Sonoco Products Co.
02/26/2026 | Press release | Distributed by Public on 02/26/2026 08:25
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations (the "MD&A") is intended to help the reader understand the Company, its operations and its present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, the Company's Consolidated Financial Statements and the accompanying notes thereto contained in Item 8 of this Form 10-K. The MD&A contains forward-looking statements, including, without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions and resources. Such forward-looking statements should be read in conjunction with our disclosures under "Forward-Looking Statements" and under "Item 1A. Risk Factors" of this Annual Report on Form 10-K.
The Company's financial statements are prepared in conformity with U.S. GAAP. Sonoco's management considers a variety of both GAAP and non-GAAP financial and operating measures in assessing the Company's financial performance. The key GAAP measures used are net sales, operating profit, gross profit margin, net income attributable to Sonoco and diluted earnings per share. The key non-GAAP measures used are Adjusted operating profit, Adjusted net income attributable to Sonoco, Adjusted diluted earnings per share, and Adjusted EBITDA. For information about the Company's use of non-GAAP measures and reconciliations of these measures to the most directly comparable GAAP measures see "Non-GAAP Financial Measures" below.
Management may also assess year-over-year changes in operating performance in terms of productivity savings or usage, which is driven by procurement savings or losses, production efficiencies or inefficiencies and the effect of fixed cost reduction initiatives. Management views productivity as a measure of operational excellence of the business and uses it to evaluate improvements in manufacturing efficiency, including automation, and other fixed and variable cost reduction initiatives. Management provides investors with this information to evaluate Sonoco's operating results in a manner similar to how management evaluates operating performance. The Company calculates productivity savings as the difference between applicable current period costs and prior year costs, excluding the impact of estimated inflation or deflation, and volume changes where appropriate.
The MD&A in this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2024 items and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.
Discontinued Operations
The Company's decision in December 2024 to sell TFP represented a major strategic shift in operations. Therefore, in accordance with applicable accounting guidance, the results of TFP are presented as discontinued operations in the Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment results for all periods presented in this Annual Report on Form 10-K and the assets and liabilities of TFP are classified as assets and liabilities of discontinued operations in the Consolidated Balance Sheets. The Consolidated Statements of Comprehensive Income, Changes in Total Equity, and Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations. All amounts, percentages and disclosures for all periods presented in this Annual Report on Form 10-K reflect only the continuing operations of Sonoco unless otherwise noted. On April 1, 2025, the Company completed the sale of TFP to TOPPAN for approximately $1.8 billion on a cash-free and debt-free basis and subject to customary adjustments. See Note 2 to the Consolidated Financial Statements for additional information.
25 FORM 10-K SONOCO 2025 ANNUAL REPORT
General Overview
Sonoco is a multi-billion dollar global designer, developer, and manufacturer of a variety of highly-engineered and sustainable packaging products serving multiple end markets. As of December 31, 2025, the Company had approximately 265 locations in 37 countries, serving some of the world's best-known brands around the globe. The Company's operating and reporting structure consists of two reportable segments, Consumer Packaging and Industrial Paper Packaging, with all remaining businesses reported as All Other. Geographically, in 2025, approximately 48% of sales were generated in the United States, 43% in EMEA, 3% in APAC, 1% in Canada, and 5% in other regions.
Sonoco competes in multiple product categories, with the majority of the Company's revenues attributable to products and services sold to consumer and industrial products companies for use in the packaging of their products for sale or shipment. The Company also manufactures uncoated recycled paperboard for both internal use and open market sale. Each of the Company's operating units has its own sales staff and maintains direct sales relationships with its customers.
Sonoco's goal is to increase its long-term profitability and return capital to shareholders. Over the past several years, we have simplified our portfolio into two core global business segments, which has reduced operating complexity and improved agility. On December 4, 2024, Sonoco completed the acquisition of Eviosys, Europe's leading food cans, ends and closures manufacturer, from KPS, for net cash consideration of approximately $3.8 billion. The transaction was designed to advance Sonoco's portfolio transformation strategy to simplify and realign its portfolio. The transaction, the largest in the Company's history, expanded Sonoco's global leadership in metal food can and aerosol packaging, facilitating our ability to partner with global customers to advance innovation and sustainability in metal packaging offerings. Eviosys operates under the Consumer Packaging segment as Sonoco Metal Packaging EMEA.
Sonoco's portfolio transformation strategy also includes significant divestitures. For example, in 2023, the Company completed the divestitures of its U.S. and Mexico Bulksak businesses, which consisted of the manufacture and distribution of flexible intermediate bulk containers, plastic and fiber pallets, and custom fit liners, and its Sonoco Sustainability Solutions ("S3") business, which provided customized waste and recycling management programs.
In April 2024, Sonoco completed the divestiture of Protexic, which manufactured molded expanded polypropylene and expanded polystyrene foam components serving the automotive, electronics, appliances, and other markets.
On April 1, 2025, the Company completed the sale of TFP to Toppan for a selling price of approximately $1.8 billion on a cash-free and debt-free basis and subject to customary adjustments. On a standalone basis, TFP had revenue of $1.3 billion in 2024.
On November 3, 2025, the Company completed the sale of ThermoSafe to Arsenal, a private equity firm, for net cash consideration of $656 million paid at closing on a cash-free and debt-free basis and subject to customary adjustments. On a standalone basis, ThermoSafe, which was part of the All Other group of businesses, had revenue of approximately $230 million in 2025, through the date of the divestiture. The sale of ThermoSafe substantially concludes the Company's portfolio transformation goal of streamlining its operations from a large portfolio of diversified businesses into two core global business segments.
See "Acquisitions and Divestitures-Divestitures" below for more information.
The Company is focused on efficient capital deployment into these larger, core business units to improve economic returns and improve integration effectiveness and speed for acquired strategic assets. For example, in July 2025 the Company announced plans to invest $30 million of capital into three rigid paper can facilities in the United States to increase its production capacity in the adhesives and sealants sector. The investment is intended to improve supply chain reliability and ensure consistent access to materials for customers.
Effective January 1, 2024, the Company began conducting its recycling operations, part of the Industrial Paper Packaging segment, as a procurement function. As a result, no recycling net sales were recorded and the margin from the Company's recycling operations reduced "Cost of sales" in the Company's Consolidated Statements of Income for the year ended December 31, 2025 and 2024 as these activities are no longer a part of ongoing major operations.
In addition, the Company is consolidating its global metal packaging and rigid paper containers businesses under one structure based on two geographies - Consumer Packaging, EMEA/APAC and Consumer Packaging, Americas. The Company believes the new geographically integrated structure creates a simpler and more efficient operating model that will lead to further innovation, collaboration and growth opportunities.
Throughout 2025, the Company continued to work on commercial, operational, and supply chain excellence programs to shift the mix of its business towards higher-valued products and increase overall productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives, as well as strategic pricing initiatives intended to better capture input costs and the value of the services provided. In addition, the Company continued to focus on improving its competitive position by reducing its cost structure through targeted restructuring activities for operations and support functions intended to enable the Company's businesses to better leverage market capabilities and generate cash flow. The Company plans to continue its focus on driving significant costs savings through implementing a profitability performance plan focused on operational improvement, commercial excellence, and structural transformation in 2026.
The Company believes that its simplified structure will enable greater strategic and operational focus, help generate proceeds to fund deleveraging and further focus capital investments in the Company's core Consumer Packaging and Industrial Paper Packaging businesses, and deliver on its strategic priorities by driving sustainable growth, further expanding margins and efficiently allocating capital, maintaining a strong balance sheet and returning capital to shareholders. By transforming into a simpler, stronger and more sustainable company, the Company believes it is positioned to grow through 2026 and beyond.
Global Trade Developments
Recent developments in U.S. and foreign trade policy have increased uncertainty for the global economy and the Company's business. On March 4, 2025, the U.S. government imposed a 25% tariff on all imports from Canada or Mexico. After imposing this tariff, the U.S. government allowed for the temporary exemption from the tariff for any goods that comply with the USMCA, which has helped mitigate the impact of the tariff on the Company's operations in North America. On February 10, 2025, the United States announced the expansion of Section 232 Tariffs on steel and aluminum imported into the United States, effective March 12, 2025, and the termination of the granting of new exclusions to mitigate these tariffs. As a result, imported steel and aluminum originating from most countries is currently subject to a 50% duty.
The United States also imposed reciprocal tariffs at a baseline rate of 10%, effective April 5, 2025, and later set firmly established tariff rates for various countries at the beginning of August 2025. For the most part, these reciprocal tariffs were incremental increases over the previously established 10% temporary reciprocal tariffs. On February 20, 2026, the U.S. Supreme Court invalidated certain of these tariffs. This ruling and any future changes in tariff and trade policy may result in additional changes, and the exact scope of any such additional changes is not known at this time. While the full impact of the recent changes is uncertain, the Company does not currently expect the current tariff environment to have a material direct effect on the Company's profitability or cash flows over 2026 because the Company's manufacturing network is designed to serve
26 FORM 10-K SONOCO 2025 ANNUAL REPORT
local markets, reducing its exposure to cross-border disruptions and tariff-related risks. While the Company is actively working with its customers to help manage the impacts of higher input costs driven by tariffs, its business model allows for pricing adjustments when necessary. In addition, the Company believes its transformed portfolio following the Eviosys acquisition and the sales of TFP and ThermoSafe is significantly more resilient, with nearly two-thirds of the Company's sales in 2025 coming from the Consumer Packaging segment, a segment that has historically demonstrated strong performance across economic cycles. In addition, while the Section 232 Tariffs impact input costs for the Company's U.S.-based operations with Consumer Packaging, Americas, which source a portion of their steel and aluminum purchases from outside the United States, the Company intends, and has the contractual ability, to pass such increases in cost due to tariffs to its customers.
The ultimate resolution and consequences of these trade policy developments, and their effect on the Company, is uncertain and the Company will continue to monitor trade policy changes closely in order to adapt its strategies and to maintain competitiveness in a challenging market environment. See "Risk Factors" in Part I, Item 1A of this Annual Report on Form 10-K.
Other Recent Developments
On July 4, 2025, the OBBBA, which includes a broad range of tax reform provisions, including the extension of key provisions of the Tax Cuts and Jobs Act of 2017, was signed into law in the United States. The Company has evaluated the impact of the OBBBA as part of its 2025 results, and the effects of the legislation are reflected in its income tax provision for the calendar year 2025. The Company currently does not anticipate any material effect from the OBBBA on its effective tax rate, financial results or cash flows for 2026; however, it will continue to assess the application of the OBBBA and any related regulatory guidance as it becomes available.
Acquisitions and Divestitures
Acquisitions
No acquisitions were completed by the Company in 2025. However, as described above, on December 4, 2024, the Company completed the acquisition of all issued and outstanding equity interests in Eviosys from an affiliate of KPS for net cash consideration of approximately $3.8 billion, net of a final working capital settlement for which the Company received $16.5 million during the second quarter of 2025. Eviosys, now operated as Sonoco Metal Packaging EMEA in the Company's Consumer Packaging segment, is a global supplier of metal packaging that produces food cans and ends, aerosol cans, metal closures and promotional packaging with a large metal food can manufacturing footprint in the EMEA region, which at the time of the acquisition included approximately 6,500 employees in 44 manufacturing facilities across 17 countries. The Company funded the Eviosys acquisition, including related fees and expenses, with the net proceeds from the registered public offering of senior unsecured notes, borrowings from two term loan facilities, and cash on hand. See Note 11 to the Consolidated Financial Statements for more information.
Acquisition activity in 2024 included the Company's purchase of a small tube and paper cone manufacturer in Brazil for $2.7 million on June 1, 2024. The financial results of this business are included in the Company's Industrial Paper Packaging segment.
TFP Divestiture
On April 1, 2025, the Company completed the sale of TFP, part of the Consumer Packaging segment, to Toppan for net cash consideration of $1,807.5 million paid at closing on a cash-free and debt-free basis. A final working capital settlement was reached in January 2026 that will require a payment of $15.2 millionto be made to the buyers during the first quarter of 2026. The Company has recorded a liability for this amount in "Accrued expenses and other payables" on its consolidated balance sheet as of December 31, 2025.This sale was the result of the Company's continuing evaluation of its business portfolio and was consistent with the Company's strategic and investment priorities. In connection with the TFP divestiture, the Company wrote off net assets totaling $1,112.5 million, reclassified $48.0 million of cumulative translation adjustment losses from accumulated other comprehensive income/(loss) and incurred transaction fees of $25.2 million, resulting in a net pretax gain of $606.6 million. The Company recognized a related tax provision of $199.5 million for an after-tax gain of $407.2 million. The after tax gain is included in "Net income from discontinued operations" in the Company's Consolidated Statements of Income for the year ended December 31, 2025. See Notes 1 and 2 to the Consolidated Financial Statements for additional information. The majority of cash proceeds generated from this transaction were used to repay debt, as further described in Note 11 to the Consolidated Financial Statements.
ThermoSafe and Other Divestitures
As described above, on November 3, 2025, the Company completed the sale of ThermoSafe, part of the All Other group of businesses, to Arsenal for net cash consideration of $655.8 million paid at closing on a cash-free and debt-free basis and subject to customary adjustments. The sale also allowed for additional consideration of up to $75.0 million if certain performance measures for calendar year 2025 were met. However, as these performance measures were not met, no additional cash consideration is anticipated. In connection with the ThermoSafe divestiture, the Company wrote off net assets totaling $265.8 million, including $173.3 millionof goodwill, reclassified $1.2 millionof cumulative translation adjustment gains from accumulated other comprehensive income/(loss) and incurred transaction fees of $13.2 million, resulting in a net pretax gain of $378.0 million, which is included in "Gain/(Loss) on divestiture of business and other assets" in the Company's Consolidated Statements of Income. The Company used the majority of the cash proceeds from the sale to pay down debt, as further described in Note 11 to the Consolidated Financial Statements.
On April 30, 2025, the Company completed the sale of a recycling facility in Asheville, North Carolina, part of the Industrial Paper Packaging segment, for cash proceeds of $3.9 million. The sale resulted in a loss of $2.1 million, which is included in "Gain/(Loss) on divestiture of business and other assets" in the Company's Consolidated Statements of Income.
On March 2, 2025, the Company completed the sale of its tube and core operations in Venezuela, part of the Industrial Paper Packaging segment, in exchange for a note receivable in the amount of $0.1 million. The sale resulted in a loss of $5.4 million, including $3.8 million of cumulative translation losses that were reclassified from accumulated other comprehensive income/(loss). This loss is included in "Gain/(Loss) on divestiture of business and other assets" in the Company's Consolidated Statements of Income.
On January 17, 2025, the Company completed the sale of a small construction tube operation in France, part of the Industrial Paper Packaging segment, for cash proceeds of $1.5 million and recognized a gain of $1.2 million, which is included in "Gain/(Loss) on divestiture of business and other assets" in the Company's Consolidated Statements of Income.
27 FORM 10-K SONOCO 2025 ANNUAL REPORT
In November 2024, the Company completed the sale of two production facilities in China, both of which were part of the Company's Industrial Paper Packaging segment, for $0.3 million. As a result of the sale, the Company reclassified $0.6 million of cumulative translation losses from accumulated other comprehensive income/(loss) and recognized a loss of $25.6 million, which is included in "Gain/(Loss) on divestiture of business and other assets" in the Company's Consolidated Statements of Income.
On April 1, 2024, the Company completed the sale of Protexic, part of the All Other group of businesses, to Black Diamond Capital Management, LLC. This business provided foam components and integrated material solutions for various industrial end markets. This sale was the result of the Company's continuing evaluation of its business portfolio and is consistent with the Company's strategic and investment priorities. The cash selling price, as adjusted for the final working capital settlement, was $78.5 million. As a result of the Protexic divestiture, the Company recognized a pretax gain of $0.9 million included in "Gain/(Loss) on divestiture of business and other assets" in the Company's Consolidated Statements of Income. The Company used the majority of the cash proceeds from the sale to pay down debt.
Additional Ownership Investment
During the second quarter of 2024, the Company increased its ownership investment in a small South Carolina-based designer and manufacturer of sustainable protective packaging solutions from 20.5% to 39.9%. The Company acquired its initial ownership interest in June 2022. The preferred stock investment increased by $18.5 millionduring the second quarter of 2024, which included a $10.0 millioncash payment, a $5.4 millionremeasurement of the fair value of the existing investment, and a $2.5 millionconversion of the carrying value of the outstanding convertible notes into a preferred series stock investment, which yielded a $0.5 millionfair value increase and a $0.1 millionincrease for interest income earned. The outstanding investment of $21.2 millionas of December 31, 2025 is included within "Other assets" in the Company's Consolidated Balance Sheet. The remeasurement of the carrying value of the existing investment to fair value during the second quarter of 2024 resulted in a gain of $5.9 millionand interest income of $0.1 million, which are included in "Other (expenses)/income, net" and "Interest income," respectively, in the Company's Consolidated Statements of Income.
The Company continually assesses its operational footprint as well as its overall portfolio of businesses and may consider the divestiture of plants and/or business units it considers to be suboptimal or nonstrategic. See Note 4 to the Consolidated Financial Statements for further information about acquisitions and divestitures.
Restructuring and Asset Impairment Charges
Due to its geographic footprint (approximately 265 locations in 37 countries as of December 31, 2025) and the cost-competitive nature of its businesses, the Company frequently seeks more cost-effective means and structures to serve its customers, to improve profitability, and to respond to fundamental changes in its markets. As such, plant closures in connection with footprint rationalization and headcount reductions are an important component of the Company's cost control initiatives. The amount of these costs can vary significantly from year to year depending upon the scope and location of the restructuring activities.
The following table summarizes the impact of restructuring and asset impairment charges for each of the years presented:
| Year Ended December 31, | |||||||||||
| Dollars in thousands | 2025 | 2024 | |||||||||
|
Restructuring and restructuring-related asset impairment charges, net
|
$ | 66,215 | $ | 65,370 | |||||||
| Other asset impairments | - | - | |||||||||
|
Restructuring/Asset impairment charges, net
|
$ | 66,215 | $ | 65,370 | |||||||
During 2025, the Company recognized restructuring charges related to severance for employees terminated as a result of various plant closures or whose positions were eliminated as part of the Company's ongoing organizational effectiveness efforts, including the relocation of certain facilities. Restructuring actions included severance costs related to the closures of metal can facilities in France and Spain, part of the Consumer Packaging segment, and the closures of a paper mill in Mexico, cone facilities in Taiwan and Mexico, and partitions facilities in Maine and California, all part of the Industrial Paper Packaging segment. Restructuring charges were also incurred during the year for costs related to plant closures, including equipment removal, utilities, plant security, property taxes, insurance and environmental remediation costs related to the prior year's closure of the Company's paper mill in Washington, costs related to the current year's closures of the metal can facilities in France and Spain, the paper mill in Mexico, the cone facility in Taiwan, and ongoing facility carrying costs of previously announced plant closures. Asset impairment charges during the year consist primarily of asset impairment charges related to the closures of the paper mill in Mexico, the cone facilities in China and Mexico, and the partitions facilities in Maine and California, and the closure of the metal packaging facility in France. These charges were offset by gains from the sales of the land and buildings associated with previously closed facilities, primarily the cone facility in Taiwan and the partitions facility in Maine. Also offsetting the impairment charges was a gain from the sale of water rights at our former paper mill in Hutchinson, Kansas, which was closed in 2023.
During 2024, the Company recognized restructuring charges related to severance for employees terminated as a result of various plant closures or whose positions were eliminated as part of the Company's ongoing organizational effectiveness efforts, including the relocation of certain facilities. The largest of these plant closures were the closures of the Company's paper mills in Sumner, Washington (the "Sumner Mill") and Kilkis, Greece (the "Kilkis Mill"), both of which were part of the Industrial Paper Packaging segment. Restructuring charges were also incurred during the year for costs related to plant closures, including equipment removal, utilities, plant security, property taxes, insurance, and environmental remediation costs related to the closure of the Sumner Mill, and ongoing facility carrying costs of previously announced plant closures. Asset impairment charges were recognized in the Industrial Paper Packaging segment related to the closures of the Sumner Mill and the Kilkis Mill and in the Consumer Packaging segment as a result of exiting a small metal canning lid business.
The Company expects to recognize future additional costs totaling approximately $11.0 million in connection with previously announced restructuring actions that were underway as of December 31, 2025. The Company believes that the majority of these charges will be incurred and paid by the end of 2026. 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 5 to the Consolidated Financial Statements for further information about restructuring activities and asset impairment charges.
28 FORM 10-K SONOCO 2025 ANNUAL REPORT
Results of Operations - 2025 Versus 2024
Consolidated net sales from continuing operations for 2025 were $7.5 billion, a $2.2 billion, or 42%, increase from 2024. The year-over-year increase in net trade sales is due primarily to the acquisition of Eviosys on December 4, 2024 which added approximately $2.2 billion in year-over-year sales. Higher selling prices across the Consumer Packaging and Industrial Paper Packaging segments resulted in a $178.0 million year-over-year increase in sales, offset by unfavorable volumes in the Industrial Paper Packaging segment and the impact of divestitures, which lowered year-over-year sales by $80.9 million and $98.5 million, respectively. These divestitures included the November 2025 divestiture of ThermoSafe and the 2024 divestitures of Protexic and two production facilities in China.
GAAP operating profit in 2025 was $1,017.7 million, an increase of $691.2 million, or 212% from the $326.6 million reported in 2024. The increase in GAAP operating profit reflects gains from the sale of businesses totaling $371.7 million in 2025, primarily related to the sale of ThermoSafe, compared to a net loss from the sale of businesses of $23.5 million in the prior year, primarily related to the sale of two production facilities in China. The remaining year-over-year change is primarily due to the Eviosys acquisition and lower acquisition, integration, and divestiture-related costs. Adjusted operating profit for the year ended December 31, 2025 was $954.9 million, an increase of 67% from the $573.1 million reported for the year ended December 31, 2024, primarily as a result of the Eviosys acquisition.
GAAP net income attributable to Sonoco was $1,003.0 million (or $10.07 per diluted share) in 2025, compared with $163.9 million (or $1.65 per diluted share) in 2024. The year-over-year increase was primarily due to the increase in GAAP operating profit as described above, a $316.0 million increase in net income from discontinued operations primarily related to the gain on the sale of TFP, and the non-recurrence of a $113.7 million remeasurement loss in 2024 on Euro denominated cash held by the Company to close the Eviosys acquisition. These increases were partially offset by a $178.1 million increase in income tax expense as discussed further below and a $60.9 million increase in interest expense due to higher levels of debt to fund the Eviosys acquisition. Adjusted net income attributable to Sonoco and Adjusted diluted earnings per share were $568.8 million (or $5.71 per diluted share) in 2025, compared with $485.8 million (or $4.89 per diluted share) in 2024.
Costs and Expenses/Margins
Cost of sales increased $1.78 billion in 2025, or 42.7%, from the prior year. The acquisition of Eviosys on December 4, 2024, increased cost of sales by approximately $1.86 billion year over year, and increases in labor costs, overhead, and fixed operating costs increased cost of sales by approximately $77.1 million year over year. These increases were partially offset by reductions related to divestitures of $89.3 million, primarily related to the sale of ThermoSafe, while lower material costs and improved productivity from procurement savings, production efficiencies and fixed cost reduction initiatives reduced costs by $74.6 million. Gross profit margin decreased to 20.9% in 2025 from 21.5% in the prior year.
Selling, general and administrative expenses ("SG&A") increased $138.3 million, or 19.1%, and were 11.5% of sales in 2025, compared to 13.6% of sales in 2024. SG&A in 2025 reflected an increase of $228.8 million related to the Eviosys acquisition, partially offset by lower year-over-year acquisition, integration, and divestiture-related costs of $53.7 million, the impact of divestitures of $19.2 million, and other net favorable changes of $17.6 million, primarily related to labor and professional fees.
Restructuring and asset impairment charges, net totaled $66.2 million in 2025, compared with $65.4 million in 2024. The 2025 charges reflect severance costs related to the Company's ongoing organizational effectiveness efforts, as well as costs related to the closures of metal can facilities in France and Spain, a paper mill in Mexico, cone facilities in Taiwan and Mexico, and partitions facilities in Maine and California. These charges were partially offset by gains from the sales of the land and buildings associated with previously closed facilities, primarily the cone facility in Taiwan and the partitions facility in Maine. Also offsetting the impairment charges was a gain from the sale of water rights at our former paper mill in Hutchinson, Kansas, which was closed in 2023. The 2024 charges reflect severance costs related to the Company's ongoing organizational effectiveness efforts, the relocation costs of certain facilities in Greece and Germany, and costs related to the closures of paper mills in Sumner, Washington and Kilkis, Greece, two small industrial converted products facilities in China, and the exit of a small metal canning lid business. Additional information regarding restructuring actions and asset impairments is provided in Note 5 to the Company's Consolidated Financial Statements.
Gain/(Loss) on divestiture of business and other assets reflected a gain of $371.7 million in 2025, compared to a loss of $23.5 million in 2024. The gain recorded in 2025 related primarily to the sale of ThermoSafe. The loss reported in 2024 related primarily to the sale of two production facilities in China. Additional information regarding divestitures is provided in Note 4 to the Company's Consolidated Financial Statements.
Other (expense)/income, net reflected a net expense of $27.5 million in 2025, compared with $104.2 million in 2024. Other (expense)/income, net reported in 2025 represents charges from third-party financial institutions related to our centralized treasury program under which the Company sells certain trade accounts receivables in order to accelerate its cash collection cycle primarily within our Consumer Packaging segment. Other (expense)/income, net reported in 2024 included a loss of $113.7 million from the remeasurement of euro-denominated cash balances held in connection with the Eviosys acquisition, partially offset by a gain of $5.9 million from the remeasurement of an equity investment to fair value and a gain of $3.6 million from the sale of the Company's equity interest in Northstar Recycling Company, LLC ("Northstar"). See Note 4 to the Consolidated Financial Statements for further information.
Non-operating pension costs were $12.2 million in 2025, compared with $13.8 million in 2024. The year-over-year decrease of $1.6 million was primarily due to higher expected returns on plan assets and lower amortization of net actuarial losses, partially offset by higher interest costs on the Company's defined benefit pension liabilities, resulting from higher year-over-year discount rates. See Note 15 to the Consolidated Financial Statements for further information on employee benefit plans.
Net interest expense totaled $212.9 million for the year ended December 31, 2025, compared with $145.1 million in 2024. The increase was primarily due to higher outstanding debt as a result of the financing transactions related to the Eviosys acquisition on December 4, 2024. Additional information regarding the Company's indebtedness is provided in Note 11 to the Company's Consolidated Financial Statements.
The effective tax rates on GAAP and Adjusted net income attributable to Sonoco for the full year 2025 were 24.0% and 24.1%, respectively, compared with 8.7% and 24.3%, respectively for the full year 2024. The year-over-year change in the GAAP effective tax rate was due primarily to the low rate in 2024 as a result of the release of a reserve for uncertain tax positions following the expiration of the applicable statute of limitations, as well as deferred tax adjustments associated with the post-acquisition entity restructuring of the partitions business. The slight decrease in the Adjusted effective tax rate was primarily due to a variance in tax reserve activity, offset by the benefit of purchased tax credits.
Discontinued Operations
Net income from discontinued operations totaled $412.3 million for the year ended December 31, 2025, compared with $96.4 million in 2024. The increase in net income reflects the gain on the divestiture of TFP, partially offset by lower sales following the completion of the sale on April 1, 2025. See Notes 2 and 4 to the Consolidated Financial Statements for further information.
29 FORM 10-K SONOCO 2025 ANNUAL REPORT
Reportable Segments
The Company's operating and reporting structure consists of two reportable segments, Consumer Packaging and Industrial Paper Packaging, with all remaining businesses reported as All Other.
In accordance with applicable accounting guidance, the results of TFP, previously part of the Consumer Packaging segment, are presented as discontinued operations in the Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment results for all periods presented in this Annual Report on Form 10-K. All amounts, percentages and disclosures for all periods presented in this Annual Report on Form 10-K reflect only the continuing operations of Sonoco unless otherwise noted. As of and for the year ended December 31, 2025, there were no changes to the manner in which the Company reviewed financial information at the segment level; therefore, these changes had no impact on the Company's segment reporting structure.
Total operating profit, reported as "Operating Profit" in the Company's Consolidated Statements of Income, is comprised of the following:
| ($ in millions) | 2025 | 2024 | % Change | ||||||||||||||
|
Operating profit:
|
|||||||||||||||||
| Consumer Packaging | $ | 626.9 | $ | 294.8 | 112.7 | % | |||||||||||
| Industrial Paper Packaging | 312.5 | 271.7 | 15.0 | % | |||||||||||||
|
Segment operating profit
|
939.4 | 566.5 | 65.8 | % | |||||||||||||
| All Other | 50.8 | 53.3 | (4.7) | % | |||||||||||||
| Corporate | |||||||||||||||||
|
Restructuring/Asset impairment charges, net
|
(66.2) | (65.4) | 1.2 | % | |||||||||||||
| Amortization of acquisition intangibles | (182.4) | (78.6) | 132.1 | % | |||||||||||||
| Gain/(Loss) on divestiture of business | 371.7 | (23.5) | (1,681.7) | % | |||||||||||||
|
Acquisition, integration and divestiture-related costs
|
(54.2) | (91.6) | (40.8) | % | |||||||||||||
|
Other corporate costs
|
(35.2) | (46.7) | (24.6) | % | |||||||||||||
|
Other operating (charges)/income, net
|
(6.1) | 12.5 | (148.8) | % | |||||||||||||
|
Total operating profit*
|
$ | 1,017.7 | $ | 326.6 | 211.6 | % | |||||||||||
| *Due to rounding, amounts above may not sum to the totals presented | |||||||||||||||||
Segment results, which are reviewed by Company management to evaluate segment performance, do not include: restructuring/asset impairment charges; amortization of acquired intangibles; acquisition, integration, and divestiture-related costs; changes in last in, first out ("LIFO") inventory reserves; gains/losses from the sale of businesses or other assets; gains/losses on derivatives; or certain other items, if any, the exclusion of which the Company believes improves the comparability and analysis of the ongoing operating performance of the business. Accordingly, the term "segment operating profit" is defined as the segment's portion of "operating profit" excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company's reportable segments and All Other, except for costs related to discontinued operations.
See Note 20 to the Company's Consolidated Financial Statements for more information on reportable segments.
Consumer Packaging
| ($ in millions) | 2025 | 2024 | % Change | ||||||||||||||
|
Net sales
|
$ | 4,874.3 | $ | 2,531.9 | 92.5 | % | |||||||||||
| Segment operating profit | 626.9 | 294.8 | 112.7 | % | |||||||||||||
| Depreciation and amortization | 209.6 | 109.4 | 91.6 | % | |||||||||||||
|
Cost of Sales
|
3,950.8 | 2,041.1 | 93.6 | % | |||||||||||||
Segment net sales in 2025 increased 92.5% compared to the prior year. The increase reflects $2.2 billion, including the impact of foreign exchange rates, attributable to Sonoco Metal Packaging EMEA following the December 2024 acquisition of Eviosys and a $93.1 million favorable impact from increased pricing intended to offset the effects of inflation and tariffs. Volume/mix remained relatively flat year over year.
Segment operating profit in 2025 increased 112.7% from 2024, primarily due to the addition of $257.8 million of operating profit from Sonoco Metal Packaging EMEA following the acquisition of Eviosys, favorable price/cost of $62.5 million, and strong productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives totaling $19.0 million. These favorable factors were partially offset by unfavorable volume/mix in rigid paper North America year over year. As a result, segment operating profit margin increased to 12.9% in 2025 compared to 11.6% during the prior year.
Cost of sales increased year over year due to the additional operating costs associated with Sonoco Metal Packaging EMEA following the acquisition of Eviosys. This increase was partially offset by strong productivity from procurement savings and production efficiencies.
Industrial Paper Packaging
| ($ in millions) | 2025 | 2024 | % Change | ||||||||||||||
|
Net sales
|
$ | 2,299.2 | $ | 2,349.5 | (2.1) | % | |||||||||||
| Segment operating profit | 312.5 | 271.7 | 15.0 | % | |||||||||||||
| Depreciation and amortization | 118.9 | 116.1 | 2.4 | % | |||||||||||||
|
Cost of Sales
|
1,726.2 | 1,818.3 | (5.1) | % | |||||||||||||
Segment net sales decreased 2.1% in 2025 compared to 2024, primarily due to unfavorable volume/mix of $78.9 million, primarily in global converted paper products, and the impact of the 2024 divestiture of two production facilities in China of $46.0 million. These declines were partially offset by a $83.7 million favorable impact from higher selling prices.
Segment operating profit increased 15.0% in 2025 versus the prior year, primarily as a result of favorable price/cost of $51.0 million and improved productivity from procurement savings, production efficiencies and fixed cost initiatives of $28.2 million. These favorable impacts were
30 FORM 10-K SONOCO 2025 ANNUAL REPORT
partially offset by an unfavorable impact of $27.6 million from volume declines across the segment and other net unfavorable impacts, including the impact of foreign exchange rates, totaling $5.2 million. As a result, segment operating margin increased to 13.6% during 2025 from 11.6% during the prior year.
Cost of sales decreased year over year due to volume declines, partially offset by strong productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives.
All Other
| ($ in millions) | 2025 | 2024 | % Change | ||||||||||||||
|
Net sales
|
$ | 345.2 | $ | 424.0 | (18.6) | % | |||||||||||
| Segment operating profit | 50.8 | 53.3 | (4.7) | % | |||||||||||||
| Depreciation and amortization | 8.7 | 12.0 | (27.5) | % | |||||||||||||
Net sales for the All Other group of businesses decreased 18.6% in 2025 compared to 2024, primarily due to the divestiture of ThermoSafe on November 3, 2025.
Operating profit in the All Other group of businesses decreased 4.7% year over year, primarily due to the sale of ThermoSafe. Segment operating margin in 2025 increased to 14.7% compared to 12.6% in 2024.
Non-GAAP Financial Measures
The Company uses certain financial performance measures, both internally and externally, that are not in conformity with GAAP (referred to as "non-GAAP financial measures") to assess and communicate the financial performance of the Company. These "non-GAAP" financial measures, which are identified using the term "Adjusted" (for example, "Adjusted Operating Profit," "Adjusted Net Income Attributable to Sonoco," and "Adjusted Diluted EPS"), reflect adjustments to the Company's GAAP operating results to exclude amounts, including the associated tax effects, where applicable, relating to:
•restructuring/asset impairment charges1;
•acquisition, integration and divestiture-related costs;
•gains or losses from the divestiture of businesses;
•losses from the early extinguishment of debt;
•non-operating pension costs;
•amortization expense on acquisition intangibles;
•changes in last-in, first-out inventory reserves;
•certain income tax events and adjustments;
•derivative gains/losses;
•other non-operating income and losses; and
•certain other items, if any.
1 Restructuring and restructuring-related asset impairment charges are a recurring item as the Company's restructuring programs usually require several years to fully implement, and the Company is continually seeking to take actions that could enhance its efficiency. Although recurring, these charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity, the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the restructuring actions occur.
The Company's management believes the exclusion of the amounts related to the above-listed items improves the period-to-period comparability and analysis of the underlying financial performance of the business.
In addition to the "Adjusted" results described above, the Company also uses Adjusted EBITDA, Segment Adjusted EBITDA, and Segment Adjusted EBITDA Margin. Adjusted EBITDA is defined as net income excluding the following: interest expense; interest income; provision for income taxes; depreciation and amortization expense; non-operating pension costs; net income/loss attributable to noncontrolling interests; restructuring/asset impairment charges; changes in LIFO inventory reserves; gains/losses from the divestiture of businesses; acquisition, integration and divestiture-related costs; other income; derivative gains/losses; and other non-GAAP adjustments, if any, that may arise from time to time. Segment Adjusted EBITDA is defined as segment operating profit plus depreciation and amortization expense and equity in earnings of affiliates, net of tax. Segment Adjusted EBITDA Margin is defined as Segment Adjusted EBITDA divided by segment net sales.
The Company's non-GAAP financial measures are not calculated in accordance with, nor are they an alternative for, measures conforming to GAAP, and they may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles.
The Company presents these non-GAAP financial measures to provide investors with information to evaluate Sonoco's operating results in a manner similar to how management evaluates business performance. The Company consistently applies its non-GAAP financial measures presented herein and uses them for internal planning and forecasting purposes, to evaluate its ongoing operations, and to evaluate the ultimate performance of management and each business unit against plans/forecasts. In addition, these same non-GAAP financial measures are used in determining incentive compensation for the entire management team and in providing earnings guidance to the investing community.
Material limitations associated with the use of such measures include that they do not reflect all period costs included in operating expenses and may not be comparable with similarly named financial measures of other companies. Furthermore, the calculations of these non-GAAP financial measures are based on subjective determinations of management regarding the nature and classification of events and circumstances that the investor may find material and view differently.
To compensate for any limitations in such non-GAAP financial measures, management believes that it is useful in evaluating the Company's results to review both GAAP information, which includes all of the items impacting financial results, and the related non-GAAP financial measures that exclude certain elements, as described above. Further, Sonoco management does not, nor does it suggest that investors should, consider any non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Whenever reviewing a non-GAAP financial measure, investors are encouraged to review and consider the related reconciliation to understand how it differs from the most directly comparable GAAP measure.
31 FORM 10-K SONOCO 2025 ANNUAL REPORT
Reconciliations of GAAP to non-GAAP results are presented under "Reconciliations of GAAP to Non-GAAP Financial Measures" below in
conjunction with MD&A of the Company's results of operations. Reconciliations are not provided for non-GAAP financial measures related to
future years due to the likely occurrence of one or more of the following, the timing and magnitude of which management is unable to reliably
forecast: possible gains or losses on the sale of businesses or other assets; restructuring costs and restructuring-related asset impairment
charges; acquisition, integration and divestiture-related costs; and the tax effect of these items and/or other income tax-related events. These
items could have a significant impact on the Company's future GAAP financial results.
Reconciliations of GAAP to Non-GAAP Financial Measures
The following tables reconcile the Company's non-GAAP financial measures to their most directly comparable GAAP financial measures for each of the years presented:
Adjusted Operating Profit, Adjusted Income from Continuing Operations Before Income Taxes, Adjusted Provision for Income Taxes, Adjusted Net Income Attributable to Sonoco, and Adjusted Diluted EPS
| For the twelve-month period ended December 31, 2025 | |||||||||||||||||||||||||||||
| Dollars in thousands, except per share data | Operating Profit | Income from Continuing Operations Before Income Taxes | Provision for Income Taxes |
Net Income Attributable to Sonoco
|
Diluted EPS | ||||||||||||||||||||||||
|
As Reported (GAAP)1
|
$ | 1,017,735 | $ | 765,101 | $ | 183,586 | $ | 1,003,011 | $ | 10.07 | |||||||||||||||||||
|
Acquisition, integration and divestiture-related costs2
|
54,158 | 54,131 | 12,006 | 51,791 | 0.52 | ||||||||||||||||||||||||
| Changes in LIFO inventory reserves | 58 | 58 | 404 | (346) | - | ||||||||||||||||||||||||
| Amortization of acquisition intangibles | 182,431 | 182,431 | 39,617 | 142,601 | 1.43 | ||||||||||||||||||||||||
| Restructuring/Asset impairment charges, net | 66,215 | 66,226 | 17,204 | 48,908 | 0.49 | ||||||||||||||||||||||||
|
Gain on divestiture of business3
|
(371,717) | (371,717) | (49,303) | (729,590) | (7.33) | ||||||||||||||||||||||||
| Non-operating pension costs | - | 12,215 | 2,923 | 9,292 | 0.09 | ||||||||||||||||||||||||
| Net losses from derivatives | 1,730 | 1,730 | 424 | 1,306 | 0.01 | ||||||||||||||||||||||||
|
Other adjustments4
|
4,335 | 4,335 | (34,489) | 41,870 | 0.43 | ||||||||||||||||||||||||
| Total adjustments | (62,790) | (50,591) | (11,214) | (434,168) | (4.36) | ||||||||||||||||||||||||
| Adjusted | $ | 954,945 | $ | 714,510 | $ | 172,372 | $ | 568,843 | $ | 5.71 | |||||||||||||||||||
| Due to rounding, individual items may not sum appropriately. | |||||||||||||||||||||||||||||
1Operating profit, income from continuing operations before income taxes, and provision for income taxes exclude results related to discontinued operations of $644,424, $619,612, and $207,264, respectively.
2Acquisition, integration and divestiture-related costs relate primarily to the Company's December 2024 acquisition of Eviosys, the April 2025 divestiture of TFP and the November 2025 divestiture of ThermoSafe.
3 Gain on divestiture of business associated with Operating Profit primarily consists of the gain on the sale of ThermoSafe. Net Income Attributable to Sonoco reflects the after-tax impact of the gains on the sales of both ThermoSafe and TFP.
4 Other adjustments to the provision for income taxes include the following: an expense related to the initial integration of the acquired Sonoco Metal Packaging EMEA legal entity structure of $10,479; a deferred tax liability related to the foreign exchange effects on undistributed earnings of Sonoco Metal Packaging EMEA not considered to be indefinitely reinvested of $10,289; provision-to-return and deferred remeasurement adjustments related to the divested TFP business of $5,998; and other net unfavorable tax items totaling $7,723. The impact of other adjustments on net income attributable to Sonoco primarily reflects these same items.
32 FORM 10-K SONOCO 2025 ANNUAL REPORT
| For the twelve-month period ended December 31, 2024 | |||||||||||||||||||||||||||||
| Dollars in thousands, except per share data | Operating Profit | Income from Continuing Operations Before Income Taxes | Provision for Income Taxes | Net Income Attributable to Sonoco | Diluted EPS | ||||||||||||||||||||||||
|
As Reported (GAAP)1
|
$ | 326,578 | $ | 63,486 | $ | 5,509 | $ | 163,949 | $ | 1.65 | |||||||||||||||||||
|
Acquisition, integration and divestiture-related costs2
|
91,600 | 125,169 | 24,281 | 115,602 | 1.16 | ||||||||||||||||||||||||
| Changes in LIFO inventory reserves | (6,263) | (6,263) | (1,570) | (4,693) | (0.05) | ||||||||||||||||||||||||
| Amortization of acquisition intangibles | 78,595 | 78,595 | 19,170 | 75,614 | 0.76 | ||||||||||||||||||||||||
| Restructuring/Asset impairment charges, net | 65,370 | 65,370 | 13,384 | 55,181 | 0.56 | ||||||||||||||||||||||||
| Loss on divestiture of business | 23,452 | 23,452 | 1,499 | 21,953 | 0.22 | ||||||||||||||||||||||||
|
Other expenses, net3
|
- | 104,200 | 27,670 | 76,530 | 0.77 | ||||||||||||||||||||||||
| Non-operating pension costs | - | 13,842 | 3,412 | 10,430 | 0.11 | ||||||||||||||||||||||||
| Net gains from derivatives | (7,225) | (7,225) | (1,811) | (5,414) | (0.05) | ||||||||||||||||||||||||
|
Other adjustments4
|
982 | 982 | 20,566 | (23,349) | (0.24) | ||||||||||||||||||||||||
| Total adjustments | 246,511 | 398,122 | 106,601 | 321,854 | 3.24 | ||||||||||||||||||||||||
| Adjusted | $ | 573,089 | $ | 461,608 | $ | 112,110 | $ | 485,803 | $ | 4.89 | |||||||||||||||||||
| Due to rounding, individual items may not sum appropriately. | |||||||||||||||||||||||||||||
1Operating profit, income from continuing operations before income taxes, and provision for income taxes exclude results related to discontinued operations of $128,037, $116,309, and $19,934, respectively.
2Acquisition, integration and divestiture-related costs include losses on treasury lock derivative instruments, amortization of financing fees and pre-acquisition net interest expenses totaling $33,569 related to debt instruments associated with the financing of the Eviosys acquisition. These costs are included in "Interest expense" in the Company's Consolidated Statements of Income.
3Other expenses, net primarily relates to remeasurement loss on Euro denominated cash held by the Company to close the Eviosys acquisition.
4Other adjustments include discrete tax items primarily related to a $12,638 adjustment to deferred taxes from a post-acquisition restructuring of the partitions business, a $9,864 reduction in reserves for uncertain tax positions following the expiration of the applicable statute of limitations and a $5,796 tax benefit due to the recording of a deferred tax asset on the outside basis of certain held-for-sale entities, partially offset by an adjustment for hurricane-related insurance deductible losses.
| For the twelve-month period ended December 31, 2023 | |||||||||||||||||||||||||||||
| Dollars in thousands, except per share data | Operating Profit | Income from Continuing Operations Before Income Taxes | Provision for Income Taxes | Net Income Attributable to Sonoco | Diluted EPS | ||||||||||||||||||||||||
|
As Reported (GAAP)1
|
$ | 589,049 | $ | 489,027 | $ | 119,730 | $ | 474,959 | $ | 4.80 | |||||||||||||||||||
| Acquisition, integration and divestiture-related costs | 24,624 | 24,624 | 5,736 | 19,847 | 0.20 | ||||||||||||||||||||||||
| Changes in LIFO inventory reserves | (11,817) | (11,817) | (2,977) | (8,840) | (0.09) | ||||||||||||||||||||||||
| Amortization of acquisition intangibles | 67,323 | 67,323 | 16,787 | 65,741 | 0.66 | ||||||||||||||||||||||||
| Restructuring/Asset impairment charges, net | 47,909 | 47,909 | 10,808 | 44,036 | 0.44 | ||||||||||||||||||||||||
| Gain on divestiture of business | (78,929) | (78,929) | (19,076) | (59,853) | (0.60) | ||||||||||||||||||||||||
| Other income, net | - | (39,657) | (9,624) | (30,033) | (0.30) | ||||||||||||||||||||||||
| Non-operating pension costs | - | 14,312 | 3,547 | 10,765 | 0.11 | ||||||||||||||||||||||||
| Net gains from derivatives | (1,912) | (1,912) | (482) | (1,430) | (0.01) | ||||||||||||||||||||||||
| Other adjustments | 10,326 | 10,298 | 5,495 | 4,680 | 0.05 | ||||||||||||||||||||||||
| Total adjustments | 57,524 | 32,151 | 10,214 | 44,913 | 0.46 | ||||||||||||||||||||||||
| Adjusted | $ | 646,573 | $ | 521,178 | $ | 129,944 | $ | 519,872 | $ | 5.26 | |||||||||||||||||||
| Due to rounding, individual items may not sum appropriately. | |||||||||||||||||||||||||||||
1Operating profit, income from continuing operations before income taxes, and provision for income taxes exclude results related to discontinued operations of $126,741, $125,805, and $29,548, respectively.
33 FORM 10-K SONOCO 2025 ANNUAL REPORT
Adjusted EBITDA1
|
Twelve Months Ended
|
|||||||||||
| Dollars in thousands | 2025 | 2024 | 2023 | ||||||||
| Net income attributable to Sonoco | $ | 1,003,011 | $ | 163,949 | $ | 474,959 | |||||
| Adjustments: | |||||||||||
| Interest expense | 258,396 | 186,015 | 136,686 | ||||||||
| Interest income | (20,828) | (29,238) | (10,383) | ||||||||
| Provision for income taxes | 390,850 | 25,443 | 149,278 | ||||||||
| Depreciation and amortization | 519,356 | 374,859 | 340,988 | ||||||||
| Non-operating pension costs | 12,215 | 13,842 | 14,312 | ||||||||
| Net income/(loss) attributable to noncontrolling interests | 375 | (9) | 942 | ||||||||
|
Restructuring/Asset impairment charges, net
|
66,641 | 69,110 | 56,933 | ||||||||
| Changes in LIFO inventory reserves | 58 | (6,263) | (11,817) | ||||||||
| (Gain)/Loss on divestiture of business | (978,350) | 23,452 | (78,929) | ||||||||
| Acquisition, integration and divestiture-related costs | 66,834 | 110,883 | 26,254 | ||||||||
| Other expense/(income), net | - | 104,200 | (39,657) | ||||||||
| Net loss/(gain) from derivatives | 1,730 | (7,225) | (1,912) | ||||||||
| Other non-GAAP adjustments | 3,722 | 6,154 | 10,142 | ||||||||
| Adjusted EBITDA | $ | 1,324,010 | $ | 1,035,172 | $ | 1,067,796 | |||||
1 Adjusted EBITDA is calculated on a total Company basis, including both continuing operations and discontinued operations.
The Company does not calculate net income by segment; therefore, Adjusted EBITDA by segment is reconciled to the closest GAAP measure of segment profitability, Segment Operating Profit, which is another method to achieve the same result. Segment Operating Profit is the measure of segment profit or loss reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance in accordance with Accounting Standards Codification ("ASC") 280, "Segment Reporting," as prescribed by the Financial Accounting Standards Board.
Segment results, which are reviewed by the Company's management to evaluate segment performance, do not include the following: restructuring/asset impairment charges; amortization of acquisition intangibles; acquisition, integration, and divestiture-related costs; changes in LIFO inventory reserves; gains/losses from the sale of businesses or other assets; gains/losses on derivatives; or certain other items, if any, the exclusion of which the Company believes improves the comparability and analysis of the ongoing operating performance of the business. Accordingly, the term "segment operating profit" is defined as the segment's portion of "operating profit" excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company's reportable segments and All Other, except for costs related to discontinued operations. Total operating profit is comprised of the sum of segment and All Other operating profit plus certain items that have been allocated to Corporate, including amortization of acquisition intangibles; restructuring/asset impairment charges; changes in LIFO inventory reserves; acquisition, integration and divestiture-related costs; gains/losses from the sale of businesses or other assets; gains/losses on derivatives; and certain other items that were excluded from segment and All Other operating profit.
34 FORM 10-K SONOCO 2025 ANNUAL REPORT
|
Segment and All Other Adjusted EBITDA and Segment Adjusted EBITDA Margin Reconciliation
|
|||||||||||||||||
| For the Twelve Months Ended December 31, 2025 | |||||||||||||||||
|
Excludes results of discontinued operations
|
|||||||||||||||||
| Dollars in thousands | Consumer Packaging segment | Industrial Paper Packaging segment | All Other | Corporate | Total | ||||||||||||
|
Segment and Total Operating Profit
|
$ | 626,920 | $ | 312,454 | $ | 50,813 | $ | 27,548 | $ | 1,017,735 | |||||||
| Adjustments: | |||||||||||||||||
|
Depreciation and amortization1
|
209,618 | 118,889 | 8,729 | 182,431 | 519,667 | ||||||||||||
|
Other expense2
|
- | - | - | (27,481) | (27,481) | ||||||||||||
| Equity in earnings of affiliates, net of tax | 226 | 9,297 | - | - | 9,523 | ||||||||||||
|
Restructuring/Asset impairment charges, net3
|
- | - | - | 66,215 | 66,215 | ||||||||||||
|
Changes in LIFO inventory reserves4
|
- | - | - | 58 | 58 | ||||||||||||
|
Acquisition, integration and divestiture-related costs5
|
- | - | - | 54,158 | 54,158 | ||||||||||||
|
Gain on divestiture of business6
|
- | - | - | (371,717) | (371,717) | ||||||||||||
|
Net loss from derivatives7
|
- | - | - | 1,730 | 1,730 | ||||||||||||
| Other non-GAAP adjustments | - | - | - | 4,335 | 4,335 | ||||||||||||
| Segment Adjusted EBITDA | $ | 836,764 | $ | 440,640 | $ | 59,542 | $ | (62,723) | $ | 1,274,223 | |||||||
| Net Sales | $ | 4,874,291 | $ | 2,299,233 | $ | 345,229 | |||||||||||
| Segment Operating Profit Margin | 12.9 | % | 13.6 | % | 14.7 | % | |||||||||||
| Segment Adjusted EBITDA Margin | 17.2 | % | 19.2 | % | 17.2 | % | |||||||||||
1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of $160,272, the Industrial Paper Packaging segment of $21,585, and the All Other group of businesses of $574.
2 These expenses relate to charges from third-party financial institutions related to our centralized treasury program under which the Company sells certain trade accounts receivables in order to accelerate its cash collection cycle primarily within the Consumer Packaging segment.
3 Included in Corporate are net restructuring/asset impairment charges associated with the Consumer Packaging segment of $54,200, the Industrial Paper Packaging segment of $8,307, and the All Other group of businesses of $5.
4 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment of $1,062 and the Industrial Paper Packaging segment of $(1,004).
5 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer Packaging segment of $21,992 and the Industrial Paper Packaging segment of $623.
6 Included in Corporate are net gains on divestiture of businesses associated with the All Other group of businesses of $(378,014) from the sale of ThermoSafe and a gain associated with the Industrial Paper Packaging segment of $(1,207) from the sale of a production facility in France. These gains were partially offset by losses of $5,390 related to the sale of the Company's operations in Venezuela and $2,114 from the sale of a recycling facility in Asheville, North Carolina, both part of the Industrial Paper Packaging segment.
7 Included in Corporate are net losses from derivatives associated with the Consumer Packaging segment of $166, the Industrial Paper Packaging segment of $1,497, and the All Other group of businesses of $67.
35 FORM 10-K SONOCO 2025 ANNUAL REPORT
|
Segment and All Other Adjusted EBITDA and Segment Adjusted EBITDA Margin Reconciliation
|
|||||||||||||||||
| For the Twelve Months Ended December 31, 2024 | |||||||||||||||||
|
Excludes results of discontinued operations
|
|||||||||||||||||
| Dollars in thousands | Consumer Packaging segment | Industrial Paper Packaging segment | All Other | Corporate | Total | ||||||||||||
| Segment and Total Operating Profit | $ | 294,832 | $ | 271,654 | $ | 53,278 | $ | (293,186) | $ | 326,578 | |||||||
| Adjustments: | |||||||||||||||||
|
Depreciation and amortization1
|
109,355 | 116,149 | 11,962 | 78,595 | 316,061 | ||||||||||||
| Equity in earnings of affiliates, net of tax | 365 | 9,223 | - | - | 9,588 | ||||||||||||
|
Restructuring/Asset impairment charges, net2
|
- | - | - | 65,370 | 65,370 | ||||||||||||
|
Changes in LIFO inventory reserves3
|
- | - | - | (6,263) | (6,263) | ||||||||||||
|
Acquisition, integration and divestiture-related costs4
|
- | - | - | 91,600 | 91,600 | ||||||||||||
|
Loss on divestiture of business and other assets5
|
- | - | - | 23,452 | 23,452 | ||||||||||||
|
Net gain from derivatives6
|
- | - | - | (7,225) | (7,225) | ||||||||||||
| Other non-GAAP adjustments | - | - | - | 982 | 982 | ||||||||||||
| Segment Adjusted EBITDA | $ | 404,552 | $ | 397,026 | $ | 65,240 | $ | (46,675) | $ | 820,143 | |||||||
| Net Sales | $ | 2,531,852 | $ | 2,349,488 | $ | 424,025 | |||||||||||
| Segment Operating Profit Margin | 11.6 | % | 11.6 | % | 12.6 | % | |||||||||||
| Segment Adjusted EBITDA Margin | 16.0 | % | 16.9 | % | 15.4 | % | |||||||||||
1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of $52,144, the Industrial Paper Packaging segment of $25,619, and the All Other group of businesses of $832.
2 Included in Corporate are net restructuring/asset impairment charges associated with the Consumer Packaging segment of $19,259, the Industrial Paper Packaging segment of $33,923, and the All Other group of businesses of $1,434.
3Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment of $(5,780) and the Industrial Paper Packaging segment of $(483).
4 Included in Corporate are acquisition, integration, and divestiture-related costs associated with the Consumer Packaging segment of $9,052 and the Industrial Paper Packaging segment of $(3,600).
5 Included in Corporate are net losses from the divestiture of businesses within the Industrial Paper Packaging segment of $24,357, including a loss of $25,607 from the sale of two production facilities in China, partially offset by a gain of $(1,250) from the sale of the S3 business, and a gain on divestiture of businesses associated with the All Other group of businesses of $(905) related to the sale of Protexic.
6Included in Corporate are net gains from derivatives associated with the Consumer segment of $(1,202), the Industrial Paper Packaging segment of $(5,174), and All Other of $(849).
36 FORM 10-K SONOCO 2025 ANNUAL REPORT
|
Segment and All Other Adjusted EBITDA and Segment Adjusted EBITDA Margin Reconciliation
|
|||||||||||||||||
| For the Twelve Months Ended December 31, 2023 | |||||||||||||||||
|
Excludes results of discontinued operations
|
|||||||||||||||||
| Dollars in thousands | Consumer Packaging segment | Industrial Paper Packaging segment | All Other | Corporate | Total | ||||||||||||
| Segment and Total Operating Profit | $ | 285,762 | $ | 317,917 | $ | 85,148 | $ | (99,778) | $ | 589,049 | |||||||
| Adjustments: | |||||||||||||||||
|
Depreciation and amortization1
|
95,340 | 104,723 | 14,643 | 67,323 | 282,029 | ||||||||||||
| Equity in earnings of affiliates, net of tax | 564 | 9,783 | - | - | 10,347 | ||||||||||||
|
Restructuring/Asset impairment charges, net2
|
- | - | - | 47,909 | 47,909 | ||||||||||||
|
Changes in LIFO inventory reserves3
|
- | - | - | (11,817) | (11,817) | ||||||||||||
|
Acquisition, integration and divestiture-related costs4
|
- | - | - | 24,624 | 24,624 | ||||||||||||
|
Gain from divestiture of business and other assets5
|
- | - | - | (78,929) | (78,929) | ||||||||||||
|
Net gain from derivatives6
|
- | - | - | (1,912) | (1,912) | ||||||||||||
|
Other non-GAAP adjustments7
|
- | - | - | 10,326 | 10,326 | ||||||||||||
| Segment Adjusted EBITDA | $ | 381,666 | $ | 432,423 | $ | 99,791 | $ | (42,254) | $ | 871,626 | |||||||
| Net Sales | $ | 2,471,048 | $ | 2,374,113 | $ | 596,265 | |||||||||||
| Segment Operating Profit Margin | 11.6 | % | 13.4 | % | 14.3 | % | |||||||||||
| Segment Adjusted EBITDA Margin | 15.4 | % | 18.2 | % | 16.7 | % | |||||||||||
1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of $44,250, the Industrial Paper Packaging segment of $16,121, and the All Other group of businesses of $6,952.
2 Included in Corporate are net restructuring/asset impairment charges associated with the Consumer Packaging segment of $4,111, the Industrial Paper Packaging segment of $38,754, and the All Other group of businesses of $2,547.
3Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment of $(10,915) and the Industrial Paper Packaging segment of $(902).
4 Included in Corporate are acquisition, integration, and divestiture-related costs associated with the Consumer Packaging segment of $1,171 and the Industrial Paper Packaging segment of $5,810.
5 Included in Corporate are gains from the sale of the Company's timberland properties in the amount of $(60,945), the sale of its S3 business in the amount of $(11,065), and the sales of its BulkSak businesses in the amount of $(6,919), all of which are associated with the Industrial Paper Packaging segment.
6Included in Corporate are net gains from derivatives associated with the Consumer segment of $(257), the Industrial Paper Packaging segment of $(1,290), and All Other of $(365).
7Included in Corporate are other non-GAAP adjustments associated with the Industrial segment of $3,762 and the All Other group of businesses of $3,249.
Financial Position, Liquidity, and Capital Resources
Cash Flow
Operating Activities
Cash flows from operations totaled $689.8 million in 2025, compared with $833.8 million in 2024, a year-over-year decrease of $144.1 million. GAAP net incomeincreased by $839.4 millionyear over year, primarily as a result of the gains recognized on the 2025 divestitures of TFP and ThermoSafe as described in the "Results of Operations" section above. Net income in the current year also reflected a $144.5 millionyear-over-year increase in non-cash depreciation and amortization expense, primarily related to the Eviosys acquisition on December 4, 2024, a $22.6 millionincrease in gains on the sale of assets, a $11.6 million decrease in share-based compensation expense, and a $4.5 million decrease in net non-cash asset impairment charges. GAAP net income in the prior year also included a remeasurement loss of $113.7 million related to euro denominated cash balances held in connection with the funding of the Eviosys acquisition. No such remeasurements occurred in 2025. Cash contributions to the Company's pension and postretirement plans in 2025 were $22.3 million, compared with $19.6 million in 2024, a year-over-year increase of $2.7 million. Accrued expenses and other assets and liabilities provided $51.5 million and $75.1 million of cash in 2025 and 2024, respectively, a $23.6 million lower year-over-year provision of cash. Significant drivers of the change include a $35.2 million lower year-over-year provision of cash related to accrued management incentive compensation as the accrual decreased $4.3 million year over year in 2025 while increasing $30.9 million year over year in 2024. In addition, accrued interest reflected a use of cash of $4.8 million in 2025 compared to a provision of cash of $34.8 million. The use of cash in 2025 reflects the reduction of accrued interest resulting from debt repayments throughout the year. The provision of cash in 2024 reflects greater levels of accrued interest at the end of 2024 compared to 2023 resulting from the financing transactions associated with the Eviosys acquisition. Partially offsetting the year-over-year impact of the changes in management incentive accruals and accrued interest were higher year-over-year restructuring accruals totaling $22.7 million.
Cash paid for taxesincreasedby $172.5 millionyear over year, primarily as a result of one-time taxes paid during 2025 on gains from the sale of TFP.
37 FORM 10-K SONOCO 2025 ANNUAL REPORT
Net working capital used cash of $70.6 millionin 2025, while providing cash of $128.1 million in 2024. The higher year-over-year net use of cash of $198.7 millionwas driven largely by changes in inventory and accounts payable, partially offset by changes in accounts receivable. Inventories used cash of $80.9 million and $13.3 million in 2025 and 2024, respectively and accounts payable used $87.5 millionof cash in 2025 while providing $123.6 million of cash in 2024. The year-over-year increase in the use of cash from inventory primarily relates to our Metal Packaging North America business, where inventory levels of steel were low at the end of 2023 and throughout 2024. Steel inventory was increased through the peak packing season in the third quarter of 2025 before moderating over the remainder of the year. The year-over-year increase in the use of cash from accounts payable also primarily relates to our Metal Packaging North America business. As inventory levels increased throughout 2025, accounts payable also increased. However, as inventory levels moderated in the fourth quarter of 2025, more of these payables were settled, resulting in a higher year-over-year use of cash. Accounts receivable provided $80.1 million more cash in 2025 compared to 2024, reflecting the Company's active management of collections and compliance with payment terms.
Investing Activities
Investing activities provided $2.2 billion of cash in 2025, compared with using $4.1 billion of cash in 2024. Cash proceeds from the sale of TFP in April 2025 and ThermoSafe in November 2025 provided $2.5 billionof cash while cash proceeds from the sale of Protexic in April 2024 and additional proceeds related to the 2023 sale of the S3 business provided $81.0 million of cash in 2024. Acquisition spending totaled $3.8 billion in 2024, primarily related to the December 2024 Eviosys acquisition. There was no acquisition spending in 2025; however, the Company received net cash proceeds of $16.5 millionfrom a final working capital settlement related to Eviosys during 2025. Capital expenditures in 2025 were$344.0 million, $49.2 millionlower than the previous year as the Company had fewer large capital projects in 2025 and directed more of its capital to reducing outstanding debt. Proceeds from the sale of assets totaled $47.0 millionin 2025, compared with $15.6 million in the prior year. The proceeds in both years were primarily from the sale of assets related to previously closed production facilities. Proceeds from the settlement of a net investment hedge provided $9.1 millionof cash in 2024, and the Company paid $34.4 million in 2024 to settle a tranche of foreign currency forward contracts that the Company entered into in connection with the funding of the Eviosys acquisition. No such similar settlements occurred in 2025. Investments in affiliated companies and other net investing proceeds provided $6.5 millionof cash in 2025 compared with a $10.0 million provisionof cash in 2024. The proceeds in 2025 were largely attributable to dividends from one of the Company's affiliate investments representing a return on capital. Both 2025 and 2024 reflect additional investments in the Company's investments in ISI Robotics and 2024 includes an additional investment in a small South Carolina-based designer and manufacturer of sustainable packaging solutions. The 2024 figure also reflects proceeds from the sale of the Company's 2.7% equity interest in Northstar, which it had acquired on January 26, 2023 as part of the sale of its S3 business to Northstar.
Financing Activities
Financing activities used $3.0 billion of cash in 2025 and provided $3.7 billion of cash in 2024. The large provision of cash in 2024 included net proceeds from the issuance of debt totaling $3.9 billion primarily used to fund the Eviosys acquisition, which closed on December 4, 2024, while the significant use of cash in 2025 included net debt repayments totaling $2.8 billion. These debt repayments included the $0.4 billion principal repayment of the Company's 1.80% Notes upon their maturity in February 2025 and the repayments of two term loan facilities totaling $2.2 billion, ahead of their scheduled maturities, utilizing proceeds from the divestitures of TFP and ThermoSafe and available cash on hand.
Financing activities in 2024 also included the payment of fees totaling $19.0 million related to an unsecured bridge term loan facility to secure funding for the Eviosys acquisition. The change in outstanding checks used cash of $3.7 million and $8.7 million in 2025 and 2024, respectively. The year-over-year change is the result of the timing and size of the last accounts payable check runs in 2025 and 2024 relative to the Company's December 31 year end.
Cash used to repurchase the Company's common stock to satisfy employee tax withholding obligations in association with the exercise of certain share-based compensation awards was $10.9 million in 2025, compared to $9.2 million in 2024.
Cash dividends totaled $208.1 millionin 2025 compared to $203.5 million in 2024, reflecting the increase in the quarterly dividend payment from $0.52 per share to $0.53 per share approved by the Board in April 2025.
Capital Resources
The Company's cash balances are held in numerous locations throughout the world. Of the Company's total reported cash and cash equivalents balances of $378.4 million and $431.0 million at December 31, 2025and 2024, respectively, approximately $193.3 million and $190.1 million, respectively, were held outside of the United States by its foreign subsidiaries. Cash held outside of theUnited States is available to meet local liquidity needs, or for capital expenditures, acquisitions, and other offshore growth opportunities. The Company has generally maintained sufficient domestic liquidity through a combination of operating cash flow generation and access to bank and capital markets borrowings, and therefore generally considered its foreign unremitted earnings to be indefinitely invested outside the United States and did not typically plan to repatriate such earnings, other than excess cash balances that could be repatriated at minimal tax cost. Beginning in 2024, due to the increase in debt in the United States affecting domestic liquidity as a result of the Eviosys acquisition, the Company does not consider certain future earnings of the Sonoco Metal Packaging EMEA business to be indefinitely reinvested outside the United States and is providing for taxes on these amounts for financial reporting purposes. For those foreign unremitted earnings considered to be indefinitely reinvested, computation of the associated potential deferred tax liability is not practicable.
The Company uses a notional pooling arrangement with an international bank to help manage global liquidity requirements. Under this pooling arrangement, the Company and its participating subsidiaries may maintain either a cash deposit or a borrowing position through local currency accounts with the bank, so long as the aggregate position of the global pool is a notionally calculated net cash deposit. Because it maintains a security interest in the cash deposits and has the right to offset the cash deposits against the borrowings, the bank provides the Company and its participating subsidiaries favorable interest terms on both the cash deposit and borrowing positions.
The Company, as part of its ongoing efforts to improve cash flow and related liquidity, works with suppliers to improve its terms and conditions, including extending payment terms. Beginning in 2020, the Company also began voluntary supply chain financing programs (the "SCF Programs") to provide certain suppliers with the opportunity to sell receivables due from the Company to the SCF Programs' participating financial institution. Such sales are conducted at the sole discretion of both the suppliers and the financial institution on a non-recourse basis at a rate that leverages the credit rating of the Company and thus might be more beneficial to the supplier. No guarantees are provided by the Company or any of its subsidiaries under the SCF Programs. Responsibility is limited to making payment on the terms originally negotiated with suppliers, regardless of whether those suppliers sell the receivables to the financial institution. The Company does not enter into any agreements with suppliers regarding their participation in the SCF Programs. All amounts outstanding at December 31, 2025 under the SCF Programs were recorded within trade accounts payable. The amount owed to the participating financial institution under the SCF Programs and included in accounts payable was $53.1 million and $28.5 million at December 31, 2025 and 2024, respectively. The year-over-year increase is primarily due
38 FORM 10-K SONOCO 2025 ANNUAL REPORT
to a greater level of participation in the SCF Programs Sonoco Metal Packaging EMEA following the acquisition of Eviosys. The Company accounts for all payments made under the SCF Programs as a reduction to cash flows from operations and reports them within "changes in payable to suppliers" in the Consolidated Statements of Cash Flows. A downgrade in the Company's credit rating or changes in the financial markets could limit financial institutions' willingness to commit funds to, and participate in, the SCF Programs. However, the Company does not believe a reduction in, or the elimination of, the SCF Programs would have a material impact on its working capital or cash flows.
The Company's total debt at December 31, 2025, was $4.3 billion, a year-over-year decreaseof $2.7 billion. The year-over-year change reflects the following actions taken during 2025:
•On November 5, 2025, the Company repaid the outstanding $700 million principal amount of borrowings under a term loan facility using cash proceeds from the sale of ThermoSafe and the issuance of commercial paper. The Company had entered into a credit agreement on July 12, 2024, with the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent providing the Company with the ability to borrow up to $700 million on an unsecured basis to finance a portion of the cash consideration for the Company's acquisition of Eviosys. The Company drew down the entire term loan facility on December 2, 2024 in connection with the consummation of the Eviosys acquisition on December 4, 2024. Under the terms of the agreement, the borrowings became payable upon completion of the ThermoSafe divestiture.
•On April 3, 2025, the Company repaid the outstanding $1.5 billionprincipal amount of borrowings under its 364-day term loan facility using a portion of the cash proceeds from the sale of TFP. The Company had entered into a credit agreement on September 16, 2024 with the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent providing the Company with the ability to borrow up to $1.5 billionon an unsecured basis to finance a portion of the cash consideration for the Company's acquisition of Eviosys. The Company drew down the entire 364-day term loan facility on December 2, 2024 in connection with the consummation of the Eviosys acquisition on December 4, 2024. Under the terms of the agreement, the borrowings became payable upon completion of the TFP divestiture.
•On February 3, 2025, the Company repaid the $400 million aggregate principal amount of its 1.80% notes upon their maturity using proceeds from the issuance of commercial paper.
Included in "Other foreign denominated debt" at December 31, 2024 are $73.5 millionof transfers of certain trade receivables of Eviosys to third-party financial institutions for which the requirements to be accounted for as a true sale in accordance with the guidance under ASC 860 were not met. Additions to and settlements of these obligations during the year ended December 31, 2025are reflected as "Proceeds from issuance of debt" and "Principal repayment of debt," respectively, in "Net cash (used)/provided by financing activities" in the Company's Consolidated Statements of Cash Flows. All of these obligations had been settled as of December 31, 2025.
At December 31, 2025, the Company had approximately $378.4 million in cash and cash equivalents on hand and $1.25 billion in committed availability under its revolving credit facility, all of which was available for drawdown. The Company has the contractual right to draw funds directly on the underlying revolving credit facility, which could possibly occur if there were a disruption in the commercial paper market.
As of December 31, 2025, the Company had scheduled debt maturities of $538.0 million, $316.4 million, $513.6 million, $600.8 million, and $602.2 million in 2026, 2027, 2028, 2029, and 2030, respectively. See Note 11 to the Consolidated Financial Statements for additional information regarding the Company's contractual principal debt maturities.
The Company's contractual obligation maturities for interest payments on outstanding fixed-rate, long-term debt, as well as financing fees on the backstop line of credit, are expected to total approximately $150.2 million in 2026, $129.2 million in 2027, $128.7 million in 2028, $118.0 million in 2029, and $86.4 million in 2030.
Capital spending is expected to total approximately $309 million in 2026, down 10% from 2025. The Company expects to continue to invest in profit generating projects in our Consumer Packaging Americas, Consumer Packaging EMEA/APAC, and global industrial businesses focused on automation, footprint optimization, and sales growth.
The Company believes cash on hand and available credit, combined with expected net cash flowsgenerated from operating and investing activities, will provide sufficient liquidity to cover these and other cash flow needs of the Company over the course of 2026 and beyond.
Acquisitions and internal investments are key elements of the Company's growth strategy. The Company believes that its cash on hand, coupled with cash generated from operations and available borrowing capacity, will enable it to support this strategy. Although the Company believes that it has excess borrowing capacity beyond its current lines of credit, there can be no assurance that such financing would be available or available on terms that are acceptable to the Company. The Company continually assesses its operational footprint as well as its overall portfolio of businesses and may consider the divestiture of plants and/or business units it considers to be suboptimal or nonstrategic. Should these efforts result in the future sale of any plants or business units, management expects to utilize the proceeds to pay down debt and/or invest in growth projects or strategic acquisitions.
The net unfunded position of the Company's pension and postretirement plans was $163 millionat the end of 2025, compared with $168 million at the end of 2024. The Company contributed approximately $22 million to its benefit plans in 2025. Benefit plan contributions are expected to total approximately $23 million in 2026. Future funding requirements will depend largely on actual investment returns, future actuarial assumptions, legislative actions, and changes to the Company's benefit offerings.
Current assets decreasedyear over year by $532 millionto $2.65 billionat December 31, 2025, and current liabilities decreasedby $1.51 billionto$2.53 billion, resulting in an increase in the Company's ratio of current assets to current liabilities to 1.0 at December 31, 2025 from 0.8 at December 31, 2024. The decrease in both current assets and current liabilities primarily relates to the divestitures of TFP and ThermoSafe in 2025. The reduction in current liabilities also reflects the repayment of debt in 2025, primarily the 1.80% Notes and the 364-day syndicated term loan.
Total equity increased$1.35 billion during 2025 as net income of $1.0 billion, other comprehensive income of $542 million and stock-based compensation of $18 million were partially offset by dividends of $209 million and share repurchases of $11 million for tax share withholding on vested stock compensation granted to employees. The primary driver of other comprehensive income was a $537 million translation gain from the impact of a weaker U.S. dollar on the Company's foreign investments, primarily the Company's euro-denominated Sonoco Metal Packaging EMEA businesses.
On April 20, 2021, the Board authorized the repurchase of the Company's common stock up to an aggregate amount of $350 million. The Company purchased a total of 3.29 million shares under this authorization during 2021 at a cost of $212 million. No additional shares have been repurchased under this authorization since 2021; accordingly, a total of $138 million remains available for share repurchases at December 31, 2025.
Although the ultimate determination of whether to pay dividends is within the sole discretion of the Board and is based on a variety of factors, the Company plans to continue paying dividends consistent with historical practice as earnings and the Company's liquidity permit. Dividends per
39 FORM 10-K SONOCO 2025 ANNUAL REPORT
common share were$2.11 in 2025, $2.07 in 2024 and $2.02 in 2023. On February 11, 2026, the Company declared a regular quarterly dividend of $0.53 per common share payable on March 10, 2026, to shareholders of record on February 25, 2026.
The Company routinely enters into leasing arrangements for real estate (including manufacturing facilities, office space, and warehouses), transportation equipment (automobiles, forklifts, and trailers), and office equipment (copiers and postage machines). Lease contracts with a term of 12 months or less are not recorded in the consolidated balance sheet. Leased assets represent the Company's right to use an underlying asset during the lease term, and lease liabilities represent the Company's obligation arising from the lease. Leased assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Most real estate leases, in particular, include one or more options to renew, with renewal terms that typically extend the lease term in increments from one to five years. For additional information regarding the Company's contractual lease obligations, see Note 8 to the Consolidated Financial Statements.
As of December 31, 2025, the Company had long-term obligations to purchase electricity and steam, which it uses in its production processes, as well as long-term purchase commitments for certain raw materials, principally old corrugated containers. In addition, as of December 31, 2025 the Company had purchase commitments of approximately $93.9 million to be paid in 2026 for the acquisition of tax credits that are expected to offset a portion of taxes payable recorded within "Accrued taxes" on the Company's Consolidated Balance Sheets at December 31, 2025. For additional information regarding the Company's purchase commitment obligations, see Note 18 to the Consolidated Financial Statements.
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 located throughout the world, and the Company generally sells in the same countries where it produces with both revenue and costs transacted in the local currency. The Company monitors these exposures and uses foreign currency forward contracts and other risk management instruments to manage exposure to changes in foreign currency cash flows and the translation of monetary assets and liabilities on the Company's consolidated financial statements by hedging a portion of forecasted transactions that are denominated in foreign currencies, foreign currency assets and liabilities, or its net investment in foreign subsidiaries. The Company's foreign operations are exposed to political, geopolitical, and cultural risks, but these risks are mitigated by diversification and the relative stability of the countries in which the Company has significant operations.
The economy in Venezuela has been considered highly inflationary under U.S. GAAP since 2010. Accordingly, the Company had considered the U.S. dollar to be the functional currency of its Venezuelan operations and had used the official exchange rate when remeasuring the financial results of those operations since January 1, 2010. Economic conditions in Venezuela worsened considerably over the past several years with no indications that conditions were likely to improve in the foreseeable future. As a result, the Company sold its operations in Venezuela during the first quarter of 2025, recognizing a loss in the amount of $5.4 million, including $3.8 million of cumulative translation losses that were reclassified from accumulated other comprehensive income/(loss).
Turkey has been deemed to be a highly inflationary economy under U.S. GAAP since the first quarter of 2022. Accordingly, the Company considers the U.S. dollar to be the functional currency of its operations in Turkey and has remeasured monetary assets and liabilities denominated in Turkish lira to U.S. dollars with changes recorded through earnings. The cumulative impact of applying highly inflationary accounting to Turkey has been a pretax charge to earnings of$9.2 million ($7.1 million after tax), including $1.3 million ($1.0 million after tax) during 2025. The magnitude of future earnings impacts, however, is uncertain as such impacts are dependent upon unpredictable movements in the Turkish lira relative to the U.S. dollar. In addition to remeasurement-related charges, significant deterioration in the Turkish economy could result in the recognition of future impairment charges. However, the Company believes its exposure is limited to its net investment in Turkey, which was approximately $54.7 million as of December 31, 2025.
The Company is a purchaser of various raw material inputs such as recovered paper, energy, steel, aluminum, and plastic resin. The Company generally does not engage in significant hedging activities for these purchases other than for energy and, from time to time, aluminum, because there is usually a high correlation between the primary input costs and the ultimate selling price of its products. Inputs are generally purchased at market or at fixed prices that are established with individual suppliers as part of the purchase process for quantities expected to be consumed in the ordinary course of business. On occasion, where the correlation between selling price and input price is less direct, the Company may enter into derivative contracts such as futures or swaps to manage the effect of price fluctuations. In addition, the Company may occasionally use traditional, unleveraged interest-rate swaps to manage its mix of fixed and variable rate debt and control its exposure to interest rate movements within select ranges.
At December 31, 2025, the Company had derivative contracts outstanding to hedge the prices on a portion of anticipated aluminum purchases. These contracts, some of which qualify as cash flow hedges, include aluminum swaps totaling 6,133 metric tons. The total fair market value of these instruments resulted in anet gainposition of $1.7 millionand$1 million at December 31, 2025and December 31, 2024, respectively. The amount of the gainincludedin accumulated other comprehensive income/(loss) at December 31, 2025 expected to be reclassified to the income statement during the next twelve months is $1.5 million. The Company also has certain natural gas hedges that are not designated as cash flow hedges.
The Company has entered into forward contracts to hedge certain anticipated foreign currency denominated sales and purchases expected to occur in 2026.The total market value of these instruments resulted in a net gain position of $49 thousand at December 31, 2025 and a net loss position of $1.8 million at December 31, 2024. At December 31, 2025, the total notional amount of these contracts, in U.S. dollar terms, was $157 million, of which $(23) million related to the Canadian dollar, $22 million to the Euro, $52 million to the British pound, $(13) millionto the Polish zloty, $39 millionto the US Dollar, and $2 millionto all othercurrencies for USD contracts and $42 millionrelated to the Euro, $73 million to the British pound, $(56) millionto the Polish zloty, $21 millionto the US Dollar, and $(2) millionto all othercurrencies for Euro contracts. In addition, the Company had various currency contracts outstanding to hedge the currency exposure of intercompany debt and foreign currency denominated receivables and payables. Although placed as economic hedges, the Company does not apply hedge accounting to these instruments. As such, changes in fair value are recorded directly to income and expense in the periods that they occur.
In 2023, the Company became a party to cross-currency swap agreements with a total notional amount of $500 million to effectively convert a portion of the Company's fixed-rate U.S. dollar denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt. The swap agreements, which had a maturity of December 18, 2026, provided for the Company to receive semi-annual interest payments in U.S. dollars at a fixed rate and to make semi-annual interest payments in euros at a fixed rate. The risk management objective of entering into the swap agreements was to manage foreign currency risk relating to net investments in certain European subsidiaries denominated in euros. The agreements were designated as net investment hedges for accounting purposes.
The gain or loss on the net investment hedge derivative instruments is included in the "Foreign currency translation" component of "Accumulated other comprehensive income/(loss)" until the net investment is sold, diluted, or liquidated. Interest payments received for the cross-
40 FORM 10-K SONOCO 2025 ANNUAL REPORT
currency swaps are excluded from the net investment hedge effectiveness assessment and are recorded in "Interest expense" in the Company's Consolidated Statements of Income. The assumptions used in measuring fair value of the cross-currency swaps are considered level 2 inputs, which are based upon the Euro-to-U.S. dollar exchange rate market.
On April 15, 2024, as a result of the strengthening of the U.S. dollar against the euro, as well as a reduction in the differential between U.S. and European interest rates, the Company terminated its swap agreements and received a net cash settlement of $9.1 million. The foreign currency translation gain of approximately $3.1 million, net of tax, is included as a component of "Accumulated other comprehensive income/(loss)."
Following the unwind of the swaps, the Company entered into new cross-currency swap agreements with a total notional amount of $500 million to effectively convert a portion of the Company's fixed-rate U.S. dollar-denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt. The new swap agreements, which have a maturity of May 1, 2027, share the same risk management objective as the terminated cross-currency swap agreements and are also designated as net investment hedges for accounting purposes.
In December 2024, the Company entered into additional cross-currency swap agreements with a total notional amount of $1.5 billion, including $500 million maturing on September 1, 2026, $500 millionmaturing on September 1, 2029, and $500 millionmaturing on May 1, 2030. The swaps effectively convert a portion of the Company's fixed-rate U.S. dollar-denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt at the prevailing market rate at execution. The new swap agreements share the same risk management objective as the Company's previously existing cross-currency swap agreements and are also designated as net investment hedges for accounting purposes.
On June 30, 2025, the Company entered into additional cross-currency swap agreements with a total notional amount of $285 million, maturing on February 1, 2027. The swaps effectively convert a portion of the Company's fixed-rate U.S. dollar-denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt at the prevailing market rate at execution.
The fair value of the Company's net investment hedges was a lossposition of $207.2 millionand a gain position of $11.9 million at December 31, 2025 and December 31, 2024, respectively. Foreign currency translation loss of $154.4 million(net of income taxes of $52.8 million) and gain of $8.9 million (net of income taxes of $3.0 million) were reported as components of "Accumulated other comprehensive income/(loss)" within "Foreign currency items" at December 31, 2025 and December 31, 2024, respectively.
In anticipation of the offering of the Notes, the Company entered into treasury lock derivative instruments with elevenbanks, with a total notional principal amount of $900 million, on August 29, 2024. These instruments had the risk management objective of reducing the Company's exposure to increases in the underlying Treasury index up to the date of pricing of the Notes. The derivatives were settled when the Notes priced on September 17, 2024, with the Company recognizing a loss on the settlement of $11.1 million. The loss is included in "Interest expense" in the Company's Consolidated Statements of Income for the year ended December 31, 2024.
The total fair market value of the Company's derivatives was a net unfavorable position of $206.6 million and a net favorable position of $8.0 million at December 31, 2025 and December 31, 2024, respectively. 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 12 to the Consolidated Financial Statements for more information on financial instruments.
The Company has an investment in preferred stock of a nonaffiliated private company that is accounted for under the measurement alternative of cost less impairment, adjusted for any qualifying observable price changes. Observable price changes would consist of Level 2 inputs based on privately negotiated transactions with the nonaffiliated company. The preferred stock balance of $21.2 million is included in "Other Assets" in the Company's Consolidated Balance Sheet as of December 31, 2025.
The Company is subject to various federal, state and local environmental laws and regulations in the United States and in each of the countries where we conduct business, concerning, among other matters, solid waste disposal, wastewater effluent and air emissions. 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 had accrued $1.8 millionat December 31, 2025 with respect to these sites. See "Environmental Charges" in Item 3 - Legal Proceedings and Note 18 to the Consolidated Financial Statements for more information on environmental matters.
Critical Accounting Estimates
The MD&A is based upon the Company's Consolidated Financial Statements, which have been prepared in accordance with 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 the MD&A, 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.
41 FORM 10-K SONOCO 2025 ANNUAL REPORT
Business Combinations
The Company's acquisitions of businesses are accounted for in accordance with ASC 805, "Business Combinations." The Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in an acquired business at their fair values as of the date of acquisition. Goodwill is measured as the excess of the consideration transferred, also measured at fair value, over the net of the acquisition date fair values of the identifiable assets acquired and liabilities assumed. The acquisition method of accounting requires us to make significant estimates and assumptions regarding the fair values of the elements of a business combination as of the date of acquisition, including the fair values of identifiable intangible assets, property, plant, and equipment, deferred tax asset valuation allowances, liabilities including those related to debt, pensions and other postretirement plans, uncertain tax positions, contingent consideration, and contingencies. This method also requires us to refine these estimates over a measurement period not to exceed one year to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. If we are required to adjust provisional amounts that we have recorded for the fair values of assets and liabilities in connection with acquisitions, these adjustments could have a material impact on our financial condition and results of operations.
Significant estimates and assumptions in estimating the fair value of acquired patents, customer relationships, trade names, proprietary technology, and other identifiable intangible assets include future cash flows that the Company expects to generate from the acquired assets, discount rate, customer attrition rate, and long-term revenue growth projections. Projecting discounted future cash flows requires the Company to make significant estimates regarding projected revenues, projected earnings before interest, taxes, depreciation, and amortization margins, discount rates and customer attrition rates. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, the Company could record impairment charges.
In addition, the Company has estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation on property, plant, and equipment and amortization expense on definite-lived intangible assets. If the estimates of the economic lives change, depreciation or amortization expenses could be increased or decreased, or the acquired asset could become impaired.
For leases acquired in a business combination, the Company measures the lease liability at the present value of the remaining lease payments, as if the acquired lease were a new lease of the Company at the acquisition date. When the implicit rate in the acquired lease is not readily determinable, the Company calculates the lease liabilities using discount rates based upon the Company's incremental secured borrowing rate for the region in which the acquisition was completed. An assessment of the certainty associated with the exercise of any lease renewal, termination, and purchase options included in the acquired lease contracts is also performed. The Company measures the right-of-use asset at the same amount as the lease liability as adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms.
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 right of use lease assets, notes receivable and equity and other investments) for impairment whenever indicators of impairment exist, or when it commits to sell the asset. 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 projection of expected future cash flows 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, estimated sale 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
The Company assesses its goodwill for impairment annually and from time to time when warranted by the facts and circumstances surrounding individual reporting units or the Company as a whole. If the fair value of a reporting unit exceeds the carrying value of that reporting unit, there is no impairment. If the carrying value of a reporting unit exceeds the fair value of that reporting unit, an impairment charge to goodwill is recognized for the excess. The Company's reporting units, as determined in accordance with ASC 350, "Intangibles-Goodwill and Other," are the same as, or one level below, its operating segments, as determined in accordance with ASC 280, "Segment Reporting."
The Company completed its most recent annual goodwill impairment testing during the third quarter of 2025. For testing purposes, the Company performed an assessment of each reporting unit using either a qualitative evaluation or a quantitative test. The qualitative evaluations considered factors such as the macroeconomic environment, the industry, the Company's overall financial performance, the current and projected financial performance of specific reporting units, and business strategy changes. The quantitative tests, described further below, relied on the current outlook of reporting unit management for future operating results and took into consideration, among other things, specific business unit risk, the countries in which the reporting units operate, and implied fair values based on comparable trading multiples.
When performing a quantitative analysis, the Company estimates the fair value of its reporting units using a weighted average of the income and market approaches. Under the income approach, the Company uses a discounted cash flow model based on projections of future years' operating results and associated cash flows. The Company's assessments reflect significant management assumptions and estimates related to the Company's forecast of sales growth during the discrete period, EBITDA, and discount rates, which are validated by observed comparable trading and transaction multiples based on guideline public companies under the market approach. The Company's model discounts projected future cash flows, forecasted over a five-year period, with an estimated residual growth rate. The Company's projections incorporate management's estimates of the most-likely expected future results. Projected future cash flows are discounted to present value using a discount rate that management believes is appropriate for the reporting unit.
The Company's assessments, whether qualitative or quantitative, incorporate management's expectations for the future, including forecasted growth rates and/or margin improvements. Therefore, should there be changes in the relevant facts and circumstances and/or expectations, management's conclusions regarding goodwill impairment may change as well.
42 FORM 10-K SONOCO 2025 ANNUAL REPORT
In considering the level of uncertainty regarding the potential for goodwill impairment, management has concluded that any such impairment would, in most cases, likely be the result of adverse changes in more than one assumption. Management considers the assumptions used to be its best estimates across a range of possible outcomes based on available evidence at the time of the assessment. Other than in the Metal Packaging EMEA and Global Paper Products APAC reporting units, which are discussed below, there is no specific singular event or single change in circumstances management has identified that it believes could reasonably result in a change to the expected future results in any of its reporting units significant enough to result in goodwill impairment. In the case of Metal Packaging EMEA, the lower differential between the fair value and carrying value of the reporting unit is due to the acquisition of Eviosys in December 2024, at which time the majority of assets and liabilities acquired were recorded at fair value. In management's opinion, a change of such magnitude would more likely be the result of changes to some combination of the factors identified above, a general deterioration in competitive position, introduction of a superior technology, significant unexpected changes in customer preferences, an inability to pass through significant raw material cost increases, and other such items as identified in "Item 1A. Risk Factors" in this Annual Report on Form 10-K.
Although no reporting units failed the annual impairment test, in management's opinion, the goodwill balances of the Metal Packaging EMEA and Global Paper Products APAC reporting units are individually at risk of impairment in the near term if each reporting unit's operation does not perform in line with management's expectations, or if there is a negative change in the long-term financial outlook for each reporting unit orin other factors such as the particular discount rates used. Total goodwill associated with the Metal Packaging EMEA and Global Paper Products APAC reporting units was $1,397.0 million and $26.9 million, respectively at December 31, 2025.
Sensitivity Analysis
In the annual goodwill impairment analysis completed during the third quarter of 2025, projected future cash flows forthe Metal Packaging EMEA and Global Paper Products APAC reporting units were discounted at 12.0% and 13.0%, respectively, and their estimated fair values were determined to exceed their carrying values by approximately 3.1% and 9.0%, respectively. Based on an equal weighting of the income and market approaches, and holding other valuation assumptions constant, the discount rates for the Metal Packaging EMEA and Global Paper Products APAC reporting units would have to increase to 12.7% and 15.4%, respectively, or projected EBITDA across all future periods would have to be reduced by approximately 3.0% and 8.4%, respectively, in order for the estimated fair values of the reporting units to fall below their individual carrying values.
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.
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.
Share-Based Compensation Plans
The Company utilizes share-based compensation in the form of restricted stock units ("RSUs"), performance contingent restricted stock units ("PCSUs"), and other share-based awards. The fair value of the Company's RSUs is equal to the closing price of the Company's stock on the date of grant discounted for any projected dividends that are not eligible to be received during the vesting period. The amount of share-based compensation expense associated with PCSUs is based on estimates of future performance using measures defined in the stock plan descriptions for each award granted. As of December 31, 2025, these performance measures include the following:
•Adjusted earnings per share - three-year sum of forecasted future and historical annual adjusted earnings per share for the three-year measurement period associated with each award; and
•Return on invested capital - three-year simple average of annual returns calculated by dividing 1) adjusted operating profit after tax (derived from historical or projected adjusted earnings) by 2) the average of total historical or projected debt plus equity for the respective annual periods.
Changes in estimates regarding the future achievement of these performance measures may result in significant fluctuations from period to period in the amount of share-based compensation expense recognized in the Company's Consolidated Financial Statements. Performance payouts for PCSU awards are also subject to adjustment by a total stock return modifier as determined by the Company's relative performance within its targeted peer group for each grant. See Note 14 to the Consolidated Financial Statements for additional information on the Company's share-based compensation plans.
Pension and Postretirement Benefit Plans
The Company has significant pension and postretirement benefit liabilities and costs that are measured using actuarial valuations. The largest of the Company's pension and postretirement plans include the U.S.-based Sonoco Pension Plan, the U.S. nonqualified retirement plans, the U.S. Retirement and Retiree Health and Life Insurance Plan, the Sonoco U.K. Retirement Benefits Plan, and several defined benefit plans assumed by the Company upon its acquisition of Eviosys on December 4, 2024 (the "Eviosys Plans"). As of December 31, 2025, the total benefit obligation of the Company's pension and postretirement benefit plans was $483.3 million and the total assets of these plans were $320.5 million, resulting in a net unfunded pension and postretirement plan obligation of $162.9 million.
The actuarial valuations used to evaluate the plans employ key assumptions that can have a significant effect on the calculated amounts. The key assumptions used at December 31, 2025 in determining the PBO for retirement plans and the accumulated benefit obligation for retiree
43 FORM 10-K SONOCO 2025 ANNUAL REPORT
health and life insurance plans include discount rates and rates of compensation increase. The key assumptions used to determine the 2025 net periodic benefit cost for retirement and retiree health and life insurance plans include discount rates, expected long-term rate of return on plan assets, and rates of compensation increase.
The Company adjusts its discount rates at the end of each fiscal year based on yield curves of high-quality debt instruments over durations that match the expected benefit payouts of each plan. The expected rate of return assumption is derived by taking into consideration the targeted plan asset allocation, projected future returns by asset class and active investment management. A third-party asset return model is used to develop an expected range of returns on plan investments over a 12- to 30-year period, with the expected rate of return selected from a best estimate range within the total range of projected results. The Company periodically rebalances its plan asset portfolio in order to maintain the targeted allocation levels. The rate of compensation increase assumption is generally based on salary and incentive compensation increases.
The sensitivity to changes in the critical assumptions for the Company's U.S. and U.K. based plans and Eviosys Plans as of December 31, 2025, is as follows:
|
Assumption ($ in millions) |
Percentage
Point
Change
|
Projected Benefit
Obligation
Higher/(Lower)
|
Annual Expense
Higher/(Lower)
|
||||||||||||||
| Discount rate | 0.25% decrease | $12.2 | $0.4 | ||||||||||||||
| Expected return on assets | 0.25% decrease | N/A | $0.7 | ||||||||||||||
Another key assumption for the U.S. retiree health and life insurance plan is a medical cost trend rate beginning at 7.0% for post-age 65 participants and trending down to an ultimate rate of 4.5% in 2035. 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 evaluates the assumptions used in projecting the pension and postretirement liabilities and associated expenses annually. These judgments, assumptions and estimates may affect the carrying value of pension and postretirement plan net assets and liabilities and pension and postretirement plan expenses in the Company's Consolidated Financial Statements. See Note 15 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 3 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Sonoco Products Co. published this content on February 26, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 26, 2026 at 14:25 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]