SONOCO PRODUCTS CO 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. FORWARD LOOKING STATEMENTS 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,” “develop,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “intend,” “is designed to,” “likely,” “maintain,” “may,” “might,” “objective,” “ongoing,” “opportunity,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “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: • availability and supply of raw materials and energy, and offsetting high raw material and energy costs; • the effects of economic downturns, inflation, volatility and other macroeconomic factors on the Company and its industry, including effects on consumers and customers; • the resiliency of the Company’s operating model; • reduced supply chain disruptions; • consumer and customer actions in connection with political, social, and economic instability, war and other geopolitical tensions; • improved productivity and cost containment, including cost savings from the Company’s investments; • leveraging strong cash flow and financial position; • costs, timing and effects of restructuring and portfolio simplification activities; • the Company’s proposed acquisition of Titan Holdings I B.V. (“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 ownership interest in RTS Packaging, LLC (“RTS Packaging”), a paper mill in Chattanooga, Tennessee (the “Chattanooga Mill”), and Inapel Embalagens Ltda. (“Inapel”), 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 (“Protexic”), the pending sale of two of its production facilities in China, and the potential divestitures of the Company’s ThermoSafe and thermoformed and flexible packaging (“TFP”) businesses; • adequacy and anticipated amounts and uses of cash flows; • capital allocation, including expected amounts of capital spending; • the Company’s capital structure, including the incurrence of debt and the refinancing and repayment of debt; • the Company’s ability to adhere to restrictive covenants in its debt agreements; • financial and business strategies and the results expected of them; • producing improvements in earnings; • profitable sales growth and rates of growth; • market opportunities and anticipated growth thereof; • expected impact and costs of resolution of legal proceedings; • extent of, and adequacy of provisions for, environmental liabilities; • the Company’s ability to achieve its sustainability goals, including with respect to greenhouse gas emissions; • 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 near-term and long-term value and returns for shareholders; 40 SONOCO PRODUCTS COMPANY • 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. Such risks, uncertainties and assumptions include, without limitation: • ability to manage the mix of business and execute on the Company’s portfolio simplification strategy, including with respect to divestitures such as the potential divestitures of its ThermoSafe and TFP businesses; • 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 conflicts in the Middle East), and the Company’s ability to pass raw material, energy and transportation price increases and surcharges through to customers or otherwise manage these commodity pricing risks; • costs of labor; • work stoppages due to labor disputes; • success of new product development, introduction and sales, including successful timing of new product or product innovation introductions; • 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, including changes related to inflation and other macroeconomic factors; • ability to be the low-cost global leader in customer-preferred packaging solutions within targeted segments; • competitive pressures, including new product development, and technological market leadership, reputation for quality, industry overcapacity, customer and supplier consolidation, and changes in competitors’ pricing for products; • 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; • collection of receivables from customers; • ability to improve margins and leverage cash flows and financial position; • 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; • 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, including the timing of funding plan obligations, and the accuracy of assumptions of underlying projections of benefit plan obligations and payments, valuation of plan assets, and projections of long-term rates of return; 41 SONOCO PRODUCTS COMPANY • foreign currency exchange rate fluctuations, interest rate and commodity price risk and the effectiveness of related hedges; • cost of employee and retiree medical, health, and life insurance benefits; • resolution of income tax contingencies; • changes in U.S. and foreign tariffs, tax rates, tax laws, regulations and interpretations thereof, including income, sales and use, property, value added, employment, and other taxes; • accuracy in valuation of deferred tax assets; • the adoption of new, or changes in, accounting standards or interpretations; • accuracy of assumptions underlying projections related to goodwill impairment testing, and accuracy of management’s assessment of goodwill impairment; • accuracy of assumptions underlying fair value measurements, accuracy of management’s assessments of fair value and fluctuations in fair value; • ability to maintain effective disclosure controls and internal controls, including with regard to financial reporting, to prevent or detect errors or acts of fraud; • liability for and costs of resolution of litigation, regulatory actions, or other legal proceedings; • liability for and anticipated costs of environmental remediation actions; • effects of environmental laws and regulations, including with respect to climate change and emissions reporting and the effectiveness of the final rules adopted by the Securities and Exchange Commission to enhance public company climate disclosures; • operational disruptions at our major facilities; • failure or disruptions in our information technology systems; • 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; • changing climate and greenhouse gas effects; • ability to meet environmental, sustainability and other social and governmental goals, including with respect to greenhouse gas emissions, and challenges in implementation thereof; • actions of domestic or foreign government agencies, changes in laws and regulations affecting the Company, and increased costs of compliance; • international, national, and local economic and market conditions and levels of unemployment; • economic disruptions resulting from war and other geopolitical tensions (such as the ongoing military conflict between Russia and Ukraine and the ongoing conflict in Israel and Gaza), public health events, terrorist activities, and natural disasters; and • inflation and the activities and operations in highly inflationary economies. 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 for the year ended December 31, 2023 under Item 1A - “Risk Factors” and throughout other sections of that report and in other reports filed with the Securities and Exchange Commission. In light of these various risks, uncertainties and assumptions, the forward-looking events discussed in this Quarterly Report on Form 10-Q 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, except as may be required by law. 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. 42 SONOCO PRODUCTS COMPANY COMPANY OVERVIEW 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 September 29, 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. Sonoco competes in multiple product categories, with the majority of the Company’s revenues arising 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 uncoated recycled 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. Sonoco’s goal is to increase its long-term profitability and return capital to its shareholders. 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 June 2024, the Company announced it had entered into an agreement to acquire all of the issued and outstanding equity interests in Eviosys, a leading European manufacturer of food cans, ends and closures, for approximately €3.6 billion (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 ownership 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. For example, in September 2024, the Company entered into agreements to divest two of its production facilities in China. 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. In addition to the completed divestitures discussed above, the Company has initiated reviews of strategic alternatives for ThermoSafe, its leading temperature assured packaging business, and TFP, its leading thermoformed and flexible packaging business (together, the “Potential Divestitures”). On a standalone basis, ThermoSafe, which is part of the All Other group of businesses, had revenue of $283 million in 2023. On a standalone basis, TFP, which was formed by integrating the Company’s flexible packaging and thermoforming packaging businesses within the Consumer Packaging segment effective as of January 1, 2024, had revenue of $1.3 billion in 2023. The Company expects to complete its review of strategic alternatives for TFP in the fourth quarter of 2024 and to complete its review of strategic alternatives for ThermoSafe by the end of the third quarter of 2025. The Company intends to use the net proceeds from the Potential Divestitures, if completed, to reduce its indebtedness if the pending Eviosys acquisition closes, or to pursue other strategic initiatives if the pending Eviosys acquisition does not close. The Company believes that these completed and 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 from procurement savings, production efficiencies, and fixed cost reduction initiatives, 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. As a result, the Company changed its operating and reporting structure to reflect the way it now manages its operations, evaluates performance, and allocates resources. Accordingly, the Company’s consumer 43 SONOCO PRODUCTS COMPANY thermoformed businesses moved from the All Other group of businesses to the Consumer Packaging segment. Also effective January 1, 2024, the Company began conducting its recycling operations, part of the Industrial Paper Packaging segment, as a procurement function. As a result, no recycling net sales are recorded and the margin from the Company’s recycling operations reduces “Cost of sales.” RESULTS OF OPERATIONS The Company’s financial statements are prepared in conformity with generally accepted accounting principles (“GAAP”). Sonoco’s management considers a variety of both GAAP and non-GAAP financial and operating measures in assessing the Company’s financial performance. The key GAAP measures used are net sales, operating profit, gross profit margin, net income attributable to Sonoco and diluted earnings per share. The key non-GAAP measures used are Adjusted operating profit, Adjusted net income attributable to Sonoco, Adjusted diluted earnings per share, Adjusted EBITDA and Adjusted EBITDA margin. For information about the Company’s use of non-GAAP measures and reconciliations of these measures to the most directly comparable GAAP measures see “Non-GAAP Financial Measures” below. Third Quarter 2024 Compared with Third Quarter 2023 The following discussion provides a review of results for the three-month period ended September 29, 2024 versus the three-month period ended October 1, 2023. Overview Net sales for the third quarter of 2024 declined by $34.6 million or 2.0%, to $1.68 billion, compared to $1.71 billion in the same period last year. The decline was primarily driven by the absence of $39.5 million sales related to the Protexic divestiture in April 2024, the absence of $32.6 million sales related to the closure of a thermoformed food packaging plant in November 2023, lower sales of $20.6 million resulting from the accounting for the Company’s recycling operations as a procurement function effective January 1, 2024, and lower selling prices of $16.8 million. Partially offsetting these decreases were increases in overall volumes, including net sales from acquisitions, of $76.0 million over the prior-year period. GAAP o perating profit for the third quarter of 2024 was $128.1 million, a decrease of 21.4% from the $162.9 million reported in the third quarter of 2023. The decrease in GAAP operating profit was primarily due to lower net sales of $52.0 million and a $30.0 million loss on the pending sale of two production facilities in China, partially offset by decreased manufacturing expenses of $56.7 million. Adjusted Operating Pro fit for the third quarter of 2024 was $210.7 million, a decrease of 0.9% from the $212.5 million reported for the same period in 2023. GAAP net income attributable to Sonoco for the third quarter of 2024 decreased to $50.9 million, or $0.51 per diluted share, compared to $130.7 million, or $1.32 per diluted share, for the same period of 2023. This decrease was primarily due to a decrease in GAAP operating profit as described above, the absence of a $44.0 million gain from the step-up to fair value of the Company’s 35% ownership interest in RTS Packaging upon acquiring the remaining 65% ownership interest in September 2023, and additional interest expense of $26.0 million primarily related to the financing of the pending Eviosys acquisition. These decreases were partially offset by a reduction in income tax expense of $18.2 million. Adjusted net income attributable to Sonoco and Adjusted diluted earnings per share for the third quarter of 2024 were $147.9 million ($1.49 per diluted share), compared with $144.9 million ($1.46 per diluted share) for the same period in 2023. Costs and Expenses Cost of goods sold decreased by $29.0 million, or 2.2% , in the third quarter of 2024 compared with the same period last year. The decrease was primarily driven by lower manufacturing expense 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 ownership interest in RTS Packaging, higher depreciation expense, and higher employee-related costs. Gross profit decreased by $5.5 million, or 1.5%, in the third quarter of 2024 compared with the same period last year, primarily due to a decline in net sales. Gross profit as a percent of sales increased slightly to 21.4% from 21.3% in the prior-year quarter. Selling, general and administrative cost s increased by $8.0 million, or 4.4%, in the third quarter of 2024 compared with the same period last year, primarily due to higher year-over-year acquisition, integration and divestiture-related costs of $7.2 million and net incremental costs of $1.7 million associated with the prior year acquisitions of Inapel, the Chattanooga Mill, and the remaining ownership interest in RTS Packaging, and the current year divestiture of Protexic. 44 SONOCO PRODUCTS COMPANY Restructuring/Asset impairment charges totaled $8.2 million in the third quarter of 2024, compared with $18.1 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. Loss on divestiture of business and other assets of $31.8 million in the third quarter of 2024 primarily reflects a loss on the pending sale of two production facilities in China. Loss on divestiture of business and other assets of $0.5 million in the second quarter of 2023 reflects a loss 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. Other income, net decreased $36.9 million in the third quarter of 2024, primarily due to the absence of a $44.0 million gain in the prior year from the step-up to fair value of the Company’s 35% ownership interest in RTS Packaging upon acquiring the remaining 65% ownership interest in September 2023. Non- operating pension costs were $0.5 million lower in the third quarter of 2024 compared to the third quarter of 2023, primarily attributable to lower year-over-year interest cost and 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. Net interest expense for the third quarter of 2024 increased to $55.6 million, compared with $29.7 million during the third quarter of 2023. The increase of $26.0 million was primarily due to higher interest from financing transactions relating to the pending Eviosys acquisition. The effective tax rates reflected in GAAP net income and Adjusted net income attributable to Sonoco in the third quarter of 2024 were 30.4% and 21.3%, respectively, compared with 23.6% and 22.7%, respectively, in the corresponding prior year quarter. The increase in the GAAP effective tax rate was primarily due to the absence of a tax benefit on a one-time loss in China as well as an unfavorable adjustment on acquisition costs related to the pending Eviosys acquisition. The effective tax rate on Adjusted net income attributable to Sonoco was lower primarily due to favorable provision-to-return adjustments. Reportable Segments 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 third quarters of 2024 and 2023: Three Months Ended (Dollars in thousands) September 29, 2024 October 1, 2023 % Change Net sales: Consumer Packaging $ 983,511 $ 984,840 (0.1) % Industrial Paper Packaging 585,082 580,035 0.9 % Total reportable segments 1,568,593 1,564,875 0.2 % All Other 107,273 145,544 (26.3) % Net sales $ 1,675,866 $ 1,710,419 (2.0) % 45 SONOCO PRODUCTS COMPANY 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 third quarters of 2024 and 2023: Three Months Ended (Dollars in thousands) September 29, 2024 October 1, 2023 % Change Operating profit: Consumer Packaging $ 123,021 $ 116,800 5.3 % Industrial Paper Packaging 70,206 75,006 (6.4) % Segment operating profit 193,227 191,806 0.7 % All Other 17,440 20,740 (15.9) % Corporate Restructuring/Asset impairment charges (8,190) (18,110) Amortization of acquisition intangibles (22,645) (21,379) Loss on divestiture of business and other assets (31,770) (537) Acquisition, integration and divestiture-related costs (19,623) (12,472) Other operating (charges)/gains, net (307) 2,889 Operating profit $ 128,132 $ 162,937 (21.4) % The following table summarizes Adjusted EBITDA attributable to each of the Company’s reportable segments and the All Other group of businesses during the third quarters of 2024 and 2023: Three Months Ended (Dollars in thousands) September 29, 2024 October 1, 2023 % Change Adjusted EBITDA 1 : Consumer Packaging $ 159,673 $ 150,917 5.8 % Industrial Paper Packaging 101,633 104,907 (3.1) % All Other 20,169 24,540 (17.8) % Adjusted EBITDA $ 281,475 $ 280,364 0.4 % 1 Adjusted EBITDA is a non-GAAP financial measure. See the Company’s reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure in “Non-GAAP Financial Measures — Quarterly Reconciliations of GAAP to Non-GAAP Financial Measures” below. 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 third quarters of 2024 and 2023: Three Months Ended (Dollars in thousands) September 29, 2024 October 1, 2023 Restructuring/Asset impairment charges: Consumer Packaging $ 4,509 $ 9,784 Industrial Paper Packaging 3,798 6,430 All Other — 270 Corporate (117) 1,626 Restructuring/Asset impairment charges $ 8,190 $ 18,110 46 SONOCO PRODUCTS COMPANY Consumer Packaging The products produced and sold within the Consumer Packaging segment are generally used to package a variety of consumer pro ducts and consist primarily of round and shaped rigid paper, steel and plastic containers; metal and peelable membrane ends, closures, and components; thermoformed plastic trays and applications; and high-barrier flexible packaging. These products primarily serve the consumer staples market, focused on food, beverage, household, personal, and pharmaceutical products. Segment sales remained flat compared to the corresponding prior year quarter as the absence of $32.6 million in sales related to the closure of a thermoformed food packaging plant in November 2023 and lower pricing of $21.4 million were offset by a $53.1 million increase in sales driven by higher net volumes, including an increase in sales from acquisitions. Segment operating profit and Adjusted EBITDA increased by 5.3% and 5.8%, respectively. The increase was largely due to higher productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives, of $17.5 million, which was partially offset by lower price/cost and higher employee-related expenses. As a result, segment operating profit margin increased to 12.5% in the third quarter of 2024 from 11.9% in the same period last year. Industrial Paper Packaging The primary products produced and sold within the Industrial Paper Packaging segment include goods produced from recycled fiber, including paperboard tubes, cones, and cores; paper-based protective packaging; and uncoated recycled paperboard for folding cartons, can board and laminated structures. Products across this segment support end markets, primarily in paper, textile, and films. Segment sales increased 0.9% from the corresponding prior year quarter primarily due to the acquisitions of the remaining ownership interest in RTS Packaging and the Chattanooga Mill and the reduction in sales 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 6.4% and 3.1%, respectively, as continued price/cost pressures lowered profitability by $23.4 million and higher employee-related expenses were only partially offset by higher productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives, of $17.7 million and the benefit of higher volumes, including acquisitions, of $8.4 million. As a result, segment operating profit margin decreased to 12% in the third quarter of 2024 from 13% in the same period last year. All Other 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 26.3% from the same quarter of the prior year primarily due to the sale of Protexic. All Other operating profit and Adjusted EBITDA dropped by 15.9% and 17.8%, respectively, in the third quarter of 2024 compared to the same period last year, primarily due to the sale of Protexic and negative price/cost, partially offset by higher productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives. As a result, operating margin increased to 16.3% in the third quarter of 2024 compared to 14.2% in the same quarter last year. Nine Months Ended September 29, 2024 Compared with Nine Months Ended October 1, 2023 The following discussion provides a review of results for the nine-month period ended September 29, 2024 compared with the nine-month period ended October 1, 2023. Overview Net sales for the first nine months of 2024 decreased 4.1% to $4.9 billion, compared with $5.1 billion in the same period last year. The decline was primarily attributable to the absence of $90.5 million in sales related to the Protexic divestiture in April 2024, the absence of $73.6 million in sales related to the closure of a thermoformed food packaging plant in November 2023, lower sales of $76.8 million resulting from the accounting for the Company’s recycling operations as a procurement function beginning January 1, 2024, and lower pricing of $106.3 million. Partially offsetting these decreases was an increase in overall volume, including net sales from acquisitions, of $159.2 million over the prior-year period. 47 SONOCO PRODUCTS COMPANY GAAP o perating profit for the first nine months of 2024 was $381.0 million, a decrease of 34.4% from the $580.4 million reported in the same period last year. The decrease in GAAP operating profit was primarily due to lower net sales of $337.8 million, a $30.0 million loss in the current period on the pending sale of two production facilities in China, the absence of a net $77.5 million benefit from the sale of the Company’s timberland properties and the divestitures of the S3 and U.S. BulkSak businesses in 2023, and additional acquisition, integration and divestiture-related costs of $25.4 million in the first nine months of 2024, partially offset by decreased manufacturing expenses of $297.9 million. Adjusted operating pro fit for the first nine months of 2024 was $579.6 million, a decrease of 9.0% from the $636.9 million reported for the same period in 2023. GAAP net income attributable to Sonoco for the first nine months of 2024 decreased to $206.9 million, or $2.09 per diluted share, compared to $393.7 million , or $3.98 per diluted share, reported for the same period of 2023. This decrease was primarily due to a decrease in GAAP operating profit as described above and the absence of a $44.0 million gain from the step-up to fair value of the Company’s 35% ownership interest in RTS Packaging upon acquiring the remaining 65% ownership interest in September 2023, partially offset by a reduction in income tax expense of $61.2 million. Adjusted net income attributable to Sonoco and Adjusted diluted earnings per share for the nine-month period ended September 29, 2024 decreased 7.7% to $386.1 million, or $3.89 per diluted share, from $418.5 million, or $4.24 per diluted share, in the nine-month period ended October 1, 2023. Costs and Expenses Cost of goods sold decreased $166.2 million, or 4.1%, primarily related to the sale of Protexic and improved productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives, partially offset by cost of sales related to the acquisitions of Inapel, the Chattanooga Mill, and the remaining ownership interest in RTS Packaging. Gross profit decreased $42.4 million, or 3.9%, year o ver year, while the Company’s gross profit margin percentage remained flat at 21.3% for the first nine months of 2024 , compared to the prior-year period. The decrease in gross profit was driven by volume and price declines, partially offset by higher productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives and positive margin related to the acquisitions of Inapel, the Chattanooga Mill, and the remaining ownership interest in RTS Packaging. Selling, general and administrative costs for the first nine months of 2024 increased $44.9 million, or 8.3%, year over year. The increase was largely driven by higher year-over-year acquisition, integration and divestiture-related costs of $25.4 million, and net incremental costs of $13.6 million associated with the prior year acquisitions of Inapel, the Chattanooga Mill, and the remaining ownership interest in RTS Packaging, and the current year divestiture of Protexic. Restructuring/Asset impairment charges totaled $59.1 million in the first nine months of 2024 , compared with $53.0 million of n et charges 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. Loss on divestiture of business and other assets of $27.3 million in the first nine months of 2024 primarily reflects a loss on the pending sale of two production facilities in China, partially offset by gains from the Company’s divestitures of Protexic and the S3 business. Gain on divestiture of business and other assets of $78.8 million in the first nine 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 nine months of 2024, reflecting a gain upon the remeasurement to fair value of one of the Company’s investments in affiliates. Other income, net was $36.9 million in the first nine months of 2023, reflecting a gain of $44.0 million resulting from the remeasurement of the Company’s previously held ownership interest in RTS Packaging to fair value, partially offset by a loss of $7.1 million from the settlement of a contract associated with the acquisition of the Chattanooga Mill that was determined to have unfavorable terms given market conditions at the time of the acquisition. 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 remained flat year over year. 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 nine months of 2024 increased to $109.4 million, compared with $94.7 million during the first nine months of 2023. The increase of $14.7 million was primarily due to higher interest from financing 48 SONOCO PRODUCTS COMPANY transactions relating to the pending Eviosys acquisition, partially offset by 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 net income attributable to Sonoco in the first nine months of 2024 were 24.6% and 24.0%, respectively, compared with 24.8% and 24.4%, respectively, in the prior-year period. The decrease in the effective tax rates on GAAP and Adjusted net income attributable to Sonoco was primarily due to favorable provision-to-return adjustments. 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 nine months of 2024 and 2023: Nine Months Ended (Dollars in thousands) September 29, 2024 October 1, 2023 % Change Net sales: Consumer Packaging $ 2,821,817 $ 2,914,168 (3.2) % Industrial Paper Packaging 1,778,912 1,781,033 (0.1) % All Other 336,159 450,291 (25.3) % Net sales $ 4,936,888 $ 5,145,492 (4.1) % 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 nine months of 2024 and 2023: Nine Months Ended (Dollars in thousands) September 29, 2024 October 1, 2023 % Change Operating profit: Consumer Packaging $ 328,190 $ 314,408 4.4 % Industrial Paper Packaging 203,008 256,413 (20.8) % Segment operating profit 531,198 570,821 (6.9) % All Other 48,430 66,085 (26.7) % Corporate Restructuring/Asset impairment charges (59,058) (52,981) Amortization of acquisition intangibles (68,095) (63,082) (Loss)/Gain on divestiture of business and other assets (27,292) 78,844 Acquisition, integration and divestiture-related costs (47,553) (22,192) Other operating gains, net 3,327 2,949 Operating profit $ 380,957 $ 580,444 (34.4) % 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 nine months of 2024 and 2023: Nine Months Ended (Dollars in thousands) September 29, 2024 October 1, 2023 % Change Adjusted EBITDA 1: Consumer Packaging $ 435,971 $ 413,748 5.4 % Industrial Paper Packaging 294,943 341,159 (13.5) % All Other 57,528 77,098 (25.4) % Adjusted EBITDA $ 788,442 $ 832,005 (5.2) % 1 Adjusted EBITDA is a non-GAAP financial measure. See the Company’s reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure in “Non-GAAP Financial Measures — Year-to-Date Reconciliations of GAAP to Non-GAAP Financial Measures” below. 49 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 nine months of 2024 and 2023: Nine Months Ended (Dollars in thousands) September 29, 2024 October 1, 2023 Restructuring/Asset impairment charges: Consumer Packaging $ 20,597 $ 16,479 Industrial Paper Packaging 34,138 32,961 All Other 1,362 1,188 Corporate 2,961 2,353 Restructuring/Asset impairment charges $ 59,058 $ 52,981 Consumer Packaging Segment sales decreased 3.2% year to date compared to the prior-year period due to the absence of $73.6 million in sales related to the closure of a thermoformed food packaging plant in November 2023 and lower pricing of $61.3 million, partially offset by an increase of $43.2 million in net volumes, including an increase in sales related to the Inapel acquisition. Year-to-date segment operating profit increased 4.4% as higher productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives of $58.0 million was partially offset by unfavorable net volumes of $5.2 million and higher employee-related expenses. As a result, segment operating profit margin increased from 10.8% in the first nine months of 2023 to 11.6% in the first nine 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 $141.5 million related to the acquisitions of the remaining ownership interest in RTS Packaging and the Chattanooga Mill, reduced by the disposition of the U.S. BulkSak business, were offset by lower index-related pricing of $45.0 million and the reduction in sales of $76.8 million related to the treatment of the segment’s recycling operations as a procurement function effective January 1, 2024. Segment operating profit decreased 20.8% versus the prior-year period primarily due to pricing pressures resulting in lower profitability of $125.6 million and higher employee-related costs, which were only partially offset by higher productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives of $69.2 million and higher volumes from acquisitions of $31.1 million. As a result, segment operating margin decreased from 14.4% in the first nine months of 2023 to 11.4% in the first nine months of 2024. All Other Sales for the All Other group of businesses declined 25.3% 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 26.7% 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 from procurement savings, production efficiencies, and fixed cost reduction initiatives. Segment operating margin declined to 14.4% year to date compared to 14.7% in 2023. 50 SONOCO PRODUCTS COMPANY NON-GAAP FINANCIAL MEASURES To assess and communicate the financial performance of the Company, Sonoco’s management uses, both internally and externally, certain financial performance measures that are not in conformity with GAAP. These “non-GAAP” financial measures reflect adjustments to the Company’s GAAP operating results to exclude amounts, including the associated tax effects, relating to: • restructuring/asset impairment charges 1 ; • acquisition, integration and divestiture-related costs; • gains or losses from the divestiture of businesses and other assets; • losses from the early extinguishment of debt; • non-operating pension costs; • amortization expense on acquisition intangibles; • changes in last-in, first-out ( “ LIFO ”) inventory reserves; • certain income tax events and adjustments; • derivative gains/losses; • other non-operating income and losses; and • certain other items, if any. 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, 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. Non-GAAP figures are identified using the term “Adjusted,” for example, “Adjusted Operating Profit,” “Adjusted Net Income Attributable to Sonoco” and “Adjusted Diluted EPS.” More information about the Company’s use of non-GAAP financial measures is provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, under Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Use of Non-GAAP Financial Measures.” In addition to the “Adjusted” results described above, the Company also uses Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is defined as net income excluding the following: interest expense; interest income; provision for income taxes; depreciation, depletion and amortization expense; non-operating pension costs; net income/loss attributable to noncontrolling interests; restructuring/asset impairment charges; changes in LIFO inventory reserves; gains/losses from the divestiture of businesses and other assets; acquisition, integration and divestiture-related costs; other income; derivative gains/losses; and other non-GAAP adjustments, if any, that may arise from time to time. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net sales. The Company’s non-GAAP financial measures are not calculated in accordance with, nor are they an alternative for, measures conforming to generally accepted accounting principles, and they may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. The Company presents these non-GAAP financial measures to provide investors with information to evaluate Sonoco’s operating results in a manner similar to how management evaluates business performance. The Company consistently applies its non-GAAP financial measures presented herein and uses them for internal planning and forecasting purposes, to evaluate its ongoing operations, and to evaluate the ultimate performance of management and each business unit against plans/forecasts. In addition, these same non-GAAP financial measures are used in determining incentive compensation for the entire management team and in providing earnings guidance to the investing community. Material limitations associated with the use of such measures include that they do not reflect all period costs included in operating expenses and may not be comparable with similarly named financial measures of other companies. 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. 51 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. Further, Sonoco management does not, nor does it suggest that investors should, consider any non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Whenever reviewing a non-GAAP financial measure, investors are encouraged to review the related reconciliation to understand how it differs from the most directly comparable GAAP measure. Quarterly Reconciliations of GAAP to Non-GAAP Financial Measures The following tables reconcile the Company’s non-GAAP financial measures to their most directly comparable GAAP financial measures in the Company’s Condensed Consolidated Statements of Income for the three-month period ended September 29, 2024 and the three-month period ended October 1, 2023. 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 September 29, 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 $ 128,132 $ 69,556 $ 21,154 $ 50,921 $ 0.51 Acquisition, integration and divestiture-related costs 1 19,623 49,804 6,512 43,292 0.44 Changes in LIFO inventory reserves 790 790 199 591 0.01 Amortization of acquisition intangibles 22,645 22,645 5,563 17,082 0.17 Restructuring/Asset impairment charges 8,190 8,190 1,497 6,560 0.07 Loss on divestiture of business and other assets 31,770 31,770 454 31,316 0.31 Non-operating pension costs — 2,947 738 2,209 0.02 Net gains from derivatives (210) (210) (53) (157) — Other adjustments (273) (695) 3,233 (3,928) (0.04) Total adjustments 82,535 115,241 18,143 96,965 0.98 Adjusted $ 210,667 $ 184,797 $ 39,297 $ 147,886 $ 1.49 Due to rounding, individual items may not sum appropriately. 1 Acquisition, integration and divestiture related costs include losses on treasury lock derivative instruments and amortization of financing fees totaling $30,181 related to debt instruments associated with the financing of the pending Eviosys acquisition. These amortization costs are included in “Interest expense” in the Company’s Condensed Consolidated Statements of Income. 52 SONOCO PRODUCTS COMPANY For the three-month period ended October 1, 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 $ 162,937 $ 166,782 $ 39,351 $ 130,749 $ 1.32 Acquisition, integration and divestiture-related costs 12,472 12,472 1,979 10,493 0.10 Changes in LIFO inventory reserves (3,186) (3,186) (816) (2,370) (0.02) Amortization of acquisition intangibles 21,379 21,379 5,197 16,182 0.16 Restructuring/Asset impairment charges 18,110 18,110 4,385 13,974 0.14 Loss on divestiture of business and sale of other assets 537 537 125 412 — Other income, net — (36,943) (8,929) (28,014) (0.28) Non-operating pension costs — 3,424 852 2,572 0.03 Net gains from derivatives (3,310) (3,310) (830) (2,480) (0.03) Other adjustments 3,607 3,607 252 3,355 0.04 Total adjustments 49,609 16,090 2,215 14,124 0.14 Adjusted $ 212,546 $ 182,872 $ 41,566 $ 144,873 $ 1.46 Due to rounding, individual items may not sum appropriately. Adjusted EBITDA and Adjusted EBITDA Margin Three Months Ended Dollars in thousands September 29, 2024 October 1, 2023 Net income attributable to Sonoco $ 50,921 $ 130,749 Adjustments Interest expense 61,643 32,847 Interest income (6,014) (3,173) Provision for income taxes 21,154 39,351 Depreciation, depletion and amortization 90,646 85,570 Non-operating pension costs 2,947 3,424 Net income attributable to noncontrolling interests 288 309 Restructuring/Asset impairment charges 8,190 18,110 Changes in LIFO inventory reserves 790 (3,186) Loss on divestiture of business and other assets 31,770 537 Acquisition, integration and divestiture-related costs 19,623 12,472 Other income, net — (36,943) Net gains from derivatives (210) (3,310) Other adjustments (273) 3,607 Adjusted EBITDA $ 281,475 $ 280,364 Net Sales $ 1,675,866 $ 1,710,419 Net Income Margin 3.0 % 7.6 % Adjusted EBITDA Margin 16.8 % 16.4 % The Company does not calculate net income by segment; therefore, Adjusted EBITDA by segment is reconciled to the closest GAAP measure of segment profitability, segment operating profit. Segment operating profit is the measure of segment profit or loss reported to the chief operating decision maker for purposes of making decisions about allocating 53 SONOCO PRODUCTS COMPANY resources to the segments and assessing their performance in accordance with Accounting Standards Codification (“ASC”) 280 - “Segment Reporting,” as prescribed by the Financial Accounting Standards Board. Segment results viewed by the Company’s management to evaluate segment performance do not include the following: restructuring/asset impairment charges; amortization of acquisition intangibles; acquisition, integration and divestiture-related costs; changes in LIFO inventory reserves; 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. Accordingly, the term “segment operating profit” is defined as the segment’s portion of “operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments and All Other. Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation For the Three Months Ended September 29, 2024 Dollars in thousands Consumer Packaging segment Industrial Paper Packaging segment All Other Corporate Total Segment and Total Operating Profit $ 123,021 $ 70,206 $ 17,440 $ (82,535) $ 128,132 Adjustments: Depreciation, depletion and amortization 1 36,283 28,989 2,729 22,645 90,646 Equity in earnings of affiliates, net of tax 369 2,438 — — 2,807 Restructuring/Asset impairment charges 2 — — — 8,190 8,190 Changes in LIFO inventory reserves 3 — — — 790 790 Acquisition, integration and divestiture-related costs 4 — — — 19,623 19,623 Loss on divestiture of business and other assets 5 — — — 31,770 31,770 Net gains from derivatives 6 — — — (210) (210) Other adjustments — — — (273) (273) Segment Adjusted EBITDA $ 159,673 $ 101,633 $ 20,169 $ — $ 281,475 Net Sales $ 983,511 $ 585,082 $ 107,273 Segment Operating Profit Margin 12.5 % 12.0 % 16.3 % Segment Adjusted EBITDA Margin 16.2 % 17.4 % 18.8 % 1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of $16,131, the Industrial Paper Packaging segment of $6,306, and the All Other group of businesses of $208. 2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer Packaging segment of $4,509 and the Industrial Paper Packaging segment of $3,798. 3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment of $758 and the Industrial Paper Packaging segment of $32. 4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer Packaging segment of $465 and the Industrial Paper Packaging segment of $(4,529). 5 Included in Corporate are losses on the divestiture of business associated with the Industrial Paper Packaging segment of $29,965 related to the pending sale of two production facilities in China, and the All Other group of businesses of $1,805 related to the sale of Protexic. 6 Included in Corporate are net gains from derivatives associated with the Consumer Packaging segment of $(41), the Industrial Paper Packaging segment of $(160), and the All Other group of businesses of $(9). 54 SONOCO PRODUCTS COMPANY Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation For the Three Months Ended October 1, 2023 Dollars in thousands Consumer Packaging segment Industrial Paper Packaging segment All Other Corporate Total Segment and Total Operating Profit $ 116,800 $ 75,006 $ 20,740 $ (49,609) $ 162,937 Adjustments: Depreciation, depletion and amortization 1 33,833 26,558 3,800 21,379 85,570 Equity in earnings of affiliates, net of tax 284 3,343 — — 3,627 Restructuring/Asset impairment charges 2 — — — 18,110 18,110 Changes in LIFO inventory reserves 3 — — — (3,186) (3,186) Acquisition, integration and divestiture-related costs 4 — — — 12,472 12,472 Loss on divestiture of business and other assets 5 — — — 537 537 Net gains from derivatives 6 — — — (3,310) (3,310) Other adjustments — — — 3,607 3,607 Segment Adjusted EBITDA $ 150,917 $ 104,907 $ 24,540 $ — $ 280,364 Net Sales $ 984,840 $ 580,035 $ 145,544 Segment Operating Profit Margin 11.9 % 12.9 % 14.2 % Segment Adjusted EBITDA Margin 15.3 % 18.1 % 16.9 % 1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of $15,980, the Industrial Paper Packaging segment of $3,414, and the All Other group of businesses of $1,985. 2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer Packaging segment of $9,784, the Industrial Paper Packaging segment of $6,430, and the All Other group of businesses of $270. 3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer segment of $(3,325) and the Industrial Paper Packaging segment of $139. 4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer Packaging segment of $410 and the Industrial Paper Packaging segment of $5,046. 5 Included in Corporate is a loss from the sale of the Company’s U.S. BulkSak business, associated with the Industrial Paper Packaging segment, in the amount of $537. 6 Included in Corporate are net gains from derivatives associated with the Consumer Packaging segment of $(507), the Industrial Paper Packaging segment of $(2,178), and the All Other group of businesses of $(625). 55 SONOCO PRODUCTS COMPANY Year-to-Date Reconciliations of GAAP to Non-GAAP Financial Measures The following tables reconcile the Company’s non-GAAP financial measures to their most directly comparable GAAP financial measures in the Company’s Condensed Consolidated Statements of Income for the nine-month period ended September 29, 2024 and the nine-month period ended October 1, 2023. 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 nine-month period ended September 29, 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 $ 380,957 $ 267,036 $ 65,821 $ 206,909 $ 2.09 Acquisition, integration and divestiture-related costs 1 47,553 77,734 13,670 64,064 0.64 Changes in LIFO inventory reserves (197) (197) (49) (148) — Amortization of acquisition intangibles 68,095 68,095 16,672 51,423 0.52 Restructuring/Asset impairment charges 59,058 59,058 11,754 47,260 0.48 Loss on divestiture of business and other assets 27,292 27,292 1,676 25,616 0.26 Other income, net — (5,867) — (5,867) (0.06) Non-operating pension costs — 10,412 2,593 7,819 0.08 Net gains from derivatives (3,981) (3,981) (1,001) (2,980) (0.03) Other adjustments 851 851 8,812 (7,961) (0.09) Total adjustments 198,671 233,397 54,127 179,226 1.80 Adjusted $ 579,628 $ 500,433 $ 119,948 $ 386,135 3.89 Due to rounding, individual items may not sum appropriately. 1 Acquisition, integration and divestiture related costs include losses on treasury lock derivative instruments and amortization of financing fees totaling $30,181 related to debt instruments associated with the financing of the pending Eviosys acquisition. These amortization costs are included in “Interest expense” in the Company’s Condensed Consolidated Statements of Income. 56 SONOCO PRODUCTS COMPANY For the nine-month period ended October 1, 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 $ 580,444 $ 512,279 $ 127,003 $ 393,717 $ 3.98 Acquisition, integration and divestiture-related costs 22,192 22,192 4,249 17,943 0.18 Changes in LIFO inventory reserves (10,186) (10,186) (2,564) (7,622) (0.08) Amortization of acquisition intangibles 63,082 63,082 15,312 47,770 0.48 Restructuring/Asset impairment charges 52,981 52,981 12,344 40,658 0.41 Gain on divestiture of business and other assets (78,844) (78,844) (18,823) (60,021) (0.61) Other income, net — (36,943) (8,929) (28,014) (0.28) Non-operating pension costs — 10,424 2,589 7,835 0.08 Net gains from derivatives (1,513) (1,513) (381) (1,132) (0.01) Other adjustments 8,750 8,750 1,423 7,327 0.09 Total adjustments 56,462 29,943 5,220 24,744 0.26 Adjusted $ 636,906 $ 542,222 $ 132,223 $ 418,461 $ 4.24 Due to rounding, individual items may not sum appropriately. Adjusted EBITDA and Adjusted EBITDA Margin Nine Months Ended Dollars in thousands September 29, 2024 October 1, 2023 Net income attributable to Sonoco $ 206,909 $ 393,717 Adjustments Interest expense 122,503 101,363 Interest income (13,127) (6,679) Provision for income taxes 65,821 127,003 Depreciation, depletion and amortization 270,691 249,387 Non-operating pension costs 10,412 10,424 Net income attributable to noncontrolling interests 524 354 Restructuring/Asset impairment charges 59,058 52,981 Changes in LIFO inventory reserves (197) (10,186) Loss/(Gain) on divestiture of business and other assets 27,292 (78,844) Acquisition, integration and divestiture-related costs 47,553 22,192 Other income, net (5,867) (36,943) Net gains from derivatives (3,981) (1,514) Other adjustments 851 8,750 Adjusted EBITDA $ 788,442 $ 832,005 Net Sales $ 4,936,888 $ 5,145,492 Net Income Margin 4.2 % 7.7 % Adjusted EBITDA Margin 16.0 % 16.2 % 57 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 Nine Months Ended September 29, 2024 Dollars in thousands Consumer Packaging segment Industrial Paper Packaging segment All Other Corporate Total Segment and Total Operating Profit $ 328,190 $ 203,008 $ 48,430 $ (198,671) $ 380,957 Adjustments: Depreciation, depletion and amortization 1 107,365 86,133 9,098 68,095 270,691 Equity in earnings of affiliates, net of tax 416 5,802 — — 6,218 Restructuring/Asset impairment charges 2 — — — 59,058 59,058 Changes in LIFO inventory reserves 3 — — — (197) (197) Acquisition, integration and divestiture-related costs 4 — — — 47,553 47,553 Loss on divestiture of business and other assets 5 — — — 27,292 27,292 Net gains from derivatives 6 — — — (3,981) (3,981) Other adjustments — — — 851 851 Segment Adjusted EBITDA $ 435,971 $ 294,943 $ 57,528 $ — $ 788,442 Net Sales $ 2,821,817 $ 1,778,912 $ 336,159 Segment Operating Profit Margin 11.6 % 11.4 % 14.4 % Segment Adjusted EBITDA Margin 15.5 % 16.6 % 17.1 % 1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of $48,307, the Industrial Paper Packaging segment of $19,168, and the All Other group of businesses of $620. 2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer Packaging segment of $20,597, the Industrial Paper Packaging segment of $34,138, 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 $388 and the Industrial Paper Packaging segment of $(585). 4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer Packaging segment of $518 and the Industrial Paper Packaging segment of $(3,658). 5 Included in Corporate are net losses on the divestiture of businesses associated with the Industrial Paper Packaging segment of $28,715, including a loss of $29,965 from the pending sale of two production facilities in China, partially offset by a gain of $(1,250) from the sale of the S3 business, and a gain on the divestiture of businesses associated with the All Other group of businesses of $(1,423) related to the sale of Protexic. 6 Included in Corporate are net gains from derivatives associated with the Consumer Packaging segment of $(624), the Industrial Paper Packaging segment of $(2,628), and the All Other group of businesses of $(729). 58 SONOCO PRODUCTS COMPANY Segment Adjusted EBITDA and All Other Adjusted EBITDA Reconciliation For the Nine Months Ended October 1, 2023 Dollars in thousands Consumer Packaging segment Industrial Paper Packaging segment All Other Corporate Total Segment and Total Operating Profit $ 314,408 $ 256,413 $ 66,084 $ (56,461) $ 580,444 Adjustments: Depreciation, depletion and amortization 1 98,847 76,444 11,014 63,082 249,387 Equity in earnings of affiliates, net of tax 493 8,302 — — 8,795 Restructuring/Asset impairment charges 2 — — — 52,981 52,981 Changes in LIFO inventory reserves 3 — — — (10,186) (10,186) Acquisition, integration and divestiture-related costs 4 — — — 22,192 22,192 Gain on divestiture of business and other assets 5 — — — (78,844) (78,844) Net gains from derivatives 6 — — — (1,514) (1,514) Other adjustments — — — 8,750 8,750 Segment Adjusted EBITDA $ 413,748 $ 341,159 $ 77,098 $ — $ 832,005 Net Sales $ 2,914,168 $ 1,781,033 $ 450,291 Segment Operating Profit Margin 10.8 % 14.4 % 14.7 % Segment Adjusted EBITDA Margin 14.2 % 19.2 % 17.1 % 1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of $48,193, the Industrial Paper Packaging segment of $8,913, and the All Other group of businesses of $5,976. 2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer Packaging segment of $16,480, the Industrial Paper Packaging segment of $32,961, and the All Other group of businesses of $1,188. 3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment of $(9,428) and the Industrial Paper Packaging segment of $(758). 4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer Packaging segment of $1,302 and the Industrial Paper Packaging segment of $5,394. 5 Included in Corporate are gains from the sale of the Company’s timberland properties of $(60,945), the sale of its S3 business of $(11,065), and the sale of its U.S. BulkSak business of $(6,834), all of which are associated with the Industrial Paper Packaging segment. 6 Included in Corporate are net gains from derivatives associated with the Consumer Packaging segment of $(210), the Industrial Paper Packaging segment of $(1,045), and the All Other group of businesses of $(259). 59 SONOCO PRODUCTS COMPANY Financial Position, Liquidity and Capital Resources Cash generated from operations fo r the first nine months of 2024 wa s $437.6 million, compared with $616.9 million in the same period of 2023, a year-over-year decrease of $179.2 million . GAAP net income decreased by $186.6 million year over year as described in the “Results of Operations” section above. Net working capital used $115.8 million of cash in the first nine months of 2024, while providing $67.3 million in the same period last year, for a year-over-year decrease in operating cash flow o f $183.2 million. Accounts receivable used $98.3 million more cash during the first nine 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 offsetting the impact of lower revenues year over year. Inventory was a use of cash of $6.7 million in the first nine months of 2024, while last year was a source of cash of $277.4 million. This lower year-over-year use of cash was expected as the Company ended 2022 with a substantial inventory position driven by pandemic-related supply chain uncertainty. Accounts payable was a source of cash of $73.5 million in the first nine months as compared to a use of cash of $125.7 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 inventories and review payment terms with customers and suppliers to address risk and balance economic benefit. Changes in accrued expenses and other assets and liabilities provided cash totaling $43.6 million in the nine-month period ended September 29, 2024, and used $9.5 million of cash in the same period last year. The $53.2 million lower use of cash in the current year was largely driven by the lower year-over-year payout of management incentive compensation. Investing activities used $178.1 million of cash in the first nine months of 2024, compared with $459.7 million in the same period last year, a lower year-over-year use of cash of $281.7 million. The lower year-over-year use of cash was primarily attributable to lower acquisition spending as the Company invested $313.4 million in the RTS Packaging and Chattanooga Mill acquisitions in the first nine months of 2023 while acquisition spending in the current year was only $3.7 million. Capital expenditures during the first nine months of 2024 were $271.3 million, $16.5 million higher than the same period last year. Proceeds from sale of businesses provided $81.2 million in the first nine months of 2024, primarily driven by the sale of Protexic, compared with $31.1 million in the prior year, from the sales of the Company’s S3 and U.S. BulkSak businesses. Proceeds from the sale of assets were $72.7 million in the first nine 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 nine months of 2024. Investing cash flows in the first nine months of 2024 also reflect the Company’s $10.0 million investment in a small South Carolina-based designer and manufacturer of sustainable protective packaging solutions. 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. Net capital spending for 2024 is expected to be approximately $350 million to $375 million compared to $283 million in 2023. Financing activities provided $1,529.5 million of cash in the nine-month period ended September 29, 2024, compared with using $129.1 million of cash in the corresponding prior-year period. The primary driver of the $1,658.6 million year-over-year increase was higher proceeds from the issuance of debt net of repayments, which provided an additional $1,687.0 million of cash compared to the previous year. Significant activity in the current year includes $1,779.9 million of net proceeds from the issuance of senior unsecured notes in September 2024 intended to fund a portion of the cash consideration for the pending Eviosys acquisition and to pay related fees and expenses, partially offset by repayments of the Company’s syndicated term loan totaling $74.5 million. Other financing costs included $19.0 million in fees related to the Bridge Loan Facility (as defined below) obtained in connection with the pending Eviosys acquisition. Cash used to pay dividends increased by $4.9 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 $9.2 million in the nine-month period ended September 29, 2024, compared to $10.6 million in the same period last year. During the nine-month period ended September 29, 2024, the Company reported a net decrease in cash and cash equivalents of $10.4 million due to currency translation adjustments resulting from a stronger U.S. d ollar relative to certain foreign currencies in which cash and cash equivalents were held. 60 SONOCO PRODUCTS COMPANY The C ompany’s cash balances are held in numerous locations throughout the world. At September 29, 2024 and December 31, 2023, approximatel y $117.1 million and $93.8 million, respectively, of the Company’s reported cash and cash equivalents balances of $1.9 billion 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 September 29, 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. 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 cash deposit and borrowing positions. 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. 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, the Company entered into a definitive agreement to acquire all of the issued and outstanding equity interests in Eviosys from an affiliate of KPS Capital Partners, LP for €3.6 billion (approximately $3.9 billion) on a cash-free and debt-free basis and subject to customary adjustments. In anticipation of closing on the Eviosys acquisition, which is expected to occur in the fourth quarter of 2024, the Company took the following steps to secure the cash consideration for the acquisition and related fees and expenses: • In conjunction with the announcement of the acquisition of Eviosys, the Company entered into a commitment letter with certain financial institutions that provided for a 364-day senior unsecured bridge term loan facility (the “Bridge Loan Facility”) on June 22, 2024 in an aggregate amount of up to $4.0 billion. • On July 12, 2024, the Company entered into a credit agreement (the “Term Credit Agreement”), providing the Company with the ability to borrow up to $700 million on an unsecured basis (the “Term Loan Facility”). Funding of the Term Loan Facility is expected to occur substantially concurrently with the closing of the acquisition. Borrowings under the Term Loan Facility, net of any prepayments, will become payable in full on the second anniversary of the Funding Date (as defined in the Term Credit Agreement) and will bear interest at a fluctuating rate per annum equal to, at the Company’s option, (i) the forward-looking Secured Overnight Financing Rate term rate (such borrowings, “Term SOFR Loans”), (ii) a base rate, or (iii) a combination thereof, plus, in each case, an applicable margin calculated based on the Company’s credit ratings and, in the of case of Term SOFR Loans, an adjustment of 10 basis points. • On September 16, 2024, the Company entered into a credit agreement (the “364-Day Term Credit Agreement”), providing the Company with the ability to borrow up to $1.5 billion on an unsecured basis (the “364-Day Term Loan Facility”). Funding of the 364-Day Term Loan Facility is expected to occur substantially concurrently with the closing of the acquisition. Borrowings under the 364-Day Term Loan Facility will bear interest under the same terms as the Term Loan Facility and will become payable in full 364 days following the funding date. 61 SONOCO PRODUCTS COMPANY • On September 19, 2024, the Company completed a registered public offering of senior unsecured notes (the “Notes”) in a combined aggregate principal amount of $1.8 billion . The Notes consisted of the following: Principal Amount Issuance Costs and Discounts Net Proceeds Interest Rate Maturity 2026 Notes $ 500,000 (3,697) $ 496,303 4.450% September 1, 2026 2029 Notes 600,000 (5,851) 594,149 4.600% September 1, 2029 2034 Notes 700,000 (10,542) 689,458 5.000% September 1, 2034 Total $ 1,800,000 $ (20,090) $ 1,779,910 Cash and cash equivalents on hand at September 29, 2024 include $1.8 billion of net proceeds from the issuance of the Notes, which are held in money market accounts. This cash is unrestricted but designated for use towards funding the pending acquisition of Eviosys. As a result of obtaining financing for the Eviosys acquisition through the Term Loan Facility, the 364-Day Term Loan Facility, and the Notes, the Company terminated the commitments under the Bridge Loan Facility and the related commitment letter effective September 19, 2024. Fees related to the Bridge Loan Facility of $18.6 million and $19.0 million were amortized to interest expense during the three- and nine-month periods ended September 29, 2024. At September 29, 2024, the Company had scheduled debt maturities of approximately $482 million over the next twelve months, including $400 million aggregate principal amount of its 1.80% notes due February 2025. As the Company had $34.0 million in commercial paper balances outstanding at September 29, 2024, $1.2 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 proceeds from the issuance and sale of the Notes the Term Loan Agreement and 364-Day Term Credit Agreement, 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 September 29, 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 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 $6 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. 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-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. 62 SONOCO PRODUCTS COMPANY 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 facilities 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 uses foreign currency forward contracts and other risk management instruments to manage exposure to changes in foreign currency cash flows and the translation of monetary assets and liabilities on the Company’s condensed consolidated financial statements by hedging a portion of forecasted transactions that are denominated in foreign currencies, foreign currency assets and liabilities, or its net investment in foreign subsidiaries. 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. Because the economy in Venezuela is considered highly inflationary under U.S. GAAP, the Company considers the U.S. dollar to be the functional currency of its Venezuelan operations and uses the official exchange rate when remeasuring the financial results of those operations. Economic conditions in Venezuela have worsened considerably over the past several years and there are no indications that conditions are likely to improve in the foreseeable future. Further deterioration could result in the recognition of an impairment charge or a deconsolidation of the subsidiary. At September 29, 2024, the carrying value of the Company’s net investment in its Venezuelan operations was approximately $2.1 million. In addition, at September 29, 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. GAAP since the first quarter of 2022. Accordingly, the Company considers the U.S. dollar to be the functional currency of its operations in Turkey and has remeasured monetary assets and liabilities denominated in Turkish lira to U.S. 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 $7.7 million ($6.0 million after tax), including $1.2 million ($1.0 million after tax) during th e nine-month period ended September 29, 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. dollar. 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 $22.6 million as of September 29, 2024. The Company is a purchaser of various raw material inputs such as recovered paper, energy, steel, aluminum, and plastic resin. The Company generally does not engage in significant hedging activities for these purchases other than for energy and, from time to time, aluminum, because there is usually a high correlation between the primary input costs and the ultimate selling price of its products. Inputs are generally purchased at market or at fixed prices that are established with individual suppliers as part of the purchase process for quantities expected to be consumed in the ordinary course of business. On occasion, where the correlation between selling price and input price is less direct, the Company may enter into derivative contracts such as futures or swaps to manage the effect of price fluctuations. 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 September 29, 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 7.3 million metric million British thermal units (“MMBTUs”) and aluminum swaps totaling 133 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 $2.9 million and $6.8 million at September 29, 2024 and December 31, 2023, respectively. 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 through Decembe r 2024. T he total market value of these instruments resulted in a net loss position of $1.0 million at September 29, 2024 and a net gain position of $1.5 million at December 31, 2023. In addition, at September 29, 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. In 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 63 SONOCO PRODUCTS COMPANY interest payments, to fixed-rate euro-denominated debt. 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 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. On April 15, 2024, as a result of the 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 Company terminated its swap agreements and received a net 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, 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 fair value of the Company’s net investment hedges was a loss position of $18.9 million and $5.1 million at September 29, 2024 and December 31, 2023, respectively. Translation losses of $14.1 million (net of income taxes of $4.8 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 September 29, 2024 and December 31, 2023, respectively. In anticipation of the offering of th e Notes, the Company entered into treasury lock derivative instruments with eleven banks, with a total notional principal amount of $900 million , on August 29, 2024. These instruments had the risk management objective of reducing the Company’s exposure to increases in the underlying Treasury index up to the date of pricing of the Notes. The derivatives were settled when the Notes priced on September 17 , 2024, with the Company recognizing a loss on the settlement of $(11.1) million . T he loss is included in “Interest expense” on the Company’s Condensed Consolidated Statements of Income for the three- and nine-month periods ended September 29, 2024 . 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 $21.2 million is included in “Other assets” in the Company’s Condensed Consolidated Balance Sheet as of September 29, 2024 . During the first nine months of 2024, the U.S. dollar strengthened against the Canadian dollar, the Mexican peso, the Brazilian real, and the Colombian peso, functional currencies in which a large amount of the Company’s foreign investments are held. During this same period, the U.S. dollar weakened against the euro, the British pound, the Polish zloty, the Malaysian ringgit, and the Danish krone. The net impact of these changes, and the changes in the net investment hedge discussed above, resulted in translation losses of $20.4 million being recor ded in “Accumulated other comprehensive loss” during the nine-month period ended September 29, 2024. 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. 64 SONOCO PRODUCTS COMPANY OTHER ITEMS Critical Accounting Estimates Impairment of Goodwill The Company assesses its goodwill for impairment annually and from time to time when warranted by the facts and circumstances surrounding individual reporting units or the Company as a whole. If the fair value of a reporting unit exceeds the carrying value of that reporting unit, there is no impairment. If the carrying value of a reporting unit exceeds the fair value of that reporting unit, an impairment charge to goodwill is recognized for the excess. The Company’s reporting units, as determined in accordance with ASC 350, “Intangibles-Goodwill and Other,” are the same as, or one level below, its operating segments, as determined in accordance with ASC 280, “Segment Reporting.” The Company completed its most recent annual goodwill impairment testing during the third quarter of 2024. For testing purposes, the Company performed an assessment of each reporting unit using either a qualitative evaluation or a quantitative test. The qualitative evaluations involved consideration of factors such as the macroeconomic environment, the industry, the Company’s overall financial performance, the current and projected financial performance of specific reporting units, and business strategy changes. The quantitative tests, described further below, relied on management’s long-term financial projections for the reporting units and took into consideration, among other things, specific business unit risk, the countries in which the reporting units operate, and implied fair values based on comparable trading multiples. When performing a quantitative analysis, the Company estimates the fair value of its reporting units using a weighted average of the income and market approaches. Under the income approach, the Company uses a discounted cash flow model based on projections of future years’ operating results and associated cash flows. The Company’s assessments reflect significant management assumptions and estimates related to the Company’s forecast of sales growth, gross profit margins and discount rates, which are validated by observed comparable trading and transaction multiples based on guideline public companies under the market approach. The Company’s model discounts projected future cash flows, forecasted over a five-year period, with an estimated residual growth rate. The Company’s projections incorporate management’s estimates of the most-likely expected future results. Projected future cash flows are discounted to present value using a discount rate that management believes is appropriate for the reporting unit. The Company’s assessments, whether qualitative or quantitative, incorporate management’s expectations for the future, including forecasted growth rates and/or margin improvements. Therefore, should there be changes in the relevant facts and circumstances and/or expectations, management’s conclusions regarding goodwill impairment may change as well. In considering the level of uncertainty regarding the potential for goodwill impairment, management has concluded that any such impairment would, in most cases, likely be the result of adverse changes in more than one assumption. Management considers the assumptions used to be its best estimates across a range of possible outcomes based on available evidence at the time of the assessment. Other than in the Plastics-Medical, Plastics-Food, and Metal Packaging reporting units, which are 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 the expected future results in any of its reporting units significant enough to result in goodwill impairment. In the case of Metal Packaging, t he lower differential between the fair value and carrying value of the reporting unit is due to the acquisition of Ball Metalpack Holding, LLC in 2022, at which time the majority of assets and liabilities acquired were recorded at fair value. 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” in the Company’s 2023 Annual Report on Form 10-K. Although no reporting units failed the annual impairment test, in management’s opinion the goodwill balances of the Plastics-Medical, Plastics-Food, and Metal Packaging reporting units are individually at risk of impairment in the near term if each reporting unit’s operation does not perform in line with management’s expectations, or if there is a negative change in the long-term financial outlook for each reporting unit or in other factors such as the particular discount rates used. 65 SONOCO PRODUCTS COMPANY Sensitivity Analysis In the annual goodwill impairment analysis completed during the third quarter of 2024, projected future cash flows for the Plastics-Medical, Plastics-Food, and Metal Packaging reporting units were discounted at 11.5% , 10.5% , and 11.0% , respectively, and their estimated fair values were determined to exceed their carrying values by approximately 18.7%, 18.9%, and 12.6%, respectively . Based on the discounted cash flow model and holding other valuation assumptions constant, the discount rates for the Plastics-Medical, Plastics-Food and Metal Packaging reporting units would have to increase t o 13.8%, 12.4%, and 12.1%, respectively, in order for the estimated fair values of the reporting units to fall below their individual carrying values. Total goodwill associated with the Plastics-Medical, Plastics-Food, and Metal Packaging reporting units was $64.9 million, $198.8 million , and $384.3 million , respectively, at September 29, 2024. Other Critical Accounting Estimates See Part II, Item 7, “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023.