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What changed in SONOCO PRODUCTS CO's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SONOCO PRODUCTS CO's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+468 added−450 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in SONOCO PRODUCTS CO's 2023 10-K

468 paragraphs added · 450 removed · 316 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

71 edited+16 added−11 removed22 unchanged
Biggest changeWe use global and local incident data along with identifying leading indicators to create program and safety improvement action plans to reduce conditions and behaviors that lead to at-risk situations. Sonoco tracks safety performance and training indicators with a goal of reducing safety incidents and improving upon the previous year’s performance.
Biggest changeProtecting the health and safety of our employees is a priority, and we are committed to providing a safe and healthy working environment for all our associates. We use global and local incident data, along with a strong set of leading indicators, to create program and safety improvement action plans to reduce exposures that lead to at-risk situations.
Products across this segment support multiple end markets in industrials (construction and building products, and industrial distribution), consumer staples (food and beverage, food distribution, household and personal products), and consumer discretionary (home building, appliances, apparel, and home furnishings), as well as various other end markets.
Products across this segment support multiple end markets in consumer staples (food and beverage, food distribution, household and personal products), consumer discretionary (home building, appliances, apparel, and home furnishings), and industrials (construction and building products, and industrial distribution), as well as various other end markets.
Raw Materials – The principal raw materials used by the Company are recovered paper, paperboard, steel, aluminum, and plastic resins. Raw materials are purchased from a number of outside sources. After a number of global supply chain challenges in the past several years, the Company considers the supply and availability of raw materials to be adequate to meet its needs.
Raw Materials – The principal raw materials used by the Company are recovered paper, paperboard, steel, aluminum, and plastic resins. Raw materials are purchased from several outside sources. After a number of global supply chain challenges in the past several years, the Company considers the supply and availability of raw materials to be adequate to meet its needs.
The Company believes that a strong focus on human capital through the talent we hire and retain is critical to maintaining our competitiveness. This focus on human capital is reinforced by our Policies on Business Conduct and through increasing employee awareness and education, communication and training.
The Company believes that a strong focus on human capital through the talent we hire and retain is critical to maintaining our competitiveness. This focus on human capital is reinforced by our Policies on Business Conduct and through increasing employee awareness, education, communication, and training.
We rely on the unique qualities and talents of our employees to help us meet our strategic priorities. Our DEI goals are focused on increasing the representation of women and racial minorities into more salaried and senior leadership positions. We are working toward this goal by increasing hiring, focusing on development and promotions, as well as focusing on retention efforts.
We rely on the unique qualities and talents of our employees to help us meet our strategic priorities. Our DEI goals are focused on increasing the representation of women and racial minorities into more salaried and senior leadership positions. We are working toward this goal by increasing hiring and focusing on development and promotions, as well as retention efforts.
We work towards this goal by establishing a foundation for actions that support sustainability; health and safety; diversity, equity and inclusion; and talent development. Integrity is a hallmark of the Sonoco culture. We seek to engage, develop and reward our employee base so they can successfully pursue our purpose of Better Packaging. Better Life.
We work towards this goal by establishing a foundation for actions that support sustainability; health and safety; diversity, equity and inclusion (“DEI”); and talent development. Integrity is a hallmark of the Sonoco culture. We seek to engage, develop, and reward our employee base so they can successfully pursue our purpose of Better Packaging. Better Life.
Water Usage - Reducing our water consumption is part of being responsible stewards of our planet’s resources. Many of our actions to reduce water usage involve our global paper mills, which account for the majority of our global water usage. We have conducted initial water risk studies at these manufacturing facilities using the WRI Aqueduct water risk tool.
Water Usage – We believe reducing our water consumption is part of being responsible stewards of our planet’s resources. Many of our actions to reduce water usage involve our global paper mills, which account for the majority of our global water usage. We have conducted initial water risk studies at these manufacturing facilities using the WRI Aqueduct water risk tool.
Information regarding compliance with government regulations, including environmental laws, is provided in Item 1A - Risk Factors, in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Risk Management,” and in Note 16 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Information regarding compliance with government regulations, including environmental laws, is provided in Item 1A - Risk Factors, in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Risk Management,” and in Note 17 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
The Company soon became the leading producer of cones in the United States. The Southern Novelty Company continued to diversify its product line and add new operations around the country. In 1923, the Southern Novelty Company name was changed to Sonoco Products Company, or "Sonoco," using the first two letters from each word of its original name.
The Company soon became the leading producer of cones in the United States. The Southern Novelty Company continued to diversify its product line and add new operations around the country. In 1923, the Southern Novelty Company name was changed to Sonoco Products Company, or “Sonoco,” using the first two letters from each word of its original name.
As part of Sonoco’s Supplier Diversity Program, supplier diversity progress is reported to the CEO, who in turn reports the progress to the Employee & Public Responsibility Committee of the Board of Directors. Talent Development Attracting, developing and retaining talented employees is critical to our success and is an integral part of our human capital strategy.
As part of Sonoco’s Supplier Diversity Program, supplier diversity progress is reported to the President and CEO, who in turn reports the progress to the Employee & Public Responsibility Committee of the Board. Talent Development Attracting, developing, and retaining talented employees is critical to our success and is an integral part of our human capital strategy.
Fuller 61 Chief Operating Officer since April 2022. Previously, Executive Vice President, Global Industrial and Consumer, 2020-2022; Senior Vice President, Global Consumer Packaging, Display and Packaging and Protective Solutions, 2019-2020; Senior Vice President, Paper/Engineered Carriers U.S./Canada and Display and Packaging, 2017-2018. Joined Sonoco in 1985. John M.
Fuller 62 Chief Operating Officer since April 2022. Previously, Executive Vice President, Global Industrial and Consumer, 2020-2022; Senior Vice President, Global Consumer Packaging, Display and Packaging and Protective Solutions, 2019-2020; Senior Vice President, Paper/Engineered Carriers U.S./Canada and Display and Packaging, 2017-2018. Joined Sonoco in 1985. John M.
The Company does not carry a significant backlog and, in general, aligns its customer deliveries on a build-to-order basis. Competition – The Company sells its products in highly competitive markets, which include paper, textile, film, food, packaging, construction, and wire and cable.
The Company does not carry a significant backlog and, in general, aligns its customer deliveries on a built-to-order basis. Competition – The Company sells its products in highly competitive markets, which include paper, textile, film, food, packaging, construction, and wire and cable.
We have implemented policies and training focused on non-discrimination and harassment prevention. We embrace DEI, which we believe fosters leadership through new ideas and perspectives. In 2022, we continued the evolution of our DEI strategy and objectives, an ongoing business imperative.
We have implemented policies and training focused on non-discrimination and harassment prevention. We embrace DEI, which we believe fosters leadership through new ideas and perspectives. In 2023, we continued the evolution of our DEI strategy and objectives, an ongoing business imperative.
Previously, Vice President, Rigid Paper Containers, North America, 2021-2022; Division Vice President and General Manager of Rigid Paper Containers, North America, 2018-2021. Division Vice President and General Manager of Tubes and Cores, U.S. and Canada, 2015-2018. Joined Sonoco in 1997. Jeffrey S. Tomaszewski 54 President, Diversified Businesses since April 2022.
Previously, Vice President, Rigid Paper Containers, North America, 2021-2022; Division Vice President and General Manager of Rigid Paper and Containers, North America, 2018-2021. Division Vice President and General Manager of Tubes and Cores, U.S. and Canada, 2015-2018. Joined Sonoco in 1997. Jeffrey S. Tomaszewski 55 President, Diversified Businesses since April 2022.
Sonoco uses its Investor Relations website as a means of disclosing material non-public information. Accordingly, investors should monitor Sonoco’s Investor Relations website, in addition to following its press releases, SEC filings, and public conference calls and webcasts. The information posted on or accessible through Sonoco’s website is not incorporated into this Annual Report on Form 10-K.
Sonoco uses its Investor Relations website as a means of disclosing material non-public information. Accord ingly, investors should monitor Sonoco’s Investor Relations website, in addition to following its press releases, SEC filings, and public conference calls and webcasts. The information posted on or accessible through Sonoco’s website is not incorporated into this Annual Report on Form 10-K.
In addition, we conduct regular talent succession assessments along with individual performance reviews in which managers provide regular feedback and coaching to assist with the development of our employees, including the use of individual development plans to assist with individual career development.
In addition, we conduct regular talent succession assessments along with individual performance reviews for salaried employees in which managers provide regular feedback and coaching to assist with the development of our employees, including the use of individual development plans to assist with individual career development.
Previously, Vice President and General Manager Rigid Paper Products Europe, 2008-2022. Joined Sonoco in 2008. Russell K. Grissett 53 President, Global Flexibles Division since April 2022. Previously, Vice President and General Manager Global Flexibles, 2019-2022; Vice President and General Manager Global Protective Solutions, 2017-2019. Joined Sonoco in 1993. James A.
Previously, Vice President and General Manager Rigid Paper Products Europe, 2008-2022. Joined Sonoco in 2008. Russell K. Grissett 54 President, Global Flexibles Division since April 2022. Previously, Vice President and General Manager Global Flexibles, 2019-2022; Vice President and General Manager Global Protective Solutions, 2017-2019. Joined Sonoco in 1993. James A.
Joined Sonoco in 2002. Lisa K. Weeks 55 Vice President, Investor Relations and Corporate Affairs, since April 2022. Previously Senior Vice President, Head of Investor Relations and Chief Strategy Officer at Benchmark Electronics, Inc. 2020-2022. Vice President, Strategy and Investor Relations at Benchmark Electronics, Inc., 2012-2020. Joined Sonoco in 2022.
Joined Sonoco in 2002. Lisa K. Weeks 56 Vice President, Investor Relations and Corporate Affairs, since April 2022. Previously Senior Vice President, Head of Investor Relations and Chief Strategy Officer at Benchmark Electronics, Inc. 2020-2022. Vice President, Strategy and Investor Relations at Benchmark Electronics, Inc., 2012-2020. Joined Sonoco in 2022.
Additional information regarding Sonoco's customers is provided in Item 1A - Risk Factors under the caption "Risks Related to Competition, Customers and Suppliers." Backlog - The Company provides a wide variety of products to multiple end markets and relies on its customers' forecasts to position raw materials for manufacturing within its facilities.
Additional information regarding Sonoco's customers is provided in Item 1A - Risk Factors under the caption “Risks Related to Competition, Customers and Suppliers.” Backlog – The Company provides a wide variety of products to multiple end markets and relies on its customers’ forecasts to position raw materials for manufacturing within its facilities.
Diversity, Equity, and Inclusion Our commitment to diversity, equity and inclusion ("DEI") starts with our goal of developing a workforce that is diverse in background, knowledge, skill and experience. Sonoco engages in efforts aimed at hiring diverse talent, including initiatives focused on gender, underrepresented ethnic groups, LGBT+ individuals, people with disabilities, veterans and others.
Diversity, Equity, and Inclusion Our commitment to DEI starts with our goal of developing a workforce that is diverse in background, knowledge, skill and experience. Sonoco engages in efforts aimed at hiring diverse talent, including initiatives focused on gender, gender identity, underrepresented ethnic groups, LGBTQ+ individuals, people with disabilities, veterans and others.
Additional information regarding competition is provided in Item 1A - Risk Factors under the caption "Risks Related to Competition, Customers and Suppliers." Compliance with Government Regulations and Laws – The Company must comply with extensive laws, rules and regulations in the United States and in each of the countries where it conducts business with respect to a variety of matters.
Additional information regarding competition is provided in Item 1A - Risk Factors under the caption “Risks Related to Competition, Customers and Suppliers.” Compliance with Government Regulations and Laws – The Company must comply with extensive laws, rules, and regulations in the United States and in each of the countries where it conducts business with respect to a variety of matters.
Haley, Chairman of Sonoco’s Board of Directors. Robert R. Dillard 48 Chief Financial Officer since June 2022. Previously, Chief Strategy Officer, April-June 2022; Vice President, Corporate Development, 2018 - March 2022; President of Personal Care Europe and Vice President of Strategy and Innovation at Domtar Personal Care, a division of Domtar Corporation, 2016-2018. Joined Sonoco in 2018. Rodger D.
Haley, Chairman of Sonoco’s Board of Directors. Robert R. Dillard 49 Chief Financial Officer (“CFO”) since June 2022. Previously, Chief Strategy Officer, April-June 2022; Vice President, Corporate Development, 2018 - March 2022; President of Personal Care Europe and Vice President of Strategy and Innovation at Domtar Personal Care, a division of Domtar Corporation, 2016-2018. Joined Sonoco in 2018. Rodger D.
We are also committed to pay equity and regularly review our compensation model to promote more fair and inclusive pay practices across our business. We offer competitive benefits packages that reflect the needs of our workforce. In the United States, we provide medical, dental, and vision benefits, life and disability coverage, education reimbursement, and paid time off.
We are also focused on pay equity and regularly review our compensation model to promote more fair and inclusive pay practices across our business. We offer competitive benefits packages that we believe reflect the needs of our workforce. In the United States, we provide medical, dental, and vision benefits, life and disability coverage, education reimbursement, and paid time off.
All references to Sonoco’s websites are intended to be inactive textual references only. 7 FORM 10-K SONOCO 2022 ANNUAL REPORT Information About our Executive Officers – Name Age Position and Business Experience for the Past Five Years Executive Officers R. Howard Coker 60 Board member, President and Chief Executive Officer since 2020.
All references to Sonoco’s websites are intended to be inactive textual references only. 7 FORM 10-K SONOCO 2023 ANNUAL REPORT Information About our Executive Officers – Name Age Position and Business Experience for the Past Five Years Executive Officers R. Howard Coker 61 Board member, President and Chief Executive Officer since 2020.
People Management - Sonoco’s core belief in “People and Packaging with a Purpose” underlies our efforts to attract, acquire and retain talented employees for our global businesses. We bring more to packaging than just the package.
Human Capital Management - Sonoco’s core belief in “People and Packaging with a Purpose” underlies our efforts to attract, acquire, and retain talented employees for our global businesses. We bring more to packaging than just the package.
Adam Wood 54 Vice President Global Paper Products-Europe since April 2022. Previously Vice President, Paper and Industrial Converted Products, EMEA, Australia and New Zealand, 2015-2022. Joined Sonoco in 2003. 8 FORM 10-K SONOCO 2022 ANNUAL REPORT
Adam Wood 55 Vice President Global Paper Products-Europe since April 2022. Previously Vice President, Paper and Industrial Converted Products, EMEA, Australia and New Zealand, 2015-2022. Joined Sonoco in 2003. 8 FORM 10-K SONOCO 2023 ANNUAL REPORT
In 2022, the Company changed the name of the DEI Council, which was formerly known as the Global Diversity and Inclusion Council, to reflect the Company's increasing emphasis on driving equity as part of an inclusive employee environment.
In 2022, the Company changed the name of the DEI Council, formerly the Global Diversity and Inclusion Council, to reflect the Company's increasing emphasis on driving equity as part of an inclusive employee environment.
With the Ball Metalpack acquisition in 2022, we expanded our manufacturing capability in steel and aluminum metal fabrication beyond our existing metal ends and closures products to include metal packaging products for food and household products including vegetables, tomatoes, fruit, spray cleaners, paint, and other products.
With the acquisition of Metal Packaging in 2022, we expanded our manufacturing capability in steel and aluminum metal fabrication beyond our existing metal ends and closures products to include metal food and household packaging products for vegetables, tomatoes, fruit, spray cleaners, paint, and other products.
Florence, Jr. 44 General Counsel, Secretary, Vice President and General Manager Converted Products North America since June 2022. Previously, Vice President, General Counsel, Human Resources and Secretary, 2019-2022. Corporate Vice President, General Counsel and Secretary, 2016-2019; Joined Sonoco in 2015. Sean Cairns 52 President, Global Rigid Paper Packaging since April 2022.
Florence, Jr. 45 General Counsel, Secretary, Vice President and General Manager Converted Products North America since June 2022. Previously, Vice President, General Counsel, Human Resources and Secretary, 2019-2022. Corporate Vice President, General Counsel and Secretary, 2016-2019; Joined Sonoco in 2015. Sean Cairns 53 President, Global Rigid Paper Packaging since April 2022.
We have also set a goal to reduce absolute scope 3 GHG emissions by 13.5% by 2030 from a 2019 base year by working with our customers and suppliers to develop innovative packaging solutions that reduce packaging waste and improve recyclability. These goals were validated by the Science-Based Target initiative in June 2021.
We have also set a goal to reduce absolute scope 3 GHG emissions by 13.5% by 2030 from a 2019 base year by working with our customers and suppliers to develop innovative packaging solutions that reduce packaging waste and improve recyclability. These goals were validated by the Science-Based Target initiative as meeting their requirements for being science-based in June 2021.
Seasonality – Although demand for the majority of the Company's products is not seasonal to any significant degree, the Company's Metal Packaging operations (acquired in January 2022) generally experience higher sales and operating profits during the second and third quarters of the year as demand for certain of its products increases during the peak of the food packaging season.
Seasonality – Although demand for the majority of the Company's products is not seasonal to any significant degree, the Company’s Metal Packaging operations generally experience higher sales and operating profits during the second and third quarters of the year as demand for certain products increases during the peak of the food packaging season.
We are also committed to responsibly managing resins use at our facilities and are implementing "Operation Clean Sweep", a program focused on preventing discharge of plastic pellets and nurdles into the environment. Recycling - We also serve as a valued partner to our customers to reduce the environmental impact of their packaging.
We are also committed to responsibly managing resin use at our facilities and are implementing “Operation Clean Sweep”, a program focused on preventing discharge of plastic pellets and nurdles into the environment. Recycling – We also serve as a valued partner to our customers to reduce the environmental impact of their packaging.
Harrell III 61 President, Global Industrial Paper Packaging since April 2022. Previously, Vice President, Industrial Americas, Asia and Conitex, 2020-2022; Vice President Tubes & Cores, US and Canada, 2016-2020. Joined Sonoco in 1985. Ernest D. Haynes III 50 President, Metal Packaging since March 2022.
Harrell III 62 President, Global Industrial Paper Packaging since April 2022. Previously, Vice President, Industrial Americas, Asia and Conitex, 2020-2022; Vice President Tubes & Cores, US and Canada, 2016-2020. Joined Sonoco in 1985. Ernest D. Haynes III 51 President, Metal Packaging since April 2022.
Sonoco is now a multi-billion dollar global designer, developer, and manufacturer of a variety of highly-engineered and sustainable packaging serving multiple end markets. As of December 31, 2022, the Company had approximately 310 locations in 32 cou ntries, serving some of the world’s best-known brands in some 85 n ations.
Sonoco is now a multi-billion dollar global designer, developer, and manufacturer of a variety of highly engineered and sustainable packaging serving multiple end markets. As of December 31, 2023, the Company had approximately 310 l ocations in 33 cou ntries, serving some of the world’s best-known brands in some 85 n ations.
Industrial Paper Packaging The Industrial Paper Packaging segment accounted for approximately 37%, 44% and 38% of the Company’s consolidated net sales in the years ended December 31, 2022, 2021 and 2020, respectively. This segment served its markets through 182 plants on five continents as of December 31, 2022.
Industrial Paper Packaging The Industrial Paper Packaging segment accounted for approximately 35%, 37%, and 44% of the Company’s consolidated net sales in the years ended December 31, 2023, 2022, and 2021, respectively. This segment served its markets through approximately 190 plants on five continents as of December 31, 2023.
(e) Available Information – The Company electronically files with the Securities and Exchange Commission (the "SEC") its annual reports on Form 10-K, its quarterly reports on Form 10-Q, its periodic reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and proxy materials pursuant to Section 14 of the Exchange Act.
(e) Available Information – The Company electronically files with the SEC its annual reports on Form 10-K, its quarterly reports on Form 10-Q, its periodic reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act, and proxy materials pursuant to Section 14 of the Exchange Act.
Patents, Trademarks, and Related Contracts – Most inventions and product and process innovations are generated by Sonoco’s development, marketing and engineering staff, and are important to the Company’s internal growth. Patents have been granted on many inventions created by Sonoco staff in the United States and in many other countries. Patents, trademarks and proprietary technology are also acquired through acquisitions.
Patents, Trademarks, and Related Contracts – Most inventions and product and process innovations are generated by Sonoco’s development, marketing, and engineering staff, and are important to the Company’s internal growth. Patents have been granted on many inventions created by Sonoco staff in the United States and in numerous other countries.
Single Use Plastics - We are committed to reducing the use and impact of virgin plastics on the environment. As such, we are working to ensure we can make relevant on-pack recyclability claims for at least 75% of our global rigid plastic product portfolio, while also ensuring we are closing the loop through continued use of post-consumer recycled content.
Single Use Plastics – We are working to reduce the use and impact of virgin plastics on the environment. As such, we are working to continue to ensure we can make relevant on-pack recyclability claims for our consumer-based global rigid plastic product portfolio, while also ensuring we are closing the loop through continued use of post-consumer recycled content.
In support of our GHG emission reductions, Sonoco aims to continue energy efficiency improvements in our manufacturing plants targeted to reduce total energy use by at least 8% by 2030 from a 2020 baseline in addition to investing in energy efficiency, renewable energy and alternative power projects.
Energy Usage – We strive to manage, mitigate, and reduce our GHG emissions where possible. In support of our GHG emission reductions, Sonoco aims to continue energy efficiency improvements in our manufacturing plants targeted to reduce total energy use by at least 8% by 2030 from a 2020 baseline, in addition to investing in renewable energy and alternative power projects.
Culture – At Sonoco, our purpose is ingrained in our culture. In fact, it drives our culture. It drives our product development. It drives how we work with our customers and each other. It drives what we do, and the decisions we make. Our purpose isn’t just a collection of words.
Culture – At Sonoco, our purpose is ingrained in our culture. In fact, it drives our culture. It drives our product development. It drives how we work with our customers and each other. It drives what we do, and the decisions we make.
An important part of our DEI efforts includes Sonoco’s Business Resource Groups, which are groups of employees who support our diversity, equity, and inclusion strategies by leveraging the unique perspectives of their members.
An important part of our DEI efforts includes Sonoco’s Employee Resource Groups, which are groups of employees who support our DEI strategies by leveraging the unique perspectives of their members.
Dependence on Customers – On an aggregate basis during 2022, the five largest customers in the Consumer Packaging and Industrial Paper Packaging segments accounted for approximately 26% and 12%, respectively, of each segment’s net sales. The five largest customers in the All Other group of businesses accounted for approximately 14% of the group’s net sales.
Dependence on Customers – On an aggregate basis during 2023, the five largest customers in the Consumer Packaging and Industrial Paper Packaging segments accounted for approximately 26% a n d 10%, respectively, of each segment’s net sales. The five largest customers in the All Other group of businesses accounted for approximately 15% of the group’s net sales.
Within the Consumer Packaging segment, Sonoco’s rigid paper containers are the Company’s largest revenue-producing group of products and services, representing approximately 21% of consolidated net sales in the year ended December 31, 2022. This group comprised 24% and 25% of consolidated net sales in 2021 and 2020, respectively.
In 2023, Sonoco’s rigid paper containers were the Company’s largest revenue-producing group of products and services, representing approximately 21% of the Company’s consolidated net sales in the year ended December 31, 2023. This group comprised 21% and 24% of consolidated net sales in 2022 and 2021, respectively.
In 2022, Sonoco had the capacity to manufacture approximately 2.2 million tons of recycled paperboard per year. Products within the Industrial Paper Packaging segment consist primarily of goods produced from recycled fiber including paperboard tubes, cores, and cones, paper-based protective materials and uncoated recycled paperboard for high-end applications such as folding cartons, can board, and laminated structures.
Products within the Industrial Paper Packaging segment consist primarily of goods produced from recycled fiber including paperboard tubes, cores, cones and cans; partitions; paper-based protective materials; and uncoated recycled paperboard for high-end applications such as folding cartons, can board, and laminated structures.
Products within the All Other businesses consist of a variety of packaging materials including plastic, paper, foam, and various other specialty materials. All Other businesses serve a wide variety of end markets including consumer staples, consumer discretionary, industrial, and pharmaceuticals.
The operations in All Other consisted of approximately 40 plants throughout the world as of December 31, 2023. Products within the All Other businesses consist of a variety of packaging materials including plastic, paper, foam, and various other specialty materials. All Other businesses serve a wide variety of end markets including consumer staples, consumer discretionary, industrial, and pharmaceuticals.
In 2022, Sonoco’s tubes and cores products were the Company’s second largest revenue-producing group of products, representing approximately 18% of consolidated net sales in the year ended December 31, 2022. This group comprised 21% and 19% of cons olidated net sales in 2021 and 2020, respectively.
In 2023, Sonoco’s tubes and cores products were the Company’s second largest revenue-producing group of products, representing approximately 19% of the Company’s consolidated net sales in the year ended December 31, 2023.
Prior to their divestitures in 2020 and 2021, the Company's global display and packaging businesses, which included point-of-purchase displays, fulfillment operations, and contract packaging, were reported in All Other. 4 FORM 10-K SONOCO 2022 ANNUAL REPORT Other Aspects of the Company's Business Product Distribution – Each of the Company’s operating units has its own sales staff and maintains direct sales relationships with its customers.
Prior to its divestiture in April 2021, the Company's U.S. global display and packaging business, which included point-of-purchase displays, fulfillment operations, and contract packaging, was reported in All Other. Other Aspects of the Company’s Business Product Distribution – Each of the Company’s operating units has its own sales staff and maintains direct sales relationships with its customers.
As of December 31, 2022, approximately 25.5% of our total work force and 17.0% of our senior leaders identified as female, while approximately 33.2% of our U.S. workforce and 13.6% of our senior leaders identified as a member of an underrepresented ethnic group.
As of December 31, 2023, approximately 25.0% of our total work force and 18.9% of our senior leaders identified as female, while approximately 34.5% of our total workforce and 13.3% of our senior leaders identified as a member of an underrepresented ethnic group.
In partnership with our employees, we are committed to protecting the natural environment and our communities through sustainable practices. We emphasize a culture of accountability and strive to conduct our business in a manner that is fair, ethical, and responsible to earn the trust of our employees.
We emphasize a culture of accountability and strive to conduct our business in a manner that is fair, ethical, and responsible to earn the trust of our employees.
It represents the collective spirit of an organization focused on one thing: Better Packaging. Better Life . Sustainability - Packaging plays a fundamental role in providing safe and hygienic delivery systems for food, medicines and other essential products around the world. However, we believe the importance of packaging extends beyond its functionality to also include its impact on the planet.
Our purpose isn’t just a collection of words; it represents the collective spirit of an organization focused on one thing: Better Packaging. Better Life . Sustainability – Packaging plays a fundamental role in providing safe and hygienic delivery systems for food, medicines, and other essential products around the world.
All Other The businesses grouped as All Other accounted for approximately 11%, 14%, and 19% of the Company’s consolidated net sales in the years ended December 31, 2022, 2021 and 2020, respectively. The operations in this segment consisted of 39 plants throughout the world as of December 31, 2022.
Consumer Packaging The Consumer Packaging segment accounted for approximately 53%, 52%, and 42% of the Company’s consolidated net sales in the years ended December 31, 2023, 2022, and 2021, respectively. The operations in this segment consisted of approximately 80 plants throughout the world as of December 31, 2023.
Our rigid paper containers are manufactured from 100% recycled paperboard provided primarily from Sonoco global paper operations. These paper products are primarily used in the food and beverage markets including snacks, baked goods, powdered drinks, and confectionary goods.
These paper products are primarily used in the food and beverage markets including snacks, baked goods, powdered drinks, and confectionary goods.
None of the Company’s customers represented 10% or more of consolidated revenues in 2022 or consolidated trade accounts receivable as of December 31, 2022.
None of the Company’s customers represented 10% or more of consolidated revenues in 2023.
Sonoco’s paper operations provide the primary raw material for the Company’s fiber-based packaging. Sonoco uses approximately 49% of the paper it manufactures, and the remainder is sold to third parties.
Sonoco’s paper operations provide the primary raw material for the Company’s fiber-based packaging. Sonoco uses approximately 52% of the paper it manufactures, and the remainder is sold to third parties. This vertical integration strategy was supported by 23 paper mills with 30 paper machines throughout the world as of December 31, 2023.
Further information about the Company’s reportable segments is provided in Note 18 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Consumer Packaging The Consumer Packaging segment accounted for approximately 52%, 42% and 43% of the Company’s consolidated net sales in the years ended December 31, 2022, 2021 and 2020, respectively.
Further information about the Company’s reportable segments is provided in Note 19 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Item 1. Business (a) General Development of Business – Sonoco Products Company ("Sonoco," "the Company," "we," "us," or "our") is a South Carolina corporation founded in Hartsville, South Carolina, in 1899 as the Southern Novelty Company.
Item 1. Business (a) General Development of Business – Sonoco Products Company (“Sonoco,” “the Company,” “we,” “us,” or “our”) is a South Carolina corporation founded in Hartsville, South Carolina, in 1899 as the Southern Novelty Company with the guiding principle that People Build Businesses by doing the right things.
The operations in this segment consisted of 87 plants throughout the world as of December 31, 2022. Products within the Consumer Packaging segment consist of rigid packaging (paper, metal, and plastic) and flexible packaging, primarily serving the consumer staples market focused on food, beverage, household, and personal products.
Products within the Consumer Packaging segment consist of rigid packaging (paper, metal, and plastic) and flexible packaging, primarily serving the consumer staples market focused on food, beverage, household, and personal products. Our rigid paper containers are manufactured from 100% recycled paperboard provided primarily from Sonoco global paper operations.
Our sustainability goals include the following key elements: 5 FORM 10-K SONOCO 2022 ANNUAL REPORT Greenhouse Gas Emissions - While we estimate that we have reduced our Scope 1 and Scope 2 greenhouse gas ("GHG") emissions intensity by approximately 25% since 2009, we are committed to further improving our environmental impact by setting ambitious new targets to reduce our global greenhouse gas emissions in line with the Paris Agreement, which is aimed at limiting the warming of global temperatures to well below 2°C above pre-industrial levels.
Our sustainability goals include the following key elements: Greenhouse Gas Emissions – We are setting ambitious targets to reduce our global greenhouse gas (“GHG”) emissions in line with the Paris Agreement, which is aimed at limiting the warming of global temperatures to less than 2°C above pre-industrial levels.
We seek to help our customers solve their packaging challenges by connecting insights to innovation and developing customized solutions that are tailored to the customer’s goals and objectives.
Our goal is to bring more to packaging than just the package by offering integrated packaging solutions that help define brand personalities, create unique customer experiences, and enhance the quality of products. We seek to help our customers solve their packaging challenges by connecting insights to innovation and developing customized solutions that are tailored to the customers’ goals and objectives.
Sonoco is committed to creating sustainable products, services and programs for our customers, employees and communities that support our corporate purpose: Better Packaging. Better Life . Our goal is to bring more to packaging than just the package by offering integrated packaging solutions that help define brand personalities, create unique customer experiences, and enhance the quality of products.
Sonoco is committed to creating sustainable products, services, and programs for the environment and our customers, employees, and communities that support our corporate purpose: Better Packaging. Better Life .
Sonoco’s registered web domain names provide information about Sonoco, its people and its products. Trademarks and domain names are licensed to outside companies where appropriate.
Most of Sonoco’s products are marketed worldwide under trademarks such as Sonoco ®, SmartSeal ®, Sonotube ®, Sealclick ®, Sonopost ®, and UltraSeal ®, among others. Sonoco’s registered web domain names provide information about Sonoco, including its people, products, locations, and governance. Trademarks and domain names are licensed to outside companies, utilizing quality control metrics, where appropriate.
This vertical integration strategy was supported by 23 paper mills with 29 paper machines throughout the world as of December 31, 2022.The Company also operates 23 recycling facilities in the United States capable of recycling old corrugated containers, paper, plastics, metals, and other recyclable materials that can be processed back through the Sonoco manufacturing ecosystem.
The Company also operates 24 recycling facilities in the United States capable of recycling old corrugated containers, paper, plastics, metals, and other recyclable materials that can be processed back through the Sonoco manufacturing ecosystem. In 2023, Sonoco had the capacity to manufacture approximately 2.2 million tons of recycled paperboard per year.
The Company is focused on supporting our employees, and we consider the management of our talent to be essential to the ongoing success of our business. Our Board of Directors, and the Executive Compensation and Employee & Public Responsibility Committees of the Board, provide oversight of our human capital management strategy.
As such, we believe attracting, recruiting, developing, and retaining diverse talent is vital to our success. The Company is focused on supporting our employees, and we consider the management of our talent to be essential to the ongoing success of our business.
We have created a Global Talent Acquisition and Organization Development team to provide a more holistic approach to managing and enriching the employee lifecycle through continuous training and comprehensive succession planning. In 2021 and 2022, we significantly expanded Sonoco University, our internal learning resource that offers on-demand webinars, e-learning and in-person learning programs.
We have created a Global Talent Acquisition and Organizational Development team to provide a more holistic approach to managing and enriching the employee lifecycle through continuous training and comprehensive succession planning. Our focus continues to be on hiring, developing, and promoting talent based on a set of core competencies that drives high performance.
The Council reports on Sonoco’s sustainability activities, quarterly, to the Board of Directors. We have committed to reporting in line with the Global Reporting Initiative standards.
We are committed to reporting in line with the Global Reporting Initiative, Task Force on Climate-Related Financial Disclosures, and Sustainability Accounting Standards Board standards as of 2023.
SDI globally manages patents, trade secrets, confidentiality agreements and license agreements. Some patents have been licensed to other manufacturers, and Sonoco also licenses a few patents from outside companies and universities. U.S. patents expire after about 20 years, and patents on new innovations replace many of the abandoned or expired patents.
Sonoco also licenses patents from outside companies and universities. U.S. patents typically expire twenty years after filing, and patents on new innovations replace many of the abandoned or expired patents. A second intellectual capital subsidiary of Sonoco, SPC Resources, Inc., globally manages Sonoco’s trademarks, service marks, copyrights, and internet domain names.
In the U.S., 29% of new employee hires were female and 42% a member of a minority group in 2022. 6 FORM 10-K SONOCO 2022 ANNUAL REPORT For the past 11 years, Sonoco’s employees have expanded and improved our Global Diversity, Equity and Inclusion Council (the "DEI Council"), which is chaired by our President and CEO.
For the past 12 years, Sonoco’s employees have expanded and improved our Global Diversity, Equity and Inclusion Council (the “DEI Council”), which is chaired by our President and CEO.
From our global workforce, our employees were located in the following geographic regions: 57% in North America; 18% in Europe, Middle East and Africa; 15% in Latin America; and 10% in Asia Pacific. We have labor unions in all regions of our operations, and in North America, approximately 12.5% of our employees are represented by unions.
From our global workforce, our employees were located in the following geographic region s as of December 31, 2023: 56% in North America; 17% in Europe; 18% in Latin America; and 9% in the Asia-Pacific region.
During 2022, proprietary technology was acquired as part of the Ball Metalpack (renamed Sonoco Metal Packaging) acquisition and both proprietary technology and trademarks were acquired as part of the Skjern acquisition. Patents are managed globally by a Sonoco intellectual capital management team through the Company’s subsidiary Sonoco Development, Inc. ("SDI").
Patents and proprietary technology are managed globally by a Sonoco intellectual capital management team through the Company’s subsidiary, Sonoco Development, Inc. (“SDI”). SDI globally manages patents, trade secrets, confidentiality agreements, and license agreements. Some patents have been licensed to other manufacturers, often as part of a larger agreement, such as a toll manufacturing agreement.
During 2020, we established a new corporate team, led by a vice president directly reporting to our CEO, to champion our global sustainability efforts. This team has expanded and leads the Company’s global sustainability programs for all our Consumer- and Industrial-related packaging businesses, including driving efforts to meet our climate change related goals.
This team has expanded and led the Company’s global sustainability programs for all our packaging businesses, including driving efforts to meet our climate change related goals. 5 FORM 10-K SONOCO 2023 ANNUAL REPORT In partnership with our employees, we are committed to protecting the natural environment and our communities through sustainable practices.
As of December 31, 2022, we had approximately 22,000 full-time equivalent employees, with the majority concentrated in the United States. We consider our employee relations to be strong. People Objectives We rely on the personal relationships and service provided by employees. As such, we believe attracting, recruiting, developing and retaining diverse talent is vital to our success.
As of December 31, 2023, we had approximately 23,000 full-t ime equivalent employees, with the majority concentrated in the United States. We consider our employee relations to be strong. We have labor unions in all regions of our operations. In North America, approximately 13.6% of our employees were represented by unions as of December 31, 2023.
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A second intellectual capital subsidiary of Sonoco, SPC Resources, Inc., globally manages Sonoco’s trademarks, service marks, copyrights and Internet domain names. Most of Sonoco’s products are marketed worldwide under trademarks such as Sonoco ® , SmartSeal ® , Sonotube ® , Sealclick ® , Sonopost ® and UltraSeal ® .
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Effective January 1, 2024, the Company will integrate its flexible packaging and thermoforming packaging businesses within the Consumer Packaging segment in order to streamline operations, enhance customer service, and better position the business for accelerated growth.
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In addition, we are actively studying necessary operational changes, technology developments and market changes that would be required to achieve net-zero GHG emissions by 2050. Energy Usage - We strive to manage, mitigate and reduce our GHG emissions where possible.
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As a result, the Company will change its operating and reporting structure to reflect the way it plans to manage its operations, evaluate performance, and allocate resources going forward. Therefore, in future reporting periods, the Company’s consumer thermoforming businesses will move from the All Other group of businesses to the Consumer Packaging segment.
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Health and Safety We take the health and safety of our employees seriously. Protecting the health and safety of our employees is a top priority, and we are committed to providing a safe working environment for all our associates. We expect each employee to follow our safety standards and protocols.
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The Company’s Industrial Paper Packaging segment will not be affected by these changes. As of and for the year ended December 31, 2023, there were no changes to the manner in which the Company reviewed financial information at the segment level; therefore, these changes had no impact on our reporting structure.
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Overall injuries in 2022 were slightly up from 2021, but remained lower than 2020 and 2019, despite the effects of acquisitions.
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This group comprised 18% and 21% of cons olidated net sales in 2022 and 2021, respectively. 4 FORM 10-K SONOCO 2023 ANNUAL REPORT All Other The businesses grouped as All Other accounted for approximately 12%, 11%, and 14% of the Company’s consolidated net sales in the years ended December 31, 2023, 2022 and 2021, respectively.
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To promote the prevention of more significant injuries or incidents that cause or have the potential to cause permanent disabilities or the loss of life, we continue to engage with outside experts to conduct assessments of high-risk activities and to leverage learnings from such engagement globally. In addition, we evaluated our safety systems to improve focus and resources.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe continue to see increased regulation of data privacy and security and the adoption of more stringent subject matter specific state laws and national laws regulating the collection and use of data, as well as security and data breach obligations – including, for example, the General Data Protection Regulation in the EU, the Cyber Security Law in China, the General Data Protection Law in Brazil, the state of California's California Consumer Privacy Act of 2018 and California Privacy Rights Act of 2020, and additional state privacy and data protection laws in Virginia, Connecticut, Utah and Colorado, each of which will come into full effect in 2023.
Biggest changeIn addition to the adoption of the new cybersecurity disclosure rules by the SEC, we continue to see increased regulation of data privacy and security and the adoption of more stringent consumer privacy laws, as well as subject matter specific state laws and national laws regulating the collection and use of data, and security and data breach obligations – including the passage and expansion of data protection laws around the world.
Any change in export or import regulations, economic sanctions regulations or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could decrease our ability to export or sell our products internationally.
Any change in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons, or technologies targeted by such regulations, could decrease our ability to export or sell our products internationally.
Increases in costs can have an adverse effect on our business and financial results. Our performance depends, in part, on our ability to pass on cost increases to our customers by raising selling prices and offset the impact by improving productivity.
Increases in costs can have an adverse effect on our business and financial results. Our performance depends, in part, on our ability to pass on cost increases to our customers by raising selling prices and to offset the impact by improving productivity.
These types of disruptions could materially and adversely affect our earnings to varying degrees depending upon the facility, the duration of the disruption, our ability to shift business to another facility or find alternative sources of materials or energy.
These types of disruptions could materially and adversely affect our earnings to varying degrees depending upon the facility, the duration of the disruption, and our ability to shift business to another facility or find alternative sources of materials or energy.
Sales of our products and services depend heavily on the volume of sales made by our customers to consumers. Consumer preferences for products and packaging formats are constantly changing based on, among other factors, cost, convenience, and health, environmental and social concerns and perceptions.
Sales of our products and services depend heavily on the volume of sales made by our customers to consumers. Consumer preferences for products and packaging formats are constantly changing based on, among other factors, cost and convenience; and health, environmental and social concerns and perceptions.
As with all large environments, our information technology systems may be susceptible to damage, disruption or shutdown due to natural disaster, hardware of software failure, obsolescence, cyberattack, support infrastructure failure, user errors or malfeasance resulting in malicious or accidental destruction of information or functionality, or other catastrophic events.
As with all large environments, our information technology systems may be susceptible to damage, disruption or shutdown due to natural disaster, hardware or software failure, obsolescence, cyberattack, support infrastructure failure, user errors or malfeasance resulting in malicious or accidental destruction of information or functionality, or other catastrophic events.
Information system damages, disruptions, shutdowns or compromises could result in production downtimes and operational disruptions, transaction errors, loss of customers and business opportunities, legal liability, regulatory fines, penalties or intervention, reputational damage, reimbursement or compensatory payments, and other costs, any of which could have a material and adverse effect on our business, financial position and results of operations.
Information system damages, disruptions, shutdowns or compromises could result in production downtimes and operational disruptions, transaction errors, loss of customers and business opportunities, legal liability, regulatory fines, penalties or intervention, reputational damage, reimbursement or compensatory payments, and other costs, any of which could have a material and adverse effect on our business, financial position and operations.
This data and information is subject to the risk of intrusion, tampering and theft. Although we develop and maintain systems designed to prevent such events from occurring, the development and maintenance of these systems is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated.
This personal data and information is subject to the risk of intrusion, tampering and theft. Although we develop and maintain systems designed to prevent such events from occurring, the development and maintenance of these systems is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become increasingly sophisticated.
Weather-related events, such as hurricanes and floods, which may increase in frequency and severity due to climate change, could result in lost production, supply chain disruptions and increased material costs. Such disruptions could have, and have in the past had, a material and adverse effect on our results of operations.
Weather-related events, such as hurricanes and floods, which may increase in frequency and severity due to climate change, have and could in the future result in lost production, supply chain disruptions, and increased material costs. Such disruptions could have, and have in the past had, a material and adverse effect on our results of operations.
Furthermore, export control laws and economic sanctions prohibit the shipment of certain products to embargoed or otherwise sanctioned countries, governments and persons. Despite our efforts taken to ensure compliance with applicable law, we cannot guarantee that a violation of export control laws or economic sanctions will not occur.
Furthermore, export control laws and economic sanctions prohibit the shipment of certain products to embargoed or otherwise sanctioned countries, governments and persons. Despite our efforts to ensure compliance with applicable law, we cannot guarantee that a violation of export control laws or economic sanctions will not occur.
Item 1A. Risk Factors We are subject to risks and uncertainties that could adversely affect our business, consolidated financial condition, results of operations and cash flows, ability to pay dividends, and the trading price of our securities.
Item 1A. Risk Factors We are subject to risks and uncertainties that could adversely affect our business, reputation, consolidated financial condition, results of operations and cash flows, ability to pay dividends, and the trading price of our securities.
We have extensive international operations and are dependent on customers and suppliers that operate in local economies around the world. In addition, we access global credit markets as part of our capital allocation strategy. Adverse global macroeconomic conditions could negatively impact our ability to access credit, or the price at which funding could be obtained.
We have extensive international operations and are dependent on customers and suppliers that operate in local economies around the world. In addition, we access global credit markets as part of our capital allocation strategy. Adverse global macroeconomic conditions could adversely impact our ability to access credit, or the price at which funding could be obtained.
Actual results for all estimates could differ materially from the estimates and assumptions that we use, which could have a material and adverse effect on our financial condition and results of operations. We have a significant amount of goodwill and other intangible assets, and a write down would negatively impact our results of operations and shareholders' equity.
Actual results for all estimates could differ materially from the estimates and assumptions that we use, which could have a material and adverse effect on our financial condition and results of operations. We have a significant amount of goodwill and other intangible assets, and a write down would adversely impact our results of operations and shareholders’ equity.
Additionally, because many of our products are used to package consumer goods, we are subject to a variety of risks that could influence consumer behavior and negatively impact demand for consumer packaged goods and, consequently, for our products, including changes in consumer preferences driven by various health-related concerns and perceptions.
Additionally, because many of our products are used to package consumer goods, we are subject to a variety of risks that could influence consumer behavior and adversely impact demand for consumer packaged goods and, consequently, for our products, including changes in consumer preferences driven by various health-related concerns and perceptions.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. Item 1B.
Any failure of a third-party transportation provider to deliver raw materials or finished products in a timely manner could harm our reputation, negatively impact our customer relationships and have a material and adverse effect on our financial condition and results of operations.
Any failure of a third-party transportation provider to deliver raw materials or finished products in a timely manner could harm our reputation, adversely impact our customer relationships, and have a material and adverse effect on our financial condition and results of operations.
Although we attempt to mitigate these risks by employing a number of technical and process-based measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems, our systems, networks, products, and services remain potentially vulnerable to cyber threats.
Although we attempt to mitigate these risks by employing a number of administrative, physical, technical and process-based measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems, our systems, networks, products, and services remain potentially vulnerable to cyber threats.
Material disruptions in our business operations could negatively affect our financial results. Although we take measures to minimize the risks of disruption at our facilities, we from time to time encounter an unforeseen material operational disruption in one of our major facilities, which could negatively impact production and our financial results.
Material disruptions in our business operations could adversely affect our financial results. Although we take measures to minimize the risks of disruption at our facilities, we from time to time encounter an unforeseen material operational disruption in one of our major facilities, which could adversely impact production and our financial results.
These additional risks can adversely affect our business operations and financial results, and include, without limitation: • foreign currency exchange rate fluctuations and foreign currency exchange controls; • hyperinflation and currency devaluation; • possible limitations on conversion of foreign currencies into dollars or payment of dividends and other payments by non-U.S. subsidiaries; • tariffs, non-tariff barriers, duties, taxes or government royalties, including the imposition or increase of withholding and other taxes on remittances and other payments by non-U.S. subsidiaries; • our interpretation of our rights and responsibilities under local statutory and regulatory rules for sales taxes, VAT and similar taxes, statutory accounting requirements, licenses and permits, etc. may prove to be incorrect or unsupportable, resulting in fines, penalties, or other liabilities related to non-compliance, damage to our reputation, unanticipated operational restrictions or other consequences as a result of the Company's actions, or inaction, taken to perform our responsibilities or protect our rights; • changes in tax laws, or the interpretation of such laws, affecting taxable income, tax deductions, or other attributes relating to our non-U.S. earnings or operations; • inconsistent product regulation or policy changes by foreign agencies or governments; • difficulties in enforcement of contractual obligations and intellectual property rights; • high social benefit costs for labor, including more expansive rights of foreign unions and work councils, and costs associated with restructuring activities; • national and regional labor strikes; • difficulties in staffing and managing international operations; • geographic, language and cultural differences between personnel in different areas of the world; • differences in local business practices; • foreign governments’ restrictive trade policies, and customs, import/export and other trade compliance regulations; • compliance with and changes in applicable foreign laws; • compliance with U.S. laws, including those affecting trade and foreign investment (including economic sanctions compliance) and the Foreign Corrupt Practices Act; • loss or non-renewal of treaties between foreign governments and the United States; • product boycotts, including with respect to products of our multi-national customers; • increased costs of maintaining international manufacturing facilities and undertaking international marketing programs; • difficulty in collecting international accounts receivable and potentially longer payment cycles; • the potential for nationalization or expropriation of our enterprises or facilities without appropriate compensation; and • political, social, legal and economic instability, civil unrest, war and other geopolitical tensions (such as the ongoing military conflict between Russia and Ukraine), catastrophic events, acts of terrorism, and widespread outbreaks of infectious diseases, such as COVID-19.
These additional risks, which can vary substantially by country and by region, can adversely affect our business operations and financial results, and include, without limitation: • foreign currency exchange rate fluctuations and foreign currency exchange controls; • hyperinflation and currency devaluation; • possible limitations on conversion of foreign currencies into dollars, or payment of dividends and other payments by non-U.S. subsidiaries; • tariffs, non-tariff barriers, duties, taxes, or government royalties, including the imposition or increase of withholding and other taxes on remittances and other payments by non-U.S. subsidiaries; • the risk that our interpretation of our rights and responsibilities under local statutory and regulatory rules for sales taxes, VAT and similar taxes, statutory accounting requirements, licenses and permits, etc. may prove to be incorrect or unsupportable, resulting in fines, penalties, or other liabilities related to non-compliance, damage to our reputation, unanticipated operational restrictions or other consequences as a result of our actions, or inaction, taken to perform our responsibilities or protect our rights; • changes in tax laws, or the interpretation of such laws, affecting taxable income, tax deductions, or other attributes relating to our non-U.S. earnings or operations; • inconsistent product regulation or policy changes by foreign agencies or governments; • difficulties in enforcement of contractual obligations and intellectual property rights; • high social benefit costs for labor, including more expansive rights of foreign unions and work councils, and costs associated with restructuring activities; • national and regional labor strikes; • difficulties in staffing and managing international operations; • geographic, language, and cultural differences between personnel in different areas of the world; • differences in local business practices; • foreign governments’ restrictive trade policies, customs, import/export and other trade compliance regulations; • compliance with and changes in applicable foreign laws; • compliance with U.S. laws, including those affecting trade and foreign investment (including economic sanctions compliance) and the Foreign Corrupt Practices Act; • loss or non-renewal of treaties between foreign governments and the United States; • product boycotts, including with respect to products of our multi-national customers; • increased costs of maintaining international manufacturing facilities and undertaking international marketing programs; • difficulty in collecting international accounts receivable and potentially longer payment cycles; • the potential for nationalization or expropriation of our enterprises or facilities without appropriate compensation; and • political, social, legal and economic instability, civil unrest, war and other geopolitical tensions (such as the ongoing conflicts between Russia and Ukraine and in Israel and Gaza), catastrophic events, acts of terrorism, and widespread outbreaks of infectious diseases (such as COVID-19).
Failure to provide adequate privacy protections and maintain compliance with the new data privacy laws could result in interruptions or damage to our operations, legal or reputational risks, create liabilities for us, subject us to sanctions by national data protection regulators and result in significant penalties, and increase our cost of doing business, all of which could have a material and adverse impact on our business, financial condition and results of operations.
Failure to provide adequate privacy protections and maintain compliance with data privacy laws could result in interruptions or damage to our operations, legal or reputational risks, create liabilities for us, subject us to sanctions by data protection regulators and result in significant penalties, and increase our cost of doing business, all of which could have a material and adverse impact on our business, financial condition and results of operations.
Our inability to effectively manage the negative impacts of changing U.S. and foreign trade policies could materially and adversely impact our consolidated financial condition and results of operations. Currency exchange rate fluctuations may adversely affect our results of operations and shareholders' equity.
Our inability to effectively manage the adverse impacts of changing U.S. and foreign trade policies could materially and adversely impact our consolidated financial condition and results of operations. Currency exchange rate fluctuations may adversely affect our results of operations and shareholders’ equity.
To the extent another party makes decisions that negatively impact the joint venture or internal control issues arise within the joint venture, we may have to take responsive actions, or we may be subject to penalties, fines or other punitive actions for these activities.
To the extent another party makes decisions that adversely impact the joint venture or internal control issues arise within the joint venture, we may have to take responsive actions, or we may be subject to penalties, fines, or other punitive actions for these activities.
Among other factors, changes in discount rates and lower-than-expected investment returns could substantially increase our future plan funding requirements and have a negative impact on our results of operations and cash flows.
Among other factors, changes in discount rates and lower-than-expected investment returns could substantially increase our future plan funding requirements and have a adverse impact on our results of operations and cash flows.
In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect our financial condition, and we may be required to restate previously published financial information, which could have a material and adverse effect on our operations, investor confidence in our business and the trading prices of our securities. 18 FORM 10-K SONOCO 2022 ANNUAL REPORT Our disclosure controls and procedures and internal controls may not prevent or detect all errors or acts of fraud.
In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect our financial condition, and we may be required to restate previously published financial information, which could have a material and adverse effect on our operations, investor confidence in our business and the trading prices of our securities. 19 FORM 10-K SONOCO 2023 ANNUAL REPORT Our disclosure controls and procedures and internal controls may not prevent or detect all errors or acts of fraud.
Certain countries where we have manufacturing facilities have set GHG reduction targets to align with an agreement signed in April 2016 between 170 countries establishing a framework to reduce global GHG emissions (also known as the "Paris Agreement"), that became effective in November 2016 and which the United States formally rejoined in February 2021.
Certain countries where we have manufacturing facilities have set GHG reduction targets to align with an agreement signed in April 2016 between 170 countries establishing a framework to reduce global GHG emissions (also known as the “Paris Agreement”), that became effective in November 2016 and which the United States formally rejoined in February 2021.
If any significant judgment or claim is not fully insured or indemnified against, it could have a material and adverse effect on our business, financial condition and results of operations.
If any significant judgment or claim is not fully insured or indemnified against or imposes restrictions on our business operations, it could have a material and adverse effect on our business, financial condition, and results of operations.
Accordingly, our products must comply with various laws and regulations for food and beverages applicable to our customers. Changes in such laws and regulations could negatively impact customers’ demand for our products as they comply with such changes and require us to make changes to our products.
Accordingly, our products must comply with various laws and regulations for food and beverages applicable to our customers. Changes in such laws and regulations could adversely impact customers’ demand for our products as they comply with such changes and require us to make changes to our products.
As of December 31, 2022, approximately $7.3 million was reserved for environmental liabilities. Such reserves are established when it is considered probable that we have some liability.
As of December 31, 2023, approximately $7.3 million was reserved for environmental liabilities. Such reserves are established when it is considered probable that we have some liability.
Likewise, uncertainty about or a decline in global or regional economic conditions could have a significant impact on the financial stability of our suppliers and customers, and could negatively impact demand for our products. For example, as a result of the impacts of the COVID-19 pandemic, we previously experienced adverse effects on customer stability and demand for our products.
Likewise, uncertainty about or a decline in global or regional economic conditions could have a significant impact on the financial stability of our suppliers and customers, and could adversely impact demand for our products. For example, as a result of the COVID-19 pandemic, we previously experienced adverse effects on customer stability and demand for our products.
Additionally, in the United States, several states where we operate manufacturing facilities have enacted or are in the process of enacting regulations related to GHG emissions or implementing cap and trade programs. Our facilities currently fall outside of the scope of these regulations but may be impacted in the future.
Additionally, in the United States, several states where we operate manufacturing facilities have enacted or are in the process of enacting regulations limiting GHG emissions or implementing cap-and-trade programs. Our facilities currently fall outside of the scope of these regulations but may be impacted in the future.
Depending on the direction, changes in those rates will either increase or decrease net income and balances as reported in U.S. dollars.
Depending on the direction, changes in those rates will either increase or decrease net sales, costs, net income, and balances as reported in U.S. dollars.
In addition, our customers may experience liquidity problems as a result of a negative change in the economic environment, including the ability to obtain credit, that could limit their ability to purchase our products and services or satisfy their existing obligations.
In addition, our customers may experience liquidity problems as a result of an adverse change in the economic environment, including the ability to obtain credit, that could limit their ability to purchase our products and services or satisfy their existing obligations.
At December 31, 2022, the carrying value of our goodwill and intangible assets was approximately $2.4 billion. We are required to evaluate our goodwill for impairment annually, or more frequently when evidence of potential impairment exists. The impairment test requires us to analyze a number of factors and make estimates that require judgment.
At December 31, 2023, the carrying value of our goodwill and intangible assets was approximately $2.7 billion. We are required to evaluate our goodwill for impairment annually, or more frequently when evidence of potential impairment exists. The impairment test requires us to analyze a number of factors and make estimates that require judgment.
For more information on concentration of sales volume in our reportable segments, see Item1(c), "Dependence on Customers." Challenges to, or the loss of, our intellectual property rights could have an adverse effect on our ability to compete effectively.
For more information on concentration of sales volume in our reportable segments, see Item1(c), “Dependence on Customers.” Challenges to, or the loss of, our intellectual property rights could have an adverse effect on our ability to compete effectively.
Certain of our products are subject to export control laws and regulations and may be exported only with an export license or through an applicable export license exception.
Certain products are subject to export control laws and regulations and may be exported only with an export license or through an applicable export license exception.
Other risks and challenges associated with acquisitions include, without limitation: • substantial costs associated with negotiating and completing acquisitions; • demands on management related to increase in size of our businesses and additional responsibilities of management; • diversion of management's attention; • disruptions to our ongoing businesses; • inaccurate estimates of fair value in accounting for acquisitions and amortization of acquired intangible assets, which could reduce future reported earnings; • difficulties in assimilation and retention of employees; • difficulties in integration of departments, systems, technologies, books and records, controls (including internal financial and disclosure controls), procedures, and policies; • potential loss of major customers and suppliers; • challenges associated with operating in new geographic regions; • difficulties in maintaining uniform standards, controls, procedures and policies; • potential failure to identify material problems and liabilities during due diligence review of acquisition targets; and • potential failure to obtain sufficient indemnification rights to fully offset possible liabilities associated with acquired businesses.
Other risks and challenges associated with acquisitions include, without limitation: • substantial costs and indebtedness associated with negotiating and completing acquisitions; • demands on management related to increase in size of our businesses and additional responsibilities of management; • diversion of management’s attention; • disruptions to our ongoing businesses; • inaccurate estimates of fair value in accounting for acquisitions and amortization of acquired intangible assets, which could reduce future reported earnings; • difficulties in assimilation and retention of employees; • difficulties in integration of departments, systems, technologies, books and records, controls (including internal financial and disclosure controls), procedures, and policies; • potential loss of major customers and suppliers; • challenges associated with operating in new geographic regions; • difficulties in maintaining uniform standards, controls, procedures, and policies; • potential failure to anticipate delays or restrictions resulting from regulatory review or required approvals; • potential failure to identify material problems and liabilities during due diligence review of acquisition targets; and • potential failure to obtain sufficient indemnification rights to fully offset possible liabilities associated with acquired businesses.
At December 31, 2022, scheduled debt maturities in 2023 totaled $502 million. Risks Related to Information Technology and Cybersecurity We rely on our information technology, and its failure or disruption could disrupt our operations and adversely affect our business, financial condition and results of operations.
At December 31, 2023, scheduled debt maturities in 2024 totaled $47 million. Risks Related to Information Technology and Cybersecurity We rely on our information technology, and its failure or disruption could disrupt our operations and adversely affect our business, financial condition and results of operations.
For example, in 2022, following Russia’s invasion of Ukraine and the imposition of economic sanctions against Russia by the United States and other countries, we exited our operations in Russia, which consisted of two small manufacturing operations, and incurred asset impairment charges as a result of our exit. We have also ceased sourcing certain inputs from Russian suppliers.
For example, in 2022, following Russia’s invasion of Ukraine and the imposition of economic sanctions against Russia by the United States and other countries, we finalized the exit from our operations in Russia, which consisted of two small manufacturing operations, and incurred asset impairment charges as a result of our exit. We also ceased sourcing from Russian suppliers.
A prohibited shipment could have negative consequences, including government investigations, penalties, fines, civil and criminal sanctions and reputational harm.
A prohibited shipment could have adverse consequences, including government investigations, penalties, fines, civil and criminal sanctions, and reputational harm.
You should consider the risk factors described below, as well as other factors described elsewhere in this report and in our other filings with the Securities and Exchange Commission, in evaluating us, our business, and any investment in our securities.
You should consider the risk factors described below, as well as other factors described elsewhere in this report and in our other filings with the SEC, in evaluating us, our business, and any investment in our securities.
Prices and availability of these raw materials are subject to substantial fluctuations that are beyond our control due to factors such as changing economic conditions, inflation, currency and commodity price fluctuations, tariffs, resource availability, transportation costs, weather conditions and natural disasters, war, political unrest and instability, such as the ongoing military conflict between Russia and Ukraine, and other factors impacting supply and demand pressures.
Prices and availability of these raw materials are subject to substantial fluctuations that are beyond our control due to factors such as changing economic conditions, inflation, currency and commodity price fluctuations, tariffs, resource availability, transportation costs, weather conditions and natural disasters, war, political unrest and instability (such as the ongoing conflicts between Russia and Ukraine and in Israel and Gaza), and other factors impacting supply and demand pressures.
For example, in the United States, the Inflation Reduction Act of 2022 (the "Inflation Reduction Act"), which was signed into law on August 16, 2022, includes a number of provisions that may impact us in the future, including a 1% excise tax on share repurchases.
In the United States, the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”), which was signed into law on August 16, 2022, includes a number of provisions that may impact us in the future, including a 1% excise tax on share repurchases.
In addition to interest payments, a significant portion of our cash flow may need to be used to service our indebtedness, and, therefore, may not be available for use in our 15 FORM 10-K SONOCO 2022 ANNUAL REPORT business.
In addition to interest payments, a significant portion of our cash flow may need to be used to service our indebtedness, and, therefore, may not be available for 16 FORM 10-K SONOCO 2023 ANNUAL REPORT use in our business.
These factors could also cause our actual results to materially differ from the results contemplated by forward-looking statements we make in this report, in our other filings with the Securities and Exchange Commission, and in our public announcements.
These factors could also cause our actual results to materially differ from the results contemplated by forward-looking statements we make in this report, in our other filings with the SEC, and in our public announcements.
If we are unable to meet these targets and goals on our projected timelines or at all, whether as a result of cost, operational or technological limitations, or if such targets or our progress against them are not perceived to be sufficiently robust, our reputation, as well as our relationships with investors, customers and other stakeholders, could be harmed, which could in turn adversely affect our business, 14 FORM 10-K SONOCO 2022 ANNUAL REPORT results of operations and prospects.
If we are unable to meet these targets and goals on our projected timelines or at all, whether as a result of cost, operational or technological limitations, or if such targets or our progress against them are not perceived to be sufficiently robust, our reputation, as well as our relationships with investors, customers and other stakeholders, could be harmed, which could in turn adversely affect our business, results of operations and prospects.
The difference between defined benefit plan obligations and assets (the funded status of the plans) significantly a ffects the net periodic benefit costs and the ongoing funding requirements of the plans.
The difference between defined benefit plan obligations and assets (the funded status of the plans) significantly affects the net periodic benefit costs and the ongoing funding requirements of the plans.
The loss of business from our larger customers, customer changes to alternative forms of packaging, or renewal of business with less favorable terms may have a significant and adverse effect on our results of operations. Continuing consolidation of our customer base and suppliers may intensify pricing pressure.
Any such impact, as well as the loss of business from our larger customers, customer changes to alternative forms of packaging, or renewal of business with less favorable terms, could have a significant and adverse effect on our results of operations. Continuing consolidation of our customer base and suppliers may intensify pricing pressure.
Risks Related to Accounting, Human Resources, Financial and Business Matters and Taxation Changes in pension plan assets or liabilities may reduce our results of operations and shareholders’ equity. We sponsor various defined benefit plans worldwide, and had an aggregate projected benefit obligation for these plans of approximately $364 million as of December 31, 2022.
Risks Related to Accounting, Human Resources, Financial, and Business Matters and Taxation Changes in pension plan assets or liabilities may reduce our results of operations and shareholders’ equity. We sponsor various defined benefit plans worldwide and had an aggregate PBO for these plans of approximately $436 million as of December 31, 2023.
As a result of potential cyber threats and existing and new data protection requirements, we have incurred and expect to continue to incur ongoing operating costs as part of our efforts to protect and safeguard our sensitive, confidential, proprietary and personal data and information, and the sensitive, confidential, proprietary and personal data and information of our customers, suppliers and third-party service providers.
As a result of potential cyber threats and existing and new data protection requirements, we have incurred significant costs as part of our efforts to protect and safeguard our sensitive, confidential, proprietary and personal data and information, and the sensitive, confidential, proprietary and personal data and information of our customers, suppliers and third-party service providers.
We believe that accounting for long-lived assets, pension benefit plans, contingencies and litigation, and income taxes involves the more significant judgments and estimates used in the preparation of our consolidated financial statements.
We believe that accounting for long-lived assets, defined benefit plans, share-based compensation, contingencies and litigation, and income taxes involves the more significant judgments and estimates used in the preparation of our consolidated financial statements.
In addition, in cases where we seek to divest or otherwise dispose of certain facilities, operations, assets or other components of our business, we may be 12 FORM 10-K SONOCO 2022 ANNUAL REPORT unable to find buyers or alternative exit strategies on acceptable terms, in a timely manner or at all, and we may dispose of facilities, operations, assets or other components of our business at prices or on terms that are less desirable than we had anticipated.
In addition, in cases where we seek to divest or otherwise dispose of certain facilities, operations, assets, or other components of our business, we may be unable to find buyers or alternative exit strategies on acceptable terms, in a timely manner or at all, and we may dispose of facilities, operations, assets, or other components of our business at prices or on terms that are less desirable than we had anticipated.
Potential effects on us include financial instability, inability to obtain credit to finance operations, and insolvency. We are subject to governmental export and import control laws, economic sanctions and other regulations in certain jurisdictions where we do business that could subject us to liability or impair our ability to compete in these markets.
Potential effects on us include financial instability, inability to obtain credit to finance operations, and insolvency. 9 FORM 10-K SONOCO 2023 ANNUAL REPORT We are subject to governmental export and import control laws, economic sanctions, and other regulations in certain jurisdictions where we do business that could subject us to liability or impair our ability to compete in these markets.
We have also voluntarily established and publicly disclosed our GHG reduction targets and other ESG goals and sustainability targets. These targets could prove more costly or difficult to achieve than we expect, and we may be unable to achieve these targets at acceptable cost or at all.
We have voluntarily established and publicly disclosed our GHG reduction targets and other environmental, social and governance (“ESG”) goals and sustainability targets. These targets could prove more costly or difficult to achieve than we expect, and we may be unable to achieve these targets at acceptable cost or at all.
Additionally, maintaining effectiveness of our internal control over financial reporting is made more challenging by the fact that as of December 31, 2022, we had approximately 180 subsidiaries and joint ventures in 32 countries around the world.
Additionally, maintaining effectiveness of our internal control over financial reporting is made more challenging by the fact that as of December 31, 2023, we had approximately 190 subsidiaries and joint ventures in 33 countries around the world.
If, for any reason, the benefits we realize are substantially less than our estimates, or the implementation of these growth initiatives and business strategies adversely affects our operations or costs significantly more or takes significantly longer to effectuate than we expect, or if our assumptions prove inaccurate, our results of operations may be materially and adversely affected.
If, for any reason, the benefits we realize are substantially 11 FORM 10-K SONOCO 2023 ANNUAL REPORT less than our estimates, or the implementation of these growth initiatives and business strategies adversely affects our operations, costs significantly more or takes significantly longer to effectuate than we expect, or if our assumptions prove inaccurate, our results of operations may be materially and adversely affected.
Although we take reasonable efforts to comply with all applicable laws and regulations, the 16 FORM 10-K SONOCO 2022 ANNUAL REPORT uncertainty and changes in the requirements of multiple jurisdictions may increase the cost of compliance, reduce demand for our services, restrict our ability to offer services in certain locations, and jeopardize business transactions across borders.
Although we take reasonable efforts to comply with all applicable laws and regulations, the uncertainty and changes in the requirements of multiple jurisdictions may increase the cost of compliance, reduce demand for our services, restrict our ability to offer services in certain locations, and jeopardize business transactions across borders.
As a result of this testing, we have in the past recognized goodwill impairment charges , and we have identified two reporting units that are currently at risk of a future impairment charge if actual results fall short of expectations.
As a result of this testing, we have in the past recognized goodwill impairment charges , and we have identified one reporting unit that is currently at risk of a future impairment charge if actual results fall short of expectations.
Such a disruption could occur as a result of any number of events including but not limited to a major equipment failure, labor stoppages, transportation failures affecting the supply and shipment of materials, disruptions at our suppliers, fire, severe weather conditions, including as a result of climate change, natural disasters and disruptions in utility services, as well as disruptions related to localized or widespread public health events such as the COVID-19 pandemic.
Such a disruption could occur as a result of any number of events including but not limited to: political events, trade and other international disputes, war, terrorism, industrial accidents, major equipment failure, labor stoppages, transportation failures affecting the supply and shipment of materials, disruptions at our suppliers, fire, severe weather conditions (including as a result of climate change), natural disasters and disruptions in utility services, as well as disruptions related to localized or widespread public health events (including epidemics or pandemics, such as the COVID-19 pandemic).
If we fail to comply with export licensing, customs regulations, economic sanctions or other laws, we 9 FORM 10-K SONOCO 2022 ANNUAL REPORT could be subject to substantial civil or criminal penalties, including economic sanctions against us, incarceration for responsible employees and managers, the possible loss of export or import privileges, and reputational harm.
If we fail to comply with export licensing, customs regulations, economic sanctions or other laws, we could be subject to substantial civil or criminal penalties, including economic sanctions against us, incarceration for responsible employees and managers, the possible loss of export or import privileges, and reputational harm.
Our ability to use these deferred tax assets depends in part upon our having future taxable income during the periods in which these temporary differences reverse or our ability to carry back any losses created by the deduction of these temporary differences. We expect to realize these assets over an extended period.
Our ability to use these deferred tax assets depends in part upon our having future taxable income during the periods in which these temporary differences reverse or our ability to carry back any losses created by the deduction of these temporary differences. We expect to 18 FORM 10-K SONOCO 2023 ANNUAL REPORT realize these assets over an extended period.
Any of these results could have a material and adverse effect on our business, results of operations, financial condition and prospects. In connection with acquisitions, joint ventures, divestitures or other strategic transactions, we may become subject to liabilities and legal claims.
Any of these results could have a material and adverse effect on our business, results of operations, financial condition, and prospects. 12 FORM 10-K SONOCO 2023 ANNUAL REPORT In connection with acquisitions, joint ventures, divestitures, or other strategic transactions, we may become subject to liabilities and legal claims.
In March 2018, the United States announced new tariffs on imported steel and aluminum products. Other international trade actions and initiatives have also been announced over the past few years, notably the imposition by the United States of additional tariffs on products of Chinese origin, and China’s imposition of additional tariffs on products of U.S. origin.
Other international trade actions and initiatives have also been announced over the past few years, notably the imposition by the United States of additional tariffs on products of Chinese origin, and China’s imposition of additional tariffs on products of U.S. origin.
Additionally, we provide confidential, proprietary and personal data to third parties when it is necessary to pursue business objectives and there is a risk that the confidentiality of data held by third parties may be compromised.
Additionally, we provide confidential, proprietary and personal data and information to third parties when it is necessary to pursue business objectives and there is a risk that the confidentiality of personal data and information held by third parties may be compromised. Increasing use of AI may increase these risks.
Similarly, consolidation of our larger suppliers has resulted in increased pricing pressures from our suppliers. Further consolidation of customers and suppliers could intensify pricing pressure, reduce our net sales, increase our costs and adversely affect our results of operations.
Similarly, 13 FORM 10-K SONOCO 2023 ANNUAL REPORT consolidation of our larger suppliers has resulted in increased pricing pressures from our suppliers. Further consolidation of customers and suppliers could intensify pricing pressure, reduce our net sales, increase our costs, and adversely affect our results of operations.
The use of our intellectual property by someone else without our authorization could reduce or eliminate certain of our competitive advantages, cause us to lose sales or otherwise harm our business.
The use of our intellectual property by someone else without our authorization could reduce or eliminate certain competitive advantages, cause us to lose sales, or otherwise harm our business. The costs associated with protecting our intellectual property rights could also adversely impact our business.
We may not be able to identify suitable acquisition candidates, which could limit our potential for growth. We have made numerous acquisitions in recent years and expect to actively seek new acquisitions that provide meaningful opportunities for growth.
We may not be able to identify suitable acquisition candidates, or complete acquisitions on our desired timing or terms, which could limit our potential for growth. We have made numerous acquisitions in recent years and are actively considering new acquisitions that provide meaningful opportunities for growth.
We may incur additional debt in the future, which could increase the risks associated with our leverage. We are continually evaluating and pursuing acquisition opportunities and, as we have in the past, we may from time to time incur additional indebtedness to finance any such acquisitions and to fund any resulting increased operating needs.
We are continually evaluating and pursuing acquisition opportunities and, as we have in the past, we may from time to time incur additional indebtedness to finance any such acquisitions and to fund any resulting increased operating needs. As new debt is added to our current debt levels, the related risks we face could increase.
We have invested a substantial amount of capital in acquisitions, joint ventures and strategic investments, including our acquisition of Ball Metalpack (now Sonoco Metal Packaging) in January 2022, and we expect that we will continue to do so in the foreseeable future.
We have invested a substantial amount of capital in acquisitions, joint ventures, and strategic investments, including our acquisition of the remaining equity interest in RTS Packaging and the acquisitions of the Chattanooga Mill in September 2023 and Metal Packaging in January 2022, and we expect that we will continue to do so in the foreseeable future.
Climate Change Related Risk Adverse weather and climate changes may result in lower sales and higher costs. In addition, climate-related regulations may add cost and complexity to our operations. We manufacture packaging products for foods as well as products used in construction and industrial manufacturing.
In addition, climate-related regulations may add cost and complexity to our operations. We manufacture packaging products for foods, as well as products used in construction and industrial manufacturing.
We on occasion utilize debt instruments with a variable rate of interest, including our two term loan facilities totaling $700 million. Fluctuations in interest rates can increase borrowing costs and, depending on the magnitude of variable-rate borrowings outstanding, could potentially have a material and adverse effect on our business. Variable-rate borrowings at December 31, 2022 were approximately $796 million.
We on occasion utilize debt instruments with a variable rate of interest, including our term loan facility, under which we had outstanding indebtedness totaling $572 million as of December 31, 2023. Fluctuations in interest rates can increase borrowing costs and, depending on the magnitude of variable-rate borrowings outstanding, could potentially have a material and adverse effect on our business.
These initiatives could also adversely impact customer retention or our operations. Additionally, our business strategies may change from time to time in light of our ability to implement new business initiatives, competitive pressures, economic uncertainties or developments, or other factors. A variety of risks could cause us not to realize some or all of the expected benefits of these initiatives.
These initiatives could also adversely impact customer or employee retention or our operations. Additionally, our business strategies may change from time to time in light of our ability to implement new business initiatives, competitive pressures, economic uncertainties or developments, or other factors.
As of December 31, 2022, these plans held a total of approximately $266 million in assets consisting primarily of fixed income securities and mutual funds, funding a portion of th e projected benefit obligations of the plans.
As of December 31, 2023, these plans held a total of approximately $309 million in assets consisting primarily of fixed income securities and mutual funds, funding a portion of the PBOs of the plans.
However, we may not be able to identify suitable acquisition candidates or complete acquisitions, including our currently pending acquisition of RTS, on acceptable timing, terms and conditions. Other companies in our industries have similar investment and acquisition strategies to ours, and competition for acquisitions may intensify.
However, we may not be able to identify suitable acquisition candidates or complete acquisitions on acceptable timing, terms, and conditions. Other companies in our industries have similar investment and acquisition strategies to ours, and competition for acquisitions may intensify. If we are unable to identify acquisition candidates that meet our criteria, our potential for growth may be restricted.
Any losses due to these events may not be covered by our existing insurance policies or may be subject to certain deductibles. 11 FORM 10-K SONOCO 2022 ANNUAL REPORT Risks Related to Acquisitions, Divestitures and Joint Ventures We may encounter difficulties in integrating acquisitions, which could have an adverse effect on our financial condition and results of operations.
Any losses due to these events may not be covered by our existing insurance policies or may be subject to certain deductibles. Risks Related to Acquisitions, Divestitures and Joint Ventures We may fail to realize expected benefits from our acquisitions, which could have an adverse effect on our financial condition and results of operations.
Changes in domestic and global economic conditions may have a negative impact on our business operations and financial results. Because of the nature of our products and services, general economic downturns in the United States and globally can adversely affect our business operations and financial results.
Because of the nature of our products and services, general economic downturns in the United States and globally can adversely affect our business operations and financial results.
These or any other such policy changes or new regulations are uncertain and we cannot predict the impact on our markets or the amount of additional capital expenditures or operating expenses that could be necessary for compliance. Risks Related to Financing Activities We, or our customers, may not be able to obtain necessary credit or, if so, on reasonable terms.
These or any other such policy changes or new regulations are uncertain and we cannot predict the impact on our markets or the amount of additional capital expenditures or operating expenses that could be necessary for compliance.
Any current and future government sanctions or an escalation or widening of the conflict could further contribute to these effects. Any energy shortages could impair our ability to continue our operations at such sites at normal levels or at acceptable cost levels, and therefore adversely affect our business operations, financial condition and results of operations.
Any energy shortages could impair our ability to continue our operations at such sites at normal levels or at acceptable cost levels, and therefore adversely affect our business operations, financial condition, and results of operations.
Economic sanctions against Russia have also contributed to adverse changes in the global price and availability of natural gas, raw materials and finished goods, which could reduce our sales and earnings or otherwise have an adverse effect on our operations, and any future additional export controls or sanctions imposed by the United States, the United Kingdom, the European Union, or other countries could further exacerbate these effects.
Economic sanctions against Russia have also contributed to adverse changes in the global price and availability of natural gas, raw materials and finished goods, which could reduce our sales and earnings or otherwise have an adverse effect on our operations.
Current global economic challenges, including inflationary pressures, supply chain disruptions, currency fluctuations, geopolitical uncertainty and increased interest rates, as well as the difficulties of the United States and other countries in dealing with the effects of the COVID-19 pandemic and their rising debt levels, are likely to continue to put pressure on the economy, and on us.
Current global economic challenges, including inflationary pressures, supply chain disruptions, currency fluctuations, geopolitical uncertainty, military conflicts, increased interest rates and recession risks, as well as the rising debt levels of the United States and other countries, are likely to continue to put pressure on the economy, and on us. For example, during 2022 and 2023, the U.S.
Moreover, we may be prevented from completing dispositions as a result of our or our counterparties’ failure to satisfy pre-closing conditions or obtain necessary regulatory or government approvals. We may also be exposed to continuing financial risks from any businesses we divest, including as a result of continuing equity ownership, guarantees, indemnities, responsibility for environmental clean-up or other financial obligations.
We may also be exposed to continuing financial risks from any businesses we divest, including as a result of continuing equity ownership, guarantees, indemnities, responsibility for environmental clean-up, or other financial obligations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties The Company’s corporate offices are owned and operated in Hartsville, South Carolina. As of December 31, 2022, there were approximate ly 310 owned and leased facilities used by the Company in 32 countries around the world. The majority of these facilities are located in North America.
Biggest changeItem 2. Properties The Company’s corporate offices are owned and operated in Hartsville, South Carolina.
The most significant foreign geographic region in which the Company operates is Europe, followed by Asia. The Company believes that its facilities have been well maintained, are generally in good condition and are suitable for the conduct of its business. The Company does not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities.
The majority of these facilities are located in North America. The most significant foreign geographic region in which the Company operates is Europe, followed by Asia. The Company believes that its facilities have been well maintained, are generally in good condition and are suitable for the conduct of its business.
Added
As of December 31, 2023 , there were a total of approximate ly 310 owned and leased facilities used by the Company in 33 countries around the world, including approximately 80 facilities in the Consumer Packaging segment, 190 in the Industrial Paper Packaging segment, and 40 in the All Other group of businesses.
Added
The Company does not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOther Legal Matters Additional information regarding legal pr oceedings is provided in Note 16 to t he Consolidated Financial Statements of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 19 FORM 10-K SONOCO 2022 ANNUAL REPORT PART II
Biggest changeOther Legal Matters Additional information regarding other legal matters is provided in Not e 17 to t he Consolidated Financial Statements of this Annual Report on Form 10-K.
The Company periodically reevaluates the assumptions used in determining the appropriate reserves for environmental matters as additional information becomes available and makes appropriate adjustments when warranted. For further information about legal proceedings , see Note 16 to the Company's Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.
The Company periodically reevaluates the assumptions used in determining the appropriate reserves for environmental matters as additional information becomes available and makes appropriate adjustments when warranted. For further information about legal proceedings , see Note 17 to the Company’s Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.
Item 3. Legal Proceedings The Company has been named as a potentially responsible party ("PRP") at several environmentally contaminated sites not owned by the Company. All of the sites are also the responsibility of other parties. The Company’s liability, if any, is shared with such other parties, but the Company’s share has not been finally determined in most cases.
Item 3. Legal Proceedings The Company has been named as a potentially responsible party (“PRP”) at several environmentally contaminated sites not owned by the Company. All of the sites are also the responsibility of other parties. The Company’s liability, if any, is shared with such other parties, but the Company’s share has not been finally determined in most cases.
Accordingly, the ultimate cost to the Company with respect to such sites, beyond what has been accrued as of December 31, 2022, cannot be determined. As of December 31, 2022 and 2021, the Company had accr ued $7.3 million and $7.4 million, re spectively, related to environmental contingencies.
Accordingly, the ultimate cost to the Company with respect to such sites, beyond what has been accrued as of December 31, 2023, cannot be determined. As of December 31, 2023 and 2022, the Company had accr ued $7.3 million and $7.3 million, re spectively, related to environmental contingencies.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDecember 31, 2017 2018 2019 2020 2021 2022 Sonoco Products Company $100.00 $103.07 $123.19 $122.25 $122.89 $133.11 S&P 500 $100.00 $95.62 $125.72 $148.85 $191.58 $156.89 Dow Jones US Containers & Packaging $100.00 $81.55 $104.86 $127.03 $140.95 $115.86 20 FORM 10-K SONOCO 2022 ANNUAL REPORT The Company made the following purchases of its securities during the fourth quarter of 2022: Issuer purchases of equity securities Period (a) Total Number of Shares Purchased 1 (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number or Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs 1 10/03/22 - 11/06/22 — $— — $ 137,971,853 11/07/22 - 12/04/22 — $— — $ 137,971,853 12/05/22 - 12/31/22 — $— — $ 137,971,853 Total — $— — $ 137,971,853 1 On April 20, 2021, the Company's Board of Directors authorized the repurchase of the Company's common stock in an aggregate amount of up to $350.0 million.
Biggest changeDecember 31, 2018 2019 2020 2021 2022 2023 Sonoco Products Company $ 100.00 $ 119.52 $ 118.61 $ 119.23 $ 129.15 $ 123.15 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 Dow Jones US Containers & Packaging $ 100.00 $ 128.59 $ 155.76 $ 172.84 $ 142.07 $ 152.91 S&P 1500 Materials $ 100.00 $ 123.88 $ 148.16 $ 188.89 $ 168.52 $ 191.27 22 FORM 10-K SONOCO 2023 ANNUAL REPORT Issuer purchases of equity securities Period (a) Total Number of Shares Purchased 1 (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number or Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs 1 10/02/23 - 11/05/23 — $— — $ 137,971,853 11/06/23 - 12/03/23 — $— — $ 137,971,853 12/04/23 - 12/31/23 — $— — $ 137,971,853 Total — $— — $ 137,971,853 In April 2021, the Board authorized the repurchase of the Company’s common stock in an aggregate amount of up to $350.0 million (the “Stock Repurchase Program”).
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock is traded on the New York Stock Exchange under the stock symbol “SON.” As of December 31, 2022, there were approximately 106,000 shareholder accounts.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The Company’s common stock is traded on the New York Stock Exchange under the stock symbol “SON.” As of December 31, 2023, there were approximately 105,000 shareholder accounts.
Although the ultimate determination of whether to pay dividends is within the sole discretion of the Board of Directors and is based on a variety of factors, the Company currently plans to continue paying dividends consistent with historical practice as earnings and the Company's liquidity permit.
Although the ultimate determination of whether to pay dividends is within the sole discretion of the Board and is based on a variety of factors, the Company currently plans to continue paying dividends consistent with historic al practice as earnings and the Company's liquidity permit. Dividends per common share were $2.02 in 2023, $1.92 in 2022 and $1.80 in 2021.
Following several repurchase transactions in 2021, a total of approximately $138.0 million remained available for share repurchases at December 31, 2021 and December 31, 2022. No shares were repurchased under this authorization during 2022. The Company did not make any unregistered sales of its securities during 2022 . Item 6. [Reserved]
As of December 31, 2023, a total of approximately $138.0 million remained available under the Stock Repurchase Program for future share repurchases. The Company did not make any unregistered sales of its securities during 2023 .
Dividends per common share were $1.92 in 2022, $1.80 in 2021 and $1.72 in 2020. On February 8, 2023, the Company declared a regular quarterly dividend of $0.49 per common share payable on March 10, 2023, to shareholders of record on February 22, 2023.
On February 14, 2024, the Company declared a regular quarterly dividend of $0.51 per common share payable on March 8, 2024, to shareholders of record on February 28, 2024.
Added
The Stock Repurchase Program was announced on May 4, 2021 and has no expiration date. During the three months ended December 31, 2023, no shares were repurchased under the Stock Repurchase Program and no other Company stock repurchase plans or programs were outstanding, expired, or terminated.
Added
During the three months ended December 31, 2023, none of the Company’s officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement.
Added
For further information about share repurchases , see Note 18 to the Company’s Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeReconciliations 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 for each of the years presented: For the year ended December 31, 2022 Dollars and shares in thousands, except per share data GAAP Restructuring/ Asset Impairment (1) Amortization of Acquisition Intangibles (2) Acquisition/Divestiture Related Costs (3) Other Adjustments (4) Base Operating profit $ 675,396 $ 56,910 $ 80,427 $ 70,210 $ 36,922 $ 919,865 Non-operating pension costs 7,073 — — — (7,073) — Interest expense, net 97,041 — — — 136 97,177 Income before income taxes 571,282 56,910 80,427 70,210 43,859 822,688 Provision for income taxes 118,509 11,269 19,554 17,640 29,788 196,760 Income before equity in earnings of affiliates 452,773 45,641 60,873 52,570 14,071 625,928 Equity in earnings of affiliates, net of tax 14,207 — — — — 14,207 Net income 466,980 45,641 60,873 52,570 14,071 640,135 Less: Net (income) attributable to noncontrolling interests, net of tax (543) (99) — — — (642) Net income attributable to Sonoco $ 466,437 $ 45,542 $ 60,873 $ 52,570 $ 14,071 $ 639,493 Diluted weighted average common shares outstanding: 98,732 98,732 Per diluted common share $ 4.72 $ 0.46 $ 0.62 $ 0.53 $ 0.14 $ 6.48 24 FORM 10-K SONOCO 2022 ANNUAL REPORT For the year ended December 31, 2021 Dollars and shares in thousands, except per share data GAAP Restructuring/ Asset Impairment (1) Amortization of Acquisition Intangibles (2) Acquisition/Divestiture Related Costs (3) Other Adjustments (5) Base Operating profit $ 486,853 $ 14,210 $ 49,419 $ 17,722 $ (3,420) $ 564,784 Non-operating pension costs 568,416 — — — (568,416) — Interest expense, net 59,235 — — — 2,165 61,400 Loss from the early extinguishment of debt 20,184 — — — (20,184) — (Loss)/Income before income taxes (160,982) 14,210 49,419 17,722 583,015 503,384 (Benefit from)/Provision for income taxes (67,430) 5,363 12,241 3,535 165,531 119,240 (Loss)/Income before equity in earnings of affiliates (93,552) 8,847 37,178 14,187 417,484 384,144 Equity in earnings of affiliates, net of tax 10,841 — — — (1,394) 9,447 Net (loss)/income (82,711) 8,847 37,178 14,187 416,090 393,591 Less: Net (income) attributable to noncontrolling interests, net of tax (2,766) — — — 2,052 (714) Net (loss)/income attributable to Sonoco $ (85,477) $ 8,847 $ 37,178 $ 14,187 $ 418,142 $ 392,877 Diluted weighted average common shares outstanding (6) : 99,608 469 100,077 Per diluted common share $ (0.86) $ 0.09 $ 0.37 $ 0.14 $ 4.18 $ 3.93 (1) Restructuring/Asset impairment charges are a recurring item as Sonoco’s restructuring actions usually require several years to fully implement and the Company is continually seeking to take actions that could enhance its efficiency.
Biggest changeReconciliations 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 for each of the years presented in conjunction with management's analysis of the Company’s results of operations: Adjusted Operating Profit, Adjusted Income Before Income Taxes, Adjusted Provision for Income Taxes, Adjusted Earnings Attributable to Sonoco, and Adjusted EPS For the year ended December 31, 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 (GAAP) $ 715,790 $ 614,832 $ 149,278 $ 474,959 $ 4.80 Acquisition, integration and divestiture-related costs 26,254 26,254 6,407 19,847 0.20 Changes in LIFO inventory reserves (11,817) (11,817) (2,977) (8,840) (0.09) Amortization of acquisition intangibles 87,264 87,264 21,523 65,741 0.66 Restructuring/Asset impairment charges 56,933 56,933 12,920 44,036 0.44 Gain on divestiture of business and other assets (78,929) (78,929) (19,076) (59,853) (0.60) Other income, net — (39,657) (9,624) (30,033) (0.30) Non-operating pension costs — 14,312 3,547 10,765 0.11 Net gain from derivatives (1,912) (1,912) (482) (1,430) (0.01) Other adjustments 10,142 10,113 5,433 4,680 0.05 Total adjustments 87,935 62,561 17,671 44,913 0.46 Adjusted $ 803,725 $ 677,393 $ 166,949 $ 519,872 $ 5.26 26 FORM 10-K SONOCO 2023 ANNUAL REPORT For the year ended December 31, 2022 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 (GAAP) $ 675,396 $ 571,282 $ 118,509 $ 466,437 $ 4.72 Acquisition, integration and divestiture-related costs 70,210 70,210 17,640 52,570 0.53 Changes in LIFO inventory reserves 28,445 28,445 7,083 21,362 0.22 Amortization of acquisition intangibles 80,427 80,427 19,554 60,873 0.62 Restructuring/Asset impairment charges 56,910 56,910 11,269 45,542 0.46 Non-operating pension costs — 7,073 2,007 5,066 0.05 Net loss from derivatives 8,767 8,767 2,183 6,584 0.07 Other adjustments (290) (426) 18,515 (18,941) (0.19) Total adjustments 244,469 251,406 78,251 173,056 1.76 Adjusted $ 919,865 $ 822,688 $ 196,760 $ 639,493 $ 6.48 Adjusted EBITDA and Adjusted EBITDA Margin For the Year Ended December 31, Dollars in thousands 2023 2022 Net income attributable to Sonoco $ 474,959 $ 466,437 Adjustments Interest expense 136,686 101,662 Interest income (10,383) (4,621) Provision for income taxes 149,278 118,509 Depreciation, depletion, and amortization 340,988 308,824 Non-operating pension costs 14,312 7,073 Net income attributable to noncontrolling interests 942 543 Restructuring/Asset impairment charges 56,933 56,910 Changes in LIFO inventory reserves (11,817) 28,445 Gain from divestiture of business and other assets (78,929) — Other income, net (39,657) Acquisition, integration and divestiture-related costs 26,254 70,210 Net (gain)/loss from derivatives (1,912) 8,767 Other non-GAAP adjustments 10,142 (290) Adjusted EBITDA $ 1,067,796 $ 1,162,469 Net Sales $ 6,781,292 $ 7,250,552 Net Income Margin 7.0 % 6.4 % Adjusted EBITDA Margin 15.7 % 16.0 % 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, which is another method to achieve the same result.
The Company evaluates its long-lived assets (property, plant and equipment), definite-lived intangible assets and other assets (including right of use lease assets, notes receivable and equity investments) for impairment whenever indicators of impairment exist, or when it commits to sell the asset.
The Company evaluates its long-lived assets (property, plant and equipment), definite-lived intangible assets and other assets (including right of use lease assets, notes receivable and equity and other investments) for impairment whenever indicators of impairment exist, or when it commits to sell the asset.
Reconciliations are not provided for non-GAAP financial measures related to future years due to the likely occurrence of one or more of the following, the timing and magnitude of which management is unable to reliably forecast: possible gains or losses on the sale of businesses or other assets, restructuring costs and restructuring-related asset impairment charges, acquisition/divestiture-related costs, and the tax effect of these items and/or other income tax-related events.
Reconciliations are not provided for non-GAAP financial measures related to future years due to the likely occurrence of one or more of the following, the timing and magnitude of which management is unable to reliably forecast: possible gains or losses on the sale of businesses or other assets; restructuring costs and restructuring-related asset impairment charges; acquisition, integration and divestiture-related costs; and the tax effect of these items and/or other income tax-related events.
As a result, the eventual resolution of these matters could have a different impact on the effective rate than currently reflected or expected. Stock-Based Compensation Plans The Company utilizes share-based compensation in the form of restricted stock units, performance contingent restricted stock units, and other share-based awards.
As a result, the eventual resolution of these matters could have a different impact on the effective rate than currently reflected or expected. Share-Based Compensation Plans The Company utilizes share-based compensation in the form of restricted stock units, performance contingent restricted stock units (“PCSUs”), and other share-based awards.
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.
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 with favorable interest terms on both.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis contains forward-looking statements, including, without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under "Forward-Looking Statements" and under “Item 1A. Risk Factors” of this Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis contains forward-looking statements, including, without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under “Forward-Looking Statements” and under “Item 1A. Risk Factors” of this Form 10-K.
Accordingly, as of December 31, 2022, 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.
Accordingly, as of December 31, 2023, 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.
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.
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.
A third-party asset return model was used to develop an expected range of returns on plan investments over a 12- to 15-year period, with the expected rate of return selected from a best estimate range within the total range of projected results. The Company periodically re-balances its plan asset portfolio in order to maintain the targeted allocation levels.
A third-party asset return model is used to develop an expected range of returns on plan investments over a 12- to 15-year period, with the expected rate of return selected from a best estimate range within the total range of projected results. The Company periodically re-balances its plan asset portfolio in order to maintain the targeted allocation levels.
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 December 31, 2022 , the Company had derivative contracts outstanding to hedge the prices on a portion of anticipated natural gas and aluminum purchases.
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 December 31, 2023 , the Company had derivative contracts outstanding to hedge the prices on a portion of anticipated natural gas and aluminum purchases.
Discussions of 2021 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2021 .
Discussions of 2022 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2022 .
The Company purchased a total of 3.29 million shares under this authorization during 2021 at a cost of $212 million. No shares were repurchased under this authorization during 2022; accordingly, a total of $138 million remains available for share repurchases at December 31, 2022.
The Company purchased a total of 3.29 million shares under this authorization during 2021 at a cost of $212 million. No shares were repurchased under this authorization during 2022 or 2023; accordingly, a total of $138 million remains available for share repurchases at December 31, 2023.
The acquisition method of accounting requires us to make significant estimates and assumptions regarding the fair values of the elements of a business combination as of the date of acquisition, including the fair values of identifiable intangible assets, deferred tax asset valuation allowances, liabilities including those related to debt, pensions and other postretirement plans, uncertain tax positions, contingent consideration and contingencies.
The acquisition method of accounting requires us to make significant estimates and assumptions regarding the fair values of the elements of a business combination as of the date of acquisition, including the fair values of identifiable intangible assets, property, plant, and equipment, deferred tax asset valuation allowances, liabilities including those related to debt, pensions and other postretirement plans, uncertain tax positions, contingent consideration, and contingencies.
Such sales are conducted at the sole discretion of both the suppliers and the financial institution on a non-recourse basis at a rate that leverages the credit rating of the Company and thus might be more beneficial to the supplier. No guarantees are provided by the Company or any of its subsidiaries under the program.
Such sales are conducted at the sole discretion of both the suppliers and the financial institution on a non-recourse basis at a rate that leverages the credit rating of the Company and thus might be more beneficial to the supplier. No guarantees are provided by the Company or any of its subsidiaries under the SCF Programs.
For such contracts that are designated and qualify as a cash flow hedge under Accounting Standards Codification ("ASC") 815, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the periods during which the hedged transaction affects earnings.
For such contracts that are designated and qualify as a cash flow hedge under ASC 815, the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the periods during which the hedged transaction affects earnings.
As of December 31, 2022, the Company had long-term obligations to purchase electricity and steam, which it uses in its production processes, as well as long-term purchase commitments for certain raw materials, principally old corrugated containers. For additional information regarding the Company's purchase commitment obligations, see Note 16 to the Consolidated Financial Statements.
As of December 31, 2023, the Company had long-term obligations to purchase electricity and steam, which it uses in its production processes, as well as long-term purchase commitments for certain raw materials, principally old corrugated containers. For additional information regarding the Company’s purchase commitment obligations, see Note 17 to the Consolidated Financial Statements.
Restructuring and Asset Impairment Charges Due to its geographic footprint (approximately 310 locations in 32 countries as of December 31, 2022) and the cost-competitive nature of its businesses, the Company frequently seeks more cost-effective means and structures to serve its customers, to improve profitability, and to respond to fundamental changes in its markets.
Restructuring and Asset Impairment Charges Due to its geographic footprint (approximately 310 locations in 33 countries as of December 31, 2023) and the cost-competitive nature of its businesses, the Company frequently seeks more cost-effective means and structures to serve its customers, to improve profitability, and to respond to fundamental changes in its markets.
Responsibility is limited to making payment on the terms originally negotiated with suppliers, regardless of whether those suppliers sell the receivables to the financial institution. The Company does not enter into any agreements with suppliers regarding their participation in the program. All amounts outstanding at December 31, 2022 under the program were recorded within trade accounts payable.
Responsibility is limited to making payment on the terms originally negotiated with suppliers, regardless of whether those suppliers sell the receivables to the financial institution. The Company does not enter into any agreements with suppliers regarding their participation in the SCF Programs. All amounts outstanding at December 31, 2023 under the SCF Programs were recorded within trade accounts payable.
Significant estimates and assumptions in estimating the fair value of acquired customer relationships, technology, and other identifiable intangible assets include future cash flows that the Company expects to generate from the acquired assets, discount rate, customer attrition rate, and long-term revenue growth projections.
Significant estimates and assumptions in estimating the fair value of acquired patents, customer relationships, trade names, proprietary technology, and other identifiable intangible assets include future cash flows that the Company expects to generate from the acquired assets, discount rate, customer attrition rate, and long-term revenue growth projections.
As of December 31, 2022, these performance measures include the following: • Base earnings per share — three-year sum of forecasted future and historical annual base earnings per share for the three-year measurement period associated with each award; and • Return on invested capital — three-year simple average calculated using the annual returns calculated by dividing 1) net base operating profit after tax (derived from historical or projected base earnings) by 2) the average of total historical or projected debt plus equity for the respective annual periods.
As of December 31, 2023, these performance measures include the following: • Adjusted earnings per share — three-year sum of forecasted future and historical annual adjusted earnings per share for the three-year measurement period associated with each award; and • Return on invested capital — three-year simple average of annual returns calculated by dividing 1) adjusted operating profit after tax (derived from historical or projected adjusted earnings) by 2) the average of total historical or projected debt plus equity for the respective annual periods.
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 the reporting unit's assets, including goodwill, there is no impairment.
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.
This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021 .
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022 .
Benefit plan contributions in 2023 are expected to total approximately $15 million. Future funding requirements will depend largely on actual investment returns, future actuarial assumptions, legislative actions, and changes to the Company's benefit offerings.
Benefit plan contributions in 2024 are expected to total approximately $19 million. Future funding requirements will depend largely on actual investment returns, future actuarial assumptions, legislative actions, and changes to the Company’s benefit offerings.
Although the ultimate determination of whether to pay dividends is within the sole discretion of the Board of Directors and is based on a variety of factors, the Company plans to continue paying dividends consistent with historical practice as earnings and the Company's liquidity permit. Dividends per common share were $1.92 in 2022, $1.80 in 2021 and $1.70 in 2020.
Although the ultimate determination of whether to pay dividends is within the sole discretion of the Board and is based on a variety of factors, the Company plans to continue paying dividends consistent with historical practice as earnings and the Company’s liquidity permit. Dividends per common share were $2.02 in 2023 , $1.92 in 2022 and $1.80 in 2021.
Although the costs of compliance have not been significant due to the nature of the materials and processes used in manufacturing operations, such laws also make generators of hazardous wastes and their legal successors financially responsible for the cleanup of sites contaminated by those wastes. The Company has been named a potentially responsible party at several environmentally contaminated sites.
Although the costs of compliance have not been significant due to the nature of the materials and processes used in manufacturing operations, such laws also make generators of hazardous wastes and their legal successors financially responsible for the cleanup of sites contaminated by those wastes. The Company has been named a PRP at several en vironmentally contaminated sites.
The amount of these costs can vary significantly from year to year depending upon the scope and location of the restructuring activities. 23 FORM 10-K SONOCO 2022 ANNUAL REPORT The following table summarizes the impact of restructuring and asset impairment charges for each of the years presented: Year Ended December 31, Dollars in thousands 2022 2021 Restructuring and restructuring-related asset impairment charges $ 46,815 $ 9,176 Other asset impairments 10,095 5,034 Restructuring/Asset impairment charges $ 56,910 $ 14,210 During 2022, the Company recognized restructuring charges related to severance for employees terminated as a result of various plant closures or whose positions were eliminated as part of the Company's ongoing organizational effectiveness efforts.
The amount of these costs can vary significantly from year to year depending upon the scope and location of the restructuring activities. 25 FORM 10-K SONOCO 2023 ANNUAL REPORT The following table summarizes the impact of restructuring and asset impairment charges for each of the years presented: Year Ended December 31, Dollars in thousands 2023 2022 Restructuring and restructuring-related asset impairment charges $ 56,933 $ 46,815 Other asset impairments — 10,095 Restructuring/Asset impairment charges $ 56,933 $ 56,910 During 2023, the Company recognized restructuring charges related to severance for employees terminated as a result of various plant closures or whose positions were eliminated as part of the Company’s ongoing organizational effectiveness efforts.
Although no divestitures were completed in 2022, the Company continually assesses its operational footprint as well as its overall portfolio of businesses and may consider the divestiture of plants and/or business units it considers to be suboptimal or nonstrategic. See Note 3 to the Consolidated Financial Statements for further information about acquisitions and divestitures.
The Company continually assesses its operational footprint as well as its overall portfolio of businesses and may consider the divestiture of plants and/or business units it considers to be suboptimal or nonstrategic. See Note 3 to the Consolidated Financial Statements for further information about acquisitions and divestitures.
The amount of share-based compensation expense associated with performance contingent restricted stock units is based on estimates of future performance using measures defined in the stock plan descriptions for each award granted.
The amount of share-based compensation expense associated with PCSUs is based on estimates of future performance using measures defined in the stock plan descriptions for each award granted.
The Company's management believes the exclusion of the above items improves the period-to-period comparability and analysis of the underlying financial performance of the business.
The Company’s management believes the exclusion of the amounts relating to the above-listed items improves the period-to-period comparability and analysis of the underlying financial performance of the business.
In addition, at December 31, 2022 , the Company's accumulated other comprehensive loss included a cumulative translation loss of approximately $3.8 million related to its Venezuela operations which would need to be reclassified to net income in the event of a complete exit of the business or a deconsolidation of these operations.
In addition, accumulated other comprehensive loss at December 31, 2023 included a cumulative translation loss of approximately $3.8 million related to the Company’s Venezuela operations. These translation losses would be reclassified to net income in the event of a complete exit of the business or deconsolidation of these operations.
The Company's combined designated and non-designated derivative contracts totaled approximately 70% and 13% of anticipated natural gas and aluminum usage, respectively, in North America for 2023. The Company routinely enters into forward contracts to hedge certain anticipated foreign currency denominated sales, purchases, and capital spending.
The Company’s combined designated and non-designated derivative contracts totaled approximately 76% and 10% of anticipated natural gas and aluminum usage, respectively, in North America for 2024. The Company routinely enters into forward contracts to hedge certain anticipated foreign currency denominated sales, purchases, and capital spending.
In addition, at December 31, 2022 , the Company had certain other commodity contracts outstanding to manage the cost of anticipated natural gas purchases for which the Company does not apply hedge accounting. These contracts consist of natural gas swaps covering approximately 7.3 million MMBTUs.
In addition, at December 31, 2023 , the Company had certain other commodity contracts outstanding to manage the cost of anticipated natural gas purchases for which the Company does not apply hedge accounting. These contracts consist of natural gas swaps covering approximately 5.4 million MMBTUs.
For leases in which the acquired business is a lessee, the Company measures the lease liability at the present value of the remaining lease payments, as if the acquired lease were a new lease of the Company at the acquisition date.
For leases acquired in a business combination, the Company measures the lease liability at the present value of the remaining lease payments, as if the acquired lease were a new lease of the Company at the acquisition date.
The Company's contractual obligation maturities for interest payments on outstanding fixed-rate, long-term debt, as well as financing fees on the backstop line of credit, are expected to total approximately $78.8 million in both 2023 and 2024, $72.2 million in 2025, $71.6 million in 2026, and $64.9 million in 2027.
The Company’s contractual obligation maturities for interest payments on outstanding fixed-rate, long-term debt, as well as financing fees on the backstop line of credit, are expected to total approximately $78.9 million in 2024, $72.4 million in 2025, $71.2 million in 2026, $64.5 million in 2027, and $63.9 million in 2028.
The quantitative tests, described further below, relied on the current outlook of reporting unit management for future operating results 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 tra ding multiples.
The quantitative tests, described further below, relied 35 FORM 10-K SONOCO 2023 ANNUAL REPORT on the current outlook of reporting unit management for future operating results 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 tra ding multiples.
The total amount settled through the program and paid by the Company to the participating financial institution was $270 million during 2022 and $178 million during 2021. A downgrade in the Company's credit rating or changes in the financial markets could limit financial institutions’ willingness to commit funds to, and participate in, the program.
The total amount settled through the SCF Programs and paid by the Company to the participating financial institution was $188 million during 2023 and $270 million during 2022. A downgrade in the Company’s credit rating or changes in the financial markets could limit financial institutions’ willingness to commit funds to, and participate in, the SCF Programs.
At December 31, 2022, the Company had approximately $227 million in cash and cash equivalents on hand and $750 million in committed availability under its revolving credit facility, all of which was available for drawdown.
At December 31, 2023, the Company had approximately $152 million in cash and cash equivalents on hand and $900 million in committed availability under its revolving credit facility, all of which was available for drawdown.
Other than in Plastics - Healthcare and Protexic 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 expected future results in any of its reporting units sufficient to result in goodwill impairment.
Other than in the Plastics-Medical reporting unit, previously known as Plastics-Healthcare, which is discussed below, there is no specific singular event or single change in circumstances management has identified that it believes could reasonably result in a change to the expected future results in any of its reporting units sufficient to result in goodwill impairment.
In parallel, we have worked on commercial, operational, and supply chain excellence programs to shift the mix of our business towards higher-valued products, improve our contracting process to better capture input costs and the value of the services we provide, and increase overall productivity.
In parallel, we have worked on commercial, operational, and supply chain excellence programs to shift the mix of our business towards higher-valued products and increase overall productivity, as well as strategic pricing initiatives to better capture input costs and the value of the services we provide.
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The primary driver of other comprehensive loss was a $69 million translation loss from the impact of a stronger U.S. dollar on the Company’s foreign investments. On April 20, 2021, the Company’s Board of Directors authorized the repurchase of the Company's common stock up to an aggregate amount of $350 million.
The primary driver of other comprehensive income was a $70 million translation gain from the impact of a weaker U.S. dollar on the Company’s foreign investments. On April 20, 2021, the Board authorized the repurchase of the Company’s common stock up to an aggregate amount of $350 million.
These contracts, which qualify as cash flow hedges, included natural gas swaps covering approximately 0.2 million metric million British thermal units ("MMBTUs") and aluminum swaps covering 983 metric tons.
These contracts, which qualify as cash flow hedges, included natural gas swaps covering approximately 0.1 million metric million British thermal units (“MMBTUs”) and aluminum swaps covering 488 metric tons.
To compensate for these limitations, management believes that it is useful in understanding and analyzing the results of the business to review both GAAP information which includes all of the items impacting financial results and the non-GAAP financial measures that exclude certain elements, as described above.
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.
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, as of December 31, 2022, was approximately $18.5 million.
In addition to remeasurement-related charges, significant deterioration in the Turkish economy could result in the recognition of future impairment charges. H owever, the Company believes its exposure is limited to its net investment in Turkey which, as of December 31, 2023, was approximately $17.8 million.
When performing a quantitative analysis, the Company estimates the fair value of its reporting units using a discounted cash flow model based on projections of future years’ operating results and associated cash flows.
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 amount owed to the participating financial institution under the program and included in accounts payable for continuing operations was $52.4 million at December 31, 2022 and $46.8 million at December 31, 2021.
The amount owed to the participating financial institution under the SCF Programs and included in accounts payable for continuing operations was $35.8 million at December 31, 2023 and $52.4 million at December 31, 2022.
The Company accounts for all payments made under the program as a reduction to cash flows from operations and reports them within "changes in payable to suppliers" in the Consolidated Statements of Cash Flows.
The Company accounts for all payments made under the SCF Programs as a reduction to cash flows from operations and reports them within “changes in payable to suppliers” in the Consolidated Statements of Cash Flows.
The largest of the Company's pension plans are the U.S.-based Sonoco Pension Plan (the "Active Plan") and the Sonoco U.K. Retirement Benefits Plan (the "U.K. Plan"). Other significant benefit plans include the U.S. Retirement and Retiree Health and Life Insurance Plan and the U.S. nonqualified retirement plans.
The largest of the Company’s pension and postretirement plans include the U.S.-based Sonoco Pension Plan, the U.S. nonqualified retirement plans, the U.S. Retirement and Retiree Health and Life Insurance Plan, and the Sonoco U.K. Retirement Benefits Plan.
Beginning in 2020, the Company also began a voluntary supply chain financing program (the "program") to provide certain suppliers with the opportunity to sell receivables due from the Company to the program's participating financial institution.
Beginning in 2020, the Company also began voluntary supply chain financing programs (the “SCF Programs”) to provide certain suppliers with the opportunity to sell receivables due from the Company to the SCF Programs’ participating financial institution.
However, the Company does not believe a reduction in, or the elimination of, the program would have a material impact on its working capital or cash flows. The Company’s total debt at December 31, 2022, was $3.2 billion, a year-over-year increase of $1.6 billion.
However, the Company does not believe a reduction in, or the elimination of, the SCF Programs would have a material impact on its working capital or cash flows. The Company’s total debt at December 31, 2023, was $3.1 billion, a year-over-year decrease of $0.1 billion.
At December 31, 2022 and 2021, approximately $170.1 million and $154.4 million, respectively, of the Company’s reported cash and cash equivalents balances of $227.4 million and $171.0 million, respectively, were held outside of the United States by its foreign subsidiaries.
At December 31, 2023 and 2022, approximately $93.8 million and $170.1 million, respectively, of the Company’s reported cash and cash equivalents balances of $151.9 million and $227.4 million, respectively, were held outside of the United States by its foreign subsidiaries.
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. See Note 18 to the Company’s Consolidated Financial Statements for more information on reportable segments.
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.
These regulatory actions and a small number of private party lawsuits are believed to represent the Company’s largest potential environmental liabilities. The Company has accru ed $7.3 million at December 31, 2022, compared with $7.4 million at December 31, 2021, with respect to these sites.
These regulatory actions and a small number of private party lawsuits are believed to represent the Company’s largest potential environmental liabilities. The Company had accrued $7.3 million at December 31, 2023 with respect to these sites.
The Company is subject to various federal, state and local environmental laws and regulations in the United States and in each of the countries where we conduct business, concerning, among other matters, solid waste disposal, wastewater effluent and air emissions.
See Note 11 to the Consolidated Financial Statements for more information on financial instruments. The Company is subject to various federal, state and local environmental laws and regulations in the United States and in each of the countries where we conduct business, concerning, among other matters, solid waste disposal, wastewater effluent and air emissions.
The Company's reporting units are the same as, or one level below, its operating segments, as determined in accordance with Accounting Standards Codification 350 - "Intangibles-Goodwill and Other." The Company completed its most recent annual goodwill impairment testing during the third quarter of 2022.
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 2023.
See Note 13 to the Consolidated Financial Statements for additional information on the Company’s pension and postretirement plans. Recent Accounting Pronouncements Information regarding recent accounting pronouncements is provided in Note 2 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Recent Accounting Pronouncements Information regarding recent accounting pronouncements is provided in Note 2 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
The Company believes that its cash on hand, coupled with cash generated from operations and available borrowing capacity will enable it to support this strategy.
Acquisitions and internal investments are key elements of the Company’s growth strategy. The Company believes that its cash on hand, coupled with cash generated from operations and available borrowing capacity, will enable it to support this strategy.
On February 8, 2023, the Company declared a regular quarterly dividend of $0.49 per common share payable on March 10, 2023, to shareholders of record on February 22, 2023.
On February 14, 2024, the Company declared a regular quarterly dividend of $0.51 per common share payable on March 8, 2024, to shareholders of record on February 28, 2024.
Risk Factors" in this Annual Report on Form 10-K. 32 FORM 10-K SONOCO 2022 ANNUAL REPORT Although no reporting units failed the annual impairment test, in management’s opinion, the goodwill of the Plastics - Healthcare and the Protexic reporting units are at risk of impairment in the near term if each reporting unit's operations do not perform in line with management's expectations, or if there is a negative change in the long-term outlook for the business or in other factors such as the discount rate.
Although no reporting units failed the annual impairment test, in management’s opinion, the goodwill of the Plastics-Medical reporting unit is at risk of impairment in the near term if its operations do not perform in line with management's expectations, or if there is a negative change in the long-term outlook for the business or in other factors such as the discount rate.
Consolidated operating profits, reported as “Operating Profit” in the Company's Consolidated Statements of Income, are comprised of the following: ($ in millions) 2022 2021 % Change Segment operating profit: Consumer Packaging $ 526.0 $ 274.9 91.3 % Industrial Paper Packaging 327.9 226.8 44.6 % All Other 66.0 63.1 4.6 % Total segment operating profit 919.9 564.8 62.9 % Restructuring/Asset impairment charges (56.9) (14.2) Amortization of acquisition intangibles (80.4) (49.4) 62.8 % Other non-base income/(charges), net (107.1) (14.3) Consolidated operating profit* $ 675.5 $ 486.9 38.7 % *Due to rounding, amounts above may not sum to the totals presented Segment results viewed by Company management to evaluate segment performance do not include restructuring/asset impairment charges, acquisition/divestiture-related charges, gains or losses from the divestiture of businesses, amortization of acquired intangibles, changes in LIFO inventory reserves, and certain other non-operational income and expenses, if any, the exclusion of which the Company believes improves comparability and analysis.
Total operating profit, reported as “Operating Profit” in the Company’s Consolidated Statements of Income, is comprised of the following: ($ in millions) 2023 2022 % Change Segment operating profit: Consumer Packaging $ 382.1 $ 526.0 (27.4) % Industrial Paper Packaging 317.9 327.9 (3.0) % All Other 103.7 66.0 57.1 % Total segment operating profit 803.7 919.9 (12.6) % Restructuring/Asset impairment charges (56.9) (56.9) Amortization of acquisition intangibles (87.3) (80.4) Other income/(charges), net 56.3 (107.1) Total operating profit* $ 715.8 $ 675.5 6.0 % *Due to rounding, amounts above may not sum to the totals presented Segment results, which are reviewed by Company management to evaluate segment performance, do not include: restructuring/asset impairment charges: amortization of acquired intangibles: acquisition, integration, and divestiture-related charges; changes in LIFO inventory reserves; gains/losses from the sale of businesses or other assets; gains/losses on 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, effective as of the beginning of the second quarter of 2022, 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.
Turkey has 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.
Restructuring charges were also incurred during the year for consulting services and costs related to plant closures, including equipment removal, utilities, plant security, property taxes, and insurance at closed facilities.
Restructuring charges were also incurred during the year for consulting services and costs related to plant closures, including equipment removal, utilities, plant security, property taxes, and insurance at closed facilities. Asset impairment charges were recognized in the Industrial Paper Packaging and Consumer Packaging segments as the result of plant closures.
The impact of applying highly inflationary accounting to Turkey was a pretax charge to earnings of approximately $2.7 million (approximately $2.1 million after tax) in 2022. The magnitude of future earnings impacts is uncertain as such impacts are dependent upon unpredictable movements in the Turkish lira relative to the U.S. dollar.
The cumulative impact of applying highly inflationary accounting to Turkey has been a pretax charge to earnings of $6.5 million ($5.0 million after tax), including $3.8 million ($2.9 million after tax) during 2023. The magnitude of future earnings impacts is uncertain as such impacts are dependent upon unpredictable movements in the Turkish lira relative to the U.S. dollar.
The RTS joint venture was formed in 1997 and combined the former protective packaging operations of WestRock and the Company to market solid fiber partitions from recycled paperboard to glass container manufacturers and producers of wine, liquor, food, and pharmaceuticals.
Prior to completing the acquisitions, the Company held a 35% ownership interest in the RTS Packaging joint venture, which was formed in 1997, and combined the former protective packaging operations of WestRock and Sonoco to market recycled paperboard to glass container manufacturers and producers of wine, liquor, food, and pharmaceuticals.
The Company believes the accounting policies discussed in the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K are critical to understanding the results of its operations.
The Company believes the accounting policies discussed in the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K are critical to understanding the results of its operations. The following discussion represents those policies that involve the more significant judgments and estimates used in the preparation of the Company’s Consolidated Financial Statements.
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.
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.
Changes in estimates regarding the future achievement of these performance measures may result in significant fluctuations from period to period in the amount of share-based compensation expense recognized in the Company’s Consolidated Financial Statements. Pension and Postretirement Benefit Plans The Company has significant pension and postretirement benefit liabilities and costs that are measured using actuarial valuations.
Changes in estimates regarding the future achievement of these performance measures may result in significant fluctuations from period to period in the amount of share-based compensation expense recognized in the Company’s Consolidated Financial Statements.
The Company believes cash on hand and available credit, combined with expected net cash flows generated from operating and investing activities, will provide sufficient liquidity to cover these and other cash flow needs of the Company over the course of 2023 and beyond. Acquisitions and internal investments are key elements of the Company’s growth strategy.
These increases are expected to be offset by moderating year-over-year levels of maintenance capital. The Company believes cash on hand and available credit, combined with expected net cash flows generated from operating and investing activities, will provide sufficient liquidity to cover these and other cash flow needs of the Company over the course of 2024 and beyond.
The Company consistently applies its non-GAAP “base” performance 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 plan/forecast all the way up through the evaluation of the Chief Executive Officer’s performance by the Board of Directors.
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.
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. The Company’s model discounts projected future cash flows, forecasted over a seven-year period, with an estimated residual growth rate.
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.
These “non-GAAP” financial measures (referred to as "Base") reflect adjustments to the Company's GAAP results to exclude amounts, including the associated tax effects, relating to: • restructuring initiatives; • asset impairment charges; • acquisition/divestiture-related costs; • gains or losses from the divestiture of businesses; • 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; and • other items, if any.
These “non-GAAP” financial measures (referred to as “Adjusted”) reflect adjustments to the net income attributable to the Company (“GAAP 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.
Capital Resources Current assets increased year over year by $703 million to $2,361 million at December 31, 2022, and current liabilities increased by $218 million to $1,744 million, resulting in an increase in the Company’s ratio of current assets to current liabilities to 1.4 at December 31, 2022 from 1.1 at December 31, 2021.
Current assets decreased year over year by $311 million to $2,050 million at December 31, 2023, and current liabilities decreased by $579 million to $1,165 million, resulting in an increase in the Company’s ratio of current assets to current liabilities to 1.8 at December 31, 2023 from 1.4 at December 31, 2022.
As of December 31, 2022, the Company had scheduled debt maturities of $502.4 million, $15.0 million, $715.3 million, $14.6 million, and $302.0 million in 2023, 2024, 2025, 2026, and 2027, respectively. See Note 9 to the Consolidated Financial Statements for additional information regarding the Company's contractual principal debt maturities.
As of December 31, 2023, the Company had scheduled debt maturities of $47.1 million, $449.8 million, $21.8 million, $310.4 million, and $583.7 million in 2024, 2025, 2026, 2027, and 2028, respectively. See Note 10 to the Consolidated Financial Statements for additional information regarding the Company’s contractual principal debt maturities.
The change in outstanding checks used cash of $18.5 million in 2022 while providing cash of $7.0 million in the prior year. The year-over-year change is the result of the timing and size of the last accounts payable check runs in 2022 and 2021 relative to the Company's December 31 year end.
The year-over-year change is the result of the timing and size of the last accounts payable check runs in 2023 and 2022 relative to the Company’s December 31 year end.
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.
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.
At December 31, 2022, the total notional amount of these contracts, in U.S. dollar terms, was $110 million, of which $28 million related to the Mexican peso, $27 million to the Polish zloty, $25M to the Canadian dollar, $11 million to the Euro, $7 million to the British pound, $6 million to the Colombian peso, and $6 million to all other currencies.
At December 31, 2023, the total notional amount of these contracts, in U.S. dollar terms, was $125 million, of which $34 million related to the Mexican peso, $33 million to the Polish zloty, $26 million to the Canadian dollar, $11 million to the Brazilian real, $7 million to the Danish krone, $6 million to the Colombian peso, $5 million to the Czech koruna and $3 million to all other currencies.
The Company evaluates the assumptions used in projecting the pension and postretirement liabilities and associated expenses annually. These judgments, assumptions and estimates may affect the carrying value of pension and postretirement plan net assets and liabilities and pension and postretirement plan expenses in the Company’s Consolidated Financial Statements.
These judgments, assumptions and estimates may affect the carrying value of pension and postretirement plan net assets and liabilities and pension and postretirement plan expenses in the Company’s Consolidated Financial Statements. See Note 14 to the Consolidated Financial Statements for additional information on the Company’s pension and postretirement plans.
These items could have a significant impact on the Company's future GAAP financial results. Acquisitions and Divestitures Acquisitions The Company completed three acquisitions during 2022 at a net cash cost of approximately $1.4 billion.
These items could have a significant impact on the Company's future GAAP financial results. 24 FORM 10-K SONOCO 2023 ANNUAL REPORT Acquisitions and Divestitures Acquisitions The Company completed two acquisitions during 2023 at a net cash cost of approximately $372.6 million.
The Company’s foreign operations are exposed to political, geopolitical, and cultural risks, but the risks are mitigated by diversification and the relative stability of the countries in which the Company has significant operations. 30 FORM 10-K SONOCO 2022 ANNUAL REPORT Due to the highly inflationary economy in Venezuela, 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.
The Company’s foreign operations are exposed to political, geopolitical, and cultural risks, but the risks are mitigated by diversification and the relative stability of the countries in which the Company has significant operations. 33 FORM 10-K SONOCO 2023 ANNUAL REPORT Because the economy in Venezuela is considered highly inflationary under U.S.
If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, the Company could record impairment charges. In addition, the Company has estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense on definite lived intangible assets.
If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, the Company could record impairment charges.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeQuantitative and Qualitative Disclosures About Market Risk Information regarding market risk is provided in this Annual Report on Form 10-K under the following items and captions: “Our international operations subject us to various risks that could adversely affect our business operations and financial results” and “Currency exchange rate fluctuations may reduce operating results and shareholders' equity” in Item 1A - Risk Factors; “Risk Management” in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations; and in Note 10 to the Consolidated Financial Statements in Item 8 – Financial Statements and Supplementary Data.
Biggest changeQuantitative and Qualitative Disclosures About Market Risk Information regarding market risk is provided in this Annual Report on Form 10-K under the following items and captions: “Our international operations subject us to various risks that could adversely affect our business operations and financial results” and “Currency exchange rate fluctuations may adversely affect our results of operations and shareholders’ equity” in Item 1A - Risk Factors; “Risk Management” in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations; and in Note 11 to the Consolidated Financial Statements in Item 8 – Financial Statements and Supplementary Data.

Other SON 10-K year-over-year comparisons