Forward-looking statements

Statements included in this Annual Report on Form 10-K 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. In addition, the Company and its representatives may from time to time make other oral or written statements that are also “forward-looking statements.” Words such as “estimate,” “project,” “intend,” “expect,” “believe,” “consider,” “plan,” “strategy,” “opportunity,” “commitment,” “target,” “anticipate,” “objective,” “goal,” “guidance,” “outlook,” “forecast,” “future,” “re-envision,” “assume,” “will,” “would,” “can,” “could,” “may,” “might,” “aspires,” “potential,” or the negative thereof, and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding:

•  availability and supply of raw materials, and offsetting high raw material costs, including the impact of potential changes in tariffs;

•  improved productivity and cost containment;

•  improving margins and leveraging strong cash flow and financial position;

•  effects of acquisitions and dispositions;

•  realization of synergies resulting from acquisitions;

•  costs, timing and effects of restructuring activities;

•  adequacy and anticipated amounts and uses of cash flows;

•  expected amounts of capital spending;

•  refinancing and repayment of debt;

•  financial strategies and the results expected of them;

•  plans with respect to repatriation of off-shore earnings;

•  financial results for future periods;

•  producing improvements in earnings;

•  profitable sales growth and rates of growth;

•  market leadership;

•  research and development spending;

•  expected impact and costs of resolution of legal proceedings;

•  extent of, and adequacy of provisions for, environmental liabilities;

•  adequacy of income tax provisions, realization of deferred tax assets, outcomes of uncertain tax issues and tax rates;

•  goodwill impairment charges and fair values of reporting units;

•  future asset impairment charges and fair values of assets;

•  anticipated contributions to pension and postretirement benefit plans, fair values of plan assets, long-term rates of return on plan assets, and projected benefit obligations and payments;

•  expected impact of implementation of new accounting pronouncements;

•  creation of long-term value and returns for shareholders;

•  continued payment of dividends; and

•  planned stock repurchases.

Such forward-looking statements are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management. Such information includes, without limitation, discussions as to guidance and other estimates, perceived opportunities, expectations, beliefs, plans, strategies, goals and objectives concerning our future financial and operating performance. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed or forecasted in such forward-looking statements. The risks, uncertainties and assumptions include, without limitation:

•  availability and pricing of raw materials, energy and transportation, including the impact of potential changes in tariffs, and the Company’s ability to pass raw material, energy and

transportation price increases and surcharges through to customers or otherwise manage these commodity pricing risks;

•  costs of labor;

•  work stoppages due to labor disputes;

•  success of new product development, introduction and sales;

•  consumer demand for products and changing consumer preferences;

•  ability to be the low-cost global leader in customer-preferred packaging solutions within targeted segments;

•  competitive pressures, including new product development, industry overcapacity, customer and supplier consolidation, and changes in competitors’ pricing for products;

•  ability to maintain or increase productivity levels, contain or reduce costs, and maintain positive price/cost relationships;

•  ability to negotiate or retain contracts with customers, including in segments with concentration of sales volume;

•  ability to improve margins and leverage cash flows and financial position;

•  continued strength of our paperboard-based tubes and cores and composite can operations;

•  ability to manage the mix of business to take advantage of growing markets while reducing cyclical effects of some of the Company’s existing businesses on operating results;

•  ability to maintain innovative technological market leadership and a reputation for quality;

•  ability to attract and retain talented and qualified employees, managers and executives;

•  ability to profitably maintain and grow existing domestic and international business and market share;

•  ability to expand geographically and win profitable new business;

•  ability to identify and successfully close suitable acquisitions at the levels needed to meet growth targets, and successfully integrate newly acquired businesses into the Company’s operations;

•  the costs, timing and results of restructuring activities;

•  availability of credit to us, our customers and suppliers in needed amounts and on reasonable terms;

•  effects of our indebtedness on our cash flow and business activities;

•  fluctuations in interest rates and our borrowing costs;

•  fluctuations in obligations and earnings of pension and postretirement benefit plans;

•  accuracy of assumptions underlying projections of benefit plan obligations and payments, valuation of plan assets, and projections of long-term rates of return;

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

•  resolution of income tax contingencies;

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

•  changes in U.S. and foreign tax rates, and tax laws, regulations, interpretations and implementation thereof;

•  accuracy in valuation of deferred tax assets;

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

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

•  ability to maintain effective internal controls over financial reporting;

•  liability for and anticipated costs of resolution of legal proceedings;

•  liability for and anticipated costs of environmental remediation actions;

•  effects of environmental laws and regulations;

•  operational disruptions at our major facilities;

•  failure or disruptions in our information technologies;

•  failures of third party transportation providers to deliver our products to our customers or to deliver raw materials to us;

•  substantially lower than normal crop yields;

•  loss of consumer or investor confidence;

•  ability to protect our intellectual property rights;

•  changes in laws and regulations relating to packaging for food products and foods packaged therein, other actions and public concerns about products packaged in our containers, or chemicals or substances used in raw materials or in the manufacturing process;

•  changing climate, climate change regulations and greenhouse gas effects;

•  actions of domestic or foreign government agencies and other changes in laws and regulations affecting the Company and increased costs of compliance;

•  international, national and local economic and market conditions and levels of unemployment; and

•  economic disruptions resulting from terrorist activities and natural disasters.

More information about the risks, uncertainties and assumptions that may cause actual results to differ materially from those expressed or forecasted in forward-looking statements is pro-

vided in the Company’s Annual Report on Form 10-K under Item 1A—“Risk Factors” and throughout other sections of that report and in other reports filed with the Securities and Exchange Commission. In light of these various risks, uncertainties and assumptions, the forward-looking events discussed in this Annual Report on Form 10-K might not occur.

The Company undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. You are, however, advised to review any further disclosures we make on related subjects, and about new or additional risks, uncertainties and assumptions, in our future filings with the Securities and Exchange Commission on Forms 10-K, 10-Q and 8-K.

References to our website address

References to our website address and domain names throughout this Annual Report on Form 10-K are for informational purposes only, or to fulfill specific disclosure requirements of the Securities and Exchange Commission’s rules or the New York Stock Exchange Listing Standards. These references are not intended to, and do not, incorporate the contents of our websites by reference into this Annual Report on Form 10-K.

Item 1. Business

(a) General development of business –

The Company is a South Carolina corporation founded in Hartsville, South Carolina, in 1899 as the Southern Novelty Company. The name was subsequently changed to Sonoco Products Company (“the Company” or “Sonoco”). Sonoco is a manufacturer of industrial and consumer packaging products and a provider of packaging services, with 298 locations in 33 countries.

Information about the Company’s acquisitions, dispositions, joint ventures and restructuring activities is provided in Notes 3 and 4 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

(b) Financial information about segments –

The Company reports its financial results in four reportable segments – Consumer Packaging, Paper and Industrial Converted Products, Display and Packaging, and Protective Solutions. Information about the Company’s reportable segments is provided in Note 16 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

(c) Narrative description of business –

Products and Services – The following discussion outlines the principal products produced and services provided by the Company.

Consumer Packaging

The Consumer Packaging segment accounted for approximately 42%, 43% and 43% of the Company’s consolidated net sales in the years ended December 31, 2017, 2016 and 2015, respectively. The operations in this segment consist of 80 plants throughout the world. The products, services and markets of the Consumer Packaging segment are as follows:

This segment included blow-molded plastic bottles and jars for most of 2016. However, on November 7, 2016, the Company completed the sale of its rigid plastics blow molding operations.

In 2017, Sonoco’s rigid packaging – paper-based products – was the Company’s second largest revenue-producing group of products and services, representing approximately 22% of consolidated net sales in the year ended December 31, 2017. This group comprised 23% and 21% of consolidated net sales in 2016 and 2015, respectively.

Display and Packaging

The Display and Packaging segment accounted for approximately 10%, 11% and 12% of the Company’s consolidated net sales in the years ended December 31, 2017, 2016 and 2015, respectively. The operations in this segment consist of 24 plants around the world including the United States, Poland, Mexico and Brazil. The products, services and markets of the Display and Packaging segment are as follows:

Paper and Industrial Converted Products

The Paper and Industrial Converted Products segment accounted for approximately 37%, 35% and 35% of the Company’s consolidated net sales in the years ended December 31, 2017, 2016 and 2015, respectively. This segment serves its markets through 164 plants on five continents. Sonoco’s paper operations provide the primary raw material for the Company’s fiber-based packaging. Sonoco uses approximately 62% of the paper it manufactures, and the remainder is sold to third parties. This vertical integration strategy is supported by 19 paper mills with 28 paper machines and 24 recycling facilities throughout the world. In 2017, Sonoco had the capacity to manufacture approximately 1.7 million tons of recycled paperboard. The products, services and markets of the Paper and Industrial Converted Products segment are as follows:

In 2017, Sonoco’s tubes and cores products were the Company’s largest revenue-producing group of products, representing approximately 22% of consolidated net sales in the year ended December 31, 2017. This group comprised 22% and 21% of consolidated net sales in 2016 and 2015, respectively.

Protective Solutions

The Protective Solutions segment accounted for approximately 11%, 11%, and 10% of the Company’s consolidated net sales in the years ended December 31, 2017, 2016 and 2015, respectively. The products, services and markets of the Protective Solutions segment are as follows:

Product Distribution – Each of the Company’s operating units has its own sales staff, and maintains direct sales relationships with its customers. For those customers that buy from more than one business unit, the Company often assigns a single representative or team of specialists to handle that customer’s needs. Some of the units have service staff at the manufacturing facility that interact directly with customers. The Paper and Industrial Converted Products segment and certain operations within the Consumer Packaging segment have customer service centers located in Hartsville, South Carolina, which are the main contact points between their North American business units and their customers. Divisional sales personnel also provide sales management, marketing and product development assistance as needed. Typically, product distribution is directly from the manufacturing plant to the customer, but in some cases, product is warehoused in a mutually advantageous location to be shipped to the customer as needed.

Raw Materials – The principal raw materials used by the Company are recovered paper, paperboard, steel, aluminum and plastic resins. Raw materials are purchased from a number of outside sources. The Company considers the supply and availability of raw materials to be adequate to meet its needs.

Patents, Trademarks and Related Contracts – Most inventions and product and process innovations are generated by Sonoco’s development, marketing and engineering staffs, and are important to the Company’s internal growth. Patents have been granted on many inventions created by Sonoco staff in the United States and in many other countries. Additionally, patents and trade secrets were acquired as part of several acquisitions over the past year, including the acquisition of Clear Lam and Packaging Holdings, Inc. and subsidiaries, including Peninsula Packaging LLC. These patents are managed globally by a Sonoco intellectual capital management team through the Company’s subsidiary, Sonoco Development, Inc. (SDI). SDI globally manages patents, trade secrets, confidentiality agreements and license agreements. Some patents have been licensed to other manufacturers. Sonoco also licenses a few patents from outside companies and universities. U.S. patents expire after about 20 years, and patents on new innovations replace many of the abandoned or expired patents. A second intellectual capital subsidiary of Sonoco, SPC Resources, Inc., globally manages Sonoco’s trademarks, service marks, copyrights and Internet domain names. Most of Sonoco’s products are marketed worldwide under trademarks such as Sonoco^®, SmartSeal^®, Sonotube^®, Sealclick^®, Sonopost^® and UltraSeal^®. Sonoco’s registered web domain names such as www.sonoco.com and www.sonotube.com provide information about Sonoco, its people and its products. Trademarks and domain names are licensed to outside companies where appropriate.

Seasonality – The Company’s operations are not seasonal to any significant degree, although the Consumer Packaging and Display and Packaging segments normally report slightly higher sales and operating profits in the second half of the year, when compared with the first half.

Working Capital Practices – The Company is not required to carry any significant amounts of inventory to meet customer requirements or to assure itself continuous allotment of goods.

Dependence on Customers – On an aggregate basis during 2017, the five largest customers in the Paper and Industrial Converted Products segment, the Consumer Packaging segment and the Protective Solutions segment accounted for approximately 7%, 22% and 29%, respectively, of each segment’s net sales. The dependence on a few customers in the Display and Packaging segment is more significant, as the five largest customers in this segment accounted for approximately 53% of that segment’s sales.

Sales to the Company’s largest customer represented approximately 4% of consolidated revenues in 2017. This concentration of sales volume resulted in a corresponding concentration of credit, representing approximately 4% of the Company’s consolidated trade accounts receivable at December 31, 2017. The Company’s next largest customer comprised approximately 3% of the Company’s consolidated revenues for the year ended December 31, 2017.

Backlog – Most customer orders are manufactured with a lead time of three weeks or less. Therefore, the amount of backlog orders at December 31, 2017, was not material. The Company expects all backlog orders at December 31, 2017, to be shipped during 2018.

Competition – The Company sells its products in highly competitive markets, which include paper, textile, film, food, chemical, packaging, construction, and wire and cable. All of these markets are influenced by the overall rate of economic activity and their behavior is principally driven by supply and demand. Because we operate in highly competitive markets, we regularly bid for new and continuing business. Losses and/or awards of business from our largest customers, customer changes to alternative forms of packaging, and the repricing of business, can have a significant effect on our operating results. The Company manufactures and sells many of its products globally. The Company, having operated internationally since 1923, considers its ability to serve its customers worldwide in a timely and consistent manner a competitive advantage. The Company also believes that its technological leadership, reputation for quality, and vertical integration are competitive advantages. Expansion of the Company’s product lines and global presence is driven by the rapidly changing needs of its major customers, who demand high-quality, state-of-the-art, environmentally compatible packaging, wherever they choose to do business. It is important to be a low-cost producer in order to compete effectively. The Company is constantly focused on productivity improvements and other cost-reduction initiatives utilizing the latest in technology.

Research and Development – Company-sponsored research and development expenses totaled approximately $21.0 million in 2017, $22.5 million in 2016 and $22.1 million in 2015. Customer-sponsored research and development expenses were not material in any of these periods. Significant projects in Sonoco’s Consumer Packaging segment include a broad range of new and next generation product developments across flexible packaging, rigid plastic and composite packaging, including development of FlexValve™ integrated venting technology for flexible coffee packaging and PureShield™ powdered infant formula cans for emerging global markets. During 2017, the Paper and Industrial Converted Products segment continued to invest in efforts to design and develop

new products for the paper industry and for the film and textiles industries. In addition, efforts were focused on enhancing performance characteristics of the Company’s tubes and cores in the construction, tape and paper packaging areas. Technology emphasis was also placed on delivering improved productivity via materials developments and key converting process improvements. Research and development projects in the Company’s Protective Solutions segment were primarily focused on developing new temperature-assurance packaging solutions for the pharmaceuticals and clinical trials market.

Compliance with Environmental Laws – Information regarding compliance with environmental laws is provided in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Risk Management,” and in Note 14 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Number of Employees – Sonoco had approximately 21,000 employees worldwide as of December 31, 2017.

(d) Financial information about geographic areas –

Financial information about geographic areas is provided in Note 16 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, and in the

information about market risk in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Risk Management” of this Annual Report on Form 10-K.

(e) Available information –

The Company electronically files with the Securities and Exchange Commission (SEC) its annual reports on Form 10-K, its quarterly reports on Form 10-Q, its periodic reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the “1934 Act”), and proxy materials pursuant to Section 14 of the 1934 Act. The SEC maintains a site on the Internet, www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Sonoco also makes its filings available, free of charge, through its website, www.sonoco.com, as soon as reasonably practical after the electronic filing of such material with the SEC.

Item 1A. Risk factors

We are subject to risks and uncertainties that could adversely affect our business, consolidated financial condition, results of operations and cash flows, and the trading price of our securities. These factors could also cause our actual results to materially differ from the results contemplated by forward-looking statements we make in this report, in our other filings with the Securities and Exchange Commission, and in our public announcements. You should consider the risk factors described below, as well as other factors described elsewhere in this report and in our other filings with the Securities and Exchange Commission, in evaluating us, our business, and any investment in our securities. Although these are the most significant risk factors of which we are currently aware, they are not the only risk factors to which we are subject. Additional risk factors not currently known to us, or that we currently deem immaterial, could also adversely affect our business operations and financial results.

Changes in domestic and global economic conditions may have a negative impact on our business operations and financial results.

Although our business is diversified across various markets and customers, because of the nature of our products and services, general economic downturns in the United States and globally can adversely affect our business operations and financial results. Current global economic challenges, including shrinking middle class incomes, the difficulties of the United States and other countries in dealing with their rising debt levels, and currency fluctuations are likely to continue to put pressure on the economy, and on us. In addition, interest rates have been at historic lows for a number of years and the likelihood of their beginning a return to historic norms appears to be increasing as the general economy improves and unemployment declines. Such an increase in rates would put additional pressure on consumers and the economy in general. As evidenced in recent years, tightening of credit availability and/or financial difficulties, leading to declines in consumer and business confidence and spending, affect us, our customers, suppliers and distributors. When such conditions exist, customers may delay, decrease or cancel purchases from us, and may also delay payment or fail to pay us altogether. Suppliers may have difficulty filling our orders and distributors may have difficulty getting our products to market, which may affect our ability to meet customer demands, and result in loss of business. Weakened global economic conditions may also result in unfavorable changes in our product price/mix and lower profit margins. All of these factors may have a material adverse effect on us.

Our international operations subject us to various risks that could adversely affect our business operations and financial results.

We have operations throughout North and South America, Europe, Australia and Asia, with 298 facilities in 33 countries. In 2017, approximately 35% of consolidated sales came from operations and sales outside of the United States, and we expect to continue to expand our international operations in the future. Management of global operations is extremely complex, and operations in foreign countries are subject to local statutory and regulatory requirements, differing legal environments and other additional risks that may not exist, or be as significant, in the United States. These additional risks may adversely affect our business operations and financial results, and include, without limitation:

•  foreign currency exchange rate fluctuations and foreign currency exchange controls;

•  hyperinflation and currency devaluation;

•  possible limitations on conversion of foreign currencies into dollars or payment of dividends and other payments by non-U.S. subsidiaries;

•  non-tariff barriers, duties, taxes or government royalties, including the imposition or increase of withholding and other taxes on remittances and other payments by non-U.S. subsidiaries;

•  our interpretation of our rights and responsibilities under local statutory and regulatory rules for sales taxes, VAT and similar taxes, statutory accounting requirements, licenses and permits, etc. may prove to be incorrect or unsupportable resulting in fines, penalties, and/or other liabilities related to non-compliance, damage to our reputation, unanticipated operational restrictions and/or other consequences as a result of the Company’s actions, or inaction, taken to perform our responsibilities or protect our rights;

•  changes in tax laws, or the interpretation of such laws, affecting taxable income, tax deductions, or other attributes relating to our non-U.S. earnings or operations;

•  inconsistent product regulation or policy changes by foreign agencies or governments;

•  difficulties in enforcement of contractual obligations and intellectual property rights;

•  high social benefit costs for labor, including more expansive rights of foreign unions and work councils, and costs associated with restructuring activities;

•  national and regional labor strikes;

•  difficulties in staffing and managing international operations;

•  geographic, language and cultural differences between personnel in different areas of the world;

•  differences in local business practices;

•  foreign governments’ restrictive trade policies, and customs, import/export and other trade compliance regulations;

•  compliance with and changes in applicable foreign laws;

•  compliance with U.S. laws, including those affecting trade and foreign investment and the Foreign Corrupt Practices Act;

•  loss or non-renewal of treaties between foreign governments and the U.S.;

•  product boycotts, including with respect to products of our multi-national customers;

•  increased costs of maintaining international manufacturing facilities and undertaking international marketing programs;

•  difficulty in collecting international accounts receivable and potentially longer payment cycles;

•  the potential for nationalization or expropriation of our enterprises or facilities without appropriate compensation; and

•  political, social, legal and economic instability, civil unrest, war, catastrophic events, acts of terrorism, and widespread outbreaks of infectious diseases.

Global economic conditions, disruptions in the credit markets and instability of the Euro could adversely affect our business, financial condition or results of operations.

Additionally, there has been concern regarding the overall long-term stability of the Euro and the future of the Euro as a single currency given the diverse economic and political circumstances in individual Eurozone countries. Potential negative developments (such as a Eurozone country in which we operate replacing the Euro with its own currency) and market perceptions related to the Euro could adversely affect the value of our Euro-denominated assets, reduce the amount of our translated amounts of U.S. dollar revenue and income from operations, and otherwise negatively affect our business, financial condition or results of operations. Although instability of the Euro would likely have more broad-reaching effects than only to euro-denominated economies, annual revenue in 2017 for our

businesses where the Euro is the functional currency totaled $515 million.

The vote by the United Kingdom to leave the European Union could adversely affect us.

In 2016, the U.K. voted to leave the European Union (E.U.) (referred to as Brexit), and in 2017, the U.K. gave the notice that commences the formal Brexit process. Brexit could cause disruptions to and create uncertainty surrounding our U.K. businesses, including affecting relationships with existing and future customers, suppliers and employees. The effects of Brexit will depend on any agreements the U.K. makes to retain access to E.U. markets either during a transitional period or more permanently. The measures could potentially disrupt the markets we serve and the tax jurisdictions in which we operate and adversely change tax benefits or liabilities in these or other jurisdictions. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate. Although the Brexit decision could have broad-reaching effects beyond just in the U.K. itself, annual revenue in 2017 for our U.K. businesses alone totaled $103 million.

We are subject to governmental export and import control laws and regulations in certain jurisdictions where we do business that could subject us to liability or impair our ability to compete in these markets.

Certain of our products are subject to export control laws and regulations and may be exported only with an export license or through an applicable export license exception. If we fail to comply with export licensing, customs regulations, economic sanctions or other laws, we could be subject to substantial civil or criminal penalties, including economic sanctions against us, incarceration for responsible employees and managers, and the possible loss of export or import privileges. In addition, if our distributors fail to obtain appropriate import, export or re-export licenses or permits, we may also be materially adversely affected through reputational harm and penalties. Obtaining the necessary export license for a particular sale may be time consuming and expensive and could result in the delay or loss of sales opportunities.

Furthermore, export control laws and economic sanctions prohibit the shipment of certain products to embargoed or sanctioned countries, governments and persons. While we train our employees to comply with these regulations, we cannot guarantee that a violation will not occur. A prohibited shipment could have negative consequences, including government investigations, penalties, fines, civil and criminal sanctions and reputational harm. Any change in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could decrease our ability to export or sell our products internationally. Any limitation on our ability to export or sell our products could materially adversely affect our business.

Raw materials, energy and other price increases or shortages may reduce our net income.

As a manufacturer, our sales and profitability are dependent on the availability and cost of raw materials, labor and other inputs. Most of the raw materials we use are purchased from third parties. Principal examples are recovered paper, steel, aluminum and resin. Prices and availability of these raw materials are subject to substantial fluctuations that are beyond our control due to factors such as changing economic conditions, currency and commodity price fluctuations, resource availability,

transportation costs, weather conditions and natural disasters, political unrest and instability, and other factors impacting supply and demand pressures. Increases in costs can have an adverse effect on our business and financial results. Our performance depends, in part, on our ability to pass on cost increases to our customers by raising selling prices and/or offset the impact by improving productivity. Although many of our long-term contracts and non-contractual pricing arrangements with customers permit limited price adjustments to reflect increased raw material costs, such adjustments may not occur quickly enough, or be sufficient to prevent a materially adverse effect on net income and cash flow. Furthermore, we may not be able to improve productivity or realize sufficient savings from our cost reduction initiatives to offset the impact of increased costs.

Some of our manufacturing operations require the use of substantial amounts of electricity and natural gas, which may be subject to significant price increases as the result of changes in overall supply and demand and the impacts of legislation and regulatory action. We forecast and monitor energy usage, and, from time to time, use commodity futures or swaps in an attempt to reduce the impact of energy price increases. However, we cannot guarantee success in these efforts, and we could suffer adverse effects to net income and cash flow should we be unable to either offset or pass higher energy costs through to our customers in a timely manner or at all.

Supply shortages or disruptions in our supply chains could affect our ability to obtain timely delivery of materials, equipment and supplies from our suppliers, and, in turn, adversely affect our ability to supply products to our customers. Such disruptions could have a material adverse effect on our business and financial results.

We depend on third parties for transportation services.

We rely primarily on third parties for transportation of the products we manufacture and/or distribute, as well as for delivery of our raw materials. In particular, a significant portion of the goods we manufacture and raw materials we use are transported by railroad or trucks, which are highly regulated. If any of our third-party transportation providers were to fail to deliver the goods that we manufacture or distribute in a timely manner, we might be unable to sell those products at full value, or at all. Similarly, if any of these providers were to fail to deliver raw materials to us in a timely manner, we might be unable to manufacture our products in response to customer demand. In addition, if any of these third parties were to cease operations or cease doing business with us, we might be unable to replace them at reasonable cost. Any failure of a third-party transportation provider to deliver raw materials or finished products in a timely manner could harm our reputation, negatively impact our customer relationships and have a material adverse effect on our financial condition and results of operations.

We may not be able to identify suitable acquisition candidates, which could limit our potential for growth.

We have made numerous acquisitions in recent years, and expect to actively seek new acquisitions that management believes will provide meaningful opportunities for growth. However, we may not be able to identify suitable acquisition candidates or complete acquisitions on acceptable terms and conditions. Other companies in our industries have similar investment and acquisition strategies to ours, and competition for acquisitions may intensify. If we are unable to identify acquisition candidates that meet our criteria, our potential for growth may be restricted.

We may encounter difficulties in integrating acquisitions, which could have an adverse impact on our financial condition and operating results.

As noted in the risk factor above, we have invested a substantial amount of capital in acquisitions, joint ventures and strategic investments and we expect that we will continue to do so in the foreseeable future. We are continually evaluating acquisitions and strategic investments that are significant to our business both in the United States and internationally. Acquisitions, joint ventures and strategic investments involve numerous risks. Acquired businesses may not achieve the expected levels of revenue, profitability or productivity, or otherwise perform as expected, and acquisitions may involve significant cash expenditures, debt incurrence, operating losses, and expenses that could have a material adverse effect on our financial condition and operating results. Acquisitions also involve special risks, including, without limitation, the potential assumption of unanticipated liabilities and contingencies, and the challenges of effectively integrating acquired businesses.

Other risks and challenges associated with acquisitions include, without limitation:

•  demands on management related to increase in size of our businesses and additional responsibilities of management;

•  diversion of management’s attention;

•  disruptions to our ongoing businesses;

•  inaccurate estimates of fair value in accounting for acquisitions and amortization of acquired intangible assets, which could reduce future reported earnings;

•  difficulties in assimilation and retention of employees;

•  difficulties in integration of departments, systems, technologies, books and records, controls (including internal financial and disclosure controls), procedures, and policies;

•  potential loss of major customers and suppliers;

•  challenges associated with operating in new geographic regions;

•  difficulties in maintaining uniform standards, controls, procedures and policies;

•  potential failure to identify material problems and liabilities during due diligence review of acquisition targets; and

•  potential failure to obtain sufficient indemnification rights to fully offset possible liabilities associated with acquired businesses.

While management believes that acquisitions will improve our competitiveness and profitability, no assurance can be given that acquisitions will be successful or accretive to earnings. If actual performance in an acquisition falls significantly short of the projected results, or the assessment of the relevant facts and circumstances was inaccurate or changes, it is possible that a noncash impairment charge of any related goodwill would be required, and our results of operations and financial condition could be adversely affected.

In connection with acquisitions or divestitures, we may become subject to liabilities and legal claims.

In connection with any acquisitions or divestitures, we may become subject to liabilities or legal claims, including but not limited to third party liability and other tort claims; claims for breach of contract; employment-related claims; environmental, health and safety liabilities, conditions or damage; permitting, regulatory or other legal compliance issues; or tax liabilities. If we become subject to any of these liabilities or claims, and they are not adequately covered by insurance or an enforceable indemnity or similar agreement from a creditworthy counterparty, we may be responsible for significant out-of-pocket expenditures. These liabilities, if they materialize, could have a material adverse effect on our business, financial condition and results of operations.

We may encounter difficulties restructuring operations or closing or disposing of facilities.

We are continuously seeking the most cost-effective means and structure to serve our customers and to respond to changes in our markets. Accordingly, from time to time, we have, and are likely to again, close higher-cost facilities, sell non-core assets and otherwise restructure operations in an effort to improve cost competitiveness and profitability. As a result, restructuring and divestiture costs have been, and are expected to be, a recurring component of our operating costs, the magnitude of which could vary significantly from year to year depending on the scope of such activities. Divestitures and restructuring may also result in significant financial charges for the write-off or impairment of assets, including goodwill and other intangible assets. Furthermore, such activities may divert the attention of management, disrupt our ordinary operations, or result in a reduction in the volume of products produced and sold. There is no guarantee that any such activities will achieve our goals, and if we cannot successfully manage the associated risks, our financial position and results of operations could be adversely affected.

We face intense competition, and failure to compete effectively can have an adverse effect on our operating results.

We sell our products in highly competitive markets. We regularly bid for new and continuing business, and being a responsive, high-quality, low-cost producer is a key component of effective competition. The loss of business from our larger customers, customer changes to alternative forms of packaging, or renewal of business with less favorable terms can have a significant adverse effect on our operating results.

Continuing consolidation of our customer base and suppliers may intensify pricing pressure.

Like us, many of our larger customers have acquired companies with similar or complementary product lines, and many of our customers have been acquired. Additionally, many of our suppliers of raw materials are consolidating. This consolidation of customers and suppliers has increased the concentration of our business with our largest customers, and in some cases, increased pricing pressures. Similarly, consolidation of our larger suppliers has resulted in increased pricing pressures from our suppliers. Further consolidation of customers and suppliers could intensify pricing pressure and reduce our net sales and operating results.

The loss of a key customer, or a reduction in its production requirements, could have a significant adverse impact on our sales and profitability.

Each of our segments has large customers, and the loss of any of these could have a significant adverse effect on the segment’s sales and, depending on the magnitude of the loss, our results of operations and financial condition. Although a majority of our master customer contracts are long-term, they are terminable under certain circumstances, such as our failure to meet quality, pricing, or volume requirements, and the contracts themselves often do not require a specific level of purchasing. There is no assurance that existing customer relationships will be renewed at the same level of production, or at all, at the end of the contract term. Furthermore, although no one customer accounted for more than 10% of our net sales in 2017 or 2016, the loss of any of our major customers, a reduction in their purchasing levels or an adverse change in the terms of supply agreements with these customers could reduce our net sales and net income. Continued consolidation of our customers could exacerbate any such loss. For more information on

concentration of sales volume in our reportable segments, see Item1(c), “Dependence on Customers.”

We may not be able to develop new products acceptable to the market.

For many of our businesses, organic growth depends on product innovation, new product development and timely response to constantly changing consumer demands and preferences. Sales of our products and services depend heavily on the volume of sales made by our customers to consumers. Consumer preferences for products and packaging formats are constantly changing based on, among other factors, cost, convenience, and health, environmental and social concerns and perceptions. Our failure, or the failure of our customers, to develop new or better products in response to changing consumer preferences in a timely manner may hinder our growth potential and affect our competitive position, and adversely affect our business and results of operations.

We are subject to costs and liabilities related to environmental, health and safety, and corporate social responsibility laws and regulations that could adversely affect operating results.

We must comply with extensive laws, rules and regulations in the United States and in each of the countries in which we do business regarding the environment, health and safety, and corporate social responsibility. Compliance with these laws and regulations can require significant expenditures of financial and employee resources.

Federal, state, provincial, foreign and local environmental requirements, including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), and particularly those relating to air, soil and water quality, handling, discharge, storage and disposal of a variety of substances, and climate change are significant factors in our business and generally increase our costs of operations. We may be found to have environmental liability for the costs of remediating soil or water that is, or was, contaminated by us or a third party at various sites that we now, or previously, owned, used or operated. Legal proceedings may result in the imposition of fines or penalties, as well as mandated remediation programs, that require substantial, and in some instances, unplanned capital expenditures.

We have incurred in the past, and may incur in the future, fines, penalties and legal costs relating to environmental matters, and costs relating to the damage of natural resources, lost property values and toxic tort claims. We have made expenditures to comply with environmental regulations and expect to make additional expenditures in the future. As of December 31, 2017, approximately $20.3 million was reserved for environmental liabilities. Such reserves are established when it is considered probable that we have some liability. However, because the extent of potential environmental damage, and the extent of our liability for the damage, is usually difficult to assess and may only be ascertained over a long period of time, our actual liability in such cases may end up being substantially higher than the currently reserved amount. Accordingly, additional charges could be incurred that would have a material adverse effect on our operating results and financial position.

Many of our products come into contact with the food and beverages packaged within, and therefore we are subject to risks and liabilities related to health and safety matters in connection with those products. Accordingly, our products must comply with various laws and regulations for food and beverages applicable to our customers. Changes in such laws and regulations could negatively impact customers’ demand for our products as they comply with such changes and/or require us to

make changes to our products. Such changes to our products could include modifications to the coatings and compounds we use, possibly resulting in the incurrence of additional costs. Additionally, because many of our products are used to package consumer goods, we are subject to a variety of risks that could influence consumer behavior and negatively impact demand for our products, including changes in consumer preferences driven by various health-related concerns and perceptions.

Disclosure regulations relating to the use of “conflict minerals” sourced from the Democratic Republic of the Congo and adjoining countries could affect the sourcing, availability and cost of materials used in the manufacture of some of our products. We also incur costs associated with supply chain due diligence, and, if applicable, potential changes to products, processes or sources of supply as a result of such due diligence. Because our supply chain is complex, we may also face reputation risk with our customers and other stakeholders if we are unable sufficiently to verify the origins of all such minerals used in our products.

Changes to laws and regulations dealing with environmental, health and safety, and corporate social responsibility issues are made or proposed with some frequency, and some of the proposals, if adopted, might, directly or indirectly, result in a material reduction in the operating results of one or more of our operating units. However, any such changes are uncertain, and we cannot predict the amount of additional capital expenditures or operating expenses that could be necessary for compliance.

Product liability claims and other legal proceedings could adversely affect our operations and financial performance.

We produce products and provide services related to other parties’ products. While we have built extensive operational processes intended to ensure that the design and manufacture of our products meet rigorous quality standards, there can be no assurance that we or our customers will not experience operational process failures that could result in potential product, safety, regulatory or environmental claims and associated litigation. We are also subject to a variety of legal proceedings and legal compliance risks in our areas of operation around the globe. Any such claims, whether with or without merit, could be time consuming and expensive to defend and could divert management’s attention and resources. In accordance with customary practice, we maintain insurance against some, but not all, of these potential claims; however, in the future, we may not be able to maintain such insurance at acceptable premium cost levels. In addition, the levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities. If any significant judgment or claim is not fully insured or indemnified against, it could have a material adverse impact on our business, financial condition and results of operations.

We and the industries in which we operate are at times being reviewed or investigated by regulators and other governmental authorities, which could lead to enforcement actions, fines and penalties or the assertion of private litigation claims and damages. Simply responding to actual or threatened litigation or government investigations of our compliance with regulatory standards may require significant expenditures of time and other resources. While we believe that we have adopted appropriate risk management and compliance programs, the global and diverse nature of our operations means that legal and compliance risks will continue to exist and legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, will arise from time to time that could adversely affect our business, results of operations and financial condition.

Changes in pension plan assets or liabilities may reduce operating results and shareholders’ equity.

We sponsor various defined benefit plans worldwide, and have an aggregate projected benefit obligation for these plans of approximately $1.8 billion as of December 31, 2017. The difference between defined benefit plan obligations and assets (the funded status of the plans) significantly affects the net periodic benefit costs and the ongoing funding requirements of the plans. Among other factors, changes in discount rates and lower-than-expected actual investment returns could substantially increase our future plan funding requirements and have a negative impact on our results of operations and cash flows. As of December 31, 2017, these plans hold a total of approximately $1.5 billion in assets funding a portion of the projected benefit obligations of the plans, which consist primarily of common collective trusts, mutual funds, common stocks and debt securities and also include alternative investments such as interests in real estate funds and hedge funds. If the performance of these assets does not meet our assumptions, or discount rates decline, the underfunding of the plans may increase and we may have to contribute additional funds to these plans, and our pension expense may increase, which could adversely affect operating results and shareholders’ equity.

We, or our customers, may not be able to obtain necessary credit or, if so, on reasonable terms.

We have $1.0 billion of fixed-rate debt outstanding. We also operate a $350 million commercial paper program, supported by a $500 million credit facility of an equal amount committed by a syndicate of eight banks until July 2022. If we were prevented from issuing commercial paper, we have the contractual right to draw funds directly on the underlying bank credit facility. We believe that the lenders have the ability to meet their obligations under the facility. However, if these obligations were not met, we may be forced to seek more costly or cumbersome forms of credit. Should such credit be unavailable for an extended time, it would significantly affect our ability to operate our business and execute our plans. In addition, our customers may experience liquidity problems as a result of a negative change in the economic environment, including the ability to obtain credit, that could limit their ability to purchase our products and services or satisfy their existing obligations.

Our credit ratings are important to our ability to issue commercial paper at favorable rates of interest. A downgrade in our credit rating could increase our cost of borrowing.

Certain of our debt agreements impose restrictions with respect to the maintenance of financial ratios and the disposition of assets. The most restrictive covenant currently requires us to maintain a minimum level of interest coverage, and a minimum level of net worth. Although we were substantially above these minimum levels at December 31, 2017, these restrictive covenants could adversely affect our ability to engage in certain business activities that would otherwise be in our best long-term interests.

Our indebtedness could adversely affect our cash flow, increase our vulnerability to economic conditions, and limit or restrict our business activities.

In addition to interest payments, from time to time a significant portion of our cash flow may need to be used to service our indebtedness, and, therefore, may not be available for use in our business. Our ability to generate cash flow is subject to general economic, financial, competitive, legislative, regulatory, and other factors that may be beyond our control. Our

indebtedness could have a significant impact on us, including, but not limited to:

•  increasing our vulnerability to general adverse economic and industry conditions;

•  requiring us to dedicate a significant portion of our cash flow from operations to payments on our indebtedness, thereby reducing the amount of our cash flow available to fund working capital, acquisitions and capital expenditures, and for other general corporate purposes;

•  limiting our flexibility in planning for, or reacting to, changes in our business and our industry;

•  restricting us from making strategic acquisitions or exploiting business opportunities; and

•  limiting our ability to borrow additional funds.

We may incur additional debt in the future, which could increase the risks associated with our leverage.

We are continually evaluating and pursuing acquisition opportunities and may incur additional indebtedness to finance any such acquisitions, as we did in 2017, and to fund any resulting increased operating needs. As new debt is added to our current debt levels, the related risks we face could increase. While we will have to effect any new financing in compliance with the agreements governing our then existing indebtedness, changes in our debt levels and or debt structure may impact our credit rating and costs to borrow, as well as constrain our future financial flexibility in the event of a deterioration in our financial operating performance or financial condition.

Currency exchange rate fluctuations may reduce operating results and shareholders’ equity.

Fluctuations in currency exchange rates can cause translation, transaction and other losses that can unpredictably and adversely affect our consolidated operating results. Our reporting currency is the U.S. dollar. However, as a result of operating globally, a portion of our consolidated net sales, costs, assets and liabilities, are denominated in currencies other than the U.S. dollar. In our consolidated financial statements, we translate the local currency financial results of our foreign operations into U.S. dollars based on their respective exchange rates. Depending on the direction, changes in those rates will either increase or decrease operating results and balances as reported in U.S. dollars. Although we monitor our exposures and, from time to time, may use forward currency contracts to hedge certain forecasted currency transactions or foreign currency denominated assets and liabilities, this does not insulate us completely from foreign currency fluctuations and exposes us to counterparty risk of nonperformance.

As noted previously in these Risk Factors, there are also ongoing concerns about the stability of the euro and its continued viability as a single European currency. If individual countries were to revert, or threaten to revert, to their former local currencies, euro-denominated assets could be significantly devalued. In addition, a dislocation or dissolution of the euro could cause significant volatility and disruption in the global economy, which could adversely impact our business, including the demand for our products, the availability and cost of supplies and materials and our ability to obtain financing at reasonable costs.

Adverse weather and climate changes may result in lower sales.

We manufacture packaging products for beverages and foods as as well as products used in construction and industrial manufacturing. Unseasonably cool weather can temporarily

reduce demand for certain beverages packaged in our containers. In addition, poor weather conditions can temporarily impact the level of construction and industrial activity and also impact the efficiency of our manufacturing operations. Such disruptions could have a material adverse effect on our results of operations.

We rely on our information technology and its failure or disruption could disrupt our operations, compromise customer, employee, vendor and other data, and adversely affect our results of operations.

We rely on the successful and uninterrupted functioning of our information technologies to securely manage operations and various business functions, and we rely on various technologies to process, store and report information about our business, and to interact with customers, vendors and employees around the world. As with all large systems, our information technology systems may be susceptible to damage, disruption or shutdown due to power outages, failures during the process of upgrading or replacing software, hardware failures, computer viruses, cyber attacks, catastrophic events, telecommunications failures, user errors, unauthorized access, and malicious or accidental destruction of information or functionality. We also maintain and have access to sensitive, confidential or personal data or information that is subject to privacy and security laws, regulations and customer controls. Despite our efforts to protect such sensitive, confidential or personal data or information, our facilities and systems and those of our customers and third-party service providers may be vulnerable to security breaches, misplaced or lost data, and programming and/or user errors that could lead to the compromising of sensitive, confidential or personal data or information.

Information system damages, disruptions, shutdowns or compromises could result in production downtimes and operational disruptions, transaction errors, loss of customers and business opportunities, legal liability, regulatory fines, penalties or intervention, reputational damage, reimbursement or compensatory payments, and other costs, any of which could have a material adverse effect on our business, financial position and results of operations. Although we attempt to mitigate these risks by employing a number of measures, our systems, networks, products, and services remain potentially vulnerable to advanced and persistent threats.

We have a significant amount of goodwill and other intangible assets and a write down would negatively impact operating results and shareholders’ equity.

At December 31, 2017, the carrying value of our goodwill and intangible assets was approximately $1.6 billion. We are required to evaluate our goodwill amounts annually, or more frequently when evidence of potential impairment exists. The impairment test requires us to analyze a number of factors and make estimates that require judgment. As a result of this testing, we have in the past recognized goodwill impairment charges, and we have identified two reporting units that currently are at risk of a significant future impairment charge if actual results fall short of expectations. Future changes in the cost of capital, expected cash flows, changes in our business strategy, and external market conditions, among other factors, could require us to record an impairment charge for goodwill, which could lead to decreased assets and reduced net income. If a significant write down were required, the charge could have a material adverse effect on our operating results and shareholders’ equity.

Our ability to attract, develop and retain talented executives, managers and employees is critical to our success.

Our ability to attract, develop and retain talented employees, including executives and other key managers, is important to our business. The experience and industry contacts of our management team and other key personnel significantly benefit us, and we need expertise like theirs to carry out our business strategies and plans. We also rely on the specialized knowledge and experience of certain key technical employees. The loss of these key officers and employees, or the failure to attract and develop talented new executives, managers and employees, could have a materially adverse effect on our business. Effective succession planning is also important to our long-term success, and failure to ensure effective transfer of knowledge and smooth transitions involving key officers and employees could hinder our strategic planning and execution.

Full realization of our deferred tax assets may be affected by a number of factors.

We have deferred tax assets, including U.S. and foreign operating loss carryforwards, capital loss carryforwards, employee and retiree benefit items, and other accruals not yet deductible for tax purposes. We have established valuation allowances to reduce those deferred tax assets to an amount that we believe is more likely than not to be realized prior to expiration of such deferred tax assets. Our ability to use these deferred tax assets depends in part upon our having future taxable income during the periods in which these temporary differences reverse or our ability to carry back any losses created by the deduction of these temporary differences. We expect to realize these assets over an extended period. However, if we were unable to generate sufficient future taxable income in the U.S. and certain foreign jurisdictions, or if there were a significant change in the time period within which the underlying temporary differences became taxable or deductible, we could be required to increase our valuation allowances against our deferred tax assets, which would increase our effective tax rate which could have a material adverse effect on our reported results of operations.

Our annual effective tax rate and the amount of taxes we pay can change materially as a result of changes in U.S. and foreign tax laws, changes in the mix of our U.S. and foreign earnings, adjustments to our estimates for the potential outcome of any uncertain tax issues, and audits by federal, state and foreign tax authorities.

As a large multinational corporation, we are subject to U.S. federal, state and local, and many foreign tax laws and regulations, all of which are complex and subject to varying interpretations. Changes in these laws or regulations, or any change in the position of taxing authorities regarding their application, administration or interpretation, could have a material adverse effect on our business, consolidated financial condition or results of our operations.

Due to widely varying tax rates in the taxing jurisdictions applicable to our business, a change in income generation to higher taxing jurisdictions or away from lower taxing jurisdictions may also have an adverse effect on our financial condition and results of operations.

We make estimates of the potential outcome of uncertain tax issues based on our assessment of relevant risks and facts and circumstances existing at the time, and we use these assessments to determine the adequacy of our provision for income taxes and other tax-related accounts. These estimates are highly judgmental. Although we believe we adequately pro-

vide for any reasonably foreseeable outcome related to these matters, future results may include favorable or unfavorable adjustments to estimated tax liabilities, which may cause our effective tax rate to fluctuate significantly.

In addition, our income tax returns are subject to regular examination by domestic and foreign tax authorities. These taxing authorities may disagree with the positions we have taken or intend to take regarding the tax treatment or characterization of any of our transactions. If any tax authorities were to successfully challenge the tax treatment or characterization of any of our transactions, it could have a material adverse effect on our business, consolidated financial condition or results of our operations. Furthermore, regardless of whether any such challenge is resolved in our favor, the final resolution of such matter could be expensive and time consuming to defend and/or settle. Future changes in tax law could significantly impact our provision for income taxes, the amount of taxes payable, and our deferred tax asset and liability balances.

As further discussed in Note 13 to our December 31, 2017 financial statements included in Item 8 of this Form 10-K, the IRS has previously notified us that it disagrees with our characterization of a distribution, and subsequent repayment, of an intercompany note in 2012 and 2013. If the IRS were to prevail, we could be required to make an adjustment to income for the affected years and pay a significant amount of additional taxes, which could have a material adverse effect on our results of operations and financial condition.

Challenges to, or the loss of, our intellectual property rights could have an adverse impact on our ability to compete effectively.

Our ability to compete effectively depends, in part, on our ability to protect and maintain the proprietary nature of our owned and licensed intellectual property. We own a large number of patents on our products, aspects of our products, methods of use and/or methods of manufacturing, and we own, or have licenses to use, all of the material trademark and trade name rights used in connection with the packaging, marketing and distribution of our major products. We also rely on trade secrets, know-how and other unpatented proprietary technology. We attempt to protect and restrict access to our intellectual property and proprietary information by relying on the patent, trademark, copyright and trade secret laws of the U.S. and other countries, as well as non-disclosure agreements. However, it may be possible for a third party to obtain our information without our authorization, independently develop similar technologies, or breach a non-disclosure agreement entered into with us. Furthermore, many of the countries in which we operate do not have intellectual property laws that protect proprietary rights as fully as do laws in the U.S. The use of our intellectual property by someone else without our authorization could reduce or eliminate certain of our competitive advantages, cause us to lose sales or otherwise harm our business. The costs associated with protecting our intellectual property rights could also adversely impact our business.

In addition, we are from time to time subject to claims from third parties suggesting that we may be infringing on their intellectual property rights. If we were held liable for infringement, we could be required to pay damages, obtain licenses or cease making or selling certain products.

Intellectual property litigation, which could result in substantial cost to us and divert the attention of management, may be necessary to protect our trade secrets or proprietary technology or for us to defend against claimed infringement of the rights of others and to determine the scope and validity of others’ proprietary rights. We may not prevail in any such litigation, and if we are unsuccessful, we may not be able to obtain

any necessary licenses on reasonable terms or at all. Failure to protect our patents, trademarks and other intellectual property rights may have a material adverse effect on our business, consolidated financial condition or results of operations.

If we fail to continue to maintain effective internal control over financial reporting at a reasonable assurance level, we may not be able to accurately report our financial results, and may be required to restate previously published financial information, which could have a material adverse effect on our operations, investor confidence in our business and the trading prices of our securities.

Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud. Any inability to provide reliable financial reports or prevent fraud could harm our business. We are required to assess the effectiveness of our internal control over financial reporting annually, as required by Section 404 of the Sarbanes-Oxley Act. We need to maintain our processes and systems and adapt them as our business grows and changes. This continuous process of maintaining and adapting our internal controls and complying with Section 404 is expensive, time-consuming and requires significant management attention. As we grow our businesses and acquire other businesses, our internal controls will become increasingly complex and we may require significantly more resources. The integration of acquired businesses into our internal control over financial reporting has required, and will continue to require, significant time and resources from our management and other personnel and will increase our compliance costs. Additionally, maintaining effectiveness of our internal control over financial reporting is made more challenging by the fact that we have over 160 subsidiaries and joint ventures in 33 countries around the world. As described in Item 9A of this Form 10-K, management has concluded that our internal controls over financial reporting were effective as of December 31, 2017. There is no assurance that, in the future, material weaknesses will not be identified that would cause management to change its current conclusion as to the effectiveness of our internal controls. If we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we could be subject to regulatory scrutiny, civil or criminal penalties or litigation. In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately reflect our financial condition, and we may be required to restate previously published financial information, which could have a material adverse effect on our operations, investor confidence in our business and the trading prices of our securities.

Several of our operations are conducted by joint ventures that we cannot operate solely for our benefit.

Several of our operations are conducted through joint ventures. In joint ventures, we share ownership and, in some instances, management of a company with one or more parties who may or may not have the same goals, strategies, priorities or resources as we do. In general, joint ventures are intended to be operated for the benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities as well as time-consuming procedures for sharing information, accounting and making decisions. In certain cases, our joint venture partners must agree in order for the applicable joint venture to take certain actions, including acquisitions, the sale of assets, budget approvals, borrowing money and granting liens on joint venture property. Our inability to take unilateral action that we believe is

in our best interests may have an adverse effect on the financial performance of the joint venture and the return on our investment. In joint ventures, we believe our relationship with our co-owners is an important factor to the success of the joint venture, and if a co-owner changes, our relationship may be adversely affected. In addition, the benefits from a successful joint venture are shared among the co-owners, so that we do not receive all the benefits from our successful joint ventures. Finally, we may be required on a legal or practical basis or both, to accept liability for obligations of a joint venture beyond our economic interest, including in cases where our co-owner becomes bankrupt or is otherwise unable to meet its commitments.

Material disruptions in our business operations could negatively affect our financial results.

Although we take measures to minimize the risks of disruption at our facilities, we may nonetheless from time to time encounter an unforeseen material operational disruption in one of our major facilities, which could negatively impact production and our financial results. Such a disruption could occur as a result of any number of events including but not limited to a major equipment failure, labor stoppages, transportation failures affecting the supply and shipment of materials, disruptions at our suppliers, fire, severe weather conditions and disruptions in utility services. These types of disruptions could materially adversely affect our earnings to varying degrees depending upon the facility, the duration of the disruption, our ability to shift business to another facility or find alternative sources of materials or energy. Any losses due to these events may not be covered by our existing insurance policies or may be subject to certain deductibles.

Item 1B. Unresolved staff comments

There are no unresolved written comments from the SEC staff regarding the Company’s periodic or current 1934 Act reports.

Item 2. Properties

The Company’s corporate offices are owned and operated in Hartsville, South Carolina. There are 90 owned and 60 leased facilities used by operations in the Paper and Industrial Converted Products segment, 34 owned and 46 leased facilities used by operations in the Consumer Packaging segment, 7 owned and 17 leased facilities used by operations in the Display and Packaging segment, and 10 owned and 26 leased facilities used by the Protective Solutions segment. Europe, the most significant foreign geographic region in which the Company operates, has 57 manufacturing locations.

Item 3. Legal proceedings

The Company has been named as a potentially responsible party (PRP) at several environmentally contaminated sites not owned by the Company. All of the sites are also the responsibility of other parties. The Company’s liability, if any, is shared with such other parties, but the Company’s share has not been finally determined in most cases. In some cases, the Company has cost-sharing agreements with other PRPs relating to the sharing of legal defense costs and cleanup costs for a particular site. The Company has assumed, for accrual purposes, that the other parties to these cost-sharing agreements will perform as agreed. Final resolution of some of the sites is years away, and actual costs to be incurred for these matters in future periods is likely to vary from current estimates because of the inherent uncertainties in evaluating environmental exposures. Accordingly, the ultimate cost to the Company with respect to such sites, beyond what has been accrued as of December 31, 2017, cannot be determined.

As of December 31, 2017 and 2016, the Company had accrued $20.3 million and $24.5 million, respectively, related to environmental contingencies. The Company periodically reevaluates the assumptions used in determining the appropriate reserves for environmental matters as additional information becomes available and makes appropriate adjustments when warranted.

Fox River settlement

As previously disclosed, in January 2017, U.S. Paper Mills Corp. (U.S. Mills), a wholly owned subsidiary of the Company, obtained Court approval of a final settlement of cost recovery claims made by Appvion, Inc. for $3.3 million. The settlement was paid during the first quarter of 2017, and related legal and professional fees totaling $0.4 million were paid during the course of 2017. All payments were made against previously established reserves and no additional expense was required to be recognized in 2017. As a result of this settlement becoming final, the Company and U.S. Mills have resolved all pending or threatened legal proceedings related to the Fox River matter, as well as any such proceedings known to be contemplated by governmental authorities.

Other legal matters

Additional information regarding legal proceedings is provided in Note 14 to the Consolidated Financial Statements of this Annual Report on Form 10-K.

Item 4. Mine safety disclosures

Not applicable.

Item 5. Market for registrant’s common equity, related stockholder matters and issuer purchases of equity securities

The Company’s common stock is traded on the New York Stock Exchange under the stock symbol “SON.” As of December 31, 2017, there were approximately 64,000 shareholder accounts. Information required by Item 201(d) of Regulation S-K can be found in Part III, Item 12 of this Annual Report on Form 10-K. The following table indicates the high and low sales prices of the Company’s common stock for each full quarterly period within the last two years as reported on the New York Stock Exchange, as well as cash dividends declared per common share:

Item 7. Management’s discussion and analysis of financial condition and results of operations

General overview

Sonoco is a leading manufacturer of consumer, industrial and protective packaging products and provider of packaging services with 298 locations in 33 countries. The Company’s operations are reported in four segments, Consumer Packaging, Display and Packaging, Paper and Industrial Converted Products, and Protective Solutions.

Generally, the Company serves two broad end-use markets, consumer and industrial, which, period to period, can exhibit different economic characteristics from each other. Geographically, approximately 65% of sales were generated in the United States, 19% in Europe, 5% in Canada and 11% in other regions.

The Company is a market-share leader in many of its product lines, particularly in tubes, cores and composite containers. Competition in most of the Company’s businesses is intense. Demand for the Company’s products and services is primarily driven by the overall level of consumer consumption of

non-durable goods; however, certain product and service groups are tied more directly to durable goods, such as appliances, automobiles and construction. The businesses that supply and/or service consumer product companies have tended to be, on a relative basis, more recession resistant than those that service industrial markets.

Financially, the Company’s objective is to deliver average annual double-digit total returns to shareholders over time. To meet that target, the Company focuses on three major areas: driving profitable sales growth, improving margins and leveraging the Company’s strong cash flow and financial position. Operationally, the Company’s goal is to be the acknowledged leader in high-quality, innovative, value-creating packaging solutions within targeted customer market segments.

Over the next three to four years, the Company aspires to achieve base earnings before interest, taxes, depreciation and amortization (EBITDA) margins of 16% per year, and increase return on net assets employed to 11% or more, subject to the impacts of potential acquisitions (see “Use of Non-GAAP financial measures” below). Although achieving these goals could

prove to be difficult, the Company believes it will be successful by focusing on the following: organic sales growth, including new product development and expansion in emerging international markets; strategic acquisitions; and margin enhancement through more effective customer relationship management, organizational design, indirect spend management, and improved manufacturing productivity, supply chain and back office support processes.

Use of non-GAAP financial measures

To assess and communicate the financial performance of the Company, Sonoco management uses, both internally and externally, certain financial performance measures that are not in conformity with generally accepted accounting principles (“non-GAAP” financial measures). These non-GAAP financial measures reflect the Company’s GAAP operating results adjusted to remove amounts, including the associated tax effects, relating to restructuring initiatives, asset impairment charges, environmental charges, acquisition-related costs, gains or losses from the disposition of businesses, excess property insurance recoveries, pension settlement charges, certain income tax events and other items, if any, including other income tax-related adjustments and/or events, the exclusion of which management believes improves the period-to-period comparability and analysis of the underlying financial performance of the business. The adjusted non-GAAP results are identified using the term “base,” for example, “base earnings.”

The Company’s base financial performance measures are not in accordance with, nor an alternative for, measures conforming to generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Sonoco continues to provide all information required by GAAP, but it believes that evaluating its ongoing operating results may not be as useful if an investor or other user is limited to reviewing only GAAP financial measures. The Company uses the non-GAAP “base” performance measures presented herein for internal planning and forecasting purposes, to evaluate its ongoing operations, and to evaluate the ultimate performance of management and each business unit against plan/forecast all the way up through the evaluation of the Chief Executive Officer’s performance by the Board of Directors. In addition, these same non-GAAP measures are used in determining incentive compensation for the entire management team and in providing earnings guidance to the investing community.

Sonoco management does not, nor does it suggest that investors should, consider these non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Sonoco presents these non-GAAP financial measures to provide users information to evaluate Sonoco’s operating results in a manner similar to how management evaluates business performance. Material limitations associated with the use of such measures are that they do not reflect all period costs included in operating expenses and may not reflect financial results that are comparable to financial results of other companies that present similar costs differently. Furthermore, the calculations of these non-GAAP measures are based on subjective determinations of management regarding the nature and classification of events and circumstances that the investor may find material and view differently. To compensate for these limitations, management believes that it is useful in understanding and analyzing the results of the business to review both GAAP information which includes all of the items impacting financial results and the non-GAAP measures that exclude certain elements, as described above.

Restructuring and restructuring-related asset impairment charges are a recurring item as Sonoco’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.

Reconciliations of GAAP to base results are presented on pages 22 and 23 in conjunction with management’s discussion and analysis of the Company’s results of operations. Whenever reviewing a non-GAAP financial measure, readers are encouraged to review the related reconciliation to fully understand how it differs from the related GAAP measure. Reconciliations are not provided for non-GAAP 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 impairment charges, acquisition-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.

2017 overview and 2018 outlook

Despite low growth rates in many of the Company’s served markets and volatile raw material costs, Sonoco reported improved results in 2017, posting year-over-year improvements in our Paper and Industrial Converted Products and Consumer Packaging segments. Operating profit improved $24.8 million, or 19.1 percent, year-over-year, in the Paper and Industrial Converted Products segment and $10.0 million, or 4.1 percent, in our Consumer Packaging segment. The performance of our Protective Solutions and Display and Packaging segments fell short of expectations in 2017 as both posted year-over-year declines in operating profit. Display and Packaging experienced significant startup costs related to a new pack center near Atlanta, Georgia, while Protective Solutions struggled with decreased volumes, specifically in automotive components. On a company-wide basis, gains from a positive overall price/cost relationship (the relationship of the change in sales prices to the change in costs of materials, energy and freight), manufacturing productivity improvements, and lower management incentives were only partially offset by declines in volume/mix, and higher labor, maintenance and other operating costs. Although these net benefits increased gross profit year over year, changes in the mix of business, as well as higher raw material costs, increased cost of sales disproportionately to sales. As a result, consolidated gross profit margin for 2017 declined to 18.8% compared to 19.6% in 2016.

Current year Net Income Attributable to Sonoco (GAAP earnings) declined $111.1 million, or 38.8%, year over year. The decline was primarily driven by pension settlement charges in 2017 totaling $20.2 million, after-tax, and a $51.3 million net tax charge related to the enactment of the U.S. Tax Cuts and Jobs Act (Tax Act). Prior year results included a $49.3 million gain, after tax, related to the sale of the Company’s rigid plastics blow molding operations. Base earnings, which exclude the previously mentioned current year charges, the prior year gain from the sale of the rigid plastics blow molding operations, as well as certain other items of income and expense, as more fully described within this Item under “Use of Non-GAAP financial measures” and reconciled within this Item under “Reconciliations of GAAP to Non-GAAP financial measures,” improved $4.5 million, or 1.6%, year over year.

Key expectations for 2017 were that overall volumes would increase by around 2%, with volumes in Protective Solutions and Display and Packaging expected to increase at higher rates, price/cost would be positive, and that overall productivity would be strong enough to offset the expected inflation in labor and other costs, except for increases in pension and post-retirement expense. Volume was essentially flat overall as modest declines in Global Rigid Paper Containers, Protective Packaging and recycling were partially offset by gains in Paper, Plastics and Display and Packaging. Reported sales were up 5.3% from a combination of higher selling prices in response to higher raw material costs, the positive impact of acquisitions net of dispositions, and the translation impact of a weaker dollar. Offsetting the earnings impact of lower than expected volume, the Company was able to achieve a stronger than expected positive price/cost relationship in many of its businesses, aided by the timing and magnitude of certain raw material cost changes together with procurement productivity gains. Although manufacturing productivity improvements for the year fell short of expectations, the results of our fixed cost productivity and cost management efforts were better than expected and partially offset inflation in labor and other costs.

Pension and postretirement benefit expenses for the year were approximately $33.2 million higher in 2017 than 2016, driven primarily by settlement charges related to lump sum payments and purchases of annuities for certain plan participants. The aggregate unfunded position of the Company’s various defined benefit plans decreased from $447.3 million at the end of 2016, to $355.2 million at the end of 2017. This decrease was largely driven by the strong market performance of plan assets and contributions to the plans in 2017, partially offset by the impact of lower discount rates on plan liabilities.

The effective tax rate on GAAP earnings was 9.3 percentage points higher than the prior year while the rate on base earnings was 0.5 percentage points higher than in 2016. The increase in the GAAP effective tax rate was driven by net charges related to the enactment of the Tax Act. The modest increase in the base effective tax rate was due to less benefit from the U.S. manufacturer’s deduction, as well as from other domestic tax adjustments, partially offset by greater benefit from distribution of earnings between high- and low-tax jurisdictions and the change in treatment of the excess tax benefit from share-based compensation resulting from the adoption of ASU 2016-09 in 2017. See Note 2 to the Consolidated Financial Statements for further information about this new accounting standard.

The Company generated $349.4 million in cash from operations during 2017, compared with $398.7 million in 2016. The majority of the year-over-year decrease is attributable to a $50 million voluntary contribution to the Company’s U.S. qualified defined benefit pension plan in the fourth quarter of 2017 and timing of payments and collection of receivables, partially offset by lower year-over-year income tax payments. Cash flow from operations is expected to be between $560 and $580 million in 2018.

Outlook

In 2018, management’s focus will be on driving synergies related to the businesses acquired in 2017, accelerating organic growth, improving manufacturing productivity and using the Company’s strong financial position to make strategic acquisitions primarily aimed at its targeted growth areas of thermoforming, flexibles and protective packaging, along with select consolidating industrial opportunities primarily in emerging markets. The Company has identified a number of targeted growth projects, the majority of which fall within its Consumer Packaging, Display and Packaging, and Protective Solutions segments and emerging markets that are expected to help drive

organic growth. In addition, a key area of focus will be on ramping up production and improving operating efficiency at the Company’s new contract packaging services center near Atlanta, Georgia. Expected cost increases in raw materials, particularly tinplate steel and old corrugated containers (OCC), could create pressure on reported earnings. An offsetting factor could be the realization of forecasted declines in the value of the US dollar which would increase the reported earnings of our foreign operations. In large part, productivity efforts will be focused on reducing our operations’ unit-cost-to-produce through the continued internal roll out of the Sonoco Performance System, our systematic approach to operational excellence.

Management expects overall volume in 2018 to increase approximately 2%. Although the Company has projected that overall price/cost will be positive in 2018, the likelihood of continued volatility in key raw material prices could make pricing for their recovery more challenging. Manufacturing productivity is expected to more than offset the projected increases in labor and other costs.

Excluding the non-recurring settlement charges recognized in 2017, the Company projects total benefit plan expense to be approximately $8 million lower in 2018 than in 2017. This anticipated decrease is primarily due to greater expected returns on plan assets due to a higher asset base. Partially offsetting this favorable impact is the effect of lower discount rates. Total contributions in 2018 to the Company’s domestic and international pension and postretirement plans are expected to be approximately $38.5 million.

In consideration of the above factors, management is projecting overall margins for both gross profit and base EBIT to improve modestly over 2017 levels.

Absent any additional borrowings in 2018 from acquisition activity, net interest expense is expected to increase approximately $3 million driven by higher average annual debt balances from funding 2017 acquisitions. The consolidated effective tax rate on base earnings is expected to be between 26% and 27% in 2018 compared with 31.1% in 2017. The anticipated year-over-year decline is driven by the enactment of the Tax Act.

The Company does not provide projected GAAP earnings results due to the likely occurrence of one or more of the following, the timing and magnitude of which we are unable to reliably forecast: possible gains or losses on the sale of businesses or other assets, restructuring costs and restructuring-related impairment charges, acquisition-related costs, and the income tax effects 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.

Acquisitions and dispositions

Acquisitions

The Company completed two acquisitions during 2017 at a cost of $383.8 million, net of cash acquired. On March 14, 2017, the Company completed the acquisition of Packaging Holdings, Inc. and subsidiaries, including Peninsula Packaging LLC (“Packaging Holdings”), for $218.8 million, net of cash acquired. Packaging Holdings manufactures thermoformed packaging for a wide range of whole fresh fruits, pre-cut fruits and produce, prepared salad mixes, as well as baked goods in retail supermarkets from five manufacturing facilities, including four in the United States and one in Mexico. The Company financed the transaction with a combination of cash and borrowings, including a $150,000 three-year term loan. The acquisition of Packaging Holdings is expected to add approximately $190 million of annual sales in the Company’s Consumer Packaging segment. On July 24, 2017, the Company completed the acquisition of Clear Lam Packaging, Inc. (“Clear Lam”) for $165.0 million net of cash acquired. Final consideration will be subject to an

adjustment for working capital, which is expected to be completed by the end of the first quarter of 2018. Clear Lam manufactures high barrier flexible and forming films used to package a variety of products for consumer packaged goods companies, retailers and other industrial manufacturers, with a focus on structures used for perishable foods. It has production facilities in Elk Grove Village, Illinois, and Nanjing, China. The Company financed a portion of the transaction with $100 million in borrowings from a $250 million five-year term loan with the remaining purchase price funded from available short-term credit facilities. The acquisition of Clear Lam is expected to add approximately $140 million of annual sales in the Company’s Consumer Packaging segment.

The Company completed four acquisitions during 2016 at a cost of $88.6 million, net of cash acquired. On June 24, 2016, the Company completed an acquisition in its Paper and Industrial Converted Products segment of a small tube and core business in Australia for $0.9 million in cash. On August 30, 2016, the Company completed the acquisition in its Protective Solutions segment of the temperature-controlled cargo container assets, licenses, trademarks, and manufacturing rights from AAR Corporation. Total consideration for this business was $6.0 million consisting of a current cash payment of $3.0 million, non-contingent deferred cash consideration of $2.0 million, and contingent consideration valued at $1.0 million. Also in the Protective Solutions segment, Laminar Medica (“Laminar”), a privately held specialty medical products company based in the U.K., was acquired on September 19, 2016 for $17.2 million, net of cash acquired. On November 1, 2016, the Company completed the acquisition in its Consumer Packaging segment of Plastic Packaging Inc. (“PPI”), a privately held Hickory, NC-based flexible packaging company for $67.6 million, net of cash acquired. Founded in 1957, PPI specializes in short-run, customized flexible packaging for consumer brands in markets including: food products (i.e. frozen foods, baked goods, seafood), pet products (i.e. dry food, bird seed, litter), confection (i.e. seasonal promotions, heat-sealed chocolate packaging, hard and soft candy), and health and personal care (i.e. nutraceuticals, diapers, tissues/wipes).

The Company completed two acquisitions during 2015 at an aggregate cost of $21.2 million, of which $17.4 million was paid in cash. On April 1, 2015, the Company acquired a 67% controlling interest in Graffo Paranaense de Embalagens S/A (“Graffo”), a flexible packaging business located in Brazil. Graffo serves the confectionery, dairy, pharmaceutical and tobacco markets in Brazil with approximately 230 employees. Total consideration paid for Graffo was approximately $18.3 million, including cash of $15.7 million, and assumed debt of $2.6 million. On September 21, 2015, the Company acquired the high-density wood plug business from Smith Family Companies, Inc., in Hartselle, Alabama. Total consideration for the acquisition was $2.9 million, including cash of $1.8 million and a contingent purchase liability of $1.1 million. The contingent liability payment of $1.1 million was paid in September 2017, upon the second anniversary of the acquisition.

Dispositions

On November 7, 2016, the Company completed the sale of its rigid plastics blow molding operations to Amcor Rigid Plastics USA, LLC and Amcor Packaging Canada, Inc. for approximately $280 million, with the Company receiving net cash proceeds of $271.8 million. In conjunction with the sale, the Company recognized a gain on the disposition, net of associated fees, of $104.3 million. The Company’s rigid plastics blow molding operations included seven manufacturing facilities in the U.S. and Canada with approximately 850 employees producing containers serving the personal care and food and

beverage markets. The disposition of these operations is expected to negatively impact the 2017 year-over-year sales comparison by approximately $175 million. The decision to sell the blow molding operations was made to focus on, and provide resources to further enhance, the Company’s targeted growth businesses, including flexible packaging, thermoformed rigid plastics, and temperature-assurance packaging. This sale did not notably affect operating margin percentages for the Company’s Consumer Packaging segment, nor did it represent a strategic shift for the Company having a major effect on the entity’s operations and financial results.

See Note 3 to the Consolidated Financial Statements for further information about acquisition and disposition activities.

Restructuring and asset impairment charges

Due to its geographic footprint (298 locations in 33 countries) and the cost-competitive nature of its businesses, the Company is constantly seeking the most cost-effective means and structure to serve its customers 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.

The following table recaps the impact of restructuring and asset impairment charges on the Company’s net income for the periods presented (dollars in thousands):

During 2017, the Company announced the closure of an expanded foam protective packaging plant in the United States and five tubes and cores plants – three in the United States, one in Belgium, and one in China. Asset impairment charges recorded in 2017 included a $17.8 million charge in the fourth quarter of 2017 recognized as a result of the Company’s decision to shut down its #9 boiler in the Hartsville, South Carolina manufacturing complex. In addition, the Company recognized severance charges throughout 2017 related to the elimination of approximately 255 positions in conjunction with the Company’s ongoing organizational effectiveness efforts.

During 2016, the Company announced the closure of four tubes and cores plants—one in the United States, one in Canada, one in Ecuador, and one in Switzerland. The Company closed a packaging services center in Mexico and a fulfillment service center in Brazil. The Company also began manufacturing rationalization efforts in its Reels division, and completed the sales of a paper mill in France and a retail security packaging plant in Puerto Rico. In addition, the Company continued to realign its cost structure, resulting in the elimination of approximately 180 positions.

During 2015, the Company announced the closure of six rigid paper facilities—two in the United States, one in Canada, one in Russia, one in Germany, and one in the United Kingdom; the closure of a production line at a thermoforming plant in the United States; and the sale of a portion of its metal ends and closures business in the United States. Restructuring actions also included the closures of a tubes and cores plant, a recycling business, and a printed backer card facility in the United States. During 2015, the Company also recognized asset impairment charges related to the planned sale of a paper mill in France and eliminated approximately 235 positions worldwide in conjunction with the Company’s organizational effectiveness efforts.

The Company expects to recognize future additional costs totaling approximately $3.6 million in connection with previously

announced restructuring actions. The Company believes that the majority of these charges will be incurred and paid by the end of 2018. 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.

See Note 4 to the Consolidated Financial Statements for further information about restructuring activities and asset impairment charges.

Results of operations – 2017 versus 2016

Net income attributable to Sonoco (GAAP earnings) was $175.3 million ($1.74 per diluted share) in 2017, compared with $286.4 million ($2.81 per diluted share) in 2016. Current-year earnings reflect net after-tax charges totaling $106.4 million, consisting of pension settlement charges, tax charges related to the 2017 U. S. Tax Cuts and Jobs Act, restructuring/asset impairment charges, and acquisition-related expenses. These charges were partially offset by insurance settlement gains.

Net income in 2016 was positively impacted by a net after-tax benefit of $9.2 million consisting of the gain from the disposal of the Company’s rigid plastics blow molding operations, partially offset by restructuring costs, asset impairment charges, acquisition-related expenses, and foreign income tax losses related to rate adjustments.

Base earnings in 2017 were $281.8 million ($2.79 per diluted share), compared with $277.2 million ($2.72 per diluted share) in 2016.

Both GAAP and base earnings in 2017 benefitted from a positive price/cost relationship, productivity improvements and lower management incentive expense. These favorable factors were partially offset by negative volume/mix, particularly in Rigid Paper North America, higher overhead and other operating costs, and unfavorable changes in foreign currency translation.

The effective tax rate on GAAP earnings was 46.6%, compared with 37.3% in 2016, and the effective tax rate on base earnings was 31.1%, compared with 30.6% in 2016. The unusually high GAAP effective tax rate in the current year reflects the currently recognized effects of the U.S. Tax Cuts and Jobs Act (Tax Act). Application of the Company’s lower estimated future effective tax rate due to the Tax Act resulted in a decrease to the Company’s recorded amount of deferred tax liabilities, net of deferred assets. Consequently, in the fourth quarter of 2017 the Company recorded a $25.7 million decrease to its net deferred tax liabilities with a corresponding decrease to GAAP income tax expense. This decrease in expense was more than offset by a $76.9 million charge to record the Tax Act’s one-time transition tax on certain accumulated foreign earnings. The 2016 GAAP tax rate, which was also higher than normal, was negatively affected by the tax impact of the disposal of the Company’s rigid plastics blow molding operations. The effective tax rate on base earnings was essentially flat year over year.

Consolidated net sales for 2017 were $5.0 billion, a $254 million, or 5.3%, increase from 2016. The components of the sales change were:

In order to enhance the meaningfulness of reported changes in volume/mix, a $20.7 million reduction in packaging center sales resulting from changes in the level of activity is classified above as “other” due to the low/inconsistent correlation that typically exists between changes in revenue and changes in operating profit in our packaging center operations.

Sales volume/mix was essentially flat as organic volume growth and a favorable change in product mix in a number of our businesses mostly offset volume declines in rigid paper containers and automotive components. For the most part, price changes for the Company’s products were driven by changes in the underlying raw materials costs. In 2017, many of the Company’s primary raw materials saw increases in their market prices; especially, old corrugated containers (OCC) which saw an average increase of more than 50% year over year. This increase most directly affected the Paper and Industrial Converted Products segment while the increase in other raw materials, mainly resins, most directly affected the Consumer Packaging segment. While the full-year average OCC price was up year over year, prices during the year were volatile with periods of sharp increases and decreases resulting in significant margin swings. However, the Company was able to achieve an overall positive price cost relationship. While the Company’s 2017 and 2016 acquisitions added more than $259 million to comparable year-over-year sales, the impact was mostly offset by sales decreases of $191 million related to dispositions, the most significant of which was the 2016 sale of the Company’s rigid plastics blow molding operations. Finally, foreign exchange rate changes increased year-over-year sales as almost all of the foreign currencies in which the Company conducts business strengthened slightly in relation to the U.S. Dollar.

Total domestic sales were $3.3 billion, up 4.9% from 2017 levels. International sales were $1.8 billion, up 6.1% from 2017 with most of the increase driven by growth in the Company’s industrial businesses and the impact of foreign currency translation.

Costs and expenses/margins

Cost of sales was up $241.8 million in 2017, or 6.3%, from the prior year primarily due to raw material price increases and additional volume from acquired businesses, net of disposed businesses. Despite the positive price/cost relationship and modest productivity improvements, an unfavorable mix of sales and higher labor and other costs resulted in gross profit margins declining to 18.8% in 2017 from 19.6% in the prior year.

Aggregate pension and postretirement plan expenses increased $33.2 million in 2017 to a total of $78.5 million, compared with $45.3 million in 2016. In February 2017, the Company initiated a program to settle a portion of its pension liability related to terminated vested participants in the U.S. qualified retirement plans through either a single, lump-sum payment or the purchase of an annuity. During the course of the program, the Company successfully settled approximately 47% of the projected benefit obligation of the terminated vested plan participants. As a result of these and other smaller settlements, the Company recognized non-cash settlement charges totaling $32.8 million in 2017. The settlement charges are reflected in selling, general and administrative expenses, and account for virtually all of the year-over-year increase in pension and postretirement plan expenses. The remainder of pension and postretirement plan expenses are reflected in the Company’s Consolidated Statements of Income with approximately 75% in cost of sales and 25% in selling, general and administrative expenses. See Note 12 to the Consolidated Financial Statements for further information on employee benefit plans.

Selling, general and administrative expenses increased $37.7 million, or 7.4%, and were 10.8% of sales compared to 10.6% of sales in 2016. The current year increase in selling, general and administrative expenses is largely attributable to the previously mentioned pension settlements. In addition, acquisition-related costs increased $9.2 million from last year to $13.8 million. Absent these items, selling, general and administrative expenses were essentially flat year over year.

GAAP Earnings before interest and income taxes (EBIT) were 7.3% of sales in 2017 compared to 10.3% in 2016, The largest contributor to this decline was the 2016 gain on the sale of the Company’s rigid plastics blow molding business. Base EBIT declined to 8.9% of sales in 2017 compared to 9.1% in 2016. The year-over-year decrease in gross profit margin discussed above contributed to the declines in both GAAP EBIT and Base EBIT.

Restructuring and restructuring-related asset impairment charges totaled $38.4 million and $42.9 million in 2017 and 2016, respectively. Additional information regarding restructuring actions and impairments is provided in Note 4 to the Company’s Consolidated Financial Statements.

Research and development costs, all of which were charged to expense, were $21 million in 2017 and $22.5 million in 2016. Management expects research and development spending to remain at a similar level in 2018.

Net interest expense totaled $52.7 million for the year ended December 31, 2017, compared with $51.6 million in 2016. The increase was due primarily to higher average debt levels as the Company used debt to fund acquisitions. On July 20, 2017, the Company entered into a Credit Agreement in connection with a new $750 million bank credit facility with a syndicate of eight banks replacing its then-existing credit facility entered into on October 2, 2014, and reflecting substantially the same terms and conditions. Included in the new facility are a $500 million five-year revolving credit facility and a $250 million five-year term

loan. Based on the pricing grid in the Credit Agreement and the Company’s current credit ratings, the borrowing has an all-in drawn margin of 112.5 basis points above the London Interbank Offered Rate (LIBOR). Borrowings under the Credit Agreement are pre-payable at any time at the discretion of the Company and the term loan has annual amortization payments totaling $12.5 million. In June 2016, the Company settled its $75.2 million 5.625% debentures upon their maturity, and in May 2016 used proceeds from a new 1.00% fixed rate Euro 150 million loan to settle the remaining $150 million balance of a variable rate term loan entered into in conjunction with the 2014 acquisition of Weidenhammer Packaging Group.

Reportable segments

The Company reports its financial results in four reportable segments – Consumer Packaging, Display and Packaging, Paper and Industrial Converted Products, and Protective Solutions.

Consolidated operating profits, also referred to as “Income before interest and income taxes” on the Consolidated Statements of Income, are comprised of the following:

Segment results viewed by Company management to evaluate segment performance do not include restructuring charges, asset impairment charges, acquisition-related charges, gains or losses from the sale of businesses, pension settlement charges, specifically identified tax adjustments, and certain other items, if any, the exclusion of which the Company believes improves comparability and analysis. Accordingly, the term “segment operating profits” is defined as the segment’s portion of “Income before interest and income taxes” excluding those items. General corporate expenses, with the exception of restructuring charges, asset impairment charges, acquisition-related charges, net interest expense and income taxes, have been allocated as operating costs to each of the Company’s reportable segments.

See Note 16 to the Company’s Consolidated Financial Statements for more information on reportable segments.

Consumer Packaging

Sales increased year over year due to the March 14, 2017 acquisition of Packaging Holdings, the July 24, 2017 acquisition of Clear Lam Packaging, Inc. and the full year impact of the

November 1, 2016 acquisition of Plastic Packaging Inc. These increases were substantially offset by the reduction in year-over-year sales due to the November 2016 disposition of the Company’s rigid plastic blow molding operations. Higher selling prices in most of the segment’s businesses, driven largely by raw material price increases, were mostly offset by volume declines in Rigid Paper Containers North America and Europe as well as Flexible Packaging. Foreign currency translation added approximately $5 million to segment trade sales year over year due to a weaker U.S. dollar. Domestic sales were approximately $1,461 million, up 6.8%, or $93 million, from 2016, while international sales were approximately $663 million, down 1.9%, or $13 million, from 2016.

Segment operating profits increased by $10.0 million year over year and operating profit margins of 11.8% were unchanged from 2016. The increase in segment operating profits was largely driven by solid gains in manufacturing productivity and the positive impact of the relationship between selling prices and costs. These benefits were partially offset by volume declines in global composite cans and flexible packaging as well as inflation. Material purchasing and logistics savings were key drivers of the positive price/cost relationship. At an operating profit level, the negative impact of divestitures somewhat exceeded the benefit of acquisitions largely due to timing.

Capital spending in the segment included numerous productivity projects and expansion of manufacturing capabilities in North America primarily in flexible packaging and plastics, and expansion of manufacturing capabilities in Europe in rigid paper containers.

Display and Packaging

Domestic trade sales in the segment increased $3.2 million, or 1.3%, to $249 million, while international trade sales decreased $15 million, or 5.6%, to $259 million. The increase in domestic trade sales resulted from increased volume at our new retail packaging fulfillment center in Atlanta, Georgia, offset by lower volume in retail security packaging and the impact of the July 2016 sale of our retail security packaging facility in Juncos, Puerto Rico. The decrease in international sales reflects the Company’s exit from a packaging center fulfillment contract with a customer resulting in the transition of the operation of certain facilities in Mexico and Brazil back to the customer during the first half of 2016. This decline in sales was somewhat offset by the positive impact of approximately $10 million from foreign currency translation as a result of a stronger Polish zloty relative to the U.S. dollar year over year.

The decrease in segment operating profit was largely due to inefficiencies and higher than expected operating costs associated with the ramp up of production at the new pack center in Atlanta. Higher than anticipated production requirements, primarily in response to multiple hurricanes, exceeded the new facility’s capability to operate efficiently with the installed equipment and a relatively inexperienced workforce that has also incurred a higher than expected turnover rate. The Company is working to resolve these and other operational issues and is optimistic that over time the center will be able to achieve efficiency and cost levels in line with expectations. An inability to

meaningfully improve the operating results of this pack center, and/or improve results of other operations of the reporting unit, may result in charges for long-term asset impairment, or goodwill impairment, or both.

Capital spending in the segment was driven by a significant customer development project in North America coupled with expansion of manufacturing capabilities in Europe.

Paper and Industrial Converted Products

On average, market costs for recovered paper in the U.S. were higher year over year resulting in higher average selling prices in all of the segment’s domestic businesses. Selling prices were also higher in Brazil and the Andean region, primarily due to overall inflation, and were up in Europe due to the pass through of higher material costs in that market. Total volume/mix gains were modest in the segment as gains in Europe, which were due to a combination of market share gains and regional expansion, and volume increases in US and Canadian Paper were mostly offset by volume declines in other businesses, particularly US and Canadian Tubes and Cores and Recycling. Changes in foreign exchange rates had little impact on reported sales in the segment. Total domestic sales in the segment increased $103 million, or 10.1%, to $1,128 million while international sales increased $70 million, or 10.4%, to $739 million.

Segment operating profit increased year over year, driven by a positive price/cost relationship as the Company was able to favorably navigate dramatic movements in Old Corrugated Containers (OCC) market prices. Improved market conditions resulted in a strong turnaround in the Company’s corrugating medium operation in 2017. Operating profit was also benefited by increases in volume and positive changes in the mix of products sold, mostly in Europe and Sonoco Reels, and modest productivity gains. These favorable factors were partially offset by wage and other fixed cost inflation.

Although conditions improved for the corrugating medium operation in 2017, and the Company’s outlook for the operation is for continued improvement in 2018, the Company continues to evaluate strategic alternatives for this operation.

Significant capital spending in the segment included the modification of several paper machines in North America, numerous productivity projects, and IT investments.

Protective Solutions

Sales increased year over year due to the acquisitions of Laminar Medica and AAR Corporation, each of which was acquired in the second half of 2016. Higher sales prices were offset by volume declines, mostly in automotive components.

Segment operating profit decreased year over year due to volume declines and associated productivity losses. A negative

price/cost relationship and increases in labor, overhead and other costs also negatively impacted profits year over year.

Domestic sales were $426 million in 2017 down $10 million, or 2%, from 2016. International sales increased to $113 million up $23 million, or 26%. The increase in international sales was driven by prior-year acquisitions.

Capital spending in the segment included significant customer development projects to support our temperature-assured packaging business.

Financial position, liquidity and capital resources

Cash flow

Operating activities

Cash flow from operations totaled $349.4 million in 2017 and $398.7 million in 2016, a year-over-year decrease of $49.3 million. The $110.4 million decline in GAAP Net Income reflects the non-recurrence of last year’s gain on the sale of the Company’s rigid plastics blow molding operations of $108.7 million, the cash impact of which was reported as an investing activity. Current year net income also reflects higher pension and postretirement expenses and increased pension and postretirement cash contributions resulting in a combined year-over-year decrease in operating cash flows of $28.6 million. Working capital consumed $5.0 million more cash in 2017 than in 2016. Changes in inventory used $16.1 million of cash in 2017 versus $11.5 million in 2016, a higher year-over-year use of cash of $4.6 million, primarily attributable to pre-buying of certain raw materials at the end of 2017 in anticipation of upcoming price increases. The combined changes in accounts receivable and accounts payable balances consumed approximately $39 million of cash from operations in both 2017 and 2016. The increases in year-end accounts receivable balances over the respective prior years were due to a combination of factors including the timing of collections from certain customers, changes in terms and sales mix by customer, and changes in selling prices. Non-cash asset impairment charges were $12.9 million higher year over year, due largely to the fourth quarter 2017 impairment of a power generating facility at the Company’s Hartsville manufacturing complex, which was determined to have been rendered obsolete by the Company’s new biomass facility and which is now scheduled for closure. The net benefit from changes in deferred income tax and income tax payable balances was $25.1 million greater in 2017 compared with the previous year. The year-over-year increase is attributable to the U.S. Tax Cuts and Jobs Act, including the recording of a liability for the new transition tax on certain accumulated foreign earnings, partially offset by a reduction in the Company’s net deferred tax liabilities which were reduced as a result of the decrease in the federal tax rate from 35% to 21%. Non-cash share-based compensation expenses were $5.8 million lower year over year as expenses recognized in association with our performance-based awards decreased, reflecting assumptions about actual performance against targeted performance metrics over the vesting period of the awards. Net losses on disposition of assets totaled $2.0 million in 2017 compared with $14.2 million in 2016, a year-over-year change of $12.1 million, driven by the loss on the disposition of a paperboard mill in France in 2016. Changes in accrued expenses reflect a $14.6 million use of cash in 2017 compared with a $11.7 million use of cash in 2016. The year-over-year change of $2.9 million was primarily driven by the final settlement of Fox River-related environmental claims in January 2017 and lower management incentive accruals. Changes in other assets and liabilities used $37.1 million of additional cash in 2017 compared to 2016, driven by $16.0 million in timing differences related to certain non-income tax payments, $7.0 million related to the timing of costs and associated reimbursements related to the relocation of a facility, and a net

change of $5.7 million in the incremental costs of obtaining contracts with certain customers. Cash paid for income taxes was $37.8 million lower year over year due primarily to the payment in 2016 of taxes arising from the gain on the sale of the rigid plastics blow molding operations.

Cash flow from operations totaled $398.7 million in 2016 and $452.9 million in 2015, a year-over-year decrease of $54.3 million. Although 2016 net income increased year over year by $37.3 million, 2016 net income includes a pre-tax gain of $108.7 million from the November 2016 sale of the Company’s rigid plastics blow molding operations, the proceeds of which are reported as investing cash flows. Lower year-over-year pension and postretirement expenses together with higher pension and postretirement cash contributions resulted in a combined year-over-year decrease in operating cash flow of $22.7 million. More cash was consumed by working capital changes in 2016 compared with the prior year. The change in trade accounts receivable consumed $29.3 million more cash year over year. While the seasonal slowdown at the end of 2016 was greater than in 2015, ending trade accounts receivable increased more in 2016 than in 2015, due largely to current-year payment term extensions and isolated payment collection timing issues at the end of 2016. Changes in inventory used $11.5 million of cash in 2016 versus $2.6 million in 2015, a higher year-over-year use of cash of $8.9 million, primarily attributable to certain businesses pre-buying raw materials at the end of 2016 in anticipation of upcoming price increases. The change in accounts payable provided $5.6 million of cash in 2016 compared with $12.3 million in 2015, a lower year-over-year provision of $6.8 million. This decline was primarily due to the lower level of business activity in the latter part of 2016 compared with the same period in 2015. Non-cash asset impairment charges were $17.3 million lower year over year, due largely to the prior year recognition of a foreign exchange remeasurement loss on the Company’s net assets in Venezuela as the Company moved from translating these operations at the country’s official rate to an alternative exchange rate and the prior year impairment of fixed assets related to the Company’s paperboard mill in Schweighouse-sur-Moder, France which was sold in early 2016. The non-cash impact of changes in environmental reserves increased $33.4 million due to a $0.9 million increase in the reserves being recorded in 2016 in anticipation of final settlement of claims related to Fox River, compared with reductions in these reserves in 2015 of $32.5 million pretax, $19.9 million after tax. Operating cash flows provided by changes in tax-related activities was $45.4 million greater in 2016 compared with the previous year. The increase was due primarily to the use of available prepaid taxes to offset current year tax liabilities in 2016, contrasted with 2015 when there was a use of cash primarily from the overpayment of estimated taxes due to passage of new tax rules late in the year. The year-over-year variance in the change in the net deferred tax liability balances also contributed to the net provision of cash and resulted largely from variances in pension payments, the use of U.S. net operating losses and deferred taxes in foreign jurisdictions. Non-cash share-based compensation expenses were $10.0 million higher year over year as expenses recognized in association with our performance-based awards increased, reflecting assumptions about actual performance against targeted performance metrics over the vesting period of the awards. Net losses on disposition of assets totaled $14.2 million in 2016 compared with a net gain of $5.7 million in 2015, a year-over-year change of $19.9 million. The change was driven by the loss on the disposition of a paperboard mill in France in 2016. Accrued expenses used $11.7 million in 2016 compared with a provision of $15.3 million in 2015. The year-over-year change of $27.0 million was driven by increases in reserves related to restructuring actions

implemented during 2016 and the timing of payments for other accrued expenses. Changes in other assets and liabilities provided $15.1 million of additional cash in 2016 compared to 2015, driven by higher year-over-year receipts of cash related to rebates, value added taxes, and customer reimbursable costs. Cash paid for taxes was $29.9 million higher year over year including the impact of the payment in December 2016 of taxes arising from the gain on the sale of the blow molding operations.

Investing activities

Cash used by investing activities was $565.7 million in 2017, compared with $3.1 million in 2016. The greater year-over-year use of cash is due in part to the Company’s 2017 acquisitions of Packaging Holdings and Clear Lam for a total of $383.7 million, whereas acquisition spending in 2016 was lower at $88.6 million. Also contributing to the year-over-year change in cash used by investing activities is a decrease in proceeds from the sale of assets. Proceeds in 2016 included $271.8 million from the November 2016 sale of the Company’s rigid plastics blow molding operations, partially offset by cash paid for the disposal of a paper operation in France. Proceeds from the sale of assets in 2017 were $5.3 million. Capital spending was $188.9 million in 2017, compared with $186.7 million in 2016, a decrease of $2.2 million. Capital spending is expected to total approximately $220 million in 2018.

Cash used in investing activities was $3.1 million in 2016, compared with $179.9 million in 2015. The lower year-over-year use of cash is primarily due to a net $239.4 million increase in proceeds from the sale of assets. Proceeds in 2016 included $271.8 million from the November 2016 sale of the Company’s rigid plastics blow molding operations, partially offset by cash paid for the disposal of a paper operation in France. Proceeds in 2015 primarily related to approximately $29.1 million received from the sale of two metal ends and closures plants in February 2015. Acquisition spending, net of cash acquired, was $71.2 million higher year-over-year as the Company completed four acquisitions in 2016 versus two in 2015. Activity in 2016 included the acquisition of Plastic Packaging Inc. for $67.6 million whereas the cash paid for acquisitions in 2015 was significantly lower. Capital spending was $186.7 million in 2016, compared with $192.3 million in 2015, a decrease of $5.6 million.

Financing activities

Net cash provided by financing activities totaled $203.2 million in 2017, compared with a use of $315.7 million in 2016, an increased provision of cash of $518.9 million. This

increase was driven primarily by increased borrowings associated with acquisition activity in 2017. Outstanding debt was $1,447.3 million at December 31, 2017 compared with at $1,052.7 million at December 31, 2016. These balances reflect net borrowings of $355.2 million during 2017, compared with net repayments of debt totaling $65.1 million in 2016. The Company completed a share repurchase program in 2016 through which it acquired 2.0 million shares of the Company’s common stock at a cost of $100 million throughout the year. No shares were repurchased under this program in 2017. Cash dividends increased 5.0% to $153.1 million in 2017 compared to $146.4 million in 2016, reflecting a $0.02 per share increase in the quarterly dividend payment approved by the Board of Directors in April 2017.

Net cash used by financing activities totaled $315.7 million in 2016, compared with $256.4 million in 2015, an increased use of cash of $59.3 million. This increase was driven primarily by the use of $106.7 million of cash in 2016 to repurchase 2.2 million shares of the Company’s common stock. Outstanding debt was $1,052.7 million at December 31, 2016 compared with at $1,128.4 million at December 31,2015. These balances reflect net repayments of $65.1 million during the 12 months ending December 31, 2016, including $75.3 million for the repayment of the Company’s 5.625% debentures upon their maturity on June 15, 2016. The balances also reflect Euro 150 million of borrowings in May 2016, under an unsecured, five-year, 1.0% fixed-rate assignable loan agreement, which were used in part to repay the remaining balance of the $150 million term loan used to fund the October 2014 acquisition of Weidenhammer Packaging Group. In 2015, net debt repayments used $114.7 million of cash as the Company paid down a portion of the incremental debt incurred to fund the acquisition of Weidenhammer. Cash dividends increased 6.0% to $146.4 million in 2016 compared to $138.0 million in 2015, reflecting a $0.02 per share increase in the quarterly dividend payment approved by the Board of Directors in April 2016.

Current assets increased year over year by $214.9 million to $1,564 million at December 31, 2017, and current liabilities increased by $197.4 million to $1,000 million, resulting in a decrease in the Company’s current ratio to 1.6 at December 31, 2017 from 1.7 at December 31, 2016. The increase in both current assets and current liabilities was largely attributable to the acquisitions completed in 2017 and higher level of working capital and short-term debt at the end of 2017 compared to the end of 2016.

Capital resources

The Company’s cash balances are held in numerous locations throughout the world. At December 31, 2017 and 2016, approximately $238.4 million and $174.7 million, respectively, of the Company’s reported cash and cash equivalents balances of $254.9 million and $257.2 million, respectively, were held outside of the United States by its foreign subsidiaries. Cash held outside of the United States is available to meet local liquidity needs, or for capital expenditures, acquisitions, and other offshore growth opportunities. Under prior law, cash repatriated to the U.S. was subject to federal income taxes, less applicable foreign tax credits. As the Company enjoys ample domestic liquidity through a combination of operating cash flow generation and access to bank and capital markets borrowings, we have considered our offshore cash balances to be indefinitely invested outside the United States and had no plans to repatriate these cash balances. However, due to changes in U.S. tax laws as part of the enactment of the Tax Cuts and Jobs Act, beginning in 2018 cash repatriated will generally not be subject to federal income taxes; accordingly, the Company is considering opportunities to repatriate cash balances. The Company will finalize its analysis during 2018 and, as provided for in SAB 118, will make any necessary adjustments in the financial statements of future periods within the provided time frame, including a determination of our intentions with respect to undistributed earnings of international subsidiaries.

Under Internal Revenue Service rules, U.S. corporations may borrow funds from foreign subsidiaries for up to 30 days without unfavorable tax consequences. The Company has utilized these rules at various times in prior years to temporarily access offshore cash in lieu of issuing commercial paper. The Company did not access any offshore cash under these rules in 2017. However, depending on its immediate offshore cash needs, the Company may choose to access such funds again in the future as allowed under the rules.

On July 20, 2017, the Company entered into a Credit Agreement in connection with a new $750 million bank credit facility with a syndicate of eight banks replacing an existing credit facility entered into on October 2, 2014, and reflecting substantially the same terms and conditions. The Company operates a $350 million commercial paper program, supported by a $500 million five-year revolving credit facility. If circumstances were to prevent the Company from issuing commercial paper, it has the contractual right to draw funds directly on the underlying revolving bank credit facility.

The Company’s total debt at December 31, 2017, was $1,447 million, a year-over-year increase of $395 million driven primarily by the $250 million term loan used to finance the Clear Lam and Packaging Holdings acquisitions and the increase in commercial paper. The Company had $124 million of commercial paper outstanding at December 31, 2017 and none at December 31, 2016.

The Company uses a notional pooling arrangement with an international bank to help manage global liquidity requirements. Under this pooling arrangement, the Company and its participating subsidiaries may maintain either a cash deposit or borrowing position through local currency accounts with the bank, so long as the aggregate position of the global pool is a notionally calculated net cash deposit. Because it maintains a

security interest in the cash deposits, and has the right to offset the cash deposits against the borrowings, the bank provides the Company and its participating subsidiaries favorable interest terms on both.

Acquisitions and internal investments are key elements of the Company’s growth strategy. The Company believes that cash on hand, cash generated from operations and borrowing capacity will enable it to support this strategy. Although the Company believes that it has excess borrowing capacity beyond its current lines, there can be no assurance that such financing would be available or, if so, at terms that are acceptable to the Company.

The net underfunded position of the Company’s various U.S and international defined benefit pension and postretirement plans was approximately $332 million at the end of 2017. During 2017, the Company contributed approximately $109 million to its benefit plans. The Company anticipates that benefit plan contributions in 2018 will total approximately $38 million. Future funding requirements will depend largely on actual investment returns and future actuarial assumptions. Participation in the U.S. qualified defined benefit pension plan is frozen for salaried and non-union hourly U.S. employees hired on or after January 1, 2004. In February 2009, the plan was further amended to freeze service credit earned effective December 31, 2018. This change is expected to moderately reduce the volatility of long-term funding exposure and expenses.

Total equity increased $175 million during 2017 as net income of $177 million and other comprehensive income totaling $146 million were partially offset by dividend payments of $155 million, stock-based compensation of $13 million and share repurchases of $6 million. The primary components of other comprehensive gain were a $89 million translation gain from the impact of a weaker U.S. dollar on the Company’s foreign investments which were partially offset by additional actuarial gains totaling $60 million, net of tax, in the Company’s various defined benefit plans resulting primarily from lower year-over-year discount rates. Total equity increased $21.8 million during 2016 as net income of $287.9 million was partially offset by other comprehensive losses totaling $34.9 million, dividend payments of $147.7 million, and share repurchases of $106.7 million. The primary components of other comprehensive loss were a $32.4 million translation loss from the impact of a stronger U.S. dollar on the Company’s foreign investments and an increase in actuarial losses totaling $9.6 million, net of tax, in the Company’s various defined benefit plans resulting primarily from lower year-over-year discount rates.

On February 10, 2016, the Company’s Board of Directors authorized the repurchase of up to 5 million shares of the Company’s common stock. During 2016, a total of 2.03 million shares were repurchased under this authorization at a cost of $100 million. No shares were repurchased under this authorization during 2017. Accordingly, at December 31, 2017, a total of 2.97 million shares remain available for repurchase under this authorization.

Although the ultimate determination of whether to pay dividends is within the sole discretion of the Board of Directors, the Company plans to increase dividends as earnings grow. Dividends per common share were $1.54 in 2017, $1.46 in 2016 and $1.37 in 2015. On February 14, 2018, the Company declared a regular quarterly dividend of $0.39 per common share payable

on March 9, 2018, to shareholders of record on February 28, 2018.

Off-balance sheet arrangements

The Company had no material off-balance sheet arrangements at December 31, 2017.

Risk management

As a result of operating globally, the Company is exposed to changes in foreign exchange rates. The exposure is well diversified, as the Company’s facilities are spread throughout the world, and the Company generally sells in the same countries where it produces. The Company monitors these exposures and may use traditional currency swaps and forward exchange contracts to hedge a portion of forecasted transactions that are denominated in foreign currencies, foreign currency assets and liabilities or net investment in foreign subsidiaries. The Company’s foreign operations are exposed to political and cultural risks, but the risks are mitigated by diversification and the relative stability of the countries in which the Company has significant operations.

Prior to July 1, 2015, the Company used Venezuela’s official exchange rate to report the results of its operations in Venezuela. As a result of significant inflationary increases, and to avoid distortion of its consolidated results from translation of its Venezuelan operations, the Company concluded that it was appropriate to begin translating its Venezuelan operations using an alternative exchange rate. Accordingly, effective July 1, 2015, the Company began translating its Venezuelan operations, and all monetary assets and liabilities in Venezuela, using the alternative rate known as the SIMADI rate (replaced in 2016 by the DICOM rate). This resulted in a foreign exchange remeasurement loss on net monetary assets. In addition, the use of the significantly higher SIMADI rate resulted in the need to recognize impairment charges against inventories and certain long-term nonmonetary assets as the U.S. dollar value of projected future cash flows from these assets was no longer sufficient to recover their U.S. dollar carrying values. The combined $12.1 million impact of the impairment charges and remeasurement loss, on both a before and after-tax basis, was recognized in the third quarter of 2015. As a result of the continued devaluation of the Venezuelan Bolivar in 2017, the Company recognized additional impairment charges and remeasurement losses in 2017 totaling $0.8 million. At December 31, 2017, the carrying value of the Company’s net investment in its Venezuelan operations was approximately $1.8 million. In addition, at December 31, 2017, the Company’s Accumulated Other Comprehensive Loss included a cumulative translation adjustment loss of $3.8 million related to its Venezuela operations which would need to be reclassified to net income in the event of a complete exit of the business or a decision to deconsolidate.

The Company is a purchaser of various raw material inputs such as recovered paper, energy, steel, aluminum and plastic resin. The Company generally does not engage in significant hedging activities for these purchases, other than for energy and, from time to time, aluminum, because there is usually a high correlation between the primary input costs and the ultimate selling price of its products. Inputs are generally purchased at market or at fixed prices that are established with individual suppliers as part of the purchase process for quantities expected to be consumed in the ordinary course of business. On occasion, where the correlation between selling price and input price is less direct, the Company may enter into derivative contracts such as futures or swaps to manage the effect of price fluctuations.

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

At December 31, 2017, the Company had derivative contracts outstanding to hedge the price on a portion of anticipated commodity and energy purchases as well as to hedge certain foreign exchange risks for various periods through December 2019. These contracts included swaps to hedge the purchase price of approximately 7.5 million MMBTUs of natural gas in the U.S. and Canada representing approximately 76.2% and 35.5% of anticipated natural gas usage for 2018 and 2019. Additionally, the Company had swap contracts covering 1796 metric tons of aluminum representing approximately 24% of anticipated usage for 2018. The aluminum hedges relate to fixed-price customer contracts. At December 31, 2017, the Company had a number of foreign currency contracts in place for both designated and undesignated hedges of either anticipated foreign currency denominated transactions or existing financial assets and liabilities. At December 31, 2017, the total notional amount of these contracts, in U.S. dollar terms, was $189 million, of which $58 million related to the Canadian dollar, $50 million to the Mexican peso, $50 million to the Polish Zloty and $31 million to all other currencies.

The total fair market value of the Company’s derivatives was a net unfavorable position of $1.3 million at December 31, 2017, and a net favorable position of $2.8 million at December 31, 2016. Derivatives are marked to fair value using published market prices, if available, or using estimated values based on current price quotes and a discounted cash flow model. See Note 9 to the Consolidated Financial Statements for more information on financial instruments.

The Company is subject to various federal, state and local environmental laws and regulations concerning, among other matters, solid waste disposal, wastewater effluent and air emissions. Although the costs of compliance have not been significant due to the nature of the materials and processes used in manufacturing operations, such laws also make generators of hazardous wastes and their legal successors financially responsible for the cleanup of sites contaminated by those wastes. The Company has been named a potentially responsible party at several environmentally contaminated sites. These regulatory actions and a small number of private party lawsuits are believed to represent the Company’s largest potential environmental liabilities. The Company has accrued $20.3 million at December 31, 2017, compared with $24.5 million at December 31, 2016, with respect to these sites. See “Environmental Charges,” Item 3 – Legal Proceedings and Note 14 to the Consolidated Financial Statements for more information on environmental matters.

Results of operations – 2016 versus 2015

Consolidated net sales for 2016 were $4.8 billion, a $181 million, or 3.7%, decrease from 2015. The components of the sales change were:

In order to enhance the meaningfulness of reported changes in volume/mix, a $63.7 million reduction in packaging center

sales resulting from changes in the level of activity, primarily from the previously reported loss of contract packaging business in Irapuato, Mexico, is classified above as “other” due to the low/inconsistent correlation that typically exists between changes in revenue and changes in operating profit in our packaging center operations.

Sales volume/mix was essentially flat as organic volume growth and a favorable change in product mix in a number of our businesses offset volume declines in rigid paper containers. For the most part, price changes for the Company’s products were driven by changes in the underlying raw materials costs. In 2016, many of the Company’s primary raw materials saw decreases in their market prices; however, old corrugated containers (OCC) saw a moderate increase year over year. This increase most directly affected the Paper and Industrial Converted Products segment while the decrease in other raw materials, mainly resins, most directly affected the Consumer Packaging segment. While the Company’s 2016 and 2015 acquisitions added more than $20 million to comparable year-over-year sales, the impact was more than offset by comparable sales decreases related to dispositions, the most significant of which was the 2016 sale of the Company’s rigid plastics blow molding operations. Finally, foreign exchange rate changes decreased sales year-over-year as almost all of the foreign currencies in which the Company conducts business weakened in relation to the U.S. Dollar.

Total domestic sales were $3.1 billion, down 3.1% from 2015 levels. International sales were $1.7 billion, down 4.6% from 2015 with most of the decrease driven by the impact of foreign currency translation. Additionally, sales in Mexico were lower due to the loss of contract packaging business in Irapuato, Mexico.

Costs and expenses/margins

Cost of sales was down $189.5 million in 2016, or 4.7%, from the prior year primarily as a result of foreign currency translation, certain raw material price declines, disposed businesses, lower pension expense and productivity improvements, somewhat offset by the impact of acquisitions. Partially offsetting these benefits were an unfavorable mix of sales and higher labor and other costs. Overall, the Company was able to achieve a positive price cost relationship, aided by certain raw material price declines in some businesses and procurement productivity gains. As a result, gross profit margins improved to 19.6% in 2016 from 18.7% in the prior year.

Aggregate pension and postretirement plan expenses decreased $12.0 million in 2016 to a total of $45.3 million, compared with $57.3 million in 2015. The decrease was primarily the result of the Company’s previously disclosed change in its method to estimate service and interest cost components of net periodic benefit cost. On January 1, 2016 the Company began using a full yield curve approach to estimate these costs as opposed to the previous method that used a single weighted-average discount rate. Approximately 75% of pension and postretirement plan expenses are reflected in cost of sales and 25% in selling, general and administrative expenses. See Note 12 to the Consolidated Financial Statements for further information on employee benefit plans.

Selling, general and administrative expenses increased $9.8 million, or 2.0%, and were 10.6% of sales compared to 10.0% of sales in 2015. In 2015, selling, general and administrative expenses included a $32.5 million gain from the release of environmental reserves upon the partial settlement of the Fox River environmental claim, and included expenses totaling approximately $7.1 million for legal and professional fees related to the financial misstatements at our Irapuato, Mexico, packaging center. Absent these items, the year-over-year change in selling, general and administrative expenses would

have been a decrease of $15.6 million. The year-over-year decrease reflects lower pension expense, a reduction in costs related to the Company’s domestic self-insured employee group medical plan, lower legal and professional fees, reductions from the sale of the Company’s rigid plastics blow molding operations, and the favorable effect of foreign currency translation from a stronger U.S. dollar. These favorable factors were partially offset by increases in 2016 incentive-based compensation and general inflation.

GAAP Earnings before interest and income taxes (EBIT) were 10.3% of sales in 2016 compared to 7.7% in 2015, The largest contributor to this increase was the 2016 gain on the sale of the Company’s rigid plastics blow molding business. Base EBIT was 9.1% of sales in 2016 compared to 8.3% in 2015, in line with the year-over-year increase in gross profit margin discussed above which contributed to the improvements in both GAAP EBIT and Base EBIT.

Restructuring and restructuring related asset impairment charges totaled $42.9 million and $50.6 million in 2016 and 2015, respectively. Additional information regarding restructuring actions and impairments is provided in Note 4 to the Company’s Consolidated Financial Statements.

Research and development costs, all of which were charged to expense, were $22.5 million in 2016 and $22.1 million in 2015. Management expects research and development spending to remain at a similar level in 2017.

Net interest expense totaled $51.6 million for the year ended December 31, 2016, compared with $54.6 million in 2015. The decrease was due primarily to lower average debt levels as the Company settled its $75.2 million 5.625% debentures upon their maturity in June 2016, and in May 2016 used proceeds from a new 1.00% fixed rate Euro 150 million loan to settle the remaining $150 million balance of a variable rate term loan entered into in conjunction with the 2014 acquisition of Weidenhammer Packaging Group.

Reportable segments

The Company reports its financial results in four reportable segments – Consumer Packaging, Display and Packaging, Paper and Industrial Converted Products, and Protective Solutions.

Consolidated operating profits, also referred to as “Income before interest and income taxes” on the Consolidated Statements of Income, are comprised of the following:

Consumer Packaging

Sales decreased year over year due to decreased sales prices driven by decreases in resins and other raw material costs coupled with a number of dispositions. The Company’s sold its rigid plastic blow molding operations in November 2016 and in February 2015 sold a portion of its metal ends and closures business, consisting of two facilities in Canton, Ohio. The year-over-year impact of these dispositions more than offset the additional sales from the acquisition of Plastic Packaging Inc. on November 1, 2016. Organic volume growth in flexible packaging and plastics somewhat offset volume declines in global composite cans. Trade sales in the segment were reduced by approximately $27 million year over year as a result of foreign currency translation due to a stronger U.S. dollar. Domestic sales were approximately $1,368 million, down 5.6%, or $81 million, from 2015, while international sales were approximately $675 million, up 0.2%, or $1 million, from 2015.

Segment operating profits increased by $9.3 million year over year and operating profit margins increased to 11.8% from 10.9% in 2015. The increase in segment operating profits was largely driven by a positive price/cost relationship and solid gains in fixed cost productivity. These benefits were partially offset by inflation, volume declines in global composite cans, and the impact of foreign currency translation. Material purchasing and logistics savings were key drivers of the positive price/cost relationship. The previously mentioned divestitures were almost completely offset by acquisitions at an operating profit level.

Significant capital spending in the Consumer Packaging segment included numerous productivity projects and expansion of manufacturing capabilities in North America in both flexible packaging and plastics, and expansion of manufacturing capabilities in Europe in rigid paper and plastic containers.

Display and Packaging

Domestic trade sales in the segment decreased $12.8 million, or 5.0%, to $246 million, while international trade sales decreased $73 million, or 21.0%, to $274 million. The decrease in domestic trade sales resulted from lower volume in retail security packaging and the impact of the July 2016 sale of our retail security packaging facility in Juncos, Puerto Rico. The decrease in international sales reflects the Company’s exit in 2016 from packaging center fulfillment contract with a customer. The Company transitioned the operation of the facility back to the customer during the first half of 2016. Additionally, the negative impact of approximately $18 million from foreign currency translation as a result of a weaker Mexican peso and Polish zloty relative to the U.S. dollar also lowered sales year over year.

The increase in segment operating profit was driven by a positive price/cost relationship and total productivity. These gains were partially offset by the impact of foreign currency translation and inflation of labor and other costs along with volume declines in retail security packaging.

Capital spending in the segment included numerous productivity and customer development projects in North America.

Paper and Industrial Converted Products

The U.S. Dollar strengthened against the local currencies in virtually every international market where the segment operates, resulting in a $31 million year-over-year decrease in sales due to foreign currency translation. Additionally, the divestiture of the Company’s paperboard mill in Schweighouse-sur-Moder, France was only partially offset by sales from acquired businesses, a small tubes and cores business in Australia acquired in June 2016 and a domestic high-density wood plug business acquired in September 2015. On average market costs for recovered paper in the U.S. were higher year over year resulting in higher average selling prices in all of the segment’s domestic businesses with the exception of corrugating medium. Selling prices were slightly higher in Brazil and the Andean region, primarily due to overall inflation, and were up in Europe due to the pass through of higher material costs in that market. Total volume/mix was effectively flat in the segment despite gains in Europe and Latin America which were due to a combination of market share gains and regional expansion. Volume decreased in our reels business on lower volumes in nail-wood reels and lower demand for steel reels used in both on- and off-shore applications in the oil and gas industry. Volume also declined in our recycling business primarily due to a 2015 action to exit a recovery facility operating agreement coupled with some loss of market share. In addition, volume decreased on our one corrugating medium machine due to general market softening. Total domestic sales in the segment decreased $18 million, or 1.7%, to $1,025 million while international sales decreased $18 million, or 2.6%, to $668 million.

Segment operating profit increased year over year driven by total productivity. Adding to this were gains from the previously mentioned acquisitions and divestitures. Partially offsetting these gains were price cost declines driven by the Company’s single corrugating medium machine which continued to struggle as market supply depressed sales price and forced a larger portion of output to be sold in less-profitable foreign markets. In corrugating medium, lower selling prices and reduced volume, which also had a negative impact on productivity, resulted in a $16.2 million year-over-year reduction in product line profitability. Excluding corrugating medium, the segment’s operating profit would have increased $21.8 million, or 17.8%, driven by solid gains in manufacturing productivity, a positive price cost relationship, and lower fixed costs.

Significant capital spending in the segment included the modification of several paper machines in North America and numerous productivity projects.

Protective Solutions

Sales increased year over year due to higher volume in temperature-assured packaging, molded foam automotive components and paper-based protective packaging, partially reduced by the negative impact of foreign currency translation.

Segment operating profit increased year over year due to a positive price/cost relationship and higher volume which were partially offset by increases in labor, overhead and other costs.

Domestic sales were $436 million in 2016 up $14 million, 3.2%, from 2015. International sales increased more modestly to $90 million up $6 million, or 7.6%.

Capital spending in the segment included numerous productivity and customer development projects.

Critical accounting policies and estimates

Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates these estimates and assumptions on an ongoing basis, including but not limited to those related to inventories, bad debts, derivatives, income taxes, share-based compensation, goodwill, intangible assets, restructuring, pension and other postretirement benefits, environmental liabilities, and contingencies and litigation. Estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. The results of these estimates may form the basis of the carrying value of certain assets and liabilities and may not be readily apparent from other sources. Actual results could differ from those estimates. The impact of and any associated risks related to estimates, assumptions and accounting policies are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as in the Notes to the Consolidated Financial Statements, if applicable, where such estimates, assumptions and accounting policies affect the Company’s reported and expected financial results.

The Company believes the accounting policies discussed in the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K are critical to understanding the results of its operations. The following discussion represents those policies that involve the more significant judgments and estimates used in the preparation of the Company’s Consolidated Financial Statements.

Impairment of long-lived, intangible and other assets

Assumptions and estimates used in the evaluation of potential impairment can result in adjustments affecting the carrying values of long-lived, intangible and other assets and the recognition of impairment expense in the Company’s Consolidated Financial Statements. The Company evaluates its long-lived assets (property, plant and equipment), definite-lived intangible assets and other assets (including notes receivable and equity investments) for impairment whenever indicators of impairment exist, or when it commits to sell the asset. If the sum of the undiscounted expected future cash flows from a long-lived asset or definite-lived intangible asset group is less than the carrying value of that asset group, an asset impairment charge is recognized. Key assumptions and estimates used in the cash flow model generally include price levels, sales growth, profit margins and asset life. The amount of an impairment charge, if any,

is calculated as the excess of the asset’s carrying value over its fair value, generally represented by the discounted future cash flows from that asset or, in the case of assets the Company evaluates for sale, as estimated proceeds less costs to sell. The Company takes into consideration historical data and experience together with all other relevant information available when estimating the fair values of its assets. However, fair values that could be realized in actual transactions may differ from the estimates used to evaluate impairment. In addition, changes in the assumptions and estimates may result in a different conclusion regarding impairment.

Impairment of goodwill

In accordance with ASC 350, the Company assesses its goodwill for impairment annually and from time to time when warranted by the facts and circumstances surrounding individual reporting units or the Company as a whole.

The Company completed its most recent annual goodwill impairment testing during the third quarter of 2017. For testing purposes, the Company performed an assessment of each reporting unit using either a qualitative evaluation or a quantitative test. The Company’s reporting units are one level below its operating segments, as determined in accordance with ASC 350. The qualitative evaluations considered factors such as the macroeconomic environment, Company stock price and market capitalization movement, business strategy changes, and significant customer wins and losses. The quantitative tests considered factors such as current year operating performance as compared to prior projections, expected changes in future operating performance, and implied fair values from comparable trading and transaction multiples.

When the Company estimates the fair value of its reporting units, it does so using a discounted cash flow model based on projections of future years’ operating results and associated cash flows, together with comparable trading and transaction multiples. The Company’s model discounts projected future cash flows, forecasted over a ten-year period, with an estimated residual growth rate. The Company’s projections incorporate management’s estimates of the most-likely expected future results, including significant assumptions and estimates related to, among other things: sales volumes and prices, new business, profit margins, income taxes, capital expenditures and changes in working capital requirements and, where applicable, improved operating margins. Projected future cash flows are discounted to present value using a discount rate appropriate for the reporting unit.

The Company’s assessments, whether qualitative or quantitative, incorporate management’s expectations for the future, including forecasted growth rates and/or profitability measures. Therefore, should there be changes in the relevant facts and circumstances and/or expectations, management’s assessment regarding goodwill impairment may change as well. Management’s projections related to revenue growth and/or margin improvements are based on a combination of factors, including expectations for volume growth with existing customers and customer retention, product expansion, changes in price/cost relationships, productivity gains, fixed cost leverage, and stability or improvement in general economic conditions.

In considering the level of uncertainty regarding the potential for goodwill impairment, management has concluded that any such impairment would likely be the result of adverse changes in more than one assumption. Management does not consider any of its assumptions to be either aggressive or conservative, but rather its best estimates across a range of possible outcomes based on available evidence at the time of the assessment. Other than in Display and Packaging, which is discussed below, there is no specific singular event or single change in circum-

stances management has identified that it believes could reasonably result in a change to expected future results in any of its reporting units sufficient to result in goodwill impairment. In management’s opinion, a change of such magnitude would more likely be the result of changes to some combination of the factors identified above, a general deterioration in competitive position, introduction of a superior technology, significant unexpected changes in customer preferences, an inability to pass through significant raw material cost increases, and other such items as identified in “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

Although no reporting units failed the testing noted above, in management’s opinion, the reporting units having the greatest risk of a significant future impairment if actual results fall short of expectations are Display and Packaging, and Paper and Industrial Converted Products – Europe. Total goodwill associated with these reporting units was approximately $203 million and $95 million, respectively, at December 31, 2017.

The Display and Packaging reporting unit designs, manufactures, assembles, packs and distributes temporary, semi-permanent and permanent point-of-purchase displays; provides supply chain management services, including contract packing, fulfillment and scalable service centers; and manufactures retail packaging, including printed backer cards, thermoformed blisters and heat sealing equipment. Based on the annual impairment test performed in the third quarter, the estimated fair value of Display and Packaging exceeded its carrying value by approximately 37% compared to 64% in the prior year’s annual test. The unit’s goodwill impairment analysis reflects expectations for moderate sales growth and improved percentage profit margins based largely on the expected successful ramp up of operations at the Company’s new battery packaging facility in Atlanta, Georgia. Operations at this facility began in mid-2017, and results to date have been well below projections due to a variety of internal and external factors impacting production efficiencies and operating costs. These operational issues and the resulting poor results relative to projections have continued in the fourth quarter. The Company is working to resolve these issues and continues to be optimistic that over time the center will be able to achieve efficiency and cost levels in line with expectations. In addition, the analysis reflects expected cash flow improvements from future productivity initiatives and increased capacity within this new center and elsewhere in the reporting unit. A large portion of expected sales in this reporting unit is concentrated in two customers and if the business with either one of these customers is lost, or other projected synergies and productivity gains are not realized, a goodwill impairment charge could be incurred. Based on an assessment made at December 31, 2017, which gave consideration to the current under-performance of the reporting unit largely driven by the previously mentioned issues at the new packaging center, the fair value of the Display and Packaging reporting unit has continued to decline from the time of the annual impairment test. Although this assessment did not result in a conclusion that as of December 31, 2017 it was more likely than not that goodwill had been impaired, in management’s opinion continued under-performance in future quarters relative to forecasts would likely result in an impairment charge.

Paper and Industrial Converted Products – Europe manufactures paperboard tubes and cores, fiber-based construction tubes and forms and recycled paperboard. In recent years the Eurozone has faced persistent high unemployment, spillover effects of geo-political conflicts in Eastern Europe and the Middle East, and uncertainties over the United Kingdom’s exit negotiations with the European Union. Despite these issues, the economy experienced steady year over year growth in the last couple of years and the Company expects the momentum to

continue in the near future. This outlook is supported by accommodative monetary policy, recovery in manufacturing and export activities, and lower inflation related to energy price declines. The growth is expected to slow down slightly in the outer years as the European Central Bank gradually tightens its monetary policies. This reporting unit experienced a significant increase in raw material costs during 2017 which it was not able to fully offset through higher selling prices. Management expects this negative price/cost relationship to improve going forward and despite the challenges noted, believes the reporting unit should be able to grow at or above the Eurozone’s projected GDP growth rates and continue to mitigate the impact of these factors. However, if economic conditions were to deteriorate and management were unable to fully mitigate the impacts, or be unable to consistently recover additional significant cost increases or otherwise fail to achieve expected sales volumes and profit margins, a goodwill impairment charge could be incurred. Based on the valuation work performed during the third quarter, the estimated fair value of Paper and Industrial Converted Products – Europe exceeded its carrying value by approximately 29%, compared with 55% in the prior year.

For the annual analyses performed during 2017, projected future cash flows were discounted at 10.0% and 8.5% for Display and Packaging and Paper and Industrial Converted Products – Europe, respectively. Holding other valuation assumptions constant, Display and Packaging projected operating profits across all future periods would have to be reduced approximately 23%, or the discount rate increased to 12.7%, in order for the estimated fair value to fall below the reporting unit’s carrying value. The corresponding percentages for Paper and Industrial Converted Products – Europe are 19% and 10.4%, respectively.

During the time subsequent to the annual evaluation, and at December 31, 2017, the Company considered whether any events and/or changes in circumstances had resulted in the likelihood that the goodwill of any of its reporting units may have been impaired. It is management’s opinion that no such events have occurred.

Income taxes

The Company follows ASC 740, Accounting for Income Taxes, which requires a reduction of the carrying amounts of deferred tax assets by recording a valuation allowance if, based on the available evidence, it is more likely than not such assets will not be realized. Deferred tax assets generally represent expenses that have been recognized for financial reporting purposes, but for which the corresponding tax deductions will occur in future periods. The valuation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns and future profitability. Our accounting for deferred tax consequences represents our best estimate of those future events. Changes in our current estimates, due to unanticipated events or otherwise, could have a material impact on our financial condition and results of operations.

For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those positions not meeting the more-likely-than-not standard, no tax benefit has been recognized in the financial statements. Associated interest has also been recognized, where applicable.

As previously disclosed, the Company received a draft Notice of Proposed Adjustment (“NOPA”) from the Internal Revenue Service (IRS) in February 2017 proposing an adjustment to income for the 2013 tax year based on the IRS’s

recharacterization of a distribution of an intercompany note made in 2012, and the subsequent repayment of the note over the course of 2013, as if it were a cash distribution made in 2013. In March 2017, the Company received a draft NOPA proposing penalties of $18 million associated with the IRS’s recharacterization, as well as an Information Document Request (“IDR”) requesting the Company’s analysis of why such penalties should not apply. The Company responded to this IDR in April 2017. On October 5, 2017, the Company received two revised draft NOPAs proposing the same adjustments and penalties as in the prior NOPAs. On November 14, 2017, the Company received two final NOPAs proposing the same adjustments and penalties as in the prior NOPAs. On November 20, 2017, the Company received a Revenue Agents Report (“RAR”) that included the same adjustments and penalties as in the prior NOPAs. At the time of the distribution in 2012, it was characterized as a dividend to the extent of earnings and profits, with the remainder as a tax free return of basis and taxable capital gain. As the IRS proposes to recharacterize the distribution, the entire distribution would be characterized as a dividend. The incremental tax liability associated with the income adjustment proposed in the RAR would be approximately $89 million, excluding interest and the previously referenced penalties. On January 22, 2018, the Company filed a protest to the proposed deficiency with the IRS, which will cause the matter to be referred to the Appeals Division of the IRS. The Company strongly believes the position of the IRS with regard to this matter is inconsistent with applicable tax laws and existing Treasury regulations, and that the Company’s previously reported income tax provision for the year in question is appropriate. However, there can be no assurance that this matter will be resolved in the Company’s favor. Regardless of whether the matter is resolved in the Company’s favor, the final resolution of this matter could be expensive and time consuming to defend and/or settle. While the Company believes that the amount of tax originally paid with respect to this distribution is correct, and accordingly has not provided additional reserve for tax uncertainty, there is still a possibility that an adverse outcome of the matter could have a material effect on its results of operations and financial condition.

The estimate for the potential outcome of any uncertain tax issue is highly judgmental. The Company believes it has adequately provided for any reasonably foreseeable outcome related to these matters. 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 limitations on potential assessments expire. Additionally, the jurisdictions in which earnings or deductions are realized may differ from current estimates. As a result, the eventual resolution of these matters could have a different impact on the effective rate than currently reflected or expected.

Stock-based compensation plans

The Company utilizes share-based compensation in the form of stock appreciation rights, restricted stock units and other share-based awards. Certain awards are in the form of contingent stock units where the ultimate number of units are performance based. The amount of share-based compensation expense associated with these performance-based awards are based on estimates regarding future performance using measures defined in the plans. In 2017, the performance measures consisted of Earnings per Share and Return on Net Assets Employed. Changes in estimates regarding the future achievement of these performance measures may result in significant fluctuations from period to period in the amount of share-based compensation expense reflected in the Company’s Consolidated Financial Statements.

The Company uses an option-pricing model to determine the grant date fair value of its stock appreciation rights. Inputs to the model include a number of subjective assumptions. Management routinely assesses the assumptions and methodologies used to calculate estimated fair value of share-based compensation per share. Circumstances may change and additional data may become available over time that results in changes to these assumptions and methodologies, which could materially impact fair value determinations.

Pension and postretirement benefit plans

The Company has significant pension and postretirement benefit liabilities and costs that are measured using actuarial valuations. The actuarial valuations employ key assumptions that can have a significant effect on the calculated amounts. The key assumptions used at December 31, 2017, in determining the projected benefit obligation and the accumulated benefit obligation for U.S. retirement and retiree health and life insurance plans include: discount rates of 3.69% and 3.49% for the active and inactive qualified retirement plans, respectively, 3.50% for the non-qualified retirement plans, and 3.36% for the retiree health and life insurance plan; and rates of compensation increases ranging from 3.28% to 4.02%. The key assumptions used to determine 2017 net periodic benefit cost for U.S. retirement and retiree health and life insurance plans include: discount rates of 4.29% and 3.99% for the active and inactive qualified retirement plans, respectively, 3.97% for the non-qualified retirement plans, and 3.70% for the retiree health and life insurance plan; an expected long-term rate of return on plan assets of 7.00% and 6.75% for the active and inactive qualified retirement plans, respectively; and rates of compensation increases ranging from 3.32% to 4.87%.

During 2017, the Company recorded total pension and postretirement benefit expenses of approximately $78.5 million, compared with $45.3 million during 2016. The 2017 amount reflects $82.8 million of expected returns on plan assets at an average assumed rate of 6.3% and interest cost of $56.3 million at a weighted-average discount rate of 3.34%. The expense recognized in 2017 also includes $32.8 million of pension settlement charges, which are discussed in more detail below. The 2016 amount reflects $87.0 million of expected returns on plan assets at an average assumed rate of 6.8% and interest cost of $60.2 million at a weighted-average discount rate of 3.55%. During 2017, the Company made contributions to its pension and postretirement plans of $108.6 million, including a voluntary $50 million contribution to its U.S. active qualified retirement plan. In the prior year, the Company made contributions to its pension and postretirement plans totaling $46.7 million. Contributions vary from year to year depending on various factors, the most significant being the market value of assets and interest rates. Cumulative net actuarial losses were approximately $616 million at December 31, 2017, and are primarily the result of low discount rates. Actuarial losses/gains outside of the 10% corridor defined by U.S. GAAP are amortized over the average remaining service life of the plan’s active participants or the average remaining life expectancy of the plan’s inactive participants if all, or almost all, of the plan’s participants are inactive.

In February 2017, the Company initiated a program to settle a portion of the projected benefit obligation (PBO) relating to terminated vested participants in the U.S. qualified retirement plans through either a single, lump-sum payment or the purchase of an annuity. The terminated vested population comprised approximately 15% of the beginning of year PBO of these plans. The Company successfully settled approximately 47% of the PBO for the terminated vested plan participants. As a result of these and other smaller settlements, the Company recognized non-cash settlement charges of $32.8 million in 2017. All

settlement payments were funded from plan assets and did not require the Company to make any additional cash contributions in 2017. The Company does not expect to recognize any additional settlement charges in 2018.

Excluding the non-recurring settlement charges recognized in 2017, the Company projects total benefit plan expense to be approximately $8 million lower in 2018 than in 2017. The decrease is primarily due to greater expected returns on plan assets due to a higher asset base resulting from the strong market performance in 2017 and the $50 million voluntary contribution made to the U.S. active qualified retirement plan in the fourth quarter of 2017. Partially offsetting this favorable impact, is the effect of lower discount rates on year-over-year benefit plan expense.

The Company adjusts its discount rates at the end of each fiscal year based on yield curves of high-quality debt instruments over durations that match the expected benefit payouts of each plan. The expected rate of return assumption is derived by taking into consideration the targeted plan asset allocation, projected future returns by asset class and active investment management. A third-party asset return model was used to develop an expected range of returns on plan investments over a 12- to 15-year period, with the expected rate of return selected from a best estimate range within the total range of projected results. The Company periodically re-balances its plan asset portfolio in order to maintain the targeted allocation levels. The rate of compensation increase assumption is generally based on salary and incentive compensation increases. A key assumption for the U.S. retiree health and life insurance plan is a medical cost trend rate beginning at 6.75% for post-age 65 participants and trending down to an ultimate rate of 4.5% in 2026. The ultimate trend rate of 4.5% represents the Company’s best estimate of the long-term average annual medical cost increase over the duration of the plan’s liabilities. It provides for real growth in medical costs in excess of the overall inflation level.

Other assumptions and estimates impacting the projected liabilities of these plans include inflation, participant withdrawal and mortality rates and retirement ages. The Company annually reevaluates assumptions used in projecting the pension and postretirement liabilities and associated expense. These judgments, assumptions and estimates may affect the carrying value of pension and postretirement plan net assets and liabilities and pension and postretirement plan expenses in the Company’s Consolidated Financial Statements.

The sensitivity to changes in the critical assumptions for the Company’s U.S. plans as of December 31, 2017, is as follows:

See Note 12 to the Consolidated Financial Statements for additional information on the Company’s pension and postretirement plans.

Recent accounting pronouncements

Information regarding recent accounting pronouncements is provided in Note 2 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Item 7A. Quantitative and qualitative disclosures about market risk

Information regarding market risk is provided in this Annual Report on Form 10-K under the following items and captions: “Our international operations subject us to various risks that could adversely affect our business operations and financial results” and “Currency exchange rate fluctuations may reduce operating results and shareholders’ equity” in Item 1A-Risk Factors; “Risk Management” in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations; and in Note 9 to the Consolidated Financial Statements in Item 8 – Financial Statements and Supplementary Data.

Item 8. Financial statements and supplementary data

The Consolidated Financial Statements and Notes to the Consolidated Financial Statements are provided on pages F-1 through F-32 of this report. Selected quarterly financial data is provided in Note 18 to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

To the Board of Directors and shareholders of Sonoco Products Company

Opinions on the financial statements and internal control over financial reporting

We have audited the accompanying consolidated balance sheets of Sonoco Products Company and its subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, changes in total equity and cash flows for each of the three years in the period ended December 31, 2017, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control—Integrated Framework (2013) issued by the COSO.

Basis for opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant esti-

mates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Packaging Holdings Inc. and subsidiaries (“Packaging Holdings”) and Clear Lam Packaging, Inc. (“Clear Lam”) from its assessment of internal control over financial reporting as of December 31, 2017 because they were acquired by the Company in a purchase business combination during 2017. We have also excluded Packaging Holdings and Clear Lam from our audit of internal control over financial reporting. Packaging Holdings and Clear Lam are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting collectively represent approximately 4.1% and 4.3%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2017.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Charlotte, North Carolina

February 28, 2018

We have served as the Company’s auditor since 1967.