What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-01 compared with 2024-05-01 · 382 added, 127 removed, 359 unchanged (59% of the section changed)

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Statements included in this Quarterly Report on Form 10-Q that are not historical in nature, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, 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 (the “Exchange Act”).

In addition, Sonoco Products Company (the “Company” or “Sonoco”) and its representatives may from time to time make other oral or written statements that are also “forward-looking statements.” Words such as “anticipate,” “assume,” “believe,” “can,” “consider,” “continue,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “intend,” “is designed to,” “likely,” “maintain,” “may,” “might,” “objective,” “ongoing,” “opportunity,” “outlook,” “plan,” “possible,” “potential,” “predict,” “seek,” “strategy,” “will,” “would,” or the negative thereof, and similar expressions identify forward-looking statements.

In addition, Sonoco Products Company (the “Company” or “Sonoco”) and its representatives may from time to time make other oral or written statements that are also “forward-looking statements.” Words such as “anticipate,” “assume,” “believe,” “can,” “consider,” “continue,” “could,” “develop,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “intend,” “is designed to,” “likely,” “maintain,” “may,” “might,” “objective,” “ongoing,” “opportunity,” “outlook,” “plan,” “possible,” “potential,” “predict,” “seek,” “strategy,” “will,” “would,” or the negative thereof, and similar expressions identify forward-looking statements.

Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding:

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• costs, timing and effects of restructuring and portfolio simplification activities;

• effects and timing of, and anticipated costs, synergies and gains resulting from our pending and completed acquisitions and divestitures, including the Company’s acquisitions of Ball Metalpack Holding, LLC, renamed Sonoco Metal Packaging, the remaining interest in RTS Packaging, LLC (“RTS Packaging”) and a paper mill in Chattanooga, Tennessee (the “Chattanooga Mill”), and Inapel Embalagens Ltda.

• the Company’s proposed acquisition of Eviosys, including the satisfaction of conditions precedent thereto and the anticipated timing and financing thereof, and the anticipated benefits of the acquisition, including with respect to market leadership, strategic alignment, customer relationships, sustainability, innovation and cost synergies;

• effects and timing of, and anticipated costs, synergies and gains resulting from our other contemplated, pending and completed acquisitions and divestitures, including the Company’s acquisitions of Ball Metalpack Holding, LLC, renamed Sonoco Metal Packaging, the remaining interest in RTS Packaging, LLC (“RTS Packaging”) and a paper mill in Chattanooga, Tennessee (the “Chattanooga Mill”), Inapel Embalagens Ltda.

(“Inapel”), and the Company’s sale of its Sonoco Sustainability Solutions (“S3”) business, its U.S.

and Mexico BulkSak businesses, its South Carolina timberland properties, and its Protective Solutions business;

and Mexico BulkSak businesses, its South Carolina timberland properties and its Protective Solutions business (“Protexic”);

• adequacy and anticipated amounts and uses of cash flows;

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• ability to manage the mix of business and execute on the Company’s portfolio simplification strategy, including with respect to divestitures;

• ability to identify and successfully close suitable acquisitions at the levels needed to meet growth targets;

• ability to successfully integrate newly acquired businesses into the Company’s operations and realize synergies and other anticipated benefits within the expected time period, or at all;

• ability to identify suitable acquisitions at the levels needed to meet growth targets;

• ability to satisfy closing conditions and close acquisitions, including the pending acquisition of Eviosys, and to finance such acquisitions on acceptable terms;

• ability to receive regulatory approvals for the pending acquisition of Eviosys in a timely manner;

• ability to successfully integrate newly acquired businesses, including Eviosys, into the Company’s operations and realize expected cost savings, synergies and other anticipated benefits relating thereto within the expected time period, or at all;

• the potential impact of the consummation of newly acquired businesses, including Eviosys, on relationships with clients and other third parties;

• availability, transportation and pricing of raw materials, energy and transportation, including the impact of potential changes in tariffs or sanctions and escalating trade wars, and the impact of war, general regional instability and other geopolitical tensions (such as the ongoing conflict between Russia and Ukraine as well as the economic sanctions related thereto, and the ongoing conflict in Israel and Gaza), 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;

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• foreign currency exchange rate fluctuations, interest rate and commodity price risk and the effectiveness of related hedges;

SONOCO PRODUCTS COMPANY

• cost of employee and retiree medical, health, and life insurance benefits;

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• accuracy of assumptions underlying projections related to goodwill impairment testing, and accuracy of management’s assessment of goodwill impairment;

SONOCO PRODUCTS COMPANY

• accuracy of assumptions underlying fair value measurements, accuracy of management’s assessments of fair value and fluctuations in fair value;

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Sonoco is a multi-billion dollar global designer, developer, and manufacturer of a variety of highly-engineered and sustainable packaging products serving multiple end markets.

As of March 31, 2024, the Company had more than 300 locations in 33 countries, serving some of the world’s best-known brands in some 85 nations.

As of June 30, 2024, the Company had more than 300 locations in 33 countries, serving some of the world’s best-known brands in some 85 nations.

The Company’s operating and reporting structure consists of two reportable segments, Consumer Packaging and Industrial Paper Packaging, with all remaining businesses reported as All Other.

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Over the past several years, the Company has simplified its business portfolio around fewer, bigger businesses, which has reduced operating complexity and improved agility.

For example, in September 2023, the Company acquired the remaining equity interest in RTS Packaging from joint venture partner WestRock Company, to further strengthen and expand the Company’s 100% recycled fiber-based packaging solutions.

For example, in June 2024, the Company announced it had entered into an agreement to acquire Eviosys, a leading European manufacturer of food cans, ends and closures, for approximately $3.9 billion.

The transaction is expected to expand Sonoco’s global leadership in metal food can and aerosol packaging and to facilitate Sonoco’s ability to partner with customers and advance innovation and sustainability in metal packaging offerings.

In addition, in September 2023, the Company acquired the remaining equity interest in RTS Packaging from joint venture partner WestRock Company, to further strengthen and expand the Company’s 100% recycled fiber-based packaging solutions.

In addition, the Company acquired Inapel in December 2023, significantly expanding its presence in the flexibles packaging services market in Latin America.

Sonoco’s portfolio transformation strategy also includes significant divestitures.

In April 2024, Sonoco completed the divestiture of Protexic, which manufactured molded expanded polypropylene and expanded polystyrene foam components serving the automotive, electronics, appliances, and other markets.

In 2023, the Company completed the divestitures of its U.S.

and Mexico Bulksak businesses, which consisted of the manufacture and distribution of flexible intermediate bulk containers, plastic and fiber pallets, and custom fit liners, and its S3 business, which provided customized waste and recycling management programs.

The Company believes that these and other potential divestitures will enable greater strategic clarity and operational focus while also generating proceeds to fund deleveraging and capital investments in core businesses.

The Company is focused on efficient capital deployment into these larger, core business units to improve economic returns and improve integration effectiveness and speed for acquired strategic assets.

In parallel, Sonoco has continued to work on commercial, operational, and supply chain excellence programs intended to shift the mix of our business towards higher-valued products and increase overall productivity, as well as strategic pricing initiatives intended to better capture input costs and the value of the services provided.

Effective January 1, 2024, the Company integrated its flexible packaging and thermoformed packaging businesses within the Consumer Packaging segment in order to streamline operations, enhance customer service and better position the business for accelerated growth.

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As a result, no recycling net sales are recorded and the margin from the Company’s recycling operations reduces “Cost of sales.”

In parallel, Sonoco continues to work on commercial, operational, and supply chain excellence programs to shift the mix of our business towards higher-valued products and increase overall productivity, as well as strategic pricing initiatives to better capture input costs and the value of the services provided.

First Quarter 2024 Compared with First Quarter 2023

SONOCO PRODUCTS COMPANY

Second Quarter 2024 Compared with Second Quarter 2023

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

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1 Restructuring and restructuring-related asset impairment charges are a recurring item as the Company’s restructuring programs usually require several years to fully implement, and the Company is continually seeking to take actions that could enhance its efficiency.

Although recurring, these charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity and the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the restructuring actions occur.

SONOCO PRODUCTS COMPANY

Although recurring, these charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity, the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the restructuring actions occur.

The Company’s management believes the exclusion of these amounts improves the period-to-period comparability and analysis of the underlying financial performance of the business.

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Furthermore, the calculations of these non-GAAP financial measures are based on subjective determinations of management regarding the nature and classification of events and circumstances that the investor may find material and view differently.

SONOCO PRODUCTS COMPANY

To compensate for any limitations in such non-GAAP financial measures, management believes that it is useful in evaluating the Company’s results to review both GAAP information, which includes all of the items impacting financial results, and the related non-GAAP financial measures that exclude certain elements, as described above.

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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 in conjunction with management’s analysis of the Company’s results of operations.

SONOCO PRODUCTS COMPANY

Adjusted Operating Profit, Adjusted Income Before Income Taxes, Adjusted Provision for Income Taxes, Adjusted Net Income Attributable to Sonoco, and Adjusted Diluted Earnings Per Share (“EPS”)

For the three-month period ended March 31, 2024

For the three-month period ended June 30, 2024

Dollars in thousands, except per share data Operating Profit Income Before Income Taxes Provision for Income Taxes Net Income Attributable to Sonoco Diluted EPS

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Restructuring/Asset impairment charges 19,250 19,250 3,190 16,116 0.16

Gain on divestiture of business and other assets (4,478) (4,478) 1,222 (5,700) (0.06)

Other income, net

— (5,867) — (5,867) (0.06)

Non-operating pension costs — 4,170 1,032 3,138 0.03

Net gain from derivatives (286) (286) (72) (214) —

Net gains from derivatives

(3,485) (3,485) (876) (2,609) (0.03)

Other adjustments (2,056) (1,634) (26) (1,608) (0.02)

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Due to rounding, individual items may not sum appropriately.

For the three-month period ended April 2, 2023

For the three-month period ended July 2, 2023

Dollars in thousands, except per share data Operating Profit Income Before Income Taxes Provision for Income Taxes Net Income Attributable to Sonoco Diluted EPS

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Non-operating pension costs — 3,342 828 2,514 0.03

Net loss from derivatives 6,085 6,085 1,518 4,567 0.05

Net gains from derivatives

(4,288) (4,288) (1,070) (3,219) (0.04)

Other adjustments 5,187 5,187 212 4,975 0.06

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Three Months Ended

Dollars in thousands March 31, 2024 April 2, 2023

Dollars in thousands June 30, 2024 July 2, 2023

Net income attributable to Sonoco $ 90,811 $ 114,649

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Non-operating pension costs 4,170 3,342

Net income/(loss) attributable to noncontrolling interests 96 (55)

Net income attributable to noncontrolling interests 140 100

Restructuring/Asset impairment charges 19,250 6,057

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Gain on divestiture of business and other assets

(4,478) (7,371)

Acquisition, integration and divestiture-related costs 22,269 4,532

Net (gain)/loss from derivatives (286) 6,085

Other income, net

Net gains from derivatives

(3,485) (4,288)

Other adjustments (2,056) 5,187

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gains/losses from the sale of businesses or other assets;

gains/losses from derivatives;

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.

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Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation

For the Three Months Ended March 31, 2024

For the Three Months Ended June 30, 2024

Dollars in thousands Consumer Packaging segment Industrial Paper Packaging segment All Other Corporate Total

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— — — 22,269 22,269

Gains from divestiture of business 5

— — — (4,478) (4,478)

Net gains from derivatives 6

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4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer Packaging segment of $177 and the Industrial Paper Packaging segment of $215.

5 Included in Corporate are net gains on derivatives associated with the Consumer Packaging segment of $(43), the Industrial Paper Packaging segment of $(190), and the All Other group of businesses of $(53).

5 Included in Corporate are gains from the divestiture of businesses including $(1,250) from the sale of the S3 business, part of the Industrial Paper Packaging segment, and $(3,228) from the sale of Protexic, part of the All Other group of businesses.

6 Included in Corporate are net gains from derivatives associated with the Consumer Packaging segment of $(540), the Industrial Paper Packaging segment of $(2,278), and the All Other group of businesses of $(667).

SONOCO PRODUCTS COMPANY

Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation

For the Three Months Ended April 2, 2023

For the Three Months Ended July 2, 2023

Dollars in thousands Consumer Packaging segment Industrial Paper Packaging segment All Other Corporate Total

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— — — (7,371) (7,371)

Derivatives losses 6

Net gains from derivatives 6

— — — (4,288) (4,288)

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2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer Packaging segment of $4,015, the Industrial Paper Packaging segment of $1,987, and the All Other group of businesses of $865.

3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment of $6,102 and the Industrial Paper Packaging segment of $(677).

3 Included in Corporate are changes in LIFO inventory reserves associated with the Industrial Paper Packaging segment of $(1,575).

4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer Packaging segment of $112 and the Industrial Paper Packaging segment of $60.

5 Included in Corporate are gains from the sale of the Company’s timberland properties in the amount of $(60,945) and the sale of its S3 business in the amount of $(11,065), both of which are associated with the Industrial Paper Packaging segment.

6 Included in Corporate are losses on derivatives associated with the Consumer Packaging segment of $946, the Industrial Paper Packaging segment of $3,912, and the All Other group of businesses of $1,170.

5 Included in Corporate is the gain from the sale of the Company’s U.S.

BulkSak businesses, associated with the Industrial Paper Packaging segment, in the amount of $(7,371).

6 Included in Corporate are net gains from derivatives associated with the Consumer Packaging segment of $(650), the Industrial Paper Packaging segment of $(2,835), and the All Other group of businesses of $(803).

RESULTS OF OPERATIONS

The following discussion provides a review of results for the three-month period ended March 31, 2024 versus the three-month period ended April 2, 2023.

Net sales for the first quarter of 2024 declined by $92.2 million or 5.3%, to $1.64 billion, compared to $1.73 billion in the same period last year.

The decline was primarily driven by lower selling prices of $57.1 million and the treatment of recycling operations as a procurement function beginning January 1, 2024.

Volumes remained flat as lower volumes were offset by the impact of acquisitions.

The following discussion provides a review of results for the three-month period ended June 30, 2024 versus the three-month period ended July 2, 2023.

Net sales for the second quarter of 2024 declined by $81.8 million or 4.8%, to $1.62 billion, compared to $1.71 billion in the same period last year.

The decline was primarily driven by the absence of $44.9 million sales related to the Protexic divestiture in April 2024, the absence of $33.7 million sales related to the closure of a thermoformed food packaging plant in November 2023, lower sales of $22.5 million resulting from the accounting for the Company’s recycling operations as a procurement function effective January 1, 2024, and lower selling prices of $32.4 million.

O verall volumes, including revenue from acquisitions, increased over the prior period.

SONOCO PRODUCTS COMPANY

Net income attributable to Sonoco for the first quarter of 2024 decreased to $65.2 million, or $0.66 per diluted share, compared to $148.3 million, or $1.50 per diluted share, for the same period of 2023.

This decrease was primarily due to the absence of a $72.0 million benefit from the sale of the Company’s timberland properties and the divestiture of the S3 business in the first quarter of 2023, as well as lower volumes and pricing, which were partially offset by higher productivity.

Adjusted Earnings for the first quarter of 2024 were $111.5 million ($1.12 per diluted share), compared with $137.6 million ($1.40 per diluted share) for the same period in 2023.

GAAP o perating profit for the first quarter of 2024 was $112.5 million, a decrease of 51.0% from the $229.6 million reported in the first quarter of 2023.

T he decrease in GAAP operating profit was primarily due to the absence of a $72.0 benefit from the sale of the Company’s timberland properties and the divestiture of the S3 business in the first quarter of 2023, as well as lower volumes and pricing, which were partially offset by higher productivity.

Adjusted Operating Pro fit for the first quarter of 2024 was $176.0 million, a decrease of 17.5% from the $213.4 million reported for the same period in 2023.

GAAP net income attributable to Sonoco for the second quarter of 2024 decreased to $90.8 million, or $0.92 per diluted share, compared to $114.6 million, or $1.16 per diluted share, for the same period of 2023.

This decrease was primarily due to higher quarter-over-quarter acquisition, integration and divestiture-related costs of $17.7 million and restructuring and asset impairment charges of $13.2 million as unfavorable price/cost was offset by higher productivity.

Adjusted Earnings for the second quarter of 2024 were $126.8 million ($1.28 per diluted share), compared with $136.0 million ($1.38 per diluted share) for the same period in 2023.

GAAP o perating profit for the second quarter of 2024 was $140.4 million, a decrease of 25.3% from the $187.9 million reported in the second quarter of 2023.

T he decrease in GAAP operating profit was primarily due to additional acquisition, integration and divestiture-related costs of $17.7 million, higher employee-related costs of $13.6 million and additional restructuring and asset impairment charges of $13.2 million as unfavorable price/cost was offset by higher productivity.

Adjusted Operating Pro fit for the second quarter of 2024 was $193.0 million, a decrease of 8.5% from the $210.9 million reported for the same period in 2023.

COSTS AND EXPENSES

Cost of goods sold decreased by $55.4 million, or 4.1%, in the first quarter of 2024 compared with the same period last year.

The decrease was primarily driven by lower volumes, partially offset by cost of sales related to the acquisitions of Inapel, the Chattanooga mill and the remaining interest in RTS Packaging.

Gross profit was $337.6 million for the three-month period ended March 31, 2024, which was $36.9 million lower than the prior-year period.

The decrease in gross profit was driven by volume and pricing declines, which were partially offset by a $51.5 million benefit from improved productivity.

Gross profit as a percent of sales decreased to 20.6% from 21.6% in the prior-year quarter.

Selling, general and administrative costs increased by $5.5 million, or 2.9%, in the first quarter of 2024 compared with the same period last year, primarily due to incremental costs associated with the prior year acquisitions of Inapel, the remaining interest in RTS Packaging and the Chattanooga Mill.

Restructuring/Asset impairment charges totaled $31.6 million in the first quarter of 2024, compared with $28.8 million during the same period last year.

Cost of goods sold decreased by $81.8 million, or 6.1%, in the second quarter of 2024 compared with the same period last year.

The decrease was primaril y driven by increased productivity and lower costs related to the sale of Protexic, partially offset by cost of sales related to the acquisitions of Inapel, the Chattanooga mill and the remaining interest in RTS Packaging.

Gross profit was $357.4 million for the three-month period ended June 30, 2024, which was flat compared to the prior-year period.

Gross profit as a percent of sales increased to 22.0% from 21.0% in the prior-year quarter.

Selling, general and administrative cost s increased by $31.4 million, or 18.4% , in the second quarter of 2024 compared with the same period last year, primarily due to higher year-over-year acquisition, integration and divestiture-related costs of $17.7 million, increased employee-related costs of $13.6 million, and incremental costs of $8.2 million associated with the prior year acquisitions of Inapel, the remaining interest in RTS Packaging, and the Chattanooga Mill.

Restructuring/Asset impairment charges totaled $19.3 million in the second quarter of 2024, compared with $6.1 million during 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.

Gain on divestiture of business and other assets of $72.0 million in the first quarter of 2023 reflects gains from the divestiture of the Company’s S3 business and the sale of the Company’s timberland properties.

Gain on divestiture of business and other assets of $4.5 million in the second quarter of 2024 reflects gains from the Company’s divestitures of Protexic and the S3 business.

Gains of divestiture of business and other assets of $7.4 million in the second quarter of 2023 reflects gain s from the divestiture of the Company’s U.S.

BulkSak business.

See Note 3 to the Company’s Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Non-operating pe nsion costs were $0.4 million lower year over year primarily attributable to settlement costs in Canada in the prior year related to the Company’s defined benefit plan liabilities.

Additional information regarding costs of the Company’s retirement plans is provided in Note 11 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Net interest expense for the first quarter of 2024 decreased to $27.7 million, compared with $32.7 million during the first quarter of 2023.

The decrease of $5.0 million was primarily due to lower year over year average debt balances and interest income from the Company’s cross-currency swap entered into in December 2023.

The effective tax rates reflected in GAAP net income and Adjusted Earnings in the first quarter of 2024 were 21.3% and 25.6%, respectively, compared with 24.3% and 24.8%, respectively, in the corresponding prior year quarter.

The decrease in the GAAP rate was primarily due to a 2024 benefit from a deferred tax adjustment.

The increase in the effective tax rate on Adjusted Earnings was due to variances in tax rates between the jurisdictions in which the respective income and charges were taxed.

Other income, net was $5.9 million in the second quarter of 2024, reflecting a gain upon the remeasurement to fair value of one of the Company’s investments in affiliates.

Non- operating pension costs were $0.8 million higher in the second quarter of 2024 compared to the second quarter of 2023, primarily attributable to higher settlement losses in Canada and higher year-over-year interest cost, partially offset by increased expected returns on assets.

A dditional information regarding costs of the Company’s retirement plans is provided in Note 12 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Net interest expense for the second quarter of 2024 decreased to $26.1 million, compared with $32.3 million during the second quarter of 2023.

The decrease o f $6.3 million was primarily due to lower year over year average debt balances and interest income from the Company’s cross-currency swaps.

The effective tax rates reflected in GAAP net income and Adjusted Earnings in the second quarter of 2024 were 23.5% and 25.5%, respectively, compared with 26.8% and 25.6%, respectively, in the corresponding prior year quarter.

The decrease in the GAAP effective tax rate was primarily related to the difference between the tax basis and the book basis on the sale of the shares of Protexic in Mexico.

The effective tax rate on Adjusted Earnings was relatively flat quarter over quarter.

SONOCO PRODUCTS COMPANY

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The Company’s operating and reporting structure consists of two reportable segments, Consumer Packaging and Industrial Paper Packaging, with all remaining businesses reported as All Other.

The following table summarizes net sales attributable to each of the Company’s segments and the All Other group of businesses for the first quarters of 2024 and 2023:

The following table summarizes net sales attributable to each of the Company’s segments and the All Other group of businesses for the second quarters of 2024 and 2023:

Three Months Ended

(Dollars in thousands) March 31, 2024 April 2, 2023 %

(Dollars in thousands) June 30, 2024 July 2, 2023 %

Consumer Packaging $ 927,729 $ 971,320 (4.5) %

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Net sales $ 1,623,479 $ 1,705,290 (4.8) %

The following table summarizes operating profit attributable to each of the Company’s reportable segments, the All Other group of businesses, and Corporate-related activity during the first quarters of 2024 and 2023:

Three Months Ended

(Dollars in thousands) March 31, 2024 April 2, 2023 %

(Dollars in thousands) June 30, 2024 July 2, 2023 %

Operating profit:

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Gains from divestiture of business and other assets 4,478 7,371

Acquisition, integration and divestiture-related costs (22,269) (4,532)

Other operating charges, net 6,959 676

Operating profit $ 140,372 $ 187,859 (25.3) %

The following table summarizes Adjusted EBITDA attributable to each of the Company’s reportable segments and the All Other group of businesses during the first quarters of 2024 and 2023:

The following table summarizes Adjusted EBITDA attributable to each of the Company’s reportable segments and the All Other group of businesses during the second quarters of 2024 and 2023:

Three Months Ended

(Dollars in thousands) March 31, 2024 April 2, 2023 %

(Dollars in thousands) June 30, 2024 July 2, 2023 %

Adjusted EBITDA:

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SONOCO PRODUCTS COMPANY

The following table summarizes restructuring/asset impairment charges attributable to each of the Company’s reportable segments, the All Other group of businesses, and Corporate-related activity during the first quarters of 2024 and 2023:

Three Months Ended

(Dollars in thousands) March 31, 2024 April 2, 2023

(Dollars in thousands) June 30, 2024 July 2, 2023

Restructuring/Asset impairment charges:

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These products primarily serve the consumer staples market, focused on food, beverage, household, personal, and pharmaceutical products.

Segment sales decreased approximately 5.0% compared to the corresponding prior year quarter as volumes continued to be impacted by lower consumer purchases from inflationary pricing impacts, primarily in snacks and confectionary markets, partially offset by year over year growth in aerosol volumes.

Segment operating profit and Adjusted EBITDA decreased by 3.6% and 0.5%, respectively.

The decline was largely due to lower volumes across the segment and negative price/cost.

These declines were partially offset by continued strong productivity throughout the segment.

Segment sales decreased approximately 4.5% compared to the corresponding prior year quarter due to the absence of $33.7 million in sales related to the closure of a thermoformed food packaging plant in November 2023, and lower pricing of $19.5 million, partially offset by a net $22.9 million increase in sales driven by the benefit of acquisitions.

Segment operating profit and Adjusted EBITDA increased by 10.9% and 10.5%, respectively.

The increase was largely due to strong productivity of $24.6 million, which was partially offset by higher employee-related expenses.

As a result, segment operating profit margin increased to 12.1% in the second quarter of 2024 from 10.4% in the same period last year.

Industrial Paper Packaging

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Products across this segment support multiple end markets, primarily in paper, textile, and films.

Segment sales decreased 3.7% from the corresponding prior year quarter due to lower index-related pricing, continued weakness in global converted products, and the conduct of recycling as a procurement function, partially offset by higher demand in paper and the benefit of the acquisitions of the remaining interest in RTS Packaging and the Chattanooga Mill.

Segment operating profit and Adjusted EBITDA decreased 30.2% and 21.1%, respectively, as continued price/cost pressures were only partially offset by strong productivity and the benefit from acquisitions.

Segment operating profit margin decreased to 11% in the first quarter of 2024 from 15% in the same period last year, and Segment Adjusted EBITDA margin declined to 16% in the first quarter compared to 20% in the same period last year, in each case due to unfavorable resets in commercial contracts with certain customers and suppliers tied to indices.

These declines were partially offset by manufacturing productivity improvements due primarily to higher utilization in our paper mills and optimization of the operations footprint.

Segment sales increased 2.7% from the corresponding prior year quarter from organic volume improvements of $9.9 million in global paper and converted products and $51.0 million in revenues from the acquisitions of the remaining interest in RTS Packaging and the Chattanooga Mill.

These increases were partially offset by lower quarter-over-quarter sales resulting from the prior year disposition of BulkSak, lower index-related pricing of $12.4 million, and the reduction in sales of $22.5 million related to the treatment of the segment’s recycling operations as a procurement function effective January 1, 2024.

Segment operating profit and Adjusted EBITDA decreased 23.1% and 15.1%, respectively, as continued price/cost pressures lowered profitability by $46.5 million and higher employee-related expenses were only partially offset by strong productivity of $23.1 million and the benefit of higher volumes, including acquisitions, of $15.2 million.

As a result, segment operating profit margin decreased to 11% in the second quarter of 2024 from 15% in the same period last year.

The primary products produced within the All Other group of businesses consist of a variety of packaging materials including plastic, paper, foam, and various other specialty materials serving a wide variety of end markets including consumer staples, consumer discretionary, and industrial.

Sales declined 14.1% from the same quarter of the prior year primarily due to lower volumes.

Operating profit and Adjusted EBITDA dropped by 24.1% and 20.4%, respectively, in the first quarter of 2024 compared to the same period last year, primarily due to lower volumes and negative price/cost, partially offset by higher productivity.

As a result, operating margin decreased to 12.8% in the first quarter of 2024 compared to 14.5% in the same quarter last year.

Sales declined 36.2% from the same quarter of the prior year primarily due to the sale of Protexic.

Operating profit and Adjusted EBITDA dropped by 39.1% and 37.3%, respectively, in the second quarter of 2024 compared to the same period last year, primarily due to the sale of Protexic, lower volumes and negative price/cost, partially offset by higher productivity.

As a result, operating margin decreased to 14.6% in the second quarter of 2024 compared to 15.3% in the same quarter last year.

SONOCO PRODUCTS COMPANY

Six Months Ended June 30, 2024 Compared with Six Months Ended July 2, 2023

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

Adjusted Operating Profit, Adjusted Income Before Income Taxes, Adjusted Provision for Income Taxes, Adjusted Net Income Attributable to Sonoco, and Adjusted Diluted EPS

For the six-month period ended June 30, 2024

Dollars in thousands, except per share data Operating Profit Income Before Income Taxes Provision for Income Taxes Net Income Attributable to Sonoco Diluted EPS

As Reported $ 252,825 $ 197,480 $ 44,667 $ 155,988 $ 1.57

Acquisition, integration and divestiture-related costs 27,930 27,930 7,158 20,772 0.21

Changes in LIFO inventory reserves (987) (987) (248) (739) (0.01)

Amortization of acquisition intangibles 45,450 45,450 11,109 34,341 0.35

Restructuring/Asset impairment charges 50,868 50,868 10,256 40,702 0.41

Gain on divestiture of business and other assets (4,478) (4,478) 1,222 (5,700) (0.06)

Other income, net

— (5,867) — (5,867) (0.06)

Non-operating pension costs — 7,465 1,855 5,610 0.06

Net gains from derivatives

(3,771) (3,771) (948) (2,823) (0.03)

Other adjustments 1,124 1,546 5,580 (4,034) (0.04)

Total adjustments 116,136 118,156 35,984 82,262 0.83

Adjusted $ 368,961 $ 315,636 $ 80,651 $ 238,250 $ 2.40

Due to rounding, individual items may not sum appropriately.

For the six-month period ended July 2, 2023

Dollars in thousands, except per share data Operating Profit Income Before Income Taxes Provision for Income Taxes Net Income Attributable to Sonoco Diluted EPS

As Reported $ 417,507 $ 345,497 $ 87,652 $ 262,968 $ 2.66

Acquisition, integration and divestiture-related costs 9,720 9,720 2,270 7,450 0.08

Changes in LIFO inventory reserves (7,000) (7,000) (1,749) (5,252) (0.05)

Amortization of acquisition intangibles 41,703 41,703 10,119 31,584 0.32

Restructuring/Asset impairment charges 34,871 34,871 7,959 26,683 0.27

Gain on divestiture of business and other assets (79,381) (79,381) (18,947) (60,434) (0.61)

Non-operating pension costs — 7,000 1,737 5,263 0.05

Net losses from derivatives

1,797 1,797 448 1,348 0.01

Other adjustments 5,144 5,144 1,167 3,979 0.04

Total adjustments 6,854 13,854 3,004 10,621 0.11

Adjusted $ 424,361 $ 359,351 $ 90,656 $ 273,589 $ 2.77

Due to rounding, individual items may not sum appropriately.

SONOCO PRODUCTS COMPANY

Adjusted EBITDA and Adjusted EBITDA Margin

Six Months Ended

Dollars in thousands June 30, 2024 July 2, 2023

Net income attributable to Sonoco $ 155,988 $ 262,968

Interest expense 60,860 68,516

Interest income (7,113) (3,506)

Provision for income taxes 44,667 87,652

Depreciation, depletion and amortization

180,045 163,817

Non-operating pension costs 7,465 7,000

Net income attributable to noncontrolling interests 236 45

Restructuring/Asset impairment charges 50,868 34,871

Changes in LIFO inventory reserves (987) (7,000)

Gain from divestiture of business and other assets

(4,478) (79,381)

Acquisition, integration and divestiture-related costs 27,930 9,720

Other income, net

Net (gains)/losses from derivatives

(3,771) 1,796

Other adjustments

Adjusted EBITDA $ 506,967 $ 551,642

Net Sales $ 3,261,022 $ 3,435,073

Net Income Margin

Adjusted EBITDA Margin 15.5 % 16.1 %

SONOCO PRODUCTS COMPANY

The following tables reconcile Segment Operating Profit, the closest GAAP measure of profitability, to Segment Adjusted EBITDA.

Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation

For the Six Months Ended June 30, 2024

Dollars in thousands Consumer Packaging segment Industrial Paper Packaging segment All Other Corporate Total

Segment and Total Operating Profit $ 205,169 $ 132,802 $ 30,990 $ (116,136) $ 252,825

Depreciation, depletion and amortization 1

71,082 57,144 6,369 45,450 180,045

Equity in earnings of affiliates, net of tax 47 3,364 — — 3,411

Restructuring/Asset impairment charges 2

— — — 50,868 50,868

Changes in LIFO inventory reserves 3

— — — (987) (987)

Acquisition, integration and divestiture-related costs 4

— — — 27,930 27,930

Gains from divestiture of business 5

— — — (4,478) (4,478)

Net gains from derivatives 6

— — — (3,771) (3,771)

Other adjustments

— — — 1,124 1,124

Segment Adjusted EBITDA $ 276,298 $ 193,310 $ 37,359 $ — $ 506,967

Net Sales $ 1,838,306 $ 1,193,830 $ 228,886

Segment Operating Profit Margin 11.2 % 11.1 % 13.5 %

Segment Adjusted EBITDA Margin 15.0 % 16.2 % 16.3 %

1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of $32,176, the Industrial Paper Packaging segment of $12,862, and the All Other group of businesses of $412.

2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer Packaging segment of $16,088, the Industrial Paper Packaging segment of $30,340, and the All Other group of businesses of $1,362.

3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment of $(370) and the Industrial Paper Packaging segment of $(617).

4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer Packaging segment of $54 and the Industrial Paper Packaging segment of $871.

6 Included in Corporate are net gains from derivatives associated with the Consumer Packaging segment of $(583), the Industrial Paper Packaging segment of $(2,467), and the All Other group of businesses of $(721).

SONOCO PRODUCTS COMPANY

Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation

For the Six Months Ended July 2, 2023

Dollars in thousands Consumer Packaging segment Industrial Paper Packaging segment All Other Corporate Total

Segment and Total Operating Profit $ 197,608 $ 181,407 $ 45,345 $ (6,853) $ 417,507

Depreciation, depletion and amortization 1

65,015 49,886 7,213 41,703 163,817

Equity in earnings of affiliates, net of tax 209 4,959 — — 5,168

Restructuring/Asset impairment charges 2

— — — 34,871 34,871

Changes in LIFO inventory reserves 3

— — — (7,000) (7,000)

Acquisition, integration and divestiture-related costs 4

— — — 9,720 9,720

Gains from divestiture of business and other assets 5

— — — (79,381) (79,381)

Net losses from derivatives 6

— — — 1,796 1,796

Other adjustments

— — — 5,144 5,144

Segment Adjusted EBITDA $ 262,832 $ 236,252 $ 52,558 $ — $ 551,642

Net Sales $ 1,929,328 $ 1,200,998 $ 304,747

Segment Operating Profit Margin 10.2 % 15.1 % 14.9 %

Segment Adjusted EBITDA Margin 13.6 % 19.7 % 17.2 %

1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of $32,213, the Industrial Paper Packaging segment of $5,499, and the All Other group of businesses of $3,991.

2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer Packaging segment of $6,695, the Industrial Paper Packaging segment of $26,531, and the All Other group of businesses of $918.

3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment of $(6,103) and the Industrial Paper Packaging segment of $(897).

4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer Packaging segment of $892 and the Industrial Paper Packaging segment of $349.

5 Included in Corporate are gains from the sale of the Company’s timberland properties in the amount of $(60,945), the sale of its S3 business in the amount of $(11,065), and the sale of its U.S.

BulkSak businesses in the amount of $(7,371), all of which are associated with the Industrial Paper Packaging segment.

6 Included in Corporate are net losses from derivatives associated with the Consumer Packaging segment of $297, the Industrial Paper Packaging segment of $1,133, and the All Other group of businesses of $366.

RESULTS OF OPERATIONS

The following discussion provides a review of results for the six-month period ended June 30, 2024 compared with the six-month period ended July 2, 2023.

Net sales for the first six months of 2024 decreased 5.1% to $3.3 billion, compared with $3.4 billion in the same period last year.

The decline was primarily attributable to the absence of $44.9 million in sales related to the Protexic divestiture in April 2024, the absence of $40.9 million in sales related to the closure of a thermoformed food packaging plant in November 2023, lower sales of $55.4 million resulting from the accounting for the Company’s recycling operations as a procurement function beginning January 1, 2024, and lower pricing of $89.5 million.

These decreases were partially offset by sales from acquisitions of $163.7 million.

SONOCO PRODUCTS COMPANY

GAAP net income attributable to Sonoco for the first six months of 2024 decreased to $156.0 million, or $1.57 per diluted share, compared to $263.0 million , or $2.66 per diluted share, reported for the same period of 2023.

This decrease was primarily due to the absence of a $72.0 million benefit from the sale of the Company’s timberland properties and the divestiture of the S3 business in 2023, additional acquisition, integration and divestiture-related costs of $18.2 million and higher restructuring and asset impairment charges of $16.0 million, as unfavorable price/cost was offset by higher productivity.

Adjusted Earning s for the six-month period ended June 30, 2024 decreased 12.9% to $238.3 million, or $2.40 per diluted share, from $273.6 million, or $2.77 per diluted share, in the s ix-month period ended July 2, 2023 .

GAAP o perating profit for the first six months of 2024 was $252.8 million, a decrease of 39.4% from the $417.5 million reported in the same period last year .

T he decrease in GAAP operating profit was primarily due to the absence of a $72.0 million benefit from the sale of the Company’s timberland properties and the divestiture of the S3 business in 2023, additional acquisition, integration and divestiture-related costs of $18.2 million, and higher restructuring and asset impairment charges of $16.0 million, as unfavorable price/cost was offset by higher productivity.

Adjusted Operating Pro fit for the first six months of 2024 was $369.0 million, a decrease of 13.1% from the $424.4 million reported for the same period in 2023.

COSTS AND EXPENSES

Cost of goods sold decreased $137.2 million, or 5.1% primarily related to increased productivity and lower costs related to the sale of Protexic, partially offset by cost of sales related to the acquisitions of Inapel, the Chattanooga mill, and the remaining interest in RTS Packaging.

Gross profit decreased $36.8 million, or 5.0%, year over year, while the Company’s gross profit margin percentage remained flat at 21.3% for the first six months of 2024, compared to the prior-year period.

The decrease in gross profit was driven by volume and pricing declines, partially offset by positive margin related to the acquisitions of Inapel, the Chattanooga mill, and the remaining interest in RTS Packaging.

Selling, general and administrative costs for the first six months of 2024 increased $36.9 million, or 10.3%, year over year.

The increase was largely driven by higher year-over-year acquisition, integration and divestiture-related costs of $18.2 million, increased employee-related costs, and incremental costs of $16.6 million associated with the prior year acquisitions of Inapel, the Chattanooga mill, and the remaining interest in RTS Packaging.

Restructuring/Asset impairment charges totaled $50.9 million in the first six months of 2023, compared with $34.9 million of n et charges in the same period last year.

Gain on divestiture of business and other assets of $4.5 million in the first six months of 2024 reflects gains from the Company’s divestitures of Protexic and the S3 business.

Gain on divestiture of business and other assets of $79.4 million in the first six months of 2023 reflects net gains from the sale of the Company’s timberland properties and the divestitures of its S3 and U.S.

BulkSak businesses.

See Note 3 to the Company’s Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Other income, net was $5.9 million in the first six months of 2024, reflecting a gain upon the remeasurement to fair value of one of the Company’s investments in affiliates.

Non-operating pe nsion costs increased $0.5 million year over year due to higher interest costs on the Company’s defined benefit plan liabilities, partially offset by increased expected returns on assets.

Additional information regarding costs of the Company’s retirement plans is provided in Note 12 to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

GAAP net interest expense for the first six months of 2024 decreased to $53.7 million, compared with $65.0 million during the first six months of 2023.

The decrease of $11.3 million was primarily due to lower year-over-year average debt balances and interest income from the Company’s cross-currency swaps.

The effective tax rates reflected in GAAP net income and Adjusted Earnings in the first six months of 2024 were 22.6% and 25.6%, respectively, compared with 25.4% and 25.2% for GAAP net income and Adjusted Earnings, respectively, in the prior-year period.

The decrease in the GAAP effective tax rate was primarily related to the difference between the tax basis and the book basis on the sale of the shares of Protexic in Mexico and a net benefit from deferred tax adjustments.

The effective tax rate on Adjusted Earnings was relatively flat year over year.

SONOCO PRODUCTS COMPANY

REPORTABLE SEGMENTS

The following table summarizes net sales attributable to each of the Company’s reportable segments, and the All Other group of businesses during the first six months of 2024 and 2023:

Six Months Ended

(Dollars in thousands) June 30, 2024 July 2, 2023 % Change

Consumer Packaging $ 1,838,306 $ 1,929,328 (4.7) %

Industrial Paper Packaging 1,193,830 1,200,998 (0.6) %

All Other 228,886 304,747 (24.9) %

Net sales $ 3,261,022 $ 3,435,073 (5.1) %

Six Months Ended

(Dollars in thousands) June 30, 2024 July 2, 2023 % Change

Operating profit:

Consumer Packaging $ 205,169 $ 197,608 3.8 %

Industrial Paper Packaging 132,802 181,407 (26.8) %

Segment operating profit 337,971 379,015 (10.8) %

All Other 30,990 45,345 (31.7) %

Restructuring/Asset impairment charges (50,868) (34,871)

Amortization of acquisition intangibles (45,450) (41,703)

Gains from divestiture of business and other assets 4,478 79,381

Acquisition, integration and divestiture-related costs (27,930) (9,720)

Other operating charges, net

Operating profit $ 252,825 $ 417,507 (39.4) %

The following table summarizes Adjusted EBITDA attributable to each of the Company’s reportable segments and the All Other group of businesses during the first six months of 2024 and 2023:

Six Months Ended

(Dollars in thousands) June 30, 2024 July 2, 2023 %

Adjusted EBITDA:

Consumer Packaging $ 276,298 $ 262,832 5.1 %

Industrial Paper Packaging 193,310 236,252 (18.2) %

All Other 37,359 52,558 (28.9) %

Adjusted EBITDA $ 506,967 $ 551,642 (8.1) %

SONOCO PRODUCTS COMPANY

Six Months Ended

(Dollars in thousands) June 30, 2024 July 2, 2023

Restructuring/Asset impairment charges:

Consumer Packaging $ 16,088 $ 6,695

Industrial Paper Packaging 30,340 26,531

All Other 1,362 918

Corporate 3,078 727

Restructuring/Asset impairment charges $ 50,868 $ 34,871

Consumer Packaging

Segment sales decreased 4.7% year to date compared to the prior-year period due to the absence of $40.9 million in sales related to the closure of a thermoformed food packaging plant in November 2023, lower pricing of $39.9 million, and lower net volumes of $9.2 million, which included an increase in sales related to the Inapel acquisition.

Year-to-date segment operating profit increased 3.8% as strong productivity of $40.5 million was partially offset by unfavorable net volumes of $12.7 million and higher employee-related expenses.

As a result, segment operating profit margin increased from 10.2% in the first six months of 2023 to 11.2% in the first six months of 2024.

Industrial Paper Packaging

Segment sales remained fairly flat year to date compared to the prior-year period as net increases in sales of $100.6 million related to the acquisitions of the remaining interest in RTS Packaging and the Chattanooga Mill, reduced by the disposition of BulkSak, were offset by lower index-related pricing of $49.4 million and the reduction in sales of $55.4 million related to the treatment of the segment’s recycling operations as a procurement function effective January 1, 2024.

Segment operating profit decreased 26.8% versus the prior-year period primarily due to pricing pressures resulting in lower profitability of $102.3 million and higher employee-related costs, which were only partially offset by increased productivity of $51.5 million and higher volumes from acquisitions of $18.7 million.

As a result, segment operating margin decreased from 15.1% in the first six months of 2023 to 11.1% in the first six months of 2024.

Sales for the All Other group of businesses declined 24.9% year to date compared to the prior-year period primarily due to the sale of Protexic and lower volumes in temperature assured packaging.

All Other operating profit declined 31.7% year to date compared to the prior-year period due to the sale of Protexic, lower volumes and negative price/cost, partially offset by higher productivity.

Segment operating margin declined to 13.5% year to date compared to 14.9% in 2023.

SONOCO PRODUCTS COMPANY

Financial Position, Liquidity and Capital Resources

Cash generated from operations for the first three months of 2024 was $166.2 million, compared with $98.0 million in the same period of 2023, a year-over-year increase of $68.2 million.

Cash generated from operations fo r the first six months of 2024 was $275.5 million, compared with $348.6 million in the same period of 2023, a year-over-year decrease of $73.1 million.

While GAAP net income decreased by $106.8 million year over year, this decline was primarily attributable to the absence of non-cash gains from the sales of the Company’s S3 business and timberland properties during the first quarter of 2023.

Net working capital provided $0.8 million of cash in the first three months of 2024, while using $91.5 million in the same period last year, for a year-over-year increase in operating cash flow of $92.3 million driven primarily by a year-over-year increase in cash provided by payable to suppliers of $97.3 million.

Purchasing activity in the first quarter of 2023 was lower than normal due to abnormally high levels of certain inventory items that were maintained at the end of 2022 as a result of supply chain challenges, whereas inventory and purchasing activity returned to more normalized levels in the current period.

Accounts receivable used $9.8 million more cash during the first three months of 2024 than in the same period last year as a result of the impact of changing mix in customer payment terms more than offsetting lower sales volumes.

The Company continues to actively manage all components of net working capital by managing inventories and reviewing payment terms with customers and suppliers to appropriately address risk and balance economic benefit.

Changes in accrued expenses and other assets and liabilities used $7.1 million in the three-month period ended March 31, 2024, compared with using $18.9 million in the same period last year.

The $11.8 million lower use of cash in the current year was largely driven by the lower year-over-year payout of management incentive compensation.

Cash contributions to the Company’s retirement plans were $4.0 million in the first three months of 2024, compared with $4.9 million in the same period last year.

Investing activities used $81.7 million of cash in the first three months of 2024, compared with $3.0 million in the same period last year, a higher year-over-year use of cash of $78.8 million.

While capital expenditures during the first three months of 2024 were $86.5 million, $3.1 million higher than the same period last year, this use of cash was partially offset in the prior year by proceeds from the sale of assets of $71.4 million, primarily from the March 2023 sale of the Company’s timberland properties.

In addition, proceeds from the sale of the Company’s S3 business provided $13.8 million of cash in the first three months of 2023.

Investments in affiliated companies used $5.0 million of cash during the three-month period ended April 2, 2023 as a result of the Company’s purchase of a 2.7% equity interest in Northstar Recycling Co.

Other net investing activities provided $4.9 million more cash year over year, primarily as a result of higher life insurance proceeds received in the current year.

Net capital spending for 2024 is expected to be approximately $350 million compared to $283 million in 2023.

Financing activities used $62.7 million of cash in the three-month period ended March 31, 2024, while using $118.2 million in the corresponding prior-year period, a year-over-year decrease of $55.5 million.

The decrease was largely driven by higher debt repayments in the prior year.

Net working capit al used $29.2 million o f cash in the first six months of 2024, while providing $0.9 million in the same period last year, for a year-over-year decrease in operating cash flow o f $30.1 million.

A ccounts receivable used $85.2 million more cash during the first six months of 2024 than in the same period last year as a result of the impact of the changing mix in customer payment terms more than offset lower revenues.

Inventory was a source of cash of $15.4 million in the first six months of 2024, while last year was a source of cash of $148.9 million .

This year-over-year decrease was expected as the Company ended 2022 with a substantial inventory position driven by pandemic-related supply chain uncertainty.

Conversely, accounts payable was a source of cash of $57.9 million in the first six months as compared to a use of cash of $130.7 million in the same period last year.

As inventories and supply chain normalized in the second half of 2023 and first half of 2024, purchasing activity has normalized.

The Company has continued to actively manage all components of net working capital by managing inventories and reviewing payment terms with customers and suppliers to appropriately address risk and balance economic benefit.

Changes in accrued expenses and other assets and liabilities used cash totaling $3.7 million in the six-month period ended June 30, 2024, and used $38.0 million in the same period last year.

The $34.3 million lo wer use of cash in the current year was largely driven by the lower year-over-year payout of management incentive compensation.

Cash contributions to the Company’s retirement plans were $9.1 million in the first six months of 2024, compar ed with $7.5 million in the same period last year.

Investing activities used $96.6 million of cash in the first six months of 2024, compared with $80.4 million in the same period last year, a higher year-over-year use of cash of $16.2 million.

Capital expenditures during the first six months of 2024 were $179.7 million, $18.0 million higher than the same period last year.

Proceeds from sale of businesses provided $81.5 million in the first six months of 2024, primarily driven by the sale of Protexic, compared with $13.8 million in the prior year, from the sale of the Company’s S3 business.

Proceeds from the sale of assets were $71.9 million in the first six months of 2023, primarily from the March 2023 sale of the Company’s timberland properties.

Additionally, proceeds from the settlement of a net investment hedge provided $9.1 million of cash in the first six months of 2024.

Investing cash flows in the first six months of 2024 also reflect the Company’s $10.0 million investment to increase its ownership in a small South Carolina based designer and manufacturer of sustainable protective packaging solutions from 20.5% to 39.9%.

In the same period last year, the Company used $5.0 million of cash to purchase a 2.7% equity interest in Northstar Recycling Co.

Other net investing activities provided $4.9 million more cash year over year, primarily as a result of higher insurance proceeds received in the current year.

Net capital spending for 2024 is expected to be approximately $350 million to $375 million compared to $283 million in 2023.

Financing activities used $178.0 million of cash in the six-month period ended June 30, 2024, compared with $185.0 million in the same period last year.

The $7.0 million lower year-over-year use of cash was largely driven by lower year-over-year net debt repayments of $24.0 million, partially offset by payments of loan financing costs of $19.0 million in the first six months of 2024.

Cash used to pay dividends increased by $3.6 million year over year reflecting the increase in the quarterly dividend payment from $0.51 per share to $0.52 per share approved by the Company’s Board of Directors in April 2024.

Cash used to repurchase the Company’s common stock to satisfy employee tax withholding obligations in association with the exercise of certain share-based compensation awards was $9.1 million in the three-month period ended March 31, 2024, compared to $10.6 million in the same period last year.

Cash used to repurchase the Company’s common stock to satisfy employee tax withholding obligations in association with the exercise of certain share-based compensation awards was $9.2 million in the six-month period ended June 30, 2024, compared to $10.6 million in the same period last year.

The C ompany’s cash balances are held in numerous locations throughout the world.

At March 31, 2024 and December 31, 2023, approximatel y $114.0 million and $93.8 million, respectively, of the Company’s reported cash and cash equivalents balances of $172.2 million and $151.9 million, respectively, were held outside of the United States by its foreign subsidiaries.

At June 30, 2024 and December 31, 2023, approximatel y $116.4 million and $93.8 million, respectively, of the Company’s reported cash and cash equivalents balances of $140.2 million and $151.9 million, respectively, were held outside of the United States by its foreign subsidiaries.

Cash held outside of the U nited States is available to meet local liquidity needs or for capital expenditures, acquisitions, and other offshore growth opportunities.

As the Company has maintained sufficient domestic liquidity through a combination of operating cash flow generation and access to bank and capital market borrowings, management 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, as of March 31, 2024 the Company is not providing for taxes on these amounts for financial reporting purposes.

Accordingly, as of June 30, 2024 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.

SONOCO PRODUCTS COMPANY

The Company uses a notional pooling arrangement with an international bank to help manage global liquidity requirements.

1 unchanged sentence

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 cash deposit and borrowing positions.

SONOCO PRODUCTS COMPANY

During the three-month period ended March 31, 2024, the Company reported a net decrease in cash and cash equivalents of $1.6 million due to currency translation adjustment s resulting from a stronger U.S.

During the six-month period ended June 30, 2024, the Company reported a net decrease in cash and cash equivalents of $12.6 million due to currency translation adjustment s resulting from a stronger U.S.

d ollar relative to certain foreign currencies in which cash and cash equivalents were held.

The Company operates a $500 million commercial paper program, supported by a $900 million unsecured revolving credit facility with a syndicate of banks that is committed through June 2026.

T he Company has the contractual right to draw funds directly on the underlying revolving credit facility, which could possibly occur if there were a disruption in the commercial paper market.

At March 31, 2024, the Company had scheduled debt maturities of approximately $454 million over the next twelve months, including $400 million aggregate principal amount of its 1.80% notes due February 2025.

As the Company ha d no commercial paper balances outstanding at March 31, 2024 , all of the $900 million in committed capacity under its revolving credit f acility was available for draw down.

The Company believes that cash and cash equivalents on hand and expected net cash flows generated from operating and investing activities, together with available capacity under the Company’s existing borrowing arrangements and the potential for additional borrowings or the issuance of new debt securities, will provide sufficient liquidity to cover debt maturities and other cash flow needs of the Company over the next twelve months and beyond.

On May 3, 2024, the Company increased the commitments under its unsecured revolving credit facility by $350 million to an aggregate amount of $1.25 billion and extended the maturity date to May 3, 2029, and also increased its $500 million commercial paper program by $750 million to $1.25 billion .

The commercial paper program is supported by the Company’s revolving credit facility.

The Company has the contractual right to draw funds directly on the underlying revolving credit facility, which could possibly occur if there were a disruption in the commercial paper market.

On June 22, 2024, to secure funding for the pending Eviosys acquisition, the Company entered into a 364-day senior unsecured bridge term loan facility (the “Bridge Loan Facility”) in an amount not to exceed $4.0 billion.

The Bridge Loan Facility is comprised of two tranches, Tranche A in the amount of $700 million and Tranche B in the amount of $3.3 billion.

On July 12, 2024, subsequent to the end of the quarter, the Company entered into a credit agreement (the “Term Loan Agreement”), providing the Company with the ability to borrow up to $700 million on an unsecured basis to finance a portion of the cash consideration for the Eviosys acquisition.

Funding of the Term Loan Agreement is expected to occur substantially concurrently with the closing of the acquisition.

The aggregate principal amount of the commitments under the Term Loan Agreement have replaced a corresponding amount of the commitments in respect of the Bridge Loan Facility in accordance with the terms of the Bridge Loan Facility commitment letter.

As a result, an aggregate principal amount of up to $3.3 billion in Bridge Loan Facility commitments remain.

On April 1, 2024, the Company completed the sale of Protexic, part of the All Other group of businesses, to Black Diamond Capital Management, LLC for net cash proceeds of $80.3 million.

The Company used the majority of these proceeds to pay down deb t.

The Company believes that this and other potential divestitures will enable greater strategic clarity and operational focus while also generating proceeds to fund deleveraging and capital investments in core businesses.

At June 30, 2024, the Company had scheduled debt maturities of approximately $485 million over the next twelve months, including $400 million aggregate principal amount of its 1.80% notes due February 2025.

As the Company had $28 million in commercial paper balances outstanding at June 30, 2024, $1.22 billion in committed capacity under its revolving credit facility was available for draw down.

The Company believes that cash and cash equivalents on hand, expected net cash flows generated from operating and investing activities, and expected proceeds from divestitures, together with available capacity under the Company’s increased borrowing arrangements and the opportunity to raise additional capital through one or more capital markets transactions, will provide sufficient liquidity to fund the Eviosys acquisition and cover debt maturities and other cash flow needs of the Company over the next twelve months and beyond.

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 March 31, 2024 , the Company’s interest coverage and net worth were substantially above the minimum levels required under these covenants.

On April 1, 2024, subsequent to the end of the first quarter, the Company completed the sale of Protexic , part of the All Other group of businesses, to Black Diamond Capital Management, LLC for cash proceeds of $82 million.

The Company used the majority of these proceeds to pay down debt.

As of June 30, 2024 , 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 that 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 existing credit facilities or additional borrowings.

The Company expects that any additional acquisitions requiring funding in excess of cash on hand would be financed using existing credit facilities or additional borrowings.

The Company anticipates making additional contributions to its other pension and postretirement plans of approximately $12 million durin g the remainder of 2024, resulting in expected total contributions to these plans of approximately $21 million in 2024.

Future funding requirements beyond the current year will vary depending largely on investment performance, future actuarial assumptions, and legislative actions.

SONOCO PRODUCTS COMPANY

Fair Value Measurements, Foreign Exchange Exposure and Risk Management

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The Company’s foreign operations are exposed to political, geopolitical, and cultural risks, but these risks are mitigated by diversification and the relative stability of the countries in which the Company has significant operations.

SONOCO PRODUCTS COMPANY

Because the economy in Venezuela is considered highly inflationary under U.S.

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Further deterioration could result in the recognition of an impairment charge or a deconsolidation of the subsidiary.

At March 31, 2024, the carrying value of the Company’s net investment in its Venezuelan operations was approximately $2.1 million.

In addition, at March 31, 2024, 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 the Venezuelan operations.

At June 30, 2024, the carrying value of the Company’s net investment in its Venezuelan operations was approximately $2.1 million.

In addition, at June 30, 2024, 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 the Venezuelan operations.

Turkey has also been deemed to be a highly inflationary economy under U.S.

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dollars with changes recorded through earnings.

The cumulative impact of applying highly inflationary accounting to Turk ey has been a pretax charge to earnings of $7.6 million ($5.8 million after tax), including $1.1 million ($0.8 million after tax) during th e three-month period ended March 31, 2024.

The cumulative impact of applying highly inflationary accounting to Turk ey has been a pretax charge to earnings of $7.5 million ($5.8 million after tax), including $1.0 million ($0.8 million after tax) during th e six-month period ended June 30, 2024.

Th e magnitude of future earnings impacts, however, is uncertain as such impacts are dependent upon unpredictable movements in the Turkish lira relative to the U.S.

In addition to remeasurement-related charges, significant deterioration in the Turkish economy could result in the recognition of future impairment charges.

However, the Company believes its exposure is limited to its net investment in Turkey which was approximat ely $18.1 million as of March 31, 2024.

However, the Company believes its exposure is limited to its net investment in Turkey which was approximat ely $22.6 million as of June 30, 2024.

The Company is a purchaser of various raw material inputs such as recovered paper, energy, steel, aluminum, and plastic resin.

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In addition, the Company may occasionally use traditional, unleveraged interest-rate swaps to manage its mix of fixed and variable rate debt and control its exposure to interest rate movements within select ranges.

At March 31, 2024, t he Company had derivative contracts outstanding to hedge the prices on a portion of anticipated natural gas and aluminum purchases.

At June 30, 2024, t he Company had derivative contracts outstanding to hedge the prices on a portion of anticipated natural gas and aluminum purchases.

These contracts, some of which qualify as cash flow hedges, include natural gas swaps totaling approximately 6.3 million metric million British thermal units (“MMBTUs”) and aluminum swaps totaling 222 metric tons.

These contracts have various maturity dates ranging through December 2025.

The total fai r market value of these instruments resulted in a net loss position of $6.6 million and $6.8 million at March 31, 2024 and December 31, 2023, respectively.

The total fai r market value of these instruments resulted in a net loss position of $3.0 million and $6.8 million at June 30, 2024 and December 31, 2023, respectively.

SONOCO PRODUCTS COMPANY

The Company routinely enters into derivative currency contracts to mitigate the risk of unfavorable fluctuations in the exchange rate on certain anticipated foreign currency cash flows.

These contracts qualify as cash flow hedges and have various maturity dates rangi n g from April 2024 through Decembe r 2024.

T he total market value of these instruments resulted in net gain positions of $1.5 million and $1.5 million at March 31, 2024 and December 31, 2023, respectively.

In addition, at March 31, 2024, the Company had various currency contracts outstanding to hedge the currency exposure of intercompany debt and foreign currency denominated receivables and payables.

These contracts qualify as cash flow hedges and have various maturity dates rangi n g through Decembe r 2024.

T he total market value of these instruments resulted in a net loss position of $1.1 million at June 30, 2024 and a net gain position of $1.5 million at December 31, 2023.

In addition, at June 30, 2024, the Company had various currency contracts outstanding to hedge the currency exposure of intercompany debt and foreign currency denominated receivables and payables.

Although placed as economic hedges, the Company does not apply hedge accounting to these instruments.

As such, changes in fair value are recorded directly to income and expense in the periods that they occur.

During the fourth quarter of 2023 , the Company became party to cross-currency swap agreements with a total notional amount of $500 million to effectively convert a portion of the Company’s fixed-rate U.S.

During the fourth quarter of 2023, the Company became a party to cross-currency swap agreements with a total notional amount of $500 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 agreements provide for the Company to receive semi-annual interest payments in U.S.

The swap agreements, which had a maturity of December 18, 2026, provided for the Company to receive semi-annual interest payments in U.S.

dollars at a fixed rate and to make semi-annual interest payments in euros at a fixed rate.

The risk management objective of entering into such agreements is to manage foreign currency risk relating to net investments in certain European subsidiaries denominated in euros.

The agreements are designated as net investment hedges for accounting purposes.

The gain or loss on the net investment hedge derivative instrument is included in the foreign currency translation component of accumulated other comprehensive loss until the net investment is sold, diluted, or liquidated.

Interest payments received for the cross-currency swap are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense.

At March 31, 2024, the fair value of the Company’s net investment hedges was a gain position o f $4.9 million, and a translation gain of $3.6 million (net of income taxes o f $1.2 million) wa s reported as a component of “Accumulated other comprehensive loss” within “Foreign currency items.”

During the first three months of 2024, the U.S.

dollar strengthened against most of the functional currencies in which the Company’s foreign investments are held, including the euro, the Canadian dollar, the British pound, the Brazilian real, and the Danish krone.

The net impact of these changes, and the changes in the net investment hedge discussed above, resulted in net translation losses of $19.3 million being recorded in “Accumulated other comprehensive loss” during the three-month period ended March 31, 2024.

The risk management objective of entering into the swap agreements was to manage foreign currency risk relating to net investments in certain European subsidiaries denominated in euros.

The agreements were designated as net investment hedges for accounting purposes.

The gain or loss on the net investment hedge derivative instruments is included in the “Foreign currency translation” component of “Accumulated other comprehensive loss” until the net investment is sold, diluted, or liquidated.

Interest payments received for the cross-currency swaps are excluded from the net investment hedge effectiveness assessment and are recorded in “Interest expense” in the Company’s Condensed Consolidated Statements of Income.

The assumptions used in measuring fair value of the cross-currency swaps are considered level 2 inputs, which are based upon the Euro-to-U.S.

dollar exchange rate market.

The fair value of the Company’s net investment hedges was a loss position of $0.3 million and a loss position of $5.1 million at June 30, 2024 and December 31, 2023, respectively.

Translation losses of $0.2 million (net of income taxes of $0.1 million) and $3.8 million (net of income taxes of $1.3 million) were reported as components of “Accumulated other comprehensive loss” within “Foreign currency items” at June 30, 2024 and December 31, 2023, respectively.

As a result of continued strengthening of the U.S.

dollar against the euro, as well as a reduction in the differential between U.S.

and European interest rates, the fair value of the Company’s net investment hedge continued to appreciate into the month of April.

On April 15, 2024, subsequent to the end of the quarter, the Company terminated the swap agreements and received a cash settlement of $11.6 million.

The foreign currency translation gain of approximately $3.1 million, net of tax, will be included as a component of “Accumulated other comprehensive loss” in the second quarter of 2024.

Following the unwind of the swaps, the Company entered into new cross-currency swap agreements with a total notional amount of $500 million to effectively convert a portion of the Company’s fixed-rate U.S.

and European interest rates, the fair value of the Company’s net investment hedges appreciated significantly through April 2024.

On April 15, 2024, the Company terminated the swap agreements and received a cash settlement of $9.1 million.

The foreign currency translation gain of approximately $3.1 million, net of tax, is included as a component of “Accumulated other comprehensive loss.” Following the unwind of the swaps, the Company entered into new cross-currency swap agreements with a total notional amount of $500 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 new swap agreements have a maturity of May 1, 2027.

The new swap agreements, which have a maturity of May 1, 2027, share the same risk management objective as the terminated cross-currency swap agreements and are also designated as net investment hedges for accounting purposes.

The Company has an investment in preferred stock of a nonaffiliated private company that is accounted for under the measurement alternative of cost less impairment, adjusted for any qualifying observable price changes.

Observable price changes would consist of Level 2 inputs based on privately negotiated transactions with the nonaffiliated company.

The preferred stock balance of $21 million is included in “Other assets” in the Company’s Condensed Consolidated Balance Sheets as of June 30, 2024.

During the first six months of 2024, the U.S.

dol lar strengthened against most of the functional currencies in which the Company’s foreign investments are held, including the euro, the Canadian dollar, the Mexican peso, the Brazilian real, and the Danish krone.

The net impact of these changes, and the changes in the net investment hedge discussed above, resulted in net translation losses of $55.6 million being recorded in “Accumulated other comprehensive loss” during the six-month period ended June 30, 2024.

Restructuring and Impairment

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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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis