Table of Contents

 
 	
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549	
 
FORM 10-Q

x    	    	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE	
 	    	SECURITIES EXCHANGE ACT OF 1934	
 	    	 
For the quarterly period ended July 1, 2012	
or

¨    	    	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE	
 	    	SECURITIES EXCHANGE ACT OF 1934	
 	    	 
For the transition period from                        to                 	
Commission File No. 0-516
SONOCO PRODUCTS COMPANY

Incorporated under the laws	 	I.R.S. Employer Identification	
of South Carolina	 	No. 57-0248420	
1 N. Second St.
Hartsville, South Carolina 29550
Telephone: 843/383-7000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes         X                  No             
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).
Yes         X                  No             
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Large accelerated filer 	 	    X    	 	 	 	 	 	Accelerated filer	 	 	 	             	  	 	
Non-accelerated filer	 	           	 	(do not check if a smaller
reporting company)	 	 	 	Smaller reporting company	 	 	 	 	  	 	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes                         No         X      
Indicate the number of shares outstanding of each of the issuer’s classes of common stock at July 20, 2012:
Common stock, no par value: 100,642,950

 

Table of Contents
SONOCO PRODUCTS COMPANY
INDEX

PART I.  FINANCIAL INFORMATION	  	 	3	  	
 	 	 	
Item 1.	  	Financial Statements:	  	 	3	  	
 	 	 	
 	  	Condensed Consolidated Balance Sheets – July 1, 2012 (unaudited) and December 31, 2011 (unaudited)	  	 	3	  	
 	 	 	
 	  	Condensed Consolidated Statements of Income – Three and Six Months Ended July 1, 2012 (unaudited) and July 3, 2011 (unaudited)	  	 	4	  	
 	 	 	
 	  	Condensed Consolidated Statements of Comprehensive Income – Three and Six Months Ended July 1, 2012 (unaudited) and July 3, 2011 (unaudited)	  	 	5	  	
 	 	 	
 	  	Condensed Consolidated Statements of Cash Flows – Six Months Ended July 1, 2012 (unaudited) and July 3, 2011 (unaudited)	  	 	6	  	
 	 	 	
 	  	Notes to Condensed Consolidated Financial Statements	  	 	7	  	
 	 	 	
 	  	Report of Independent Registered Public Accounting Firm	  	 	22	  	
 	 	 	
Item 2.	  	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	  	 	23	  	
 	 	 	
Item 3.	  	Quantitative and Qualitative Disclosures About Market Risk.	  	 	33	  	
 	 	 	
Item 4.	  	Controls and Procedures.	  	 	34	  	
 	 	
PART II.  OTHER INFORMATION	  	 	34	  	
 	 	 	
Item 1.	  	Legal Proceedings.	  	 	34	  	
 	 	 	
Item 2.	  	Unregistered Sales of Equity Securities and Use of Proceeds.	  	 	36	  	
 	 	 	
Item 6.	  	Exhibits.	  	 	36	  	
 
2

Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars and shares in thousands)

 	  	  July 1,     2012  	 	  	  December 31,  
  2011*  	 	
Assets	  	 	 	 	  	 	 	 	
Current Assets	  	 	 	 	  	 	 	 	
Cash and cash equivalents	  	  $	196,005   	  	  	  $	175,523   	  	
Trade accounts receivable, net of allowances	  	 	647,203   	  	  	 	606,035   	  	
Other receivables	  	 	34,143   	  	  	 	43,378   	  	
Inventories:	  	 	 	 	  	 	 	 	
Finished and in process	  	 	171,312   	  	  	 	157,891   	  	
Materials and supplies	  	 	236,113   	  	  	 	237,431   	  	
Prepaid expenses	  	 	54,872   	  	  	 	65,227   	  	
Deferred income taxes	  	 	23,981   	  	  	 	26,806   	  	
 	  	 	 	 	  	 	 	 	
 	  	 	1,363,629   	  	  	 	1,312,291   	  	
Property, Plant and Equipment, Net	  	 	1,017,705   	  	  	 	1,013,622   	  	
Goodwill	  	 	1,105,037   	  	  	 	1,110,220   	  	
Other Intangible Assets, Net	  	 	289,625   	  	  	 	304,600   	  	
Long-term Deferred Income Taxes	  	 	77,615   	  	  	 	81,690   	  	
Other Assets	  	 	171,305   	  	  	 	170,835   	  	
 	  	 	 	 	  	 	 	 	
Total Assets	  	  $	4,024,916   	  	  	  $	3,993,258   	  	

Liabilities and Equity	  	 	 	 	  	 	 	 	
Current Liabilities	  	 	 	 	  	 	 	 	
Payable to suppliers	  	  $	452,760   	  	  	  $	436,732   	  	
Accrued expenses and other	  	 	335,907   	  	  	 	347,622   	  	
Notes payable and current portion of long-term debt	  	 	42,453   	  	  	 	53,666   	  	
Accrued taxes	  	 	5,372   	  	  	 	5,551   	  	
 	  	 	 	 	  	 	 	 	
 	  	 	836,492   	  	  	 	843,571   	  	
Long-term Debt, Net of Current Portion	  	 	1,276,498   	  	  	 	1,232,966   	  	
Pension and Other Postretirement Benefits	  	 	374,654   	  	  	 	420,048   	  	
Deferred Income Taxes	  	 	14,989   	  	  	 	16,794   	  	
Other Liabilities	  	 	56,688   	  	  	 	54,471   	  	
Commitments and Contingencies	  	 	 	 	  	 	 	 	
Sonoco Shareholders’ Equity	  	 	 	 	  	 	 	 	
Common stock, no par value	  	 	 	 	  	 	 	 	
Authorized 300,000 shares	  	 	 	 	  	 	 	 	
100,643 and 100,211 shares issued and outstanding at July 1, 2012 and December 31, 2011, respectively	  	 	7,175   	  	  	 	7,175   	  	
Capital in excess of stated value	  	 	439,698   	  	  	 	427,484   	  	
Accumulated other comprehensive loss	  	 	(466,450)  	  	  	 	(460,299)  	  	
Retained earnings	  	 	1,471,727   	  	  	 	1,437,435   	  	
 	  	 	 	 	  	 	 	 	
Total Sonoco Shareholders’ Equity	  	 	1,452,150   	  	  	 	1,411,795   	  	
Noncontrolling Interests	  	 	13,445   	  	  	 	13,613   	  	
 	  	 	 	 	  	 	 	 	
Total Equity	  	 	1,465,595   	  	  	 	1,425,408   	  	
 	  	 	 	 	  	 	 	 	
Total Liabilities and Equity	  	  $	    4,024,916   	  	  	  $	    3,993,258   	  	

 	*	The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles.	
 
See accompanying Notes to Condensed Consolidated Financial Statements
 
3

Table of Contents
SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars and shares in thousands except per share data)

 	  	Three Months Ended	 	  	Six Months Ended	 	
 	  	  July 1,  
  2012  	 	  	  July 3,  
  2011  	 	  	  July 1,  
  2012  	 	  	  July 3,  
  2011  	 	
Net sales	  	  $	    1,202,359   	  	  	  $	    1,127,865   	  	  	  $	    2,414,729   	  	  	  $	    2,245,188   	  	
Cost of sales	  	 	985,817   	  	  	 	936,775   	  	  	 	1,981,326   	  	  	 	1,859,889   	  	

Gross profit	  	 	216,542   	  	  	 	191,090   	  	  	 	433,403   	  	  	 	385,299   	  	
Selling, general and administrative expenses	  	 	118,554   	  	  	 	99,273   	  	  	 	241,360   	  	  	 	201,571   	  	
Restructuring/Asset impairment charges	  	 	9,396   	  	  	 	9,578   	  	  	 	24,608   	  	  	 	11,895   	  	

Income before interest and income taxes	  	 	88,592   	  	  	 	82,239   	  	  	 	167,435   	  	  	 	171,833   	  	
Interest expense	  	 	16,205   	  	  	 	9,335   	  	  	 	32,471   	  	  	 	18,709   	  	
Interest income	  	 	957   	  	  	 	1,161   	  	  	 	1,802   	  	  	 	1,798   	  	

Income before income taxes	  	 	73,344   	  	  	 	74,065   	  	  	 	136,766   	  	  	 	154,922   	  	
Provision for income taxes	  	 	25,905   	  	  	 	23,775   	  	  	 	47,802   	  	  	 	48,959   	  	

Income before equity in earnings of affiliates	  	 	47,439   	  	  	 	50,290   	  	  	 	88,964   	  	  	 	105,963   	  	
Equity in earnings of affiliates, net of tax	  	 	3,912   	  	  	 	3,416   	  	  	 	5,299   	  	  	 	5,380   	  	

Net income	  	  $	51,351   	  	  	  $	53,706   	  	  	  $	94,263   	  	  	  $	111,343   	  	
 	 	 	 	 	
Net loss/(income) attributable to noncontrolling interests	  	  $	(28)  	  	  	  $	(298)  	  	  	  $	128   	  	  	  $	(544)  	  	

Net income attributable to Sonoco	  	  $	51,323   	  	  	  $	53,408   	  	  	  $	94,391   	  	  	  $	110,799   	  	

Weighted average common shares outstanding:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Basic	  	 	101,812   	  	  	 	100,891   	  	  	 	101,672   	  	  	 	101,104   	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Diluted	  	 	102,569   	  	  	 	101,982   	  	  	 	102,563   	  	  	 	102,371   	  	

Per common share:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Net income attributable to Sonoco:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Basic	  	  $	0.50   	  	  	  $	0.53   	  	  	  $	0.93   	  	  	  $	1.10   	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Diluted	  	  $	0.50   	  	  	  $	0.52   	  	  	  $	0.92   	  	  	  $	1.08   	  	

Cash dividends	  	  $	0.30   	  	  	  $	0.29   	  	  	  $	0.59   	  	  	  $	0.57   	  	

See accompanying Notes to Condensed Consolidated Financial Statements
 
4

Table of Contents
SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (unaudited)
(Dollars in thousands)

 	  	Three Months Ended	 	  	Six Months Ended	 	
 	  	  July 1,  
  2012  	 	  	  July 3,  
  2011  	 	  	  July 1,  
  2012  	 	  	  July 3,  
  2011  	 	
Net income	  	  $	51,351   	  	  	  $	    53,706   	  	  	  $	    94,263   	  	  	  $	    111,343   	  	
 	 	 	 	 	
Other comprehensive income:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Foreign currency translation adjustments	  	 	(45,684)  	  	  	 	17,982   	  	  	 	(17,809)  	  	  	 	57,633   	  	
Changes in defined benefit plans, net of tax	  	 	4,936   	  	  	 	2,791   	  	  	 	9,947   	  	  	 	5,387   	  	
Changes in derivative financial instruments, net of tax	  	 	1,493   	  	  	 	852   	  	  	 	1,711   	  	  	 	3,717   	  	

Comprehensive income	  	 	12,096   	  	  	 	75,331   	  	  	 	88,112   	  	  	 	178,080   	  	
 	 	 	 	 	
Comprehensive (income)/loss attributable to noncontrolling interests	  	 	(28)  	  	  	 	(298)  	  	  	 	128   	  	  	 	(544)  	  	

Comprehensive income attributable to Sonoco	  	  $	    12,068   	  	  	  $	75,033   	  	  	  $	88,240   	  	  	  $	177,536   	  	

 
See accompanying Notes to Condensed Consolidated Financial Statements
 
5

Table of Contents
SONOCO PRODUCTS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)

 	  	    Six Months Ended    	 	
 	  	    July 1,    
    2012     	 	  	    July 3,    
    2011     	 	
Cash Flows from Operating Activities:	  	 	 	 	  	 	 	 	
Net income	  	  $	94,263   	  	  	  $	111,343   	  	
Adjustments to reconcile net income to net cash provided by operating activities:	  	 	 	 	  	 	 	 	
Asset impairment	  	 	4,692   	  	  	 	5,509   	  	
Depreciation, depletion and amortization	  	 	101,133   	  	  	 	87,679   	  	
Share-based compensation expense	  	 	6,826   	  	  	 	8,284   	  	
Equity in earnings of affiliates	  	 	(5,299)  	  	  	 	(5,380)  	  	
Cash dividends from affiliated companies	  	 	1,250   	  	  	 	2,115   	  	
Loss on disposition of assets	  	 	172   	  	  	 	542   	  	
Pension and postretirement plan expense	  	 	25,057   	  	  	 	17,203   	  	
Pension and postretirement plan contributions	  	 	(58,964)  	  	  	 	(110,482)  	  	
Tax effect of share-based compensation exercises	  	 	4,357   	  	  	 	3,731   	  	
Excess tax benefit of share-based compensation	  	 	(1,867)  	  	  	 	(2,895)  	  	
Net decrease in deferred taxes	  	 	(3,288)  	  	  	 	(4,724)  	  	
Change in assets and liabilities, net of effects from acquisitions, dispositions, and foreign currency adjustments:	  	 	 	 	  	 	 	 	
Trade accounts receivable	  	 	(43,923)  	  	  	 	(79,120)  	  	
Inventories	  	 	(15,239)  	  	  	 	(18,821)  	  	
Payable to suppliers	  	 	19,887   	  	  	 	30,568   	  	
Prepaid expenses	  	 	(5,559)  	  	  	 	(7,151)  	  	
Accrued expenses	  	 	(6,921)  	  	  	 	(31,786)  	  	
Income taxes payable and other income tax items	  	 	16,394   	  	  	 	21,846   	  	
Fox River environmental reserves	  	 	(910)  	  	  	 	(639)  	  	
Other assets and liabilities	  	 	12,307   	  	  	 	4,253   	  	
 	  	 	 	 	  	 	 	 	
Net cash provided by operating activities	  	 	144,368   	  	  	 	32,075   	  	
 	 	 	
Cash Flows from Investing Activities:	  	 	 	 	  	 	 	 	
Purchase of property, plant and equipment	  	 	(104,433)  	  	  	 	(80,217)  	  	
Cost of acquisitions, exclusive of cash	  	 	(503)  	  	  	 	(10,395)  	  	
Proceeds from the sale of assets	  	 	2,399   	  	  	 	9,751   	  	
 	  	 	 	 	  	 	 	 	
Net cash used in investing activities	  	 	(102,537)  	  	  	 	(80,861)  	  	
 	 	 	
Cash Flows from Financing Activities:	  	 	 	 	  	 	 	 	
Proceeds from issuance of debt	  	 	3,610   	  	  	 	10,223   	  	
Principal repayment of debt	  	 	(26,174)  	  	  	 	(8,081)  	  	
Net increase in commercial paper	  	 	55,000   	  	  	 	110,000   	  	
Net change in overdrafts	  	 	2,026   	  	  	 	(3,463)  	  	
Excess tax benefit of share-based compensation	  	 	1,867   	  	  	 	2,895   	  	
Cash dividends	  	 	(59,343)  	  	  	 	(56,985)  	  	
Purchase of noncontrolling interest	  	 	-    	  	  	 	(5,718)  	  	
Shares acquired	  	 	(3,430)  	  	  	 	(47,603)  	  	
Shares issued	  	 	5,975   	  	  	 	15,279   	  	
 	  	 	 	 	  	 	 	 	
Net cash (used in) provided by financing activities	  	 	(20,469)  	  	  	 	16,547   	  	
 	 	 	
Effects of Exchange Rate Changes on Cash	  	 	(880)  	  	  	 	7,973   	  	

Net Increase (Decrease) in Cash and Cash Equivalents	  	 	20,482   	  	  	 	(24,266)  	  	
Cash and cash equivalents at beginning of period	  	 	175,523   	  	  	 	158,249   	  	

Cash and cash equivalents at end of period	  	  $	    196,005   	  	  	  $	    133,983   	  	
 	  	 	 	 	  	 	 	 	
See accompanying Notes to Condensed Consolidated Financial Statements
 
6

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
Note 1:	Basis of Interim Presentation	
In the opinion of the management of Sonoco Products Company (the “Company” or “Sonoco”), the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments, unless otherwise stated) necessary to state fairly the consolidated financial position, results of operations and cash flows for the interim periods reported herein. Operating results for the three and six months ended July 1, 2012, are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.
With respect to the unaudited condensed consolidated financial information of the Company for the three- and six-month periods ended July 1, 2012 and July 3, 2011 included in this Form 10-Q, PricewaterhouseCoopers LLP reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated August 1, 2012 appearing herein, states that they did not audit and they do not express an opinion on that unaudited financial information. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers LLP is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their report on the unaudited financial information because that report is not a “report” or a “part” of a registration statement prepared or certified by PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the Act.
 
Note 2:	Shareholders’ Equity	
Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share:

 	 	Three Months Ended	 	 	Six Months Ended	 	
 	 	July 1,
2012	 	 	July 3,
2011	 	 	July 1,
2012	 	 	July 3,
2011	 	
Numerator:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income attributable to Sonoco	 	$	51,323	  	 	$	53,408	  	 	$	94,391	  	 	$	110,799	  	

Denominator:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average common shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	101,812,000	  	 	 	100,891,000	  	 	 	101,672,000	  	 	 	101,104,000	  	
Dilutive effect of stock-based compensation	 	 	757,000	  	 	 	1,091,000	  	 	 	891,000	  	 	 	1,267,000	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	 	102,569,000	  	 	 	101,982,000	  	 	 	102,563,000	  	 	 	102,371,000	  	

Reported net income attributable to Sonoco per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.50	  	 	$	0.53	  	 	$	0.93	  	 	$	1.10	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	0.50	  	 	$	0.52	  	 	$	0.92	  	 	$	1.08	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stock options and stock appreciation rights covering 2,460,920 and 1,186,225 shares at July 1, 2012 and July 3, 2011, respectively, were not dilutive and, therefore, are excluded from the computations of diluted income attributable to Sonoco per common share amounts. No adjustments were made to reported net income attributable to Sonoco in the computations of earnings per share.
 
7

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
Stock Repurchases
The Company’s Board of Directors has authorized the repurchase of up to 5,000,000 shares of the Company’s common stock. No shares were purchased under this authorization during the first six months of 2012; accordingly, at July 1, 2012, a total of 5,000,000 shares remain available for repurchase.
The Company frequently repurchases shares of its common stock to satisfy employee tax withholding obligations in association with the exercise of certain share-based compensation awards. These repurchases, which are not part of a publicly announced plan or program, totaled 102,964 shares in the first six months of 2012 at a cost of $3,430, and 31,924 shares in the first six months of 2011 at a cost of $1,306.
Dividend Declarations
On April 18, 2012, the Board of Directors declared a regular quarterly dividend of $0.30 per share. This dividend was paid June 8, 2012 to all shareholders of record as of May 18, 2012.
On July 18, 2012, the Board of Directors declared a regular quarterly dividend of $0.30 per share. This dividend is payable September 10, 2012 to all shareholders of record as of August 17, 2012.
 
Note 3:	Acquisitions	
On November 8, 2011, the Company completed the acquisition of Tegrant Holding Corporation (“Tegrant”), a leading provider of highly engineered protective, temperature-assured and retail security packaging solutions. The cost of the Tegrant acquisition was $550,000 in cash paid at the time of the purchase plus an additional $503 paid in February 2012 for changes in working capital levels to the date of the closing. As the acquisition was completed near the end of the year, the allocation of the purchase price reported in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, was based on provisional estimates of the fair value of the tangible and intangible assets acquired and liabilities assumed. During the first half of 2012, the Company finalized its valuations of most of the acquired assets and liabilities based on information obtained about facts and circumstances that existed as of the acquisition date. As a result, adjustments were made to the provisional fair values that reduced property, plant and equipment by $(6,669), increased goodwill by $6,536, increased other intangible assets (customer lists) by $4,900, increased long-term deferred income tax assets by $2,821, decreased inventories by $(500), and increased accrued expenses by $7,088. The amounts shown in the Company’s Condensed Consolidated Balance Sheet as of December 31, 2011, have been adjusted to reflect these changes. The impact of the changes on the Company’s fiscal 2011 and 2012 results of operations was insignificant; accordingly, previously reported results have not been changed. The Company is finalizing the assessment of the valuation of certain assets and liabilities and will complete the valuation of all remaining assets and liabilities within 12 months from the date of the acquisition. Any further adjustments, if any, are expected to be insignificant.
 
Note 4:	Restructuring and Asset Impairment	
The Company has engaged in a number of restructuring actions over the past several years. Actions initiated in 2012 and 2011 are reported as “2012 Actions” and “2011 Actions,” respectively. Actions initiated prior to 2011, all of which were substantially complete at July 1, 2012, are reported as “2010 and Earlier Actions.”
Following are the total restructuring and asset impairment charges, net of adjustments, recognized by the Company during the periods presented:

 	  	2012	 	 	2011	 	
 	  	Second
Quarter	 	 	Six
Months	 	 	Second
Quarter	 	 	Six
Months	 	
Restructuring/Asset impairment:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2012 Actions	  	$	6,114	  	 	$	17,102	  	 	$	—	  	 	$	—	  	
2011 Actions	  	 	3,489	  	 	 	7,280	  	 	 	10,258	  	 	 	10,637	  	
2010 and Earlier Actions	  	 	(207	) 	 	 	226	  	 	 	(680	) 	 	 	1,258	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Restructuring/Asset impairment charges	  	$	9,396	  	 	$	24,608	  	 	$	9,578	  	 	$	11,895	  	
Income tax benefit	  	 	(1,195	) 	 	 	(5,786	) 	 	 	(2,903	) 	 	 	(3,639	) 	
Equity method investments, net of tax	  	 	22	  	 	 	22	  	 	 	—	  	 	 	17	  	
Costs attributable to Noncontrolling Interests, net of tax	  	 	43	  	 	 	73	  	 	 	27	  	 	 	70	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total impact of Restructuring/Asset impairment charges, net of tax	  	$	8,266	  	 	$	18,917	  	 	$	6,702	  	 	$	8,343	  	

8

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
Restructuring and asset impairment charges are included in “Restructuring/Asset impairment charges” in the Condensed Consolidated Statements of Income.
The Company expects to recognize future additional charges totaling approximately $10,500 in connection with previously announced restructuring actions and believes that the majority of these charges will be incurred and paid by the end of 2012. The Company continually evaluates its cost structure, including its manufacturing capacity, and additional restructuring actions may be undertaken.
2012 Actions
During 2012, the Company announced the planned closures of a paper mill in Germany (part of the Paper and Industrial Converted Products segment) and a paperboard based protective packaging operation in the United States (part of the Protective Packaging segment). In addition, the Company continued its manufacturing rationalization efforts in its blow-molding businesses (part of the Consumer Packaging segment), including the planned closure of a facility in Canada, and realigned its cost structure resulting in the elimination of approximately 70 positions.
Below is a summary of 2012 Actions and related expenses by type incurred and estimated to be incurred through completion.

2012 Actions	  	Second
Quarter	 	  	Total
Incurred
to Date	 	  	Estimated
Total Cost	 	
Severance and Termination Benefits	  	 	 	 	  	 	 	 	  	 	 	 	
Paper and Industrial Converted Products	  	$	2,137	  	  	$	7,605	  	  	$	9,005	  	
Consumer Packaging	  	 	792	  	  	 	1,102	  	  	 	1,352	  	
Packaging Services	  	 	4	  	  	 	285	  	  	 	285	  	
Protective Packaging	  	 	432	  	  	 	1,363	  	  	 	1,363	  	
Asset Impairment / Disposal of Assets	  	 	 	 	  	 	 	 	  	 	 	 	
Paper and Industrial Converted Products	  	 	113	  	  	 	2,251	  	  	 	2,251	  	
Consumer Packaging	  	 	2,031	  	  	 	3,295	  	  	 	3,295	  	
Protective Packaging	  	 	—	  	  	 	161	  	  	 	161	  	
Other Costs	  	 	 	 	  	 	 	 	  	 	 	 	
Paper and Industrial Converted Products	  	 	187	  	  	 	517	  	  	 	792	  	
Consumer Packaging	  	 	232	  	  	 	325	  	  	 	775	  	
Protective Packaging	  	 	186	  	  	 	198	  	  	 	498	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
Total Charges and Adjustments	  	$	    6,114	  	  	$	    17,102	  	  	$	    19,777	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	
The following table sets forth the activity in the 2012 Actions restructuring accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets:

2012 Actions
Accrual Activity
2012 Year to Date	 	Severance
and
  Termination
Benefits	 	 	Asset
Impairment/  
Disposal
of Assets	 	 	    Other    
Costs	 	 	     Total     	 	
Liability at December 31, 2011	 	 	  	$	—	  	 	 	  	$	—	  	 	 	  	$	—	  	 	 	  	$	—	  	
2012 charges	 	 	  	 	10,355	  	 	 	  	 	5,707	  	 	 	  	 	1,040	  	 	 	  	 	17,102	  	
Cash payments	 	 	  	 	(3,966	) 	 	 	  	 	—	  	 	 	  	 	(710	) 	 	 	  	 	(4,676	) 	
Asset write downs/disposals	 	 	  	 	—	  	 	 	  	 	(5,707	) 	 	 	  	 	—	  	 	 	  	 	(5,707	) 	
Foreign currency translation	 	 	  	 	(264	) 	 	 	  	 	—	  	 	 	  	 	(18	) 	 	 	  	 	(282	) 	
 	 	 	  	 	 	 	 	 	  	 	 	 	 	 	  	 	 	 	 	 	  	 	 	 	
Liability at July 1, 2012	 	 	  	$	    6,125	  	 	 	  	$	        —	  	 	 	  	$	        312	  	 	 	  	$	        6,437	  	
 	 	 	  	 	 	 	 	 	  	 	 	 	 	 	  	 	 	 	 	 	  	 	 	 	
“Other costs” consist primarily of lease termination costs and costs related to plant closures including the cost of equipment removal, utilities, plant security, property taxes and insurance.
The Company expects to pay the majority of the remaining 2012 Actions restructuring costs by the end of 2012 using cash generated from operations.
 
9

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
2011 Actions
During 2011, the Company announced the closures in Canada of a flexible packaging facility and a thermoformed plastic packaging facility (parts of the Consumer Packaging segment), a tube and core facility in France (part of the Paper and Industrial Converted Products segment), and a fulfillment service center and a point-of-purchase display facility both in the United States (parts of the Packaging Services segment). The Company also sold two small businesses, a plastics operation in Brazil and a tubes and cores operation in the United States, and realigned its fixed cost structure resulting in the elimination of approximately 160 positions.
Below is a summary of 2011 Actions and related expenses by type incurred and estimated to be incurred through completion.

 	  	2012	 	 	2011	 	 	Total	 	  	 	 	
2011 Actions	  	Second
Quarter	 	 	Six
Months	 	 	Second
Quarter	 	 	Six
Months	 	 	Incurred
to Date	 	  	Estimated
Total Cost	 	
Severance and Termination Benefits	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Paper and Industrial Converted Products	  	$	43	  	 	$	76	  	 	$	188	  	 	$	422	  	 	$	9,204	  	  	$	10,304	  	
Consumer Packaging	  	 	1,171	  	 	 	3,138	  	 	 	2,594	  	 	 	2,729	  	 	 	10,152	  	  	 	10,227	  	
Packaging Services	  	 	(12	) 	 	 	292	  	 	 	212	  	 	 	212	  	 	 	1,137	  	  	 	1,137	  	
Protective Packaging	  	 	109	  	 	 	109	  	 	 	—	  	 	 	—	  	 	 	1,218	  	  	 	1,218	  	
Asset Impairment / Disposal of Assets	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Paper and Industrial Converted Products	  	 	—	  	 	 	33	  	 	 	(286	) 	 	 	(286	) 	 	 	194	  	  	 	194	  	
Consumer Packaging	  	 	255	  	 	 	576	  	 	 	6,868	  	 	 	6,868	  	 	 	10,788	  	  	 	10,788	  	
Packaging Services	  	 	(304	) 	 	 	(782	) 	 	 	—	  	 	 	—	  	 	 	2,704	  	  	 	2,704	  	
Protective Packaging	  	 	—	  	 	 	—	  	 	 	—	  	 	 	—	  	 	 	65	  	  	 	65	  	
Other Costs	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Paper and Industrial Converted Products	  	 	530	  	 	 	807	  	 	 	—	  	 	 	—	  	 	 	1,154	  	  	 	3,104	  	
Consumer Packaging	  	 	1,692	  	 	 	2,541	  	 	 	586	  	 	 	596	  	 	 	3,946	  	  	 	6,946	  	
Packaging Services	  	 	117	  	 	 	302	  	 	 	96	  	 	 	96	  	 	 	735	  	  	 	935	  	
Protective Packaging	  	 	(112	) 	 	 	188	  	 	 	—	  	 	 	—	  	 	 	768	  	  	 	1,568	  	

Total Charges and Adjustments	  	$	3,489	  	 	$	7,280	  	 	$	10,258	  	 	$	10,637	  	 	$	42,065	  	  	$	49,190	  	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
The following table sets forth the activity in the 2011 Actions restructuring accrual included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets:

2011 Actions
Accrual Activity
2012 Year to Date	 	Severance
and
     Termination    
Benefits	 	 	Asset
  Impairment/  
Disposal
of Assets	 	 	    Other    
Costs	 	 	    Total    	 	
Liability at December 31, 2011	 	 	 	$	10,320	  	 	 	  	$	—	  	 	 	  	$	80	  	 	 	  	$	    10,400	  	
2012 charges	 	 	 	 	3,657	  	 	 	  	 	305	  	 	 	  	 	3,838	  	 	 	  	 	7,800	  	
Adjustments	 	 	 	 	(42	) 	 	 	  	 	(478	) 	 	 	  	 	—	  	 	 	  	 	(520	) 	
Cash receipts/(payments)	 	 	 	 	(10,225	) 	 	 	  	 	802	  	 	 	  	 	(3,918	) 	 	 	  	 	(13,341	) 	
Asset write downs/disposals	 	 	 	 	—	  	 	 	  	 	(629	) 	 	 	  	 	—	  	 	 	  	 	(629	) 	
Foreign currency translation	 	 	 	 	(34	) 	 	 	  	 	—	  	 	 	  	 	—	  	 	 	  	 	(34	) 	
 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	  	 	 	 	 	 	  	 	 	 	
Liability at July 1, 2012	 	 	 	$	3,676	  	 	 	  	$	—	  	 	 	  	$	    —	  	 	 	  	$	3,676	  	
 	 	 	 	 	 	 	 	 	  	 	 	 	 	 	  	 	 	 	 	 	  	 	 	 	
“Other costs” consist primarily of lease termination costs and costs related to plant closures including the cost of equipment removal, utilities, plant security, property taxes and insurance.
The Company expects to pay the majority of the remaining 2011 Actions restructuring costs by the end of 2012 using cash generated from operations.
 
10

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
2010 and Earlier Actions
2010 and Earlier Actions are comprised of a number of plant closures and workforce reductions initiated prior to 2011. The ongoing costs for these actions relate primarily to building lease terminations and plant closures and include the cost of equipment removal, utilities, plant security, property taxes and insurance. The Company expects to recognize future pretax charges of approximately $750 associated with 2010 and Earlier Actions.
Below is a summary of expenses/(income) incurred by segment for 2010 and Earlier Actions for the three- and six-month periods ended July 1, 2012 and July 3, 2011.

 	  	2012	 	  	2011	 	
2010 and Earlier Actions	  	Second
Quarter	 	  	Six
Months	 	  	Second
Quarter	 	  	Six
Months	 	
Paper and Industrial Converted Products	  	$	      (225)	  	  	$	      208	  	  	$	      (1,098)	  	  	$	867 	  	
Consumer Packaging	  	 	18 	  	  	 	18	  	  	 	324 	  	  	 	582 	  	
Packaging Services	  	 	— 	  	  	 	—	  	  	 	94 	  	  	 	(187)	  	
Corporate	  	 	— 	  	  	 	—	  	  	 	—	  	  	 	(4)	  	

Total Charges and Adjustments	  	$	    (207)	  	  	$	    226	  	  	$	    (680)	  	  	$	      1,258 	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The accrual for 2010 and Earlier Actions totaled $3,625 and $4,039 at July 1, 2012 and December 31, 2011, respectively, and is included in “Accrued expenses and other” on the Company’s Condensed Consolidated Balance Sheets. The accrual relates primarily to a pension withdrawal liability associated with a former paper mill in the United States and building lease terminations. Net cash payments during the six months ended July 1, 2012 were $(641). The Company expects the majority of both the liability and the future costs associated with 2010 and Earlier Actions to be paid by the end of 2012 using cash generated from operations.
 
Note 5:	Accumulated Other Comprehensive Loss	
The following table summarizes the components of accumulated other comprehensive loss and the changes in accumulated other comprehensive loss, net of tax as applicable, for the six months ended July 1, 2012:

 	  	Foreign
Currency
Translation
Adjustments	  	Defined
Benefit
Plans	 	  	Derivative
Financial
Instruments	 	  	Accumulated
Other
Comprehensive
Loss	 	
 	 	 	 	 	 	 	
Balance at December 31, 2011	  	$	(21,277	) 	 	 	  	$	(430,835)	  	  	$	(8,187)	  	  	 	  	$	(460,299)	  	
Year-to-date change	  	 	(17,809	) 	 	 	  	 	9,947	  	  	 	1,711	  	  	 	  	 	(6,151	) 	

Balance at July 1, 2012	  	$	(39,086	) 	 	 	  	$	(420,888)	  	  	$	(6,476)	  	  	 	  	$	(466,450)	  	
 	  	 	 	 	 	 	  	 	 	 	  	 	 	 	  	 	  	 	 	 	
At July 1, 2012, the Company had commodity and foreign currency contracts outstanding to fix the costs of certain anticipated raw materials and energy purchases. These contracts, which have maturities ranging from July 2012 to December 2014, qualify as cash flow hedges under U.S. GAAP. The amounts included in accumulated other comprehensive loss related to these cash flow hedges were an unfavorable position of $10,534 ($6,476 after tax) at July 1, 2012, and an unfavorable position of $13,211 ($8,187 after tax) at December 31, 2011.
The cumulative tax benefit on Derivative Financial Instruments was $4,058 at July 1, 2012, and $5,024 at December 31, 2011. During the three- and six-month periods ended July 1, 2012, the tax benefit on Derivative Financial Instruments decreased by $(839) and $(966), respectively.
 
11

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
The cumulative tax benefit on Defined Benefit Plans was $249,708 at July 1, 2012, and $255,466 at December 31, 2011. During the three- and six-month periods ended July 1, 2012, the tax benefit on Defined Benefit Plans decreased by $(2,863) and $(5,758), respectively.
Current period foreign currency translation adjustments of $(41) are included in noncontrolling interests at July 1, 2012.
 
Note 6:	Goodwill and Other Intangible Assets	
Goodwill
A summary of the changes in goodwill for the six months ended July 1, 2012 is as follows:

 	 	 	 	   Consumer
   Packaging
   Segment	 	 	Paper and
Industrial
Converted
Products
Segment	 	 	Packaging
Services
Segment	 	 	Protective
Packaging
Segment	 	 	Total	

Goodwill at December 31, 2011	 	 	 	 $	424,062	  	 	  $	252,476	  	 	  $	158,023	  	 	  $	275,659	  	 	  $	1,110,220	  	 	 	
Foreign currency translation	 	 	 	 	(1,000	) 	 	 	(4,171	) 	 	 	—	  	 	 	(12)	  	 	 	(5,183	) 	 	 	

Goodwill at July 1, 2012	 	 	 	 $	    423,062	  	 	  $	  248,305	  	 	  $	  158,023	  	 	  $	  275,647	  	 	  $	 1,105,037	  	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The Company completed its most recent annual goodwill impairment testing during the third quarter of 2011. Based on the results of its qualitative and quantitative assessments, the Company concluded that there was no impairment of goodwill for any of its reporting units. Because the Company’s assessments, whether qualitative or quantitative, incorporate management’s expectations for the future, including forecasted growth rates and/or margin improvements, if there are changes in the relevant facts and circumstances and/or expectations, management’s assessment regarding goodwill impairment may change as well. Although no reporting units failed the qualitative or quantitative assessments noted above, in management’s opinion, the reporting units with significant goodwill having the greatest risk of future impairment if actual results in the future are not as expected are Blow Molded Plastics (Matrix) and Flexible Packaging. Total goodwill associated with these reporting units was approximately $129,000 and $93,000, respectively, at July 1, 2012. The reporting unit with the most significant growth expectations relative to its size is Rigid Paper Containers – Europe. Total goodwill associated with this reporting unit was approximately $10,000 at July 1, 2012. There were no triggering events during the three- or six-month periods ended July 1, 2012.
Other Intangible Assets
A summary of other intangible assets as of July 1, 2012 and December 31, 2011 is as follows:

  	  	July 1,
2012  	 	  	December 31,
2011	 	
  Other Intangible Assets, gross	  	 	 	 	  	 	 	 	
Patents	  	$	2,222 	  	  	$	2,222        	  	
Customer lists	  	 	342,508 	  	  	 	343,564        	  	
Trade names	  	 	21,121 	  	  	 	21,175        	  	
Proprietary technology	  	 	17,814 	  	  	 	17,818        	  	
Land use rights	  	 	354 	  	  	 	360        	  	
Other	  	 	4,912 	  	  	 	4,925        	  	
  Other Intangible Assets, gross	  	$	388,931 	  	  	$	390,064        	  	
  Accumulated Amortization	  	$	(99,306)	  	  	$	(85,464)       	  	
  Other Intangible Assets, net	  	$	    289,625 	  	  	$	    304,600        	  	

12

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
Other intangible assets are amortized on a straight-line basis over their respective useful lives, which generally range from three to forty years. The Company has no intangibles with indefinite lives. Aggregate amortization expense was $6,821 and $3,650 for the three months ended July 1, 2012 and July 3, 2011, respectively, and $14,177 and $7,351 for the six months ended July 1, 2012 and July 3, 2011, respectively. Amortization expense on other intangible assets is expected to approximate $28,800 in 2012, $28,400 in 2013, $27,900 in 2014, $26,500 in 2015 and $26,200 in 2016.
 
Note 7:	Financial Instruments and Derivatives	
The following table sets forth the carrying amounts and fair values of the Company’s significant financial instruments for which the carrying amount differs from the fair value.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
  	  	July 1, 2012	 	  	December 31, 2011    	 	
  	  	Carrying
Amount	 	  	Fair
Value	 	  	Carrying
Amount	 	  	Fair    
Value    	 	
Long-term debt, net of current portion	  	  $	  1,276,498	  	  	  $	  1,397,036	  	  	  $	  1,232,966	  	  	  $	  1,282,727    	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The carrying value of cash and cash equivalents, short-term debt and long-term variable-rate debt approximates fair value. The fair value of long-term debt is determined based on trade information in the financial markets of the Company’s public debt and is considered a Level 2 fair value investment.
Cash Flow Hedges
At July 1, 2012 and December 31, 2011, the Company had derivative financial instruments outstanding to hedge anticipated transactions and certain asset and liability related cash flows. To the extent considered effective, the changes in fair value of these contracts are recorded in other comprehensive income and reclassified to income or expense in the period in which the hedged item impacts earnings.
Commodity Cash Flow Hedges
The Company has entered into certain derivative contracts to manage the cost of anticipated purchases of natural gas, aluminum and old corrugated containers. At July 1, 2012, natural gas swaps covering approximately 8.5 million MMBTUs were outstanding. These contracts represent approximately 83%, 73% and 38% of anticipated U.S. and Canadian usage for the remainder of 2012, 2013 and 2014, respectively. Additionally, the Company had swap contracts covering 4,619 metric tons of aluminum representing approximately 50% of anticipated usage for 2012 and 17% for 2013, and 19,650 short tons of old corrugated containers representing approximately 3% of anticipated usage for 2012. The fair values of the Company’s commodity cash flow hedges were in loss positions of $(11,631) and $(13,989) at July 1, 2012 and December 31, 2011, respectively. The amount of the loss included in accumulated other comprehensive loss at July 1, 2012, that is expected to be reclassified to the income statement during the next twelve months is $(7,735).
Foreign Currency Cash Flow Hedges
The Company has entered into forward contracts to hedge certain anticipated foreign currency denominated sales and purchases forecast to occur in 2012. At July 1, 2012, the net positions of these contracts were to purchase approximately 8.0 billion Colombian pesos, 396.9 million Mexican pesos, 29.4 million Canadian dollars, 8.7 million Polish zlotys, 3.7 million euros, and 1.2 million Turkish lira and to sell 0.2 million British pounds, 0.9 million New Zealand dollars, 1.5 million Australian dollars, and 46.0 million Russian rubles. The fair value of these foreign currency cash flow hedges was $835 and $608 at July 1, 2012 and December 31, 2011, respectively. During the first six months of 2012, certain foreign currency cash flow hedges related to construction in progress were settled as capital expenditures were made. A gain of $10 and a loss of $(17) were reclassified from accumulated other comprehensive loss and netted against the carrying value of assets during the three- and six-month periods ending July 1, 2012, respectively. The amount of the gain included in accumulated other comprehensive loss at July 1, 2012 expected to be reclassified to the income statement during the next twelve months is $903.
 
13

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
Other Derivatives
The Company routinely enters into forward contracts or swaps to economically hedge the currency exposure of intercompany debt and existing foreign currency denominated receivables and payables. The Company does not apply hedge accounting treatment under ASC 815 for these instruments. As such, changes in fair value are recorded directly to income and expense in the periods that they occur. At July 1, 2012, the net positions of these contracts were to purchase 19.6 million euros, 3.4 million Canadian dollars, and 1.1 million British pounds, and to sell 6.5 billion Colombian pesos. The fair value of the Company’s other derivatives was $37 and $(746) at July 1, 2012 and December 31, 2011, respectively.
The Company has determined all hedges to be highly effective and as a result no material ineffectiveness has been recorded.
The following table sets forth the location and fair values of the Company’s derivative instruments at July 1, 2012 and December 31, 2011:

Description	  	Balance Sheet Location	  	July 1,
2012	 	 	December 31,
2011	 	 	 	
Derivatives designated as hedging instruments:	  	 	  	 	 	 	 	 	 	 	 	 	
Commodity Contracts	  	Prepaid expenses	  	$	436	  	 	$	—	  	 	 	
Commodity Contracts	  	Accrued expenses and other	  	$	(8,161	) 	 	$	    (10,234	) 	 	 	
Commodity Contracts	  	Other liabilities	  	$	    (3,906	) 	 	$	(3,755	) 	 	 	
Foreign Exchange Contracts	  	Prepaid expenses	  	$	1,512	  	 	$	1,097	  	 	 	
Foreign Exchange Contracts	  	Accrued expenses and other	  	$	(677	) 	 	$	(489	) 	 	 	
Derivatives not designated as hedging instruments:	  	 	  	 	 	 	 	 	 	 	 	 	
Foreign Exchange Contracts	  	Prepaid expenses	  	$	136	  	 	$	2	  	 	 	
Foreign Exchange Contracts	  	Accrued expenses and other	  	$	(47	) 	 	$	(748	) 	 	 	
Foreign Exchange Contracts	  	Other liabilities	  	$	(52	) 	 	$	—	  	 	 	
The following tables set forth the effect of the Company’s derivative instruments on financial performance for the three months ended July 1, 2012 and July 3, 2011:

Description	  	Amount of Gain or
(Loss) Recognized
in OCI on
Derivative
(Effective Portion)	 	  	Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
Into Income
(Effective Portion)	  	Amount of Gain or
(Loss) Reclassified
from Accumulated
OCI Into Income
(Effective Portion)	 	  	Location of Gain or
(Loss) Recognized in
Income on
Derivative
(Ineffective Portion)	  	Amount of Gain or
(Loss) Recognized
in Income on
Derivative
(Ineffective Portion)	
Three months ended July 1, 2012	  	  	 	  	 	 	 	  	 	  	 	
Derivatives in Cash Flow Hedging Relationships:	  	 	 	 	  	 	  	 	
Foreign Exchange Contracts	  	        $	(1,756)     	  	  	Net sales	  	    $	(302)    	  	  	Net sales	  	   $     —        	
 	  	 	 	 	  	Cost of sales	  	    $	123    	  	  	 	  	 	
Commodity Contracts	  	        $	505     	  	  	Cost of sales	  	    $	(3,415)    	  	  	Cost of sales	  	   $     —        	
 	 	 	 	 	
Three months ended July 3, 2011	  	  	 	  	 	 	 	  	 	  	 	
 	 	 	 	
Derivatives in Cash Flow Hedging Relationships:	  	 	 	 	  	 	  	 	
Foreign Exchange Contracts	  	        $	578     	  	  	Net sales	  	    $	1,736    	  	  	Net sales	  	   $     —        	
 	  	 	 	 	  	Cost of sales	  	    $	(918)    	  	  	 	  	 	
Commodity Contracts	  	        $	(715)     	  	  	Cost of sales	  	    $	(2,327)    	  	  	Cost of sales	  	   $    63        	
 
14

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

Derivatives not
designated as hedging
instruments:	  	Location of Gain or
(Loss) Recognized
in Income
Statement	  	Gain or (Loss)
Recognized	 	  	 	
 
Three months ended July 1, 2012	  	 	  	 	 	 	  	 	
Foreign Exchange
Contracts	  	Cost of sales	  	    $	(628)    	  	  	 	
 	  	Selling, general and
administrative	  	    $	15    	  	  	 	
 
Three months ended July 3, 2011	  	 	  	 	 	 	  	 	
Foreign Exchange
Contracts	  	Cost of sales	  	    $	855    	  	  	 	
 	  	Selling, general and
administrative	  	    $	10    	  	  	 	
The following tables set forth the effect of the Company’s derivative instruments on financial performance for the six months ended July 1, 2012 and July 3, 2011:

Description	  	Amount of Gain or
(Loss) Recognized
in OCI on
Derivative
(Effective Portion)	 	  	Location of Gain
or (Loss)
Reclassified from
Accumulated OCI
Into Income
(Effective Portion)	  	Amount of Gain or
(Loss) Reclassified
from Accumulated
OCI Into Income
(Effective Portion)	 	  	Location of Gain or
(Loss) Recognized in
Income on
Derivative
(Ineffective Portion)	  	Amount of Gain or
(Loss) Recognized
in Income on
Derivative
(Ineffective Portion)	
Six months ended July 1, 2012	  	  	 	  	 	 	 	  	 	  	 	
Derivatives in Cash Flow Hedging Relationships:	  	 	 	 	  	 	  	 	
Foreign Exchange Contracts	  	        $	1,431     	  	  	Net sales	  	    $	(206)    	  	  	Net sales	  	   $     —        	
 	  	 	 	 	  	Cost of sales	  	    $	1,304    	  	  	 	  	 	
Commodity Contracts	  	        $	(4,345)     	  	  	Cost of sales	  	    $	(6,672)    	  	  	Cost of sales	  	   $     —        	
 	 	 	 	 	
Six months ended July 3, 2011	  	  	 	  	 	 	 	  	 	  	 	
 	 	 	 	
Derivatives in Cash Flow Hedging Relationships:	  	 	 	 	  	 	  	 	
Foreign Exchange Contracts	  	        $	3,293     	  	  	Net sales	  	    $	2,793    	  	  	Net sales	  	   $    12        	
 	  	 	 	 	  	Cost of sales	  	    $	(1,517)    	  	  	 	  	 	
Commodity Contracts	  	        $	(1,527)     	  	  	Cost of sales	  	    $	(6,027)    	  	  	Cost of sales	  	   $    112        	

Derivatives not
designated as hedging
instruments:	  	Location of Gain or
(Loss) Recognized
in Income
Statement	  	Gain or (Loss)
Recognized	 	  	 	
 
Six months ended July 1, 2012	  	 	  	 	 	 	  	 	
Foreign Exchange
Contracts	  	Cost of sales	  	    $	745    	  	  	 	
 	  	Selling, general and
administrative	  	    $	38    	  	  	 	
 
Six months ended July 3, 2011	  	 	  	 	 	 	  	 	
Foreign Exchange
Contracts	  	Cost of sales	  	    $	1,268    	  	  	 	
 	  	Selling, general and
administrative	  	    $	18    	  	  	 	
 
15

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
Note 8:	Fair Value Measurements	
Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

Level 1 –	    	Observable inputs such as quoted market prices in active markets;	
Level 2 –	    	Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and	
Level 3 –	    	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.	
The following table sets forth information regarding the Company’s financial assets and financial liabilities, excluding retirement and postretirement plan assets, measured at fair value on a recurring basis:

Description	 	July 1, 2012	  	Level 1  	 	  	 Level 2  	 	  	 Level 3  	 	
Hedge derivatives, net:	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Commodity contracts	 	$(11,631)	  	$	—	  	  	 	$ (11,631)	  	  	$	—	  	
Foreign exchange contracts	 	    835	  	 	—	  	  	 	835 	  	  	 	—	  	
Non-hedge derivatives, net:	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Foreign exchange contracts	 	      37	  	 	—	  	  	 	37 	  	  	 	—	  	
Deferred compensation plan assets	 	    2,458	  	 	2,458	  	  	 	— 	  	  	 	—	  	
 	 	 	 	 	
Description	 	December 31, 2011	  	Level 1  	 	  	 Level 2  	 	  	 Level 3  	 	
Hedge derivatives, net:	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Commodity contracts	 	$(13,989)	  	$	—	  	  	 	$(13,989)	  	  	$	            —	  	
Foreign exchange contracts	 	      608	  	 	—	  	  	 	608 	  	  	 	—	  	
Non-hedge derivatives, net:	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Foreign exchange contracts	 	      (746)	  	 	—	  	  	 	(746)	  	  	 	—	  	
Deferred compensation plan assets	 	    2,279	  	 	        2,279 	  	  	 	— 	  	  	 	—	  	
As discussed in Note 7, the Company uses derivatives to mitigate the effect of raw material and energy cost fluctuations, foreign currency fluctuations and, from time to time, interest rate movements. Fair value measurements for the Company’s derivatives are classified under Level 2 because such measurements are determined using published market prices or estimated based on observable inputs such as interest rates, yield curves, spot and future commodity prices and spot and future exchange rates.
Certain deferred compensation plan liabilities are funded by assets invested in various exchange traded mutual funds. These assets are measured using quoted prices in accessible active markets for identical assets.
The Company does not currently have any nonfinancial assets or liabilities that are recognized or disclosed at fair value on a recurring basis. None of the Company’s financial assets or liabilities is measured at fair value using significant unobservable inputs. There were no transfers in or out of Level 1 or Level 2 fair value measurements during the three- or six-month periods ended July 1, 2012.
 
16

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
Note 9:	Employee Benefit Plans	
Retirement Plans and Retiree Health and Life Insurance Plans
The Company provides non-contributory defined benefit pension plans for a majority of its employees in the United States and certain of its employees in Mexico and Belgium. Effective December 31, 2003, the Company froze participation for newly hired salaried and non-union hourly U.S. employees in its traditional defined benefit pension plan. At that time, the Company adopted a defined contribution plan, the Sonoco Investment and Retirement Plan (SIRP), which covers its non-union U.S. employees hired on or after January 1, 2004. The Company also sponsors contributory defined benefit pension plans covering the majority of its employees in the United Kingdom, Canada, and the Netherlands.
On February 4, 2009, the U.S. qualified defined benefit pension plan was amended to freeze plan benefits for all active participants effective December 31, 2018. Remaining active participants in the U.S. qualified plan will become participants of the SIRP effective January 1, 2019.
The Company also provides postretirement healthcare and life insurance benefits to a limited number of its retirees and their dependents in the United States and Canada, based on certain age and/or service eligibility requirements.
The components of net periodic benefit cost include the following:

 	 	Three Months Ended	 	 	Six Months Ended	 	
 	 	    July 1,    
2012	 	 	    July 3,    
2011	 	 	    July 1,    
2012	 	 	    July 3,    
2011	 	
Retirement Plans	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Service cost	 	$	5,671	  	 	$	5,014	  	 	$	11,413	  	 	$	10,117	  	
Interest cost	 	 	17,165	  	 	 	17,522	  	 	 	34,524	  	 	 	35,355	  	
Expected return on plan assets	 	 	(20,882	) 	 	 	(21,052	) 	 	 	(41,999	) 	 	 	(42,382	) 	
Amortization of net transition obligation	 	 	113	  	 	 	118	  	 	 	229	  	 	 	237	  	
Amortization of prior service cost	 	 	84	  	 	 	35	  	 	 	169	  	 	 	71	  	
Amortization of net actuarial loss	 	 	9,048	  	 	 	5,828	  	 	 	18,197	  	 	 	11,769	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net periodic benefit cost	 	$	11,199	  	 	$	7,465	  	 	$	22,533	  	 	$	15,167	  	

Retiree Health and Life Insurance Plans	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Service cost	 	$	241	  	 	$	298	  	 	$	484	  	 	$	602	  	
Interest cost	 	 	342	  	 	 	421	  	 	 	687	  	 	 	851	  	
Expected return on plan assets	 	 	(368	) 	 	 	(350	) 	 	 	(740	) 	 	 	(707	) 	
Amortization of prior service credit	 	 	(1,618	) 	 	 	(1,950	) 	 	 	(3,253	) 	 	 	(3,942	) 	
Amortization of net actuarial loss	 	 	199	  	 	 	345	  	 	 	401	  	 	 	697	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net periodic benefit income	 	$	(1,204	) 	 	$	(1,236	) 	 	$	(2,421	) 	 	$	(2,499	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The Company made contributions of $50,044 and $101,914 to its defined benefit retirement and retiree health and life insurance plans during the six months ended July 1, 2012 and July 3, 2011, respectively. The Company anticipates that it will make additional contributions of approximately $13,400 to its defined benefit retirement and retiree health and life insurance plans in 2012.
Sonoco Investment and Retirement Plan (SIRP)
The Company recognized SIRP expense totaling $2,694 and $2,501 for the quarters ended July 1, 2012 and July 3, 2011, respectively, and $4,945 and $4,537 for the six month periods ended July 1, 2012 and July 3, 2011, respectively. Contributions to the SIRP, funded annually in the first quarter, totaled $8,920 during the six months ended July 1, 2012, and $8,568 during the six months ended July 3, 2011. No additional SIRP contributions are expected during the remainder of 2012.
 
17

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
Note 10:	Income Taxes	
The Company’s effective tax rate for the three-and six-month periods ending July 1, 2012, was 35.3% and 35.0%, respectively, and its effective tax rate for the three and six-month periods ending July 3, 2011 was 32.1% and 31.6%, respectively. The quarterly and year-to-date rates for both years varied from the U.S. statutory rate primarily due to the favorable effect of international operations that are subject to tax rates generally lower than the U.S. rate, the favorable effect of the manufacturer’s deduction, and contingencies recorded for uncertain tax positions. The benefit from operations taxed in jurisdictions with lower tax rates was lower in 2012 than in 2011.
The Company and/or its subsidiaries file federal, state and local income tax returns in the United States and various foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examination by tax authorities for years before 2008. With few exceptions, the Company is no longer subject to examination prior to 2007 with respect to U.S. state and local and non-U.S. income taxes.
There have been no significant changes in the Company’s liability for uncertain tax positions since December 31, 2011. The Company’s estimate for the potential outcome for any uncertain tax issue is highly judgmental. Management believes that any reasonably foreseeable outcomes related to these matters have been adequately provided for. However, future results may include favorable or unfavorable adjustments to estimated tax liabilities in the period the assessments are made or resolved or when statutes of limitation on potential assessments expire. Additionally, the jurisdictions in which earnings or deductions are realized may differ from current estimates. As a result, the Company’s effective tax rate may fluctuate significantly on a quarterly basis.
 
Note 11:	New Accounting Pronouncements	
In June 2011, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This update eliminated the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity and provided the entity with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements for fiscal years, and interim periods within those years, beginning after December 15, 2011. The update also included a requirement for an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. This reclassification requirement, however, was subsequently deferred by ASU No. 2011-12. The Company selected the two statement approach and has included the additional statement in this Quarterly Report on Form 10-Q.
During the six months ended July 1, 2012, there have been no other newly issued nor newly applicable accounting pronouncements that have or are expected to have a significant impact on the Company’s financial statements.
 
Note 12:	Segment Reporting	
The Company modified its reportable segments in the fourth quarter of 2011 as the result of changes in our business and related internal management reporting to better reflect its mix of business following the November 2011 acquisition of Tegrant. The Company now reports its financial results in the following four reportable segments: the Consumer Packaging segment, the Paper and Industrial Converted Products segment, the Packaging Services segment, and the Protective Packaging segment.
The Consumer Packaging segment includes the following products and services: round and shaped rigid containers and trays (both composite and thermoformed plastic); blow-molded plastic bottles and jars; extruded and injection-molded plastic products; printed flexible packaging; metal and peelable membrane ends and closures; and global brand artwork management.
 
18

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
The Paper and Industrial Converted Products segment includes the following products: high-performance paper and composite paperboard tubes and cores; fiber-based construction tubes and forms; wooden, metal and composite wire and cable reels and spools; and recycled paperboard, linerboard, corrugating medium, recovered paper and other recycled materials.
The Packaging Services segment includes the following products and services: designing, manufacturing, assembling, packing and distributing temporary, semipermanent and permanent point-of-purchase displays; supply chain management services, including contract packing, fulfillment and scalable service centers; and paper amenities, such as coasters and glass covers.
The Protective Packaging segment includes the following products: custom-designed paperboard-based and expanded foam protective packaging; temperature-assurance packaging; and retail security packaging.
The following table sets forth net sales, intersegment sales and operating profit for the Company’s reportable segments. “Segment operating profit” is defined as the segment’s portion of “Income before interest and income taxes” excluding restructuring charges, asset impairment charges, acquisition-related costs, and certain other items, if any, the exclusion of which the Company believes improves comparability and analysis of the financial performance of the business. General corporate expenses have been allocated as operating costs to each of the Company’s reportable segments. Prior year’s data have been restated to conform to the current presentation.
FINANCIAL SEGMENT INFORMATION

 	 	Three Months Ended	 	 	Six Months Ended	 	
 	 	    July 1,    
2012	 	 	    July 3,    
2011	 	 	    July 1,    
2012	 	 	    July 3,    
2011	 	
Net sales:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consumer Packaging	 	 $	477,038	  	 	 $	490,453	  	 	 $	972,804	  	 	 $	988,887	  	
Paper and Industrial Converted Products	 	 	475,460	  	 	 	485,170	  	 	 	939,070	  	 	 	956,370	  	
Packaging Services	 	 	107,801	  	 	 	125,934	  	 	 	222,706	  	 	 	249,371	  	
Protective Packaging	 	 	142,060	  	 	 	26,308	  	 	 	280,149	  	 	 	50,560	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated	 	$	  1,202,359	  	 	$	  1,127,865	  	 	$	  2,414,729	  	 	$	  2,245,188	  	

Intersegment sales:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consumer Packaging	 	 $	2,214	  	 	 $	1,048	  	 	 $	4,113	  	 	 $	2,195	  	
Paper and Industrial Converted Products	 	 	24,919	  	 	 	25,073	  	 	 	50,653	  	 	 	53,504	  	
Packaging Services	 	 	594	  	 	 	318	  	 	 	1,178	  	 	 	621	  	
Protective Packaging	 	 	328	  	 	 	227	  	 	 	1,008	  	 	 	657	  	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated	 	$	28,055	  	 	$	26,666	  	 	$	56,952	  	 	$	56,977	  	

Income before interest and income taxes:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating Profit	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consumer Packaging	 	 $	42,752	  	 	 $	40,200	  	 	 $	92,832	  	 	 $	91,350	  	
Paper and Industrial Converted Products	 	 	39,652	  	 	 	40,440	  	 	 	71,956	  	 	 	70,753	  	
Packaging Services	 	 	4,029	  	 	 	8,722	  	 	 	8,871	  	 	 	15,213	  	
Protective Packaging	 	 	11,653	  	 	 	3,446	  	 	 	18,658	  	 	 	6,663	  	
Restructuring/Asset impairment charges	 	 	(9,396	) 	 	 	(9,578	) 	 	 	(24,608	) 	 	 	(11,895	) 	
Other, net	 	 	(98	) 	 	 	(991	) 	 	 	(274	) 	 	 	(251	) 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated	 	$	88,592	  	 	$	82,239	  	 	$	167,435	  	 	$	171,833	  	

19

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
Note 13:	Commitments and Contingencies	
The Company is a party to various legal proceedings incidental to its business and is subject to a variety of environmental and pollution control laws and regulations in all jurisdictions in which it operates. The Company is also currently a defendant in a class action by persons who bought Company stock between February 7, 2007 and September 18, 2007. The complaint, as amended, alleges that the Company issued press releases and made public statements during the class period that were materially false and misleading. The complaint seeks an unspecified amount of damages plus interest and attorneys’ fees. On April 26, 2012, the parties filed with the court a stipulation of settlement, which, if finally approved by the court and subject to the conditions contained therein, will end the litigation and provide a settlement fund, to be funded entirely by insurance, to make payments to the authorized claimants as therein provided. As is the case with other companies in similar industries, the Company faces exposure from actual or potential claims and legal proceedings. Some of these exposures have the potential to be material. Information with respect to these and other exposures appears in Part II – Item 8 – “Financial Statements and Supplementary Data” (Note 14 - “Commitments and Contingencies”) in the Company’s Annual Report on Form 10-K. The Company cannot currently estimate the final outcome of many of the items described or the ultimate amount of potential losses.
Pursuant to U.S. GAAP, accruals for estimated losses are recorded at the time information becomes available indicating that losses are probable and that the amounts are reasonably estimable. Amounts so accrued are not discounted. While the ultimate liabilities relating to claims and proceedings may be significant to profitability in the period recognized, it is management’s opinion that such liabilities, when finally determined, will not have an adverse material effect on Sonoco’s consolidated financial position or liquidity.
Environmental Matters
During the fourth quarter of 2005, the U.S. Environmental Protection Agency (EPA) notified U.S. Paper Mills Corp. (U.S. Mills), a wholly owned subsidiary of the Company, that U.S. Mills and NCR Corporation (NCR), an unrelated party, would be jointly held responsible to undertake a program to remove and dispose of certain PCB-contaminated sediments at a particular site on the lower Fox River in Wisconsin (the “Site”) which is now labeled by the EPA as Phase 1. U.S. Mills and NCR reached an agreement between themselves that each would fund 50% of the costs of remediation. The Company has expensed a total of $17,650 for its estimated share of the total cleanup cost of the Site, and through July 1, 2012, has spent a total of $14,467. The remaining accrual of $3,183 represents the Company’s best estimate of what it is likely to pay to complete the Site project. However, the actual costs associated with cleanup of the Site are dependent upon many factors and it is possible that remediation costs could be higher than the current estimate of project costs. The Company acquired U.S. Mills in 2001, and the alleged contamination predates the acquisition.
The EPA and Wisconsin Department of Natural Resources (WDNR) have also issued a general notice of potential liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and a request to participate in remedial action implementation negotiations relating to a stretch of the lower Fox River, including the bay at Green Bay, (Operating Units 2 – 5) to eight potentially responsible parties, including U.S. Mills. Operating Units 2 – 5 include, but also comprise a vastly larger area than, the Site. A detailed description of the claims and proceedings associated therewith appears in Part II – Item 8 – “Financial Statements and Supplementary Data” (Note 14 - “Commitments and Contingencies”) in the Company’s Annual Report on Form 10-K.
On October 14, 2010, the EPA and WDNR filed suit against NCR, API, U.S. Mills and nine other defendants in the United States District Court for the Eastern District of Wisconsin (No. 10-CV-00910-WCG) pursuant to Sections 106 and 107 of CERCLA. The plaintiffs seek to recover unreimbursed costs incurred for activities undertaken in response to the release and threatened release of hazardous substances from facilities at or near the Lower Fox River and Green Bay as well as damages for injury to, loss of, and destruction of natural resources resulting from such releases. The plaintiffs also seek a ruling that the defendants are liable for future response costs of the plaintiffs and requiring the defendants to comply with the unilateral Administrative Order for Remedial Action discussed in prior filings. The Company does not believe that the remedies sought in the suit materially expand the Company’s potential liability beyond what has been disclosed in this report or in the Company’s prior filings with the SEC. U.S. Mills plans to defend the suit vigorously.
 
20

Table of Contents
SONOCO PRODUCTS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(unaudited)
 
Since 2007, U.S. Mills has expensed a total of $60,825 for potential liabilities associated with the Fox River contamination (not including amounts expensed for remediation at the Site) and through July 1, 2012, has spent a total of $8,150, primarily on legal fees, leaving a reserve of $52,675 remaining at July 1, 2012 for potential liabilities associated with the Fox River contamination (not including amounts accrued for remediation at the Site). Because of the continuing uncertainties in the estimated costs of remediation and continuing uncertainties surrounding U.S. Mills’ allocable share, including a potentially favorable resolution, it is impossible to state with any reasonable degree of certainty that any estimate is a better estimate than the amount recorded. However, because the discharges of hazardous materials into the environment occurred before the Company acquired U.S. Mills, and U.S. Mills has been operated as a separate subsidiary of the Company, the Company does not believe that it bears financial responsibility for these legacy environmental liabilities of U.S. Mills. Therefore, the Company continues to believe that the maximum additional exposure to its consolidated financial position is limited to the equity position of U.S. Mills, which was approximately $89,000 at July 1, 2012.
On November 8, 2011, the Company completed the acquisition of Tegrant. During its due diligence, the Company identified several potential environmentally contaminated sites. The total remediation cost of these sites is estimated to be $18,850 and an accrual in this amount was recorded on Tegrant’s opening balance sheet.
The Company has been named as a potentially responsible party at several other environmentally contaminated sites. All of the sites are also the responsibility of other parties. The potential remediation liabilities are shared with such other parties, and, in most cases, the Company’s share, if any, cannot be reasonably estimated at the current time.
As of July 1, 2012 and December 31, 2011, the Company (and its subsidiaries) had accrued $77,466 and $72,590, respectively, related to environmental contingencies. Of these, a total of $55,858 and $56,768 relate to U.S. Mills and $18,756 and $18,846 relate to Tegrant at July 1, 2012 and December 31, 2011, respectively. These accruals are included in “Accrued expenses and other” on the Company’s Consolidated Balance Sheets. U.S. Mills recognized a $40,825 benefit in 2008 from settlements reached and proceeds received on certain insurance policies covering the Fox River contamination. U.S. Mills’ two remaining insurance carriers are in liquidation. It is possible that U.S. Mills may recover from these carriers a small portion of the costs it ultimately incurs. U.S. Mills may also be able to reallocate some of the costs it incurs among other parties. There can be no assurance that such claims for recovery or reallocation would be successful and no amounts have been recognized in the consolidated financial statements of the Company for such potential recovery or reallocation.
 
21

Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and Directors of Sonoco Products Company:
We have reviewed the accompanying condensed consolidated balance sheet of Sonoco Products Company as of July 1, 2012, and the related condensed consolidated statements of income and comprehensive income for the three-month and six-month periods ended July 1, 2012 and July 3, 2011 and the condensed consolidated statement of cash flows for the six-month periods ended July 1, 2012 and July 3, 2011. These interim financial statements are the responsibility of the Company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2011, and the related consolidated statements of income, of comprehensive income, of changes in total equity, and of cash flows for the year then ended (not presented herein), and in our report dated February 29, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2011, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/PricewaterhouseCoopers LLP	
 	
Charlotte, North Carolina	
August 1, 2012	
 
22

Table of Contents
SONOCO PRODUCTS COMPANY
 
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	
Statements included in this report that are not historical in nature, are intended to be, and are hereby identified as “forward-looking statements” for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended. The words “estimate,” “project,” “intend,” “expect,” “believe,” “consider,” “plan,” “strategy,” “opportunity,” “target,” “anticipate,” “objective,” “goal,” “guidance,” “outlook,” “forecasts,” “future,” “will,” “would,” or the negative thereof, and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding offsetting high raw material costs; improved productivity and cost containment; adequacy of income tax provisions; refinancing of debt; realization of synergies resulting from acquisitions; adequacy of cash flows; anticipated amounts and uses of cash flows; effects of acquisitions and dispositions; adequacy of provisions for environmental liabilities; financial strategies and the results expected from them; sales growth; continued payments of dividends; stock repurchases; producing improvements in earnings; financial results for future periods; goodwill impairment charges; expected amounts of capital spending; anticipated contributions to benefit plans; and creation of long-term value for shareholders. Such forward-looking statements are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management. Such information includes, without limitation, discussions as to guidance and other estimates, expectations, beliefs, plans, strategies and objectives concerning our future financial and operating performance. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed or forecasted in such forward-looking statements. The risks and uncertainties include, without limitation:
 
 	•	 	Availability and pricing of raw materials;	
 	•	 	Success of new product development and introduction;	
 	•	 	Ability to maintain or increase productivity levels and contain or reduce costs;	
 	•	 	Ability to manage the mix of business to take advantage of growing markets while reducing cyclical effects of some of the Company’s existing business on operating results;	
 	•	 	International, national and local economic and market conditions;	
 	•	 	Availability of credit to us, our customers and/or our suppliers in needed amounts and/or on reasonable terms;	
 	•	 	Fluctuations in obligations and earnings of pension and postretirement benefit plans;	
 	•	 	Pricing pressures, demand for products, and ability to maintain market share;	
 	•	 	Continued strength of our paperboard-based tubes and cores and composite can operations;	
 	•	 	Anticipated results of restructuring activities;	
 	•	 	Resolution of income tax contingencies;	
 	•	 	Ability to successfully integrate newly acquired businesses into the Company’s operations;	
 	•	 	Ability to win new business and/or identify and successfully close suitable acquisitions at the levels needed to meet growth targets;	
 	•	 	Rate of growth in foreign markets;	
 	•	 	Foreign currency, interest rate and commodity price risk and the effectiveness of related hedges;	
 	•	 	Actions of government agencies and changes in laws and regulations affecting the Company;	
 	•	 	Liability for and anticipated costs of environmental remediation actions;	
 	•	 	Accuracy of assumptions underlying projections related to goodwill impairment testing, and accuracy of management’s assessment of goodwill impairment;	
 	•	 	Accuracy of assumptions underlying fair value measurements, accuracy of management’s assessments of fair value, and fluctuations in fair value;	
 	•	 	Loss of consumer or investor confidence; and	
 	•	 	Economic disruptions resulting from terrorist activities.	
The Company undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.
 
23

Table of Contents
SONOCO PRODUCTS COMPANY
 
COMPANY OVERVIEW
Sonoco is a leading provider of consumer packaging, industrial products, protective packaging and packaging supply chain services, with approximately 345 locations in 34 countries.
Sonoco competes in multiple product categories, with its operations organized and reported in four segments: Consumer Packaging, Paper and Industrial Converted Products, Packaging Services, and Protective Packaging. The majority of the Company’s revenues are from products and services sold to consumer and industrial products companies for use in the packaging of their products for sale or shipment. The Company also manufactures paperboard, primarily from recycled materials, for both internal use and open market sale. Each of the Company’s operating units has its own sales staff and maintains direct sales relationships with its customers.
Second Quarter 2012 Compared with Second Quarter 2011
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
Measures calculated and presented in accordance with generally accepted accounting principles are referred to as GAAP financial measures. The following tables reconcile the Company’s non-GAAP financial measures to their most directly comparable GAAP financial measures in the Company’s Condensed Consolidated Statements of Income for each of the periods presented. These measures (referred to as “base”) are the GAAP measures adjusted to exclude (dependent upon the applicable period) restructuring charges, asset impairment charges, acquisition charges, specifically identified tax adjustments and certain other items, if any, the exclusion of which the Company believes improves comparability and analysis of the underlying financial performance of the business.

 	  	For the three months ended July 1, 2012	 	
 	 	
  Dollars in thousands, except per share data	  	GAAP	 	 	Restructuring/
Asset
Impairment	 	  	Acquisition
Related Costs
and Other
Adjustments	 	  	Base       	 	
 	 	
  Income before interest and income taxes	  	 	$88,592	  	 	 	$9,396      	  	  	 	98    	  	  	 	$98,086    	  	
  Interest expense, net	  	 	15,248	  	 	 	-      	  	  	 	-    	  	  	 	15,248    	  	
 	 	
  Income before income taxes	  	 	73,344	  	 	 	9,396      	  	  	 	98    	  	  	 	82,838    	  	
  Provision for income taxes	  	 	25,905	  	 	 	1,195      	  	  	 	30    	  	  	 	27,130    	  	
 	 	
  Income before equity in earnings of affiliates	  	 	47,439	  	 	 	8,201      	  	  	 	68    	  	  	 	55,708    	  	
  Equity in earnings of affiliates, net of tax	  	 	3,912	  	 	 	22      	  	  	 	-    	  	  	 	3,934    	  	
 	 	
  Net income	  	 	51,351	  	 	 	8,223      	  	  	 	68    	  	  	 	59,642    	  	
  Net loss attributable to noncontrolling interests	  	 	(28	) 	 	 	43      	  	  	 	-    	  	  	 	15    	  	
 	 	
  Net income attributable to Sonoco	  	 	$51,323	  	 	 	$8,266      	  	  	 	68    	  	  	 	$59,657    	  	

  Per diluted common share	  	 	$0.50	  	 	 	$0.08      	  	  	 	$0.00    	  	  	 	$0.58    	  	

24

Table of Contents
SONOCO PRODUCTS COMPANY

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	For the three months ended July 3, 2011	 	
 	 	
  Dollars in thousands, except per share data	  	GAAP  	 	  	Restructuring/
Asset
Impairment	 	  	Acquisition
Related Costs
and Other
Adjustments	 	  	Base       	 	
 	 	
  Income before interest and income taxes	  	 	$82,239 	  	  	 	$9,578        	  	  	 	$991     	  	  	 	$92,808    	  	
  Interest expense, net	  	 	8,174 	  	  	 	-        	  	  	 	-      	  	  	 	8,174    	  	
 	 	
  Income before income taxes	  	 	74,065 	  	  	 	9,578        	  	  	 	991     	  	  	 	84,634    	  	
  Provision for income taxes	  	 	23,775 	  	  	 	2,903        	  	  	 	320     	  	  	 	26,998    	  	
 	 	
  Income before equity in earnings of affiliates	  	 	50,290 	  	  	 	6,675        	  	  	 	671     	  	  	 	57,636    	  	
  Equity in earnings of affiliates, net of tax	  	 	3,416 	  	  	 	-        	  	  	 	-      	  	  	 	3,416    	  	
 	 	
  Net income	  	 	53,706 	  	  	 	6,675        	  	  	 	671     	  	  	 	61,052    	  	
  Net (income)/loss attributable to noncontrolling interests	  	 	(298)	  	  	 	27        	  	  	 	-      	  	  	 	(271)    	  	
 	 	
  Net income attributable to Sonoco	  	 	$53,408 	  	  	 	$6,702        	  	  	 	$671     	  	  	 	$60,781    	  	

  Per diluted common share	  	 	$0.52 	  	  	 	$0.07        	  	  	 	$0.01     	  	  	 	$0.60    	  	
 	 	
RESULTS OF OPERATIONS
The following discussion provides a review of results for the three months ended July 1, 2012 versus the three months ended July 3, 2011.
OVERVIEW
Net sales for the second quarter of 2012 were $1,202 million, compared with $1,128 million in the same period in 2011. This 6.6% increase was due primarily to $118 million in sales from the Company’s recently acquired Tegrant operations and higher selling prices in some businesses, partially offset by a negative impact from foreign currency translation. Tegrant was acquired November 8, 2011, and so is not included in the comparable prior year period.
Net income attributable to Sonoco for the second quarter of 2012 was $51.3 million compared to $53.4 million reported for the same period of 2011. Results for 2012 include a total of $8.3 million of after-tax restructuring and other non-base charges, while 2011 results were impacted by after-tax charges of $7.4 million. Second quarter 2012 base net income attributable to Sonoco (base earnings) was $59.7 million ($0.58 per diluted share) versus $60.8 million ($0.60 per diluted share) in 2011.
A combination of lower volume and unfavorable mix had a negative impact on earnings in most of the Company’s businesses. In addition, a significantly stronger dollar further reduced reported earnings compared to the prior year quarter. Absent the impact of Tegrant, overall base operating profits would have been down over 4%, as the impact of volume and mix, along with higher pension and other costs, more than offset the benefits of positive price/cost and improved productivity. In Protective Packaging, operating profits in the legacy operations were up only modestly, but, operating profits in the segment including Tegrant more than tripled. Operating profits also increased in Consumer Packaging, but were down modestly in Paper and Industrial Converted Products, and down more than 50% in Packaging Services.
 
25

Table of Contents
SONOCO PRODUCTS COMPANY
 
OPERATING REVENUE
Net sales for the second quarter of 2012 were $1,202 million, compared to $1,128 million for the second quarter of 2011, an increase of 6.6%, or $74 million.
The components of the sales change were:
 	 	 	 	 	
  ($ in millions)	  	 	 	
 	 	
  Volume/mix	  	$	(13)      	  	
  Selling prices	  	 	3       	  	
  Acquisitions/dispositions, net	  	 	124       	  	
  Foreign currency translation and other, net	  	 	    (40)      	  	
 	 	
  Total sales increase	  	$	74       	  	
 	 	
Acquisition-related sales gains were almost exclusively driven by Tegrant and were partially offset by last year’s sale of a small plastics business in Brazil. Sales prices were slightly higher for the Company overall as higher prices in the Consumer Packaging segment were largely offset by lower prices in Paper and Industrial Converted Products where sales prices were lower because of lower market prices for recovered paper, primarily old corrugated containers (OCC).
COSTS AND EXPENSES
Cost of sales were up $49.0 million from the prior year quarter; however, excluding the impact of acquisitions, cost of sales would have been down, in line with the decrease in sales absent acquisitions. Lower market pricing for recovered paper benefitted our industrial businesses, while Consumer Packaging was negatively impacted by higher film and other costs. Price/cost (the relationship of the change in sales prices to the change in costs of materials, energy and freight) was positive relative to the prior year, but the benefit was offset by largely higher labor, pension and other costs.
Acquisitions were responsible for almost all of the $19.3 million year-over-year increase in second quarter selling, general and administrative costs. Excluding acquisitions, these costs would have been only slightly higher, driven primarily by higher pension and general inflation. Base earnings before interest and income taxes were 8.2% of sales, virtually unchanged from last year’s second quarter.
Restructuring and restructuring-related asset impairment charges totaled $9.4 million and $9.6 million for the second quarters of 2012 and 2011, respectively. Additional information regarding restructuring actions and impairments is provided in Note 4 to the Company’s Condensed Consolidated Financial Statements.
Net interest expense for the second quarter of 2012 increased to $15.2 million, compared with $8.2 million during the same period in 2011. The increase was due to higher debt levels as a result of the acquisition of Tegrant.
This year’s second quarter effective tax rate of 35.3% was higher than the 32.1% rate recorded in the second quarter of 2011. This increase is partially attributable to a portion of this year’s foreign restructuring charges not being fully tax deductible in the local jurisdiction. The effective tax rate on base earnings for the quarter increased to 32.8% from 31.9% last year. The quarter-over-quarter increases in both the GAAP and base rates reflect a favorable accrual adjustment of approximately $1 million recorded in the prior year quarter.
REPORTABLE SEGMENTS
The following table recaps net sales for the second quarter of 2012 and 2011 ($ in thousands):

 	  	Three Months Ended	 	  	  	
 	  	July 1, 2012	 	  	    July 3, 2011    	 	  	      % Change        	
Net sales:	  	 	 	 	  	 	 	 	  	 	
Consumer Packaging	  	$	477,038	  	  	$	490,453	  	  	  (2.7)%	
Paper and Industrial Converted Products	  	 	475,460	  	  	 	485,170	  	  	  (2.0)%	
Packaging Services	  	 	107,801	  	  	 	125,934	  	  	(14.4)%	
Protective Packaging	  	 	142,060	  	  	 	26,308	  	  	440.0%  	
 	  	 	 	 	  	 	 	 	  	 	
Consolidated	  	$	1,202,359	  	  	$	1,127,865	  	  	    6.6%  	

26

Table of Contents
SONOCO PRODUCTS COMPANY
 
Consolidated operating profits, also referred to as “Income before interest and income taxes” on the Company’s Condensed Consolidated Statements of Income, are comprised of the following ($ in thousands):

 	  	Three Months Ended	 	 	  	 	 	 	
 	  	July 1, 2012	 	 	July 3, 2011	 	 	% Change	 	 	 	
Income before interest and income taxes:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
Segment operating profit	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consumer Packaging	  	$	42,752	  	 	$	40,200	  	 	 	6.3	%  	 	 	
Paper and Industrial Converted Products	  	 	39,652	  	 	 	40,440	  	 	 	(1.9	)% 	 	 	
Packaging Services	  	 	4,029	  	 	 	8,722	  	 	 	(53.8	)% 	 	 	
Protective Packaging	  	 	11,653	  	 	 	3,446	  	 	 	238.2	%  	 	 	
Restructuring/Asset impairment charges	  	 	(9,396	) 	 	 	(9,578	) 	 	 	 	 	 	 	
Other, net	  	 	(98	) 	 	 	(991	) 	 	 	 	 	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
Consolidated	  	$	88,592	  	 	$	82,239	  	 	 	7.7	%  	 	 	
 	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
The following table recaps restructuring/asset impairment charges attributable to each of the Company’s segments during the second quarter of 2012 and 2011 ($ in thousands):	   	 	 	
 	 	 	
 	  	Three Months Ended	 	 	 	
 	  	July 1, 2012	 	 	July 3, 2011	 	 	 	
Restructuring/Asset impairment charges:	  	 	 	 	 	 	 	 	 	 	
Consumer Packaging	  	$	6,191	  	 	$	10,389	  	 	 	
Paper and Industrial Converted Products	  	 	2,784	  	 	 	(1,213	) 	 	 	
Packaging Services	  	 	(194	) 	 	 	402	  	 	 	
Protective Packaging	  	 	615	  	 	 	—	  	 	 	
 	  	 	 	 	 	 	 	 	 	 	
Total	  	$	9,396	  	 	$	9,578	  	 	 	
 	  	 	 	 	 	 	 	 	 	 	
Segment operating profit is used by Company management to evaluate segment performance and does not include (dependent upon the applicable period) restructuring charges, asset impairment charges, acquisition-related costs, specifically identified tax adjustments and certain other items, if any, the exclusion of which the Company believes improves comparability and analysis of the underlying financial performance of the business. Accordingly, the term “segment operating profit” is defined as the segment’s portion of “Income before interest and income taxes” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments.
Consumer Packaging
Sonoco’s Consumer Packaging segment includes the following products and services: round and shaped rigid containers and trays (both composite and thermoformed plastic); blow-molded plastic bottles and jars; extruded and injection-molded plastic products; printed flexible packaging; metal and peelable membrane ends and closures; and global brand artwork management.
This year’s second quarter segment sales of $477 million were 2.7% lower than the $490 million reported in the prior year’s quarter. Year-over-year sales were down slightly as lower volumes, primarily in the Company’s composite cans and closures operations, and the unfavorable impact of foreign currency translation more than offset higher selling prices. Volume of blow molded plastics was up modestly, but was largely offset by lower market demand in the Company’s other plastics businesses driven by reduced demand for dual-ovenable trays for the frozen food industry.
Segment operating profit was $42.8 million compared with $40.2 million in last year’s second quarter. Operating profits were higher in the quarter due to a positive price/cost relationship and productivity improvements partially offset by negative volume and mix and higher pension, labor and other expenses.
 
27

Table of Contents
SONOCO PRODUCTS COMPANY
 
Paper and Industrial Converted Products
The Paper and Industrial Converted Products segment includes the following products: high-performance paper and composite paperboard tubes and cores; fiber-based construction tubes and forms; wooden, metal and composite wire and cable reels and spools; and recycled paperboard, linerboard, corrugating medium, recovered paper and other recycled materials.
Second quarter 2012 sales for the segment were $475 million, compared with $485 million in the same period in 2011. The 2% year-over-year reduction in second quarter sales was primarily due to the negative impact of foreign currency translation and lower recovered paper prices. In North America, lower recovered paper prices led to lower selling prices in the Company’s recycling and paper operations. Increased recycling activity in North America and Europe, additional trade sales of paper in North America, and improvement in the Company’s reels business were partially offset by tube and core volume declines in most regions of the world.
Segment operating profit was $39.7 million in the second quarter compared to $40.4 million in the second quarter of 2011. Excluding the negative impact of exchange rates, operating profits would have been essentially unchanged as improvements in productivity and a positive price/cost relationship were offset by higher pension, labor and other costs.
Packaging Services
The Packaging Services segment includes the following products and services: designing, manufacturing, assembling, packing and distributing temporary, semipermanent and permanent point-of-purchase displays; supply chain management services, including contract packing, fulfillment and scalable service centers; and paper amenities, such as coasters and glass covers.
Second quarter 2012 sales for this segment were $108 million, compared with $126 million in the same period in 2011. A continued increase in fulfillment activity globally was more than offset by lower year-over-year pack center revenue associated with last year’s loss of business with a major contract packaging customer and the negative impact of foreign currency translation.
Operating profit declined 54% to $4.0 million from $8.7 million in last year’s quarter due primarily to lower volumes associated with the lost contract packaging customer. This loss of business was partially offset by increased retail merchandising and fulfillment business.
Protective Packaging
The Protective Packaging segment includes the following products: custom-designed paperboard-based and expanded foam protective packaging; temperature-assurance packaging; and retail security packaging.
Second quarter 2012 segment sales increased to $142 million, compared with $26 million in 2011. This increase was due entirely to last year’s acquisition of Tegrant as sales in the Company’s legacy protective packaging operations declined approximately 5% year-over-year due primarily to lower volume.
Segment operating profit increased to $11.7 million in the second quarter, compared to $3.4 million in the second quarter of 2011, primarily due to the acquisition of Tegrant. Operating profit from the Company’s legacy protective packaging operations improved slightly due primarily to productivity improvements.
 
28

Table of Contents
SONOCO PRODUCTS COMPANY
 
Six Months Ended July 1, 2012 Compared with Six Months Ended July 3, 2011
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
The following tables reconcile the Company’s non-GAAP financial measures to their most directly comparable GAAP financial measures for each of the periods presented.

 	  	For the six months ended July 1, 2012	 	
 	 	
  Dollars in thousands, except per share data	  	GAAP	 	  	Restructuring/
Asset
Impairment	 	  	Acquisition
Related Costs
and Other
Adjustments	 	  	Base       	 	
 	 	
  Income before interest and income taxes	  	 	$167,435	  	  	 	$24,608      	  	  	 	274    	  	  	 	$192,317    	  	
  Interest expense, net	  	 	30,669	  	  	 	-      	  	  	 	-    	  	  	 	30,669    	  	
 	 	
  Income before income taxes	  	 	136,766	  	  	 	24,608      	  	  	 	274    	  	  	 	161,648    	  	
  Provision for income taxes	  	 	47,802	  	  	 	5,786      	  	  	 	98    	  	  	 	53,686    	  	
 	 	
  Income before equity in earnings of affiliates	  	 	88,964	  	  	 	18,822      	  	  	 	176    	  	  	 	107,962    	  	
  Equity in earnings of affiliates, net of tax	  	 	5,299	  	  	 	22      	  	  	 	-    	  	  	 	5,321    	  	
 	 	
  Net income	  	 	94,263	  	  	 	18,844      	  	  	 	176    	  	  	 	113,283    	  	
  Net loss attributable to noncontrolling interests	  	 	128	  	  	 	73      	  	  	 	-    	  	  	 	201    	  	
 	 	
  Net income attributable to Sonoco	  	 	$94,391	  	  	 	$18,917      	  	  	 	176    	  	  	 	$113,484    	  	

  Per diluted common share	  	 	$0.92	  	  	 	$0.19      	  	  	 	$0.00    	  	  	 	$1.11    	  	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	  	For the six months ended July 3, 2011	 	
 	 	
  Dollars in thousands, except per share data	  	GAAP	 	 	Restructuring/
Asset
Impairment	 	  	Acquisition
Related Costs
and Other
Adjustments	 	  	Base       	 	
 	 	
  Income before interest and income taxes	  	 	$171,833	  	 	 	$11,895      	  	  	 	$250    	  	  	 	$183,978    	  	
  Interest expense, net	  	 	16,911	  	 	 	-      	  	  	 	-    	  	  	 	16,911    	  	
 	 	
  Income before income taxes	  	 	154,922	  	 	 	11,895      	  	  	 	250    	  	  	 	167,067    	  	
  Provision for income taxes	  	 	48,959	  	 	 	3,639      	  	  	 	84    	  	  	 	52,682    	  	
 	 	
  Income before equity in earnings of affiliates	  	 	105,963	  	 	 	8,256      	  	  	 	166    	  	  	 	114,385    	  	
  Equity in earnings of affiliates, net of tax	  	 	5,380	  	 	 	17      	  	  	 	-    	  	  	 	5,397    	  	
 	 	
  Net income	  	 	111,343	  	 	 	8,273      	  	  	 	166    	  	  	 	119,782    	  	
  Net (income)/loss attributable to noncontrolling interests	  	 	(544	) 	 	 	70      	  	  	 	-    	  	  	 	(474)   	  	
 	 	
  Net income attributable to Sonoco	  	 	$110,799	  	 	 	$8,343      	  	  	 	$166    	  	  	 	$119,308    	  	

  Per diluted common share	  	 	$1.08	  	 	 	$0.09      	  	  	 	$0.00    	  	  	 	$1.17    	  	
 	 	
RESULTS OF OPERATIONS
The following discussion provides a review of results for the six months ended July 1, 2012 versus the six months ended July 3, 2011.
OVERVIEW
Net sales for the first half of 2012 were $2,415 million, compared with $2,245 million in the same period in 2011. This 7.6% increase was due primarily to $232 million in sales from the Company’s recently acquired Tegrant operations and higher selling prices in some businesses, partially offset by an overall decline in volume of approximately 1 percent and a $58 million negative impact from foreign currency translation. Tegrant was acquired November 8, 2011, and so is not included in the comparable prior year period.
 
29

Table of Contents
SONOCO PRODUCTS COMPANY
 
Net income attributable to Sonoco for the first half of 2012 was $94.4 million compared to $110.8 million reported for the same period of 2011. Current year earnings include $19.1 million of after-tax restructuring and other non-base charges, while 2011 results were impacted by after-tax charges of $8.5 million, including a loss from the disposition of a plastics business in Brazil. First half 2012 base net income attributable to Sonoco (base earnings) was $113.5 million ($1.11 per diluted share) versus $119.3 million ($1.17 per diluted share) in 2011.
Combined, lower volume and unfavorable mix had a negative impact on earnings in most of the Company’s businesses. Absent the impact of Tegrant, overall operating profits would have been down approximately 4%, as the impact of volume and mix, along with higher pension and other costs, more than offset the benefits of positive price/cost and improved productivity. In Protective Packaging, operating profits in the legacy operations were up more than 8%, and operating profits including Tegrant nearly tripled. Operating profits also increased in Paper and Industrial Converted Products and Consumer Packaging, but were down nearly 42% in Packaging Services.
OPERATING REVENUE
Net sales for first half of 2012 were $2,415 million, compared to $2,245 million for the first half of 2011, an increase of $170 million.
The components of the sales change were:
 	 	 	 	 	
  ($ in millions)	  	 	 	
 	 	
  Volume/mix	  	$	(24)      	  	
  Selling prices	  	 	9       	  	
  Acquisitions/dispositions, net	  	 	238       	  	
  Foreign currency translation and other, net	  	 	    (53)      	  	
 	 	
  Total sales increase	  	$	170       	  	
 	 	
Acquisition-related sales gains were almost exclusively driven by Tegrant and were partially offset by last year’s sale of a small plastics business in Brazil. Sales prices were slightly higher for the Company overall as higher prices in the Consumer Packaging segment more than offset lower prices in the Company’s paper and recycling businesses where sales prices were lower because of lower market prices for recovered paper, primarily old corrugated containers (OCC).
COSTS AND EXPENSES
Cost of sales were up $121.4 million from the prior year; however, cost of sales excluding the impact of acquisitions would have been down, in line with the decrease in sales absent acquisitions. Lower market pricing for recovered paper benefitted our industrial businesses, while Consumer Packaging was negatively impacted by higher resin, film and other costs. Price/cost was positive relative to the prior year, but was largely offset by higher labor, pension and other costs.
Acquisitions were responsible for almost all of the $39.8 million year-to-date increase in selling, general and administrative costs. Excluding acquisitions, these costs would have been only slightly higher, driven primarily by higher pension and general inflation. Base earnings before interest and income taxes were 8.0% of sales compared to 8.2% last year.
Restructuring and restructuring-related asset impairment charges totaled $24.6 million and $11.9 million for the first half of 2012 and 2011, respectively. Additional information regarding restructuring actions and impairments is provided in Note 4 to the Company’s Condensed Consolidated Financial Statements.
Net interest expense for the first half of 2012 increased to $30.7 million, compared with $16.9 million during the same period in 2011. The increase was due to higher debt levels as a result of the acquisition of Tegrant.
This year’s first half effective tax rate of 35.0% was higher than the 31.6% rate recorded in the first half of 2011. This increase is partially attributable to a portion of this year’s foreign restructuring charges not being fully tax deductible in the local jurisdiction. The effective tax rate on base earnings increased to 33.2% in the first half of 2012 from 31.5% in the same period last year. The year-over-year increases in both the GAAP and base rates reflect a favorable accrual adjustment of approximately $1 million recorded in the prior year quarter.
 
30

Table of Contents
REPORTABLE SEGMENTS
The following table recaps net sales for the first half of 2012 and 2011 ($ in thousands):

 	  	Six Months Ended	 	 	  	  	  	
 	  	    July 1, 2012    	 	 	July 3, 2011	 	 	      % Change        	  	 	
Net sales:	  	 	 	 	 	 	 	 	 	 	  	 	
Consumer Packaging	  	$	972,804	  	 	$	988,887	  	 	(1.6)%	  	 	
Paper and Industrial Converted Products	  	 	939,070	  	 	 	956,370	  	 	(1.8)%	  	 	
Packaging Services	  	 	222,706	  	 	 	249,371	  	 	(10.7)% 	  	 	
Protective Packaging	  	 	280,149	  	 	 	50,560	  	 	454.1%    	  	 	
 	  	 	 	 	 	 	 	 	 	 	  	 	
Consolidated	  	$	2,414,729	  	 	$	2,245,188	  	 	    7.6%   	  	 	

Consolidated operating profits, also referred to as “Income before interest and income taxes” on the Company’s Condensed Consolidated Statements of Income, are comprised of the following ($ in thousands):	  	 	
 	 	 	 	
 	  	Six Months Ended	 	 	  	  	 	
 	  	July 1, 2012	 	 	July 3, 2011	 	 	% Change	  	 	
Income before interest and income taxes:	  	 	 	 	 	 	 	 	 	 	  	 	
Segment operating profit	  	 	 	 	 	 	 	 	 	 	  	 	
Consumer Packaging	  	$	92,832	  	 	$	91,350	  	 	1.6% 	  	 	
Paper and Industrial Converted Products	  	 	71,956	  	 	 	70,753	  	 	1.7% 	  	 	
Packaging Services	  	 	8,871	  	 	 	15,213	  	 	(41.7)%   	  	 	
Protective Packaging	  	 	18,658	  	 	 	6,663	  	 	180.0%      	  	 	
Restructuring/Asset impairment charges	  	 	(24,608	) 	 	 	(11,895	) 	 	 	  	 	
Other, net	  	 	(274	) 	 	 	(251	) 	 	 	  	 	
 	  	 	 	 	 	 	 	 	 	 	  	 	
Consolidated	  	$	167,435	  	 	$	171,833	  	 	(2.6)%  	  	 	

The following table recaps restructuring/asset impairment charges attributable to each of the Company’s segments during the first half of 2012 and 2011 ($ in thousands):	  	 	
 	 	 	
 	  	Six Months Ended	 	 	 	
 	  	July 1, 2012	 	 	July 3, 2011	 	 	 	
Restructuring/Asset impairment charges:	  	 	 	 	 	 	 	 	 	 	
Consumer Packaging	  	$	10,994	  	 	$	11,118	  	 	 	
Paper and Industrial Converted Products	  	 	11,497	  	 	 	655	  	 	 	
Packaging Services	  	 	98	  	 	 	122	  	 	 	
Protective Packaging	  	 	2,019	  	 	 	—	  	 	 	
 	  	 	 	 	 	 	 	 	 	 	
Total	  	$	24,608	  	 	$	11,895	  	 	 	
 	  	 	 	 	 	 	 	 	 	 	
Consumer Packaging
First half 2012 sales of $973 million were down slightly from the $989 million reported in the first half of 2011 as lower sales from the divestiture of the Company’s Brazilian injection molding plastics business, reduced volumes and the unfavorable impact of foreign currency translation more than offset higher selling prices. Volume of blow molded plastics was up notably, but was offset by lower market demand in the Company’s other plastics businesses. The volume growth in blow molding was driven by the commercialization in mid 2011 of new products for the food market and stronger demand in the personal care market.
Segment operating profit in the first half of 2012 was $92.8 million compared with $91.4 million in the same period last year. Operating profits were slightly higher year-to-date due to a positive price/cost relationship and productivity improvements, partially offset by lower volume and higher pension, labor and other expenses.
 
31

Table of Contents
SONOCO PRODUCTS COMPANY
 
Paper and Industrial Converted Products
First half 2012 sales for the segment were $939 million, compared with $956 million in the same period in 2011. The 2% year-over-year decrease was primarily due to lower selling prices and the negative impact of foreign currency translation. In North America, lower recovered paper prices led to lower selling prices in the Company’s recycling and paper operations. Increased recycling activity in North America and Europe, additional trade sales of paper in North America, and improvement in the Company’s reels business were partially offset by tube and core volume declines in most regions of the world.
Segment operating profit improved to $72 million in the first half of 2012, compared to $71 million in the first half of 2011. Productivity improvement and a positive price/cost relationship were partially offset by negative volume and mix, higher pension, labor and other costs and an unfavorable impact from foreign exchange rates.
Packaging Services
First half 2012 sales for this segment were $223 million, compared with $249 million in the same period in 2011. A continued increase in fulfillment activity globally was more than offset by lower year-over-year pack center revenue associated with last year’s loss of business with a major contract packaging customer and the negative impact of foreign currency translation.
Operating profit declined 42% to $8.9 million from $15.2 million last year due primarily to lower volumes associated with the lost contract packaging customer and the impact of exchange rates. This loss of business was partially offset by increased retail merchandising and fulfillment business.
Protective Packaging
First half 2012 segment sales increased to $280 million, compared with $51 million in 2011. This increase was due entirely to last year’s acquisition of Tegrant, as sales in the Company’s legacy protective packaging operations were down slightly year-over-year.
Segment operating profit increased to $18.7 million in the first half of 2012, compared to $6.7 million in the first half of 2011, primarily due to the acquisition of Tegrant. In addition, operating profit from the Company’s legacy protective packaging operations increased more than 8% due to productivity improvements and a positive price/cost relationship.
Financial Position, Liquidity and Capital Resources
The Company’s financial position remained strong during the first half of 2012. Cash flows provided by operations totaled $144.4 million in the first six months of 2012, compared with $32.1 million in the same period last year. The effect of lower year-over-year earnings on operating cash flow was offset by a $51.5 million decrease in pension and postretirement plan contributions, lower management incentive payments and a lesser demand to fund working capital.
During the first six months of 2012, the Company utilized cash to fund capital expenditures of $104.4 million and pay dividends of $59.3 million. Outstanding debt increased by a net $32.3 million to $1,319.0 million at July 1, 2012. Cash and cash equivalents as of the end of the second quarter were $196.0 million, a $19.5 million increase from year end 2011. Additional capital spending, net of proceeds from the sale of assets, is expected to be approximately $100 million during the remainder of 2012.
The Company operates a $350 million commercial paper program, supported by a bank credit facility of the same amount committed through October 2015. Outstanding commercial paper, a component of the Company’s long-term debt, totaled $82 million at July 1, 2012.
Under an Internal Revenue Service rule, U.S. corporations may borrow funds from foreign subsidiaries for up to 30 days without unfavorable tax consequences. The Company utilizes this rule from time to time to access offshore cash in lieu of issuing commercial paper. Amounts outstanding subject to this rule at July 1, 2012, and December 31, 2011, were $122 million and $145 million, respectively. These short-term lending arrangements were subsequently settled within the 30-day period, resulting in equivalent increases in commercial paper outstanding and cash on hand. Depending on its immediate offshore cash needs, the Company may choose to access such funds again in the future as allowed under the rule.
 
32

Table of Contents
SONOCO PRODUCTS COMPANY
 
Certain of the Company’s debt agreements impose restrictions with respect to the maintenance of financial ratios and the disposition of assets. The most restrictive covenant currently requires the Company to maintain a minimum level of interest coverage, and a minimum level of net worth, as defined. As of July 1, 2012, and throughout 2012, the Company’s interest coverage and net worth were substantially above the minimum levels required under these covenants.
The Company anticipates additional contributions to its pension and postretirement plans of approximately $13 million during the remainder of 2012, which would bring total contributions made during 2012 to approximately $72 million. Future funding requirements beyond 2012 will vary depending largely on actual investment returns, future actuarial assumptions, and recently enacted legislation.
Certain assets and liabilities are reported in the Company’s financial statements at fair value, the fluctuation of which can impact the Company’s financial position and results of operations. Items reported by the Company on a recurring basis at fair value include derivative contracts and pension and deferred compensation related assets. The valuation of the vast majority of these items is based either on quoted prices in active and accessible markets or on other observable inputs.
At July 1, 2012, the Company had commodity contracts outstanding to fix the cost of a portion of anticipated raw materials and natural gas purchases. The total net fair market value of these instruments was an unfavorable position of $11.6 million at July 1, 2012, and an unfavorable position of $14.0 million at December 31, 2011. Natural gas, aluminum contracts, and old corrugated containers contracts covering an equivalent of 8.5 million MMBTUs, 5,000 metric tons, and 20,000 short tons, respectively, were outstanding at July 1, 2012. Additionally, the Company had various currency contracts outstanding to fix the exchange rate on certain anticipated foreign currency cash flows. The total market value of these instruments was a net favorable position of $0.8 million at July 1, 2012 compared with a net favorable position of $0.6 million at December 31, 2011. These contracts qualify as cash flow hedges and mature within twelve months of their respective reporting dates.
In addition, at July 1, 2012, the Company had various currency contracts outstanding to fix the exchange rate on certain foreign currency assets and liabilities. Although placed as an economic hedge, the Company does not apply hedge accounting to these contracts. The fair value of these currency contracts was a net favorable position of less than $0.1 million at July 1, 2012 and a net unfavorable position of $0.7 million December 31, 2011.
At July 1, 2012, the U.S. dollar had strengthened against most of the functional currencies of the Company’s foreign operations compared to December 31, 2011, resulting in a translation loss of $17.8 million being recorded in accumulated other comprehensive income during the six months ended July 1, 2012.
Restructuring and Impairment
Information regarding restructuring charges and restructuring-related asset impairment charges is provided in Note 4 to the Company’s Condensed Consolidated Financial Statements.
New Accounting Pronouncements
Information regarding new accounting pronouncements is provided in Note 11 to the Company’s Condensed Consolidated Financial Statements.
 
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	
Information about the Company’s exposure to market risk is discussed under Part I, Item 2 in this report and was disclosed in its Annual Report on Form 10-K for the year ended December 31, 2011, which was filed with the Securities and Exchange Commission on February 29, 2012. There have been no other material quantitative or qualitative changes in market risk exposure since the date of that filing.
 
33

Table of Contents
SONOCO PRODUCTS COMPANY
 
Item 4.	Controls and Procedures.	
Evaluation of Disclosure Controls and Procedures
Under the supervision, and with the participation, of our management, including our principal executive officer and principal financial officer, we conducted an evaluation pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on this evaluation, our principal executive officer and principal financial officer concluded that such controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q, were effective.
Changes in Internal Controls
The Company is continuously seeking to improve the efficiency and effectiveness of its operations and of its internal controls. This results in refinements to processes throughout the Company. However, there have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. In making its assessment of changes in internal control over financial reporting as of July 1, 2012, management has excluded Tegrant Holding Corporation (Tegrant), acquired November 8, 2011. The Company is currently assessing Tegrant’s control environment and expects the evaluation to be completed by the first anniversary of the acquisition as required by the Securities and Exchange Commission’s rules. Tegrant’s total revenues for the six month period ended July 1, 2012 represent approximately 9.6% of the Company’s consolidated revenue for the same period. Its excluded assets represent approximately 18% of the Company’s consolidated assets at July 1, 2012.
PART II.  OTHER INFORMATION
 
Item 1.	Legal Proceedings.	
Information with respect to legal proceedings and other exposures appears in Part I – Item 3 – “Legal Proceedings” and Part II – Item 8 – “Financial Statements and Supplementary Data” (Note 14 – “Commitments and Contingencies”) in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, and in Part I – Item 1 – “Financial Statements” (Note 14 – “Commitments and Contingencies”) of this report.
Fox River
In April 2006, the United States and the State of Wisconsin (plaintiffs) sued U.S. Paper Mills Corp. (U.S. Mills), a wholly owned subsidiary of the Company, and NCR Corporation (NCR), an unrelated company, to recover certain costs incurred for response activities undertaken regarding the release and threatened release of hazardous substances in specific areas of elevated concentrations of polychlorinated biphenyls (PCBs) in sediments in the Lower Fox River and Green Bay in northeastern Wisconsin (hereinafter the Site). Pursuant to a Consent Decree agreed to by NCR and U.S. Mills as a consequence of the litigation, the Site is to be cleaned up on an expedited basis and NCR and U.S. Mills started removing contaminated sediment in May 2007. The remediation involves removal of sediment from the riverbed, dewatering of the sediment and storage at an offsite landfill. U.S. Mills and NCR reached an agreement between themselves that each would fund 50% of the costs of remediation, which through July 1, 2012, has totaled slightly more than $25 million. U.S. Mills’ environmental reserve at July 1, 2012, includes $3.2 million for its share of the estimated remaining costs under the funding agreement for the remediation of the Site. The actual costs associated with cleanup of the Site, however, are dependent upon many factors and it is possible that remediation costs could be higher or lower than the current estimate of project costs. Under the terms of the agreement, the parties reserved their rights to make claims against each other, as well as third parties, to reallocate the costs of remediating the Site. Accordingly, the Company’s ultimate share of the liability for remediating the Site could be greater or less than 50% of the total cost.
In addition to the Site discussed above, as previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2011, U.S. Mills faces additional exposure related to potential natural resource damage and environmental remediation costs for a larger stretch of the lower Fox River, including the bay at Green Bay, which includes the Site discussed above (Operating Units 2 – 5). On November 13, 2007, the EPA issued a unilateral Administrative Order for Remedial Action pursuant to Section 106 of CERCLA. The order requires U.S. Mills and the seven other respondents jointly to take various actions to cleanup OUs 2 – 5. The order covers planning and design
 
34

Table of Contents
SONOCO PRODUCTS COMPANY
 
work as well as dredging and disposing of contaminated sediments and the capping of dredged and less contaminated areas of the river bottom. The order also provides for a penalty for failure by a respondent to comply with its terms as well as exposing a non-complying respondent to potential treble damages. Even though U.S. Mills has reserved its rights to contest liability for any portion of the work, it is cooperating with the other respondents to comply with the order, but its financial contribution will likely be determined by the lawsuit commenced in June 2008 and discussed below.
On June 12, 2008, NCR and Appleton Papers, Inc. (API), as plaintiffs, commenced suit in the United States District Court for the Eastern District of Wisconsin (No. 08-CV-0016-WCG) against U.S. Mills, as one of a number of defendants, seeking a declaratory judgment allocating among all the parties the costs and damages associated with the pollution and clean up of the Lower Fox River. The suit also seeks damages from the defendants for amounts already spent by the plaintiffs, including natural resource damages, and future amounts to be spent by all parties with regard to the pollution and cleanup of the Lower Fox River. On December 16, 2009, the court issued an order which concluded that, under the equities of the case, NCR and API were not entitled to any contributions from U.S. Mills and other defendants, thereby granting the defendant’s motions for summary judgment and denying the plaintiffs’ motions for summary judgment. Although an order has been issued by the court, no appealable final judgment has been entered yet; nevertheless, NCR has reported that it intends to appeal the ruling, presumably after entry of the final judgment. Subsequent to the December 2009 ruling, U.S. Mills and other defendants made motions to have the court rule that, on the same basis as the December 2009 ruling, NCR would be responsible for any costs that U.S. Mills might incur, past, present and future. These motions have been granted by the court, but are also subject to being appealed. U.S. Mills plans to continue to defend the suit vigorously.
On October 14, 2010, the United States and the State of Wisconsin filed suit against NCR, API, U.S. Mills and nine other defendants in the United States District Court for the Eastern District of Wisconsin (No. 10-CV-00910-WCG) pursuant to Sections 106 and 107 of CERCLA. The plaintiffs seek to recover unreimbursed costs incurred for activities undertaken in response to the release and threatened release of hazardous substances from facilities at or near the Lower Fox River and Green Bay as well as damages for injury to, loss of, and destruction of natural resources resulting from such releases. The plaintiffs also seek a ruling that the defendants are liable for future response costs of the plaintiffs and requiring the defendants to comply with the unilateral Administrative Order for Remedial Action discussed above. The Company does not believe that the remedies sought in the suit materially expand the Company’s potential liability beyond what has been previously disclosed in this report or in the Company’s prior filings. U.S. Mills plans to defend the suit vigorously.
As of July 1, 2012, U.S. Mills’ environmental reserve for potential liabilities associated with the remediation of OUs 2 -5 (not including amounts accrued for remediation of the Site) totaled $52.7 million. Because of the continuing uncertainties in the estimated costs of remediation and continuing uncertainties surrounding U.S. Mills’ allocable share, including a potentially favorable resolution, it is impossible to state with any degree of certainty that any estimate is a better estimate than the amount recorded. However, because the discharges of hazardous materials into the environment occurred before the Company acquired U.S. Mills, and U.S. Mills has been operated as a separate subsidiary of the Company, the Company does not believe that it bears financial responsibility for these legacy environmental liabilities of U.S. Mills. Therefore, the Company continues to believe that the maximum additional pretax exposure to its consolidated financial position is limited to the equity position of U.S. Mills, which was approximately $89 million at July 1, 2012.
Other Legal Matters
On July 7, 2008, the Company was served with a complaint filed in the United States District Court for South Carolina by the City of Ann Arbor Employees’ Retirement System, individually and on behalf of others similarly situated (no. 4:08-cv-02348-TLW-KDW). The suit is a class action on behalf of those who purchased the Company’s common stock between February 7, 2007 and September 18, 2007, except officers and directors of the Company. The complaint, as amended, alleges that the Company issued press releases and made public statements during the class period that were materially false and misleading. The complaint also names certain Company officers as defendants and seeks an unspecified amount of damages plus interest and attorneys’ fees. On April 26, 2012, the parties filed with the court a stipulation of settlement, which, if finally approved by the court and subject to the conditions contained therein, will end the litigation and provide a settlement fund, to be funded entirely by insurance, to make payments to the authorized claimants as therein provided.
 
35

Table of Contents
SONOCO PRODUCTS COMPANY
 
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	
ISSUER PURCHASES OF EQUITY SECURITIES
 	 	 	 	 	 	 	 	 	
Period	 	  (a) Total Number of  
Shares Purchased1	 	    (b) Average Price    
Paid per Share	 	(c) Total Number of
  Shares Purchased as  
Part of Publicly
Announced Plans or
Programs2	 	(d) Maximum
Number of Shares
that May Yet be
  Purchased under the  
Plans or Programs2	
4/02/12 – 5/06/12	 	536        	 	$  33.26          	 	—          	 	5,000,000        	
5/07/12 – 6/03/12	 	257        	 	$  32.31          	 	—          	 	5,000,000        	
6/04/12 – 7/01/12	 	—        	 	—          	 	—          	 	5,000,000        	
Total	 	793        	 	$  32.95          	 	—          	 	5,000,000        	
 
1 	A total of 793 common shares were repurchased in the second quarter of 2012 related to shares withheld to satisfy employee tax withholding obligations in association with the exercise of certain share-based compensation awards. These shares were not repurchased as part of a publicly announced plan or program.	
 
2 	On April 19, 2006, the Company’s Board of Directors authorized the repurchase of up to 5,000,000 shares of the Company’s common stock. This authorization rescinded all previous existing authorizations and does not have a specific expiration date. From December 2010 through March 2011, a total of 2,000,000 shares were repurchased under this program. On April 20, 2011, the Company’s Board of Directors reinstated 2,000,000 shares to its authorization, returning the total number of shares available for future repurchase to 5,000,000 as of that date. No shares were repurchased under this authorization subsequent to this reinstatement; accordingly, a total of 5,000,000 shares remained available for repurchase at July 1, 2012.	
 
Item 6.	Exhibits.	

      3-2.	 	 	 	Sonoco Products Company Bylaws (revised solely to correct references in Article IX to article numbers in the Articles of Incorporation)	
      10.	 	 	 	Sonoco Products Company 2012 Long-Term Incentive Plan (incorporated by reference to the Company’s Proxy Statement for the Annual Meeting of Shareholders on April 18, 2012)	
      15.	 	 	 	Letter re: unaudited interim financial information	
      31.	 	 	 	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and 17 C.F.R. 240.13a-14(a)	
      32.	 	 	 	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 17 C.F.R. 240.13a-14(b)	
      101.	 	 	 	The following materials from Sonoco Products Company’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at July 1, 2012 and December 31, 2011, (ii) Condensed Consolidated Statements of Income for the three and six months ended July 1, 2012 and July 3, 2011, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 1, 2012 and July 3, 2011, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended July 1, 2012 and July 3, 2011, and (v) Notes to Condensed Consolidated Financial Statements.	
 
36

Table of Contents
SONOCO PRODUCTS COMPANY
 
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 	 	SONOCO PRODUCTS COMPANY	
 	 	(Registrant)	
 	 	
Date:  August 1, 2012	 	By: /s/ Barry L. Saunders	
 	 	Barry L. Saunders	
 	 	Vice President and Chief Financial Officer	
 	 	(principal financial officer)	
 
37

Table of Contents
SONOCO PRODUCTS COMPANY
 
EXHIBIT INDEX

Exhibit	 	 	 	 	 	 	
    Number    	 	  	 	Description	
 	 	 	 	
      3-2	 	 	 	 	 	Sonoco Products Company Bylaws (revised solely to correct references in Article IX to article numbers in the Articles of Incorporation)	
      10	 	 	 	 	 	Sonoco Products Company 2012 Long-Term Incentive Plan (incorporated by reference to the Company’s Proxy Statement for the Annual Meeting of Shareholders on April 18, 2012)	
      15	 	 	 	 	 	Letter re: unaudited interim financial information	
      31	 	 	 	 	 	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and 17 C.F.R. 240.13a-14(a)	
      32	 	 	 	 	 	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and 17 C.F.R. 240.13a-14(b)	
      101	 	 	 	 	 	The following materials from Sonoco Products Company’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at July 1, 2012 and December 31, 2011, (ii) Condensed Consolidated Statements of Income for the three and six months ended July 1, 2012 and July 3, 2011, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and six months ended July 1, 2012 and July 3, 2011, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended July 1, 2012 and July 3, 2011, and (v) Notes to Condensed Consolidated Financial Statements.	
 
38

Exhibit 3.2
BY-LAWS
SONOCO PRODUCTS COMPANY
HARTSVILLE, S.C.
(Incorporated under the laws of the
State of South Carolina)
Revised through February 8, 2012
ARTICLE I - OFFICE
1. THE PRINCIPAL OFFICE of the corporation shall be at Hartsville, Darlington County, South Carolina.
2. THE CORPORATION may also have offices at such other places as the Board of Directors may from time to time determine or as the business of the corporation may require.
ARTICLE II - SHAREHOLDERS’ MEETINGS
1. THE PLACE OF ALL MEETINGS of shareholders shall be at Hartsville, Darlington County, State of South Carolina.
2. THE ANNUAL MEETING of the shareholders of the corporation for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held each year on the third Wednesday of April at 11:00 A.M., or such other date as the Board of Directors may, in its discretion, choose.
3. SPECIAL MEETINGS OF SHAREHOLDERS for any purpose or purposes may be called by or at the direction of the Board of Directors, or by the Chairman of the Board of Directors, or by the President. Special meetings shall be called by the Chairman of the Board of Directors at the request of: (a) holders of Preferred Stock as may be provided in provisions of the Articles of Incorporation at the time in effect with respect to the rights, preferences, privileges, limitations and conditions affecting the capital stock of the corporation; or (b) shareholders to the extent required by applicable law. Business to be transacted at all special meetings shall be confined to the purpose or purposes stated in the notice of the meeting. The time, date and place of any special meeting shall be determined by the Chairman of the Board of Directors, the Board of Directors or the President, except as otherwise required by the Articles of Incorporation.
4. NOTICE of the time, date and place of the annual meeting and any special meeting of shareholders shall be given by the corporation by transmitting written or printed notice of the same not less than twenty (20) days nor more than sixty (60) days prior to the meeting to each shareholder of record of the corporation entitled to notice of such meeting, addressed to the shareholder at such shareholder’s address appearing on the stock transfer books of the corporation. Such notice may be amended or withdrawn after it is given in the discretion of the Chairman of the Board of Directors or the Board of Directors.

NOTICE SHALL BE DEEMED TO HAVE BEEN GIVEN when actually received or when deposited with postage prepaid in the United States mail, addressed to the shareholder at the address appearing on the stock transfer books of the corporation.
A RECORD DATE may be set by the Board of Directors for a date which is not less than ten (10) nor more than seventy (70) days preceding the date of any meeting of the shareholders, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting or adjournment thereof.
5. A COMPLETE LIST OF SHAREHOLDERS ENTITLED TO NOTICE at the annual shareholders’ meeting or any adjournment thereof, or any special meeting of the shareholders or adjournment thereof, shall be prepared by the corporation, such list to be arranged by voting group in alphabetical order with each shareholder’s address appearing on the stock transfer books of the corporation, showing the number of voting shares held by each shareholder, subject to the provisions of the laws of the State of South Carolina.
6. THE VOTING AT ALL MEETINGS of the shareholders may be by voice vote, but any shareholder entitled to vote may demand a stock vote whereupon such stock vote shall be taken by ballot, each of which shall state the name of the shareholder voting and the number of shares voted by him; and if such ballots be cast by proxy, it shall also state the name of such proxy.
7. EVERY SHAREHOLDER HAVING THE RIGHT TO VOTE at any meeting of the shareholders shall be entitled to vote in person or by proxy. A proxy may be appointed either (a) by an instrument in writing subscribed by such shareholder, or (b) by any other means permitted under applicable law;  provided, however , the Board of Directors shall have the authority, in its discretion, to prescribe or limit a particular method or methods by which appointment of a proxy must be made with respect to a vote on any matter. Unless otherwise provided in the Articles of Incorporation, each shareholder entitled to vote shall have one vote for each share of stock having voting power registered in his name on the books of the corporation as of the record date set by the Board of Directors.
NO PROXY SHALL BE VALID after the expiration of eleven (11) months from its execution.
8. A QUORUM as to any matter to come before any annual or special meeting of shareholders shall consist of shareholders representing, either in person or by proxy, a majority of shares of each voting group entitled to vote on such matter. A majority of the votes cast on such matter shall decide any question that may come before such meeting except as otherwise provided by law and except as otherwise may be provided by provisions of the Articles of Incorporation at the time in effect with respect to the rights, preferences, privileges, limitations and conditions affecting shares of the corporation.
 
2

9. IN THE ABSENCE OF A QUORUM at a properly called shareholders’ meeting, such meeting may be adjourned from time to time by the presiding officer as provided in Section 12 of this Article. If the meeting is adjourned for thirty (30) days or more, a notice of such adjournment shall be sent to all shareholders entitled to vote thereat stating the time and place of holding such adjourned meeting.
10. NO NOTICE OF ANY ADJOURNED MEETING for less than thirty (30) days need be given if the time and place of the adjourned meeting are announced at the meeting at which the adjournment is taken.
11. RESOLUTIONS TO BE VOTED ON BY SHAREHOLDERS, other than resolutions proposed by the Board of Directors, shall be submitted to the Secretary of the corporation in writing not less than seventy-five (75) days prior to the meeting at which the vote is to occur. No resolution shall be considered at any meeting of shareholders unless such resolution is proposed by the Board of Directors or by a shareholder of record at the date of submission to the Secretary and on the record date for the meeting. The person presiding at the meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall determine whether such notice has been duly given and shall direct that proposals and nominees not be considered if such notice has not been duly given.
12. THE PRESIDING OFFICER OF ALL SHAREHOLDERS’ MEETINGS shall be the Chairman of the Board of Directors unless he or the Board of Directors shall designate some other person to preside at the meeting. The presiding officer may, in his discretion, adjourn any meeting to such later date and time as he shall state whether or not there is a quorum present at the time of such adjournment. The presiding officer shall determine the manner in which the meeting shall be conducted, including the order of business, and all rulings of the presiding officer shall be final and binding. The presiding officer may, in his discretion, designate various persons to perform tasks associated with the conduct of the meeting.
ARTICLE III - DIRECTORS
1. THE MANAGEMENT of all the affairs, property and the business of the corporation shall be vested in a Board of Directors. The number of directors of the corporation shall be (i) the number fixed from time to time by the Board of Directors, which number shall not be less than nine, plus (ii) any directors elected exclusively by the holders of Preferred Stock as provided in the corporation’s Articles of Incorporation. The directors need not be residents of the State of South Carolina.
 
3

2. EXCEPT FOR ANY DIRECTOR elected exclusively by the holders of Preferred Stock, the Board of Directors shall be divided into three classes of as nearly equal size as possible in accordance with the provisions of the Articles of Incorporation.
3. ALL DIRECTORS SHALL SERVE until their successors shall have been duly elected and qualify or until their earlier resignation, retirement, removal from office, death or incapacity except as otherwise provided by provisions of the Articles of Incorporation with respect to the rights, preferences, privileges, limitations and conditions affecting the shares of the corporation. No reduction in the size of the Board of Directors shall have the effect of shortening the term of any director in office at the time.
4. ALL DIRECTORS OF AN EXPIRING CLASS shall be eligible for re-election to the Board of Directors.
5. ALL VACANCIES OCCURRING IN THE BOARD OF DIRECTORS whether caused by resignation, death, increase in number of directors, or otherwise may be filled by a majority vote of the remaining directors, even if such number would not constitute a quorum.
6. RETIREMENT OF DIRECTORS shall be automatic upon each reaching the age of seventy-two (72), and a special meeting of the Board of Directors may be called to fill the vacancy thus created by the retirement.
7. REMOVAL OF A DIRECTOR OR THE ENTIRE BOARD OF DIRECTORS for cause shall only be accomplished by a vote of the holders of at least a majority of the outstanding shares then entitled to vote at an election for such Directors, subject to the provisions of the laws of the State of South Carolina and the Articles of Incorporation. Directors may be removed only for cause as defined by the South Carolina Business Corporation Act.
8. A CHAIRMAN OF THE BOARD OF DIRECTORS may be elected by the Board of Directors from one of their number to serve for one year in the discretion of the Board of Directors. The Chairman of the Board of Directors shall preside at all meetings of the directors and perform the duties and have the powers set forth in these by-laws and shall have such additional duties and powers as may be specified by the Board of Directors.
A LEAD DIRECTOR, who shall be the Chairman of the Corporate Governance and Nominating Committee, shall:
 
 	(a)	Preside at any meeting of the Board of Directors at which the Chairman of the Board of Directors is not present;	
 
 	(b)	Preside at executive sessions of the independent directors;	
 
 	(c)	Be authorized to call meetings of the independent directors; and	
 
4

 	(d)	Have such additional duties and powers as may be specified by the Board of Directors.	
9. REGULAR MEETINGS OF THE BOARD OF DIRECTORS shall be held quarterly and ten (10) days written notice shall be given prior to the meeting date. The date of each quarterly meeting shall be decided upon by the Chairman of the Board of Directors or by the President or, in their absence, by any two Vice Presidents or by any two directors.
10. SPECIAL MEETINGS of the Board of Directors may be called at any time to be held at the principal office of the corporation at Hartsville, South Carolina or elsewhere by:
 
 	(a)	The Chairman of the Board of Directors;	
 
 	(b)	The President;	
 
 	(c)	The Lead Director;	
 
 	(d)	Unanimous written consent of all the members at any time and place without notice; or	
 
 	(e)	The presence of all members at such meeting.	
Notice of all special meetings of the Board of Directors shall be given to each director at such director’s address given to the Secretary for the purpose of giving notices, by telegram, telephone, facsimile, letter, or other reasonable means reasonably calculated to be received not less than twenty-four hours prior to the meeting. Notice of a meeting of the directors need not be given to any director who signs a waiver of notice either before or after the meeting.
11. NOTICE OF ADJOURNMENT OF A MEETING OF THE BOARD OF DIRECTORS need not be given if the time and place to which it is adjourned are fixed and announced at such meeting.
12. NEITHER THE BUSINESS TO BE TRANSACTED at nor the purpose of any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice.
13. A QUORUM at any meeting of the Board of Directors shall consist of a majority of the total number of directors then in office, but less than a quorum may adjourn the meeting which may be held on a subsequent date without further notice if the time and place to which it is adjourned are fixed and announced at such meeting.
14. COMPENSATION shall be paid directors not otherwise currently employed by the corporation for their services in such form and in such amount as may be determined by Resolution of the Board of Directors. Directors may be paid differing amounts in recognition of the requirements of various assignments undertaken such as chairman or as members of committees.
 
5

ARTICLE IV - OFFICERS
1. THE OFFICERS OF THE CORPORATION shall consist of a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary and Treasurer who shall be appointed for one year by the directors at their first meeting after the annual meeting of shareholders and who shall hold office until their successors are appointed and qualify. The positions of Chief Executive Officer and President and/or Vice President and Treasurer and/or Secretary and Treasurer and/or Vice President and Secretary may be united in one person. The Board of Directors may also appoint one or more Assistant Secretaries and Assistant Treasurers. The Board of Directors may alter or modify the duties of any officer set forth herein.
2. THE CHAIRMAN OF THE BOARD OF DIRECTORS may be designated by the Board of Directors as the Chief Executive Officer of the corporation and, in such case, the Chairman shall have general supervision of the affairs of the corporation, shall have the power to sign certificates, contracts and other instruments of the corporation as authorized by the Board of Directors and shall perform all such other duties as are incident to his office or are properly required of him by the Board of Directors. Otherwise, the Chairman of the Board of Directors shall not be an officer of the corporation.
3. THE PRESIDENT shall have, except when the Chairman of the Board of Directors has been designated as the Chief Executive Officer, general supervision of the affairs of the corporation, shall have the power to sign or countersign certificates, contracts and other instruments of the corporation as authorized by the Board of Directors, shall make reports to the Board of Directors and shareholders and shall perform all such other duties as are incident to his office or are properly required of him by the Board of Directors. The President shall be the Chief Executive Officer of the corporation unless the Board of Directors has designated the Chairman of the Board of Directors as the Chief Executive Officer.
4. THE VICE PRESIDENTS, in the order designated by the Board of Directors, shall exercise the functions of the President during the absence or disability of the President and the Chairman of the Board of Directors. Each Vice President shall have such powers and discharge such duties as may be assigned to him from time to time by the Board of Directors.
5. THE SECRETARY shall issue notices for all meetings, shall keep minutes of all meetings, shall have charge of the seal and corporate books, shall have responsibility to authenticate corporate documents, shall sign with the President such instruments that require his signature, shall make such reports and shall perform such other duties as are incident to his office or are properly required of him by the Board of Directors.
6. THE ASSISTANT SECRETARIES, in the order designated by the Board of Directors, shall in the absence or disability of the Secretary, or as delegated by the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board of Directors may prescribe.
 
6

7. THE TREASURER shall have custody of all funds and securities of the corporation and shall keep regular books of account. He shall disburse the funds of the corporation in payment of just demands against the corporation or as may be ordered by the Board of Directors, taking proper vouchers for disbursements, and shall render to the Board of Directors from time to time as may be required of him an account of all his transactions as Treasurer and of the financial condition of the corporation. He shall perform all duties incident to his office or which are properly required of him by the Board of Directors.
8. THE ASSISTANT TREASURERS, in the order designated by the Board of Directors, shall in the absence or disability of the Treasurer, or as delegated by the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors may prescribe.
9. IN THE CASE OF ABSENCE OR INABILITY TO ACT of any officer of the corporation or of any person herein authorized to act in his place, the Board of Directors may from time to time delegate the powers or duties of such officer to any other officer or any director or other person whom it may select.
10. VACANCIES in any office may be filled by the directors at any regular or special meeting.
11. THE SALARIES of all officers receiving both officer compensation and officer benefits shall be fixed by the Board of Directors.
12. THE CHIEF EXECUTIVE OFFICER MAY DELEGATE portions of the authority conferred upon the Chief Executive Officer to other officers and employees of the corporation except where such delegation would conflict with the corporation’s Articles of Incorporation, By-laws or resolutions of the Board of Directors.
ARTICLE V - SHARES
1. THE SHARES OF THE CORPORATION, both Common and Preferred, may be represented by certificates or may be uncertificated. Certificates for shares, Common and Preferred, respectively, shall be issued in numerical order, and each shareholder shall be entitled to a certificate signed by the Chairman of the Board of Directors or by the President or any Vice President and by the Secretary or Treasurer of the corporation or bearing the facsimile signatures of such officers and bearing the corporate seal or a facsimile thereof. A record of such certificates issued to shareholders shall be kept by the corporation or a designated transfer agent and/or registrar. No certificate shall be issued covering or evidencing a fractional part of a share of either Common or Preferred shares but in lieu thereof the corporation may issue script in registered or
 
7

bearer form over the manual or facsimile signature of an officer of the corporation or of its agents, exchangeable as therein provided for full shares, but such script shall not entitle the holder to any right of a shareholder except as therein provided. Such script may be issued subject to the condition that it shall become void if not exchanged for certificates representing full shares before a specified date or, subject to the condition that the shares for which such script is exchangeable, may be sold by the corporation and the proceeds thereof distributed to the holders of such script or subject to any other conditions which the Board of Directors may determine.
If shares are issued or transferred without certificates, within a reasonable time after issue or transfer, the corporation or its transfer agent shall send the shareholder a written statement setting out the information that would be on a share certificate, including: (i) the corporation’s name; (ii) the name of the person to whom the shares are issued; (iii) the number and class of shares and the designation of the series, if any, the shares represent; and (iv) the designations, relative rights, preferences, and limitations applicable to each class of shares the corporation is authorized to issue and the variations in rights, preferences, and limitations determined for each series (and the authority of the Board of Directors to determine variations for future series), or a statement to the effect that the corporation will furnish the shareholder with this information on request in writing and without charge. If the shares are subject to any restriction on transfer, the restrictions on transfer shall also be set forth in the written statement.
2. TRANSFERS OF SHARES shall be made only upon the transfer books of the corporation kept at the principal office of the corporation or by a transfer agent designated to transfer the Common or Preferred shares. Upon surrender to the corporation or any transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation or such transfer agent (i) to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books, or (ii) if uncertificated registration is requested by the transferor or transferee, to record the transaction upon its books and provide the written statement required by Section 1 of this Article V. Upon receipt by the corporation or any transfer agent of proper transfer instructions from the registered owner of uncertificated shares, or from an individual presenting proper evidence of succession, assignment or authority to transfer uncertificated shares, it shall be the duty of the corporation or such transfer agent (i) to record the transaction upon its books and provide the written statement required by Section 1 of this Article V, or (ii) if issuance of a certificate is requested by the transferor or transferee, to issue a certificate to the person entitled thereto and record the transaction on its books.
3. REGISTERED HOLDERS only shall be entitled to be treated by the corporation as holders in fact of the shares standing in their respective names at their respective addresses appearing in the stock transfer books of the corporation, and the corporation shall not be bound to recognize any equitable or other claim to or interest in any share on the part of any person, whether or not it shall have express or other notice thereof.
 
8

4. IN CASE OF LOSS OR DESTRUCTION BY A SHAREHOLDER of the original certificate, another may be issued in its place upon proof of such loss or destruction and upon the giving of a satisfactory bond of indemnity to the corporation and/or to the transfer agent of such shares, subject to the provisions of the laws of the State of South Carolina.
5. TRANSFER AGENTS OR REGISTRARS of the Common or Preferred shares of the corporation may from time to time be designated by the Board of Directors which may provide for their countersigning of share certificates.
ARTICLE VI - DIVIDENDS AND FINANCE
1. THE BOARD OF DIRECTORS MAY DECLARE and the corporation may pay dividends at such time as the Board of Directors may designate on its outstanding shares, in cash or property or from authorized but unissued shares and may declare stock splits, but no dividends or splits shall be declared that shall impair the capital stock of the corporation or violate any right, preference, privilege, limitation or condition affecting any class of shares of the corporation as fixed and determined by the shareholders or that shall violate any agreement or undertaking made by the corporation or that shall not conform to the laws of the State of South Carolina.
2. THE FUNDS of the corporation shall be deposited in the name of the corporation in such bank or banks or trust company or trust companies as the Board of Directors may designate and shall be drawn out by checks signed by any two officers or any two designated employees or by an officer together with a designated employee or by the use of facsimile signatures in lieu thereof.
3. THE FISCAL year of the corporation shall begin on the first day of January in each year unless otherwise provided by the Board of Directors.
ARTICLE VII - SEAL
1. THE CORPORATE SEAL shall consist of two concentric circles between which are written the words, “SONOCO PRODUCTS COMPANY, S.C.,” and in the center of which is written “INCORPORATED 1899,” and such seal is impressed on the margin hereof, has been and is hereby adopted as the corporate seal of the corporation. Failure to affix the seal to a document shall not in any way affect the validity of the document.
ARTICLE VIII - INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
1. Any present or former director, officer or employee of the corporation or any person who, at the request of the corporation, may have served as director or officer of another corporation in which it owns shares or of which it is a creditor shall be entitled to reimbursement of expenses and other liabilities to the maximum extent permitted by the laws of the State of South Carolina or by order of any Court having jurisdiction in any action or proceeding to which he is a party by reason of being or having been a director, officer or employee.
 
9

ARTICLE IX - AMENDMENTS
1. The By-Laws may be amended, repealed or altered, in whole or in part, or new By-Laws adopted, by a majority of the outstanding shares of the corporation entitled to vote at any annual meeting of the shareholders of the corporation or at any special meeting called for such purpose or, to the extent permitted by law, by a majority of the Board of Directors at any regular meeting or special meeting called for that purpose;  provided, however,  that no such amendment, repeal, alteration or adoption shall violate any right, preference, privilege, limitation or condition affecting any class of stock of the corporation as fixed and determined by shareholders or, acting under or pursuant to authority in the Articles of Incorporation, by the Board of Directors, or violate any agreement or understanding made by the corporation; and  provided further  that Article III, Sections 1, 2, 7, and Article IX, Section 1, of the By-Laws may not be amended, repealed or altered, in whole or in part, and no By-Law may be amended, repealed, altered or adopted which is inconsistent with any of such Sections or either Article 5 or Article 6 of the Articles of Incorporation, other than by an affirmative vote of shareholders sufficient to amend Articles 5 and 6 of the Articles of Incorporation of the corporation.
ARTICLE X - SUITS BY SHAREHOLDERS
1. No shareholder shall bring any action in law or in equity against the corporation, or any of its officers or directors which is based on any right of the shareholder as a shareholder except in compliance with the following conditions:
 
 	a.	The shareholder shall have first presented the substance of the complaint to the corporation in writing in sufficient detail to permit the corporation to determine the validity of the complaint. Such complaint shall have been submitted to the Secretary of the corporation not less than 90 days prior to the commencement of a legal proceeding.	
 
 	b.	The legal proceeding shall be commenced and maintained in a court of competent jurisdiction in the State of South Carolina or in the United States District Court for the District of South Carolina.	
ARTICLE XI - CONTROL SHARE ACQUISITIONS
1. Except as otherwise provided herein, terms in this Article shall have the meaning assigned to such terms in Article 1 of Chapter 2 of Title 35 of the Code of Laws of South Carolina, 1976, as amended (the “Control Share Acquisitions Act”).
 
10

2. The corporation is authorized, but not required, to redeem control shares as provided in Section 35-2-110 of the Code of Laws of South Carolina, 1976, as amended. The fair value of such shares and the price at which they shall be redeemed shall be the lesser of the lowest price paid by the holder of the shares being redeemed in the ninety days immediately preceding the date on which the control share acquisition occurred or the average closing price of the shares on the ten trading days immediately preceding the earlier of: (i) a public announcement of the acquiring person’s acquisition of, or plan to acquire, shares; or (ii) ten days prior to the date on which the acquiring person would be required to file a Schedule 13D pursuant to Section 13(d) of the Securities Exchange Act of 1934. In the event that the corporation exercises its right to redeem control shares, it shall give written notice of such redemption to the record owner of such shares. Upon receipt of such notice, such shares shall be deemed to have been redeemed and the rights of the holder of such shares shall be limited to the right to receive payment for such shares. Payment for shares redeemed shall be made within two business days after surrender to the corporation of the certificates for the shares redeemed.
3. For purposes of determining whether a control share acquisition has occurred, whether shares are control shares, what are interested shares and other rights with respect to control shares under the Control Share Acquisitions Act, all shares tendered in response to any tender offer or made subject to any option (other than an option granted by the corporation) shall be considered to be held by the members of a group with respect to a control share acquisition. Such group shall include all tendering shareholders and option granting shareholders as well as the persons to whom or for whose benefit the shares were tendered or optioned.
 
11

EXHIBIT 15
August 1, 2012
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Commissioners:
We are aware that our report dated August 1, 2012 on our review of interim financial information of Sonoco Products Company for the three-month and six-month periods ended July 1, 2012 and July 3, 2011 and included in the Company’s quarterly report on Form 10-Q for the quarter ended July 1, 2012 is incorporated by reference in its Registration Statements on Forms S-8 (File No. 33-45594; File No. 33-60039; File No. 333-12657; File No. 333-100799; File No. 333-100798; and File No. 333-152531) and Form S-3 (File No. 333-160964).

Yours very truly,	
 	
/s/ PricewaterhouseCoopers LLP	

EXHIBIT 31
I, Harris E. DeLoach, Jr., certify that:
 
1.	I have reviewed this quarterly report on Form 10-Q of Sonoco Products Company;	
 
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 
 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 
 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 
 	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 
 	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 
 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 
 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

Date: August 1, 2012	 	 	 	By:	 	/s/ Harris E. DeLoach, Jr.	
 	 	 	 	Harris E. DeLoach, Jr.	
 	 	 	 	Chief Executive Officer	

I, Barry L. Saunders, certify that:
 
1.	I have reviewed this quarterly report on Form 10-Q of Sonoco Products Company;	
 
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 
 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 
 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 
 	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 
 	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 
 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 
 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

Date: August 1, 2012	 	 	 	By:	 	/s/ Barry L. Saunders	
 	 	 	 	Barry L. Saunders	
 	 	 	 	Vice President and Chief Financial Officer	

EXHIBIT 32
Certification of Principal Executive Officer and Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes – Oxley Act of 2002
The undersigned, who are the chief executive officer and the chief financial officer of Sonoco Products Company, each hereby certifies that, to the best of his knowledge, the accompanying Form 10-Q for the quarter ended July 1, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the issuer.
August 1, 2012

/s/ Harris E. DeLoach, Jr.	
Harris E. DeLoach, Jr.	
Chief Executive Officer	
 	
/s/ Barry L. Saunders	
Barry L. Saunders	
Chief Financial Officer	
A signed original of this written statement required by Section 906 has been provided to Sonoco Products Company (the “Company”) and will be retained by the Company and furnished to the Securities and Exchange Commission upon request. This certification accompanies the Form 10-Q and shall not be treated as having been filed as part of the Form 10-Q.