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 October 1, 2017June 28, 2020
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, a 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 October 20, 2017:July 17, 2020:
Common stock, no par value: 99,400,898

100,376,491




SONOCO PRODUCTS COMPANY
INDEX
 
3
Item 1.
3
Item 1.
3
Condensed Consolidated Balance Sheets - October 1, 2017June 28, 2020 (unaudited) and December 31, 20162019 (unaudited)
3
4
5
56
68
79
3035
Item 2.
3136
Item 3.
4754
Item 4.
4754
4855
Item 1.
4855
Item 1A.
55
Item 2.
4956
Item 6.Exhibits.
Exhibits.56
49



2


Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars and shares in thousands)
 October 1,
2017		 December 31,
2016*		June 28,
2020		December 31,
2019*
Assets    Assets
Current Assets    Current Assets
Cash and cash equivalents $247,908
 $257,226
Cash and cash equivalents$857,272  $145,283  
Trade accounts receivable, net of allowances 751,445
 625,411
Trade accounts receivable, net of allowances692,943  698,149  
Other receivables 51,229
 43,553
Other receivables104,397  113,754  
Inventories:    
Inventories, net:Inventories, net:
Finished and in process 187,133
 127,446
Finished and in process173,697  172,223  
Materials and supplies 285,823
 245,368
Materials and supplies350,158  331,585  
Prepaid expenses 51,787
 49,764
Prepaid expenses60,195  60,202  
 1,575,325
 1,348,768
2,238,662  1,521,196  
Property, Plant and Equipment, Net 1,182,384
 1,060,017
Property, Plant and Equipment, Net1,235,505  1,286,842  
Goodwill 1,240,439
 1,092,215
Goodwill1,423,712  1,429,346  
Other Intangible Assets, Net 342,316
 224,958
Other Intangible Assets, Net360,996  388,292  
Deferred Income Taxes 52,549
 42,130
Deferred Income Taxes41,301  46,502  
Right of Use Asset-Operating LeasesRight of Use Asset-Operating Leases294,050  298,393  
Other Assets 176,615
 155,115
Other Assets144,634  155,718  
Total Assets $4,569,628
 $3,923,203
Total Assets$5,738,860  $5,126,289  
Liabilities and Equity    Liabilities and Equity
Current Liabilities    Current Liabilities
Payable to suppliers $559,432
 $477,831
Payable to suppliers$554,090  $537,764  
Accrued expenses and other 294,889
 273,996
Accrued expenses and other354,302  367,114  
Notes payable and current portion of long-term debt 125,916
 32,045
Notes payable and current portion of long-term debt646,623  488,234  
Accrued taxes 10,931
 18,744
Accrued taxes21,257  11,380  
 991,168
 802,616
1,576,272  1,404,492  
Long-term Debt, Net of Current Portion 1,300,191
 1,020,698
Long-term Debt, Net of Current Portion1,618,640  1,193,135  
Noncurrent Operating Lease LiabilitiesNoncurrent Operating Lease Liabilities249,217  253,992  
Pension and Other Postretirement Benefits 388,492
 447,339
Pension and Other Postretirement Benefits303,606  304,798  
Deferred Income Taxes 91,009
 59,753
Deferred Income Taxes95,962  76,206  
Other Liabilities 40,142
 38,092
Other Liabilities87,459  77,961  
Commitments and Contingencies 
 
Sonoco Shareholders’ Equity    Sonoco Shareholders’ Equity
Common stock, no par value    Common stock, no par value
Authorized 300,000 shares
99,398 and 99,193 shares issued and outstanding at
October 1, 2017 and December 31, 2016, respectively		 7,175
 7,175
Authorized 300,000 shares
100,330 and 100,198 shares issued and outstanding
at June 28, 2020 and December 31, 2019, respectively
Authorized 300,000 shares
100,330 and 100,198 shares issued and outstanding
at June 28, 2020 and December 31, 2019, respectively
7,175  7,175  
Capital in excess of stated value 325,707
 321,050
Capital in excess of stated value309,427  310,778  
Accumulated other comprehensive loss (596,953) (738,380)Accumulated other comprehensive loss(869,453) (816,803) 
Retained earnings 1,996,244
 1,942,513
Retained earnings2,350,189  2,301,532  
Total Sonoco Shareholders’ Equity 1,732,173
 1,532,358
Total Sonoco Shareholders’ Equity1,797,338  1,802,682  
Noncontrolling Interests 26,453
 22,347
Noncontrolling Interests10,366  13,023  
Total Equity 1,758,626
 1,554,705
Total Equity1,807,704  1,815,705  
Total Liabilities and Equity $4,569,628
 $3,923,203
Total Liabilities and Equity$5,738,860  $5,126,289  

*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 EndedSix Months Ended
June 28, 2020June 30, 2019June 28, 2020June 30, 2019
Net sales$1,245,485  $1,359,721  $2,548,781  $2,711,426  
Cost of sales997,502  1,084,385  2,034,208  2,165,969  
Gross profit247,983  275,336  514,573  545,457  
Selling, general and administrative expenses121,371  132,213  245,259  274,774  
Restructuring/Asset impairment charges22,885  13,355  35,484  24,027  
Operating profit103,727  129,768  233,830  246,656  
Non-operating pension costs7,600  5,550  15,179  11,591  
Interest expense19,563  16,798  36,092  32,830  
Interest income878  846  1,362  1,493  
Income before income taxes77,442  108,266  183,921  203,728  
Provision for income taxes23,230  28,491  49,986  51,115  
Income before equity in earnings of affiliates54,212  79,775  133,935  152,613  
Equity in earnings of affiliates, net of tax778  1,511  1,291  2,441  
Net income54,990  81,286  135,226  155,054  
Net loss/(income) attributable to noncontrolling interests221  (127) 430  (232) 
Net income attributable to Sonoco$55,211  $81,159  $135,656  $154,822  
Weighted average common shares outstanding:
Basic100,971  100,759  100,915  100,700  
Diluted101,109  101,178  101,109  101,129  
Per common share:
Net income attributable to Sonoco:
Basic$0.55  $0.81  $1.34  $1.54  
Diluted$0.55  $0.80  $1.34  $1.53  
  Three Months Ended Nine Months Ended
  October 1,
2017		 October 2,
2016		 October 1,
2017		 October 2,
2016
Net sales $1,324,634
 $1,208,724
 $3,737,632
 $3,640,680
Cost of sales 1,073,761
 973,351
 3,030,662
 2,918,041
Gross profit 250,873
 235,373
 706,970
 722,639
Selling, general and administrative expenses 130,280
 121,583
 413,626
 382,387
Restructuring/Asset impairment charges 511
 8,947
 12,519
 41,453
Income before interest and income taxes 120,082
 104,843
 280,825
 298,799
Interest expense 14,741
 13,133
 41,649
 41,414
Interest income 1,094
 696
 3,152
 1,646
Income before income taxes 106,435
 92,406
 242,328
 259,031
Provision for income taxes 35,545
 29,618
 78,251
 83,602
Income before equity in earnings of affiliates 70,890
 62,788
 164,077
 175,429
Equity in earnings of affiliates, net of tax 2,521
 3,190
 7,320
 7,457
Net income $73,411
 $65,978
 $171,397
 $182,886
Net income attributable to noncontrolling interests (599) (583) (1,727) (1,325)
Net income attributable to Sonoco $72,812
 $65,395
 $169,670
 $181,561
Weighted average common shares outstanding:        
Basic 100,275
 100,925
 100,214
 101,320
Diluted 100,684
 101,579
 100,793
 101,960
Per common share:        
Net income attributable to Sonoco:        
Basic $0.73
 $0.65
 $1.69
 $1.79
Diluted $0.72
 $0.64
 $1.68
 $1.78
Cash dividends $0.39
 $0.37
 $1.15
 $1.09

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 Nine Months EndedThree Months EndedSix Months Ended
 October 1,
2017		 October 2,
2016		 October 1,
2017		 October 2,
2016		June 28, 2020June 30, 2019June 28, 2020June 30, 2019
Net income $73,411
 $65,978
 $171,397
 $182,886
Net income$54,990  $81,286  $135,226  $155,054  
Other comprehensive income/(loss):        Other comprehensive income/(loss):
Foreign currency translation adjustments 27,445
 (3,157) 87,807
 10,282
Foreign currency translation adjustments32,864  9,745  (62,348) 6,773  
Changes in defined benefit plans, net of tax 10,301
 5,799
 58,311
 14,753
Changes in defined benefit plans, net of tax4,416  1,807  10,196  8,963  
Changes in derivative financial instruments, net of tax (186) 641
 (3,653) 5,263
Changes in derivative financial instruments, net of tax1,830  (481) (2,725) 1,383  
Other comprehensive income 37,560
 3,283
 142,465
 30,298
Comprehensive income 110,971
 69,261
 313,862
 213,184
Net income attributable to noncontrolling interests (599) (583) (1,727) (1,325)
Other comprehensive loss (income) attributable to noncontrolling interests (517) 363
 (1,038) (1,775)
Other comprehensive income/(loss):Other comprehensive income/(loss):$39,110  $11,071  $(54,877) $17,119  
Comprehensive income:Comprehensive income:94,100  92,357  80,349  172,173  
Net loss/(income) attributable to noncontrolling interestsNet loss/(income) attributable to noncontrolling interests221  (127) 430  (232) 
Other comprehensive loss/(income) attributable to noncontrolling interestsOther comprehensive loss/(income) attributable to noncontrolling interests590  (172) 2,227  (52) 
Comprehensive income attributable to Sonoco $109,855
 $69,041
 $311,097
 $210,084
Comprehensive income attributable to Sonoco$94,911  $92,058  $83,006  $171,889  
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)
  Nine Months Ended
  October 1,
2017		 October 2,
2016
Cash Flows from Operating Activities:    
Net income $171,397
 $182,886
Adjustments to reconcile net income to net cash provided by operating activities:    
Asset impairment 1,486
 7,157
Depreciation, depletion and amortization 159,130
 156,542
Share-based compensation expense 9,028
 14,277
Equity in earnings of affiliates (7,320) (7,457)
Cash dividends from affiliated companies 5,467
 7,090
Net gain on disposition of assets 833
 14,809
Pension and postretirement plan expense 66,245
 34,165
Pension and postretirement plan contributions (52,549) (39,946)
Tax effect of share-based compensation exercises —
 2,365
Excess tax benefit of share-based compensation —
 (2,406)
Net increase/(decrease) in deferred taxes (2,126) 2,998
Change in assets and liabilities, net of effects from acquisitions, dispositions, and foreign currency adjustments:    
Trade accounts receivable (70,908) (69,189)
Inventories (14,965) (11,289)
Payable to suppliers 29,321
 7,678
Prepaid expenses (2,504) 3,996
Accrued expenses 1,229
 16,350
Income taxes payable and other income tax items (1,886) 22,951
Other assets and liabilities (9,769) 5,700
Net cash provided by operating activities 282,109
 348,677
Cash Flows from Investing Activities:    
Purchase of property, plant and equipment (144,738) (142,073)
Cost of acquisitions, net of cash acquired (383,358) (21,338)
Cash paid for disposition of assets —
 (8,436)
Proceeds from the sale of assets 3,743
 6,565
Investment in affiliates and other, net 1,739
 63
Net cash used in investing activities (522,614) (165,219)
Cash Flows from Financing Activities:    
Proceeds from issuance of debt 436,335
 230,393
Principal repayment of debt (196,198) (269,017)
Net change in commercial paper 98,000
 —
Net increase in outstanding checks 500
 6,796
Excess tax benefit of share-based compensation —
 2,406
Cash dividends (114,368) (109,821)
Shares acquired (5,942) (65,015)
Net cash provided by/(used in) financing activities 218,327
 (204,258)
Effects of Exchange Rate Changes on Cash 12,860
 (2,313)
Net Decrease in Cash and Cash Equivalents (9,318) (23,113)
Cash and cash equivalents at beginning of period 257,226
 182,434
Cash and cash equivalents at end of period $247,908
 $159,321
Total
Equity		Common 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








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, 2019$1,815,705  100,198  $7,175  $310,778  $(816,803) $2,301,532  $13,023  
Net income/(loss)80,236  80,445  (209) 
Other comprehensive income/(loss):
Translation loss(95,212) (93,575) (1,637) 
Defined benefit plan adjustment, net of tax5,780  5,780  
Derivative financial instruments, net of tax(4,555) (4,555) 
Other comprehensive loss$(93,987) $(92,350) $(1,637) 
Dividends(43,339) (43,339) 
Issuance of stock awards376  196  376  
Shares repurchased(3,938) (65) (3,938) 
Stock-based compensation597  597  
Impact of new accounting pronouncements(209) (209) 
March 29, 2020$1,755,441  100,329  $7,175  $307,813  $(909,153) $2,338,429  $11,177  
Net income/(loss):54,990  55,211  (221) 
Other comprehensive income/(loss):
Translation gain/(loss)32,864  33,454  (590) 
Defined benefit plan adjustment, net of tax4,416  4,416  
Derivative financial instruments, net of tax1,830  1,830  
Other comprehensive income/(loss)$39,110  $39,700  $(590) 
Dividends(43,451) (43,451) 
Issuance of stock awards287  2  287  
Shares repurchased(12) (1) (12) 
Stock-based compensation1,339  1,339  
June 28, 2020$1,807,704  100,330  $7,175  $309,427  $(869,453) $2,350,189  $10,366  

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 28, 2020June 30, 2019
Cash Flows from Operating Activities:
Net income$135,226  $155,054  
Adjustments to reconcile net income to net cash provided by operating activities:
Asset impairment8,759  7,284  
Depreciation, depletion and amortization123,447  116,978  
Share-based compensation expense1,936  8,866  
Equity in earnings of affiliates(1,291) (2,441) 
Cash dividends from affiliated companies3,276  3,297  
Net (gain)/loss on disposition of assets(2,265) 3,943  
Pension and postretirement plan expense29,135  13,647  
Pension and postretirement plan contributions(31,105) (213,579) 
Net increase in deferred taxes19,653  37,953  
Change in assets and liabilities, net of effects from acquisitions and foreign currency adjustments:
Trade accounts receivable(13,516) (46,191) 
Inventories(31,984) (16,825) 
Payable to suppliers17,844  (2,842) 
Prepaid expenses(8,769) (4,976) 
Accrued expenses9,261  (7,741) 
Income taxes payable and other income tax items8,533  (26,990) 
Other assets and liabilities13,851  14,644  
Net cash provided by operating activities281,991  40,081  
Cash Flows from Investing Activities:
Purchases of property, plant and equipment(76,417) (102,272) 
Cost of acquisitions, net of cash acquired(3,787) (455) 
Proceeds from the sale of assets4,845  1,498  
Investment in affiliates and other, net524  1,301  
Net cash used in investing activities(74,835) (99,928) 
Cash Flows from Financing Activities:
Proceeds from issuance of debt1,105,139  243,394  
Principal repayment of debt(269,970) (81,025) 
Net change in commercial paper(250,000) (18,000) 
Net increase/(decrease) in outstanding checks7,469  (11,697) 
Proceeds from cross-currency swap14,480  —  
Payment of contingent consideration(2,500) (5,000) 
Cash dividends(86,337) (84,160) 
Dividends paid to noncontrolling interests—  (214) 
Shares repurchased(3,950) (8,550) 
Net cash provided by financing activities514,331  34,748  
Effects of Exchange Rate Changes on Cash(9,498) 1,005  
Net Increase/(Decrease) in Cash and Cash Equivalents711,989  (24,094) 
Cash and cash equivalents at beginning of period145,283  120,389  
Cash and cash equivalents at end of period$857,272  $96,295  
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 ninesix months ended October 1, 2017,June 28, 2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2020. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2019.
With respect to the unaudited condensed consolidated financial information of the Company for the three- and nine-monthsix-month periods ended October 1, 2017June 28, 2020 and October 2, 2016June 30, 2019 included in this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated October 31, 2017July 29, 2020 appearing herein, states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial information because that report is not a “report” or a “part” of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.


Note 2: New Accounting Pronouncements
In August 2017,March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, "Facilitation of the Effects of Reference Rate Reform on Financial Reporting". The ASU 2017-12, Derivativesis intended to provide optional expedients and Hedging: Targeted Improvementsexceptions to Accounting for Hedging Activities, which expandsthe U.S. GAAP guidance on contract modifications 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 guidancefinancial reporting burdens related to the assessmentdiscontinuation 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 does not expect the implementation of ASU 2017-12 to have a material effect on its consolidated financial statements.
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 requiredLondon Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be presented separately from the service cost component and outside a subtotal of income from operations,discontinued. The relief offered by this guidance, if oneadopted, is presented, or disclosed. This update also allows only the service cost componentavailable to be eligible for capitalization when applicable and is effective for periods beginning after December 15, 2017. The amendments should be applied retrospectivelycompanies 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 does not expect the implementation of ASU 2017-07 to have a material effect on its consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, "Restricted Cash,"requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in ASU 2016-18 do not provide a definition of restricted cash or restricted cash equivalents. The guidance is effective for periods beginning afterMarch 12, 2020 through December 15, 2017, on a retrospective basis.31, 2022. The Company does not expect the implementationdiscontinuation of ASU 2016-18LIBOR to have a material impact on its consolidated financial statements.



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

In AugustJune 2016, the FASB issued ASU 2016-15, "Classification2016-13, "Measurement of Certain Cash ReceiptsCredit Losses on Financial Instruments," which requires measurement and Cash Payments," providing clarificationrecognition of expected versus incurred credit losses for financial assets held. The measurement of expected credit losses should be based on eight cash flow classification issues,relevant information about past events, including 1) debt prepayment or debt extinguishment costs, 2) settlementhistorical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility 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.the reported amount. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company does not expect the implementation of ASU 2016-15 to have a material effect on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which impacts several aspects of the accounting for share-based payment transactions, including among others, the classification of excess tax benefits in the statements of income and cash flows and accounting for forfeitures. The Company's adoption of this update effective January 1, 2017 resulted in the recognition of $2,273 of excess tax benefits in the income statement during the nine-month period ended October 1, 2017. In accordance with the provisions of this ASU, excess tax benefits have also been recognized on a prospective basis within the operating section of the consolidated statement of cash flows for the nine-month period ended October 1, 2017, rather than the financing section. Pursuant to adoption of the new ASU, the Company recorded a cumulative charge to retained earnings of $318 for the elimination of estimated forfeitures associated with the Company's share-based compensation. The Company has elected to recognize forfeitures prospectively as they occur beginning January 1, 2017.
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 2016-02, "Leases" which changes accounting for leases and requires lessees to recognize the assets and liabilities arising from all leases, including those classified as operating leases under previous accounting guidance on the balance sheet and requires disclosure of key information about leasing arrangements to increase transparency and comparability among organizations. The accounting for lessors does not fundamentally change except for changes to conform and align guidance to the lessee guidance. The guidance is effective forannual reporting periods beginning after December 15, 2018, including2019, and interim periods within those fiscal years and requires retrospective application.annual periods. The Company is still assessing the impact of adopted ASU 2016-02 on its consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, "Revenue From Contracts With Customers," which changes the definitions/criteria used to determine when revenue should be recognized from being based on risks and rewards to being based on control. Among other changes, ASU 2014-09 changes the manner2016-13 in which variable consideration is recognized, requires recognition of the time value of money when payment terms exceed one year, provides clarification on accounting for contract costs, and expands disclosure requirements. ASU 2014-09 is effective for reporting periods beginning after December 15, 2017.  Although the Company will not complete its final assessment and quantification of the impact of ASU 2014-09 on its consolidated financial statements until adoption, it expects the adoption to have the effect of accelerating the timing of revenue recognition compared to current standards for those arrangements under which the Company is producing customer-specific products without alternative use and would be entitled to payment for work completed, including a reasonable margin. The Company is still in the process of developing an estimate of the impact of the transition adjustment on its consolidated financial statements. The Company plans to adopt ASU 2014-09 in the first quarter of fiscal 2018 following2020, using the modified retrospective transition method.approach and recorded a cumulative-effect adjustment to retained earnings of $209, a $279 increase to the allowance for doubtful accounts, and a $70 decrease to deferred income tax liabilities as of January 1, 2020.
During the three- and nine-month periodssix-month period ended October 1, 2017,June 28, 2020, 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 October 1, 2017,June 28, 2020, 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: Acquisitions
On July 24, 2017,January 10, 2020, the Company completed the acquisition of Clear Lam Packaging,a small tube and core operation in Jacksonville, Florida, from Design Containers, Inc. ("Clear Lam"Jacksonville"), for $164,585, nettotal cash consideration of cash acquired. Final consideration will be subject to an adjustment for working capital, which is expected to be completed by the end of the first quarter of 2018. Clear Lam manufactures high barrier flexible and forming films used to package a variety of products for consumer packaged goods companies, retailers and other industrial manufacturers, with a focus on structures used for perishable foods. It has production facilities in Elk Grove Village, Illinois, and Nanjing, China. $3,973.
The Company financed a portion of the transaction with $100,000 in borrowings from a $250,000 five-year term loan with the remaining purchase price funded from available short-term credit facilities.
The provisionalpreliminary fair values of the assets acquired and liabilities assumed in connection with the Jacksonville acquisition of Clear Lam are as follows:
Trade accounts receivable$10,578
Inventories27,299
Property, plant and equipment25,673
Goodwill48,818
Other intangible assets77,600
Trade accounts payable(14,455)
Other net tangible assets /(liabilities)(10,928)
Net assets$164,585
  
Jacksonville
Property, plant and equipment$2,773 
Inventories150 
Goodwill1,050 
Net Assets$3,973 
Management is continuing to finalize its valuation of certain assets and liabilities of Clear Lam including, but not limited to: inventory; property, plant and equipment; other intangible assets; deferred income taxes; and capital leases. Factors comprising goodwill,
Goodwill, all of which is expected to be deductible for income tax purposes, includeconsists of increased access to certain markets as well as the value of the assembled workforce. Clear Lam'smarkets. Jacksonville's financial results from January 10, 2020 to June 28, 2020 are included in the Company's Consumer PackagingPaper and Industrial Converted Products segment.
On March 14, 2017,During the six months ended June 28, 2020, the Company completed the acquisition of Packaging Holdings, Inc. and subsidiaries, including Peninsula Packaging LLC ("Packaging Holdings"), for $218,774, net of cash acquired. Packaging Holdings manufactures thermoformed packaging for a wide range of whole fresh fruits, pre-cut fruits and produce, prepared salad mixes, as well as baked goods in retail supermarkets from five manufacturing facilities, including four in the United States and one in Mexico. The Company financed the transaction with a combination of cash and borrowings including a $150,000 three-year term loan.
The fair valuescontinued to finalize its valuations of the assets acquired and liabilities assumed in connection with the December 31, 2019 acquisition of PackagingThermoform Engineered Quality, LLC, and Plastique Holdings, are as follows:
Trade accounts receivable$14,143
Inventories43,276
Property, plant and equipment53,787
Goodwill72,316
Other intangible assets60,190
Trade accounts payable(22,286)
Other net tangible assets /(liabilities)(2,652)
Net assets$218,774
  
DuringLTD (together "TEQ") and the third quarterAugust 9, 2019 acquisition of 2017, the Company continued to finalize its valuations of certain assets and liabilities of PackagingCorenso Holdings America, Inc. ("Corenso") based on new information obtained about facts and circumstances that existed as of their respective acquisition dates. In addition, a final post-closing settlement for the change in working capital at TEQ to the date of closing was made in April 2020 resulting in the receipt of cash from the sellers totaling $185. The following measurement period adjustments were made to the previously disclosed preliminary fair values:
TEQCorenso
Trade accounts receivable$(41) $—  
Inventories(241) (536) 
Property, plant and equipment(2,020) —  
Goodwill2,763  616  
Other intangible assets600  —  
Payable to suppliers—  (80) 
Other net tangible assets/liabilities(701) —  
Deferred income taxes, net(545) —  
Decrease in consideration paid$(185) $—  

The allocation of the purchase price of TEQ and Corenso to the tangible and intangible assets acquired and liabilities assumed was based on the Company's preliminary estimates of their fair value, based on information currently available. Management is continuing to finalize its valuations of certain assets and liabilities including, but not limited to, those listed in the table above, and expects to complete its valuations within one year from their respective dates of acquisition.

On April 12, 2018, the Company completed the acquisition date.of Highland Packaging Solutions ("Highland"). Total consideration for this acquisition included a contingency purchase liability of $7,500 payable in 2 annual installments if certain sales metrics were achieved. The continuing valuation includes, but is not limited to: inventory; property, plantmetrics were met and equipment; other intangible assets; deferred income taxes;the Company paid the first installment of $5,000 in 2019 and capital leases.paid the second and final installment of $2,500 in May 2020. The valuationspayments of these contingent obligations are expected to be completed inreflected as financing activities on the fourth quarterCompany's Condensed Consolidated Statement of 2017. Factors comprising goodwill, of which approximately $30,500 is expected to be deductibleCash Flows for income tax purposes, include increased access to certain markets as well as the value of the assembled workforce. Packagingsix months ended June 28, 2020 and June 30, 2019.
10
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Holding's financial results are included in the Company's Consumer Packaging segment and the business will operate as the Peninsula brand of thermoformed packaging products within the Company's global plastics division. 
The Company has accounted for the Packaging Holdings and Clear Lamits 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’sCompany's Condensed Consolidated Statements of Income.
The following table presents the aggregate, unaudited financial results for Packaging Holdings and Clear LamIncome from their respective dates of acquisition:acquisition.
 (unaudited)
Aggregate Supplemental InformationThree Months Ended Nine Months Ended
Packaging Holdings and Clear LamOctober 1, 2017 October 1, 2017
Actual net sales$77,764
 $145,983
Actual net income$1,976
 $2,160
    
Although neither of the acquisitions completed during the nine months ended October 1, 2017, is considered individually material, they are considered material on a combined basis. The following table presents the Company's estimated unaudited pro forma consolidated results for the three and nine-month periods ended October 1, 2017 and October 2, 2016, assuming both acquisitions had occurred on January 1, 2016. This pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had been completed as of the beginning of 2016, nor are they necessarily indicative of future consolidated results.
 (unaudited) (unaudited)
Pro Forma Supplemental InformationThree Months Ended Nine Months Ended
ConsolidatedOctober 1, 2017October 2, 2016 October 1, 2017October 2, 2016
Net sales$1,332,532
$1,293,139
 $3,844,048
$3,873,977
Net income attributable to Sonoco$73,284
$66,334
 $172,470
$173,219
Earnings per share:     
  Pro forma basic$0.73$0.66 $1.72$1.71
  Pro forma diluted$0.73$0.65 $1.71$1.70
    
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 for both 2017 and 2016 includes adjustments to depreciation, amortization, interest expense, and income taxes. Acquisition-related costs of $4,285 and non-recurring expensesCosts related to fair value adjustments to acquisition-date inventory of $5,750 were recognized in 2017 in connection with the acquisitions of Packaging Holdings and Clear Lam. These costs are excluded from 2017 pro forma net incomepotential acquisitions and reflected as though having been incurred on January 1, 2016.
During the nine-month period ended October 1, 2017, the Company updated its valuations of the assetsdivestitures totaling $357 and liabilities acquired in conjunction with the 2016 acquisitions of Plastic Packaging Inc. (“PPI”) and Laminar Medica (“Laminar”) based on information obtained about facts and circumstances that existed as of their respective acquisition dates. As a result, measurement period adjustments were made to the previously disclosed provisional fair values of PPI's net assets that increased identifiable intangibles by $1,400, increased property, plant and equipment by $400, increased the deferred tax liability by $1,085, and decreased goodwill by $715.  The measurement period adjustments to the previously disclosed provisional fair values of Laminar's net assets decreased goodwill by $326, decreased deferred tax liabilities by $487 and decreased property, plant and equipment by $161.

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

Acquisition-related costs of $963 and $943$1,224 were incurred during the three months ended October 1, 2017June 28, 2020 and October 2, 2016,June 30, 2019, respectively, and $6,233$1,528 and $2,092$1,624 during the ninesix months ended October 1, 2017June 28, 2020 and October 2, 2016,June 30, 2019, respectively. Acquisition-relatedThese 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.

Note 4: Shareholders' Equity
Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share (dollars and sharesshare:
Three Months EndedSix Months Ended
June 28, 2020June 30, 2019June 28, 2020June 30, 2019
Numerator:
Net income attributable to Sonoco$55,211  $81,159  $135,656  $154,822  
Denominator:
Weighted average common shares outstanding:
Basic100,971  100,759  100,915  100,700  
Dilutive effect of stock-based compensation138  419  194  429  
Diluted101,109  101,178  101,109  101,129  
Net income attributable to Sonoco per common share:
Basic$0.55  $0.81  $1.34  $1.54  
Diluted$0.55  $0.80  $1.34  $1.53  
Cash dividends$0.43  $0.43  $0.86  $0.84  

No adjustments were made to "Net income attributable to Sonoco" in thousands, exceptthe computations of earnings per share data): share.
  Three Months Ended Nine Months Ended
  October 1,
2017		 October 2,
2016		 October 1,
2017		 October 2,
2016
Numerator:        
Net income attributable to Sonoco $72,812
 $65,395
 $169,670
 $181,561
Denominator:        
Weighted average common shares outstanding:        
Basic 100,275
 100,925
 100,214
 101,320
Dilutive effect of stock-based compensation 409
 654
 579
 640
Diluted 100,684
 101,579
 100,793
 101,960
Net income attributable to Sonoco per common share:      
Basic $0.73
 $0.65
 $1.69
 $1.79
Diluted $0.72
 $0.64
 $1.68
 $1.78
Anti-dilutive Securities
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 stock appreciation rightsSARs may become dilutive in the future if the market price of the Company's common stock appreciates.
The average numbernumbers of stock appreciation rightsSARs that were not dilutive and, therefore, not included in the computation of diluted earnings per share during the three- and nine-monthsix- month periods ended October 1, 2017June 28, 2020 and October 2, 2016 wasJune 30, 2019 were as follows (in thousands):follows:
Three Months EndedSix Months Ended
June 28, 2020June 30, 2019June 28, 2020June 30, 2019
Anti-dilutive stock appreciation rights1,191  537  890  421  



11
  Three Months Ended Nine Months Ended
  October 1,
2017		 October 2,
2016		 October 1,
2017		 October 2,
2016
         
Anti-dilutive stock appreciation rights 531
 —
 473
 477
SONOCO PRODUCTS COMPANY
No adjustments were made to net income attributable to SonocoNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in the computations of earningsthousands except per share.share data)
(unaudited)

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 shares were purchased during 2016 at a cost of $100,000, leaving a total of 2,970 shares remaining available for repurchase at December 31,in 2016. NoNaN shares were repurchased under this authorization during 2017, 2018, 2019, or during the ninesix months ended October 1, 2017. At October 1, 2017,June 28, 2020. Accordingly, a total of 2,970 shares remain available for repurchase.repurchase at June 28, 2020.
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 11366 shares in the ninesix months ended October 1, 2017June 28, 2020 at a cost of $5,942,$3,950, and 136151 shares in the ninesix months endedOctober 2, 2016 June 30, 2019 at a cost of $6,072.
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)

$8,550.
Dividend Declarations
On July 19, 2017,April 15, 2020, the Board of Directors declared a regular quarterly dividend of $0.39$0.43 per share. This dividend was paid on September 8, 2017June 10, 2020 to all shareholders of record as of August 11, 2017.May 8, 2020.
On October 16, 2017,July 15, 2020, the Board of Directors declared a regular quarterly dividend of $0.39$0.43 per share. This dividend is payable on December 8, 2017September 10, 2020 to all shareholders of record as of NovemberAugust 10, 2017.2020.
Noncontrolling Interests
During the third quarter of 2017, the Company recorded a noncontrolling interest related to the creation of a joint venture for the manufacture of tubes and cores from a facility in Saudi Arabia. The Company owns a 51% share in the joint venture, which is not yet operational. The assets of the joint venture have been consolidated, and a noncontrolling interest in the amount of $1,341 recorded in the Company’s Condensed Consolidated Balance Sheet at October 1, 2017.

Note 5: Restructuring and Asset Impairment
Due to its geographic footprint and the cost-competitive nature of its businesses, the Company is continually seeking the most cost-effective means and structure to serve its customers and to respond to fundamental changes in its markets. As such, restructuring costs have been, and are expected to be, a recurring component of the Company's operating costs. The Company has engaged in a numberamount of these costs can vary significantly from quarter to quarter and from year to year depending upon the scope and location of the restructuring actions over the past several years. Actions initiated in 2017 and 2016 are reported as “2017 Actions” and “2016 Actions,” respectively. Actions initiated prior to 2016, all of which were substantially complete at October 1, 2017, are reported as “2015 and Earlier Actions.”activities.
Following are the totalThe table below sets forth restructuring and restructuring-related asset impairment charges/(credits), net of adjustments,charges by type incurred:
Three Months EndedSix Months Ended
June 28, 2020June 30, 2019June 28, 2020June 30, 2019
Severance and Termination Benefits$15,159  $5,199  $25,259  $11,499  
Asset Impairment / Disposal of Assets6,073  5,652  8,759  7,284  
Other Costs1,653  2,504  1,466  5,244  
Total Restructuring/Asset Impairment Charges$22,885  $13,355  $35,484  $24,027  

The table below sets forth restructuring and gains on dispositions recognizedrestructuring-related asset impairment charges by the Company during the periods presented: reportable segment:
Three Months EndedSix Months Ended
June 28, 2020June 30, 2019June 28, 2020June 30, 2019
Consumer Packaging$3,250  $10,487  $5,612  $17,742  
Display and Packaging668  511  3,548  886  
Paper and Industrial Converted Products17,689  1,600  23,045  2,474  
Protective Solutions695  561  1,168  1,003  
Corporate583  196  2,111  1,922  
Total Restructuring/Asset Impairment Charges$22,885  $13,355  $35,484  $24,027  
  2017 2016
  Third Quarter Nine Months Third Quarter Nine Months
Restructuring/Asset impairment:        
2017 Actions $1,610
 $7,798
 $—
 $—
2016 Actions (68) 1,816
 3,389
 29,434
2015 and Earlier Actions (1,233) 2,365
 2,941
 9,402
Other asset impairments 202
 540
 2,617
 2,617
Restructuring/Asset impairment charges $511
 $12,519
 $8,947
 $41,453
Income tax benefit $(445) (4,081) $(2,097) (10,442)
Less: Costs attributable to noncontrolling interests, net of tax (21) (35) (34) (78)
Restructuring/asset impairment charges attributable to Sonoco, net of tax $45
 $8,403
 $6,816
 $30,933

Pre-tax restructuringRestructuring and asset impairment charges are included in “Restructuring/Asset impairment charges” in the Company's Condensed Consolidated Statements of Income.
When recognizable
12
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in accordancethousands except per share data)
(unaudited)

The following table sets forth the activity in the restructuring accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets:
Severance
and
Termination
Benefits		Asset
Impairment/
Disposal
of Assets		Other
Costs		Total
Accrual Activity
Liability at December 31, 2019$10,765  $—  $592  $11,357  
2020 charges25,259  8,759  1,466  35,484  
Cash receipts/(payments)(17,431) 722  (2,305) (19,014) 
Asset write downs/disposals—  (9,481) 1,143  (8,338) 
Foreign currency translation(89) (5) (94) 
Liability at June 28, 2020$18,504  $—  $891  $19,395  

"Severance and Termination Benefits" during the first six months of 2020 includes the cost of severance provided to employees terminated as a result of the operational closures in the Paper and Industrial Converted Products segment including a paper mill in Canada, a paper machine in the United States, and 2 tube and core plants in the United States, and the closure in the Consumer Packaging segment of a graphic design operation in the United Kingdom. In addition, the charges include the cost of severance for approximately 150 employees whose positions were eliminated in conjunction with GAAP,the Company's ongoing organizational effectiveness efforts.
"Asset Impairment/Disposal of Assets" consists primarily of impairment charges of $5,726 resulting from the closure of a paper mill in Canada, and $2,300 resulting from the closure of a paper machine in Hartsville, South Carolina. Additionally, the Company received net cash proceeds of $722 primarily from the sale of a previously closed retail security plant facility in Spartanburg, South Carolina. This facility had a net book value of $490.
“Other Costs” consist primarily of costs related to plant closures including equipment removal, utilities, plant security, property taxes and insurance, net of incentive forfeitures.
The Company expects to pay the majority of the remaining restructuring reserves by the end of 2020 using cash generated from operations. The Company also expects to recognize future additional charges totaling approximately $1,500$2,700 in connection with previously announced restructuring actions. The Companyactions and believes that the majority of these charges will be incurred and paid by the end of 2017.2020. The Company continually evaluates its cost structure, including its manufacturing capacity, and additional restructuring actions are likely to be undertaken.

13




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

2017 Actions
During 2017, the Company announced the closure of an expanded foam protective packaging plant in North Carolina (part of the Protective Solutions segment) and a tubes and cores plant in Iowa (part of the Paper and Industrial Converted Products segment). In addition, approximately 120 positions were eliminated in the first nine months of 2017 in conjunction with the Company's ongoing organizational effectiveness efforts.
Below is a summary of 2017 Actions and related expenses by segment and by type incurred and estimated to be incurred through completion. 

2017 Actions Third Quarter 2017 Total
Incurred
to Date		 Estimated
Total Cost
Severance and Termination Benefits      
Consumer Packaging $60
 $1,376
 $1,576
Display and Packaging —
 172
 172
Paper and Industrial Converted Products 748
 $2,952
 3,452
Protective Solutions 83
 1,057
 1,157
Corporate (4) 452
 452
Asset Impairment / Disposal of Assets      
Consumer Packaging 126
 126
 126
Paper and Industrial Converted Products 13
 13
 13
Protective Solutions 55
 832
 832
Other Costs      
Consumer Packaging 37
 288
 288
Paper and Industrial Converted Products 62
 100
 650
Protective Solutions 430
 430
 430
Total Charges and Adjustments $1,610
 $7,798
 $9,148
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
2017 Year to Date		   
Liability at December 31, 2016 $—
 $—
 $—
 $—
2017 charges 6,009
 971
 818
 7,798
Cash receipts/(payments) (3,674) 457
 (818) (4,035)
Asset write downs/disposals —
 (1,428) —
 (1,428)
Foreign currency translation 29
 —
 —
 29
Liability at October 1, 2017 $2,364
 $—
 $—
 $2,364
Included in "Asset Impairment/Disposal of Assets" above is a loss of $903 primarily relating to the impairment of fixed assets resulting from the closure of an expanded foam protective packaging plant in North Carolina, and losses of $68 relating primarily to the sale of a vacated building. The Company received proceeds of $457 from the sale of this building and wrote off assets of $525.
"Other costs" consists primarily of costs related to plant closures including equipment removal, utilities, plant security, property taxes and insurance. The Company expects to pay the majority of the remaining 2017 Actions restructuring costs by the end of 2017 using cash generated from operations.


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

2016 Actions
During 2016, the Company closed four tubes and cores plants - one in the United States, one in Canada, one in Ecuador, and one in Switzerland (all part of the Paper and Industrial Converted Products segment), a packaging services center in Mexico (part of the Display and Packaging segment) and a fulfillment service center in Brazil (part of the Display and Packaging segment). The Company also began manufacturing rationalization efforts in its Reels division (part of the Paper and Industrial Converted Products segment) and completed the sales of a paper mill in France (part of the Paper and Industrial Converted Products segment) and a retail security packaging plant in Puerto Rico (part of the Display and Packaging segment). In addition, the Company continued to realign its cost structure, resulting in the elimination of approximately 180 positions.
Below is a summary of 2016 Actions and related expenses by segment and by type incurred and estimated to be incurred through completion. 
  2017 2016 
Total
Incurred
to Date
  Estimated
Total Cost
2016 Actions Third Quarter Nine Months Third Quarter Nine Months  
Severance and Termination Benefits            
Consumer Packaging $—
 $1
 $766
 $2,218
 $2,408
 $2,408
Display and Packaging (22) (18) 372
 3,025
 4,286
 4,286
Paper and Industrial Converted Products 5
 419
 1,187
 5,328
 6,306
 6,306
Protective Solutions —
 —
 109
 469
 678
 678
Corporate 14
 14
 3
 1,442
 1,564
 1,564
Asset Impairment / Disposal of Assets            
Consumer Packaging $—
 —
 —
 (306) (306) (306)
Display and Packaging —
 96
 475
 2,712
 2,808
 2,808
Paper and Industrial Converted Products —
 45
 —
 13,279
 13,345
 13,345
Other Costs            
Consumer Packaging $14
 42
 12
 314
 773
 773
Display and Packaging 20
 388
 37
 48
 674
 674
Paper and Industrial Converted Products (99) 779
 428
 905
 2,077
 2,077
Protective Solutions —
 50
 —
 —
 200
 200
Total Charges and Adjustments $(68) $1,816
 $3,389
 $29,434
 $34,813
 $34,813
The following table sets forth the activity in the 2016 Actions restructuring accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets:
2016 Actions Severance
and
Termination
Benefits		 Asset
Impairment/
Disposal
of Assets		 Other
Costs		 Total
Accrual Activity
2017 Year to Date
    
Liability at December 31, 2016 $3,558
 $—
 $640
 $4,198
2017 charges 416
 141
 1,259
 1,816
Adjustments —
 —
 —
 —
Cash payments (3,098) —
 (1,354) (4,452)
Asset write downs/disposals —
 (141) (252) (393)
Foreign currency translation 12
 —
 34
 46
Liability at October 1, 2017 $888
 $—
 $327
 $1,215
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)

“Other costs” consist primarily of costs related to plant closures including equipment removal, utilities, plant security, property taxes and insurance. The Company expects to pay the majority of the remaining 2016 Actions restructuring costs by the end of 2017 using cash generated from operations.
2015 and Earlier Actions
2015 and Earlier Actions are comprised of a number of plant closures and workforce reductions initiated prior to 2016. Included in "Total Charges and Adjustments" below is a gain of $2,022 related to the sale of land and building of a rigid paper plant in Manchester, England (part of the Consumer Packaging Segment). The Company received proceeds from the sale of $2,741 and wrote off assets of $719. Additional charges for these actions in both 2017 and 2016 primarily relate to the cost of plant closures including severance, equipment removal, plant security, property taxes and insurance.
The Company expects to recognize future pretax charges of approximately $100 associated with 2015 and Earlier Actions.
Below is a summary of expenses incurred by segment for 2015 and Earlier Actions for the three- and nine- month periods ended October 1, 2017 and October 2, 2016. 
  2017 2016
2015 and Earlier Actions Third Quarter Nine Months Third Quarter Nine Months
Consumer Packaging $(1,348) $1,216
 $2,079
 $7,216
Display and Packaging —
 83
 113
 679
Paper and Industrial Converted Products 62
 953
 744
 1,368
Protective Solutions 53
 106
 18
 152
Corporate —
 7
 (13) (13)
Total Charges and Adjustments $(1,233) $2,365
 $2,941
 $9,402
The accrual for 2015 and Earlier Actions totaled $3,211 and $3,608 at October 1, 2017 and December 31, 2016, respectively, and is included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets. The accrual relates primarily to unpaid severance and building lease terminations. The Company expects the majority of the liability associated with 2015 and Earlier Actions to be paid by the end of 2017 using cash generated from operations.
Other asset impairments
In addition to the restructuring charges discussed above, as a result of the continued devaluation of the Venezuelan Bolivar in 2017, the Company recognized impairment charges against inventories and certain long-term nonmonetary assets totaling $338. 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. In addition, the Company has recognized foreign exchange remeasurement losses on net monetary assets of $202.
During the Company's annual goodwill impairment testing conducted during the third quarter of 2016, management concluded that goodwill associated with the Company's Paper and Industrial Converted Products - Brazil reporting unit had become impaired as a result of the continued deterioration of economic conditions in Brazil. Accordingly, an impairment charge totaling $2,617, the entire amount of goodwill associated with this reporting unit, was recognized during the third quarter of 2016.
The asset impairment charges and remeasurement loss are included in "Restructuring/Asset impairment charges" in the Company's Condensed Consolidated Statements of Income.

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

Note 6: Accumulated Other Comprehensive Loss
The following table summarizes the components of accumulated other comprehensive loss and the changes in the balances of each component of accumulated other comprehensive loss, net of tax as applicable, for the ninesix months ended October 1, 2017June 28, 2020 and October 2, 2016:June 30, 2019:
Foreign
Currency
Items		Defined
Benefit
Pension Items		Cash
Flow Hedges		Accumulated
Other
Comprehensive
Loss
Balance at December 31, 2019$(241,994) $(574,413) $(396) $(816,803) 
Other comprehensive loss before reclassifications(60,121) (862) (4,402) (65,385) 
Amounts reclassified from accumulated other comprehensive loss to net income—  11,058  1,677  12,735  
Other comprehensive (loss)/income(60,121) 10,196  (2,725) (52,650) 
Balance at June 28, 2020$(302,115) $(564,217) $(3,121) $(869,453) 
Balance at December 31, 2018$(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) 


14
  
Gains and
Losses on Cash
Flow Hedges
 
Defined
Benefit
Pension Items
 
Foreign
Currency
Items
 
Accumulated
Other
Comprehensive
Loss
Balance at December 31, 2016
$1,939

$(453,821)
$(286,498)
$(738,380)
Other comprehensive income/(loss) before reclassifications
(654)
22,337

86,769

108,452
Amounts reclassified from accumulated other comprehensive loss to net income
(2,984)
35,974

—

32,990
Amounts reclassified from accumulated other comprehensive loss to fixed assets
(15)
—

—

(15)
Other comprehensive income/(loss)
(3,653)
58,311

86,769

141,427
Balance at October 1, 2017
$(1,714)
$(395,510)
$(199,729)
$(596,953)
         
Balance at December 31, 2015 $(5,152) $(444,244) $(253,137) $(702,533)
Other comprehensive income/(loss) before reclassifications 1,318
 (5,020) 10,282
 6,580
Amounts reclassified from accumulated other comprehensive loss to net income 3,897
 19,773
 —
 23,670
Amounts reclassified from accumulated other comprehensive loss to fixed assets 48
 —
 —
 48
Other comprehensive income 5,263
 14,753
 10,282
 30,298
Balance at October 2, 2016 $111
 $(429,491) $(242,855) $(672,235)
         

"Other comprehensive income/(loss) before reclassifications" during the nine months ended October 1, 2017, includes $5,071 of "Defined Benefit Pension Items" related to the release of a portion of the valuation allowance on deferred tax assets related to the pension plan of a foreign subsidiary.
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 nine-monthsix-month periods ended October 1, 2017June 28, 2020 and October 2, 2016: June 30, 2019:

 
Amount Reclassified from Accumulated
Other Comprehensive Loss
 Amount Reclassified from Accumulated
Other Comprehensive Loss
 Three Months EndedNine Months Ended Three Months EndedSix Months Ended
Details about Accumulated Other Comprehensive
Loss Components
 October 1,
2017		October 2,
2016		October 1,
2017		 October 2,
2016		 
Affected Line Item in 
the Condensed Consolidated 
Statements of Income
Details about Accumulated Other
Comprehensive
Loss Components		June 28,
2020		June 30,
2019		June 28,
2020		June 30,
2019		Affected Line Item in
the Condensed Consolidated
Statements of Income
Gains and losses on cash flow hedges     
Gains/(losses) on cash flow hedgesGains/(losses) on cash flow hedges
Foreign exchange contracts $4,814
$(2,370)$8,097
 $(5,217) Net salesForeign exchange contracts$(3,384) $532  $(4,522) $849  Net sales
Foreign exchange contracts (2,766)907
(4,808) 2,339
 Cost of salesForeign exchange contracts2,050  (378) 2,877  (666) Cost of sales
Commodity contracts 656
(541)1,367
 (3,346) Cost of salesCommodity contracts525  (319) (554) 116  Cost of sales
 2,704
(2,004)4,656
 (6,224) Income before income taxes$(809) $(165) $(2,199) $299  Income before income taxes
 (977)630
(1,672) 2,327
 Provision for income taxes197  59  522  (57) Provision for income taxes
 $1,727
$(1,374)$2,984
 $(3,897) Net income$(612) $(106) $(1,677) $242  Net income
Defined benefit pension items 
    Defined benefit pension items
Effect of curtailment loss(a)
Effect of curtailment loss(a)
$(31) $—  $(31) $—  Non-operating pension costs
Effect of settlement loss(a)
 $(476)$—
$(31,550) $—
 Selling, general and 
administrative expenses
Effect of settlement loss(a)
(38) (225) (661) (1,547) Non-operating pension costs
Amortization of defined benefit pension items(a)
 (7,155)(7,392)(21,994) (21,903) Cost of sales
Amortization of defined benefit pension items(a)
 (2,385)(2,464)(7,331) (7,301) Selling, general and 
administrative expenses
Amortization of defined
benefit pension items(a)
(7,221) (9,523) (14,082) (18,455) Non-operating pension costs
 (10,016)(9,856)(60,875) (29,204) Income before income taxes$(7,290) $(9,748) $(14,774) $(20,002) Income before income taxes
 3,935
2,227
24,901
 9,431
 Provision for income taxes1,815  2,510  3,716  5,100  Provision for income taxes
 $(6,081)$(7,629)$(35,974) $(19,773) Net income$(5,475) $(7,238) $(11,058) $(14,902) Net income
Total reclassifications for the period $(4,354)$(9,003)$(32,990) $(23,670) Net incomeTotal reclassifications for the period$(6,087) $(7,344) $(12,735) $(14,660) Net income
 
(a)See Note 10 for additional details.

(a) See Note 11 for additional details.



15














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 three-month periods ended October 1, 2017June 28, 2020 and October 2, 2016: June 30, 2019:

Three months ended June 28, 2020Three months ended June 30, 2019
Before Tax
Amount		Tax
(Expense)
Benefit		After Tax
Amount		Before Tax
Amount		Tax
(Expense)
Benefit		After Tax
Amount
Foreign currency items:
Net other comprehensive loss from foreign currency items$33,454  $—  $33,454  $9,573  $—  $9,573  
Defined benefit pension items:
Other comprehensive income/(loss) before
reclassifications		(1,410) 351  (1,059) (6,957) 1,526  (5,431) 
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income		7,290  (1,815) 5,475  9,748  (2,510) 7,238  
Net other comprehensive income/(loss) from
defined benefit pension items		5,880  (1,464) 4,416  2,791  (984) 1,807  
Gains and losses on cash flow hedges:
Other comprehensive income/(loss) before
reclassifications		1,612  (394) 1,218  (828) 297  (531) 
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income		809  (197) 612  165  (59) 106  
Amounts reclassified from accumulated other
comprehensive loss to fixed assets		—  —  —  (56) —  (56) 
Net other comprehensive income/(loss) from
cash flow hedges		2,421  (591) 1,830  (719) 238  (481) 
Other comprehensive income/(loss):$41,755  $(2,055) $39,700  $11,645  $(746) $10,899  

16
   Three months ended October 1, 2017 Three months ended October 2, 2016
   Before Tax AmountTax (Expense) BenefitAfter Tax Amount Before Tax AmountTax (Expense) BenefitAfter Tax Amount
Foreign currency items $26,928
$—
$26,928
 $(3,157)$—
$(3,157)
Defined benefit pension items:        
 
Other comprehensive income/(loss) before
   reclassifications
 6,634
(2,414)4,220
 (2,531)701
(1,830)
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to net income
 10,016
(3,935)6,081
 9,856
(2,227)7,629
 
Net other comprehensive income/(loss) from
   defined benefit pension items
 16,650
(6,349)10,301
 7,325
(1,526)5,799
Gains and losses on cash flow hedges:        
 
Other comprehensive income/(loss) before
   reclassifications
 2,425
(859)1,566
 (1,024)221
(803)
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to net income
 (2,704)977
(1,727) 2,004
(630)1,374
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to fixed assets
 (25)—
(25) 70
—
70
 
Net other comprehensive income/(loss) from
   cash flow hedges
 (304)118
(186) 1,050
(409)641
Other comprehensive income/(loss) $43,274
$(6,231)$37,043
 $5,218
$(1,935)$3,283
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 nine-monthsix-month periods ended October 1, 2017June 28, 2020 and October 2, 2016:June 30, 2019:

Six months ended June 28, 2020Six months ended June 30, 2019
Before Tax
Amount		Tax
(Expense)
Benefit		After Tax
Amount		Before Tax
Amount		Tax
(Expense)
Benefit		After Tax
Amount
Foreign currency items:
Net other comprehensive (loss)/income from foreign currency items(a)
$(52,540) $(7,581) $(60,121) $6,721  $—  $6,721  
Defined benefit pension items:
Other comprehensive (loss)/income before
reclassifications		(1,146) 284  (862) (7,638) 1,699  (5,939) 
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income		14,774  (3,716) 11,058  20,002  (5,100) 14,902  
Net other comprehensive income/(loss) from
defined benefit pension items		13,628  (3,432) 10,196  12,364  (3,401) 8,963  
Gains and losses on cash flow hedges:
Other comprehensive income/(loss) before
reclassifications		(5,721) 1,319  (4,402) 2,193  (467) 1,726  
Amounts reclassified from accumulated other
comprehensive income/(loss) to net income		2,199  (522) 1,677  (299) 57  (242) 
Amounts reclassified from accumulated other
comprehensive loss to fixed assets		—  —  —  (101) —  (101) 
Net other comprehensive (loss)/income from
cash flow hedges		(3,522) 797  (2,725) 1,793  (410) 1,383  
Other comprehensive income/(loss):$(42,434) $(10,216) $(52,650) $20,878  $(3,811) $17,067  

(a) Other comprehensive loss from foreign currency items for the six months ended June 28, 2020, includes the settlement gain and corresponding tax provision related to the termination of a net investment hedge. See Note 9 for more information.


   Nine months ended October 1, 2017 Nine months ended October 2, 2016
   Before Tax AmountTax (Expense) BenefitAfter Tax Amount Before Tax AmountTax (Expense) BenefitAfter Tax Amount
Foreign currency items $86,769
$—
$86,769
 $10,282
$—
$10,282
Defined benefit pension items:        
 
Other comprehensive income/(loss) before
   reclassifications
 25,655
(3,318)22,337
 (7,926)2,906
(5,020)
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to net income
 60,875
(24,901)35,974
 29,204
(9,431)19,773
 
Net other comprehensive income/(loss) from
   defined benefit pension items
 86,530
(28,219)58,311
 21,278
(6,525)14,753
Gains and losses on cash flow hedges:        
 
Other comprehensive income/(loss) before
   reclassifications
 (1,021)367
(654) 2,106
(788)1,318
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to net income
 (4,656)1,672
(2,984) 6,224
(2,327)3,897
 
Amounts reclassified from accumulated other
   comprehensive income/(loss) to fixed assets
 (15)—
(15) 48
—
48
 
Net other comprehensive income/(loss) from
   cash flow hedges
 (5,692)2,039
(3,653) 8,378
(3,115)5,263
Other comprehensive income/(loss) $167,607
$(26,180)$141,427
 $39,938
$(9,640)$30,298




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

Note 7: Goodwill and Other Intangible Assets
Goodwill
A summary of the changes in goodwill by segment for the ninesix months ended October 1, 2017June 28, 2020 is as follows: 
  
Consumer
Packaging
 
Display
and
Packaging
 
Paper and
Industrial
Converted
Products
Protective
Solutions
 Total
Goodwill at December 31, 2016 $435,590
 $203,414
 $221,983
$231,228
 $1,092,215
Acquisitions 121,134
 —
 —
—
 121,134
Foreign currency translation 16,533
 —
 10,681
917
 28,131
Other (715) —
 —
(326) (1,041)
Goodwill at October 1, 2017 $572,542
 $203,414
 $232,664
$231,819
 $1,240,439

Consumer
Packaging		Display
and
Packaging		Paper and
Industrial
Converted
Products		Protective
Solutions		Total
Goodwill at December 31, 2019$691,243  $203,414  $303,041  $231,648  $1,429,346  
2020 Acquisitions—  —  1,050  —  1,050  
Foreign currency translation(6,398) —  (3,138) (527) (10,063) 
Measurement period adjustments2,763  —  616  —  3,379  
Goodwill at June 28, 2020$687,608  $203,414  $301,569  $231,121  $1,423,712  
The acquisitionsCompany recorded goodwill totaling $1,050 upon completion of Packaging Holdingsthe acquisition of a small tube and core operation in March 2017 and Clear Lam in July 2017 resulted in the recognition of $72,316 and $48,818 of goodwill, respectively. In addition, measurementJacksonville, Florida, from Design Containers, Inc. Measurement period adjustments were made in the first nine monthshalf of 20172020 to the provisional fair values of the assets acquired and the liabilities assumed in the November 2016 acquisition2019 acquisitions of PPICorenso and the September 2016 acquisition of Laminar,TEQ resulting in reductionsincreases in goodwill of $715 for PPI$616 and $326 for Laminar.$2,763, respectively. See Note 3 for additional information.

17
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

The Company assesses goodwill for impairment annually andduring the third quarter, or 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 2017.2019. As part of this testing, the Company analyzed certain qualitative and quantitative factors in determining whether a goodwill impairment.impairment existed. The Company's assessments reflected a number of significant management assumptions and estimates including the Company's forecast of sales, volumes and prices, profit margins, income taxes, capital expenditures and changes in working capital requirements.discount rates. Changes in these assumptions and/or discount rates could materially impact the Company's conclusions. Based on its assessments, as part of its annual impairment test during the third quarter of 2019, the Company concluded that there was no0 impairment of goodwill for any of its reporting units.
Although no reporting units failed the assessments noted above, during the time subsequent to the annual evaluation, and at June 28, 2020, the Company considered whether any events and/or changes in management’s opinion,circumstances, including the impact of the COVID-19 pandemic, had resulted in the likelihood that the goodwill of any of its reporting units havingmay have been impaired. It is management's opinion that no such events have occurred. However, the greatest riskgoodwill of a significant future impairment if actual results fall short of expectations arethe Display and Packaging and Paper and Industrial Converted Products - Europe. Total goodwill associated with these reporting units was $203,414 and $93,277, respectively,unit is at October 1, 2017.risk of impairment in the near term if there is a negative change in the long-term outlook for the business or in other factors such as the discount rate. A large portion of projected sales in the Display and Packagingthis reporting unit is concentrated in twoseveral major customers, the loss of eitherany of which could impact the Company's conclusion regarding the likelihood of goodwill impairment for the unit. Total goodwill associated with this reporting unit was $203,414 at June 28, 2020. In the latest annual impairment test, the estimated fair value of the Display and Packaging reporting unit was determined to exceed its carrying value by approximately 35%. In this analysis, projected future cash flows for Display and Packaging were discounted at 8.9%. Based on the discounted cash flow model and holding other valuation assumptions constant, Display and Packaging projected operating profits across all future periods would have to be reduced approximately 27.0%, or the discount rate increased to 12.5%, in order for the estimated fair value to fall below the reporting unit’s carrying value.

In addition, the results of the Conitex reporting unit have been negatively impacted by the economic fallout of the COVID-19 pandemic due to end-market weakness, particularly in textiles, as well as certain customers' plants being temporarily shut down to contain the spread of the virus. Management currently expects customer demand will begin to increase and begin approaching pre-pandemic levels next year. However, should it become apparent that the post-COVID-19 recovery is likely to be weaker, or significantly delayed, compared to management’s current expectations, a goodwill impairment charge may be possible in the future. Total goodwill associated with this reporting unit was $32,151 at June 28, 2020. The Company previously owned a 30% noncontrolling interest in Conitex Sonoco (BVI), Ltd. before acquiring the remaining 70% interest on October 1, 2018. In its 2019 annual goodwill impairment test, the Company estimated the fair value of the Conitex reporting unit to be approximately equal to its carrying value.

Other Intangible Assets

A summary of other intangible assets as of June 28, 2020 and December 31, 2019 is as follows:

June 28,
2020		December 31,
2019
Other Intangible Assets, gross:
Patents$26,091  $26,096  
Customer lists629,363  632,036  
Trade names32,357  32,427  
Proprietary technology24,474  24,525  
Other2,790  2,297  
Other Intangible Assets, gross$715,075  $717,381  
Accumulated Amortization:
Patents$(12,483) $(11,669) 
Customer lists(309,488) (287,831) 
Trade names(11,336) (9,985) 
Proprietary technology(19,028) (17,910) 
Other(1,744) (1,694) 
Total Accumulated Amortization$(354,079) $(329,089) 
Other Intangible Assets, net$360,996  $388,292  

18









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

Other Intangible Assets
A summary of other intangible assets as of October 1, 2017 and December 31, 2016 is as follows:     

  October 1,
2017		 December 31,
2016
Other Intangible Assets, gross:    
Patents $21,957
 $13,164
Customer lists 496,623
 362,162
Trade names 25,127
 19,902
Proprietary technology 20,771
 20,721
Land use rights 294
 288
Other 1,737
 1,701
Other Intangible Assets, gross $566,509
 $417,938
     
Accumulated Amortization:    
Patents (6,469) (5,647)
Customer lists (199,924) (172,292)
Trade names (3,881) (2,733)
Proprietary technology (12,709) (11,236)
Land use rights (46) (41)
Other (1,164) (1,031)
Total Accumulated Amortization $(224,193) $(192,980)
Other Intangible Assets, net $342,316
 $224,958

The Packaging Holdings acquisition in March 2017 resulted inIn the additionfirst quarter of $60,190 of intangible assets, of which $48,4002020, the Company paid $500 to purchase proprietary technology related to customer lists, $8,790 relatedmachinery and equipment purchased from a third-party that the Company plans to patents, and $3,000 related to trade names. The Clear Lam acquisition in July 2017 resulted in the additionservice internally going forward. This intangible will be amortized over its expected useful life of $77,600 of intangible assets, of which $75,500 related to customer lists and $2,100 related to trade names. In addition, measurementtwelve years. Measurement period adjustments were made in the first quarterhalf of 20172020 to the provisional fair values of the assets acquired and the liabilities assumed in the November 20162019 acquisition of PPI which resultedTEQ resulting in the recognitionan increase in amortizable intangibles, primarily customer lists, of an$600. See Note 3 for additional $1,400 of intangible assets, all of which related to customer lists. These intangible assets will be amortized over an expected average useful life of 13.4 years.information.
Other intangible assetsIntangible Assets are amortized on a straight-line basis over their respective useful lives, which generally range from three to forty years. The Company has no0 intangible assets with indefinite lives.
Aggregate amortization expense was $10,117$13,359 and $7,767$13,098 for the three months ended October 1, 2017June 28, 2020 and October 2, 2016,June 30, 2019, respectively, and $26,706$26,631 and $24,334$25,890 for the ninethe six months ended October 1, 2017June 28, 2020 and October 2, 2016,June 30, 2019, respectively. Amortization expense on other intangible assets is expected to total approximately $37,500 in 2017, $42,700 in 2018, $41,500 in 2019, $38,900$53,000 in 2020, $51,600 in 2021, $48,700 in 2022, $41,000 in 2023 and $37,100$29,300 in 2021.2024.


Note 8: Debt
Details of the Company's debt at June 28, 2020 and December 31, 2019 are as follows:
June 28,
2020		December 31,
2019
Commercial paper$—  $250,000  
Wells Fargo term loan due March 2021150,000  —  
U.S. Bank term loan due March 2021100,000  —  
Wells Fargo term loan due May 2021200,000  200,000  
Syndicated bank term loan due July 2022143,115  146,569  
1.0% Euro loan due May 2021167,639  167,272  
9.2% debentures due August 20214,319  4,318  
4.375% debentures due November 2021249,582  249,428  
3.125% debentures due May 2030594,397  —  
5.75% debentures due November 2040599,261  599,244  
Other foreign denominated debt15,189  16,734  
Finance lease obligations26,760  33,077  
Other notes15,001  14,727  
Total debt$2,265,263  $1,681,369  
Less current portion and short-term notes646,623  488,234  
Long-term debt$1,618,640  $1,193,135  

The Company has taken several actions in 2020 to secure liquidity in light of volatility in the credit markets and economic uncertainty caused by the COVID-19 pandemic.
On July 20, 2017,March 18, 2020, the Company entered intoclosed and funded a Credit Agreement in connection364-day, $150,000 term loan with Wells Fargo Bank, National Association, using the proceeds to repay a new $750,000 bank credit facility which replaced an existing credit facility entered into on October 2, 2014, and reflects substantially the same terms and conditions. Included in the new facility are a $500,000 five-year revolving credit facility and a $250,000 five-year term loan. Based on the pricing grid in the Credit Agreement and the Company's current credit ratings, the borrowing has an all-in drawn margin aboveportion of outstanding commercial paper. Interest was assessed at the London Interbank Offered Rate (LIBOR) of 112.5plus a margin based on a pricing grid that used the Company’s credit ratings. The margin above LIBOR at June 28, 2020 was 125 basis points. Borrowings under the Credit Agreement are pre-payableThere was no required amortization and repayment could be accelerated at any time at the discretion of the Company.
On April 1, 2020, the Company and the term loan has annual amortization payments totaling $12,500.
Consistent with prior facilities, theaccessed $250,000 from its $500,000 revolving credit facility will continuewith a syndicate of 8 banks committed through July 2022. The Company used $85,000 of the proceeds to support the Company's $350,000fully repay its then outstanding commercial paper program. Proceeds from the $250,000 term loan were used to repay the $150,000 term loan entered into on March 13, 2017,balance and the remaining $100,000 was used to partially fund the Clear Lam acquisition.proceeds were invested in short-term cash equivalents with maturities of 30 days or less.



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


On April 6, 2020, the Company borrowed $100,000, pursuant to a new 364-day term loan with U.S. Bank, National Association. Interest is assessed at the LIBOR plus a margin based on a pricing grid that uses the Company's credit ratings. The margin above LIBOR at June 28, 2020 was 125 basis points. There is no required amortization and repayment can be accelerated at any time at the discretion of the Company.
On April 22, 2020, the Company sold through a public offering $600,000 of 3.125% notes due May 1, 2030. The offering was made pursuant to an effective shelf registration statement. This action was taken largely to mitigate the risk of possible future credit market dislocations triggered by the economic impact of the COVID-19 pandemic. The Company intends to use the net proceeds from the offering of approximately $594,200 for general corporate purposes, including the repayment of existing debt.
In May 2020, the Company exercised a conditional, one-time option to extend its $200,000 term loan with Wells Fargo Bank, National Association, for an additional 364 days to May 2021. Interest is assessed at the LIBOR plus a margin based on a pricing grid that uses the Company's credit ratings. The margin above LIBOR at June 28, 2020 was 112.5 basis points. There is no required amortization and the repayment can be accelerated at any time at the discretion of the Company.
On May 5, 2020, the Company repaid the $250,000 borrowed April 1, 2020 under the Company's revolving credit facility. On July 20, 2020, subsequent to quarter end, the Company repaid the $150,000 term loan with Wells Fargo Bank, National Association.
As a result of these actions, the Company currently expects debt maturities of approximately $750,000 through December 31, 2021. The Company currently has approximately $700,000 in cash and cash equivalents on hand and $500,000 in committed availability under its revolving credit facility. The Company believes that these amounts, combined with expected net cash flows from operating and investing activities, provide ample liquidity to cover the 2021 debt maturities and other cash flow needs of the Company over the course of the next year.
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 June 28, 2020, the Company’s interest coverage and net worth were substantially above the minimum levels required under these covenants.

Note 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 28, 2020December 31, 2019
Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Long-term debt, net of current portion$1,618,640  $1,804,459  $1,193,135  $1,351,397  
  October 1, 2017 December 31, 2016
  
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Long-term debt, net of current portion $1,300,191
 $1,428,716
 $1,020,698
 $1,116,336

The carrying value of cash and cash equivalents, short-term debt and long-term variable-rate debt approximates fair value. The fair value of long-term debt is determined based on recent trade information in the financial markets of the Company’s public debt or is determined by discounting future cash flows using interest rates available to the Company for issues with similar terms and maturities. It is considered a Level 2 fair value measurement.
Cash Flow Hedges
At October 1, 2017June 28, 2020 and December 31, 2016,2019, 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 2019,2021, qualify as cash flow hedges under U.S. GAAP. ToFor derivative instruments that are designated and qualify as a cash flow hedge, the extent considered effective,gain or loss on the changes in fair valuederivative instrument is reported as a component of these contracts are recorded in other comprehensive income and reclassified to income or expenseinto earnings in the same period inor periods during which the hedged transaction affects earnings and is presented in the same income statement line item impacts earnings. The Company has determined all hedges to be highly effectiveas the earnings effect of the hedged item.


20
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and as a result no material ineffectiveness has been recorded.shares in thousands except per share data)
(unaudited)

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 October 1, 2017,June 28, 2020, natural gas swaps covering approximately 5.82.3 million MMBTUs were outstanding. These contracts represent approximately 89%, 54%, and 35%64% of anticipated U.S.usage in the United States, Canada, and Canadian usageMexico for the remainder of 2017, 2018 and 2019, respectively.2020. Additionally, the Company had swap contracts covering 1,2101,088 metric tons of aluminum, representing approximately 63%23% and 4% of anticipated usage for the remainder of 2017.2020 and 2021. The fair values of the Company’s commodity cash flow hedges netted to a loss position of $(33)$(1,722) and $(1,625) at October 1, 2017,June 28, 2020 and a gain position of $3,636 at December 31, 2016.2019 respectively. The amount of the loss included in Accumulated Other Comprehensive Loss at October 1, 2017,June 28, 2020, that is expected to be reclassified to the income statement during the next twelve months is $(24)$(1,189).
Foreign Currency Cash Flow Hedges
The Company has entered into forward contracts to hedge certain anticipated foreign currency denominated sales, purchases, and purchases forecastcapital spending expected to occur in 2017.2020. The net positions of these contracts at October 1, 2017June 28, 2020 were as follows (in thousands):
CurrencyActionQuantity
Colombian pesopurchase890,8547,829,084 
Mexican pesopurchase147,650173,687 
Canadian dollarPolish zlotypurchase13,56850,740 
British poundCzech korunapurchase7,24020,274 
Turkish liraCanadian dollarpurchase3,60010,077 
Russian rubleBritish poundpurchase1,8803,171 
Turkish lirapurchase1,598 
New Zealand dollarsell(170(1,241))
Australian dollarSwedish kronasell(195(1,500))
Polish zlotyAustralian dollarsell(907(2,624))
Eurosell(4,101(15,717))
Russian rublesell(99,189)

The fair value of these foreign currency cash flow hedges related to forecasted sales and purchases netted to a loss positionsposition of $(2,158)$(2,299) at October 1, 2017June 28, 2020 and $(184)a gain position of $1,058 at December 31, 2016. In2019. Losses of $(2,296) are expected to be reclassified from accumulated other comprehensive income to the income statement during the next twelve months. In addition, the Company has enteredoccasionally enters into forward contracts to hedge certain foreign currency cash flow transactions related to construction in progress. As of October 1, 2017, the net position of these contracts was $313 and during the nine months ended October 1, 2017, gains Gains or losses from these hedges totaling $15 wereare reclassified from accumulated other comprehensive lossincome and included in the carrying value of the related fixed assets acquired. For allThe net positions of these contracts were immaterial as of June 28, 2020 and December 31, 2019.
Net Investment Hedge
In January 2020, the Company entered into a cross-currency swap agreement with a notional amount of $250,000 to effectively convert a portion of the Company's fixed-rate, U.S. dollar denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt. The swap agreement had an original maturity of November 1, 2024 and provided for the Company to receive semi-annual interest payments in U.S. dollars at a rate of 5.75% and pay interest in euros at a rate of 3.856%. The risk management objective was to manage foreign currency risk relating to net investments in certain European subsidiaries denominated in foreign currencies. As a result of significant strengthening of the U.S. dollar, as well as a reduction in the differential between U.S. and European interest rates, the fair market value of the swap position appreciated significantly during the first quarter of 2020. In March 2020, the Company terminated the swap agreement and received a net cash settlement of $14,480. The Company recorded this foreign currency translation gain in "Accumulated other comprehensive loss," net of a tax provision of $7,581.


21
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


cash flow hedges, losses of $(2,471) are expected to be reclassified from Accumulated Other Comprehensive Loss 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 currency positions of these contracts at October 1, 2017,June 28, 2020, were as follows (in thousands):
CurrencyActionQuantity
Colombian pesoIndonesian rupiahpurchase3,309,22718,050,048 
MexicanColombian pesopurchase304,1628,270,325 
Mexican pesopurchase326,547 
Canadian dollarpurchase18,8823,114 

The Company has entered into certain other derivative contracts to manage the cost of purchases of diesel fuel. At June 28, 2020, diesel swaps covering approximately 3.1 million gallons were outstanding.
The fair value of the Company’s other derivatives position was in a gain position of $124$21 and a loss position of $(696) $54 at October 1, 2017June 28, 2020 and December 31, 2016,2019, respectively.
The following table sets forth the location and fair values of the Company’s derivative instruments at October 1, 2017June 28, 2020 and December 31, 2016: 2019:
Description Balance Sheet Location October 1,
2017		 December 31,
2016		DescriptionBalance Sheet LocationJune 28, 2020December 31, 2019
Derivatives designated as hedging instruments:    Derivatives designated as hedging instruments:
Commodity Contracts Prepaid expenses $630
 $3,240
Commodity ContractsOther assets$35  $—  
Commodity Contracts Other assets $80
 $527
Commodity ContractsAccrued expenses and other$(1,758) $(1,625) 
Commodity Contracts Accrued expenses and other $(540) $(89)
Commodity Contracts Other liabilities $(203) $(42)
Foreign Exchange Contracts Prepaid expenses $81
 $761
Foreign Exchange ContractsPrepaid expenses$62  $1,236  
Foreign Exchange Contracts Accrued expenses and other $(2,552) $(946)Foreign Exchange ContractsAccrued expenses and other$(2,361) $(178) 
Derivatives not designated as hedging instruments:    Derivatives not designated as hedging instruments:
Commodity ContractsCommodity ContractsPrepaid expenses$184  $—  
Foreign Exchange Contracts Prepaid expenses $397
 $194
Foreign Exchange ContractsPrepaid expenses$1  $88  
Foreign Exchange Contracts Accrued expenses and other $(273) $(890)Foreign Exchange ContractsAccrued expenses and other$(164) $(34) 
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.
22
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

The following tables set forth the effect of the Company's derivative instruments on financial performance for the three months ended October 1, 2017 and October 2, 2016:
Description 
Amount of Gain or
(Loss) Recognized
in OCI on
Derivatives
(Effective Portion)
 
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
Into Income
(Effective Portion)
 
Amount of Gain or
(Loss) Reclassified
from Accumulated
OCI Into Income
(Effective Portion)
 
Location of Gain 
or (Loss)  Recognized in
Income on
Derivatives
(Ineffective Portion)
 
Amount of Gain 
or (Loss)
Recognized
in Income on
Derivatives (Ineffective 
Portion)
Derivatives in Cash Flow Hedging Relationships:      
Three months ended October 1, 2017        
Foreign Exchange Contracts$3,119
 Net sales $4,814
 Net sales $—
    Cost of sales $(2,766)    
Commodity Contracts$(694) Cost of sales $656
 Cost of sales $100
Three months ended October 2, 2016        
Foreign Exchange Contracts$130
 Net sales $(2,370) Net sales $—
    Cost of sales $907
    
Commodity Contracts$(1,110) Cost of sales $(541) Cost of sales $(54)
Description
Location of Gain or (Loss) Recognized in
Income Statement
Gain or (Loss)
Recognized
Derivatives not Designated as Hedging Instruments: 
Three months ended October 1, 2017  
Foreign Exchange ContractsCost of sales$—
 Selling, general and administrative$(3,172)
Three months ended October 2, 2016  
Foreign Exchange ContractsCost of sales$—
 Selling, general and administrative$(743)

The following tables set forth the effect of the Company’s derivative instruments on financial performance for the ninethree months endedOctober 1, 2017 June 28, 2020 and October 2, 2016: June 30, 2019:

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 28, 2020
Foreign Exchange Contracts$(97) Net sales$(3,384) 
Cost of sales$2,050  
Commodity Contracts$1,709  Cost of sales$525  
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) 
DescriptionGain or (Loss)
Recognized		Location of Gain or (Loss) Recognized in
Income Statement
Derivatives not Designated as Hedging Instruments:
Three months ended June 28, 2020
Commodity Contracts$184 Cost of sales
Foreign Exchange Contracts$866 Selling, general and administrative
Three months ended June 30, 2019
Commodity Contracts$— Cost of sales
Foreign Exchange Contracts$893 Selling, general and administrative


Three months ended June 28, 2020Three months ended June 30, 2019
DescriptionRevenueCost of
sales		RevenueCost of
sales
Total amount of income and expense line items presented in the Condensed Consolidated Statements of Income$(3,384) $2,575  $532  $(697) 
The effects of cash flow hedging:
Gain or (loss) on cash flow hedging relationships:
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income$(3,384) $2,050  $532  $(378) 
Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income$—  $525  $—  $(319) 

23
Description 
Amount of Gain or
(Loss) Recognized
in OCI on
Derivatives
(Effective Portion)
 
Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
Into Income
(Effective Portion)
 
Amount of Gain or
(Loss) Reclassified
from Accumulated
OCI Into Income
(Effective Portion)
 
Location of Gain 
or (Loss) 
Recognized in
Income on
Derivatives
(Ineffective Portion)
 
Amount of Gain
or (Loss) Recognized
in Income on
Derivatives
(Ineffective 
Portion)
Derivatives in Cash Flow Hedging Relationships:      
Nine months ended October 1, 2017        
Foreign Exchange Contracts $936
 Net sales $8,097
 Net sales $—
    Cost of sales $(4,808)    
Commodity Contracts $(1,957) Cost of sales $1,367
 Cost of sales $(100)
Nine months ended October 2, 2016        
Foreign Exchange Contracts $1,700
 Net sales $(5,217) Net sales $—
    Cost of sales $2,339
    
Commodity Contracts $406
 Cost of sales $(3,346) Cost of sales $(52)
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


The following tables set forth the effect of the Company’s derivative instruments on financial performance for the six months ended June 28, 2020 and June 30, 2019:
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 28, 2020
Foreign Exchange Contracts$(5,075) Net sales$(4,522) 
Cost of sales$2,877  
Commodity Contracts$(646) Cost of sales$(554) 
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  
 
DescriptionGain or (Loss)
Recognized		Location of Gain or (Loss) Recognized in
Income Statement
Derivatives not Designated as Hedging Instruments:
Six months ended June 28, 2020
Commodity Contracts$184 Cost of sales
Foreign Exchange Contracts$(4,051)Selling, general and administrative
Six months ended June 30, 2019
Commodity Contracts$— Cost of sales
Foreign Exchange Contracts$(571)Selling, general and administrative


Six months ended June 28, 2020Six months ended June 30, 2019
DescriptionRevenueCost of
sales		RevenueCost of
sales
Total amount of income and expense line items presented in the Condensed Consolidated Statements of Income$(4,522) $2,324  $849  $(550) 
Gain or (loss) on cash flow hedging relationships:
Foreign exchange contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income$(4,522) $2,877  $849  $(666) 
Commodity contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income into net income$—  $(554) $—  $116  









24
Description
Location of Gain or (Loss) Recognized in
Income Statement
Gain or (Loss)
Recognized
Derivatives not Designated as Hedging Instruments: 
Nine months ended October 1, 2017  
Foreign Exchange ContractsCost of sales$—
 Selling, general and administrative$(2,074)
Nine months ended October 2, 2016  
Foreign Exchange ContractsCost of sales$—
 Selling, general and administrative$373
SONOCO PRODUCTS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars and shares in thousands except per share data)
(unaudited)


Note 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 28, 2020Assets measured
at NAV		Level 1Level 2Level 3
Hedge derivatives, net:
Commodity contracts$(1,722) $—  $—  $(1,722) $—  
Foreign exchange contracts$(2,299) $—  $—  $(2,299) $—  
Non-hedge derivatives, net:
Commodity contracts185  —  —  $185  —  
Foreign exchange contracts$(164) $—  $—  $(164) $—  
DescriptionDecember 31, 2019Assets measured
at NAV		Level 1Level 2Level 3
Hedge derivatives, net:
Commodity contracts$(1,625) $—  $—  $(1,625) $—  
Foreign exchange contracts$1,058  $—  $—  $1,058  $—  
Non-hedge derivatives, net:
Foreign exchange contracts$54  $—  $—  $54  $—  
Description October 1,
2017		 Assets measured at NAVLevel 1 Level 2 Level 3
Hedge derivatives, net:         
Commodity contracts $(33) $—
$—
 $(33) $—
Foreign exchange contracts $(2,471) $—
$—
 $(2,471) $—
Non-hedge derivatives, net:         
Foreign exchange contracts $124
 $—
$—
 $124
 $—
Deferred compensation plan assets $255
 $—
$255
 $—
 $—
          
Description December 31,
2016		 Assets measured at NAVLevel 1 Level 2 Level 3
Hedge derivatives, net:         
Commodity contracts $3,636
 $—
$—
 $3,636
 $—
Foreign exchange contracts $(185) $—
$—
 $(185) $—
Non-hedge derivatives, net:         
Foreign exchange contracts $(696) $—
$—
 $(696) $—
Deferred compensation plan assets $349
 $—
$349
 $—
 $—


As discussed in Note 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.
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)

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 nine-monthsix-month periods ended October 1, 2017.June 28, 2020.


Note 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.

25
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

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, withare provided 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 further 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 28, 2020June 30, 2019June 28, 2020June 30, 2019
Retirement Plans
Service cost$1,003  $962  $2,085  $1,903  
Interest cost12,549  15,100  25,230  30,043  
Expected return on plan assets(12,227) (19,232) (24,807) (38,329) 
Amortization of prior service cost247  216  497  430  
Amortization of net actuarial loss7,258  9,646  14,134  18,680  
Effect of curtailment loss31  —  31  —  
Effect of settlement loss38  225  661  1,547  
Net periodic benefit cost$8,899  $6,917  $17,831  $14,274  
Retiree Health and Life Insurance Plans
Service cost$93  $78  $176  $152  
Interest cost81  113  165  231  
Expected return on plan assets(93) (179) (183) (356) 
Amortization of prior service credit(69) (124) (137) (247) 
Amortization of net actuarial gain(215) (215) (412) (408) 
Net periodic benefit income$(203) $(327) $(391) $(628) 
  Three Months Ended Nine Months Ended
  October 1,
2017		 October 2,
2016		 October 1,
2017		 October 2,
2016
Retirement Plans      
Service cost $4,626
 $4,938
 $13,835
 $14,760
Interest cost 13,716
 14,842
 42,085
 45,152
Expected return on plan assets (20,297) (21,201) (60,833) (64,633)
Amortization of prior service cost 228
 188
 683
 569
Amortization of net actuarial loss 9,625
 9,958
 29,585
 29,514
Effect of settlement loss 476
 —
 31,550
 —
Net periodic benefit cost $8,374
 $8,725
 $56,905
 $25,362
Retiree Health and Life Insurance Plans        
Service cost 70
 77
 234
 233
Interest cost 123
 120
 347
 364
Expected return on plan assets (408) (393) (1,228) (1,191)
Amortization of prior service credit (124) (124) (374) (376)
Amortization of net actuarial gain (189) (166) (569) (503)
Net periodic benefit income $(528) $(486) $(1,590) $(1,473)


The Company made aggregate contributionscontributions of $38,483$8,602 and $26,594$199,006 to its defined benefit retirement and retiree health and life insurance plans during the ninesix months ended October 1, 2017June 28, 2020 and October 2, 2016,June 30, 2019, respectively. The prior year included voluntary contributions to the Company's U.S. defined benefit pension plans (the "Plans") in May 2019 totaling $190,000. These voluntary contributions were followed by actions to further de-risk the Plan portfolios by increasing the allocation of pension assets to fixed-income investments. The Company expects to make additional aggregate contributions of approximately $55,000$8,500 to its defined benefit retirement and retiree health and life insurance plans over the remainder of 2017, which includes2020, excluding potential immaterial cash funding related to restructuring actions.
Plan Termination
As previously disclosed, the Company terminated the Sonoco Pension Plan for Inactive Participants (the "Inactive Plan"), a $50,000 voluntary contribution to its U.S. qualifiedtax-qualified defined benefit pension plan, madeeffective September 30, 2019. Upon approval from the Pension Benefit Guaranty Corporation ("PBGC"), and following completion of a limited lump sum offering, the Company is expected to settle all remaining liabilities under the Inactive Plan through the purchase of annuities. The Company intends to apply to the PBGC for an extension of the distribution deadline and expects to make additional contributions to the Inactive Plan of approximately $150,000 in 2021 in order to be fully funded on October 25, 2017.a termination basis at the time of the annuity purchase. 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. These expected contributions are reducing tax payments in 2020 by approximately $38,000. Non-cash, pretax settlement charges totaling approximately $590,000 are expected to be recognized in 2021 as the lump sum payouts and annuity purchases are made.

26
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


Settlements and Curtailments
In February 2017,The Company recognized settlement charges totaling $661 and $1,547 during the Company initiated a program through which it offeredsix months ended June 28, 2020 and June 30, 2019, respectively. These charges resulted from payments made to certain terminated vested participants inof the U.S. qualified retirement plans the opportunity to receive their benefits early as eitherCompany's non-union Canadian pension plan who elected a lump sum or an annuity. This population comprised approximately 15%distribution option upon retirement. Additional settlement charges may be recognized over the remainder of the projected benefit obligation of these plans. At the close of the election period, approximately 51% of the eligible participants elected to take the early payment. These payments were distributed from plan assets in May and June 2017. As2020 as a result of settling these obligations,ongoing lump-sum distributions and restructuring actions. In addition, curtailment charges totaling $31 related to the Company recognizedclosure of a non-cash, pre-tax settlement charge of $31,074paper mill in the second quarter of 2017. Additional settlement charges of $476Canada were recognized induring the third quarter of 2017 for settlements to certain plan participants who were eligible to select a lump sum payment option upon retirement.

six months ended June 28, 2020.
Sonoco Retirement Contribution (SRC)
The SRC contributions, which isare funded annually in the first quarter, totaled $14,066$22,503 during the ninesix months ended October 1, 2017,June 28, 2020, and $13,352$14,573 during the ninesix months ended October 2, 2016. NoJune 30, 2019. NaN additional SRC contributions are expected during the remainder of 2017.2020. The Company recognized expense related to the SRC of $3,239$5,716 and $3,682$5,830 for the quarters ended October 1, 2017June 28, 2020 and October 2, 2016,June 30, 2019, respectively, and $10,930$11,694 and $10,277$12,097 for the nine-monthsix-month periods ended October 1, 2017June 28, 2020 and October 2, 2016,June 30, 2019, respectively.


Note 12: Income Taxes
The Company’s effective tax raterates for the three- and nine-monthsix-month periods ending October 1, 2017, was 33.4%ended June 28, 2020 were 30.0% and 32.3%27.2%, respectively, and its effective ratetax rates for the three- and nine-monthsix-month periods ending October 2, 2016, was 32.1%ended June 30, 2019 were 26.3% and 32.3%25.1%, respectively. The rates for the three- and nine-monthsix-month periods of both yearsended June 28, 2020 and June 30, 2019 varied from the U.S. statutory rate due primarily to the favorableunfavorable effect of certain international operations that arewere subject to tax rates generally lowerhigher than the U.S. rate. The 2017 year-to-datetax rate, also varied from the statutory rate due toeffect of state income taxes, the effect of the Global Intangible Low Taxed Income (GILTI) tax, and the recording of the expected impact of settling the Company's January 1, 2017, adoption of ASU 2016-09 regarding accounting for share-based compensation, which requires excessfederal income tax benefits to be utilized as an offset to tax expense and was not required to be applied retrospectively.audit.
The Company and/or its subsidiaries file federal, state and local income tax returns in the United States and various foreign jurisdictions. WithThe Company's U.S. federal income tax return is currently under audit for the 2012 and 2013 tax years, and the Company expects to finalize settlement of this audit in the second half of 2020. Other than the aforementioned audit, with few exceptions, the Company is no longer subject to U.S. federal, or non-U.S., income tax examinations by tax authorities for years before 2012. With respect to state and local income taxes, the Company is no longer subject to examination for years prior to 2012, with few exceptions. The Company is currently under audit by the Internal Revenue Service for the 2012 and 2013 tax years.2016.
The Company’s reserve for uncertain tax benefits has decreasedincreased by approximately $2,400$700 since December 31, 2016,2019, due primarily to the settlement of a prior year's audit.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 October 1, 2017 will increaseJune 28, 2020 could decrease by approximately $200$7,000 over the next twelve months. This change includes the anticipated increase in reserves related to existing positions offset by settlements of issues currently under examination and the release of existing reserves due to the expiration of the statute of limitations. Although the Company’s estimate for the potential outcome for any uncertain tax issue is highly judgmental, management believes that any reasonably foreseeable outcomes related to these matters have been adequately provided for. However, future results may include favorable or unfavorable adjustments to estimated tax liabilities in the period the assessments are made or resolved or when statutes of limitation on potential assessments expire. Additionally, the jurisdictions in which earnings or deductions are realized may differ from current estimates. As a result, the Company’s effective tax rate may fluctuate significantly on a quarterly basis. The Company has operations and 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 those benefitssuch benefit would have a material effect on the Company’s overall effective tax rate. 
As previously disclosed in prior periods, in February 2017 the Company received a draft Notice of Proposed Adjustment (“NOPA”) from the Internal Revenue Service (IRS) in February 2017(“IRS”) proposing an adjustmentadjustments to income for the 2012 and 2013 tax year based onyears. In 2018, the IRS's recharacterization ofCompany filed a distribution of an intercompany note made in 2012,protest to the proposed deficiency and the subsequent repaymentmatter was referred to the Appeals Division of the note overIRS. In the coursesecond quarter of 2013, as if it were a cash distribution made in 2013. In March 2017,2020, the Company received a draft NOPA proposing penaltiesagreed to pay approximately $6,000 in taxes and interest to settle the dispute and recorded the impact 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.this settlement in its provision for income taxes. The Company responded to this IDR in April 2017. On October 5, 2017,anticipates receiving a final notice formalizing the Company received two revised draft NOPAs proposingsettlement, and paying the same adjustments and penalties asassessment, in the prior NOPAs. At the time the distribution was paid in 2012, it was characterized as a dividend to the extentsecond half of earnings and profits, with the remainder as a tax free return of basis and taxable capital gain. As the IRS2020.





27
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)



proposes to recharacterize
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 distribution, the entire distribution would be characterized as a dividend. The incremental tax liabilitycertainty associated with the income adjustment proposed in the NOPA would be approximately $84,000, excluding interestexercise of various lease renewal, termination, and the previously referenced penalties. Should a final NOPA be issued, the Company intends to file a protest to the proposed deficiency with the IRS, which will cause the matter to be referred to the Appeals Division of the IRS. The Company strongly believes the position of the IRS with regard to this matter is inconsistent with applicable tax laws and existing Treasury regulations, and that the Company's previously reported income tax provision for the year in question is appropriate. However, there can be no assurance that this matter will be resolvedpurchase options included in the Company's favor. Regardless of whetherlease contracts is at the matter is resolvedCompany'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 favor, the final resolution of this matter could be expensive and time consuming to defend and/or settle. Whileleases is not readily determinable, the Company believescalculates its 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 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 outcomeregion of the matter could haveCompany’s global operations. The Company further utilizes a material effectportfolio 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.
The following table sets forth the balance sheet location and values of the Company’s lease assets and lease liabilities at June 28, 2020 and December 31, 2019:
ClassificationBalance Sheet LocationJune 28, 2020December 31, 2019
Lease Assets
Operating lease assetsRight of Use Asset - Operating Leases$294,050  $298,393  
Finance lease assetsOther Assets28,719  34,858  
Total lease assets$322,769  $333,251  
Lease Liabilities
Current operating lease liabilitiesAccrued expenses and other$53,563  $54,048  
Current finance lease liabilitiesNotes payable and current portion of debt2,897  10,803  
Total current lease liabilities$56,460  $64,851  
Noncurrent operating lease liabilitiesNoncurrent Operating Lease Liabilities$249,217  $253,992  
Noncurrent finance lease liabilitiesLong-term Debt, Net of Current Portion23,863  22,274  
Total noncurrent lease liabilities$273,080  $276,266  
Total lease liabilities$329,540  $341,117  

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 its resultsthe 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 operationsuse asset balances recorded on the balance sheet result in variable expenses being incurred when paid during the lease term.
28
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and financial condition.shares in thousands except per share data)
(unaudited)

The following table sets forth the components of the Company's total lease cost for the three- and six-month periods ended June 28, 2020 and June 30, 2019:
Three Months EndedSix Months Ended
Lease CostJune 28, 2020June 30, 2019June 28, 2020June 30, 2019
Operating lease cost(a)$14,360  $15,771  $28,711  $31,316  
Finance lease cost:
     Amortization of lease asset(a) (b)2,391  2,053  4,938  4,122  
     Interest on lease liabilities(c)238  245  463  521  
Variable lease cost(a) (d)8,576  7,791  21,861  16,969  
Total lease cost$25,565  $25,860  $55,973  $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.


The following table sets forth certain lease-related information for the six months ended June 28, 2020 and June 30, 2019:
Six Months Ended June 28, 2020Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows used by operating leases$29,309  $31,482  
     Operating cash flows used by finance leases$463  $521  
     Financing cash flows used by finance leases$5,389  $4,575  
Leased assets obtained in exchange for new operating lease liabilities$25,896  $8,820  
Leased assets obtained in exchange for new finance lease liabilities$8,237  $104  


Note 14: Revenue Recognition
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 with margin for products produced that are customer specific without alternative use. The Company recognizes over time revenue under the input 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 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 revenue 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.

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

Payment terms under the Company's sales arrangements are short term, 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.
The following table sets forth information about receivables, contract assets, and liabilities from contracts with customers. Contract assets and liabilities are reported in "Other receivables" and "Accrued expenses and other," respectively, on the Company's Condensed Consolidated Balance Sheets.
June 28, 2020December 31, 2019
Contract Assets$62,289  $56,364  
Contract Liabilities$(16,435) $(17,047) 

Significant changes in the contract assets and liabilities balances during the period were as follows:
June 28, 2020December 31, 2019
Contract
Asset		Contract
Liability		Contract
Asset		Contract
Liability
Beginning Balance$56,364  $(17,047) $48,786  $(18,533) 
Revenue deferred or rebates accrued—  (15,102) —  (29,062) 
Recognized as revenue3,893  8,473  
Rebates paid to customers—  11,821  —  22,075  
Increases due to rights to consideration for customer specific goods produced, but not billed during the period62,289  —  51,797  —  
Transferred to receivables from contract assets recognized at the beginning of the period(56,364) —  (48,786) —  
Acquired as part of a business combination—  —  4,567  —  
Ending Balance$62,289  $(16,435) $56,364  $(17,047) 

Contract assets and liabilities are generally short in duration given the nature of products produced by the Company. Contract assets represent 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, volume rebates, and payments received in advance. For multi-year arrangements with pricing mechanisms, the Company will generally defer revenue during the first 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.

30
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 28, 2020 and June 30, 2019. The tables also include a reconciliation of disaggregated revenue with reportable segments.
Three months ended June 28, 2020Consumer
Packaging		Display and
Packaging		Paper and
Industrial
Converted
Products		Protective
Solutions		Total
Primary Geographical Markets:
  United States$448,546  $47,804  $259,178  $73,777  $829,305  
  Europe102,327  59,499  75,279  5,411  242,516  
  Canada26,732  —  20,995  —  47,727  
  Asia17,745  —  52,799  186  70,730  
  Other19,271  —  26,201  9,735  55,207  
Total$614,621  $107,303  $434,452  $89,109  $1,245,485  

Three months ended June 30, 2019Consumer PackagingDisplay 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  
  Asia17,445  —  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  

The following tables set forth information about revenue disaggregated by primary geographic regions for the six-month periods ended June 28, 2020 and June 30, 2019. The tables also include a reconciliation of disaggregated revenue with reportable segments.
Six months ended June 28, 2020Consumer
Packaging		Display and
Packaging		Paper and
Industrial
Converted
Products		Protective
Solutions		Total
Primary Geographical Markets:
  United States$870,025  $103,513  $536,000  $170,265  $1,679,803  
  Europe205,350  125,146  158,819  10,695  500,010  
  Canada52,577  —  46,572  —  99,149  
  Asia34,283  —  108,583  388  143,254  
  Other40,803  —  59,448  26,314  126,565  
Total$1,203,038  $228,659  $909,422  $207,662  $2,548,781  

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

Six months ended June 30, 2019Consumer PackagingDisplay 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  

Note 13:15: Segment Reporting
The Company reports its financial results in four4 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. This segment also included blow-molded plastic bottles and jars through November 7, 2016, when the Company completed the sale of its rigid plastics blow molding operations.
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 “Income before interest and income taxes”“Operating profit” excluding restructuring charges,and asset impairment charges, acquisition-related costs, pension settlement charges,acquisition expenses, interest income and expense, income taxes or 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. "Other, net" for the three- and nine-months ended October 1, 2017 includes pension settlement charges of $476 and $31,550, respectively. See note 11 for additional information.
32
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)


SEGMENT FINANCIAL INFORMATION

Three Months Ended
Nine Months Ended Three Months EndedSix Months Ended

October 1,
2017
October 2,
2016
October 1,
2017
October 2,
2016		 June 28, 2020June 30, 2019June 28, 2020June 30, 2019
Net sales:







Net sales:
Consumer Packaging
$565,788

$519,729

$1,569,231

$1,558,074
Consumer Packaging$614,621  $602,750  $1,203,038  $1,192,466  
Display and Packaging
135,560

132,016

365,807

407,157
Display and Packaging107,303  134,833  228,659  272,387  
Paper and Industrial Converted Products
483,376

424,615

1,395,075

1,281,031
Paper and Industrial Converted Products434,452  491,328  909,422  987,365  
Protective Solutions
139,910

132,364

407,519

394,418
Protective Solutions89,109  130,810  207,662  259,208  
Consolidated
$1,324,634

$1,208,724

$3,737,632

$3,640,680
Consolidated$1,245,485  $1,359,721  $2,548,781  $2,711,426  
Intersegment sales:







Intersegment sales:
Consumer Packaging
$2,173

$1,357

$4,749

$4,285
Consumer Packaging$2,451  $1,122  $4,724  $2,043  
Display and Packaging
679

683

2,253

1,806
Display and Packaging1,169  1,114  2,467  2,281  
Paper and Industrial Converted Products
38,791

25,241

103,844

75,158
Paper and Industrial Converted Products27,848  31,535  57,060  65,189  
Protective Solutions
518

257

1,436

1,129
Protective Solutions331  363  703  825  
Consolidated
$42,161

$27,538

$112,282

$82,378
Consolidated$31,799  $34,134  $64,954  $70,338  
Income/(loss) before interest and income taxes:







Operating profit:Operating profit:
Segment operating profit:







Segment operating profit:
Consumer Packaging
$67,869

$63,761

$184,942

$186,135
Consumer Packaging$86,129  $62,942  $153,930  $125,057  
Display and Packaging
1,965

5,153

6,592

13,464
Display and Packaging5,981  5,889  14,075  12,343  
Paper and Industrial Converted Products
42,154

33,239

110,390

104,018
Paper and Industrial Converted
Products		29,964  61,229  83,977  109,616  
Protective Solutions
11,272

12,580

33,085

38,826
Protective Solutions4,482  14,275  18,486  25,279  
Restructuring/Asset impairment charges
(511) (8,947) (12,519) (41,453)Restructuring/Asset impairment charges(22,885) (13,355) (35,484) (24,027) 
Other, net
(2,667) (943) (41,665) (2,191)Other, net56  (1,212) (1,154) (1,612) 
Consolidated
$120,082

$104,843

$280,825

$298,799
Consolidated$103,727  $129,768  $233,830  $246,656  




Note 14:16: 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.
Fox River
In January 2017, U.S. Paper Mills Corp. (U.S. Mills), a wholly owned subsidiary of the Company, obtained Court approval of a final settlement of cost recovery claims made by Appvion, Inc. for $3,334. The settlement was paid during the first quarter of 2017, and related legal and professional fees totaling $369 were paid during the first and second quarters of 2017. As a result of the settlement becoming final, the Company and U.S. Mills have resolved all pending or threatened legal proceedings related to the Fox River matter, as well as any such proceedings known to be contemplated by government authorities.
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 $851$1,678 on remediation of the Spartanburg site. During previous years,
Based on favorable developments at the Spartanburg site, the Company has increasedreduced its reserves for this site by a totalenvironmental reserve by$10,000 in the third quarter of $1172019 in order to reflect its revised best estimate of what it is likely to pay in order to complete the remediation. This prior year adjustment resulted in a $10,000 reduction in "Selling, general and administrative expenses" in the third quarter of 2019.
At October 1, 2017June 28, 2020 and December 31, 2016,2019, the Company's accrual for environmental contingencies related to the Spartanburg site totaled $16,666$5,722 and $16,821, respectively.$5,789, 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
33
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands except per share data)
(unaudited)

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

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 June 28, 2020 and December 31, 2019, the Company's accrual for these other sites totaled $2,679 and $2,938, respectively.
Summary
As of October 1, 2017June 28, 2020 and December 31, 2016,2019, the Company (and its subsidiaries) had accrued $20,539accrued $8,401 and $24,515,8,727, 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.

34





Report of Independent Registered Public Accounting Firm

To the ShareholdersBoard of Directors and DirectorsShareholders of Sonoco Products Company:Company

Results of Review of Interim Financial Statements

We have reviewed the accompanying condensed consolidated balance sheet of Sonoco Products Company and its subsidiaries (the “Company”) as of October 1, 2017,June 28, 2020, and the related condensed consolidated statements of income, and comprehensive income and changes in total equity for the three-month and nine-monthsix-month periods ended October 1, 2017June 28, 2020 and October 2, 2016June 30, 2019 and the condensed consolidated statementstatements of cash flows for the nine-monthsix-month periods ended October 1, 2017June 28, 2020 and October 2, 2016. TheseJune 30, 2019, including the related notes (collectively referred to as the “interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial statements arefor them to be in conformity with accounting principles generally accepted in the responsibilityUnited States of the Company’s management.America.

We conducted our reviewhave previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of December 31, 2019, and the related consolidated statements of income, comprehensive income, changes in total equity and of cash flows for the year then ended (not presented herein), and in our report dated February 28, 2020, 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, 2019, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

These interim financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the 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 Public Company Accounting Oversight Board (United States),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.
Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2016, and the related consolidated statements of income, of comprehensive income, of changes in total equity and of cash flows for the year then ended (not presented herein), and in our report dated March 1, 2017, which included a paragraph describing a change in the manner of accounting for Debt Issuance Costs in the 2016 financial statements, 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, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.




/s/ PricewaterhouseCoopers LLP

Charlotte, North Carolina
October 31, 2017July 29, 2020
35
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;
•potential impacts of the COVID-19 Coronavirus on business, operations and financial condition;
•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 business strategies and the results expected of them;
•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;
•sustainability commitments;
•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 escalating trade wars, 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;
•impacts arising as a result of the COVID-19 Coronavirus global pandemic on our results of operations, financial condition, value of assets, liquidity, prospects, growth, and on the industries in which we operate and that we
36
SONOCO PRODUCTS COMPANY
serve, resulting from, without limitation, recent and ongoing financial market volatility, potential governmental actions, changes in consumer behaviors and demand, changes in customer requirements, disruptions of the Company’s suppliers and supply chain, availability of labor and personnel, necessary modifications to operations and business, and uncertainties about the extent and duration of the pandemic;
•costs of labor;
•work stoppages due to labor disputes;
•success of new product development, introduction and sales;
•success of implementation of new manufacturing technologies and installation of manufacturing equipment, including the startup of new facilities and lines;
•consumer demand for products and changing consumer preferences;
•ability to be the low-cost global leader in customer-preferred packaging solutions within targeted segments;
•competitive pressures, including new product development, industry overcapacity, customer and supplier consolidation, and changes in competitors' pricing for products;
SONOCO PRODUCTS COMPANY
•financial conditions of customers and suppliers;

•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;
•inventory management strategies of customers;
•timing of introduction of new products or product innovations by customers;
•collection of receivables from customers;
•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'sCompany’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'sCompany’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;
•timing of funding pension and postretirement benefit plan obligations;
•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 and interpretations thereof;
•the adoption of new, or changes in, accounting standards or interpretations;
•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'smanagement’s assessment of goodwill impairment;
•accuracy of assumptions underlying fair value measurements, accuracy of management'smanagement’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;
37
SONOCO PRODUCTS COMPANY
•failure or disruptions in our information technologies;
•failures 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 consumer attitudes toward plastic packaging;
•ability to meet sustainability targets and challenges in implementation;
•changing climate, climate change regulations and greenhouse gas effects;
•actions of domestic or foreign government agencies and changes in laws and regulations affecting the Company;Company and increased costs of compliance;
•international, national and local economic and market conditions and levels of unemployment; and
•economic disruptions resulting from terrorist activities and natural disasters.disasters; and

•accelerating inflation.
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 - "Risk1A-"Risk Factors" and throughout other sections of that report, in this report on Form 10-Q under Part II, Item 1A - "Risk Factors," 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.

38
SONOCO PRODUCTS COMPANY



COMPANY OVERVIEW
Sonoco is a leading provider of consumer packaging, industrial products, protective packaging and packaging supply chain services, with approximately 324320 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 fromuncoated recycled materials,paperboard, 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.
COVID-19
ThirdImpact on Operating Results
Around the world, Sonoco is an essential provider of consumer, industrial and medical packaging. Sonoco associates are deemed “Essential Critical Infrastructure Workers” under the guidance of the U.S. Department of Homeland Security and have received similar designations by the vast majority of other governmental agencies in the 36 countries where the Company operates. As a result, nearly all of the Company’s global operations have been able to continue to operate despite locally-mandated temporary shutdown orders that were issued in many of our geographic locations. Certain customers whose products have not been deemed “critically essential” had to temporarily suspend operations due to the COVID-19 pandemic, while some others have had time periods when they were unable to fully staff their operations. As areas around the world continue to reopen their economies, the Company is beginning to see improved demand for more of its products and services. However, a resurgence of the virus in late June and into July has raised concerns about a re-imposition of restrictions on business activity and a negative effect on consumer behavior that alone, or together, could delay or possibly reverse the economic recovery. Sonoco is following these developments closely and will respond with appropriate changes to active production capacity and cost-management initiatives.
The significance of the COVID-19 pandemic, including its effect on the Company's financial condition and results of operations, will be dictated by, among other things, its duration, the success of efforts to contain the virus and the impact of actions taken by governments and others in response. An extended period of disruption to our served markets or global supply chains could materially and adversely affect our results of operations, access to sources of liquidity and overall financial condition. In addition, an extended global recession caused by the pandemic would have an adverse impact on the Company's operations and financial condition.
While a COVID-19 driven spike in consumer demand for certain food and household products benefited the Company's 2020 first and second-quarter results, the overall impact of the pandemic on second-quarter and year-to-date consolidated results was negative, and the overall impact is expected to continue to be negative in the third quarter. Although the Company has provided third-quarter Base earnings per share (EPS) guidance of $0.73 to $0.83 compared to Base EPS of $0.97 in the third quarter of 2019, it is not able to reliably estimate the full-year 2020 financial impact of the COVID-19 pandemic and, therefore, is not providing full-year Base EPS guidance. The wide range of third-quarter guidance reflects uncertainties regarding the challenging macroeconomic conditions stemming from the pandemic, including the impacts of volatile recycled fiber costs and a stronger U.S. dollar. We expect COVID-19 to have a mixed impact on demand for our products in the third quarter with a net negative impact to earnings compared to the third quarter of last year. After a sharp run up in recycled fiber costs that peaked in May 2020, the Company expects prices, including those for old corrugated containers, to stabilize at a lower level in the third quarter, which has the possibility of benefiting results in our industrial-related businesses compared to the second quarter of 2020.
Looking ahead to the third quarter, we expect our Consumer Packaging segment to continue performing well, although more in line with normal seasonal volume trends, as sales from food packaging should continue to benefit from consumers' stay-at-home eating habits. We expect our industrial-related markets to continue experiencing weak demand compared to 2019 with our Paper and Industrial Converted Products segment continuing to face a negative price/cost relationship due to higher year-over-year recycled fiber costs and lower market pricing. However, more-stable OCC prices should allow price/cost to improve over the second quarter of this year. Our Protective Solutions businesses that serve automotive and appliance markets began seeing a gradual reopening of customers' facilities late in the second quarter and we expect demand to continue to improve during the third quarter. We expect our ThermoSafe temperature-assured packaging business will benefit from a strong flu vaccine season and a return to more-normal demand from its base pharmaceutical and food customers during the third quarter. Finally, our Display and Packaging business is expected
39
SONOCO PRODUCTS COMPANY
to continue to face weak retail promotional display activity, but should partially offset this weakness through cost controls.

Financial Flexibility and Liquidity
Sonoco has a strong, investment-grade balance sheet and has substantial liquidity available in the form of cash, cash equivalents and revolving credit facilities, as well as the ability to issue commercial paper and to access liquidity in the bank or other debt capital markets. On March 18, 2020, the Company closed and funded a new $150 million, 364-day term loan, the proceeds from which were used to repay a portion of outstanding commercial paper. On April 1, 2020, the Company accessed $250 million from its revolving credit facility using $85 million of the proceeds to fully repay the then outstanding commercial paper balance. On April 6, 2020, the Company borrowed $100 million, pursuant to a new 364-day term loan and on April 22, 2020, sold $600 million of 3.125% notes due 2030. On May 5, 2020, the Company repaid the $250 million borrowed April 1, 2020 under its revolving credit facility and on July 20, 2020, the Company repaid the $150 million term loan entered into on March 18, 2020. In May, the Company exercised a conditional, one-time option to extend its $200 million term loan originally due May 2020 to May 2021. Following these actions, the Company currently has approximately $700 million in cash and cash equivalents on hand and $500 million in committed availability under its revolving credit facility.

Health, Safety and Business Continuity
The health and safety of Sonoco’s associates, contractors, suppliers and the general public is a top priority. Included among the safety measures we have recently implemented are: conducting health screenings for personnel entering our operations, routinely cleaning high-touch surfaces, following social distancing protocols, prohibiting all non-critical business travel, and encouraging all associates who can to work from home when possible. Additionally, Sonoco has launched a dedicated COVID-19 internal microsite to keep its associates up to date on Company and health authority information, guidelines, protocols and policies, including those set by the World Health Organization and the U.S. Centers for Disease Control and Prevention.
Sonoco has also put in place a Global Task Force to develop and implement business continuity plans to ensure its operations are as prepared as possible to be able to continue producing and shipping product to its customers without disruption. Sonoco has a diverse global supply chain and to date has not experienced significant raw material or other supply disruptions.
Second Quarter 20172020 Compared with ThirdSecond Quarter 20162019
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 amounts (dependent upon the applicable period), including the associated tax effects, relating to restructuring charges,initiatives, asset impairment charges, acquisition charges, specifically identified tax adjustments,non-operating pension settlement chargescosts or income, environmental reserve charges/releases, acquisition-related costs, gains or losses from the disposition of businesses, excess property insurance recoveries, and certain other items, if any, including other income tax-related adjustments and/or events, 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-GAAPnon-GAAP financial measures is provided in the Company's Annual Report on Form 10-K for the year ended December 31, 20162019 under Item 7 - "Management's discussion and analysis of financial condition and results of operations," under the heading "Use of non-GAAP financial measures."
40
SONOCO PRODUCTS COMPANY
 For the three months ended October 1, 2017For the three months ended June 28, 2020
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
Income before interest and income taxes $120,082
 $511
 $2,667
 $123,260
Operating profitOperating profit$103,727  $22,885  $(56) $126,556  
Non-operating pension costsNon-operating pension costs7,600  —  (7,600) —  
Interest expense, net 13,647
 —
 —
 13,647
Interest expense, net18,685  —  —  18,685  
Income before income taxes 106,435
 511
 2,667
 109,613
Income before income taxes77,442  22,885  7,544  107,871  
Provision for income taxes 35,545
 445
 (1,080) 34,910
Provision for income taxes23,230  6,224  (717) 28,737  
Income before equity in earnings of affiliates 70,890
 66
 3,747
 74,703
Income before equity in earnings of affiliates54,212  16,661  8,261  79,134  
Equity in earnings of affiliates, net of tax 2,521
 —
 —
 2,521
Equity in earnings of affiliates, net of tax778  —  —  778  
Net income 73,411
 66
 3,747
 77,224
Net income54,990  16,661  8,261  79,912  
Net (income) attributable to noncontrolling interests (599) (21) —
 (620)
Net loss/(income) attributable to noncontrolling interestsNet loss/(income) attributable to noncontrolling interests221  (5) —  215  
Net income attributable to Sonoco $72,812
 $45
 $3,747
 $76,604
Net income attributable to Sonoco$55,211  $16,655  $8,261  $80,127  
Per diluted common share* $0.72
 $—
 $0.04
 $0.76
Per diluted common share*$0.55  $0.16  $0.08  $0.79  
*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 of non-operating pension costs, costs related to actual and potential acquisitions and divestitures, the anticipated impact of the settlement of a U.S. Tax Audit, and tax benefits related primarily to a tax rate change.
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 Sonoco$81,159  $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 primarily of non-operating pension costs and costs related to acquisitions and potential acquisitions. Additionally, these amounts include the effect of state tax rate changes on deferred taxes as well as reserves for uncertain tax positions totaling a net loss of $2,362.
SONOCO PRODUCTS COMPANY

  For the three months ended October 2, 2016
Dollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment		 
Other
Adjustments(1)
 Base
Income before interest and income taxes $104,843
 $8,947
 $943
 $114,733
Interest expense, net 12,437
 —
 —
 12,437
Income before income taxes 92,406
 8,947
 943
 102,296
Provision for income taxes 29,618
 2,097
 (357) 31,358
Income before equity in earnings of affiliates 62,788
 6,850
 1,300
 70,938
Equity in earnings of affiliates, net of tax 3,190
 —
 —
 3,190
Net income 65,978
 6,850
 1,300
 74,128
Net (income) attributable to noncontrolling interests (583) (34) —
 (617)
Net income attributable to Sonoco $65,395
 $6,816
 $1,300
 $73,511
Per diluted common share* $0.64
 $0.07
 $0.01
 $0.72
*Due to rounding individual items may not sum across      
(1) Consists primarily of costs related to acquisitions, potential acquisitions and a small income tax reserve adjustment.divestitures.

RESULTS OF OPERATIONS
The following discussion provides a review of results for the three months ended October 1, 2017June 28, 2020 versus the three months ended October 2, 2016.June 30, 2019.
OVERVIEW
Net sales for the thirdsecond quarter of 2017 increased 9.6%2020 decreased 8.4 percent to $1,325$1,245 million, compared with $1,209$1,360 million in the same period last year. The increase in sales was the result of higherThis decrease reflects volume declines and lower selling prices in many of the effect onCompany's businesses as well as unfavorable changes in foreign currency exchange rates. These negative factors were partially offset by sales from acquisitions. Lower overall selling prices in our industrial businesses were largely due to contracts indexed to Old Corrugated Containers (OCC), the cost of acquisitions, netwhich increased considerably after selling prices were reset for the second quarter. Conversely, in the prior year OCC prices fell after the second quarter reset. Thus, margins contracted in the second quarter of dispositions, and2020 compared to 2019 for most of the positive impact of foreign exchange. Sales price increases primarily reflect higher raw material costs which the Company was able to pass through to customers.Company's industrial businesses.

Net income attributable to Sonoco for the thirdsecond quarter of 2017 increased 11.3%2020 decreased 32.0 percent to $72.8$55.2 million, $0.72$0.55 per diluted share, compared to $65.4$81.2 million, $0.64$0.80 per diluted share, reported for the same period of 2016. Current quarter2019. Current-quarter net income includes after-tax, non-base charges totaling $3.8 million. These charges consist mostly of acquisition and acquisition-related charges as well as non-base tax charges related to tax rate changes and reserve adjustments. Results$24.9 million, while results for the thirdsecond quarter of 2016 2019
41
SONOCO PRODUCTS COMPANY
include after-tax, non-base net charges totaling $15.3 million. The $9.6 million increase in non-base charges is largely attributable to a $6.7 million increase in after-tax restructuring and asset impairment costs. For more information regarding restructuring and asset impairment costs see Note 5. All other after-tax non-base items increased $2.9 million driven by charges of $6.8 million andrelated to an income tax settlement that was agreed to in principle during the quarter as well as an increase in after-tax acquisition and non-base tax charges of $1.3 million. Adjusted for these items, third-quarter basenon-operating pension costs compared to the prior year's second quarter.

Base net income attributable to Sonoco (base(Base earnings) increased 4.2%for the second quarter 2020 decreased 16.9 percent to $76.6$80.1 million, $0.76$0.79 per diluted share, from $73.5$96.5 million, $0.72$0.95 per diluted share, in 2016.
2019. This decrease was largely driven by a 12.3 percent decrease in Base operating profit together with a higher effective tax rate and an increase in net interest expense. The higher third-quarter 2017 earnings were largely the resultimpact on profitability of a positivevolume declines and an overall negative price/cost impact, particularly in the Company's Paper and Industrial Converted Products segment, as third quarter selling prices to many of the segment's customers were reset during the second quarter of 2017 when old corrugated containers (OCC) prices were higher than what they subsequently averaged during the third quarter of 2017. Strong manufacturing productivity in the Company's Consumer Packaging segment and lower restructuring and asset impairment charges also contributed to the overall increase in earnings over the previous year's third quarter. These positive factors were slightlyrelationship was partially offset by higher wagestrong productivity improvements, other variable and other inflation.fixed cost reductions and the benefit of acquisitions.






SONOCO PRODUCTS COMPANY


OPERATING REVENUE
Net sales for the thirdsecond quarter of 2017 increased $1162020 decreased $114 million, or 8.4 percent, from the prior-year quarter.
The components of the sales change were: 
($ in millions)
Volume/mix$(94)
Selling prices(12)
Acquisitions34 
Foreign currency translation and other, net(42)
Total sales decrease$(114)
 ($ in millions)
Volume/mix$(1)
Selling prices58
Acquisitions and Divestitures38
Foreign currency translation and other, net21
  
Total sales increase$116
  


COSTS AND EXPENSES
The Company'sCost of goods sold decreased $86.9 million, or 8.0 percent, driven primarily by lower volume, the translation impact of a stronger dollar, and productivity gains. Gross profit was $248 million for the quarter, $27 million below the prior-year period. Despite this reduction, gross profit margin percentageas a percent of sales declined only modestly to 18.9% this quarter19.9 percent compared to 19.5%20.2 percent in the prior-year quarter. The 60 basis point decline in gross profit margin was largely attributable to the effect on margin percentages from passing through higher material prices and other operating costs. The translation impact of a weaker dollar increased reported cost of goods sold by approximately $13 million compared to the third quarter of 2016. These negative impacts to the gross profit margin percentage were somewhat offset by manufacturing and procurement productivity.
Selling, general and administrative expenses ("SG&A") costs for the quarter increased $8.7decreased $10.8 million, or 7.2%,8.2 percent, year over year due primarily toa significant focus across the business on reducing controllable costs and the impact of the pandemic on certain costs such as travel and employee medical. These reductions were partially offset by the addition of SG&A expenses incurred byfrom acquisitions.
As noted in the operationssegment discussions below, the COVID-19 pandemic is expected to continue triggering higher demand in some of acquiredour businesses, but result in lower demand in others. The net of divested businesses,overall impact for the Company is expected to be negative for at least the third quarter. As a result, the Company will continue to seek to reduce costs at manufacturing locations expected to experience sustained declines in volume and wage inflation.aggressively pursue reductions in overall selling, general and administrative costs.
Third quarter restructuringRestructuring costs and asset impairment charges totaled $0.5$22.9 million for the second quarter of 2020 compared with $8.9$13.4 million in the same period last year. The year-over-year increase was driven largely by severance costs related to the closure of the No. 3 uncoated recycled board paper machine at its Hartsville, South Carolina, paper mill and the closure of the Trenton, Ontario, Canada paper mill. The closure of the Canadian Mill also resulted in a $5.7 million asset impairment charge in the second quarter of 2020. Additional information regarding restructuring and asset impairment charges is provided in Note 5 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 increased $2.1 million for the quarter, compared to the prior-year's period, due primarily to lower expected returns on plan assets stemming from actions in the previous year to de-risk the U.S. plan's portfolio by increasing the allocation of pension assets to fixed-income investments.
Net interest expense for the thirdsecond quarter increased to $13.6$18.7 million, compared with $12.4$16.0 million during the thirdsecond quarter of 2016.2019. The increase was primarily due to higher average borrowingsdebt balances, partially offset by the impact of lower interest rates.
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SONOCO PRODUCTS COMPANY
The 2020 second-quarter effective tax rates on GAAP and Base earnings were 30.0 percent and 26.6 percent, respectively, compared with 26.3 percent and 25.9 percent, respectively, in the current-year quarter stemming from acquisition financing.
prior year’s quarter. The effective tax rate on GAAP and base earnings infor the thirdsecond quarter of 20172020 was 33.4% and 31.8%, respectively, compared with 32.1% and 30.7%, respectively, for last year's quarter. The 2016 GAAP and basehigher than the prior year’s rate due primarily to recording the expected impact of settling the Company’s federal income tax rates were both positively affected by favorable discrete tax adjustments, including a benefit from the release of reserves for uncertain tax positions while the current-year rates reflect the negative impacts of less benefit from the manufacturer’s deduction and a higher overall state tax rate. audit.

REPORTABLE SEGMENTS
The following table recaps net sales attributable to each of the Company’s segments for the thirdsecond quarters of 20172020 and 20162019 ($ in thousands):
Three Months Ended
June 28, 2020June 30, 2019%
Change
Net sales:
Consumer Packaging$614,621  $602,750  2.0 %
Display and Packaging107,303  134,833  (20.4)%
Paper and Industrial Converted Products434,452  491,328  (11.6)%
Protective Solutions89,109  130,810  (31.9)%
Consolidated$1,245,485  $1,359,721  (8.4)%
  Three Months Ended
  October 1,
2017		 October 2,
2016		 % Change
Net sales:      
Consumer Packaging $565,788
 $519,729
 8.9%
Display and Packaging 135,560
 132,016
 2.7%
Paper and Industrial Converted Products 483,376
 424,615
 13.8%
Protective Solutions 139,910
 132,364
 5.7%
Consolidated $1,324,634
 $1,208,724
 9.6%

SONOCO PRODUCTS COMPANY

Consolidated operating profits, also referred to as “Income before interest and income taxes” on the Company’s Condensed Consolidated Statements of Income, are comprised of the following ($ in thousands): 
  Three Months Ended
  October 1,
2017		 October 2,
2016		 % Change
Income/(loss) before interest and income taxes:      
Segment operating profit:      
Consumer Packaging $67,869
 $63,761
 6.4 %
Display and Packaging 1,965
 5,153
 (61.9)%
Paper and Industrial Converted Products 42,154
 33,239
 26.8 %
Protective Solutions 11,272
 12,580
 (10.4)%
Restructuring/Asset impairment charges (511) (8,947) 

Other, net (2,667) (943) 

Consolidated $120,082
 $104,843
 14.5 %
The following table recaps restructuring/asset impairment chargesoperating profit attributable to each of the Company’s segments during the thirdsecond quarters of 20172020 and 20162019 ($ in thousands):
Three Months Ended
June 28, 2020June 30, 2019%
Change
Operating profit:
Segment operating profit:
Consumer Packaging$86,129  $62,942  36.8 %
Display and Packaging5,981  5,889  1.6 %
Paper and Industrial Converted Products29,964  61,229  (51.1)%
Protective Solutions4,482  14,275  (68.6)%
Restructuring/Asset impairment charges(22,885) (13,355) 
Other, net56  (1,212) 
Consolidated$103,727  $129,768  (20.1)%
  Three Months Ended
  October 1,
2017		 October 2,
2016
Restructuring/Asset impairment charges:    
Consumer Packaging $(1,111) $2,857
Display and Packaging (2) 997
Paper and Industrial Converted Products 993
 4,976
Protective Solutions 621
 127
Corporate 10
 (10)
Total $511
 $8,947

Segment results viewed by Company management to evaluate segment performance do not include restructuring charges, asset impairment charges, acquisition-related costs, non-operating pension costs or income, environmental reserve charges interest expense, income taxes,or releases, 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 a non-GAAP measure and is defined as the segment’s portion of “Income before interest and income taxes”“operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments.

43
SONOCO PRODUCTS COMPANY
The following table recaps restructuring/asset impairment charges attributable to each of the Company’s segments during the second quarter of 2020 and 2019 ($ in thousands):
Three Months Ended
June 28, 2020June 30, 2019
Restructuring/Asset impairment charges:
Consumer Packaging$3,250  $10,487  
Display and Packaging668  511  
Paper and Industrial Converted Products17,689  1,600  
Protective Solutions695  561  
Corporate583  196  
Consolidated$22,885  $13,355  

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. This segment also included blow-molded plastic bottles and jars through November 7, 2016, when the Company completed the sale of its rigid plastics blow molding operations.
Segment sales increased 8.9%2.0 percent compared to the prior-year quarter due to acquisitions, nethigher volume/mix and sales added from the December 2019 acquisition of divestitures, higher selling pricesThermoformed Engineered Quality, LLC, and Plastique Holdings, LTD (together TEQ), medical packaging businesses, partially offset by the positivenegative impact of foreign exchange whichtranslation and lower selling prices. Global Rigid Paper Containers sales benefited from an approximately 8 percent gain in volume/mix driven by strong food product demand in North America, Europe and Asia. Flexible Packaging sales declined slightly during the quarter due primarily to the closure of a forming films line in 2019, while volume/mix was up approximately 1 percent during the quarter as solid demand for hard baked goods and other food categories was offset by lower demand for confectionery products. In Global Plastics, sales were higher as a result of the acquisition of TEQ, while solid volume/mix growth in prepared and specialty foods was more than offset modestlyby industrial-related volume declines and reduced selling prices due to lower volume/mix.resin prices.
Segment operating profit grew 6.4%increased 36.8 percent compared to the prior-yearprior year's quarter due todriven by strong improvement in manufacturing productivity andimprovements along with solid volume/mix improvement, a positive price/cost relationship. These positive factors were partially offsetrelationship and cost controls.Segment operating margin improved to 14.0 percent in the quarter from 10.4 percent in the 2019 period.
The COVID-19 pandemic is expected to have a mixed impact on this segment in the near term reflecting increased demand for food and household goods packaging driven by lower volumestay-at-home consumers and weakness in metal endsnon-food categories due to on-going restrictions on normal economic activity and composite cansthe impact of higher unemployment. The Company will continue to seek to reduce costs at locations that experience sustained declines in North America and flexible packaging.volume.






SONOCO PRODUCTS COMPANY


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 2.7%declined 20.4 percent compared to last year’s quarter due primarily to lower volume in domestic displays, paper amenities and retail security packaging as well as the positivenegative impact of foreign exchange.
currency translation. Segment operating profit decreased $3.2 million, or 61.9%,was essentially flat as productivity improvements and cost controls were mostly offset by lower volume/mix. Segment operating margin improved to 5.6 percent in the quarter up from 4.4 percent in 2019.
Lower overall economic activity is expected to negatively impact the prior year's quarter duesegment's manufactured materials, retail security, and paper amenities businesses compared to higherthe prior-year levels. This negative impact is expected to be only partially offset by demand from stay-at-home consumers and COVID-19 preparedness which should continue benefiting the Company's fulfillment operations. The Company will continue to seek to reduce costs at locations that experience sustained declines in volume. Because the profitability of certain packaging center business is not highly sensitive to volume, COVID-19 driven declines in activity would not be expected to have a commensurate impact on related operating costs associated with the ramp up of operations at a new domestic retail packaging fulfillment center.results.
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SONOCO PRODUCTS COMPANY

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 segmentSegment sales increased approximately 13.8% fordeclined 11.6 percent from the prior year's quarter due to higher selling prices implemented to recover higher raw material costs,as lower volume/mix, the positivenegative impact of foreign exchange translation and improvedlower selling prices more than offset sales gained from the acquisition of Corenso Holdings in August 2019. The lower volume/mix was driven by significantly lower global tube, core and cone volume, including an approximately 13 percent decline in tube and core volume in the U.S. and Canada and about an 8 percent decline in volume in Europe. Global uncoated recycled paperboard (URB) and corrugated medium volume/mix was down almost 7 percent despite an approximately 14 percent increase in demand for paper going into the tissue and towel market. During the quarter, the Company permanently closed its paper mill in Trent Valley, Ontario, Canada, and a URB machine in Hartsville, South Carolina, to address capacity requirements.
Segment operating profit declined 51.1 percent from the prior year's quarter as the benefit of business. The higher third-quarter selling prices wereproductivity improvements and earnings from the result of contract pricing resets tied to the market price for OCC whichCorenso acquisition was significantly higher this year compared to when prices were set for last year's third quarter.
Operating profit increased 26.8% due tomore than offset by a positivesignificant negative price/cost relationship improved volumecaused by an approximately $60 per ton, or 130%, increase in international tubesaverage OCC prices for the quarter along with the negative impact of much lower volume/mix and cores and global paper operations, and gainsthe stronger U.S. dollar. Segment operating margin declined 556 basis points from manufacturing productivity. Results in the Company's corrugating medium operations improved over the prior-year quarter due to higher selling6.9 percent.
As a result of COVID-19, the Company expects to see continued year-over-year volume declines in many of our global paper and industrial converted markets with some offset from increased near-term demand for paperboard serving the tissue and towel market. The Company expects recycled fiber prices and stronger demand.to stabilize near July 2020 averages in the third quarter. Although the Company's corrugating medium operation showed significant improvement quarter over quarter, it continues to under perform long-term expectations. This operation, which consists of only one machine, has been and continuesresulting price/cost relationship is expected to be under pressure duenegative compared to market supply in North America exceeding demand. This has resulted in generally lower prices and reduced volume for our corrugating medium operation. Managementthe prior-year third quarter, the relationship is continuingexpected to improve compared to this year's second quarter. The Company will continue to seek both near and long-term solutions including, but not limited to modified run schedules, targeted cost reductions, strategic partnerships, and potential closure of the operation.reduce costs at locations that experience sustained declines in volume.
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 were up 5.7% year over yeardeclined 31.9 percent driven primarily by sales from acquisitions, higher selling prices, and the positive impact of foreign exchange.
Operating profits decreased 10.4% from the prior-year quarter due primarily to lower volume invirus-related customer shutdowns which negatively impacted demand for molded foam automotive components and fiber packaging for consumer appliances. ThermoSafe temperature-assured packaging volume also declined due to reduced demand for transporting pharmaceuticals to medical clinics as non-virus related treatments were postponed. Segment operating margin, compared to the related unfavorable impact on manufacturing productivity.prior-year's quarter, declined 588 basis points to 5.0 percent.
The ThermoSafe business is expected to produce solid results in the third quarter of 2020 largely driven by the sales of temperature-assured packaging critical for virus testing and pharmaceutical transport, including flu vaccines. In addition, we expect third-quarter earnings in our Protective Solutions segment to significantly improve over the second quarter of 2020 driven by improved demand in our molded foam and consumer fiber businesses, which serve the automotive and appliance markets.
45
SONOCO PRODUCTS COMPANY



NineSix Months Ended October 1, 2017June 28, 2020 Compared with NineSix Months Ended October 2, 2016June 30, 2019
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
The following tables reconcile the Company'sCompany’s non-GAAP financial measures to their most directly comparable GAAP financial measures in the Company'sCompany’s Condensed Consolidated Statements of Income for each of the periods presented.
For the six months ended June 28, 2020
Dollars in thousands, except per share dataGAAPRestructuring/
Asset
Impairment
Other
Adjustments(1)
Base
Operating profit$233,830  $35,484  $1,154  $270,468  
Non-operating pension costs15,179  —  (15,179) —  
Interest expense, net34,730  —  —  34,730  
Income before income taxes183,921  35,484  16,333  235,738  
Provision for income taxes49,986  9,353  2,683  62,022  
Income before equity in earnings of affiliates133,935  26,131  13,650  173,716  
Equity in earnings of affiliates, net of tax1,291  —  —  1,291  
Net income135,226  26,131  13,650  175,007  
Net (income) attributable to noncontrolling interests430  (17) —  413  
Net income attributable to Sonoco$135,656  $26,114  $13,650  $175,420  
Per diluted common share*$1.34  $0.26  $0.14  $1.73  
*Due to rounding individual items may not sum across
  For the nine months ended October 1, 2017
Dollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment		 
Other
Adjustments(1)
 Base
Income before interest and income taxes $280,825
 $12,519
 $41,665
 $335,009
Interest expense, net 38,497
 —
 —
 38,497
Income before income taxes 242,328
 12,519
 41,665
 296,512
Provision for income taxes 78,251
 4,081
 11,422
 93,754
Income before equity in earnings of affiliates 164,077
 8,438
 30,243
 202,758
Equity in earnings of affiliates, net of tax 7,320
 —
 —
 7,320
Net income 171,397
 8,438
 30,243
 210,078
Net (income) attributable to noncontrolling interests (1,727) (35) —
 (1,762)
Net income attributable to Sonoco $169,670
 $8,403
 $30,243
 $208,316
Per diluted common share* $1.68
 $0.08
 $0.30
 $2.07
*Due to rounding individual items may not sum across      
(1) Consists of non-operating pension costs, costs related to actual and potential acquisitions and divestitures, the anticipated impact of the settlement of a U.S. Tax Audit, and tax benefits related primarily to a tax rate change.

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 sum across
(1 )(1) IncludesConsists primarily of non-operating pension settlement charges of $31,550,costs and costs related to acquisitions and potential acquisitions and certain other costs, partially offset by insurance settlement gains. Also includes net tax charges totaling $2,229 primarily related to the settlement of a tax audit in Canada and the effect of state tax rate changes on deferred taxes as well as reserves for uncertain tax positions totaling a net loss of $2,263. These amounts are partially offset by a tax benefit from the final settlement of a prior-year business disposition.divestitures..
46
  For the nine months ended October 2, 2016
Dollars in thousands, except per share data GAAP Restructuring/
Asset
Impairment		 
Other
Adjustments(1)
 Base
Income before interest and income taxes $298,799
 $41,453
 $2,191
 $342,443
Interest expense, net 39,768
 —
 —
 39,768
Income before income taxes 259,031
 41,453
 2,191
 302,675
Provision for income taxes 83,602
 10,442
 (17) 94,027
Income before equity in earnings of affiliates 175,429
 31,011
 2,208
 208,648
Equity in earnings of affiliates, net of tax 7,457
 —
 —
 7,457
Net income 182,886
 31,011
 2,208
 216,105
Net (income) attributable to noncontrolling interests (1,325) (78) —
 (1,403)
Net income attributable to Sonoco $181,561
 $30,933
 $2,208
 $214,702
Per diluted common share* $1.78
 $0.30
 $0.02
 $2.11
*Due to rounding individual items may not sum across      
(1) Consists primarily of costs related to acquisitions and potential acquisitions.












SONOCO PRODUCTS COMPANY

RESULTS OF OPERATIONS
The following discussion provides a review of results for the ninesix months ended October 1, 2017 versusJune 28, 2020 compared with the ninesix months ended October 2, 2016.June 30, 2019.
OVERVIEW
Net sales for the first ninesix months of 2017 were $3,7382020 decreased 6.0 percent to $2,549 million, a 2.7% increase from the $3,641compared with $2,711 million reported in the same period last year. The modest sales growth wasdecline reflects a decrease in volume/mix stemming from the result of highervirus-driven recession, lower selling prices, implemented to recover rising material costs and thea negative impact of acquisitions, net of divestitures. These positive factors were partiallyfrom foreign exchange translation that more than offset by lower volume/mix and the loss of contract packaging business in Mexico and Brazil.

sales added from acquisitions.
Net income attributable to Sonoco for the first ninesix months of 20172020 decreased 6.5%12.4 percent to $169.7$135.7 million, $1.68$1.34 per diluted share, compared to $181.6$154.8 million, $1.78$1.53 per diluted share, reported for the same period of 2016.2019. Current period net income includes after-tax, restructuring and asset impairmentnon-base charges of $8.4 million, after-tax pension settlement charges of $19.5 million, and other after-tax, non-base items netting to a charge of $10.7totaling $39.8 million. These other items primarilycharges largely consist of $26.1 million in after-tax restructuring charges for acquisition-related costs, the settlement of a tax auditand $11.1 million in Canada and changes in deferred tax amounts, partially offset by insurance settlement gains and a favorable tax adjustment related to a prior-year disposition.after-tax non-operating pension charges. Results for the third quarterfirst six months of 20162019 include after-tax restructuring and asset impairment charges of $30.9$17.9 million and after-tax acquisition-related costsother non-base charges totaling $9.9 million, after tax, consisting largely of $2.2 million.non-operating pension expense and acquisition costs. Adjusted for these items, baseBase net income attributable to Sonoco (base(Base earnings) for the six-month period ending June 28, 2020 decreased 3.0%4.0 percent to $208.3$175.4 million, $2.07$1.73 per diluted share, from $182.7 million, $1.81 per diluted share, in the first nine months of 2017 down from $214.7 million, $2.11 per diluted share, in 2016.2019.
The lowerdecrease in Base earnings inof $7.2 million is largely attributable to the first nine months of 2017 were the result of volume declines and unfavorable product mix, particularly in global rigid paper containers and retail packaging and fulfillment. The divestiturenet impact of the Company's rigid plastic blowmolding operationsCOVID-19 pandemic on overall sales volume, negative price/cost in November 2016 also contributed to the lower year-over-year earningsour Paper and Industrial Converted Products segment, higher net interest expense and a slightly higher effective tax rate, which, in the first nine months of 2017. These negative impactstotal, were partiallylargely offset by a positive year-to-date price/productivity improvements, other cost relationship compared to thereductions and earnings from prior-year as third-quarter selling price resets allowed the Company to fully recover the margin impact of higher OCC costs on a year-to-date basis. Productivity improvements and lower management incentive costs also benefited year-over-year earnings.acquisitions.
OPERATING REVENUE
Net sales for the first ninesix months of 2017 increased $972020 decreased $163 million from the same period in 2016. 2019.
The components of the sales change were:
($ in millions)
Volume/mix$(131)
Selling prices(37)
Acquisitions and Divestitures72 
Foreign currency translation and other, net(68)
Total sales increase$(163)
 ($ in millions)
Volume/mix$(51)
Selling prices141
Acquisitions and Divestitures19
Foreign currency translation and other, net(12)
  
Total sales increase$97
  
In order to enhance the meaningfulness of reported changes in volume/mix, a $20.9 million reduction in packaging center sales resulting from changes in the level of activity, primarily from the previously reported losses of contract packaging business in Mexico and Brazil, is classified above as "other" due to the low/inconsistent correlation that typically exists between changes in revenue and operating profit in certain packaging center operations.


COSTS AND EXPENSES
TheCost of goods sold decreased $131.8 million, or 6.1 percent, while the Company's gross profit margin percentage declinedincreased slightly to 18.9%20.2 percent for the first ninesix months of 2020, compared to 19.8%20.1 percent in the prior-year period. The 90 basis point declinedecrease in gross profit margin was largely attributable to volume declines in Global Rigid Containers and Flexible Packaging. The translation impactthe amount of a stronger dollar lowered reported cost of goods sold by approximately $5 million comparedwas primarily due to the same period of 2016.decrease in sales, as their percentage decreases were nearly identical. Despite the pandemic-driven decrease in sales volume and the negative price/cost relationship resulting from the second-quarter spike in OCC costs, gross profit margin remained steady due to strong productivity improvements and aggressive cost management actions.
InSG&A costs for the ninefirst six months ended October 1, 2017 selling, general and administrative ("SG&A") costs increased $31.2decreased $29.5 million, or 8.2%, from the nine months ended October 2, 2016. This increase was driven by the previously mentioned pension settlement charges totaling $31.6 million, before-tax. Additionally, legal and professional fees related to acquisitions and potential acquisitions, SG&A expenses incurred by the operations of acquired businesses, net of divested businesses, and
SONOCO PRODUCTS COMPANY

higher wages all contributed to the increase in SG&A costs10.7 percent, year over year.year driven by a significant focus across the business on reducing controllable costs, as well as the impact of the pandemic on lower travel, employee medical, management incentives, and other expenses. These itemsreductions were partially offset by fixed cost reductions, including lower management incentive costs.the addition of SG&A expenses from acquisitions.
In the first nine months of 2017,Year-to-date restructuring costs and asset impairment charges in 2020 totaled $12.5$35.5 million, compared with $41.5$24.0 million in the same period last year. Additional information regarding restructuring and asset impairment charges is provided in Note 5 to the Company’s Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
47
SONOCO PRODUCTS COMPANY
Non-operating pension costs increased $3.6 million in the first six months of 2020 compared to the prior-year period due primarily to lower expected returns stemming from actions in the previous year to de-risk the U.S. plan's portfolio by increasing the allocation of pension assets to fixed-income investments.
Net interest expense for the ninefirst six months ended October 1, 2017 decreasedof 2020 increased to $38.5$34.7 million, compared with $39.8$31.3 million during the same periodfirst six months of 2016.2019. The decreaseincrease was primarily due to lower average interest rates applicablehigher debt balances stemming from the $600 million in 10-year bonds issued in April 2020 and other shorter-term borrowings executed in April and May to debt and an increase in interest income.ensure adequate liquidity due to the pandemic.
The effective tax rate on GAAP and baseBase earnings in the first ninesix months of 20172020 was 32.3%27.2 percent and 31.6%,26.3 percent, respectively, compared with 32.3% and 31.1%, respectively,25.1 percent for the same period last year. Theboth GAAP and baseBase earnings in the prior-year period. The effective tax rates were both affected by favorable 2016 discrete tax adjustments including a benefit fromrate on GAAP and Base earnings was higher in the settlement of a contested state tax audit. The current year rates benefitted fromdue to a greater portion of the adoptionCompany’s earnings being subject to tax in higher-tax jurisdictions outside of FASB Accounting Standards Update 2016-9 regarding accounting for share-based compensation which requires excessthe United States. The effective tax benefitsrate on settlementsGAAP earnings was also higher due to recording the expected impact of share-based compensation to be recognized withinsettling the Company’s federal income statement.  The Company adopted ASU 2016-09 effective January 1, 2017 using the prospective method.tax audit.
REPORTABLE SEGMENTS
The following table recaps net sales for the first nine months of 2017 and 2016 ($ in thousands):
  Nine Months Ended
  October 1,
2017		 October 2,
2016		 % Change
Net sales:      
Consumer Packaging $1,569,231
 $1,558,074
 0.7 %
Display and Packaging 365,807
 407,157
 (10.2)%
Paper and Industrial Converted Products 1,395,075
 1,281,031
 8.9 %
Protective Solutions 407,519
 394,418
 3.3 %
Consolidated $3,737,632
 $3,640,680
 2.7 %
Consolidated operating profits, also referred to as “Income before interest and income taxes” on the Company’s Condensed Consolidated Statements of Income, are comprised of the following ($ in thousands): 
  Nine Months Ended
  October 1,
2017		 October 2,
2016		 % Change
Income/(loss) before interest and income taxes:      
Segment operating profit:      
Consumer Packaging $184,942
 $186,135
 (0.6)%
Display and Packaging 6,592
 13,464
 (51.0)%
Paper and Industrial Converted Products 110,390
 104,018
 6.1 %
Protective Solutions 33,085
 38,826
 (14.8)%
Restructuring/Asset impairment charges (12,519) (41,453) 

Other, net (41,665) (2,191)  
Consolidated $280,825
 $298,799
 (6.0)%
SONOCO PRODUCTS COMPANY

The following table recaps restructuring/asset impairment charges attributable to each of the Company’sCompany's segments during the first ninesix months of 20172020 and 20162019 ($ in thousands):
Six Months Ended
June 28, 2020June 30, 2019% Change
Net sales:
Consumer Packaging$1,203,038  $1,192,466  0.9 %
Display and Packaging228,659  272,387  (16.1)%
Paper and Industrial Converted Products909,422  987,365  (7.9)%
Protective Solutions207,662  259,208  (19.9)%
Consolidated$2,548,781  $2,711,426  (6.0)%
  Nine Months Ended
  October 1,
2017		 October 2,
2016
Restructuring/Asset impairment charges:    
Consumer Packaging $3,049
 $9,442
Display and Packaging 721
 6,464
Paper and Industrial Converted Products 5,801
 23,497
Protective Solutions 2,475
 621
Corporate 473
 1,429
Total $12,519
 $41,453

The following table recaps operating profits attributable to each of the Company's segments during the first six months of 2020 and 2019 ($ in thousands):
Six Months Ended
June 28, 2020June 30, 2019% Change
Operating profit:
Segment operating profit:
Consumer Packaging$153,930  $125,057  23.1 %
Display and Packaging14,075  12,343  14.0 %
Paper and Industrial Converted Products83,977  109,616  (23.4)%
Protective Solutions18,486  25,279  (26.9)%
Restructuring/Asset impairment charges(35,484) (24,027) 
Other, net(1,154) (1,612) 
Consolidated$233,830  $246,656  (5.2)%

Segment results viewed by Company management to evaluate segment performance do not include restructuring charges, asset impairment charges, acquisition-related charges, non-operating pension settlement charges, interest expense, income taxes,costs, 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 a non-GAAP measure and is defined as the segment’s portion of “Income before interest and income taxes”“operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments.

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SONOCO PRODUCTS COMPANY
The following table recaps restructuring/asset impairment charges attributable to each of the Company’s segments during the first six months of 2020 and 2019 ($ in thousands):
Six Months Ended
June 28, 2020June 30, 2019
Restructuring/Asset impairment charges:
Consumer Packaging$5,612  $17,742  
Display and Packaging3,548  886  
Paper and Industrial Converted Products23,045  2,474  
Protective Solutions1,168  1,003  
Corporate2,111  1,922  
Consolidated$35,484  $24,027  
Consumer Packaging
YearSegment sales increased 0.9 percentyear to date segment sales increased 0.7% from the prior year duecompared to the net impactprior-year period as sales added by the acquisition of businesses acquiredTEQ and sold, and higher sales prices. The positive factorsa modest uptick in volume, were mostlylargely offset by the closure of a forming films line in 2019, lower volume in composite cans in Europe and metal ends in North Americaselling prices and the negative impact of foreign currency translation from a stronger U.S. dollar year over year.translation. The pandemic's impact on consumer behavior positively affected demand for rigid paper containers and prepared and specialty foods plastic packaging, but those benefits were largely offset by significantly reduced demand for plastic packaging in our industrial end use market.
SegmentYear-to-date segment operating profit decreased 0.6% year over yearincreased 23.1 percent due almost entirely to lower volumes and negative mix and the net impact of businesses acquired and sold. In addition, results were negatively impacted by higher labor, maintenance, and other operating expenses.These negative factors were partially offset by productivity gains and other cost reductions that, in total, were somewhat offset by a favorablemodestly negative price/cost relationship.impact. As a result, segment operating profit margin increased 231 basis points to 12.8 percent.


Display and Packaging
Reported salesSales for the first nine months of 2017segment were down 10.2%16.1 percent year to date compared to last year’s period as volume was down throughout the segment due primarily to the previously disclosed loss of the Company’s contract packaging business in Mexico and Brazil. Lower volumes in our domesticpandemic's impact on demand for promotional displays and retail security packaging businesses also negatively impacted year-over-year sales. These declines were partially offset bypaper amenities for the positive effect of foreign exchange rates.hotel industry.
SegmentDespite the decline in volume, segment operating profit decreased $6.9increased $1.7 million or 51.0%, from the prior year's first nine months due to lower volume/mix in domestic displaystrong productivity improvements and retail packaging and higher operating costs associated with the ramp up of operations at a new domestic retail packaging fulfillment center. These negative factors were partially offset by improved fixed-cost productivity.effective cost reduction actions.
Paper and Industrial Converted Products
Segment sales increased 8.9% as higher selling pricesdecreased 7.9 percent year to date versus the prior-year period due to contract pricing resets and announced price increases, both driven by increased raw material costs, more than offset the impacts of the divestiture of a paperboard mill in France,pandemic-driven volume declines, lower sales prices, and a negative impact of foreign currency translation. These declines were partially offset by sales added by the prior-year acquisition of Corenso Holdings.
Operating profit increased 6.1%decreased 23.4 percent from the prior-year period driven by the decline in volume and a negative price/cost relationship largely due to a positive year-over-year price/cost relationship driven by a current year third-quarter declinesteep increase in OCC prices following selling price resets that occurred at the end ofrecycled fiber costs in the second quarter of 2017 when old corrugated containers (OCC) pricesthat could not be fully recovered through selling price adjustments. These decreases were higher.partially offset by solid productivity gains. As a result, the Company has recovered all of the negative profit impact caused by OCC cost increases during the first six months of 2017. Manufacturing productivity improvements were essentially offset by higher labor, maintenance, and othersegment operating expenses.
The Company's corrugating medium operation continuesmargin declined 188 basis points to under perform long-term expectations. This operation, which consists of only one machine, has been and continues to be under pressure due to market supply in North America exceeding demand. This has resulted in lower prices and reduced volume for our corrugating medium operation.
SONOCO PRODUCTS COMPANY

Management is continuing to seek both near and long-term solutions including, but not limited to, modified run schedules, targeted cost reductions, strategic partnerships, and potential closure of the operation.9.2 percent.
Protective Solutions
Segment sales were up 3.3%for the period declined 19.9 percent year over year driven by volume declines in molded foam and consumer fiber packaging due to automotive plant shutdowns and lower consumer demand for durable goods such as appliances. In addition, temperature-assured packaging sales also saw a year-over-year decline as customers reduced or delayed purchases due to uncertainty regarding the impact the virus would have on their businesses.
Year-to-date operating profit decreased 26.9 percent from acquisitions and higher selling prices were onlythe prior-year period due primarily to the volume declines, partially offset by unfavorable changes in volume/mix.productivity improvements and effective cost management. Segment operating margin was 8.9 percent, an 86 basis point decline from the same period last year.
Operating profits decreased 14.8% on unfavorable changes in volume/mix, declines in manufacturing productivity, and a negative price/cost relationship. These were partially offset by fixed-cost productivity improvements.

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SONOCO PRODUCTS COMPANY
OTHER ITEMS
Critical Accounting Policies and Estimates
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 $18.0 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. 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 NOPA would be approximately $84.0 million, excluding interest and the previously referenced penalties. Should a final NOPA be issued, the Company intends to file a protest to the proposed deficiency with the IRS, which will cause the matter to be referred to the Appeals Division of the IRS. The Company strongly believes the position of the IRS with regard to this matter is inconsistent with applicable tax laws and existing Treasury regulations, and that the Company's previously reported income tax provision for the year in question is appropriate. However, there can be no assurance that this matter will be resolved in the Company's favor. Regardless of whether the matter is resolved in the Company's favor, the final resolution of this matter could be expensive and time consuming to defend and/or settle. While the Company believes that the amount of tax originally paid with respect to this distribution is correct, and accordingly has not provided additional reserve for tax uncertainty, there is still a possibility that an adverse outcome of the matter could have a material effect on its results of operations and financial condition.
Pension and postretirement benefit plans
In February 2017, the Company initiated a program through which it offered certain terminated vested participants in the Sonoco Pension Plan for Inactive Participants, a qualified retirement plan in the United States, the opportunity to receive their benefits early as either a lump sum or an annuity. The terminated vested population comprised approximately 15% of the projected benefit obligation of this plan. At the close of the election period, approximately 51% of the eligible participants elected to take the early payment. These payments were distributed from plan assets in May and June 2017. As a result of settling these obligations, the Company recognized a non-cash pre-tax settlement charge of approximately $31.1 million in the second quarter of 2017. Additional settlement charges of $0.5 million were recognized in the third quarter of 2017 for settlements to certain plan participants who were eligible to select a lump sum payment option upon retirement.





SONOCO PRODUCTS COMPANY

Goodwill impairment evaluation
The Company assesses its goodwill for impairment annually andduring the third quarter, or from time to time when warranted by the facts and circumstances surrounding individual reporting units or the Company as a whole. If the carrying value of a reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment charge is recognized for the excess. The Company's reporting units are one level below its operating segments, as determined in accordance with ASC 350.
The Company completed its most recent annual goodwill impairment testing during the third quarter of 2017. For testing purposes, the Company performed an assessment of each reporting unit using either a qualitative evaluation or a quantitative test. The qualitative evaluations considered factors such as the macroeconomic environment, Company stock price and market capitalization movement, business strategy changes, and significant customer wins and losses. The quantitative tests considered factors such as current year operating performance as compared to prior projections and implied fair values from comparable trading and transaction multiples.
When the Company estimates the fair value of its reporting units, it does so using a discounted cash flow model based on projections of future years’ operating results and associated cash flows, together with comparable trading and transaction multiples. The Company’s model discounts projected future cash flows, forecasted over a ten-year period, with an estimated residual growth rate. The Company’s projections incorporate management’s estimates of the most-likely expected future results, including significant assumptions and estimates related to, among other things: sales volumes and prices, new business, profit margins, income taxes, capital expenditures and changes in working capital requirements and, where applicable, improved operating margins. Projected future cash flows are discounted to present value using a discount rate appropriate for the reporting unit.
The Company’s assessments, whether qualitative or quantitative, incorporate management’s expectations for the future, including forecasted growth rates and/or margin improvements. Therefore, should there be changes in the relevant facts and circumstances and/or expectations, management’s assessment regarding goodwill impairment may change as well. Management’s projections related to revenue growth and/or margin improvements are based on a combination of factors, including expectations for volume growth with existing customers and customer retention, product expansion, changes in price/cost relationships, productivity gains, fixed cost leverage, and stability or improvement in general economic conditions.
In considering the level of uncertainty regarding the potential for goodwill impairment, management has concluded that any such impairment would likely be the result of adverse changes in more than one assumption. Management does not consider any of its assumptions to be either aggressive or conservative, but rather its best estimates across a range of possible outcomes based on available evidence at the time of the assessment. Other than in Display and Packaging, which is discussed below, there is no specific singular event or single change in circumstances management has identified that it believes could reasonably result in a change to expected future results in any of its reporting units sufficient to result in goodwill impairment. In management’s opinion, a change of such magnitude would more likely be the result of changes to some combination of the factors identified above, a general deterioration in competitive position, introduction of a superior technology, significant unexpected changes in customer preferences, an inability to pass through significant raw material cost increases, and other such items as identified in "Item 1A. Risk Factors" on pages 9-15 of the Company's 2016 Annual Report on Form 10-K.
2019. Although no reporting units failed the testing noted above,assessments, during the time subsequent to the annual evaluation, and at June 28, 2020, the Company considered whether any events and/or changes in management’s opinion,circumstances, including the impact of the COVID-19 pandemic, had resulted in the likelihood that the goodwill of any of its reporting units havingmay have been impaired. Although it is management's opinion that no such events have occurred, the greatest riskresults of a significant future impairment if actual results fall short of expectations are Display and Packaging, and Paper and Industrial Converted Products - Europe.
Display and Packaging
The Display and Packagingthe Conitex reporting unit designs, manufactures, assembles, packshave been negatively impacted by the economic fallout of the COVID-19 pandemic due to end-market weakness, particularly in textiles, as well as certain customers' plants being temporarily shut down to contain the spread of the virus. Management currently expects customer demand will begin to increase and distributes temporary, semi-permanent and permanent point-of-purchase displays; provides supply chain management services, including contract packing, fulfillment and scalable service centers; and manufactures retail packaging, including printed backer cards, thermoformed blisters and heat sealing equipment. The updated goodwill impairment analysis reflectsbegin approaching pre-pandemic levels next year. However, should it become apparent that the post-COVID-19 recovery is likely to be weaker, or significantly delayed, compared to management’s current expectations, for moderate sales growth and improved percentage profit margins based largely on the expected successful ramp up of operations at the Company’s new battery packaging facility. In addition, the analysis reflects expected cash flow improvements from future productivity initiatives and increased capacity. A large portion of expected sales in this reporting unit is concentrated in two customers and if the business with either one of these customers is lost, or other projected synergies and productivity gains are not realized, a goodwill impairment charge couldmay be incurred.possible in the future. Total goodwill associated with this reporting unit was approximately $203$32.2 million at June 28, 2020. The Company previously owned a 30% noncontrolling interest in Conitex Sonoco (BVI), Ltd. before acquiring the remaining 70% interest on October 1, 2017. Based on the valuation
SONOCO PRODUCTS COMPANY

work performed for the current year's2018. In its 2019 annual goodwill impairment test, the Company estimated the fair value of Display and Packaging exceededthe Conitex reporting unit to be approximately equal to its carrying valuevalue.
Income taxes
As disclosed in prior periods, in February 2017 the Company received a Notice of Proposed Adjustment (“NOPA”) from the Internal Revenue Service (“IRS”) proposing adjustments to the 2012 and 2013 tax years. In 2018, the Company filed a protest to the proposed deficiency and the matter was referred to the Appeals Division of the IRS. In the second quarter of 2020, the Company agreed to pay approximately $6 million in taxes and interest to settle the dispute and recorded the impact of this settlement in its provision for income taxes. The Company anticipates receiving a final notice formalizing the settlement, and paying the assessment, in the second half of 2020.
Pension Plan Termination
As previously disclosed, the Company terminated 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 Pension Benefit Guaranty Corporation ("PBGC"), and following completion of a limited lump-sum offering, the Company is expected to settle all remaining liabilities under the Inactive Plan in 2021 through the purchase of annuity contracts. The Company intends to apply to the PBGC for an extension of the distribution deadline and expects to make additional contributions to the Inactive Plan of approximately $150 million in 2021 in order to be fully funded on a termination basis at the time of the annuity purchase. The actual amount of the Company's long-term liability when it is transferred, and the related required cash contribution, will depend upon the nature and timing of participant settlements, as well as prevailing market conditions. These expected contributions are reducing tax payments in 2020 by approximately 37%.
Paper$38 million. Non-cash, pretax settlement charges resulting from the lump sum payouts and Industrial Converted Products - Europe
Paperannuity purchases are currently expected to total approximately $590 million. The termination of the Inactive Plan will apply to participants who have separated service from Sonoco and Industrial Converted Products - Europe manufactures paperboard tubes and cores, fiber-based construction tubes and forms and recycled paperboard. In recent years the Eurozone has faced persistent high unemployment, spillover effects of geo-political conflicts in Eastern Europe and the Middle East, and uncertainties over the United Kingdom’s exit negotiations with the European Union. Despite these issues, the economy experienced steady year over year growthto nonunion active employees who no longer accrue pension benefits. There is no change in the last couplecumulative benefit previously earned by the approximately 11,000 impacted participants as a result of yearsthese actions, and the Company expects the momentum to continue in the near future. This outlook is supported by accommodative monetary policy, recovery in manufacturing and export activities, and lower inflation related to energy price declines. The growth is expected to slow down slightly in the outer years as the European Central Bank gradually tightens its monetary policies. In addition, the reporting unit has experienced a significant increase in raw material costs this year which it has not yet been able to fully offset through higher selling prices. Despite the challenges, management believes the reporting unit should be able to grow at or above the Eurozone’s projected GDP growth rates andwill continue to mitigatemanage and support the impactSonoco Pension Plan, comprised of these factors. However, if economic conditions wereapproximately 600 active participants who continue to deteriorate and management was unable to fully mitigate the impacts, or be unable to consistently recover additional significant cost increases or otherwise achieve expected sales volumes and profit margins,accrue benefits in accordance with a goodwill impairment charge could be incurred. Total goodwill associated with this reporting unit was approximately $93 million at October 1, 2017. Based on the valuation work performed for the current year test, the estimated fair value of Paper and Industrial Converted Products - Europe exceeded its carrying value by approximately 29%.flat-dollar multiplier formula. 
Sensitivity Analysis
In its 2017 goodwill impairment analysis, projected future cash flows were discounted at 10.2% and 8.5% for Display and Packaging and Paper and Industrial Converted Products - Europe, respectively. Holding other valuation assumptions constant, Display and Packaging projected operating profits across all future periods would have to be reduced approximately 23%, or the discount rate increased to 12.7%, in order for the estimated fair value to fall below the reporting unit’s carrying value. The corresponding percentages for Paper and Industrial Converted Products - Europe are 19% and 10.4%, respectively.

Financial Position, Liquidity and Capital Resources
CashOperating cash flows provided by operations totaled $282.1$282.0 million in the ninesix months ended October 1, 2017June 28, 2020 compared with $348.7$40.1 million during the same period last year, a declinen increase of $66.6$241.9 million. The increase is largely attributable to a year-over-year decreasereduction in net income of $11.5 million was offset by an increase in year-to-date net pension and post-retirementretirement plan expensescontributions. The Company made a voluntary contribution of $190 million to its U.S. defined benefit pension plans in the first six months of 2019 and made no such contributions in the first six months of $19.5 million. However, changes in tax accounts2020. Accounts Receivable consumed $30.0$13.5 million moreof operating cash in the first ninesix months of 20172020 compared to 2016. Thiswith $46.2 million in the same period last year. Although both periods saw increased consumption was partially drivenbusiness activity from year-end levels, the global recession caused by the settlement of outstanding taxes payable at the end of 2016 related to the disposal of the Company's blow molded plastics business. Asset impairment charges/losses on the dispositions of assets was $19.6 million less of a benefitCOVID-19 has muted that increase in the current period compared to 2016. The benefit in 2016 included non-cash losses related to dispositionsyear. Additionally, inventories consumed $32.0 million of a paper mill in France and retail packaging business in Puerto Rico, along with other previously announced restructuring actions and a goodwill impairment of the Company’s industrial converted products business in Brazil.
Inventories consumed $15.0 millioncash in the first ninesix months of 20172020 compared with $11.3$16.8 million consumed in
50
SONOCO PRODUCTS COMPANY
the first nine months of 2016.same period last year. Due to swiftly changing demand caused by the pandemic, right-sizing inventory has been a greater challenge than normal. Trade accounts payable provided $29.3 $17.8 million of cash during the ninesix months ended October 1, 2017June 28, 2020 compared to consuming $2.8 million in the same reporting period last year.
Changes in accrued expenses provided $9.3 million of operating cash in the six months ended June 28, 2020 while consuming $7.7 million in the same period last year. AlthoughThe greater provision of cash in the current year is primarily due to lower management incentives paid in the first ninesix months of both 2016 and 2017 saw increased rates of business activity following seasonal year-end slow downs, there were higher levels of deferred payments at December 31, 2015 than at December 31, 2016. As a result, more cash was used in 2016 to settle prior-year payables than was used in 2017. This difference was a primary contributor2020 compared to the $21.6same period last year, as well as the timing of payroll and other payments. Changes in other assets and liabilities provided $0.8 million year-over-year improvement in cash provided by trade accounts payable.
Increases in accrued expenses provided $1.2 million ofless cash in the ninefirst six months of 2020 compared to 2019. Although the current year benefited from the deferred payment of certain payroll taxes under the CARES Act, these were slightly less than insurance proceeds received in the prior year associated with clean-up and other repair costs related to Hurricane Florence. The impact of income taxes, net payables and deferred items provided $17.2 million more cash in the first six months of 2020 versus the first six months of the prior year due largely to timing of estimated tax payments in 2020 because of deferrals allowed under COVID-related IRS guidance.
Cash used in investing activities was $74.8 million in the six months ended October 1, 2017 while providing $16.4June 28, 2020, compared with $99.9 million in the same period last year, primarily due toa lower year-over-year accruals for management incentives, restructuring activities, payroll, payroll-related taxes and withholdings. Also reflected in the current year accrued expense reduction is ause of cash of $25.1 million. Acquisition spending was $3.3 million payment forhigher year over year as a result of the final settlementCompany's acquisition of environmental claims related to Fox River. Changesa tubes and cores operation in prepaid expenses and other assets and liabilities used $22.0 million of additional cash in 2017 compared to 2016, largely attributable to a current year increase in miscellaneous prepaid expenses and the collection of miscellaneous receivables
SONOCO PRODUCTS COMPANY

Jacksonville, Florida in the first ninesix months of 2016 that were outstanding at2020. In the endfirst six months of 2015. Similar levels2019, a small amount of miscellaneous receivable items were not outstanding atcash was used to settle final purchase price adjustments related to the end2018 Conitex and Compositub acquisitions. Proceeds from the sale of 2016.
Cash used in investing activities was $522.6assets provided $4.8 million in the ninesix months ended October 1, 2017,June 28, 2020, compared with $165.2to $1.5 million in the same period last year. year. The $357.4year-over-year increase was due primarily to net proceeds of $2.4 million increasereceived in February 2020 for the net usesale of cash reflectsequipment at a metal ends operation in Canton, Ohio. Capital spending during the 2017 acquisitionfirst six months of Packaging Holdings and Clear Lam for $383.42020 was $76.4 million, and capital spending increased $2.7approximately $26 million lower year over year. Capital spending for the remainderremaining six months of 20172020 is not expected to exceed $120 million, bringing the total expected net capital spending in 2020 to $195.0 million. This increase in the second half of 2020 includes planned spending of approximately $45 million.$20 million to begin work on the transformation of the corrugated medium paper machine in Hartsville, South Carolina, into a low-cost, state-of-the-art uncoated recycled paperboard machine, as well as other projects that were previously on hold due to the economic uncertainty of COVID-19.
Cash provided bygenerated in financing activities totaled $218.3$514.3 million in the ninesix months ended October 1, 2017, $422.6June 28, 2020, compared with $34.7 million more than the $204.3 million use of cash in the same period last year. Outstandingyear, a change of $479.6 million. Proceeds from the issuance of debt was $1,426.1increased $861.7 million at October 1, 2017 compared with $1,052.7 million at December 31, 2016. Net debt borrowings provided $338.1year over year mostly driven by the Company's issuance of $600 million of cash during10-year bonds in April 2020. Additionally, the nine months ended October 1, 2017. This activity included proceeds from a $250.0Company paid down an additional $420.9 million term loan which were used to repay the $150.0 million term loan entered into on March 13, 2017, and the remaining $100.0 million was used to partially fund the Clear Lam acquisition. There was also a $98.0 million increase in borrowings from commercial paperdebt year over year. InThese large swings in financing activities were driven by the prior-year period, net debt repayments used $38.6Company's efforts to improve and ensure liquidity during the global recession. The year-over-year increase in outstanding checks was $19.2 million and resulted primarily from the timing of cash.payroll payments. The Company received proceeds of $14.5 million from the settlement of a cross-currency swap in March 2020 and, during the six months ended June 28, 2020, paid cash dividends of $114.4$86.3 million, during the nine months ended October 1, 2017, an increase of $4.5$2.2 million over the same period last year. Cash used to repurchase the Company's common stock was lower year over year by $59.1 million as throughout 2016 the Company was engaged in a $100 million stock buyback program that was concluded by the end of the year.$4.6 million.
On July 20, 2017, the Company entered into a Credit Agreement in connection with a new $750 million bank credit facility which replaced the credit facility entered into on October 2, 2014, and reflected substantially the same terms and conditions. Included in the new facility are a $500 million five-year revolving credit facility and a $250 million five-year term loan. The Company is continuing to explore strategic acquisition opportunities which may result in the additional use of cash. Given the nature of acquisitions, the timing and amounts of such utilization are not predictable. The Company expects that acquisitions requiring funding in excess of cash on hand would be financed using available borrowing capacity.
Cash and cash equivalents totaled $247.9 million and $257.2 million at October 1, 2017 and December 31, 2016, respectively. Of these totals, approximately $222 million and $175 million, respectively, were held outside of the United States by the Company’s foreign subsidiaries. Cash held outside of the United States is available to meet local liquidity needs, or for capital expenditures, acquisitions, and other offshore growth opportunities. Under current law, cash repatriated to the United States is subject to federal income taxes, less applicable foreign tax credits. Because the Company has domestic liquidity through a combination of on-going operating cash flow and access to bank and capital markets borrowings, it has generally considered its offshore cash balances to be indefinitely invested outside the United States and the Company currently has no plans to repatriate any of these cash balances. Accordingly, as of October 1, 2017, the Company is not providing for any deferred tax liability on the foreign earnings associated with these balances. However, if any such balances were to be repatriated, additional income tax payments could result. Computation of the potential deferred tax liability associated with unremitted earnings deemed to be indefinitely reinvested is not 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 cash deposit or borrowing positions 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 the bank 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 subsidiaries favorable interest terms on both.
During the ninesix months ended October 1, 2017,June 28, 2020, the Company reported a net increasedecrease in cash and cash equivalents of $12.9$9.5 milliondue to currency translation adjustments resulting from a weakerstronger U.S. dollar relative to certainmost foreign currencies, most notablycurrencies.
The Company operates a $500 million commercial paper program, supported by a $500 million revolving credit facility with a syndicate of eight banks. The revolving bank credit facility is committed through July 2022. If circumstances were to prevent the Canadian dollar, Euro,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 facility may be prepaid at any time at the discretion of the Company.
The Company has taken several actions to secure liquidity in light of volatility in the credit markets and Mexican peso.economic uncertainty being caused by the COVID-19 pandemic.
On March 18, 2020, the Company closed and funded a 364-day, $150 million term loan with Wells Fargo Bank, National Association, and the proceeds were used to repay a portion of outstanding commercial paper. Interest was assessed at the London Interbank Offered Rate (LIBOR) plus a margin based on a pricing grid that used the Company’s credit ratings. The margin above LIBOR at June 28, 2020 was 125 basis points. There was no required amortization and repayment could be accelerated at any time at the discretion of the Company. On July 20, 2020, subsequent to quarter end, this loan was fully repaid.
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SONOCO PRODUCTS COMPANY
On April 1, 2020, the Company accessed $250 million from its revolving credit facility. This borrowing was repaid on May 5, 2020. The Company used $85 million of the proceeds to fully repay its outstanding commercial paper balance and the remaining proceeds were invested in short term cash equivalents with maturities of 30 days or less.
On April 6, 2020, the Company borrowed $100 million, pursuant to a new 364-day term loan with U.S. Bank, National Association. Interest is assessed at LIBOR plus a margin based on a pricing grid that uses the Company's credit ratings. The margin above LIBOR at June 28, 2020 was 125 basis points. There is no required amortization and repayment can be accelerated at any time at the discretion of the Company.
On April 22, 2020, the Company sold through a public offering $600 million of 3.125% notes due May 1, 2030. The offering was made pursuant to an effective shelf registration statement. This action was taken largely to mitigate the risk of possible future credit market dislocations triggered by the economic impact of the COVID-19 pandemic. The net proceeds from the offering of approximately $594.2 million are available for general corporate purposes, including repayment of outstanding debt.
To further improve its financial flexibility and liquidity, the Company exercised a conditional one-time option to extend its $200 million term loan with Wells Fargo Bank, National Association, due May 2020, for an additional 364 days to May 2021.
As a result of these actions, the Company currently expects debt maturities of approximately $750 million through December 31, 2021. The Company currently has approximately $700 million in cash and cash equivalents on hand and $500 million in committed availability under its revolving credit facility. The Company believes these amounts, combined with net cash flows from operating and investing activities, provide ample liquidity to cover the 2021 debt maturities and other cash flow needs of the Company over the course of the next year.
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 October 1, 2017,June 28, 2020, the Company’s interest coverage and net worth were substantially above the minimum levels required under these covenants.
The Company continually explores strategic acquisition opportunities which may result in the use of cash. Given the nature of the acquisition process, the timing and amounts of such expenditures are not always predictable. The Company expects that any acquisitions requiring funding in excess of cash on hand would be financed using available borrowing capacity.
Although there are approximately 3.0 million shares of common stock remaining available for open-market repurchase under a 2016 Board of Directors authorization, the Company currently has no intention of making any such repurchases in the near term.
Cash and cash equivalents totaled $857.3 million and $145.3 million at June 28, 2020 and December 31, 2019, respectively. Of these totals, approximately $127.5 million and $115.0 million, respectively, were held outside of the United States by the Company’s foreign subsidiaries. Cash held outside of the United States is available to makemeet local liquidity needs, or for capital expenditures, acquisitions, and other offshore growth opportunities. Reflecting the financing actions described above, the Company has ample domestic liquidity from a combination of cash on hand, operating cash flow generation and access to bank and capital markets borrowings. The Company has generally considered its foreign unremitted earnings to be indefinitely invested outside the United States and currently has 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 amounts for financial reporting purposes. Computation of the potential deferred tax liability associated with unremitted earnings considered to be indefinitely reinvested is not 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.
The Company anticipates making additional contributions to its pension and postretirement plans of approximately $55approximately $8.5 million during the remainder of 2017,2020, which includes a voluntary contribution to its U.S. qualified defined benefit pension planwould result in total 2020 contributions of $50approximately $40 million, made on October 25, 2017. Contributions to its pension and postretirement plans are
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SONOCO PRODUCTS COMPANY

excluding potential immaterial cash funding related to restructuring actions. As discussed in "Other Items," the Sonoco Pension Plan for Inactive Participants was terminated effective September 30, 2019. Upon approval by the PBGC, and following completion of a limited lump-sum offering, the Company is expected to totalsettle all remaining liabilities under the Inactive Plan through the purchase of annuities. The Company intends to apply to the PBGC for an extension of the distribution deadline and expects to make additional contributions to the Inactive Plan of approximately $107$150 million in 2017.2021 in order to be fully funded on a termination basis at the time of the annuity purchase. Any such 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 operatingfinancial results and all monetary assets and liabilitiesof 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 October 1, 2017,June 28, 2020, the carrying value of the Company's net investment in its Venezuelan operations was approximately $2.3$2.1 million. In addition, at October 1, 2017,June 28, 2020, the Company's Accumulated Other Comprehensive Loss included a cumulative translation loss of $3.8 million related to its Venezuelan operations which would need to be reclassified to net income in the event of a complete exit of the business or a deconsolidation of these operations.
At October 1, 2017,The Company has operations in the United Kingdom and elsewhere in Europe that could be impacted by the exit of the U.K. from the European Union (Brexit). Our U.K. operations have made contingency plans regarding potential customs clearance issues, tariffs and other uncertainties resulting from Brexit. Although it is difficult to predict all of the possible impacts to our supply chain or in our customers' downstream markets, the Company had commodity contracts outstanding to fixhas evaluated the costpotential operational impacts and uncertainties of Brexit and at this time believes that the likelihood of a portionmaterial impact on our future results of anticipated raw materialsoperations is low. Although there are some cross-border sales made out of and natural gas purchases. The total net fair market valueinto the U.K., most of these instruments was $0.0what we produce in the U.K. is also sold in the U.K. and the same is true for continental Europe. In some cases, companies that have been importing from Europe into the U.K. are now seeking local sources, which has actually been positive for our U.K. operations. Annual sales of our U.K. operations totaled approximately $120 million and a favorable position of $3.6 million at at October 1, 2017 and December 31, 2016, respectively. Natural gas and aluminum hedge contracts covering an equivalent of 5.8 MMBTUs and 1,210 metric tons, respectively, were outstanding at October 1, 2017. Additionally,in 2019.
At June 28, 2020, the Company had various currency contracts outstanding to fix the exchange rate on certain anticipated foreign currency cash flows. The total market value of these instruments was a net unfavorable position of $(2.5)$(2.3) million at October 1, 2017, compared withJune 28, 2020 and a net unfavorablefavorable position of $(0.2)$1.1 million at December 31, 2016.2019. These contracts qualify as cash flow hedges and mature within twelve months of their respective reporting dates.
In addition, at October 1, 2017,June 28, 2020, 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 valuevalues of these currency contracts were immaterial at June 28, 2020 and December 31, 2019.
At June 28, 2020, 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 a net favorable position of $0.1 million at October 1, 2017 and a netan unfavorable position of $(0.7)$(1.7) million and $(1.6) million at June 28, 2020 and December 31, 2016.2019, respectively. Natural gas and aluminum hedge contracts covering an equivalent of 2.3 million MMBTUs and 1,088 metric tons, respectively, were outstanding at June 28, 2020. These contracts qualify as cash flow hedges and mature within twelve months of their respective reporting
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SONOCO PRODUCTS COMPANY
dates. In addition, during the second quarter of 2020, the Company entered into commodity contracts to fix the cost of a portion of anticipated diesel purchases. The Company does not apply hedge accounting to these contracts, the fair value of which was not material at June 28, 2020.
In January 2020, the Company entered into a cross-currency swap agreement with a notional amount of $250 million to effectively convert a portion of the Company's fixed-rate, U.S. dollar denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt. The swap agreement had an original maturity of November 1, 2024 and provided for the Company to receive semi-annual interest payments in U.S. dollars at a rate of 5.75% and pay interest in euros at a rate of 3.856%. The risk management objective was to manage foreign currency risk relating to net investments in certain European subsidiaries denominated in foreign currencies. As a result of significant strengthening of the U.S. dollar, as well as a reduction in the differential between U.S. and European interest rates, the fair market value of the swap position appreciated significantly during the first quarter of 2020. In March 2020, the Company terminated the agreement and received a net cash settlement of $14.5 million. The Company recorded this foreign currency translation gain in "Accumulated other comprehensive loss," net of a tax provision of $7.6 million.
At October 1, 2017,June 28, 2020, the U.S. dollar had weakenedstrengthened against most of the functional currencies of the Company's foreign operations compared to December 31, 2016,2019, resulting in a net translation gainloss of $86.8$60.1 million being recorded in accumulated other comprehensive loss duringat June 28, 2020.
As a result of the nine months ended October 1, 2017.weakening global economy due to the COVID-19 pandemic, the Company increased its allowance for cumulative expected credit losses by $1.0 million as of June 28, 2020. Continued weakness in the economy may require additional charges to be recognized in future periods. The magnitude of such charges cannot be estimated at this time.
Restructuring and Impairment
Information regarding restructuring charges and restructuring-related asset impairment charges is provided in Note 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.

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, 2016,2019, which was filed with the Securities and Exchange Commission on March 1, 2017.February 28, 2020. 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 October 1, 2017,June 28, 2020, 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
ThereIn response to the COVID-19 pandemic, we have required certain employees, some of whom are involved in the operation of our internal controls over financial reporting, to work from home. Despite this change, there have been no changes in the Company’s internal control over financial reporting occurring during the three monthsquarter ended October 1, 2017,June 28, 2020, that
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SONOCO PRODUCTS COMPANY
materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. We are continually monitoring and assessing the COVID-19 pandemic on our internal controls to minimize any impact it may have on their design and operating effectiveness.

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, 2016,2019, and in Part I - Item 1 - “Financial Statements” (Note 1316 - “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 October 1, 2017,June 28, 2020, cannot be determined. As of October 1, 2017June 28, 2020 and December 31, 2016,2019, the Company had accrued $20.5$8.4 million and $24.5$8.7 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.

Fox River
In January 2017, U.S. Paper Mills Corp. (U.S. Mills), a wholly owned subsidiary of the Company, obtained Court approval of a final settlement of cost recovery claims made by Appvion, Inc. for $3.3 million. The settlement was paid during the first quarter of 2017. Legal and professional fees relating to the settlement, totaling $0.4 million, were paid during the first and second quarters of 2017. As a result of the settlement becoming final, the Company and U.S. Mills have resolved all pending or threatened legal proceedings related to the Fox River matter, as well as any such proceedings known to be contemplated by government authorities.


Other legal matters
Additional information regarding legal proceedings is provided inin Note 1416 to the CondensedCondensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q. 

Item 1A. Risk Factors.
Except as set forth below, during the six months ended June 28, 2020, there were no material changes to the Risk Factors disclosed in Item 1A- "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
The direct and indirect results of the COVID-19 pandemic may adversely affect our operations, results of our operations and our financial condition.
The United States and other countries are experiencing a major global health pandemic related to the outbreak of a novel strain of coronavirus, COVID-19. Governmental authorities nationally and in affected regions took increasingly dramatic actions and mandated various restrictions in an effort to slow the spread of the virus, including travel restrictions, restrictions on public gatherings, “shelter at home” orders and advisories, and quarantining of people who may have been exposed to the virus. We are an essential provider of consumer, industrial and medical packaging. Our associates are deemed “Essential Critical Infrastructure Workers” under the guidance of the U.S. Department of Homeland Security and have received similar designations by the vast majority of other governmental agencies in the 36 countries where the Company operates. As a result, nearly all of the Company’s global operations continue to operate and are serving our customers’ critical needs. Certain customers whose products have not been deemed “critically essential” have had to suspend operations due to the COVID-19 pandemic, while some others have been unable to fully staff their operations, and as a result these customers are taking temporary downtime or furloughing employees. Although mandated restrictions on business activities have expired or been relaxed in most of our locations, a resurgence of the virus in late June and into July has raised concerns about reimposition of restrictions on business activities, and some governmental entities have already done so. This reimposition of restrictions could delay or possibly reverse the economic recovery. We are following these developments closely and responding with cost-reduction initiatives.
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SONOCO PRODUCTS COMPANY

We have put in place a Global Task Force to develop and implement business continuity plans to ensure our operations are as prepared as possible to be able to continue producing and shipping product to our customers without disruption. We have a diverse global supply chain and to date we have not experienced significant raw material or other supply disruptions. However, certain raw materials pricing has increased significantly since January, including Old Corrugated Containers (“OCC”), which is the largest raw material used by our recycled paperboard mills. Sustained OCC pricing at current, or higher, levels is likely to have an adverse effect on near-term operating margins.
Many of our businesses have already been adversely affected by the pandemic. Given the unprecedented uncertainty of this situation, including the unknown duration and severity of the pandemic and the unknown overall impact on consumer demand, we are unable to forecast the full impact on our business in 2020. An extended period of disruption to our served markets or global supply chains could materially and adversely affect our business, results of operations, access to sources of liquidity and overall financial condition. In addition, an extended global recession caused by the pandemic would have a material and adverse impact on our operations, results of operations and financial condition, and may result in the future impairment of goodwill at certain of the Company's reporting units.

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
7/03/17 - 8/06/17 238
 $51.77
 —
 2,969,611
8/07/17 - 9/03/17 58
 $47.67
 —
 2,969,611
9/04/17 - 10/01/17 889
 $48.88
 —
 2,969,611
Total 1,185
 $49.40
 —
 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
3/30/20 - 5/03/2075  $48.36  —  2,969,611  
5/04/20 - 5/31/2091  $50.51  —  2,969,611  
6/01/20 - 6/28/2075  $53.87  —  2,969,611  
Total241  $50.89  —  2,969,611  
 
1A total of 1,185241 common shares were repurchased in the thirdsecond quarter of 20172020 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
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 at a cost of $100.0 million. No shares were repurchased during 2017, 2018, 2019 or during the nine-month periodsix months ended October 1, 2017.June 28, 2020. Accordingly, a total of 2,969,611 shares remain available for repurchase at October 1, 2017.

June 28, 2020.
 

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SONOCO PRODUCTS COMPANY
Item 6.Exhibits.

Exhibit Index
3.1Exhibit Index
10.13.2
4.1
4.2
10.210.1
10.2
10.3
10.4
10.5
15.15
31.31
32.32
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
101.101.SCHThe following materials from Sonoco Products Company’s Quarterly Report on Form 10-Q for the quarter ended October 1, 2017, formattedXBRL 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
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at October 1, 2017 and December 31, 2016, (ii) Condensed Consolidated Statements of Income for the three and nine months ended October 1, 2017 and October 2, 2016, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 1, 2017 and October 2, 2016, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended October 1, 2017 and October 2, 2016, and (v) Notes to Condensed Consolidated Financial Statements.Exhibit 101)
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SONOCO PRODUCTS COMPANY

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
SONOCO PRODUCTS COMPANY
(Registrant)
Date:July 29, 2020SONOCO PRODUCTS COMPANYBy:/s/ Julie C. Albrecht
(Registrant)Julie C. Albrecht
Date:October 31, 2017By:/s/ Barry L. Saunders
Barry L. Saunders
Senior Vice President and Chief Financial Officer
(principal financial officer)
/s/ James W. Kirkland
James W. Kirkland
Corporate Controller
(principal accounting officer)


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