SONOCO PRODUCTS CO

Previous wording

This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. Discussions of 2022 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31,2022.

Current wording

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Previous wording

The following discussion and analysis contains forward-looking statements, including, without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under “Forward-Looking Statements” and under “Item 1A. Risk Factors” of this Form 10-K.

Current wording

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) is intended to help the reader understand the Company, its operations and its present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s Consolidated Financial Statements and the accompanying notes thereto contained in Item 8 of this Form 10-K. The MD&A contains forward-looking statements, including, without limitation, statements relating to the Company’s plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under “Forward-Looking Statements” and under “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

Previous wording

Use of Non-GAAP Financial Measures

Current wording

The Company’s financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Sonoco’s management considers a variety of both GAAP and non-GAAP financial and operating measures in assessing the Company’s financial performance. The key GAAP measures used are net sales, operating profit, gross profit margin, net income attributable to Sonoco and diluted earnings per share. The key non-GAAP measures used are Adjusted operating profit, Adjusted net income attributable to Sonoco, Adjusted diluted earnings per share, and Adjusted EBITDA. For information about the Company’s use of non-GAAP measures and reconciliations of these measures to the most directly comparable GAAP measures see “Non-GAAP Financial Measures” below.

Previous wording

Sonoco is a multi-billion dollar global designer, developer, and manufacturer of a variety of highly-engineered and sustainable packaging serving multiple end markets. As of December 31, 2023, the Company had approximately 310 locations in 33 countries, serving some of the world’s best-known brands in some 85 nations. The Company's operating and reporting structure consists of two reportable segments, Consumer Packaging and Industrial Paper Packaging, with all remaining businesses reported as All Other. Geographically, in 2023, approximately 71% of sales were generated in the United States, 14% in Europe, 5% in Asia, 3% in Canada, and 7% in other regions.

Current wording

Sonoco is a multi-billion dollar global designer, developer, and manufacturer of a variety of highly-engineered and sustainable packaging products serving multiple end markets. As of December 31, 2024, the Company had approximately 315 locations in 40 countries, serving some of the world’s best-known brands around the globe. The Company’s operating and reporting structure consists of two reportable segments, Consumer Packaging and Industrial Paper Packaging, with all remaining businesses reported as All Other. Geographically, in 2024, approximately 67% of sales were generated in the United States, 18% in Europe, 6% in Asia, 2% in Canada, and 7% in other regions.

Previous wording

On September 8, 2023, the Company completed the acquisition of the remaining 65% interest in RTS Packaging from joint venture partner WestRock Company (“WestRock”) and the acquisition of a paper mill in Chattanooga, Tennessee (the “Chattanooga Mill”) from WestRock. These acquisitions further strengthened and expanded the Company’s 100% recycled fiber-based packaging solutions to serve consumer wine, spirits, food, beauty and healthcare markets. On December 1, 2023, the Company completed the acquisition in Brazil of Inapel, significantly expanding the Company’s presence in the flexible packaging services market in Latin America. Both acquisitions build on the Company's strategy of investing in our core businesses. See “Acquisitions and Divestitures—Acquisitions” below for more information.

Current wording

In September 2023, the Company acquired the remaining ownership interest in RTS Packaging, LLC (“RTS Packaging”) from joint venture partner WestRock Company (“WestRock”), to further strengthen and expand the Company’s 100% recycled fiber-based packaging solutions. See “Acquisitions and Divestitures—Acquisitions” below for more information.

Previous wording

Sonoco’s goal is to increase its long-term profitability and return capital to shareholders. Over the past several years, we have simplified our business portfolio around fewer, bigger businesses which has reduced operating complexity and improved agility. We are focused on efficient capital deployment into these larger, core business units to improve economic returns and improve integration effectiveness and speed for acquired strategic assets. In parallel, we have worked on commercial, operational, and supply chain excellence programs to shift the mix of our business towards higher-valued products and increase overall productivity, as well as strategic pricing initiatives to better capture input costs and the value of the services we provide.

Current wording

The Company is focused on efficient capital deployment into these larger, core business units to improve economic returns and improve integration effectiveness and speed for acquired strategic assets. In parallel, the Company has worked on commercial, operational, and supply chain excellence programs to shift the mix of its business towards higher-valued products and increase overall productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives, as well as strategic pricing initiatives intended to better capture input costs and the value of the services provided.

Previous wording

The Company's primary focus areas in 2023 were to continue to focus on improving returns on promising organic investments and acquisitions to better manage our business mix, improve profits, improve generation of operating cash flow and free cash flow, and operate the business with better efficiency. Another focus area in 2023 was the Company’s continued commitment to promote accountability and transparency in its sustainability and corporate responsibility programs.

Current wording

In 2024, the Company continued to focus on improving returns on both organic investments and acquisitions with a goal of better managing its business mix, improving profits, improving generation of operating cash flow and free cash flow, and operating the business with better efficiency. Another focus area in 2024 was the Company’s continued commitment to promote accountability and transparency in its sustainability and corporate responsibility programs.

Previous wording

The Company also continued efforts to improve productivity through focus on operational excellence including the implementation of automation programs and commercial excellence where we are realigning pricing models to value versus legacy cost-based inputs. The results of these efforts reflected positively in the Company's 2023 financial results.

Current wording

The Company also continued efforts to improve productivity through focus on operational excellence including the implementation of automation programs and commercial excellence where the Company is realigning pricing models to value-based pricing versus legacy cost-based inputs. The results of these efforts reflected positively in the Company’s 2024 financial results.

Previous wording

The Company completed two acquisitions during 2023 at a net cash cost of approximately $372.6 million.

Current wording

The Company completed two acquisitions during 2023 at a net cash cost of approximately $372.6 million. On December 1, 2023, the Company completed the acquisition of Inapel Embalagens Ltda. (“Inapel”), a manufacturer of single-layer and multilayer materials for flexible packaging in Brazil for a net cash payment at closing of $59.2 million with additional purchase consideration of $2.3 million and a final working capital settlement of $0.5 million paid to the seller in 2024. As Inapel is one of the operations included in the pending sale of TFP, the acquired assets and liabilities are reflected as assets and liabilities of discontinued operations in the Company’s Consolidated Balance Sheets as of December 31, 2024 and 2023.

Previous wording

On September 8, 2023, the Company completed the acquisition of the remaining 65% interest in RTS Packaging from joint venture partner WestRock, and the acquisition of the Chattanooga Mill from WestRock for net cash consideration of $313.4 million, subject to a final working capital adjustment of $0.5 million that was paid to WestRock in January 2024. Prior to completing the acquisitions, the Company held a 35% ownership interest in the RTS Packaging joint venture, which was formed in 1997, and combined the former protective packaging operations of WestRock and Sonoco to market recycled paperboard to glass container manufacturers and producers of wine, liquor, food, and pharmaceuticals. With the acquisition of the remaining interest in RTS Packaging and the acquisition of the Chattanooga Mill, the Company added approximately 1,100 employees, fourteen converting operations, including ten in the United States, two in Mexico, two in South America, and one paper mill in the United States.

Current wording

On September 8, 2023, the Company completed the acquisition of the remaining 65% ownership interest in RTS Packaging from joint venture partner WestRock, and the acquisition of a paper mill in Chattanooga, Tennessee (the “Chattanooga Mill”) from WestRock for net cash conside ration of $313.4 million, subject to a final working capital adjustment of $0.5 million that was paid to WestRock in January 2024. Prior to completing the acquisitions, the Company held a 35% ownership interest in the RTS Packaging joint venture, which was formed in 1997, and combined the former protective packaging operations of WestRock and Sonoco to market recycled paperboard to glass container manufacturers and producers of wine, liquor, food, and pharmaceuticals. With the acquisition of the remaining interest in RTS Packaging and the acquisition of the Chattanooga Mill, the Company added approximately 1,100 employees, fourteen converting operations, including ten in the United States, two in Mexico, two in South America, and one paper mill in the United States.

Previous wording

On July 1, 2023, the Company completed the sale of its U.S. BulkSak business, which consisted of the manufacturing and distribution of flexible intermediate bulk containers, plastic and fiber pallets, and custom fit liners and was a part of the Company’s Industrial Paper Packaging segment, to U.S. BulkSak Holdings, LLC. The cash selling price, as adjusted for the final working capital settlement, was $20.3 million with cash proceeds totaling $18.3 million received in 2023, and the remaining $2.0 million held in escrow to be released to the Company within 18 months from the date of the sale, pursuant to the settlement of any indemnity claims. As a result of the U.S. BulkSak divestiture, the Company recognized a pretax gain of $6.8 million included in “Gain/(Loss) on divestiture of business and other assets” in the Company’s Consolidated Statements of Income.

Current wording

On July 1, 2023, the Company completed the sale of its U.S. BulkSak business, which consisted of the manufacturing and distribution of flexible intermediate bulk containers, plastic and fiber pallets, and custom fit liners and was a part of the Company’s Industrial Paper Packaging segment, to U.S. BulkSak Holdings, LLC. The cash selling price, as adjusted for the final working capital settlement, was $20.3 million with cash proceeds totaling $18.3 million received in 2023, and the remaining $2.0 million held in escrow to be released to the Company within 18 months from the date of the sale, pursuant to the settlement of any indemnity claims. As a result of the U.S. BulkSak divestiture, the Company recognized a pretax gain of $6.8 million included in“(Loss)/Gain on divestiture of business and other assets” in the Company’s Consolidated Statements of Income.

Previous wording

Also on July 1, 2023, the Company agreed to the sale of its Mexico BulkSak business. The sale closed in December 2023 for a cash selling price, as adjusted for working capital, of $1.1 million. As a result of the Mexico BulkSak sale, the Company recognized a pretax gain of $0.1 million which is included in “Gain/(Loss) on divestiture of business and other assets” in the Company’s Consolidated Statements of Income.

Current wording

Also on July 1, 2023, the Company agreed to the sale of its Mexico BulkSak business. The sale closed in December 2023 for a cash selling price, as adjusted for working capital, of $1.1 million. As a result of the Mexico BulkSak sale, the Company recognized a pretax gain of $0.1 million which is included in “(Loss)/Gain on divestiture of business and other assets” in the Company’s Consolidated Statements of Income.

Previous wording

On January 26, 2023, the Company completed the sale of its S3 business, a provider of customized waste and recycling management programs and part of the Company’s Industrial Paper Packaging segment, to Northstar Recycling Co. (“Northstar”), for total cash proceeds of $13.8 million. An additional $1.5 million of proceeds are being held in escrow and will be released to the Company twenty months following the date of the divestiture, pursuant to any indemnification claims. The Company recognized a pretax gain of $11.1 million during the first quarter of 2023, which is included in “Gain/(Loss) on divestiture of business and other assets” in the Company’s Consolidated Statements of Income and is entitled to receive additional proceeds of $3.2 million in the second quarter of 2024 if certain conditions are met. This contingent consideration will be recognized as an additional gain on the sale at the point the contingencies are resolved.

Current wording

On January 26, 2023, the Company completed the sale of its S3 business, a provider of customized waste and recycling management programs and part of the Company’s Industrial Paper Packaging segment, to Northstar Recycling Co. (“Northstar”), for total cash proceeds of $13.8 million. An additional $1.5 million of proceeds were released to the Company from escrow in September 2024. The Company recognized a pretax gain of $11.1 million during the first quarter of 2023. In the second quarter of 2024, upon resolution of certain contingencies, the Company received cash proceeds and recognized an additional pretax gain of $1.3 million on the sale. These gains are included in “(Loss)/Gain on divestiture of business and other assets” in the Company’s Consolidated Statements of Income for their respective periods.

Previous wording

On January 26, 2023, in connection with the sale of the S3 business, the Company acquired a 2.7% equity interest in Northstar valued at $5.0 million. This investment is being accounted for under the measurement alternative (i.e., cost less impairment, adjusted for any qualifying observable price changes).

Current wording

On January 26, 2023, in connection with the sale of the S3 business, the Company acquired a 2.7% equity interest in Northstar valued at $5.0 million. This investment, which had been accounted for under the measurement alternative, was sold in December 2024 for a cash selling price of $8.6 million. The resulting gain of $3.6 million is included in “Other (expenses)/income, net” in the Company’s Consolidated Statements of Income.

Previous wording

Following the completion of Project Horizon in the third quarter of 2022, the Company’s project to convert the corrugated medium machine in Hartsville, South Carolina, to produce uncoated recycled paperboard, the Company now produces paper exclusively from recycled fibers and no longer requires natural tree fiber for production. Accordingly, on March 29, 2023, the Company sold its timberland properties, consisting of approximately 55,000 acres, to Manulife Investment Management for net cash proceeds of $70.8 million. The Company disposed of assets with a net book value of $9.9 million as part of the sale, and recognized a pretax gain from the sale of these assets of $60.9 million during the year ended December 31, 2023, which is included in “Gain/(Loss) on divestiture of business and other assets” in the Company’s Consolidated Statements of Income.

Current wording

Following the completion of Project Horizon in the third quarter of 2022, the Company’s project to convert the corrugated medium machine in Hartsville, South Carolina, to produce uncoated recycled paperboard, the Company now produces paper exclusively from recycled fibers and no longer requires natural tree fiber for production. Accordingly, on March 29, 2023, the Company sold its timberland properties, consisting of approximately 55 acres, to Manulife Investment Management for net cash proceeds of $70.8 million. The Company disposed of assets with a net book value of $9.9 million as part of the sale, and recognized a pretax gain from the sale of these assets of $60.9 million during the year ended December 31, 2023, which is included in“(Loss)/Gain on divestiture of business and other assets” in the Company’s Consolidated Statements of Income.

Previous wording

Due to its geographic footprint (approximately 310 locations in 33 countries as of December 31, 2023) and the cost-competitive nature of its businesses, the Company frequently seeks more cost-effective means and structures to serve its customers, to improve profitability, and to respond to fundamental changes in its markets. As such, restructuring costs have been and are expected to be a recurring component of the Company’s operating costs. The amount of these costs can vary significantly from year to year depending upon the scope and location of the restructuring activities.

Current wording

Due to its geographic footprint (approximately 315 locations in 40 countries as of December 31, 2024) and the cost-competitive nature of its businesses, the Company frequently seeks more cost-effective means and structures to serve its customers, to improve profitability, and to respond to fundamental changes in its markets. As such, plant closures in connection with footprint rationalization and headcount reductions are an important component of the Company’s cost control initiatives. The amount of these costs can vary significantly from year to year depending upon the scope and location of the restructuring activities.

Previous wording

During 2022, the Company recognized restructuring charges related to severance for employees terminated as a result of various plant closures or whose positions were eliminated as part of the Company’s ongoing organizational effectiveness efforts. Restructuring charges were also incurred during the year for consulting services and costs related to plant closures, including equipment removal, utilities, plant security, property taxes, and insurance at closed facilities. Asset impairment charges were recognized in the Industrial Paper Packaging and Consumer Packaging segments as the result of plant closures. The Company recognized other asset impairment charges in 2022 totaling $10.1 million, primarily as a result of completing the exit of its operations in Russia during the second quarter of 2022. These operations consisted of two small tube and core plants and were part of the Industrial Paper Packaging segment.

Current wording

During 2024, the Company recognized restructuring charges related to severance for employees terminated as a result of various plant closures or whose positions were eliminated as part of the Company’s ongoing organizational effectiveness efforts, including the relocation of certain facilities. The largest of these plant closures were the closures of the Company’s paper mills in Sumner, Washington (the “Sumner Mill”) and Kilkis, Greece (the “Kilkis Mill”), both of which were part of the Industrial Paper Packaging segment. Restructuring charges were also incurred during the year for costs related to plant closures, including equipment removal, utilities, plant security, property taxes, insurance, and environmental remediation costs related to the closure of the Sumner Mill, and ongoing facility carrying costs of previously announced plant closures. Asset impairment charges were recognized in the Industrial Paper Packaging segment related to the closures of the Sumner Mill and the Kilkis Mill and in the Consumer Packaging segment as a result of exiting a small metal canning lid business.

Previous wording

During 2023, the Company recognized restructuring charges related to severance for employees terminated as a result of various plant closures or whose positions were eliminated as part of the Company’s ongoing organizational effectiveness efforts. The largest of these plant closures was the closure of the Company’spaper mill in Hutchinson, Kansas, which was part of the Industrial Paper Packaging segment. Restructuring charges were also incurred during the year for costs related to plant closures, including equipment removal, utilities, plant security, property taxes, and insurance at closed facilities. Asset impairment charges were recognized in the Industrial Paper Packaging and Consumer Packaging segments as the result of plant closures.

Current wording

During 2023, the Company recognized restructuring charges related to severance for employees terminated as a result of various plant closures or whose positions were eliminated as part of the Company’s ongoing organizational effectiveness efforts. The largest of these plant closures was the closure of the Company’s paper mill in Hutchinson, Kansas, which was part of the Industrial Paper Packaging segment. Restructuring charges were also incurred during the year for costs related to plant closures, including equipment removal, utilities, plant security, property taxes, and insurance at closed facilities. Asset impairment charges were recognized in the Industrial Paper Packaging and Consumer Packaging segments as the result of plant closures.

Previous wording

The Company expects to recognize future additional costs totaling approximately $2.3 millionin connection with previously announced restructuring actions that were underway as of December 31, 2023. The Company believes that the majority of these charges will be incurred and paid by the end of 2024. The Company regularly evaluates its cost structure, including its manufacturing capacity, and additional restructuring actions are likely to be undertaken. Restructuring and asset impairment charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity and the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the Company operates.

Current wording

The Company expects to recognize future additional costs totaling approximately $3.0 millionin connection with previously announced restructuring actions that were underway as of December 31, 2024. The Company believes that the majority of these charges will be incurred and paid by the end of 2025. The Company regularly evaluates its cost structure, including its manufacturing capacity, and additional restructuring actions are likely to be undertaken. Restructuring and asset impairment charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity and the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the Company operates.

Previous wording

GAAP results reflect net after-tax, adjusted charges totaling $44.9 million and $173.1 million in 2023 and 2022, respectively. These adjustments are presented in the “Reconciliations of GAAP to Non-GAAP Financial Measures” tables. Adjusted for these items, Adjusted Earnings in 2023 was $519.9 million ($5.26 per diluted share), compared with $639.5 million ($6.48 per diluted share) in 2022.

Current wording

GAAP net income attributable to Sonoco was $475.0 million($4.80 per diluted share) in 2023, compared with $466.4 million ($4.72 per diluted share) in 2022. These GAAP results reflect net after-tax, adjusted charges totaling $44.9 million and $173.1 million in 2023 and 2022, respectively. These adjustments are presented in the “Reconciliations of GAAP to Non-GAAP Financial Measures” tables. Adjusted for these items, Adjusted net income attributable to Sonoco was $519.9 million ($5.26 per diluted share) in 2023, compared with $639.5 million ($6.48 per diluted share) in 2022.

Previous wording

The GAAP results were slightly higher in 2023 as a result of the full year impact of the acquisition of Metal Packaging, the acquisition of the remaining interest in RTS Packaging, and the acquisition of the Chattanooga Mill, gains from divestitures and sale of assets, and lower acquisition, integration and divestiture-related costs. These favorable factors were partially offset by lower volumes across the portfolio and unfavorable metal price overlap. Adjusted Earnings in 2023 declined as a result of lower volumes across the portfolio, inflationary pricing pressure within retail in the Consumer Packaging segment, and unfavorable index-related pricing in the Industrial Paper Packaging segment.

Current wording

The GAAP results were slightly higher in 2023 as a result of the full year impact of the acquisition of Metal Packaging, the acquisition of the remaining interest in RTS Packaging, and the acquisition of the Chattanooga Mill, gains from divestitures and sale of assets, and lower acquisition, integration and divestiture-related costs. These favorable factors were partially offset by lower volumes across the portfolio and unfavorable metal price overlap. Adjusted net income attributable to Sonoco declined in 2023 as a result of lower volumes across the portfolio, inflationary pricing pressure within retail in the Consumer Packaging segment, and unfavorable index-related pricing in the Industrial Paper Packaging segment.

Previous wording

Cost of sales decreased $465.3 million in 2023, or 8.0%, from the prior year. The decrease was attributable to the lower sales volume, which was partially offset by lower input costs, primarily for steel and old corrugated cardboard. Gross profit margins increased to 21.2% in 2023 from 19.9% in the prior year primarily due to the previously mentioned lower input costs.

Current wording

Cost of sales decreased $0.4 billion in 2023, or 8.5%, from the prior year. The decrease was attributable to the lower sales volume, which was partially offset by lower input costs, primarily for steel and old corrugated cardboard. Gross profit margins increased to 22.1% in 2023 from 20.9% in the prior year primarily due to the previously mentioned lower input costs.

Previous wording

Selling, general and administrative expenses (“SG&A”) increased $34.5 million, or 4.9%, and were 10.9% of sales in 2023 compared to 9.8% of sales in 2022. The current year increase was related to higher compensation, benefits, group medical, and information technology costs resulting from inflation and the impact of acquisitions. These increases were partially offset by lower year-over-year acquisition, integration, and divestiture-related costs. These costs were higher in the prior year due to the January 2022 acquisition of Metal Packaging.

Current wording

SG&A increased $35.0 million, or 5.7%, and were 11.8% of sales in 2023 compared to 10.4% of sales in 2022. The current year increase was related to higher compensation, benefits, group medical, and information technology costs resulting from inflation and the impact of acquisitions. These increases were partially offset by lower year-over-year acquisition, integration, and divestiture-related costs. These costs were higher in the prior year due to the January 2022 acquisition of Metal Packaging.

Previous wording

Restructuring and asset impairment charges totaled $56.9 million in both 2023 and 2022. The 2023 charges reflect the closure costs of several operations, including a paper mill in Kansas, a perimeter-of-the-store facility in California, and medical plastics facilities in the United States and United Kingdom. The 2022 charges include severance and other plant closure costs as well as a $9.2 million impairment charge resulting from the Company’s exit from its Russian operations. Additional information regarding restructuring actions and asset impairments is provided in Note 4 to the Company’s Consolidated Financial Statements.

Current wording

Restructuring and asset impairment charges totaled $47.9 million in 2023 compared with $52.4 million in 2022. The 2023 charges reflect costs related to the closure of several operations, including a paper mill in Kansas and a metal packaging facility and severance related to the closures of several smaller operations. The 2022 charges include severance and other plant closure costs as well as a $9.2 million impairment charge resulting from the Company’s exit from its Russian operations. Additional information regarding restructuring actions and asset impairments is provided in Note 5 to the Consolidated Financial Statements.

Previous wording

Other income, net was $39.7 million in 2023, reflecting a gain of $44.0 million resulting from the remeasurement of the Company’s previously held equity interest in RTS Packaging to fair value, partially offset by a loss of $4.3 million from the settlement of a contract associated with the acquisition of the Chattanooga Mill that was determined to have unfavorable terms given market conditions at the time of the acquisition. See Note 3 to the Consolidated Financial Statements for further information.

Current wording

Other (expense)/income, net was $39.7 million in 2023, reflecting a gain of $44.0 million resulting from the remeasurement of the Company’s previously held equity interest in RTS Packaging to fair value, partially offset by a loss of $4.3 million from the settlement of a contract associated with the acquisition of the Chattanooga Mill that was determined to have unfavorable terms given market conditions at the time of the acquisition. See Note 4 to the Consolidated Financial Statements for further information.

Previous wording

Net interest expense totaled $126.3 million for the year ended December 31, 2023, compared with $97.0 million in 2022. The increase was primarily due to higher year-over-year average debt balances resulting from the term loans executed in December 2022 and August 2023 and the impact of higher interest rates on the Company’s variable debt. Additional information regarding the Company’s indebtedness is provided in Note 10 to the Company’s Consolidated Financial Statements.

Current wording

Net interest expense totaled $125.4 million for the year ended December 31, 2023, compared with $96.3 million in 2022. The increase was primarily due to higher year-over-year average debt balances resulting from the term loans executed in December 2022 and August 2023 and the impact of higher interest rates on the Company’s variable debt. Additional information regarding the Company’s indebtedness is provided in Note 11 to the Consolidated Financial Statements.

Previous wording

The effective tax rates on GAAP and Adjusted Earnings for the full year 2023 were 24.3% and 24.6%, respectively, compared with 20.7% and 23.9%, respectively in 2022. The increase in the GAAP effective tax rate for 2023 was due primarily to the absence in 2023 of a release of a valuation allowance on foreign tax credits. The increase in the effective tax rate on Adjusted Earnings was primarily due to a variance in tax rates between jurisdictions in which the respective income and charges were taxed.

Current wording

The effective tax rates on GAAP and Adjusted net income attributable to Sonoco for the full year 2023 were 24.5% and 24.9%, respectively, compared with 20.8% and 24.5%, respectively, for the full year 2022. The increase in the GAAP effective tax rate for 2023 was due primarily to the absence in 2023 of a release of a valuation allowance on foreign tax credits. The increase in the effective tax rate on Adjusted net income attributable to Sonoco was primarily due to a variance in tax rates between jurisdictions in which the respective income and charges were taxed.

Previous wording

Segment results, which are reviewed by Company management to evaluate segment performance, do not include: restructuring/asset impairment charges: amortization of acquired intangibles: acquisition, integration, and divestiture-related charges; changes in LIFO inventory reserves; gains/losses from the sale of businesses or other assets; gains/losses on derivatives; or certain other items, if any, the exclusion of which the Company believes improves the comparability and analysis of the ongoing operating performance of the business. Accordingly, the term “segment operating profit” is defined as the segment’s portion of “operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments and All Other.

Current wording

Segment results, which are reviewed by Company management to evaluate segment performance, do not include: restructuring/asset impairment charges; amortization of acquired intangibles; acquisition, integration, and divestiture-related costs; changes in LIFO inventory reserves; gains/losses from the sale of businesses or other assets; gains/losses on derivatives; or certain other items, if any, the exclusion of which the Company believes improves the comparability and analysis of the ongoing operating performance of the business. Accordingly, the term “segment operating profit” is defined as the segment’s portion of “operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments and All Other, except for costs related to discontinued operations.

Previous wording

Segment operating profits decreased by $144.0 million year over year and operating profit margins decreased to 10.5% from 14.0%. The decreases in operating profit and operating margins were primarily due to unfavorable volume/mix and the unfavorable impact of metal price overlap of approximately $35 million. These unfavorable impacts were partially offset by improved productivity.

Current wording

Segment operating profits decreased by $156.4 million year over year and operating profit margins decreased to 11.6% from 17.2%. The decreases in operating profit and operating margins were primarily due to a $84.7 million decline from price/cost pressures and the unfavorable impact of metal price overlap, a $58.5 million decline from unfavorable sales volume/mix, and increased employee compensation and group medical costs. These unfavorable impacts were partially offset by $25.9 million in improved productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives.

Previous wording

31 FORM 10-K SONOCO 2023 ANNUAL REPORT reflecting the Company’s active management of collections and compliance with payment terms, along with the impact of lower volumes and lower selling prices.

Current wording

31 FORM 10-K SONOCO 2024 ANNUAL REPORT

Previous wording

All Other operating profit increased year over year, driven by ongoing structural improvement programs to improve profitability across this diversified collection of businesses, favorable strategic pricing initiatives and strong productivity. These favorable factors were partially offset by the impact of the lower volumes.

Current wording

All Other operating profit increased year over year, driven by ongoing structural improvement programs to improve profitability across this diversified collection of businesses, favorable strategic pricing initiatives and strong productivity from procurement savings, production efficiencies and fixed cost reduction initiatives. These favorable factors were partially offset by the impact of the lower volumes.

Previous wording

To assess and communicate the financial performance of the Company, Sonoco’s management uses, both internally and externally, certain financial performance measures that are not in conformity with GAAP. These “non-GAAP” financial measures (referred to as “Adjusted”) reflect adjustments to the net income attributable to the Company (“GAAP results”) to exclude amounts, including the associated tax effects, relating to:

Current wording

The Company uses certain financial performance measures, both internally and externally, that are not in conformity with GAAP (referred to as “non-GAAP financial measures”) to assess and communicate the financial performance of the Company. These non-GAAP financial measures, which are identified using the term “Adjusted” (for example, “Adjusted Operating Profit,” “Adjusted Net Income Attributable to Sonoco,” and “Adjusted Diluted EPS”), reflect adjustments to the Company’s GAAP operating results to exclude amounts, including the associated tax effects, relating to:

Previous wording

1 Restructuring and restructuring-related asset impairment charges are a recurring item as the Company’s restructuring programs usually require several years to fully implement, and the Company is continually seeking to take actions that could enhance its efficiency. Although recurring, these charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity and the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the restructuring actions occur.

Current wording

1 Restructuring and restructuring-related asset impairment charges are a recurring item as the Company’s restructuring programs usually require several years to fully implement, and the Company is continually seeking to take actions that could enhance its efficiency. Although recurring, these charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity, the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the restructuring actions occur.

Previous wording

The Company’s management believes the exclusion of the amounts relating to the above-listed items improves the period-to-period comparability and analysis of the underlying financial performance of the business. Non-GAAP figures previously identified by the term “Base” are now identified using the term “Adjusted,” for example, “Adjusted Operating Profit,” “Adjusted Net Income” (referred to as “Adjusted Earnings”), and Adjusted Diluted Earnings Per Share (referred to as “Adjusted EPS”).

Current wording

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

Previous wording

In addition to the “Adjusted” results described above, the Company also uses Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is defined as net income excluding the following: interest expense; interest income; provision for income taxes; depreciation, depletion and amortization expense; non-operating pension costs; net income attributable to noncontrolling interests; restructuring/asset impairment charges; changes in LIFO inventory reserves; gains/losses from the divestiture of businesses and other assets; other income; acquisition, integration and divestiture-related costs; derivative gains/losses; and other non-GAAP adjustments, if any, that may arise from time to time. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net sales.

Current wording

In addition to the “Adjusted” results described above, the Company also uses Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is defined as net income excluding the following: interest expense; interest income; provision for income taxes; depreciation, depletion and amortization expense; non-operating pension costs; net income/loss attributable to noncontrolling interests; restructuring/asset impairment charges; changes in LIFO inventory reserves; gains/losses from the divestiture of businesses and other assets; acquisition, integration and divestiture-related costs; other income; derivative gains/losses; and other non-GAAP adjustments, if any, that may arise from time to time. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net sales.

Previous wording

Reconciliations of GAAP to Non-GAAP results are presented under “Reconciliations of GAAP to Non-GAAP Financial Measures” below in conjunction with management’s discussion and analysis of the Company’s results of operations. Reconciliations are not provided for non-GAAP financial measures related to future years due to the likely occurrence of one or more of the following, the timing and magnitude of which management is unable to reliably forecast: possible gains or losses on the sale of businesses or other assets; restructuring costs and restructuring-related asset impairment charges; acquisition, integration and divestiture-related costs; and the tax effect of these items and/or other income tax-related events. These items could have a significant impact on the Company's future GAAP financial results.

Current wording

Reconciliations of GAAP to non-GAAP results are presented under “Reconciliations of GAAP to Non-GAAP Financial Measures” below in

Previous wording

The following tables reconcile the Company’s non-GAAP financial measures to their most directly comparable GAAP financial measures for each of the years presented in conjunction with management's analysis of the Company’s results of operations:

Current wording

The following tables reconcile the Company’s non-GAAP financial measures to their most directly comparable GAAP financial measures for each of the years presented:

Previous wording

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

Current wording

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

Previous wording

Segment results, which are reviewed by the Company’s management to evaluate segment performance, do not include the following: restructuring/asset impairment charges; amortization of acquisition intangibles; acquisition, integration, and divestiture-related costs; changes in LIFO inventory reserves; gains/losses from the sale of businesses or other assets; gains/losses on derivatives; or certain other items, if any, the exclusion of which the Company believes improves the comparability and analysis of the ongoing operating performance of the business. Accordingly, the term “segment operating profit” is defined as the segment’s portion of “operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments and All Other. Total operating profit is comprised of the sum of segment and All Other operating profit plus certain items that have been allocated to Corporate, including amortization of acquisition intangibles; restructuring/asset impairment charges; changes in LIFO inventory reserves; acquisition, integration and divestiture-related costs; gains/losses from the sale of businesses or other assets; gains/losses on derivatives; and certain other items that were excluded from segment and All Other operating profit.

Current wording

Segment results, which are reviewed by the Company’s management to evaluate segment performance, do not include the following: restructuring/asset impairment charges; amortization of acquisition intangibles; acquisition, integration, and divestiture-related costs; changes in LIFO inventory reserves; gains/losses from the sale of businesses or other assets; gains/losses on derivatives; or certain other items, if any, the exclusion of which the Company believes improves the comparability and analysis of the ongoing operating performance of the business. Accordingly, the term “segment operating profit” is defined as the segment’s portion of “operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments and All Other, except for costs related to discontinued operations. Total operating profit is comprised of the sum of segment and All Other operating profit plus certain items that have been allocated to Corporate, including amortization of acquisition intangibles; restructuring/asset impairment charges; changes in LIFO inventory reserves; acquisition, integration and divestiture-related costs; gains/losses from the sale of businesses or other assets; gains/losses on derivatives; and certain other items that were excluded from segment and All Other operating profit.

Previous wording

35 FORM 10-K SONOCO 2023 ANNUAL REPORT on the current outlook of reporting unit management for future operating results and took into consideration, among other things, specific business unit risk, the countries in which the reporting units operate, and implied fair values based on comparable trading multiples.

Current wording

35 FORM 10-K SONOCO 2024 ANNUAL REPORT