained earnings 2,151,658 2,036,006 
Total Sonoco Shareholders’ Equity 1,767,831
 1,707,066
Total Sonoco Shareholders’ Equity 1,810,821 1,707,066 
Noncontrolling Interests 22,434
 22,994
Noncontrolling Interests 22,109 22,994 
Total Equity 1,790,265
 1,730,060
Total Equity 1,832,930 1,730,060 
Total Liabilities and Equity $4,622,968
 $4,557,721
Total Liabilities and Equity $4,658,634 $4,557,721 
*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 EndedThree Months Ended Nine Months Ended 
 July 1,
2018		 July 2,
2017		 July 1,
2018		 July 2,
2017		September 30, 2018October 1,
2017		September 30, 2018October 1, 2017
Net sales $1,366,373
 $1,240,674
 $2,670,560
 $2,412,998
Net sales $1,364,762 $1,324,634 $4,035,322 $3,737,632 
Cost of sales 1,089,913
 1,002,289
 2,143,498
 1,951,634
Cost of sales 1,105,126 1,071,755 3,248,624 3,023,397 
Gross profit 276,460
 238,385
 527,062
 461,364
Gross profit 259,636 252,879 786,698 714,235 
Selling, general and administrative expenses 141,031
 125,308
 278,472
 250,517
Selling, general and administrative expenses 136,002 129,136 414,474 379,645 
Restructuring/Asset impairment charges 3,567
 7,897
 6,630
 12,008
Restructuring/Asset impairment charges 22,061 511 28,691 12,519 
Operating profit 131,862
 105,180
 241,960
 198,839
Operating profit 101,573 123,232 343,533 322,071 
Non-operating pension costs 513
 34,410
 222
 38,096
Non-operating pension costs/(income) Non-operating pension costs/(income) (25)3,150 197 41,246 
Interest expense 16,217
 13,823
 31,012
 26,908
Interest expense 15,989 14,741 47,001 41,649 
Interest income 1,090
 1,031
 2,530
 2,058
Interest income 1,487 1,094 4,017 3,152 
Income before income taxes 116,222
 57,978
 213,256
 135,893
Income before income taxes 87,096 106,435 300,352 242,328 
Provision for income taxes 30,293
 17,167
 53,649
 42,706
Provision for income taxes 18,325 35,545 71,974 78,251 
Income before equity in earnings of affiliates 85,929
 40,811
 159,607
 93,187
Income before equity in earnings of affiliates 68,771 70,890 228,378 164,077 
Equity in earnings of affiliates, net of tax 3,716
 2,845
 4,963
 4,799
Equity in earnings of affiliates, net of tax 4,049 2,521 9,012 7,320 
Net income 89,645
 43,656
 164,570
 97,986
Net income 72,820 73,411 237,390 171,397 
Net income attributable to noncontrolling interests (233) (531) (1,103) (1,128)Net income attributable to noncontrolling interests (405)(599)(1,508)(1,727)
Net income attributable to Sonoco $89,412
 $43,125
 $163,467
 $96,858
Net income attributable to Sonoco $72,415 $72,812 $235,882 $169,670 
Weighted average common shares outstanding:        Weighted average common shares outstanding:
Basic 100,568
 100,258
 100,482
 100,184
Basic 100,640 100,275 100,534 100,214 
Diluted 101,040
 100,717
 100,965
 100,849
Diluted 101,040 100,684 100,993 100,793 
Per common share:        Per common share:
Net income attributable to Sonoco:        Net income attributable to Sonoco:
Basic $0.89
 $0.43
 $1.63
 $0.97
Basic $0.72 $0.73 $2.35 $1.69 
Diluted $0.88
 $0.43
 $1.62
 $0.96
Diluted $0.72 $0.72 $2.34 $1.68 
Cash dividends $0.41
 $0.39
 $0.80
 $0.76
Cash dividends $0.41 $0.39 $1.21 $1.15 
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 EndedThree Months Ended Nine Months Ended 
 July 1,
2018		 July 2,
2017		 July 1,
2018		 July 2,
2017		September 30, 2018October 1,
2017		September 30, 2018October 1, 2017
Net income $89,645
 $43,656
 $164,570
 $97,986
Net income $72,820 $73,411 $237,390 $171,397 
Other comprehensive income/(loss):        Other comprehensive income/(loss):
Foreign currency translation adjustments (64,587) 29,526
 (41,604) 60,362
Foreign currency translation adjustments 1,186 27,445 (40,418)87,807 
Changes in defined benefit plans, net of tax 9,422
 36,711
 15,239
 48,010
Changes in defined benefit plans, net of tax 6,961 10,301 22,200 58,311 
Changes in derivative financial instruments, net of tax (2,312) (518) (1,265) (3,467)Changes in derivative financial instruments, net of tax 1,659 (186)394 (3,653)
Other comprehensive (loss)/income (57,477) 65,719
 (27,630) 104,905
Other comprehensive income/(loss) Other comprehensive income/(loss) 9,806 37,560 (17,824)142,465 
Comprehensive income 32,168
 109,375
 136,940
 202,891
Comprehensive income 82,626 110,971 219,566 313,862 
Net income attributable to noncontrolling interests (233) (531) (1,103) (1,128)Net income attributable to noncontrolling interests (405)(599)(1,508)(1,727)
Other comprehensive loss/(income) attributable to noncontrolling interests 2,107
 159
 1,677
 (521)
Other comprehensive (income)/loss attributable to noncontrolling interests Other comprehensive (income)/loss attributable to noncontrolling interests 730 (517)2,407 (1,038)
Comprehensive income attributable to Sonoco $34,042
 $109,003
 $137,514
 $201,242
Comprehensive income attributable to Sonoco $82,951 $109,855 $220,465 $311,097 
See accompanying Notes to Condensed Consolidated Financial Statements


5

SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)
 Six Months EndedNine Months Ended 
 July 1,
2018		 July 2,
2017		September 30, 2018October 1, 2017
Cash Flows from Operating Activities:    Cash Flows from Operating Activities:
Net income $164,570
 $97,986
Net income $237,390 $171,397 
Adjustments to reconcile net income to net cash provided by operating activities:    Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairment 133
 1,486
Asset impairment 2,627 1,486 
Depreciation, depletion and amortization 120,402
 103,649
Depreciation, depletion and amortization 176,895 159,130 
Share-based compensation expense 6,122
 5,682
Share-based compensation expense 9,442 9,028 
Equity in earnings of affiliates (4,963) (4,799)Equity in earnings of affiliates (9,012)(7,320)
Cash dividends from affiliated companies 2,750
 2,685
Cash dividends from affiliated companies 5,203 5,467 
Net (gain)/loss on disposition of assets (833) 285
Net loss on disposition of assets Net loss on disposition of assets 7,022 833 
Pension and postretirement plan expense 17,408
 55,160
Pension and postretirement plan expense 25,736 66,245 
Pension and postretirement plan contributions (24,146) (48,511)Pension and postretirement plan contributions (27,339)(52,549)
Net increase/(decrease) in deferred taxes 3,926
 (9,487)Net increase/(decrease) in deferred taxes 6,097 (2,126)
Change in assets and liabilities, net of effects from acquisitions, dispositions, and foreign currency adjustments:    Change in assets and liabilities, net of effects from acquisitions, dispositions, and foreign currency adjustments:
Trade accounts receivable (45,032) (55,138)Trade accounts receivable (58,187)(70,908)
Inventories (16,741) (12,795)Inventories (8,938)(14,965)
Payable to suppliers 16,716
 11,884
Payable to suppliers 45,038 29,321 
Prepaid expenses (5,602) (5,258)Prepaid expenses (5,126)(2,504)
Accrued expenses 1,012
 (29,289)Accrued expenses 35,353 1,229 
Income taxes payable and other income tax items (1,031) (11,430)Income taxes payable and other income tax items (13,050)(1,886)
Other assets and liabilities 16,557
 1,068
Other assets and liabilities 22,365 (10,873)
Net cash provided by operating activities 251,248
 103,178
Net cash provided by operating activities 451,516 281,005 
Cash Flows from Investing Activities:    Cash Flows from Investing Activities:
Purchase of property, plant and equipment (88,852) (98,819)Purchase of property, plant and equipment (135,420)(144,738)
Cost of acquisitions, net of cash acquired (141,305) (217,489)Cost of acquisitions, net of cash acquired (150,995)(383,358)
Proceeds from the sale of assets 6,164
 1,973
Proceeds from the sale of assets 23,444 3,743 
Investment in affiliates and other, net 559
 1,372
Investment in affiliates and other, net 899 2,843 
Net cash used in investing activities (223,434) (312,963)Net cash used in investing activities (262,072)(521,510)
Cash Flows from Financing Activities:    Cash Flows from Financing Activities:
Proceeds from issuance of debt 137,272
 180,363
Proceeds from issuance of debt 202,460 436,335 
Principal repayment of debt (93,564) (34,461)Principal repayment of debt (157,911)(196,198)
Net change in commercial paper (33,000) 87,000
Net change in commercial paper (100,000)98,000 
Net (decrease)/increase in outstanding checks (5,749) 1,195
Net (decrease)/increase in outstanding checks (6,416)500 
Cash dividends (79,801) (75,604)Cash dividends (120,651)(114,368)
Shares acquired (4,558) (5,884)Shares acquired (6,987)(5,942)
Net cash (used in)/provided by financing activities (79,400) 152,609
Net cash (used in)/provided by financing activities (189,505)218,327 
Effects of Exchange Rate Changes on Cash (5,635) 7,541
Effects of Exchange Rate Changes on Cash (4,427)12,860 
Net Decrease in Cash and Cash Equivalents (57,221) (49,635)Net Decrease in Cash and Cash Equivalents (4,488)(9,318)
Cash and cash equivalents at beginning of period 254,912
 257,226
Cash and cash equivalents at beginning of period 254,912 257,226 
Cash and cash equivalents at end of period $197,691
 $207,591
Cash and cash equivalents at end of period $250,424 $247,908 
See accompanying Notes to Condensed Consolidated Financial Statements

6
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares 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 sixnine months ended July 1,September 30, 2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. 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, 2017.
With respect to the unaudited condensed consolidated financial information of the Company for the three and six-monthnine-month periods ended July 1,September 30, 2018 and July 2,October 1, 2017 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 August 1,October 31, 2018 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 August 2017,2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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 will implement this ASU using the prospective method effective October 1, 2018. The adoption of the standard is not expected to have a material effect on the Company's consolidated financial statements.
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 certain 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 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 capitalization of the service cost component. The Company implemented this ASU effective January 1, 2018, modifying 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 three months ended July 2,October 1, 2017, were reduced by $2,510$2,006 and $31,900,$1,144, respectively, and "Operating profit" increased by $34,410,$3,150, in order to conform to the current presentation. The comparable changes for the sixnine months ended July 2,October 1, 2017, were $5,267, $32,829,$7,273, $33,973, and $38,096,$41,246, for "Cost of sales," "Selling, general and administrative expenses," and "Operating profit," respectively. No change was required to the Company's historical policy regarding the capitalization of such costs.

7
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

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 goodwill 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
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

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 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 guidance became effective for the Company on January 1, 2018, and did not have a material effect on its consolidated 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 insignificant debt instruments, 3) contingent consideration payments, 4) insurance claim settlements, 5) life insurance settlements, 6) distributions received from equity method investees, 7) beneficial interests in securitization transactions, and 8) separately identifiable cash flows. This guidance, which applies to both interim and annual periods, became effective for the Company on January 1, 2018. As a result of the retrospective application, insurance proceeds totaling $1,104 received during the sixnine months ended July 2,October 1, 2017 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 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 affecteffect 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”) which changes accounting for leases andprimarily requires lessees to recognize the assets and liabilities arising from all leases, including those classified as operating leases under previous accounting guidance on the balance sheet a right-of-use asset and lease liability for all long-term leases. ASU 2016-02 also requires disclosure of key information about leasing arrangements to increase transparency and comparability among organizations. The accounting for lessors does not fundamentally change except for changes to conform and align guidance to the lessee guidance.guidance and the newly adopted revenue recognition standard. The guidanceCompany has elected to adopt the standard using the modified retrospective transition approach with a January 1, 2019 effective date of initial application. Under the modified retrospective transition method, we will recognize a cumulative effect adjustment to retained earnings as of the effective date in the period of adoption. Consequently, comparative financial information and disclosures provided for dates and periods before January 1, 2019 will not be updated in the Company’s future filings. The Company established a cross-functional team to implement certain software solutions as part of its newly integrated enterprise-wide lease management system. The team is effective forprogressing through the implementation plan and developing business processes, accounting systems, and internal controls to ensure the Company meets the reporting periods beginning after December 15, 2018, including interim periods within those fiscal years and requires retrospective application.disclosure requirements of the new standard. The Company is still assessing the impact of ASU 2016-02 on its consolidated financial statements, but expects the adoption of this ASU 2016-02 to have a material impact on its consolidated balance sheet for the initial recognition of the right-of-use asset and lease liability associated with operating leases that are not currently recognized on the balance sheet under present U.S. GAAP. The impact on the Company’s consolidated statement of income continues to be evaluated.
In May 2014, the FASB issued ASU 2014-09, "Revenue 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 consideration is recognized,
8
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

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 adoption of this ASU are the acceleration of revenue recognition 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 margin, and the recognition of material customer contract rights for certain agreed-upon future price concessions.
During the three- and six-monthnine-month periods ended July 1,September 30, 2018, 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 July 1,September 30, 2018, there were no other pronouncements pending adoption that are expected to have a material impact on the Company’s consolidated financial statements.
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Note 3: Changes in Accounting Policy
Except for the changes below, the Company has consistently applied the accounting policies to all periods presented in these condensed consolidated financial statements.
The Company adopted TopicASC 606, "Revenue from Contracts with Customers," effective January 1, 2018. As a result, the Company has changed its accounting policy for revenue recognition as detailed in Note 14.
The Company applied TopicASC 606 using the cumulative effect method by recognizing the cumulative effect of initially applying TopicASC 606 as an adjustment to the opening balance of equity at January 1, 2018. Therefore, the comparative information has not been adjusted and continues to be reported under TopicASC 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 $725,251 $3,636 $728,887 
Other receivables 64,561 41,351 105,912 
Inventories: 
Finished and in process 196,204 (37,447)158,757 
Total Assets $4,557,721 $7,540 $4,565,261 
Liabilities and Equity 
Current Liabilities 
Accrued expenses and other 283,355 5,215 288,570 
999,970 5,215 1,005,185 
Deferred Income Taxes 74,073 604 74,677 
Sonoco Shareholders’ Equity 
Retained earnings 2,036,006 1,721 2,037,727 
Total Sonoco Shareholders’ Equity 1,707,066 1,721 1,708,787 
Total Equity 1,730,060 1,721 1,731,781 
Total Liabilities and Equity $4,557,721 $7,540 $4,565,261 

9

 December 31, 2017 As ReportedAdjustmentsJanuary 1, 2018 Adjusted
Assets    
Current Assets    
Trade accounts receivable, net of allowances 725,251
3,636
728,887
Other receivables 64,561
41,351
105,912
Inventories:    
Finished and in process 196,204
(37,447)158,757
Total Assets $4,557,721
$7,540
$4,565,261
Liabilities and Equity    
Current Liabilities    
Accrued expenses and other 283,355
5,215
288,570

 999,970
5,215
1,005,185
Deferred Income Taxes 74,073
604
74,677
Sonoco Shareholders’ Equity 


Retained earnings 2,036,006
1,721
2,037,727
Total Sonoco Shareholders’ Equity 1,707,066
1,721
1,708,787
Total Equity 1,730,060
1,721
1,731,781
Total Liabilities and Equity $4,557,721
$7,540
$4,565,261
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


The following table summarizes the impact of the adoption of TopicASC 606 on the Company's Condensed Consolidated Balance Sheet as of July 1,September 30, 2018:
September 30, 2018 as reportedAdjustments Balances without
Adoption of
ASC 606 
Assets 
Current Assets 
Trade accounts receivable, net of allowances $775,054 (5,744)$769,310 
Other receivables 93,470 (44,698)48,772 
Inventories: 
Finished and in process 157,920 42,051 199,971 
Total Assets $4,658,634 $(8,391)$4,650,243 
Liabilities and Equity 
Current Liabilities 
Accrued expenses and other 321,842 (5,998)315,844 
994,384 (5,998)988,386 
Deferred Income Taxes 85,473 (622)84,851 
Sonoco Shareholders' Equity 
Retained earnings 2,151,658 (1,771)2,149,887 
Total Sonoco Shareholders’ Equity 1,810,821 (1,771)1,809,050 
Total Equity 1,832,930 (1,771)1,831,159 
Total Liabilities and Equity $4,658,634 $(8,391)$4,650,243 
  July 1,
2018		AdjustmentsBalances without Adoption of Topic 606
Assets    
Current Assets    
Trade accounts receivable, net of allowances 768,338
(5,187)763,151
Other receivables 90,954
(44,347)46,607
Inventories:    
Finished and in process 162,766
40,321
203,087
Total Assets $4,622,968
$(9,213)$4,613,755
Liabilities and Equity    
Current Liabilities    
Accrued expenses and other 285,096
(5,737)279,359
  1,030,072
(5,737)1,024,335
Deferred Income Taxes 79,891
(904)78,987
Sonoco Shareholders' Equity    
Retained earnings 2,120,529
(2,572)2,117,957
Total Sonoco Shareholders’ Equity 1,767,831
(2,572)1,765,259
Total Equity 1,790,265
(2,572)1,787,693
Total Liabilities and Equity $4,622,968
$(9,213)$4,613,755

The following table summarizes the impact of the adoption of TopicASC 606 on the Company's Condensed Consolidated Statement of Income for the three- and six-monthsnine-months ending July 1,September 30, 2018:
Three Months Ended Nine Months Ended 
September 30, 2018
as reported		Adjustments Balances
without
Adoption of
ASC 606 		September 30, 2018
as reported		Adjustments Balances
without
Adoption of
ASC 606 
Net sales $1,364,762 $(648)$1,364,114 $4,035,322 $(4,673)$4,030,649 
Cost of sales 1,105,126 (1,731)1,103,395 3,248,624 (4,605)3,244,019 
Gross profit 259,636 1,083 260,719 786,698 (68)786,630 
Operating profit 101,573 1,083 102,656 343,533 (68)343,465 
Income before income taxes 87,096 1,083 88,179 300,352 (68)300,284 
Provision for income taxes 18,325 281 18,606 71,974 (18)71,956 
Income before equity in earnings of affiliates 68,771 802 69,573 228,378 (50)228,328 
Net income 72,820 802 73,622 237,390 (50)237,340 
Net income attributable to Sonoco $72,415 $802 $73,217 $235,882 $(50)$235,832 

10
  Three Months Ended Six Months Ended
  July 1,
2018		AdjustmentsBalances without Adoption of Topic 606 July 1,
2018		AdjustmentsBalances without Adoption of Topic 606
Net sales $1,366,373
$(966)$1,365,407
 $2,670,560
$(4,025)$2,666,535
Cost of sales 1,089,913
(252)1,089,661
 2,143,498
(2,874)2,140,624
Gross profit 276,460
(714)275,746
 527,062
(1,151)525,911
Operating profit 131,862
(714)131,148
 241,960
(1,151)240,809
Income before income taxes 116,222
(714)115,508
 213,256
(1,151)212,105
Provision for income taxes 30,293
(186)30,107
 53,649
(299)53,350
Income before equity in earnings of affiliates 85,929
(528)85,401
 159,607
(852)158,755
Net income 89,645
(528)89,117
 164,570
(852)163,718
Net income attributable to Sonoco $89,412
$(528)$88,884
 $163,467
$(852)$162,615
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


The following table summarizes the impact of the adoption of TopicASC 606 on the Company's Condensed Consolidated Statement of Comprehensive Income for the three- and six-monthsnine-month periods ending July 1,September 30, 2018:
Three Months Ended Nine Months Ended 
September 30, 2018
as reported		Adjustments Balances
without
Adoption of
ASC 606 		September 30, 2018
as reported		Adjustments Balances
without
Adoption of
ASC 606 
Net income $72,820 $802 $73,622 $237,390 $(50)$237,340 
Other comprehensive income/(loss): 
Foreign currency translation adjustments 1,186 (30)1,156 (40,418)13 (40,405)
Other comprehensive income 9,806 (30)9,776 (17,824)13 (17,811)
Comprehensive income 82,626 772 83,398 219,566 (37)219,529 
Comprehensive income attributable to Sonoco $82,951 $772 $83,723 $220,465 $(37)$220,428 
  Three Months Ended Six Months Ended
  July 1,
2018		AdjustmentsBalances without Adoption of Topic 606 July 1,
2018		AdjustmentsBalances without Adoption of Topic 606
Net income $89,645
$(528)$89,117
 $164,570
$(852)$163,718
Other comprehensive income/(loss):        
Foreign currency translation adjustments (64,587)376
(64,211) (41,604)309
(41,295)
Other comprehensive income (57,477)376
(57,101) (27,630)309
(27,321)
Comprehensive income 32,168
(152)32,016
 136,940
(543)136,397
Comprehensive income attributable to Sonoco $34,042
$(152)$33,890
 $137,514
$(543)$136,971

The following table summarizes the impact of the adoption of TopicASC 606 on the Company's Condensed Consolidated Statement of Cash Flows for the sixnine months ended July 1,September 30, 2018:
Nine Months Ended 
September 30, 2018
As Reported 		Adjustments Balances without
Adoption of
ASC 606 
Cash Flows from Operating Activities: 
Net income $237,390 $(50)$237,340 
Trade accounts receivable (58,187)2,108 (56,079)
Inventories (8,938)(4,604)(13,542)
Other assets and liabilities 22,365 3,347 25,712 
Accrued expenses 35,353 (783)34,570 
Income taxes payable and other income tax items (13,050)(18)(13,068)
Net cash provided by operating activities $451,516 $— $451,516 
  Six Months Ended
  July 1, 2018 As ReportedAdjustmentsBalances without Adoption of Topic 606
Cash Flows from Operating Activities:    
Net income $164,570
$(852)$163,718
Trade accounts receivable (45,032)1,551
(43,481)
Inventories (16,741)(2,874)(19,615)
Other assets and liabilities 16,557
2,996
19,553
Accrued expenses 1,012
(522)490
Income taxes payable and other income tax items (1,031)(299)(1,330)
Net cash provided by operating activities 251,248
—
251,248


Note 4:  Acquisitions
On April 12, 2018, the Company completed the acquisition of Highland Packaging Solutions ("Highland"). Total consideration for this acquisition was $148,805,$148,539, including cash paid at closing of $141,305, and a contingent purchase liability of $7,500. Final consideration will also be subject to an adjustment for$7,500, and a final working capital which is expected to besettlement completed by the end ofin the third quarter of 2018.in which the Company received $266. 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 closing 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 Company's Condensed Consolidated Balance Sheet at July 1,September 30, 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 solutions 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 $100,000 term loan, along with proceeds from existing credit facilities. See Note 9 for additional information.
11
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


The preliminary fair values of the assets acquired and liabilities assumed in connection with the Highland acquisition are as follows:
Trade accounts receivable$6,072
Inventories25,425
Property, plant and equipment30,880
Goodwill48,387
Other intangible assets45,610
Trade accounts payable(5,995)
Other net tangible assets /(liabilities)(1,574)
Net assets$148,805
  
Trade accounts receivable $6,072 
Inventories 27,225 
Property, plant and equipment 29,080 
Goodwill 47,193 
Other intangible assets 45,624 
Trade accounts payable (6,006)
Other net tangible assets /(liabilities) (649)
Net assets $148,539 
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 will operate within the Company's global plastics division. 
The allocation of the purchase price of Highland 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 continuing to finalize its valuation of certain assets and liabilities including, but not limited to: inventory; property, plant and equipment; other intangible assets; and trade accounts receivable, and expects to complete its valuations within one year of the date of acquisition.
The Company has accounted for its acquisitions as business combinations under the acquisition method of accounting, in accordance with the business combinations subtopic of the Accounting Standards Codification and has included their results of operations in the Company's Condensed Consolidated Statements of Income from their respective dates of acquisition.
The Company does not believe the Highland acquisition is an individually material transaction subject to the supplemental pro-forma information required by ASC 805. However, the prior year acquisitions of Packaging Holdings, Inc. and subsidiaries, including Peninsula Packaging LLC ("Packaging Holdings"), acquired March 14, 2017, and Clear Lam Packaging, Inc. ("Clear Lam"), acquired July 24, 2017, were considered material on a combined basis. The following table presents the Company's estimated unaudited pro forma consolidated results for the three- and six-monthnine-month periods ended July 2,October 1, 2017, 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 acquisitions had been completed as of the beginning of 2016, nor are they necessarily indicative of future consolidated results.
(unaudited)(unaudited) 
Pro Forma Supplemental InformationThree Months Ended Six Months EndedPro Forma Supplemental Information Three Months Ended Nine Months Ended 
ConsolidatedJuly 2, 2017 July 2, 2017Consolidated October 1, 2017October 1, 2017
Net sales$1,274,053
 $2,511,516
Net sales $1,332,532 $3,844,048 
Net income attributable to Sonoco$47,711
 $99,186
Net income attributable to Sonoco 73,284 172,470 
Earnings per share:   Earnings per share:
Pro forma basic$0.48 $0.99Pro forma basic $0.73 $1.72 
Pro forma diluted$0.47 $0.98
Pro forma diluted $0.73 $1.71 
   
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 includes adjustments to depreciation, amortization, interest expense, income taxes, and acquisition-related costs.

12
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


The following table presents the aggregate, unaudited financial results for Packaging Holdings and Clear Lam from their respective dates of acquisition:
(unaudited)(unaudited) 
Aggregate Supplemental InformationThree Months Ended Six Months EndedAggregate Supplemental Information Three Months Ended Nine Months Ended 
Packaging Holdings and Clear LamJuly 2, 2017 July 2, 2017Packaging Holdings and Clear Lam October 1, 2017October 1, 2017
Actual net sales$33,379
 $68,219
Actual net sales $77,764 $145,983 
Actual net income$4,503
 $184
Actual net income 1,976 2,160 
   
During the second quarter ofnine months ended September 30, 2018, the Company finalized its valuations of the assets and liabilities acquired in conjunction with the 2017 acquisition of Clear Lam, 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 provisional fair values of Clear Lam's net assets that decreased 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 $4,341,$3,168, and decreasedincreased other net tangibles assets by $488.$685.
During the first quarter ofnine months ended September 30, 2018, the Company finalized its valuations of the assets and liabilities acquired in conjunction with the 2017 acquisition of Packaging Holdings, 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 provisional fair values of Packaging Holding's net assets that increased inventory by $2,381, decreased deferred tax assets by $6,516,$7,057, increased long-term debt by $664, and increased goodwill by $7,180.$5,340. The adjustments were primarily related to a reduction in the Company’s valuation of acquired tax loss carryforwards, and the fair valuevalues of spare parts inventories and capital lease obligations.
Acquisition-related costs of $3,091$401 and $945 were incurred during the three months ended July 1,September 30, 2018 and July 2,October 1, 2017, respectively, and $3,636$4,037 and $5,270 during the sixnine months ended July 1,September 30, 2018 and July 2, 2017,October 1,2017, respectively. Acquisition-related costs consist primarily of legal and professional fees and are included in "Selling, general and administrative expenses" in the Company's Condensed Consolidated Statements of Income.
On May 25,October 1, 2018, subsequent to the end of the third quarter, the Company entered into a definitive agreement to acquirecompleted the acquisition of the remaining 70 percent interest in Conitex Sonoco (BVI), Ltd. ("Conitex Sonoco") from Texpack, Inc. for total consideration of approximately $133,000 in cash. Final consideration will be subject to a post-closing adjustment for the change in working capital to the date of closing. The Conitex Sonoco joint venture was formed in 1998 betweenwith Texpack, Inc., a Spanish-based global provider of paperboard and paper-based packaging products, and Sonoco’s former North America textile cone business.products. Conitex Sonoco produces uncoated recycled paperboard 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, including four paper mills and seven cone and tube converting operations and two other production facilities. The transaction is subject to normal international regulatory reviews and is expected to close inAlso on October 1, 2018, the fourth quarter of 2018. The Company has also entered into an agreement withacquired from Texpack, Inc. to acquire a rigid paper facility in Spain for approximately $10,000. This transaction is contingent$9,956, the full amount of which was pre-funded on completionSeptember 28, 2018. As these acquisitions were completed subsequent to the end of the Conitex Sonoco acquisitionquarter, the preliminary assessment of the fair values of the assets acquired and will close concurrently with it.liabilities assumed has not been completed. Accordingly, such amounts cannot yet be provided.







13










SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)



Note 5: Shareholders' Equity
Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share:
 Three Months Ended Six Months EndedThree Months Ended Nine Months Ended 
 July 1,
2018		 July 2,
2017		 July 1,
2018		 July 2,
2017		September 30, 2018October 1,
2017		September 30, 2018October 1,
2017
Numerator:        Numerator:
Net income attributable to Sonoco $89,412
 $43,125
 $163,467
 $96,858
Net income attributable to Sonoco $72,415 $72,812 $235,882 $169,670 
Denominator:        Denominator:
Weighted average common shares outstanding:        Weighted average common shares outstanding:
Basic 100,568
 100,258
 100,482
 100,184
Basic 100,640 100,275 100,534 100,214 
Dilutive effect of stock-based compensation 472
 459
 483
 665
Dilutive effect of stock-based compensation 400 409 459 579 
Diluted 101,040
 100,717
 100,965
 100,849
Diluted 101,040 100,684 100,993 100,793 
Net income attributable to Sonoco per common share:Net income attributable to Sonoco per common share:      Net income attributable to Sonoco per common share:
Basic $0.89
 $0.43
 $1.63
 $0.97
Basic $0.72 $0.73 $2.35 $1.69 
Diluted $0.88
 $0.43
 $1.62
 $0.96
Diluted $0.72 $0.72 $2.34 $1.68 
Potentially dilutive securities are calculated in accordance with the treasury stock method, which assumes the proceeds from the exercise of all dilutive stock appreciation 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 market price of the stock during the reporting period or assumed repurchases from proceeds from the exercise of the SARs were antidilutive. These SARs may become dilutive in the future if the market price of the Company's common stock appreciates.
The average number of SARs that were not dilutive and, therefore, not included in the computation of diluted earnings per share during the three- and six-monthnine-month periods ended July 1,September 30, 2018 and July 2, 2017October 1,2017 was as follows:
  Three Months Ended Six Months Ended
  July 1,
2018		 July 2,
2017		 July 1,
2018		 July 2,
2017
         
Anti-dilutive stock appreciation rights 1,043
 532
 891
 444
Three Months Ended Nine Months Ended 
September 30, 2018October 1,
2017		September 30, 2018October 1, 2017
Anti-dilutive stock appreciation rights 895 531 892 473 
No adjustments were made to net income attributable to Sonoco in the computations of earnings per share.
Stock Repurchases
On February 10, 2016, the Company’s Board of Directors authorized the repurchase of up to 5,000 shares of the Company's common stock. A total of 2,030 were purchased in 2016. No shares were repurchased under this authorization during 2017 or during the sixnine months ended July 1,September 30, 2018. Accordingly, a total of 2,970 shares remain available for repurchase at July 1,September 30, 2018.
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 87135 shares in the sixnine months ended July 1,September 30, 2018 at a cost of $4,558,$6,987, and 111113 shares in the sixnine months endedJuly 2, October 1, 2017 at a cost of $5,884.$5,942.






14
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Dividend Declarations
On AprilJuly 18, 2018, the Board of Directors declared a regular quarterly dividend of $0.41 per share. This dividend was paid on June 8,September 10, 2018 to all shareholders of record as of May 11,August 10, 2018.
On July 18,October 16, 2018, the Board of Directors declared a regular quarterly dividend of $0.41 per share. This dividend is payable on SeptemberDecember 10, 2018 to all shareholders of record as of August 10,November 9, 2018.


Note 6: Restructuring and Asset Impairment
The Company has engaged in a number of restructuring 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 July 1,September 30, 2018, are reported as “2016 and Earlier Actions.”
Following are the total restructuring and asset impairment charges, net of adjustments, recognized by the Company during the periods presented: 
 2018 201720182017
 Second Quarter Six Months Second Quarter Six MonthsThird Quarter Nine Months Third Quarter Nine Months 
Restructuring/Asset impairment:        Restructuring/Asset impairment:
2018 Actions $2,708
 $4,915
 $—
 $—
2018 Actions $19,348 $24,263 $— $— 
2017 Actions 1,017
 1,422
 3,884
 6,188
2017 Actions 3,184 4,606 1,610 7,798 
2016 and Earlier Actions (158) 293
 3,675
 5,482
2016 and Earlier Actions (471)(178)(1,301)4,181 
Other asset impairments —
 —
 338
 338
Other asset impairments — — 202 540 
Restructuring/Asset impairment charges $3,567
 $6,630
 $7,897
 $12,008
Restructuring/Asset impairment charges 22,061 28,691 511 12,519 
Income tax benefit $(1,046) (1,731) $(2,338) (3,636)Income tax benefit (5,465)(7,196)(445)(4,081)
Less: Costs attributable to noncontrolling interests, net of tax (15) (20) (12) (14)Less: Costs attributable to noncontrolling interests, net of tax (28)(48)(21)(35)
Restructuring/asset impairment charges attributable to Sonoco, net of tax $2,506
 $4,879
 $5,547
 $8,358
Restructuring/asset impairment charges attributable to Sonoco, net of tax $16,568 $21,447 $45 $8,403 
Pre-tax restructuring and asset impairment charges are included in “Restructuring/Asset impairment charges” in the Condensed Consolidated Statements of Income.
When recognizable in accordance with GAAP, the Company expects to recognize future additional charges totaling approximately $2,350$3,900 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 2018. The Company continually evaluates its cost structure, including its manufacturing capacity, and additional restructuring actions are likely to be undertaken.
2018 Actions
During 2018, the Company announced the closureclosures of a flexible packaging plant in North Carolina, and a global brand management facility in Canada, (bothand a thermoformed packaging plant in California (all part of the Consumer Packaging segment), a tubestwo tube and cores plantcore plants, one in Alabama (partand one in Canada (both 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 Packaging segment included charges associated with exiting a single-customer contract at a packaging center near Atlanta, Georgia. In addition, approximately 55100 positions were eliminated in the first halfnine months of 2018 in conjunction with the Company's ongoing organizational effectiveness efforts.
15
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Below is a summary of 2018 Actions and related expenses by segment and by type incurred and estimated to be incurred through completion.
2018 Actions Third Quarter 2018 Total
Incurred
to Date 		Estimated
Total Cost 
Severance and Termination Benefits 
Consumer Packaging $1,154 $2,848 $4,148 
Display and Packaging 1,134 1,865 1,865 
Paper and Industrial Converted Products 608 $1,900 1,900 
Protective Solutions 232 1,008 1,008 
Corporate — 243 243 
Asset Impairment / Disposal of Assets 
Consumer Packaging 305 380 380 
Display and Packaging 4,517 4,517 4,517 
Paper and Industrial Converted Products 70 70 70 
Protective Solutions — (243)(243)
Other Costs 
Consumer Packaging 361 366 866 
Display and Packaging 9,729 9,732 9,732 
Paper and Industrial Converted Products 1,250 1,543 1,643 
Protective Solutions — 46 46 
Corporate (12)(12)(12)
Total Charges and Adjustments $19,348 $24,263 $26,163 
2018 Actions Second Quarter 2018 Total
Incurred
to Date		 Estimated
Total Cost
Severance and Termination Benefits      
Consumer Packaging $906
 $1,694
 $1,994
Display and Packaging 556
 731
 731
Paper and Industrial Converted Products 301
 $1,292
 1,292
Protective Solutions 517
 776
 776
Corporate 20
 243
 243
Asset Impairment / Disposal of Assets      
Consumer Packaging 89
 75
 75
Protective Solutions 29
 (243) (243)
Other Costs      
Consumer Packaging (6) 5
 105
Display and Packaging 3
 3
 3
Paper and Industrial Converted Products 293
 293
 1,293
Protective Solutions —
 46
 146
Total Charges and Adjustments $2,708
 $4,915
 $6,415

The following table sets forth the activity in the 2018 Actions restructuring accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets:
2018 Actions Severance
and
Termination
Benefits 		Asset Impairment/
Disposal
of Assets 		Other
Costs 		Total 
Accrual Activity
2018 Year to Date 
Liability at December 31, 2017 $— $— $— $— 
2018 charges 7,864 4,724 11,675 24,263 
Cash receipts/(payments) (4,166)24,217 (11,385)8,666 
Asset write downs/disposals — (28,941)— (28,941)
Foreign currency translation (17)— 2 (15)
Liability at September 30, 2018 $3,681 $— $292 $3,973 
2018 Actions 
Severance
and
Termination
Benefits
 
Asset
Impairment/
Disposal
of Assets
 
Other
Costs
 Total
Accrual Activity
2018 Year to Date		   
Liability at December 31, 2017 $—
 $—
 $—
 $—
2018 charges 4,736
 (168) 347
 4,915
Cash receipts/(payments) (2,039) 2,049
 (309) (299)
Asset write downs/disposals —
 (1,881) —
 (1,881)
Foreign currency translation (22) —
 —
 (22)
Liability at July 1, 2018 $2,675
 $—
 $38
 $2,713

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 and inventory with net book values of $24,869 and  $1,810, respectively. 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 protective packaging plant in North Carolina. The Company received proceeds of $2,019 from the sale and wrote off assets of $1,747.
"Other costs" include a contract termination fee of $9,600 related to exiting the single-customer contract as well as 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 2018 Actions restructuring costs by the end of 2018 using cash generated from operations.


16
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

2017 Actions
During 2017, the Company announced the closure of an expanded foam protective packaging plant in the United States (part of the Protective Solutions segment) and 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). In addition, approximately 255 positions were eliminated throughout 2017 in conjunction with the Company's ongoing organizational effectiveness efforts.
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

Below is a summary of 2017 Actions and related expenses by segment and by type incurred and estimated to be incurred through completion.
20182017Total
Incurred
to Date 		 Estimated
Total Cost 
2017 Actions Third Quarter Nine Months Third Quarter Nine Months 
Severance and Termination Benefits 
Consumer Packaging $2,397 $3,453 $60 $1,376 $7,644 $8,744 
Display and Packaging — (15)— 172 726 726 
Paper and Industrial Converted Products 4 6 748 2,952 4,024 4,024 
Protective Solutions (149)163 83 1,057 1,561 1,561 
Corporate — — (4)452 452 452 
Asset Impairment / Disposal of Assets 
Consumer Packaging — — 126 126 351 351 
Display and Packaging — 193 — — 193 193 
Paper and Industrial Converted Products — (1,264)13 13 (1,359)(1,359)
Protective Solutions 93 93 55 832 964 964 
Other Costs 
Consumer Packaging 406 958 37 288 1,837 2,037 
Display and Packaging 213 (13)— — 776 1,076 
Paper and Industrial Converted Products 131 772 62 100 1,773 1,973 
Protective Solutions 89 260 430 430 1,002 1,102 
Corporate — — — — (9)(9)
Total Charges and Adjustments $3,184 $4,606 $1,610 $7,798 $19,935 $21,835 
  2018 2017 
Total
Incurred
to Date
  Estimated
Total Cost
2017 Actions Second Quarter Six Months Second Quarter Six Months  
Severance and Termination Benefits            
Consumer Packaging $684
 $1,056
 $349
 $1,316
 $5,247
 $5,247
Display and Packaging (7) (15) 66
 172
 726
 726
Paper and Industrial Converted Products (2) 2
 1,663
 2,204
 4,020
 4,020
Protective Solutions 179
 312
 899
 974
 1,710
 1,710
Corporate —
 —
 —
 456
 452
 452
Asset Impairment / Disposal of Assets            
Consumer Packaging $—
 —
 —
 —
 351
 351
Display and Packaging 27
 193
 —
 —
 193
 193
Paper and Industrial Converted Products (599) (1,264) —
 —
 (1,359) (1,359)
Protective Solutions —
 —
 777
 777
 871
 871
Other Costs            
Consumer Packaging $445
 552
 92
 251
 1,431
 1,931
Display and Packaging 122
 (226) —
 —
 563
 813
Paper and Industrial Converted Products 91
 641
 38
 38
 1,642
 1,642
Protective Solutions 77
 171
 —
 —
 913
 913
Corporate —
 —
 —
 —
 (9) (9)
Total Charges and Adjustments $1,017
 $1,422
 $3,884
 $6,188
 $16,751
 $17,501

The following table sets forth the activity in the 2017 Actions restructuring accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets:
2017 Actions Severance
and
Termination
Benefits		 Asset
Impairment/
Disposal
of Assets		 Other
Costs		 Total2017 Actions Severance
and
Termination
Benefits 		Asset
Impairment/
Disposal
of Assets 		Other
Costs 		Total 
Accrual Activity
2018 Year to Date
 Accrual Activity
2018 Year to Date
Liability at December 31, 2017 $3,889
 $—
 $213
 $4,102
Liability at December 31, 2017 $3,889 $— $213 $4,102 
2018 charges 1,355
 (1,071) 1,138
 1,422
2018 charges 3,607 (978)1,977 4,606 
Cash receipts/(payments) (3,052) 1,841
 (1,434) (2,645)Cash receipts/(payments) (5,714)1,841 (2,173)(6,046)
Asset write downs/disposals —
 (770) —
 (770)Asset write downs/disposals — (863)— (863)
Foreign currency translation (12) —
 94
 82
Foreign currency translation (8)— (10)(18)
Liability at July 1, 2018 $2,180
 $—
 $11
 $2,191
Liability at September 30, 2018 Liability at September 30, 2018 $1,774 $— $7 $1,781 

Included in "Asset Impairment/Disposal of Assets" above are gains totaling $1,373 related to the sales of the land and buildings associated with two previously closed tube and core facilities. The Company received proceeds of $1,833 from these sales and wrote off assets with a book value totaling $460.
17
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

“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 2017 Actions restructuring costs by the end of 2018 using cash generated from operations.




SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


2016 and Earlier Actions
2016 and Earlier Actions are comprised of a number of plant closures and workforce reductions initiated prior to 2017. Charges for these actions in both 2018 and 2017 primarily relate to the cost of plant closures including severance, equipment removal, plant security, property taxes and insurance.
The Company expects to recognize future pretax charges of approximately $100 associated with 2016 and Earlier Actions.
Below is a summary of expenses/(income) incurred by segment for 2016 and Earlier Actions for the three- and six-monthnine-month periods ended July 1,September 30, 2018 and July 2,October 1, 2017.
20182017
2016 and Earlier Actions Third Quarter Nine Months Third Quarter Nine Months 
Consumer Packaging $(292)$41 $(1,334)$1,259 
Display and Packaging — (23)(2)549 
Paper and Industrial Converted Products (198)(251)(32)2,196 
Protective Solutions 19 55 53 156 
Corporate — — 14 21 
Total (credits)/charges, net of adjustments $(471)$(178)$(1,301)$4,181 
  2018 2017
2016 and Earlier Actions Second Quarter Six Months Second Quarter Six Months
Consumer Packaging $(132) $333
 $2,619
 $2,593
Display and Packaging (24) (23) 156
 551
Paper and Industrial Converted Products (20) (53) 875
 2,228
Protective Solutions 18
 36
 25
 103
Corporate —
 —
 —
 7
Total (credits)/charges, net of adjustments $(158) $293
 $3,675
 $5,482

The accrual for 2016 and Earlier Actions totaled $1,577$1,177 and $3,044 at July 1,September 30, 2018 and December 31, 2017, respectively, and is included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets. The majority of the liability associated with 2016 and Earlier Actions relates to unpaid severance and building lease termination costs and is expected to be paid by the end of 2018 using cash generated from operations.
Other asset impairments
As a result of the continued devaluation of the Venezuelan Bolivar, the Company recognized impairment charges against inventories and certain long-term nonmonetary assets totaling $338 in the second quarterand third quarters of 2017.2017 totaling $540. The assets were deemed to be impaired as the U.S. dollar value of the projected cash flows from these assets was no longer sufficient to recover their U.S. dollar carrying values.





18













SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)



Note 7: 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 sixnine months ended JulySeptember 30, 2018 and October 1, 2018 and July 2, 2017:
 
Gains and
Losses on Cash
Flow Hedges
 
Defined
Benefit
Pension Items
 
Foreign
Currency
Items
 
Accumulated
Other
Comprehensive
Loss
Gains and
Losses on Cash
Flow Hedges 		Defined
Benefit
Pension Items 		Foreign
Currency
Items 		Accumulated
Other
Comprehensive
Loss 
Balance at December 31, 2017
$(641)
$(467,136)
$(198,495)
$(666,272)Balance at December 31, 2017 $(641)$(467,136)$(198,495)$(666,272)
Other comprehensive income/(loss) before reclassifications
(1,139)
1,068

(39,927)
(39,998)Other comprehensive income/(loss) before reclassifications 583 1,221 (38,011)(36,207)
Amounts reclassified from accumulated other comprehensive loss to net income
(182)
14,171

—

13,989
Amounts reclassified from accumulated other comprehensive loss to net income (325)20,979 — 20,654 
Amounts reclassified from accumulated other comprehensive loss to fixed assets
56

—

—

56
Amounts reclassified from accumulated other comprehensive loss to fixed assets 136 — — 136 
Other comprehensive income/(loss)
(1,265)
15,239

(39,927)
(25,953)Other comprehensive income/(loss) 394 22,200 (38,011)(15,417)
Amounts reclassified from retained earnings to accumulated other comprehensive loss $(176) $—
 $—
 (176)Amounts reclassified from retained earnings to accumulated other comprehensive loss (176)$— $— (176)
Balance at July 1, 2018
$(2,082)
$(451,897)
$(238,422)
$(692,401)
Balance at September 30, 2018 Balance at September 30, 2018 $(423)$(444,936)$(236,506)$(681,865)
        
Balance at December 31, 2016 $1,939
 $(453,821) $(286,498) $(738,380)Balance at December 31, 2016 1,939 (453,821)(286,498)(738,380)
Other comprehensive income/(loss) before reclassifications (2,220) 18,117
 59,841
 75,738
Other comprehensive income/(loss) before reclassifications (654)22,337 86,769 108,452 
Amounts reclassified from accumulated other comprehensive loss to net income (1,257) 29,893
 —
 28,636
Amounts reclassified from accumulated other comprehensive loss to net income (2,984)35,974 — 32,990 
Amounts reclassified from accumulated other comprehensive loss to fixed assets 10
 —
 —
 10
Amounts reclassified from accumulated other comprehensive loss to fixed assets (15)— — (15)
Other comprehensive income/(loss) (3,467) 48,010
 59,841
 104,384
Other comprehensive income/(loss) (3,653)58,311 86,769 141,427 
Balance at July 2, 2017 $(1,528) $(405,811) $(226,657) $(633,996)
Balance at October 1, 2017 Balance at October 1, 2017 $(1,714)$(395,510)$(199,729)$(596,953)
        


"Other comprehensive income/(loss) before reclassifications" during the sixnine months ended July 2,October 1, 2017, includes $5,071 of "Defined Benefit Pension 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.

19
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


The following table summarizes the effects on net income of significant amounts reclassified from each component of accumulated other comprehensive loss for the three- and six-monthnine-month periods ended July 1,September 30, 2018 and July 2, 2017: October 1,2017:
 
Amount Reclassified from Accumulated
Other Comprehensive Loss
 Amount Reclassified from Accumulated
Other Comprehensive Loss 
 Three Months EndedSix Months Ended Three Months Ended Nine Months Ended 
Details about Accumulated Other Comprehensive
Loss Components
 July 1,
2018		July 2,
2017		July 1,
2018		 July 2,
2017		 
Affected Line Item in 
the Condensed Consolidated 
Statements of Income
Details about Accumulated Other
Comprehensive
Loss Components 		September 30, 2018October 1,
2017		September 30, 2018October 1, 2017Affected Line Item in
the Condensed Consolidated
Statements of Income 
Gains and losses on cash flow hedgesGains and losses on cash flow hedges    Gains and losses on cash flow hedges
Foreign exchange contracts $(240)$2,243
$570
 $3,283
 Net salesForeign exchange contracts $614 $4,814 $1,184 $8,097 Net sales 
Foreign exchange contracts 174
(1,317)(353) (2,042) Cost of salesForeign exchange contracts (260)(2,766)(613)(4,808)Cost of sales 
Commodity contracts 68
463
10
 711
 Cost of salesCommodity contracts (153)656 (143)1,367 Cost of sales 
 2
1,389
227
 1,952
 Income before income taxes201 2,704 428 4,656 Income before income taxes 
 (1)(497)(45) (695) Provision for income taxes(58)(977)(103)(1,672)Provision for income taxes 
 $1
$892
$182
 $1,257
 Net income$143 $1,727 $325 $2,984 Net income 
Defined benefit pension items 
    Defined benefit pension items
Effect of curtailment loss(a)
Effect of curtailment loss(a)
$(97)$— $(97)$— Non-operating pension (income)/cost 
Effect of settlement loss(a)
 $(645)$(31,074)$(645) $(31,074) Selling, general and 
administrative expenses
Effect of settlement loss(a)
$— $(476)$(645)$(31,550)Non-operating pension (income)/cost 
Amortization of defined benefit pension items(a)
 (8,983)(9,668)(18,284) (19,785) Non-operating pension (income)/cost
Amortization of defined
benefit pension items(a)
(9,068)(9,540)(27,352)(29,325)Non-operating pension (income)/cost 
 (9,628)(40,742)(18,929) (50,859) Income before income taxes(9,165)(10,016)(28,094)(60,875)Income before income taxes 
 2,419
17,224
4,758
 20,966
 Provision for income taxes2,357 3,935 7,115 24,901 Provision for income taxes 
 $(7,209)$(23,518)$(14,171) $(29,893) Net income$(6,808)$(6,081)$(20,979)$(35,974)Net income 
Total reclassifications for the period $(7,208)$(22,626)$(13,989) $(28,636) Net incomeTotal reclassifications for the period $(6,665)$(4,354)$(20,654)$(32,990)Net income 
 
(a)
(a)See Note 12 for additional details.
20
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

See Note 12 for additional details.

The following table summarizes the before and after tax amounts for the various components of other comprehensive income/(loss) for the three-month periods ended July 1,September 30, 2018 and July 2, 2017:October 1,2017:
Three months ended September 30, 2018 Three months ended October 1, 2017 
Before Tax
Amount 		Tax
(Expense)
Benefit 		After Tax
Amount 		Before Tax
Amount 		Tax
(Expense)
Benefit 		After Tax
Amount 
Foreign currency items $1,916 $— $1,916 $26,928 $— $26,928 
Defined benefit pension items: 
Other comprehensive income/(loss) before
reclassifications 		184 (31)153 6,634 (2,414)4,220 
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income 		9,165 (2,357)6,808 10,016 (3,935)6,081 
Net other comprehensive income/(loss) from
defined benefit pension items 		9,349 (2,388)6,961 16,650 (6,349)10,301 
Gains and losses on cash flow hedges: 
Other comprehensive income/(loss) before
reclassifications 		2,415 (693)1,722 2,425 (859)1,566 
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income 		(201)58 (143)(2,704)977 (1,727)
Amounts reclassified from accumulated other
comprehensive income/(loss) to fixed assets 		80 — 80 (25)— (25)
Net other comprehensive income/(loss) from
cash flow hedges 		2,294 (635)1,659 (304)118 (186)
Other comprehensive income/(loss) $13,559 $(3,023)$10,536 $43,274 $(6,231)$37,043 
The following table summarizes the before and after tax amounts for the various components of other comprehensive income/(loss) for the nine-month periods ended September 30, 2018 and October 1,2017:
Nine months ended September 30, 2018 Nine months ended October 1, 2017 
Before Tax
Amount 		Tax
(Expense)
Benefit 		After Tax
Amount 		Before Tax
Amount 		Tax
(Expense)
Benefit 		After Tax
Amount 
Foreign currency items $(38,011)$— $(38,011)$86,769 $— $86,769 
Defined benefit pension items: 
Other comprehensive income/(loss) before
reclassifications 		1,674 (453)1,221 25,655 (3,318)22,337 
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income 		28,094 (7,115)20,979 60,875 (24,901)35,974 
Net other comprehensive income/(loss) from
defined benefit pension items 		29,768 (7,568)22,200 86,530 (28,219)58,311 
Gains and losses on cash flow hedges: 
Other comprehensive income/(loss) before
reclassifications 		784 (201)583 (1,021)367 (654)
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income 		(428)103 (325)(4,656)1,672 (2,984)
Amounts reclassified from accumulated other
comprehensive income/(loss) to fixed assets 		136 — 136 (15)— (15)
Net other comprehensive income/(loss) from
cash flow hedges 		492 (98)394 (5,692)2,039 (3,653)
Other comprehensive income/(loss) $(7,751)$(7,666)$(15,417)$167,607 $(26,180)$141,427 





21
   Three months ended July 1, 2018 Three months ended July 2, 2017
   Before Tax AmountTax (Expense) BenefitAfter Tax Amount Before Tax AmountTax (Expense) BenefitAfter Tax Amount
Foreign currency items $(62,480)$—
$(62,480) $29,685
$—
$29,685
Defined benefit pension items:        
 
Other comprehensive income/(loss) before
   reclassifications
 2,635
(422)2,213
 19,168
(5,975)13,193
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to net income
 9,628
(2,419)7,209
 40,742
(17,224)23,518
 
Net other comprehensive income/(loss) from
   defined benefit pension items
 12,263
(2,841)9,422
 59,910
(23,199)36,711
Gains and losses on cash flow hedges:        
 
Other comprehensive income/(loss) before
   reclassifications
 (3,106)784
(2,322) 602
(196)406
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to net income
 (2)1
(1) (1,389)497
(892)
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to fixed assets
 11
—
11
 (32)—
(32)
 
Net other comprehensive income/(loss) from
   cash flow hedges
 (3,097)785
(2,312) (819)301
(518)
Other comprehensive income/(loss) $(53,314)$(2,056)$(55,370) $88,776
$(22,898)$65,878
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

The following table summarizes the before and after tax amounts for the various components of other comprehensive income/(loss) for the six-month periods ended July 1, 2018 and July 2, 2017:

   Six months ended July 1, 2018 Six months ended July 2, 2017
   Before Tax AmountTax (Expense) BenefitAfter Tax Amount Before Tax AmountTax (Expense) BenefitAfter Tax Amount
Foreign currency items $(39,927)$—
$(39,927) $59,841
$—
$59,841
Defined benefit pension items:        
 
Other comprehensive income/(loss) before
   reclassifications
 1,490
(422)1,068
 19,021
(904)18,117
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to net income
 18,929
(4,758)14,171
 50,859
(20,966)29,893
 
Net other comprehensive income/(loss) from
   defined benefit pension items
 20,419
(5,180)15,239
 69,880
(21,870)48,010
Gains and losses on cash flow hedges:        
 
Other comprehensive income/(loss) before
   reclassifications
 (1,631)492
(1,139) (3,446)1,226
(2,220)
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to net income
 (227)45
(182) (1,952)695
(1,257)
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to fixed assets
 56
—
56
 10
—
10
 
Net other comprehensive income/(loss) from
   cash flow hedges
 (1,802)537
(1,265) (5,388)1,921
(3,467)
Other comprehensive income/(loss) $(21,310)$(4,643)$(25,953) $124,333
$(19,949)$104,384


Note 8: Goodwill and Other Intangible Assets
Goodwill
A summary of the changes in goodwill by segment for the sixnine months ended July 1,September 30, 2018 is as follows: 
Consumer
Packaging 		Display
and
Packaging 		Paper and
Industrial
Converted
Products 		Protective
Solutions 		Total 
Goodwill at December 31, 2017 $572,716 $203,414 $233,778 $231,967 $1,241,875 
2018 Acquisitions 47,193 — — — 47,193 
Foreign currency translation (7,221)— (4,654)(333)(12,208)
Other 8,508 — — — 8,508 
Goodwill at September 30, 2018 $621,196 $203,414 $229,124 $231,634 $1,285,368 
  
Consumer
Packaging
 
Display
and
Packaging
 
Paper and
Industrial
Converted
Products
Protective
Solutions
 Total
Goodwill at December 31, 2017 $572,716
 $203,414
 $233,778
$231,967
 $1,241,875
2018 Acquisitions 48,387
 —
 —
—
 48,387
Foreign currency translation (8,715) —
 (4,896)(333) (13,944)
Other 11,521
 —
 —
—
 11,521
Goodwill at July 1, 2018 $623,909
 $203,414
 $228,882
$231,634
 $1,287,839

On April 12, 2018, the Company completed theThe acquisition of Highland Packaging Solutions ("Highland") whichin April 2018 resulted in the recognition of $48,387$47,193 of goodwill. Reflected in "Other" above areIn addition, measurement period adjustments made in the first sixnine months of 2018 to finalize the fair values of the assets acquired and the liabilities assumed in the 2017 acquisitions of Packaging Holdings and Clear Lam, resultingresulted in increases in goodwill of $7,180$5,340 and $4,341,$3,168, respectively. These adjustments are reflected above in "Other." See Note 4 for additional information.
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. The Company completed its most recent annual goodwill impairment testing during the third quarter of 2017.2018. As part of this testing, the Company analyzed certain qualitative and quantitative factors in determining goodwill impairment. The Company's assessments reflected a number of significant management assumptions and estimates including discount rates, and the Company's forecast of sales volumes and prices, new business, 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. Based on its assessments, the Company concluded that there was no impairment of goodwill for any of its reporting units.
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

Although no reporting units failed the assessments noted above, in management’s opinion, the reporting units havinggoodwill of the greatest risk of a significant future impairment if actual results fall short of expectations are Display and Packaging and Paper and Industrial Converted Products - Europe.reporting unit is at risk of impairment in the near term if operating performance does not improve in line with management's expectations, or if there is a negative change in the long-term outlook for the business or in other factors such as the discount rate. Total goodwill associated with thesethis reporting unitsunit was $203,414  and $91,639, respectively, at July 1,September 30, 2018. AIn addition, a large portion of projected sales in the Display and Packaging reporting unit is concentrated in several major customers, the loss of any of which could impact the Company's conclusion regarding the likelihood of goodwill impairment for the unit.
There were no triggering events identified between the most recent annual impairment test

22
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and July 1, 2018. Although on April 20, 2018, the Company was advised by one if its Display and Packaging customers that its contract would not be renewed, it has subsequently been able to successfully retain this business through 2021. Because the estimated fair value of this reporting unit is extremely close to its carrying value, it is likely that any significant negative changeshares in assumptions regarding future performance and / or discount rate would result in a goodwill impairment charge being recognized.  thousands except per share data)

(unaudited)

Other Intangible Assets
A summary of other intangible assets as of July 1,September 30, 2018 and December 31, 2017 is as follows:
 July 1,
2018		 December 31,
2017		September 30, 2018December 31, 2017
Other Intangible Assets, gross:    Other Intangible Assets, gross:
Patents $21,969
 $21,957
Patents $22,114 $21,957 
Customer lists 535,038
 497,634
Customer lists 537,027 497,634 
Trade names 26,987
 25,148
Trade names 26,990 25,148 
Proprietary technology 20,763
 20,779
Proprietary technology 20,764 20,779 
Land use rights 289
 298
Land use rights 279 298 
Other 2,133
 1,740
Other 2,135 1,740 
Other Intangible Assets, gross $607,179
 $567,556
Other Intangible Assets, gross $609,309 $567,556 
    
Accumulated Amortization:    Accumulated Amortization:
Patents (8,231) (7,187)Patents (8,805)(7,187)
Customer lists (227,296) (210,212)Customer lists (237,285)(210,212)
Trade names (5,777) (4,427)Trade names (6,405)(4,427)
Proprietary technology (14,084) (13,192)Proprietary technology (14,554)(13,192)
Land use rights (49) (47)Land use rights (48)(47)
Other (1,327) (1,196)Other (1,388)(1,196)
Total Accumulated Amortization $(256,764) $(236,261)Total Accumulated Amortization $(268,485)$(236,261)
Other Intangible Assets, net $350,415
 $331,295
Other Intangible Assets, net $340,824 $331,295 

The acquisition of Highland in April 2018 resulted in the addition of $45,610$45,624 of intangible assets, the vast majority of which related to customer lists.  These intangibles will be amortized over a weighted average useful life of approximately 13 years. In addition, measurement period adjustments were made induring the second quarterfirst nine months of 2018 to the provisional fair values of the intangible assets acquired in the July 2017 acquisition of Clear Lam resulting in a $1,300 reduction in the value previously attributed to customer lists. See Note 4 for additional information. In the third quarter of 2018 the Company purchased certain intangible assets in Australia, primarily customer lists, for a total of $2,071. The intangibles acquired in the first nine months of 2018 will be amortized over a weighted average useful life of approximately 13 years.
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 intangible assets with indefinite lives.
Aggregate amortization expense was $12,401$11,664 and $9,378$10,117 for the three months ended July 1,September 30, 2018 and July 2,October 1, 2017, respectively, and $22,603$34,266 and $16,589$26,706 for the sixnine months ended July 1,September 30, 2018 and July 2,October 1, 2017, respectively. Amortization expense on other intangible assets is expected to total approximately $46,100$45,900 in 2018, $45,400$45,400 in 2019, $42,300$43,100 in 2020, $41,400$41,600 in 2021 and $39,500$39,700 in 2022.



SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

Note 9: Debt
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 Solutions. The loan hashad a 364-day term and the Company hashad a one-time option to extend the term for an additional 364 days at its sole discretion. Interest iswas assessed at the London Interbank Offered Rate (LIBOR) plus a margin based on a pricing grid that usesused the Company's creditcredit ratings. The current LIBOR margin iswas 110 basis points. There iswas no required amortization and repayment cancould be accelerated at any time at the discretion of the Company. The Company repaid $50,000entire $100,000 of the borrowings from this term loan duringhad been repaid as of the secondend of the third quarter of 2018.






23
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)



Note 10: 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. 
September 30, 2018December 31, 2017
Carrying
Amount 		Fair
Value 		Carrying
Amount 		Fair
Value 
Long-term debt, net of current portion $1,312,678 $1,388,231 $1,288,002 $1,426,862 
  July 1, 2018 December 31, 2017
  
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Long-term debt, net of current portion $1,274,325
 $1,369,785
 $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 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.
Adoption of Accounting Standards Update 2017-12
The Company elected to early adopt Accounting Standards Update (ASU) 2017-12, "Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities," as of January 1, 2018. The impact of the adoption 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 comprehensive 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 July 1,September 30, 2018 and December 31, 2017,, the Company had derivative financial instruments outstanding to hedge anticipated transactions and certain asset and liability related cash flows. These contracts, which have maturities ranging to December 2019,2020, qualify as cash flow hedges under U.S. GAAP. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and is presented in the same income statement line item as the earnings effect of the hedged item. Gains and losses on the derivative instrument representing hedge components excluded from the assessment of effectiveness are recognized currently in current earnings and are presented in the same line of the income statement expected for the hedged item.

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 July 1,September 30, 2018, natural gas swaps covering approximately 5.08.0 million MMBTUs were outstanding. These contracts represent approximately 74%, 57% and 33%29% of anticipated U.S. and Canadian usage for the remainder of 2018, 2019 and 2019,2020, respectively. Additionally, the Company had swap contracts covering 1,9051,769 metric tons of aluminum, representing approximately 51% of anticipated usage for the remainder of 2018. The fair values of the Company’s commodity cash flow hedges netted to a loss position of $(593)$(575) at July 1,September 30, 2018, and $(1,713)$(1,713) at December 31, 2017.2017. The amount of the loss included in Accumulated Other Comprehensive Loss at July 1,September 30, 2018,, that is expected to be reclassified to the income statement during the next twelve months is $(233)$(320).

24
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Foreign Currency Cash Flow Hedges
The Company has entered into forward contracts to hedge certain anticipated foreign currency denominated sales, purchases, and capital spending forecast to occur in 2018. The net positions of these contracts at July 1,September 30, 2018 were as follows (in thousands):
CurrencyActionQuantity
Colombian pesopurchase3,821,059
1,921,999 
Mexican pesopurchase351,178
167,127 
Polish zlotypurchase217,049
25,763 
Russian rubleCanadian dollar purchase31,506
13,123 
Canadian dollarRussian ruble purchase26,485
9,284 
British poundTurkish lira purchase5,535
2,093 
Turkish liraBritish pound purchase5,194
1,326 
New Zealand dollarsell(262)(131)
Australian dollarsell(709)(355)
Eurosell(51,137)(3,425)

The fair value of these foreign currency cash flow hedges related to forecasted sales and purchases netted to a lossgain position of $(1,826)$313 at July 1,September 30, 2018 and a gain position of $950 at December 31, 2017. In Gains of $313 are expected to be reclassified from accumulated other comprehensive income 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 July 1,September 30, 2018 and at December 31, 2017, the net position of these contracts was $(262)$(235) and $330, respectively. During the sixnine months ended July 1,September 30, 2018, gains from these hedges totaling $56$136 were reclassified from accumulated other comprehensive income and included in the carrying value of the related fixed assets acquired. Losses of $(262)$(235) are expected to be reclassified from accumulated other comprehensive income and included in the carrying value of the related fixed assets acquired during the next twelve months. For all cash flow hedges, losses of $(1,564) are expected to be reclassified from accumulated other comprehensive income to the income statement during the next twelve months.
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 July 1,September 30, 2018,, were as follows (in thousands):
CurrencyActionQuantity
Colombian pesopurchase7,353,411
6,196,372 
Mexican pesopurchase151,893
330,523 
Canadian dollarsellpurchase (52,22823,199 
Saudi Arabian riyal )sell (4,131)
South African rand sell (18,784)

The fair value of the Company’s other derivatives was ina gain position of $471 and a loss position of $(284)$(581) at September 30, 2018 and $(581) at July 1, 2018 and December 31, 2017,, respectively.
25
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


The following table sets forth the location and fair values of the Company’s derivative instruments at July 1,September 30, 2018 and December 31, 2017: 2017:
Description Balance Sheet Location July 1,
2018		 December 31,
2017		Description Balance Sheet Location September 30, 2018December 31, 2017
Derivatives designated as hedging instruments:    Derivatives designated as hedging instruments:
Commodity Contracts Commodity Contracts Prepaid expenses $205 $149 
Commodity Contracts Prepaid expenses $279
 $149
Commodity Contracts Other assets $13 $— 
Commodity Contracts Accrued expenses and other $(658) $(1,417)Commodity Contracts Accrued expenses and other $(577)$(1,417)
Commodity Contracts Other liabilities $(214) $(445)Commodity Contracts Other liabilities $(216)$(445)
Foreign Exchange Contracts Prepaid expenses $154
 $2,232
Foreign Exchange Contracts Prepaid expenses $706 $2,232 
Foreign Exchange Contracts Accrued expenses and other $(1,980) $(1,282)Foreign Exchange Contracts Accrued expenses and other $(628)$(1,282)
Derivatives not designated as hedging instruments:    Derivatives not designated as hedging instruments:
Foreign Exchange Contracts Prepaid expenses $2
 $90
Foreign Exchange Contracts Prepaid expenses $496 $90 
Foreign Exchange Contracts Accrued expenses and other $(286) $(671)Foreign Exchange Contracts Accrued expenses and other $(25)$(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 agreements.
The following tables set forth the effect of the Company’s derivative instruments on financial performance for the three months endedJuly 1,September 30, 2018 and July 2, 2017: October 1,2017: 
Description 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 
Derivatives in Cash Flow Hedging Relationships: 
Three months ended September 30, 2018 
Foreign Exchange Contracts $2,550 Net sales $614 
Cost of sales $(260)
Commodity Contracts $(135)Cost of sales $(153)
Three months ended October 1, 2017 
Foreign Exchange Contracts $3,119 Net sales $4,814 
Cost of sales $(2,766)
Commodity Contracts $(694)Cost of sales $656 
Description Gain or (Loss)
Recognized 		Location of Gain or (Loss) Recognized in
Income Statement 
Derivatives not Designated as Hedging Instruments: 
Three months ended September 30, 2018 
Foreign Exchange Contracts $— Cost of sales 
$(1,008)Selling, general and administrative 
Three months ended October 1, 2017 
Foreign Exchange Contracts $— Cost of sales 
$(3,172)Selling, general and administrative 

Description 
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

Derivatives in Cash Flow Hedging Relationships:  
Three months ended July 1, 2018    
Foreign Exchange Contracts $(4,407) Net sales $(240)
    Cost of sales $174
Commodity Contracts $1,301
 Cost of sales $68
       
Three months ended July 2, 2017    
Foreign Exchange Contracts $509
 Net sales $2,243
    Cost of sales $(1,317)
Commodity Contracts $93
 Cost of sales $463
Description 
Gain or (Loss)
Recognized
 
Location of Gain or (Loss) Recognized in
Income Statement
Derivatives not Designated as Hedging Instruments:    
Three months ended July 1, 2018    
Foreign Exchange Contracts $—
 Cost of sales
  $1,270
 Selling, general and administrative
Three months ended July 2, 2017    
Foreign Exchange Contracts $—
 Cost of sales
  $1,665
 Selling, general and administrative
26
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Three months ended July 1, 2018 Three months ended July 2, 2017Three months ended September 30, 2018 Three months ended October 1, 2017 
DescriptionRevenueCost of sales RevenueCost of salesDescription Revenue Cost of
sales 		Revenue Cost of
sales 
Total amount of income and expense line items presented in the Condensed Consolidated Statements of Income



Total amount of income and expense line items presented in the Condensed Consolidated Statements of Income



$(240)$242
 $2,243
$(854)Total amount of income and expense line items presented in the Condensed Consolidated Statements of Income $614 $(413)$4,814 $(2,110)
    
The effects of cash flow hedging:The effects of cash flow hedging:   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


$(240)$174
 $2,243
$(1,317)
    
Commodity contracts:   
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income


$—
$68
 $—
$463
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 $614 $(260)$4,814 $(2,766)
Commodity contracts: 
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income $— $(153)$— $656 

The following tables set forth the effect of the Company’s derivative instruments on financial performance for the sixnine months endedJuly September 30, 2018 and October 1, 2018 and July 2, 2017: 2017:
Description 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 
Derivatives in Cash Flow Hedging Relationships: 
Nine months ended September 30, 2018 
Foreign Exchange Contracts $(211)Net sales $1,184 
Cost of sales $(613)
Commodity Contracts $995 Cost of sales $(143)
Nine months ended October 1, 2017 
Foreign Exchange Contracts $936 Net sales $8,097 
Cost of sales $(4,808)
Commodity Contracts $(1,957)Cost of sales $1,367 
Description Gain or (Loss)
Recognized 		Location of Gain or (Loss) Recognized in
Income Statement 
Derivatives not Designated as Hedging Instruments: 
Nine months ended September 30, 2018 
Foreign Exchange Contracts $— Cost of sales 
$1,016 Selling, general and administrative 
Nine months ended October 1, 2017 
Foreign Exchange Contracts $— Cost of sales 
$(2,074)Selling, general and administrative 


27
Description 
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

Derivatives in Cash Flow Hedging Relationships:  
Six months ended July 1, 2018    
Foreign Exchange Contracts $(2,761) Net sales $570
    Cost of sales $(353)
Commodity Contracts $1,130
 Cost of sales $10
Six months ended July 2, 2017    
Foreign Exchange Contracts $(2,183) Net sales $3,283
    Cost of sales $(2,042)
Commodity Contracts $(1,263) Cost of sales $711
Description 
Gain or (Loss)
Recognized
 Location of Gain or (Loss) Recognized in
Income Statement
Derivatives not Designated as Hedging Instruments:    
Six months ended July 1, 2018    
Foreign Exchange Contracts $—
 Cost of sales
  $2,024
 Selling, general and administrative
Six months ended July 2, 2017    
Foreign Exchange Contracts $—
 Cost of sales
  $1,098
 Selling, general and administrative


SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Nine months ended September 30, 2018 Nine months ended October 1, 2017 
Six months ended July 1, 2018 Six months ended July 2, 2017
DescriptionRevenueCost of sales RevenueCost of sales
Description Description Revenue Cost of
sales 		Revenue Cost of
sales 
Total amount of income and expense line items presented in the Condensed Consolidated Statements of Income



Total amount of income and expense line items presented in the Condensed Consolidated Statements of Income



$570
$(343) $3,283
$(1,331)Total amount of income and expense line items presented in the Condensed Consolidated Statements of Income $1,184 $(756)$8,097 $(3,441)
    
The effects of cash flow hedging:The effects of cash flow hedging:   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


$570
$(353) $3,283
$(2,042)
    
Commodity contracts:   
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income


$—
$10
 $—
$711
Gain or (loss) on cash flow hedging relationships in Subtopic 815-20: Gain or (loss) on cash flow hedging relationships in Subtopic 815-20:
Foreign exchange contracts: Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income $1,184 $(613)$8,097 $(4,808)
Commodity contracts: Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income $— $(143)$— $1,367 




Note 11: 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 September 30, 2018Assets measured
at NAV 		Level 1 Level 2 Level 3 
Hedge derivatives, net: 
Commodity contracts $(575)$— $— $(575)$— 
Foreign exchange contracts $78 $— $— $78 $— 
Non-hedge derivatives, net: 
Foreign exchange contracts $471 $— $— $471 $— 
Deferred compensation plan assets $290 $— $290 $— $— 
Description December 31, 2017Assets measured
at NAV 		Level 1 Level 2 Level 3 
Hedge derivatives, net: 
Commodity contracts $(1,713)$— $— $(1,713)$— 
Foreign exchange contracts $950 $— $— $950 $— 
Non-hedge derivatives, net: 
Foreign exchange contracts $(581)$— $— $(581)$— 
Deferred compensation plan assets $268 $— $268 $— $— 


28
Description July 1,
2018		 Assets measured at NAVLevel 1 Level 2 Level 3
Hedge derivatives, net:         
Commodity contracts $(593) $—
$—
 $(593) $—
Foreign exchange contracts $(1,826) $—
$—
 $(1,826) $—
Non-hedge derivatives, net:         
Foreign exchange contracts $(284) $—
$—
 $(284) $—
Deferred compensation plan assets $273
 $—
$273
 $—
 $—
          
Description December 31,
2017		 Assets measured at NAVLevel 1 Level 2 Level 3
Hedge derivatives, net:         
Commodity contracts $(1,713) $—
$—
 $(1,713) $—
Foreign exchange contracts $950
 $—
$—
 $950
 $—
Non-hedge derivatives, net:         
Foreign exchange contracts $(581) $—
$—
 $(581) $—
Deferred compensation plan assets $268
 $—
$268
 $—
 $—

SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


As discussed in Note 10, 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 non-financial assets or liabilities that are recognized or disclosed at fair value on a recurring basis. None of the Company’s financial assets or liabilities are 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-monthnine-month periods ended July 1, 2018.September 30, 2018.


Note 12: Employee Benefit Plans
Retirement Plans and Retiree Health and Life Insurance Plans
The Company provides non-contributory defined benefit pension plans to certain of its employees in the United States and certain of its employees in Mexico and Belgium. The Company also sponsors contributory defined benefit pension plans covering the majority of its employees in the United Kingdom, Canada, and the Netherlands. In addition, the Company 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 Contribution (SRC), to their participant accounts in the Sonoco Retirement and Savings Plan. The SRC is equal to 4% of the participant's eligible pay plus 4% of eligible pay in excess of the social security wage base. 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. Remaining active participants in the U.S. qualified plan will become eligible for SRC contributions effective January 1, 2019.
The components of net periodic benefit cost include the following:
Three Months Ended Nine Months Ended 
September 30, 2018October 1,
2017		September 30, 2018October 1, 2017
Retirement Plans 
Service cost $4,532 $4,626 $13,682 $13,835 
Interest cost 13,698 13,716 41,249 42,085 
Expected return on plan assets (22,740)(20,297)(68,529)(60,833)
Amortization of prior service cost 239 228 730 683 
Amortization of net actuarial loss 9,241 9,625 27,823 29,585 
Effect of curtailment loss 97 — 97 — 
Effect of settlement loss — 476 645 31,550 
Net periodic benefit cost $5,067 $8,374 $15,697 $56,905 
Retiree Health and Life Insurance Plans 
Service cost $73 $70 $222 $234 
Interest cost 115 123 336 347 
Expected return on plan assets (222)(408)(912)(1,228)
Amortization of prior service credit (124)(124)(373)(374)
Amortization of net actuarial gain (288)(189)(828)(569)
Net periodic benefit income $(446)$(528)$(1,555)$(1,590)

29
  Three Months Ended Six Months Ended
  July 1,
2018		 July 2,
2017		 July 1,
2018		 July 2,
2017
Retirement Plans      
Service cost $4,478
 $4,497
 $9,150
 $9,209
Interest cost 13,573
 13,668
 27,551
 28,369
Expected return on plan assets (22,580) (19,698) (45,789) (40,536)
Amortization of prior service cost 242
 224
 491
 455
Amortization of net actuarial loss 9,162
 9,792
 18,582
 19,960
Effect of settlement loss 645
 31,074
 645
 31,074
Net periodic benefit cost $5,520
 $39,557
 $10,630
 $48,531
         
Retiree Health and Life Insurance Plans    
Service cost $70
 $80
 $149
 $164
Interest cost 110
 104
 221
 224
Expected return on plan assets (218) (406) (690) (820)
Amortization of prior service credit (123) (123) (249) (250)
Amortization of net actuarial gain (298) (225) (540) (380)
Net periodic benefit income $(459) $(570) $(1,109) $(1,062)

SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


The Company made aggregate contributions of $9,995$13,188 and $34,445$38,483 to its defined benefit retirement and retiree health and life insurance plans during the sixnine months ended July 1,September 30, 2018 and July 2,October 1, 2017, respectively. The Company expects to make additional aggregate contributions of approximately $14,500$8,500 to its defined benefit retirement and retiree health and life insurance plans over the remainder of 2018.


The Company recognized settlement losses totaling $645 during the sixnine months ended July 1,September 30, 2018 resulting from payments made to certain participants of the Company's Canadian pension plan who elected the lump sum option of distribution upon retirement. Settlement losses in the prior year totaling $31,074$31,550 resulted primarily from the Company's initiative to settle the pension obligation of certain terminated vested participants in the U.S. qualified retirement plans, through a lump sum payment or the purchase of an annuity.


During the three-month period ended September 30, 2018, the Company recognized a curtailment loss of $97 related to the termination of a small retirement plan in Canada.

Sonoco Retirement Contribution (SRC)
The SRC contributions, which isare funded annually in the first quarter, totaled $14,151 during the sixnine months ended July 1,September 30, 2018, and $14,066 during the sixnine months ended July 2,October 1, 2017. No additional SRC contributions are expected during the remainder of 2018. The Company recognized expense related to the SRC of $3,855$3,707 and $3,820$3,239 for the quarters ended July 1,September 30, 2018 and July 2,October 1, 2017, respectively, and $7,887$11,594 and $7,691,$10,930, for the six-monthnine-month periods ended July 1,September 30, 2018 and July 2,October 1, 2017, respectively.


Note 13:  Income Taxes
The Company’s effective tax rate for the three- and six-monthnine-month periods ending July 1,September 30, 2018,, was 26.1%21.0% and 25.2%24.0%, respectively, and its effective rate for the three- and six-monthnine-month periods ending July 2,October 1, 2017, was 29.6%33.4% and 31.4%32.3%, respectively. The ratesrate for the three- and six-month periodsnine-month period ending July 1,September 30, 2018 varied from the U.S. statutory rate due primarily to the new international tax regime of the U.S. as part of the enactment of the Tax Cuts and Jobs Act (Tax Act) as well as the effect of state income taxes.taxes and the release of reserves on uncertain tax positions related to the expiration of the statute of limitations. The rate for the three-month period ending September 30, 2018 was impacted by these same items; however, they had the effect of offsetting one another, resulting in an effective tax rate approximately equal to the U.S. statutory rate. The rates for the three- and six-monthnine-month periods ending July 2,October 1, 2017 varied from the U.S. statutory rate due primarily to the favorable effect of certain international operations that were subject to tax rates generally lower than the U.S. rate.rate, as well as the effect of state income taxes.
On December 22, 2017, 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. The Company recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act. No subsequent adjustmentsAdjustments were made during the sixnine months ended July 1,September 30, 2018, to the provisional amounts recorded in December.December as necessary to revalue deferred tax assets and liabilities pursuant to the preparation of the 2017 federal income tax return. As of September 30, 2018, the 2017 U.S. federal tax return, as well as various state income tax returns, had not been finalized. Any suchadditional  adjustments will be recorded to tax expense in 2018 in the fourth quarter the analysis is completed.of 2018.
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 income tax examinations by tax authorities for years before 2012.prior to 2015. The Company is currently under audit byhas entered the appeals process with the Internal Revenue Service for the 2012 and 2013 tax years.
The Company’s reserve for uncertain tax benefits has increaseddecreased by approximately $1,400$1,000 since December 31, 2017, due primarily to an increasea decrease in reserves related to existing uncertain tax positions. The Company believes that it is
30
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

reasonably possible that the amount reserved for unrecognized tax benefits at July 1,September 30, 2018 will decrease by approximately $800$3,200 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 Company’s effective tax rate may fluctuate significantly on a quarterly basis. The Company has operations and
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

pays taxes in many countries outside of the U.S. and taxes 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 the loss of such benefit 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 intercompany note made in 2012, and the subsequent repayment 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”) 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 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 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 distribution, the entire distribution would be characterized as a dividend. The incremental tax liability associated with the income adjustment proposed in the RAR would be approximately $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 willhas now bebeen 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 Treasury 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 Company 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.


Note 14: Revenue Recognition
The Company adopted ASU 2014-09, "Revenue from Contracts 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 condensed consolidated financial statements.
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 for products produced that are customer specific without alternative use. The Company recognizes over time revenue under the output 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 Arrangements (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 Condensed Consolidated Statements of Income.
31
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

The Company has rebate agreements with certain customers. These rebates are recorded as reductions of sales and are accrued using sales data and rebate percentages specific to each customer agreement. Accrued customer rebates are included in "Accrued expenses and other" in the Company's Condensed 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 discounts 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 of the sale.
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

The following table sets forth information about receivables, contract 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 Condensed Consolidated Balance Sheets.
September 30, 2018January 1, 2018
As adjusted 
Contract Assets $50,769 $45,877 
Contract Liabilities $(16,135)$(16,513)
  July 1, 2018 
January 1, 2018
As adjusted
Contract Assets $48,765
 $45,877
Contract Liabilities $(5,737) $(5,215)


Significant changes in the contract assets and liabilities balances during the period were as follows:
September 30, 2018January 1, 2018 Adjusted 
Contract
Asset 		Contract
Liability 		Contract
Asset 		Contract
Liability 
Beginning Balance $45,877 $(16,513)$— $(11,298)
Revenue deferred or rebates accrued — (12,240)— 
Recognized as revenue or rebate paid to customer — 12,618 — — 
Increases due to rights to consideration for customer specific goods produced, but not billed during the period 50,769 — — — 
Transferred to receivables from contract assets recognized at the beginning of the period (45,877)— — — 
Increase as a result of cumulative catch-up arising from changes in the estimate of completion, excluding amounts transferred to receivables during the period — 45,877 (5,215)
Impairment of contract asset — — — — 
Ending Balance $50,769 $(16,135)$45,877 $(16,513)
  July 1, 2018 January 1, 2018 Adjusted
  
Contract
Asset
 
Contract
Liability
 
Contract
Asset
 
Contract
Liability
Beginning Balance$45,877
 $(5,215) $—
 $—
Revenue recognized that was
included in the contract liabilities
balance at the beginning of the period
—
 (522) —
 —
Increases due to rights to consideration for customer specific goods produced, but not billed during the period48,765
 —
 —
 —
Transferred to receivables from contract assets recognized at the beginning of the period(45,877) —
 —
 —
Increase as a result of cumulative catch-up arising from changes in the estimate of completion, excluding amounts transferred to receivables during the period—
 —
 45,877
 (5,215)
Impairment of contract asset—
 —
 —
 —
Acquired as part of a business combinations—
 —
 —
 —
Ending Balance$48,765
 $(5,737) $45,877
 $(5,215)


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 an unconditional right to payment. Contract liabilities represent revenue deferred due to pricing mechanisms utilized by the Company in certain multi-year arrangements. Generally the Company will 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 15.
32
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


The following table sets forth information about revenue disaggregated by primary geographic regions, and timing of revenue recognition for the three-month period ended July 1,September 30, 2018. The table also includes a reconciliation of disaggregated revenue with reportable segments.
Three Months EndedThree Months EndedConsumer Packaging Display and Packaging Paper and Industrial Converted Products Protective SolutionsThree Months Ended Consumer
Packaging 		Display and
Packaging 		Paper and
Industrial
Converted
Products 		Protective
Solutions 
Primary Geographical Markets:Primary Geographical Markets:
 
 
 
Primary Geographical Markets:
United States United States$446,573
 $69,180
 $279,701
 $111,748
United States $431,216 $80,696 $274,966 $91,093 
Europe Europe101,954
 72,377
 90,398
 6,816
Europe 101,848 82,906 84,313 6,721 
Canada Canada30,595
 —
 33,762
 —
Canada 29,427 — 33,233 — 
Other Other36,940
 1,703
 70,276
 14,350
Other 37,663 1,562 71,236 37,882 
TotalTotal$616,062
 $143,260
 $474,137
 $132,914
Total $600,154 $165,164 $463,748 $135,696 
 
 
 
 
Timing of Revenue Recognition:Timing of Revenue Recognition:
 
 
 
Timing of Revenue Recognition:
Products transferred at a point in time Products transferred at a point in time$386,850
 $99,233
 $452,576
 $109,636
Products transferred at a point in time $368,709 $124,437 $438,599 $117,608 
Products transferred over time Products transferred over time229,212
 44,027
 21,561
 23,278
Products transferred over time 231,445 40,727 25,149 18,088 
Total $616,062
 $143,260
 $474,137
 $132,914
Total $600,154 $165,164 $463,748 $135,696 
The following table sets forth information about revenue disaggregated by primary geographic regions, and timing of revenue recognition for the six-monthnine-month period ended July 1,September 30, 2018. The table also includes a reconciliation of disaggregated revenue with reportable segments.
Nine Months Ended Consumer
Packaging 		Display and
Packaging 		Paper and
Industrial
Converted
Products 		Protective
Solutions 
Primary Geographical Markets: 
United States $1,275,775 $223,760 $820,429 $313,341 
Europe 310,865 221,228 267,566 20,326 
Canada 87,728 — 99,868 — 
Other 111,700 6,094 210,675 65,967 
Total $1,786,068 $451,082 $1,398,538 $399,634 
Timing of Revenue Recognition: 
Products transferred at a point in time $1,101,125 $325,313 $1,332,266 $339,043 
Products transferred over time 684,943 125,769 66,272 60,591 
Total $1,786,068 $451,082 $1,398,538 $399,634 

Six Months EndedConsumer Packaging Display and Packaging Paper and Industrial Converted Products Protective Solutions
Primary Geographical Markets:
 
 
 
  United States$844,559
 $143,064
 $545,463
 $222,248
  Europe209,017
 138,322
 183,253
 13,605
  Canada58,301
 —
 66,635
 —
  Other74,037
 4,532
 139,439
 28,085
Total$1,185,914
 $285,918
 $934,790
 $263,938
         
Timing of Revenue Recognition:       
  Products transferred at a point in time$732,416
 $200,876
 $893,667
 $221,435
  Products transferred over time453,498
 85,042
 41,123
 42,503
Total $1,185,914
 $285,918
 $934,790
 $263,938
33













SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Note 15: 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.
The Consumer Packaging segment includes the following 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 management; and metal and peelable membrane ends and closures.
The Display and Packaging segment includes the following products and services: point-of-purchase displays; supply chain management services; retail packaging, including printed backer cards, thermoformed blisters and heat sealing equipment; and paperboard specialties, 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.
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 “Operating profit” 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 Nine Months Ended 
  September 30, 2018October 1,
2017		September 30, 2018October 1, 2017
Net sales: 
Consumer Packaging $600,154 $565,788 $1,786,068 $1,569,231 
Display and Packaging 165,164 135,560 451,082 365,807 
Paper and Industrial Converted Products 463,748 483,376 1,398,538 1,395,075 
Protective Solutions 135,696 139,910 399,634 407,519 
Consolidated $1,364,762 $1,324,634 $4,035,322 $3,737,632 
Intersegment sales: 
Consumer Packaging $782 $2,173 $2,643 $4,749 
Display and Packaging 1,034 679 2,196 2,253 
Paper and Industrial Converted Products 32,828 38,791 100,804 103,844 
Protective Solutions 418 518 1,273 1,436 
Consolidated $35,062 $42,161 $106,916 $112,282 
Operating profit: 
Segment operating profit: 
Consumer Packaging $56,014 $68,922 $180,772 $188,758 
Display and Packaging 3,703 1,993 4,865 6,694 
Paper and Industrial Converted
Products 		53,906 43,696 155,229 115,983 
Protective Solutions 10,433 11,323 34,739 33,270 
Restructuring/Asset impairment charges (22,061)(511)(28,691)(12,519)
Other, net (422)(2,191)(3,381)(10,115)
Consolidated $101,573 $123,232 $343,533 $322,071 

 
Three Months Ended
Six Months Ended
 
July 1,
2018
July 2,
2017
July 1,
2018
July 2,
2017
Net sales:







Consumer Packaging
$616,062

$521,262

$1,185,914

$1,003,443
Display and Packaging
143,260

115,612

285,918

230,247
Paper and Industrial Converted Products
474,137

469,197

934,790

911,699
Protective Solutions
132,914

134,603

263,938

267,609
Consolidated
$1,366,373

$1,240,674

$2,670,560

$2,412,998
Intersegment sales:







Consumer Packaging
$1,122

$1,353

$1,861

$2,576
Display and Packaging
624

824

1,162

1,574
Paper and Industrial Converted Products
33,433

36,680

67,976

65,053
Protective Solutions
282

519

855

918
Consolidated
$35,461

$39,376

$71,854

$70,121
Operating profit:







Segment operating profit:







Consumer Packaging
$63,670

$60,376

$124,758

$119,836
Display and Packaging
(570)
1,479

1,162

4,701
Paper and Industrial Converted Products
61,542

45,437

101,323

72,287
Protective Solutions
13,626

11,016

24,306

21,947
Restructuring/Asset impairment charges
(3,567) (7,897) (6,630) (12,008)
Other, net
(2,839) (5,231) (2,959) (7,924)
Consolidated
$131,862

$105,180

$241,960

$198,839
34


SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Note 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.


Environmental Matters
The Company is subject to a variety of environmental and pollution control laws and regulations in all jurisdictions 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 Spartanburg site was estimated to be $17,400$17,400 at the time of 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 $1,116$1,293 on remediation of the Spartanburg site. During previous years, the Company 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 July 1,September 30, 2018 and December 31, 2017,, the Company's accrual for environmental contingencies related to the Spartanburg site totaled $16,301$16,124 and $16,504,$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 responsible 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 current 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. At July 1,September 30, 2018 and December 31, 2017, the Company's accrual for these other sites totaled $3,338$3,311 and $3,802, respectively.
Summary
As of July 1,September 30, 2018 and December 31, 2017,, the Company (and its subsidiaries) had accrued $19,639$19,435 and $20,306,$20,306, respectively, related to environmental contingencies. These accruals are included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets.
Other Legal Matters
In addition to those matters described above, the Company is subject to other various legal proceedings, claims, and litigation arising in the ordinary course of business. While the outcome of these matters could differ from management’s expectations, the Company does not believe the resolution of these matters has a reasonable possibility of having a material adverse effect on the Company’s financial statements.




35



Report of Independent Registered Public Accounting Firm


To the Board of Directors and Shareholders of Sonoco Products Company,


Results of Review of Financial Statements


We have reviewed the accompanying condensed consolidated balance sheet of Sonoco Products Company and its subsidiariesas of July 1,September 30, 2018, and the related condensed consolidated statements of income and comprehensive income for the three-month and six-monthnine-month periods ended July 1,September 30, 2018 and July 2,October 1, 2017 and the condensed consolidated statement of cash flows for the six-monthnine-month periods ended July 1,September 30, 2018 and July 2,October 1, 2017,including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.


We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedbalance sheet of the Company as of December 31, 2017, and the related consolidated statements of income, comprehensive income, changes in total equityand of cash flowsfor the year then ended (not presented herein), and in our report dated February 28, 2018, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2017, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.


Basis for Review Results


These interim financial statements are the responsibility of the Company’s management.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 review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.




/s/PricewaterhouseCoopers LLP


Charlotte, North Carolina
August 1,October 31, 2018


36
SONOCO PRODUCTS COMPANY

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.


Statements included in this Quarterly Report on Form 10-Q 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, statements 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;
• plans with respect to repatriation of off-shore earnings;
• 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 proceedings;
• 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 commodity pricing risks;
• costs of labor;
• work stoppages due to labor disputes;
• success of new product development, introduction and sales;
37
SONOCO PRODUCTS COMPANY
• consumer demand for products and changing consumer preferences;
SONOCO PRODUCTS COMPANY

• ability to be the low-cost global leader in customer-preferred packaging solutions within targeted segments;
• competitive pressures, including new product development, industry overcapacity, and changes in competitors' pricing for products;
• ability to maintain or increase productivity levels, contain or reduce costs, and maintain positive price/cost relationships;
• 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 leadership and a reputation for quality;
• ability to attract and retain talented and qualified employees, 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 acquisitions 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 business 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 benefit 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;
• 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;
• accuracy in valuation of deferred tax assets;
• accuracy of assumptions underlying projections related to goodwill impairment testing, and accuracy of management's assessment of goodwill impairment;
• accuracy of assumptions underlying fair value measurements, 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;
• failure 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 greenhouse 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.


38
SONOCO PRODUCTS COMPANY

More information about the risks, uncertainties and assumptions that may cause actual results to differ materially from those expressed or forecasted in forward-looking statements is provided in the Company's Annual Report on Form 10-K under Item 1A - "Risk Factors" and throughout other sections of that 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 report 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.


COMPANY OVERVIEW
Sonoco is a leading provider of consumer packaging, industrial products, protective packaging and packaging supply chain services, with approximately 300 locations in 33 countries.
Sonoco competes in multiple product categories, with its operations organized and reported in four segments: Consumer Packaging, Display and Packaging, Paper and Industrial Converted Products, and Protective Solutions. The majority of the Company’s revenues are from products and services sold to consumer and industrial products companies for use in the packaging of their products for sale or shipment. The Company also manufactures paperboard, primarily from recycled materials, for both internal use and open market sale. Each of the Company’s operating units has its own sales staff and maintains direct sales relationships with its customers.
SecondThird Quarter 2018 Compared with SecondThird Quarter 2017
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
Measures calculated and presented in accordance with generally accepted accounting principles are referred to as GAAP financial measures. The following tables reconcile the Company’s non-GAAP financial measures to their most directly comparable GAAP financial measures in the Company’s Condensed Consolidated Statements of Income for each of the periods presented. These non-GAAP financial measures (referred to as “Base”) are the GAAP measures adjusted to exclude (dependent upon the applicable period) restructuring charges, asset impairment charges, acquisition charges, specifically identified tax adjustments, pension settlement charges and certain other items, if any, the exclusion of which the Company believes improves comparability and analysis of the underlying financial performance of the business. More information about the Company's use of Non-GAAP financial measures is provided in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 under Item 7 - "Management's discussion and analysis of financial condition and results of operations," under the heading "Use of non-GAAP financial measures."

 For the three months ended July 1, 2018For the three months ended September 30, 2018 
Dollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment		 
Other
Adjustments(1)
 BaseDollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment 
Other
Adjustments(1)
Base 
Operating profit $131,862
 $3,567
 $2,839
 $138,268
Operating profit $101,573 $22,061 $422 $124,056 
Non-operating pension (income)/costs 513
 —
 (645) (132)Non-operating pension (income)/costs (25)— (97)(122)
Interest expense, net 15,127
 —
 —
 15,127
Interest expense, net 14,502 — — 14,502 
Income before income taxes 116,222
 3,567
 3,484
 123,273
Income before income taxes 87,096 22,061 519 109,676 
Provision for income taxes 30,293
 1,046
 1,586
 32,925
Provision for income taxes 18,325 5,465 2,137 25,927 
Income before equity in earnings of affiliates 85,929
 2,521
 1,898
 90,348
Income before equity in earnings of affiliates 68,771 16,596 (1,618)83,749 
Equity in earnings of affiliates, net of tax 3,716
 —
 —
 3,716
Equity in earnings of affiliates, net of tax 4,049 — — 4,049 
Net income 89,645
 2,521
 1,898
 94,064
Net income 72,820 16,596 (1,618)87,798 
Net (income) attributable to noncontrolling interests (233) (15) —
 (248)Net (income) attributable to noncontrolling interests (405)(28)— (433)
Net income attributable to Sonoco $89,412
 $2,506
 $1,898
 $93,816
Net income attributable to Sonoco 72,415 16,568 (1,618)87,365 
Per diluted common share* $0.88
 $0.02
 $0.02
 $0.93
*Due to rounding individual items may not sum across      
$0.72 $0.16 $(0.02)$0.86 
(1)Consists primarily of acquisition-related costs and a pension settlement charge related to the Company's Canadian pension plan, partially offset by a gain fromacquisitions and potential acquisitions. Also includes the effect of a changechanges in the U.S. corporate tax rate on deferred tax adjustments and other non-base tax adjustments totaling a small insurance settlement gain.gain of $2,757.
39
SONOCO PRODUCTS COMPANY

For the three months ended October 1, 2017 
Dollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment 		Other
Adjustments(1) 		Base 
Operating profit $123,232 $511 $2,191 $125,934 
Non-operating pension (income)/costs 3,150 — (476)2,674 
Interest expense, net 13,647 — — 13,647 
Income before income taxes 106,435 511 2,667 109,613 
Provision for income taxes 35,545 445 (1,080)34,910 
Income before equity in earnings of affiliates 70,890 66 3,747 74,703 
Equity in earnings of affiliates, net of tax 2,521 — — 2,521 
Net income 73,411 66 3,747 77,224 
Net (income) attributable to noncontrolling interests (599)(21)— (620)
Net income attributable to Sonoco $72,812 $45 $3,747 $76,604 
Per diluted common share $0.72 $— $0.04 $0.76 
  For the three months ended July 2, 2017
Dollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment		 
Other
Adjustments(1)
 Base
Operating profit $105,180
 $7,897
 $5,231
 $118,308
Non-operating pension (income)/costs 34,410
 —
 (31,074) 3,336
Interest expense, net 12,792
 —
 —
 12,792
Income before income taxes 57,978
 7,897
 36,305
 102,180
Provision for income taxes 17,167
 2,338
 13,147
 32,652
Income before equity in earnings of affiliates 40,811
 5,559
 23,158
 69,528
Equity in earnings of affiliates, net of tax 2,845
 —
 —
 2,845
Net income 43,656
 5,559
 23,158
 72,373
Net (income) attributable to noncontrolling interests (531) (12) —
 (543)
Net income attributable to Sonoco $43,125
 $5,547
 $23,158
 $71,830
Per diluted common share* $0.43
 $0.06
 $0.23
 $0.71
*Due to rounding individual items may not sum across      
(1) Includes pension settlement chargesConsists primarily of $31,074, costs related to acquisitions and potential acquisitions, and certain other charges, partially offset by insurance settlement gains.acquisitions. Additionally, these amounts include the effect of state tax rate changes on deferred taxes as well as reserves for uncertain tax positions totaling a net loss of $2,362.


RESULTS OF OPERATIONS
The following discussion provides a review of results for the three months ended July 1,September 30, 2018 versus the three months ended July 2,October 1, 2017.
OVERVIEW
Net sales for the secondthird quarter of 2018 increased 10.1%3.0% to $1,366$1,365 million, compared with $1,241$1,325 million in the same period last year. The improvement reflects an increase in sales added by acquisitions, volume growth, the positive impact of foreign exchange and higher year-over-year selling prices implemented to recover rising costs forin some product lines, reflecting an increase in the cost of certain raw materials, as well as freight and other operating expenses. These positive factors were somewhat offset by unfavorable changes in foreign currency exchange rates.
Net income attributable to Sonoco for the secondthird quarter of 2018 increased 107.3%decreased 0.5% to $89.4$72.4 million, $0.88$0.72 per diluted share, compared to $43.1$72.8 million, $0.43$0.72 per diluted share, reported for the same period of 2017. Current quarter net income includes after-tax, non-base charges totaling $4.4$15.0 million, consisting primarily of restructuring and acquisition-related costs. Results for the secondthird quarter of 2017 include non-base, after-tax restructuring and asset impairment charges of $5.5 million and after-tax, non-base charges totaling $3.8 million, consisting primarily of acquisition-related costs and pension settlement and other charges of $23.2 million.charges. Adjusted for these items, second-quarterthird-quarter 2018 base net income attributable to Sonoco (base earnings) increased 30.6%14.0% to $93.8$87.4 million, $0.93$0.86 per diluted share, from $71.8$76.6 million, $0.71$0.76 per diluted share, in 2017.
In September 2018, Sonoco's paper mill operations in Hartsville, South Carolina, were temporarily shut down following unprecedented flooding from Hurricane Florence. The higher secondstorm impact also temporarily idled operations at several recycling operations, tube and core plants and other operations in Virginia, North Carolina and South Carolina. All operations impacted by Hurricane Florence are back in production. In September, paper mill operations in Hartsville lost approximately 22,300 tons of uncoated recycled paperboard and corrugated medium paper production due to the storm. The negative third-quarter earnings impact from Hurricane Florence was approximately $4.8 million, $0.04 per diluted share. This impact was primarily driven by lost production and sales at impacted facilities. The Company expects to experience additional business interruption losses of approximately $0.02 to $0.03 per diluted share in the fourth quarter. Sonoco carries property and business interruption insurance, subject to a combined, per-event, $1 million self-insured retention, and is actively working on insurance recovery.
In addition, the Company incurred approximately $8.0 million in flood-related costs during the third quarter, including costs for clean-up, repairs, damaged inventory, and excess production costs related to downtime and disruptions within our internal supply chain. These costs were offset by $10.0 million in proceeds from an advance insurance payment and did not impact earnings for the quarter other than to the extent of the Company's self-insured retention mentioned above.   

40
SONOCO PRODUCTS COMPANY
Third-quarter 2018 earnings were largelyessentially flat with the result ofsame period last year. The $11.2 million increase in after-tax non-base charges, which was driven primarily by the charges related to exiting a contract at a packaging center, was essentially offset by a positive price/cost impact, particularly inimpact. In particular, the Company's Paper and Industrial Converted Products segment ashas benefited from higher selling prices on the Company was successful in raising prices onportion of the tubes, cores and paper that arebusiness not contractually tied to an index withold corrugated containers (OCC), while prices for OCC, a primary raw material, have trended downward and are substantially below prior-year levels.  As a result, all regions of the world reportingsegment's geographical regions reported a favorable year-over-year spread onchange in price/cost. Additionally, continued improvement in market conditionscost for corrugating medium benefitted earnings year over year. Strong manufacturing productivitythe quarter. These gains were offset by the impact of Hurricane Florence and higher management incentives, as well as higher general wage and other inflation, and unfavorable changes in the Company's Consumer Packaging segment and lower restructuring, asset impairment, and acquisition-related chargesimpact of foreign currency exchange rates. The third quarter of 2018 also contributed to the overall increase in earnings over the previous year's second quarter. The year-over-year improvement also reflectsbenefited from a significantly lower effective tax rate versus 2017 due to the 2017 Tax Cuts and Jobs Act ("Tax Act").These positive factors were slightly offset by higher management incentives as well as general wage and other inflation.




SONOCO PRODUCTS COMPANY



OPERATING REVENUE
Net sales for the secondthird quarter of 2018 increased $126$40 million from the prior-year quarter.
The components of the sales change were: 
($ in millions) 
Volume/mix $25 
Selling prices 6 
Acquisitions 31 
Foreign currency translation and other, net (22)
Total sales increase $40 
 ($ in millions)
Volume/mix$35
Selling prices11
Acquisitions62
Foreign currency translation and other, net18
  
Total sales increase$126
  


COSTS AND EXPENSES
The Company's gross profit margin percentage increased to 20.2%remained relatively flat at 19.0% this quarter compared to 19.2%19.1% in the prior-year quarter. The 100 basis point increase in gross profit margin was largely attributable to theA favorable price/cost relationship driven by stronger market conditions procurement productivity, and the timing and direction of material cost movements. Margins also benefitted from improved manufacturing cost productivity, partiallywas offset by wage and operating cost inflation.the impact of acquisitions. The translation impact of a weakerstronger dollar increaseddecreased reported cost of goods sold by approximately $17 million compared to the secondthird quarter of 2017.
Selling, general and administrative ("SG&A") costs for the quarter increased $15.7$6.9 million, or 12.5%5.3%, year over year due primarily to the inclusion of the SG&A expenses incurred by the operations of acquired businesses, higher management incentives and wage inflation.
Second-quarterThird-quarter restructuring costs and asset impairment charges totaled $3.6$22.1 million compared with $7.9$0.5 million in the same period last year. The year-over-year increase was mostly driven by costs recognized in the third quarter of 2018 related to exiting a contract at a packaging center. Additional information regarding restructuring and asset impairment charges is provided in Note 6 to the Company’s Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Non-operating pension costs decreased $33.9$3.2 million for the quarter, compared to the prior-year period, due primarily to lower pension settlement costs in the current year and a higher expected return on plan assets resulting from a larger asset base following the strong investment performance in 2017 and the $50 million voluntary contribution made to the Company's U.S. pension plans in October 2017.
Net interest expense for the secondthird quarter increased to $15.1$14.5 million, compared with $12.8$13.6 million during the secondthird quarter of 2017. The increase was primarily due to higher interest rates and higher average borrowings in the current-year quarter stemming from acquisition financing.
The effective tax rate on GAAP and base earnings in the secondthird quarter of 2018 was 26.1%21.0% and 26.7%23.6%, respectively, compared with 29.6%33.4% and 32.0%31.8%, respectively, for last year's quarter. The Tax Act lowered the year-over-year effective tax rate on both GAAP and base earnings.effective tax rates were lower in 2018 primarily due to the decrease in the U.S. federal tax rate as well as other changes in the Tax Act. The 2018 GAAP and base rates also benefited from the release of tax reserves on uncertain tax positions as a result of the expiration of the statute of limitations. In addition, the current year GAAP rate benefited from adjustments related to finalization of the 2017 federal income tax return while the prior year's GAAP tax rate benefittedbenefited from a favorable distribution of earnings between lowlow- and high tax jurisdictions, primarily from the previously discussed pension settlement costs occurring in the United States. This lessened the year-over-year change in the GAAP effective tax rate.high-tax jurisdictions.  
41
SONOCO PRODUCTS COMPANY

REPORTABLE SEGMENTS
The following table recaps net sales attributable to each of the Company’s segments for the secondthird quarters of 2018 and 2017 ($ in thousands):
Three Months Ended 
September 30, 2018October 1,
2017		%
Change 
Net sales: 
Consumer Packaging $600,154 $565,788 6.1 %
Display and Packaging 165,164 135,560 21.8 %
Paper and Industrial Converted Products 463,748 483,376 (4.1)%
Protective Solutions 135,696 139,910 (3.0)%
Consolidated $1,364,762 $1,324,634 3.0 %
  Three Months Ended
  July 1,
2018		 July 2,
2017		 % Change
Net sales:      
Consumer Packaging $616,062
 $521,262
 18.2 %
Display and Packaging 143,260
 115,612
 23.9 %
Paper and Industrial Converted Products 474,137
 469,197
 1.1 %
Protective Solutions 132,914
 134,603
 (1.3)%
Consolidated $1,366,373
 $1,240,674
 10.1 %

The following table recaps operating profit attributable to each of the Company’s segments during the secondthird quarters of 2018 and 2017 ($ in thousands):
 Three Months EndedThree Months Ended 
 July 1,
2018		 July 2,
2017		 % ChangeSeptember 30, 2018October 1,
2017		%
Change 
Operating profit:      Operating profit:
Segment operating profit:      Segment operating profit:
Consumer Packaging $63,670
 $60,376
 5.5 %Consumer Packaging $56,014 $68,922 (18.7)%
Display and Packaging (570) 1,479
 (138.5)%Display and Packaging 3,703 1,993 85.8 %
Paper and Industrial Converted Products 61,542
 45,437
 35.4 %Paper and Industrial Converted Products 53,906 43,696 23.4 %
Protective Solutions 13,626
 11,016
 23.7 %Protective Solutions 10,433 11,323 (7.9)%
Restructuring/Asset impairment charges (3,567) (7,897) 

Restructuring/Asset impairment charges (22,061)(511)
Other, net (2,839) (5,231) 

Other, net (422)(2,191)
Consolidated $131,862
 $105,180
 25.4 %Consolidated $101,573 $123,232 (17.6)%
Segment results viewed by Company management to evaluate segment performance do not include restructuring charges, asset impairment charges, acquisition-related charges, or certain other items, if any, the exclusion of which the Company believes improves the comparability and analysis of the ongoing operating performance of the business. Accordingly, the term “segment operating profit” is defined as the segment’s portion of “operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments.


The following table recaps restructuring/asset impairment charges attributable to each of the Company’s segments during the secondthird quarters of 2018 and 2017 ($ in thousands):
Three Months Ended 
September 30, 2018October 1,
2017
Restructuring/Asset impairment charges: 
Consumer Packaging $4,331 $(1,111)
Display and Packaging 15,593 (2)
Paper and Industrial Converted Products 1,865 993 
Protective Solutions 284 621 
Corporate (12)10 
Consolidated $22,061 $511 



42
  Three Months Ended
  July 1,
2018		 July 2,
2017
Restructuring/Asset impairment charges:    
Consumer Packaging $1,986
 $3,060
Display and Packaging 677
 222
Paper and Industrial Converted Products 64
 2,914
Protective Solutions 820
 1,701
Corporate 20
 —
Consolidated $3,567
 $7,897
SONOCO PRODUCTS COMPANY
Consumer Packaging
The Consumer Packaging segment includes the following 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 management; and metal and peelable membrane ends and closures.
SONOCO PRODUCTS COMPANY


Segment sales increased 18.2%6.1% compared to the prior-year quarter due to sales added from acquisitions the positive impact from changes in foreign exchange rates, and higher selling prices. Sales also benefitted from higherprices, partially offset by the negative impact of foreign exchange and lower volume. Higher sales volume in flexible packaging and European and Asian composite cans, partiallywas more than offset by a declinelower rigid paper sales volume in plastic container sales volume.North America, Latin America and Europe as well as in rigid plastics.

Segment operating profit grew 5.5%declined 18.7% compared to the prior-year quarter due to a positive price/cost relationship, solid productivity gains, andas the benefit of acquisitions whichwas more than offset higherby higher-than-anticipated resin, freight and other operating expenses, due to inflationalong with lower volume and higher management incentives. Segment operating margin declined to 10.3% in the quarter from 11.6% in 2017 due to negative manufacturing productivity. These items, together with changes in the mix of business, including changesresulted in segment operating margin declining to 9.3% of sales in the quarter from acquisitions, and higher operating costs.12.2% in 2017.


Display and Packaging
The Display and Packaging segment includes the following 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.

Sales for the quarter were up 23.9%21.8% compared to last year’s quarter due primarily to volume growth from a new packincreased sales in the packaging center near Atlanta, andpartially offset by the positivenegative impact of foreign exchange.

Segment operating profit decreased $2.0increased $1.7 million largely due to inefficienciesas higher volume, improved manufacturing productivity and an improved price/cost relationship were partially offset by higher operating costs associated with the start up of new production linesAtlanta packaging center. Despite continued improvements at the packaging center near Atlanta, pack center. Thethe Company continues working to resolve these issues.decided that it could not achieve acceptable margins under the single-customer contract associated with this facility. As of September 30, 2018 the Company has exited this contract. Costs triggered by this exit are included in Restructuring / Asset Impairment Charges.
Paper and Industrial Converted Products
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.

Reported segment sales increaseddecreased approximately 1.1%4.1% percent from the prior-year quarter as volume/mix growth and the positive impact of foreign exchange more than offset lower selling prices associated withdeclined due to lower recovered paper prices.prices and a negative impact from changes in foreign exchange rates. Volume/mix gains in North Americanwas essentially flat as lower global tube and core volume and the impact of Hurricane Florence on domestic paper operations as well aswere offset by improved volume in wire and cable reels, were partially offset by declines in North Americanrecycling and European tube and core volumes.paper operations.

Operating profit increased 35.4%23.4% over the prior year, driven by a positive price/cost relationship across most of the segment, excluding recycling operations, which also helped drive a 330 basis point improvement in segmentoperations. Segment operating margin improved 258 basis points to 13.0%11.6%.

Protective Solutions
The Protective Solutions segment includes the following products: custom-engineered, paperboard-based and expanded foam protective packaging and components; and temperature-assured packaging.

Segment sales for the quarter declined 1.3%3.0% year over year asdue primarily to the negative impact of declining foreign exchange transaction losses on foreign currency denominatedrates and softer demand. Volume/mix declined as increased sales for temperature-assured packaging and molded foam transportation components were more than offset higher selling prices. Volume/mix was essentially flat as continuedby declines in the segment’s automotive components business was offset by growth in temperature-assuredmolded foam and paper-based consumer packaging.
Operating profits increased 23.7% from the prior-year quarter
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SONOCO PRODUCTS COMPANY
Segment operating profit declined slightly due primarily to positive price/cost relationship and productivity improvements more than offsetting higher operating inflation. Segment operating margin increaseddecreased slightly to 10.3% from 8.2% in the prior-year quarter. 7.7%.
SONOCO PRODUCTS COMPANY



SixNine Months Ended July 1,September 30, 2018 Compared with SixNine Months Ended July 2,October 1, 2017
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 in the Company’s Condensed Consolidated Statements of Income for each of the periods presented.
For the nine months ended September 30, 2018 
Dollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment 
Other
Adjustments(1)
Base 
Operating profit $343,533 $28,691 $3,381 $375,605 
Non-operating pension (income)/costs 197 — (742)(545)
Interest expense, net 42,984 — — 42,984 
Income before income taxes 300,352 28,691 4,123 333,166 
Provision for income taxes 71,974 7,196 5,635 84,805 
Income before equity in earnings of affiliates 228,378 21,495 (1,512)248,361 
Equity in earnings of affiliates, net of tax 9,012 — — 9,012 
Net income 237,390 21,495 (1,512)257,373 
Net (income) attributable to noncontrolling interests (1,508)(48)— (1,556)
Net income attributable to Sonoco $235,882 $21,447 $(1,512)$255,817 
Per diluted common share* $2.34 $0.21 $(0.01)$2.53 
  For the six months ended July 1, 2018
Dollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment		 
Other
Adjustments(1)
 Base
Operating profit $241,960
 $6,630
 $2,959
 $251,549
Non-operating pension (income)/costs 222
 —
 (645) (423)
Interest expense, net 28,482
 —
 —
 28,482
Income before income taxes 213,256
 6,630
 3,604
 223,490
Provision for income taxes 53,649
 1,731
 3,498
 58,878
Income before equity in earnings of affiliates 159,607
 4,899
 106
 164,612
Equity in earnings of affiliates, net of tax 4,963
 —
 —
 4,963
Net income 164,570
 4,899
 106
 169,575
Net (income) attributable to noncontrolling interests (1,103) (20) —
 (1,123)
Net income attributable to Sonoco $163,467
 $4,879
 $106
 $168,452
Per diluted common share* $1.62
 $0.05
 $0.00
 $1.67
*Due to rounding individual items may not sum across      
(1)Consists primarily of acquisition-related costs and a pension settlement charge related to the Company's Canadian pension plan, partially offset by a gain fromacquisitions and potential acquisitions. Also includes the effect of athe change in the U.S. corporate tax rate on deferred tax adjustments and other non-base tax adjustments totaling a small insurance settlement gain.gain of $5,540.

 For the six months ended July 2, 2017For the nine months ended October 1, 2017 
Dollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment		 
Other
Adjustments(1)
 BaseDollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment 		Other
Adjustments(1) 		Base 
Operating profit $198,839
 $12,008
 $7,924
 $218,771
Operating profit $322,071 $12,519 $10,115 $344,705 
Non-operating pension (income)/costs 38,096
 —
 (31,074) 7,022
Non-operating pension (income)/costs 41,246 — (31,550)9,696 
Interest expense, net 24,850
 —
 —
 24,850
Interest expense, net 38,497 — — 38,497 
Income before income taxes 135,893
 12,008
 38,998
 186,899
Income before income taxes 242,328 12,519 41,665 296,512 
Provision for income taxes 42,706
 3,636
 12,506
 58,848
Provision for income taxes 78,251 4,081 11,422 93,754 
Income before equity in earnings of affiliates 93,187
 8,372
 26,492
 128,051
Income before equity in earnings of affiliates 164,077 8,438 30,243 202,758 
Equity in earnings of affiliates, net of tax 4,799
 —
 —
 4,799
Equity in earnings of affiliates, net of tax 7,320 — — 7,320 
Net income 97,986
 8,372
 26,492
 132,850
Net income 171,397 8,438 30,243 210,078 
Net (income) attributable to noncontrolling interests (1,128) (14) —
 (1,142)Net (income) attributable to noncontrolling interests (1,727)(35)— (1,762)
Net income attributable to Sonoco $96,858
 $8,358
 $26,492
 $131,708
Net income attributable to Sonoco $169,670 $8,403 $30,243 $208,316 
Per diluted common share* $0.96
 $0.08
 $0.26
 $1.31
Per diluted common share* $1.68 $0.08 $0.30 $2.07 
*Due to rounding individual items may not sum across      
(1) Includes pension settlement charges of $31,074,$31,550, costs related to acquisitions and potential acquisitions, and certain other costs, partially offset by insurance settlement gains. Also includes net tax charges totaling $2,160$2,229 primarily related to the settlement of a tax audit in Canada and the effect of state tax rate changes on deferred taxes as well as reserves for uncertain tax positions totaling a net loss of $2,263. These amounts are partially offset by non-basea tax gainsbenefit from the final settlement of $1,138 related toa prior year business dispositions.disposition.



44







SONOCO PRODUCTS COMPANY


RESULTS OF OPERATIONS
The following discussion provides a review of results for the sixnine months ended July 1,September 30, 2018 versus the sixnine months ended July 2,October 1, 2017.
OVERVIEW
Net sales for the first sixnine months of 2018 increased 10.7%8.0% to $2,671$4,035 million, compared with $2,413$3,738 million in the same period last year. The improvement reflects an increase in sales added by acquisitions, volume growth, the positive impact of foreign exchange and higher selling prices implemented to recover the higher cost of certain rising raw material prices, risingmaterials as well as freight and other operating inflation.
Net income attributable to Sonoco for the first sixnine months of 2018 increased 68.8%39.0% to $163$236 million, $1.62$2.34 per diluted share, compared to $97$170 million, $0.96$1.68 per diluted share, reported for the same period of 2017. Current period net income includes after-tax, non-base charges totaling $5$19.9 million. These charges consist primarily of restructuring and acquisition-related costs. Results for the first sixnine months of 2017 include after-tax restructuring and asset impairment charges of $8.4 million and after-tax lump-sum pension settlement charges, acquisition, and non-base tax charges of $26.5$30.2 million. Adjusted for these items, six-monthnine-month base net income attributable to Sonoco (base earnings) increased 27.9%22.8% to $168.5$255.8 million, $1.67$2.53 per diluted share, from $131.7$208.3 million, $1.31$2.07 per diluted share, in 2017.
The higher earnings in the first halfnine months of 2018 were largely the result of a positive price/cost impact, particularly in the Company's Paper and Industrial Converted Products segment. AsThe Company has benefited from higher selling prices on the Company was successful in raising prices onportion of the tubes, cores and paper that arebusiness not contractually tied to an index with all regions reportingold corrugated containers (OCC), while prices for OCC, a favorable year-over-year spread on price/cost.primary raw material, have trended downward and are substantially below prior-year levels. Additionally, continued improvement in market conditions for corrugating medium benefittedbenefited earnings year over year. Manufacturing productivity, which was especially strongstrongest in the Company's Consumer Packaging segment, together with lower restructuring, asset impairment, and acquisition-related charges also contributed to the increase in year-to-date net income. These positive factors were slightly offset by higher management incentives as well as general wage and other inflation. Also, as previously discussed, Hurricane Florence had an approximately $4.8 million, $.04 per diluted share, negative impact year to date, driven largely by lost production as other costs incurred were essentially offset by recognized insurance recoveries above the Company's $1.0 million deductible. Finally, compared to 2017, year-to-date net income benefitted as lump-sumbenefited from pension settlement charges of $19.0$19.5 million, after tax, in 2017that did not recur in 2018.2018 and a significant decrease in the effective tax rate due to the 2017 Tax Act.
OPERATING REVENUE
Net sales for the first sixnine months of 2018 increased $258$298 million from the same period in 2017.
The components of the sales change were:
($ in millions) 
Volume/mix $67 
Selling prices 40 
Acquisitions and Divestitures 152 
Foreign currency translation and other, net 39 
Total sales increase $298 
 ($ in millions)
Volume/mix$42
Selling prices34
Acquisitions and Divestitures122
Foreign currency translation and other, net60
  
Total sales increase$258
  


COSTS AND EXPENSES
The Company's gross profit margin percentage increased to 19.7%19.5% for the first sixnine months compared to 19.1% in the prior-year period. The 60 basis pointmodest increase in gross profit margin was largely attributable to the favorable price/cost relationship driven by stronger market conditions, procurement productivity, and the timing and direction of material cost movements. Margins also benefittedbenefited from improved manufacturing cost productivity, partially offset by higher wage and operating cost inflation. The translation impact of a weaker dollar increased reported cost of goods sold by approximately $54$37 million compared to the first sixnine months of 2017.
Selling, general and administrative ("SG&A") costs for the first sixnine months increased $28.0$34.8 million, or 11.2%9.2%, year over year due primarily to SG&A expenses incurred byat the operations of acquired businesses, higher management incentives and wage inflation.
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SONOCO PRODUCTS COMPANY

Year-to-date restructuring costs and asset impairment charges totaled $6.6$28.7 million compared with $12.0$12.5 million in the same period last year. Additional information regarding restructuring and asset impairment charges is provided in Note 6 to the Company’s Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Non-operating pension costs decreased $37.9 million$41.0 in the first sixnine months of 2018 due primarily to lower year-over-year pension settlement costs in the current yearcharges and a higher expected return on plan assets resulting from a larger asset base following the strong investment performance in 2017 and the $50 million voluntary contribution made to the Company's U.S. pension plans in October 2017.
Net interest expense for the first sixnine months increased to $28.5$43.0 million, compared with $24.9$38.5 million during the first sixnine months of 2017. The increase was primarily due to higher interest rates and higher average borrowings in the current-year period stemming from acquisition financing.
The effective tax rate on GAAP and base earnings in the first sixnine months of 2018 was 25.2%24.0% and 26.3%25.5%, respectively, compared with 31.4%32.3% and 31.5%31.6%, respectively, for last year's period. Although the Tax Act lowered the year-over-year effective tax rate on bothThe GAAP and base earnings, it had a greater impact on the GAAP effective tax rates were lower in 2018 primarily due to the decrease in the U.S. federal tax rate as well as other changes in the Tax Act. The 2018 GAAP and base rates also benefited from the release of tax reserves on uncertain tax positions as a result of the expiration of the statute of limitations. In addition, the current year GAAP rate benefited from adjustments related to finalization of the 2017 federal income tax return while the prior year's GAAP tax rate benefited from a favorable distribution of earnings between low- and high-tax jurisdictions.
REPORTABLE SEGMENTS
The following table recaps net sales attributable to each of the Company's segments during the first sixnine months of 2018 and 2017 ($ in thousands):
Nine Months Ended 
September 30, 2018October 1,
2017		% Change 
Net sales: 
Consumer Packaging $1,786,068 $1,569,231 13.8 %
Display and Packaging 451,082 365,807 23.3 %
Paper and Industrial Converted Products 1,398,538 1,395,075 0.2 %
Protective Solutions 399,634 407,519 (1.9)%
Consolidated $4,035,322 $3,737,632 8.0 %
  Six Months Ended
  July 1,
2018		 July 2,
2017		 % Change
Net sales:      
Consumer Packaging $1,185,914
 $1,003,443
 18.2 %
Display and Packaging 285,918
 230,247
 24.2 %
Paper and Industrial Converted Products 934,790
 911,699
 2.5 %
Protective Solutions 263,938
 267,609
 (1.4)%
Consolidated $2,670,560
 $2,412,998
 10.7 %
The following table recaps operating profits attributable to each of the Company's segments during the first sixnine months of 2018 and 2017 ($ in thousands):
 Six Months EndedNine Months Ended 
 July 1,
2018		 July 2,
2017		 % ChangeSeptember 30, 2018October 1,
2017		% Change 
Operating profit:      Operating profit:
Segment operating profit:      Segment operating profit:
Consumer Packaging $124,758
 $119,836
 4.1 %Consumer Packaging $180,772 $188,758 (4.2)%
Display and Packaging 1,162
 4,701
 (75.3)%Display and Packaging 4,865 6,694 (27.3)%
Paper and Industrial Converted Products 101,323
 72,287
 40.2 %Paper and Industrial Converted Products 155,229 115,983 33.8 %
Protective Solutions 24,306
 21,947
 10.7 %Protective Solutions 34,739 33,270 4.4 %
Restructuring/Asset impairment charges (6,630) (12,008) 

Restructuring/Asset impairment charges (28,691)(12,519)
Other, net (2,959) (7,924) 

Other, net (3,381)(10,115)
Consolidated $241,960
 $198,839
 21.7 %Consolidated $343,533 $322,071 6.7 %
 
Segment results viewed by Company management to evaluate segment performance do not include restructuring charges, asset impairment charges, acquisition-related charges, or certain other items, if any, the exclusion of which the Company believes improves the comparability and analysis of the ongoing operating performance of the business. Accordingly, the term “segment operating profit” is defined as the segment’s portion of “operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments.


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SONOCO PRODUCTS COMPANY

The following table recaps restructuring/asset impairment charges attributable to each of the Company’s segments during the first sixnine months of 2018 and 2017 ($ in thousands):
 Six Months EndedNine Months Ended 
 July 1,
2018		 July 2,
2017		September 30, 2018October 1,
2017
Restructuring/Asset impairment charges:    Restructuring/Asset impairment charges:
Consumer Packaging $3,715
 $4,160
Consumer Packaging $8,046 $3,049 
Display and Packaging 663
 723
Display and Packaging 16,256 721 
Paper and Industrial Converted Products 911
 4,808
Paper and Industrial Converted Products 2,776 5,801 
Protective Solutions 1,098
 1,854
Protective Solutions 1,382 2,475 
Corporate 243
 463
Corporate 231 473 
Consolidated $6,630
 $12,008
Consolidated $28,691 $12,519 
Consumer Packaging
Segment sales increased 18.2%13.8%year to date compared to the prior-year period due to acquisitions, higher selling prices and the positive impact of changes in foreign exchange rates.
Year-to-date segment operating profit grew 4.1% due to strong improvement in manufacturing productivity, a positive price/cost relationship, and the benefit of acquisitions, partially offset by a negative change in volume/mix across most businesses, higher wages, management incentives, and operating costs. Segment operating margin declined to 10.5% from 11.9% in the prior-year period4.2% due to higher operating costs driven by certain resin material inflation, higher wages and management incentives, and changes in the mix of business, includingbusiness. These declines were partially offset by a positive price/cost relationship, the impactbenefit of acquisitions, and manufacturing productivity. Segment operating margin declined to 10.1% from acquisitions.12.0% in the prior-year period due to the previously mentioned higher operating costs.


Display and Packaging
Sales for the segment were up 24.2%23.3% year to date compared to last year’s period due primarily to volume growth from a new packpackaging center near Atlanta and the positive impact of foreign exchange.
Segment operating profit decreased $3.5$1.8 million, or 75.3%27.3%, largely due to inefficiencies and higher operating costs associated with the ramp up of production at the new packpackaging center. TheDespite improvements throughout the year at the packaging center near Atlanta, the Company continues working to resolve these issues.decided that it could not achieve acceptable margins under the single-customer contract associated with this facility. As of September 30, 2018 the Company has exited this contract.
Paper and Industrial Converted Products
Segment sales increased approximately 2.5%were essentially flat year to date fromversus the prior year period due to the positive impact ofmodest increases from changes in foreign exchange and higher selling prices implemented to recover higher freight and other operating costs, partiallyrates which were effectively offset by lower volume/mix. Volume/mix gainsselling prices in wire and cable reels as well as North American and European paper operations were more than offsetthe Company's recycling business driven by declinesdecreases in North American tube and core and recycling volumes.market prices for old corrugated containers (OCC). 
Operating profit increased 40.2%33.8% over the prior year period driven by a positive price/cost relationship across most of the segment, including continued improvement in the Company's corrugating medium operations. Segment operating margin improved 290278 basis points to 10.8%11.1%.
Protective Solutions
Segment sales for the period declined 1.4%1.9% year over year as the positive impact of higher selling prices was offset by the negative impact of foreign exchange transaction losses on foreign currency denominated sales and lower volume/mix, primarily in the segment’s automotive components business.
Year-to-date operating profit increased 10.7%4.4% from the prior-year period due to manufacturing productivity and a positive price/cost relationship partially offset by lower volume, specifically in automotive components. Segment operating margin was 9.2%8.7%, a 10052 basis point improvement over the prior-year year to date.





47

SONOCO PRODUCTS COMPANY

OTHER ITEMS
Subsequent Events
Completion of acquisition
On October 1, 2018, the Company completed the acquisition of the remaining 70 percent interest in Conitex Sonoco for total consideration of approximately $133.0 million in cash. Final consideration will be subject to a post-closing adjustment for the change in working capital to the date of closing. The Conitex Sonoco joint venture was formed in 1998 between Texpack, Inc., a Spanish-based global provider of paperboard and paper-based packaging products, and Sonoco. Conitex Sonoco produces uncoated recycled paperboard 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, including four paper mills and seven cone and tube converting operations and two other production facilities. The financial results of Conitex Sonoco will be included in the Company's Paper and Industrial Converted Products segment. Also on October 1, 2018, the Company acquired from Texpack, Inc. a rigid paper facility in Spain for approximately $10.0 million in cash, the full amount of which was pre-funded on September 28, 2018. The results of this operation will be accounted for in the Company's Consumer Packaging segment. 
Critical Accounting Policies and Estimates
Interim Goodwill Impairment Assessmentimpairment evaluation
Information regardingThe Company assesses its goodwill for impairment annually and from time to time when warranted by the interimfacts 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 reporting 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 goodwill 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, considered factors such as current year operating performance 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 discounted cash flow model based on projections of future years’ operating results and associated cash flows, validated 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 projections 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 discount 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 margin 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 relationships, productivity gains, fixed cost leverage, and stability or improvement in general economic conditions.

In considering the level of uncertainty regarding the potential for goodwill impairment, management has concluded 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
48
SONOCO PRODUCTS COMPANY
no specific singular event or single change in circumstances management has identified that it believes could reasonably result in a change to expected future charges is includedresults in Note 8any of its reporting units sufficient 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 Factors" on pages 9-16 of the Company's Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly2017 Annual Report on Form 10-Q.10-K.

Although no reporting units failed the annual impairment 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 performance does not improve in line with management's expectations, 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, fulfillment and scalable service centers; and manufactures retail packaging, including printed backer cards, thermoformed 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 business 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 September 30, 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.

Sensitivity Analysis
In its 2018 annual goodwill impairment analysis, projected 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 impairment charge of approximately $25 million would be incurred.

Income taxes
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 intercompany note made in 2012, and the subsequent repayment 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 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 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 distribution, the entire distribution would be characterized as a dividend. The incremental tax liability associated with the income adjustment proposed in the RAR would be approximately $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 willhas now bebeen 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 Treasury 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 Company 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.


49
SONOCO PRODUCTS COMPANY




Financial Position, Liquidity and Capital Resources
Operating cash flows totaled $251.2$451.5 million in the sixnine months ended July 1,September 30, 2018 compared with $103.2$281.0 million during the same period last year, an increase of $148.1$170.5 million. This increase reflects the improvementan increase in GAAP net income of $66.6$66.0 million and the following described year-over-year changes. In 2018, year-to-date net cash paid for taxes was $2.9 million less than reported tax expense while in 2017 it was $20.9 million more, a year-over-year benefit of $23.8 million. This difference is largely due to the timing of taxes paid on the 2016 sale of our blowmolding plastics business and normal changes in various deferred tax items. Pension and post-retirement plan contributions, net of non-cash expenses, had a negative year-over-year impact of $13.4$15.3 million. This change is composed of a $24.4$25.2 million year-over-year decrease in cash contributions that was more than offset by a $37.8$40.5 million decrease in non-cash expense which was largely driven by one-time, non-base pension settlement charges of $31.1$31.6 million in 2017.
Accounts Receivable consumed $45.0$58.2 million of operating cash in the first halfnine months of 2018 compared with $55.1$70.9 million in the same period last year as both periods experienced increased business activity during the first sixnine months following seasonally lower year-end activity. Although business activity increased more in the first sixnine months of 2018 compared to the same period in 2017, improved current-year collection efforts in the current period mitigated the impact in 2018. Additionally, inventories consumed $16.7$8.9 million of cash in the first sixnine months of 2018 compared with $12.8$15.0 million last year and trade accounts payable provided $16.7$45.0 million of cash during the sixnine months ended July 1,September 30, 2018 while providing $11.9$29.3 million in the same period last year. Both the current and prior-year periods saw increased business activity from thetheir respective prior year end,ends, but the increase in 2018 was more meaningful than in the prior year period.
SONOCO PRODUCTS COMPANY

Additionally, excess costs related to flooding resulting from Hurricane Florence were incurred but largely unpaid at September 30, 2018 which caused a temporary increase in Accounts Payable.
Changes in accrued expenses provided $1.0$35.4 million of operating cash in the sixnine months ended July 1,September 30, 2018 while using $29.3providing $1.2 million in the same period last year. The greater use of cash in the priorprovision this year is primarily due to the payment ofhigher year-over-year management incentives and other accrued expenses. Additionally, the amount of which2017 provision was greater last yearlower than this year, andnormal due to a non-recurring payment of an environmental settlement in the 2017 period.last year. Changes in other assets and liabilities provided $15.5$33.2 million of additional cash in 2018 compared to 2017, 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 2016.
Cash used in investing activities was $223.4$262.1 million in the sixnine months ended July 1,September 30, 2018, compared with $313.0$521.5 million in the same period last year, a lower year-over-year use of cash totaling $89.5$259.4 million. The most significant driver of the decrease was lower year-over-year acquisition spending. The first sixnine months of 2017 included the acquisitionacquisitions of Packaging Holdings and ClearLam for $217.5$383.4 million while the first sixnine months of 2018 included the acquisition of Highland Packaging Solutions and a prepayment for $141.3a small rigid paper business in Spain totaling $151.0 million. Proceeds from the sale of assets provided $23.4 million in the nine months ended September 30, 2018 compared to $3.7 million in the same period last year. The year-over-year increase was due primarily to net proceeds of $17.2 million received in September 2018 for the sale of equipment relating to a single-customer contract packaging operation near Atlanta, Georgia, less a contract termination fee. Capital spending during the first nine months of $88.92018 was $135.4 million, was approximately $10$9 million lower year over year. Capital spending for the remainder of 2018 is expected to total approximately $130not exceed $80 million.
Cash used by financing activities totaled $79.4$189.5 million in the sixnine months ended July 1,September 30, 2018, compared with a provision of cash totaling $152.6$218.3 million in the same period last year. The $232.0$407.8 million year-over-year reduction is primarily due to lower proceeds from borrowings for acquisitions in the current year, term loan repayments and net reductions in commercial paper. The Company paid cash dividends of $79.8$120.7 million during the sixnine months ended July 1,September 30, 2018, an increase of $4.2$6.3 million over the same period last year. Cash used to repurchase the Company's common stock was lower year over year by $1.3$1.0 million. Total debt outstanding was $1,452$1,387 million at July 1,September 30, 2018 compared with $1,447 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 new $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
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SONOCO PRODUCTS COMPANY
draw funds directly on the underlying revolving bank credit facility. Borrowings under the credit agreement are pre-payablemay be prepaid at any time at the discretion of the Company and the term loan has annual amortization payments totaling $12.5 million.million per year.
On April 12, 2018, the Company entered into a new $100 million, 364-day term loan facility in conjunction with the purchase of Highland Packaging Solutions. A total of $50 million wasThe Company subsequently repaid bythis loan in its entirety over the Company priorsecond and third quarters of 2018 using cash generated from operations.
On October 1, 2018, subsequent to the end of the second quarter.
third quarter, the Company completed the acquisition of the remaining 70 percent interest in Conitex Sonoco for total cash consideration of approximately $133 million, using available cash on hand. The Company continually explores strategic acquisition opportunities which may result in the additional use of cash. Given the nature of acquisitions, the timing and amounts of such utilization are not predictable. The Company expects that acquisitions requiring funding in excess of cash on hand would be financed using available borrowing capacity.
Cash and cash equivalents totaled $197.7$250.4 million and $254.9 million at July 1,September 30, 2018 and December 31, 2017, respectively. Of these totals, approximately $183.0$229.8 million and $238.4 million, respectively, were held outside of the United States by the Company’s 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. Under prior law, cash repatriated to the United States was subject to federal income taxes, less applicable foreign tax credits. As the Company enjoyshas ample domestic liquidity through a combination of operating cash flow generation and access to bank and capital markets borrowings, it has generally considered its offshore cash balances to be indefinitely invested outside the United States and had no plans to repatriate these cash balances. However, due to changes in U.S. tax laws as part of the enactment of the Tax Cuts and Jobs Act, beginning in 2018 repatriated cash will generally not be subject to federal income taxes. The Company repatriated approximately $110$140 million induring the second quarterfirst nine months of 2018 and will continue to consider opportunities to repatriate additional cash balances in a tax efficient manner. The Company is reviewing its intentions with respect to undistributed earnings of international subsidiaries. This review will be completed by the end of 2018 and, as provided for in SAB 118, the Company will make any necessary adjustments in the financial statements of future periods within the provided time frame.
The Company uses a notional pooling arrangement with an international bank to help manage global liquidity requirements. Under this pooling arrangement, the Company and its participating subsidiaries may maintain either a cash deposit or borrowing position through local currency 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 interest terms on both.
SONOCO PRODUCTS COMPANY

During the sixnine months ended July 1,September 30, 2018, the Company reported a net decrease in cash and cash equivalents of $5.6$4.4 milliondue to a stronger U.S. dollar relative to certain foreign currencies, most notably the Brazilian real, euro and Canadian dollar.
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 in the agreements. As of July 1,September 30, 2018, the Company’s interest coverage and net worth were substantially above the minimum levels required under these covenants.
The Company anticipates making additional contributions to its pension and postretirement plans of approximately $15$9 million during the remainder of 2018, which would result in total 2018 contributions of approximately $39$36 million. Future funding requirements beyond the current year will vary depending largely on actual investment returns, future actuarial assumptions, and legislative actions.
Fair Value Measurements, Foreign Exchange Exposure and Risk Management
Certain assets and liabilities are reported in the Company’s financial statements at fair value, the fluctuation of which can impact the Company’s financial position and results of operations. Items reported by the Company at fair value on a recurring basis include derivative contracts and pension and deferred compensation related assets. The valuation of the vast majority of these items is based either on quoted prices in active and accessible markets or on other observable inputs.
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 operations are located throughout the world, and the Company generally sells in the same
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SONOCO PRODUCTS COMPANY
countries where it produces with both revenue and costs transacted in the local currency. The Company 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, geopolitical 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, the Company concluded that it was an appropriate time to begin translating its Venezuelan operations at an alternative exchange rate. Accordingly, effective July 1, 2015, the Company began translating its Venezuelan operating results and all monetary assets and liabilities in Venezuela using thean alternative rate (currently known as the SIMADI rate (replaced in 2016 by the DICOM rate). At July 1,September 30, 2018, the carrying value of the Company's net investment in its Venezuelan operations was approximately $2.1$1.8 million. In addition, at July 1,September 30, 2018, the Company's Accumulated Other Comprehensive Loss included a translation loss of $3.8$4.0 million related to its Venezuelan 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.
At July 1,September 30, 2018, the Company had commodity contracts outstanding to fix the cost of a portion of anticipated raw materials and natural gas purchases. The total net fair market value of these instruments was an unfavorable position of $(0.6) million and $(1.7) million at at July 1,September 30, 2018 and December 31, 2017, respectively. Natural gas and aluminum hedge contracts covering an equivalent of 5.08.0 million MMBTUs and 1,9051,769 metric tons, respectively, were outstanding at July 1,September 30, 2018. Additionally, the Company had various currency contracts outstanding to fix the exchange rate on certain anticipated foreign currency cash flows. The total market value of these instruments was a net unfavorable position of $(1.8) million and a net favorable position of $0.1 million and $1.0 million at July 1,September 30, 2018 and December 31, 2017, respectively. These contracts qualify as cash flow hedges and mature within twelve months of their respective reporting dates.
In addition, at July 1,September 30, 2018, the Company had various currency contracts outstanding to fix the exchange rate on certain foreign currency assets and liabilities. Although placed as an economic hedge, the Company does not apply hedge accounting to these contracts. The fair value of these currency contracts was a net favorable position of $0.5 million and a net unfavorable position of $(0.3) million and $(0.6) million at July 1,September 30, 2018 and December 31, 2017, respectively.
At July 1,September 30, 2018, the U.S. dollar had strengthened against most of the functional currencies of the Company's foreign operations compared to December 31, 2017, resulting in a translation loss of $39.9$38.0 million being recorded in accumulated other comprehensive loss during the sixnine months ended July 1,September 30, 2018.

SONOCO PRODUCTS COMPANY

Restructuring and Impairment
Information regarding restructuring charges and restructuring-related asset impairment charges is provided in Note 6 to the Company’s Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Form 10-Q.
New Accounting Pronouncements
Information regarding new accounting pronouncements is provided in Note 2 to the Company’s Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Form 10-Q.

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SONOCO PRODUCTS COMPANY

Item 3.Quantitative and Qualitative Disclosures About Market Risk.
Information about the Company’s exposure to market risk is discussed under Part I, Item 2 in this report and was disclosed in its Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the Securities and Exchange Commission on February 28, 2018. There have been no other material quantitative or qualitative changes in market risk exposure since the date of that filing. 


Item 4.Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision, and with the participation, of our management, including our Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we conducted an evaluation pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, ("the Exchange Act") of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on this evaluation, our CEO and CFO concluded that such controls and procedures, as of July 1,September 30, 2018, the end of the period covered by this Quarterly Report on Form 10-Q, were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the 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 disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting occurring during the three months ended July 1,September 30, 2018, that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

SONOCO PRODUCTS COMPANY

PART II. OTHER INFORMATION

Item 1.Legal Proceedings.
Information with respect to legal proceedings and other exposures appears in Part I - Item 3 - “Legal Proceedings” and Part II - Item 8 - “Financial Statements and Supplementary Data” (Note 14 - “Commitments and Contingencies”) in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, and in Part I - Item 1 - “Financial Statements” (Note 16 - “Commitments and Contingencies”) of this report.
Environmental Matters
The Company has been named as a potentially responsible 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 Company's share has not been finally determined in most cases. In some cases, the Company has cost-sharing arrangements with other PRPs with respect to a particular site. Such agreements relate to the sharing of legal defense costs or cleanup costs, or both. The Company has assumed, for purposes of estimating amounts to be accrued, that the other parties to such cost-sharing agreements will perform as agreed. It appears that final resolution of some of the sites is years away, and actual costs to be incurred for these environmental matters in future periods is likely to vary from current estimates 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 at July 1,September 30, 2018, cannot be determined. As of July 1,September 30, 2018 and December 31, 2017, the Company had accrued $19.6$19.4 million and $20.3 million, respectively, related to environmental contingencies. The Company periodically reevaluates the assumptions used in determining the appropriate reserves for environmental matters as additional information becomes available and, when warranted, makes appropriate adjustments.


Other legal matters
Additional information regarding legal proceedings is provided in Note 16 to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. 

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SONOCO PRODUCTS COMPANY

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
ISSUER PURCHASES OF EQUITY SECURITIES 
Period 
(a) Total Number of
Shares Purchased1
 
(b) Average Price
Paid per Share
 
(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
4/02/18 - 5/06/18 5,575
 $51.95
 —
 2,969,611
5/07/18 - 6/03/2018 758
 $52.13
 —
 2,969,611
6/04/18 - 7/01/2018 2,529
 $52.96
 ��
 2,969,611
Total 8,862
 $52.26
 —
 2,969,611
Period 
(a) Total Number of
Shares Purchased1
(b) Average Price
Paid per Share
(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
7/02/18 - 8/05/18 40,982 $55.34 — 2,969,611 
8/06/18 - 9/02/18 526 $55.92 — 2,969,611 
9/3/18 - 9/30/18 2,282 $57.34 — 2,969,611 
Total 43,790 $55.45 — 2,969,611 
 
1A total of 8,86243,790 common shares were repurchased in the secondthird quarter of 2018 related to shares withheld to satisfy employee tax withholding obligations in association with 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 Company's Board of Directors authorized the repurchase of up to 5,000,000 shares of the Company's common stock. A total of 2,030,389 shares were repurchased under this authorization during 2016.2016 at a cost of $100.0 million. No shares were repurchased during 2017 or during the six-monthnine-month period ended July 1,September 30, 2018. Accordingly, a total of 2,969,611 shares remain available for repurchase at July 1,September 30, 2018.

 

Item 6. Exhibits. 

Exhibit Index
Item 6.3.2Exhibits.
Exhibit Index
10.15
15.
Letter re: unaudited interim financial information
31.31
32.32
101.The following materials from Sonoco Products Company’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at July 1, 2018 and December 31, 2017, (ii) Condensed Consolidated Statements of Income for the three and six months ended July 1, 2018 and July 2, 2017, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 1, 2018 and July 2, 2017, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended July 1, 2018 and July 2, 2017, and (v) Notes to Condensed Consolidated Financial Statements.
 
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SONOCO PRODUCTS COMPANY

SIGNATURE
Pursuant to the requirements 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.
 
SONOCO PRODUCTS COMPANY 
(Registrant) 
Date: October 31, 2018SONOCO PRODUCTS COMPANY
By: (Registrant)
Date:August 1, 2018By:/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)


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