0000091767true00000917672024-12-042024-12-04
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 4, 2024
SONOCO PRODUCTS COMPANY
(Exact name of registrant as specified in its charter)
001-11261
(Commission File Number)
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South Carolina | | 57-0248420 |
| (State or other jurisdiction or incorporation) | | (I.R.S. Employer Identification Number) |
1 N. Second St.
Hartsville, South Carolina 29550
(Address of principal executive offices)(Zip Code)
(843) 383-7000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| No par value common stock | SON | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐
Introductory Note
On December 4, 2024, Sonoco Products Company (the “Company”) filed a Current Report on Form 8-K (the “Original Filing”) in connection with the December 4, 2024 completion of the acquisition of Titan Holdings I B.V. (“Eviosys”), a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands, and a direct wholly owned subsidiary of Titan Holdings Coöperatief U.A., a cooperative with excluded liability (coöperatie met uitgesloten aansprakelijkheid) incorporated under the laws of the Netherlands, as described in more detail in the Original Filing.
This Current Report on Form 8-K/A amends the Original Filing to include the audited financial statements as of and for the years ended December 31, 2023 and 2022 and the related auditor consent, the unaudited financial statements as of September 30, 2024 and December 31, 2023 and for the nine months ended September 30, 2024 and 2023, and the pro forma financial information required by Item 9.01 of Form 8-K. Except for the filing of such financial statements, auditor consent, and pro forma financial information, this Current Report on Form 8-K/A does not modify or update other disclosures in, or exhibits to, the Original Filing.
Item 7.01 Regulation FD Disclosure.
Unaudited supplemental non-GAAP pro forma condensed combined financial measures of the Company and Eviosys for the year ended December 31, 2023 and the nine months ended September 30, 2024 are attached as Exhibit 99.4 to this Current Report and incorporated herein by reference.
The information in this Item 7.01, including Exhibit 99.4 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of businesses or funds acquired.
The consolidated financial statements and accompanying notes of Eviosys as of December 31, 2023 and 2022 and for the years ended December 31, 2023 and 2022 are filed as Exhibit 99.1 to this Current Report on Form 8-K/A.
The consolidated financial statements and accompanying notes of Eviosys as of September 30, 2024 and December 31, 2023 and for the three and nine months ended September 30, 2024 and 2023 are filed as Exhibit 99.2 to this Current Report on Form 8-K/A.
(b) Pro forma financial information.
The pro forma financial information required by Item 9.01(b) of Form 8-K in relation to the acquisition of Eviosys is filed as Exhibit 99.3 to this Current Report on Form 8-K/A and is incorporated herein by reference.
(d) Exhibits | | | | | | | | | | | |
| Exhibit No. | | Description of Exhibit |
| 23.1 | | |
| 99.1 | | |
| 99.2 | | |
| 99.3 | | |
| 99.4 | | |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | | | SONOCO PRODUCTS COMPANY |
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| Date: February 19, 2025 | | | | By: | | /s/ Jerry A. Cheatham |
| | | | | | Jerry A. Cheatham |
| | | | | | Interim Chief Financial Officer |
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-266837) and Form S-8 (No. 333-206669, 333-206671, 333-206672, 333-206673, 333-232936, and 333-279043) of Sonoco Products Company of our report dated August 2, 2024 relating to the consolidated financial statements of Titan Holdings I B.V. as of December 31, 2023 and 2022 and for the years then ended, which is incorporated by reference in this Current Report on Form 8-K/A.
/s/ PricewaterhouseCoopers Audit
Neuilly-sur Seine, France
February 19, 2025
in Millions of Eur Cost of product sold (523) (597) (1,402) (1,569) Selling, general and administration expenses (22) (28) (115) (82) Other income/(expenses) (13) (1) (19) (7) Amortization of intangible assets (13) (14) (40) (40) Finance expense (42) (45) (113) (117) Foreign exchange gain/(loss) (2) (1) (3) - IAS 29 Net monetary loss (1) (7) (4) (7) Income tax (19) (37) (24) (47) The notes are an integral part of these consolidated interim condensed financial statements. ‑
in Millions of Eur Foreign currency translation adjustments: Arising in the period Effective portion of changes in fair value of cash flow hedges: New fair value adjustments into reserve Movement in deferred tax Re‑measurement of employee benefit obligations Movement in deferred tax - - - - - - - - (2) (3) (2) (7) (6) 1 (6) (3) - (1) - - - 1 2 - - - (1) - ‑ ‑ The notes are an integral part of these consolidated interim condensed financial statements.
in Millions of Eur Cash & cash equivalents 219 342 Trade receivables 304 205 Contract receivables 60 43 Other receivables 51 37 Current tax receivables 11 20 Inventory 478 466 Current financial assets 8 2 Other current assets 16 16 Current assets held for sale 5 37 - Property, plant and equipment 816 826 Right‑of‑use assets 33 27 Intangible assets 1,320 1,364 Deferred tax asset 24 21 Other non‑current assets 3 4 Non‑current financial assets - 14 ‑ Short‑term debt 62 10 Trade payable 538 499 Current lease liabilities 12 10 Income taxes payable 21 21 Current financial liabilities 3 2 Other current liabilities 242 324 Current liabilities held for sale 5 10 - Long‑term debt 1,910 1,915 Non‑current lease liabilities 21 18 Employee benefits 60 61 Deferred tax liability 206 214 Other non‑current provisions 3 7 Non‑current financial liabilities 5 6 Other non‑current liabilities 1 2 ‑ Non‑controlling interest 19 18 Issued capital - - Reserves 267 280 The notes are an integral part of these consolidated interim condensed financial statements.
in Millions of Eur Income of the period - - - - 36 - - 36 1 37 Dividend Distribution - - - - - (388) - (388) - (388) Other comprehensive (loss)/ income for the period - (3) (7) - - - - (10) (10) Employee equity plan - - - - - - 2 2 - 2 Hyperinflation 2023 adjustment (2) - - - - - - 10 10 - 10 Rounding - - - - - - - - - - Income of the period - - - - (21) - - (21) - (21) Other comprehensive (loss)/ income for the period - (6) (2) 1 - - - (7) - (7) Employee equity plan - - - - - - 9 9 - 9 Hyperinflation 2024 adjustment(2) - - - - - - 7 7 - 7 Rounding - - - - - - (1) (1) 1 - (1) Titan Holdings I B.V. has 91 euros of share capital in 2024. Please refer to note 3. (2) Impact of the Turkish subsidiary as required by IAS 29. The notes are an integral part of these consolidated interim condensed financial statements.
in Millions of Eur Amortisation & depreciation 119 115 Finance costs net 113 117 Restructuring & other 10 13 Decrease/(increase) in trade receivables (109) (36) Decrease/(increase) in contract receivables (17) (10) Decrease/(increase) in inventories (34) 66 Decrease/(increase) in other operating assets (16) 7 (Decrease)/increase in trade payables 37 (167) (Decrease)/Increase in other operating liabilities (65) (72) Interest paid (120) (111) Income tax paid (28) (49) Restructuring payments (12) (19) Employee benefits payments/contributions (2) (1) Transaction costs relating to debt financing (2) (14) Other operating cash flows 12 (5) Purchase of property, plant and equipment (49) (51) Other investing cash flows - 4 Proceeds from borrowings 50 405 Repayment of borrowings - (7) Dividend Payment - (388) Other financing cash flows (10) - Cash, cash equivalents and restricted cash at the beginning 263 of the period 342 Foreign exchange losses on cash, cash equivalents and restricted cash (2) - The notes are an integral part of these consolidated interim condensed financial statements.
Titan Holdings I B.V. (the “Company”), a company with limited liability, was incorporated in the Netherlands on April 6, 2021. The Company’s registered office is Honthorststraat 19, 1071 DC Amsterdam, The Netherlands (previously Keizersgracht 555, 1017 DR Amsterdam, The Netherlands), registered under number 82439613. The Company had no activity until the acquisition of the European Tinplate business of Crown Holdings, Inc. on August 31, 2021. The principal place of business of the Company, where the executive management team is based, is located in Zug, Switzerland. Titan Holdings I B.V. and its subsidiaries (together the “Group” or “Eviosys”) are a leading supplier of innovative, value‑added, rigid metal packaging solutions. The Group’s products mainly include metal containers primarily for food markets. The Group operates 44 plants in 17 countries mainly throughout Europe and Africa. The new can making facility in Dakhla underwent final start up testing in June and started producing cans commercially in Q3 2024. The food can business is seasonal with the first quarter tending to be the slowest period as the autumn packaging period in the Northern Hemisphere has ended and new crops are not yet planted. The industry enters its busiest period in the third quarter when the majority of fruits and vegetables in the Northern Hemisphere are harvested. Due to this seasonality, inventory levels increase in the first half of the year to meet peak demand in the second and third quarters. These non‑statutory condensed consolidated unaudited interim financial statements (referred to as “consolidated interim statements”) reflect the consolidation of the legal entities forming the Group for the nine months ended September 30, 2024 (the “reporting date”). On June 22, 2024, Sonoco Products Company (Sonoco) entered into a binding agreement with KPS Capital Partners, LP (KPS) to acquire all of the equity of Titan Holdings I B.V. The amount of the transaction is €3,615m. Eviosys, through its Russian subsidiary Packaging Kuban, operates two plants in Timashevsk and Novotitarovskaya (co‑located with a major customer). Revenue in Russia was approximately 2% of Group sales in 2024. Eviosys is continually monitoring the evolving situation in Eastern Europe and is working to ensure continuity of operations, access to cash generated in Russia, and with the support of specialized external counsel, compliance with all applicable sanctions being put in place. On September 6, 2024 Eviosys signed an agreement to sell all of the equity of Eviosys Packaging Kuban. This agreement drives the group to apply the IFRS 5 standard for this entity. A loss of €11m in P&L has been recognized to represent the difference between the fair value (the sale price less costs to sell) and the net book value. This impairment loss has been allocated to the PPE and the goodwill as mentioned in note 5. On February 8, 2024 Eviosys repriced the €400m non‑fungible coterminous Term Loan B (“New Term Loan facility B2”) with the aim of improving cash flow generation. This Term loan has been renamed from “New term Loan facility B2” to “New term Loan facility B3". The transaction was leverage neutral. The new margin decreased from Euribor plus 475 basis points to Euribor plus 400 basis points, giving rise to a catch up adjustment of €11.8m recognised in finance income according to IFRS 9. The "catch up" method has been applied and explained in note 13 - Borrowings. Management have considered climate change risks when exercising judgements and estimates during the preparation of the consolidated interim statements and have determined that there are no significant consequences for Eviosys.
The Group's unaudited Condensed Consolidated Interim Financial Statements for the nine months ended September 30, 2024 are prepared in accordance with IAS 34 “Interim Financial Reporting” and with generally accepted accounting principles under International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The unaudited Condensed Consolidated Interim Financial Statements do not include all the information and disclosures required in the Consolidated Financial Statements. They should be read in conjunction with the Group’s Consolidated Financial Statements for the year ended December 31, 2023, which were authorized for issue by the Board of Directors on July 31, 2024. Subsequent events impacting these interim financial statements were assessed up to and including February 19, 2025. These unaudited Condensed Consolidated Interim Financial Statements were authorized for issue by management on February 19, 2025. The same accounting policies and methods of computation are followed in these interim financial statements as compared with the most recent annual financial statements except for the application of the effective tax rate in accordance with IAS 34 “Interim Financial Reporting”. Income tax expense is recognised based on management’s estimate of the weighted average annual income tax rate expected for the full financial year. The projected annual tax rate used for the year to September 30, 2024, is 35%. Several amendments and interpretations described below apply for the first time in 2024, but do not have any material impact on the Unaudited Condensed Interim Consolidated Financial Statements of the Group. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. The Group plans to adopt the new standards and interpretations on their required effective dates. The following new standards and amendments are effective for the period beginning January 1, 2024: • Supplier Finance Arrangements (Amendments to IAS 7 & IFRS 7); • Lease Liability in a Sale and Leaseback (Amendments to IFRS 16); • Classification of Liabilities as Current or Non‑Current (Amendments to IAS 1); and • Non‑current Liabilities with Covenants (Amendments to IAS 1). In December 2022, the Member States of the European Union unanimously agreed to adopt the Directive introducing an overall minimum corporate tax rate of 15%, which has entered into force in 2024, in line with the OECD second pillar model framework. On May 23, 2023 the IASB published the amendment to IAS 12 International Tax Reform – Model Pillar Two Rules for immediate application. The Group has applied the exemption to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes. (in EUR) April 6, 2021 94 Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects. On April 6, 2021 Titan Holdings I B.V. issued authorized capital amounting to USD 100, divided into 10,000 shares with par value USD 0.01.
The CEO has been identified as the Chief Operating Decision Maker (CODM) and examines the Group’s performance at the consolidated level. The Group evaluated the need to assess different product lines as separate Reporting Segments using the guidance around quantitative thresholds and qualitative characteristics in IFRS 8. Based on this evaluation it was concluded that there is only one Reporting Segment for Eviosys. The CEO primarily uses a Non‑GAAP measure of adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA, see below) to assess the performance of the operating segment. Adjusted EBITDA excludes the effects of significant items of income and expenditure which may have an impact on the quality of earnings described in the analysis below. in Millions of Eur Taxes on income 19 37 24 47 Net interest expense / (income) 42 45 112 116 Depreciation and amortization 37 37 108 115 Restructuring/Asset Impairments & Disposals - 1 6 5 IAS 29 Net Monetary Loss 1 7 4 7 KPS Management Fees 1 1 4 3 Bonus Plan & Management Equity Plan - 1 39 2 Russian IFRS 5 impairment loss 11 - 11 - Other - 1 6 3
On September 6, 2024, Eviosys signed an agreement to sell all of the equity of Eviosys Packaging Kuban, the Russian operating company. Management deem the held for sale criteria of IFRS 5 to have been met as of September 30, 2024, given that the Russian operation is available for immediate sale in its present condition and the sale is judged highly probable based on the signed sales agreement. As of September 30, 2024, the sale is expected to be completed within 12 months subject to Russian regulatory approval. An impairment loss on classification as held for sale of €11m has been recognized within operating profit (see note 8). in Millions of Eur Trade receivables 9 - - Inventory 22 - - Other current assets 6 - - Goodwill 8 (8) - Property, plant and equipment 3 (3) - Current assets held for sale - - 37 Current financial liabilities 10 - - Current liabilities held for sale - - 10
‑ The Group derives revenue from the transfer of goods over time and at a point in time. The non‑current assets and the revenue by geographic area are presented as follows : in Millions of Eur France Italy 109 109 241 255 Spain 101 109 230 242 United Kingdom 63 91 184 209 Germany 41 44 117 128 Other 252 282 683 779 ‑ in Millions of Eur France 145 146 Italy 107 110 Spain 188 192 United Kingdom 123 114 Germany 43 44 Other 243 247 No other countries have revenue or other non‑current assets in excess of the countries listed above. No customer represents more than 10% of the revenue.
in Millions of Eur Personnel costs 10 16 72 50 Professional fees 2 3 8 9 Depreciation and ROU asset amortization 2 1 3 2 KPS management fees 1 1 4 3 Other SG&A 7 7 28 18 The increase of personnel costs is mainly due to the bonus plan for €30m triggered by the likely change of control. The increase of other SG&A is mainly due to the Management Equity Plan for €8.6m triggered by the likely acquisition of Eviosys by Sonoco. in Millions of Eur Spain restructuring 1 - 4 - Aerosol restructuring - - - 3 Other restructuring 2 - 2 2 Transaction costs - - 3 - Russian IFRS 5 impairment loss 11 - 11 - Other (1) 1 (1) 2
in Millions of Eur Interest expense on debt 31 34 97 89 Interest expense on factoring and securitization 7 9 20 21 Amortization of debt issue cost 3 2 (4) 5 Interest expense on leases 1 - 1 1 Pension and related non services costs/ (income) - - 1 1 Interest income - - (2) - Interest expense mainly comprises the interest due on the Term loan and Senior bonds. The variation in the amortization of debt issue cost is related to the Facility B3. The operation is explained in note 13. The Eviosys subsidiary in Turkey, Eviosys Packaging Türkiye Sanayi Ve Ticaret Limited Sirketi, has Turkish lira as its functional currency. The consumer price index of the Turkish Statistical Institute (TURKSTAT) was 2,526.16 at September 30, 2024 and 1,691.04 at September 30, 2023. The calculated net monetary loss in 2024 is €4m and is recognised in the Statement of Profit or Loss. The projected tax rate of 30% was applied to income before tax for the nine months ended September 30, 2024, after adjustment for the losses in the Netherlands where no tax credit is reported. In September 30, 2024 the tax expense is €24m compared to €47m in September 30, 2023 (In September 2023 the projected tax rate of 29% after adjustment for losses in the Netherlands was applied to the income before tax.) Under the Pillar II legislation the Group is liable to pay a top‑up tax for the difference between its GloBE effective tax rate per jurisdiction and the 15% minimum tax rate. All entities within the Group have an effective tax rate that exceeds 15%, except for three subsidiaries operating in Ireland, Hungary and Switzerland where the statutory tax rate is below 15%. Any top‑up tax payable is not expected to be material.
Trade receivables are amounts due from customers for goods sold in the ordinary course of business. They are generally due for settlement between 30 and 90 days (depending on local practice) and are therefore all classified as current. The Group holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. The allowance for credit losses is €11m. The carrying amounts of trade receivables are considered to be the same as their fair values due to their short‑term nature. The carrying amount of the trade receivables includes €70m (€16m in 2023) of receivables which are subject to a factoring arrangement with recourse. Under this arrangement, Eviosys has transferred the relevant receivables to the factor in exchange for cash and is prevented from selling or pledging the receivables. However, Eviosys has retained late payment and credit risk. The Group therefore continues to recognise the transferred assets in their entirety in its balance sheet. The amount repayable under the factoring agreement is presented within short‑term debt (€70m in Q3 2024, €16m at December 31, 2023). The Group considers that the held to collect business model remains appropriate for these receivables and hence continues measuring them at amortised cost. The company also uses receivables securitization and factoring facilities in the normal course of business as part of managing its cash flows. The company primarily accounts for transfers under these facilities as sales because it has met the criteria for the risk of the receivables to be considered transferred. The company’s continuing involvement in the transfers is limited to servicing the receivables. The company receives adequate compensation for servicing the receivables and no asset or liability is recorded. As at September 30, 2024 the company derecognised receivables of €143m securitised and €233m factored related to the facilities. Year to date September 30, 2024 the company recorded expenses related to the facilities of €18m as interest expense. (As at December 31, 2023 the company derecognised receivables of €136m securitised and €317m factored related to the facilities. Year to date September 30, 2023 the company recorded expenses related to the facilities of €21m as interest expense.) Interest expense related to the facilities was €6m and €9m for the three months ended September 30, 2024 and 2023 respectively.
The Company’s outstanding net borrowings is as follows: in Millions of Eur Other short term debt 70 17 Debt issuance costs (short term portion) (8) (7) Current lease liabilities 12 10 Bond 375 375 Term loan 1,575 1,575 Debt issuance costs (long term portion) (40) (35) Non‑current lease liabilities 21 18 Cash & cash equivalents (219) (342) Restricted cash (1) - Borrowings are further analysed as follows : in Millions of Eur Term loan – facility B EUR 1,175 08/2028 Term loan 1,175 - Term loan – facility B3 EUR 400 08/2028 Term loan 400 - Senior notes EUR 375 07/2029 Bonds 375 - Revolving Credit Facility EUR 275 02/2028 Revolving - 275 Other short term debt 70 - The fair value of the Group’s borrowings excluding lease obligations at September 30, 2024 is estimated, based on level 1 quoted market prices, at €2,025m. in Millions of Eur Term loan – facility B Term loan – facility B2 Term loan – facility B3 Senior notes Other short term debt 1,158 1,174 - - 377 400 367 381 70 70 1,155 1,160 389 402 - - 364 323 17 17
On August 31, 2021, Kouti B.V. incurred €1,175m of senior secured term loans to finance, in part, the acquisition of the Tinplate business pursuant to a Senior Facilities Agreement, dated as of July 15, 2021 (the “Senior Facilities Agreement”), by and among Titan Holdings II B.V., Kouti B.V., the lenders and other parties from time to time party thereto, Barclays Bank PLC, as agent, and Deutsche Bank AG, London Branch, as security agent. Under the Senior Facilities Agreement, Kouti B.V. and certain subsidiaries may also borrow senior secured revolving loans up to €275m from time to time. The facilities have the following key terms: • A Term Loan (Facility B Commitments) of €1,175m with a maturity date of August 31, 2028. This tranche incurs interest at the applicable 1, 2, 3 or 6 months EURIBOR rate plus a margin that is subject to a leverage‑based grid and a sustainability‑based ratchet (commencing with delivery of the Company’s non‑financial annual report due within 120 days after the end of each fiscal year). Greater than 3.80:1 3.75% Equal to or less than 3.8:1 but greater than 3.30:1 3.50% Equal to or less than 3.30:1 3.25% ‑ Compliance with sustainability KPIs 0.075% Rate Discount Non‑Compliance with Sustainability KPIs 0.075% Rate Premium Kouti B.V. entered into interest rate swap contracts on March 17, 2022 to fix the EURIBOR component of the interest rate of €450m of the Term Loan at 0.7655% until February 28, 2025. • On March 7, 2023 an additional Facility B tranche of €400m with a maturity date of August 31, 2028, was established under the existing Senior Facilities Agreement (Facility B2). Each of Kouti B.V., Eviosys Packaging France S.A.S, Eviosys Embalajes España, S.A.U. and Eviosys Packaging UK Limited became the borrowers of Facility B2. This tranche incurs interest at the applicable 1, 2, 3 or 6 months EURIBOR rate plus a margin that is subject to a leverage‑based grid and a sustainability‑based ratchet (in each case commencing after two full fiscal quarters after the closing date of Facility B2). Greater than 2.20:1 4.75% Equal to or less than 2.20:1 but greater than 1.70:1 4.50% Equal to or less than 1.70:1 4.25% ‑ Compliance with sustainability KPIs 0.075% Rate Discount Non‑Compliance with Sustainability KPIs 0.075% Rate Premium Kouti B.V. entered into interest rate swap contracts on March 9, 2023 to fix the EURIBOR component of the interest rate of €300m of the Term Loan B2 at 3.6076% until February 28, 2026. The Facility B2 tranche of €400m has been repriced on February 8, 2024 and subsequently renamed to Facility B3. The repricing has been analysed as a debt renegotiation. The Borrowers remain the same: Kouti B.V., Eviosys Packaging France S.A.S, Eviosys Embalajes España, S.A.U. and Eviosys Packaging UK Limited. The maturity date also remains the same. The new margin has decreased from Euribor plus 475 basis points to Euribor plus 400 basis points. In application of IFRS 9, the difference between the former basis points (475 pts) and the new basis (400 pts) has been accounted for in one‑shot according to the “catch‑up” method. This accounting policy drives Eviosys to recognise a €11.8m gain in the Net finance expense in the category : Amortization of debt issuance cost.
The Facility B3 has the following characteristics : Greater than 2.20:1 4.00% Equal to or less than 2.20:1 but greater than 1.70:1 3.75% Equal to or less than 1.70:1 3.50% • A Revolving Credit Facility of €275m with a maturity date of February 29, 2028. When drawn, this Revolving Credit Facility incurs interest at the applicable 1, 2, 3 or 6 months EURIBOR rates plus a margin that is subject to a leverage‑based grid. Greater than 3.80:1 3.75% Equal to or less than 3.8:1 but greater than 3.30:1 3.50% Equal to or less than 3.30:1 but greater than 2.80:1 3.25% Equal to or less than 2.8:1 but greater than 2.30:1 3.00% Equal to or less than 2.3:1 2.75% This Revolving Credit Facility was not drawn as of September 30, 2024. The amount available for direct drawing under the Revolving Credit Facility as of the end of such period was €266m as €9m is blocked as guarantee to an overdraft facility that reduces the revolving commitment on a euro‑for‑euro basis. The commitment fee applied to the available amount of the Revolving Credit Facility is 30% of the applicable margin. On July 15, 2021, Titan Holdings II B.V. issued €375m of 5.125% Senior Notes due in July 2029. The Notes have been offered in connection with the acquisition of, directly or indirectly, the Tinplate business. ‑ Short‑term loans relate to receivables factored with recourse. Refer to note 12. According to IFRS 9, the repricing has been considered as a debt renegotiation. As a result the “catch‑up” method has been applied for the repricing of the Facility B2 to B3. A one‑off gain of €11.8m has been reported. Incremental debt issuance costs amounting to €1.6m related to the repricing transaction have been recorded, giving a total of €69m, of which €19m has already been amortized, leaving €48m recorded against debt. Eviosys has complied with the financial covenants of its borrowing facilities during the 2023 and 2024 reporting periods. The Senior Facilities Agreement contains a springing financial covenant for the benefit of the revolving lenders that, if tested, requires the Group to maintain a minimum consolidated senior secured debt ratio of 8.10x. The financial covenant is tested, if required, on the last day of every financial quarter in which the “Test Condition” is satisfied (commencing on the last day of the third full fiscal quarter to have elapsed after the acquisition closing date). The Test Condition is satisfied if the Revolving Credit Facility usage exceeds 40% of the revolving commitment (excluding letters of credit and ancillary facilities issued thereunder). The test condition was not satisfied at the end of the quarter and therefore the financial covenant was not required to be tested.
in Millions of Eur Trade payables excluding supplier financing 532 475 Payables under supplier financing arrangements 6 24 Trade payables are unsecured and are usually payable within 30 to 90 days of recognition depending on local practice. The carrying amounts of trade and other payables are considered to be the same as their fair values due to their short‑term nature. The Group has agreed to support strategic tinplate suppliers with their cash flows by entering into supplier financing arrangements. Under the arrangement, a bank acquires the rights to selected trade receivables from the supplier. Following this acquisition, the Group will no longer be able to make earlier direct payments to the supplier and will not be able to offset any of the acquired payables against credit notes received from the supplier. However, the Group has determined that the terms of the trade payable are otherwise substantially unchanged and that it is therefore appropriate to continue presenting the relevant amounts within trade and other payables in the balance sheet. The following table sets out the Company’s financial assets and liabilities that were accounted for at fair value (hierarchy level two) on a recurring basis. in Millions of Eur Foreign exchange current contracts cash flow 2 (2) Commodities current contracts cash flow - - Interest rate swap 14 (6) Foreign exchange current contracts cash flow 2 (3) Commodities current contracts cash flow - - Interest rate swap 5 (5) In addition, current financial assets includes restricted cash of €1.2m. (December 30, 2023 : €0.1m).
in Millions of Eur Goodwill 818 - 818 826 - 826 Intangibles 664 (162) 502 661 (123) 538 The goodwill decrease of €8m is related to the application of IFRS 5 (see note 5). Amortization expense for intangible assets was €13m and €14m for the three months ended September 30, 2024 and 2023 respectively, and €40m for both the nine months ended September 30, 2024 and 2023. in Millions of Eur Land & Land Improvements 152 - 152 151 - 151 Buildings 335 (60) 275 323 (44) 279 Machinery & Equipment 528 (226) 302 468 (189) 279 Other Depreciable Assets 27 (13) 14 21 (9) 12 Capital Projects in Progress 73 - 73 105 - 105 For the nine months ended September 30, 2024, €49m of additions and less than €1m of net disposals were recorded. The additions mainly related to the purchase of machinery and equipment. Depreciation expense for tangible assets was €19m and €21m for the three months ended September 30, 2024 and 2023 respectively, and €58m and €68m for the nine months ended September 30, 2024 and 2023 respectively. Management did not identify any indication that an asset may be impaired. in Millions of Eur Defined benefit plan assets (2) (2) Defined benefit plan liabilities 50 52 Long service award and other 10 9 Employee benefit expenses and payments of some €2m offset each other in the first nine months of 2024. The impact of the discount rate movements during the nine months ended September 30, 2024 on employee benefit obligations has been estimated and a net gain of some €1.7m has been recognised in Other Comprehensive Income.
Crown Holdings, Inc. (“Crown”) is considered as a related party due to the 20% interest Crown has retained in one of the parent entities of Titan Holdings I B.V. Ongoing transactions with Crown are presented in the tables below: in Millions of Eur Sales to Crown subsidiaries 9 6 26 25 Purchase of finished goods (1) (26) (31) (82) Transition services agreement net expense - - (1) (2) Following the acquisition by KPS, a transition services agreement is in place between Crown and Eviosys mainly for Shared Service centre activities. The net fee paid to Crown for the nine‑month period ended September 30, 2024 was €1m and for the nine‑month period ended September 2023 was €2m. As at September 30, 2024 this agreement has come to an end. The purchase of finished goods concerns one Eviosys factory where Crown continued to operate producing beverage cans for its own market, plus food cans solely for Eviosys. This interim arrangement terminated during Q2 2024 when Crown moved its beverage operations to new UK premises and Eviosys took over operation of the factory in‑line with the Sale and Purchase Agreement. Sales to Crown are made at arm’s length transaction prices. in Millions of Eur Accounts receivable 1 1 Accounts payable - (17) Accounts receivable and payable relate to the purchase and sale of products. KPS is the Private Equity Investor which administers the investment funds that are the ultimate owners of Titan Holdings I B.V. Eviosys recorded an expense in the period of €3.6m in 2024 (€3.0m in 2023) for management fees paid to KPS. The completion of the acquisition of Titan Holdings I B.V by Sonoco took place on December 4, 2024. At the time of the transaction all outstanding Bonds and Term loans were repaid. Subsequent to September 30, 2024, the agreeement to exit the Russian operations was terminated. As from the date of the transaction, KPS and Crown cease to be related parties of Eviosys.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Unless the context otherwise requires, in this exhibit, the terms “Sonoco” and the “Company” refer to Sonoco Products Company, a South Carolina corporation, and its consolidated subsidiaries, and the term “Eviosys” refers to Titan Holdings I B.V., a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands, and its subsidiaries.
Introduction
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, as amended, and reflects the acquisition of the entire equity interest of Eviosys by Sonoco (the “Eviosys Acquisition”) pursuant to the Equity Purchase Agreement, dated June 22, 2024, by and among Titan Holdings Coöperatief U.A., a cooperative with excluded liability (coöperatie met uitgesloten aansprakelijkheid), incorporated under the laws of the Netherlands (the “Seller”), Eviosys and Sonoco (the “Purchase Agreement”) and the related financing transactions. As described in more detail in Note 2 below, the Company funded the cash consideration payable by the Company in connection with the Eviosys Acquisition, including related fees and expenses, with the net proceeds from the issuance and sale of senior unsecured notes, borrowings under its Acquisition Term Loan Facilities (as defined in Note 2. Description of Financing) and cash on hand.
The unaudited pro forma condensed combined balance sheet combines the historical unaudited condensed consolidated balance sheet of Sonoco as of September 29, 2024 and the historical unaudited condensed consolidated balance sheet of Eviosys as of September 30, 2024, giving effect to the Eviosys Acquisition and the related financing transactions as if they had been consummated on September 29, 2024.
The unaudited pro forma condensed combined statement of income for the nine months ended September 29, 2024 combines the historical unaudited condensed consolidated statement of income of Sonoco for the nine months ended September 29, 2024 and the historical unaudited condensed consolidated statement of income of Eviosys for the nine months ended September 30, 2024. The unaudited pro forma condensed combined statement of income for the year ended December 31, 2023 combines the historical audited consolidated statement of income of Sonoco for the year ended December 31, 2023 and the historical audited consolidated statement of income of Eviosys for the year ended December 31, 2023. Both of the unaudited pro forma condensed combined statements of income give effect to the Eviosys Acquisition and the related financing transactions as if they had been consummated on January 1, 2023.
The unaudited pro forma condensed combined balance sheet and the unaudited pro forma condensed combined statements of income are collectively referred to as the “pro forma financial information.”
The pro forma financial information and the accompanying notes have been derived from and should be read in conjunction with:
• The following historical financial statements of Sonoco:
•The historical audited consolidated financial statements of Sonoco as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021, included in Sonoco’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2024 and incorporated herein by reference; and
•The historical unaudited condensed consolidated financial statements of Sonoco as of September 29, 2024 and December 31, 2023 and for the three and nine months ended September 29, 2024 and October 1, 2023, included in Sonoco’s Quarterly Report on Form 10-Q filed with the SEC on November 1, 2024 and incorporated herein by reference.
• The following historical financial statements of Eviosys:
•The historical audited consolidated financial statements of Eviosys as of and for the years ended December 31, 2023 and 2022, which are included as Exhibit 99.1 to this Current Report on Form 8-K/A (the “Current Report”); and
•The historical unaudited condensed consolidated financial statements of Eviosys as of September 30, 2024 and December 31, 2023 and for the three and nine months ended September 30, 2024 and 2023, which are included as Exhibit 99.2 to this Current Report.
Description of the Eviosys Acquisition
On June 22, 2024, the Company entered into a definitive agreement to acquire all issued and outstanding equity interests in Eviosys, 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 Europe, Middle East, and Africa (“EMEA”) region from KPS Capital Partners, LP (“KPS”).
On December 4, 2024, the Company completed the acquisition of all issued and outstanding equity interests in Eviosys for approximately $3.8 billion, net of cash acquired, on a cash-free and debt-free basis and subject to customary adjustments. The Company funded the Eviosys Acquisition, including related fees and expenses, with the net proceeds from the issuance and sale of senior unsecured notes, borrowings under its Acquisition Term Loan Facilities and cash on hand.
Basis for the Eviosys Acquisition
The accompanying pro forma financial statements are prepared using the acquisition method of accounting with Sonoco being treated as the acquirer.
Basis for the Pro Forma Presentation
The pro forma financial information has been prepared in accordance with Article 11 of Regulation S-X, as amended. The pro forma financial information is provided for illustrative purposes only and do not purport to represent the actual financial position and results of operations that would have been achieved had the Eviosys Acquisition and related financing transactions occurred on the dates indicated, and do not reflect adjustments for any anticipated integration costs, synergies, operating efficiencies, tax savings or cost savings. The actual financial condition and results of operations may differ from the amounts set forth in the pro forma financial information and in the accompanying notes. Further, the pro forma financial information does not purport to project the future operating results or financial position of Sonoco following the consummation of the Eviosys Acquisition and the related financing transactions.
The adjustments in the pro forma financial information have been identified and presented to provide an illustrative understanding of the effects of the Eviosys Acquisition and the related financing transactions and have been prepared for informational purposes only. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date the pro forma financial information is issued and are subject to change as additional information becomes available and analyses are performed. There can be no assurance that additional information and analyses will not result in material changes. Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the pro forma financial information are described above and in the accompanying notes.
Sonoco Products Company
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars and shares in thousands) as of September 29, 2024 | Sonoco | Eviosys (as Reclassified) (see Note 4) | IFRS to U.S. GAAP Adjustments | Note | Eviosys (U.S. GAAP) | Transaction Accounting Adjustments | Note | Pro Forma Condensed Combined |
| Assets | | | | | | | | |
| Current Assets | | | | | | | | |
| Cash and cash equivalents | $ | 1,930,633 | | $ | 245,322 | | $ | — | | | $ | 245,322 | | $ | (1,783,640) | | 7A, 7F | $ | 392,315 | |
| Trade accounts receivable, net | 1,042,520 | | 333,638 | | — | | | 333,638 | | 7,831 | | 7B, 7F | 1,383,989 | |
| Other receivables | 110,042 | | 130,110 | | — | | | 130,110 | | (214) | | 7C, 7F | 239,938 | |
| Inventories | | | | | | | | |
| Finished and in process | 304,042 | | 275,149 | | — | | | 275,149 | | 34,198 | | 7D, 7F | 613,389 | |
| Materials and supplies | 451,210 | | 258,059 | | — | | | 258,059 | | (60,234) | | 7D, 7F | 649,035 | |
| Prepaid expenses | 130,584 | | 37,980 | | — | | | 37,980 | | (165) | | 7E, 7F | 168,399 | |
| Assets Held for Sale | — | | 41,149 | | — | | | 41,149 | | (41,149) | | 7F | — | |
| Total Current Assets | 3,969,031 | | 1,321,407 | | — | | | 1,321,407 | | (1,843,373) | | | 3,447,065 | |
| Property, Plant and Equipment, Net | 1,930,025 | | 911,218 | | — | | | 911,218 | | 206,662 | | 7G, 7F | 3,047,905 | |
| Goodwill | 1,780,967 | | 913,743 | | — | |
| 913,743 | | 448,005 | | 7H | 3,142,715 | |
| Other Intangible Assets, Net | 785,616 | | 559,711 | | — | | | 559,711 | | 1,525,890 | | 7I | 2,871,217 | |
| Long-term Deferred Income Taxes | 28,682 | | 26,341 | | — | | | 26,341 | | (26,341) | | 7J | 28,682 | |
| Right of Use Asset-Operating Leases | 314,611 | | — | | 45,929 | | 3A | 45,929 | | 301 | | 7K, 7F | 360,841 | |
| Other Assets | 233,929 | | 40,640 | | (36,312) | | 3A,3C | 4,328 | | — | | | 238,257 | |
| Total Assets | $ | 9,042,861 | | $ | 3,773,060 | | $ | 9,617 | | | $ | 3,782,677 | | $ | 311,144 | | | $ | 13,136,682 | |
| Liabilities and Equity | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Payable to suppliers | $ | 748,193 | | $ | 604,707 | | $ | — | | | $ | 604,707 | | $ | (904) | | 7L, 7O | $ | 1,351,996 | |
| Accrued expenses and other | 438,296 | | 292,033 | | 15,364 | | 3A, 3C, 3D | 307,397 | | 9,913 | | 7M, 7O | 755,606 | |
| Notes payable and current portion of long-term debt | 481,706 | | 82,738 | | (13,844) | | 3A | 68,894 | | 1,490,587 | | 7N, 7O | 2,041,187 | |
| Accrued taxes | 10,084 | | — | | — | | | — | | | | 10,084 | |
| Liabilities Held for Sale | | 11,455 | | — | | | 11,455 | | (11,455) | | 7O | — | |
| Total Current Liabilities | 1,678,279 | | 990,933 | | 1,520 | | | 992,453 | | 1,488,141 | | | 4,158,873 | |
| Long-term Debt | 4,320,442 | | 2,155,546 | | (10,520) | | 3A,3E | 2,145,026 | | (1,447,287) | | 7P | 5,018,181 | |
| Noncurrent Operating Lease Liabilities | 269,251 | | — | | 32,557 | | 3A | 32,557 | | 4 | | 7O | 301,812 | |
| Pension and Other Postretirement Benefits | 137,302 | | 56,277 | | 1,265 | | 3C | 57,542 | | — | | | 194,844 | |
| Deferred Income Taxes | 84,048 | | 229,952 | | 166 | | 3A, 3C, 3D | 230,118 | | 445,066 | | 7Q, 7O | 759,232 | |
| Other Liabilities | 66,379 | | 21,578 | | (3,140) | | 3D | 18,438 | | (5,842) | | 7R | 78,975 | |
| Commitments and Contingencies | | | | | | | | |
| Shareholders’ Equity | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Common shares, no par value | 7,175 | | — | | — | | | — | | — | | | 7,175 | |
| | | | | | | | |
| | | | | | | | |
| Capital in excess of stated value | 175,532 | | 248,743 | | — | | | 248,743 | | (248,743) | | 7S | 175,532 | |
| Accumulated other comprehensive loss | (382,010) | | (8,817) | | (16,706) | | 3C | (25,523) | | 25,523 | | 7T | (382,010) | |
| Retained earnings | 2,678,242 | | 57,861 | | 4,475 | | 3A, 3C-3E | 62,336 | | 67,343 | | 7U | 2,807,921 | |
| Total Shareholders’ Equity | 2,478,939 | | 297,787 | | (12,231) | | | 285,556 | | (155,877) | | | 2,608,618 | |
| Noncontrolling Interests | 8,221 | | 20,987 | | — | | | 20,987 | | (13,061) | | 7V | 16,147 | |
| Total Equity | 2,487,160 | | 318,774 | | (12,231) | | | 306,543 | | (168,938) | | | 2,624,765 | |
| Total Liabilities and Equity | $ | 9,042,861 | | $ | 3,773,060 | | $ | 9,617 | | | $ | 3,782,677 | | $ | 311,144 | | | $ | 13,136,682 | |
Sonoco Products Company
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars and shares in thousands except per share data) Nine months ended September 29, 2024 | Sonoco | Eviosys (as Reclassified) (see Note 4) | IFRS to U.S. GAAP Adjustments | Note | Eviosys(U.S. GAAP) | Transaction Accounting Adjustments | Note | Pro Forma Condensed Combined |
| Net sales | $ | 4,936,888 | | $ | 1,847,980 | | $ | — | | | $ | 1,847,980 | | $ | (11,061) | | 8A | $ | 6,773,807 | |
| Cost of sales | 3,883,244 | | 1,523,520 | | 1,599 | | 3A-3D | 1,525,119 | | (5,292) | | 8A-8C, 8E | 5,403,071 | |
| Gross profit | 1,053,644 | | 324,460 | | (1,599) | | | 322,861 | | (5,769) | | | 1,370,736 | |
| Selling, general and administrative expenses | 586,337 | | 209,549 | | (3,576) | | 3A-3D | 205,973 | | 36,823 | | 8C, 8D, 8G | 829,133 | |
| Restructuring/Asset impairment charges | 59,058 | | 6,875 | | — | | | 6,875 | | — | | | 65,933 | |
Loss on divestiture of business and other assets
| (27,292) | | — | | — | | | — | | — | | | (27,292) | |
| Operating profit | 380,957 | | 108,036 | | 1,977 | | | 110,013 | | (42,592) | | | 448,378 | |
| Other income, net | 5,867 | | — | | — | | | — | | — | | | 5,867 | |
| Non-operating pension costs | 10,412 | | 1,356 | | (112) | | 3C | 1,244 | | — | | | 11,656 | |
| Interest expense | 122,503 | | 105,588 | | 11,414 | | 3A, 3E | 117,002 | | (4,540) | | 8H | 234,965 | |
| Interest income | 13,127 | | 2,857 | | — | | | 2,857 | | — | | | 15,984 | |
Income/(Loss) before income taxes | 267,036 | | 3,949 | | (9,325) | | | (5,376) | | (38,052) | | | 223,608 | |
Provision for/(Benefit from) income taxes | 65,821 | | 26,187 | | (2,413) | | 3A-3E | 23,774 | | (22,521) | | 8I | 67,074 | |
Income/(Loss) before equity in earnings of affiliates | 201,215 | | (22,238) | | (6,912) | | | (29,150) | | (15,531) | | | 156,534 | |
| Equity in earnings of affiliates, net of tax | 6,218 | | — | | — | | | — | | — | | | 6,218 | |
Net income/(loss) | 207,433 | | (22,238) | | (6,912) | | | (29,150) | | (15,531) | | | 162,752 | |
Net (income)/loss attributable to noncontrolling interests | (524) | | (510) | | — | | | (510) | | — | | | (1,034) | |
Net income/(loss) attributable to Sonoco | $ | 206,909 | | $ | (22,748) | | $ | (6,912) | | | $ | (29,660) | | $ | (15,531) | | | $ | 161,718 | |
| Weighted average common shares outstanding: | | | | | | | | |
| Basic | 98,616 | | | | | | | | 98,616 | |
| Assuming exercise of awards | 605 | | | | | | | | 605 | |
| Diluted | 99,221 | | | | | | | | 99,221 | |
| Per common share | | | | | | | | |
Net income attributable to Sonoco: | | | | | | | |
| Basic | $ | 2.10 | | | | | | | | $ | 1.64 | |
| Diluted | $ | 2.09 | | | | | | | | $ | 1.63 | |
| | | | | | | | |
Sonoco Products Company
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars and shares in thousands except per share data) Year ended December 31, 2023 | Sonoco | Eviosys (as Reclassified) (see Note 4) | IFRS to U.S. GAAP Adjustments | Note | Eviosys(U.S. GAAP) | Transaction Accounting Adjustments | Note | Pro Forma Condensed Combined |
| Net sales | $ | 6,781,292 | | $ | 2,602,880 | | $ | — | | | $ | 2,602,880 | | $ | (12,171) | | 8A | $ | 9,372,001 | |
| Cost of sales | 5,345,638 | | 2,153,722 | | 2,215 | | 3A-3D | 2,155,937 | | 5,700 | | 8A-8C | 7,507,275 | |
| Gross profit | 1,435,654 | | 449,158 | | (2,215) | | | 446,943 | | (17,871) | | | 1,864,726 | |
| Selling, general and administrative expenses | 741,860 | | 218,130 | | (1,867) | | 3A-3D | 216,263 | | 102,816 | | 8C,8D, 8F-8G | 1,060,939 | |
| Restructuring/Asset impairment charges | 56,933 | | 11,276 | | — | | | 11,276 | | — | | | 68,209 | |
Gain on divestiture of business and other assets
| 78,929 | | — | | — | | | — | | — | | | 78,929 | |
| Operating profit | 715,790 | | 219,752 | | (348) | | | 219,404 | | (120,687) | | | 814,507 | |
| Other income, net | 39,657 | | — | | — | | | — | | — | | | 39,657 | |
| Non-operating pension costs | 14,312 | | 2,021 | | (253) | | 3C | 1,768 | | — | | | 16,080 | |
| Interest expense | 136,686 | | 145,657 | | (1,454) | | 3A | 144,203 | | 81,850 | | 8H | 362,739 | |
| Interest income | 10,383 | | 1,841 | | — | | | 1,841 | | — | | | 12,224 | |
| Income before income taxes | 614,832 | | 73,915 | | 1,359 | | | 75,274 | | (202,537) | | | 487,569 | |
| Provision for income taxes | 149,278 | | 36,330 | | 361 | | 3A-3E | 36,691 | | (66,575) | | 8I | 119,394 | |
| Income before equity in earnings of affiliates | 465,554 | | 37,585 | | 998 | | | 38,583 | | (135,962) | | | 368,175 | |
| Equity in earnings of affiliates, net of tax | 10,347 | | — | | — | | | — | | — | | | 10,347 | |
| Net income | 475,901 | | 37,585 | | 998 | | | 38,583 | | (135,962) | | | 378,522 | |
Net (income)/loss attributable to noncontrolling interests | (942) | | 158 | | — | | | 158 | | — | | | (784) | |
| Net income attributable to Sonoco | $ | 474,959 | | $ | 37,743 | | $ | 998 | | | $ | 38,741 | | $ | (135,962) | | | $ | 377,738 | |
| Weighted average common shares outstanding: | | | | | | | | |
| Basic | 98,294 | | | | | | | | 98,294 | |
| Assuming exercise of awards | 596 | | | | | | | | 596 | |
| Diluted | 98,890 | | | | | | | | 98,890 | |
| Per common share | | | | | | | | |
Net income attributable to Sonoco: | | | | | | | | |
| Basic | $ | 4.83 | | | | | | | | $ | 3.84 | |
| Diluted | $ | 4.80 | | | | | | | | $ | 3.82 | |
| | | | | | | | |
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
Note 1. Description of Acquisition
On June 22, 2024, the Company entered into a definitive agreement to acquire all issued and outstanding equity interests in Eviosys, a global supplier of metal packaging that produces food cans and ends, aerosol cans, metal closures and promotional packaging from 44 manufacturing facilities located in 17 countries across the EMEA region, from KPS.
On December 4, 2024, the Company completed the acquisition of all issued and outstanding equity interests in Eviosys for €3,615,000 (equivalent to approximately $3,798,000 at the time of the acquisition), net of cash acquired, on a cash-free and debt-free basis and subject to customary adjustments. The Company funded the Eviosys Acquisition, including related fees and expenses, with the net proceeds from the issuance and sale of senior unsecured notes, borrowings under its Acquisition Term Loan Facilities (defined in Note 2. Description of Financing) and cash on hand.
Note 2. Description of Financing
On July 12, 2024, the Company entered into a credit agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Term Credit Agreement”) which provided the Company with the ability to borrow up to $700,000 on an unsecured basis (the “Term Loan Facility”) 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. Borrowings under the Term Loan Facility, net of any prepayments, will become payable in full on December 2, 2026 and will bear interest at a fluctuating rate per annum equal to, at the Company’s option, (i) the forward-looking Secured Overnight Financing Rate term rate (such borrowings, “Term SOFR Loans”), (ii) a base rate, or (iii) a combination thereof, plus, in each case, an applicable margin calculated based on the Company’s credit ratings and, in the of case of Term SOFR Loans, an adjustment of 10 basis points.
On September 16, 2024, the Company entered into a credit agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (the “364-Day Term Credit Agreement”) which provided the Company with the ability to borrow up to $1,500,000 on an unsecured basis (the “364-Day Term Loan Facility”) 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. Borrowings under the 364-Day Term Loan Facility, net of any prepayments, will become payable in full on December 1, 2025 and will bear interest under the same terms as the Term Loan Facility.
The Term Loan Facility together with the 364-Day Term Loan Facility comprise the “Acquisition Term Loan Facilities.”
On September 19, 2024, the Company completed a registered public offering of senior unsecured notes (the “Notes”) in a combined aggregate principal amount of $1,800,000. The Notes consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Principal Amount | | Issuance Costs and Discounts | | Net Proceeds | | Interest Rate | | Maturity |
| 2026 Notes | $ | 500,000 | | | (3,697) | | | $ | 496,303 | | | 4.450 | % | | September 1, 2026 |
| 2029 Notes | 600,000 | | | (5,851) | | | 594,149 | | | 4.600 | % | | September 1, 2029 |
| 2034 Notes | 700,000 | | | (10,542) | | | 689,458 | | | 5.000 | % | | September 1, 2034 |
| Total | $ | 1,800,000 | | | $ | (20,090) | | | $ | 1,779,910 | | | | | |
The Company used the net proceeds from the issuance and sale of the Notes, together with the borrowings under the Acquisition Term Loan Facilities and cash on hand, to fund the cash consideration payable by the Company in connection with the Eviosys Acquisition and to pay related fees and expenses.
As part of its financing strategy the Company entered into foreign currency swaps to mitigate foreign currency risk. The impact of these derivative instruments is not reflected in the pro forma adjustments included herein.
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
Note 3. Basis of Pro Forma Presentation
The accompanying unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations,” with Sonoco being the acquirer, and are based on the audited annual and unaudited interim historical consolidated financial information of Sonoco and Eviosys. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only. The pro forma adjustments have been prepared as if the Eviosys Acquisition and the related financing transactions had been consummated on September 29, 2024, in the case of the unaudited pro forma condensed combined balance sheet, and as if the Eviosys Acquisition and the related financing transactions had been consummated on January 1, 2023, the beginning of the earliest period presented, in the unaudited pro forma condensed combined statements of income.
Sonoco’s historical financial statements were prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) and presented in U.S. dollars (“USD”). Eviosys’s historical financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and presented in euros. As discussed in Note 4. Eviosys Historical Financial Statement Reclassification Adjustments, the historical Eviosys financial statements were translated to USD and certain reclassifications were made to align the presentation of Eviosys’s financial statements with the presentation of Sonoco’s financial statements. The consolidated statements of income of Eviosys were translated using the average exchange rate for the nine months ended September 29, 2024 of 1.08743 USD per euro and the average exchange rate for the twelve months ended December 31, 2023 of 1.08102 USD per euro. The consolidated balance sheet of Eviosys as of September 29, 2024 was translated using the spot rate on September 29, 2024 of 1.11625 USD per euro.
The consolidated statement of income of Eviosys for the nine months ended September 29, 2024, and the consolidated balance sheet of Eviosys as of September 30, 2024, include certain costs triggered by the Eviosys Acquisition. These one-time costs include €30 million of bonus costs and €8.6 million of Management Equity Plan costs, which are presented in “Selling, general and administrative expenses” in the unaudited pro forma condensed combined statement of income and “Accrued expenses and other” in the unaudited pro forma condensed combined balance sheet, respectively.
IFRS to U.S. GAAP
IFRS differs in certain respects from U.S. GAAP. The following adjustments have been made to align Eviosys’s historical accounting policies under IFRS to Sonoco’s accounting policies under U.S. GAAP for the purposes of this pro forma presentation.
(A) Leases
Under IFRS, Eviosys recognized right-of-use assets and lease liabilities for all leases as finance leases. An adjustment of $45,929 was recorded to reflect right-of-use assets relating to operating leases under U.S. GAAP and in accordance with Sonoco policies and borrowing rates, which included a $36,348 reclassification from “Other Assets” to “Right of Use Asset-Operating Leases” in the unaudited condensed combined balance sheet as of September 29, 2024. A similar adjustment of $11,942 was recorded in order to reflect the short-term operating lease liability within “Accrued expenses and other,” which included a reclassification of $13,844 from “Notes payable and current portion of long-term debt.” Additionally, an adjustment of $32,557 was recorded in order to reflect the noncurrent operating lease liability, which included a reclassification of $23,371 from “Long-term Debt” in the condensed combined balance sheet as of September 29, 2024. The adjustment resulted in an increase in the “Deferred income taxes” liability of $517 in the condensed combined balance sheet as of September 29, 2024. None of the acquired leases were classified as finance leases under U.S. GAAP.
Eviosys recorded depreciation on the right-of-use assets and interest expense on the lease liabilities. Under U.S. GAAP, a straight-line operating expense based upon the average of the gross contractual payments is recorded for operating leases. The difference in the treatment resulted in a reduction of $1,437 to “Interest expense,” an increase of $2,345 to “Cost of sales,” a $457 decrease in “Selling, general and administrative expenses,” and a $113 decrease in “Provision for income taxes” in the unaudited condensed combined statement of income for the nine-month period ended September 29, 2024. Additionally, this IFRS to U.S. GAAP difference resulted in a reduction of $1,454 to “Interest expense,” an increase of $1,961 to “Cost of sales,” an increase of $571 to “Selling, general and administrative expenses,” and a decrease of $261 in “Provision for income taxes” in the unaudited condensed combined income statement for the year ended December 31, 2023. Expenses recorded to the “Selling, general and
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
administrative expenses” line item relate to leases for administrative related activities, whereas lease expenses recorded to the “Cost of sales” line item are related to plant activities.
(B) Turkey Hyperinflation
Eviosys’s reclassified unaudited condensed combined statement of income was converted to USD by translating at month-to-date exchange rates and adjusting for the hyperinflationary impact of the Turkish lira from Eviosys's operations in Turkey. The adjustment removes the hyperinflationary impact based on a hyperinflationary index in accordance with IFRS and treats USD as the functional currency in accordance with U.S. GAAP requirements for hyperinflation.
For the nine-month period ended September 29, 2024, the adjustment resulted in reductions to “Cost of sales” and “Selling, general and administrative expenses” of $1,436 and $3,349, respectively, and an increase in “Provision for income taxes” of $1,196.
For the year ended December 31, 2023, the adjustment resulted in reductions to “Cost of sales” and “Selling, general and administrative expenses” of $1,261 and $2,943, respectively, and an increase in “Provision for income taxes” of $1,050.
(C) Pension and Postretirement Plans
Changes associated with assumed discount rates on plan obligations and expected returns on plan assets under U.S. GAAP as compared to IFRS resulted in a $36 increase to “Other Assets,” a $2,815 increase to “Accrued expenses and other,” an $1,265 increase to “Pension and Other Postretirement Benefits,” and the elimination of the pre-acquisition “Accumulated other comprehensive loss” balance of $16,706 in the unaudited pro forma condensed combined balance sheet as of September 29, 2024. The adjustment resulted in a decrease in the “Deferred income taxes” liability of $113 in the condensed combined balance sheet as of September 29, 2024.
Additionally, these changes in assumptions resulted in net decreases of $112 and $253 in “Non-operating pension costs” in the unaudited pro forma condensed combined statements of income for the nine-month period ended September 29, 2024 and the year ended December 31, 2023, respectively, and aggregate increases of $350 and $1,164 to “Cost of sales” and “Selling, general and administrative expenses” combined in the unaudited pro forma condensed combined statements of income for the nine-month period ended September 29, 2024 and the year ended December 31, 2023, respectively. The adjustments resulted in decreases of $73 and $221 in “Provision for income taxes” in the unaudited pro forma condensed combined statements of income for the nine-month period ended September 29, 2024 and the year ended December 31, 2023, respectively.
(D) Long Service Employee Benefit Awards
Changes associated with assumed discount rates on award obligations and gain/(loss) recognition assumptions under U.S. GAAP as compared to IFRS resulted in a $607 increase to “Accrued expenses and other” and a $3,141 decrease to “Other Liabilities” in the unaudited pro forma condensed combined balance sheet as of September 29, 2024. The adjustment resulted in a decrease in the “Deferred income taxes” liability of $238 in the condensed combined balance sheet as of September 29, 2024. Additionally, changes associated with discount rate assumptions resulted in an aggregate increase of $570 and $856 to “Cost of sales” and “Selling, general and administrative expenses” combined in the unaudited pro forma condensed combined statements of income for the nine-month period ended September 29, 2024 and the year ended December 31, 2023, respectively. The adjustments resulted in decreases of $130 and $207 in “Provision for income taxes” in the unaudited pro forma condensed combined statements of income for the nine-month period ended September 29, 2024 and the year ended December 31, 2023, respectively.
(E) Debt Renegotiation
Eviosys recognized a gain under IFRS related to a debt modification catch-up adjustment on a repriced term loan facility as of September 29, 2024. U.S. GAAP does not allow for a debt repricing as part of a debt modification to be recognized in the income statement. Therefore, an adjustment was made to remove the $12,851 offset to “Interest expense” in the unaudited pro forma condensed combined statement of income for the nine-month period ended September 29, 2024 with a corresponding increase to “Long-term Debt.” The adjustment resulted in a decrease of $3,293 in “Provision for income taxes” in the unaudited pro forma condensed combined statement of income for the nine-month period ended September 29, 2024.
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
Further detailed review of Eviosys’s historical accounting policies under IFRS may identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact in the financial statements of the combined company. However, at this time, Sonoco is not aware of any additional accounting policy differences between IFRS and U.S. GAAP that would have a material impact in the unaudited condensed combined pro forma information that are not reflected in the pro forma financial information.
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
Note 4. Eviosys Historical Financial Statement Reclassification Adjustments
Certain reclassifications were made to align the presentation of the Eviosys historical financial statements with the presentation of Sonoco’s historical financial statements. The tables below summarize such reclassifications made to the Eviosys historical balance sheet and statements of income based on information available to date:
Eviosys’s Unaudited Reclassified Condensed Combined Balance Sheet as of September 29, 2024:
| | | | | | | | | | | | | | | | | | | | |
Presentation in Eviosys’s
Historical Financial Statements | Presentation in Unaudited Pro Forma Condensed Combined Balance Sheet | Eviosys before Reclassifications (EUR) | Reclassified Amounts (EUR) | | Eviosys as Reclassified (EUR) | Eviosys as Reclassified (USD) |
| Cash & cash equivalents | Cash and cash equivalents | € | 218,548 | | € | 1,225 | | (a) | € | 219,773 | | $ | 245,322 | |
| Trade receivables | Trade accounts receivable, net | 303,704 | | (4,812) | | (b) | 298,892 | | 333,638 | |
| Other receivables | | 4,812 | | (b) | 4,812 | | 5,371 | |
| Contract receivables | Other receivables | 60,295 | | — | | | 60,295 | | 67,304 | |
| Other receivables | Other receivables | 51,453 | | | | 51,453 | | 57,435 | |
| Current tax receivables | Prepaid expenses | 10,601 | | — | | | 10,601 | | 11,833 | |
| Inventory | Finished and in process | 477,678 | | (231,184) | | (c) | 246,494 | | 275,149 | |
| Materials and supplies | | 231,184 | | (c) | 231,184 | | 258,059 | |
| Current financial assets | Prepaid expenses | 14,074 | | — | | | 14,074 | | 15,710 | |
| Other current assets | Prepaid expenses | 10,575 | | (1,225) | | (a) | 9,350 | | 10,437 | |
| Current assets held for sale | Assets held for sale | 36,864 | | — | | | 36,864 | | 41,149 | |
| Property, plant and equipment | Property, Plant and Equipment, Net | 816,321 | | — | | | 816,321 | | 911,218 | |
| Right-of-use assets | Other Assets | 32,563 | | (32,563) | | (e) | — | | — | |
| Intangible assets | Other Intangible Assets, Net | 1,320,004 | | (818,583) | | (d) | 501,421 | | 559,711 | |
| Goodwill | | 818,583 | | (d) | 818,583 | | 913,743 | |
| Deferred tax asset | Deferred Income Taxes | 23,598 | | — | | | 23,598 | | 26,341 | |
| Other non-current assets | Other Assets | 3,845 | | 32,563 | | (e) | 36,408 | | 40,640 | |
| Short-term debt | Notes payable and current portion of long-term debt | 61,720 | | — | | | 61,720 | | 68,895 | |
| Trade payable | Payable to suppliers | 537,567 | | 4,164 | | (f) | 541,731 | | 604,707 | |
| Accrued expenses and other | | (4,164) | | (f) | (4,164) | | (4,648) | |
| Current lease liabilities | Notes payable and current portion of long-term debt | 12,402 | | — | | | 12,402 | | 13,844 | |
| Income taxes payable | Accrued expenses and other | 20,601 | | — | | | 20,601 | | 22,996 | |
| Current financial liabilities | Accrued expenses and other | 3,047 | | — | | | 3,047 | | 3,401 | |
| Other current liabilities | Accrued expenses and other | 242,136 | | — | | | 242,136 | | 270,284 | |
| Current liabilities held for sale | Liabilities held for sale | 10,262 | | — | | | 10,262 | | 11,455 | |
| Long-term debt | Long-term Debt | 1,910,124 | | — | | | 1,910,124 | | 2,132,175 | |
| Non-current lease liabilities | Long-term Debt | 20,937 | | — | | | 20,937 | | 23,371 | |
| Employee benefits | Pension and Other Postretirement Benefits | 60,290 | | (9,874) | | (g) | 50,416 | | 56,277 | |
| Other Liabilities | | 9,874 | | (g) | 9,874 | | 11,021 | |
| Deferred tax liability | Deferred Income Taxes | 206,004 | | — | | | 206,004 | | 229,952 | |
| Other non-current provisions | Other Liabilities | 3,220 | | — | | | 3,220 | | 3,593 | |
| Non-current financial liabilities | Other Liabilities | 5,235 | | — | | | 5,235 | | 5,844 | |
| Other non-current liabilities | Other Liabilities | 1,003 | | — | | | 1,003 | | 1,120 | |
| Non-controlling interest | Noncontrolling Interests | 18,801 | | — | | | 18,801 | | 20,987 | |
| Reserves | Retained earnings | 266,774 | | (214,939) | | (h) | 51,835 | | 57,861 | |
| Capital in excess of stated value | | 222,838 | | (h) | 222,838 | | 248,743 | |
| Accumulated other comprehensive loss | | (7,899) | | (h) | (7,899) | | (8,817) | |
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
(a) “Other current assets” in the Eviosys historical balance sheet includes Restricted cash of €1,225 that was reclassified to “Cash & cash equivalents” in order to conform with Sonoco’s presentation.
(b) “Trade receivables” in the Eviosys historical balance sheet includes short term notes receivable of €4,812 that were reclassified to “Other receivables” in order to conform with Sonoco’s presentation.
(c) Inventories that were presented on a combined basis in Eviosys’s historical financial statements have been separately presented as “Finished and in process” and “Materials and supplies” in order to conform with Sonoco’s presentation.
(d) “Intangible assets” that were presented on a combined basis in Eviosys’s historical financial statements have been separately presented as “Goodwill” and “Other Intangible Assets, Net” in order to conform with Sonoco’s presentation.
(e) The “Right‑of‑use assets” presented separately in the Eviosys’s historical financial statements were reclassified to “Other non-current assets” in order to conform with Sonoco’s presentation.
(f) The “Accrued expenses and other” in the Eviosys historical balance sheet includes liabilities related to capital expenditures of €4,164 that were reclassified to “Payable to suppliers” in order to conform with Sonoco’s presentation.
(g) The non-current liability “Employee benefits” in the Eviosys historical balance sheet includes long service award obligations of €9,874 that are presented as “Other Liabilities” in order to conform with Sonoco’s presentation.
(h) “Reserves” in the Eviosys historical balance sheet have been broken out and separately presented in “Capital in excess of stated value,” “Accumulated other comprehensive loss,” and “Retained earnings” in order to conform with Sonoco’s presentation.
Eviosys’s Unaudited Reclassified Condensed Combined Statement of Income for the nine months ended September 29, 2024:
| | | | | | | | | | | | | | | | | | | | |
Presentation in Eviosys’s
Historical Financial Statements | Presentation in Unaudited Pro Forma Condensed Combined Statement of Income | Eviosys before Reclassifications (EUR) | Reclassified Amounts (EUR) | | Eviosys as Reclassified (EUR) | Eviosys as Reclassified (USD) |
| Revenue | Net sales | € | 1,699,404 | | € | — | | | € | 1,699,404 | | $ | 1,847,980 | |
| Cost of product sold | Cost of sales | 1,401,806 | | — | | | 1,401,806 | | 1,524,364 | |
| Selling, general and administration expenses | Selling, general and administrative expenses | 115,600 | | (2,706) | | (a) | 112,894 | | 122,764 | |
| Other expenses, net | Restructuring/Asset impairment charges | 19,007 | | (12,685) | | (b) | 6,322 | | 6,875 | |
| Selling, general and administrative expenses | | 12,685 | | (b) | 12,685 | | 13,794 | |
| Amortization of Intangible assets | Selling, general and administrative expenses | 39,802 | | 1,868 | | (c) | 41,670 | | 45,313 | |
| Cost of sales | | (1,868) | | (c) | (1,868) | | (2,031) | |
| Finance expense | Interest expense | 113,315 | | (16,217) | | (a),(d-f) | 97,098 | | 105,588 | |
| Interest income | | 2,627 | | (d) | 2,627 | | 2,857 | |
| Selling, general and administrative expenses | | 20,303 | | (e) | 20,303 | | 22,078 | |
| Non-operating pension costs | | 1,247 | | (f) | 1,247 | | 1,356 | |
| Foreign exchange loss | Selling, general and administrative expenses | 2,602 | | — | | | 2,602 | | 2,829 | |
| IAS 29 Net monetary loss | Selling, general and administrative expenses | 3,640 | | (1,092) | | (g) | 2,548 | | 2,771 | |
| Cost of sales | | 1,092 | | (g) | 1,092 | | 1,187 | |
| Income tax | Provision for income taxes | 24,082 | | — | | | 24,082 | | 26,187 | |
| Profit attributable to non-controlling interest | Net (income)/loss attributable to noncontrolling interests | (469) | | — | | | (469) | | (510) | |
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
Eviosys’s Unaudited Reclassified Condensed Combined Statement of Income for the year ended December 31, 2023:
| | | | | | | | | | | | | | | | | | | | |
Presentation in Eviosys’s
Historical Financial Statements | Presentation in Unaudited Pro Forma Condensed Combined Statement of Income | Eviosys before Reclassifications (EUR) | Reclassified Amounts (EUR) | | Eviosys as Reclassified (EUR) | Eviosys as Reclassified (USD) |
| Revenue | Net sales | € | 2,407,810 | | € | — | | | € | 2,407,810 | | $ | 2,602,880 | |
| Cost of product sold | Cost of sales | 1,991,107 | | — | | | 1,991,107 | | 2,152,418 | |
| Selling, general and administration expenses | Selling, general and administrative expenses | 112,091 | | (2,504) | | (a) | 109,587 | | 118,466 | |
| Other expense, net | Restructuring/Asset impairment charges | 13,827 | | (3,396) | | (b) | 10,431 | | 11,276 | |
| Selling, general and administrative expenses | | 3,396 | | (b) | 3,396 | | 3,671 | |
| Amortization of Intangible assets | Selling, general and administrative expenses | 52,736 | | 1,218 | | (c) | 53,954 | | 58,325 | |
| Cost of sales | | (1,218) | | (c) | (1,218) | | (1,317) | |
| Finance expense | Interest expense | 160,657 | | (25,915) | | (a),(d-f) | 134,742 | | 145,657 | |
| Interest income | | (1,703) | | (d) | (1,703) | | (1,841) | |
| Selling, general and administrative expenses | | 28,252 | | (e) | 28,252 | | 30,541 | |
| Non-operating pension costs | | 1,870 | | (f) | 1,870 | | 2,021 | |
| Foreign exchange loss | Selling, general and administrative expenses | 935 | | — | | | 935 | | 1,011 | |
| IAS 29 Net monetary loss | Selling, general and administrative expenses | 8,083 | | (2,425) | | (g) | 5,658 | | 6,116 | |
| Cost of sales | | 2,425 | | (g) | 2,425 | | 2,621 | |
| Income tax | Provision for income taxes | 33,607 | | — | | | 33,607 | | 36,330 | |
| Profit attributable to non-controlling interest | Net (income)/loss attributable to noncontrolling interests | 146 | | — | | | 146 | | 158 | |
(a) The historical financial statements of Eviosys include costs related to factoring within the line item “Selling, general and administration expenses.” In order to conform with Sonoco’s presentation, factoring costs of €2,706 and €2,504 for the nine-month period ended September 29, 2024 and for the year ended December 31, 2023, respectively, were reclassified to “Interest expense.”
(b) “Other expense, net” in the historical financial statements of Eviosys consists primarily of restructuring charges as well as bad debt expense and other miscellaneous expenses. In order to conform with Sonoco’s presentation, the restructuring charges are reflected under “Restructuring/Asset impairment charges” and combined totals of bad debt expense and other miscellaneous expenses of €12,685 and €3,396 were reclassified to “Selling, general and administrative expenses” for the nine-month period ended September 29, 2024 and for the year ended December 31, 2023, respectively.
(c) The historical financial statements of Eviosys include the Amortization of ROU finance lease assets within the line item “Amortization of Intangible assets.” In order to conform with Sonoco’s presentation, the ROU finance lease assets amortization of €1,868 and €1,218 for the nine-month period ended September 29, 2024 and for the year ended December 31, 2023, respectively, were reclassified to “Cost of sales.”
(d) The historical financial statements of Eviosys include interest income within the line item “Finance expense.” Therefore, in order to conform with Sonoco’s presentation, interest income of €2,627 and €1,703 for the nine-month period ended September 29, 2024 and for the year ended December 31, 2023, respectively, were reclassified to “Interest income.”
(e) The historical financial statements of Eviosys include factoring and securitization expense within the line item “Finance expense.” Therefore, in order to conform with Sonoco’s presentation, factoring and securitization expense of €20,289 and €28,252 for the nine-month period ended September 29, 2024 and for the year ended December 31, 2023, respectively, were reclassified to “Selling, general and administrative expenses.”
(f) The historical financial statements of Eviosys include non-operating pension costs within the line item “Finance expense.” Therefore, in order to conform with Sonoco’s presentation, non-operating pension costs of €1,247 and €1,870 for the nine-month period ended September 29, 2024 and for the year ended December 31, 2023, respectively, were reclassified to “Non-operating pension costs.”
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
(g) The reclassified income statement of Eviosys was converted to USD by translating at month-to-date exchange rates and adjusting for the hyperinflationary impact of the Turkish lira. The hyperinflationary impact was reflected in the line item “IAS 29 Net monetary loss” in the historical financial statements of Eviosys. In order to conform with Sonoco’s presentation, the hyperinflationary impact was bifurcated between “Selling, general and administrative expenses” and “Cost of sales” with €1,092 and €2,425 reclassified to “Cost of sales” for the nine-month period ended September 29, 2024 and for the year ended December 31, 2023, respectively.
Note 5. Consideration Transferred
The following table summarizes the consideration transferred to consummate the Eviosys Acquisition:
| | | | | |
| Cash Consideration to Eviosys Sellers | $ | 1,932,301 | |
| Escrow payment | 33,487 | |
| Cash Repayment of Eviosys Debt, Other Expenses and Estimated Working Capital Adjustment | 2,233,106 | |
| Purchase of Morocco noncontrolling interest | 25,227 | |
| Total Purchase Consideration | $ | 4,224,121 | |
| |
| Less: Cash Acquired | 245,802 | |
Total Purchase Consideration, net of Cash Acquired | $ | 3,978,319 | |
Note 6. Fair Value Estimate of Assets Acquired and Liabilities Assumed
The table below represents a preliminary allocation of the estimated purchase consideration to Eviosys’s tangible and intangible assets acquired and liabilities assumed based on management’s preliminary estimate of their respective fair values as if the Eviosys Acquisition had been consummated on September 29, 2024. The Company has not completed its evaluation of the fair value of assets acquired and liabilities assumed and, accordingly, the adjustments to record the fair value of assets acquired and liabilities assumed at the acquisition date reflect the best estimates of the Company based on the information currently available and are subject to change following the completion of the Eviosys Acquisition and once additional analyses and ongoing valuation work are completed. The changes may be material.
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
| | | | | |
| Total Purchase Consideration | $ | 4,224,121 | |
| Cash and cash equivalents | $ | 245,802 | |
| Trade accounts receivable | 342,676 | |
| Other receivables | 129,896 | |
| Inventories | |
| Finished and in process | 309,347 | |
| Materials and supplies | 197,825 | |
| Prepaid expenses | 37,815 | |
| Property, plant and equipment | 1,117,880 | |
| Right of use asset - operating leases | 46,230 | |
| Other intangible assets | 2,085,601 | |
| Deferred taxes | — | |
| Other assets | 4,328 | |
| Total Assets Acquired | 4,517,400 | |
| |
| Payable to suppliers | 605,010 | |
| Accrued expenses and other | 264,210 | |
| |
| |
| Notes payable and current portion of long-term debt | 62,447 | |
| |
| Noncurrent operating lease liabilities | 32,561 | |
| Pension and other postretirement benefits | 57,542 | |
| Deferred income taxes | 675,184 | |
| Other liabilities | 12,594 | |
| Total Liabilities Assumed | 1,709,548 | |
Net Assets Acquired, excluding Goodwill | 2,807,852 | |
Less: Noncontrolling interest | 7,926 | |
| Goodwill | 1,424,195 | |
| Total Estimated Fair Value of Net Assets Acquired | $ | 4,224,121 | |
Note 7. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
Explanations of the adjustments to the unaudited pro forma condensed combined balance sheet as of September 29, 2024 are as follows:
(A) Cash and cash equivalents
An adjustment to incorporate the estimated effects of the following inflows and outflows as a result of the Eviosys Acquisition and the related financing transactions. Proceeds received from the Notes are included in the historical nine-month period ended September 29, 2024. The following table presents the components of the transaction adjustments relating to cash and cash equivalents:
| | | | | |
Net proceeds received from financing | $ | 4,166,719 | |
| Cash consideration to Eviosys sellers | (1,932,301) | |
| Cash repayment of Eviosys debt, including accrued interest | (2,197,743) | |
| Payment of seller fees and other expenses | (2,948) | |
| Escrow payment | (33,487) | |
| Buyer transaction costs | (240) | |
| Reinstating Cash and cash equivalents of Russia (no longer meets the held for sale criteria) | 480 | |
Less: Senior notes included in Sonoco historical balance sheet | (1,784,120) | |
| Total | $ | (1,783,640) | |
(B) Trade accounts receivable, net of allowances
Trade receivables, net of allowances as of September 29, 2024, were increased by $7,831 to reflect the adjustments which include: (1) increase of $9,077 to record the reclassification of “Trade receivables” of Eviosys’s Russia business as it no longer meets the held for sale criteria, partially offset by (2) a reduction of $1,246 to eliminate trade receivables related to transactions between Sonoco and Eviosys.
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
(C) Other receivables
Other receivables, were increased by $205 to reclassify the Russia “Other receivables” (as the Russia business no longer meets the held for sale criteria) and reduced by $419 to eliminate the return of scrap to Sonoco due to Abbott inspection rejections.
(D) Inventories
“Finished and in process” inventories were increased by $34,198 to reflect the following adjustments: (1) increase of $25,404 to record the purchase accounting fair value adjustment, determined based on the estimated selling prices of the inventory, less the estimated remaining manufacturing and selling costs and normal profit margins on those manufacturing and selling efforts, (2) increase of $9,561 to record the reclassification of the “Finished and in process” balance of Eviosys’s Russia business, as the Russia business no longer meets the held for sale criteria, and (3) reduction of $767 related to the identification of additional obsolete inventory.
The pro forma condensed combined income statement for the year ended December 31, 2023 was adjusted to increase “Cost of sales” by $25,404 to reflect the fair value adjustment to acquired inventory as the acquired inventory is expected to be sold within one year of the acquisition date. See Note 8B for additional information.
Under Sonoco’s inventory capitalization policy, all spare parts with an extended unit value of less than five hundred dollars are expensed whereas Eviosys capitalized all spare parts regardless of the unit value. Also under Sonoco’s inventory capitalization policy certain packaging materials are expensed whereas Eviosys records them in inventory. Adjustments for these policy differences totaling $75,427 were deducted from “Materials and supplies” in Eviosys’s unaudited reclassified condensed combined balance sheet as of September 29, 2024. Additionally, the reclassification of the “Materials and supplies” balance of Eviosys’s Russia business, as the Russia business no longer meets the held for sale criteria, resulted in an increase of $15,193. Accordingly, an adjustment was made to record a net reduction in both “Materials and supplies” and “Capital in excess of stated value” by $60,234, in order to align Eviosys’s presentation with Sonoco’s policy.
(E) Prepaid expenses
Prepaid expenses were reduced by $165, which included a $6,194 adjustment to eliminate Eviosys’s fair value position of interest rate swaps as of September 29, 2024. This adjustment was the result of the anticipated repayment of Eviosys’s debt and termination of the related interest rate swaps. Additionally, a net adjustment of $6,029 was recorded to reclassify the balances attributable to Eviosys’s Russia business back to “Prepaid expenses,” as the Russia business no longer meets the held for sale criteria.
(F) Assets Held for Sale
Eviosys had signed a definitive agreement to exit its operations in Russia that was subject to certain regulatory approvals. The transaction met the held for sale criteria at September 30, 2024 and was presented as such in the financial statements. Subsequent to September 30, 2024, the agreement to exit the Russia operations was terminated. Therefore, adjustments were made to present the “Assets Held for Sale” back in the appropriate financial statement line item as follows:
| | | | | |
| Cash and cash equivalents | $ | 480 | |
| Trade accounts receivable, net | 9,077 | |
| Other receivables | 204 | |
| Inventories | |
| Finished and in process | 9,561 | |
| Materials and supplies | 15,193 | |
| Prepaid expenses | 6,029 | |
| Property, plant and equipment, net | 3,752 | |
| Right of Use Asset - Operating Leases | 37 | |
| Capital in excess of stated value | (3,184) | |
| Pro forma adjustment | 41,149 | |
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
(G) Property, Plant and Equipment, net
Represents the preliminary fair value and resulting pro forma accounting adjustment to “Property, Plant and Equipment, Net.” The preliminary amounts assigned to these assets and estimated weighted average useful lives are as follows:
| | | | | | | | |
| Fair Value | Weighted Average Useful Lives (Years) |
| Land | $ | 180,973 | | N/A |
| Land improvements | 10,537 | | 5.8 |
| Buildings and improvements | 327,338 | | 14.7 |
| Machinery and equipment* | 520,604 | | 8.7 |
| Construction in progress | 78,428 | | N/A |
| Total | 1,117,880 | | |
Less: Historical Eviosys value (as reclassified) | (911,218) | | |
| Pro forma adjustment | $ | 206,662 | | |
*The fair value of Machinery and equipment has been adjusted as follows: (1) to record the reclassification of the “Property, plant and equipment” balance of Eviosys’s Russia business of $3,752, which was previously considered as held for sale, and (2) to reduce start-up costs of $1,228. Sonoco expenses all start-up costs related to placing assets into service whereas Eviosys capitalizes certain start-up costs.
(H) Goodwill
Represents the purchase accounting and related deferred income tax adjustments to goodwill, which is the excess of the preliminary consideration over the preliminary fair value of the assets acquired and liabilities assumed. Goodwill will be tested for impairment annually and whenever events or circumstances have occurred that may indicate a possible impairment. None of the goodwill associated with the Eviosys Acquisition is expected to be deductible for income tax purposes.
(I) Other Intangible Assets, Net
Represents the preliminary fair value and resulting purchase accounting adjustment to intangible assets (other than goodwill). The preliminary amounts assigned to intangible assets and estimated weighted average useful lives are as follows:
| | | | | | | | |
| Fair Value | Weighted Average Useful Lives (Years) |
Customer lists | $ | 1,880,881 | | 20.0 |
| Trade names | 12,614 | | 15.0 |
Process know-how | 186,414 | | 11.5 |
| Patents | 5,692 | | 5.2 |
| Total | 2,085,601 | | |
Less: Historical Eviosys value (as reclassified) | (559,711) | | |
| Pro forma adjustment | $ | 1,525,890 | | |
(J) Long-term Deferred Income Tax Asset
Represents the estimated net long-term deferred income tax asset adjustments related to the preliminary fair value of assets acquired and liabilities assumed. Differences between these preliminary estimates and the final acquisition accounting are likely to occur and may be materially different from these estimates.
(K) Right of Use Asset - Operating Leases
“Right of Use Asset - Operating Leases” as of September 29, 2024 was increased by $301 to reflect the following adjustments: (1) an increase of $264 to record the purchase accounting fair value adjustment, and (2) an increase of $37 to record the reclassification of the “Right of Use Assets” balance of Eviosys’s Russia business, as the Russia business no longer meets the held for sale criteria.
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
(L) Payable to suppliers
“Payable to suppliers” as of September 29, 2024 was reduced by $904, which included a reduction of $1,247 to eliminate trade payables related to transactions between Sonoco and Eviosys and an increase of $343 to reclassify the Russia payable to suppliers (as the Russia business no longer meets the held for sale criteria).
(M) Accrued expenses and other
The pro forma adjustments to “Accrued expenses and other” include the following:
•an estimated $48,100 of additional acquisition-related transaction costs expected to be incurred by Sonoco subsequent to September 29, 2024;
•a $5,000 adjustment for estimated retention bonuses for certain Eviosys employees subsequent to the Eviosys Acquisition;
•a $11,074 adjustment to reclassify the “Accrued expenses and other” of Eviosys’s Russia business, which no longer meets the held for sale criteria;
•a $(37,162) adjustment to decrease accrued bonuses and liabilities under the Eviosys management equity plan triggered by the anticipated change of control resulting from the acquisition of Eviosys by Sonoco, which Eviosys included on its balance sheet as of September 29, 2024; and
•a $(17,099) adjustment for the anticipated repayment of Eviosys’s debt and related accrued interest payable.
(N) Notes payable and current portion of long-term debt
Represents adjustments to “Notes payable and current portion of long-term debt” due to the following inflows and outflows resulting from the Eviosys Acquisition:
| | | | | |
Short-term portion of net proceeds received from financing | $ | 1,497,000 | |
Elimination of historical Eviosys current portion of long-term debt | (6,446) | |
| Reclassification of Russia balances | 33 | |
| Pro forma adjustment | $ | 1,490,587 | |
(O) Liabilities Held for Sale
Eviosys had signed a definitive agreement to exit its operations in Russia that was subject to certain regulatory approvals. The transaction met the held for sale criteria at September 30, 2024 and was presented as such in the financial statements. Subsequent to September 30, 2024, the agreement to exit the Russia operations was terminated. Therefore, adjustments were made to present the “Liabilities Held for Sale” back in the appropriate financial statement line items as follows:
| | | | | |
| Payable to suppliers | $ | 343 | |
| Accrued expenses and other | 12,181 | |
| Notes payable and current portion of long-term debt | 33 | |
| Accrued taxes | (1,107) | |
| Noncurrent Operating Lease Liabilities | 4 | |
| Deferred Income Taxes | (710) | |
| Capital in excess of stated value | 711 | |
| Pro forma adjustment | 11,455 | |
(P) Long-term Debt
Represents adjustments to “Long-term Debt” due to the following inflows and outflows resulting from the Eviosys Acquisition:
| | | | | |
Long-term portion of net proceeds received from financing | $ | 698,080 | |
Elimination of remaining historical Eviosys long-term debt | (2,145,367) | |
| Pro forma adjustment | $ | (1,447,287) | |
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
(Q) Long-term Deferred Income Tax Liability
Represents the estimated net long-term deferred income tax liability adjustments related to the preliminary fair value of assets acquired and liabilities assumed. Differences between these preliminary estimates and the final acquisition accounting are likely to occur and may be materially different from these estimates.
(R) Other Liabilities
“Other Liabilities” were reduced by $5,842 to eliminate Eviosys’s fair value position of interest rate swaps due to the repayment of historical Eviosys debt as of September 29, 2024.
(S) Capital in excess of stated value
The pro forma adjustment to “Capital in excess of stated value” reflects the elimination of Eviosys’s historical capital in excess of stated value from the unaudited pro forma condensed combined balance sheet as of September 29, 2024.
(T) Accumulated other comprehensive loss
“Accumulated other comprehensive loss” was increased by $351 to eliminate Eviosys’s fair value position of interest rate swaps as of September 29, 2024. An offsetting $25,874 pro forma reduction was also included for the elimination of the portion of Eviosys’s historical accumulated other comprehensive loss associated with currency translation adjustments from the unaudited pro forma condensed combined balance sheet as of September 29, 2024.
(U) Retained earnings
The following pro forma adjustments impacted retained earnings:
| | | | | |
| Pro Forma Adjustment |
Additional transaction costs incurred by Sonoco (see Note 8G) | $ | (48,100) | |
Accrual of retention bonus payable to Eviosys employees (see Note 8F) | (5,000) | |
| Elimination of remaining historical Eviosys capital in excess of stated value and accumulated other comprehensive income | 222,870 | |
Purchase accounting adjustments impacting retained earnings | (102,427) | |
| Pro forma adjustment | $ | 67,343 | |
(V) Noncontrolling Interests
Eviosys’s historical financial statements reflect noncontrolling interests related to joint ventures. For purposes of the unaudited pro forma condensed combined financial information, it has been assumed that the remaining ownership interest in these joint ventures, except for that of the Ivory Coast, was acquired as part of the Eviosys Acquisition. Therefore, an adjustment has been made to eliminate $13,061 of the total balance in “Noncontrolling interests” in the unaudited pro forma condensed combined balance sheet as of September 29, 2024.
Note 8. Adjustments to Unaudited Pro Forma Condensed Combined Statement of Income
Explanations of the adjustments to the unaudited pro forma condensed combined statement of income are as follows:
(A) Intercompany transactions – net sales and cost of sales
The adjustment to eliminate intercompany revenue and expense related to transactions between Sonoco and Eviosys included reductions of “Net sales” and “Cost of sales” of $11,061 and $10,469, respectively, for the nine-month period ended September 29, 2024 and reductions of “Net sales” and “Cost of sales” of $12,171 and $11,843, respectively, for the year ended December 31, 2023.
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
(B) Inventory – cost of sales
The historical inventory for Eviosys as of September 29, 2024 has been adjusted to increase inventories by $25,404 to reflect the estimated fair value adjustment of finished goods and work in process inventory. The fair value was determined based on the estimated selling prices of the inventory, less the estimated remaining manufacturing and selling costs, and a normal profit margin on those manufacturing and selling efforts. The unaudited pro forma condensed combined statement of income for the year ended December 31, 2023 has been adjusted to increase “Cost of sales” by the same amount, as the inventory is expected to be sold within one year of the acquisition date.
Sonoco expenses all spare parts with a unit value of less than five hundred dollars whereas Eviosys capitalized all spare parts regardless of the unit value. Accordingly, “Cost of sales” was increased by $4,138 for the nine-month period ended September 29, 2024 and $1,150 for the year ended December 31, 2023 in order to align Eviosys’s presentation with Sonoco’s spare parts capitalization policy.
See additional pro forma adjustments related to cost of sales in Notes 8A, 8C, and 8E.
(C) Depreciation expense – cost of sales and selling, general and administrative expenses
A depreciation expense adjustment was determined related to the acquisition date fair value adjustments made to acquired tangible assets. The following table is a summary of information related to certain tangible assets to be acquired, including information used to calculate the pro forma change in depreciation expense that is adjusted to “Cost of sales” and “Selling, general and administrative expenses.”
| | | | | | | | | | | | | | | | | |
| Fair Value | Weighted Average Useful Lives ( Years) | Depreciation Expense For the Nine Months Ended September 29, 2024 | | Depreciation Expense For the Year Ended December 31, 2023 |
| Land Improvements | $ | 10,537 | | 5.8 | $ | 1,360 | | | $ | 1,817 | |
| Buildings and Improvements | 327,338 | | 14.7 | 16,671 | | | 22,268 | |
| Machinery & Equipment | 520,604 | | 8.7 | 45,013 | | | 60,128 | |
| Total | | | $ | 63,044 | | | $ | 84,213 | |
| Less: Historical Eviosys depreciation expense | | | (63,239) | | | (94,373) | |
| Pro forma adjustment | | | $ | (195) | | | $ | (10,160) | |
| | | | | |
| Pro forma adjustment - cost of sales | | | $ | (188) | | | $ | (9,011) | |
| Pro forma adjustment - selling, general and administrative expenses | | | (7) | | | (1,149) | |
| Pro forma adjustment | | | $ | (195) | | | $ | (10,160) | |
| | | | | |
See additional pro forma adjustments related to “Cost of sales” in Notes 8A-8B and 8E and to “Selling, general and administrative expenses” in Notes 8D and 8F-8G.
(D) Amortization expense – selling, general and administrative expenses
An amortization expense adjustment was determined related to the acquisition date fair value adjustments made to acquired intangible assets. The following table is a summary of information related to certain intangible assets acquired, including information used to calculate the pro forma change in amortization expense that is adjusted to “Selling, general and administrative expenses:”
| | | | | | | | | | | | | | |
| Fair Value | Weighted Average Useful Lives (Years) | Amortization Expense for the Nine Months Ended September 29, 2024 | Amortization Expense for the Year Ended December 31, 2023 |
| Customer lists | $ | 1,880,881 | | 20 | $ | 70,405 | | $ | 94,043 | |
| Trade names | 12,614 | | 15 | 630 | | 841 | |
| Patents | 5,692 | | 5.2 | 826 | | 1,104 | |
Process know-how | 186,414 | | 11.5 | 12,135 | | 16,210 | |
| Total | $ | 2,085,601 | | | 83,996 | | 112,198 | |
| Less: Historical Eviosys amortization expense | | | (43,282) | | (57,008) | |
| Pro forma adjustment | | | $ | 40,714 | | $ | 55,190 | |
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
See additional pro forma adjustments related to “Selling, general and administrative expenses” in Notes 8C and 8F-8G.
(E) Start-up costs – cost of sales
Sonoco expenses all start-up costs related to placing assets into service whereas Eviosys capitalizes certain start-up costs. In order to align Eviosys’s presentation with Sonoco’s policy, an adjustment to increase “Cost of sales” of $1,228 was made for the nine-month period ended September 29, 2024. No adjustment was required for the year ended December 31, 2023.
(F) Retention bonuses – selling, general and administrative expenses
Certain Eviosys employees are expected to be eligible to receive retention bonuses subsequent to the Eviosys Acquisition. Accordingly, a pro forma adjustment in the amount of $5,000 has been included as an increase to “Selling, general and administrative expenses” during the year ended December 31, 2023 to reflect such retention bonuses as having been earned during the pro forma period as if the Eviosys Acquisition had occurred on January 1, 2023.
(G) Transaction costs – selling, general and administrative expenses
The pro forma adjustments to “Selling, general and administrative expenses” for the year ended December 31, 2023 include $48,100 of estimated additional Eviosys Acquisition-related transaction costs expected to be incurred subsequent to September 29, 2024. These costs will not affect the Company’s income statement beyond 12 months of the acquisition date.
The Seller is an affiliate of KPS. KPS or its affiliates provided Eviosys with certain corporate advisory services in both 2023 and 2024 for which Eviosys was charged fees of $3,884 during the nine-month period ended September 29, 2024 and $4,325 during the year ended December 31, 2023.
(H) Interest expense
The pro forma adjustments to “Interest expense” represent the estimated difference in interest expense associated with the expected net additional borrowings used to fund the Eviosys Acquisition as compared to the interest expense reported on Eviosys’s historical income statement for the nine-month period ended September 29, 2024 and the year ended December 31, 2023.
The following table presents the pro forma “Interest expense” adjustments: | | | | | | | | | | | |
| For the Nine Months Ended September 29, 2024 | | For the Year Ended December 31, 2023 |
Interest expense on net additional borrowings used to fund the Eviosys Acquisition | $ | 96,667 | | | $ | 223,348 | |
| Eliminate Eviosys historical interest expense | (101,207) | | | (141,498) | |
| Pro forma adjustment | $ | (4,540) | | | $ | 81,850 | |
For purposes of preparing the unaudited pro forma condensed combined financial information, the weighted average interest rate assumed for the aggregate additional borrowings used to fund the Eviosys Acquisition was 5.61%. A change in the assumed variable interest rates of the Acquisition Term Loan Facilities of 0.125% would change pro forma interest expense by approximately $2,744 per year.
(I) Income tax expense
An adjustment to incorporate the estimated tax effect of the taxable pro forma adjustments related to the Eviosys Acquisition was calculated using tax rates in effect for the countries in which Eviosys operates. This resulted in a combined blended statutory income tax rate of 30.0% and 24.5% for the nine-month period ended September 29, 2024 and the year ended December 31, 2023, respectively. The effective tax rate of the combined company could be significantly different as the legal entity structure and activities of the combined company are integrated.
Sonoco Products Company
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(currency amounts and shares in thousands, except per share data)
Note 9. Pro Forma Net Income per Share
| | | | | | | | |
| Consolidated | For the Nine Months Ended September 29, 2024 | For the Year Ended December 31, 2023 |
| Pro Forma Net Income Attributable to Sonoco | $ | 161,718 | | $ | 377,738 | |
| | |
| Weighted Average Shares: | | |
| Basic | 98,616 | | 98,294 | |
| Assuming exercise of awards | 605 | | 596 | |
| Diluted | 99,221 | | 98,890 | |
| | |
| Pro Forma Net Income Per Share - Basic | $ | 1.64 | | $ | 3.84 | |
| Pro Forma Net Income Per Share - Diluted | $ | 1.63 | | $ | 3.82 | |
Pro Forma Net Income Per Share - Basic has been calculated based on the estimated weighted average number of shares of Sonoco’s common stock that would have been outstanding during the nine-month period ended September 29, 2024 and the year ended December 31, 2023.
Pro Forma Net Income Per Share - Diluted is computed by dividing Pro Forma Net Income Attributable to Sonoco by the weighted average shares outstanding, assuming all dilutive potential common shares were issued, unless doing so is anti-dilutive. For purposes of the pro forma condensed consolidated financial information, no new shares have been assumed to be issued in connection with the probable Eviosys Acquisition.
UNAUDITED SUPPLEMENTAL NON-GAAP PRO FORMA FINANCIAL INFORMATION
Background
On June 22, 2024, the Sonoco Products Company (“Sonoco” or the “Company”) entered into a definitive agreement to acquire all issued and outstanding equity interests in Titan Holdings I B.V. (“Eviosys”), 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 Europe, Middle East, and Africa region from KPS Capital Partners, LP.
On December 4, 2024, the Company completed the acquisition of all issued and outstanding equity interests in Eviosys for €3.615 billion (approximately $3.8 billion based on the exchange rate as of December 4, 2024), net of cash acquired, on a cash-free and debt-free basis and subject to customary adjustments (the “Eviosys Acquisition”). The Company funded the Eviosys Acquisition, including related fees and expenses, with the net proceeds from the issuance and sale of senior unsecured notes, borrowings under two term loan facilities, and cash on hand. See Note 2 in Exhibit 99.3 to the Current Report on Form 8-K/A filed on February 19, 2025, to which this Exhibit 99.4 is attached (the “Current Report”) for more information.
Unaudited Supplemental Non-GAAP Pro Forma Financial Information
The Company is furnishing this Exhibit 99.4 to provide certain unaudited supplemental non-GAAP pro forma financial information with respect to the completed Eviosys Acquisition. The Company has provided unaudited pro forma condensed combined financial information of Sonoco and Eviosys and notes thereto prepared in accordance with Article 11 of Regulation S-X in Exhibit 99.3 to the Current Report.
This Exhibit 99.4 includes certain financial performance measures that are not in conformity with U.S. generally accepted accounting principles (“GAAP”), including Sonoco Adjusted EBITDA, Sonoco Adjusted EBITDA Margin, pro forma Adjusted EBITDA, and pro forma Adjusted EBITDA Margin. Sonoco Adjusted EBITDA and Sonoco Adjusted EBITDA Margin are derived from Sonoco’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2023 and its unaudited condensed consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended September 29, 2024. Pro forma Adjusted EBITDA and Pro forma Adjusted EBITDA Margin are derived from the unaudited pro forma condensed combined financial information of Sonoco and Eviosys and notes thereto filed as Exhibit 99.3 to this Current Report. Refer to Exhibit 99.3 to this Current Report for additional information regarding such pro forma condensed combined financial information.
Sonoco Adjusted EBITDA is defined as net income attributable to Sonoco, excluding the following: interest expense; interest income; provision for income taxes; depreciation, depletion and amortization expense; non-operating pension costs; net income/loss attributable to noncontrolling interests; restructuring/asset impairment charges; changes in last-in, first-out (“LIFO”) inventory reserves; gains/losses from the divestiture of businesses and other assets; acquisition, integration and divestiture-related costs; other income; derivative gains/losses; and other non-GAAP adjustments, if any, that may arise from time to time. Sonoco Adjusted EBITDA Margin is defined as Sonoco Adjusted EBITDA divided by Sonoco net sales. Pro forma Adjusted EBITDA is defined as pro forma net income attributable to Sonoco, excluding the same items as Sonoco Adjusted EBITDA, in each case calculated on a pro forma basis assuming Sonoco had owned Eviosys for the period presented. Pro forma Adjusted EBITDA Margin is defined as pro forma Adjusted EBITDA divided by pro forma net sales.
Sonoco’s non-GAAP financial measures are not calculated in accordance with, nor are they an alternative for, measures conforming to generally accepted accounting principles, and they may be different from similarly titled non-GAAP financial measures used by other companies. In addition, Sonoco’s non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Sonoco presents non-GAAP financial measures to provide investors with information to evaluate its operating results in a manner similar to how management evaluates business performance. 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. Sonoco consistently applies its non-GAAP financial measures and use 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. Sonoco’s pro forma non-GAAP financial measures are provided for illustrative purposes only and do not purport to represent the actual financial position and results of operations that would have been achieved had the Eviosys Acquisition and related financing transactions occurred on the dates indicated, and do not reflect adjustments for any anticipated integration costs, synergies, operating efficiencies, tax savings or cost savings. In addition, pro forma Adjusted EBITDA and pro forma Adjusted EBITDA Margin do not give effect to any potential or planned divestitures by Sonoco, including the potential divestiture of ThermoSafe, Sonoco’s leading temperature-assured packaging business, for which Sonoco has initiated reviews of strategic alternatives, and the pending divestitures of the Company’s
Thermoformed and Flexible Packaging business and Global Trident business (collectively, “TFP”) pursuant to the December 18, 2024 agreement providing that the Company sell TFP to TOPPAN Holdings, Inc. for approximately $1.8 billion on a cash-free and debt-free basis and subject to customary adjustments and closing conditions. On a standalone basis, ThermoSafe, which is part of the All Other group of businesses, had revenue of $283 million and an Adjusted EBITDA Margin in the low twenties for the year ended December 31, 2023. On a standalone basis, TFP, which Sonoco formed by integrating its flexible packaging and thermoforming businesses within its Consumer Packaging segment effective as of January 1, 2024, had revenue of $1.3 billion and an Adjusted EBITDA Margin in the mid-teens for the year ended December 31, 2023.
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, the Company believes that it is useful in evaluating its 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, the Company does not, nor does the Company 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 the related reconciliation to understand how it differs from the most directly comparable GAAP measure.
Reconciliation of GAAP to Non-GAAP Financial Measures
The following table reconciles Sonoco Adjusted EBITDA, Sonoco Adjusted EBITDA Margin, pro forma Adjusted EBITDA, and pro forma Adjusted EBITDA Margin for the year ended December 31, 2023 and the nine months ended September 29, 2024 to net income attributable to Sonoco, Sonoco net income margin, pro forma net income attributable to Sonoco, and pro forma net income margin, respectively, for each of the periods presented. See Exhibit 99.3 to this Current Report for more detailed information regarding the unaudited pro forma condensed combined financial information of Sonoco and Eviosys.
| | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, | | Nine Months Ended September 29, | |
| (Unaudited) | 2023 | | 2024 | | |
| Dollars in thousands | Sonoco | Pro Forma | | Sonoco | Pro Forma | | |
| | | | | | | |
| Net income attributable to Sonoco | $ | 474,959 | | $ | 377,739 | | | $ | 206,909 | | $ | 161,718 | | | |
| Adjustments | | | | | | | |
| Interest expense | 136,686 | | 362,739 | | | 122,503 | | 234,965 | | | |
| Interest income | (10,383) | | (12,224) | | | (13,127) | | (15,984) | | | |
| Provision for income taxes | 149,278 | | 119,394 | | | 65,821 | | 67,074 | | | |
| Depreciation, depletion and amortization (a) | 340,988 | | 537,999 | | | 270,691 | | 417,731 | | | |
| Non-operating pension costs | 14,312 | | 16,080 | | | 10,412 | | 11,656 | | | |
| Net income attributable to noncontrolling interests | 942 | | 784 | | | 524 | | 1,034 | | | |
| Restructuring/Asset impairment charges (b) | 56,933 | | 68,209 | | | 59,058 | | 65,933 | | | |
| Changes in LIFO inventory reserves | (11,817) | | (11,817) | | | (197) | | (197) | | | |
| (Gain)/loss from divestiture of business and other assets | (78,929) | | (78,929) | | | 27,292 | | 27,292 | | | |
Acquisition, integration and divestiture-related
costs (c) | 26,254 | | 104,758 | | | 47,553 | | 96,087 | | | |
| Other income, net (d) | (39,657) | | (39,657) | | | (5,867) | | 5,497 | | | |
| Net gains from derivatives | (1,912) | | (1,912) | | | (3,981) | | (3,981) | | | |
Other adjustments (e) | 10,142 | | 14,675 | | | 851 | | 24 | | | |
| Adjusted EBITDA | $ | 1,067,796 | | $ | 1,457,838 | | | $ | 788,442 | | $ | 1,068,849 | | | |
| | | | | | | |
| Net Sales | $ | 6,781,292 | | $ | 9,372,001 | | | $ | 4,936,888 | | $ | 6,773,807 | | | |
| Net Income Margin | 7.0 | % | 4.0 | % | | 4.2 | % | 2.4 | % | | |
| Adjusted EBITDA Margin | 15.7 | % | 15.6 | % | | 16.0 | % | 15.8 | % | | |
(a) Pro forma depreciation, depletion and amortization expense includes estimated depreciation and amortization for Eviosys of $84,213 and $112,198, respectively, for the year ended December 31, 2023, and $63,044 and $83,996, respectively, for the nine months ended September 29, 2024. See Notes 8(C) and 8(D) to Exhibit 99.3 to this Current Report for more information on the estimated depreciation and amortization related to Eviosys.
(b) 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.
(c) Pro forma acquisition, integration and divestiture-related costs for the year ended December 31, 2023 include Sonoco historical costs and give further pro forma effect to (i) a $25,404 increase in cost of sales to reflect the estimated step up of finished goods and work in process inventory to fair value, (ii) a $48,100 increase in legal and professional expenses to reflect estimated Eviosys Acquisition-related transaction costs and (iii) a $5,000 increase in selling, general and administrative expenses to reflect estimated retention bonuses for certain Eviosys employees. Pro forma acquisition, integration and divestiture-related costs for the nine months ended September 29, 2024 include Sonoco historical costs and give further pro forma effect to (i) $5,447 of legal and professional expenses incurred by Eviosys for costs related to the Eviosys Acquisition and (ii) $43,087 of selling, general and administrative expenses recognized by Eviosys to reflect estimated change in control bonuses for certain Eviosys employees.
(d) The pro forma adjustments to Other income,net for the nine-month period ended September 29, 2024, include Sonoco historical income,net and give further pro forma effect to the adjustment of a non-cash impairment charge related to certain Eviosys’s operations, included in Eviosys’s income statement for the nine-month period ended September 29, 2024.
(e) Pro forma other adjustments for the year ended December 31, 2023 include Sonoco historical costs and give further pro forma effect to $4,533 of costs associated with accounting for Eviosys’s operations in Turkey as highly inflationary under GAAP. Pro forma other adjustments for the nine months ended September 29, 2024 include Sonoco historical costs and give further pro forma effect to $827 of income associated with accounting for Eviosys’s operations in Turkey as highly inflationary under GAAP.
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Sonoco Products (NYSE:SON)
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