UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 2018June 30, 2019
or
 
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to              ��      
Commission File No. 001-11261
SONOCO PRODUCTS COMPANY
Incorporated under the laws
of South Carolina
I.R.S. Employer Identification
No. 57-0248420
1 N. Second St.
Hartsville, South Carolina 29550
Telephone: 843/383-7000

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)		Name of each exchange on which registered
No par value common stockSONNew York Stock Exchange, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes 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 filerý☒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, 2018:19, 2019:
Common stock, no par value: 99,602,101

100,076,838




SONOCO PRODUCTS COMPANY
INDEX
 
3
Item 1.
3
Item 1.
3
Condensed Consolidated Balance Sheets - July 1, 2018June 30, 2019 (unaudited) and December 31, 20172018 (unaudited)
3
4
5
6
68
79
3538
Item 2.
3639
Item 3.
5054
Item 4.
5054
5154
Item 1.
5154
Item 2.
5255
Item 6.
5255



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*		June 30,
2019		December 31,
2018*
Assets    Assets
Current Assets    Current Assets
Cash and cash equivalents $197,691
 $254,912
Cash and cash equivalents$96,295 $120,389 
Trade accounts receivable, net of allowances 768,338
 725,251
Trade accounts receivable, net of allowances784,907 737,420 
Other receivables 90,954
 64,561
Other receivables100,384 111,915 
Inventories, net:    Inventories, net:
Finished and in process 162,766
 196,204
Finished and in process178,795 174,115 
Materials and supplies 308,682
 277,859
Materials and supplies333,454 319,649 
Prepaid expenses 46,537
 44,849
Prepaid expenses85,185 55,784 
 1,574,968
 1,563,636
1,579,020 1,519,272 
Property, Plant and Equipment, Net 1,167,665
 1,169,377
Property, Plant and Equipment, Net1,233,615 1,233,821 
Goodwill 1,287,839
 1,241,875
Goodwill1,310,638 1,309,167 
Other Intangible Assets, Net 350,415
 331,295
Other Intangible Assets, Net328,617 352,037 
Deferred Income Taxes 49,479
 62,053
Deferred Income Taxes48,100 47,297 
Right of Use Asset-Operating LeasesRight of Use Asset-Operating Leases304,655 — 
Other Assets 192,602
 189,485
Other Assets140,919 121,871 
Total Assets $4,622,968
 $4,557,721
Total Assets$4,945,564 $4,583,465 
Liabilities and Equity    Liabilities and Equity
Current Liabilities    Current Liabilities
Payable to suppliers $556,519
 $548,309
Payable to suppliers$554,431 $556,011 
Accrued expenses and other 285,096
 283,355
Accrued expenses and other348,609 322,958 
Notes payable and current portion of long-term debt 177,645
 159,327
Notes payable and current portion of long-term debt357,222 195,445 
Accrued taxes 10,812
 8,979
Accrued taxes14,626 8,516 
 1,030,072
 999,970
1,274,888 1,082,930 
Long-term Debt, Net of Current Portion 1,274,325
 1,288,002
Long-term Debt, Net of Current Portion1,188,026 1,189,717 
Noncurrent Operating Lease LiabilitiesNoncurrent Operating Lease Liabilities258,549 — 
Pension and Other Postretirement Benefits 340,602
 355,187
Pension and Other Postretirement Benefits178,075 374,419 
Deferred Income Taxes 79,891
 74,073
Deferred Income Taxes116,569 64,273 
Other Liabilities 107,813
 110,429
Other Liabilities75,837 99,848 
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
100,075 and 99,829 shares issued and outstanding
at June 30, 2019 and December 31, 2018, respectively
Authorized 300,000 shares
100,075 and 99,829 shares issued and outstanding
at June 30, 2019 and December 31, 2018, respectively
7,175 7,175 
Capital in excess of stated value 332,528
 330,157
Capital in excess of stated value305,750 304,709 
Accumulated other comprehensive loss (692,401) (666,272)Accumulated other comprehensive loss(723,846)(740,913)
Retained earnings 2,120,529
 2,036,006
Retained earnings2,251,279 2,188,115 
Total Sonoco Shareholders’ Equity 1,767,831
 1,707,066
Total Sonoco Shareholders’ Equity1,840,358 1,759,086 
Noncontrolling Interests 22,434
 22,994
Noncontrolling Interests13,262 13,192 
Total Equity 1,790,265
 1,730,060
Total Equity1,853,620 1,772,278 
Total Liabilities and Equity $4,622,968
 $4,557,721
Total Liabilities and Equity$4,945,564 $4,583,465 

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


3


SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars and shares in thousands except per share data)
 
 Three Months Ended Six Months EndedThree Months EndedSix Months Ended
 July 1,
2018		 July 2,
2017		 July 1,
2018		 July 2,
2017		June 30, 2019July 1, 2018June 30, 2019July 1, 2018
Net sales $1,366,373
 $1,240,674
 $2,670,560
 $2,412,998
Net sales$1,359,721 $1,366,373 $2,711,426 $2,670,560 
Cost of sales 1,089,913
 1,002,289
 2,143,498
 1,951,634
Cost of sales1,084,385 1,089,913 2,165,969 2,143,498 
Gross profit 276,460
 238,385
 527,062
 461,364
Gross profit275,336 276,460 545,457 527,062 
Selling, general and administrative expenses 141,031
 125,308
 278,472
 250,517
Selling, general and administrative expenses132,213 141,031 274,774 278,472 
Restructuring/Asset impairment charges 3,567
 7,897
 6,630
 12,008
Restructuring/Asset impairment charges13,355 3,567 24,027 6,630 
Operating profit 131,862
 105,180
 241,960
 198,839
Operating profit129,768 131,862 246,656 241,960 
Non-operating pension costs 513
 34,410
 222
 38,096
Non-operating pension costs5,550 513 11,591 222 
Interest expense 16,217
 13,823
 31,012
 26,908
Interest expense16,798 16,217 32,830 31,012 
Interest income 1,090
 1,031
 2,530
 2,058
Interest income846 1,090 1,493 2,530 
Income before income taxes 116,222
 57,978
 213,256
 135,893
Income before income taxes108,266 116,222 203,728 213,256 
Provision for income taxes 30,293
 17,167
 53,649
 42,706
Provision for income taxes28,491 30,293 51,115 53,649 
Income before equity in earnings of affiliates 85,929
 40,811
 159,607
 93,187
Income before equity in earnings of affiliates79,775 85,929 152,613 159,607 
Equity in earnings of affiliates, net of tax 3,716
 2,845
 4,963
 4,799
Equity in earnings of affiliates, net of tax1,511 3,716 2,441 4,963 
Net income 89,645
 43,656
 164,570
 97,986
Net income81,286 89,645 155,054 164,570 
Net income attributable to noncontrolling interests (233) (531) (1,103) (1,128)Net income attributable to noncontrolling interests(127)(233)(232)(1,103)
Net income attributable to Sonoco $89,412
 $43,125
 $163,467
 $96,858
Net income attributable to Sonoco$81,159 $89,412 $154,822 $163,467 
Weighted average common shares outstanding:        Weighted average common shares outstanding:
Basic 100,568
 100,258
 100,482
 100,184
Basic100,759 100,568 100,700 100,482 
Diluted 101,040
 100,717
 100,965
 100,849
Diluted101,178 101,040 101,129 100,965 
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$0.81 $0.89 $1.54 $1.63 
Diluted $0.88
 $0.43
 $1.62
 $0.96
Diluted$0.80 $0.88 $1.53 $1.62 
Cash dividends $0.41
 $0.39
 $0.80
 $0.76
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 EndedSix Months Ended
 July 1,
2018		 July 2,
2017		 July 1,
2018		 July 2,
2017		June 30, 2019July 1, 2018June 30, 2019July 1, 2018
Net income $89,645
 $43,656
 $164,570
 $97,986
Net income$81,286 $89,645 $155,054 $164,570 
Other comprehensive income/(loss):        Other comprehensive income/(loss):
Foreign currency translation adjustments (64,587) 29,526
 (41,604) 60,362
Foreign currency translation adjustments9,745 (64,587)6,773 (41,604)
Changes in defined benefit plans, net of tax 9,422
 36,711
 15,239
 48,010
Changes in defined benefit plans, net of tax1,807 9,422 8,963 15,239 
Changes in derivative financial instruments, net of tax (2,312) (518) (1,265) (3,467)Changes in derivative financial instruments, net of tax(481)(2,312)1,383 (1,265)
Other comprehensive (loss)/income (57,477) 65,719
 (27,630) 104,905
Other comprehensive income/(loss)Other comprehensive income/(loss)$11,071 $(57,477)$17,119 $(27,630)
Comprehensive income 32,168
 109,375
 136,940
 202,891
Comprehensive income92,357 32,168 $172,173 $136,940 
Net income attributable to noncontrolling interests (233) (531) (1,103) (1,128)Net income attributable to noncontrolling interests(127)(233)(232)(1,103)
Other comprehensive loss/(income) attributable to noncontrolling interests 2,107
 159
 1,677
 (521)
Other comprehensive (income)/loss attributable to noncontrolling interestsOther comprehensive (income)/loss attributable to noncontrolling interests(172)2,107 (52)1,677 
Comprehensive income attributable to Sonoco $34,042
 $109,003
 $137,514
 $201,242
Comprehensive income attributable to Sonoco$92,058 $34,042 $171,889 $137,514 
See accompanying Notes to Condensed Consolidated Financial Statements



5

SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
CHANGES IN TOTAL EQUITY (unaudited)
(Dollars in thousands)
  Six Months Ended
  July 1,
2018		 July 2,
2017
Cash Flows from Operating Activities:    
Net income $164,570
 $97,986
Adjustments to reconcile net income to net cash provided by operating activities:    
Asset impairment 133
 1,486
Depreciation, depletion and amortization 120,402
 103,649
Share-based compensation expense 6,122
 5,682
Equity in earnings of affiliates (4,963) (4,799)
Cash dividends from affiliated companies 2,750
 2,685
Net (gain)/loss on disposition of assets (833) 285
Pension and postretirement plan expense 17,408
 55,160
Pension and postretirement plan contributions (24,146) (48,511)
Net increase/(decrease) in deferred taxes 3,926
 (9,487)
Change in assets and liabilities, net of effects from acquisitions, dispositions, and foreign currency adjustments:    
Trade accounts receivable (45,032) (55,138)
Inventories (16,741) (12,795)
Payable to suppliers 16,716
 11,884
Prepaid expenses (5,602) (5,258)
Accrued expenses 1,012
 (29,289)
Income taxes payable and other income tax items (1,031) (11,430)
Other assets and liabilities 16,557
 1,068
Net cash provided by operating activities 251,248
 103,178
Cash Flows from Investing Activities:    
Purchase of property, plant and equipment (88,852) (98,819)
Cost of acquisitions, net of cash acquired (141,305) (217,489)
Proceeds from the sale of assets 6,164
 1,973
Investment in affiliates and other, net 559
 1,372
Net cash used in investing activities (223,434) (312,963)
Cash Flows from Financing Activities:    
Proceeds from issuance of debt 137,272
 180,363
Principal repayment of debt (93,564) (34,461)
Net change in commercial paper (33,000) 87,000
Net (decrease)/increase in outstanding checks (5,749) 1,195
Cash dividends (79,801) (75,604)
Shares acquired (4,558) (5,884)
Net cash (used in)/provided by financing activities (79,400) 152,609
Effects of Exchange Rate Changes on Cash (5,635) 7,541
Net Decrease in Cash and Cash Equivalents (57,221) (49,635)
Cash and cash equivalents at beginning of period 254,912
 257,226
Cash and cash equivalents at end of period $197,691
 $207,591
Total
Equity		Common SharesCapital in
Excess of
Stated Value		Accumulated
Other
Comprehensive
Loss		Retained
Earnings		Noncontrolling
Interests
OutstandingAmount
December 31, 2017$1,730,060 99,414 $7,175 $330,157 $(666,272)$2,036,006 $22,994 
Net income74,925 74,055 870 
Other comprehensive income:
Translation gain22,982 22,553 429 
Defined benefit plan adjustment, net of tax5,817 5,817 
Derivative financial instruments, net of tax1,047 1,047 
Other comprehensive income:$29,846 $29,417 $429 
Dividends(39,535)(39,535)
Issuance of stock awards479 227 479 
Shares repurchased(4,088)(78)(4,088)
Stock-based compensation3,048 3,048 
Impact of new accounting pronouncements1,721 (176)1,897 
April 1, 2018$1,796,456 99,563 $7,175 $329,596 $(637,031)$2,072,423 $24,293 
Net income89,645 89,412 $233 
Other comprehensive income/(loss):
Translation loss:(64,587)(62,480)(2,107)
Defined benefit plan adjustment, net of tax9,422 9,422 
Derivative financial instruments, net of tax(2,312)(2,312)
Other comprehensive loss:$(57,477)$(55,370)$(2,107)
Dividends(41,306)(41,306)
Issuance of stock awards329 24 329 
Shares repurchased(471)(9)(471)
Stock-based compensation3,074 3,074 
Noncontrolling interest from acquisition15 15 
July 1, 2018$1,790,265 99,578 $7,175 $332,528 $(692,401)$2,120,529 $22,434 
See accompanying Notes to Condensed Consolidated Financial Statements

6

SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN TOTAL EQUITY (unaudited)
(Dollars in thousands)
Total EquityCommon SharesCapital in
Excess of
Stated Value		Accumulated
Other
Comprehensive
Loss		Retained
Earnings		Noncontrolling
Interests
OutstandingAmount
December 31, 2018$1,772,278 99,829 $7,175 $304,709 $(740,913)$2,188,115 $13,192 
Net income73,768 73,663 105 
Other comprehensive income/(loss):
Translation loss(2,972)(2,852)(120)
Defined benefit plan adjustment, net of tax7,156 7,156 
Derivative financial instruments, net of tax1,864 1,864 
Other comprehensive income/(loss)$6,048 $6,168 $(120)
Dividends(41,534)(41,534)
Dividends paid to noncontrolling interests(214)(214)
Issuance of stock awards399 340 399 
Shares repurchased(7,395)(133)(7,395)
Stock-based compensation4,560 4,560 
Impact of new accounting pronouncements(6,771)(6,771)
March 31, 2019$1,801,139 100,036 $7,175 $302,273 $(734,745)$2,213,473 $12,963 
Net income81,286 81,159 $127 
Other comprehensive income/(loss):
Translation gain9,745 9,573 172 
Defined benefit plan adjustment, net of tax1,807 1,807 
Derivative financial instruments, net of tax(481)(481)
Other comprehensive income$11,071 $10,899 $172 
Dividends(43,353)(43,353)
Issuance of stock awards326 58 326 
Shares repurchased(1,155)(19)(1,155)
Stock-based compensation4,306 4,306 
June 30, 2019$1,853,620 100,075 $7,175 $305,750 $(723,846)$2,251,279 $13,262 
See accompanying Notes to Condensed Consolidated Financial Statements
7

SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)
Six Months Ended
June 30, 2019July 1, 2018
Cash Flows from Operating Activities:
Net income$155,054 $164,570 
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairment7,284 133 
Depreciation, depletion and amortization116,978 120,402 
Share-based compensation expense8,866 6,122 
Equity in earnings of affiliates(2,441)(4,963)
Cash dividends from affiliated companies3,297 2,750 
Net loss/(gain) on disposition of assets3,943 (833)
Pension and postretirement plan expense13,647 17,408 
Pension and postretirement plan contributions(213,579)(24,146)
Increase in net deferred tax liability37,953 3,926 
Change in assets and liabilities, net of effects from acquisitions, dispositions, and foreign currency adjustments:
Trade accounts receivable(46,191)(45,032)
Inventories(16,825)(16,741)
Payable to suppliers(2,842)16,716 
Prepaid expenses(4,976)(5,602)
Accrued expenses(7,741)1,012 
Income taxes payable and other income tax items(26,990)(1,031)
Other assets and liabilities14,644 16,557 
Net cash provided by operating activities40,081 251,248 
Cash Flows from Investing Activities:
Purchase of property, plant and equipment(102,272)(88,852)
Cost of acquisitions, net of cash acquired(455)(141,305)
Proceeds from the sale of assets1,498 6,164 
Investment in affiliates and other, net1,301 559 
Net cash used in investing activities(99,928)(223,434)
Cash Flows from Financing Activities:
Proceeds from issuance of debt243,394 137,272 
Principal repayment of debt(81,025)(93,564)
Net change in commercial paper(18,000)(33,000)
Net decrease in outstanding checks(11,697)(5,749)
Payment of contingent consideration(5,000)— 
Cash dividends(84,160)(79,801)
Dividends paid to noncontrolling interests(214)— 
Shares acquired(8,550)(4,558)
Net cash provided by/(used in) financing activities34,748 (79,400)
Effects of Exchange Rate Changes on Cash1,005 (5,635)
Net Decrease in Cash and Cash Equivalents(24,094)(57,221)
Cash and cash equivalents at beginning of period120,389 254,912 
Cash and cash equivalents at end of period$96,295 $197,691 
See accompanying Notes to Condensed Consolidated Financial Statements

8
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 six months ended July 1, 2018,June 30, 2019, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.2019. 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, 2017.2018.
With respect to the unaudited condensed consolidated financial information of the Company for the threethree- and six-month periods ended June 30, 2019 and July 1, 2018 and July 2, 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, 2018July 31, 2019 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,January 2016, the Financial Accounting Standards Board (FASB)("FASB") issued Accounting Standards Update (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, 2017, were reduced by $2,510 and $31,900, respectively, and "Operating profit" increased by $34,410, in order to conform to the current presentation. The comparable changes for the six months ended July 2, 2017, were $5,267, $32,829, and $38,096, 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.
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 six months ended July 2, 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 affect the guidance in ASU No. 2014-09 and are effective in the same time frame as ASU 2014-09 as discussed below.
In February 2016, the FASB issued("ASU") ASU 2016-02, "Leases" which changes accounting for leases and requires(“ASU 2016-02”) requiring 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 requireslease liability for all long-term leases and requiring disclosure of key information about leasing arrangements in order 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. The guidance is effective for reporting periods beginning after December 15, 2018, including interim periods within those fiscal years and requires retrospective application.the revenue recognition standard adopted in 2018. The Company is still assessingestablished a cross-functional team to implement certain software solutions as part of its newly integrated enterprise-wide lease management system. The implementation plan included developing business processes, accounting systems, and internal controls to ensure the impact of ASU 2016-02 on its consolidated financial statements, but expects the adoption of this ASU to have a material impact on its consolidated balance sheet for the initial recognitionCompany's compliance with reporting and disclosure requirements of the right-of-use assetnew standard. The Company elected the package of practical expedients permitted under the transition guidance and, lease liability associated with operating leases that are not currently recognized onas also provided for under the standard, has made an accounting policy election to exclude from the balance sheet under present U.S. GAAP.
In May 2014,leases with a term of 12 months or less. The Company also elected the FASB issued ASU 2014-09, "Revenue From Contracts With Customers," which changes the definitions/criteria usedhindsight practical expedient to determine when revenue should be recognized from being based on risksthe reasonably certain lease term for existing leases and rewardshas elected to being based on control. Among other changes, ASU 2014-09 changes the manner in which variable consideration is recognized, requires recognitioncombine lease and non-lease components as a single lease component for all classes of the time value of money when payment terms exceed one year, provides clarification on accounting for contract costs, and expands disclosure requirements. assets. 
The Company adopted ASU 2014-09 in the first quarter2016-02 as of 2018 followingJanuary 1, 2019, using the modified retrospective transition method and as such, recorded a cumulative adjustment of $1,721elected to beginning retained earnings forapply the period. The most significant impactsoptional transition approach prescribed by ASU 2018-11 which allows entities to initially apply the Company's financial statements fromnew leases standard at the adoption date, without adjusting comparative periods. Upon the adoption of this ASU are the acceleration of revenue recognition compared to prior standards for arrangements under which2016-02, the Company is producing customer-specific products without alternativerecorded on its consolidated balance sheet right of use assets totaling $336,083 and would be entitledlease liabilities totaling $344,362, as well as a cumulative effect adjustment to payment for work completed, includingretained earnings of $6,771 and a reasonable margin, and the recognition of material customer contract rights for certain agreed-upon future price concessions.$1,508 reduction to deferred tax liabilities.
During the three- and six-month periods ended July 1, 2018,June 30, 2019, 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, 2018,June 30, 2019, there were no other pronouncements pending adoption that are expected to have a material impact on the Company’s consolidated financial statements.





9
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)



Note 3: ChangesAcquisitions
On October 1, 2018, the Company completed the acquisition of the remaining 70 percent interest in Accounting Policy
ExceptConitex Sonoco (BVI), Ltd. ("Conitex Sonoco") from Texpack Investments, Inc. ("Texpack"). Concurrent with this acquisition, the Company also acquired a rigid paper facility in Spain ("Compositub") from Texpack Group Holdings B.V. Final consideration for both acquisitions was subject to a post-closing adjustment for the changes below, the Company has consistently applied the accounting policies to all periods presentedchange in these condensed consolidated financial statements.
The Company adopted Topic 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 Topic 606 using the cumulative effect method by recognizing the cumulative effect of initially applying Topic 606 as an adjustmentworking capital to the opening balancedate of equity at January 1, 2018. Therefore,closing. These adjustments were settled in February 2019 for additional cash payments to the comparative information has not been adjusted and continues to be reported under Topic 605. The details of the significant changes and quantitative impact of the changes are set out below.

 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 Topic 606 on the Company's Condensed Consolidated Balance Sheet as of July 1, 2018:
  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 Topic 606 on the Company's Condensed Consolidated Statement of Income for the three- and six-months ending July 1, 2018:
  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 Topic 606 on the Company's Condensed Consolidated Statement of Comprehensive Income for the three- and six-months ending July 1, 2018:
  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 Topic 606 on the Company's Condensed Consolidated Statement of Cash Flows for the six months ended July 1, 2018:
  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: Acquisitionssellers totaling $455.
On April 12, 2018, the Company completed the acquisition of Highland Packaging Solutions ("Highland"). Total consideration for this acquisition was $148,805, 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 working capital, which is expected to be completed by the end of the third quarter of 2018. 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, 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,Florida. The acquisition of Highland included a contingent purchase liability of $7,500 payable in two installments and inventory management through distribution warehousesbased upon a sales metric which the Company anticipated meeting in full at the time of the acquisition. The first year's metric was met and the Company paid the first installment of $5,000 in the Southeastsecond quarter of 2019. The second year's metric is also expected to be met and West Coastthe final installment of $2,500 is expected to be paid in the United States.second quarter of 2020. The liability for the remaining installment is included in "Accrued expenses and other" on the Company's Condensed Consolidated Balance Sheets at June 30, 2019.
During the six months ended June 30, 2019, 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.
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

The preliminary fair valuescontinued to finalize its valuations 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
  
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 includedacquisitions completed in the Company's Consumer Packaging segmentprevious year based on new information obtained about facts and circumstances that existed as of their respective acquisition dates. As a result, the business will operate within the Company's global plastics division. 
The allocation of the purchase price of Highlandfollowing measurement period adjustments were made to the tangible and intangiblepreviously disclosed provisional fair values of assets acquired and liabilities assumed was based on the Company's preliminary estimates of their fair value, based on information currently available. acquired:
Conitex Sonoco Compositub Highland  
Trade accounts receivable$(77)$203 $— 
Inventories— 50 — 
Property, plant and equipment(199)(1,026)1,895 
Goodwill1,971 (566)(1,895)
Other intangible assets300 1,888 — 
Accrued expenses and other(1,782)(138)— 
Other net tangible assets /(liabilities)(129)(40)— 
Additional cash consideration$84 $371 $— 
Management is continuing to finalize its valuationvaluations of certain assets and liabilities associated with its 2018 acquisitions of Conitex Sonoco and Compositub, 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 yearin the third quarter of the date of acquisition.2019. The measurement period adjustments for Highland are now completed.
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-month periods ended July 2, 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)
Pro Forma Supplemental InformationThree Months Ended Six Months Ended
ConsolidatedJuly 2, 2017 July 2, 2017
Net sales$1,274,053
 $2,511,516
Net income attributable to Sonoco$47,711
 $99,186
Earnings per share:   
  Pro forma basic$0.48 $0.99
  Pro forma diluted$0.47 $0.98
    
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.
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)
Aggregate Supplemental InformationThree Months Ended Six Months Ended
Packaging Holdings and Clear LamJuly 2, 2017 July 2, 2017
Actual net sales$33,379
 $68,219
Actual net income$4,503
 $184
    
During the second quarter of 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, and decreased other net tangibles assets by $488.
During the first quarter of 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 decreased deferred tax assets by $6,516, increased long-term debt by $664, and increased goodwill by $7,180. The adjustments were primarily related to a reduction in the Company’s valuation of acquired tax loss carryforwards and the fair value of capital lease obligations.
Acquisition-related costs of $3,091$1,224 and $945$3,091 were incurred during the three months ended June 30, 2019 and July 1, 2018, and July 2, 2017, respectively, and $3,636$1,624 and $5,270$3,636 during the six months ended June 30, 2019 and July 1, 2018, and July 2, 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, 2018, the Company entered into a definitive agreement to acquire the remaining 70 percent interest in Conitex Sonoco (BVI), Ltd. ("Conitex Sonoco") for approximately $133,000 in cash. 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’s former North America textile cone business. 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 in the fourth quarter of 2018. The Company has also entered into an agreement with Texpack, Inc. to acquire a rigid paper facility in Spain for approximately $10,000. This transaction is contingent on completion of the Conitex Sonoco acquisition and will close concurrently with it.







10










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



Note 5:4: Shareholders' Equity
Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share:
Three Months EndedSix Months Ended
June 30, 2019July 1, 2018June 30, 2019July 1, 2018
Numerator:
Net income attributable to Sonoco$81,159 $89,412 $154,822 $163,467 
Denominator:
Weighted average common shares outstanding:
Basic100,759 100,568 100,700 100,482 
Dilutive effect of stock-based compensation419 472 429 483 
Diluted101,178 101,040 101,129 100,965 
Net income attributable to Sonoco per common share:
Basic$0.81 $0.89 $1.54 $1.63 
Diluted$0.80 $0.88 $1.53 $1.62 
Cash dividends$0.43 $0.41 $0.84 $0.80 
  Three Months Ended Six Months Ended
  July 1,
2018		 July 2,
2017		 July 1,
2018		 July 2,
2017
Numerator:        
Net income attributable to Sonoco $89,412
 $43,125
 $163,467
 $96,858
Denominator:        
Weighted average common shares outstanding:        
Basic 100,568
 100,258
 100,482
 100,184
Dilutive effect of stock-based compensation 472
 459
 483
 665
Diluted 101,040
 100,717
 100,965
 100,849
Net income attributable to Sonoco per common share:      
Basic $0.89
 $0.43
 $1.63
 $0.97
Diluted $0.88
 $0.43
 $1.62
 $0.96

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 numbernumbers of SARs that were not dilutive and, therefore, not included in the computation of diluted earnings per share during the three- and six-monthsix- month periods ended June 30, 2019 and July 1, 2018 and July 2, 2017 was were 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 EndedSix Months Ended
June 30, 2019July 1, 2018June 30, 2019July 1, 2018
Anti-dilutive stock appreciation rights537 1,043 421 891 
No adjustments were made to net"Net income attributable to SonocoSonoco" 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, 2018, or during the six months ended July 1, 2018.June 30, 2019. Accordingly, a total of 2,970 shares remain available for repurchase at July 1, 2018.June 30, 2019.
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 151 shares in the six months ended June 30, 2019 at a cost of $8,550, and 87 shares in the six months ended July 1, 2018 at a cost of $4,558, and 111 shares in$4,558.
Dividend Declarations
On April 17, 2019, the six months endedBoard of Directors declared a regular quarterly dividend of $0.43 per share. This dividend was paid on June 10, 2019 to all shareholders of record as of May 10, 2019.
On July 2, 2017 at17, 2019, the Board of Directors declared a costregular quarterly dividend of $5,884.$0.43 per share. This dividend is payable on September 10, 2019 to all shareholders of record as of August 9, 2019.



11

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


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

Note 6:5: Restructuring and Asset Impairment
The Company has engaged in a number of restructuring actions over the past several years. Actions initiated in 20182019 and 20172018 are reported as “2018“2019 Actions” and “2017“2018 Actions,” respectively. Actions initiated prior to 2017,2018, all of which were substantially complete at July 1, 2018,June 30, 2019, are reported as “2016“2017 and Earlier Actions.”
Following are the total restructuring and asset impairment charges, net of adjustments, recognized by the Company during the periods presented: 
20192018
Second QuarterSix MonthsSecond QuarterSix Months
Restructuring/Asset impairment:
2019 Actions$9,961 $16,350 $— $— 
2018 Actions3,202 7,248 2,708 4,915 
2017 and Earlier Actions192 429 859 1,715 
Restructuring/Asset impairment charges13,355 24,027 3,567 6,630 
Income tax benefit(3,307)(5,945)(1,046)(1,731)
Less: Costs attributable to noncontrolling interests, net of tax(69)(138)(15)(20)
Restructuring/asset impairment charges attributable to Sonoco, net of tax$9,979 $17,944 $2,506 $4,879 
  2018 2017
  Second Quarter Six Months Second Quarter Six Months
Restructuring/Asset impairment:        
2018 Actions $2,708
 $4,915
 $—
 $—
2017 Actions 1,017
 1,422
 3,884
 6,188
2016 and Earlier Actions (158) 293
 3,675
 5,482
Other asset impairments —
 —
 338
 338
Restructuring/Asset impairment charges $3,567
 $6,630
 $7,897
 $12,008
Income tax benefit $(1,046) (1,731) $(2,338) (3,636)
Less: Costs attributable to noncontrolling interests, net of tax (15) (20) (12) (14)
Restructuring/asset impairment charges attributable to Sonoco, net of tax $2,506
 $4,879
 $5,547
 $8,358

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$6,600 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 2018.2019. The Company continually evaluates its cost structure, including its manufacturing capacity, and additional restructuring actions are likely to be undertaken.
2019 Actions
During 2019, the Company announced the elimination of a forming film production line at a flexible packaging facility in the United States, initiated the closure of a composite can and injection molding facility in Germany, and announced the closure of a composite can plant in Malaysia (all part of the Consumer Packaging segment). The Company also exited an integrated material protective packaging facility in Texas (part of the Protective Solutions segment). In addition, approximately 112 positions were eliminated in the first six months of 2019 in conjunction with the Company's ongoing organizational effectiveness efforts.
12
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

Below is a summary of 2019 Actions and related expenses by segment and by type incurred and estimated to be incurred through completion.
2019 ActionsSecond Quarter 2019Total
Incurred
to Date		Estimated
Total Cost
Severance and Termination Benefits
Consumer Packaging$2,866 $5,855 $10,315 
Display and Packaging57 57 57 
Paper and Industrial Converted Products1,356 $1,778 1,778 
Protective Solutions340 681 681 
Corporate196 1,922 1,922 
Asset Impairment / Disposal of Assets
Consumer Packaging3,884 4,196 4,196 
Protective Solutions130 130 130 
Other Costs
Consumer Packaging880 1,322 2,889 
Display and Packaging236 391 391 
Paper and Industrial Converted Products13 15 15 
Protective Solutions3 3 3 
Total Charges and Adjustments$9,961 $16,350 $22,377 

The following table sets forth the activity in the 2019 Actions restructuring accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets:
2019 ActionsSeverance
and
Termination
Benefits		Asset Impairment/
Disposal
of Assets		Other
Costs		Total
Accrual Activity
2019 Year to Date
Liability at December 31, 2018$— $— $— $— 
2019 charges10,293 4,326 1,731 16,350 
Cash payments(5,676)— (1,731)(7,407)
Asset write downs/disposals— (4,326)— (4,326)
Foreign currency translation12 — — 12 
Liability at June 30, 2019$4,629 $— $— $4,629 

"Asset Impairment/Disposal of Assets" consists primarily of an impairment charge of $3,306 resulting from the elimination of a forming film line at a flexible packaging facility, a $431 loss on the disposal of assets related to the closure of a composite can and injection molding facility in Germany, and a $325 loss on the disposal of assets and inventory relating to the closure of a composite can plant in Malaysia.
“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 2019 Actions restructuring costs by the end of 2019 using cash generated from operations.

2018 Actions
During 2018, the Company announced the closure 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 tubesfive tube and cores plantcore plants - one in Alabama, (partone in Canada, one in Indonesia, one in Russia, and one in Norway (all part of the Paper and Industrial Converted Products segment), and a protective packaging plant in North Carolina (part of the Protective Solutions segment). In addition, approximately 55 positions were eliminatedRestructuring actions in the first half of 2018 in conjunction with the Company's ongoing organizational effectiveness efforts.Display and Packaging segment included charges
13
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


associated with exiting a single-customer contract at a packaging center near Atlanta, Georgia. In addition, approximately 120 positions were eliminated throughout 2018 in conjunction with the Company's ongoing organizational effectiveness efforts.
Below is a summary of 2018 Actions and related expenses by segment and by type incurred and estimated to be incurred through completion.
20192018
2018 ActionsSecond QuarterSix MonthsSecond QuarterSix Months
Severance and Termination Benefits
Consumer Packaging$195 $836 $906 $1,694 $5,535 $5,535 
Display and Packaging150 152 556 731 2,092 2,092 
Paper and Industrial Converted Products28 197 301 1,292 3,308 3,308 
Protective Solutions— (1)517 776 1,074 1,074 
Corporate— — 20 243 243 243 
Asset Impairment / Disposal of Assets
Consumer Packaging1,611 2,618 89 75 5,307 5,307 
Display and Packaging— 87 — — 4,712 4,712 
Paper and Industrial Converted Products27 253 — — 371 371 
Protective Solutions— — 29 (243)(243)(243)
Other Costs
Consumer Packaging959 2,768 (6)5 5,158 5,518 
Display and Packaging68 116 3 3 9,966 10,066 
Paper and Industrial Converted Products162 202 293 293 1,963 1,963 
Protective Solutions2 20 — 46 66 66 
Corporate— — — — (11)(11)
Total Charges and Adjustments$3,202 $7,248 $2,708 $4,915 $39,541 $40,001 
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 ActionsSeverance
and
Termination
Benefits		Asset
Impairment/
Disposal
of Assets		Other
Costs		Total
Accrual Activity
2019 Year to Date
Liability at December 31, 2018$3,194 $— $179 $3,373 
2019 charges1,184 2,958 3,106 7,248 
Cash receipts/(payments)(3,150)494 (3,175)(5,831)
Asset write downs/disposals— (3,452)— (3,452)
Foreign currency translation1 — 5 6 
Liability at June 30, 2019$1,229 $— $115 $1,344 
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 isare asset impairment charges of $1,725 and $909 related to the closures of a net gain of $272 resulting fromflexible packaging plant in North Carolina and a thermoformed packaging plant in California, respectively. Also included are losses totaling $232 related to the sale of a buildingfixed assets and land relating toinventory associated with the closure of a protective packagingtube and core plant in North Carolina.Indonesia. The Company received proceeds of $2,019$416 from thethis sale and wrote off assets of $1,747.with a book value totaling $648.
The Company expects to pay the majority of the remaining 2018 Actions restructuring costs by the end of 2018 using cash generated from operations.
2017 Actions
14
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. 

  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		 Total
Accrual Activity
2018 Year to Date
    
Liability at December 31, 2017 $3,889
 $—
 $213
 $4,102
2018 charges 1,355
 (1,071) 1,138
 1,422
Cash receipts/(payments) (3,052) 1,841
 (1,434) (2,645)
Asset write downs/disposals —
 (770) —
 (770)
Foreign currency translation (12) —
 94
 82
Liability at July 1, 2018 $2,180
 $—
 $11
 $2,191
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.
“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 20172018 Actions restructuring costs by the end of 20182019 using cash generated from operations.





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

20162017 and Earlier Actions
20162017 and Earlier Actions are comprised of a number of plant closures and workforce reductions initiated prior to 2017.2018. Charges for these actions in both 20182019 and 20172018 primarily relate toto 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 20162017 and Earlier Actions.
Below is a summary of expenses/(income) incurred by segment for 20162017 and Earlier Actions for the three- and six-month periods ended June 30, 2019 and July 1, 2018 and July 2, 2017. 2018.
20192018
2017 and Earlier ActionsSecond QuarterSix MonthsSecond QuarterSix Months
Consumer Packaging$92 $147 $997 $1,941 
Display and Packaging— 83 118 (71)
Paper and Industrial Converted Products14 29 (530)(674)
Protective Solutions86 170 274 519 
Corporate— — — — 
Total charges, net of adjustments$192 $429 $859 $1,715 
  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 20162017 and Earlier Actions totaled $1,577$1,239 and $3,044$4,199 at July 1, 2018June 30, 2019 and December 31, 2017,2018, respectively, and is included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets. The majority of the liability associated with 20162017 and Earlier Actions relates to unpaid severance and building lease termination costs and is expected to be paid by the end of 20182019 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 quarter of 2017. 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.



15














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



Note 7:6: Accumulated Other Comprehensive Loss
The following table summarizes the components of accumulated other comprehensive loss and the changes in the balances of each component of accumulated other comprehensive loss, net of tax as applicable, for the six months ended June 30, 2019 and July 1, 2018 and July 2, 2017:2018:
Foreign
Currency
Items		Defined
Benefit
Pension Items		Gains and
Losses on Cash
Flow Hedges		Accumulated
Other
Comprehensive
Loss
Balance at December 31, 2018$(251,102)$(487,380)$(2,431)$(740,913)
Other comprehensive income/(loss) before reclassifications6,721 (5,939)1,726 2,508 
Amounts reclassified from accumulated other comprehensive loss to net income— 14,902 (242)14,660 
Amounts reclassified from accumulated other comprehensive loss to fixed assets— — (101)(101)
Other comprehensive income6,721 8,963 1,383 17,067 
Balance at June 30, 2019$(244,381)$(478,417)$(1,048)$(723,846)
Balance at December 31, 2017$(198,495)$(467,136)$(641)$(666,272)
Other comprehensive income/(loss) before reclassifications(39,927)1,068 (1,139)(39,998)
Amounts reclassified from accumulated other comprehensive loss to net income— 14,171 (182)13,989 
Amounts reclassified from accumulated other comprehensive loss to fixed assets— — 56 56 
Other comprehensive income/(loss)(39,927)15,239 (1,265)(25,953)
Amounts reclassified from retained earnings to accumulated other comprehensive loss— — (176)(176)
Balance at July 1, 2018$(238,422)$(451,897)$(2,082)$(692,401)


16
  
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)
Other comprehensive income/(loss) before reclassifications
(1,139)
1,068

(39,927)
(39,998)
Amounts reclassified from accumulated other comprehensive loss to net income
(182)
14,171

—

13,989
Amounts reclassified from accumulated other comprehensive loss to fixed assets
56

—

—

56
Other comprehensive income/(loss)
(1,265)
15,239

(39,927)
(25,953)
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 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
Amounts reclassified from accumulated other comprehensive loss to net income (1,257) 29,893
 —
 28,636
Amounts reclassified from accumulated other comprehensive loss to fixed assets 10
 —
 —
 10
Other comprehensive income/(loss) (3,467) 48,010
 59,841
 104,384
Balance at July 2, 2017 $(1,528) $(405,811) $(226,657) $(633,996)
         

"Other comprehensive income/(loss) before reclassifications" during the six months ended July 2, 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.

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-monthsix- month periods ended June 30, 2019 and July 1, 2018 and July 2, 2017: 2018:

 
Amount Reclassified from Accumulated
Other Comprehensive Loss
 Amount Reclassified from Accumulated
Other Comprehensive Loss
 Three Months EndedSix Months Ended Three Months EndedSix 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		June 30,
2019		July 1, 2018June 30,
2019		July 1,
2018		Affected 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$532 $(240)$849 $570 Net sales
Foreign exchange contracts 174
(1,317)(353) (2,042) Cost of salesForeign exchange contracts(378)174 (666)(353)Cost of sales
Commodity contracts 68
463
10
 711
 Cost of salesCommodity contracts(319)68 116 10 Cost of sales
 2
1,389
227
 1,952
 Income before income taxes$(165)$2 $299 $227 Income before income taxes
 (1)(497)(45) (695) Provision for income taxes59 (1)(57)(45)Provision for income taxes
 $1
$892
$182
 $1,257
 Net income$(106)$1 $242 $182 Net income
Defined benefit pension items 
    Defined benefit pension items
Effect of settlement loss(a)
 $(645)$(31,074)$(645) $(31,074) Selling, general and 
administrative expenses
Effect of settlement loss(a)
$(225)$(645)$(1,547)$(645)Non-operating pension costs
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)
(9,523)(8,983)(18,455)(18,284)Non-operating pension costs
 (9,628)(40,742)(18,929) (50,859) Income before income taxes$(9,748)$(9,628)$(20,002)$(18,929)Income before income taxes
 2,419
17,224
4,758
 20,966
 Provision for income taxes2,510 2,419 5,100 4,758 Provision for income taxes
 $(7,209)$(23,518)$(14,171) $(29,893) Net income$(7,238)$(7,209)$(14,902)$(14,171)Net income
Total reclassifications for the period $(7,208)$(22,626)$(13,989) $(28,636) Net incomeTotal reclassifications for the period$(7,344)$(7,208)$(14,660)$(13,989)Net income
 
(a)
(a) See Note 11 for additional details.

17
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 June 30, 2019 and July 1, 2018 and July 2, 2017:2018:


Three months ended June 30, 2019 Three months ended July 1, 2018 
Before Tax
Amount 		Tax
(Expense)
Benefit 		After Tax
Amount 		Before Tax
Amount 		Tax
(Expense)
Benefit 		After Tax
Amount 
Foreign currency items:
Net other comprehensive income/(loss) from foreign currency items $9,573 $— $9,573 $(62,480)$— $(62,480)
Defined benefit pension items:
Other comprehensive income/(loss) before
reclassifications 		(6,957)1,526 (5,431)2,635 (422)2,213 
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income 		9,748 (2,510)7,238 9,628 (2,419)7,209 
Net other comprehensive income/(loss) from
defined benefit pension items 		2,791 (984)1,807 12,263 (2,841)9,422 
Gains and losses on cash flow hedges:
Other comprehensive income/(loss) before
reclassifications 		(828)297 (531)(3,106)784 (2,322)
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income 		165 (59)106 (2)1 (1)
Amounts reclassified from accumulated other
comprehensive income/(loss) to fixed assets 		(56)— (56)11 — 11 
Net other comprehensive income/(loss) from
cash flow hedges 		(719)238 (481)(3,097)785 (2,312)
Other comprehensive income/(loss):$11,645 $(746)$10,899 $(53,314)$(2,056)$(55,370)


18
   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 June 30, 2019 and July 1, 2018 and July 2, 2017:2018:

Six months ended June 30, 2019 Six months ended July 1, 2018 
Before Tax
Amount 		Tax
(Expense)
Benefit 		After Tax
Amount 		Before Tax
Amount 		Tax
(Expense)
Benefit 		After Tax
Amount 
Foreign currency items:
Net other comprehensive income/(loss) from foreign currency items $6,721 $— $6,721 $(39,927)$— $(39,927)
Defined benefit pension items:
Other comprehensive income/(loss) before
reclassifications 		(7,638)1,699 (5,939)1,490 (422)1,068 
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income 		20,002 (5,100)14,902 18,929 (4,758)14,171 
Net other comprehensive income/(loss) from
defined benefit pension items 		12,364 (3,401)8,963 20,419 (5,180)15,239 
Gains and losses on cash flow hedges:
Other comprehensive income/(loss) before
reclassifications 		2,193 (467)1,726 (1,631)492 (1,139)
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income 		(299)57 (242)(227)45 (182)
Amounts reclassified from accumulated other
comprehensive income/(loss) to fixed assets 		(101)(101)56 — 56 
Net other comprehensive income/(loss) from
cash flow hedges 		1,793 (410)1,383 (1,802)537 (1,265)
Other comprehensive income/(loss):$20,878 $(3,811)$17,067 $(21,310)$(4,643)$(25,953)



   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 8:7: Goodwill and Other Intangible Assets
Goodwill
A summary of the changes in goodwill by segment for the six months ended July 1, 2018June 30, 2019 is as follows: 
Consumer
Packaging		Display
and
Packaging		Paper and
Industrial
Converted
Products		Protective
Solutions		Total
Goodwill at December 31, 2018$617,332 $203,414 $256,947 $231,474 $1,309,167 
Foreign currency translation1,590 — 377 (6)1,961 
Other(2,461)— 1,971 — (490)
Goodwill at June 30, 2019$616,461 $203,414 $259,295 $231,468 $1,310,638 
  
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 the acquisition of Highland Packaging Solutions ("Highland") which resulted in the recognition of $48,387 of goodwill. Reflected in "Other" above are measurementMeasurement period adjustments were made in the first six months of 20182019 to finalize the fair values of the assets acquired and the liabilities assumed in the 20172018 acquisitions of Packaging HoldingsCompositub, Highland, and Clear Lam,Conitex Sonoco resulting in increasesincreases/(decreases) in goodwill of $7,180$(566), $(1,895) and $4,341,$1,971, respectively. These adjustments are reflected above in "Other." See Note 43 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
19
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

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 continue to 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, 2018. AJune 30, 2019. In 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
During the most recenttime subsequent to the annual impairment testevaluation, and July 1, 2018. Although on April 20, 2018,at June 30, 2019, the Company was advised by one ifconsidered whether any events and/or changes in circumstances had resulted in the likelihood that the goodwill of any of its Display and Packaging customersreporting units may have been impaired. It is management's opinion 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 change in assumptions regarding future performance and / or discount rate would result in a goodwill impairment charge being recognized.  no such events have occurred.


Other Intangible Assets
A summary of other intangible assets as of July 1, 2018June 30, 2019 and December 31, 20172018 is as follows:
 July 1,
2018		 December 31,
2017		June 30,
2019		December 31,
2018
Other Intangible Assets, gross:    Other Intangible Assets, gross:
Patents $21,969
 $21,957
Patents$22,496 $22,509 
Customer lists 535,038
 497,634
Customer lists550,003 548,038 
Trade names 26,987
 25,148
Trade names31,166 31,174 
Proprietary technology 20,763
 20,779
Proprietary technology28,755 28,748 
Land use rights 289
 298
Land use rights284 282 
Other 2,133
 1,740
Other2,127 2,093 
Other Intangible Assets, gross $607,179
 $567,556
Other Intangible Assets, gross$634,831 $632,844 
    
Accumulated Amortization:    Accumulated Amortization:
Patents (8,231) (7,187)Patents(10,604)(9,539)
Customer lists (227,296) (210,212)Customer lists(268,123)(246,946)
Trade names (5,777) (4,427)Trade names(8,810)(7,413)
Proprietary technology (14,084) (13,192)Proprietary technology(17,077)(15,400)
Land use rights (49) (47)Land use rights(50)(48)
Other (1,327) (1,196)Other(1,550)(1,461)
Total Accumulated Amortization $(256,764) $(236,261)Total Accumulated Amortization$(306,214)$(280,807)
Other Intangible Assets, net $350,415
 $331,295
Other Intangible Assets, net$328,617 $352,037 
The acquisition of Highland in April 2018 resulted in the addition of $45,610 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
Measurement period adjustments were made in the second quarterfirst six months of 20182019 to the provisional fair values of the assets acquired and the liabilities assumed in the 2018 acquisitions of Compositub and Conitex Sonoco resulting in increases in other intangible assets, acquired in the July 2017 acquisitionprimarily customer lists, of Clear Lam resulting in a $1,300 reduction in the value previously attributed to customer lists. See Note 4 for additional information.$1,888 and $300, respectively.
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$13,098 and $9,378$12,401 for the three months ended June 30, 2019 and July 1, 2018, and July 2, 2017, respectively, and $22,603$25,890 and $16,589$22,603 for the six months ended June 30, 2019 and July 1, 2018, and July 2, 2017, respectively. Amortization expense on other intangible assets is expected to total approximately $46,100 in 2018, $45,400$51,400 in 2019, $42,300$49,000 in 2020, $41,400$47,000 in 2021, $44,500 in 2022 and $39,500$36,800 in 2022.2023.



20
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Note 9:8: Debt
On April 12, 2018,May 17, 2019, the Company entered into a $100,000364-day, $200,000 term loan with Wells Fargo Bank, of America, N.A.National Association. The full amount$200,000 was drawn from this facility on April 12, 2018,May 20, 2019, and $190,000 of the loan proceeds along with proceeds from existing credit facilities, were used to fundmake voluntary contributions to the acquisition of Highland Packaging Solutions.Company's U.S. defined benefit pension plans. The unsecured loan has a 364-day term and the Company has a one-timeone-time option to extendrequest an extension of the term for an additional 364 days at its sole discretion.if it meets certain conditions. Interest is assessed at the London Interbank Offered Rate (LIBOR) plus a margin based on a pricing grid that uses the Company'sCompany’s credit ratings. The current LIBOR margin is 110at June 30, 2019 was 100 basis points. There is no required amortization and repayment can be accelerated at any time at the discretion of the Company. The Company repaid $50,000 of the borrowings from this term loan during the second quarter of 2018.


Note 10:9: Financial Instruments and Derivatives
The following table sets forth the carrying amounts and fair values of the Company’s significant financial instruments for which the carrying amount differs from the fair value. 
June 30, 2019December 31, 2018
Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Long-term debt, net of current portion$1,188,026 $1,295,115 $1,189,717 $1,270,521 
  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, 2018June 30, 2019 and December 31, 2017,2018, 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, 2018,June 30, 2019, natural gas swaps covering approximately 5.06.0 million MMBTUs were outstanding. These contracts represent approximately 74% and 33%52% of anticipated U.S. and Canadian usage for the remainder of 20182019 and 2019,2020, respectively. Additionally, the Company had swap contracts covering 1,9052,041 metric tons of aluminum, representing approximately 51% of anticipated usage for the remainder of 2018.2019. The fair values of the Company’s commodity cash flow hedges netted to a loss position of $(593)$(2,351) and $(1,571) at July 1, 2018,June 30, 2019 and $(1,713) at December 31, 2017.2018 respectively. The amount of the loss included in Accumulated Other Comprehensive Loss at July 1, 2018,June 30, 2019, that is expected to be reclassified to the income statement during the next twelve months is $(233)$(2,050).

21
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 2018.2019. The net positions of these contracts at July 1, 2018June 30, 2019 were as follows (in thousands):
CurrencyActionQuantity
Colombian pesopurchase3,821,059
8,090,286 
Mexican pesopurchase351,178
355,994 
Polish zlotyCanadian dollarpurchase217,049
31,576 
Russian rublePolish zlotypurchase31,506
25,074 
Canadian dollarCzech korunapurchase26,485
23,587 
British poundTurkish lirapurchase5,535
3,311 
Turkish liraBritish poundpurchase5,194
333 
New Zealand dollarsell(262)
Australian dollarsell(709)
EuroSwedish kronasell(51,137(1,010)
Euro)sell(6,995)
Russian rublesell (113,055)

The fair value of these foreign currency cash flow hedges related to forecasted sales and purchases netted to a gain position of $872 at June 30, 2019 and a loss position of $(1,826) at July 1, 2018 and a gain position of $950$(1,624) at December 31, 2017. In2018. Gains of $872 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, 2018June 30, 2019 and at December 31, 2017,2018, the net position of these contracts was $(262)were $(7) and $330,$(88), respectively. During the six months ended July 1, 2018, gainsJune 30, 2019, losses from these hedges totaling $56$(101) were reclassified from accumulated other comprehensive income and included in the carrying value of the related fixed assets acquired. Losses of $(262)$(7) 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, 2018,June 30, 2019, were as follows (in thousands):
CurrencyActionQuantity
Colombian pesopurchase7,353,411
10,371,390 
Mexican pesopurchase151,893
407,604 
Canadian dollarsellpurchase(52,22818,608 
)
South African randsell(7,000)

The fair value of the Company’s other derivatives was in a lossgain position of $(284)$687 and $(581)$166 at July 1, 2018June 30, 2019 and December 31, 2017,2018, respectively.
22
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, 2018June 30, 2019 and December 31, 2017: 2018:
DescriptionBalance Sheet LocationJune 30, 2019December 31, 2018
Derivatives designated as hedging instruments:
Commodity ContractsPrepaid expenses$— $282 
Commodity ContractsAccrued expenses and other$(2,131)$(1,843)
Commodity ContractsOther liabilities$(220)$(10)
Foreign Exchange ContractsPrepaid expenses$1,238 $770 
       Foreign Exchange ContractsAccrued expenses and other$(373)$(2,482)
Derivatives not designated as hedging instruments:
Foreign Exchange ContractsPrepaid expenses$— $727 
Foreign Exchange ContractsOther assets$696 $— 
Foreign Exchange ContractsAccrued expenses and other$(9)$(561)
Description Balance Sheet Location July 1,
2018		 December 31,
2017
Derivatives designated as hedging instruments:      
Commodity Contracts Prepaid expenses $279
 $149
Commodity Contracts Accrued expenses and other $(658) $(1,417)
Commodity Contracts Other liabilities $(214) $(445)
Foreign Exchange Contracts Prepaid expenses $154
 $2,232
       Foreign Exchange Contracts Accrued expenses and other $(1,980) $(1,282)
Derivatives not designated as hedging instruments:      
Foreign Exchange Contracts Prepaid expenses $2
 $90
Foreign Exchange Contracts Accrued expenses and other $(286) $(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 ended June 30, 2019 and July 1, 2018 and July 2, 2017: 2018:
DescriptionAmount 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 June 30, 2019
Foreign Exchange Contracts$928 Net sales$532 
Cost of sales$(378)
Commodity Contracts$(1,756)Cost of sales$(319)
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$68 
DescriptionGain or (Loss)
Recognized		Location of Gain or (Loss) Recognized in
Income Statement
Derivatives not Designated as Hedging Instruments:
Three months ended June 30, 2019
Foreign Exchange Contracts$— Cost of sales
$893 Selling, general and administrative
Three months ended July 1, 2018
Foreign Exchange Contracts$— Cost of sales
$1,270 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
23
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Three months ended June 30, 2019Three months ended July 1, 2018
Three months ended July 1, 2018 Three months ended July 2, 2017
DescriptionRevenueCost of sales RevenueCost of sales
DescriptionDescriptionRevenueCost of
sales		RevenueCost 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$532 $(697)$(240)$242 
    
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: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 incomeAmount of gain or (loss) reclassified from accumulated other comprehensive income into net income$532 $(378)$(240)$174 
Commodity contracts:Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net incomeAmount of gain or (loss) reclassified from accumulated other comprehensive income into net income$— $(319)$— $68 

The following tables set forth the effect of the Company’s derivative instruments on financial performance for the six months ended June 30, 2019 and July 1, 2018 and July 2, 2017: 2018:
DescriptionAmount 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 June 30, 2019
Foreign Exchange Contracts$2,858 Net sales$849 
Cost of sales$(666)
Commodity Contracts$(664)Cost of sales$116 
Six months ended July 1, 2018
Foreign Exchange Contracts$(2,761)Net sales$570 
Cost of sales$(353)
Commodity Contracts$1,130 Cost of sales$10 
DescriptionGain or (Loss)
Recognized		Location of Gain or (Loss) Recognized in
Income Statement
Derivatives not Designated as Hedging Instruments:
Six months ended June 30, 2019
Foreign Exchange Contracts$— Cost of sales
$(571)Selling, general and administrative
Six months ended July 1, 2018
Foreign Exchange Contracts$— Cost of sales
$2,024 Selling, general and administrative


24
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)


Six months ended June 30, 2019Six months ended July 1, 2018
Six months ended July 1, 2018 Six months ended July 2, 2017
DescriptionRevenueCost of sales RevenueCost of sales
DescriptionDescriptionRevenueCost of
sales		RevenueCost 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$849 $(550)$570 $(343)
    
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 incomeAmount of gain or (loss) reclassified from accumulated other comprehensive income into net income$849 $(666)$570 $(353)
Commodity contracts:Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net incomeAmount of gain or (loss) reclassified from accumulated other comprehensive income into net income$— $116 $— $10 




Note 11:10: 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:
DescriptionJune 30, 2019Assets measured
at NAV		Level 1Level 2Level 3
Hedge derivatives, net:
Commodity contracts$(2,351)$— $— $(2,351)$— 
Foreign exchange contracts$865 $— $— $865 $— 
Non-hedge derivatives, net:
Foreign exchange contracts$687 $— $— $687 $— 
Deferred compensation plan assets$135 $— $135 $— $— 
DescriptionDecember 31, 2018Assets measured
at NAV		Level 1Level 2Level 3
Hedge derivatives, net:
Commodity contracts$(1,571)$— $— $(1,571)$— 
Foreign exchange contracts$(1,712)$— $— $(1,712)$— 
Non-hedge derivatives, net:
Foreign exchange contracts$166 $— $— $166 $— 
Deferred compensation plan assets$260 $— $260 $— $— 

25
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, 9, 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-monthsix-month periods ended July 1, 2018.June 30, 2019.


Note 12:11: 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, non-union participants effective December 31, 2018. Remaining active participants in the U.S. qualified plan will becomebecame eligible for SRC contributions effective January 1, 2019.
The components of net periodic benefit cost include the following:
Three Months EndedSix Months Ended
June 30, 2019July 1, 2018June 30, 2019July 1, 2018
Retirement Plans
Service cost$962 $4,478 $1,903 $9,150 
Interest cost15,100 13,573 30,043 27,551 
Expected return on plan assets(19,232)(22,580)(38,329)(45,789)
Amortization of prior service cost216 242 430 491 
Amortization of net actuarial loss9,646 9,162 18,680 18,582 
Effect of settlement loss225 645 1,547 645 
Net periodic benefit cost$6,917 $5,520 $14,274 $10,630 
Retiree Health and Life Insurance Plans
Service cost$78 $70 $152 $149 
Interest cost113 110 231 221 
Expected return on plan assets(179)(218)(356)(690)
Amortization of prior service credit(124)(123)(247)(249)
Amortization of net actuarial gain(215)(298)(408)(540)
Net periodic benefit income$(327)$(459)$(628)$(1,109)

26
  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$199,006 to its defined benefit retirement and $34,445retiree health and life insurance plans during the six months ended June 30, 2019, including voluntary contributions to its U.S. defined benefit pension plans (the "Plans") totaling $190,000 in May 2019. This voluntary contribution was followed by actions to further de-risk the Plan's portfolio by increasing the allocation of pension assets to fixed-income investments. The Company expects to make additional aggregate contributions of approximately $17,100 to its defined benefit retirement and retiree health and life insurance plans over the remainder of 2019, including an additional $10,000 voluntary contribution to the Plans. The Company made aggregate contributions of $9,995 to its defined benefit retirement and retiree health and life insurance plans during the six months ended July 1, 2018 and July 2, 2017, respectively. The Company expects to make additional aggregate contributions of approximately $14,500 to its defined benefit retirement and retiree health and life insurance plans over the remainder of 2018.

The Company recognized settlement lossescharges totaling $1,547 and $645 during the six months ended June 30, 2019 and July 1, 2018, resultingrespectively. These charges resulted from payments made to certain participants of the Company's Canadian pension plan who elected thea lump sum option of distribution upon retirement. Settlement losses in

Pending Plan Termination
On July 17, 2019, subsequent to the prior year totaling $31,074 resultedend of the second quarter, the Company's Board of Directors approved a resolution to terminate the Sonoco Pension Plan for Inactive Participants, a tax-qualified defined benefit plan (the "Inactive Plan"), effective September 30, 2019. Once approval is received from the Company's initiativeInternal Revenue Service and the Pension Benefit Guaranty Corporation, and following completion of the limited lump-sum offering, the Company is expected to settle all remaining liabilities under the pension obligation of certain terminated vested participantsInactive Plan in the U.S. qualified retirement plans,2020 through a lump sum payment or the purchase of an annuity.annuity contracts. The Company anticipates making additional contributions to the Inactive Plan beginning in 2020 of between $75,000 and $125,000 in order to be fully funded on a termination basis at the time of the annuity purchase. However, the actual amount of the Company's long-term liability when it is transferred, and the related cash contribution requirement, will depend upon the nature and timing of participant settlements, as well as prevailing market conditions. Non-cash settlement charges resulting from the lump sum payouts and annuity purchases are expected to range between $525,000 and $575,000. The termination of the Inactive Plan will apply to participants who have separated service from Sonoco and to non-union active employees who no longer accrue pension benefits. There is no change in the cumulative benefit previously earned by the approximately 11,000 impacted participants as a result of these actions, and the Company will continue to manage and support the Sonoco Pension Plan, comprised of approximately 600 active participants who continue to accrue benefits in accordance with a flat-dollar multiplier formula.


Sonoco Retirement Contribution (SRC)
The SRC contributions, which isare funded annually in the first quarter, totaled $14,573 during the six months ended June 30, 2019, and $14,151 during the six months ended July 1, 2018, and $14,066 during the six months ended July 2, 2017.2018. No additional SRC contributions are expected during the remainder of 2018.2019. The Company recognized expense related to the SRC of $3,855$5,830 and $3,820$3,855 for the quarters ended June 30, 2019 and July 1, 2018, and July 2, 2017, respectively, and $7,887$12,097 and $7,691,$7,887 for the six-month periods ended June 30, 2019 and July 1, 2018, and July 2, 2017, respectively.


Note 13:12: Income Taxes
The Company’s effective tax rate for the three- and six-monthsix-month periods ending July 1, 2018,June 30, 2019 was 26.1%26.3% and 25.2%25.1%, respectively, and its effective tax rate for the three- and six-month periods ending July 2, 2017,1, 2018 was 29.6%26.1% and 31.4%25.2%, respectively. The rates for the three- and six-month periods ending June 30, 2019 and July 1, 2018 varied from the U.S. statutory rate due primarily to the new international tax regimeeffect of the U.S. as part of the enactment of the Tax Cuts and Jobs Act (Tax Act)Global Intangible Low Taxed Income (GILTI) tax as well as the effect of state income taxes. The rates for the three- and six-month periods ending July 2, 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.
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 adjustments were made during the six months ended July 1, 2018, to the provisional amounts recorded in December. Any such adjustments will be recorded to tax expense in 2018 in the quarter the analysis is completed.
The Company and/or its subsidiaries file federal, state and local income tax returns in the United States and various foreign jurisdictions. WithThe Company is currently under audit for the 2012 and 2013 tax years and has entered the appeals process with the Internal Revenue Service. Other than the aforementioned audit, with few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2012. The Company is currently under audit by the Internal Revenue Service for the 2012 and 2013 tax years.prior to 2015.
The Company’s reserve for uncertain tax benefits has increased by approximately $1,400$600 since December 31, 2017,2018, due primarily to an increase in reserves related to existing uncertain tax positions. The Company believes that it is reasonably possible that the amount reserved for unrecognized tax benefits at July 1, 2018 willJune 30, 2019 could decrease by approximately $800$2,800 over the next twelve months. This change includes the anticipated increase in reserves related to
27
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

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 prior NOPAs. At the time of the distribution in 2012, it was characterized as a dividend to the extent of earnings and profits, with the remainder as a tax free return of basis and taxable capital gain. As the IRS proposes to recharacterize the 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 had a pre-conference hearing with IRS Appeals during the second quarter of 2019. 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.

28
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

Note 13: Leases
The Company routinely enters into leasing arrangements for real estate (including manufacturing facilities, office space, warehouses, and packaging centers), transportation equipment (automobiles, forklifts, and trailers), and office equipment (copiers and postage machines). The assessment of the certainty associated with the exercise of various lease renewal, termination, and purchase options included in the Company's lease contracts is at the Company's sole discretion. Most real estate leases, in particular, include one or more options to renew, with renewal terms that can extend the lease term from one to 50 years. The Company's leases do not have any significant residual value guarantees or restrictive covenants.
As the implicit rate in the Company's leases is not readily determinable, the Company calculates its right of use lease liabilities using discount rates based upon the Company’s incremental secured borrowing rate, which contemplates and reflects a particular geographical region’s interest rate for the leases active within that region of the Company’s global operations. The Company further utilizes a portfolio approach by assigning a “short” rate to contracts with lease terms of 10 years or less and a “long” rate for contracts greater than 10 years. See Note 2 for further information regarding the Company's adoption of ASU 2016-02, "Leases."
The following table sets forth the balance sheet location and values of the Company’s lease assets and lease liabilities at June 30, 2019:

ClassificationBalance Sheet LocationJune 30, 2019
Lease Assets
Operating lease assetsRight of Use Asset - Operating Leases$304,655 
Finance lease assetsOther Assets20,275 
Total lease assets324,930 
Lease Liabilities
Current operating lease liabilitiesAccrued expenses and other55,210 
Current finance lease liabilitiesNotes payable and current portion of debt9,508 
Total current lease liabilities64,718 
Noncurrent operating lease liabilitiesNoncurrent Operating Lease Liabilities258,549 
Noncurrent finance lease liabilitiesLong-term Debt, Net of Current Portion9,563 
Total noncurrent lease liabilities268,112 
Total lease liabilities$332,830 

As of June 30, 2019, the Company has entered into additional leases that have not yet commenced. The associated contracts include payments over the respective lease terms totaling $573, which are not reflected in the Company's liabilities recorded as of June 30, 2019. These leases will commence during fiscal year 2019 with lease terms of approximately 3 years.




29
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

Certain of the Company’s leases include variable costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, and also non-lease components that were incurred based upon actual terms rather than contractually fixed amounts. In addition, variable costs are incurred for lease payments that are indexed to a change in rate or index. Because the right of use asset recorded on the balance sheet was determined based upon factors considered at the commencement date, subsequent changes in the rate or index that were not contemplated in the right of use asset balances recorded on the balance sheet result in variable expenses being incurred when paid during the lease term.
The following table sets forth the components of the Company's total lease cost for the three- and six-month periods ended June 30, 2019:
Lease CostThree Months Ended June 30, 2019Six Months Ended June 30, 2019
Operating lease cost(a)$15,771 $31,316 
Finance lease cost:
     Amortization of lease asset(a) (b)2,053 4,122 
     Interest on lease liabilities(c)245 521 
Variable lease cost(a) (d)7,791 16,969 
Total lease cost$25,860 $52,928 

(a) Production-related and administrative amounts are included in cost of sales and selling, general and administrative expenses, respectively.
(b) Included in depreciation and amortization.

(c) Included in interest expense.

(d) Also includes short term lease costs, which are deemed immaterial.

In compliance with ASC 842, the Company must provide the prior year disclosures required under the previous lease guidance (ASC 840) for comparative periods presented herein. Rental expense under operating leases for the three- and six-month periods ended July 1, 2018 was $19,399 and $38,300, respectively.

The following table sets forth the five-year maturity schedule of the Company's lease liabilities as of June 30, 2019:
Maturity of Lease LiabilitiesOperating LeasesFinance LeasesTotal
2019 (excluding six months ended June 30, 2019)$30,472 $5,031 $35,503 
202054,945 8,723 63,668 
202147,075 3,165 50,240 
202241,259 1,644 42,903 
202337,895 994 38,889 
Beyond 2023188,730 843 189,573 
Total lease payments$400,376 $20,400 $420,776 
     Less: Interest86,617 1,329 87,946 
Lease Liabilities$313,759 $19,071 $332,830 



30
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

As presented in our 2018 Form 10-K (under ASC 840), the future minimum rentals under noncancellable operating leases with terms of more than one year, payable over the remaining lives of the leases at December 31, 2018, were as follows:
PeriodMinimum Future Rental Commitments
2019$48,200 
202041,700 
202132,500 
202227,300 
202321,400 
Beyond 202392,300 

The following tables set forth the Company's weighted average remaining lease term and discount rates used in the calculation of its outstanding lease liabilities June 30, 2019, along with other lease-related information for the three months ended June 30, 2019:
Lease Term and Discount RateAs of June 30, 2019
Weighted-average remaining lease term (years):
     Operating leases11.2
     Finance leases2.8
Weighted-average discount rate:
     Operating leases4.92% 
     Finance leases5.08% 
Other InformationSix Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows used by operating leases$31,482 
     Operating cash flows used by finance leases$521 
     Financing cash flows used by finance leases$4,575 
Leased assets obtained in exchange for new operating lease liabilities$8,820 
Leased assets obtained in exchange for new finance lease liabilities$104 

31
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

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.
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 sales 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 contractContract assets and liabilities are locatedreported in "Other receivables" and "Accrued expenses and other"other," respectively, on the Condensed Consolidated Balance Sheets.
June 30, 2019December 31, 2018
Contract Assets$53,085 $48,786 
Contract Liabilities$(18,074)$(18,533)
  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:
June 30, 2019December 31, 2018
Contract
Asset		Contract
Liability		Contract
Asset		Contract
Liability
Beginning Balance$48,786 $(18,533)$45,877 $(17,736)
Revenue deferred or rebates accrued— (16,458)— (19,730)
Recognized as revenue3,091 1,652 
Rebates paid to customers— 13,826 — 17,281 
Increases due to rights to consideration for customer specific goods produced, but not billed during the period54,570 — 48,786 — 
Transferred to receivables from contract assets recognized at the beginning of the period(50,271)— (45,877)— 
Ending Balance$53,085 $(18,074)$48,786 $(18,533)
  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. Generallyarrangements, volume rebates, and payments received in advance. For multi-year arrangements with pricing mechanisms, the Company will generally defer revenue during the initial termfirst half 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.
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, 2018. The table also includes a reconciliation of disaggregated revenue with reportable segments.
32
Three Months EndedConsumer Packaging Display and Packaging Paper and Industrial Converted Products Protective Solutions
Primary Geographical Markets:
 
 
 
  United States$446,573
 $69,180
 $279,701
 $111,748
  Europe101,954
 72,377
 90,398
 6,816
  Canada30,595
 —
 33,762
 —
  Other36,940
 1,703
 70,276
 14,350
Total$616,062
 $143,260
 $474,137
 $132,914
  
 
 
 
Timing of Revenue Recognition:
 
 
 
  Products transferred at a point in time$386,850
 $99,233
 $452,576
 $109,636
  Products transferred over time229,212
 44,027
 21,561
 23,278
Total $616,062
 $143,260
 $474,137
 $132,914
The following table sets forth information about revenue disaggregated by primary geographic regions, and timing of revenue recognition for the six-month period ended July 1, 2018. The table also includes a reconciliation of disaggregated revenue with reportable segments.
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













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


The following tables set forth information about revenue disaggregated by primary geographic regions, and timing of revenue recognition for the three-month periods ended June 30, 2019 and July 1, 2018. The tables also include a reconciliation of disaggregated revenue with reportable segments.
Three months ended June 30, 2019Consumer
Packaging		Display and
Packaging		Paper and
Industrial
Converted
Products		Protective
Solutions		Total
Primary Geographical Markets:
  United States$436,896 $62,097 $268,890 $104,058 $871,941 
  Europe99,007 71,564 87,958 5,595 264,124 
  Canada28,839 — 29,903 — 58,742 
  Asia Pacific17,445 — 69,588 516 87,549 
  Other20,563 1,172 34,989 20,641 77,365 
Total$602,750 $134,833 $491,328 $130,810 $1,359,721 
Timing of Revenue Recognition:
  Products transferred at a point in time$343,324 $60,450 $472,363 $111,208 $987,345 
  Products transferred over time259,426 74,383 18,965 19,602 372,376 
Total$602,750 $134,833 $491,328 $130,810 $1,359,721 

Three months ended July 1, 2018Consumer PackagingDisplay and PackagingPaper and Industrial Converted ProductsProtective SolutionsTotal
Primary Geographical Markets:
United States$446,573 $69,180 $279,752 $103,777 $899,282 
Europe101,953 72,377 90,398 6,816 271,544 
Canada30,595 — 33,762 — 64,357 
Asia Pacific16,713 — 35,689 903 53,305 
Other20,228 1,703 34,536 21,418 77,885 
Total$616,062 $143,260 $474,137 $132,914 $1,366,373 
Timing of Revenue Recognition1:
Products transferred at a point in time$376,406 $68,324 $452,576 $109,636 $1,006,942 
Products transferred over time239,656 74,936 21,561 23,278 359,431 
Total$616,062 $143,260 $474,137 $132,914 $1,366,373 

33
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

The following tables set forth information about revenue disaggregated by primary geographic regions, and timing of revenue recognition for the six-month periods ended June 30, 2019 and July 1, 2018. The tables also include a reconciliation of disaggregated revenue with reportable segments.
Six months ended June 30, 2019Consumer
Packaging		Display and
Packaging		Paper and
Industrial
Converted
Products		Protective
Solutions		Total
Primary Geographical Markets:
  United States$853,296 $127,659 $537,456 $205,236 $1,723,647 
  Europe207,219 141,807 178,663 11,462 539,151 
  Canada56,139 — 62,736 — 118,875 
  Asia33,358 — 138,648 1,436 173,442 
  Other42,454 2,921 69,862 41,074 156,311 
Total$1,192,466 $272,387 $987,365 $259,208 $2,711,426 
Timing of Revenue Recognition:
  Products transferred at a point in time$671,820 $128,826 $951,843 $219,105 $1,971,594 
  Products transferred over time520,646 143,561 35,522 40,103 739,832 
Total$1,192,466 $272,387 $987,365 $259,208 $2,711,426 


Six months ended July 1, 2018Consumer PackagingDisplay and
Packaging		Paper and
Industrial
Converted
Products		Protective
Solutions		Total
Primary Geographical Markets:
  United States$844,559 $143,064 $545,464 $205,848 $1,738,935 
  Europe209,017 138,322 183,253 13,605 544,197 
  Canada58,301 — 66,635 — 124,936 
  Asia33,203 — 70,998 1,891 106,092 
  Other40,834 4,532 68,440 42,594 156,400 
Total$1,185,914 $285,918 $934,790 $263,938 $2,670,560 
Timing of Revenue Recognition1:
  Products transferred at a point in time$712,113 $142,898 $893,667 $221,435 $1,970,113 
  Products transferred over time473,801 143,020 41,123 42,503 700,447 
Total$1,185,914 $285,918 $934,790 $263,938 $2,670,560 


1 The Company has revised the amounts from those previously reported in 2018 to reflect corrections in the classification of revenue between "Products transferred at a point in time" and "Products transferred over time" for the Consumer Packaging and Display and Packaging reportable segments.







34
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Revised disclosures for the three- and nine-month periods ended September 30, 2018 and year ended December 31, 2018 are presented below:

Consumer PackagingDisplay and Packaging
As Originally ReportedAdjustmentAs RevisedAs Originally ReportedAdjustmentAs Revised
Products transferred at a point in time
Three months ended September 30, 2018$368,709 $(10,476)$358,233 $124,437 $(45,198)$79,239 
Nine months ended September 30, 20181,101,125 (30,779)1,070,346 325,313 (103,176)222,137 
Year ended December 31, 20181,440,662 (41,837)1,398,825 248,034 41,837 289,871 
Products transferred over time
Three months ended September 30, 2018$231,445 $10,476 $241,921 $40,727 $45,198 $85,925 
Nine months ended September 30, 2018684,943 30,779 715,722 125,769 103,176 228,945 
Year ended December 31, 2018919,337 41,837 961,174 344,275 (41,837)302,438 

35
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: designing, manufacturing,
assembling, packing and distributing temporary, semi-permanent and permanent point-of-purchase displays; supply chain management services;services, including contract packing, fulfillment and scalable service centers; retail packaging, including printed backer cards, thermoformed blisters and heat sealing equipment; and paperboard specialties,paper amenities, such as coasters and glass covers.
The Paper and Industrial Converted Products segment includes the following products: paperboard tubes, cones, and cores; fiber-based construction tubes and forms;tubes; 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 EndedSix Months Ended
 June 30, 2019July 1, 2018June 30, 2019July 1, 2018
Net sales:
Consumer Packaging$602,750 $616,062 $1,192,466 $1,185,914 
Display and Packaging134,833 143,260 272,387 285,918 
Paper and Industrial Converted Products491,328 474,137 987,365 934,790 
Protective Solutions130,810 132,914 259,208 263,938 
Consolidated$1,359,721 $1,366,373 $2,711,426 $2,670,560 
Intersegment sales:
Consumer Packaging$1,122 $1,122 $2,043 $1,861 
Display and Packaging1,114 624 2,281 1,162 
Paper and Industrial Converted Products31,535 33,433 65,189 67,976 
Protective Solutions363 282 825 855 
Consolidated$34,134 $35,461 $70,338 $71,854 
Operating profit:
Segment operating profit:
Consumer Packaging$62,942 $63,670 $125,057 $124,758 
Display and Packaging5,889 (570)12,343 1,162 
Paper and Industrial Converted
Products		61,229 61,542 109,616 101,323 
Protective Solutions14,275 13,626 25,279 24,306 
Restructuring/Asset impairment charges(13,355)(3,567)(24,027)(6,630)
Other, net(1,212)(2,839)(1,612)(2,959)
Consolidated$129,768 $131,862 $246,656 $241,960 

 
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
36


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$1,510 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, 2018June 30, 2019 and December 31, 2017,2018, the Company's accrual for environmental contingencies related to the Spartanburg site totaled $16,301$15,907 and $16,504,$15,964, 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, 2018June 30, 2019 and December 31, 2017,2018, the Company's accrual for these other sites totaled $3,338$3,946 and $3,802,$4,136, respectively.
Summary
As of July 1, 2018June 30, 2019 and December 31, 2017,2018, the Company (and its subsidiaries) had accrued $19,639$19,853 and $20,306,$20,100, 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.




37




Report of Independent Registered Public Accounting Firm


To theBoard of Directors and Shareholdersshareholders of Sonoco Products Company,


Results of Review of Interim Financial Statements


We have reviewed the accompanying condensed consolidatedbalance sheet ofSonoco Products Companyand its subsidiaries(the “Company”) as of July 1, 2018,June 30, 2019, and the relatedcondensed consolidatedstatements of income, and comprehensive income, and changes in total equity for the three-month and six-monthsix month periods endedJune 30, 2019andJuly 1, 2018, and July 2, 2017 and the condensed consolidated statement of cash flows for the six-month periods ended June 30, 2019 and July 1, 2018, and July 2, 2017,including the related notes (collectively referred to as the “interim financialstatements”).Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statementsfor 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, 2017,2018, 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, 2018,2019, 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, 2017,2018, 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 arethe responsibility of the Company’s management.We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(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, 2018July 31, 2019


38
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;
•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;
39
SONOCO PRODUCTS COMPANY
•competitive pressures, including new product development, industry overcapacity, customer and supplier consolidation, 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;
•challenges and assessments from tax authorities resulting from differences in interpretation of tax laws, including income, sales and use, property, value added, employment and other taxes;
•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;
•anticipated impact on our operations of Brexit; and
•economic disruptions resulting from terrorist activities and natural disasters.


40
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 300310 locations in 3336 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.
Second Quarter 20182019 Compared with Second Quarter 20172018
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,acquisition/disposition-related costs, specifically identified tax adjustments, non-operating pension settlement chargescosts/income 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, 20172018 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 June 30, 2019
Dollars in thousands, except per share dataGAAPRestructuring/
Asset
Impairment
Other
Adjustments(1)
Base
Operating profit$129,768 $13,355 $1,212 $144,335 
Non-operating pension costs5,550 — (5,550)— 
Interest expense, net15,952 — — 15,952 
Income before income taxes108,266 13,355 6,762 128,383 
Provision for income taxes28,491 3,307 1,430 33,228 
Income before equity in earnings of affiliates79,775 10,048 5,332 95,155 
Equity in earnings of affiliates, net of tax1,511 — — 1,511 
Net income81,286 10,048 5,332 96,666 
Net (income) attributable to noncontrolling interests(127)(69)— (196)
Net income attributable to Sonoco81,159 9,979 5,332 96,470 
Per diluted common share*$0.80 $0.10 $0.05 $0.95 
*Due to rounding individual items may not sum across
(1)Consists of non-operating pension costs and costs related to acquisitions and potential acquisitions and divestitures.
41
SONOCO PRODUCTS COMPANY
 For the three months ended July 1, 2018For the three months ended July 1, 2018
Dollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment		 
Other
Adjustments(1)
 BaseDollars in thousands, except per share dataGAAPRestructuring/
Asset
Impairment
Other
Adjustments(1)
Base
Operating profit $131,862
 $3,567
 $2,839
 $138,268
Operating profit$131,862 $3,567 $2,839 $138,268 
Non-operating pension (income)/costs 513
 —
 (645) (132)
Non-operating pension costsNon-operating pension costs513 — (513)— 
Interest expense, net 15,127
 —
 —
 15,127
Interest expense, net15,127 — — 15,127 
Income before income taxes 116,222
 3,567
 3,484
 123,273
Income before income taxes116,222 3,567 3,352 123,141 
Provision for income taxes 30,293
 1,046
 1,586
 32,925
Provision for income taxes30,293 1,046 1,626 32,965 
Income before equity in earnings of affiliates 85,929
 2,521
 1,898
 90,348
Income before equity in earnings of affiliates85,929 2,521 1,726 90,176 
Equity in earnings of affiliates, net of tax 3,716
 —
 —
 3,716
Equity in earnings of affiliates, net of tax3,716 — — 3,716 
Net income 89,645
 2,521
 1,898
 94,064
Net income89,645 2,521 1,726 93,892 
Net (income) attributable to noncontrolling interests (233) (15) —
 (248)Net (income) attributable to noncontrolling interests(233)(15)— (248)
Net income attributable to Sonoco $89,412
 $2,506
 $1,898
 $93,816
Net income attributable to Sonoco$89,412 $2,506 $1,726 $93,644 
Per diluted common share* $0.88
 $0.02
 $0.02
 $0.93
Per diluted common share*$0.88 $0.02 $0.02 $0.93 
*Due to rounding individual items may not sum across*Due to rounding individual items may not sum across      *Due to rounding individual items may not sum across
(1)Consists primarily of acquisition-related costs and anon-operating pension settlement charge related to the Company's Canadian pension plan,costs, partially offset by a gain from the effect of athe change in the U.S. corporate tax rate on deferred tax adjustments and a small insurance settlement gain.
SONOCO PRODUCTS COMPANY


  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 charges of $31,074, costs related to acquisitions and potential acquisitions, and certain other charges, partially offset by insurance settlement gains.

RESULTS OF OPERATIONS
The following discussion provides a review of results for the three months ended July 1, 2018June 30, 2019 versus the three months ended July 2, 2017.1, 2018.
OVERVIEW
Net sales for the second quarter of 2018 increased 10.1%2019 decreased 0.5% to $1,366$1,360 million, compared with $1,241$1,366 million in the same period last year. The improvementThis marginal decrease reflects an increasevolume declines throughout most of the Company's businesses, as well as unfavorable changes in foreign currency exchange rates, which were mostly offset by sales added by acquisitions volume growth, the positive impact of foreign exchange and higher year-over-year selling prices implementedprices. The selling price increases were a result of both higher material and non-material costs as well as other efforts to recover rising costs for raw materials, freight,more fully realize the value of the products and other operating expenses.services we provide to our customers.

Net income attributable to Sonoco for the second quarter of 2018 increased 107.3%2019 decreased 9.2% to $89.4$81.2 million, $0.88$0.80 per diluted share, compared to $43.1$89.4 million, $0.43$0.88 per diluted share, reported for the same period of 2017.2018. Current quarter net income includes after-tax, non-base charges totaling $4.4$15.3 million, consisting primarily of restructuring and acquisition-related costs. Resultswhile results for the second quarter of 20172018 include after-tax, non-base net charges totaling $4.2 million. Earnings declined due to a $7.5 million increase in after-tax restructuring and asset impairment chargescosts in the current quarter associated with previously announced plant closures and organizational restructuring activities within a number of $5.5the Company's businesses and corporate support groups. Additionally, after-tax non-operating pension costs increased $3.8 million and after-tax, non-base pension settlement and other charges of $23.2 million. over the prior year's second quarter.

Adjusted for theseall non-base items, second-quarter 20182019 base net income attributable to Sonoco (base earnings) increased 30.6%3.0% to $93.8$96.5 million, $0.95 per diluted share, from $93.6 million, $0.93 per diluted share, in 2018. This increase was driven by a 4.4 percent increase in base operating profit. Total productivity improvements and operating profits from $71.8 million, $0.71 per diluted share, in 2017.
The higher second quarter 2018acquisitions drove this year-over-year increase, but were partially offset by volume declines. Base earnings were largely the result of a positive price/cost impact, particularly in the Company's Paper and Industrial Converted Products segment, as the Company was successful in raising prices on tubes, cores and paper that are not tied to an index with all regions of the world reportingalso benefited from a favorable year-over-year spread on price/cost. Additionally, continued improvement in market conditions for corrugating medium benefitted earnings year over year. Strong manufacturing productivity in the Company's Consumer Packaging segment and lower restructuring, asset impairment, and acquisition-related charges also contributed to the overall increase in earnings over the previous year's second quarter. The year-over-year improvement also reflects a lower effective tax rate duecompared to the 2017 Tax Cuts and Jobs Act ("Tax Act"). 2018. These positive factors were slightlypartially offset by higher management incentives as well as general wage and other inflation.an increase in net interest expense.













42
SONOCO PRODUCTS COMPANY


OPERATING REVENUE
Net sales for the second quarter of 2018 increased $1262019 decreased $7 million, or 0.5 percent, from the prior-year quarter.
The components of the sales change were: 
($ in millions)
Volume/mix$(48)
Selling prices12 
Acquisitions67 
Foreign currency translation and other, net(38)
Total sales decrease$(7)
 ($ in millions)
Volume/mix$35
Selling prices11
Acquisitions62
Foreign currency translation and other, net18
  
Total sales increase$126
  


In September of 2018, the Company exited a single-customer contract at a packaging center near Atlanta. The negative impact on comparable net sales, second quarter to second quarter, was $16.2 million. Due to the relatively low margins in this business, the impact of the lost revenue is included above in "Foreign currency translation and other, net."

COSTS AND EXPENSES
The Company'sCost of goods sold decreased 5.5 million, or 0.5%, and gross profit margin percentage increasedwas flat at 20.2% for the second quarter of 2019 compared to 20.2% this quarter compared to 19.2% in the prior-yearprior-year's second quarter. The 100 basis point 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 benefitted from improved manufacturing cost productivity, partially offset by wage and operating cost inflation. The translation impact of a weakerstronger dollar increaseddecreased reported cost of goods sold by approximately $17$24 million compared to the second quarter of 2017.2018 while acquisitions added $53 million.

Selling, general and administrative ("SG&A") costs for the quarter increased $15.7decreased $8.8 million, or 12.5%6.3%, year over year due primarily to SG&A expenses incurreda significant focus across the business on lowering controllable costs and lower management incentive expense, which were partially offset by the operationsaddition of acquired businesses, higher management incentives and wage inflation.expenses from acquisitions.
Second-quarter restructuring
Restructuring costs and asset impairment charges totaled $3.6$13.4 million for the second quarter of 2019 compared with $7.9$3.6 million in the same period last year. The year-over-year increase was mostly driven by costs associated with previously announced plant closures and organizational restructuring activities within a number of the Company's businesses and corporate support groups. Additional information regarding restructuring and asset impairment charges is provided in Note 65 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 $33.9increased $5.0 million for the quarter, compared to the prior-year's period, due primarily to lower pension settlement costs in the current year and a higher expected returnreturns 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.higher discount rates.
Net interest expense for the second quarter increased to $15.1$16.0 million, compared with $12.8$15.1 million during the second quarter of 2017.2018. The increase was primarily due to higher average borrowingsnon-U.S. debt balances and reduced interest income on lower offshore cash balances.
The 2019 second-quarter effective tax rates on GAAP and base earnings were 26.3% and 25.9%, respectively, compared with 26.1% and 26.8%, respectively, in the current-year quarter stemming from acquisition financing.
prior year’s quarter. The effective tax rate on GAAP and base earnings for the second quarter of 2019 was slightly higher due primarily to one-time adjustments in the second quarter of 2018 was 26.1%related to the U.S. Tax Cuts and 26.7%, respectively, compared with 29.6% and 32.0%, respectively, for last year's quarter.Jobs Act of 2017. The Tax Act lowered the year-over-yearlower base effective tax rate on both GAAP and base earnings. The prior year's GAAP tax rate benefitted fromfor the second quarter of 2019 was primarily attributable to a favorable distribution of earnings between low and high tax jurisdictions, primarilydecreased impact 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.Global Intangible Low Taxed Income (GILTI) tax.
43
SONOCO PRODUCTS COMPANY

REPORTABLE SEGMENTS
The following table recaps net sales attributable to each of the Company’s segments for the second quarters of 2019 and 2018 and 2017 ($ in thousands):
Three Months Ended
June 30, 2019July 1, 2018%
Change
Net sales:
Consumer Packaging$602,750 $616,062 (2.2)%
Display and Packaging134,833 143,260 (5.9)%
Paper and Industrial Converted Products491,328 474,137 3.6 %
Protective Solutions130,810 132,914 (1.6)%
Consolidated$1,359,721 $1,366,373 (0.5)%
  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 second quarters of 2019 and 2018 and 2017 ($ in thousands):
 Three Months EndedThree Months Ended
 July 1,
2018		 July 2,
2017		 % ChangeJune 30, 2019July 1, 2018%
Change
Operating profit:      Operating profit:
Segment operating profit:      Segment operating profit:
Consumer Packaging $63,670
 $60,376
 5.5 %Consumer Packaging$62,942 $63,670 (1.1)%
Display and Packaging (570) 1,479
 (138.5)%Display and Packaging5,889 (570)> 100%  
Paper and Industrial Converted Products 61,542
 45,437
 35.4 %Paper and Industrial Converted Products61,229 61,542 (0.5)%
Protective Solutions 13,626
 11,016
 23.7 %Protective Solutions14,275 13,626 4.8 %
Restructuring/Asset impairment charges (3,567) (7,897) 

Restructuring/Asset impairment charges(13,355)(3,567)
Other, net (2,839) (5,231) 

Other, net(1,212)(2,839)
Consolidated $131,862
 $105,180
 25.4 %Consolidated$129,768 $131,862 (1.6)%
Segment results viewed by Company management to evaluate segment performance do not include restructuring charges, asset impairment charges, acquisition-related charges, non-operating pension costs/income, 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 second quarters of 2019 and 2018 and 2017 ($ in thousands):
Three Months Ended
June 30, 2019July 1, 2018
Restructuring/Asset impairment charges:
Consumer Packaging$10,487 $1,986 
Display and Packaging511 677 
Paper and Industrial Converted Products1,600 64 
Protective Solutions561 820 
Corporate196 20 
Consolidated$13,355 $3,567 



44
  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%decreased 2.2 percent compared to the prior-yearprior year's quarter due to sales added from acquisitions,lower volume/mix and the positivenegative impact from changesof foreign exchange. Sales volume declined in foreign exchange rates,North America Rigid Paper Containers as well as Flexible Packaging and higher selling prices. SalesRigid Plastics as many served markets experienced slowing customer demand. The Rigid Plastics volume decline was largely due to poor perimeter of the store performance, partially due to the negative impact of weather on strawberry crop yield and partially due to operational issues related to the consolidation of a facility and relocation of four thermoforming lines to other facilities. The plastics business also benefitted from higher sales volumeexperienced a slowdown in flexible packaging and European and Asian composite cans, partially offset by a decline in plastic container sales volume.some industrial-served markets.

Segment operating profit grew 5.5% decreased 1.1 percent compared to the prior-yearprior year's quarter due toas the benefits of productivity improvements and a positive price/cost relationship solid productivity gains, and the benefit of acquisitions, whichwere more than offset higher operating expenses due to inflationby weaker volume. Despite the volume declines, the productivity improvements and higher management incentives. Segmentpositive price/cost relationship resulted in segment operating margin declinedimproving slightly to 10.3%10.4 percent in the quarter from 11.6%10.3 percent in 2017 due to changes in the mix of business, including changes from acquisitions, and higher operating costs.2018.


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%declined 5.9 percent compared to last year’s quarter due primarily toas volume growth across the segment was more than offset by the foregone revenue following the Company's September 2018 exit from a newsingle-customer contract to operate a pack center near Atlanta and the positive impact of foreign exchange.
outside Atlanta. Segment operating profit decreased $2.0improved $6.5 million largely due to inefficiencieshigher volume/mix, improved productivity and higherthe non-recurrence of operating costs associated with the start up of new production lineslosses at the Atlantaexited pack center. The Company continues working to resolve these issues.
Paper and Industrial Converted Products
The Paper and Industrial Converted Products segment includes the following products: paperboard tubes, cones and cores; fiber-based construction tubes and forms;tubes; wooden, metal and composite wire and cable reels and spools; and recycled paperboard, linerboard, corrugating medium, recovered paper and material recycling services.
Reported segment
Segment sales increased approximately 1.1%3.6 percent from the prior-yearprior-year's quarter due primarily to sales added from the Conitex acquisition. This was partially offset by lower volume/mix and the negative impact of changes in foreign exchange rates. Current quarter paperboard, corrugated medium and tube and core volumes were weaker across all geographies largely due to a combination of soft end-use demand and inventory management by our customers in response to tariffs and increased risks of an economic slowdown.

Segment operating profit was essentially flat with the prior year's quarter as volume/mix growthearnings from the Conitex acquisition, productivity improvements and a slightly positive price/cost relationship effectively offset negative volume/mix. Segment operating margin declined 52 basis points to 12.5 percent.

In May 2019, the positive impact of foreign exchange more than offset lower selling prices associated with lower recovered paper prices. Volume/mix gainsCompany signed a definitive agreement to acquire Corenso Holdings America (Corenso) for approximately $110 million. Corenso operates a 108,000-ton per year Uncoated Recycled Board (URB) mill in North American paper operationsWisconsin Rapids, Wisconsin, as well as wiretwo core converting facilities, and cable reels were partially offsetgenerates total annual sales of approximately $75 million. All of Corenso's products are made from recycled paper, which further enhances the Company's commitment to increase the amount of material it recycles, or causes to be recycled, relative to the volume of products it puts into the market place. The transaction is expected to close by declines in North American and European tube and core volumes.
Operating profit increased 35.4% over the prior year driven by a positive price/cost relationship across mostend of the segment, excluding recycling operations, which also helped drive a 330 basis point improvement in segment operating margin to 13.0%.third quarter.

45
SONOCO PRODUCTS COMPANY
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%1.6% year over year as the negative impact of foreign exchange transaction losses on foreign currency denominated sales offset higher selling prices. Volume/mix was essentially flat as continued declines in the segment’s automotive components business was offset by growth in temperature-assured packaging.
Operating profits increased 23.7% from the prior-year quarter due primarily to positivelower volume/mix as strong sales growth for temperature-assured packaging was more than offset by declines in molded foam and consumer fiber packaging. Segment operating profit improved modestly as strong productivity improvements were only partially offset by a negative price/cost relationship and productivity improvements more than offsetting higher operating inflation. Segmentrelationship. Compared to the prior-year's quarter, segment operating margin increasedimproved 66 basis points to 10.3% from 8.2% in the prior-year quarter.10.9 percent.
SONOCO PRODUCTS COMPANY



Six Months Ended July 1, 2018June 30, 2019 Compared with Six Months Ended July 2, 20171, 2018
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 six months ended June 30, 2019
Dollars in thousands, except per share dataGAAPRestructuring/
Asset
Impairment
Other
Adjustments(1)
Base
Operating profit$246,656 $24,027 $1,612 $272,295 
Non-operating pension costs11,591 — (11,591)— 
Interest expense, net31,337 — — 31,337 
Income before income taxes203,728 24,027 13,203 240,958 
Provision for income taxes51,115 5,945 3,315 60,375 
Income before equity in earnings of affiliates152,613 18,082 9,888 180,583 
Equity in earnings of affiliates, net of tax2,441 — — 2,441 
Net income155,054 18,082 9,888 183,024 
Net (income) attributable to noncontrolling interests(232)(138)— (370)
Net income attributable to Sonoco$154,822 $17,944 $9,888 $182,654 
Per diluted common share*$1.53 $0.18 $0.10 $1.81 
*Due to rounding individual items may not foot across
  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 non-operating pension costs and costs related to acquisitions and potential acquisitions.

For the six months ended July 1, 2018
Dollars in thousands, except per share dataGAAPRestructuring/
Asset
Impairment
Other
Adjustments(1)
Base
Operating profit$241,960 $6,630 $2,959 $251,549 
Non-operating pension costs222 — (222)— 
Interest expense, net28,482 — — 28,482 
Income before income taxes213,256 6,630 3,181 223,067 
Provision for income taxes53,649 1,731 3,465 58,845 
Income before equity in earnings of affiliates159,607 4,899 (284)164,222 
Equity in earnings of affiliates, net of tax4,963 — — 4,963 
Net income164,570 4,899 (284)169,185 
Net (income) attributable to noncontrolling interests(1,103)(20)— (1,123)
Net income attributable to Sonoco$163,467 $4,879 $(284)$168,062 
Per diluted common share*$1.62 $0.05 $—$1.66 
*Due to rounding individual items may not foot across
(1) Consists primarily of acquisition-related costs and anon-operating pension settlement charge related to the Company's Canadian pension plan,costs, partially offset by a gain from the effect of a change in the U.S. corporate tax rate on deferred tax adjustments, and a small insurance settlement gain.gain.
46
  For the six months ended July 2, 2017
Dollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment		 
Other
Adjustments(1)
 Base
Operating profit $198,839
 $12,008
 $7,924
 $218,771
Non-operating pension (income)/costs 38,096
 —
 (31,074) 7,022
Interest expense, net 24,850
 —
 —
 24,850
Income before income taxes 135,893
 12,008
 38,998
 186,899
Provision for income taxes 42,706
 3,636
 12,506
 58,848
Income before equity in earnings of affiliates 93,187
 8,372
 26,492
 128,051
Equity in earnings of affiliates, net of tax 4,799
 —
 —
 4,799
Net income 97,986
 8,372
 26,492
 132,850
Net (income) attributable to noncontrolling interests (1,128) (14) —
 (1,142)
Net income attributable to Sonoco $96,858
 $8,358
 $26,492
 $131,708
Per diluted common share* $0.96
 $0.08
 $0.26
 $1.31
*Due to rounding individual items may not sum across      
(1) Includes pension settlement charges of $31,074, 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 primarily related to the settlement of a tax audit in Canada offset by non-base tax gains of $1,138 related to prior year business dispositions.










SONOCO PRODUCTS COMPANY


RESULTS OF OPERATIONS
The following discussion provides a review of results for the six months ended July 1, 2018June 30, 2019 versus the six months ended July 2, 2017.1, 2018.
OVERVIEW
Net sales for the first six months of 20182019 increased 10.7%1.5% to $2,671$2,711 million, compared with $2,413$2,671 million in the same period last year. The improvement reflects an increase in sales added by acquisitions volume growth,and higher selling prices implemented both to cover higher material and non-material costs as well as other efforts to more fully realize the value of the products and services we provide to our customers. These positive factors were somewhat offset by the negative impact of foreign exchange and higher selling prices implemented to recover certain rising raw material prices, rising freight and other operating inflation.volume declines across most of our businesses.
Net income attributable to Sonoco for the first six months of 2018 increased 68.8%2019 decreased 5.3% to $163$154.8 million, $1.62$1.53 per diluted share, compared to $97$163.5 million, $0.96$1.62 per diluted share, reported for the same period of 2017.2018. Current period net income includes after-tax, non-base charges totaling $5$27.8 million. These charges consist primarily of $17.9 million in after-tax restructuring charges, $8.7 million in after-tax non-operating pension charges, and $1.2 million in after-tax acquisition-related costs. Results for the first six months of 20172018 include after-tax restructuring and asset impairment charges of $8.4$4.9 million and after-tax lump-sumnon-operating pension settlement charges, acquisition, and non-base tax chargesbenefits of $26.5$0.3 million. Adjusted for these items, six-month base net income attributable to Sonoco (base earnings) increased 27.9%8.7% to $168.5$182.7 million, $1.67$1.81 per diluted share, from $131.7$168.1 million, $1.31$1.66 per diluted share, in 2017.2018.
The higherlower GAAP earnings in the first halfsix months of 20182019 were largely the result of a $13.1 million increase in after-tax restructuring expense which was mostly driven by costs associated with previously announced plant closures and organizational restructuring activities within a number of the Company's businesses and corporate support groups. Additionally, after-tax non-operating pension costs increased $8.6 million. Absent these and all other non-base items, base earnings increased $14.6 million from the first six months last year. This increase was driven by earnings from acquired businesses, total productivity improvements and a positive price/cost impact, particularly in the Company's Paper and Industrial Converted Products segment. As the Company was successful in raising prices on tubes, cores and paper that are not tied to an index with all regions reporting a favorable year-over-year spread on price/cost. Additionally, continued improvement in market conditions for corrugating medium benefitted earnings year over year. Manufacturing productivity, which was especially strong 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. Finally, year-to-date net income benefitted as lump-sum pension settlement charges of $19.0 million, after tax, in 2017 did not recur in 2018.volume declines across most businesses.
OPERATING REVENUE
Net sales for the first six months of 20182019 increased $258$41 million from the same period in 2017.2018.
The components of the sales change were:
($ in millions)
Volume/mix$(64)
Selling prices38 
Acquisitions and Divestitures150 
Foreign currency translation and other, net(83)
Total sales increase$41 
 ($ in millions)
Volume/mix$42
Selling prices34
Acquisitions and Divestitures122
Foreign currency translation and other, net60
  
Total sales increase$258
  
In September of 2018, the Company exited a single-customer contract at a packaging center near Atlanta. The negative impact on comparable net sales, for the first six months of 2019 compared to the six months of 2018, was $38.5 million. Due to the relatively low margins in this business, the impact of the lost revenue is included above in "Foreign currency translation and other, net."


COSTS AND EXPENSES
The Company's gross profit margin percentage increased to 19.7%20.1% for the first six months compared to 19.1%19.7% in the prior-yearprior-year's period. The 60 basis pointmodest 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 benefittedbenefited from improved manufacturing cost productivity, partially offset by higher wage and operating cost inflation. The translation impact of a weakerstronger dollar increaseddecreased reported cost of goods sold by approximately $54$57 million compared to the first six months of 2017.2018.
Selling, general and administrative ("
47
SONOCO PRODUCTS COMPANY
SG&A")&A costs for the first six months increased $28.0decreased $3.7 million, or 11.2%1.3%, year over year due primarily to SG&A expenses incurreddriven by a significant focus across the business on lowering controllable costs and lower year-over-year management incentive expense, which were partially offset by the operationsaddition of acquired businesses, higher management incentives and wage inflation.
SONOCO PRODUCTS COMPANY

expenses from acquisitions.
Year-to-date restructuring costs and asset impairment charges totaled $6.6$24.0 million compared with $12.0$6.6 million in the same period last year. Additional information regarding restructuring and asset impairment charges is provided in Note 65 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 $37.9increased $11.4 million in the first six months of 20182019 compared to the prior-year period due primarily to lower pension settlement costs in the current year and a higher expected returnreturns on plan assets resulting fromas a largerresult of lower asset base followingvalues at the strong investment performance in 2017end of 2018 and the $50 million voluntary contribution made to the Company's U.S. pension plans in October 2017.modestly lower assumed long-term rates of return.
Net interest expense for the first six months increased to $28.5$31.3 million, compared with $24.9$28.5 million during the first six months of 2017.2018. The increase was primarily due to higher average borrowings in the current-year period stemming from acquisition financing.non-U.S. debt balances and reduced interest income on lower offshore cash balances.
The effective tax rate on GAAP and base earnings in the first six months of 20182019 was 25.2%25.1% and 26.3%25.1%, respectively, compared with 31.4%25.2% and 31.5%26.4%, respectively, for last year's period. AlthoughThe 2019 base rate was lower than the prior year's period due primarily to the decrease in the GILTI tax. The year to date GAAP rate was essentially unchanged, driven by a favorable non-base adjustment in 2018 resulting from the U.S. Tax Cuts and Jobs Act lowered the year-over-year effective tax rate on both GAAP and base earnings, it had a greater impact on the GAAP effective tax rateof 2017.
REPORTABLE SEGMENTS
The following table recaps net sales attributable to each of the Company's segments during the first six months of 2019 and 2018 and 2017 ($ in thousands):
Six Months Ended
June 30, 2019July 1, 2018% Change
Net sales:
Consumer Packaging$1,192,466 $1,185,914 0.6 %
Display and Packaging272,387 285,918 (4.7)%
Paper and Industrial Converted Products987,365 934,790 5.6 %
Protective Solutions259,208 263,938 (1.8)%
Consolidated$2,711,426 $2,670,560 1.5 %
  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 six months of 2019 and 2018 and 2017 ($ in thousands):
 Six Months EndedSix Months Ended
 July 1,
2018		 July 2,
2017		 % ChangeJune 30, 2019July 1, 2018% Change
Operating profit:      Operating profit:
Segment operating profit:      Segment operating profit:
Consumer Packaging $124,758
 $119,836
 4.1 %Consumer Packaging$125,057 $124,758 0.2 %
Display and Packaging 1,162
 4,701
 (75.3)%Display and Packaging12,343 1,162 >100%  
Paper and Industrial Converted Products 101,323
 72,287
 40.2 %Paper and Industrial Converted Products109,616 101,323 8.2 %
Protective Solutions 24,306
 21,947
 10.7 %Protective Solutions25,279 24,306 4.0 %
Restructuring/Asset impairment charges (6,630) (12,008) 

Restructuring/Asset impairment charges(24,027)(6,630)
Other, net (2,959) (7,924) 

Other, net(1,612)(2,959)
Consolidated $241,960
 $198,839
 21.7 %Consolidated$246,656 $241,960 1.9 %
 
Segment results viewed by Company management to evaluate segment performance do not include restructuring charges, asset impairment charges, acquisition-related charges, non-operating pension costs/income, 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
48
SONOCO PRODUCTS COMPANY
“operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments.


SONOCO PRODUCTS COMPANY

The following table recaps restructuring/asset impairment charges attributable to each of the Company’s segments during the first six months of 2019 and 2018 and 2017 ($ in thousands):
 Six Months EndedSix Months Ended
 July 1,
2018		 July 2,
2017		June 30, 2019July 1, 2018
Restructuring/Asset impairment charges:    Restructuring/Asset impairment charges:
Consumer Packaging $3,715
 $4,160
Consumer Packaging$17,742 $3,715 
Display and Packaging 663
 723
Display and Packaging886 663 
Paper and Industrial Converted Products 911
 4,808
Paper and Industrial Converted Products2,474 911 
Protective Solutions 1,098
 1,854
Protective Solutions1,003 1,098 
Corporate 243
 463
Corporate1,922 243 
Consolidated $6,630
 $12,008
Consolidated$24,027 $6,630 
Consumer Packaging
Segment sales increased 18.2%0.6%year to date compared to the prior-year period due to acquisitions and higher selling prices which were mostly offset by lower volumes in Global Plastics, Flexibles and North American Rigid Paper Containers as many served markets experienced weaker customer demand, most notably in the positivesecond quarter. The volume decline in Rigid Plastics was largely due to poor perimeter of the store performance, partially due to the negative impact of weather on strawberry crop yield and partially due to operational issues related to the consolidation of a facility and relocation of four thermoforming lines to other facilities. The plastics business also experienced a slowdown in some industrial-served markets. Additionally, the negative impact of changes in foreign exchange rates.rates lowered sales approximately $22 million.
Year-to-date segment operating profit grew 4.1%increased 0.2% due to strong improvement in manufacturing productivity, a positive price/cost relationship, and the benefit of acquisitions, partiallyand productivity gains particularly in Flexibles. These positive drivers were effectively 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 period due to higher operating costs driven by certain resin material inflation and changes in the mix of business, including the impact from acquisitions.previously mentioned volume declines.


Display and Packaging
Sales for the segment were up 24.2%down 4.7% year to date compared to last year’s period due primarily to as volume growth in domestic displays and international pack centers was more than offset by foregone revenue following the Company's September 2018 exit from a newsingle-customer contract to operate a pack center near Atlanta and the positive impact of foreign exchange.outside Atlanta.
Segment operating profit decreased $3.5increased $11.2 million, or 75.3%, largely due to inefficiencieshigher volume/mix, improved productivity and higherthe non-recurrence of operating costs associated with the ramp up of productionlosses at the newexited pack center. The Company continues working to resolve these issues.
Paper and Industrial Converted Products
Segment sales increased approximately 2.5%5.6% year to date fromversus the prior year period due to the positive impact of foreign exchangeacquisitions and modest increases from higher selling prices, implemented to recover higher freight and other operating costs, partially offset by lower volume/mix. Volume/mix gains in wire and cable reels as well as North American and European paper operations were more than offset byvolume declines in North American tube and core and recycling volumes.across most businesses.
Operating profit increased 40.2%8.2% over the prior year period driven by the 2018 acquisition of Conitex; otherwise, a positive price/cost relationship across most of the segment including continued improvement inand modest productivity gains were offset by volume losses. Prices for old corrugated containers (OCC), a primary raw material, trended downward during the Company's corrugating medium operations. Segmentfirst half of the year, creating margin pressure on the segment's contract business. However, more than offsetting this effect, the Company was able to better maintain selling prices on the portion of the tubes, cores and paper business not contractually tied to OCC. As a result, segment operating margin improved 29025 basis points to 10.8%11.1%.
Protective Solutions
Segment sales for the period declined 1.4%1.8% year over year as the positive impact of higher selling prices wasdriven by volume declines in molded foam and consumer fiber packaging, somewhat offset by the negative impact of foreign exchange transaction losses on foreign currency denominatedstrong sales and lower volume/mix, primarily in the segment’s automotive components business.growth for temperature-assured packaging.
Year-to-date operating profit increased 10.7%4.0% from the prior-year period due to manufacturingtotal productivity and a positive price/cost relationship partiallysomewhat offset by lower volume, specifically in automotive components.a negative price/cost relationship. Segment operating margin was 9.2%9.8%, a 10053 basis point improvement over the prior-year year to date.same period last year.



49


SONOCO PRODUCTS COMPANY

OTHER ITEMS
Critical Accounting Policies and Estimates
Interim Goodwill Impairment Assessment
Information regarding the interim goodwill impairment assessment and the potential for future charges is included in Note 8 to the Company's Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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 prior NOPAs. At the time of the distribution in 2012, it was characterized as a dividend to the extent of earnings and profits, with the remainder as a tax free return of basis and taxable capital gain. As the IRS proposes to recharacterize the 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 had a pre-conference hearing with IRS Appeals during the second quarter of 2019. 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.


Subsequent Event
On July 17, 2019, subsequent to the end of the second quarter, the Company's Board of Directors approved a resolution to terminate the Sonoco Pension Plan for Inactive Participants, a tax-qualified defined benefit plan (the "Inactive Plan"), effective September 30, 2019. Once approval is received from the Internal Revenue Service and the Pension Benefit Guaranty Corporation, and following completion of the limited lump-sum offering, the Company is expected to settle all remaining liabilities under the Inactive Plan in 2020 through the purchase of annuity contracts. The Company anticipates making additional contributions to the Inactive Plan in 2020 of between $75 million and $125 million in order to be fully funded on a termination basis at the time of the annuity purchase. However, the actual amount of the Company's long-term liability when it is transferred, and the related cash contribution requirement, will depend upon the nature and timing of participant settlements, as well as prevailing market conditions. Non-cash settlement charges resulting from the lump sum payouts and annuity purchases are expected to range between $525 million and $575 million. The termination of the Inactive Plan will apply to participants who have separated service from Sonoco and to nonunion active employees who no longer accrue pension benefits. There is no change in the cumulative benefit previously earned by the approximately 11,000 impacted participants as a result of these actions, and the Company will continue to manage and support the Sonoco Pension Plan, comprised of approximately 600 active participants who continue to accrue benefits in accordance with a flat-dollar multiplier formula. 








50
SONOCO PRODUCTS COMPANY

Financial Position, Liquidity and Capital Resources
Operating cash flows totaled $251.2$40.1 million in the six months ended July 1, 2018June 30, 2019 compared with $103.2$251.2 million during the same period last year, ana decrease of $211.2 million. The year-over-year change in operating cash flows is due largely to a $189.4 million increase of $148.1 million. This increase reflects the improvement in GAAP net income of $66.6benefit plan contributions resulting from voluntary contributions totaling $190 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 duemade to the timing of taxes paid on the 2016 sale of our blowmolding plastics business and normal changesCompany's U. S. defined benefit pension plans 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 million. This change is composed of a $24.4 million year-over-year decrease in cash contributions that was more than offset by a $37.8 million decrease in non-cash expense which was largely driven by one-time, non-base pension settlement charges of $31.1 million in 2017.
May 2019. Accounts Receivable consumed $45.0$46.2 million of operating cash in the first halfsix months of 20182019 compared with $55.1$45.0 million in the same period last year as both periods experienced increased business activity during the first six months following seasonally lower year-end activity. Although, business activity increased more in the first six months of 2018 compared to the same period in 2017 improved collection efforts in the current period mitigated the impact in 2018. Additionally,Similarly, inventories consumed $16.7$16.8 million of cash in the first six months of 20182019 compared with $12.8$16.7 million in the same period last year and tradeyear. Trade accounts payable provided $16.7consumed $2.8 million of cash during the six months ended July 1, 2018 whileJune 30, 2019 compared to providing $11.9$16.7 million in the same period last year. Both periods saw increased business activity fromThe year-over-year change was due largely to the prior yeartiming of payments at the end butof the increase in 2018 was more meaningful than in the prior year period.second quarter of 2019.
SONOCO PRODUCTS COMPANY


Changes in accrued expenses provided $1.0consumed $7.7 million of operating cash in the six months ended July 1, 2018June 30, 2019 while using $29.3providing $1.0 million in the same period last year. The greater use of cash in the priorconsumption this year is primarily due to the payment ofhigher management incentives the amount of which was greater last year than this year, and a non-recurring payment of an environmental settlementpaid in the 2017 period.first six months of 2019 compared to the first six months of 2018. Changes in other assets and liabilities provided $15.5consumed $1.9 million of additional cash in 2018the first six months of 2019 compared to 2017, largely attributable2018 while the impact of income taxes, net payables and deferred items, provided $8.1 million more. Operating cash flows in the second half of 2019 are anticipated to include cash tax benefits of approximately $22 million associated with 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.$200 million total expected voluntary pension contributions.
Cash
Net cash used in investing activities was $223.4$99.9 million in the six months ended July 1, 2018,June 30, 2019, compared with $313.0$223.4 million in the same period last year, a lower year-over-year use of cash totaling $89.5$123.5 million. The most significant driver of the decreased net use of cash was a $140.9 million decrease was lower year-over-yearin acquisition spending. The first six months of 2017 includedspending as the acquisition ofCompany acquired Highland Packaging Holdings for $217.5 million whileduring the first six months of 2018 includedand had no meaningful acquisition activity in the acquisitionfirst six months of Highland Packaging Solutions for $141.3 million.2019. Capital spending during the first six months of $88.92019 was $102.3 million, was approximately $10$13 million lowerhigher year over year. Capital spending for the remainder of 20182019 is not expected to total approximately $130exceed $110 million.

Cash usedprovided by financing activities totaled $79.4$34.7 million in the six months ended July 1, 2018,June 30, 2019, compared with a provisionuse of cash totaling $152.6$79.4 million in the same period last year. The $232.0$114.1 million year-over-year reduction is primarily due to lower proceeds from borrowings for acquisitions inincreased provision was partially driven by higher debt issuances net of repayments, of $133.7 million. In May 2019, the current year,Company entered into a new $200 million term loan repaymentsthat was used to fund the voluntary contributions to the U.S. defined benefit pension plans. Also, during the second quarter the Company settled a contingent purchase price liability related to the Highland acquisition for $5.0 million and net reductions in commercial paper. The Company paid cash dividends of $79.8$84.2 million during the six months ended July 1, 2018,June 30, 2019, an increase of $4.2$4.4 million over the same period last year. Cash used to repurchase the Company's common stock was lowerhigher year over year by $1.3$4.0 million. Total debt outstanding was $1,452 million at July 1, 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 agreementfacility with a syndicate of eight banks for that revolving facility, together with a new $250 million five-year term loan.banks. The revolving bank credit facility is committed through July 2022. If circumstances were to prevent the Company from issuing commercial paper, it has the contractual right to draw funds directly on the underlying revolving bank credit facility. Borrowings under the credit agreement are pre-payablefacility may be prepaid at any time at the discretion of the Company and the term loan has annual amortization payments totaling $12.5 million.Company.
On April 12, 2018,May 17, 2019, the Company entered into a new $100364-day, $200 million term loan. The full $200 million was drawn from this facility on May 20, 2019. Of these proceeds, $190 million was used to fund voluntary contributions to the Sonoco's U.S. defined benefit pension plans. The unsecured loan has a 364-day term loan facility in conjunction with the purchase of Highland Packaging Solutions. A total of $50 million was subsequently repaid byand the Company priorhas a one-time option to the endrequest an extension of the second quarter.term for an additional 364 days if it meets certain conditions. Interest is assessed at the London Interbank Offered Rate (LIBOR) plus a margin based on a pricing grid that uses the Company’s credit ratings. The LIBOR margin at June 30, 2019 was 100 basis points. There is no required amortization and repayment can be accelerated at any time at the discretion of the Company.
The Company continually explores strategic acquisition opportunities which may result in the additional use of cash. Given the nature of acquisitions,the acquisition process, the timing and amounts of such utilizationexpenditures are not predictable. The Company expects that any acquisitions requiring funding in excess of cash on hand would be financed using available borrowing capacity.
Cash and cash equivalents totaled $197.7$96.3 million and $254.9$120.4 million at July 1, 2018June 30, 2019 and December 31, 2017,2018, respectively. Of these totals, approximately $183.0$81.6 million and $238.4$102.3 million, respectively, were held outside of the
51
SONOCO PRODUCTS COMPANY
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 haswe have generally considered its offshore cash balancesour foreign unremitted earnings to be indefinitely invested outside the United States and hadcurrently have no plans to repatriate such earnings, other than excess cash balances that can be repatriated at minimal tax cost. Accordingly, the Company is not providing for taxes on these cash balances. However, due to changes in U.S. tax laws as partamounts for financial reporting purposes. Computation of the enactment of the Tax Cuts and Jobs Act, beginning in 2018 repatriated cash will generallypotential deferred tax liability associated with unremitted earnings considered to be indefinitely reinvested is not be subject to federal income taxes. The Company repatriated approximately $110 million in the second quarter 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.practicable.
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 six months ended July 1, 2018,June 30, 2019, the Company reported a net decreaseincrease in cash and cash equivalents of $5.6$1.0 milliondue to a strongeran overall weaker U.S. dollar relative to certain foreign currencies, most notably the Brazilian real, euro and Canadian dollar.currencies.
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, 2018,June 30, 2019, 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$17.1 million during the remainder of 2018,2019, including an additional $10 million voluntary contribution to its U.S. defined benefit pension plans, which would result in total 20182019 contributions of approximately $39$231 million. As discussed in "Other Items," the Company expects to make additional contributions to the Sonoco Pension Plan for Inactive Participants in 2020 of between $75 million and $125 million, ($55 million and $95 million, after tax), as the liabilities of the Inactive Plan are settled pursuant to Board actions to terminate the Inactive Plan effective September 30, 2019. Any such additional contributions in excess of cash on hand are expected to be financed using available borrowing capacity. Future funding requirements beyond the current year will vary depending largely on actual investment returns, future actuarial assumptions, the nature and timing of participant settlements, 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 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.
PriorDue to July 1, 2015,the highly inflationary economy in Venezuela, the Company used Venezuela's official exchange rateconsiders the U.S. dollar to reportbe the results of its operations in Venezuela. As a result of significant inflationary increases, and to avoid distortion of its consolidated results from translationfunctional currency of its Venezuelan operations and uses the Company concluded that it was an appropriate time to begin translating its Venezuelan operations at an alternativeofficial exchange rate. Accordingly, effective July 1, 2015,rate when remeasuring the Company began translating its Venezuelan operating results and all monetary assets and liabilitiesfinancial records of those operations. Economic conditions in Venezuela usinghave worsened considerably over the alternative rate known aspast several years and there is no indication that conditions are due to improve in the SIMADI rate (replacedforeseeable future. Further deterioration could result in 2016 by the DICOM rate).recognition of an impairment charge or a deconsolidation of the subsidiary. At July 1, 2018,June 30, 2019, the carrying value of the Company's net investment in its Venezuelan operations was approximately $2.1$2.0 million. In addition, at July 1, 2018,June 30, 2019, the Company's Accumulated Other Comprehensive Loss included a translation loss of $3.8 million related to its Venezuelan
52
SONOCO PRODUCTS COMPANY
operations which would need to be reclassified to net income in the event of a complete exit of the business or a deconsolidation of these operations.
The Company has operations in the United Kingdom and elsewhere in Europe that could be impacted by the pending exit of the UK from the European Union (Brexit). Our UK operations have been making contingency plans regarding potential customs clearance issues, tariffs and other uncertainties should no Brexit deal be reached. Although it is difficult to predict all of the possible impacts to our supply chain or in our customers' downstream markets, the Company has evaluated the potential operational impacts and uncertainties of Brexit and at this time believes that the likelihood of a material impact on our future results of operations is low. Although there are some cross-border sales made out of and into the UK, most of what we produce in the UK is also sold in the UK and the same is true for continental Europe. In some cases, companies that have been importing from Europe into the UK are now seeking local sources, which has actually been positive for our UK operations. Annual sales of our UK operations totaled approximately $120 million in 2018.
At July 1, 2018,June 30, 2019, 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 $(0.6)$(2.4) million and $(1.7)$(1.6) million at at July 1, 2018June 30, 2019 and December 31, 2017,2018, respectively. Natural gas and aluminum hedge contracts covering an equivalent of 5.06.0 million MMBTUs and 1,9052,041 metric tons, respectively, were outstanding at July 1, 2018.June 30, 2019. 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 favorable position of $0.9 million at June 30, 2019 and a net unfavorable position of $(1.8) million and a net favorable position of $1.0$(1.7) million at July 1, 2018 and December 31, 2017, respectively.2018. These contracts qualify as cash flow hedges and mature within twelve months of their respective reporting dates.
In addition, at July 1, 2018,June 30, 2019, 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 unfavorablefavorable position of $(0.3)$0.7 million and $(0.6)$0.2 million at July 1, 2018June 30, 2019 and December 31, 2017,2018, respectively.
At July 1, 2018,June 30, 2019, the U.S. dollar had strengthenedweakened against most of the functional currencies of the Company's foreign operations compared to December 31, 2017,2018, resulting in a net translation lossgain of $39.9$6.7 million being recorded in accumulated other comprehensive loss during the six months ended July 1, 2018.June 30, 2019.

SONOCO PRODUCTS COMPANY


Restructuring and Impairment
Information regarding restructuring charges and restructuring-related asset impairment charges is provided in Note 6 5 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.

53
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, 2017,2018, which was filed with the Securities and Exchange Commission on February 28, 2018.2019. 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, 2018,June 30, 2019, 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, 2018,June 30, 2019, 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 1416 - “Commitments and Contingencies”) in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017,2018, and in Part I - Item 1 - “Financial Statements” (Note(Note 16 - “Commitments“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, 2018,June 30, 2019, cannot be determined. As of July 1, 2018June 30, 2019 and December 31, 2017,2018, the Company had accrued $19.6$19.9 million and $20.3$20.1 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 inin Note 16 to the CondensedCondensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. 

54
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
4/01/19 - 5/05/1912,479 $61.85 — 2,969,611 
5/06/19 - 6/02/191,514 $63.51 — 2,969,611 
6/03/19 - 6/30/194,570 $62.92 — 2,969,611 
Total18,563 $62.25 — 2,969,611 
 
1A total of 8,86218,563 common shares were repurchased in the second quarter of 20182019 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, 2018, or during the six-month periodsix months ended July 1, 2018.June 30, 2019. Accordingly, a total of 2,969,611 shares remain available for repurchase at July 1, 2018.

June 30, 2019.
 

Item 6.Exhibits.

Exhibit Index
Item 6.2.1*Exhibits.
Exhibit Index
10.10
15.15
31.31
32.32
101.101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
*Schedules and exhibits have been omitted pursuant to Item 601 (b)(2) of Regulation S-K. The following materials from Sonoco Products Company’s Quarterly Report on Form 10-Q forCompany hereby undertakes to furnish supplementally copies of any of the quarter ended July 1, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at July 1, 2018omitted schedules or exhibits upon request of the Securities 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.Exchange Commission.

55
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:July 31, 2019SONOCO PRODUCTS COMPANYBy:/s/ Julie Albrecht
(Registrant)Julie Albrecht
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)


53
56